Lisa McCracken headshot
Lisa McCracken

Attendees of a Tuesday webinar were split fairly evenly in their views of whether access and cost of capital would be similar to 2023 or better.

A few outliers at the National Investment Center for Senior for Seniors Housing & Care virtual event were less optimistic.

NIC Head of Research and Analytics Lisa McCracken moderated the panel discussion on successfully accessing capital in 2024.

It’s anyone’s guess as to if and when the Fed will move to decrease interest rates, according to the experts. Most of the attendees who participated in an online poll during the webinar said they anticipate that the Fed will make its first direct cut during the second half of the year. 

“Access to capital is still available, but it does depend upon a lot of variables and boxes that have to be checked,” said panelist Sarah Dugan, manager of the senior housing group at Synovus, a $60 billion regional bank headquartered in Columbus, GA.

The biggest challenge, according to Dugan, is hitting sustainable net operating income  levels.

She opined that lenders need to start looking at a picture broader than a month-to-month snapshot of the economy. A shorter-term view was needed during the uncertainty of the pandemic era, but as things have settled down, she said, she sees the need to return to looking at things from a six- or 12-month perspective.

“It has really bounced up and down from the cash flow basis, and so I think that accessing capital is dependent upon having sustainable cash flow,” Dugan said.

Dan Hermann, president and CEO and head of investment banking at Ziegler, said that the market on the taxes and bond side of things “is open and has been open.”

Not-for-profit senior living typically represents about 2% of the taxes and bond market, he added. “So just a small little piece is a subset of healthcare, but it’s open. It’s been open,” Hermann said. 

“The folks tapping that market are existing, traditional not-for-profit providers, faith-based or community-based. They range from large multi-facility systems down to single sites,” he added.

That market is open, Hermann said, because a steady flow of cash flow is coming into mutual funds and exchange-traded funds that have invested in high-yield municipal debt. 

“And while it’s only 2% of the muni market, it makes up 10 to 20% of the typical high-yield mutual fund,” he said.

Michelle Kelly, senior vice president of investments at National Health Investors, represented the real estate investment trust view on accessing capital on the panel.

“As a REIT, one of the good things right now is, we sit in a position where we’re looking at acquisitions and new investments. We’re not as reliant on the secured financing world,” Kelly said. “So all of the noise that Sarah was talking about? Thankfully, we’re fairly immune to that.”

NHI’s cost of capital has not increased significantly, which puts the REIT into a much more competitive position right now, she said. 

“And then, as I said, we’re not reliant on getting secured financing, so we really are a cash buyer,” Kelly said.

She said she anticipates seeing an increase in transactions in the second half of the year.

Steve Blazejewski, managing director at PGIM Real Estate and senior portfolio manager for senior housing strategies, said that, in his opinion, REITs will more or less lead the senior housing market in growth, which they did particularly 2008 to 2010.

“I think that’s going to be an important trend. We see that playing out now a little bit, and I think that will accelerate or become more important in the coming years,” he said.