Senior housing has been one of my lifelong passions. It’s the only business in the world where the only prerequisites to success are liking money and loving the elderly. It’s also the only business in the world where you can readily increase sales by simply increasing quality of service. Development pressure continues to be driven by the aging demographics of our population and this is not going to abate for another 18 to 20 years. Senior housing development financing has become a much more difficult harbor to navigate in recent years, as has all other CRE verticals due to the changing banking regulations that have dramatically reduced the LTV ratios on new construction loans. This has created new opportunities for funders and developers to find a better place to be in as a result. That place is post-development profit-taking by creating the “have your cake and eat it too” structured finance outcome that provides this exact outcome opportunity. That outcome is being driven by the other income-producing CRE properties that are getting few and far between for capital investors to fight over as acquisitions of stabilized assets.
Last year there was only a whisper regarding senior housing properties being put in portfolio deals for the average investor to own because they are supposedly so doggone hard to manage. This year the whisper has become keen interest – can you show us how this would work? Can you show us how we can get in on those outrageous returns (comparatively speaking)? Can you show us how to limit our investment loss severity risk exposure?
Now we see properties being developed and the day they are put into operation they are blown off the construction financing with a significant profit going to the developer/sponsor entity plus ongoing participation in the permanent deal. If you are a senior housing developer and now taking advantage of this opportunity you obviously need to have your head examined.
There is no way of knowing where the market will head to next but we do know that whatever the challenges seem to be, the American entrepreneur will find a way to innovate to take advantage of the challenges. Making lemonade is what we do in America and you should get your own glass.
Be The One…