“Time is of the essence,” according to Cambridge Vice President Zachary Scardina. When it comes to refinancing, “that time is now. Waiting could cost you the ability to refinance.”
While rising interest rates have some borrowers feeling skittish, Scardina pointed out that the reluctance of banks and other conventional lenders to provide financing to senior living operators is a more pressing reason for concern. “Cambridge is observing nationwide, from Florida to Tennessee to Illinois and Washington state, that some lenders are no longer lending to or extending/renewing senior housing and skilled nursing mortgages.” According to Scardina, “We have even seen what seemed to be relatively routine loan renewals for good borrowers being cancelled by industry-informed regional banks, as well as national and bulge-bracket lenders.”
Scardina cites a number of factors for this trend, including occupancy issues and expenses being more difficult to manage than in the past. Scardina also noted that bank expectations in general, across all sectors, are tightening. Add to this mix of uncertainty and red tape the growing rate of inflation brings, and it creates the perfect storm for niche borrowers like senior living and skilled nursing borrowers.
Scardina noted, “When times are good, capital is plentiful and there are a variety of options. In a lean economic climate like we are experiencing right now, finding capital can be a challenge, especially for a niche asset class like senior living and healthcare.” He added, “Capital stack/debt financing is a critical component of being a real estate owner and financing sensitivities should not be overlooked.”
While this trend should raise the alarm for such borrowers, it is not a cause for total panic. However, Scardina does note that timing is crucial, and waiting too long may result in not obtaining capital.
He also pointed out that relationships are not necessarily a precursor to obtaining financing from a conventional lender, at least during times of plenty. “When times are good,” he stated, “relationships are overlooked. But now more than ever, relationships matter.”
Scardina urges borrowers, particularly senior living and healthcare owners, to consider alternative capital providers like Cambridge Realty Capital. Even when the big banks may be saying “no,” Cambridge is often able to say “yes.” Cambridge looks at lending through the lens of decades of experience in senior housing and healthcare lending and is often able to come through for borrowers even when the big banks won’t. “Whether it’s a borrower we already have a relationship with or a new client, Cambridge is ready to make deals happen, with terms and rates that are manageable in a tight economy,” said Scardina.