Increasing demand to finance senior housing facilities has prodded Wells Fargo & Company (NYSE: WFC) to establish a new speciality group solely dedicated to the space, the company announced Tuesday.
Housed within Wells Fargo’s Commercial Real Estate Group, the company’s new Senior Housing Finance team will provide a suite of banking and credit services for developers, investors and operators of private-pay senior living facilities.
The fully staffed group will also provide expanded support for balance sheet lending, working with Wells Fargo’s Healthcare Corporate Banking and Multifamily Capital businesses.
Although Wells Fargo has already been providing financing services to the senior housing industry, the creation of the new entity comes at a time when an estimated 20,000 senior housing units will be needed per year to meet peak demand over the next 25 years, said Mark Cotsakis, who has been named the head of the new Senior Housing Finance division.
“Wells Fargo has been providing financing to the senior housing industry for quite some time, but in order to best serve the existing and emerging senior housing client base, we saw the opportunity to create a specialty focus on the sector,” Cotsakis said in a written statement. “The formation of our new Senior Housing Finance division, in partnership with existing Wells Fargo businesses, is a natural fit to position Wells Fargo as a leader in providing financial solutions in this rapidly growing market.”
The Senior Housing Finance group has already seen some robust activity in 2015.
In March, the division closed financing for several projects across the country, including $17.45 million for the construction of an independent, assisted living and memory care facility in Albany, Ore.; as well as $21.2 million for the construction of an assisted living-memory care community in Ft. Lauderdale, Fla.
During the same month, the group closed on construction financing for a $49.2 million facility in Foster City, Calif., along with $53.5 million for the acquisition and construction of an independent living, assisted living and memory care community in Ft. Myers, Fla.
Statistics continue to show that demand for senior living options will increase in the years to come.
The population of Americans age 65 and older is expected to grow 67% by 2040, from 48 million today to approximately 80 million, according to U.S. Census Bureau projections. Moreover, the Bureau also notes that over 21% of the current age 75 and older population resides in senior housing or care facilities.
But while this demographic surge presents a favorable “wind at our back” for future industry prosperity, Cotsakis says underwriting and operational disciplines must be maintained so as to prevent the potential of oversupply and ill-conceived development that stands to jeopardize the entire sector.
“The challenge is formidable, but achievable, from a sector that at its core is a service oriented industry striving to provide a higher quality of options to our aging population,” he said.
Written by Jason Oliva