The senior housing financing markets have evolved over the course of the pandemic — as lenders and owners both adapted in real-time — to unprecedented asset level revenue declines exacerbated by operating expense increases. But most investors still expect a strong recovery over the coming year, despite the current conservative nature of underwriting and increased debt requirements, speakers said at a National Investment Center for Seniors Housing & Care “Leadership Huddle” webinar Wednesday.
“The phrase of the year for senior housing debt in 2020 was ‘hit the pause button,’ or one of its synonyms, ‘focusing on asset management’ or ‘servicing existing clients,’ ” said Joel Mendes, senior director of seniors housing at JLL Capital Markets.
During that time, it was critical for owners / operators to communicate often with their lenders about the challenges they faced amid the pandemic, said Robb Chapin, CEO of Bridge Seniors Housing Fund Manager.
“I think lenders really appreciate that partnership with us as owners and operators and want to understand the dynamics we’re challenged with and work together to drive the right outcomes,” he said.
Now, as the vast majority of communities have vaccinated or are in the process of vaccinating their residents and staff, many lenders are looking toward a gradual return to a “new normal” in the sector, said Steven Schmidt, national director of the seniors housing group at Freddie Mac.
“It will probably take a couple of months, but we’re hoping to see some ‘green shoots’ soon: more tours, more move-ins, improving occupancies and, hopefully, some relief on some of the concessions that we’re seeing in the market, and that’s going to enable us to open up and make financing more attractive,” Schmidt said. “As long as we start to see a sustainable upward trend, we’ll gradually begin to reduce the debt service requirements.”