Banks are more “bullish” on the market for loans to qualified nurses by 2022


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The skilled nursing market was anything but calm in 2021 and some of the industry’s top lenders expect this activity to continue despite the persistent staffing challenges that operators now face.

“We’re definitely seeing more bridging loans, especially if the owner-operator has a proven track record. When it comes to new construction, we’re seeing an increase in interest among bank lenders, ”Steve Kennedy, executive managing director of VIUM Capital, told Skilled Nursing News.

Most recently in the deal pipeline, Northland Networks, a debt placement agent that funds senior housing projects through a network of community banks, arranged funding for three SNFs in Southeast Michigan, totaling 250 beds.

The attractive loan terms are indicative of the swelling of community bank cash deposits amid the COVID-19 relaunch, Northland Networks chief executive Seth Kahn said in the press release.

“Community banks across the country are sitting on record sums of money with nowhere to put it,” he added. “Participating in senior loans is an attractive option for many of these banks which in the past had minimal exposure to this asset class. These loans offer high returns and diversification benefits.

After some banks took a cautious approach to the skilled nursing market when the pandemic first hit, others launched their own specific elderly care funds to focus on the market.

In November, KeyBank Real Estate Capital and Welltower announced a $ 750 million unitranche loan program that will be active in senior housing and skilled nursing spaces. A month later, OptimumBank announced plans to enter the skilled nursing lending space with a new loan program for small operators.

Kennedy continues to see a lot of value in the skilled nursing market as the New Year approaches.

“M&A activity continues to be strong and rates are not going down so many providers have taken advantage of the low interest rate foreclosure,” he said. “I think bank and non-bank lenders are definitely more aggressive and we’ve seen spreads tighten a bit.”

Low interest rates continue to stimulate the market.

“I would say that the interest rates have created an interesting environment where a lot of capital is available at very low prices and in fact caused many sellers to decide to leave their positions and many buyers to take new ones,” Chris Utz, a general manager of Ziegler’s healthcare investment banking team, told SNN.

He said that over the past year buyers have remained rather bullish in the market, as evidenced by the purchase prices seen over the past 12 to 24 months.

“A lot of people are betting that there’s going to be a change in reimbursement and a change in valuation,” Utz said. “When it came to new buyers entering the market, I think they were mainly looking for yield and raising cheap capital to enter the market. “

In her opinion, banks are healthier and have renewed their interest in the skilled nursing sector as the new year approaches as market competition has returned to 2019 levels.

“I would say we anticipate a very active year in nursing mergers and acquisitions in 2022,” added Dan Revie, managing director and co-lead of the housing finance and senior care practice at Ziegler.

Lisa McCracken, director of senior living research and development at Ziegler, said the number of independent, nonprofit nursing homes continues to decline as they are regularly acquired by private sector buyers.

“Nonprofit eldercare nursing is a big part of a continuum and increasingly so,” she said. “What we are seeing more and more is consolidation, especially in this independent nursing home space, those numbers continue to decline and those [facilities] are actively acquired by private sector buyers.

Kennedy said VIUM is currently doing about a 50/50 split in terms of refinancing and acquisition loans in the skilled nursing sector.

“The ability to recapitalize and maybe structure the debt into more permanent funding is, I think, something that owners / operators are motivated to do when you see interest rates start to rise and you watch them rise. forecasts, “he added.

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