|
| | Assisted Living
Project Construction Loans...
The times are changing; senior housing property developers seeking
assisted living
construction loans, mezzanine
loans and/or bridge
loans are finding the increased equity requirements hard to
accept. In point of fact, most assisted living construction  loans
are still being provided through the FHA/HUD
Section 232 Board & Care Loan Insurance Program, but the lead
time for processing in most major markets makes the HUD program
non-competitive due to a variety of reasons:
 |
The HUD approach requires the senior housing developer to
shoulder the carrying costs of the project for 12 to 18
months. This adds significant working capital costs to the
project budget that are not part of the HUD reimbursement structure.
|
|
The HUD approach reduces the overall loan-to-cost ratio - in
some cases the effective loan-to-cost ratio dips below 80%.
|
|
The HUD approach requires the assisted living project to have
the market feasibility study continuously updated for each
successive 6-month period. HUD places limits on the
reimbursement for market feasibility studies, thus leaving the
developer to pay the freight two, three, even four times. If
the market conditions change (more competition enters the market)
the assisted living project may no longer qualify for underwriting -
leaving the assisted living developer out of business for the given
location until the market absorbs the new inventory.
|
Rainmaker's approach is to sidestep the entirety of the
HUD-insured construction loan process and create a structured funding
for the project that focuses on obtaining a commercial loan that is
non-recourse due to the amount of equity capital provided in the
financing structure that is over and above the requirement for any loan
to be issued.
Continued on
following page.
| |
|
|
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? |
|
