On the heels of Hunt Mortgage Group’s first loan in the senior living sector—a two-year, $8.85 million bridge loan to refinance Autumn Leaves of Rockwall, an assisted living facility in Texas—the firm has outlined its vision for a future in the space through its Proprietary Loan Group, the company’s new balance sheet lending platform launched earlier this year.
Hunt has evolved into a privately owned company that is international in scope, focusing primarily on financing commercial real estate throughout the United States through Fannie Mae, Freddie Mac, HUD/FHA and its own proprietary loan products. It maintains a servicing portfolio of $11 billion.
Senior Housing News recently sat down with Jim Neil, director of health care lending at Hunt Mortgage Group, to discuss plans to build Hunt’s presence in the senior living sector and how it aims to differentiate itself from other lenders.
SHN: What’s the opportunity for Hunt in the senior housing space?
JN: In reality, they should have gotten into this space seven years ago. The seniors market is going to continue to grow for years. It’s an attractive space from a growth standpoint, and if you do it right, then it’s relatively profitable. I think they’ve been wanting to get into it for a few years now, and we’ve now had success.
SHN: What else does Hunt have in the works?
JN: We’ve got a pretty good pipeline of other bridge loans. It’s the bridge loan that we’re utilizing as our lead product, because while I’ve personally been doing the HUD program since it was born, Hunt doesn’t have a resume on that. So we’re differentiating ourselves with the bridge product. I’m spending my time right now trying to build a national platform, which means I’m hiring people. We’ll think about the next step down the road, but we’re plenty busy.
I have a lot of experience in Texas, but I’m trying to build a platform across the country. I’ll give you an example. I was at a state conference just a few weeks ago and walked away with $60 million worth of opportunities to look at. There’s a lot of business out there.
SHN: What does the typical Hunt bridge loan entail?
JN: Different people have different definitions [of bridge loans], but I’ll give you ours: a two- to three-year loan. In our case, it’s usually interest only at a floating rate, usually non-recourse, which is a very attractive feature to the owners and operators. If it’s a very, very challenging loan, then it won’t be non-recourse, but typically it is. I would differentiate that from a five-year loan, which sometimes would come from a commercial bank, and I would call that a mini-permanent loan. A bridge loan could be a year, but usually they need to be, for their purpose, two to three years. It’s bridging to a permanent loan.
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I’ll give you an example: A quick acquisition. I could take an acquisition to HUD, but it might take several months. I could close on an acquisition through a bridge loan in 45 days. Bridge loans are good for quick refinances and cash-outs, which HUD won’t do. There are several very economic and strategic purposes for a bridge loan, and we’re having [the client] sign onto us as their permanent lender when we do the bridge loan.
Also, not many lenders, and HUD certainly, won’t finance a turnaround property. Either when they’re acquiring it and it’s not performing well, they’re going to make it perform well, because they’re really good operators, or maybe there’s been a blip—something better opened up in the market, and it’s taking them some time to get back up or something. So because we’re a private company and not a regulated bank and we’re not the government, it’s our own money, so if it makes good, economic sense, we’ll probably do that loan.
SHN: In what types of projects will Hunt partake?
JN: It’s really nursing homes, assisted living, which sometimes has memory care, and independent living. It’s just different lending platforms when you’re dealing with different asset classes, different acuity levels. We’re going to do all those, but my group is going to focus primarily on skilled nursing and assisted living.
HUD has a new construction product, and we will do that, but at this point in time, we don’t yet do new construction off of our own balance sheet. If your definition of repositioning is the same as mine, which I think of as somebody maybe wanting to convert an old hotel into an assisted living facility, those are few and far between that really look attractive to us. The nursing home space is huge, so we will see more nursing home properties than assisted living opportunities.
SHN: What does Hunt look for in a client?
JN: I’ve been a banker for 30 years, and the number one thing is, you deal with top-notch people, and in the case of senior living, top-notch operators and obviously top-notch character. Just as an example, I’ve always found that if I deal with the top 25%, the top quartile of quality operators out there, I’ll do really well. Then, obviously, you have to look at their existing portfolio, how well it performs, their experience, all that good stuff. But it’s really the quality of the people you’re lending the money to.
SHN: What is the competition like for Hunt?
There is [a lot of competition], but not so much for a true bridge product that you actually control yourself. Most of our competitors will say that they have a bridge product, but I would argue that most are not their own money. We provide that capability.
Written by Kourtney Liepelt