Healthcare Acquisition/ Refinance 232/223(f)
Acquisition and Refinancing 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 f) Three years must pass since last certificate of occupancy has been issued |
|---|---|
| Commercial Space Limitation | Limited to 20% of net rentable area and 20% of effective gross income |
| Borrower | Single asset, special purpose entity, either for profit or non-profit |
| Loan Amount | No maximum (Limited by loan parameters and HUD does not allow for any equity take out for healthcare properties) |
| 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 | Maximum loan amount will be the lesser of: a) Recommended % of LTV; b) Recommended % of Purchase Price; c) Recommended Debt Service Coverage Ratio; or d) Existing debt plus transaction costs and proposed repairs. Based on current economic and fiscal environment, HUD has recommended the Following parameters: • For Skilled Nursing and Assisted Living: 80% LTV, 1.45 DSCR • For Board and Car and Independent Living: 80% LTV, 1.45 DSCR • For Non-Profit Mortgagors: 85% LTV, 1.45 DSCR |
| Term and Amortization | A maximum of 35 years or 75% of the remaining economic life, fully amortizing |
| 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) Taxes and insurance are escrowed monthly; b) Replacement reserve required and the monthly deposit amount determined in accordance with HUD guidelines |
| Professional Liability Insurance | HUD will require minimum coverage of $1 million per occurrence; $3 million aggregate with a max deductible of $100,000; Waivers may be granted in cases where premiums are high and claim history is clean |
| Mortgage Insurance Premium | 1% due to HUD at closing and 0.50% annually thereafter, escrowed monthly |
| HUD Application Fee | 30 basis points ($3 per $1,000) on requested loan amount (due with submission of firm application to HUD) |
| HUD Inspection Fee | Maximum of $30 per unit/bed or 1% repairs |
| Third Party Reports | Appraisal, Phase I and Physical Needs Assessment are required |
| Timeline | Typical firm application is submitted within 45-60 days of engagement; LEAN processing time varies based on OHP (Office of Healthcare Programs) volume |
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