InnoVative Capital Completes $35 Million USDA Financing Morgan Memorial Hospital Project
Press Release (ePRNews.com) - SPRINGFIELD, Penn. - Oct 12, 2017 - As Financial Advisor to Morgan Memorial Hospital (“Morgan Memorial”), InnoVative Capital, LLC, announces the placement of $35 million, 23-month, tax-exempt construction notes, in conjunction with a forward permanent funding obligation from the U.S. Department of Agriculture (“USDA”) for a 25-year Direct Loan at a fixed rate of 2.375%. This composite financing was made possible through the issuance of a funding commitment by USDA through the Georgia and Washington D.C. offices of the Community Facilities Program. Loan proceeds will fund the construction of the new Morgan Memorial Hospital, a 25-bed, 74,500 square foot facility to be located on U.S. Highway 441.
Located 60 miles east of Atlanta in the historic city of Madison, Georgia, Morgan Memorial was originally built in 1960 and serves a population of 18,000. Despite the financial pressures facing rural hospitals in Georgia, Morgan Memorial has continued to staff a 24-hour emergency department, provide diagnostic outpatient services, and deliver patient care through acute and swing bed programs. Morgan Memorial is proud to have been the first critical access hospital in Georgia to be certified as a Level IV Trauma Center.
“With the issuance of the USDA commitment and note sale, construction has begun on our project, which has been carefully designed to meet the specific health care needs of Morgan County and adhere to a reasonable and financially supportable budget,” said Ralph Castillo, CEO of Morgan Memorial. “This is the product of the hard work of members of the Hospital Authority, senior management, staff and our doctors. I would also like to thank Piedmont Athens Regional Medical Center, the Morgan County Commissioners and our community for the support they provided throughout the development and financing process,” added Mr. Castillo. “In completing this financing with USDA, I am very pleased that we have been able to dispel rumors suggesting that rural hospitals are obsolete and instead, support the proposition that even in small communities, an independent critical access hospital can thrive,” Mr. Castillo proclaimed.
“While Morgan Memorial began its quest for a new hospital to replace its 57-year-old facility over a decade ago, it wasn’t until 2013 that we really pursued a new hospital in earnest when we commissioned InnoVative Capital to complete a comprehensive due diligence review. This review incorporated market analytics, an operational assessment, physician needs review, physical plant evaluation, economic impact analysis, capital markets review and financial forecasting,” said Kyle Wilkinson, Morgan Memorial’s CFO. “These analyses gave our Board the comfort level they required to invest time, money and their reputations in this venture. With the strong upfront support expressed for the replacement hospital project by the Monroe and Athens offices of USDA, and its never-ending efforts to provide funding for the permanent loan, we remained energized throughout the lengthy project development process that preceded the financing,” added Mr. Wilkinson.
Terry Evans, Former Chairman of the Hospital Authority pronounced, “Throughout my 12 years on the board of Morgan Memorial Hospital, I knew our fiduciary responsibility dictated that we manage the hospital at all times with an eye to the future. As it is an economic pillar of the community, a modern new hospital is an essential catalyst for increased economic development in Morgan County and the delivery of exemplary locally-based health care.”
Alan P. Richman, President and CEO of InnoVative Capital stated, “The sale of tax-exempt notes, which will be refinanced after construction with a USDA Direct Loan, facilitated the lowest possible borrowing rate for our client. At a time when numerous rural hospitals have been shuttered, the fact that we were able to achieve a long-term loan rate for Morgan Memorial, lower than that of any other Georgia hospital, is a testament to the hard work and planning of Morgan Memorial’s board and management, along with the determination of USDA to get this done right. The financing was not easy, as Morgan Memorial is an independent rural hospital, without the deep pockets of a health system or corporate sponsor.” Mr. Richman added, “to improve the financial integrity of the replacement hospital project and assure its financial success, Morgan Memorial enlisted support from “AA-rated” Morgan County, in the form of a 25-year, annual $1 million uncompensated care subsidy, and community backing, through the completion of a multimillion fundraising campaign.” At a time, where the nation’s rural hospitals struggle to recruit doctors, InnoVative Capital worked with Morgan Memorial to execute a clinical collaboration with Piedmont Athens Regional Medical Center to augment Morgan Memorial’s physician base. Additionally, Morgan Memorial marketed its new hospital project and successfully recruited primary care physicians and health care practitioners. “The careful development and execution of this project financing took almost five years, but serves as a roadmap for other independent rural hospitals on how they can survive and prosper even in difficult times for the hospital industry,” concluded Mr. Richman.
The Construction Financing and USDA Direct Loan
The construction loan for the project was funded with the proceeds of the publicly underwritten tax-exempt, $35 million MIG-3 rated Hospital Authority Revenue Anticipation Certificates, Series 2017 and a $2.2 million equity contribution from Morgan Memorial Healthcare Foundation. The 23-month certificates, which fund construction and a six-month stabilization period, will be immediately refinanced no later than the maturity date of the certificates by a USDA 25-year Direct Loan, under the terms of USDA’s funding commitment.
About InnoVative Capital
Founded in 2000, InnoVative Capital maintains a national hospital financing practice as an SEC-approved municipal advisor, USDA banker, FHA mortgage lender and hospital turnaround consultant; with a specialty focus serving rural hospitals and their communities through the capital financing of modern hospitals, as well as the restructuring of underperforming assets and refinancing of debt obligations.
About Morgan Memorial Hospital
Morgan Memorial Hospital is a 25-bed critical access hospital, which is governed by the Morgan County Hospital Authority as a component unit of Morgan County, Georgia, under the direction of its nine Board members, who are each appointed by the Morgan County Commissioners.
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