An inside scoop on what lenders really think…

By Steve Moran

While at NIC I had the opportunity to spend some time with Imran Javaid and Keith Kodrin with Capital One’s Healthcare Real Estate Lending Group, a Senior Housing Forum partner. I had two goals:

  1. To talk about the results of a survey they conducted this past September at the IMN Real Estate Private Equity Forum.

  2. To talk about their view of the current state of senior living and the capital markets.

Here is what they had to say:

Capital One is a data-intensive company and they want to understand what is going on in the marketplace — specifically what developers and operators are thinking. This data gives them the ability to better identify areas of concern and opportunity.

According to their survey, there is this surprising contradiction whereby many developers continue to be tremendously interested in new development, while at the same time showing concern about overdevelopment. What seems to be happening is that developers believe their projects are safe, good investments, and that it is the “other guy’s” project that will end up in trouble. Because of this, it’s more important than ever that all players in the industry conduct in-depth analysis of each opportunity. For Imran and Keith, the number one thing they look for is an operator who has a solid history of success.

We also spent some time talking about low- or middle-income senior living, largely because they were surprised that affordable seniors housing ranked so low as a concern for survey respondents. I asked the team if a developer or operator showed up on their doorstep with a non-traditional model that would serve that population, would Capital One be interested? Their response was that the financial and market fundamentals would need to be there, but a non-traditional product would certainly get serious consideration.

On Occupancy Rates

I also wanted to know what the team thought about the general softening of occupancy rates. According to Imran, he sees it as a tapping of the brakes in some specific markets where there is the potential for overbuilding.

He also makes the point that the overall market has a bunch of inventory that is now 10-15 years old. While things like paint and carpets are easily replaced, many building features have changed. In newer facilities, the common areas are bigger and more opulent. The units are larger. He expects the newer inventory may make it harder for those owning older properties.  

In a couple of weeks we will publish part two of this interview where we will talk about product mix, market trends and emerging challenges and opportunities.