Senior Living Capital Providers Shifting From Lending ‘standstill’ To ‘cautious Reengagement’ 

New survey data shows capital sources are still continuing their lending strategies from last year, but shifting economic conditions is lending cautious optimism about the road ahead.

That’s according to a June 18 lender survey from the National Investment Center for Seniors Housing and Care (NIC), which examined lending trend reports for the second half of 2024 with contributions from 18 participating lenders.

Three consecutive rate cuts issued by the Federal Reserve starting last September brought the federal funds rate down to a target range of 4.25% to 4.50% by year-end. Although interest rates are still relatively high, those conditions have “opened the door for more movement in 2025, especially for stabilized assets,” according to Omar Zahraoui, senior principal at NIC and author of the report.

“While capital remains selective, the overall tone has shifted from hesitation to cautious reengagement,” Zahraoui told Senior Housing News. “‘Calendar year 2024,’ as one lender described it, ‘was a nice general bounce back from prior years.’”

A few lenders reported “loosening requirements” with regard to credit standards, and others said they are seeing “increased competition, thinner spreads and a greater appetite for growing loan balances, especially from banks,” according to the report.

Permanent loan volumes reached more than $2.8 billion in the second half of the year, which was “well above any level observed since 2020,” Zahraoui wrote. Nursing care reached similar levels, which is above historical norms, according to NIC. In all, these trends are suggesting a more stable lending environment going into 2025 and there should be “a stronger appetite for long-term investments.”

While permanent loan volumes increased, mini-perm and bridge loans lagged behind in comparison. Senior housing bridge loan volume had reached $290 million in the third quarter of 2024, but fell to $200 million in the fourth quarter, indicating the sector is cautious about short-term financing.

Nursing care loans on the other hand surged to $619 million in the fourth quarter, reflecting interest in skilled nursing opportunities “buoyed by improved Medicaid rates and continued operational stabilization,” Zahraoui wrote.

Loan delinquencies have been on a continuous downward trend for the senior housing industry, which reached 2.6% of total loans by the end of 2024, marking five quarters of continuous improvements since reaching a peak in 2023.

“The number of senior housing units under construction remained near decade-low levels, reflecting ongoing hesitancy driven by cost pressures and overall economic uncertainty,” the report states.

While capital sources are returning to the dealmaking table, their standards are now higher than a few years ago, Zahraoui said. But that should still lead to more activity ahead, at least with established operators that have strong lending relationships.

“Permanent loans are flowing, especially to strong operators with proven performance. Delinquency trends are improving, and while new development is still constrained, lenders are watching closely for the right opportunities,” Zahraoui told Senior Housing News. “Cautious optimism is replacing the standstill we saw in prior years. The industry should prepare for more activity in 2025, but expect a continued focus on quality, structure, and long-term fundamentals.”

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