Hudson Realty Capital projects up to $400 million in bridge loans through new senior living platform
Hudson Realty Capital has launched a bridging loan platform focused on senior housing and skilled nursing properties. The New York-based company plans to lend between $300 million and $400 million through this platform over the next 18 to 24 months.
The platform has been in the works for “some time” and follows Hudson Realty Capital’s first senior housing transaction last fall, chief executive Justin Elshire told Senior Housing News.
The deal announced in October 2021 involved two bridge loans totaling $37.75 million, guaranteed by two senior and memory care communities owned by Columbia Pacific Advisors.
Since its inception in 2003, Hudson Realty Capital has managed investments totaling more than $4.5 billion in aggregate transaction value across a variety of sectors, including multifamily, office, mixed-use and hospitality.
With the bridge platform, Hudson Realty Capital is targeting loans of $15 million to $50 million with terms up to 36 months and a maximum loan-to-value ratio of 80%. The bridge loans will be available to qualified borrowers who are targeting conventional or FHA/HUD permanent financing, with three-year, interest-only terms.
The company has no mandate in terms of the amount of capital to lend to skilled nursing over the privacy of older people, Elshire said. However, he estimates that the current pipeline is roughly 70% assisted living and memory care and 30% skilled nursing.
Hudson Realty Capital has received applications for independent living, and these are generally new construction projects that have opened in the last year and are not meeting rental forecasts due to market volatility related to Covid and other factors, Elshire said.
Elshire has seen a slowdown in uptake rates following the move-in boom that occurred when Covid-19 vaccines and boosters were first rolled out; rental projections calculated during this occupancy boom were sometimes too optimistic.
But other market trends are also emerging that make bridge financing attractive or necessary as communities strive to increase occupancy, he said. For example, some communities experience some instability as they transition from low-severity level residents to higher-level residents. Additionally, many carriers have aggressively raised rates to help offset dramatic increases in labor, insurance, and other operating costs. This may have resulted in a strategic disruption of the occupation.
“The reality is there’s a great need for the bridge product,” Elshire said.
When it comes to what Hudson Realty Capital is looking for in a potential borrower, the company focuses on quality operators and sponsors with a track record of success.
“We want to know who the operator is, I want to stay in touch with the sponsor [and determine] is the facility well maintained, are the residents supported, are the employees supported, is the sponsor committed to the industry,” Elshire said.
And he is confident that the pieces are in place to make the bridging lending platform a success.
“It really comes down to trust and certainty of execution, as well as proof of concept, and we have those things in place,” he said.
He also touts Hudson’s willingness and ability to customize loans to the unique needs of owners and operators.
“We’re nimble, we’re small, we’re growing, which inherently allows us to customize the product,” he said.