Seniors Housing Finance
Delivering customized bridge and permanent loan solutions for Senior Housing
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Seniors Housing and Assisted Living Loan Programs
Loans for Seniors Housing. Assisted Living Facilities, Independent Living, Alzheimer’s Care, Memory Care, Age-Restricted Housing, Independent Living, Continuing Care Retirement Communities, and Long Term Care facilities
The silver tsunami is here, creating a tidal wave in seniors housing and the senior living markets. By 2030, all Baby Boomers will be 65 years and older, according to the U.S. Census Bureau. As boomers exit the workforce and prepare for retirement, there will be continued demand within the senior housing industry, from active adult communities and continuing care retirement communities to standalone independent living facilities and assisted living memory care facilities. Boomers have a storied history of making their mark in the world and the senior living sector will be no different
For the past 18 years, Wilshire Finance Partners has specialized in financing experienced owners and operators in senior housing. Whether that’s providing capital to owners and operators sprucing up existing facilities with a competitive repositioning or strategic acquisitions of other nearby assisted living and skilled nursing facilities, opportunities will continue to abound in the industry.
As senior housing lenders, Wilshire Finance Partners is a leading private debt fund that provides capital solutions in seniors housing ranging from $1 million to $10 million for various housing properties and projects. One example of that could be utilizing a short-term bridge loan before an owner or operator transitions to a fixed, permanent financing solution like Fannie Mae Seniors Housing Loan.
While profits are crucial to business success, people are just as important. Wilshire Finance Partners invests in owners and operators with a heart to improve care and services to seniors, in addition to improving the bottom line. Creating retirement options and housing for older adults as they age is an important investment.
We finance various transactions as senior housing loan providers, including, continuing care retirement communities (CCRCs), assisted living facilities, memory care facilities, skilled nursing facilities and independent living.
If you are an owner or operator, or an aspiring owner or operator in senior living, explore how you can finance your vision to serve seniors when traditional lending may not be an option. Talk with the sage advisors on our seniors housing team to learn more about the creative financing solutions available, or read on for further information.
Use Case: How to Use Bridge Capital
Strategic Acquisitions
Part of an acquisition strategy that one company uses to purchase another company whereby the combined companies or the consolidation of the companies becomes more profitable or valuable than by itself.
Value-Add Real Estate Investments
- ‘Value-Add’ is synonymous with ‘growth’ in the stock market and is associated with moderate to high risk.
- Value-add properties often have little to no cash flow at acquisition but have the potential to produce a tremendous amount of cash flow once the value has been added. These building often times have occupancy issues, management problems, deferred maintenance or a combination of all three.
- These investments require a deep knowledge of real estate, strategic planning, and daily oversight by their owners.
- Value-add investors tend to use between 60% and 75% leverage to generate annual returns between 11% and 15%.
Opportunistic Real Estate Investments
- Opportunistic is the riskiest of all real estate investment strategies. It is also synonymous with ‘growth’ in the stock market, like ‘value-add,’ but it is even riskier.
- Opportunistic investors take on the most complicated projects and may not see a return on their investment for three or more years.
- These investment strategies require years of experience and a team of people to be successful.
- Ground-up developments, acquiring an empty building, land development and repositioning a building from one use to another are examples of opportunistic investments.
- Opportunistic properties often have little to no cash flow at acquisition but have the potential to produce a tremendous amount of cash flow once the value has been added.
- Opportunistic investors tend to use leverage of 70% or more, but the amount of leverage can vary based on the ability to obtain debt. For land development, banks simply won’t lend more than 50%. Opportunistic investors can expect the highest annual returns for a real estate investment, often over 20%.
Competitive Repositioning
Acuity Level Transition
Cash Out Refinance
Rate and Term Refinance
Growth Capital
Leveraged Recapitalizations
Monetization of Equity
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Bridge Financing Structure Types
First Lien Debt
Bridge lending is short term or interim financing that is generally used by a borrower until they secure permanent financing or sell the underlying real estate. Both the Fund and the Manager employ a collateral-based lending approach in their bridge lending activities. Under a collateral-based lending approach, a lender will evaluate a borrower’s character, credit history, capacity (income or assets unrelated to the real property), cash flow from the real property and the collateral value of the real property. However, as opposed to the approach used by credit-based lenders, who place greater reliance and weight in their underwriting decisions on the credit history and capacity of a borrower to service the loan (i.e., tax return or Form W-2 income), a collateral-based lending approach places the greatest emphasis and weight on the cash flow and collateral value of the real property. The Fund’s bridge loans will not be guaranteed by any governmental agency or private entity. Most loans made by the Fund will be collateral-based loans, generally not requiring recourse, a guaranty or additional personal property as collateral.
Bridge loans made by the Fund may be in a first lien position or subordinate lien position.
Second lien or junior secured debt
Unitranche A/B Notes
Unlike a first lien and second lien facility, a Unitranche facility or A/B Note structure uses a single loan agreement, a single promissory note, and a single deed of trust or mortgage, and the loan is contractually bifurcated or split using an Agreement Among Lenders or an Intercreditor Agreement creating a senior piece (the “Senior Tranche” or “A Note”) and a subordinate piece (the “Subordinate Tranche” or “B Note”). Under this structure, there is a single lien against the collateral and the borrower has a single payment obligation. As between the lenders, the Subordinate Tranche (or B Note) functions much like a second trust deed or a credit enhancement to the Senior Tranche (or A Note). The interest rate for the facility is allocated among the lenders disproportionately to provide the holder of the Senior Tranche (or A Note) with a lower effective interest rate than holder of the Subordinate Tranche (or B Note). As interest payments are made under the loan they are paid to the holder of the Senior Tranche (or A Note) and the holder of the Subordinate Tranche (or B Note) based on the agreed upon allocation. The Fund may elect in its sole and absolute discretion to retain the B Note on loans originated by the Fund or acquire B Notes from the Manager, an Affiliate or any other party.
Some of the benefits of this structure include that it can be put in place more quickly than a traditional first lien and second lien facility. As opposed to lenders negotiating and drafting two separate sets of loan documents, the time and cost to document and finalize the transaction may be reduced through the use of a single set of loan documents.
Mezzanine debt
Mezzanine debt is a type of subordinated financing used to increase leverage in a real estate transaction. This type of debt generally fits between equity and real estate secured debt in the capital stack. It has priority of repayment over equity but is subordinate to the real estate secured debt. The primary benefit to the borrower using mezzanine debt is the ability to increase their leveraged returns.
Mezzanine debt is real estate-based debt, but it is not directly collateralized by the underlying real estate. Rather, mezzanine debt is secured by a pledge of the borrower/sponsor’s ownership interest in the entity that owns the underlying real estate. If the borrower defaults on real estate secured debt, the holder of that debt has the right to foreclose on the real estate. Conversely, if the borrower defaults on the mezzanine debt, the holder of the mezzanine debt has the right to foreclose on the pledge of the ownership interests of the entity that owns the underlying real estate and take over the ownership of that entity. A foreclosure on the ownership interest of the entity holding the real estate would result in the ownership of the underlying real estate through that entity subject to any real estate secured debt. As a result, the holders of mezzanine debt may obtain higher returns than real estate secured debt and may be in a more protected position than common or preferred equity.
Stretch senior debt
Participating debt / Hybrid equity
Participating loans are structured as debt with equity-like economic attributes. Participating loans may be secured in first lien position, however, participating loans are more frequently a type of subordinated financing used to increase leverage in a real estate transaction. When used as subordinated financing, this type of debt generally fits between equity and senior real estate secured debt in the capital stack. It has priority of repayment over equity but is subordinate to the real estate secured debt. The primary benefit to the borrower using participating loans is the ability to increase their leveraged returns at a lower cost than preferred or common equity. Due to the lower overall cost, Borrowers may use participating loans in lieu of preferred equity in the capital stack.
Participating loans may be directly secured by the real estate in a senior or subordinate lien position. If the borrower defaults on a participating loan secured by the real estate, the holder of the participating loan has the right to foreclose on the real estate and take it ownership of the underlying real estate subject to any senior liens. Further, participating loans may be structured as real estate-based debt, but not directly collateralized by the underlying real estate. In such structures, the participating loans are secured by a pledge of the borrower/sponsor’s ownership interest in the entity that owns the underlying real estate. If the borrower defaults on a participating loan secured by equity in the entity that owns the real estate, the holder of the participating loan has the right to foreclose on the pledge of the ownership interests of the entity that owns the underlying real estate and take over the ownership of that entity. That would result in the ownership of the underlying real estate subject to any real estate secured debt.
Because of the equity-like participating returns, participating loans are sometimes compared to preferred equity, which is a class of ownership senior to common equity. The primary differences between participating loans and preferred equity are that preferred equity (1) is not a loan, and (2) continues to participate in the ownership of the real estate once the principal amount is repaid. Conversely, once a participating loan is repaid, the holder of that loan no longer participates in any gain or appreciation in the underlying real estate. As a result, participating loans result in a lower cost of capital to the borrower. While having greater risk than senior secured debt, because of its priority over equity, the holders of participating loans generally have less risk than equity holders. As a result, the holders of participating loans may obtain higher returns than real estate secured debt or mezzanine debt and may be in a more protected position than equity.
Equity – Preferred and Common
Historically, the Fund has not invested in preferred or common equity because of the potential impacts of unrelated business taxable income (UBTI), however, the Fund may invest in preferred and common equity in the future. See ERISA Considerations in the Memorandum.
Common equity typically has the highest potential upside in a real estate transaction compared to other layers of the capital stack. If a transaction is successful, the common equity holders may receive large returns from the appreciation in value. In exchange for the greater upside potential, common equity typically carries higher risk than other components of the real estate capital stack. Common equity holders are in a first-loss position and could potentially lose all of their invested capital if the transaction is unsuccessful.
Preferred equity typically has rights, preferences and privileges which are superior to common equity. Preferred equity holders may receive preferred returns or distributions on their invested capital, which are superior and paid prior to distributions to the common equity holders. Further, preferred equity holders typically receive a return of their invested capital prior to the common equity holders. However, unlike debt, preferred equity is not a loan and holders of preferred equity may not foreclose on the real estate or ownership interest in the entity that owns the property. Conversely, preferred equity holders may have the right to take control of the entity that owns the real estate over the common equity holders upon the occurrence of certain defaults.
While the form and structure of preferred equity will differ, the general features of preferred equity include (1) the ability to obtain preferred returns and distributions with higher annualized returns than senior secured debt, (2) the ability to receive a ratable share of the gain in the underlying real estate, resulting in higher annualized returns, (3) unlike participating loans which cease to participate in future gains once repaid, preferred equity holders continue to participate in future income and gains until the property is sold or their equity interests are retired, (4) it is subordinate to the debt, resulting in higher risk than the debt, and (5) it is senior to common equity, resulting in lower risk than common equity.
Agency Financing Structure
Fannie Mae
Seniors Housing and Assisted Living Facility Loan Program Overview
Eligible Properties: Seniors Housing and Healthcare Real Estate
- Independent living properties
- Assisted living properties
- Alzheimer’s/dementia Care
- Newly constructed and stabilized Seniors Housing facilities, as well as campuses containing skilled nursing beds on a case-by-case basis
- Properties must have at between 5 and 50 units
- Properties must be stabilized, and can include manufactured housing communities
- For acquisitions or refinances, loans must be first lien
- Eligible borrowers must be single asset entities
- No properties with entrance fees are allowed
- Owner/operators must have at least 5 years successful experience in senior living communities, and must have owned/managed 5 or more senior housing properties
Loan Amount: Minimum of $5,000,000, with exceptions on a case-by-case basis
Loan-To-Value: 75% (80% for fixed rate tax-exempt bonds)
Rate Structure: Fixed and adjustable rate options available
Term: 5 to 10 years (up to 30 years for fixed-rate loans)
Amortization: Up to 30 years
Recourse: Non-recourse with standard exceptions, including for fraud and misrepresentation
Prepayment Penalty / Lockout: Fixed Rate: Yield Maintenance or Standard Defeasance Graduated Prepayment Premium Floating Rate:12-month lockout followed by 1% prepayment penalty to open window
Advantages:
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Competitive interest rates
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Most loans are non-recourse
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Flexible prepayment options
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Supplemental financing is allowed
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30- 90 day rate locks available (early and extended rate locks are also available-- early rate locks allow borrowers to lock the rate between 45 and 365 days before closing)
Disadvantages:
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Requires third-party reports including an Appraisal, Property Condition Assessment, Zoning, Termite, Flood and Seismic reports (for properties in specific areas), a Phase I Environmental Assessment, and a Seniors Housing Liability Assessment Report
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Replacement reserves are required ($300/unit per year)
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Typically requires 90% economic occupancy for 12 months (for independent living facilities) or 15 months (for Alzheimer's/Dementia care or Skilled Nursing properties), though this may vary
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Typically requires $15,000 application deposit and $3,000 non-refundable processing fee
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Typically requires a 1% origination fee
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A 2% rate lock fee is required (refundable at closing)
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Commitment fees may also be charged
Multifamily Loan Options Include:
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LTVs from 80%
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Competitive fixed rates
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Amortizations from 30 years
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Nonrecourse
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45-day closings
Freddie Mac
Seniors Housing and Assisted Living Facility Loan Program Overview
Eligible Properties: Seniors Housing and Healthcare Real Estate
- Independent living properties
- Assisted living properties
- Memory care properties
- Properties with a limited amount of skilled nursing (maximum 20% of NOI)
Loan Amount: Minimum of $5,000,000, with exceptions on a case-by-case basis
Loan-To-Value: Maximum 75% of appraised value, maximum of 80% for tax-exempt bond finance transactions.
Rate Structure: Fixed and adjustable rate options available
Term: 5 to 10 years (up to 30 years for fixed-rate loans)
Amortization: Up to 30 years
Recourse: Non-recourse with standard exceptions, including for fraud and misrepresentation.
Prepayment Penalty / Lockout: Yield Maintenance or Standard Defeasance (Fixed Rate) Floating Rate: 12-month lockout followed by 1% prepayment penalty to open window Four prepayment option for floating rate loans
HUD
Seniors Housing and Assisted Living Facility Loan Program Overview
Programs:
- HUD 232
- HUD/FHA 223(a)7 Refinance
- HUD 202
Eligible Properties: Seniors Housing and Healthcare Real Estate
- Age restricted housing
- Independent living properties
- Assisted living properties
- Medical office buildings
Loan Amount: $1,000,000 To $50,000,000
Rate Structure: Fixed and adjustable rate options available
Term: Up to 35 Years
Amortization: Up to 30 years
Recourse: Non-recourse with standard exceptions, including for fraud and misrepresentation.
Prepayment Penalty / Lockout: Standard option is declining prepayment penalty through year 10 and then freely pre-payable thereafter. Flexibility on prepayment structure exists.
Bank
Seniors Housing and Assisted Living Facility Loan Program Overview
Eligible Properties: Seniors Housing and Healthcare Real Estate
- Independent living properties
- Assisted living properties
- Memory care properties
- Properties with a limited amount of skilled nursing (maximum 20% of NOI)
Loan Amount / Loan-To-Value: Up to 75% for Purchase / 70% on Refi
Rate Structure: 250-350 bps over index
Term: 5, 7, 10 yr. fixed / 20 yr. fix to float also available
Amortization: 25-30 yrs. and IO also available
Recourse: Non-recourse with standard exceptions, including for fraud and misrepresentation.
Prepayment Penalty / Lockout: Step down: 5,4,3,2,1
Insurance Company
Seniors Housing and Assisted Living Facility Loan Program Overview
Eligible Properties: Seniors Housing and Healthcare Real Estate
- Independent living properties
- Assisted living properties
- Memory care properties
- Properties with a limited amount of skilled nursing (maximum 20% of NOI)
Loan Amount / Loan-To-Value: Up to 70% higher on exception basis on purchase / 65% on Refi
Rate Structure: 300-350 bps over index
Term: 10 Yr. fixed 5, 7 and 15 yrs. w/ balloon or 20 & 30 yr. self amortizing
Amortization: 25-30 yrs. and IO also available on exception basis
Recourse: Non-recourse with standard exceptions, including for fraud and misrepresentation.
Prepayment Penalty / Lockout: Yield Maintenance, Step Down or Standard Defeasance
SBA
Seniors Housing and Assisted Living Facility Loan Program Overview
Programs:
- SBA 504
- SBA 7(a)
Eligible Properties: Seniors Housing and Healthcare Real Estate
- Independent living properties
- Assisted living properties
- Memory care properties
- Properties with a limited amount of skilled nursing (maximum 20% of NOI)
Loan Amount / Loan-To-Value: Up to 70% higher on exception basis on purchase / 65% on Refi
Rate Structure: 300-350 bps over index
Term: 10 Yr. fixed 5, 7 and 15 yrs. w/ balloon or 20 & 30 yr. self amortizing
Amortization: 25-30 yrs. and IO also available on exception basis
Recourse: Non-recourse with standard exceptions, including for fraud and misrepresentation.
Prepayment Penalty / Lockout: Yield Maintenance, Step Down or Standard Defeasance
Frequently Asked Questions
Which Seniors Housing property types does Wilshire finance?
What’s the difference between an age-restricted property and Seniors Housing?
What loan product offerings are available for Seniors?
How is the Seniors team at Wilshire set up?
Who can deliver Seniors Housing loans to Wilshire?
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Related Transactions




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(866) 575-5070
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© 2008-2021 Wilshire Finance Partners, Inc. All Rights Reserved.
DISCLOSURES:
Loans: The information contained on this website and the related communications are directed to real estate professionals only. The information contained on this website and the related communications are not a loan approval, agreement or commitment to lend. The delivery or circulation of any attached documents is for discussion purposes only and Wilshire Finance Partners, Inc. may make substantial and material revisions to the same. Rates and terms are subject to change without notice. Loans made by Wilshire Finance Partners, Inc. California Department of Real Estate Broker License number 01523207 and California Department of Financial Protection and Innovation, Finance Lenders License number 603K729; WFP Income Fund, LLC, California Department of Financial Protection and Innovation, Finance Lenders License number 603K726; WFP Opportunity Fund, LLC California Department of Financial Protection and Innovation, Finance Lenders License number 603K725; or WFP Income Fund REIT, LLC, California Department of Financial Protection and Innovation Finance License number 60DBO-99184. •Equal Opportunity Housing Lender•
Investments: The information contained on this website and the related communications are not an offer to sell or the solicitation of offers to purchase the securities of the WFP Income Fund, LLC, the WFP Income Fund REIT, LLC, the WFP Opportunity Fund, LLC, loan or trust deed investments, participations or other securities offered by or through Wilshire Finance Partners, Inc. (individually and collectively, the “Securities”). The purpose of this website and the related communications is to provide an overview of the respective Securities and their private placement. Persons interested in learning about the Securities and their private placement will be provided with the respective Private Placement Memorandum (inclusive of exhibits thereto and any supplements, the “Memorandum”), which provides a description of the Securities, the terms of their private placement, a discussion of risk factors, a copy of the limited liability company operating agreement for the respective fund (as applicable), a subscription agreement and other information related to the Securities.
This website and the related communications contain certain forward-looking statements regarding the Securities and the investment objectives and strategies of each of the Funds. The forward-looking statements are based on current expectations that involve numerous risks and uncertainties which are difficult or impossible to predict accurately and many of which are beyond the control of Wilshire, as the manager of the Funds. Although Wilshire believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Wilshire, any placement agent, or any other person, that the objectives and strategies of the respective Securities will be achieved.
Investments in the Securities may only be made solely by accredited investors (which for natural persons, are investors who meet certain minimum annual income or net worth threshold), who are provided with the Memorandum and who complete, execute and deliver the subscription documents included therein, and otherwise comply with the requirements contained therein. Each of the Securities is being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act. Neither the Securities Exchange Commission nor any other state securities commission or agency has passed upon the merits of or given its approval to the Securities, the terms of the offering, or the accuracy or completeness of any offering materials. Each of the Securities is subject to legal restrictions on transfer and resale and investors should not assume they will be able to resell the Securities. Past performance is not indicative of future results. Investing in any of the Securities, including the Funds, involves substantial risk, including loss of investment, and is not suitable for all investors.
To the extent there is any inconsistency between the information provided in this website. The related communications and the Memorandum, the information contained in the Memorandum shall control.
Other Notices: Information provided by Wilshire Finance Partners, Inc., its affiliates and their respective directors, managers, officers, employees and agents is not to be interpreted as legal, tax or accounting advice. Wilshire Finance Partners, Inc. is a debt collector and is required by law to inform you that this communication may be an attempt to collect a debt and any information obtained will be used for that purpose. Wilshire Finance Partners®, Proven Professional Performance®, Stable Income & Principal Protection®, and The Alternative Solution® are registered trademarks of Wilshire Finance Partners, Inc. © 2021 Wilshire Finance Partners, Inc. All rights reserved.