Access to Capital Through HUD
Last month Jim Rasche and Dave Sheedy of Kahler Slater Architects traveled to Washington D.C. and New York City to meet with various experts on the Department of Housing and Urban Development’s (HUD) Section 242 mortgage insurance program, including the HUD loan officers themselves. Here is a very brief summary of what they learned:
1. HUD 242 is essentially a program that increases access to capital. An application process allows the government to thoroughly vet an organization and evaluate its debt capacity. An accepted HUD 242 application is like a seal of approval from the government that allows clients who may not be able to access capital achieve an AA or AAA rating and borrow at lower interest rates.
With no capital limit, the HUD 242 program is designed to be of most benefit to larger projects. HUD also has programs designed specifically for smaller communities (fewer than 20,000 residents) and certain geographies.
2. The application process has been streamlined; and the money is there. Applying still requires a significant investment of time, but they learned from the lawyers who have closed 90% of these deals that the money is there to be had. There is also a new element of the program – Design Build – for projects under $30 million.
4. Successful applicants have put together a team of experts to assist them with the application. One step in the process is identifying the capital project need. This is a service Kahler Slater provided in 2003 for the Grand Itasca Clinic and Hospital in northern Minnesota, which received HUD 242 funding for its replacement hospital.
It’s great that Kahler Slater took the initiative to become experts in this area. Who says architects just have to design buildings?