Loan Performance, Volume for Seniors Housing Industry Remains Strong in Q2

By Anuradha Kher, Online News EditorAnnapolis, Md.–Loan volume and loan performance remained strong during the second quarter of 2008 for the seniors housing and care market, according to the National Investment Center (NIC) for the Seniors Housing and Care Industry. Each quarter, NIC collects financial and performance data from the nation’s leading senior living lenders, owners/operators and appraisal professionals.Based on this data, loan volume in the second quarter of 2008 was $1.55 billion, which was up 68 percent from the first quarter. However, when comparing year over year, the second quarter results were unchanged. “This fits with the recent boom in the seniors housing industry but is unusual given the credit crisis,” Michael Hargrave, vice president of NIC MAP, tells MHN. “We believe this is due to Fannie Mae and Freddie Mac, who have been supporting multifamily financing.” NIC Map is a subscription-based service that tracks operating and performance metrics in the top 100 metro markets.The loans tracked during the second quarter 2008 showed overall strong performance, with 99.5 percent performing and just 0.5 percent restructured or delinquent. This loan performance matched the all-time high, reported in the fourth quarter 2007, since NIC has been keeping track of this data beginning in 1999. Robert G. Kramer, president of NIC, explains the reason for this. “Similar to other commercial real estate asset classes, seniors housing had not yet seen any significant deterioration in loan performance,” he notes. In terms of loan volume, one must remember that these data results predate the disruptive market activity and tightened credit markets that took place in September 2008. We’ll be looking closely at the impact from those conditions, when our fourth quarter data come in early next year.”Occupancy rates did show a slight decline during the second quarter for independent living and continuing care retirement communities (CCRCs) compared to the previous quarter. Compared to the second quarter of 2007, the mean occupancy rate was down 250 basis points for independent living and 200 basis points for CCRCs. “When looking at assisted living,” says Hargrave, “the mean occupancy rate fell from 89.5 percent in the fourth quarter of 1999 to 83.5 percent in the first quarter of 2003, a 600 basis point decline. Most recently, the occupancy for assisted living was again at 89.5 percent during the third quarter of 2006 and it dropped to 88 percent during this second quarter, which is only a 150 basis point drop.” He says this number may fall further in the next few quarters as job losses continue.”We have to monitor third and fourth quarter data to determine whether we have reached the low point for occupancy in this cycle,” says Hargrave. “It is important to remember that, until very recently, we were facing a housing slump and we are now in an economic slump with declining stocks. Since many seniors pay with their net worth, which has declined due to stock market plunges, the recent developments could have a significant impact,” he adds.Meanwhile, rent continued to grow at a steady rate of over four percent for assisted living and over three percent for independent living. (Shown in table)