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

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 RatioCost 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

Term and Amortization

Actual construction period plus 40 years (fully amortizing with interest only payable during construction period)

payment 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
g) Offsite escrows (if applicable)

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