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| | Senior Housing
HUD/FHA Mortgagees
HUD/FHA
mortgagees are a major player in the capitalization of senior housing
development programs. Most senior
housing HUD/FHA mortgagees will underwrite and close construction and 
permanent loans on a nationwide basis because HUD places no restrictions on the
operating areas that senior housing HUD/FHA mortgagees can service (other than
requiring the facilities be in the U.S.).
The pros and cons facing senior
housing developers and owner/operators with respect to this financing approach
include the following:
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Know
your time limits. All too frequently people get hung up in a Section
221 or Section 232 application processing cycle that just seems to go on and on. The
Department of Housing & Urban Development's local area multifamily
housing division may not be the underwriting office. This means the
project application must be sent up the line. This takes time.
The backlog of applications also creates an impediment to timely completion
of the process. The result of this approach is to dramatically
increase the transaction carrying costs while the application makes its way
through the various application phases until the final lending commitment is
issued. Be prepared! Assume you will have at least one (1) year
of carrying costs and build these costs into your capital funding plan from
the beginning! |
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Know your loan
limits. The program provides a 90% Loan-To-Value ratio of certain
qualified costs - not all the costs - as offsite construction, minor
ff&e, development fee, working capital reserves and applied working
capital are not part of the loan basis. The resulting construction
and permanent loan will vary between 78% to 86% of the total project budget
because the resulting loan will not include uses of working capital. |
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Know your application
costs. You must provide a comprehensive array of reports and studies
in order to qualify the project for a loan closing. These requirements
are typically greater than what would be expected in a structured finance
approach, but the HUD process represents a "surety of outcome"
because of the statutory requirements. In short, if the project
profile meets the requirements of title, HUD must issue the loan insurance
commitment. |
Check with
a Rainmaker Marketing Corporation consultant for more details.
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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