ORCF Underwriting Contract Total in Firm Review 219 Contract Underwriters ORCF Underwri ter %18% 223(f) = 170 (a)(7) = 8 Current Contract Underwriter Assignments
Applications Received FY 14 to 3/21/14 Type of Application FY 11FY 12FY 13FY f (a)(7) Other Total
Firm Commitments Issued FY 14 to 4/25/14 Type of Application FY 11FY 12FY 13FY f (a)(7) Other Total
Insurance Changes Proposed changes were vetted with MBA and large FHA servicing lenders along with FNMA New Requirements: 90 % of Estimated Replacement Cost. Loss of Business Income Windstorm coverage Expanded flood insurance coverage if facility is located in flood zone
Decision Circuit Tool for setting the scope of the appraisal review. All applications are looked at by an ORCF appraiser. The scope of review is on a spectrum depending on risk factors.
Flags - Continued NOI trending down for 3 years. Recent NOI at half of concluded rate. Private Pay or Medicare census higher than proven history. Medicaid census lower than history. Occupancy lower than 75% Change in potential resident days Recent purchases
Green Flags (tend to offset red flags) DSCR over 2.00 LTV under 80% (LTV evaluated under two Scenarios) 1.As underwritten 2.Using most recent NOI and Avg Market Cap rate.
Special Consideration Loans over $25 million History doesnt match Operating Statement. Purchase within 3 years.
ORCF Loan Committee For 223f main concerns and example mitigation: Valuing/sizing the loan using prospective NOI – Mitigation: Debt service reserve, reduce mortgage Patient/Resident care issues – Mitigation: Third-party risk management (one-time or on-going) Market concerns, facility low historical occupancy levels – Mitigation: Let season until operations turn-around, management/marketing efforts Loan term as it relates to some functional obsolescence – Mitigation: Reduce loan term, reduce mortgage
Continued ORCF Loan Committee New construction concerns Borrower/Operators lack of experience in developing and operating similar facilities Low equity contribution less than 20 % Market concerns Size of facility in relation to comparable Aggressive metrics used in loan sizing
Underwriting Highlights What is going well New Process for Reviews – changes Expediting Processing & Reviews
Underwriting Highlights Valuation Issues & Concerns Prospective or Aggressive NOI conclusions NOI Conclusion not yet Achieved Fluctuating NOI History Declining NOI trend Aggressive Expense Ratio Aggressive Cap Rate
Proposed New Construction SUPPLY Competition – existing and proposed (pipeline) Market position within PMA Saturation rates Reasonable capture rates
Replacement Facilities SUPPLY Proximity Same demographics Same services – adding or deleting How many current residents will transfer
New Construction Supply CONs and Moratoriums CON (Certificate Of Need) Moratoriums on adding new beds State need calculations Only transfer within county
New Construction Supply Transitional Rehab Facilities Hospital discharges to rehab ALOS (Average Length of Stay) Hospital incentives Rehab purpose (cardio, stroke, hip, orthopedic, etc.)
New Construction Demand Demand determinants for Assisted Living Age Household Income Home Value Income Qualification Living Status Acuity, Mobility and Care Limitations Memory Care Adjustments
New Construction Demand Demand determinants for Skilled Nursing Age Acuity Income Qualification Mobility Demand for Transitional Rehabilitation
Closings Expediting Section 232 Closings
Closing Team Updates ORCFs Closing Team is keeping the conveyor belt of closing moving! FY 2013 had 766 closings, compared to 706 in FY 2012, 415 in FY 2011, and 309 in FY 2010 Fiscal year to date volume much lower, mostly due to 223a7 volume dropping off.
How do I get a HUD Closer assigned? For a HUD Closer assignment (and any other closing related issues, including extensions) when the HUD Attorney closing package is Average turnaround time for closer assignment right now: 1-2 business days ORCF has 11 full time Closers and 3 contract Closers (most pictured below at our January 2014 Closing Kaizen)
Partnership & Collaboration Please Remember: Complete, clean, and accurate closing packages get reviewed and closed quicker All special conditions must be met and properly documented prior to closing Use the Special Conditions Matrix! Responsiveness to HUD Closer and HUD Attorney and fast turnaround is KEY Closing Docs Closing Table