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Multifamily Viewpoints

Seniors Housing Workshop—A Rousing Success

By Steve Schmidt
Published on August 14, 2017
Steve Schmidt

It's no surprise that the attendance of our Seniors Housing Workshop in Chicago last month was almost 20 percent higher than last year’s—the seniors housing industry has been booming with growth to meet increased demand. Here at Freddie Mac Multifamily our line of seniors housing loan products includes fixed and floating-rate loans, supplemental loans, and Revolving Credit Facilities. Plus, we now offer lease-up loans and float-to-fixed loans designed specifically for seniors housing Borrowers. Our funding has grown from $645 million in 2012 to more than $3.2 billion last year, making us No. 1 in the industry. Already for the first half of 2017 we’ve funded more than $1.5 billion while our portfolio performance has remained stellar with zero loan delinquencies.

We Made It Easier

To make our financing solutions better for Borrowers, we sped up execution times by adding resources. We’ve hired and continue to hire new staff to meet our Sellers’ demands, and we’ve retained valuable, experienced staff who just keep getting better with every transaction. We reduced paperwork, created easier legal documents specific to seniors housing and improved some of our processes. One of our big advantages, however, remains the ability to lock in spreads upon application signing and for repeat Borrowers to be able to lock the Treasury index, effectively locking the entire note rate upon a signed application. In this time of volatile interest rates, that’s a very attractive benefit.

A Bullish Outlook

At the workshop, I announced that Freddie Mac remains bullish on seniors housing and our forecast for our seniors housing volumes.  I also told the attendees that new construction has spread across the country making overbuilding more prevalent. Yet, the dramatic long-term senior demographic growth, as shown in this chart, should solve most current overbuilding issues over the medium term. While there is some temporary oversupply in pockets around the country, seniors housing market fundamentals are strong, and I expect increased demand to absorb the supply.

Nathaniel Poteet, director for Freddie Mac Capital Markets, told the audience that CMBS volume is up by 20 percent over last year for the commercial real estate industry. Close to $3.5 billion of 2016 Freddie Mac Multifamily securitizations were backed by seniors housing loans, a 44 percent increase from 2015 and a 198 percent increase from 2014. Expanding our seniors housing loan securitization adds capital back into this high-demand market.

Looking to the Future

It was great to see all our Sellers at the workshop and share best practices for serving Borrowers better. The workshop provided a venue where Sellers heard about the latest enhancements to Freddie Mac’s program, and mingled with their Freddie Mac team and industry peers. It was a productive day for all. I won’t be surprised if next year’s workshop needs an even larger room.

 

 

Related article: GSEs Continue to Innovate, July 17, 2017, Seniors Housing Business

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