Credit standards among senior housing lenders remained essentially unchanged during the second half of 2024, with most lenders maintaining their approach from the first half of the year, while some loosened their requirements amid three consecutive interest rate cuts starting in September.
Lenders who participated in NIC Analytics’ lending trends report for the second half of 2024, noted increased competition, thinner spreads and a greater appetite for growing loan balances, especially from banks.
Many lenders maintained a focus on existing relationships during the latter half of the year, but there was evidence of renewed deal flow and selective onboarding of new clients. This was particularly true for senior housing stabilized assets, said NIC Analytics.
“Improved operating performance and rising occupancy rates supported lending confidence, although debt-service constraints remained a limiting factor amid persistent staffing challenges and cost pressures,” said the report. “Overall, the fall 2024 interest rate cuts helped restore cautious optimism and contributed to a more constructive lending environment heading into year-end.”
Following the momentum that began early in 2024, new permanent loan volumes remained relatively strong through the second half. Senior housing volumes reached more than $2.8 billion, the highest level since 2020. Nursing care lending volumes reached nearly $2.8 billion during the second half, above historical norms.
Bridge and mini-perm loan activity remained relatively low for senior housing in 2H 2024, with volumes still well below historical norms. After reaching $290 million in the third quarter, senior housing bridge loan volume fell to $200 million in the fourth quarter, highlighting the sector’s ongoing caution around short-term financing, said the report.
Meanwhile, nursing care saw a notable shift, with fourth quarter bridge and mini-perm loan volume surging to $619 million. This surge reflects renewed lender interest in select skilled nursing opportunities, buoyed by improved Medicaid rates and continued operational stabilization, said NIC Analytics.
Construction loan activity remained subdued in the second half, with senior housing volumes continuing to trend below historical norms, the report said. Nursing care construction lending, however, showed its first sign of life in more than seven quarters, with $38 million in volume recorded during the fourth quarter.
“While activity remained very limited, even this small uptick signals a marginal thaw in what has long been a stagnant development pipeline, although it remains consistent with pre-2020 levels where new construction was historically minimal,” said the report.
Delinquency rates for senior housing continued a downward trajectory in 2H 2024, marking five consecutive quarters of improvement, while nursing care delinquency rates remained relatively elevated through much of the year but showed a meaningful decline in the fourth quarter, the report said.
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