Turnaround afoot The occupancy rate nationally for skilled nursing increased 59 basis points from July to August to reach 82.3 percent, according to NIC MAP Vision. Occupancy is up 142 basis points from August 2022 as it contin-ues to recover since the pandemic low of 75 percent set in January 2021. Meanwhile, the assisted living occupancy rate within the 31 NIC MAP Primary Markets rose 90 basis points between the second and third quarter of this year to reach 82.6 percent. The improving real estate fundamentals have given a big boost to the 232/223(f) loan program, notes Gehl. The 223(f) program offers non-recourse, fixed-rate, long-term financing for the acquisition or refinanc-ing of existing senior living and healthcare facilities. Volume in the 223(f) program during FY 2023 totaled nearly $2.7 bil-lion compared with $1.85 billion in FY 2022, a 46 percent increase. The number of 223(f) loans rose from 148 to 175 year over year. “The market is recovering, as exemplified by the 223(f) volume mov-ing in the right direction. Total volume has not yet returned to 2019 lev-els, but we are getting closer. We are seeing occupancies ticking upward, [Medicaid] reimbursement rates increasing in many states, and labor challenges abating,” explains Gehl. “We expect HUD lending in this sector to steadily keep increasing in proportion to improvements in market conditions until we make a full comeback to pre-pandemic levels. That’s not likely to occur in fiscal year 2024, but we’re hopeful for fiscal year 2025,” adds Gehl. HUD Section 232 Loan Production for FY 2023 Application Type 223(a)(7) 223(f) New Construction & Other Totals Total Closing Dollars $147,656,900 $2,694,885,105 $26,074,800 $2,868,616,805 Dollars % of Total 5.1% 93.9% 0.9% 100% Loan Count 20 175 1 196 Average Mortgage Amount $7,382,845 $15,399,343 $26,074,800 $14,635,800 Source: HUD Office of Residential Care Facilities VIUM’s Kennedy, who previously worked for Lancaster Pollard as a senior managing director.. “Internally we coined fiscal year 2023 as our year of ‘working in the dark’ for the success we would see in fiscal year 2024. That has now started to come to fruition, as we secured 14 HUD 232/223(f) commit-ments in the final quarter of fiscal year 2023, setting up a fiscal year 2024 where we plan to be the leading HUD healthcare lender in the country.” What’s next? ‘Working in the dark’ VIUM Capital, which launched in 2020, closed eight loans totaling $114 million in FY 2023, a substantial decrease from $352 million in deal volume and 30 loans closed in FY 2022. Still, VIUM was the ninth larg-est HUD loan producer in FY 2023. The majority of loans originated by VIUM in FY 2022 were a combination of (a)(7) loans and 223(f) loans. “With the increase in rates and our relatively new bridge loan book, we knew fiscal year 2023 would be a year of allowing our bridge book to further mature and the beginning of a continued onslaught of HUD 232/223(f) application submissions to pay off those bridge loans,” says Private-pay seniors housing is still approximately a year away from reaching pre-pandemic net operating income levels because it will take time for occupancies and rents to catch up with inflationary pressures on the expense side, says Kennedy. Skilled nursing is closer to pre-pandemic net operating income levels for two reasons, explains Kennedy. First, it is more of a need-based prod-uct. Second, Medicaid rebasing (an adjustment in the reimbursement rate) has kicked in across many states to capture the increased costs incurred by skilled nursing facilities during COVID. “Given the above, the lack of permanent financing options for skilled nursing facilities and HUD’s still relatively favorable cost of capital (fixed rates of approximately 6 percent) and favorable loan terms (a 35-year amortization and non-recourse debt), we expect HUD’s fiscal year 2024 to potentially return to pre-pandemic deal volume approach-ing $4 billion,” says Kennedy. Give your senior care Superheroes more Superpowers In FORM I A Mobile Nurse Call is your ultimate Operational Productivity Platform. ™ One innovative platform. So many opportunities… to elevate care, improve operational efficiency, increase staff & resident satisfaction and generate measurable ROI. It’s a gamechanger for residents, family, your staff and you. Time-stamped Nurse Call Accountability Staff Text/Chat Efficiency NEW 2-Way Resident Voice Connectivity NEW Video Doorbell Security Taskman TM Task Mgt. Scheduling Wander Management Protection Empower your Senior Care Superheroes. Call 1-800-558-8957, email sales@cornell.com or visit cornell.com October-November 2023 Seniors Housing Business www.seniorshousingbusiness.com 11
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