Acquisition loan requests from operating tenants have been on the rise in recent months, and Cambridge Senior Vice President Brent Holman-Gomez sees the trend continuing in the weeks and months to come. “Circumstances are favorable for senior housing and skilled nursing owners who wish to sell their properties to the operators,” Holman-Gomez asserted, “and Cambridge has the right underwriting conditions for operators who want to take advantage of the current market.”
He noted that there are a few different factors contributing to the ongoing movement toward operators buying from their facility owners. One is that, overall, facility occupancy is on the rise, creating a steadier and more reliable income stream. The normalization of Medicaid rates has also contributed to a more positive financial outlook. Additionally, the staffing issues that have plagued the industry since the start of the COVID-19 pandemic have improved. Agency and overtime costs are stabilizing, and operators have more time to focus on other parts of the business, namely improving performance.
That improvement, in turn, has given operators the greater ability to get financing based on facility performance and reduce equity requirements. And property owners are increasingly willing to get creative to get sales done. In fact, noted Holman-Gomez, “The current skilled nursing and senior housing market is showing that a lot of property owners are ready to sell their properties to the operating tenant or management company and will negotiate payment structures to make it happen.”
At the same time, interest rate changes have brought less confidence to existing lender relationships, causing borrowers to seek more options. Holman-Gomez agrees: “A variety of underwriting options are needed to take advantage of the above situations.”
Cambridge has been fielding inquiries recently from new customers who are seeking to purchase the properties they are currently operating from their owners. Fortunately, Cambridge has a vast network of diverse capital providers able to meet the complex needs that this type of arrangement presents. Cambridge provides Signature Bridge Loans through a network of lenders aggressively making loans with varied underwriting requirements. Also, long-term debt with fixed rates can be surprisingly beneficial in the current environment, and Cambridge sizes them to achieve the greatest proceeds and highest leverage possible, reducing equity needed to close.
Cambridge got its start providing conventional loans. While Cambridge has come to be one of the nation’s premier HUD lenders today, Cambridge continues to provide conventional loans through its Signature Bridge Loan program to senior housing owners and operators. “We haven’t strayed from our roots and continue to provide insight, expertise, and competitive rates, even in a challenging market,” said Holman-Gomez.