Cautious optimism forecast for senior housing/health-care industry.


CAMBRIDGE REALTY CAPITAL COMPANIES, Chicago, predicts that the senior housing/health-care capital markets were buoyed by a number of positive developments in 2004 and should see an expanded list of capital providers funding projects in the new year.

"We think the new year will continue to bring new players into the sector. But it will be 'walk before you run,' with no one jumping in with reckless abandon," said Jeffrey A. Davis, Cambridge Realty Capital Companies' chairman.

According to Davis, lenders and financiers vividly recall the "perfect storm" that mauled the senior housing/health-care industry industry during the late 1990s. In this tempest, a significant capital shortfall resulted from a confluence of connected events that blindsided the industry in quick succession, he said.

There was a tremendous amount of overbuilding in the assisted-living sector, and this problem was exacerbated when the industry was suddenly asked to adjust to changes in the implementation of the Medicare Prospective Payment system. Long-term care bond issues were hammered, and this precipitated a meltdown in the short-term commercial mortgage-backed securities (CMBS) market, according to Davis. Partly in response to the problems that arose, excessive over-regulation became part of the pattern as well, he said.

"There were numerous foreclosures, bankruptcies, plummeting stock values and sector-exiting. More than 90 percent of the lenders or capital providers who were in senior housing and health-care during the mid-1990s were not in the market by 2001," Davis said.

Continuing low interest rates and the lack of...

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