HEALTHCARE PROPERTIES | FHA/HUD Section 232/223(f)
Acquisition and Refinancing of Healthcare Properties
Our FHA/HUD Section 232/223(f) program provides long-term permanent financing for the acquisition or refinance of healthcare properties.
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 for-profit or not-for-profit owners. Single asset, special purpose entity.
Term
Up to 35 years, or 75% of the remaining economic life, but no less than 10 years.
Interest Rate
Locked before closing and fixed for the duration of the term. (Subject to market conditions.)
Guarantees
Non-recourse for the 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
| For-Profit | 100% | 80%* | 1.45 | .065% (0.45%) |
| Not-for-Profit | 100% | 85%* | 1.45 | .065% (0.45%) |
(*For acquisition financing, LTV increase by 5%.)
HUD Fees and Expenses
- FHA Application Fee of 0.30% of loan amount.
- FHA Inspection Fee of the greater of $30 per /bed or 1% of repairs.
Commercial Space
Limited to 20% of net rentable area and 20% of effective gross income.
Third-Party Reports
Appraisal, Environmental, Property Capital Needs Assessment (PCNA).
Repairs/Improvements
Funds for repairs, deferred maintenance, and capital improvements for generally up to 15% of value can be included in the loan amount, subject to the maximum loan limitations.
Timing
Approximately 6-9 months for engagement, submission, FHA/HUD review, and closing. Process may vary due to Office of Residential Care Facilities volume.
Funding
Ginnie Mae guaranteed mortgage-backed securities.
Other Program Parameters
- Escrows for property taxes, insurance, MIP and replacement reserves are required.
- Cash-Out is not permitted.
- Facilities financed under this program must be at least 3 years old.
- Existing debt to be refinanced must be at least two years old unless it was used for an eligible purpose as defined by FHA (refinancing of prior eligible indebtedness, arms-length acquisition, property improvements, operating losses, etc.).
- A master lease may be required when an owner finances 3 or more properties or $15 million or greater in combined loan amounts with the FHA healthcare programs within an 18-month period.