Cambridge Realty Capital recently released its first quarter statistics, and the IRR trend has proved to continue into 2021. “It’s an extraordinary time for Cambridge’s business,” noted Cambridge President Jeffrey Davis. “The COVID-19 pandemic has changed so many things in everyone’s landscape and for Cambridge, it has meant a shift in focus to a product that is particularly relevant to the current circumstances, namely IRR (Interest Rate Reduction) loans.”

During the first quarter of 2021, Cambridge closed a total of 13 loans, all of them IRRs. They totalled $150,000,000 and represented facilities in six states. The largest loan for $21,959,964 went to The View in Marion, Iowa, a 112-bed assisted living facility. The smallest loan was granted to Beaver Dam Nursing and Rehabilitation Center in Beaver Dam, Kentucky, an 83-bed mixed skilled nursing and board and care facility.  In 2020, Cambridge closed 47 IRR loans totalling approximately $440,000,000.

Cambridge has been proactive about auditing its borrowers’ portfolios and reaching out to those that are qualified for and could benefit from an IRR loan. Many such borrowers were not even aware that an IRR loan was an option and were grateful for Cambridge’s proactive stance. “Our IRR program beneficiaries have expressed that the small cost involved was greatly outweighed by the long-term savings generated, and that very little work on their part was needed. Cambridge does the bulk of the detail work, involving the borrower for just a short time at closing,” said Davis. As many operators are still burdened by the chaos that the pandemic created for their facilities, residents and staff members, the ability to obtain a lower interest rate without a lot of extra time spent came as a big relief.

An IRR loan provides a means for qualified borrowers to reduce the interest rate of an existing loan without penalty and for very little cost. The earliest drops were significant, with rates beginning to climb slowly again in the summer of 2020. Despite the slow rise, interest rates were and remain highly favorable and made the prospect of an IRR loan tantalizing to many of Cambridge’s SNF operators. “Cambridge closed its first IRR loan of the year shortly after the pandemic was declared, and it hasn’t stopped since then,” Davis stated.

Davis sees more IRR loans in Cambridge’s future, thanks to the Fed’s commitment to keep interest rates stable. Many states have either already re-opened for business, or are in the early stages of doing so, and leaving the interest rate intact is intended to help facilitate strong re-openings and to stimulate growth. “The prospect of negotiating a better interest rate for existing borrowers is positive,” Davis noted, but he urges any borrowers who are still on the fence about obtaining an IRR loan to act quickly. “Low rates, as everyone knows, eventually go up. The sooner you can act, the better.”

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