Tool · budget, lease-up and HUD 232 construction sizing

Senior housing development calculator

From land and hard costs to a stabilized building: the budget, the month-by-month lease-up, the operating deficit a lender will make you fund, and what a HUD 232 construction loan would cover.

Project Building type Borrower Units or beds

Budget Land, $ Hard cost per unit, $ Your contractor's number; no public benchmark exists. Soft costs, % of hard cost Design, permits, reports, legal, furnishings. Construction months Construction loan rate, % Average share of the loan drawn during construction, % An assumption for interest carry.

Lease-up Occupied units at opening Net move-ins per month Stabilized occupancy, % Monthly revenue per occupied unit, $ Fixed operating cost per month, $ Staff, utilities and overhead the building carries from day one. Variable cost per occupied unit per month, $

Permanent loan and value Cap rate on stabilized NOI, % Your assumption. HUD note rate, %

Every number starts as an example. Replace them with your pro forma.

Equity and escrows to fund

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Occupancy by month from opening. Darker bars lose money; the line marks breakeven.

What the calculator does

Total cost is land, hard cost, soft cost, construction interest (the loan rate on the average share drawn, for the construction months) and HUD's financing costs: the 0.30% application fee, the 0.50% inspection fee for new construction and the first year of the 0.77% mortgage insurance premium, which the lender pays at initial closing.

Lease-up starts at the opening census and adds the net move-ins each month until stabilized occupancy. Each month's cash flow is revenue on occupied units less fixed and variable cost and the HUD loan's principal, interest and mortgage insurance. The operating deficit is the sum of the losing months until the building breaks even; HUD sizes its initial operating deficit escrow the same way, as "the total of all cumulative monthly losses projected to occur until the project reaches breakeven operations" (Handbook 4232.1, Appendix 2.1).

The HUD 232 loan is the lowest of 90% of total cost, the loan-to-value limit on the value at your cap rate, and NOI divided by 1.45 and by the 40-year loan constant plus the 0.77% annual premium. A 4% working capital escrow and the operating deficit escrow are added to the equity, since HUD does not let either be financed.

What it leaves out

Davis-Bacon prevailing wages apply to Section 232 construction (12 U.S.C. 1715c); build them into the hard cost. HUD also requires payment and performance bonds or a cash or letter-of-credit assurance (15% for buildings up to three stories, 25% for elevator buildings of four or more), may require a 6 to 12 month debt service reserve where new units enter a market, and needs a market study and a state certificate of need for nursing beds where the state has one. None of those is modeled here.

Send this pro forma to the desk

A person at Janover Capital reads it and replies about whether the numbers look like HUD 232 construction, a bank construction loan with a HUD takeout, or something else. Your inputs are attached.

Name

Work email

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You are the

Facility name or CCN

What do you need?

Approximate loan amount (optional)

Timing

Anything the desk should know (site, unit mix, care levels, budget, entitlement status)

This goes to Janover Capital LLC only, and a person there will reply. It is not a loan application, and nothing here is an offer to lend. Please leave out resident names and any health information.

An estimate, not a market study, an appraisal, a loan offer or a commitment. Absorption is operated by Janover Capital LLC and is not affiliated with HUD, FHA, CMS or any government agency.

Questions

How much can HUD 232 lend on new assisted living construction?

The lowest of 90% of total estimated replacement cost, 75% of value for a for-profit borrower (80% for a qualifying nonprofit), and the loan NOI can carry at 1.45 coverage with the mortgage insurance premium counted. New skilled nursing allows 80% and 85% of value. Source: HUD Handbook 4232.1, Section II, 3.2 and 3.4.

What escrows does a HUD 232 construction loan require?

A working capital escrow of 4% of the loan, half of it a construction contingency, and an initial operating deficit escrow sized to the losses projected until the building breaks even. Neither is mortgageable, so both come from equity, cash or a letter of credit. Source: HUD Handbook 4232.1, 2.6.K and Appendix 2.1.