Cambridge Capital's Davis Says Difficult Times for Financial Markets Create Opportunity for Senior Housing and Helathcare Borrowers

FHA-Insured HUD Loans Remain Rock-Solid in Tumultuous Environment

CHICAGO, IL--Dramatic moves by world financial leaders appear to have staved off a meltdown of the global financial system, but economists broadly agree that what’s ahead for the economy isn’t all that rosy.

“By most accounts, the U.S. already is in a recession that many believe could be long and protracted. The freeze gripping the banking industry is beginning to thaw but it will take time for the capital markets to begin functioning in a normal way,” cautions funding expert Jeffrey A. Davis. (top right photo) “We’ve pulled back from the precipice, but a host of other problems remain,“ he observes.

Davis is Chairman of Cambridge Realty Capital Companies, one of the nation’s leading senior housing/healthcare lenders with more than $2.75 billion in closed transactions since the mid-1990s. The company has three distinctive business units: FHA-insured HUD loans, conventional financing and investments, and acquisitions.

“At this time, many traditional lenders are out of the market. Senior housing/healthcare borrowers are relying primarily on government-insured programs or local and regional banking contacts to meet their funding needs.

“As anticipated, FHA-insured HUD loans have been rock-solid in the current crisis, with rates near historic lows. Conventional loans have and will continue to be adversely impacted by developments in the capital markets, but remain a viable option for some borrowers,” he noted.

Davis points out that effective interest rates for conventional loans have increased in recent weeks, while loan-to-value ratios have moved in the opposite direction.

(Pinecrest Care Center, DeKalb, IL, middle right photo)

As the financial system began to freeze up, bankers became increasingly more conservative in their overall activities.

“To avoid surprises, owners are well-advised to spend more time communicating and talking with their bankers," he believes.

"Because new developments can occur swiftly in the current cycle, it’s important for owners to be aware of the condition and capital level of their banking resources. There’s also a need to observe service levels and the way banks respond to customer needs,“

Davis says the good news for borrowers is that with the economy weakening, the Fed isn’t likely to increase short-term interest rates any time soon. The bad news is that the Fed’s ability to influence interest rates one way or another hasn't been all that impressive in the current cycle.

(The Pavilion at Crossing Point, Orlando, FL, bottom right photo)

The Cambridge chairman explains that popular HUD loans tend to mirror what’s happening with 10-year Treasury notes, while conventional commercial loans most typically are keyed to other benchmarks, such as the prime interest rate or the London Inter-Bank Offered Rate (LIBOR) index.

In October, 10-Year Treasury notes have fluctuated between 3.50 percent on October 7 to 4.04 percent eight days later on October 15. The prime rate remained at 5 percent but the one-month Libor rate was up more dramatically, rising to 4.17 percent on October 15 from 3.13 percent a month earlier on September 15.

“During periods of heightened anxiety, it’s not always easy to look ahead. But at some future time borrowers will probably look back on this moment in history as a good time to have secured financing at a relatively attractive rate near the low point for the cycle,” he observed.

For additional information, contact Cambridge at (312) 357-1601 or via e-mail at info@cambridgecap.com.

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