healthcare
Hospital
Refinance/Moderate Rehab
FHA will refinance existing debt, normal transaction soft costs and moderate rehabilitation costs up to 20% of the mortgage amount with a fixed rate fully-amortizing 25-year term loan. Note that the requirement to do capital improvements was eliminated by FHA in 2013. The borrower must show that the refinance will significantly lower the debt service cost of the facility or provide some other important benefit. To be eligible, the hospital must provide at least 50% of its patient days to acute care (the diagnosis and treatment of an immediate medical need which will stabilize the patient). However, FHA will waive this requirement in the case of hospitals planned to serve isolated populations that do not have practical access to full-scale acute care facilities. HUD will want to see that the hospital has sufficient historic operating income to support the new debt and is adequately funded to cover any temporary declines in revenue. The process begins with an extensive screening questionnaire to determine overall eligibility. No third party reports are required at this stage. Once a project has cleared initial screening, there will be a meeting with key FHA personnel in Washington. Click here for a term sheet with more details.
Sub Rehab
FHA offers a program for substantial rehabilitation of existing hospitals. If there is no mortgage debt on the hospital, FHA will finance up to 100% of the cost of substantial rehabilitation. When a hospital is mortgaged, FHA will finance the cost of the rehabilitation plus up to 90% of the market value of the land and improvements prior to substantial rehabilitation. The program is similarly liberal for acquisitions. FHA will finance up to 100% of the substantial rehabilitation cost plus up to 90-100% of the amount of existing debt or acquisition cost. The construction loan converts to a fixed rate fully-amortizing 25-year loan. The interest rate on hospital substantial rehabilitation loans is similar to those available for multifamily projects. To be eligible, the facility must provide at least 50% of its patient days to acute care (the diagnosis and treatment of an immediate medical need which will stabilize the patient). However, FHA will waive this requirement in the case of hospitals planned to serve isolated populations that do not have practical access to full-scale acute care facilities. There also are important adjustments for hospitals that do a lot of outpatient acute care. HUD will want to see that the hospital has sufficient historic operating income to support the new debt and is adequately funded to cover any declines in revenue during the rehabilitation period. The process begins with an extensive screening questionnaire to determine overall eligibility. No third party reports are required at this stage. Once a project has cleared initial screening, there will be a meeting with key FHA personnel in Washington. Click here for a term sheet with more details.
New Construction
FHA will finance up to 90% of the replacement cost of new acute care hospitals with construction loans that convert to fixed rate fully-amortizing 25-year loans. The interest rate on hospital new construction loans is similar to those available for multifamily projects. To be eligible, the facility must provide at least 50% of its patient days to acute care (the diagnosis and treatment of an immediate medical need which will stabilize the patient). However, FHA will waive this requirement in the case of hospitals planned to serve isolated populations that do not have practical access to full-scale acute care facilities. There also are important adjustments for hospitals that do a lot of outpatient acute care. The start-up cost of a new hospital can be daunting and FHA will require that a substantial debt service and operating deficit reserve funded at closing. The process begins with an extensive screening questionnaire to determine overall eligibility. No third party reports are required at this stage. Once a project has cleared initial screening, there will be a meeting with key FHA personnel in Washington. Click here for a term sheet with more details.
Acquisition
For arm’s length sales, FHA will finance up to 90% of the replacement cost of the hospital including equipment with a 25-year term fixed rate fully-amortizing loan. For non-arm’s length sales, the loan is limited to the amount required to pay off existing debt, normal transaction soft costs and hard costs up to 20% of the mortgage amount. Note that the requirement to do capital improvements was eliminated by FHA in 2013. To be eligible, the hospital must provide at least 50% of its patient days to acute care (the diagnosis and treatment of an immediate medical need which will stabilize the patient). However, FHA will waive this requirement in the case of hospitals planned to serve isolated populations that do not have practical access to full-scale acute care facilities. HUD will want to see that the hospital has sufficient historic operating income to support the new debt and is adequately funded to cover any temporary declines in revenue. The process begins with an extensive screening questionnaire to determine overall eligibility. No third party reports are required at this stage. Once a project has cleared initial screening, there will be a meeting with key FHA personnel in Washington. Click here for a term sheet with more details.