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Healthcare Financing Loans
 Loan Program Features 2 Million and up with no Maximum
Loan Term Fixed Rates for 5,7,10, or 15 years
Ammortization 15 - 25 years
Loan-to-Value up to 80% ( with MEZZ CAP )
Debt Service Ratio 1.35 or more
Closing Time 30 - 60 Days
Rate Lock Period 60 Days
Reserves $250 Per Bed
Prepayment Options Defeasance-Yield Maintenance
Recourse NO -All loans are non-recourse with the exception of required carve outs
Application Fee None
Initial 3rd Party Fees $15,000 to $25,000
SECTION 232 INSURED LOANS – SUMMARY SHEET
Program Features:
· Financing for the new construction or substantial rehabilitation of nursing homes and/or sheltered care facilities (aka, assisted living facilities or board and care facilities). Substantial rehabilitation must encompass at least 15% of the project value after completion of the rehab, or the replacement of a minimum of two major building components.
· No personal liability.
· Higher loan-to-cost ratios (90% of total replacement cost for new construction).
· Low, fixed interest rates for construction, rehab and permanent loans. Permanent loan rates are fixed prior to the closing of the construction loan.
· Interest only for up to 36 months during the construction period.
· Longer loan terms of up to 40 years for new construction and 35 years for sub-rehab projects, structured on a fully amortized basis.
· Loan proceeds may include major movable equipment, as well as the rehab costs for projects requiring substantial rehabilitation. Costs of major movable equipment and rehab are considered in the project’s valuation.
· Permanent loans are fully assumable.
· Permanent loans can be prepaid
· HUD mortgage insurance can be used as credit enhancement for new construction taxable or tax-exempt bond issues. Bond proceeds can be used to fund both the construction and permanent loan.
· No limit on number of loans to one borrower.
Eligibility Features/Project Criteria:
· Both for-profit and not-for-profit entities are eligible borrowers, to include individuals, corporations, general and limited partnerships, limited liability corporations (LLC’s) as well as public or proprietary entities.
· The real estate must be held in fee simple or under a long term lease.
· Kitchen facilities and/or private bathroom facilities are not required for each bed or living unit.
· Properties or facilities that charge entrance fees or Life Estate fees to residents are NOT eligible.
· Davis Bacon prevailing wage requirements and labor standards apply.
· Borrower must file annual, audited project financial statements.
· Full year escrows for real estate taxes, property insurance and special assessments, if any, are required to be funded at the closing and maintained for the life of the loan, in non-interest bearing escrow accounts.
· A reserve for replacements escrow is required for the life of the loan, with monthly contributions. Funds may be used by the borrower for ongoing replacement of depreciable items. This escrow account may be interest bearing to the benefit of the borrower.
· An operating deficit escrow is required at the time of the loan closing and must be funded with cash or a letter of credit. This escrow is required to fund any operating losses until sustaining occupancy is achieved.
· A working capital escrow (or letter of credit) equal to 2% of the loan amount is required during the construction period.
SECTION 242
FACT SHEET
DEFINITION: Under this section of the National Housing Act, HUD-FHA insures first mortgage loans made only by HUD-approved mortgagees such as Red Stone, for the new construction or the substantial rehabilitation of hospitals.
ELIGIBLE PROJECTS:
a) Must be either new construction or substantial rehabilitation.
b) Must be situated on one site. However, the site may consist of two or more non-contiguous parcels (scattered sites) with HUD approval.
c) Must provide community service for inpatient medical care of the sick or injured.
d) Must not have more than 50% of the total patient days during any year assignable to the categories of chronic convalescent and rest, drug and alcoholic, epileptic, mentally deficient, mental, nervous and mental, and tuberculosis.
e) A proprietary facility, or facility of a private non-profit corporation or association, licensed or regulated by the State (or if there is no State law providing for such licensing or regulation by the State, then by the municipality or other political subdivision in which the facility is located).
f) Must have received a Certificate of Need from the designated State agency.
SUBSTANTIAL REHABILITATION:
For the mortgage on an existing hospital property to be insured under the Section 242 program, the property must require substantial rehabilitation (sub-rehab), which is defined as:
a) The alteration, repair, modernization, or addition to an existing hospital, including alteration and landscaping of the grounds.
b) The installation of technical or professional equipment to be used in the hospital. However, the cost of rehabilitating the exiting building and grounds (together with the cost of purchasing and installing technical equipment) must represent at least 20% of the total mortgage amount, with at least one half of such 20% applied to the rehabilitation of the buildings and grounds. No more than one half of such 20% may be applied to equipment for an existing building.
REAL ESTATE REQUIREMENTS:
All new developments or sub-rehab properties must be on real estate held, or to be held:
a) in fee simple, or
b) under a renewable lease for a period of not less than 99 years, or
c) under a lease having a period of at least 50 years from the date of the insured mortgage
ELIGIBLE BORROWERS:
The following types of borrowers are eligible for participation in the Section 242 program:
a) Non-Profit – an entity organized for reasons other than financial gain and not controlled or directed by persons or firms seeking financial gain. The non-profit entity must be regulated under Federal or State law, i.e. 501(c)(3). If the project sponsor is different from the mortgagor, then the sponsor must also be a bona fide non-profit entity which meets the same test.
b) Proprietary (profit motivated) mortgagors may be a corporation, partnership, trust, individual, or any other qualified legal entity. It is expected that such hospital will have a board of directors or trustees to include community and consumer participation.
c) Leasing of a non-profit facility to a proprietary entity will not be considered.
d) Entities created to be the borrower under a HUD-insured mortgage transaction must be single asset entities.
CONSTRUCTION, HIRING AND WAGES:
This program requires that payment of no less than the wages prevailing in the locality, as predetermined by the Secretary of Labor, pursuant to the Davis-Bacon Act, be paid to all laborers and mechanics employed in the development of the project.
Additionally, all borrowers and general contractors must comply with HUD’s Equal Employment Opportunity regulations, in that discrimination because of race, color, religion, sex or national origin is prohibited.
UNDERWRITING CONSIDERATIONS/FEATURES:
a) 25-year, level annuity payment, fully amortized permanent loan term.
b) Maximum mortgage amount is the lesser of: $50,000,000 OR 90% of estimated property replacement cost including major movable equipment. Loan amounts in excess of $50 million may be permitted with HUD approval.
c) Fixed rate of interest during both construction and permanent loan terms. Permanent loan rate fixed at closing of construction loan.
d) No personal liability on either the construction or permanent loan.
e) Permanent loan cannot be prepaid except under such terms and conditions as may be approved by HUD.
a) Property must be operated as a hospital facility as long as the property continues to be subject to a HUD insured mortgage.
f) Complete audited annual financial statements required each year
g) Operating fund may be required to meet an anticipated operating deficit until facility reaches self-sustaining operation
h) Escrows for payment of real estate taxes (if any) and property insurance are required in addition to monthly principal, interest and HUD mortgage insurance premium (MIP) payments
i) Proprietary facilities are required to make deposits to a replacement reserve fund
Call 866-372-FLAT
Today for a list of documents required for Healthcare Facility or Assisted Living Facility Commercial Loan Submission
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