Loan volume was up in fiscal year 2019 and the average loan size of $13 million set a new record for the FHA 232 mortgage insurance program, which provides financing for senior housing and care properties.
Total loan volume for FY 2019 reached $3.7 billion, which was an increase from $3.6 billion a year prior, according to recently released data from the U.S. Department of Housing & Urban Development (HUD).
However, there were fewer loans closed overall on a year-over-year basis, with 317 closed in 2018 and 288 closed in 2019. That might be due in part to delays caused by the 35-day government shutdown that occurred between December 2018 and January 2019.
The 232 program offers financing to both licensed skilled nursing facilities and licensed assisted living communities, for the purchase, refinance, new construction, or substantial rehabilitation of a project.
Assisted living volume was down in FY 2019, dropping to $604 million from the previous year’s $800 million, HHC Finance Chief Investment Officer Michael Gehl told Senior Housing News.
HHC was one of the most active 232 lenders last year, closing 26 loans.
With 50 loans, Lancaster Pollard, a division of ORIX Real Estate Capital, was the top lender. Its par amount of $903 million set a new record for the 232 program.
“From a volume perspective, our market share has been consistently strong, but we were incredibly proud to be well over 20% this year,” Lancaster Pollard President Kass Matt told SHN.
About one-third of Lancaster Pollard’s 232 business was for assisted living projects, he said.
He points to a few factors driving the strong numbers for his firm and for the 232 program as a whole. One is the interest rate environment, given that rates have remained low and the Federal Reserve has recently moved to cut the benchmark rate. HUD rates remain around 3%.
Another driver of 2019 loan volume: There were plentiful mergers and acquisitions in 2017 and 2018, leading many organizations to seek permanent financing through a HUD-backed loan last year.
In addition to Lancaster Pollard, other firms that closed five or more assisted living 232 loans last year included Jones Lang LaSalle and Keybank. Overall, 21 lenders closed loans last year. The complete list can be found on the HUD website.
Going into 2020, both Lancaster Pollard and HHC are keeping an eye on senior housing projects in opportunity zones. HUD recently announced incentives for opportunity zone projects to tap 232 financing.
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