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Old 09-28-2005, 08:41 AM
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Default Conventional Loans as a Bridge to a Long-HUD Financing on Acquisitions

This is an interesting financing structure to ameliorate the process----
while pursuing a HUD loan application.

Our general perception is that HUD loans are highly attractive on
acquisitions of apartments or healthcare properties (i.e. HUD provides a high leverage;
long term debt at a term of 35 years on acquisitions; fixed interest rates
---roughly 5.20% if done today, plus a substantial HUD mortgage insurance
premium; and all of this is to be structured as non-recourse ).

But unfortunately ,processing the HUD loans often ignores the
"time-sensitivity" of making a particular acquisition.

A means to address this problem might be in using an "interim or bridge"
conventional source of financing to effect an acquisition, which then ultimately
(i.e when the HUD processing is completed) is to be re-financed through a
HUD loan.

That is, the acquisition is made on a timely basis-----thus capturing the
specific opportunity-----through a more-controllable conventional source of
financing, which is subsequently to be refinanced through a more beneficial HUD
permanent loan.

Rather an elegant financing structure..

A number of lenders provide these conventional bridge loans, either in tandem
with processing the HUD loans, or as an independent financial service.

The underwriting profile on the conventional bridge loan is the following :
================================================== ===

* Property types : Apartments or healthcare-related.

* Sized at $2 million to $ 75 million.

* Terms at six months to 24 months.

* Fully recourse.

* LTV at 65% to 75%..

* Ideally properties are at least three years into its operations.

If you wish to pursue this structure, please contact Mr. Margolin of
Chilmark Associates Inc. at 203-353-0897.

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