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NIC Annual Conference: Senior Living Sector in a Lending Lull

CHICAGO – Increasing competition among lenders in the seniors housing sector has caused loan volume to drop precipitously in the second quarter, according to the National Investment Center for the Seniors Housing & Care Industries (NIC). Volume decreased 33% to $336 million from the first quarter to the second quarter of 2004. NIC released the new data at its 14th annual conference taking place in Chicago Oct. 6-8.

“We are seeing more and more banks, especially regional and smaller ones, enter or re-enter seniors housing and long term care,” says Anthony Mullen, NIC research director. “But we’re also seeing REITs and more institutional investors getting involved.”

Much of the second-quarter volume was placed in the independent living and assisted living property types, reports NIC. Volume for the assisted living sector totaled $5 million, while independent living totaled $4.2 million.

Overall loan performance for the seniors housing sector held steady at 94.3%. Although independent living is performing well, assisted living is showing signs weakness. The delinquency rate for permanent loans on assisted living properties rose slightly from 6.15% in the first quarter to 6.28% in the second quarter. NIC defines permanent debt as fixed-rate loans of 10 years or longer.

“The good news is that assisted living has stayed steady for several quarters with just a little movement up and down on the delinquency and restructuring side,” says Mullen.

In addition, sector fundamentals have not improved significantly. The median occupancy rate for assisted living properties hovered around 86%, while skilled nursing properties within continuing care retirement communities (CCRCs) showed a sharp decline from 87% to 84.5%.

There is also a bifurcation of the market in terms of occupancy. Newer product is experiencing high-rate growth than older product, according to Marc Thompson, healthcare department manager for Bank of the West. “Some product that’s about 10 years and older is having difficulty competing against the newer product type in the marketplace.”

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