Locust Point Capital is preparing for a post-pandemic lending landscape.
The Red Bank, New Jersey-based senior living investor and lender announced the closing of its second senior housing debt fund on Monday with $428 million. The fund exceeded its target and includes commitments from pension funds, endowments, foundations, insurance companies and wealth advisors.
Nearly 75% of the fund’s commitments came from U.S.-based investors, with the balance originating from European investors.
Locust Point’s new fund will continue the lending strategy of its previous offering — providing subordinate debt, preferred equity, and opportunistic senior mortgage loans to owner-operators of seniors housing and care facilities in the U.S. This gives borrowers short-term flexible financing solutions, which gained in popularity over the past year as national and larger regional banks restricted their lending to existing clients with proven track records during Covid-19.
Other lenders, notably private equity firms, have rushed to fill the void left by larger banks. And Locust Point has been very successful placing debt during the pandemic. Deal volume and lending inquiries increased between 60% to 70% last year, compared to 2019, Managing Director and Founding Partner Dan Contardi said last month during Senior Housing News’ Capital Quarterly webinar series. And the firm is finding opportunities to partner with growing owner-operators across a wider swath of the capital stack, particularly with new construction.
This could prove to be a growth opportunity moving forward. As banks return to the lending environment, they are demanding more recourse from borrowers. Owner-operators strapped for cash may be enticed by private funds offering non-recourse debt, at rates ranging between 75 basis points and 100 basis points higher than the interest rates banks are offering recourse debt, Alliance Residential Regional CFO – East Coast Christie Jordan said during the webinar.
Locust Point launched its debut fund in 2016, with $312 million in commitments. Since then, the total value of financed transactions in which the firm participated exceeds $2.25 billion.
“Our pace of new investments reflects the tremendous opportunity we are seeing today in the seniors housing and care sector,” CEO and Managing Partner Eric Smith said in a statement.