Corporate Credit and Portfolio Review in Residential Care Facilities Conference
Explore key topics discussed at the U.S. Department of Housing and Urban Development Eastern Lenders Conference focusing on corporate credit and portfolio review in residential care facilities. Topics covered include portfolio definitions, project types, risk mitigation requirements, and portfolio review topics. The event brought together industry experts to share insights and best practices in managing corporate credit and ensuring the long-term viability of organizations in the care facilities sector.
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Presentation Transcript
Portfolios Portfolios The Office of The Office of Residential Residential Care Facilities Care Facilities U.S. Department of Housing and Urban Development Eastern Lenders Conference Philadelphia, PA March 13 & 14, 2013 1
INTRODUCTION PANEL MEMBERS JENNIFER BUHLMAN - OHP JEROME RATLIFFE - OHP JENNIFER TADLOCK OHP STEVE ERVIN BERKADIA ERIK LINDENAUER HHC FINANCE 2
AGENDA OHP Team Corporate credit review process Industry Experts Approach to corporate credit reviews Share tips/best practices 3
Portfolio Definitions #of Facilities / Total Mortgage 2 49 50+ SMALL $0 < x $75M No Corporate Credit MIDSIZE $75M < x $250M Yes Corporate Credit LARGE x > $250M Yes Corporate Credit Mortgagee Letter and Handbook redefine the threshold between Small and Midsize to be $90M 4
Project Types Yes Corporate Credit No Corporate Credit 223(f) 232 NC Transfer of Physical Assets Change in operator (control of resident care) Change in license holder a7 5
Corporate Credit/Portfolio Review Contents Description of the overall organization List of all facilities owned and/or operated by the organization Identify proposed HUD, current HUD (if any) Three year historical through current and budget financial summary of entire organization Three year historical through current and budget operations data (census mix and occupancy) Risk management Accounts receivable financing Status and performance review of properties and lines of business not coming to HUD for refinancing 6
Portfolio Risk Mitigation Requirements Standard on All Portfolios Master Lease Mortgage Reserve Fund 7
Portfolio Review Topics Financial strength of the participants Executive management and its experience and ability to generate cash flow and create value for stakeholders in any market condition and ensure the long term viability of the organization Quality of care Executive management s corporate culture and standards for high quality of care demonstrated by positive resident and family outcomes (clean surveys, Centers for Medicare and Medicaid Services (CMS) Five Star Quality Ratings, low professional liability claims, etc.) 8
Portfolio Review Topics Current debt Ensure that existing indebtedness is consistent with or below similarly-situated facilities by examining debt per bed and as demonstrated by low loan-to- value and high debt service coverage Legal issues Evaluate any significant legal issues that may compromise the ability of the organization to continue to operate under the current structure 9
Portfolio Reviews Areas of Further Investigation Financial Strength of Participants Experience of the owner Experience of the operator Historical trend of financial performance owner Historical trend of financial performance operator Other ???? 10
Portfolio Reviews Areas of Further Investigation Quality of Care Indicators CMS Star Rating/surveys PLI claims history Risk management program Other ???? 11
Portfolio Reviews Areas of Further Investigation Current Debt to be Retired with FHA Mortgage Existing debt per bed Debt allocation issues Swaps/prepayment penalties/yield maintenance/defeasance Other ??? Legal Issues Pending litigation Labor union issues Other ???? 12
Portfolio Risk Mitigation Requirements Master Lease If one master lease will not work for all properties in the portfolio, lender needs to propose alternate structure that will provide HUD protection like a master lease Mortgage Reserve Fund Separate funds per facility Accessed after all funds available under the master lease are exhausted May be mortgageable item 13
Program Guidance Portfolio Guidance Notice H01-03 Future Mortgagee Letter Future Handbook Master Lease Requirement Future Mortgagee Letter Future Handbook Professional Liability Insurance Guidance Notice H04-15 Future Handbook 14
Program Guidance Accounts Receivable Financing Notice H08-09 Future Handbook Email Blasts Referencing Portfolios November 2, 2010 November 18, 2011 15
Sequence of Events Corporate Credit Review ORCF analyzes materials submitted PLI and AR financing reviews Meet with working group ORCF team, OGC and ORM Meet with OHP Leadership Concurrence from OGC and ORM Issue Portfolio Acceptance Letter Master Lease Documents Must be in Final Form Approved by OGC Prior to Submitting Applications to the Queue Portfolio Acceptance Letter Must be Issued Prior to Submitting Applications to the Queue 16
Portfolio Monitoring Post-Endorsement Quarterly Status Monitoring Establish process among HUD Asset Management, Lender and Borrower for Quarterly Status Review Consolidated Financial Statements Summary of significant/material events occurred or planned this information is not subject to FOIA Contact Patricia Fukuda Lewis 202-402-5901 17
Case-Specific Questions? Call us Jennifer Buhlman 202.402.6722 Jerome Ratliffe 202.402.3658 Jennifer Tadlock 206.220.6232 18
Lender Experience with HUD Portfolio Review Process 19
Questions 20
