financing capital projects at your hospital with fha ... · • learn how fha 242 mortgage...
TRANSCRIPT
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Financing Capital Projects at Your Hospital with FHA Mortgage Insurance
October 3rd, 2012 4:15 – 5:15
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Presenter F. Nick Bacqué Account Executive Department of Housing and Urban Development Federal Housing Administration Office of Healthcare Programs Office of Hospital Facilities
WWW.HUD.GOV/HEALTHCARE
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Learning Objectives • Learn how FHA 242 Mortgage Insurance can help lower the
cost of capital for Hospitals looking to finance construction projects
• Understand the programmatic eligibility determinants • Know how to start the process • Establish a general understanding of what healthcare
projects might be a fit for FHA programs
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Definition of Terms • HUD – U.S Department of Housing and Urban Development • FHA – Federal Housing Administration • 242 – Section 242 of the National Housing Act (NHA) gives HUD/FHA the authority to insure
mortgages for acute care hospitals. • 232 – Section 232 of the National Housing Act (NHA) gives HUD/FHA the authority to insure
mortgages for nursing homes, assisted living, and other long-term care residential facilities • 223 (f) – Section 223 (f) of the NHA Act gives HUD/FHA the authority to insure mortgages for 100 %
refinancing loans pursuant to 242 and 232 • 241 – Section 241 of the NHA gives HUD/FHA the authority to insure mortgages for supplemental
loan for HUD portfolio hospitals.
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Who We Are • FHA Office of Healthcare Programs
– Section 242 Hospital Facilities – Section 232 Residential Care Facilities – Office of Architecture and Engineering
• Programs provide FHA mortgage insurance to
back the mortgage on healthcare capital projects
• Healthcare principal balance of $27 billion with 2,740 loans (as of 12/31/11)
Willow Towers Assisted Living Facility New Rochelle NY
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What We Do • Enable the affordable financing of needed healthcare facilities
• Improve access to quality healthcare nationwide
• Reduce cost of care
• Strengthen communities - healthcare facilities are economic engines
– Healthcare facilities employ millions of Americans and support trillions in economic activity – FY10 and FY11 hospital projects (new Section 242 commitments) create an estimated 19,130
new jobs during construction and $4.7 billion overall economic benefit*
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How Does FHA Do This?
Healthcare Project
Bank
Investor (Optional)
FHA
Mortgage Insurance
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How Does FHA Benefit My Project?
• Provide Access to Capital
• Allow Flexible Funding Options
• Enhanced Credit Rating/Reduced Cost of Capital
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Use of FHA-Insured Loans • Construction Financing • Refinancing • Replacement Facilities • Expansion • Modernization • Equipment • Remodeling
Capital Health System. Trenton NJ $755.9 million mortgage
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Healthcare Facilities that Utilize FHA
• FHA serves healthcare facilities in all 50 states and territories • For-profit, not-for-profit, and government-owned health care
facilities • No limit on size – big or small
– From a $500K nursing home refinance – To a $700+ million large urban teaching hospital construction
Lakeway Regional Medical Center Lakeway, TX
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FHA Offers Attractive Loan Terms • No maximum loan amount • No cash required at closing, with sufficient equity • FHA insures 99% of the loan amount • Loan term can be up to 25 years • Fixed annual premium of 0.7% of remaining
balance (for new construction hospitals) • Upfront fees: 0.15% Application, 0.3%
Commitment, 0.5% Inspection
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Is Your Project Eligible for FHA Mortgage Insurance?
• Eligibility
• Market need
• Financial feasibility
University of New Mexico,
Albuquerque, NM $183 million mortgage
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General Eligibility Requirements (1/2)
• Both Section 242 and Section 232 Programs: – Mortgage must be on real estate held
• In fee simple, or • Under a long-term lease
• Section 242 Hospitals:
– 0% (at minimum) Average Operating Margin for the past 3 years
– 1.25 DSC (at minimum) for the past 3 years – 50% of Patient Days must be Acute Care – 90% Loan to Value
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General Eligibility Requirements (2/2)
• Section 232 Residential Care Facilities: Type of Facility Loan-to-
Value Debt Service
Coverage
SNF/ILU – For-Profit 80% 1.45
SNF/ILU – Non-Profit 85% 1.45
New Assisted Living Unit – For-Profit 75% 1.45
New Assisted Living Unit – Non-Profit 80% 1.45
Existing Assisted Living Unit – For-Profit 80% 1.45
Existing Assisted Living Unit – Non-Profit 85% 1.45
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Other Program Requirements • Borrower must have sufficient equity and
working capital on hand to be considered for 242 mortgage insurance.
• FHA cannot insure a mortgage for a project in progress
• Hospital must agree to contribute to a Mortgage Reserve Fund
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Steps to Obtaining your FHA-Insured Mortgage
1. Self assessment 2. Choose an FHA Lender 3. Initial contact with HUD 4. HUD conducts Preliminary Review (242 Projects Only) 5. Pre-application meeting (242 Projects Only) 6. Application 7. Application review 8. HUD decision 9. Insurance commitment 10. Initial closing 11. Construction 12. Final closing
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Case Study of Hospital That Utilized FHA Mortgage Insurance
Rio Grande Hospital Del Norte, CO
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Basic Hospital Facts (Pre-Financing) • Name: Valley Citizens’ Foundation for Health Care, Inc.
d/b/a Rio Grande Hospital • Location: Del Norte, CO • Designation: Critical Access Hospital • Beds (pre-242): 12 beds (6 acute, 6 swing) • Old Facility: 15,000 sq/ft leased facility, shared with nursing home. Obsolete
infrastructure, asbestos in building, ER is cramped one room that is poorly equipped. Landlord/owner will not upgrade or sell facility.
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Phase 1: Rio Grande Receives Commitment for FHA 242 Financing
• Date Commitment from FHA Received: May 15, 2003
• Construction Begins: July, 2003
• Project Cost: $11,533,263
• Amount of Mortgage: $10,000,000
• Mortgage Interest Rate: 5.375%
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Result: New Stand Alone Rio Grande Hospital
Grand Opening: August , 2004
New Facility Details: • 35,000 sq/ft Critical Access Hospital
• 14 beds (10 acute, 4 swing)
• Expanded Emergency Room
• Updated Imaging Center including X-Ray, fluoroscopy, ultrasound, mammography, and CT Scanner
• New Laboratory • New Pharmacy
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Phase 2: Rio Grande Receives Commitment for FHA Section 241 Mortgage Insurance Addition
• Date Commitment from FHA Received: September 28, 2007
• Construction Begins: December 2007
• Project Cost: $2,380,491
• Amount of Mortgage: $1,950,000
• Mortgage Interest Rate: 6.75%
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Result: New Medical Office Building for Rio Grande Hospital
• Grand Opening: October, 2008 New MOB Details:
•7,500 sq/ft Outpatient Clinic
• 14 Exam Rooms
• 6 Offices
• New Conference Room
• Adjacent to Rio Grande Hospital
• Expanded Emergency Room
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Phase 3: Rio Grande Refinances Existing FHA Mortgages at Lower Interest Rate
• Date Commitment to Refinance from FHA Received:
• Original Interest Rates on FHA Mortgages: 5.375% $8,268,971 6.75% $1,841,144
• Total Unpaid Principal Balance on Mortgages: $10,110,115
• New Refinanced Interest Rate: 3.4%
• Cost Savings from Refinancing: Per Year $168,258 Life of Mortgage $1,627,657 (NPV)
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Final Result
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Initial Contact with HUD • Describe project • Ask questions • Provide additional information • Receive pre-application list
HUD Washington, DC (202) 402-2221 1-877-HLTH-FHA
Email inquiries: [email protected]
Contact Info:
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THANK YOU
www.hud.gov/healthcare
HUD Washington, DC (202) 402-2221 1-877-HLTH-FHA
Email inquiries: [email protected]
Einstein Medical Center Montgomery East Norriton, PA