By Hayden Spiess
Professionals active in the seniors housing lending space say that the sector is somewhat insulated from cyclical economic headwinds relative to other types of commercial real estate. Even so, lenders and borrowers have not been exempt from contending with factors such as elevated interest rates.
Though the secured overnight financing rate (SOFR) has declined meaningfully year over year, the U.S. 10-year Treasury yield has remained largely unchanged.
Widespread geopolitical turmoil is also creating uncertainty around not only interest rates, but also the outlook for inflation and other broader economic realities.
Even so, lenders have seen increased financing activity in the senior living sector, which is expected to accelerate. Competition — among both borrowers and lenders — is also intensifying, and lenders say that they are focused on seeking out experienced, quality operators as sponsors.
Seniors Housing Business conducted a remote roundtable with such lenders, sending industry leaders who are active in the seniors housing sector a set of questions and collecting their responses.
Participants in the Q&A included Crispen Carey, director of seniors housing at Live Oak Bank; Donald Pelgrim, fund manager and CEO of Wilshire Finance Partners; Ken Assiran, managing principal of Capital Funding Group; Lee Levy, senior managing director and head of real estate debt at Kayne Anderson; Molly Odgers, vice president of BOK Financial; Morgin Morris, senior vice president of KeyBank; Thomas Cassidy, first vice president, healthcare and not-for-profit lending at Provident Bank; and Zachary Britton, director, originations at Locust Point Capital.
SHB: What do you think has been the biggest surprise, trend or issue to unfold in the seniors housing debt market thus far in 2026? Please explain.
Carey: One of the bigger surprises for me — really beginning in the second half of 2025 and continuing into 2026 — has been the degree to which loan spreads have tightened for high-quality deals. This appears to be caused by the surge in capital providers entering the sector with appetites to lend on high-quality seniors deals and a noted public boost in sentiment around the industry.
Pelgrim: No surprises. However, we are seeing an increase in new platforms entering the market from other real estate sectors, including investors, promoters and syndicators shifting from or adding to their multifamily platform. Combined with the existing platforms in the space, we’re seeing an increase in loan requests involving the acquisition of transitional assets.
Assiran: The most surprising development has been that despite what many expected to be a more normalized transaction market by now, the bid-ask gap has not fully closed, and there are still attractive deals you can find on the market today.
Another positive surprise: Occupancy recovery has been stronger than many of us modeled. Several operators we work with hit or exceeded pre-pandemic census levels in late 2025 and carried that momentum into 2026, which has meaningfully improved net operating income (NOI) and made underwriting conversations more productive.
Although we anticipated interest rate spreads to tighten as more lenders re-entered the market in 2025 and 2026, we have been surprised by the aggressive quotes some borrowers have been able to receive from lending platforms, specifically for value-add deals.
Levy: The continued improvement in operating fundamentals has supported a broader recovery in the seniors housing sector. Transaction activity remains robust, with both established and new sponsors pursuing high-quality assets. This has led to an increase in lenders, including those that traditionally have not provided financing to the seniors housing market, leading to spread compression and more favorable loan structures for borrowers.
Odgers: Throughout 2025 and 2026, lenders have seen increasing amounts of payoffs, leading them to race to refill their balance sheets. Because of this, the competitive landscape has intensified compared to recent years. For quality sponsors, spread and pricing is compressing, and structures are getting more aggressive.
That has been the biggest trend we have seen unfold in the debt markets so far in 2026; the lenders who are still active in the space are stretching to win new business, and the tides are turning in favor of the borrower.
Morris: High volumes for REIT M&A activity were on my bingo card for 2026, but I’ve enjoyed seeing growing REITs, like American Healthcare REIT and other new private equity firms, maneuver to take market share.
One debt trend to highlight: The delta on spreads as compared to multifamily quotes is growing smaller. Quotes were reviewing note the all-in rates becoming more and more competitive, especially for deals with strong sponsorship.
Cassidy: The defining trend of 2026 is the collision of unprecedented demographic demand with severe, compounding supply constraints. With new construction starts down roughly 77 percent in primary markets relative to recent peaks, the resulting supply-demand imbalance is generating record occupancy levels and giving stabilized assets incredible pricing power.
Britton: One notable development in 2026 has been the continued tightening of spreads. We are seeing more lenders re-enter the seniors housing space, which has compressed spreads and created a more competitive environment.
At the same time, property level performance across the industry has continued to improve. An additional surprise this year is that multifamily is no longer seen as the default low-risk opportunity.
At the CRE Finance Council meeting in Miami earlier this year, seniors housing was repeatedly mentioned as one of the most compelling risk-adjusted opportunities. It will be interesting to see how this plays out.
SHB: How did your company’s loan volume in the seniors housing sector (total dollar amount in loan closings and number of deals) in 2025 compare with the prior year?
Assiran: 2025 was another strong year. Both total dollar volume and deal count were up meaningfully compared to 2024. This production was driven by pent-up refinancing demand, an active acquisition market and a marginal increase in the development market.
Pelgrim: Our loan volume increased approximately 35 percent in 2025, with much of that activity occurring in the third and fourth quarters of the year.
Morris: KeyBank’s off-balance-sheet team produced record volumes for 2025 through our commercial mortgage pipeline, with over $2 billion in permanent originations. Notable was the spectrum of lending, with executions through HUD, the agencies and life company platforms. Large transaction volume with HUD (over $800 million during HUD’s fiscal year 2025) and life companies (over $850 million in 2025) drove the majority of the business.
Odgers: We were able to close a healthy mix of construction and bridge loans in 2025, making it a record year for us in new production, more than doubling our production from the prior year.
Carey: Both 2024 and 2025 were strong years for us in the seniors housing space, with similar record-setting loan volume both years. This shows our commitment to the space; we have been extremely active while many other lenders were much less so.
Britton: 2025 was a strong year for Locust Point Capital. We leaned into parts of the market where we excel and benefited from the ability to deploy Fund III, which closed at $668 million in total commitments. The majority of our transactions continued to be bridge loans, mezzanine structures and preferred equity for acquisitions, refinancings and value-add scenarios. Average loan size is typically in the $5 million to $25 million range, which is squarely in our target market.
SHB: Do you expect the total loan volume generated by your company in 2026 to meet, exceed or fall short of the level achieved in 2025? Do you think the industry as a whole will meet, exceed or fall short of the total deal volume in 2025?
Cassidy: We fully expect to have a record-setting year. Institutional capital is aggressively targeting the space right now. All our conversations with investors have been around portfolio expansion in 2026, with cap rates decreasing. It is clear that this optimism is fueling a highly active environment for acquisitions and recapitalizations.
Levy: We expect our 2026 loan volume to exceed 2025 levels, supported by a strong pipeline and improving sponsor sentiment and increased acquisition activity.
At the industry level, overall transaction volume is also likely to increase year over year, although progress may vary depending on capital market conditions and broader economic factors.
Assiran: We expect to exceed our 2025 loan volume on both a deal count and dollar amount in 2026. Our pipeline coming into the year was healthy and has continued to grow. We see consistent deal flow across refinancings and acquisitions and have been selective by only undertaking top-quality new development financings.
For the industry, total loan volume should exceed 2025, with some shift toward development due to growth of demand for seniors housing. The agencies remain aggressive and active in certain segments, and bank competition is intensifying, resulting in increased deal flow.
Pelgrim: Based on the requests we’ve seen in the first quarter of 2026, we anticipate our volume to increase this year. Our sense is that with more entrants in the market, the industry as a whole will see more transaction volume as well.
Britton: We have a well-capitalized fund and a borrower base that is actively pursuing growth, so we expect deal volume to be healthy. The number of our partners looking to acquire, develop or capitalize deals in the lower middle market has been robust.
For the industry as a whole, I would expect total deal volume to rise in 2026 compared to 2025. There’s a well-known supply-demand gap, the industry has found its footing operationally and demographic trends are positive, which is attracting more investment.
Carey: I expect our seniors housing loan volume in 2026 to exceed 2025. I believe overall industry demand for debt will also be higher in 2026 than it was in 2025. Further stabilization of operating performance, and increased interest in new development should support higher borrowing demand, and the capital markets seem ready to meet the demand.
SHB: Is there a segment of seniors housing that you are particularly bullish on as a lender? If so, why? Is there any segment you are particularly bearish on?
Cassidy: We are particularly bullish on independent living and assisted living with memory care.
Britton: We are a little contrarian by nature and tend to lean in when others lean out. We like assets that are currently overlooked by the more efficient capital in the market today. We especially like properties that complement the existing portfolios of our manager partners. Often, these are well-designed properties that set up well for an enterprising manager to own and operate and ultimately sell or recapitalize. We also tend to be cautious when others are overly optimistic, and we have seen some buys at the top of the market that give us pause.
Morris: As a lender, I’m very excited about demand continuing to grow occupancy levels across the entire sector. As an individual passionate about the space, I am rooting for active adult as a positive introduction to seniors housing.
Odgers: Arguably even more than the segment of seniors housing, the quality of sponsorship and operations is vital to our underwriting and why we continue to be bullish in the seniors space.
Assiran: We are bullish on all segments of seniors housing due to the lack of development needed to support strong demographic tailwinds. Active adult is interesting to us — it is less operationally intensive, performs more like a conventional multifamily product in terms of underwriting and the demand story is compelling.
Carey: We are not currently lending for skilled nursing or entrance-fee continuing care retirement communities (CCRCs). These have more exposure to government reimbursement and higher exposure to the for-sale housing market, different categories of risk.
SHB: Are you more comfortable financing the acquisition and renovation of existing Class B/C assets at a significant discount to replacement cost as opposed to financing new, ground-up construction?
Levy: It depends heavily on the market and the sponsor. Development and value-add repositioning each present unique challenges that require seasoned operators to successfully execute. We evaluate each investment opportunity on the merits of each deal, focusing on the fundamentals, market fit and sponsorship.
That said, we tend to focus on newly developed assets that are in the early stages of lease up.
Odgers: Our group’s comfort continues to prioritize ground-up construction and Class A assets. However, we try to stay nimble where we can to meet the needs and opportunities of our clients.
Cassidy: We actually lean toward ground-up construction when we are working with the right well-capitalized and highly experienced sponsor group. While acquiring at a discount to replacement cost is a popular narrative right now, we are currently seeing construction costs per unit come in below what some existing stabilized communities are trading for in today’s competitive market.
Furthermore, the new construction projects we are reviewing lately are strategically located in markets with high barriers to entry. For a proven development team, building purpose-built, modern product in these tight markets often presents a much cleaner underwriting profile than taking on the unknown capital expenditures and operational heavy lifting of a Class B or C turnaround.
Assiran: Generally, yes — we are comfortable with well-located existing Class B or C assets acquired at a meaningful discount to replacement cost, assuming the sponsor has a strong track record with the product and clear path to stabilization. With replacement costs where they are today, buying at 50 to 70 cents on the dollar is possible and will allow for greater market penetration and meaningful rent growth in the future.
Ground-up construction is not off the table for us, but the bar is higher.
Pelgrim: Financing existing properties better aligns with our lending and investment philosophy, risk tolerance and transaction metrics.
Carey: We tend to prefer new construction over value-add transactions.
That said, I personally think the acquisition and renovation strategy can be very effective for investors and has produced strong outcomes in many cases. The challenge is that value-add deals tend to rely on future operational improvements that don’t translate well into the trailing cash flow metrics banks are required to emphasize for credit approval. As a result, while value-add strategies may make sense for equity investors or non-bank lenders, they are often a less natural fit for bank debt.
Britton: Generally, yes. We believe we are at the start of a massive CapEx cycle in seniors housing, and the acquisition and renovation of existing assets at a discount to replacement cost is very much in our wheelhouse.
SHB: How do you expect the senior living sector to perform this year relative to other sectors of commercial real estate, and how do you expect financing activity in seniors housing to differ from the other sectors?
Assiran: Seniors housing is positioned to outperform most other real estate sectors this year, and I anticipate the lending market will reflect that. Office remains structurally challenging. Retail is bifurcated. Multifamily has supply headwinds in a number of Sun Belt markets. Industrial has cooled from its peak. Seniors housing, by contrast, has a fundamental demand story that is only strengthening.
Lenders who pulled back from seniors housing during the COVID-19 pandemic have come back, and competition for quality deals is tightening spreads. I expect more REIT and life company activity in seniors housing relative to other sectors in 2026, which will be a tailwind for borrowers.
Carey: One of the things I like about seniors housing is how relatively disconnected it is from broader economic cycles compared with other areas of commercial real estate.
Other commercial sectors may ultimately perform just fine, but they tend to carry greater cyclical risk tied to employment, consumer spending or business investment. That dynamic is somewhat ironic given that seniors housing was historically viewed as a more volatile and therefore a higher-risk asset class.
Levy: An aging and wealthy population in the U.S. continues to provide favorable tailwinds to seniors housing, priming it for many years of outperforming traditional commercial real estate. Despite the increased number of lenders, the sector remains less commoditized, which creates opportunities for lenders — like Kayne Anderson — that have specialized expertise in the sector.
Odgers: With Baby Boomers beginning to turn 80 this year and the continuing record lows of construction starts, we anticipate the senior living sector to perform well. Over the next few years, it will likely outperform other sectors of commercial real estate as the supply-demand dynamics are some of the best the senior living industry has seen thus far.
Morris: The property type outperformed the market for the entire year, posting a return of over 9 percent in 2025 across the sector. My hope is that the increasing demand for the product will pair with continued strong investment news (like the NCREIF Property Index) to drive positive attention and dollars to the healthcare space.
Britton: In our view, seniors housing is one of the more attractive sectors in commercial real estate right now.
Cassidy: Seniors housing is vastly outperforming traditional commercial real estate. The sector just recorded its 18th consecutive quarter of occupancy increases, reaching 89.1 percent in the fourth quarter of 2025. It has proven its resilience and needs-based strength and is currently one of the most compelling opportunities for investors seeking income stability.
SHB: At the close of business on March 11, 2026, the secured overnight financing rate (SOFR) stood at 3.64 percent, down from 4.33 percent a year earlier. During the same period, the U.S. 10-year Treasury yield was relatively unchanged and closed at 4.23 percent on March 11, 2026. What impact has the movement — or lack thereof in the case of the 10-year Treasury yield — in those two benchmark rates had on borrower activity over the past year?
Assiran: The divergence between SOFR and the 10-year Treasury has created an interesting dynamic, and when factoring in the SOFR forward curve, a two- to three-year fixed-rate swap has been an attractive recent bet for borrowers, but that could change quickly.
The decline in SOFR over the past year has provided real relief for borrowers on floating-rate debt — particularly those who were stressed by the rate environment of 2023 and early 2024. The operating environment has improved, resulting in debt-service coverage ratios increasing on existing variable-rate loans. Some borrowers that were treading water 18 months ago are now quickly able to refinance or transact with agencies.
Levy: The decline in SOFR has modestly improved borrowing conditions, particularly for floating-rate structures, despite the stability of the 10-year Treasury.
As a result, many borrowers continue to pursue floating-rate financings, given the structuring flexibility.
The real story is that overall investment activity has picked up, driven by improving property-level performance from the lows of COVID.
Britton: The decline in SOFR has been a positive development for our floating-rate borrowers. A roughly 70-basis-point reduction in SOFR over the past year has given our partners more financial flexibility to invest in their communities and staff.
As to the 10-year Treasury yield, essentially exit assumptions that were built on 10-year rates moving lower have not played out. That has extended some hold periods. For us, in some ways it’s been a net positive, as it has extended quality performing loans in the portfolio, but over time, a clear path to permanent financing or sale is important to us and our borrowers.
Pelgrim: The requests for bridge loans increased dramatically for us in the fourth quarter of 2025, and inquiries in the first quarter of 2026 have already surpassed the prior quarter.
Morris: I am an economist at heart and spend a lot of time studying market trends and the
influences that impact rates.
The U.S.-Iran military conflict and other inflationary factors, such as trade and periodic government shutdowns, have a major impact on GDP and consumer confidence. I expect some volatility of the financial markets for the foreseeable future, and I continue to advise our clients to be prepared to move quickly and take advantage of positive rate movement.
Cassidy: The pullback in SOFR has provided immediate relief for floating-rate bridge borrowers, making acquisitions and value-add business plans viable once again.
Meanwhile, stability in the 10-year Treasury yield has preserved broad access to competitively priced permanent financing. As seniors housing cap rates compressed to around 6.2 percent in late 2025, improved debt conditions have supported asset values and brought sellers off the sidelines.
SHB: What are the key metrics that your shop focuses on most when vetting a loan application from a borrower in the seniors housing space and why?
Britton: At the end of the day, the operator is the business — their ability to staff, manage and deliver care is what drives occupancy, revenue and ultimately cash flow.
And so, we spend considerable time understanding the manager, their history and motivations.
On the financial side, the key metrics we focus on include occupancy trends and momentum, revenue per occupied unit, expense ratios and operating margins.
We are hyper focused on partnering with the right owner-operators and making sure there is a margin of safety by getting the basis right.
Carey: Trailing debt service coverage is a critical metric for us in order to obtain credit approval. Bank regulations significantly influence that focus.
Sponsor strength is the other key factor for us. We place a high premium on experienced, well capitalized sponsors.
Assiran: Operator quality, capitalization and track record: These are the most important factors in seniors housing. We have seen great assets underperform and mediocre assets outperform, based entirely on the operator.
Sponsor liquidity and guaranty: We want to know whether the sponsor has the capacity to support the asset through a rough patch, if necessary.
Occupancy and NOI trends: We want to understand the trajectory, not just a point-in-time
snapshot. Is census growing, declining or volatile? What is driving it?
Debt service coverage ratio and debt yield: We underwrite to stabilized numbers, but we stress-test those numbers. We want enough cushion to absorb a realistic downside scenario — a five to eight point occupancy dip, or a 10 percent revenue compression — without the loan going into distress.
Market positioning and competition: Supply pipeline matters. A strong asset in a market
getting hit with new deliveries is a different risk profile than the same asset in a supply-
constrained market.
Levy: We focus on acuity mix, asset quality, location and sponsorship, with a focus on the forward-looking cash-flows and expected exit value.
This includes detailed diligence on occupancy trends, leasing velocity, revenue per occupied unit and expense structure, alongside scenario analysis to ensure the asset can withstand volatility from rates and potential pressure on rents from new supply.
Pelgrim: We want to see experience, alignment between ownership and operations and a strong capital commitment from the sponsor. Those have proven to be the common elements in successful facilities and transactions that we’ve funded and serviced on our balance sheet.
Morris: Sponsorship strength and operator experience are the two primary factors in our initial vetting process.
We have transacted in all 50 states under every type of acuity. We feel comfortable with large or complicated deals and have found success with a focus on the ownership level.
Cassidy: We are focused on operator quality and expense management, particularly regarding labor. Net operating margins have recently improved across the industry due to labor cost stabilization and declining reliance on expensive agency staffing. We closely scrutinize an operator’s ability to maintain those margins while capturing the industry’s rent growth.
SHB: What questions are you fielding most frequently from borrowers today, and what is your advice to them?
Assiran: “Should I lock in a fixed rate now or stay floating?”
Our honest answer is that we do not know where the 10-year yield is going — nobody does. We help borrowers think through their holding period, their business plan and what a rate movement in either direction would mean for their deal.
“Can I get a bridge loan to stabilize this asset before going permanent?” There’s bridge capital available, and HUD is meeting the demand for permanent financing.
Pelgrim: With all the new market entrants, including sponsors, brokers and other advisors, questions often involve the differences in the expectations of a lender making a loan backed by a multifamily property or other asset versus a seniors housing facility.
Morris: ‘Bring us an off-market deal’ is the most common comment I hear from sponsors. A fun part of my job is introducing private equity firms to operators we trust, or connecting a client with a regional sponsor looking to sell.
‘How many dollars can I get?’ from a client looking to push proceeds on an acquisition is another one.
Purchase prices on loans are starting to push higher, a factor of an overall improved market and stiff competition for increasingly limited Class A product.
Britton: We are most frequently fielding questions about whether we all missed the chance to acquire assets at reasonable levels.
Typically, we talk about how there is a lot of competition at the top end of the market and whether or not it makes sense to spend much time there. We walk through our thought process around those deals and how they will likely ultimately be won by cheaper forms of capital.
Cassidy: Borrowers frequently ask how aggressively they can underwrite future rent growth and how to navigate ongoing economic uncertainty.
Our advice is to execute with precision. Align your product and pricing carefully with local market incomes and invest heavily in operational excellence.
The slowdown in new construction has created a highly favorable supply and demand imbalance.
Operators who focus on stabilizing their frontline workforce and delivering high-quality care will naturally capture sustained occupancy momentum.
SHB: Do you expect the current geopolitical turmoil and uncertainty to affect the lending climate for seniors housing in the near term, or is that not a factor?
Carey: I don’t expect geopolitical turmoil to have a significant direct impact on the performance of seniors housing properties themselves. If the seniors housing finance market existed in isolation, I would generally say it is not a major factor.
However, large financial institutions generally have exposure to other sectors and operating businesses that could be affected by geopolitical developments.
Stress in those areas could indirectly influence borrowers’ and lenders’ overall capacity to deploy additional capital into seniors housing.
Pelgrim: Predicting the outcome of wars and their potential impacts is nearly impossible. There are way too many variables.
That said, near-term impacts may include a pause in rate reductions and higher operational costs.
Assiran: The indirect effects matter. If geopolitical stress pushes the 10-year Treasury higher, that bleeds into fixed-rate borrowing costs and deal economics.
If this contributes to inflation re-acceleration, the Fed’s path becomes more complicated, and borrowers will feel the effects — as will consumers — potentially impacting demand for seniors housing.
Inflation’s effect on costs of construction, including building materials, capital and labor, will also have an impact on the supply of seniors housing.
Nobody operates in an isolated environment, and uncertainty tends to make sponsors more cautious about pulling the trigger on transactions.
Levy: The current geopolitical turmoil creates uncertainty on interest rates, inflation, capital formation and broader economic policy.
However, seniors housing has strong fundamentals and an aging demographic that positions it well over the medium and long term regardless of the current geopolitical turmoil.
Morris: Yes. On several fronts, including interest rates, access to capital, equity, investment and consumer demand.
There is no question that rates will be impacted by the world turmoil and the instability within the U.S. political system.
Key economic drivers directly impact the bond markets and the federal fund rates (variable/SOFR-based lending rates).
Access to capital and equity could be impacted if we continue to see an escalation on the world stage, with an outsized impact on owners that rely on foreign investment.
Further down the line, if we do experience a more drawn-out economic impact, the lower acuity sector of seniors housing (independent living, active adult) could see a slow in demand due to financial uncertainty.
Thankfully, seniors housing has proven to be an extremely resilient real estate class.
Cassidy: While the seniors housing sector is not completely immune to macroeconomic shocks, particularly if turmoil triggers supply chain disruptions or inflation that impacts operating costs, it remains heavily insulated.
The sector is driven by domestic demographic tailwinds, and this needs-based demand supersedes near-term geopolitical uncertainty.
Britton: Candidly, it’s not something we spend much time thinking about.
We are really focused day in and day out on being a good partner to the groups that we work with and remaining a durable source of capital for those groups.
— This article originally appeared in the April 2026 issue of Seniors Housing Business magazine.