ATLANTA—The aging population of Baby Boomers helped propel the seniors housing sector to the best performing real estate asset class during the 2007-2012 financial crisis. That trend continues today.
So says the collective wisdom of Michael Waldron, Joshua Hausfeld and Don Husi. Waldron serves as senior vice president of SunTrust Aging Services. Hausfeld is managing director of Pillars Senior Housing & Healthcare Financing. And Husi is director at Pillars.
The trio has numbers to back up their assertion. According to data released by the National Investment Center for Seniors Housing & Care, loan origination volume in the first quarter of 2017 was a robust $4.7 billion and the strength of this sector is widespread, with independent living and assisted living properties seeing significant development. Currently, inventory growth in seniors housing is concentrated in and around high-growth cities such as Atlanta, Dallas, Houston and Miami, as well as others like Boston, Chicago and Minneapolis.
A 2016 report published by the Federal Reserve Bank of Atlanta implies that the seniors housing and healthcare real estate sector is in its nascent stage with room for growth for all investors, including institutional and large national portfolio owners/operators to regional owners/operators and not-for-profit investors. Demographic outlooks show that investment growth and demand will remain high in this sector.
(Here's why developers should target this powerful demographic.)
“Trends indicate that the development of facilities that provide flexible space designs and programs for residents' well-being will be able to meet the needs of seniors, especially those who may need memory care,” Hausfeld tells GlobeSt.com. “A 2015 research report by AEW Senior Housing Investment Opportunity supports this point. The number of seniors—people age 75 and older—is expanding at roughly twice the pace of the general population. This will accelerate to three times through 2020 and even faster the following decade.”
Increasingly, the trio says, senior housing developers have turned to lenders who offer a full spectrum of financing options. These options range from short-term bridge loans to permanent financing, as well as agency lending execution.
“In part to meet this demand, SunTrust Bank acquired the assets of Pillar Financial, LLC in December 2016,” Waldron tells GlobeSt.com. “The combination of SunTrust's Healthcare and Aging Services Commercial Industry Specialty Groups, along with Pillar's Seniors Housing and Post-Acute Care Platform offers a strategic, integrated approach to capitalizing seniors housing/post-acute care properties.”
Indeed, SunTrust, with its Pillar division, is already well established in this marketplace. For example, the combined team is working on a multiple asset transaction in the Southeast. SunTrust is working to provide the bridge financing and the Pillar division is working to secure long-term HUD refinancing loans shortly afterwards. Pillar is working on securing HUD agency loans for memory care facilities in the Southeast and Northeast, as well as nursing home properties in the Midwest that are currently rolling off shorter-term SunTrust balance sheet loans. Husi tells GlobeSt.com, “Long-term agency loans for these projects can provide clients access to efficient agency financing vehicles, while freeing up their balance sheets to develop, acquire, reposition or renovate existing or new projects in their portfolio.”
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