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Healthcare May Emerge From Credit Crunch

Green Park Financial views the health care real estate sector as ripe for opportunity – enough to devote at least $500 million to it this year.

By Erika Morphy | Updated on March 30, 2008

The health care real estate sector, for all its differences from more traditional categories such as office or retail, has suffered in the credit crunch in the last several months. As in every other category, many of the major players in this space have either pulled back entirely, or substantially, in lending. Also, credit spreads — which are traditionally wider than in other less risky asset classes — have widened even more after seven month of credit paralysis. Many deals that might have closed in the high 100s over Libor are now closing in the 300s, for instance.

To be sure, deals are still done. Earlier this month, one of the major private sector providers of debt and equity financing in this space, GE Healthcare Financial Services, underwrote a $160 million senior secured credit facility to Odyssey HealthCare, for its recent acquisition of VistaCare Inc., one of the largest providers of hospice care. Dallas-based Odyssey, which completed the acquisition of VistaCare on March 6, now operates approximately 110 Medicare-certified hospice care locations in 30 states.

But such deals have been more the exception than the rule lately. Acquisition finance activity is much lower, compared to a year ago, with most of the current deals focusing on recapitalizations. Still, though, there are signs that this sector – which includes skilled nursing and assisted living – is well-positioned to come out of the credit crunch with more efficient and streamlined sources of debt and equity.

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