Senior Living News Wire

In the past few years, the U.S. Department of Housing and Urban Development has taken a major role in the healthcare financing arena, as private capital became scarce while the need for seniors housing and care financing increased, and the top three lenders dominated HUD’s financing portfolio.

Capital Funding, LLC funded the most loans at 85, or 20% of the 2011 Lean portfolio of 415 total loans, while Lancaster Pollard and Walker and Dunlop LLC rounded out the top three lenders, with volumes of 60 and 48, respectively. This amounts to nearly half of the total number of loans, and nearly $1.3 billion of mortgage financing.

In fiscal year 2011, HUD endorsed $3,288,581,750 of Section 232 Lean loans through its Office of Healthcare Programs (OHP), approximately 32% more than the $2,542,587,800 in 2010, or 309 total loans.

Both years’ volume could potentially have been higher were it not for the backlog of loan applications, known as the HUD Queue, which grew to well over 400 applications by the spring of 2011 and forced long wait times of eight to twelve months.

The extended timeframe elicited complaints from applicants whose cases were mired in the backlog, and prompted HUD’s OHP to add 35 permanent staff members, most of them in Section 232 production.

Since September, the queue has shrunk to below 300; HUD plans on processing 80-90 loans a month, and forecasts the backlog of applications to be completed by early summer 2012.

HUD’s Lean 232 financing volume varied among states between 2010 and 2011. Last year, Florida and Wisconsin combined for 21% of overall loan volume, while in 2011 the two states accounted for barely 3%.

In FY 2011, the numbers were distributed more evenly among the top seven states, including Ohio, California, and Indiana, making up nearly 43% of all loan volume.

View the FY 2011 Lean data here.

Written by Alyssa Gerace

Love Funding arranged a record $737.2 million of Federal Housing Administration loans in fiscal year 2011, it announced on Tuesday, making it the agency’s third-ranked multifamily and healthcare lender in terms of volume.

Data released by the Department of Housing and Urban Development (HUD) showed a total of 67 multifamily and healthcare business transactions that Love Funding closed in fiscal 2011.

With private lenders remaining wary, HUD saw increased demand for its multifamily and healthcare loan insurance programs, and Love Funding became a top FHA lender in 2007 after exiting other commercial financing business to focus on leveraging its expertise in HUD’s programs. The company expanded its product offerings this year by launching a hospital financing division.

“These outstanding results would not have been possible without the exceptional team of originators, underwriters, closers and support staff that continue to make client satisfaction the company’s top priority,” said Love Funding President Mark Dellonte. “We’re looking forward to another strong performance in 2012.”

Highlights in Love Funding’s lending activity include a $118.5 million refinancing for a portfolio of skilled nursing and assisted living facilities in New Jersey and a $31.9 million construction loan for NuVista Care at Wellington Green, a skilled nursing and assisted living facility in Florida.

Written by Alyssa Gerace

After a widespread outcry in the skilled nursing industry following the announcement of an 11.1% reduction in Medicare reimbursement rates, many SNF operators are finding ways to stay profitable and mitigate the effects of the cuts that went into effect at the start of the fourth quarter.

Earnings conference calls for senior housing operators and health care real estate investment trusts (REITs) revealed focused action to diversify portfolios, increase private-pay ratios, reduce costs and cut down on all unnecessary expenses.

Ensign’s operators were able to maintain both clinical and financial performance during the quarter, according to CEO Christopher Christensen, while creating “meaningful long-term solutions” to the recently-implemented rate cut.

“These dedicated teams, immediately upon the announcement and rather than waiting for instructions from anyone, began putting all of their expenses which are not directly related to patient care under the microscope and making appropriate adjustments,” said Christensen during Ensign’s earnings conference call. ”We expect this combination of expense reduction, operational efficiency and continued movement in occupancy and skilled mix to significantly offset the reimbursement reductions and other changes.”

Many operators felt the strain of the cuts, and some, like Five Star Quality Care, based their strategy on reducing Medicare dependency.

“As we’ve been very active in growing the company in the private pay space, the EBITDA we expect to receive from our 2011 acquisitions will help to offset majority of the Medicare rate cut,” said Bruce Mackey, Jr., president and CEO of Five Star.

Less than 15% of Five Star’s senior living revenues come from Medicare, and the company says this will continue to decline as it grows its private pay portfolio.

Some operators have reacted to the cuts by lowering their revenue outlook, like Sun Healthcare Group.

“Our analysis demonstrates that the rate reductions imposed by the CMS final rule have far exceeded the stated goal of parity with prior Medicare rates, and we remain concerned that these reductions may have serious consequences for our entire industry,” said William A. Mathies, chairman and CEO of Sun Healthcare Group, in a statement. “That said, we are moving expeditiously to mitigate the impact of the rule on our operations while retaining our focus on our primary mission of providing quality care.”

In terms of REITs, many spoke of the need for careful underwriting, planning ahead, and diversified portfolios.

“To protect against the uncertainty of SNF Medicare reimbursement we are underwriting with 13% cuts from the CMS fiscal year 2011 Medicare run-rate,” said Justin Hutchens, CEO and president of National Health Investors REIT, in an interview with the National Investment Center (NIC). “This takes into account the 11.1% cuts that have occurred and a potential 2% more which we believe should be contemplated in underwriting, though this is not a certain outcome.”

At HCR ManorCare, operators wasted no time in making efforts to mitigate the effects of the rate change once they were announced in August, according to James Flaherty, the president and CEO of HCP, Inc., which acquired the nursing home nearly a year ago.

“They had their action plan set up, and depending on the outcome of that CMS directive and when it was communicated, they went into implementation mode immediately,” said Flaherty in an earnings call. “I think all those measures were put in place with an effective date of Sept. 1, so they were all over this.”

For its part, Ventas CEO Debra Cafaro said in an earnings call that the REIT has “strategically invested with a goal of diversifying its portfolio and increasing its private-pay revenues. We continue to believe that our skilled nursing rates are well covered and should provide sustainable cash flow to Ventas,” she said.

Going forward, Ventas president Raymond Lewis stated the REIT’s intention to remain involved in the skilled nursing industry and make acquisitions despite recent headwinds, as it’s going to be “an important part of the healthcare system.”

“I think people are very internally focused on making sure that they… focus their efforts on mitigating the cuts, that they are working on their operations rather than thinking about monetizing their portfolio in a relatively less certain environment,” said Lewis. “As this plays out, there may actually be some good buying opportunities, and we’re going to keep our eyes peeled for that.”

Written by Alyssa Gerace

Oak Grove Capital recently closed a $437.8 million Fannie Mae DUS credit facility for Brookdale Senior Living, Inc. (NYSE:BKD).

The seven-year facility, which is 75% fixed-rate and 25% variable rate, was used to refinance existing mortgage debt.

Brookdale used the new debt to refinance existing loans for 44 different properties with a total of 4,145 units, consisting of assisted living, independent living, memory care and skilled nursing located across 13 states.

The credit facility provides Brookdale with “significant structural flexibility” and had competitive rates, Bill Sheriff, CEO of Brookdale, said in a statement, adding that it was closed in a 75-day timeframe “in the face of political uncertainty.”

Written by Alyssa Gerace

In case you missed it, here’s a roundup of senior housing & care financing news from October 2011.

Senior housing financing:

Capital Senior Living gets $23.8 million of financing for acquisitions.

Love Funding closes a $9.22 million construction loan.

Love Funding secures a $6.51 million loan for an Ohio senior living facility.

HUD approves a $210 million construction loan for a Georgia hospital and assisted living facility.

Red Mortgage Capital provides $19.9 million of financing to Premier Senior Living for three assisted living facilities.

Fannie Mae touts its assisted living financing programs.

Senior housing study shows discontent with HUD’s LEAN 232 financing program.

Senior care financing:

Barclays provides a £14.8 million construction loan to a UK Care Home company.

ActiveCare, Inc. secures a $10 million equity line of credit.

Independa, Inc. develops growth strategy for senior care with $1.6 million seed round fund.

Brookdale Senior Living Inc. (NYSE:BKD) reported a net loss of $7 million, or $0.06 per diluted share, for the quarter ended Sept. 30, 2011, an improvement from the previous year’s loss of $16.9 million, $0.14 per diluted share.

Income from operations increased substantially to $29.5 million in the quarter, more than triple the previous year’s $8.6 million. However, overall facility operating income saw just a 3.1% gain to $187.2 million, as operating expenses went up 3.4% to $381.4 million.

Cash from facility operations (CFFO) were up 9.9% to $65.6 million compared to $59.7 million in the same period of 2010.

“The Company delivered a solid operating performance for the third quarter of 2011,” said Bill Sheriff, Brookdale’s CEO, in a statement. “Increasing average occupancy by 80 basis points with a portfolio our size is meaningful. Continuing to focus on marketing led to an average occupancy increase of 120 basis points from the year’s low point in May to 87.6% in September.”

Total revenue for the third quarter was $615.7 million, an increase of 6.9% from Q3 2010′s $39.9 million.

During the third quarter, Brookdale completed its previously announced acquisition of 100% of the equity interests in Horizon Bay Realty, L.L.C., adding 91 communities to its portfolio. As a part of this acquisition, Brookdale formed a joint venture with HCP, Inc., which had an existing relationship with Horizon Bay, to own and operate 21 communities, and lease the remaining 12 communities from HCP pursuant to long term, triple net leases. Brookdale acquired a 10% interest in the joint venture, which utilizes a RIDEA structure.

View the earnings report here.

Written by Alyssa Gerace

Despite the attractive terms and interest rates offered by the Department of Housing and Urban Development’s (HUD) senior housing financing programs, many have been turned off by the lengthy HUD queue and are resorting to other funding sources.

“The basic problem with the FHA program is that it takes way too long, and a lot of people don’t want to wait that long,” says Paul Dribin, of Dribin Consulting. “The Lean program is taking a year to a year and a half, and that’s just unacceptable to a lot of people.”

It’s so unacceptable, in fact, that about three-quarters of the people who come to him to find financing are specifically requesting non-HUD financing, says Dribin; of these, about half get approved for financing.

Lengthy timeframes have forced many borrowers to get interim loans at higher interest rates and less attractive terms, to “bridge” the gap between when they need financing, and when HUD approves their case.

“They shouldn’t have to do bridge financing and refinance into Lean,” says Dribin, who says the original guidelines under the HudMap were four to six months.

A recent Seniors Housing study showed that 47% of respondents indicated the HUD LEAN 232 program had “fallen short” of their expectations, compared to 41% who said it had met them, and only 4% who said the program had exceeded their expectations. Although some say the Lean program is “worth the wait,” others aren’t convinced.

Some real estate financing firms aren’t doing any HUD funding whatsoever, a category Commercial Real Estate Financing, Inc. falls under, says Terry Smith, the firm’s president.

“It’s too long of a process. It’s too arduous. It’s not worth the trouble,” says Smith, of HUD programs.

Sewickley, Pa.-headquartered CREF, a comprehensive commercial real estate mortgage-banking organization, has its own warehouse line, and Smith says it offers comparable rates to HUD.

“We are in great demand. We’re seeing a senior market exploding,” he says, talking about a growing need for senior housing financing as thousands of boomers reach retirement age each day. “I think a majority [of those looking for financing] is going to exit from HUD altogether.”

Whether or not that happens, HUD’s Office of Healthcare Programs (OHP) has taken action to pare down the queue, going so far as to add 35 permanent staff members, most of them in Section 232 production, HUD told SHN.

A third-party consulting firm was also contracted to assist with underwriting efforts, and the queue has since gone down significantly.

Source: HUD, FY End of 2011 Key Production Statistics

“Although OHP issued 473 commitments in FY 2011, the incoming volume of applications was greater and the queue grew to over 400 applications,” said HUD. “Since July, the queue has declined to 280 applications. We project that with the contractor and new underwriters on board we will be through the queue by early next summer.”

Waiting times in the 223(a)(7) [expedited refinance of FHA-insured mortgages] queue have already dropped “dramatically,” says HUD, which expects a “substantial improvement in coming months” as it seeks to process a monthly average of 80-90 cases in the next six months.

However, despite this update, not everyone’s outlook is entirely favorable.

“I’d be very skeptical of any improvement in the Lean program or FHA within the next year,” says Dribin.

Written by Alyssa Gerace

Ventas, Inc., is near the top of the REIT world right now after languishing at the bottom, largely thanks to the tireless efforts of chairman and CEO Debra Cafaro, reports Real Estate Journal. But it hasn’t been an easy journey, and it’s left them drained, Cafaro told a crowd at a ULI forum.

“We are exhausted,” Cafaro was quoted as saying at the Union Club in Chicago. “We’ve pushed the organization beyond what it was built for, but we believe that with our plan, we will continue to be a terrific company.”

The businesswoman took Ventas from being $1 billion in debt one decade ago, to more than doubling its assets in the space of one year, RE Journal reported, after the company acquired $11 billion in assets within the last year for a total of more than $20 billion.

Cafaro started out as a lawyer with expertise in doing tax exempt bond deals, and this distinction gave her credibility with REITs that used this method to finance deals. This ultimately led to offers to join the “business side of the table,” says the article, and in the 1990s she became president of Ambassador Apartments, Inc., a multi-family REIT which she guided to sale in less than two years.

Some time later, colleague David Neithercut, president and CEO of Equity Residential, persuaded Cafaro to take over a troubled health care REIT located in Louisville, Ky., where he was on the board of advisors. With limited healthcare knowledge, Cafaro was hesitant.

“I told them that I didn’t know anything about healthcare, but David said they wanted someone who knew about REITs,” she said. “I took the position and it turned out that I did need to know about healthcare.”

It was 1998, and that REIT was Ventas, but it was nowhere near the Ventas of today. With less than 10 employees and a debt of $1 billion coming due, its only tenant was post-acute-care-provider Vencore, Inc., and it was facing a dozen Medicare fraud suits filed by government whistleblowers. In short, the firm was less than promising, especially after Vencore officials stated their intention to file bankruptcy.

With Cafaro at the helm, things began to change for the better. Her lawyer background helped Vencore to restructure and reemerge with a sustainable capital structure, RE Journal reports. And although Cafaro originally planned on selling Ventas to a larger firm, she found that investors weren’t looking favorably upon healthcare REITs.

“When I realized that we weren’t going to be able to sell I decided that we had to grow the company,” she said. “I kept telling people that this is a great business.”

Armed with $100 million in equity, Cafaro set about positioning the firm for growth. She realized that in order to be recognized by investors, healthcare REITs would need to be listed on major indices like Morgan Stanley, and set about campaigning for this, RE Journal reports. She won this bid in 2009, when healthcare REITs became accepted on most major indices, and Ventas joined the S&P 500.

After the recession, Ventas started making big moves, acquiring Lillibridge Healthcare Services Inc. and its 96 medical office buildings for $381 million. Next, it acquired 118 Atria senior housing assets for $3.1 billion, and shortly after picked up Nationwide Health Properties, Inc. and its more than 600 healthcare properties for $7.6 billion.

The acquisitions put Ventas on the map from coast to coast, and looking forward, Cafaro says they want to reduce revenue independence from government programs by going after a private pay audience. Ventas’ strategy includes targeting the aging baby boomer population as they begin moving into upscale senior housing facilities, and also acquiring medical office buildings, which are less costly than hospitals, she says.

The REIT recently acquired a $2 billion revolving credit line, hinting at further acquisition activity in the future.

Read the Real Estate Journal article here.

Written by Alyssa Gerace

Senior Housing Properties Trust (NYSE:SNH) recently announced the public offering of six million common shares. SNH intends to put the proceeds of this offering toward repaying outstanding amounts from its revolving credit facility and for general business purposes, including funding acquisitions.

Underwriters may also be granted a 30-day option to purchase up to an additional 900,000 common shares to cover over-allotments, if any.

Jefferies & Company, Inc., BofA, Merrill Lynch, and Citigroup are the joint bookrunning mangers for this offering, and the co-lead managers are Morgan Keegan, Morgan Stanley, RBC Capital Markets, UBS Investment Bank and Wells Fargo Securities.

Social media’s pervasive grip can be seen everywhere, and with business professionals joining LinkedIn at a rate of two members per second, it’s providing opportunity for those involved in seniors housing to use networking sites as a platform for announcing and discussing business transactions.

A number of senior housing industry trade groups have emerged on LinkedIn that host forums for notices of available properties and funding, and facilitate discussion of recent, upcoming, or sought-after transactions.

Seniors Housing Transactions, started by senior associate Ben Firestone of the National Senior Housing Group at Marcus & Millichap, is one such group.

It serves as a networking platform for owners, operators, managers, investors, mortgage lenders, prospective owners, appraisers, and financial intermediaries in the seniors housing industry, says Firestone, with recent discussions including an operator seeking mortgage debt outside of agency financing; a portfolio of Assisted Living and Memory are facilities in Wisconsin for sale; and a confidentiality agreement contemplating new inventory offerings from an investment advisory firm.

And recently, this group passed the 500-member milestone, making it one of the largest among similar groups like Senior Assisted Living Sales, Marketing & Operations Professionals; Senior Care Acquisitions and Financing; Seniors Housing and Healthcare Real Estate; and The Senior Housing Investors Forum.

As business interaction becomes more and more instantaneous, market participants seek both to gather and to provide more salient information which can be instantly accessed online, says Firestone.

“Clearly, at 500+ members, the already-established market for seniors housing finance and transactions continues to evolve in the direction of social media,” he commented. “Top executives from REITs, banks, national and regional operators form the core members of Seniors Housing Transaction, and evidence of these members finding the group to be beneficial lies in the active discussion board.”

Written by Alyssa Gerace

Financing backed by the Department of Housing and Urban Development continues to increase due to its wider program offerings. But Fannie Mae remains an alternative that also can span a variety of different senior housing projects.

What some may not know is that size and scope isn’t the only consideration for that financing and that Fannie Mae not be as strict as it is often thought to be.

“We have a set of underwriting guidelines, created over time to walk the fine line of having high quality production volume but also having the right credit and risk parameters,” Christopher Honn, director of multifamily mortgage business, seniors housing for Fannie Mae, told SHN.

While Fannie Mae does have some set credentials including a five-property minimum for owner/operators to obtain financing, Honn says there are other very important considerations as well and that FNMA can bend a bit for the right deal.

“The guideline we have set is: experience is important,” he said. “The experience level of an operator/owner is absolutely critical to success, doesn’t matter the size.”

Fannie Mae will work closely with the operator to ensure the investment is viable, including hands-on interaction with the facilities and the people who manage them. The guidelines are general, Fannie Mae says, but not set in stone. For the right operator and experience level, the organization will examine the operator in search of a good fit, including site visits.

“It’s part of our business plan,” Honn says. “We work a lot with borrowers directly and always have because it’s very important to understand their business model. We don’t meet them in our office, we go out to their headquarters. This is a seeing is believing business. You have to go out there and see and feel what’s going on.”

The partnerships with lenders and borrowers that are developed from the first few properties are valuable when built carefully, Honn says and operators are of utmost importance.

“We weigh that out on every transaction we work on and it guides us in decision making,” he says.

Written by Elizabeth Ecker

Virtus Real Estate Capital, a private equity real estate firm based in Austin, Tex., is preparing to launch a $500 million fund –the largest in company history– to invest in “recession resilient” types of properties, including seniors housing, student housing, medical offices, and self-storage facilities.

Although Virtus hasn’t yet closed a senior housing-specific transaction, company founder and CEO Terrell Gates says they’ve been researching and analyzing the sector for several years.

“It just happens to be that it was one of our targeted property types when we made a shift in 2006 into a class of properties we consider to be recession resilient,” Gates told SHN.

The fund will be launched in the coming quarter, and will be invested across all four of Virtus’ targeted property types. No single category will represent greater than 40% of the fund, Gates says, and the firm will probably invest somewhere between 20% and 30% in senior housing.

This will be about $150 million of the fund, and taking leverage into account, that portion could translate into $350-400 million worth of senior housing product, he adds.

Virtus plans to invest primarily in independent living and skilled nursing facilities (SNFs), even though the latter sector has come under fire recently after reimbursement rate cuts and other budget-related issues.

“We like that space because barriers to entry are higher,” says Gates. “Not just anyone can jump into it and upset demand and supply metrics. It’s an asset type that’s well within the way of some major demographic types coming through the system, and there are far fewer beds than there’s going to be demand.”

This statement is backed up by a recent infographic released by Assisted Living Today showing the possibility that 42 million Americans may go without nursing home care by 2012, as the nation gets older and nursing homes close down.

“We’ll manage reduction in reimbursement rates, we’re going to target markets where we can target private pay,” Gates says. “Our general plan for those property types is to allow us to maintain yield, but also enhance it over time.”

Virtus also plans on investing in ground-up expansion or rehabilitation of facilities, and will work with operating companies under a master lease scenario, he says.

As for independent living, the other sector of senior housing the firm is looking to get into, Gates says they want to bring down the price point.

“We’re really focused more on the value segment of [IL],” he says. “The rent per bed is something that is more manageable for the vast majority of the senior housing community. Instead of doing the ‘full cruise ship model’ where everything is included, and you’re paying $1,500 to $2,000 per bed per month, we want to provide more of an ‘a la carte’ service basis where we offer services as needed.”

They like this value space because about $800 per bed per month is much more affordable for a majority of the targeted age group, Gates says.

Virtus has operating partners for both SNFs and ILFs, and Gates says that while its first independent living facility will probably be in the Midwest, it’s looking to the Sunbelt as the geographic location for the majority of its assets.

Written by Alyssa Gerace

The Coronet, a new 150 unit affordable senior housing complex in San Francisco, CA, celebrated its grand opening last week.

The building will provide housing and health services for approximately 225 independent senior citizens in San Francisco’s Richmond district, and was financed in part by a $19.4 million tax credit equity investment from Union Bank.

Developed by BRIDGE Housing in collaboration with the Institute on Aging, the Coronet is a community-based nonprofit serving the region’s senior citizens.  The six-story building was constructed on the site of the former Coronet movie theater, which closed in 2005.

“Union Bank is very pleased to have served as a financial partner for The Coronet,” said Senior Vice President Annette Billingsley, head of Union Bank’s Community Development Finance division.  “The lack of affordable housing in this area hits senior citizens especially hard.  Helping our longtime partner BRIDGE Housing provide 150 affordable apartments, as well as space for the Institute on Aging’s vital services, has been a gratifying opportunity to advance our mission here in the Bay Area and in Union Bank’s home city.”

The Institute on Aging’s Senior Campus, housed in The Coronet, provides a wide range of services to seniors and to disabled adults, including geriatric assessment services, support groups and creative classes.  The facility features an education center and meeting rooms, fully-equipped arts studios and a senior fitness and rehabilitation center, among other resources.

“By integrating these high-quality affordable apartments with the Institute on Aging’s comprehensive, cutting edge services, we are helping approximately 225 seniors maintain their independence as well as their dignity,” said Cynthia Parker, President and CEO of BRIDGE Housing.  “We are grateful to Union Bank, the city of San Francisco and all our financial partners for their critical assistance in turning The Coronet development into a reality.

The decision by the Department of Housing and Urban Development to add additional staff to speed up the application process for its Section 232 program was welcomed by the senior housing industry, but the support didn’t come easily. In fact, obtaining the support of the agency has been a work in progress as far back as 2009.

Looking at the big picture, the decision to add additional staff to accommodate the program should have been a no brainer.

During a time when the Federal Housing Administration’s single family programs’ capital levels are below the minimum capital requirements established by Congress, the agency dragged its feet in providing additional resources to the Section 232 program—which is cash flow positive according to the latest budget from the Office of Management and Budget.

As a result, a backlog of applications for senior housing facilities developed, and the agency received intense criticism from both sides of the aisle in Congress.

“The Committee is very concerned about the increasing length of time necessary to complete processing for Section 232 applications,” said a Congressional Research Report from the House of Representatives dated July, 2010. ”As private financing has become increasingly difficult to secure, FHA has been a reliable source for the construction and refinancing of units for elders, particularly those in need of supportive services.”

During fiscal year 2010, the timeline for getting an application through FHA’s LEAN processing model continued to increase, despite Congress providing more staff for FHA in response to the increased workload. “This is not due to lack of staff, but rather a misallocation of staff,” said the report.

The House’s Transportation, Housing and Urban Development (THUD) Committee on Appropriations, and Related Agencies also directed FHA to transfer 25 qualified underwriters into the Office of Insured Healthcare Facilities to ease the workload within 30 days of enactment of the bill.

“These staff must be trained on the LEAN processing model and qualified to assist in reducing the backlog of applications in a timely manner,” said the THUD report.

The Senate’s THUD Committee agreed with the House assessment, noting in a CRS report that additional funding provided to HUD would help manage the demand for the Section 232 program. “The funding provided will enable HUD to increase staff within the Office of Insured Healthcare Facilities. This staff is important to efficiently managing its programs, while reducing any risk related to increased business,” said the report.

In response to the requests from Congress, HUD tells SHN that additional staffing slots were provided to the Office of Healthcare Programs.

“Jobs were advertised and selections were made by January 2011, but only seven slots were filled prior to the hiring freeze caused by the Continuing Resolution funding HUD’s budget,” said a spokesperson for HUD. “Additional hires have been made starting in April, and jobs re-advertised where selectees were no longer available.”

The agency said the hiring of these additional staffers as well as an additional allocation of FY 2011 staff should enable OHP to handle submission volume. “The contract personnel is used to work through the backlog that has built up in the meantime,” said the agency.

According to data from HUD, the number of applications comes in at 555 during fiscal year 2011, with 380 currently waiting to be assigned to an underwriter.

Change of Management Could Be A Shift in Favor of Senior Housing

Last year, David Stevens, who was Commissioner of FHA at the time, made it clear to senior housing lobbyists and industry leaders during a meeting in Washington, D.C. that the backlog of Section 232 applications wasn’t a top priority. In response to the growing backlog applications, Stevens suggested the agency make the program less attractive, according to sources present at the meeting.

“[Stevens' comment] demonstrated a serious need for Congress to get involved on behalf of facilities, lenders and ultimately residents of long-term care facilities,” says Christopher Boesen, a lobbyist for Capital Funding Group. “Stevens’ position was that FHA’s resources should be deployed to single-family and only after Olver’s language appeared and House and Senate Appropriations Committee staffers called him on the carpet did that attitude change.”

It’s clear there was frustration among others at FHA, “one staffer quipped that Stevens needed to learn that he was responsible for all of FHA, not just single-family,” he says.

When asked about Steven’s desire to make the program less attractive, HUD said that guidelines for the program were made somewhat more restrictive at the initiative of the OHP through the LEAN application processing model.

“These changes were made to mitigate risk and reflect the Department’s default and claim experience,” said HUD.  ”The volume of submitted transactions increased dramatically subsequent to these changes, so they did not have the effect of reducing demand, but rather limited the risk profile of the submissions.”

With Stevens leaving to become the Chief Executive of the Mortgage Bankers Association in May, the remaining staff at HUD do not share Stevens’ opinion on the importance of the program.

“Program staff knew how serious the problem was and were trying to address it, they just weren’t being given the tools to do so,” says Boesen. “I think the health care program staff were almost as frustrated as the applicants.”

In addition to the contract recently put out for bidding, HUD tells SHN the agency has hired 15 this fiscal year and another 13 more are on the way.  Despite HUD not meeting the number of staff requested by Congress, Boesen says things could be turning for the better.

“The hope is that the contract can eliminate the backlog and the new hires can prevent one from building up again,” he says.

With the backlog of applications hopefully being worked through in the near future, the industry is continuing to work with the agency to improve other areas.  Jeffrey A. Davis, Chairman of Cambridge Realty Capital Companies says a task force is looking into ways to streamline the closing document process. Of special concern is the time-consuming final review that occurs after a firm commitment already has been made to the lender and borrower.

“Senior management at HUD appropriately views the extra 90 days this can take as unacceptable, and is working with the industry to affect improvements in this area,” he said.

Oxford Finance announced it has provided $4 million in senior debt to Platinum Health Care, a company that provides back office services to senior housing communities.

The deal includes a $3.5 million senior secured term loan and a $500 thousand revolving line of credit. The proceeds from the loan are being used to refinance existing debt, make capital improvements, and provide working capital for a skilled nursing facility in Illinois.

“We are extremely pleased to expand our existing lending relationship with Platinum Healthcare,” said Christopher A. Herr, managing director for Oxford Finance LLC. “Its management team has a great deal of experience in the healthcare industry and it is widely known that Platinum Health Care’s skilled nursing facilities are extremely well-managed.”

Started in 2001, PHC has 11 locations in the Midwest.

“We are excited about our new relationship with Oxford and look forward to their support as our financial partner as we continue to expand and improve our businesses,” said Paresh Vipani, chief financial officer for Platinum Health Care. “When we looked to refinance our business, Oxford exhibited uncommon creativity, flexibility and commitment to our needs throughout the transaction. We chose to work with Oxford because of its responsive, knowledgeable and deeply experienced team and the firm’s outstanding reputation.”