While the Department of Housing and Urban Development’s senior housing programs have created a backup a mile long, Fannie Mae wants to make sure operators are not over looking its programs for assisted living facilities.
Often considered more conservative than HUD’s programs, the government sponsored entity wants to make sure operators with experience know they can help, even if they don’t meet all the published guidelines.
“We have a set of underwriting guidelines, created over time to walk the fine line of having high quality production volume but also having the right credit and risk parameters,” Christopher Honn, director of multifamily mortgage business, seniors housing for Fannie Mae, told SHN during the National Investment Center for the Seniors Housing & Care Industry (NIC) conference in Washington, DC.
While published guidelines say the GSE requires a five-property minimum for owner/operators to obtain financing, Honn says there are other very important considerations as well and that FNMA can bend a bit for the right deal. The guidelines are general, but not set in stone.
“The guideline we have set is: experience is important,” he said. “The experience level of an operator/owner is absolutely critical to success, doesn’t matter the size.”
Fannie Mae will work closely with the operator to ensure the investment is viable, including hands-on interaction with the facilities and the people who manage them. For the right operator and experience level, the organization will examine the operator in search of a good fit, including site visits.
“It’s part of our business plan,” Honn says. “We work a lot with borrowers directly and always have because it’s very important to understand their business model. We don’t meet them in our office, we go out to their headquarters. This is a seeing is believing business. You have to go out there and see and feel what’s going on.”
The partnerships with lenders and borrowers that are developed from the first few properties are valuable when built carefully, Honn says and operators are of utmost importance.
“We weigh that out on every transaction we work on and it guides us in decision-making,” he says.
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The GSE said it continues to be inundated with requests from borrowers and lenders looking to modify or convert units to do a small expansion in order to accommodate demand.
“We think that’s an advantage we have to provide a path for lenders to do such a thing,” he says.
Written by Elizabeth Ecker