Seniors Housing Business

APR 2018

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

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www.seniorshousingbusiness.com 29 April 2018 n Seniors Housing Business www.bluemooncp.com (617) 307-5961 Matching institutional capital with leading senior housing operating partners "Last year was the largest level of seniors housing production we've had since we entered the sector more than 20 years ago," says Klein. "We don't anticipate as high a volume in 2018, but still more than where we've been in the past." Additionally, Schmidt notes that the recent construction boom in seniors housing is slowing down (both new starts and deliveries are on a downward trajectory fol- lowing a spike). New construc- tion as a percentage of existing inventory hit a high of 6.6 percent in the third of quarter 2016 and has steadily declined since then, according to the National Invest- ment Center for Seniors Housing & Care (NIC). As new seniors housing projects are completed, borrowers look to refinance construction loans with permanent debt, a perfect time for Fannie and Freddie to swoop in. "As new properties reach stabi- lization, we'll actively refinance those," says Schmidt. A breakdown of Freddie Mac's seniors housing lending activity in 2017 shows that refinancings accounted for 48.2 percent of total volume, followed by acquisition financing (42.4 percent) and credit facilities (9.4 percent). Specialty products are a hit Naturally, the lenders autho- rized to make loans on behalf of Fannie Mae and Freddie Mac recorded increases of their own in 2017. KeyBank, for instance, origi- nated $1.83 billion in agency loans for seniors housing during 2017, up from $818.5 million in 2016. KeyBank notched considerably more loan volume with Fannie over Freddie in 2017. In fact, Key- Bank was Fannie's top Delegated Underwriting and Servicing (DUS) lender for seniors housing last year. The company says many of its clients sought out Fannie Mae's credit facility product. Borrowers like the credit facility for a few different reasons. It can provide a single loan to an entire portfolio (rather than single loans for each asset). And the borrower has the ability to add and release assets, mix fixed with floating inter- est rates, and even have differ- ent loan terms in the same financ- ing, according to Carolyn Nazdin, national production manager for healthcare mortgage banking with KeyBank Real Estate Capital. "It's very flexible," says Nazdin. "Maybe an investor bought a port- folio that was underperforming. As the buyers improve the perfor- mance of the assets, they would like to access that additional equity that's been created. The ability to do that with the credit facility is a feature that has been attractive to a lot of our clients." Freddie Mac's Commitment to Seniors Housing Grows 2014 2015 2016 2017 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0 Annual Funded Loan Amount ($ Billions) Source: Freddie Mac Freddie Mac's annual funded loan amount in the seniors housing sector has increased substantially in recent years, climbing from $1.2 billion in 2014 to a record $3.6 billion in 2017. Freddie Mac's penchant for product innovation has helped to boost overall deal volume, according to the agency.

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