When it comes to finding capital in the senior housing sector, now is a sweet time to be a Real Estate Investment Trust (REIT), associ- ated with a REIT, or in a position to indi- rectly benefit from their trajectory. Ask brokers, bankers, and lenders about the availability of capital for senior care operators right now, and the response is likely to be the same: While access to conventional sources of funding is slowly improving, it is the REITs that are in the driver’s seat, and borrowers and lenders alike are looking forward to a new ride. True, the residential housing market slump continues to put a damper on the conomy in general and senior housing move-ins in particular. However, the se- nior living industry is in a different financ- ing position that it was even two years ago. Construction starts are at an all-time low, which has enabled demand to catch up with supply; interest rates remain low; and occupancy rates are starting to increase, even in independent living properties. By Whitney Redding
REITs
in the
Driver’s Seat
Credit is still tight, but experts anticipate positive
developments in the senior living sector
FAST FORWARD
› The recent flurry of REIT-related acquisitions has
helped spark other sales and
lending activity in the senior
living sector.
› Construction loans
are still hard to come by,
although some providers
with a solid track record
have been able to secure
financing through their
relationship bank.
› Agency lending continues
to be a reliable source
for properties that fit the
criteria, and HUD, Fannie
Mae, and Freddie Mac have
each taken steps to make
funding more attainable.
The equity returns of the recession-resil-ient senior housing and care sector have
outperformed NCREIF’s National Property Index, which measures the returns of
core real estate product types over the past
three-, five-, and seven-year periods.
“Most participants in the seniors housing and care sector believe the sector is
poised for another period of growth over
the next five years, and to a certain extent
people are now positioning themselves
to get ready for that,” says Robert Kramer,
president of the National Investment center for the Seniors Housing & care Industries (NIc).
Leading the charge are the REITs.
Thanks to their access to capital and legislative changes allowing them to profit directly from operations, REITs have entered
a number of acquisitions in the senior
living sector, including groundbreaking
large transactions involving top operators and the three biggest health care REITs—Health care REIt, HCP, and ventas.
“They’re all aggressively out there looking
