July 15, 2013
Long-Term Senior Housing Finance Still a Niche Market
With big REIT acquisitions eliminating the need for agency financing, there is an emerging market within such GSEs as HUD, Fannie Mae, and Freddie Mac. Despite talks of these entities being privatized and eventually wound down, such speculation is still just that—speculation. For now, there remains a lucrative market for senior housing financing.
Senior Housing News reported earlier this year that HUD had a record breaking year in 2012, insuring $5.5 billion in senior housing loans. Fannie Mae and Freddie Mac also made an impressive showing by lending $1.2 billion toward senior housing projects last year. These agencies report that 2013 will be another strong year in the senior housing sector.
The implication of many large acquisitions is that loans to GSEs are being paid off. This leaves agencies wanting for business. With short-term financing being dominated by the big REITs, there is still room for competition, but there is a particular need for long-term projects and new or upcoming investors building their portfolio.
Another implication of the REIT dominance is that with so many acquisitions, future M&A opportunities will become scarce, bolstering the market for mid-level ventures that larger REITs will not be interested in pursuing. These happenings in the market, coupled with low interest rates make for great opportunities in 2013.
With the rise of senior households a future certainty and 16 million senior household moves projected in the next decade, there is a marked need for senior housing facilities. A segment of these seniors who will be in need of different housing options have limited resources, but many seniors will be prepared for the changes ahead. The bottom line is that diversity and abundance of senior housing facilities will be a needed and valued commodity indefinitely. Considering there are still markets to be capitalized on, like memory care, this is an incredible opportunity for new or growing players in the senior housing industry to capitalize on the steady growth potential ahead.