Provider Granted HUD Loan to Support Small House Assisted Living

One provider of small house assisted living is catching the interest of HUD, having recently consolidated eight loans under one new loan insured by the FHA Sec. 232/223(f) program.

The $5.7 million loan, arranged by Lancaster Pollard, consolidated Bethesda, Md.-based Eden Homes Group’s eight loans. Eden Homes Group operates six high-end assisted living and memory care facilities with a seventh community in the works.

Typically, HUD finances projects related to affordable housing.


Nursing homes, assisted living facilities and board and care are some examples of the type of housing covered by Section 232, “an FHA-Insured loan product that covers housing for the frail elderly—those in need of supportive services,” says Lisa Wolfe, regional public affairs officer at HUD.

The recent financing activity reveals one way a private pay, scattered-site provider can obtain funding from HUD.

Each of the four Bethesda, Md.-based facilities carried two loans—a bank loan and a Small Business Administration (SBA) loan. When ownership sought funding to expand its business and build additional facilities, it realized its financial capacity to do so was limited by the debt derived from its eight outstanding loans. This led the company to seek additional financing.


The buildings are seamlessly located within residential neighborhoods, and each house accommodates no more than eight residents.

“Many people are unhappy in a large facility, particularly as they become more vulnerable,” says Lori Larson, co-founder/owner of Eden Homes Group. “These communities look like your typical house, with front porches, the standard living and dining room. Other than the fact they have eight bedrooms, we could turn around and sell them as single family homes.”

But repurposing the homes for sale is the opposite of the senior care provider’s intentions. The company’s $5.7 million loan increases its borrowing capacity, allowing them to pursue additional financing to construct additional homes and expand their business.

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As the four separate homes all utilized shared services, were covered by the same insurance policies and effectively operated as one property, Lancaster Pollard was able to refinance the scattered sites under one loan, explains Thomas Gale, senior vice president of Lancaster Pollard.

“We thought it would be a good test for the U.S. Department of Housing and Urban Development (HUD) to see if they would be interested in a senior housing scattered site financing,” Gale says, noting that HUD is more familiar with issuing scattered site loans related to affordable housing.

The loan is nonrecourse and features a low interest rate and 35-year term. The refinance also results in annual debt service savings and approximately $150,000 for repairs and improvements such as new elevators and generators.

Zoning for the homes, which in addition to Bethesda are located in Potomac, Md. and McLean Va. — with a seventh to open in McLean next year — allow for eight unrelated people to reside under one roof, provided the house is licensed by one of several state departments.

“Often there are certain caveats, but in these counties we have by-right zoning,” Larson says, noting that eight is the maximum amount of residents these homes can accommodate by law in these areas. “We don’t need to obtain special exceptions to the existing zoning codes to operate.”

The ratio between direct care staff to residents is three-to-eight with a number of additional supporting staff including activities, training and nursing. Within Eden Homes Group’s model necessary health care fixtures are disguised to ensure the feeling of home, which can be compromised in larger types of senior care communities.

“We’re not doing anything if it doesn’t look like a house, or that would defeat the concept,” Larson says. “There’s no medicine carts in the hall. We keep our medicine in a secured closet to be opened by staff only when needed. From the outside it looks like a pantry.”

Obtaining financing for a cluster of sites had its challenges, Gale admits.

“We had to overcome that there were separate licenses,” he says. “Because of the zoning and uniqueness of the facilities they couldn’t be licensed as one as HUD requires, otherwise they run into zoning issues.”

Lancaster Pollard went through the LEAN thinking process, writing HUD a three- to four-page memo.

“High-end projects are not HUD’s forte,” he says. “But because of the uniqueness of the facilities and how they deliver care we thought HUD would agree with us, and they did.”

Looking ahead, Lancaster Pollard says it would work with another company like Eden Homes if the right opportunity comes along.

“Lancaster Pollard really looks to help all senior living providers whether large national/regional operators or smaller community providers,” Gale says.

Written by Cassandra Dowell

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