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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30 www.seniorshousingbusiness.com Seniors Housing Business n April 2018 • Our Expert built successful teams for large banks and for smaller private companies. • More than 20 years of financial experience. • Almost 10 years as a HUD-certified LEAN Underwriter. High-Level Perspective for Detailed Execution Latoria Thompson Consulting, LLC offers an array of versatile consulting and underwriting services in commercial real estate finance. We bring to every project vast experience in healthcare and multifamily analysis and strong expertise in HUD lending. Bowie, MD • (301) 966-0102 www.latoriathompsonconsulting.com Your Seniors Housing HUD Expert Latoria Thompson Consulting, LLC Nazdin is quick to note that Freddie Mac unveiled its own credit facility product near the end of 2017 in an effort to compete with Fannie's product. Another special feature drawing borrowers is Freddie Mac's Green Advantage program, which offers better terms to borrowers imple- menting sustainability initiatives on a property. Schmidt says the volume of green loans in seniors housing is on the rise. Seeing an opportunity, Fannie Mae imple- mented a similar program. In the last quarter of 2017, Walker & Dunlop provided the first seniors housing loan under Fannie Mae's new green program: an $82 million refinancing for Par- adise Village, a newly constructed independent living, assisted living and memory care community near San Diego. Using the program, the bor- rower received a lower inter- est rate and additional proceeds, as Walker & Dunlop was able to underwrite based on reduced util- ity expenses (and therefore higher net operating income). "While this was the first deal of its kind, we anticipate more bor- rowers leveraging green financ- ing through Fannie and Freddie for their seniors housing proper- ties," says Jeff Ringwald, manag- ing director with Walker & Dun- lop who worked on the deal. "These programs have cost- and energy-saving benefits for both the borrower and the community members." Oversupply, new players In 2017, HFF also enjoyed a major spike in its GSE lending vol- ume, becoming Freddie Mac's top- producing seniors housing lender for the year with $732.7 million in volume. "There have been a number of new entrants to the space, which is very exciting from both an equity and debt perspective," says Sarah Anderson, director with HFF. "We have a ton of data with regard to other real estate types, and seniors housing is one of the best returns a buyer can get. It's an attractive product type and it's really catch- ing the eye of a lot of equity pro- viders and developers." Overall, mul- tifamily prop- erties average a 6.16 percent annual return on acquisition cost, according to the National Council of Real Estate Invest- ment Fidu- ciaries, which tracks the performance of real estate assets owned by institu- tional investors. NIC data shows that returns for private-pay seniors housing fluctuates between 7 per- cent and 8 percent, while skilled nursing's annual returns are con- sistently above 9 percent. The flip side of increased inter- est in the sector is that many of the new entrants don't understand the business well enough to succeed. Additionally, investors rushing to seniors housing's high rate of return can lead to oversupply and, by extension, low occupancy rates. However, Anderson suggests that continued strict underwriting by lenders (including Fannie and Freddie) have largely kept these heightened risks in check. "Some new entrants are build- ing a product that might not be Walker & Dunlop provided the first Fannie Mae green loan in the seniors housing sector. The $82 million financing replaced a previous construction loan and provided cash to enable the financing of an adjacent, newly developed memory care facility at Paradise Village in the San Diego suburb of National City. Carolyn Nazdin KeyBank

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