Developers of seniors housing projects have kept St. Paul, Minn.-based Oak Grove Capital busy lately with a steady stream of business.
These developers are calling on Oak Grove to provide them with refinancing loans for seniors housing communities in Minnesota and across the country.
Bill Kauffman, managing director of Oak Grove Capital’s seniors housing and healthcare finance group, says that he doesn’t see this business slowing down any time soon.
“A lot of seniors housing projects have aging debt maturing over the next three years,” Kauffman said in a recent interview. “That is creating a lot of refinancing opportunities.”
And refinancing isn’t the only work Oak Grove Capital is doing for seniors housing providers. The company is also providing financing to help these providers renovate older facilities and build new ones.
Like much of the healthcare industry, the seniors housing industry is going through significant changes. Seniors expect a wider range of services. And they expect modern facilities with high-end amenities.
Some seniors housing providers today are building facilities that focus on memory care, an important subset of the seniors housing industry. Some are building independent-living facilities in which the residents need little medical care. Still others are building facilities that provide different levels of care depending on the health of specific residents. Some residents might need limited care such as physical therapy or the services of a nutritionist. Others might need round-the-clock medical treatment.
“There is definitely more new construction going on in this field,” Kauffman said “That is a healthy thing for the commercial real estate industry.”
As an example of the steady business in refinances and new-construction financing that Oak Grove Capital is receiving from seniors housing providers is a major refinance loan that Oak Grove recently closed for Brookdale Senior Living, Inc.
Oak Grove Capital recently closed a $259 million Fannie Mae DUSĀ® credit facility for Brookdale. The 10-year, variable-rate facility was used to refinance existing mortgage debt.
Brookdale Senior Living used the new debt to refinance existing loans for 23 different properties totaling 1,781 units. The collateral pool consists of assisted-living, independent-living and memory-care units located in 10 states, including Florida, New York, Kansas, Pennsylvania and Texas.
This financing package was a challenging one, and not just because of its size. Timing was a factor, too.
Kauffman said that Brookdale had to repay tax-exempt bonds on the five largest facilities in the 23-property portfolio. These bonds had to be repaid on a specific date in the middle of April. This meant that Oak Grove Capital had to act quickly.
“Usually when you refinance, if you miss a date it’s not the end of the world,” Kauffman said. “That wasn’t the case with this refinance. If we missed the date, Brookdale would have had to wait another entire month to be able to pay off that tax-exempt bond debt. With 23 properties, that put a lot of pressure on everyone. It also kept everyone motivated.”