Platform Overview:
The bridge-to-HUD platform is an interim financing option when quick executions are
required or HUD regulations dictate the need for interim financing.
Borrower
Single purpose entity, bankruptcy remote entity
Purpose
Acquisition or refinance (including cash-out) because of timing challenges associated with
going directly to HUD, including ineligibility due to 3-year rule and debt seasoning that may be required by HUD.
Property Type
Skilled nursing, assisted living, memory care or any combination. Independent living units
are permitted so long as the total number of IL units does not exceed 30% of the total number of units for the project.
Loan Amount
$12,500,000 (can go higher with lender approved participants)
Underwriting
Underwritten NOI should be supported by Trailing-12 operations and three (3) years of
operating history. Exceptions are made on a case by case basis for newly constructed or renovated assets that have stabilized and have at least four (4) months of stabilized operating history at application and six (6) months of stabilized operating history at closing.
Timing
Typically 60 to 90 days from term sheet issuance by Midland States Bank (MSB) to closing.
It is anticipated that the bridge loan will fund expeditiously upon completion of MSB due
diligence, which may be prior to the date Love Funding (LFC) files the application with HUD.
Term
Six (6) months to three (3) years
Amortization
Typically 20 years (up to 25 years on a case-by-case basis)
Maximum LTV
75%. Based on appraisal engaged by and acceptable to lender
Minimum DSC
1.30x
Extension Options
Negotiable with performance covenants
Interest Rate
Based on current market conditions
Original Fee
Negotiable
Exit Strategy / Exit Fee
This program is designed to facilitate a take-out using FHA insured financing. As such, a sizing illustrating the take-out through HUD must be provided and should not be based on prospective NOI (exceptions apply to newly constructed or renovated assets that are utilizing this program to bridge the 3-year rule). Exit fee is typically 3.00% to be paid to LFC. Such fee is waived if LFC provides take-out financing through HUD.
Payments
Typically, principal and interest payable monthly on stabilized projects. Interest only option available on a case by case basis
Cash Out
Permitted, but cash-out proceeds will typically be held by lender as additional collateral
until LFC has loan committee approval for the HUD take-out, at which time the cash-out
proceeds will be released to the borrower in full so that the full amount is eligible to be
refinanced through HUD.
Recourse
Full recourse to borrower. Joint and several unlimited personal guarantees from all key principals, with a 20% or greater ownership interest..
Security
First mortgage or deed of trust, and assignment of rents and leases on the property.
Additional collateral may be required, depending on specific transaction.
Prepayment
Negotiated on a case by case basis
Standard Escrows
Typically borrower to contribute monthly to tax, insurance and replacement reserve escrows as required.
Additional Escrows
To be determined on a per deal basis
Expenses
Borrower will reimburse lender for all of lender’s out-of-pocket expenses associated with the transaction including but not limited to appraisal, legal, travel, environmental, closing, etc.