Loan Purpose: New Construction

HOSPITALS | FHA/HUD Section 242

Affordable Financing for New Construction or Substantial Rehabilitation of Hospitals

Our HUD Section 242 program provides long-term, low fixed-rate, financing for the construction and permanent financing of acute care and critical access hospitals.

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Hospitals

Eligible Properties

The facility must be a licensed hospital.

Eligible Borrowers

For-profit or not-for-profit.

Term

Up to 25 years, self-amortizing. Construction period is interest only.

Interest Rate

Locked before closing and fixed for the duration of the term. (Subject to market conditions.)

Security

First mortgage on subject property and all improvements and equipment financed.

Loan Parameters

Over the past three years:

  • Aggregate debt service coverage ratio greater than 1.25%.
  • Aggregate positive operating margin.
  • Construction must be approved before start of construction.

HUD Fees and Expenses

  • FHA Application Fee of 0.30% of loan amount.
  • FHA Inspection Fee of 0.50% of loan amount.
  • Annual Mortgage Insurance Premium of 0.70% of the outstanding loan amount.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Timing

Approximately 8 – 10 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
  • If the State has a Certificate of Need (CON) process, a CON must be issued or pending.
  • Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.

HEALTHCARE PROPERTIES | FHA/HUD Section 232

New Construction or Substantial Rehabilitation Loan

Our HUD Section 232 mortgage program provides long-term, low fixed-rate, non-recourse, assumable financing for the construction and permanent financing of healthcare properties.

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Healthcare Facilities

Eligible Properties

Licensed assisted living, skilled nursing homes, intermediate care, and board and care facilities.

  • Facility must be licensed by the state.
  • Facility must provide three meals per day.
  • Facility must provide continuous protective oversight.
  • Non-resident day care must not exceed 20% of gross area and 20% of gross income.
  • May include up to 25% non-licensed independent living units.

Eligible Borrowers

Experienced, single asset, for-profit or not-for-profit owners.

Term

Up to 40 years, fully amortizing (plus interest only period during construction).

Interest Rate

Locked before closing and fixed for the duration of the construction period and full 40-year term. (Subject to market conditions.)

Guarantees

Non-recourse for the construction period and duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Assisted Living 90% 75% (80%) 1.45 .077% (0.45%)
Skilled Nursing 90% 80% (85%) 1.45 .077% (0.45%)

HUD Fees and Expenses

  • FHA Application Fee of 0.30% of loan amount.
  • FHA Inspection Fee of 0.50% of loan amount (new construction) and 0.50% of costs associated with construction (substantial rehabilitation).

Commercial Space

Limited to 10% of net rentable space and 15% of gross income.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Construction Wages

Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.

Timing

Approximately 8 – 10 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.

MULTIFAMILY | FHA/HUD Section 221(d)(4)

New Construction or Substantial Rehabilitation Loan

Our HUD Section 221(d)(4) program provides long-term, low fixed-rate, non-recourse, assumable financing for the construction and permanent financing of new apartment projects or substantial rehabilitation of existing apartment projects.

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Multifamily Housing

Eligible Properties

Market rate, affordable, or subsidized multifamily properties.

Eligible Borrowers

Single asset, special-purpose entity, either for profit or not-for-profit.

Term

Maximum of 40 years, fully amortizing (plus interest only period during construction).

Interest Rate

Locked before closing and fixed for the duration of the construction period and full 40-year term. (Subject to market conditions.)

Guarantees

Non-recourse for the construction period and duration of the term.

Prepayment

Customizable, typically a 10-year step down, based on market conditions and borrower preferences.

Assumable

Subject to FHA/HUD and lender approval.

Loan Parameters

Market Rate 85% 1.176
Affordable 87% 1.15
Subsidized 90% 1.11

HUD Fees and Expenses

  • The annual Mortgage Insurance Premium (MIP) is 0.65% of the outstanding loan amount for market rate transactions. Reduced MIP rates for affordable projects or projects that qualify for Green/Energy Efficient Housing.
  • FHA Application Fee of 0.30% of loan amount.
  • FHA Inspection Fee of 0.50% of loan amount (new construction) and 0.50% of costs associated with construction (substantial rehabilitation).
  • Replacement Reserves determined by a 20-year capital needs analysis, minimum of $250 per unit per annum.

Commercial Space

Limited to 25% of net rentable space and 15% of gross income.

Third-Party Reports

Market Study, Appraisal, Phase I Environmental, and Architectural & Cost Review.

Construction Wages

Local prevailing wages, as per Department of Labor, paid under Davis-Bacon Act.

Timing

Approximately 8 – 12 months for engagement, submission, FHA/HUD review, and closing.

Funding

Ginnie Mae guaranteed mortgage-backed securities.

Other Program Parameters

  • Escrows for property taxes, insurance, MIP, working capital, and replacement reserves are required.
  • A Builder’s and Sponsor’s Profit and Risk Allowance (BSPRA) equal to 10% of all costs other than land can be utilized for sponsors with an identity of interest general contractor. For affordable and rental assisted transactions, a mortgageable developer Fee in lieu of BSPRA is permitted.
  • Value of land already owned is included in eligible costs.