92266-ORCF Application for Change of Ownership
Comprehensive Listing of Transactional Documents for Mortgagors, Mortgagees and Contractors
92266_orcf
Transactional Documents for Mortgagees and Contractors
OMB: 2502-0605
Lender Narrative – Change of Ownership Review Section 232 |
U.S. Department of Housing and Urban Development Office of Residential Care Facilities
|
OMB Approval No. 2502-0605 (exp. 11/30/2022) |
Public reporting burden for this collection of information is estimated to average 5.0 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The information is being collected to obtain the supportive documentation that must be submitted to HUD for approval, and is necessary to ensure that viable projects are developed and maintained. The Department will use this information to determine if properties meet HUD requirements with respect to development, operation and/or asset management, as well as ensuring the continued marketability of the properties. Response to this request for information is required in order to receive the benefits to be derived from the National Housing Act Section 232 Healthcare Facility Insurance Program. This agency may not collect this information, and you are not required to complete this form unless it displays a currently valid OMB control number. While no assurance of confidentiality is pledged to respondents, HUD generally discloses this data only in response to a Freedom of Information Act request.
Warning: Anyone who knowingly submits a false claim or makes a false statement is subject to criminal and/or civil penalties, including confinement for up to 5 years, fines, and civil and administrative penalties. (18 U.S.C. §§ 287, 1001, 1010, 1012; 31 U.S.C. §3729, 3802).
Privacy Act Statement: The Department of Housing and Urban Development, Federal Housing Administration, is authorized to collect the information requested in this form by virtue of: The National Housing Act, 12 USC 1701 et seq. and the regulations at 24 CFR 5.212 and 24 CFR 200.6; and the Housing and Community Development Act of 1987, 42 USC 3543(a). The information requested is used to review applications within HUD. No information will be disclosed outside of HUD. The information requested is mandatory to receive the mortgage insurance benefits to be derived from the National Housing Act Section 232 Healthcare Facility Insurance Program. No applications will be reviewed or approved without the necessary information requested. No confidentiality is assured.
INSTRUCTIONS:
The narrative is a document critical to the Change of Ownership Review transaction process (formerly known as a transfer of physical assets or TPA transactions) that include, but are not limited to, transactions demonstrating the following characteristics:
The sale and conveyance by deed of title to a property that has a mortgage insured or held by HUD and necessitates a substitution of Borrowers.
The transfer/change of an entity having a controlling interest in a property that has a mortgage insured or held by HUD.
Transactions with a change of Internal Revenue Services (IRS) Reporting Structure (e.g., a Borrower converts from a limited partnership to a limited liability company, but all principals remain the same and the Tax Identification Number (TIN) is not changing).
If a change of ownership entities/structure will be completed in conjunction with a Section 232 refinance under Section 223(a)(7) of the National Housing Act, do not use this form. The required exhibits for processing the transaction are listed on the Section 223(a)(7) Firm Application Checklist posted on the Section 232 Program website. A change to ownership entities/structure is also possible prior to the final closing of an insured note for new FHA mortgage insurance; however, please discuss with the ORCF Closer assigned. Depending on the extent of the change, ORCF may choose to reprocess the application for mortgage insurance or require submission of this Change of Ownership application.
If this transaction includes a change of Operator and/or Management Agent in conjunction with the Change of Ownership Review application, those transactions may be combined with this submission. Where applicable, please provide additional documentation for those transactions; there is no need to complete separate applications for a change of Operator and/or Management Agent. However, if the subject transaction is for a Change of Operator and/or Change of Management Agent and does not involve a Change of Ownership transaction as described above, do not use this form. For further description of these requirements, please refer to Chapters 7 and 8 of the Section 232 Handbook 4232.1, Section III Asset Management.
The corresponding Change of Ownership Review Checklist provides instructions that determine the level of review required to approve the transaction. Your response to a few questions will generate a Transaction Determinant Code (e.g., □□□□□) that identifies the documents required for submission with this application. This Transaction Determinant Code also identifies the sections of this Lender Narrative that must also be completed. Each of these sections of the narrative and all of the questions in these sections marked with the corresponding Transaction Determinant Code must be completed and answered. If the lender disagrees and modifies any third-party report conclusions, sufficient detail to justify the change must be provided. This narrative is to identify the strengths and weaknesses of the transactions and demonstrate how the weaknesses are mitigated.
Charts: The charts contained in this document have been created with versatility in mind; however, they will not be able to accommodate all situations. For this reason, you are allowed to alter the charts as the situation demands. Be sure to state how you have altered the charts along with your justification. Include all the information the form calls for. Charts that include blue text indicate names that should be modified by the lender as the situation dictates.
Applicability: If a section is not applicable, state so in that section and provide a reason. Do not delete a section heading that is not applicable. The narrative will be checked to make certain all sections are provided. If a major section is not applicable, add “– Not Applicable” to the heading and provide the reason. For instance:
Parent of the Operator – Not Applicable
This section is not applicable because there is no operator.
The rest of the subsections under the inapplicable section can then be deleted. This instruction page may also be deleted.
Format: In addition to submitting the PDF version of the Lender Narrative to HUD, please also submit an electronic Word version.
Instead of pasting large portions of text from third-party reports into the narrative, it is preferred that the lender simply reference the page number and the report. The focus of this document is for lender conclusions, analyses, and summaries.
Italicized text found between these characters <<EXAMPLE>> is instructional in nature, and may be deleted from the lender’s final version. Please use the gray shaded areas (e.g., ) for your response. Double click on a check box and then change the default value to mark selection (e.g., ).
<<Optional: Insert Project Photo>>
Table of Contents
Upper Payment Limit (UPL) Transaction Summary (if applicable) 7
New Borrower Entity (Purchaser) 11
Principal of the New Borrower – <<Enter Principal Name>> 13
Organization (not applicable to individuals) 14
Other Business Concerns/232 Applications 15
New Operator (if applicable) 16
Parent of the New Operator (if applicable) 19
Other Business Concerns/232 Applications 21
Other Facilities Owned, Operated or Managed 21
New Management Agent (if applicable) 23
New Management Agent’s Duties and Responsibilities 24
Other Facilities Owned, Operated or Managed 25
Past and Current Performance 25
Accounts Receivable (A/R) Financing 30
Permitted Uses and Payment Priorities 32
Professional Liability Insurance (PLI) Coverage 35
Commercial General Liability Insurance 37
Fidelity Bond/Crime Insurance Coverage 38
Circumstances that May Require Additional Information (e.g., secondary financing) 39
Executive Summary □□
FHA Number: |
|
|
||
Project Name: |
|
|
||
Project Address: |
|
|
||
City / State / Zip: |
|
|
||
County: |
|
|
||
|
|
|
||
Lender Name: |
|
|
||
Part of a small, medium, or large portfolio: |
Yes No |
If yes, describe: |
||
|
|
|
|
Licensed |
Operating |
|
Licensed |
Operating |
|
|
||
|
Type of facility: |
|
Skilled Nursing (SNF): |
|
|
beds |
|
|
units |
|
||
|
|
|
Assisted Living (AL): |
|
|
beds |
|
|
units |
|
||
|
|
|
Memory Care (AL): |
|
|
beds |
|
|
units |
|
||
|
|
|
Board & Care (B&C): |
|
|
beds |
|
|
units |
|
||
|
|
|
Independent Living (IL): |
|
|
beds |
|
|
units |
|
||
|
|
|
Total: |
|
|
beds |
|
|
units |
|
||
|
|
|
||||||||||
|
Borrower: |
<<Legal Name>> |
||||||||||
|
Operator: |
<<Legal Name>> Operating lease |
||||||||||
|
Parent of Operator: |
<<Legal Name>> |
||||||||||
|
Does the operating lease cover multiple properties or tenants (is it a master lease)? Yes No |
|||||||||||
|
Management Agent: |
<<Legal Name>> |
||||||||||
|
License held by: |
<<Legal Name>> |
||||||||||
|
Resident contracts with: |
<<Entity with whom residents contract for services>> |
||||||||||
|
CMS Provider Number: |
|
||||||||||
Section 38 of the Regulatory Agreement shall apply to the following individuals and/or entities: <<list name(s) here>>
|
|
|
||||||||||
|
|
|||||||||||
Portfolios
Program Guidance:
Handbook 4232.1, Section II Production, Chapter 17
It
is the Lender’s responsibility to read the handbook chapter and
provide HUD with full disclosure of all other HUD-insured projects of
the borrower and operator utilizing Forms HUD-90013-ORCF,
Consolidated Certifications - Borrower and HUD-90014-ORCF
Consolidated Certifications – Operator.
Key Questions
|
Yes |
|
No |
|
|
|
|
Small (2 or more projects, up to $90 million) Medium ($90 million to $250 million) Large (> $250 million) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<< For Medium and Large Portfolios (>$90 Million) provide name/number of portfolio and date Corporate Credit Review approval was granted by ORCF.
Provide listing of projects, for the borrower and/or operator, that have been insured by HUD in the past 18 months, that are currently in application processing, or projects that the borrower and/or operator plans to submit for mortgage insurance in the next 18 months.>>
Transaction Overview
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion regarding the topic. As applicable, discuss the issue and its effect on the transaction. Describe any potential risks and the mitigants. For waivers, identify specific provisions to be waived and justification for the waiver.>>
Upper Payment Limit (UPL) Transaction Summary (if applicable)
<<The state will require preliminary approval from HUD in order for the subject to participate in their UPL program. To obtain HUD approval, please provide the following:>>
Background
<<Provide narrative to explain how the state’s UPL program works and why the subject facility wants to participate in the program. Provide draft copies of any documents required by the state to participate in the UPL program as an attachment to this document (Exhibit A).>>
Proposed Structure
<<Provide narrative discussion and organization charts to describe the current and proposed organizational structure of the subject. Be sure to discuss the effect the proposed structure will have on any existing master lease, if applicable. Also, if applicable, discuss the effect of the proposed structure on any accounts receivable financing and what, if any, changes are needed to accommodate the new operator’s receipt of Medicare and Medicaid receivables.
Provide a Cash Flow Chart describing the current and proposed location of the Deposit Account Control Agreement (DACA) and Deposit Account Instructions and Services Agreement (DAISA).>>
Material Provisions
<<Provide a narrative discussion of provisions in proposed sublease (e.g., “Under XXX state law, the hospital districts must file change of ownership applications for licensure and Medicaid at least XX days before the sublease becomes effective….”) and management agreement (e.g., “The new management agreement will require the current licensee to provide management services necessary to operate the facility…. The hospital district will pay the current licensee (as manager) a base management fee and incentive payments that are equal to XXX% of the net revenue of the facility plus XX% of the supplemental payments that the hospital district receives under the UPL Program….”). Attach copies of sublease and management agreement as Exhibits B and C, respectively.>>
Conclusion
<<Provide narrative discussion regarding how the proposed transaction will be of benefit to the project. Complete income analysis in the table provided that compares financial operations with and without UPL participation.>>
Income Analysis |
||
|
Trailing 12 mos. without UPL participation* <<TTM thru Month-Year>> |
Forecast with UPL participation |
Effective Gross Income (EGI) |
$ |
$ |
Expenses |
$ |
$ |
Replacement Reserves |
$ |
$ |
Net Operating Income (NOI) |
$ |
$ |
Date UPL participation to begin (month, year): |
||
*Use trailing 12-month (TTM) figures in this column. The TTM data is preferred; however, if TTM is not available, year-to-date annualized figures may be used (please indicate this in the heading). |
||
Certification
<The borrower must certify that a change in operator will not occur until HUD has given its preliminary approval for the change. Additionally, if at any time the state determines that it will not fund the UPL Program, the borrower will immediately notify their lender and HUD.
Program Eligibility □□
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
<<If you answered “yes” to any of the questions above, this application will not be approved under this program. >>
Licensing
<<Provide affirmative statement along the lines of: “The facility is currently licensed by the State of {State}’s Department of Health and Welfare as a {Type of Facility} for {X} beds. The license is issued to {Name of Entity on License}, effective {date}, through {date}. The license covers {number of beds}. An application to transfer the license to {Name of New Entity} was filed on {Date}.”>>
Identities-of-Interest □□
Program Guidance: Handbook 4232.1, Section I, Introduction, Chapter 1.6. |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion regarding the topic. As applicable, describe the risk and how it will be mitigated. For example: The borrower and operator are related parties – John Doe has ownership in both entities. No other identities of interest are disclosed. >>
Title □□
For a Change of Ownership transaction, HUD requires either an endorsement to the existing lender’s policy or a new lender’s policy.
If an endorsement is proposed, it must show that the new borrower owns the property and has assumed liability under the Loan Documents. The endorsement must also show that there has not been a change in the priority of the Loan Documents. It must also confirm that no new exceptions have been recorded since the insured closing. If there are new exceptions to the policy shown on the endorsement, these must be provided (along with an explanation and/or confirmation of previous HUD approval).
If a new Lender’s policy is provided, it must confirm to the current standards HUD requires for insured closings.
Title Search
Date of Search: |
|
Firm: |
|
File Number: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. >>
Pro Forma Policy
Date/Time: |
|
Firm: |
|
Policy Number: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion regarding the topic. Example: Additional Endorsements: As described in the Risk Factors section of the narrative, the XXXX does not conform to the past or current zoning requirements. The lender recommends…>>
New Borrower Entity (Purchaser) □
Name: |
|
State of Organization: |
|
Date Formed: |
|
Termination Date: |
|
FYE Date: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Program Guidance: Handbook 4232.1, Section II Production, Chapter 6.1.D, Foreign National and Corporate Entity Participation |
Organization
<<Provide organization chart and narrative, as applicable. At a minimum, all principals of the borrower should be identified.>>
Experience/Qualifications
<<Provide narrative description of new borrower’s experience and qualifications. For example: “The borrower entity is a single-asset entity that was established in {date} to develop and own the subject project.”>>
Credit History
Report Date: |
<<within 60 days of submission>> |
Reporting Firm: |
|
Score: |
|
<<Provide an explanation of the credit score in terms of risk level (i.e., low, medium, or high). Also, if the score is evaluated numerically, explain what value the credit agency places on the score.>>
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Financial Statements
The application includes the following financial statements for the new borrower:
Year-to-date: |
<<dates for start and end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. Example: Tenant Security Deposits: The tenant security deposits do not appear to be fully funded. At closing, however, the borrower will not be the operator and the tenant deposit obligation will fall to the new operator. Therefore, the lender has included a commitment condition requiring the new operator to set up project accounts by closing and to provide an acceptable, certified Balance Sheet showing that the tenant security deposits are fully funded.
Owner-operated projects with material accounts receivables over 120 days that do not intend to have Accounts Receivable Financing should address the project State’s recent trends in length of time until reimbursement is made. The Lender should address the project’s ability to handle delayed payments (e.g., access to sources of liquidity in an amount comparable to material accounts receivable over 120 days.) >>
General Overview
<<Provide Narrative and analysis of financial statements as appropriate. In addition to the Key Questions above, working capital should be discussed along with the general financial stability and position of the entity. >>
Conclusion
<<Provide narrative discussion of the lender’s conclusion and recommendation. For example: “The new borrower entity has demonstrated an acceptable financial and credit history. The borrower has the experience to continue to successfully own this facility. The lender recommends this borrower for approval as an acceptable participant in this transaction.”>>
Principal of the New Borrower – <<Enter Principal Name>> □□
<<Provide this section for each principal of the new borrower.>>
Program Guidance: Handbook 4232.1, Section II Production, Chapter 6.1.E. . |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. >>
Organization (not applicable to individuals)
<<If the principal is an entity, provide the following information:>>
State of Organization: |
|
Date Formed: |
|
Termination Date: |
|
<<Provide organization chart and narrative, as applicable.>>
Experience/Qualifications
<<Provide narrative description of principal’s experience and qualifications. Discussion should highlight direct experience and involvement in other HUD transactions. This section should clearly demonstrate that the new borrower has sufficient expertise to successfully own the facility. >>
Credit History
Report Date: |
<<within 60 days of submission>> |
Reporting Firm: |
|
Score: |
|
<<Provide an explanation of the credit score in terms of risk level (i.e., low, medium, or high). Also, if the score is evaluated numerically, explain what value the credit agency places on the score. >>
Program Guidance: Handbook 4232.1, Section II, Production, Chapter 6.1.F, The Credit Investigation |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Other Business Concerns/232 Applications
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. Example: Other Business Concerns: XXXXX identified XX other business concerns in addition to the borrower and the newly formed operator discussed in this narrative. The lender reviewed Dunn and Bradstreet credit reports for XX Other Business Concerns identified by XXXX. {Discuss each report}. No reports indicated derogatory information that would prohibit XXXXX participation in this loan transaction.
Example: Other Section 232 Applications: XXXXX identified XX other Section 232 loan application – {projects}. The applications were submitted XXX and closed in XXX. As this is only XXXXX’s Xth HUD-insured healthcare loan, no additional reviews are required>>
Credit Reports for Other Business Concerns:
<<Provide narrative discussion on other business concerns. For example, “XXX identified XX other business concerns. The lender reviewed Dunn and Bradstreet credit reports for XX other business concerns identified by XXXX. {Discuss each report.} No reports indicated derogatory information that would prohibit XXXXX from participation in this Change of Ownership transaction.>>
Name of Entity |
Report Type (Commercial, etc.) |
Report Date |
Comments |
|
|
|
|
|
|
|
|
Conclusion
<<Provide narrative discussion of lender’s conclusion and recommendation. For example, “XXXXX has demonstrated an acceptable credit history and sufficient experience owning and operating this and other facilities. The lender recommends this principal as an acceptable participant in this transaction.”>>
New Operator (if applicable) □
Name: |
|
State of Organization: |
|
Date Formed: |
|
Termination Date: |
|
FYE Date: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. >>
Organization
<<Provide organization chart and narrative, as applicable. >>
Experience/Qualifications
<<Provide narrative description of new operator’s experience and qualifications. Discussion should highlight direct experience and involvement in other HUD transactions, if any. This section should clearly demonstrate that the new operator has the expertise to successfully operate the facility.>>
Credit History
Report Date: |
<<within 60 days of submission>> |
Reporting Firm: |
|
Score: |
|
<<Provide an explanation of the credit score in terms of risk level (i.e., low, medium, or high). Also, if the score is evaluated numerically, explain what value the credit agency places on the score.>>
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Financial Statements
The application includes the following financial statements for the new operator.
Year-to-date: |
<<dates for start and end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<If you answer “yes” to any of the above questions, please identify each risk factor and how it is mitigated below. The Accounts Payable and Accounts Receivable analysis provides information regarding an entity’s collection and payment practices, policies, and potential risks to the new project. Discuss your analysis of these issues and how the lender determined they are an acceptable risk.
Example: No Financial Statements: The new operator is a newly formed entity and does not have a financial history to report. At this time, the operation of the subject facility will be the new entity’s sole purpose, so there is no need to review financial data from other facilities or sources.
Example: Tenant Security Deposits: The tenant security deposits do not appear to be fully funded. At closing, however, the borrower will not be the new operator and the tenant deposit obligation will fall to the new operator; therefore, the lender has included an approval condition requiring the new operator to set up project accounts by closing and to provide an acceptable, certified Balance Sheet showing that the tenant security deposits are fully funded.>>
Projects with material accounts receivables over 120 days that do not intend to have Accounts Receivable Financing should address the project State’s recent trends in length of time until reimbursement is made. The Lender should address these projects’ ability to handle delayed payments, e.g. access to sources of liquidity in an amount comparable to material accounts receivable over 120 days.)>>
General Overview
<<Provide narrative and analysis of financial statements as appropriate. In addition to the Key Questions above, working capital should be discussed along with the general financial stability and strength of the entity. >>
Net Income Analysis
Net Income*
In total $
20XX |
20XX |
20XX |
YTD (Indicate time frame) |
$ |
$ |
$ |
|
*before depreciation, amortization, and any other non-cash expense
<<Provide an explanation of any Net Losses or declining Net Incomes for the year-to-date and last 3 fiscal years, as applicable.>>
Conclusion
<<Provide narrative discussion of lender’s conclusion and recommendation. For example: “The new operator entity has demonstrated an acceptable financial and credit history as discussed in our analysis of their financial statements and credit history above. The new operator has the experience to continue to successfully operate this facility. The lender recommends this new operator for approval as an acceptable participant in this transaction.”>>
Parent of the New Operator (if applicable) □
<<Provide this section for the parent organization of the new operator. This section is not applicable to individuals who are principals unless you are depending on the person or persons for approval of the new operator (e.g., newly formed entity). In that instance (individuals), follow the principal of the new borrower template and modify it appropriately for an operator.>>
Name: |
|
State of organization: |
|
Date formed: |
|
Termination date: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. Example: S&P Rating: The entity is rated X by S&P. The rating agency indicates the outlook for the company is X.>>
Organization
<<Provide organization chart and narrative, as applicable.>>
Experience/Qualifications
<<Provide narrative description of experience and qualifications. Discussion should highlight direct experience and involvement in other HUD transactions. This section should clearly demonstrate the expertise to successfully operate the facility. >>
Credit History
Report date: |
<<within 60 days of submission>> |
Reporting firm: |
|
Score: |
|
<<Provide an explanation of the credit score in terms of risk level (i.e., low, medium, or high). Also, if the score is evaluated numerically, explain what value the credit agency places on the score. >>
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Other Business Concerns/232 Applications
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. Example: Other Business Concerns: XXXXX identified XX other business concerns in addition to the borrower and the newly formed operator discussed in this narrative. The lender reviewed Dunn and Bradstreet credit reports for XX Other Business Concerns identified by XXXX. {Discuss each report}. No reports indicated derogatory information that would prohibit XXXXX participation in this loan transaction.
Example: Other Section 232 Applications: XXXXX identified XX other Section 232 loan application – {projects}. The applications were submitted XXX and closed in XXX. As this is only XXXXX’s Xth HUD-insured healthcare loan, no additional reviews are required.>>
Other Facilities Owned, Operated or Managed
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated; however, for “e” and “f” only, evidence of mitigation will not be required (HUD only requires an explanation of the insurance). Example: Other Facilities: XXXXX identified XX other facilities it owns, operates, or manages in addition to the subject facility. PLI Insurance: XXXXX identified XX facilities that are carried on the same PLI policy as the subject project. Other facilities of the parent of the operator are covered on XX separate PLI policies.>>
Program Guidance: Handbook 4232.1, Section II Production, Chapter 8.8. |
Financial Statements
The application includes the following financial statements for the parent of the new operator:
Year-to-date: |
<<dates for start and end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Fiscal year ending: |
<<date – end of period>> |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<If you answer “yes” to any of the above questions, please identify each risk factor and how it is mitigated below. The Accounts Payable and Accounts Receivable analysis provides information regarding an entities collection and payment practices, policies, and potential risks to the new project. Discuss your analysis of these issues and how the lender determined they are an acceptable risk. >>
General Overview
<<Provide Narrative and analysis of financial statements as appropriate. In addition to the Key Questions above, working capital should be discussed along with the general financial stability and strength of the entity.>>
Net Income Analysis
Net Income*
In total $
20XX |
20XX |
20XX |
YTD (Indicate time frame) |
$ |
$ |
$ |
|
*before depreciation, amortization, and any other non-cash expense
<<Provide an explanation of any Net Losses or declining Net Incomes for the year to date and last three fiscal years, as applicable.>>
Conclusion
<<Provide narrative discussion of lender’s conclusion and recommendation. For example: “The parent of the new operator entity has demonstrated an acceptable financial and credit history as discussed in our analysis of their financial statements and credit history above. The parent of the new operator has the experience to continue to successfully operate this facility. The lender recommends this parent of the new operator for approval as an acceptable participant in this transaction.”>>
New Management Agent (if applicable) □
Name: |
|
Relation to borrower: |
<<Owner Managed/IOI Entity/Independent/Other>> |
Principals/officers: |
|
|
|
|
|
|
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.
Previous HUD Experience
Project Name |
Project City |
Project |
Type of Facility |
|
|
|
|
|
|
|
|
|
|
|
|
New Management Agent’s Duties and Responsibilities
<<Briefly describe the new management agent’s duties and responsibilities (i.e., will the new management agent control the operating accounts; contract for services; recruit, select or train employees; take responsibility for the management of the functional operation of the facility or the execution of the day-to-day policies of the facility; etc.). Also describe the nature of the management agent’s compensation and how it was calculated.>>
Experience/Qualifications
<<Provide a narrative description of experience and qualifications. Discussion should highlight direct experience and involvement in other HUD transactions. This section should clearly demonstrate the expertise to successfully manage the facility and meet the obligations of the management agreement.>>
Credit History
Report Date: |
<<within 60 days of submission>> |
Reporting Firm: |
|
Score: |
|
<<Provide an explanation of the credit score in terms of risk level (i.e., low, medium, or high). Also, if the score is evaluated numerically, explain what value the credit agency places on the score. >>
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Other Facilities Owned, Operated or Managed
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. Example: Other Facilities: XXXXX identified XX other facilities it owns, operates, or manages in addition to the subject facility.>>
Program Guidance: Handbook 4232.1, Section II Production, Chapter 8.8
|
Past and Current Performance
Indicator |
Findings |
Billing |
<<acceptable>> |
Controlling operating expenses |
|
Vacancy rates |
|
Resident turnover |
|
Rent collection and accounts receivable |
|
Physical security |
|
Physical condition and maintenance |
|
Resident relations |
|
<<Provide narrative support for review and finding. For example: “Based on interviews with the principals of the new borrower and new management agent, as well as a review of the management policies and procedures, the Lender has concluded that the new management agent has demonstrated acceptable past and current performance with regard to all of the above indicators.”>>
Management Agreement
Date of agreement: |
|
Agreement expires: |
|
Management fee: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated. >>
Management Certification
<<Provide narrative review. For example: “The form HUD-9839-ORCF, Management Agent Certification, provided in the application package indicates a management fee of XX percent of the residential, commercial and miscellaneous income collected, which is in line with industry standards for projects of this size. The term of the agreement is for XX-years. The stated fee and term match those stated in the management agreement.”>>
Conclusion
<<Provide narrative discussion of lender’s conclusion and recommendation. For example: “The management agent has demonstrated an acceptable credit history and has the experience to continue to successfully manage this facility. The lender recommends this management agent for approval as an acceptable participant in this transaction.”>>
Operation of the Facility □□
Administrator
Name: |
|
Employed by: |
<<Name of entity who employs/pays administrator>> |
Facility Start Date: |
<<Date started at this facility as Administrator>> |
<<Narrative description of experience and qualifications - For example, “{Administrator} has been a licensed administrator since XXXX. Her current Residential Care Administrator’s license No. XXXXXXX expires XXXXX. It was issued by XXXXXX in the State of XXXX. Her experience includes… Since arriving at the facility, XXXX has helped to increase the revenues and profitability of the project, as evidenced by the increasing effective gross income and net operating income (NOI). XXXXX is well qualified and has demonstrated her ability to act as Administrator for the subject facility.”>>
Operating Lease
Program Guidance: Handbook 4232.1, Section II Production, Chapter 8.6, Operating Lease Requirements |
Date of Agreement: |
|
Current Lease Term Expires: |
|
Description of Renewals: |
|
Current Lease Payment: |
|
Major Movable Equipment Current Ownership: |
<<Borrower/Operator>> |
Post Closing Ownership: |
<<Borrower/Operator>> |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.>>
Program Guidance: Lenders need to provide HUD with information in their application regarding any changes to the operator that will occur within the next 5 years. This plan of action is needed to ensure that the quality and experience of any potential new operator will be comparable or better than the current operator. For assisted living facilities (ALFs), it is important to re-emphasize that operators need to be experienced and have a proven track record with the operation, marketing, and lease up of ALF facilities. The 5- year lease expiration issue does not apply to lessees that have lease renewal options. |
Lease Payment Analysis
The lease payments must be sufficient to (1) enable the borrower to meet debt service and impound requirements; and (2) enable the operator to properly maintain the project and cover operating expenses. The minimum annual lease payment must be at least 1.05 times the sum of the annual principal, interest, mortgage insurance premium, reserve for replacement deposit, property insurance, and property taxes.
The lender has prepared an analysis demonstrating the minimum annual lease payment.
a. |
Annual principal and interest |
$ |
b. |
Annual mortgage insurance premium |
|
c. |
Annual replacement reserves |
|
d. |
Annual property insurance |
|
e. |
Annual real estate taxes |
|
f. |
Total debt service and impounds |
$ |
g. |
Minimum annual lease payment |
$ |
<<Compare the minimum annual lease payment to the current lease payment. If the lease payment needs to increase, add the following language: “The lease payment must be increased to $XX per year ($XX per month). The lender has included a special condition to the firm commitment requiring the lease payment be revised to meet or exceed this minimum.” If the lease payment does not need to increase, add the following language: “The current lease payment is sufficient. The recommended annual lease payment also provides the operator with an acceptable profit margin.”>>
Responsibilities
<<Provide a description of the responsibilities of the Lessor and Lessee under the terms of the lease with regard to the following: payment of real estate taxes, maintenance of building, capital improvements, replacement of equipment, property insurance, etc.>>
Master Lease
Program Guidance: Handbook 4232.1, Section II Production, Chapter 13. It is the Lender’s responsibility to read the handbook chapter and provide HUD with a full set of documents for review of the proposed master lease structure. |
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
If you answered “yes’ to all three questions, a master lease or master lease alternative is required.
Key Questions |
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<Provide a narrative describing the terms and conditions of the master lease, proposed payments to and from the master tenants, lease agreements between the new borrower, master tenant, and subtenants, the flow of funds from the subtenants to the master tenant and the new borrower (including the AR lender, if applicable), and any waivers or requests for modification to standard requirements.
If the subject is being joined to an existing master lease, list projects with project numbers already included in the master lease.
Describe any other HUD master leases the principals of the new borrower or parent of the operator are party to, list projects with project numbers, and indicate the HUD lender who is party to the lease(s).>>
Accounts Receivable (A/R) Financing □
Program Guidance: Handbook 4232.1, Section II Production, Chapter 15. |
AR Lender: |
|
AR Borrower |
|
Maximum Loan Amount: |
|
Interest Rate: |
|
Current Balance: |
|
Current Maturity Date: |
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion regarding the topic. For projects being added to an existing HUD-insured AR line, provide specific information on when the AR line was originated (date), when documents were reviewed/approved by HUD, which HUD OGC field office performed the review, and provide a listing of projects participating in the line (project name and FHA number). >>
Terms and Conditions
Describe the borrowing base formula (e.g., XX% of the AR borrowers accounts receivable up to 120 days):
Describe term and renewal options:
Describe the rate applied to the used and unused portion of the AR loan:
Other fees (i.e., financing fees, late payment fees, etc.):
Mechanisms for Operator receipts, disbursements and control of operator funds:
<<Describe the flow of all funds, into and out of accounts. Describe how deposit accounts are controlled (e.g., number of controlled accounts, hard or springing lockbox, daily sweeps, etc.). Attach cash flow chart.>>
Collateral/Security
<Provide narrative description of the AR lender’s collateral/security. Explain any unsecured AR financing.>>
Permitted Uses and Payment Priorities
<<Provide descriptions of the permitted uses of the AR loan funds in order of priority. For example: (1) debt service incurred in connection with the AR loan; (2) operating costs; and (3) distributions to the operator’s shareholders. >>
Financial Analysis
Borrowing Base Analysis
(Double click inside the Excel Table to add information)
Historical AR Loan Costs
<<If there is an existing AR loan that is not yet approved by HUD, provide a financial analysis that explains how the cost of the AR loan has been factored into the NOI calculation. Complete the Historical AR Loan Costs table.>>
Historical AR Loan Costs
(Double click inside the Excel Table to add information)
Proposed AR Loan Costs
<<If the AR borrower is obtaining AR financing for the first time, provide a financial analysis that demonstrates that the AR borrower has sufficient financial capacity to pay all projected operating expenses, AR financing costs and loan payments, and all rent or debt service payments. The analysis must assume the maximum AR loan amount to stress test the AR financing based on the lesser of the operator’s 12-month trailing operating statements. Calculate the impact on the borrower’s debt coverage after payment of the AR loan expenses and payments.>>
Assuming the $ maximum AR loan limit, an annual interest rate of %, and that the entire amount is outstanding for the year, the maximum annual interest expense would be $ . In addition to the interest, the other associated fees are the fees <<list types of fees>>, that total $ per year for the same assumed balance. An analysis of the operator’s 12 month trailing financial statement (Month 20XX – Month 20XX) is below:
12-Month Trailing Operating History |
|
Operating revenue |
$ |
Less: Operating expenses |
|
Net operating income (NOI) |
$ |
|
|
Annual P&I + MIP |
$ |
AR fee: Interest |
|
AR fee: Other |
|
Total annual mortgage & AR debt service |
$ |
|
|
DSCR including AR |
|
The transaction assumed an NOI of $ . The 12-month trailing NOI is $ . The annual debt service including the MIP amount is $ per year. Adding the AR fees equates to a total mortgage and AR debt service expense of $ per year. This equates to prospective debt service coverage.
<<If multiple HUD-insured facilities have access to the AR loan, repeat the analysis above with the consolidated revenues and expenses for all those facilities.>>
Recommendation
<<The lender recommends approval of the AR loan.>>
Insurance □
Professional Liability Insurance (PLI) Coverage
Program Guidance: Handbook 4232.1, Section II Production, Appendix 14.1 |
Name of insured: |
|
||
Insurance company: |
|
||
Rating: |
|
Rater: |
|
Insurance company is licensed in the United States: |
Yes No |
||
Statute of limitations: |
|
||
Current coverage: |
Per occurrence: |
|
|
|
Aggregate: |
|
|
|
Deductible: |
|
|
Policy Basis: |
Per occurrence Claims made |
||
Current Expiration: |
|
||
Retroactive Date: |
|
||
Policy Premium: |
|
||
Summary of Six-Year Loss History for New Operator or its Parent of Operator |
|||||
|
Year |
Total claims paid under this policy (dollars) |
Total claims paid under this policy (no. of claims) |
Total bed count covered under the policy |
Dollars paid in claims per bed |
1 |
|
|
|
|
|
2 |
|
|
|
|
|
3 |
|
|
|
|
|
4 |
|
|
|
|
|
5 |
|
|
|
|
|
6 |
|
|
|
|
|
Total/average |
|
|
|
|
|
Key Questions
|
Yes |
|
No |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<<For each “yes” answer above, provide a narrative discussion on the topic describing the risk and how it will be mitigated.
Example: 1.Multiple properties: The lender notes that the professional liability policy is a ‘blanket’ policy covering XXX facilities, including the subject…{address potential impact of other facilities on the subject’s coverage}
Example: 2.Less than 6-year loss history: The claims history reports were examined for the period XX through XX. The lender determined that there were no professional liability XX claims during that period… {Address claims and sufficiency of coverage, etc. based on history}.
Example: Claims made coverage: The project’s previous professional liability insurance coverage was a “claims made” form policy with XXXX, which expired XXXX, when the current policy was put in place. In XXXX the borrower purchased a “nose coverage” policy which is the coverage needed when going from a “claims made” form of insurance to a “per occurrence” form of insurance. The premium for this “nose” coverage liability was a one-time charge and was paid in XXX. Because of that additional insurance coverage, the insurance expense for XXXX was substantially higher than the current expense. The current “per occurrence basis” insurance policy covers the entire statute of limitations. The project’s professional liability insurance is in compliance with HUD’s requirements. >>
Lawsuits
<< Identify all potential or expected professional liability insurance (PLI) claims in excess of $35,000 that have been or may be filed for all periods within the statute of limitations for the state where the claim occurred. Identify any reserves held for potential claims. Discuss the risk associate with each potential PLI claim. Discuss how that risk is mitigated. Describe the circumstances, identify the potential award amount, provide evidence and analysis showing that the suits are covered by PLI insurance, and if the insurance is not sufficient, does the insured demonstrate adequate funds to cover the potential excess? Describe any other information that mitigates the risk.
As applicable, discuss other types of lawsuits (non-PLI) and describe the potential risk related to the party’s participation in the proposed project. Discuss how that risk is mitigated. If the suit is closed, does it contribute to a pattern? Does it materially affect the party’s ability to participate in the project? If not closed, describe the circumstances, identify the potential award amount, provide evidence and analysis showing that the suits are covered by insurance (general liability), and if the insurance is not sufficient, do they demonstrate adequate funds to cover the potential excess? Describe any other information that mitigates the risk.>>
Commercial General Liability Insurance
<<Provide narrative discussion of policy coverage for bodily injury, property damage and personal injury. For example: General liability insurance will be provided by XX. The underwriter has confirmed estimates of the cost and coverage for underwriting and will re-verify this information prior to closing. The insurance coverage will comply with HUD requirements prior to closing.>>
Recommendation
<<Provide narrative recommendation regarding acceptability of professional and general liability insurance. For example: “The new borrower’s professional and general liability insurance was analyzed in accordance with Handbook 4232.1, Section II Production, Chapter 14 and Appendix 14.1. The property has XX current potential (threatened) insurance claims at this time as reflected on the certification provided by the borrower. It is {lender’s} opinion that the information provided above and in the application sufficiently demonstrates that the existing professional liability coverage meets HUD’s requirements and that the risk from professional liability issues is sufficiently addressed. No modifications to the current coverage are recommended.”>>
Property Insurance
<<Provide narrative discussion of policy coverages as applicable, including property damage, ordinance and law coverage, and boiler and machinery/equipment breakdown insurance. For example: “Property insurance will be provided by XX. The lender has confirmed estimates of the cost and coverage for and will re-verify this information prior to closing. The insurance coverage will comply with HUD requirements prior to closing.”>>
Fidelity Bond/Crime Insurance Coverage
<<Provide narrative discussion of fidelity bond/crime insurance coverage. For example: “The current insurance policy reflects fidelity (crime) insurance with the limit of $XX and $XX deductible. The HUD requirement for at least two months potential gross income receipts would total $XX. The current level of coverage is sufficient for this project.” If not sufficient, recommend commitment condition.
Additional Insurances
Additionally, information for the following additional insurance coverages as applicable:
Type of Insurance |
Amount of Coverage |
Deductible |
Narrative discussion of coverage |
Director’s and officer’s liability coverage |
$ |
$ |
|
Commercial auto liability coverage |
$ |
$ |
|
Business income coverage |
$ |
$ |
|
Earthquake insurance |
$ |
$ |
|
Sinkhole/mine subsidence insurance |
$ |
$ |
|
Windstorm coverage |
$ |
$ |
|
Flood insurance |
$ |
$ |
|
Circumstances that May Require Additional Information (e.g., secondary financing) □□
In addition to the information required in this narrative, HUD may require additional information from the lender to accurately determine the strengths and weaknesses of the transaction. If additional information is required, the questions will be included in an appendix that accompanies the narrative.
Special Conditions □□
<<List any recommended special conditions. If none, state “None.”>>
Conclusion □□
<<Provide narrative conclusion and recommendation.>>
Signatures □□
Lender hereby certifies that the statements and representations of fact contained in this instrument and all documents submitted and executed by lender in connection with this transaction are, to the best of lender’s knowledge, true, accurate, and complete. Lender further acknowledges that any material changes to this transaction subsequent to the submission date may void this transaction in its entirety. This instrument has been made, presented, and delivered for the purpose of influencing an official action of HUD and may be relied upon by HUD as a true statement of the facts contained therein.
If the above transaction(s) is/are approved by HUD, the Lender agrees to execute any and all documents, including a Release and Assumption Agreement and/or a Security Instrument Modification Agreement. It is understood that the Lender’s consent to this transfer will in no way prejudice its rights under is contract of insurance with HUD.
<<REQUIRED FOR SECONDARY FINANCING WHEN A LIEN IS BEING PLACED AGAINST THE PROJECT. Lender hereby consents to the creation of a subordinate lien against the Project in connection with the transfer. Lender waives its right to assign the Security Instrument and claim insurance benefits by reason of the creation of such lien(s).>>
Lender: |
|
HUD Mortgagee/Lender No.: |
|
This report was prepared by:
|
Date |
|
This report was reviewed by:
|
Date |
<<Name>> <<Title>> <<Phone>> <<Email>> |
|
|
<<Name>> <<Title>> <<Phone>> <<Email>> |
|
Previous
versions obsolete Page
| File Type | application/vnd.openxmlformats-officedocument.wordprocessingml.document |
| File Modified | 0000-00-00 |
| File Created | 2023-07-29 |
© 2024 OMB.report | Privacy Policy