Cambridge Chairman Says Healthcare Borrowers Not Unduly Pessimistic as Credit Crisis Worsens

CHICAGO, IL--Senior housing/healthcare borrowers have mentally adjusted to the reality of a credit crunch, and worry about deteriorating economic conditions like everyone else.

“No one doubts that the months ahead will be challenging. But we’re not finding that healthcare providers are unduly pessimistic about the industry’s short- or long-term prospects,” says Cambridge Realty Capital Companies Chairman Jeffrey A. Davis. (top right photo)

Cambridge is one of the nation’s leading senior housing/healthcare lenders with more than 300 closed transactions totaling more than $2.75 billion since the mid-1990s. Davis says his observations are not scientifically based on survey data but on informal conversations with hundreds of participants attending industry trade shows in recent months.

“I think it’s fair to say that innovation continues to take place in the industry and that the mood of healthcare providers is more upbeat than might be expected,“ he said.

Hymie I. Barber, Managing Director of Catalyst/Cambridge Healthcare Finance, the company‘s West Coast affiliate, points out that conferences on the West Coast have been well attended with “high quality” participants.

“The market remains healthy with few defaults. But borrowers are more sensitive to the need to have certainty of loan execution, and are looking to government-insured financing options to achieve this end,” he noted.

Davis points out that low borrowing costs have been a factor in helping borrowers maintain perspective in a tight credit market. If not ebullient, borrowers today have reason to be optimistic with rates possibly as low as they’re going to get in the current cycle.

“The Fed has signaled that it doesn’t intend any more rate cuts at this time. We continue to strongly urge our clients to take advantage of the opportunity to lock-in today’s low rates,” he said.

The Cambridge Chairman notes that it’s now been almost a year since the capital markets began to become aware of problems developing in the subprime mortgage segment.

Since last summer, a number of capital sources have dried up, but interest in senior housing healthcare loans is not off substantially from levels posted during the previous year, when everyone was blissfully unaware of the gathering capital market storm clouds, he observes.

For a 12-month period ending in May 2007, Cambridge reviewed 409 loan origination requests totaling $5.2 billion. For the same period ending in May 2008, origination requests were down 12.2 percent, to 359 requests, and dollar volume was $4.78 billion.

Davis says lenders close a relatively small percentage of origination requests received, but the numbers are interesting to track as an indication of market directions and borrower interest.

“Given all the bad news the capital markets have absorbed, one might anticipate that enthusiasm would wane a lot more than it has,“ he said.

Contact:

Evan Washington, Phone: (312) 521-7603. Fax: (312) 357-1611. E-Mail: ew@cambridgecap.com