Greystone has closed a $451.6 million healthcare collateralized loan obligation, marking what the company describes as the industry’s fourth-ever CRE CLO composed entirely of healthcare assets. The pool includes 12 whole loans and seven loan participations backed by 46 properties across 13 states. The portfolio consists of 65.2% skilled nursing, 25% memory care or independent living and 9.8% properties combining skilled nursing with assisted living, memory care or independent living.
Ross Gusler, head of finance and capital markets at Greystone, told GlobeSt.com that the deal reflects growing investor confidence in the company’s healthcare lending platform.
“Our first deal had only a small handful of investors, and with each successive issuance, our investor base has continued to grow and diversify,” Gusler says.
“Our first issuance was about seven years ago. [Investors] now have seven years of seeing how we perform with our deals, what our loans look like, what the repayment rate is like. Our goal is to continue to do right by investors and to keep growing our brand in the market.”
Greystone remains the country’s largest FHA HUD lender, according to Gusler, and HUD loans continue to be the dominant source of financing for skilled nursing properties. Most of Greystone’s healthcare loans fall within that category. The healthcare-focused CLOs generally support transitional scenarios, such as borrowers acquiring new properties or refinancing existing loans ahead of a permanent FHA HUD refinancing.
“It’s a combination of either acquisitions by borrowers or refinancing of prior loans ahead of working on an application with Greystone for an FHA HUD refinancing,” Gusler says, noting a roughly 50-50 split between acquisitions and refinancings.
The HUD application process can take nine to twelve months and requires extensive documentation, including the trailing 12 months of operating cash flow. Bridge loans, Gusler adds, help sponsors manage financing needs during that period.
Current market conditions have strengthened the case for healthcare CLOs, Gusler says, pointing to limited new construction of senior care facilities due to rising costs. The resulting supply constraints have boosted valuations for existing properties, while demographic trends continue to drive long-term demand for skilled nursing and senior living services.
One ongoing concern, Gusler notes, is uncertainty around potential changes to Medicaid and Medicare policy and how such shifts might affect facility cash flows. While not a public policy expert, he says that potential cuts are largely tied to changing qualification rules for able-bodied working-age adults, not residents of senior housing facilities.
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