Lending Spreads for Assisted Living, Skilled Nursing ‘Remarkably Similar’

Senior housing operators and owners seeking financing at higher loan-to-value ratios are likely to find favorable terms with alternative lenders and finance companies, as banks remain disciplined with their underwriting during the coronavirus pandemic.

And among care segments, lending spread differentials between majority assisted living and memory care communities, and skilled nursing facilities, are remarkably similar and high.

These are a couple of the main takeaways from a new quarterly lender survey released Monday from investment banking firm Ziegler and the National Investment Center for Seniors Housing & Care (NIC). The purpose of the survey is to gauge where the long-term care lending landscape stands, six months after Covid-19 sent capital markets into a period of “peak volatility.”


Ziegler and NIC solicited 98 firms – 81 banks and 17 alternative lenders – and received responses from 22 companies.

The survey confirms previous reports that the capital markets are stabilizing after the spring disruption brought about by the outbreak, as lenders and third-party consultants become more accustomed to virtual tours of communities, and pricing returns to pre-pandemic levels.

Some key points from the survey:

  • Regional banks were the largest cohort of respondents at 45.5%, corresponding to their emergence in the capital markets landscape as senior living enters a management phase of the pandemic. But more than half indicated that their lending in the sector covers a national footprint.
  • A growing number of lenders are approving financing for private-pay senior living and long-term care. Majority assisted living and memory care is leading the way, with majority independent living and nursing care neck and neck behind.
  • Spread differentials between majority assisted living/memory care and majority nursing care communities are remarkably similar, with the majority of respondents quoting spread ranges of 3% to 4% over the base rate.
  • Nonprofit, entry-fee life plan communities have the lowest spreads, followed by rental life plan communities and majority independent living. Spreads here ranged 2% to 3% over the base rate.
  • Alternative lenders and finance companies are more willing to lend at LTV ratios between 75% and 90% to assisted living/memory care communities and nursing homes.
  • Construction lending remains tight. Half of the survey respondents indicated they are currently lending for construction projects at LTV ratios between 60% and 70%.

Ziegler and NIC gathered replies between July 28 and August 15, and said that the surveys will be conducted quarterly in order to report improvements or setbacks to lending.

Companies featured in this article: