As demand for senior housing continues to rise, many operators are looking to respond with new development projects — especially for assisted living and skilled nursing communities. CFG has certainly seen evidence of this uptick in new construction projects. Building a skilled nursing or assisted living facility from the ground-up can be a daunting task, but if unmet demand has been established in the market, securing financing is the logical next step. Whether you are considering HUD-insured financing or conventional financing, keep in mind that the lender you select should have extensive experience with construction projects, as well as a thorough understanding of healthcare finance as a whole.
There are several benefits of the HUD 232 program, including low interest rates, non-recourse loans, longer amortization and other terms that are more favorable to the borrower. When taking a loan application into consideration, HUD wants to see that the borrower has demonstrated previous success in the industry. If a borrower cannot demonstrate a history of success, the deal isn’t necessarily off the table — but it does become even more important to work with an experienced lender.
“The more experience the borrower has in this space the better, but at CFG we pride ourselves on our ability to shepherd any client through the HUD process to make it as seamless as possible and get the transaction over the finish line,” Erik Howard, Managing Director of Real Estate Finance said. “Because of the significant volume of loans we have closed with HUD, we understand how HUD will view the application and develop a strategy for that project that maximizes the borrower’s chances of closing.”
CFG’s expertise in this area has not gone unnoticed. Currently, CFG has eight new facilities that are at various stages in the HUD approval process for construction loans:
• Approved by HUD: one loan that totals approximately $20 million
• In HUD’s queue for review/approval: two loans that together total approximately $40 million
• HUD application underway with CFG: five loans that together total approximately $91 million
When a client presents a proposed construction cost and timeline, that’s where CFG’s expertise really comes into play. The team can quickly estimate how soon HUD will move on the deal, as well as the optimal financial strategy. While most of the new construction is run directly through HUD 232’s LEAN program, others begin with bridge loans when the project needs to be expedited or has a short timeline for completion. In this case, the CFG team structures the bridge loan in a way that will allow it to be easily taken out with HUD at a later date.
In addition, CFG is one of the largest servicers of HUD healthcare loans, including those for construction. “Our asset management department is solely dedicated to servicing clients’ HUD healthcare loans, including those for construction,” Howard said. “We know that many lenders choose not to service their loans after closing, but in an effort to build positive long-term relationships with our clients, we try to do as much of the heavy lifting as possible.”
For more information about CFG’s FHA/HUD loans for healthcare facilities, please visit our FHA/HUD Healthcare services page or contact Erik Howard at 410-513-8728.