VIUM Capital's Role in Refinancing and Recapitalization Strategies

How VIUM Capital Optimizes Property Ownership with Efficient Acquisition, Recapitalization, and Refinancing Solutions

At VIUM Capital, we are dedicated to delivering capital solutions for our clients in the seniors housing and healthcare industries. With our extensive experience and expertise, we focus on addressing the capital needs of these sectors by providing commercial real estate bridge loan financing and refinancing into permanent debt structures such as long-term HUD-insured loans. Along with our recapitalization strategies, our professionals have executed various transaction structures, assisting businesses and individual investors in achieving their investment goals. Our solutions benefit both our clients and the seniors housing industry as a whole by unlocking the potential of their assets through flexible financing options. In this article, we’ll explore three recent transactions, showcasing our effective and independently tailored funding structures.

Transaction 1: 4 Skilled Nursing Facilities in Texas 

In Q3 2023, VIUM Capital provided an $18 million loan ($4 million initial funding and $14 million earn-out) for the acquisition of a 4-facility portfolio in Texas. The portfolio includes 421 skilled nursing and 6 independent living beds. The Sponsor, a repeat client of VIUM, had previously closed four transactions, including two HUD-insured loans and two bridge loans. VIUM’s approach to funding the acquisition enabled the assets’ appropriate recapitalization and eventual refinancing through long-term HUD insured debt.

VIUM’s accelerated credit evaluation and loan processing timeline further enhances the value delivered to clients. For the acquisition, the initial bridge funding was promptly used to execute the purchase option and cover closing costs, with the remaining funds structured to comply with 1031 exchange requirements. There were also two potential earnouts available if the facilities are able to maintain certain performance requirements. The $14 million earnout, a combination of two separate earnouts under a “B piece” loan, was structured for the client to unlock additional value from this transaction. The first earnout provided funding of $7 million which could be earned out twelve months post-closing. This feature provides time for the additional Medicaid add-on to become permanent and flow through the properties’ financials. Structuring the earnout in this way provided borrower flexibility to appropriately leverage the portfolio as new Texas Medicaid legislation took effect. The second earnout, an additional $7 million, will be released when the transaction is submitted to HUD for permanent financing. 

VIUM has been, and will continue to be, involved in every part of the transaction, from short-term bridge financing to HUD loan closing, while navigating the acquisition financing and the nuances of Texas Medicaid rates. With VIUM’s advisory and strategic refinancing solutions, the client will be able to secure HUD permanent financing for the portfolio, placing the assets in a long-term, low- fixed rate, non-recourse debt structure.

Transaction 2: A Tennessee Skilled Nursing Facility

Also in Q3 2023, VIUM provided acquisition financing for a 162-bed Skilled Nursing Facility (SNF) in Lawrenceburg, TN, with an initial funding of $17.2 million (including a $1.2 million working capital reserve) and a $4 million earnout. 

The working capital reserve, funded by the bridge loan, was necessary due to a delay in the State of Tennessee's initial Medicaid reimbursement, which prevented the sponsor from receiving Medicaid funding for several months post-closing. The earnout was structured to take advantage of a substantial Medicaid rate increase effective July 1, 2023. VIUM underwrote the $4 million earnout to be eligible at HUD submission, capturing potential incremental value from the Medicaid rate increases and stabilized proforma performance. This acquisition and processing timeline created tremendous value for the sponsor in implementing its capital optimization strategy. This was the sponsor’s second acquisition in the region.

Transaction 3: Assisted Living and Memory Care Refinancing/Acquisitions Across the Pacific Northwest 

In Q1 2024, VIUM successfully closed an operator-buyout transaction, involving the exercise of purchase options on eight assisted living facilities and the refinance of one memory care facility for the same sponsor. This deal included a total of 347 assisted living/memory care units located in Oregon and Washington. The client, who had operated the buildings since 2019, negotiated a purchase option to acquire the real estate. With a history of leadership in the Washington and Oregon assisted living/memory care market, the client demonstrated their commitment to expanding their footprint in the region and looked to VIUM for the financing solution. The deal size for this purchase option totaled $55 million, and the transaction had several unique conditions. The borrower aimed to take advantage of higher Medicaid waiver rates expected later this year. 

Although current financials did not support an immediate HUD takeout, the expected Medicaid rate increases in Washington and Oregon for FY 2025 helped ensure financial stability for the term of the bridge loan. The memory care facility, owned and operated by the sponsor since 2015, was also refinanced as part of the transaction.

Conclusion 

Through a sample of recently closed transactions, VIUM Capital demonstrates the ability to offer strategic solutions for seniors housing and healthcare owners based on each client's specific needs and circumstances. We provide customized acquisition, recapitalization, and refinance products to optimize each borrower’s unique capital structure, ensuring continuous growth with an efficient processing timeline, ultimately aiming for HUD-insured or GSE permanent financing. 

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Contact us today to learn more about our acquisition and refinancing solutions, and how we can support your organization’s financial needs. Let VIUM be your trusted partner in navigating the complexities of healthcare and seniors housing real estate finance.