Seniors housing owners hoping to refinance their properties this year will find money available, though lenders are cautious and still have fairly strict underwriting standards.
"So many banks have impaired portfolios," notes Jeffrey Davis, chairman and CEO at Cambridge Realty Capital Companies, a Chicago-based seniors housing finance firm. A well-performing seniors housing property due to be refinanced in 2012 may have trouble getting a new loan from a local lender, Davis notes. "The bank may want to reduce its real estate exposure."
The good news is that interest rates are low and well-performing properties with adept operators should be able to refinance. Many borrowers are turning to government-backed programs from HUD as well as Fannie Mae and Freddie Mac, the so-called government-sponsored enterprises (GSEs).
"This is a great time to refinance if you're seeking long-term permanent debt," says Cary Tremper, senior vice president in charge of the government agency lending program at KeyBank Real Estate Capital, a big lender in the senior housing market. He says Freddie Mac currently offers fixed interest rates ranging from slightly less than 5 percent to 5.25 percent for seven-to-10-year terms.
Freddie Mac financed more than $700 million in seniors housing loans in 2011. About three-quarters of the loans were refinancing. The others were property acquisitions. The agency expects to have a higher loan volume in 2012, according to Steve Schmidt, seniors housing director for Freddie Mac. He adds that underwriting standards tightened two years ago have subsequently been relaxed a bit. "We're very comfortable where we are right now," says Schmidt, who is based in Chicago.
But underwriting standards at the GSEs and HUD have always been high, according to KeyBank's Tremper, in Dallas. "They haven't changed much." He says the agencies look for stabilized properties, with a solid 18-month track record of 88 to 90 percent occupancy.
