Understanding TPAs-the Transfer of Physical Assets

Originating and underwriting HUD-insured loans for multifamily and healthcare projects is Sims Mortgage Funding’s primary activity, but sometimes our experience and success in that space leads us to other business opportunities. Such was the case earlier this month when Sims Mortgage Funding, Inc. (“SMF”) completed two consulting assignments in connection with the sales by our clients of two nursing homes in New Jersey and a hospital in California.

Both transactions involved the assumption of six existing HUD-insured loans that we originated in 2009, 2011, 2012 and 2017 and are spread across the three properties. Yes, HUD has an acronym to describe that process – TPA, which stands for Transfer of Physical Assets.

Under a TPA, HUD and the lender servicing the loan effectively “underwrite” the purchaser who becomes the new borrower on the assumed debt. Part of that process is to analyze the background, qualifications, and experience of the purchaser; the financial and operational projections of the property after the sale; and, the transfer of assets and discharge of liabilities at closing. SMF provided technical assistance in the development of the TPA applications relating to the new borrowers and helped shepherd the proposals through the HUD approval process and on to closings.

With the TPAs now completed, HUD has two new and accomplished healthcare organizations in their insured loan portfolio, and the borrowers have assumed long-term, fixed rate, non-recourse loans at competitive interest rates.

Subsidiaries of Hackensack-Meridian Health, the largest hospital system in New Jersey, acquired interests in Prospect Heights Care Center, a 196-bed nursing home in Hackensack, New Jersey, and West Caldwell Care Center, a 180-bed nursing home in West Caldwell, New Jersey.

On the west coast, a subsidiary of AHMC Healthcare acquired Parkview Community Hospital Medical Center, a 193-bed acute care facility in Riverside, California. AHMC, a for-profit organization, owns and operates seven “safety net” hospitals in Southern California. The two loans AHMC is assuming on Parkview will be their first HUD-insured loans – we certainly hope that they will not be their last!