FHA Section 232 Mortgage Insurance Program

PURPOSE To provide funding for the new construction or substantial rehabilitation of nursing homes and assisted living projects. This program also provides permanent take-out financing upon completion of construction. ELIGIBLE PROJECTS Licensed Nursing Homes, Assisted Living, Intermediate Care, and Board and Care a) Must provide continuous protective oversight b) Must offer three meals per day c) Facility must be licensed by state d) Non-Resident day care not to exceed 20% of gross area and 20% of gross income e) May include up to 25% non-licensed independence living units COMMERCIAL SPACE LIMITATION Limited to 10% of net rent-able area and 15% of effective gross income. INTEREST RATE Fixed for terms of loan, determined by market conditions at time of rate lock. Rate lock deposit is 0.5% and refunded at closing. LOAN TERM Actual construction period plus 40 years fully amortizing with interest only payable during construction period. ASSUMPTION/PREPAY Negotiable with best pricing for 10 years of call protection (can be a combination of lockout and/or penalty); loan is fully subject to HUD approval. ESCROWS a) Taxes, insurance and mortgage insurance premium are escrowed monthly; b) Replacement reserve required and the monthly deposit amount determined in accordance with HUD guidelines c) Working Capital Reserve equal to 2% (post in cash or LOC); d) Operating Deficit Reserve determined by HUD at commitment; e) Twelve month Debt Service Reserve for non-licensed ILF units; f) Minor movables; g) Offsite escrows (if applicable) DAVIS BACON WAGE Payment of prevailing wages, as determined by the Department of Labor, is required for all contractors and subcontractors. LOAN PARAMETERS New Construction: Maximum loan amount will be lesser of a) Recommended % of LTV b) Recommended % of Replacement Cost; or c) Recommended Debt Service Coverage Ratio   Substantial Rehabilitation: Maximum loan amount will be lesser of a) Recommended % of LTV b) Recommended % of Rehabilitation Cost plus the lesser of: existing indebtedness or recommended % of as-is value for properties owned; or c) Recommended % of Rehabilitation Cost plus the lesser of: recommended % of purchase price or recommended % of as-is value for properties to be purchased; or d) Recommended Debt Service Coverage Ratio *Cost of offsite improvements, FF&E, marketing, construction contingency and operating deficit reserve excluded from loan amount. HUD has recommended the following parameters: For Profit ALF: 75% LTV, 1.45 DSCR For Profit SNF, Board & Care and ILF: 80% LTV, 1.45 DSCR Non-Profit ALF: 80% LTV, 1.45 DSCR Non-Profit SNF, Board & Care and ILF: 85% LTV, 1.45 DSCR LOAN AMOUNT No maximum (loan is limited by loan parameters and HUD does not allow for any equity take out for healthcare properties) HUD APPLICATION FEE 0.30% of estimated loan amount due with submission of application. HUD INSPECTION FEE 0.5% of the mortgage amount for new construction and 0.5% of total improvements for substantial rehabilitation. THIRD PARTY REPORTS Appraisal, Market Study, Environmental and Architectural and Cost Review NON-RECOURSE* Nothing contained herein is intended to be, nor should it be construed as, a commitment to lend on these or any other terms. Arizona MB007451