Assisted Living and Memory Care Feasibility Study, Boerne, Texas: New Construction on a HUD Section 232 Loan

The trade area is about a ten-mile radius around Boerne, taking in Fair Oaks Ranch and the I-10 corridor south toward Leon Springs. Census estimates are published for the city, not for a radius, so the table uses city figures; a drive-time tabulation of age- and income-qualified households was not found and is a lender condition. HUD's draft appraisal chapter expects the primary market area to supply 60 to 80 percent of a community's demand [43], which is why the radius, not the city line, is what the appraiser will draw.

Three features of Boerne's population matter for assisted living. First, the growth is long-running: the city's 2010 census count was 10,471 and its 2020 count 17,850 [1], and a StorageCafe study ranked it 63rd among the fastest-growing U.S. cities, with 67% growth from 2014 to 2023 [4]. Growth of that kind brings the adult children who usually choose a parent's community. Second, the age profile: 17.1% of residents are 65 or over, and the median age is 38.7 on a secondary source [1][3]. Third, the means to pay: 64.5% of homes are owner-occupied, 47.6% of adults hold a bachelor's degree or more, and only 6.8% of residents are in poverty [1]. The 1,270 veterans in the city are a small additional pool for VA pension benefits that can help pay for care [1].

The national backdrop helps. NIC reports that the 75-and-over population is growing nearly 4% a year while senior housing inventory grows about 1% [51]. Memory care penetration of 75-plus households rose from 1.2% to 1.4% between 2017 and 2023 [52], and the Alzheimer's Association estimates 7.4 million Americans 65 and over live with Alzheimer's dementia, about 11% of that age group [55]. Texas had about 1,400 residential care communities with 61,200 licensed beds in the 2020 national survey [56].

The local health care base is a gap. Boerne's health care and social assistance receipts were $207,294 thousand in 2022 [1], but the research could not document an inpatient hospital in the city or a source for the status of a planned regional hospital. Hospital discharges drive many assisted living move-ins, and memory care referrals come from physicians and geriatric practices. The referral base is a lender condition.

The subject is a hypothetical 4.4-acre tract in the City of Boerne's extraterritorial jurisdiction, near the I-10 corridor. The acreage is the national median site for a combined assisted living and memory care community in fiscal 2024 [44]. Land is priced at $300,000 an acre, a round assumption inside the range two cited Boerne asks set, and an appraisal will set the value: 2.56 acres on I-10 at $1,200,000, listed January 30, 2026 and under option [5], and a 45.4-acre tract listed at $8,000,000 on one portal, with higher asks on others [6]. Undeveloped land in the ETJ often carries an agricultural exemption that rolls back on development; the rollback amount for the tract bought is a condition.

Zoning and approvals

The ETJ has no municipal zoning, so the use is not a zoning question; the city's platting and site development rules still apply [7]. Boerne's Planning and Zoning Commission meets at 6 pm on the first Monday of each month, and plat submittals are due about a month before each meeting [33]. The end-to-end approval timeline was not found. Licensing runs through Texas HHSC: the facility licence (Form 3720), an Alzheimer certification for the memory care wing (Form 3721) and a $15 per bed fee for a capacity increase [31]. The building also needs an architectural barriers registration and inspection with TDLR [32]. The research found no certificate-of-need requirement for assisted living in Texas; licensing, not a need test, is the state gate.

Utilities

Water, wastewater and gas service for an ETJ site are conditions to confirm before the loan is sized. The City of Boerne owns its electric, natural gas, water, wastewater and reclaimed water systems [8], but whether this ETJ location falls in Boerne's electric and gas service areas was not found. Utility costs are rising: commercial water rates rose 7% and wastewater 3% in February 2025, with a further 7% base water increase on October 1, 2025 [29]. Boerne's FY2026 utilities capital plan is funded with $15 million of impact fees and $650,000 of developer funds [30], but the per-unit impact fee schedule was not found. Service area, capacity and impact fees are lender conditions.

Access, flood, environment and taxes

No TxDOT count was found for the site's roads, no FEMA flood zone, no environmental report and no appraisal district parcel record. Each becomes a condition. On taxes, the ETJ location avoids the city levy: the combined 2025 rate is $1.3929 per $100 (Kendall County $0.3770, Boerne ISD $1.0109 and the Cow Creek groundwater district $0.005), against $1.8645 inside city limits [27]. The school district rate includes a voter-approved increase that passed on November 4, 2025 with 51.2% [28]. Licensed assisted living does not collect hotel occupancy tax [27]. The model taxes land, building and furnishings at cost, because no assessment basis was found.

Labor is the largest cost in assisted living and the reason lease-up is expensive. At the median combined community in fiscal 2024, labor was 47.2% of revenue, total operating expense 77.7% and the management fee 5.0%, leaving a 22.3% net operating margin [44]. Stand-alone assisted living did better, at a 34.1% margin, and memory care worse, at 19.3% [44]. Public operators sit between: Brookdale's assisted living and memory care segment earned a 26.8% margin in fiscal 2025 [63] and Sonida's same-store margin was 32.6% in the second quarter of 2026 [62].

The model carries operating costs other than management, tax and reserves at 62.0% of revenue at stabilization, and never below 70.0% of the stabilized cost while the building fills. That floor is what produces the Year 1 loss: a licensed community must staff its care and memory care neighborhoods around the clock from the first resident, and Hummingbird's stated 1:5 daytime and 1:8 night ratios show how quickly a small census becomes expensive [18]. The management fee is 5.0% of revenue, the median in the national survey [44].

Property tax is the line most specific to Boerne. At the ETJ rate, tax on the land, building and furnishings at cost is a meaningful share of income, and the research found no assessment ratio and no evidence of how the appraisal district values new seniors housing. A non-profit sponsor might qualify for an exemption, as Morningside's campus may (its status was not verified), but this sponsor is for-profit. The replacement reserve of $400 a unit is a placeholder for the amount HUD sets at firm commitment.

Total operating expense is $4,216,502 in Year 3, leaving $1,567,660 of net operating income, a 27.1% margin. That is above the national median for combined communities and below the public operators' best quarters, a reasonable place for a new building with a professional manager.

A Section 232 new-construction loan is the lesser of three amounts: 90% of eligible cost, 75% of the appraised value (80% for a non-profit borrower) and the loan whose debt service the projected income covers at 1.45x [34][58]. The working capital escrow adds 4% of the loan [34]. Those figures come from lender and broker summaries; HUD's Handbook 4232.1 was not fetched, so they rest on secondary sources, and the lender must confirm each against the handbook and its own term sheet. The model tests the cost and coverage limits; the value test needs the appraisal and is a condition. At 75.0% of value, the restructured loan needs an appraisal of at least $19,552,505, 62.9% of project cost; the sponsor's full-cost request would need 120.0% of cost, a value a community still in lease-up is unlikely to reach.

The term is 40 years after construction, with no personal liability, on one lender's term sheet [58]. The rate is an assumption: the research has no dated Section 232 rate, the 10-year Treasury was 4.23% on March 11, 2026 [60], and the model uses 6.00% fixed. The annual mortgage insurance premium is the most uncertain term. HUD set 0.25% for FHA multifamily insurance programs for applications from October 1, 2025 [36], but earlier 2025 Mortgagee Letters on premiums and loan limits said their changes did not apply to the health care programs, Section 232 included [35], and the research never finds the 0.25% applied to a Section 232 loan. The last Section 232 rate table in the research, in HUD's June 2025 notice ending the green premium category, lists 0.77% for new construction without tax credits [64]. The model uses 0.77%, the higher rate. If the lender confirms a lower Section 232 premium in writing, debt service falls and the loan can grow.

The market study rules matter as much as the loan terms. For new construction, the appraisal must include a complete market study written by the same appraiser, who may not be affiliated with the originator, broker, developer, borrower or lender; the lender orders and pays for it, and HUD is a named user [43]. The study must map every independent living, assisted living, memory care and nursing facility in the market, existing, under construction or planned, forecast monthly cash flows to stabilization and be submitted within 120 days of its effective date [43]. That chapter is a draft redline whose final adoption was not found. A draft HUD letter also says valuations that look inflated, with aggressive or poorly supported assumptions, "will be heavily scrutinized" [42]. A sponsor's feasibility study, like this one, comes before all of that: it tells the sponsor whether the appraisal is likely to support the loan.

The program's recent record explains why a lender will be careful. Firm commitments for Section 232 reached $8.1 billion in fiscal 2025, against $4.1 billion the year before, and the application backlog fell from 130 to 29 [37]. Almost all of that was refinancing: only seven of 337 closings were new construction and other [38]. HUD's Inspector General reported in April 2026 that 167 of 3,670 Section 232 borrowers, nearly 5%, were in default as of June 2024, with more than $1.1 billion of unpaid principal, and that the office overseeing them fell from 61 staff to 38 between October 2024 and May 2025 [39]. Seniors housing was also the weak spot at Fannie Mae, where its serious delinquency rate was 4.09% in March 2025 against 0.63% for the whole multifamily book [41]. Agency loans are an alternative only after stabilization: Freddie Mac's seniors term sheet calls for 1.40x coverage and up to 75% loan to value for assisted living [40]. Our conventional and institutional practice covers how we prepare HUD and agency files.

As proposed. The sponsor asks for the full $29,765,234 that a 90.0% loan to cost allows. The equity test passes on cost, because 90.0% is the program's cost ceiling, though the value test would need an appraisal of 120.0% of cost; debt service of $2,194,461 is covered only 0.71x by Year 3 income, far below the 1.45x floor. HUD would not insure that loan.

As restructured. Lowering the loan until Year 3 coverage reaches the floor gives an insured loan of $14,664,379 with $1,081,141 of annual debt service, including the premium. The sponsor's equity rises to $16,404,220, 52.8% of cost. Coverage is 1.08x in Year 2, still in lease-up, and 1.55x by Year 5.

That equity is the finding, and it is not a quirk of the model. It follows from two sourced facts: development costs of $388,830 a unit nationally [45] and Boerne rates below national levels. The sponsor has three ways to close the gap, and each needs evidence the research does not hold: a building that costs less per unit (fewer amenities or a smaller footprint), rates closer to national levels (which the phone survey and the appraiser must support), or a non-profit structure that lifts the value test and may reduce property tax. A bank construction loan with a later 223(f) refinance does not escape the arithmetic, because the refinance is sized on the same stabilized income.

The two drivers that matter most are stabilized occupancy and the assisted living rate, which applies to most of the units. Across the grid, Year 3 coverage on the restructured loan runs from 1.03x to 1.81x. Any shortfall in occupancy or rate without an offsetting gain in the other takes coverage below the floor, because the loan was sized exactly to it; no cell falls below 1.00x, because the restructured loan is small relative to income.

The practical reading is about direction. If the phone survey shows that a new building can command rates at the upper end of the grid, the insured loan grows and equity falls. If it shows Boerne families will not pay a new-building premium, the loan shrinks further. The memory care rate is not in the grid, but it moves coverage in the same direction on fewer units.

• Rates that do not reach new-building levels. Boerne's quoted rates are below the model's opening rates, and they come from aggregators, not operators. If the market will not pay a premium, both the coverage test and the value test cut the loan.
• A slower lease-up. The research has no local move-in pace. Each month of slower absorption extends the operating deficit and eats into the escrow, which the sponsor must top up.
• Labor. Labor is close to half of revenue in combined communities [44], and no local wage data were found. A tight San Antonio labor market would raise the cost floor during lease-up.
• Competition from an established brand. Franklin Park is an established 2017 community with memory care and room to cut price, and Morningside's campus feeds its own residents into its care levels.
• Program terms in flux. The handbook chapter, the working capital rule and the premium are draft or unconfirmed. A tighter working capital rule shrinks the loan; a confirmed lower premium lets it grow.
• Value below cost. Existing communities trade far below the cost of building new ones [50][45]; Class A assisted living cap rates were 6.5% and memory care 8.0% in April 2026 [53]. The appraisal may limit the loan below the coverage result.
• Utilities and impact fees. The tract's service area, capacity and fees are unknown, and Boerne's rates are rising.
• Closures in Texas. HHS's closure registry recorded assisted living closures through September 29, 2026 [57]; small operators exit when lease-up or staffing fails, which is the risk this case's escrows are meant to absorb.

Two other Texas cases on this site show related tests. The Texas agency multifamily case sizes a loan by coverage and value under agency rules, the same discipline Section 232 applies, and the Johnson City lodging case tests a Hill Country project a few counties away whose lease-up also carries the loan. The Texas hotel case shows another operating-business real estate loan with a ramp to stabilization. The assisted living and memory care hub covers the subtypes and review patterns, and the Texas market page and San Antonio metro page place Boerne in its region.