Q&A: Scott Thurman, Chief Credit Officer, FHA Lending

September 23, 2019

What is the single-largest factor impacting the future of the seniors housing sector?  

Affordability. Affordability. Affordability. In Multifamily (and Single too), the term “crisis” is used when discussing affordable housing. Imagine adding personal care services to that with people on fixed incomes. Providing high quality care that is affordable to a significant portion of the elderly will greatly impact the future of the sector, especially as baby boomers start requiring more and more personal care. 


What’s the most innovative financing trend you’ve noticed lately in seniors housing and skilled nursing? 

With interest rates being so low again, it makes a lot of sense for investors to capture equity to renovate properties or capitalize an expansion of their portfolio. For example, with one client that has limited capital to expand their holdings, we are exploring the option for them to first come in as an operator with the potential to buy the assets in the future. For other clients, we have helped find them equity sources or mezzanine loans to fill gaps or capitalize their equity. Having access to so many platforms at Greystone allows for a lot of creativity and innovation for our clients. 


There has been a lot of talk about the “middle market” – what do you foresee for addressing this growing segment? 

This “forgotten” segment will be a challenge – particularly for assisted living. I think it will be especially difficult for the early part of the baby boomer population that was initially depending on pensions and Social Security - their choice of facilities and care options will be very limited. This middle market segment will be left to spend down assets to qualify for Medicaid or depend on family financial support and/or the family providing the care. It will help if they have significant home equity, but the last several decades have encouraged using that home equity for more immediate need. 


Affordable housing is already a crisis for the middle market. Adding personal care to the mix amplifies the issue. I am happy to see NIC and other groups starting to focus on these very real challenges. As with most complicated issues of this nature, the solution will likely require the industry; local, state and federal governments; and individual families to be more creative about how the later years of our lives are funded. 


What should property investors be doing now to prepare for the market in 5-10 years? 

I think property investors should be taking advantage of the current low rate environment to invest in renovating and modernizing older buildings, or in some cases building a replacement facility. The low rates can also help with affordability and reimbursement rate uncertainty in the future. I also think figuring out how to deliver more services to IL facilities or even in the home will be imperative for the future demand that is rapidly becoming a reality. 


OK, Scott, time for the speed round. What are your thoughts on 


The silver tsunami? 

The silver tsunami is in sight now. After 25 years, It has been interesting to see the initial surge of demand for IL as the first baby boomers are entering their 70s. Over the next 15-years, we will see how the industry develops to meet the demand of this group, especially as the average age of AL and SN residents climb. This generation is also going to be more vocal than both the “greatest” and “silent” generations, demanding more amenities and services.   



There is a lot of education going on in the industry, which is great. It will be interesting to see if the actual application of the system achieves the desired results. For our underwriting, we have been focusing on making sure operators are up to speed on PDPM and have a strategy for their facilities. Ultimately, as with any significant change, it will take some time to adjust to a new reimbursement system; however, the SNF industry and its operators have typically proven themselves to be extremely adaptable. 


Interest rates? 

Crazy times. Unprecedented times. With the uncertainty of PDPM, State budgets and the talk of recession, I would encourage owners to lock in long-term, fixed-rate financing. The FHA product is hard to beat with up to a 35-year, fully amortizing loan with flexible prepayment terms. And it is assumable. I would also encourage SNF owners to take advantage of this rate environment to invest in their assets and improve their portfolios’ marketability and longevity. 

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