The Department of Housing and Urban Development is seeking a buyer for Lakeway Regional Medical Center after the two-year-old suburban Austin hospital defaulted on a $164 million mortgage loan that carried a federal guarantee.
The loan guarantee, announced in 2010, was the largest the federal agency had ever provided for a for-profit health care facility, according to the Austin American-Statesman.
HUD officials called the default "an exceedingly rare" event, according to the Statesman. The agency took over the hospital in October.
HUD' 2010 loan guarantee was expected to save the hospital $91.2 million in interest. Investors' HUD application said that Lakeway lacked a hospital, making the residential area around Lake Travis west of Austin medically "underserved."
Investors cited a study showing the hospital would provide access to a primary service area with an estimated 243,000 residents by 2016. The 100-bed hospital, which cost $210 million, was also marketed as an economic engine to spur retail and other development.
Just months after opening in April 2012, Lakeway Regional suffered cash shortages. In August 2013, the hospital missed its first mortgage payment and landed in default, HUD officials said. After that, the loan changed hands to Greystone Servicing Corp. Inc. In September, HUD took over from Greystone.
On Sept. 17, HUD paid Greystone $154.6 million, 90% of the amount owed, according to the Statesman. The other 10% will be paid when HUD receives all of the ownership documents, officials told the paper.
Since 1968, the Federal Housing Administration, an agency operating under HUD, has insured 358 mortgages to hospitals throughout the nation, 45 within the past five years.
Moody's Investors Service cited the planned hospital as a factor in upgrading the city of Lakewood to Aa3 from A1 on April 7, 2010.
Lakeway is about 15 miles northwest of Austin on the shores of Lake Travis, with a small but affluent population of about 11,200. Traditionally a lake home community with higher-end homes, the city's assessed value increased to $2.74 billion in 2010 and averaged 16.3% annual growth over the previous five years.