With the seniors housing and care industry reaching a critical period of demand, savvy owners, operators, and developers are looking for financial solutions that position their communities for long-term success. Those who act now to implement prudent strategies and forward-thinking operations will be well positioned to benefit from decades of steady demand, while those who dawdle and fail to adjust to the evolving needs of this next generation of seniors will fall by the wayside. That dynamic was one of the key discussion points during the Senior Housing Credit and Investment Outlook webinar featuring Lument’s Aaron Becker and a team of NIC experts: Caroline Clapp, senior principal; Bill Kauffman, senior principal; and Lisa McCracken, head of research and analytics.
When asked what has changed in regard to seniors housing and care lending, Becker got right to the point. “Clients are no longer talking about theoretical deals that they hope to do, but actual deals in process with a clear path forward,” he said. “We are already seeing an increase in deal activity, and we expect to underwrite and close a lot of loans in the foreseeable future.”
Becker also noted the substantial success operators have had improving margins, as many have reached pre-pandemic levels with some even higher. Rents have remained sticky, and good operators have proved deft at handling exogenous expenses and learning to operate around issues they can’t control. This all culminates in a substantial boost in enthusiasm and positivity that is being felt across the industry, Becker pointed out.
In terms of the challenges of financing new development, Becker noted that many construction projects simply don’t pencil out right now due to higher interest rates and increased construction costs. There is positive momentum, however, as the rate of inflation is moderating, and more banks appear willing to put construction dollars to work. Debt solutions are readily available, he added, but getting equity investors on board can be a challenge if expected returns are a point of contention. Once momentum really starts accelerating with new development, there will be a lot of construction deals moving forward at a rapid pace, he added.
As the informative webcast wound down, Becker noted that he is more optimistic about the industry’s future right now than he has been in some time. “The silver tsunami has arrived and with it the favorable demographics we’ve all we’ve been waiting for,” he said. “The demand is here, it’s growing, and the time is now for owner-operators to really examine how they are going to position their communities for long-term success.”
