Healthcare New Construction 232
Construction or Substantial Rehabilitation of Healthcare Properties
| Eligible Properties | Licensed Nursing Homes, Assisted Living, Intermediate Care, and Board and Care a) Must provide continuous protective oversight; b) Must offer three meals per day; c) Facility must be licensed by the state; d) Non-resident day care not to exceed 20% of gross area and 20% of gross income; e) May include up to 25% non-licensed independent living units; and |
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| Commercial Space Limitation | Limited to 10% of gross floor area and 15% of gross income |
| Use of Proceeds | New construction or Substantial rehabilitation which is defined as: a) 15% of post-rehabilitated appraised value, or replacement of two or more major building components b) Additions are not included in the eligibility test |
| Davis Bacon Wages | Payment of prevailing wages is required by HUD; wages are determined by the Department of Labor. |
| Borrower | Single asset, special purpose entity, either for profit or non-profit |
| Loan Amount | No maximum (Limited by loan parameters) |
| Recourse | Non-recourse |
| Interest Rate | Fixed for term of loan, determined by market conditions at time of rate lock (Rate lock deposit is 1% and refunded at closing) |
| Loan Parameters for New Construction | New Construction: Maximum loan amount will be the lesser of: a) Recommended % of LTV; b) Recommended % of Replacement Cost; or c) Recommended Debt Service Coverage Ratio |
| Substantial Rehabilitation: Maximum loan will be the lesser of: a) Recommended % of Loan to Value; b) Recommended % of Rehabilitation Cost plus the lesser of: existing indebtedness or recommended % of as-is value for properties owned; or c) Recommended % of Rehabilitation Costs plus the lesser of: recommended % of purchase price or recommended % of as-is value for properties to be purchased; or d) Recommended Debt Service Ratio |
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| Cost of offsite improvements, FF&E, marketing, construction contingency and operating deficit reserve excluded from loan amount Based on current and fiscal environment, HUD has recommended the following parameters: a) For Profit Assisted Living: 75% LTV, 1.45 DSCR b) For Profit Skilled Nursing, Board and Care and Independent Living: 80% LTV, 1.45 DSCR c) Non-Profit Assisted Living: 80% LTV, 1.45 DSCR d) Non-Profit Skilled Nursing, Board and Care and Independent Living: 85% LTV, 1.45 DSCR |
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| Term and Amortization | Actual construction period plus 40 years (fully amortizing with interest only payable during construction period) |
| Prepayment and Assumption | Negotiable with best pricing for 10 years of call protection (can be combination of lockout and/or penalty); Loan is fully assumable subject to HUD approval |
| Escrows | a) Replacement reserves in accordance with HUD guidelines; b) Taxes and Insurance escrowed monthly (post construction); c) Working Capital Reserve equal to 2% (post in cash or LOC); d) Operating Deficit Reserve determined by HUD at commitment; e) Twelve month living units; Debt Service Reserve for non-licensed independent f) Minor movables; and |
| Mortgage Insurance Premium | Payable at Closing an amount equal to 0.57% of the loan amount for each year of construction |
| Fees & Expenses | a) HUD application fee of 30 basis points due with submission of firm application; b) Mortgage Insurance Premium is 57 basis points of principal mortgage amount a year after final endorsement; c) HUD Inspection Fee is 0.5% of the mortgage amount for new construction and 0.5% of total improvements for substantial rehabilitation; d) FHA Mortgage Insurance Premium due at closing; and e) Actual Cost of Third Party Reports |
| Third Party Reports | Appraisal, Market Study, Phase I and Plans and Specs Review are required |
| Timeline | 8-12 months depending on whether Borrower wants to submit a pre-application |
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