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We closed on a $4.68 million FHA-insured HUD LEAN loan for Transcendent Healthcare of Boonville, a 72-bed skilled nursing home in Boonville, Indiana.

Jeff Davis says the fully amortized, 27-year term loan was arranged for the owner, an Indiana limited liability company. Cambridge Realty Capital Ltd. of Illinois, the Cambridge affiliate responsible for underwriting insured healthcare loans, closed the transaction using HUD’s Section 232.

Davis said the loan was processed in the “Green Lane,” a special queue created by HUD to speed the underwriting process for low-risk loans.

The recent plunge in the 10-year U.S. Treasury bond rate means senior housing and healthcare borrowers will be getting an even more attractive interest rate on their HUD LEAN mortgage loans in the weeks ahead, funding expert and Cambridge chairman Jeffery Davis observes.

According to Davis, interest rates for HUD 232 loans tend to mirror developments in the government bond market. In May, there was a significant 50 basis point drop in 10-year Treasury yields, from a high of 3.76 percent in April to 3.25 percent a month later.

Bond yields nudged up slightly in early June but remain well below highs for the current calendar year.

Jeff explains:

It’s not uncommon for volatility in the equities market to drive bond yields lower. The economic crisis in Europe, a disappointing job report and the calamitous oil spill in the Gulf all have investors on edge. Some worry that the U.S. economy could be headed for a double-dip recession, while others, including Fed Chairman Ben Bernanke, see a tepid recovery continuing but with stubbornly high unemployment. Whichever scenario unfolds, it’s unlikely that Treasury bond yields will be moving dramatically higher anytime soon.

Davis said the Cambridge staff is reminding senior housing and healthcare clients that rates for refinancing with the popular new HUD LEAN product are probably as low as they’re likely to get in the current.

Want to take advantage of these rates? Contact us.

Do you think interest rates will continue to drop? Or do yo agree that they’ve hit bottom for this cycle?

Last week, our CEO Jeff Davis attended the Civic Affairs Society Breakfast Forum at the University Club of Chicago. The topic of discussion was “Issues Today and Tomorrow”, with Dr. Charles L. Evans serving as keynote speaker.

Charles L. Evans is the president and CEO of the Federal Reserve Bank of Chicago.  He serves on the Federal Open Market Committee and the Federal Reserve System’s monetary policy-making body. Evans has published several articles in financial journals and has taught at the University of Chicago, as well as other universities.

Dr. Evans reported that the gross domestic product is expected to grow at a rate of 3.5% this year. While that may seem slow, 3.5% is considered a moderate rate for a rebound like this one. In the last quarter, the gross domestic product increased, and should continue to increase, thanks to the federal government stimulus, increased inventory consumption, and increased consumer spending. Evans noted that the auto industry alone has seen an increase of 17% in sales.

As evidence of the still-struggling economy, recovery in the job market continues at a snail’s pace. Job increases will come about modestly, while hiring will continue to be slow. Part-time and temporary hiring, however, are at an all-time high.

On a more positive note, inflation is projected to stay at 1.25%, and rise to 1.75% 2012, which is well below Evans’ 2% guideline.

Dr. Evans finished his talk by discussing the European debt crisis. He explained that there will be a lower demand in Europe for U.S. products, and more European imports to the U.S., but Evans feels that U.S. panic over the effects of the crisis are overblown. European exports make up only 15% of our economy. In contrast, trade with Canada alone makes up 18% of our economy.

Overall, the economy is on good footing, according to Evans. Recovery will progress, and Evans is optimistic that there won’t be slippages. The federal stimulus was a strong lubricant in the process of bringing the U.S. up to speed, and recovery could not have happened with out it. That being said, Dr. Evans feels an entitlement program will continue to have drag on the economy as well as commercial real estate. Expect slowdown to continue for some time, but remember that recovery is imminent.

Do you think the U.S. economy is on good footing? Or do you think we should be more concerned about what’s going on in Europe?

Joe Resor, Resor Financial Group

It’s not uncommon for healthcare clients to labor under the impression that applying for FHA-insured HUD financing means enduring a tedious, inflexible, by-the-numbers process, says Joseph Resor.

Joseph is a banking, merger, and acquisition consultant. He’s the CEO of Cleveland-based Resor Financial Group, a boutique consulting and investment banking firm. RFG is working with Cambridge on a multi-facility transaction involving the purchase and refinance of a 14-property portfolio using HUD’s new LEAN funding program.

“Borrowers sometimes get this idea based on personal experience or horror stories from others,” says Joseph. “But not all HUD underwriters are alike. Some are able to bring creativity and out-of-the-box thinking to the process.”

Throughout the process, Cambridge has come up with creative ideas and solutions that have the transaction steaming towards a successful conclusion.

Joseph says RFG helps senior housing and healthcare clients raise debt capital and facilitates mergers and acquisitions for both buyers and sellers. The company also consults clients on various strategic and tactical aspects of their businesses.

“When the task is to raise debt capital to refinance an existing property or make additional acquisitions, FHA-insured HUD funding has emerged as a very attractive option in today’s tight capital markets. Cambridge understands the nuances of HUD financing and can apply tailored solutions better than anyone else in the business,” Joseph says.

Cambridge is a niche provider that has focused exclusively on senior housing and healthcare financing for many years. Joseph says our staff is knowledgeable, focused and professional, and understands what will or will not work. ”Cambridge definitely is the go-to company for the FHA option,” he said.  ”The amount of success the company has had in the marketplace speaks to its depth and expertise in this area.”

Looking for an update on this week’s news? Here’s a list:

‘Doughnut hole’ Medicare drug rebates start going to seniors soon

The L.A. Times reports that $250 checks will be sent out to seniors soon.

Nursing organizations release list of competencies for nursing home culture change

Nursing organizations are working together to raise the standard of living in nursing homes, and have released a list of basic standards.

For Elderly, a Different Different of Make a Wish

The Seniors Have Dreams Too organization works to grant “wishes” for elderly citizens.

Senior Housing News Lists the Week’s Transaction Briefs

Check out the mention of Cambridge in the third paragraph!

What’s the Best Way to Handle Departures from a Senior Living Facility?

Patricia Conlon gives several tips to help seniors have smooth transitions between facilities.

Study of health-care law rebuts state protests on Medicaid costs
The Federal government will bear the brunt of Medicaid costs, and many governors predict fiscal calamity.

Want to know what clients are looking for in senior housing facilities?

• The Washington Post on Assisted Living Options for Aging Parents
• U.S. News on 9 Things to Consider in Your Search for an Assisted Living Facility

Did we miss anything? What do you think the most important headline of the week was?

Caution is still the operative word for the senior housing and health care industry. Potential borrowers must be prepared to over overcome the conservative instincts that define the current business climate. But what’s the best way for a long-term care facility to demonstrate their business acumen? Here’s a three step process to beginning the search for funding:

Step One: Evaluate Your Needs

Before starting a dialogue with lenders or financial intermediaries, senior housing/healthcare borrowers should carefully evaluate their needs and the various types of funding that may be available to them.

In today’s tight credit markets, it’s important for borrowers to know specifically what type of loan they need and what they expect it to cover. Is it money for new construction? A permanent mortgage? Rehab and expansion?

Step Two: Examine Your Options

Today’s borrowers may qualify for a variety of different products ranging from short-term bridge loans to fixed- rate long-term loans. Government-insured HUD loans are available for nursing homes and assisted living facilities, and Fannie Mae and Freddie Mac have programs for independent living and assisted living properties. Credit companies are underwriting loans for assisted living and independent living properties, and banks, finance companies and brokerage companies are cautiously funding all property types.

Step Three: Enlist Help

Wise borrowers don’t presume they understand capital markets well enough to sort everything out on their own. A long-term care facility must be able to show that they are making money, or that they have the potential to do so. This isn’t good time to eschew the expertise of a financial intermediary or consultant.

Borrowers typically need advice when dealing with the process of gathering and presenting information for prospective lenders. The type of loan they’ll qualify for will generally depend upon the performance and location of the property and the borrower’s financial strength. Make sure you find a consultant that is willing to consider every possibility.

Want to start your search with us? Fill out our deal form.

Did we skip a step? What process do you go through before applying for a loan?