Throughout its thirty-plus years in business, Cambridge Realty Capital has amassed a wealth of knowledge in the field of senior living. Our advice and insight, like the ideas you will find in "HUD Made Contingencies For Borrowers During COVID-19 Pandemic", is based on on-the-job experience plus the unique skills and talents of Cambridge’s staff and their individual specialties. This quick read from Cambridge’s archives is filled with timely advice that is as relevant today as ever and will inspire you as you weigh your capital market options.
HUD Made Contingencies For Borrowers During COVID-19 Pandemic
As with millions of other businesses across the US, Cambridge Realty Capital is operating remotely during the COVID-19 pandemic. So while it’s not quite “business as usual,” it’s “about as close as it can be,” according to Cambridge President Jeffrey Davis. And during the early days of the pandemic, he had some good news to offer to HUD borrowers who were feeling pressure and anxiety during this unprecedented time: “HUD made some concessions,” he stated. “HUD supported its senior housing and healthcare borrowers by offering several unique programs to assist them with the financial challenges caused by the COVID-19 virus.”
He continued, “HUD, like many lenders across the United States, realized that they needed to support their borrowers. Obviously of great concern to operators was the ability to continue delivering the necessary level of service to residents, and not just maintain the status quo but also being able to respond to emergent needs that arose due to the COVID-19 virus, which had infiltrated many senior facilities across the country.”
With that in mind, HUD created a series of four benefits as part of its COVID-19 assistance program, all of which helped borrowers address their obligations to HUD and also to take care of their residents. Though this program is over, these benefits were offered to borrowers and did not need HUD review or approval, provided that HUD had not notified the Lender that the subject property is with ORCF’s Risk Mitigation Branch; if it was, then HUD approval wass required.
The benefits were:
1) Suspend monthly deposits to be placed for replacement reserve through July 31, 2020, or longer if the authority to grant this benefit is extended. At the conclusion of the suspension period, the sum of such suspended payments shall be paid into the reserves for replacement in equal monthly increments over the next 12 consecutive months.
2) Use operating deficit funds to make debt service payments, subject to repayment provisions if any contained in the subject escrow agreement.
3) Use debt service reserves to meet debt service payments, subject to repayment provisions, if any, contained in the subject escrow agreement.
4) Use replacement reserves to meet debt service payments required, so long as the reserve for replacement reserve account does not fall below $1,000 per unit.
Davis believes that these programs sent a message to HUD borrowers that “we are all in this together” and that the senior housing and healthcare population are extremely important, and the landlords and owners of these buildings need to be properly funded to address their growing and continually-changing healthcare needs.
As for Cambridge Realty Capital, its staff members have been doing their usual jobs, just not at the Cambridge office. “We stay in regular contact via the internet and phone,” Davis said. “And while it’s not the same as being able to walk into a co-worker’s cubicle or office, our lines of communication are flowing. Our staff members remain committed to open and timely conversations, not just with one another, but with our clients. If you pick up the phone to call Cambridge and make an inquiry, you’ll still be directed to a human being. If you need to talk to a specific staff member, you’ll be able to reach her or him, if not directly then through a callback.” Davis also assures operators that even though these contingencies have expired, HUD is still processing applications, “and Cambridge is still submitting those applications during this time, as well as closing on loans that were and still are in process.”
With more than $5.5 billion in closed senior housing capital transactions, Cambridge Realty Capital has a proven track record of getting the deal done. Whether it is conventional. an equity transaction, a bridge loan, or a HUD loan, Cambridge works closely with senior living operators to structure a customized financial package that meets their individual needs.
Of course, it’s only a great deal if it actually closes. Cambridge Realty Capital is committed to walking with its clients every step of the way, from initial inquiry to the receipt of funds. One of the things Cambridge’s clients have consistently attested to throughout its years in business is that they are never abandoned during the process. You won’t be left hanging with unanswered phone calls or unreturned emails. If it’s a concern to you, it’s a concern to Cambridge.