Financing Without Fear: Program Expands Senior Housing Lending Options

Would you convert senior housing units into assisted living, if doing so would lead to refinancing problems down the line?

In the past, some providers faced this choice. But that has changed, thanks to new rules under a U.S. Department of Housing and Urban Development (HUD) program.

The Assisted Living Conversion Program (ALCP) provides grants to nonprofit owners to convert a portion of their units into an assisted living facility. Previously, properties that received ALCP grants were blocked from using FHA mortgage insurance through HUD’s Sec. 223(f) and Sec. 221(d)(4) programs.


Now, lenders can tap these HUD programs to refinance or rehabilitate properties that have undergone a conversion through ALCP, so long as less than 75% of its units and residents receive assisted living services. They no longer have to fear that if they utilize ALCP to expand assisted living, future renovations or refinancings on the property will have to financed through non-HUD channels.

“A number of attempts over the years to refinance or recapitalize have been very complicated,” Ryan Miles, a senior vice president of specialty investment bank Lancaster Pollard, tells Senior Housing News. “From a lender’s side, it opens up a good deal of pent-up demand for work that needs to happen on these projects. It’s going to allow us to make the whole building accommodate all residents’ needs, rather than just a small portion.”

The barriers proved difficult to overcome, Miles says, requiring owners to split their HUD debt into two different ownership structures and pay significant legal fees to do so. Even then, very few refinances or recapitalizations were actually achieved.


“Those that [Lancaster Pollard] has talked to in the past were told there was nothing we could do for them,” Miles tells SHN.

Expanding the Program

Since 2000, HUD has provided 125 ALCP grants to more than 80 seniors housing properties, disqualifying them all for FHA insurance programs. The new guidelines, though, give nonprofit operators the ability to stay within HUD’s programs rather than seek out capital elsewhere, Miles says.

National Church Residences, a nonprofit provider of affordable housing for seniors ranked No. 30 on the 2015 LeadingAge Ziegler 150, received its first ALCP grants in 2008. These were to convert 34 units into assisted living at Hopeton Village in Chillicothe, Ohio and 32 units at Portage Trial Village in Cuyahoga Falls, Ohio. National Church Residences went on to apply for and receive two more ALCP grants in 2009 to incorporate more assisted living at each of the Ohio properties.

In total, National Church Residences received eight awards for six properties. However, ALCP limitations steered the provider away from the program in its recent projects—a scenario that could have been different had the new changes been implemented sooner.

“Our last two projects, we didn’t go through ALCP because of refinancing problems we had in the past,” Eric Walker, director of affordable housing development with National Church Residences, tells SHN. “Looking back now, we might have done things a little differently.”

By opening ALCP grantees to further HUD options, Miles says such discouragement can be avoided.

“The guidance finally provides proactive owners who have utilized ALCP grants access to the many benefits of HUD financing and ensures that the future capital needs of the entire building can be met,” Miles wrote in October.

Written by Kourtney Liepelt

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