| FHA 232 LEAN New Construction Loan Nationally Assisted Living Facility and Nursing Home Finance Kendall Realty Advisors LLC Chicago, IL |
HUD - 232 - New Construction or Substantial Rehabilitation of Skilled
Nursing Home - Assisted Living Facilities - Profit-Motivated Sponsor
ELIGIBLE PROPERTIES: Proposed new construction or substantial rehabilitation (including both purchase
and refinancing) of skilled nursing, assisted living and other specialty care facilities.
Assisted Living facilities must provide room, board, and continuous protective oversight. No
“founder fees”, life care fees or other up-front fees are allowed.
In order to qualify as a substantial rehabilitation project, either (1) the cost of repairs, replacements or
improvements must exceed 15% of the property’s value after completion, or (2) two or more major
building systems must be replaced.
MAXIMUM LOAN:
New Construction:
Amount equal to the lesser of:
1. 90% of appraised value, including major moveables;
2. 90% of the HUD estimated replacement cost; or
3. 1.11 debt service coverage.
Substantial Rehabilitation Projects:
The lesser of the three criteria above; or
Refinance:
1. 100% of the estimated rehabilitation cost plus the lessor of:
a. existing secured indebtedness; or
b. 90% of the “as is” value before rehabilitation
Purchase:
1. 90% of the estimated rehabilitation cost plus the lesser of:
a. 90% of the actual purchase price of the property; or
b. 90% of the “as is” value before rehabilitation. may need higher DSC and lower LTV
INTEREST RATES: Fixed rate determined by market rates at the time of rate lock.
AMORTIZATION: Construction loan which converts into a 40-year, fully amortizing loan.
PERSONAL RECOURSE: Non-recourse.
ASSUMABILITY: Assumable, subject to lender approval.
SUBORDINATE FINANCING: Generally not permitted, special requirements apply.
PROFESSIONAL LIABILITY INSURANCE: Required in all cases. The minimum requirement is $1 million
per occurrence and $3 million aggregate. Further information regarding this requirement is available
upon request.
WAGE REQUIREMENTS: Adherence to Davis-Bacon prevailing wage laws is required.
BOND ENHANCEMENT: Program can be used to provide a AAA rating of tax exempt bonds.
ANNUAL MORTGAGE INSURANCE PREMIUM: During the construction period, the MIP is paid annually in
advance, based on a rate established by HUD. The rate is fixed at initial endorsement. After
commencement of amortization, the MIP is escrowed monthly based on the average principal balance.
ESCROWS: Monthly escrows for real estate taxes, property insurance, reserves for replacement, sinking
fund (if applicable), and mortgage insurance premiums.
COMMERCIAL SPACE: Up to 10% of the gross floor area of the project. Commercial activity must be
compatible with the use of the facility. Day care space is not considered commercial.
ENVIRONMENTAL ISSUES: Special rules apply for properties which are located in Flood Hazard Zones as
designated by FEMA.
APPLICATION FEE: A non-refundable fee of 0.3% of the requested mortgage amount is payable to HUD at
the time of application, plus estimated underwriting costs for market study, appraisal,
architectural/engineering report, cost analysis, environmental assessment and other loan processing
costs.
INSPECTION FEE: For New Construction projects, 0.5% of the mortgage amount is payable to HUD at
Initial Endorsement. For Sub-Rehabilitation Projects, 0.5% of the cost of improvements is paid to HUD at
Initial Endorsement.
FINANCING AND PLACEMENT FEES: Negotiable.
CLOSING EXPENSES: Standard transaction costs, including legal fees, title insurance and survey.
OTHER HUD REQUIREMENTS: Cash escrows or letters of credit are required for the following:
1. Forecasted operating deficits, to be released 12 months after final endorsement if breakeven
operations have been achieved.
2. 2% of the mortgage amount for working capital, to be released 12 months after project completion if
loan is not in default.
3. Purchase of any minor non-realty items.
4. 100% performance and 100% payment bond or a letter of credit equal to 15% or 25% (depending
on structure type) of the construction contract.
5. If not covered by performance and payment bond, 2.5% of the construction contract amount as
latent defects guarantee.
6. 100% of off-site construction costs.
STATE LICENSURE: A Certificate of Need and an operating license must be submitted if required by state
or local law. An assisted living or board and care facility must be regulated by the state or political
subdivision in which the facility is located.
HUD PROCESSING TIME: One or two stages for HUD Multifamily Accelerated Processing (MAP)
procedures:
1. Pre-Application Stage: 45 days for review.
2. Firm Commitment Stage: 45 days for review.
3. One stage combining items 1 and 2 above: 60 days.
Scott Kendall 847-903-7578 kendallrealty@gmail.com
Charles Kendall 773-259-7074 kendallrealtyadv@gmail.com
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