News & Press Releases

Key Financial Indicators Show Senior Housing and Care Loan Originations Slowed in Second Quarter

Press Room – 2007 NIC Press Releases

Key Financial Indicators Show Senior Housing and Care Loan Originations Slowed in Second Quarter

FOR IMMEDIATE RELEASE: October 9, 2007
Contact: Renee Tilton, (410) 626-0805 or rtilton@crosbymarketing.com

Annapolis, Md. – The second quarter showed a decline in loan originations, according to the NIC Key Financial Indicators? released today by the National Investment Center for the Seniors Housing & Care Industry (NIC). The amount of loans placed in the second quarter of 2007 was down 31 percent from the first quarter and down 1 percent from the second quarter of 2006. This decline slowed the growth rate of outstanding loans. Outstanding loan volume for the second quarter of 2007 was up 2.4 percent from the first quarter of 2007 from $18.5 billion to $18.9 billion, which was up 19 percent over the second quarter of 2006.

“Lending for the second quarter did not keep pace with the first quarter of 2007, and we would expect that the third quarter will show downward movement as well,” stated Robert G. Kramer, president of NIC. “This can be attributed to the credit crunch that the country is experiencing, which started in third quarter of 2007.”

Performing loans during the second quarter of 2007 stayed near the highest percentage ever recorded at 99.35 percent, up year-over-year compared to 99.25 percent in the second quarter of 2006.

Loan data represent the quarterly lending activity of major national lenders (non-REITs) that make permanent and short-term debt investments in seniors housing and care, including Fannie Mae, Freddie Mac, and several of the larger credit companies and banks.

Mean occupancy in independent living was 91.5 percent in this year’s second quarter, up slightly from 91 percent in the first quarter, but off slightly from the second quarter of 2006 (at 92.5 percent). In comparison, the mean occupancy rate in continuing care retirement communities (CCRCs) remained at 91 percent in the second quarter of 2007, unchanged from the first quarter of 2007 and from the second quarter of 2006.

Nationally, nursing homes experienced a drop in the mean occupancy rate from 87 percent in the first quarter of 2007 to 85.5 percent in the second, while assisted living occupancy was off slightly at 87.5 percent from 88 percent in the first quarter.

Capitalization rates were up slightly for independent living in the second quarter and down slightly for assisted living, skilled nursing and CCRCs. Mean capitalization rates – at 7.9 percent in independent living, 8.5 percent in assisted living, 12.3 percent in nursing and 7.9 percent in CCRCs – remained about 20-40 basis points below those of the second quarter of 2006.

“While there is significant discussion about the potential for softness in the seniors housing and care industry, there is not strong evidence of this from the second quarter national metrics,” said Dr. Lawrence Horan, financial research and analysis director for NIC. “Third quarter numbers could show more movement, especially in loan volume. Some entrance-fee CCRCs have reported softness in sales and we will be closely following third quarter data results.”

Each quarter, the nation’s leading senior living lenders, owners/operators and appraisal professionals report their key financial and performance data to NIC. The results are posted free of charge as the NIC Key Financial Indicators™ at www.NIC.org/research/kfi/.

About NIC: Founded in 1991, the National Investment Center for the Seniors Housing & Care Industry is a nonprofit organization providing information about business strategy and capital formation for the senior living industry. Proceeds from its annual conference – scheduled next for Sept. 10-12, 2008, in Chicago, Ill. – are used to fund research and data that lead to informed investment decision-making to advance the seniors housing and care industry. For more information, visit www.NIC.org or call (410) 267-0504.

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