FHA HUD SECTION 232/223(F) - Acquisition and Refinancing of Healthcare Properties

Let's move your project forward

Terms

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 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.
f) Three years must have passed since last certificate of occupancy was 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 nonprofit.

Recourse
Non-recourse.

Interest Rate
Fixed for term of loan, determined by market conditions at time of rate lock.

Rate lock deposit is 0.5% and refunded at closing.

Loan Parameters
Maximum loan amount will be the least of the following:

Borrower Type Maximum Loan to Value Minimum Debt
Service Coverage
Maximum Loan to
Refinance Cost
Maximum Loan to
Acquisition Cost
For-Profit 80% 1.45x 100% 80%
Not-for-Profit 85% 1.45x 100% 90%

 

Additional Terms

Term and Amortization
A maximum term 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 a combination of lockout and/or penalty); loan is fully assumable subject to HUD approval.

Escrows
Capital needs reserve will be maintained with monthly deposits in accordance with HUD guidelines on a property-specific basis.

Professional Liability Insurance
HUD will require minimum coverage of $1 million per occurrence; $3 million aggregate with a max deductible of $25,000. 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 0.65% annually thereafter (0.45% for qualifying LIHTC projects), escrowed monthly.

HUD Application Fee
0.30% of estimate loan amount due with submission of application (0.20% for properties located in a qualified Opportunity Zone).

HUD Inspection Fee
Greater of $30 per unit/bed or 1% of repairs.

Third Party Reports
Appraisal, Environmental and Capital Needs Assessment.

Timing
Typical application is submitted within 60 days of engagement; processing time varies based on OCRF (Office of Residential Care Facilities) volume.