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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