After a sharp decline in the issuance of mini-perm/bridge debt for senior living in the third quarter of 2022 , senior living loans bounced back in the fourth quarter to levels seen earlier in the year, according to a lending trends report released Wednesday by the National Investment Center for Seniors Housing & Care.
“The use of mini-perms and bridge debt reflects difficulties in sourcing permanent debt, given the challenges in the overall capital markets and lending environment,” Senior Data Analyst Omar Zahraoui and Senior Principal Bill Kauffman wrote in a blog post written in conjunction with the quarterly report.
“Specifically, the jump in mini-perm/bridge loans for senior housing suggests that some borrowers are opting for mini-perm loans over permanent loans for some deals, likely due to elevated interest rates, inflation and moderately low occupancy rates in general,” they said.
The senior living and care sector saw $931,378 mini-perm/bridge loans completed in the fourth quarter. Of those, $686,122 for senior living (independent living and assisted living) and $245,256 were for skilled nursing.
Although closed new permanent loan volumes increased to levels seen earlier in 2022, volumes remained well below those levels seen in 2018 and 2019.
Permanent loans closed for skilled nursing in the fourth quarter were 38% less than that of senior housing. Of the $1.7 million permanent loans closed for senior living and care, $1.08 million were for senior living and $675,506 were for skilled nursing.
New construction loans increased slightly in the fourth quarter of 2022 “but were generally weak by historic standards,” according to Zahraoui and Kauffman. “Only two other periods in the time series (third quarter 2016 through fourth quarter 2022) were as low — the third quarter of 2022 and the first quarter of 2021.”
Overall, the total balance of loan delinquencies in the senior living and care sector was slightly higher than the previous quarter, but NIC noted that the tally was “well below” pandemic highs seen in 2020. Delinquencies as a share of total loans increased to 1.3% for senior housing from 1.2% in the third quarter; for nursing care, the rate slipped to 1.1%.
