Banks are failing the senior living industry when support is needed the most, according to Sunshine Retirement Living President and CEO Luis Serrano.

Bend, OR-based Sunshine is a family-owned business that operates independent living, assisted living and memory care communities across 18 states and employs 1,700 workers. The company includes 24,109 units in 41 buildings

As McKnight’s previously reported, a declining pool of lenders may have undercut in recent months some mergers and acquisitions in skilled nursing and senior living. Although some banks have consolidated and newcomers have entered the senior living and care lending industry, some larger banks have decided to exit the market, Serrano told the McKnight’s Business Daily. 

“Some banks on the whole are getting shy about investing in the industry,” he said. And some banks are going out of their way to support the senior housing industry “in these very rough times,” Serrano added.

For example, he said, the Bank of New England stepped in earlier this year and proactively offered Sunshine six months interest deferment on a new construction project “without being asked” and postponed all covenants for one year without asking for anything in return. 

“Some banks have been very understanding,” Serrano said.

On the flip side, he said that he believes some of the banks Sunshine deals with “are not acting in good faith and resorting to unethical predatory practices.” Serrano said he had particular difficulty with a lender associated with one of his company’s assisted living and memory care communities in Brookfield, WI.

The company, he said, asked Fifth Third Bank for forbearance on a construction loan for Lakewood Assisted Living and Memory Care, which was built at the end of 2019, just before the pandemic. When COVID-19 hit, the company could not fill up the new building.

“When Fifth Third Bank finally responded many months later, not only they did not offer any forbearance or assistance to the senior community, instead they attempted to renegotiate the loan terms increasing the interest rate, reducing the loan term by two years, introducing an interest rate floor, increasing guarantor liquidity levels, etc.,” Serrano said in a written statement. 

“When Sunshine did not agree to those terms, Fifth Third Bank declared a technical default even though Sunshine always made the mortgage payments on time. Fifth Third Bank doubled the interest rate, charged legal fees, and threatened to foreclose on the senior community,” the statement continued.

“Instead of helping us, what they did was turn the screws on us,” Serrano told the McKnight’s Business Daily. “We’ve never missed a payment. We’ve done everything by the books.”

Serrano said Fifth Third and other banks “have benefited from government programs with the intent purpose to provide relief to companies such as Sunshine in the form of payment deferrals, covenant waivers and more.” 

“Instead, they chose to behave in bad faith,” Serrano claimed. “The bank wanted to get rid of the loan.”

Although Sunshine was fortunate to find alternative financing, he said, he believes that the situation would be a “disaster” for a small operator, based on the increased interest payments alone. 

“Over time, you can basically destroy the project, especially in this environment where profit margins are compressed,” Serrano said. “Expenses have just gone through the roof.”