Fannie Mae Seniors Housing Financing

Loans for Independent Living, Assisted Living, and Alzheimer's/Dementia Care Centers insured by Fannie Mae

Any wise investor can agree that seniors housing properties are a sound addition to any portfolio, with over 10,000 Americans hitting retirement age each and every day. For those interested in acquiring a senior housing development, the Fannie Mae Seniors Housing Loan can be a highly cost-effective way to do so. Fannie Mae Seniors Housing Loans have terms and amortizations up to 30 years, fixed and adjustable-rate interest options, and can be used for the acquisition or refinance of independent living, assisted living, and Alzheimer's/Dementia care facilities. These loans start at a minimum of $5 million, have a maximum LTV allowance of 80%, and are fully assumable (with a 1% fee and lender/Fannie Mae approval.)

Sample Fannie Mae Terms For Seniors Housing Loans

Size: $5 million minimum (exceptions can be made on an individual basis)

Terms: 5-30 years

Use: Acquisitions or refinances

Amortization: Up to 30 years

Interest Rates: Fixed and adjustable-rate loans available

Maximum LTV:

  • 75% (80% for fixed-rate, tax-exempt bonds)
  • 70% for Alzheimer's/Dementia care properties
  • 70% for properties with a Skilled Nursing component
  • Decrease max. LTV by 5% for cash-out refinances

Minimum DSCR:

  • 1.30x for independent living only
  • 1.40x for properties with 50% or more Alzheimer's/Dementia care
  • 1.45x for 100% Alzheimer's/Dementia care properties
  • 1.50x for properties with a Skilled Nursing component
  • Weighted average calculation for properties with less than 50% Alzheimer's/Dementia care units

Recourse: Most loans are non-recourse with standard carve-outs

Prepayment Options: Yield maintenance, defeasance, or graduated prepayment premiums

Commercial Space Limits: Commercial space must comprise no more than 10% of the net rentable area and produce no more than 10% of the project's effective gross income

Eligible Properties:

  • Properties must have at between 5 and 50 units
  • Properties must be stabilized, and can include manufactured housing communities
  • For acquisitions or refinances, loans must be first lien
  • Eligible borrowers must be single asset entities
  • No properties with entrance fees are allowed
  • Owner/operators must have at least 5 years successful experience in senior living communities, and must have owned/managed 5 or more senior housing properties

Advantages:

  • Competitive interest rates
  • Most loans are non-recourse
  • Flexible prepayment options
  • Supplemental financing is allowed
  • 30- 90 day rate locks available (early and extended rate locks are also available-- early rate locks allow borrowers to lock the rate between 45 and 365 days before closing)

Disadvantages:

  • Requires third-party reports including an Appraisal, Property Condition Assessment, Zoning, Termite, Flood and Seismic reports (for properties in specific areas), a Phase I Environmental Assessment, and a Seniors Housing Liability Assessment Report
  • Replacement reserves are required ($300/unit per year)
  • Typically requires 90% economic occupancy for 12 months (for independent living facilities) or 15 months (for Alzheimer's/Dementia care or Skilled Nursing properties), though this may vary
  • Typically requires $15,000 application deposit and $3,000 non-refundable processing fee
  • Typically requires a 1% origination fee
  • A 2% rate lock fee is required (refundable at closing)
  • Commitment fees may also be charged