News & Press Releases

Loan Volume and Loan Performance in Seniors Housing and Care Hit Record Levels in the Third Quarter of 2006

Press Room – 2007 NIC Press Releases

Loan Volume and Loan Performance in Seniors Housing and Care Hit Record Levels in the Third Quarter of 2006 

FOR IMMEDIATE RELEASE: January 30, 2007
Contact: Renee Tilton, (410) 626-0805 or rtilton@crosbymarketing.com

ANNAPOLIS, Md. – Loan volume and loan performance for the seniors housing and care industry posted record highs in the third quarter of 2006, according to the NIC Key Financial Indicatorsä released today by the National Investment Center for the Seniors Housing & Care Industry (NIC).

Every quarter since 1999, the nation’s leading senior living lenders, owners/operators and appraisal professionals have reported their key financial and performance data to NIC. The results can be accessed free of charge at www.NIC.org.

“The third quarter was a very good one for seniors housing and care,” said Robert G. Kramer, NIC president. “Our indicators showed that for both quarter-over-quarter and year-over-year, loan volumes and loan performance for the industry were at record levels.”

Loan volume for the third quarter of 2006 was $1.64 billion, which increased from $1.59 billion in the second quarter. This amount was also up 135 percent compared to the third quarter of 2005. The loan volume represents 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.

“Loan volume in skilled nursing was up almost 200 percent year-over-year and money is starting to flow back into this segment,” said Anthony J. Mullen, NIC research director. “The nursing sector has also become much more open to investment by institutional investors, whereas a year ago, they flat out would not have considered it.” He added that more people are looking to invest in renovations of existing nursing homes; a trend that NIC believes will grow quickly over the next five years.

NIC’s indicators also showed that loan performance within the industry reached its highest point to date. “During the start of our industry’s recovery in 2003-2004, we cautioned about the need for this asset class to show a percentage of performing loans over 98.5 percent,” said Mullen. “Since that time, we’ve witnessed a strengthening in this area and today, the percentage stands at 99.4 percent.”

In further good news from the third quarter of 2006, median occupancy rates across all four property types – independent living, assisted living, skilled nursing and continuing care retirement communities (CCRCs) – increased from the second quarter and previous year. NIC draws its median occupancy rates information from properties open at least 24 months. More than 3,300 properties and 387,000 units were reflected in this quarter’s data summary.

Independent living occupancy rates had the strongest showing at 93 percent, a jump from 91.5 percent in the second quarter of 2006 and 92 percent from the third quarter of 2005. Nursing home occupancy rates were also up significantly year-over-year. During the third quarter of 2006, the sector had a median occupancy rate of 88.5 percent. That compared to 86 percent in the second quarter of 2006 as well as in the third quarter of 2005.

Lastly, capitalization rates continued to be at or near historic lows during the third quarter, particularly for top-performing properties and top portfolios. The average capitalization rate for independent living fell to 7.7 percent, compared to 8.3 percent in the second quarter of 2006.

One point of interest was that a low capitalization rate of 5.8 percent was reported in independent living during the third quarter. “But 80 percent of the independent living properties in this country would not attract such a cap rate.” cautioned Mullen, “Only the very best properties, the newest ones, or those in large, stabilized portfolios can get the lowest cap rates.”

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 Oct. 3-5, 2007, in Washington, D.C. – are used to fund research and data that leads 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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