Obtaining construction lending for addition or expansion projects from HUD is rare and is difficult. In fact, in fiscal year 2013, the Department insured mortgages for only 3 projects with 398 units, totaling $16.9 million. The time it takes to go through HUD alone, because it is longer than traditional or commercial financing, steers many away from that option. Plus, the property to be expanded must already have a HUD mortgage on it, and it has to be stabilized. But, if you are willing to wait it out, it may be worth it. Governor’s Village, a 48-unit assisted living community which includes 24 units for residents in need of memory care, was built in 2001, but has been itching to expand ever since 2010.
Love Funding originally refinanced the property in 2007 with a HUD 232/223 loan, which replaced the existing commercial loan, and had the rate reduced in 2011. But the owner, Randal Residence, wanted to grow, and waited until demand numbers in the Cleveland area went its way, as there were already quite a few assisted living communities nearby. But, by late-2013 occupancy was strong (in the low 90s) and there was a need in Cleveland for assisted living, so Randal Residence, with the help of Bob Smallwood of Love Funding, went to HUD to obtain a $5.32 million loan, with a low, fixed-rate and coterminous with the other HUD loan on the property (28 years). Smallwood attributed the relatively quick closing (about 6 months) to HUD’s improved processing of new construction applications and the strength of Governor’s Village. With the loan proceeds, the borrower plans on nearly doubling the community’s capacity by adding another 38 assisted living units and taking away one memory care unit, bringing total capacity to 85 units. Randal Residence brought in contractor The Douglas Company and architectural firm C.C. Hodgson to complete the expansion.
