Amid the fallout from the pandemic, the seniors housing industry may find new development opportunities in defaulted hotel deals, according to panelists Thursday during an Urban Land Institute Westchester/Fairfield webinar.
To date, hotel property loans have been among the hardest hit by the coronavirus pandemic, as much of the travel industry has shut down. The sector’s Commercial Mortgage Backed Securities delinquency rate spiked to 11.49% in June, up from 2% in May, and many hotels remain closed.
Senior Care Development CEO David Reis noted that, particularly in several northeastern states such as New York and Connecticut, developers of continuing care retirement communities could find a host of available properties in distressed hotels. Atria Senior Living Chairman and CEO John Moore agreed, noting that the firm also has been eyeing distressed hotels to help fill the expected future demand for luxury senior living properties as baby boomers age.
“There are a lot of great 200-room or less hotels in New York City that are fully amenitized that would work incredibly well for private-pay assisted living, and a lot of larger, convention hotels that have a lot of extra space that could be thoughtfully converted into full-on CCRCs as well,” Moore said.
But one panelist cautioned that many lenders may not have the appetite to fund such conversions.
“That risk is considered similar to ground-up construction, which we’re shying away from right now,” said Yasamin Al-Askari, senior vice president of senior care finance at Truist.
“Fannie and Freddie also typically have a bit of aversion to properties that are not purpose-built. While they will consider the risk under the right circumstances, most have been in the lower to middle market with heavy Medicaid residents,” Al-Askari noted.