The number of delinquent loans in the long-term care industry edged down in the second quarter, but delinquencies remain above pre-COVID levels, according to a report released Wednesday by the National Investment Center for Seniors Housing & Care.
The quarterly lending trends report, which tracks more than $86.9 billion in loans to senior living (independent living and assisted living) and skilled nursing operators, found that senior living loan delinquencies slowed to third quarter 2021 rates. The delinquency rate for both senior living and nursing care declined and stood at 1% for senior housing and 0.9% for nursing care.
Mini-perm/bridge loans
“Despite this overall improvement in delinquency rates, some foreclosures were reported for the sample in second quarter 2022 for both senior housing and nursing care,” Senior Data Analyst Omar Zahraoui and Senior Principal Bill Kauffman wrote in a blog post.
Mini-perm/bridge loans closings were up in the second quarter, following a steep decline in the first quarter, with a same-store increase of 27% for senior housing. Nursing care mini-perm/bridge loan closings, however, have dipped this year, with a 7.2% decline in the first quarter and 29.7% in the second quarter.
The data, according to NIC, suggest that some lenders are more comfortable issuing a mini-perm over permanent loan for some deals in the current economy. Additionally, according to Zahraoui and Kauffman, financing solutions such as mini-per/bridge loans help support business operations “in the midst of relatively low occupancy levels in general and high inflation.”
New construction loans
New construction loan closings for skilled nursing facilities reached their highest level in the second quarter since 2016, with quarter-over-quarter same-store growth for nursing care new construction loan closings at 15.1%. The authors noted that the number of skilled nursing-related closings still is relatively low compared with the number in the senior living sector.
Senior living new construction loan volume still is below its peak in the third quarter of 2021. Closings increased in the second quarter, however, at a growth of 47.1% on a same-store quarter-over-quarter basis, according to NIC.
In the future, higher interest rates and inflationary pressures could affect loan volume and construction starts, the authors said. Coming out of the third quarter, warning signs exist that construction starts for senior living and nursing care are slowing down, according to NIC.
