Current lending spread differentials between majority assisted living/memory care communities and majority nursing facilities are remarkably similar, with most lenders quoting spread ranges of 3% to 4% over the base rate. That’s according to the results of a new quarterly lender survey jointly released this week by specialty investment banking firm Ziegler and the National Investment Center for Seniors Housing & Care.
The survey was sent to 98 lenders, including 81 banks and 17 finance companies/alternative lenders. A total of 22 organizations participated, Ziegler said. Among those, roughly half reported that they had lent solely in the for-profit senior housing and care sector in the past year, whereas the other half reported lending to both for-profit and nonprofit operators.
Nonprofit life plan communities reported the lowest spread range, followed by rental life plan communities and then majority independent living communities. The spreads were primarily 2% to 3% over the base rate.
Lenders also reported that operators were likely to find the most favorable terms with alternative lenders and finance companies, as banks are remaining more conservative with their underwriting amid the pandemic. Further, more alternative lenders are willing to lend 75% to 90% loan-to-value ratios for assisted living/memory care communities and nursing care facilities compared with rental life plan communities and majority independent living communities.
Loan-to-value ratios for new construction loans remain primarily in the 60% to 70% range, with approximately half the lenders indicating they are currently providing construction loans.
“[The] current lending environment is tough across all asset classes,” said one respondent. “It’s very difficult to underwrite as there is no way to possibly know or reasonably assume what the future is going to look like.”
