We recently met with eight local banks ranging in size from small to very large to present a new development opportunity. What we found was an positive attitude on the part of these lenders that they have eliminated much of there toxic assets. They now need to make new loans in order to make there business model profitable.
That being said it still seems that to get loans with leverage of 75% or above the answer always comes back to some type of SBA loan. Both the 7A and 504 programs are being pushed heavily as both provide the banks with guarantees and reduced risk which in turn creates higher leveraged loans even up to 90% in some cases.
The downside to these loans are high upfront fees 2-3% of the loan amount and rates that are in competitive but not aggressive. Personal guarantees and the strength of the owners is almost a more significant factor these days then the project itself.
If you have put projects on hold because of refinancing now may be the time to revisit them with lenders. You need to take your project to a lot more lenders than in the past in order to find one that will evaluate your project/ownership structure as you would hope but at least the banks are finally interested again.
By Rory Underwood; email@example.com
There are still many unknowns in terms of the impact that the Affordable Care Act of 2010 will have on healthcare reform. But medical real estate has bounced back and is now approaching pre-recession levels.
The consensus is that hospitals will continue to employ or joint venture with private practitioners as they have over the past several years. This trend has helped hospitals increase admissions and allowed physicians to focus more on their patients rather than operating their private practice while reimbursements continue to decline.
This trend has and will continue to impact healthcare real estate. An increasing number of real estate transactions are executed on the hospital’s balance sheet since more and more physicians are employees of a hospital. This has been a positive for this sector since the creditworthiness of the physician has been replaced with the financial strength of the hospital. In addition, as physicians become more comfortable with this shift from private practice to employee they are signing longer term leases. This tends to lower long-term vacancy and increase valuations of medical assets.
The long-term impact of healthcare reform remains an unknown. Reimbursement and compensation remain key concerns. This will continue to put pressure on physicians and hospitals to be more efficient and look for ways to cut expenses. This will surely impact medical real estate in the long-term and how providers view their real estate needs.
By Rob Schick, firstname.lastname@example.org
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