Expert Says HUD Loans Becoming More Attractive To Multiple-Facility Healthcare Owners/Operators
Chicago, IL - Cambridge Realty Capital, a senior housing/healthcare lender, says its Multi-Facility Plus lending program can effectively be used by owners and operators of multiple properties to take advantage of the attractive terms and conditions available to borrowers who qualify for FHA-insured HUD loans.
"Historically, because of the agency's underwriting requirements, HUD loans have been widely perceived as a funding source for smaller Ma & Pa owners. However, enthusiasm for HUD as a funding source for owners of multiple property portfolios has been gathering momentum for many years and almost all of Cambridge's clients are multi-facility regional owner-operators," Cambridge Chairman Jeffrey A. Davis observes.
Over the past 15 years, Cambridge is believed to have closed more than 275 senior housing/healthcare transactions totaling more than $1.75B. The company is a HUD 232 FHA/MAP-approved lender, and last year is believed to have funded more nursing homes than any other HUD lender in the nation.
Davis said the company's Multi-Facility Plus financing program has historically tapped the resources of Wall Street partners to provide conventional funding for clients with larger portfolios of ten or more senior housing/healthcare facilities. The program is structured to provide competitive rates across the board with better overall loan execution and a more timely response from investors. However, Multi-Facility Plus funding options are not limited. FHA-insured HUD loans are proving to be a viable option for many borrowers, he points out.
"With an experienced HUD lender in the picture, Multi-Facility HUD financing packages may come together more easily than some might think, in about the same amount of time it takes to put together a single property HUD loan," he said. Davis describes an $80M refinance package arranged for a not-for-profit ownership group of eight southern Illinois nursing homes that the company recently closed. The insured HUD loans were separately underwritten for individual properties in the group over a period of several months. Davis says borrowers like the idea that the Multi-Facility HUD loan package is inherently flexible. Even though only one loan is made, the borrower has the ability to pay off loans for individual properties in the package on an individual basis.
Rather than having multiple sets of discussions regarding loan terms, loan covenants, amortization, appraisals and so forth only one primary conversation takes place with interest rates for each loan set prior to closing. Also, rather than having the accounting office write out multiple checks to multiple lenders, only one lender is paid for each loan.
Theoretically, Davis says the processing of a Multi-Facility HUD loan package does not need to be staggered, and may not take much longer than a single-facility transaction. There are other advantages. For example, when portfolios are funded conventionally, the individual loans are typically cross-collateralized. In contrast, with the HUD financing on multiple facilities, each loan in the package is individually secured, Davis said. If there are 10 or fewer properties in the portfolio, HUD's medium or large operator criteria for corporate level underwriting will not apply, which can save both time and money for qualified borrowers. However, no matter what size the portfolio is multi-facility owners should find the HUD 232/223 (f) option appealing, Davis points out.
"The rewards for patient borrowers who qualify for HUD funding are lower rates plus superior terms and conditions. At this time, interest rates on HUD loans are approximately 5.75 percent. A 35-year term amortization and the non-recourse nature of these loans helps to make a compelling case for the committed long-term owner," he said, adding: "We've been involved in considerably more conversations and engagements regarding multiple facilities and suspect this trend might continue."
SOURCE: Cambridge Realty Capital