Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
Issue link: https://seniorshousingbusiness.epubxp.com/i/799407
February/March 2017 n Seniors Housing Business memory care," according to Mur- ray. "We're also seeing some inter- est in the skilled nursing space. However, the skilled space is obvi- ously very operator intensive." Ultimately, the preferences of institutional investors will vary depending on the yield or return they are seeking and the various stages of life their portfolios are currently in, he emphasizes. Murray sees his role as a consul- tant that begins with understand- ing the goals of his investor clients, finding out how long they want to hold the properties they purchase, and then matching the client's strategic goals with the bank's finance capabilities. In short, it's a one-stop shop at KeyBank. "We actively use our balance sheet with most of our clients as well as utilize the permanent debt solutions. Oftentimes when you acquire a property, it's not quite ready to go to a permanent debt solution. We're more than happy to utilize our balance sheet to bridge those transactions," says Murray. Banking regs under review The Dodd-Frank Wall Street Reform and Consumer Protection Act and the Basel III accord taken together have placed more regula- tory burdens on commercial real estate lenders, says Sherman of Dougherty Mortgage. Basel III requires banks to set aside much higher capital reserves for high-volatility commercial real estate (HVCRE) loans. For example, a loan that previously required $1 million to be held in reserves will now require $1.5 mil- lion to be held in reserves if it's classified as HVCRE, according to an impact study conducted by the CRE Finance Council. The study concludes that the net effect of these regulations will be to increase the banks' cost of capi- tal and decrease the availability of financing. Dougherty Mortgage, which syndicates many of its loans to the banks, is feeling the impact of the regulations, says Sherman. "We have a multi-billion portfolio of balance sheet loans." Murray of KeyBank Real Estate Capital says the regulations have had some impact on how the bank conducts its business day to day in the seniors housing sector, but has worked hard to ensure the impact on clients is limited. He adds, how- ever, that "the regulations have def- initely impacted all the banks as it relates to the cost of capital." With the Trump administra- tion now settling in at the White House, the business community anticipates that regulation may decrease over the next couple of years, according to Murray. That's reflected in the rising stock prices of banks in recent months. "Obvi- ously, we haven't seen anything very specific as of yet. Clarity of regulation is of benefit to many lenders as it allows them to put more capital to work." Possible wild cards Lenders continue to pay close attention to the strength of the U.S. economy — particularly the housing market — as well as the interest rate environment because they are the main drivers of debt financing in the seniors housing industry, according to Clark of MB Financial. If interest rates rise, the expectation is that cap rates will follow suit. "More specifi- cally, new con- struction and the impact on market census will continue to influence the assisted living market, while skilled nursing operators need to be aware of changes to Medi- care and Medicaid reimburse- ment," cautions Clark. Another wild card is availabil- ity of labor. "The potential short- age for qualified caregivers and the ability for employers to retain high-caliber employees will con- tinue to be issues across the indus- try moving forward," says Clark. Kennedy of Lancaster Pollard believes the Trump administra- tion is a wild card because skilled nursing facilities are extremely dependent on government policy and regulation, whether the issue concerns licensing or Medicaid reimbursement. "Finance folks and business owners just want to have some rel- ative certainty what the landscape looks like going forward," says Kennedy. "In the short time Trump has been in office, his administra- tion has not clearly forecast what it's going to do in a variety of areas, so that inherently creates a little bit of consternation." n Sims is the Right Capital Partner Member FINRA, SIPC Sims Mortgage Funding is a wholly owned subsidiary of HJ Sims. n n n n hjsims.com simsmortgage.com Contact us for a meeting at the 2017 NIC Spring Investment Forum. Learn more: hjsims.com/right-capital-partner. Partnered Right. Structured Right. Executed Right. FINANCED RIGHT ® Curtis King Senior Vice President, HJ Sims 512.519.5003 cking@hjsims.com Anthony Luzzi President, Sims Mortgage Funding 201.307.9383 aluzzi@simsmortgage.com n n n n n Higher leverage Flexible structure Non-recourse financing Trusted partner in good times and bad Mezzanine and Subordinate Loan Financing Preferred Equity Sims HUD Plus SM FHA-Insured Loans 142(d) Bond Financing We offer: Kevin Murray KeyBank Real Estate Capital