Seniors Housing: Q&A with Investment Sales Lead of Berkadia’s Senior Housing & Healthcare Group

March 2, 2021

Headed into 2020 the senior housing market was riding a wave of momentum, but it was one of the most immediately, and drastically, impacted commercial real estate sectors at the onset of the pandemic. Transaction activity came to a near halt in the second quarter, as the industry took stock and worked to mitigate the effects of the pandemic on seniors’ communities.

Despite the challenges, Berkadia’s Seniors Housing & Healthcare group remained active, advising clients and closing nearly $1 billion in financing in 2020. And with vaccine roll outs taking hold and the market beginning to thaw, the outlook is optimistic. We sat down with Tim Cobb, Investment Sales Lead for Berkadia’s Seniors Housing & Healthcare group, to dig into how the market is recovering, how the pandemic has shifted attitudes and what’s on the horizon.

What have you learned about the senior housing industry as a result of the pandemic?

This year has demonstrated how critical safe, reliable care for seniors’ communities is, particularly as more adult children have had to help their aging parents through the pandemic and have realized that they need assistance. We’re optimistic that the pandemic will give legislators a better understanding of the importance of giving operators the tools they need to provide a safe level of care. But the industry also needs to rebuild confidence among residents and their families. There is tremendous potential for improvement and growth in the coming years.

If you could sum up the past year for your industry in one word, what would it be?

Uncertainty. The pandemic definitely upended our market—we saw recourse bridge lenders pull back and it was difficult to get people into buildings to conduct physical inspections, among other challenges. We were all trying to get our footing in a rapidly changing environment.

However, at the end of 2020 we started to see confidence return to market. That has continued and we think business in the second and third quarter will be very strong.

COVID aside, what about 2020 surprised you?

We are doing more HUD business with private pay assisted living. In the past, many owners were often hesitant to use HUD loans. They were less competitive relative to Fannie Mae and Freddie Mac and seen as more cumbersome and less flexible.

But we’ve been able to work with clients to breakdown these misconceptions and take advantage of what HUD has to offer in the seniors space. There are more processes involved to get a HUD loan, but our team can execute HUD loans done relatively quickly—it’s a matter of having clients having the right information to expedite the process. Certain rules have been changed and there has been significant improvement on closing timing. Similarly, more structuring can be done around HUD loans than most are aware. We’ve been able to work with clients to identify ways to buy down pre-penalties and create slightly more flexible debt repayments. As owners lock in historically low interest rates with HUD, investors are willing to assume that HUD debt can continue to meet their yield requirements.

What trends do you see on the horizon for senior housing in 2021?

One trend we’re watching is whether the pandemic will accelerate the push for a government reimbursed component for private pay seniors housing. We think it will. The topic isn’t new—it’s something the industry has talked about for years—and it brings with it the potential for more government oversight, but it would have a dramatic effect. While these discussions are already being accelerated, I think 2021 will lay the groundwork with real progress after a vaccine.

What are you most excited about in 2021?

We’re very bullish on seniors housing and will continue to be. Our servicing portfolio including more than $8 billion of seniors housing loans and from that data, we’re seeing early indications of an uptick in occupancies at well located properties with good operators.

In short, we’re excited about 2021.

-Tim Cobb, Seniors Housing & Healthcare – Head of Investment Sales

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