As we get deeper into 2014, low interest rates and demographic changes continue to drive demand for acquisitions in seniors housing. In addition to these factors, some property owners whose facilities are outside their portfolios core assets are also divesting themselves of their senior housing properties. Examples of this can be found in the not-for-profit area where some nonprofits who came out of the recession under significant financial strain are selling their non-core senior housing assets in order to generate much needed capital. Furthermore, because of some attractive terms in its Section 232/223 (f) program, many of these acquisitions are being financed through the Department of Housing and Urban Development (HUD). The financing firm Cambridge Realty Capital is an approved HUD lender and has significant experience with the Department’s programs. Senior housing providers, investors, and others who are interested in acquiring properties should contact Cambridge Realty Capital to explore the many different options it offers including its HUD options as well.
A significant number of nonprofits are dependent on donations for a large portion of their revenues. During the recession donations for many of these organizations dried up and have yet to return to pre-recession levels. This has forced some nonprofits that are in need of capital to divest themselves of non-core assets. Indeed, in a recent webinar hosted by Senior Housing news, Steve Kennedy, the managing director at Lancaster Pollard noted as much when he stated that “We have seen an uptick in this type of transaction, where a nonprofit is divesting to a for-profit.” An example of this was also provided in the webinar in a transaction that involved the senior living owner and operator CarDon & Associates, Inc. and a skilled nursing and assisted living facility that is located in Indianapolis. The facility’s owner was based in Ohio and the facility itself was being operated by a nonprofit. Like many organizations, the recession took a toll on the nonprofit operator and the facility was also outside the owner’s core portfolio, so the decision was made to sell it. CarDon was attracted to it because of its location, its strong reputation in the community, the fact that it had been well maintained, and that there was also room for improvements in its daily operations. These are important factors that many buyers in general wisely take into consideration when making purchasing decisions. Ultimately, CarDon decided to purchase the facility and to use HUD because HUD offered non-recourse financing, long-term fixed rate debt, smaller equity requirements than other lenders, and HUD also allows buyers to detach a property’s value from its purchase price when the property has significant upside. All of these terms made the HUD loan very attractive to CarDon and that’s why they used it to purchase the facility.
As smooth as CarDon’s acquisition process was, it’s even better today because HUD’s once significant backlog has been reduced to almost zero. Accordingly, senior housing participants and others who wish to take advantage of the market’s strong dynamics by acquiring assets in the space through HUD or another means should continue to look to Cambridge Realty Capital for their financing needs.