Case Study: Finance

University Health System, Inc.

Challenge

Secure capital funds for $25 million of new construction which minimizes equity capital investment and interest costs, and protects the financial flexibility and balance sheet of a large hospital system, all while allowing the system to maintain a level of control and approval of activities associated with the buildings.

Our Approach

We analyzed various alternatives that addressed the client's needs. After selecting the optimal alternative, we developed a Request for Proposal (RFP) that was sent to real estate financing specialists who had proven experience in working with health systems, as well as developing specialized real estate financing products. The RFP, which we prepared, included project capital and operating summaries, and required the proposals to include the cost of funds (interest rate), leasing requirements, right of first refusal requirements, maximum loan-to-value, and a summary of all fees and expenses. The responses were reviewed and compared; then selected firms were interviewed by senior management.

Success

Because of the expertise of the financial specialists we identified, the client received three proposals that allowed financing of up to 100% of the project and provided very competitive interest rates. This allowed them to maintain control over the types of medical procedures and a purchase option. In addition, the client learned of various options to finance projects off-balance sheet, thus enabling them to use those options again in the future.