Seniors Housing Business

FEB-MAR 2018

Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.

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48 Seniors Housing Business n February-March 2018 AMBITION trusted Your investment goals are our top priority. Our Capital Markets team has dedicated seniors housing and healthcare experts to help you achieve your ambitions. Investment sales Debt & equity sourcing Direct Agency/GSE lender (1) (1) Agency/GSE lending and loan servicing are performed by Jones Lang LaSalle Multifamily, LLC, a wholly owned indirect subsidiary of Jones Lang LaSalle Incorporated. © 2018 Jones Lang LaSalle IP, Inc. All rights reserved. says Meridian's Adlerstein. "Larger commercial banks are still lending. They are just a lit- tle more cautious," emphasizes Berkadia's Fenton. "They are focused on deploying their capi- tal with existing relationships, not new relationships." That's a sea change from three and four years ago when lend- ers were more carefree. "Lenders knew they should have an experi- enced sponsor," says CBRE's Will, "but they kept making those loans anyway." Today more lenders resist the temptation to makes loans to developers who don't know seniors housing. "These loans to inexperienced developers still happen, but they are not as prevalent," says Will. Interest rates rise Developers are paying higher interest rates for construction loans as short-term interest rates rise throughout the U.S. economy. Not only have the credit spreads that banks charge borrowers increased. The underlying interest rates have also risen steadily over the last two years. Federal Reserve officials con- tinue to gradually increase the benchmark federal funds rate, which is the interest rate at which depository institutions lend reserve balances to other deposi- tory institutions overnight. The Federal Reserve held the federal funds rate near zero dur- ing the financial crisis and through most of the long, slow economic recovery. Officials started to inch the federal funds rate higher at the end of 2015. At the beginning of 2018, the federal funds rate was set to a range between 1.25 and 1.50 per- cent, after a series of five small bumps of 25 basis points each, which were often announced far in advance and often delayed. Three more bumps of 25 basis points are expected in 2018 as new leadership comes to the Fed. Jerome Powell has replaced Janet Yellen as the new Federal Reserve chair. Yellen's term officially ended Feb. 3. "The Fed is getting more hawk- ish," says Beth Burnham Mace, chief economist at the National Investment Center for Seniors Housing & Care (NIC). "Further interest rate increases are expected this year, as Fed policy becomes less accommodative in response to Southwestern Illinois Development Authority (SWIDA), Bywater Development Group and Bi-State Development have broken ground on Metro Landing of Swansea, a $10.9 million seniors housing community adjacent to the Swansea MetroLink Station in the St. Louis suburb of Swansea, Ill. SWIDA and Bywater, which are jointly developing the project, secured the majority of the financing from the Illinois Housing Development Authority (IHDA), with additional construction financing provided by PNC Bank. Photo courtesy of Worn Jerabek Wiltse Architects.

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