When it comes to financing large portfolios of senior housing properties, real estate investment trusts (REITs) are dominating the market and will continue to do so for the foreseeable future, says a capital firm executive in an interview with the National Investment Center for the Seniors Housing & Care Industry (NIC).
Fannie Mae and Freddie Mac representatives are saying the bulk of their senior housing business is coming from smaller portfolios, even one- and two-offs, said Michael Hargrave, NIC MAP’s vice present, going on to ask if that was consistent with what Steve Wendel, president at Boston, Mass.-based Berkeley Point Capital LLC, has been seeing.
“I would agree with that statement,” [Wendel said during the interview.] We’ve been working on a portfolio of a dozen small properties, but I would say the bulk is two properties here, three there, five there and some single properties, which is different than in the past. We had done pools in the past for the likes of Ventas and Healthcare REIT, but there are more one offs presently.
What I think is driving this is that the large pools, particularly acquisitions, are being done by and financed by the REITs with their unsecured debt financing. To me that is the big change, the large deals aren’t going to Fannie Mae and Freddie Mac for financing, because the REITs’ cost of funds on the unsecured side is so cheap, they just use their own debt.
Oddly enough, this phenomenon is new for seniors housing, but on our multifamily side—our main business, we are probably 80 percent–90 percent multifamily and 10 percent–20 percent seniors housing—the bulk of our business is single-property loans. It’s not unusual for the general real estate sector, but seniors housing has historically tended to trade in pools and I think that is still true.
I think the REITs are going to dominate the large pool space for the foreseeable future. Ventas’s unsecured debt has rates that are comparable with Fannie Mae and Freddie Mac debt, with much more flexibility. I don’t see that changing in the near future.”
Read the rest of the interview at NIC Insider Newsletter.
Written by Alyssa Gerace