Can the acquisition cost of existing bed authority be included in the HUD Replacement Cost?
No, it may not. The issue here is that in CON states with no new beds permitted there is a “free market” where the rights to have these scarce beds were sold from one operator to another. Normally it is the operator who participates in this market, not the owner. Bottom line is that HUD will not allow the cost of purchasing existing CON beds in the HUD replacement cost. However replacement cost is just one test in loan sizing. In the mortgage sizing test based on loan to value the value of the bed authority will be an intrinsic part of the overall Market Value, and need not be deducted. -- Sep-14
Why doesn't ORCF have a minimum vacancy requirement?
ORCF wants a “Market Value.” The occupancy rate selected should not only be reflective of the subject’s history, but should acknowledge the occupancy of your specific market, acknowledge collection loss, acknowledge a typical purchaser’s assumptions, acknowledge frictional vacancy, and should square with your cap rate assumptions on the sustainability in the long-term. --Mar-16