'09
By Dees Stribling
What’s the best way to describe the lackluster state of seniors’ housing financing in New Jersey these days? Is the market in the doldrums, or is it in a holding pattern?
Doldrums is sailing shorthand for “dead in the water”—no activity of any kind is expected anytime soon, and no relief is in sight. A holding pattern, on the other hand, means that things will be moving again as soon as some adverse condition is over.
In reference to financing seniors’ housing, a case could be made for either metaphor. Currently, most of the money moving through the seniors’ housing market in New Jersey involves government action of one kind or another. As the federal stimulus works its way through the economy—it’s a two-year program of outlays—more seniors’ housing in the state will probably be financed through public means as part of a larger effort to build affordable housing.
But it’s a different story for financing market-rate seniors’ housing. “There really isn’t much going on in seniors’ finance, either for development or acquisition, here in New Jersey or much of anywhere for that matter,” notes Darren Boswell, vice president of Fort Lee-based CareVentures Finance Group, which specializes in short-term healthcare and seniors’ housing lending. “Considering the tough economy and the depressed demand for seniors’ housing, it’s hard to know when that’s going to change.”
It’s in the doldrums, in other words. That doesn’t mean that the market is completely without activity, but it’s the sort of activity you don’t see in healthy markets. Opportunistic investors are eyeing seniors’ housing-related debt, just as they are other kinds of real estate debt.
Early this summer, Chicago-based Cambridge Realty Capital Cos., through its investment arm Cambridge Investment and Finance Co., initiated a drive to buy seniors’ housing debt. At first, the company says, it will buy only performing loans, but as it delves deeper in the swamp of the current debt market, it will consider acquiring subperforming or nonperforming loans. There is no word on its geographic reach, but New Jersey, with its high concentration of seniors’ housing, would probably be a strong possibility for investors like Cambridge.
More optimistically, seniors’ housing may also be in a holding pattern, waiting for the inevitable recovery of the U.S. and New Jersey economies, for the residential market to see some activity, and for banks to get their lending mojo back. But will some of those recent economic green shoots (to mix metaphors) eventually grow enough to provide the right impetus for seniors’ housing financing?
As of mid-2008, economists, policymakers, and pundits were still arguing about whether the bottom had arrived for either the economy or the housing market. Nationally, each month of 2009 has seen plenty of job losses, though not as many in the second quarter as the first – 766,000 fewer losses in 2Q09 than 1Q09, in fact.
That could point to a bottom—an important one for seniors’ housing. A 2009 report by the National Investment Center for the Seniors Housing & Care Industry noted that “median income of adult children was a strong predictor of assisted living revenues, with employment status intuitively being the primary driver of income.”
Similar to the national numbers, unemployment in New Jersey now seems to be getting worse less quickly than before. According to New Jersey’s Department of Labor and Workforce Development, the rise in unemployment in June 2009, which was 40 basis points, was the least such increase since early 2008. Currently, the state has an unemployment rate of 9.2 percent, a little below the national average of 9.5 percent.
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