By Jeff Shaw
BOK Financial Corp. likes to keep its business local.
The Tulsa, Okla.-based lender doesn’t often use its corporate name to market the company, preferring instead to use smaller subsidiaries to drive business at a local, state or regional level. Brad Vincent, the company’s executive vice president and director of healthcare banking, says that this is how banking should be done.
“We believe healthcare is delivered on a regional basis and that banking should be delivered on a local basis as well,” says Vincent. “We’re solutions providers based on the unique needs of our unique clients.”
BOKF, which entered the seniors housing market in 1997, currently has over $1 billion in active seniors housing loans.
Until 2011, BOKF only originated loans for acquisitions, repositioning and refinancing. Steve LeBlanc joined the company that year as senior vice president of the seniors housing group to lead a new team assembled to originate construction loans in the seniors housing space. Unlike Vincent, LeBlanc’s team is embedded in the commercial real estate group reporting to Dan Easley, executive vice president and director of commercial real estate Lending. The launch came just in time for the construction boom the industry is currently experiencing.
Seniors Housing Business recently spoke with Vincent about BOKF’s position in the national market, as well as its focus on lending at a local level.
Seniors Housing Business: Do most of your deals occur in your home region of the South and Midwest? Do you try to remain local, or do you have expansion plans nationally?
Brad Vincent: We may be the biggest bank no one’s ever heard of. We use a different name in every market. In Oklahoma we’re Bank of Oklahoma; in Texas we’re Bank of Texas. In our healthcare banking group, we have professionals in eight different cities across our footprint. That’s our commitment to local delivery and relationship banking.
Having said that, however, we’ve grown as our customers have grown and followed customers from one state to another. Today we have relationships and loan transactions in over half the states across the country, and expect that to expand as we continue to focus on the seniors housing business.
SHB: How much lending has BOKF done in seniors housing, and how is that divided up between independent living, assisted living, memory care and skilled nursing?
Vincent: We have active loans in the seniors housing space totaling well over $1 billion. Skilled nursing currently accounts for about half of our total volume. The vast majority of the rest of our commitments are in assisted living and memory care. Independent living represents a very small portion of our portfolio.
SHB: Why do you lend so much in the skilled nursing space and so little in independent living?
Vincent: We look at the industry as a healthcare industry. Independent living, in its truest form, does not include a significant healthcare component. We’re all aware of home healthcare and other ways of finding care in an independent living environment, but we’re predominantly focused on communities that provide healthcare to their clientele.
Healthcare is an area where we have expertise that has been developed over a long period of time.
SHB: How much do you lend in seniors housing on an annual basis and how has that number changed over time?
Vincent: We originate well over $500 million per year in seniors housing loans, and we see that number continuing to grow. That number has been gradually going up in magnitude over the last three to four years — somewhere in the neighborhood of 10 to 15 percent annually. Clearly, with the addition of Steve LeBlanc and his team four years ago, that number has gone up quite a bit.
SHB: What percentage of the company’s total lending is in the seniors housing sector?
Vincent: Seniors housing is about 10 percent of BOKF’s total portfolio. It’s been a focus of BOKF for a long time, and a heightened focus for the last two to three years. It’s something we want to grow rapidly for the foreseeable future.
SHB: The seniors housing industry is currently undergoing a development boom. How much of your lending activity centers on new construction, and how has that number changed in recent years?
Vincent: Steve handles our construction activity — all in independent living (which we are emphasizing), assisted living and memory care — which equals more than one-quarter of our $1 billion in total commitments.
My team handles the rest of the loans, which are for finished, stabilized properties. My team’s expertise is in understanding the operator risk and knowing who can successfully operate a property over a long period of time.
Steve started from zero and built the construction portion of our portfolio up to over 25 percent in just four years, so that’s definitely an area of growth for us.
SHB: The pricing of seniors housing today is considered by many in the industry to be frothy, but backed by solid real estate fundamentals. Do you expect a slowdown in the near future?
Vincent: It’s a great question. Most industries have up cycles and down cycles, and from time to time get a little ahead of themselves. There will be a slowdown somewhere 12 to 18 months down the road.
Healthcare, though, is a regional or local business. We look very carefully at metrics in each and every local market. We don’t paint the market with a broad brush to say, “We’re going to have a slowdown, we’d better pull back.” We look at every market as an individual market and we still see tremendous upside opportunity for portfolio growth.
SHB: What’s your ideal loan size and why?
Vincent: I’m not sure there’s an easy answer to that question. We have loans as small as $5 million and as large as $50 million. We facilitate credit facilities that are several hundred million dollars.
Down the middle of the fairway for us would be $10 million to $25 million. Multi-property operators are our focus, meaning operators who’ve been in the business for some time and have significant experience and expertise. We want great operators.