Bank consolidation trend puts the brakes on senior lending

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A sharp drop in the total number of banks has occurred over the past 20 years, and this is not good news for senior housing.

Although the trend has been stable over an extended period, it has been virtually “invisible,” Donald Husi, managing director of the bank’s housing finance and senior care team, told Senior Housing News. Ziegler specialist investment.

In fact, nearly half of all U.S. banks have been acquired or gone bankrupt in the past 20 years, according to FDIC data cited in Ziegler’s latest Lender Survey Findings report and of the National Investment Center for Seniors Housing & Care (NIC).

Between 1934 and 1980, the number of banks remained relatively stable around 13,000 to 14,000. But the number fell to 8,315 in 2000 and to 4,518 in 2019.

The Ziegler report includes 12 examples of bank consolidations and financial partnerships that have taken place since 2019.

“You would like this to help available capital, but it has shrunk,” Husi observed. “Instead of 12 banks, we have six banks, but in terms of housing and senior care, they are not doubling in size.”

Banks that were heavily focused on senior housing might find that they need to take a step back to comply with what the Office of the Comptroller of the Currency (OCC) sees as the right mix of commercial real estate and others. commercial and industrial goods (C&I) ready, Husi observed.

And as institutions like these combine, loans are typically frozen for a year or two, “except for the best credits and clients,” the Ziegler report says.

Also, loan officers at different banks may have different views on commercial real estate, and those different views need to be worked out as institutions combine, Husi said.

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Even within the same institution, there may be different approaches to senior housing lending; of the 10 largest US banks, 4 of them – Chase, US Bank, Santander and Citibank – do not have a vertical dedicated to senior housing, according to the Ziegler report.

“These four leave credit decisions to local and regional decision-makers. Sometimes the loans are taken out by the commercial real estate teams, sometimes by the commercial and industrial teams (“C&I”) and sometimes by another vertical specialized in banking teams (for example, non-profit organizations) ”, indicates the report. “These three teams within banks generally see credit in very different ways.”

The majority of home and senior care loans come from around 115 banks and lending institutions, but that number could become even smaller in the years to come.

“We think there will be more consolidation, and that will have an impact on prices,” said Husi.

Capital markets activity is gradually picking up

At least in the short term, bank consolidation could exacerbate other problems in financing retirement homes, as capital markets gradually accelerate activity after Covid-19.

Yet Husi is seeing more and more community and regional banks resuming operations, as well as internet-based banks such as Ally. And his team at Ziegler continues to grow their part of the business, which is focused on the for-profit sector.

Historically, Ziegler is known for his work in the nonprofit sector, underwriting between $ 4 billion and $ 8 billion in bonds each year. But since Husi’s arrival in 2018, his team has grown from 7 to 21 people, while going from 9 transactions completed in 2019 to more than 30 planned this year, for a total of $ 1.1 billion to 1, $ 4 billion. About 40% of the business is for seniors’ residences, while 60% is for skilled nursing, although the team wants to reverse those percentages.

Husi’s goal is to be the preferred banker for providers from 5 to 50 communities. He sees added value in being able to leverage Ziegler’s data and research capabilities, as well as his own operational expertise from experience with organizations such as American Retirement Corp., not just to provide financial products but also strategic advice.

“We love to come in and help companies position themselves for growth,” he said.


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