Property Type:
Section 202 senior housing
Location:
Goshen, IN
Objective:
Provide equity to a parent organization and fund near-term and future repairs
Financing Amount:
$4.0 million total
Sources of Funding:
Fixed-rate notes insured by FHA’s 223(a)(7) and 223(f) programs
Closing Dates:
Jan. 17 and
May 18 2007

Background & Goals
Greencroft Manor II and III offer a total of 250 affordable senior apartment units. They are part of the Greencroft Goshen system, which serves 1,200 residents in the full continuum of care. The properties wanted to decrease their cost of capital in order to fund near-term and future repairs, secure debt service savings, and payoff a loan from its parent company.

Sources of Funding & Outcome
By refinancing with HUD mortgage insurance programs, both properties were able to take advantage of a favorable interest rate environment to transfer equity in the projects to Greencroft, Inc., fund significant repairs to the properties’ physical plants, and position the properties to maximize benefits from future debt service savings.

The most significant benefits of the refinances were the provision of repair funds and the positive impact on the organization’s overall financial condition. Refinancing:

• Pays off intercompany loans of nearly $400,000
• Funds capital improvements totaling over $380,000 at Greencroft Manor III
• Pays an unrestricted developer’s fee of $60,800
• Creates a debt service savings escrow for Greencroft Manor III
• Provides debt service savings of $379,000 over the loans’ lives

The escrow ensures that Greencroft can retain debt service savings on its balance sheet. Additionally, this new escrow allows for more flexibility than Replacement Reserves with regard to capital expenditures, ensuring that management is able to fund improvements and capital expenditures that are more consistent with the evolving nature of senior living.

Lancaster Pollard is the nation’s leading underwriter of Section 202 refinance loans. From the beginning of fiscal year 2006 through the first half of FY07, according to HUD data, the firm refinanced more Section 202 loans and units than any other firm in the country.