NIC Analytics released the 4Q 2023 NIC Lending Trends Report. The complimentary quarterly report includes data trends over seven years for senior housing and nursing care construction loans, mini-perm/bridge loans, and permanent loans from 3Q 2016 through 4Q 2023. The survey reflects the contributions of 17 lenders.

For the sample of lenders in the NIC Lending Trends Report in the fourth quarter of 2023, government-related sources accounted for 72% of total loan balances, while banks represented 13%, and other lenders comprised 15%.

Market Forces Recap

At its May meeting, the FOMC voted unanimously to maintain the fed funds rate in the target range of 5.25%-5.5% for the sixth consecutive meeting.

The FOMC comments highlighted that risks to achieving the Fed’s employment and inflation goals have moved toward a better balance over the past year. However, the Fed reiterated its stance on rate cuts, stating that it does not expect to cut rates until it has greater confidence that inflation is moving sustainably toward 2%.

Looking ahead: In May, the Fed stated that starting June 1, 2024, the Fed will slow the pace of quantitative tightening, reducing the cap on the amount of treasury securities rolling off the balance sheet. While recent months have delivered mixed results on key inflation indicators, many market expectations include a potential rate cut by late 2024 or early 2025.

Takeaways from the 4Q 2023 NIC Lending Trends Report

• Permanent financing for senior housing and nursing care remained inconsistent across lender types, reflecting ongoing challenges in the lending environment, including tighter lending standards, wider spreads, and lower loan proceeds.
• Mini-perm/bridge debt issuance for senior housing showed a slight uptick but remained near the time series low.
• New construction loan closings for senior housing saw a slight uptick from the previous quarter, which had somewhat non-existent activity. However, the volume remained well below historical standards.
• Related to construction activity, analysis in the previously released NIC SHARK report showed indications of increased activity in the Mid-Atlantic region, with construction figures showing positive growth in the fourth quarter of 2023 compared to 2019 levels.
• Fourth quarter survey data reveals a reduced total balance of delinquent loans for senior housing, down by 13% from the time series high recorded in the third quarter of 2023. Delinquencies as a share of total loans also decreased among contributors to 4.1% for senior housing, down from 4.4% in the third quarter of 2023. Conversely, the delinquency rate for nursing care rose to a time series high of 2.1% from 0.6% in the third quarter.

• Total loan balances for senior housing decreased, on a same-store quarter-over-quarter basis. This decline may reflect a combination of factors, including market conditions, lender caution, some loans coming off the books, and possibly distressed properties.

From the Field: 4Q 2023 Survey Comments

As part of the survey process for the NIC Lending Trends report, we ask data contributors questions about the lending environment for senior housing and nursing care. The following summarizes responses related to changing capital market conditions, lending patterns, and any notable trends they are observing in the market.

The lending market for senior housing and nursing care in the fourth quarter of 2023 continued to show improving T3 NOI over T12 NOI, movement in the positive direction, but investment opportunities remain suppressed due to higher interest rates and limited investment sales.

Some lenders maintained their existing lending positions set forth in the first half of 2023, while others expressed optimism about potentially loosening requirements in 2024.

Many contributors reported primarily focusing on current relationships and stabilized properties, as rising rates affected credit quality, requiring lower requested loan amounts to meet the minimum DSCR. However, many contributors reported that there was an increasing pace of applications underwritten and approved throughout the fourth quarter. This suggests that while challenges exist, there is a continued interest in lending to the senior housing and nursing care sectors, with lenders adjusting strategies to navigate the current market conditions.

Download the complimentary 4Q 2023 NIC Lending Trends Report for full details on these and other trends in senior housing and skilled nursing lending. 

Note: These data are not to be interpreted as a census of all senior housing and skilled nursing lending activity in the U.S., but rather reflect lending activity from participants included in the survey sample only. 

Interested in participating? The NIC Lending Trends Report helps NIC Analytics deliver on NIC’s mission to enable access and choice by further enhancing transparency of capital market trends in the senior housing and care sectors. We very much appreciate our data contributors. This report would not be possible without them. 

If you would like to participate and contribute your data, please contact us at analytics@nic.org. As a courtesy for providing data, data contributors receive this report early before publication on the website. The information provided as part of the survey will be kept strictly confidential. Individual answers will be combined with the answers of all other respondents. Data acquired from this survey will only be reported in the aggregate, and therefore, the resulting aggregated data will not be attributed to you or your company upon distribution. 

This article is the third in a series showcasing parent/child duos across the senior housing and care industry. My conversation with Patricia Will, Belmont Village Senior Living, and her son, Aron Will, CBRE Capital Markets, offers insights into why this is becoming a common trend. 

Tell us about your background. 

Patricia: In the process of trying to find care for my mother-in-law with Alzheimer’s, I realized there simply wasn’t a place with the capabilities to effectively care for her. 

My background is in commercial real estate, specifically as a developer for medical properties. My acumen as a developer and my needs as a daughter-in-law converged at the founding of Belmont Village. I knew we could make a better building, but we needed to figure out how to bring it to life. We wanted to create a place that would foster a sense of independence in each of our residents—a place where getting older wasn’t the end of the road, but rather a new opportunity. 

We developed and expanded our relationships in the medical community and schools of hospitality to merge the best of both worlds. We took all that we had learned—from seniors, families, and gerontology experts—and built a community around them. Today, Belmont Village has expanded to 35 communities in eight states and Mexico City—thirty-three of which were developed and are still owned by us in joint ventures. 

As a mom doing all this while my children, Aron and his younger brother Adam, were growing up, I never really knew how it would affect them. Aron got dragged to more negotiations, job sites, and eventually building openings than he cared to at the time.  

Aron: I soaked it up through osmosis. I started with the predecessor to CBRE Capital Markets 17 years ago. It was one of the largest mortgage banking and real estate investment banking companies in the country. Fast forward to 2009 and I approached our leadership team about starting a dedicated seniors housing finance practice on the mortgage banking side.  

In 2010, after the executive leadership team at my company defected, CBRE corporate leaders gave me the opportunity to run the seniors housing finance business that I helped create. Even though it was atypical to have someone in their 20s at that level position, they were confident in my commitment to the task knowing that I’d grown up in the industry and had already begun to scale the business. Within three years, we grew to become the largest combined mortgage banking and agency finance practice in the industry—a designation we’ve maintained to this day. Today, I have a broader responsibility for the practice group including investment sales and equity capital markets. Additionally, I’ve been deeply involved in our two debt platforms and I manage 15 professionals nationally across our three senior housing verticals. 

Patricia: Adam works at Belmont as Vice President of Communications. I never imagined that both my sons would be in some phase of the business!  

Where do you see the industry headed for the next generation?  

Patricia: I honestly can’t think of a business with a better demand profile over the next 20-30 years. I’m very bullish on the space. 

In the major markets like coastal California and South Florida, the barriers to building will constrain supply relative to burgeoning demand. For example, in coastal California it takes on average anywhere from three to eight years for us to entitle a site. But these are large markets with tremendous affluence. This means that if you know how to create supply and bring it alive for the coming generation, you have a great business. 

Multiple recessions have also taught us that demand for our product is not cyclical. This is why I think we’re a great space for young people to pursue careers. 

How do you find the balance between what’s worked for so long and adapting to the ever-changing world?  

Aron: I’m an old soul. For example, I’m a huge proponent of working in the office. You can’t beat the collaboration that happens when you pull a colleague into your office to listen in on a call ad hoc. 

There’s a dearth of high-quality personnel in our industry and a glaring age gap. I think there’s a tremendous opportunity for the next generation, which is why through my involvement in NIC, I helped grow a university internship program placing best in class BBAs and MBAs from top tier schools into the industry. Why should hospitality have fabulous recruiting and a multitude of different programs with very different curriculum and a strategic recruiting methodology, and not the seniors housing sector? 

As an asset class, we’re large enough now that young people should make a very conscious decision to seek out a career in senior living. We’re going to come out of this stronger than a lot of other asset classes and the next generations entrance into the sector should be deliberate and not by happen stance.  

Patricia: So many entrepreneurs in our industry groom their children to be their successors. Having grown up in a family business, I never dreamt of making that a requirement—my sons can and do choose what they want to do. But you need to have a succession plan.   

Many entrepreneurs make the terrible mistake of sticking around too long, particularly in a business that’s scaled and matured. At that point, there’s a different kind of leader required—one who’s more process driven. Hard as it is, we entrepreneurs need to know when to cede the reins. I’m no longer in the best position to administer the business, but I love to be the spark plug to spur investment and innovation. 

How do you keep home and work separated? 

Aron: Lately, I’ve been very conscientious and deliberate about not monopolizing conversations. We didn’t start that way. We conversed about work probably to a point where it was an annoyance to both my wife and dad. Whether it’s a specific transaction or news of what’s going on in the industry, there’s a lot to talk about. We’ll break away from the group for those discussions.  

Patricia: To add to that, the advent of grandchildren is a great antidote to talking about anything that doesn’t concern them because basically they take over and we happily oblige. Aron and I have learned that you can steal a few moments to collaborate early in the morning as opposed to taking over family time at dinner.   

*Interviews edited for length 

NIC’s Strategic Plan included objectives to “’expand the tent’ into five Focus Areas – selected by the NIC Board because of their increasing impact on the senior housing and care industry and the benefit of integrating subject matter expertise into the NIC ecosystem of offerings.  

Focus Area Committees (FACs) were created to support these efforts and include subject matter experts and industry experts in the five Focus Areas who will make recommendations for including the Focus Area in conference sessions; research, data, and analytics; and educational and training programs. 

The Active Adult Committee, led by Chair Mitch Brown and Vice Chair Jane Arthur-Roslovic, will explore the extension of senior living to this emerging product type.  

The AgeTech Committee, led by Chair Michael Kurliand and Vice Chair Abby Levy, will explore technology to facilitate senior living and senior housing operations. NIC’s focus is on technology improving operating and health outcomes.  

The Capital for Operations Committee, led by Chair Fee Stubblefield and Vice Chair Madisen Medley, will focus on any capital (debt or equity) use in senior housing that invests in or lends to an owner, operator, and/or management company, and is not secured by real estate.  

The Middle Market Committee, led by Chair Matt Ruark and Vice Chair Sophia Lukas, examines housing and care options for older Americans with too much income to qualify for government subsidies, but inadequate income for traditional senior housing and care. NIC will showcase successful middle market models.  

The Partnering for Health Committee, led by Chair Jim Lydiard and Vice Chair Joelle Poe, focuses on the intersection of health care and senior housing and care, and will examine value-based care and wellness in senior living.  

FAC volunteers recently kicked off their important work together in Annapolis, MD with a networking reception and dinner, a general session on NIC’s strategic objectives, and individual committee meetings to begin drafting their recommendations.   

The FAC volunteers have already impacted NIC’s future activities to advance our mission. NIC stakeholders can look forward to quality content, research, and educational offerings in each of the five Focus Areas soon. The work of each of the five Focus Areas will be highlighted in upcoming NIC Insider articles – stay tuned! 

Full committee member lists are available on NIC.org.  

The White House recently announced the finalization of the nursing home minimum staffing rule. This will impact all skilled nursing properties that receive federal funding through Medicare and Medicaid. The proposed staffing rule has been the topic of many industry discussions since the White House released a comprehensive nursing home reform package in 2022. After the 2022 announcement, the Centers for Medicare & Medicaid Services (CMS) hired a consulting firm to study and determine the efficacy of implementing various staffing thresholds. CMS received nearly 50,000 comments on the proposed rule ranging from those that strongly supported the rule to those expressing opposition to the new standards. 

The final rule adopted standards that are largely similar to the proposed rule. The following is a summary of the standards, which will be rolled out across multiple phases. 

The timing for meeting the interim and final standards differs for urban and rural facilities. The interim requirements must be met by May 2026 for urban facilities and May 2027 for rural facilities, while the final requirements must be met by May 2027 for urban facilities and May 2028 for rural facilities. 

Highlights of the Rule 

• Once fully implemented, nursing facilities will be required to meet minimum nurse staffing levels of 3.48 hours per resident day (HPRD), including 0.55 registered nurse (RN) and 2.45 nurse aide HPRD. 
• CMS indicated that facilities may utilize a mix of nurse staff, including RNs, LPNs/LVNs, or nurse aides, to meet this standard. 
• By May 2027, the final rule requires nursing facilities to have an RN on duty 24/7 and provide at least 3.48 HPRD of total nurse staffing hours irrespective of staff type. This initial deadline excludes the more specific RN and nurse aide requirements that will take effect once the rule is fully implemented. 
• The final rule also includes new reporting and assessment requirements as well as a detailed process by which facilities may qualify for an exemption from the minimum staffing provisions. The final rule also indicates that CMS will release additional details later this year on how the $75 million investment in a nursing home staffing campaign will be structured. 

KFF performed an analysis and estimates that only 19% of nursing facilities would meet the minimum HPRD staffing standards under full implementation of the final rule with their current staffing levels and nearly 60% of facilities would meet the interim requirement of an overall requirement of 3.48 HPRD. 

Nursing homes may qualify for exemptions under certain conditions according to CMS. For example, if the property is located in an area where the supply of RN, NA, or total nurse staff is not sufficient to meet area needs as evidenced by the applicable provider-to-population ratio for nursing workforce. 

Note that the nursing home industry is expected to challenge the ruling. The industry is currently exploring various options including legal action. Additionally, several Senators and other officials have publicly expressed their concerns with the mandate and encouraged CMS and the current administration to reconsider. 

Readers can find detailed information on the CMS Fact Sheet here. 

Key Takeaways 

• Occupied penetration rates in senior housing are changing across markets, likely due to shifts in demand dynamics and migration patterns. 
• There is a trend of demand and growth driven by the continuum of care, which could lead to improvements in occupied penetration rates for needs-based segments in the future. 
• Seven markets are reporting their highest occupied penetration rates in 2023. 

This analysis, conducted by NIC Analytics, explores the trends and variations in occupied penetration rates since 2017 across senior housing segments and markets within the 31 NIC MAP Primary Markets. It sets the foundation for an upcoming in-depth research segment within the NIC SHARK series. For purposes of this analysis, occupied penetration rates are defined as occupied senior living units relative to households aged 75+. 

Occupied penetration rates in senior housing are changing across markets, likely due to shifts in demand dynamics and migration patterns. However, the overall penetration rate at the national level, known for its stability, remains a challenging puzzle to solve. 

The exhibit below depicts the occupied penetration rates among households aged 75+ for senior housing units (independent living, assisted living, and memory care) across the 31 NIC MAP Primary Markets from 2017 to 2023. 

Notably, there was a general decrease in occupied penetration rates across all unit types in 2020. By 2023, the occupied penetration rates for independent living fell below the 2017 levels. In contrast, the rates for assisted living remained stable, matching the 2017 levels, while the rates for memory care experienced a positive increase of 0.2pps, representing a 17% improvement over the last six years, from 1.2% to 1.4%.  

In the last three years, we have observed a pattern where dynamics are shifting not only across markets but also among unit types. For instance, in terms of occupancy recovery and demand, memory care and assisted living units showed the earliest signs of recovery, despite having experienced the largest demand contraction, whereas independent living is lagging behind despite a relatively smaller demand contraction.  

This observation prompts us to consider the continuum of care and its influence. It appears that there may be a trend of demand and growth driven by the continuum of care.  

One plausible explanation for this trend could be tied to move-ins. In assisted living or memory care, residents typically fall into two categories: (1) those transitioning from independent living or assisted living, and (2) those coming from non-congregate settings. However, move-ins in independent living primarily originate from one source – non-congregate settings. 

Additionally, when considering penetration rates—a metric that generally reflects preferences among older adults—distinguishing between those who prefer aging in a community versus those who opt for aging in place, assisted living and memory care have a distinct advantage. They are both considered needs-based, and services are often required.  

The assisted living and memory care segments, being needs-based, already have a consumer pool of millions who have chosen to move to a senior housing setting and are currently part of the continuum of care. This existing consumer base is likely to contribute to improvements in occupied penetration rates for these segments in the future. 

Occupied Penetration Rates in 2023: Market Trends and Variations 

The exhibit below shows the 2023 senior housing occupied penetration rates and the change in percentage points from 2017 levels across all 31 NIC MAP Primary Markets. 

There are notable variations in terms of these rates, with seven markets reporting the highest occupied penetration rates in 2023 since 2017. These markets include Minneapolis (21.6%), Kansas City (14.4%), Phoenix (12.1%), Washington, DC (11.1%), Detroit (10.1%), Cleveland (10.1%), and New York (4.3%). 

Among the biggest gainers from 2017 to 2023 are Minneapolis, Kansas City, and Phoenix. Conversely, markets such as Portland, OR, Seattle, Baltimore, and San Jose experienced declines in occupied penetration rates between one and two percentage points.  

The top markets with 2023 occupied penetration rates above the Primary Markets’ average of 9.3% include Minneapolis (21.6%), Portland (19.2%), Seattle (14.6%), Kansas City (14.4%), Denver (13.5%), and Dallas (13.3%). On the other hand, 10 markets fall below the Primary Markets’ average, with New York (4.3%) and Las Vegas (4.2%) ranking at the bottom. 

These variations in occupied penetration rates may result from a variety of factors, including specific cultural differences in certain markets i.e., cultural views and financial support towards aging in place vs. aging in a community, which could be challenging to influence, or they could be tied to factors that are easier to impact. The upcoming research segment report will explore a multitude of factors and dive into the underlying drivers of high versus low senior housing occupied penetration rates in order to uncover hidden patterns and correlations at the market level and answer questions like: 

• Why has the overall occupied penetration rate not shown notable changes over time?  
• What factors contribute to higher occupied penetration rates in some markets and lower rates in others? 
• Are there specific strategies that the senior housing sector can employ to positively impact occupied penetration rates?