Healthcare Borrowers Obtain Loans Despite Volatile Market Swings

The economic experts aren't predicting an immediate end to the current cycle of denial, hope and panic that has been causing interest rates, stock prices, commodity prices and exchange rates to fluctuate wildly since the onset of the credit crisis last summer.

"At this point, after all the lumps the markets have been taking, the recent projection by the International Monetary Fund (IMF) that the U.S. economy will tip into a modest recession this year followed by a gradual recovery in 2009 sounds almost upbeat," senior housing/healthcare funding expert Jeffrey A. Davis observes.

Davis is chairman of Cambridge Realty Capital Companies, one of the nation's leading senior housing/healthcare lenders with more than $2.75 billion in 300 closed transactions since the mid-1990s. The IMF prediction, he notes, contrasts sharply with the Bush administration's much more optimistic forecast earlier this year, which projected a 2.7% growth rate for 2008 followed by 3.1% growth in 2009.

"The IMF expects the U.S. growth rate to shrink to 0.5% in 2008 and 0.6% in 2009. Given the bleak outlook for housing, to most observers the IMF projection probably seems closer to the mark," Davis said.

He points out that the IMF's baseline projection that U.S. home prices could decline between 14% and 22% in 2007 and 2008 is unprecedented for the U.S. but not elsewhere in the world.

While most segments of the senior housing/healthcare industry are more 'recession proof' than other industries, Davis says there is now some concern that the housing slump is a factor in the lower occupancy levels for independent living communities reported by the National Investment Center for the Seniors Housing & Care Industry (NIC). Mean occupancy was up slightly during the third quarter of 2007 for assisted living, skilled nursing and continuing care retirement communities but down slightly, from 93% to 91%, for independent living communities.

"But, overall, the industry appears to be in good shape to ride out even a protracted economic downturn," Davis believes.

He points out that the Federal Reserve Board lowered short-term interest rates again in March by three-quarters of a percentage point to 2.5%. And the one-month LIBOR Index rate has declined to 2.70% from 5.32% at this time last year.

"Primarily because of the current liquidity crisis, commercial mortgage loans hardly reflect declines of this magnitude. But funds are available for viable projects, with FHA-insured HUD loans especially attractive at this time," he said.

Privately owned since its founding in 1983 as a real estate investment banker specializing in commercial real estate properties, Cambridge emerged in the 1990s as one of the nation's leading senior housing and healthcare debt and equity capital providers, closing more than 300 such transactions totaling more than $2.75 billion since then.

The company is one of the nation's leading HUD 232 FHA/MAP-approved lenders and also has an integrated debt/equity financing strategy that includes direct property acquisitions and joint ventures; sale/leasebacks for clients; conventional and mezzanine debt financing; and acquisition of distressed debt. Additionally, Cambridge offers a wide array of conventional lending options for senior housing/healthcare owners, including permanent construction and interim loans on either a floating or variable rate basis.

Link: http://www.abfjournal.com/story.asp?id=22889