What’s Driving HUD MF, Healthcare Financing?

In 2017, Berkadia was the No. 1 originating HUD lender for the fourth consecutive year, with a volume totaling more than $1.7 billion for HUD’s fiscal year 2017. Berkadia recently expanded its HUD team in Washington, D.C. with the addition of Laura Saull Smith, an expert in providing HUD financing to owners of multifamily and healthcare properties. The move is expected to further strengthen Berkadia’s HUD offering. Connect Media asked Saull Smith to share insights into national HUD multifamily and healthcare financing, primarily under the LEAN and MAP insured programs through HUD in our latest 3 CRE Q&A.

Q: What are the main trends you are tracking in the HUD financing space for owners of multifamily and healthcare properties?  What’s on the horizon?
A: 1- Green Building – Lower MIP for multifamily, in exchange for energy efficiency construction and renovation, is a huge advantage.
2- Better technology – According to an Entrata survey, apartment residents reported they’d be willing to pay more for amenities like a better technology package; online payments; secure access; and smart home features.
3- Upgrades/renovations to affordable – Many tax credit projects are in need of upgrades and renovation. HUD is the “perfect fit” for these, offering long-term, non-recourse financing at historically low interest rates.
4- Technology innovation in Senior Housing – technology, like in-room “infra-red” sensors, allow staff to better monitor residents without infringing upon HIPAA and privacy rules, giving “peace of mind” to residents’ families.

Q: What are the HUD LEAN and MAP programs?  How do they work and how can MF and healthcare borrowers tap into them?
A: Both programs allow for the long-term financing (35-40 years) of senior housing (LEAN) and multifamily properties located across the United States. Projects are underwritten based solely on net income and value, and the loans are non-recourse to the borrower. HUD and GNMA insures the loans, which allows a lender like Berkadia (HUD approved MAP and LEAN lender) to sell the paper on Wall Street and obtain an interest rate between 50 and 100 basis points+ below conventional rates. The best way to work with either program is to hire an experienced HUD lender, especially considering the HUD’s staff shortage.

Q: Can you cite some examples of deals and how borrowers successfully secured this type of financing for their projects?
A: 1- Viera Assisted Living – 86-unit project financed using a new “model” for Veterans’ assisted living needs, combining the VA’s EUL program (Enhanced Use Lease) with financing insured by HUD. Developer Invenco Senior Housing LLC obtained a lower interest rate than conventional financing could offer, and at least 15 more years to the loan term.
2-St. Paul Square and Adriatica Senior Apartments – Both projects were financed using the HUD 221(d)4 program on a unique town center site in McKinney, TX, modeled after Croatian fishing village, Supetar. The first is market rate and fully stabilized; the second, an age-restricted (Head of Household 62+) project, opened earlier this year and currently is in lease-up.

For comments, questions or concerns, please contact Dennis Kaiser