Lending to long-term care providers picked up in the second half of 2021, according to results of a Ziegler / National Investment Center for Seniors Housing & Care lending survey released Friday.
The 131 seniors housing and care lenders participating said they noticed an uptick in activity, and more banks seem to have returned to the market, according to report authors Don Husi, managing director at Ziegler, and Beth Burnham Mace, chief economist at NIC. The report includes data from the second half of last year, along with survey results from the fourth quarter of 2020 for comparison.
During the second half of 2021, long-term care lending picked up “meaningfully” from 2020. The lending environment started to become more competitive relative to the pandemic-induced dip. Lenders closed on $700 million in deals during 2021 versus the $600 million closed in 2020. More refinancing and opportunistic buying is occurring than before the pandemic.
Respondents noted very aggressive competition and thin pricing in the not-for-profit continuing care retirement community space. Also, “a lot” of skilled nursing facilities have gone from not-for-profit to for profit, and many of skilled nursing facilities are changing hands, they said.
Some concern exists regarding interest rates and inflation, especially with regard to new construction projects. One respondent reported being “cautiously optimistic but monitoring COVID-19 as well as equity investments.
Underwriters are facing new challenges since the pandemic began and take varying approaches, according to the report. Some are trying to underwrite lending by stripping out the disruptive cash flow effects of Coronavirus Aid, Relief and Economic Security (CARES) Act / Paycheck Protection Program money. Others will exclude all COVID-19-related revenues but include all COVID-related expenses in their calculations. Still others will include all COVID-19-related revenues and expenses.
“[The underwriting differences] will be a challenge for the next 18 to 24 months and definitely a question [providers] need to be asking their lenders,” Husi told McKnight’s Friday.
