Windsor, Vt. – Mary Louise Sayles and her daughter, Patricia Horn, co-owners and operators of the Cedar Hill CCRC in Windsor, Vt., had created a very prominent and successful senior living community. They achieved the highest ranking for their nursing home – five-stars – and enjoyed an excellent reputation for quality of care, but they needed to expand their assisted living and alzheimer’s space to accommodate new residents.
While the owners wanted a HUD 232 loan to help finance the project, the original project team lacked expertise on HUD 232 mechanics and implications. What was needed was a clear understanding of budgetary targets and how they affected the construction financing, the equity required, and the appraisal information. The lender wanted to optimize construction financing and needed accurate costs to underwrite the project. Eventually, rising prices rendered the appraisal, market study and costs invalid and outdated, putting the project on hold.
The instincts of the original team were to simply cut costs, but when evaluating the HUD maximum loan criteria with the lender it became apparent that cost cutting beyond the necessary thresholds would actually result in a reduction of the HUD Loan. In essence, the maximum loan was being driven down by reduced costs when the cost reductions drove the costs below the appraised value maximum loan.
The lender asked Congress Building Company to step in to propose a solution, and a series of meetings was conducted to help clarify what was essential to properly meet the owners’ target market and to provide client services in a way that made sense for their business plan.
Next, Congress, the owners, and the lender worked closely with the appraiser to make sure that a clear understanding of the project’s attributes resulted in the most accurate appraisal possible. Lastly, Congress worked closely with the owner to evaluate the HUD processing “queue” and HUD’s actual lead time to underwrite and then close the loan. This certainly was not, and still is not a science; it’s a semi-intuitive, semi-educated evaluation. Nonetheless, adequate contingencies for rising construction costs, changes in Davis Bacon prevailing wages, and unforeseen conditions, as well as a series of techniques relative to HUD regulations and allowed sources of and uses to close were all properly incorporated into the costing of the project and the mortgage structuring.
This was accomplished, the owners’ equity was optimized, and the best possible loan structure was obtained in the HUD 232 loan.
The $10-million-dollar addition will include a 20-patient memory care unit on the first floor, and another 20 independent and assisted living apartments on the second floor. The addition will also include amenities such as a fitness center, salon, library, computer center, pub, country kitchen and multipurpose activity room.
At the groundbreaking on a very cold and snowy winter’s day, co-owner Louise Sayles, proudly said, “It took almost four years to get to this place. Being just kind of ordinary citizens and women, it has been a long, hard struggle to grow the business. But because of the help that we’ve had along the way, we’re able to be here today.”
Celebrating the groundbreaking with the owners were William Nicholson, CEO of The Congress Companies, Stephen P.Mackenzie of Mackenzie Architects.
Best value is much harder to deliver than lowest initial cost. And adding true value is much harder than just cutting costs in any proposed health care project. Congress Building Company strives to add value to every aspect of the projects their clients undertake.