Active adult communities have become one of the fastest growing sectors of the senior housing industry. Growth has been fueled by increasing demand from Baby Boomers, who typically want a more active lifestyle in retirement, and a heightened interest by investors in senior housing communities. One study forecasts that the active adult community will grow at a compound annual growth rate of 4% through 2030. That means a lot of new projects will need financing!
Did you know that HUD has construction/permanent financing available for active adult – or as they call them – “age restricted” communities. Here is a quick rundown of their programs:
- HUD defines an active adult as someone 62 years of age and older.
- Projects are prohibited from having central kitchens, dining facilities and mandatory meal programs. Optional services and amenities, i.e., a-la-carte dining, concierge services, housekeeping, laundry, transportation, etc., are permitted.
- Loans for market-rate projects are underwritten at 87% loan to cost ratio/1.15 debt service coverage ratio; “middle market” projects can qualify for a 90% loan to cost and 1.11 debt service coverage.
- Loans are non-recourse, have a fixed interest rate and amortize over 40 years. They also are assumable and prepayable under flexible conditions.
- Refinancing loans for existing projects are underwritten at 87% loan to value and a 1.11 debt service coverage ratio; cash-out options are available at 80% loan to value; refinancing loans for affordable projects lowers the required age of residents to 55 years.
Please contact us for more information about how you can finance active adult communities with HUD and Sims Mortgage Funding.
