With all the construction going on today in the seniors housing and care industry, how are these developers financing their projects? Once you get past the longer lines and list of regulations, HUD has a few attractive options. Walker & Dunlop is one lender that has worked with HUD a good amount recently to fund new construction and expansion projects for borrowers across the country. One such example is a $5 million construction/permanent loan through HUD’s 232 program for TDK Companies to build a 36-unit assisted living/memory care community on its existing 82-unit AL campus is Murfreesboro, Tennessee. Primarily a build-and-hold multifamily developer, TDK forayed into the seniors housing space in 2008 with the opening of the Murfreesboro community, which was built originally with a $10.5 million HUD 232 loan. After a slow start (as it was for most communities opening in 2008), the community soon had a waiting list by 2010 with experienced Atlanta-based operators Beacon Communitiesmanaging, and began exploring the option to add memory care and higher acuity AL units to its campus. Built in three 12-unit “pods”, each with a common area, kitchen, beauty salon, other amenities, and its own Certificate of Occupancy, the project should have its first units on line by January (having broken ground in June) and will be fully open by August 2016. In addition, each building will be for a different level of acuity. David Strange and Keith Melton of Walker & Dunlop led the way on the financing, which featured a 40-year term and a rate in the 3% range.
Messrs. Strange and Melton also closed a $39.7 million loan using HUD’s Section 232 Insurance Upon Completion loan program. The borrower, MW Group, originally planned in 2013 to finance construction of its 158-bed senior living community in Honolulu, Hawaii using HUD construction debt, but obtained a bank loan, and a lower floating interest rate, instead, to finance the original construction. The developer complied with HUD protocol and inspections throughout the process in order to obtain immediate access to this permanent financing, which features a 40-year term and low fixed rate. This loan followed a $37.05 million HUD refinance of MW Group’s existing 122-unit assisted living community in Honolulu, also arranged by Walker & Dunlop earlier this year. Though not for everyone, HUD construction debt particularly suits smaller developers with a build-and-hold strategy and those with a slower, methodical approach to building their portfolio.