IHCA/WHCA PRESENTATION - SEPTEMBER 25, 2019 IHCA/WHCA Fall Conference - Washington Health Care Association ...
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IHCA/WHCA PRESENTATION SEPTEMBER 25, 2019 IHCA/WHCA Fall Conference For Internal Use Only
September 23, 2019
Agenda
1 Introduction
2 Acquisition Landscape
3 Financing Options
4 New Construction Landscape
5 Interest Rate Environment
2
September 23, 2019
Acquisition Landscape – National
Over the past four
quarters (Q2 2018 – Q2
2019), Seniors Housing
and Nursing Care
transaction volume
reached $15.9B, up 4%
year over year, for the
same time frame.
NIC RCA US Quarterly Report – Q2 2019 3
September 23, 2019
Acquisition Landscape – State
Washington Activity
Since 2016 Average Price Per Bed/Unit
Sales Volume 2016 2017 2018
Nursing Care 26 $175,600,000 $47,000 $72,000 $37,000
Seniors - Majority AL/IL 46 $751,500,000 $199,000 $189,000 $202,000
72 $927,100,000
* 2017 NC Average Inflated Due to Sabra Acquisitions
Typical Cap Rates
New / Big Average Old / Small
AL/MC 7.00% 8.00% 9.00%
SNF 12.00% 12.50% 13.00%
4
September 23, 2019
Acquisition Landscape – State
Idaho Select Activity
2019 2017
Caretrust Cascadia
- Cascadia of Nampa, 99- - 7 SNF Idaho portfolio
bed SNF Rathdrum
- $12.8 million, $129,000 per - 48-unit AL
bed - $8 million, $166,700 per unit
Ensign - Out of state purchaser and
- Temple View Transitional operator
Care Center, 119-bed SNF
Radiant Senior Living
- The Renaissance, 64-
unit AL/MC
5
September 23, 2019
Motivations of Sellers and Buyers
Sellers Buyers
• PDPM • Regional owner/operators
• Medicaid • Medicaid changes
• Uncertainty • Economies of scale
• Estate planning
• Geographical consolidation
6September 23, 2019
Future Growth Strategy
Preparing to take advantage of opportunities
Define growth strategy
Cash out existing assets
Buy out investment partners
Line up acquisition financing
Line up additional equity
7September 23, 2019
Financing Options
HUD/FHA Fannie/Freddie Banks Debt Funds
Longest Shorter Shortest
Long Term
Term Term Term
Lowest Low Highest
Speedy
Rates Leveraged Rates
High Non- Highly
Recourse
Leverage Recourse Leveraged
Non- Lending
Recourse
Recourse Limits
Flexible
Prepay
8September 23, 2019
Financing Options – Bridge Lending
Terms Uses
1-3 years +/- Acquisition
0%-100% recourse Turnaround
Fixed or floating, index Cash out refinance
driven Lease-up from construction
I/O, amortizing, other Construction and lease-up
Prepayment lockout/penalties
Deal
Experience
Turnaround story
Proven track record
Personal financial statements
Reimbursement
Purchase price
Timing
9September 23, 2019
Agency Lending Programs
Eligible properties include independent living, assisted living, and memory care
Minimum experience requirements for owners and operators.
Sponsor must currently own at least 5 facilities
Supplemental loans are available
Fixed and floating rate loans available
Financing for acquisition or refinance
Structured financing available
Non-recourse
Partial interest only options
Fannie Mae Freddie Mac
Minimum DSCR ranges from 1.30 to 1.45 Minimum DSCR ranges from 1.30 to
depending on facility type 1.45 depending on facility type, loan
Maximum LTV is 75% term/structure
5 to 10-year terms Maximum LTV is 75%
Streamlined rate lock available 5 to 10-year terms (up to 30 years for fixed-rate)
Supplemental loan availability Skilled nursing up to 20% of NOI
Credit Facility availability Early rate and index locks available
PGIM is a delegated underwriter for FNMA Lease-up/pre-stabilization loans available for
which streamlines process and timing new build products at 75% occupancy and up
10September 23, 2019
FHA Lending Programs
Permanent Construction
223a7 232
Refinance of existing FHA mortgage 40-year term plus the construction period
Expedited processing Combined construction and permanent loan
No LTV test Loan amount is lesser of
Term can be extended up to 12 years past - 1.45 DSCR
All mortgage
remaining term of existing FHA programs: - 75-80% LTV*
Can be used for skilled nursing, assisted
Proceeds for repairs or improvements - 90%living, and
of replacement cost
memory care facilities - 100% of rehabilitation costs plus a portion of as-is
Early rate lock available
Independent living is eligible on a limited
valuebasis
and existing debt/purchase price
223f Are non-recourse and fully assumable
241a
Acquisition or refinance Have flexible prepayment structures
Supplemental
with no yield
loan to existing FHA mortgage
Loan amount is lesser of maintenance Proceeds for furniture and equipment
- 1.45 DSCR Have fixed rate for the length
ofLoan
the mortgage
amount is lesser of:
- 80-90% LTV/LTC* Offer early rate lock options
- 90% of replacement cost
- 100% of existing debt plus transaction costs
including repairs - 90% of the difference between as-is and as
proposed value
No equity takeout - 1.45 DSCR as proposed (excluding DS on first
35-year term; fully amortizing mortgage)
- 90% of as proposed value less existing debt
No working capital required; typically no
operating deficit
*LTC/LTV limits determined by borrower type, loan purpose, and seasoning of debt being refinanced. 11September 23, 2019 New Construction Landscape – Boise NIC Inventory and Construction Report 2Q2019 Boise, ID 12
September 23, 2019 New Construction Landscape – Seattle NIC Inventory and Construction Report 2Q2019 Seattle, WA 13
September 23, 2019
HUD Replacement Facility
Case Study
- 112 bed; Operating Lease coming up for renewal
- 1960s vintage; 3-4 bed wards
Declining occupancy
- Small hallways / bathrooms
CMS Star Rating Decrease
- Research found residents leaving the zip code
- Current Operator could develop on new land
State approval to move the license
Agreement to be preferred provider for discharge planners with new facility
- 232 New Constuction financing for a replacement facility
- Modern building provided expense efficiencies and helped boost star ratings
- Private units increased occupancy and Q-mix
14September 23, 2019
Interest Rate Environment
LEAN 223(a)(7) LEAN 223(f)
Refinance existing HUD Low 3% rates
insured debt
Lower current rate to today's rates
Finance prepayment penalties
Increase loan amount up
to original mortgage amount
Extend the mortgage term
Idaho Rate # of HUD % of Washington Rate # of HUD % of
Insured Facilities Total Insured Facilities Total
SNF 3.79% 8 10.2% SNF 3.95% 48 21.6%
AL/MC 4.39% 11 AL/MC 3.58% 61
15September 23, 2019
Corley Audorff is a Director with PGIM Real Estate Finance. In this role, he is responsible for originating seniors housing and
multifamily loans on behalf of FHA, Fannie Mae and Freddie Mac. Corley sources commercial real estate loans throughout the
United States, with a focus on skilling nursing and assisted living facilities. Corley is located in Cumming, GA.
Prior to joining the company, Corley served as Managing Director at Monticello Asset Management, LLC, where he originated
and structured bridge loans for skilled nursing facilities, assisted living facilities, and market rate and affordable multifamily
housing. He also obtained MAP underwriting authority to submit loans to HUD’s Office of Multifamily Housing while serving
as Vice President at Oppenheimer Multifamily Housing & Healthcare Finance, Inc.
Corley has Bachelor of Arts, Master of Business Administration and Juris Doctor degrees, all from the University of Georgia.
16September 23, 2019
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