As the over-80 population grows at more than double the rate of the general population, lenders are seeing great opportunities for growth in seniors housing.
Berkeley Point Capital is no exception. Historically throughout the company’s 26 years, its specialty has been in the multifamily segment. The company services a $26 billion portfolio representing over 2,000 loans in 45 states and the District of Columbia. Since its inception, the company has provided over $1 billion of financing in the seniors housing sector. That number is about to grow.
Berkeley made several significant hires in the last six months in order to expand the business. In July 2014, Mark Van Kirk was selected to head up seniors housing and healthcare finance as well as FHA and affordable lending. In January 2015, the company added industry veteran Casey Moore with more than 20 years of dedicated seniors housing and healthcare lending experience. Moore, along with Doug Harper, will be co-directing Berkeley Point Capital’s Seniors Housing lending program and have nearly a decade of prior experience working together.
Seniors Housing Business spoke with Van Kirk about the company’s expanding role in the seniors housing market.
Seniors Housing Business: Berkeley Point Capital has provided over $1 billion of financing in the seniors housing sector. The company’s website says that it can provide financing for all types of seniors housing and care facilities. How much of the company’s lending activity today in seniors housing is refinancing, acquisition financing, construction financing or something other than that? Has that shifted over time?
Mark Van Kirk: Our activity is predominantly in the acquisition and refinance categories, but we do provide HUD 232 new construction financing. We have also successfully placed construction loans for clients with conventional lenders, where the HUD 232 program was not the client’s preferred capital solution. Additionally, we are one of the first lenders to execute Freddie Mac’s revolver product for seniors housing that allows for properties not fully stabilized to season within a structure that provides a non-recourse loan and attractive interest rate before being permanently financed.
SHB: Looking ahead to 2015, where does Berkeley Point Capital see the best opportunities for seniors housing?
Van Kirk: We are a national seniors housing and healthcare lender that has provided financing across the country from Portland, Ore., to Boston, Mass. With our 2014 merger with CCRE [Cantor Commercial Real Estate], we now have more than 300 colleagues across 15 offices throughout the country. That provides us considerable reach. In 2015, we expect to continue to see significant client requests to take out their existing new construction loan with cash-out agency permanent debt in order to lock in historically low interest rates.
SHB: What was the total dollar amount of loans closed by Berkeley Point Capital in the seniors housing space in 2014? What’s the outlook for 2015?
Van Kirk: Specific to 2014, volume was approximately $120 million and growing. We are seeing a continued increase in production activity, with December being our busiest month with three significant loan closings. By increasing our seniors housing team and leveraging our affiliated companies, including Newmark Grubb Knight Frank and ARA, we expect to materially increase seniors housing and healthcare production in 2015 and beyond.
SHB: What are the biggest differences between lending on conventional multifamily versus a seniors housing property?
Van Kirk: From a credit lending perspective, the debt-service coverage ratios are slightly higher and the loan-to-value parameters are typically slightly lower than multifamily due to the perceived risks of the operational component of seniors housing. Also, cap rates for seniors housing and healthcare products are generally higher than for multifamily.
SHB:Total domestic CMBS issuance in 2014 was about $83 billion, according to preliminary figures from the Commercial Real Estate Finance Council. Total CMBS issuance for all of 2013 was $80 billion. Is CMBS a significant source of debt financing in the seniors housing sector. Why or why not?
Van Kirk: Generally, CMBS issuance in seniors housing and healthcare remains light with few transactions. The CMBS opportunities in seniors housing are predominantly for independent living/senior apartments or for transactions of considerable size, although there were several very low leveraged issuances on skilled nursing product in 2014.
We are very well positioned to execute for our clients as these products become more viable in seniors housing and healthcare, too.
SHB: Berkeley Point Capital is the result of a combination of three family-owned regional companies, each of which was among the very early participants in the Fannie Mae, Freddie Mac and FHA multifamily financing programs. What were the names of those three companies? Where does the name Berkeley Point Capital come from?
Van Kirk: Our predecessor company, Berkshire Mortgage Finance, was founded in 1987. In January of 1997, we increased our production base and nearly doubled our servicing portfolio with the acquisition of the Patrician Financial Co., based in Bethesda, Md., and then in June of 2000 further expanded our national presence with the acquisition of Bankers Mutual headquartered in Irvine, Calif.
Deutsche Bank acquired the company in 2004. In 2012, entities affiliated with WL Ross & Co. LLC and Ranieri Real Estate Partners LP acquired the company. At that point the company was renamed Berkeley Point Capital LLC. Cantor Commercial Real Estate acquired Berkeley Point Capital LLC in 2014.
SHB: Is there anything about the seniors housing lending business that keeps you up at night, or do you sleep tight?
Van Kirk: While there are certainly aspects and trends of our business that we watch very closely, such as pockets of new development and interest rates, nothing causes us to lose sleep at the moment as our industry fundamentals are quite good and our portfolio loan performance is excellent. If anything, we are focused 24/7 on making certain we provide exceptional customer service to our clients, ranging from originations through servicing of our loans.
SHB: Is there a notable deal that Berkeley Point Capital recently closed that reinforces any of the points we’ve discussed?
Van Kirk: The last loan we closed on Dec. 30 is a great example. Our client had quickly leased up and stabilized a memory care community that opened in early 2013. We were able to provide a cash-out Fannie Mae refinancing for this recently built community.
At the same time — and in order to meet the client’s timing request — we were able to execute on this financing in less than 45 days, demonstrating both our firm’s and Fannie Mae’s ability to execute.