Although lenders remain conservative when investing in long-term-care and senior living properties, loanmaking for such projects is on the rise, a new survey has found.
But integrated delivery systems may be surprised by lenders' relative lack of interest in financing Alzheimer's, sub-acute-care or home healthcare projects.
This is the first survey funded by the National Investment Conference for Senior Living and Long Term Care Industries, a not-for-profit educational forum sponsored by industry organizations.
Based in Annapolis, Md., NIC was founded in 1991 to hold annual educational meetings on capital formation, to fund research, and to recognize successful lenders and operators in the industry. Survey results were to be unveiled at NIC's 1994 conference in Washington last week.
From 1993 to 1994, the number of firms making loans to long-term-care and senior living properties rose to 71 from 60, an 18% increase, the survey found. The median loan amount increased 20% to $12 million in 1994 from $10 million in 1993. And, lenders are projecting a 67% increase in the median loan, to $20 million, in 1995.
The increased lending activity demonstrates that the long-term-care niche is "very attractive to the people who have been in it for the last few years," said Anthony J. Mullen, senior vice president for Brentwood, Tenn.-based American Retirement Corp. and chairman of NIC's research projects committee. It's also indicative of lenders' increased interest in real estate projects in general, he said.
The 118 survey respondents included commercial and mortgage bankers, insurers, real estate investment trusts, savings and loans, credit companies, pension funds and other institutional investors, endowments, and other investors.
Seventy percent of respondents comprised commercial bankers, mortgage bankers and insurance companies. This group also represented 79% of those making loans to long-term-care and senior living properties in 1994.
Survey respondents prefer relatively low-risk loans. More than 70% are willing to provide permanent debt financing for acquisitions of existing stabilized projects, refinancing of existing permanent debt, and permanent financing for new projects that have guarantees of occupancy.
Three types of properties lead the list of projects lenders prefer to finance: senior apartments with no services, rental congregate projects with assisted-living units, and nursing homes. Sixty-one percent said they are willing to finance each of those projects.
And although the growth of freestanding assisted-living seems to be an industry trend, just 46.6% of lenders said they were willing to finance such projects.
Interest in financing Alzheimer's units (25.4%), continuing-care retirement communities (20.3%), home healthcare companies (14.4%) and adult day care (8.5%) ranked even lower.