Lancaster Pollard closed on a $25 million financing deal with Mahaska Health Partnership in Oskaloosa, Iowa, for a 52,000-square-foot expansion of the healthcare facility, the financial services firm announced Monday.
Construction on the county-owned critical access hospital (CAH), which began recently, is anticipated to last about 15-16 months. Once completed, Mahaska Health Partnership will have a new two-story addition to house a surgery suite, inpatient services and a birthing center.
The hospital provides inpatient acute care for medical, surgical, coronary care and obstetrical/gynecological services. The existing hospital was experiencing higher outpatient volumes and needed to expand its surgical suite. Additionally, it needed to relocate patient rooms and its obstetrics unit to comply with patient codes as well as replace existing power units that heat and cool the entire facility.
“Mahaska Health Partnership plays an important role in providing health services in Oskaloosa and its surrounding communities,” said Quintin Harris, vice president for Lancaster Pollard. “The hospital also is a major contributor to the local economy, generating 371 jobs. We felt we were in the best position to bring the best competitive options to the table. Lancaster Pollard was pleased to facilitate the financing of this long-awaited capital project for the county’s only hospital.”
Lancaster Pollard pursued several financing options due to heightened volatility in the capital markets and lack of investor interest in nonrated health-care bonds, according to Harris.
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As funding structures became unavailable or unfeasible, the U.S. Department of Agriculture eventually was able to provide a $23 million direct loan to fund Mahaska’s expansion. Because USDA direct loans cannot be used to directly fund construction projects, Lancaster Pollard underwrote multidraw bonds and used a competitive bidding process with both local and regional investors to obtain a very low interest rate for construction financing. A separate series of bonds was issued to refund Mahaska’s existing debt for a total interim financing of $25 million, Harris said.
“For community hospitals, it continues to be a best practice to consider multiple financing options early in the development and design process,” said Harris. “Capital markets are always changing and you wouldn’t want to get stuck not being able to finance the project cost-effectively or not feasibly.”
For more information about the Mahaska Health Partnership financing case study, visit www.lancasterpollard.com/hospitalfinancings.
Follow HFN Associate Editor Kelsey Brimmer on Twitter @kbrimmerhfn.
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