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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40 www.seniorshousingbusiness.com Seniors Housing Business n April 2018 MATT JOHNSON McFarlin Group & Surpass Senior Living • Principal • (469) 619-5418 S U R PA S S New Ideas – Flawless Execution A senior living operator with General Partner Equity We invest alongside all our owners and Sponsors Every moment treasured. Every moment yours! SHB: What's your preferred leverage on a development loan for seniors housing? Taylor: We prefer to be in the 70 to 75 percent range, inclusive of all working capital and start-up oper- ating reserves. Lucas: We go up to 75 percent of value for assisted living/mem- ory care or 80 percent of value for skilled nursing. Midland States Bank bridge-to-HUD construction loans will finance up to 75 percent of cost. Shoop: KeyBank has limited capacity for construction financing and typically reserves such capital for established clients who use a variety of products within Key- Bank's lending platform. For these clients, KeyBank looks to limit financing to less than 70 percent loan to cost. SHB: What do you look for in an investor/developer when it comes to seniors housing lending? Taylor: Experience. We want people who have a track record in developing and/or operating seniors housing facilities. We like to see them partnering with archi- tects, contractors and other pro- fessionals who are experienced in developing seniors hous- ing properties. From there, it is the market, financial projec- tions, transac- tion structure, and access to equity to sup- port the project should there be operational challenges during the fill-up of the community. Lucas: Bricks-and-sticks expe- rience is important. However, seniors housing projects are oper- ating businesses that require a high degree of operational experi- ence. A borrower should be suited to day-to-day management and, more importantly, the lease-up process. McMeen: We look for organiza- tions that have a track record of performance, both financially and with respect to quality of care. We also look for sponsors of high integrity and character. Saunders: KeyBank targets cli- ents with an experienced track record of owning and/or operat- ing assets in the seniors space, with a preference for multi-prop- erty pool financ- ings. We look for those with strong finan- cial sponsorship who value Key- Bank's platform of providing both on- and off-balance-sheet financing solu- tions. Coiley: We want to see someone who has experience and a solid reputation in the sector — someone who has done their homework and is will- ing or able to put meaningful capi- tal into the opportunity. SHB: Do you have concerns about overbuilding in seniors housing? Taylor: As with any sector, seniors housing is a very local- ized market. Do we feel that cer- tain metro markets are reaching the point of saturation? Potentially, yes. We do not feel there is over- building across the entire industry. Many markets continue to have favorable demographics and posi- tive trends with low overall pen- etration rates. That being said, penetration rates may need to increase in order to absorb the number of new units that are coming on line. With new competition in the market, pro- viders will have to battle to dif- ferentiate themselves. They will also have to continue to compete with residents choosing to stay in their homes with services or care coming to them. The home health industry continues to mature, and with technological advancements it will continue to become easier for seniors to stay home. Lucas: In a general sense, I do not have concerns about over- building. Of course, seniors hous- ing demand varies from market to market and by product type within a market. McMeen: We do have concerns, but those concerns vary in inten- sity by submarket. There are cer- tainly markets where overbuilding is not a concern and others where it is a very serious issue. Shoop: Global concerns include supply issues industrywide. We Charlie Shoop KeyBank Trace Wilson PGIM Real Estate Finance Mike Taylor First Midwest Bank HJ Sims arranged $19 million in financing plus a $5 million non-revolving line of credit for Westminster Village, a nonprofit continuing care retirement community (CCRC) in Scottsdale, Ariz. The community features 250 independent living apartments, 23 assisted living units and 49 skilled nursing beds.

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