Seniors housing and care, from independent living through skilled nursing, is in high demand, and that demand is only going to grow in the years ahead as the affluent baby boomer generation continues to age. With the silver tsunami starting to reach shore, now is an ideal time for owners and operators to grow and recapitalize their portfolios to position themselves for lasting success.
“The capital markets are very attractive and it’s certainly a great time to grow and invest in your business to position yourself for several years of tremendous growth in our industry,” noted Lument’s Aaron Becker during a recent podcast with McKnight’s Long-Term Care.
Rates Stabilize
Any discussion of financing strategies usually begins with a look at interest rates, which have achieved a much-appreciated level of stability. Becker noted that once we started to settle into the new normal following the rate spikes of a few years ago, the financial markets and deal activity started picking up. It is safe to say the “extend and pretend” phase of borrowers kicking the can down the road has come to an end, as the uncertainty is behind us and ample capital has entered the market.
Capital is flowing into the industry in many forms: real estate investment trusts (REITs), private equity, family offices, banks (both long-term lenders in the space and new entrants), finance companies, and even foreign capital are all increasingly active. With so many solid options, now is a great time for borrowers to grow their business.
“Staying the course, doing nothing, is really not a strategy,” Becker noted. Instead, owners and operators are examining “what can be done to either grow the portfolio or improve the portfolio. It is a great time for borrowers to reposition,” he added. Borrowers are getting off the sidelines and looking to refinance, acquire, and renovate. Construction remains difficult to pencil out, so adaptive reuse remains a prudent strategy.
Financing Options
If one is looking to put debt away for the long-term and focus on operations, the U.S. Department of Housing and Urban Development (HUD)/Federal Housing Administration (FHA) Section 232 program remains popular due to the beneficial terms. Secretary of Housing Scott Turner and Assistant Secretary of Housing Frank Cassidy have worked to streamline the program, reducing queues and improving transaction processing time.
Of note, the new Express Lane, which drastically reduces processing time for established borrowers, has proven successful, as qualifying transactions are getting firm commitments in two-to-five business days.
Banks also remain active, with acquisition and refinance transactions still the majority, with some construction financing in certain scenarios. “Banks have always been there, but I’d say they’re more aggressive than they’ve been in recent years. And we’re seeing more banks enter the market too, which is great for the borrower community in terms of having access to deep pools of capital.”
Becker emphasized that the agencies also play a key role, as Freddie Mac is coming off a banner 2025 in the seniors space, and Fannie Mae is looking to pick up activity as 2026 progresses.
“What’s nice about the range of active products is that we can present our clients with multiple options – agency, HUD, banks, or alternative capital – and work together to evaluate benefits and considerations of each avenue to figure out what the best product is,” he said.
Transaction Tips
How can a borrower help facilitate a seamless execution? Number one is preparation. Even before a transaction begins, getting everything together in advance is key. A good lender prepares the borrower and helps them get a head-start on third-party reports, get attorneys involved early, and proactively address any potential issues.
Utilizing improved technology such as data rooms, which are secure and quick, is also important. As is exploring artificial intelligence (AI) to automate the gathering of data, fill out forms, and make workflows more efficient.
The most important tip? “Communication, communication, and communication,” Becker said. He likes to overcommunicate, speaking to clients daily in many cases, and makes it a point to never go more than a week without speaking during a transaction.
Looking Ahead
All things considered, the seniors housing and care industry is on the precipice of serious growth and those that invest early and truly understand the residents they care for will be well positioned for long-term success. Financing activity has been steadily increasing and is only expected to accelerate.
“We know from talking to our clients, small and large borrowers, that there is a lot of interest in getting deals done,” Becker said.
As the podcast concluded, Becker left listeners with an optimistic note: “You look at the stable capital markets, you look at the demographics, and you look at the needs-based demand; it’s a wonderful space to be in. And I’m very optimistic about where our industry is heading.”
Listen to the podcast here.
