“I have wondered many times why assisted living properties can’t seem to make it into CMBS transactions,” noted Jim Brett, head of Underwriting at ValueXpress. “It seems the risk profile is similar to hotels, so applying underwriting standards somewhat more conservative than hotels, perhaps 65% LTV and 1.60x DSCR, ought to work.”
With the aging U.S. population, housing for senior citizens is growing and in demand, boosting assisted living occupancies. Approximately two-thirds of assisted living residents paid for services with private funds, lessening the concern for government cutbacks. Many facilities are newer, state-of-the art, like this facility under construction in Bluffton, South Carolina:
“So I rifled through Trepp to see if maybe CMBS conduit lending has expanded to more assisted living transactions, but it has not. Take a look at what I found.”
Assisted Living Transactions, 2010-2014
|Year||# of Loans|
The first of two transactions in 2011 was an $8-million assisted living facility located in San Leandro, CA underwritten to a 1.98x DSCR and a 69% LTV. The second loan was a $15,500,000 loan secured by an assisted living facility underwritten to a 2.44x DSCR and a 45% LTV.
“I asked one of our investment bankers about assisted living, and he said ‘Mike, if you have a private-pay, 50%-60% LTV deal on a well-occupied, newer facility in a major metro, we will take a look at it. Otherwise, there is not much appetite here,’ ” said Michael D. Sneden, Executive Vice President at ValueXpress.