Takeaways from eCap24, Spring NIC and MBA CREF Conference

VIUM Capital’s partners and team members noted insightful experiences at the 2024 eCap Healthcare Summit, Spring NIC, and Mortgage Bankers Association (MBA) CREF Conference, walking away with an abundance of updates and information that will equip the leadership team to better serve and support the seniors housing and healthcare industry. In addition to the information gained, Tony Ruberg, Senior Managing Director at VIUM, represented the firm as a panelist at eCap24, and Steve Kennedy, Executive Managing Director at VUM, represented the firm as a panelist at Spring NIC. Following are some key takeaways from the conferences.

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Medicare Advantage Penetration, Local DOH Engagement, and Star Ratings

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Q: What were the featured points from your panel session: Where to Grow - Evaluating a New State?

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Tony Ruberg: Scale, boots on the ground, understanding Medicare Coverage Database (MCD) rates, and more were all discussed. Following are some specific takeaways:

• Medicare Advantage penetration: Marc Zimmet highlighted this as one of the most important things to consider. In his opinion, the higher penetration the better because it’s already baked into the deal. If a state has low MA penetration, he believes that will continue to grow, driving down revenue on that front by about 1/3 of traditional MCR rates. 

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• Meeting with local DOH: Alan Schabes from Benesch is a regulatory attorney and he strongly encourages buyers entering new markets to meet with the local head of DOH and create a personal relationship. He said this piggybacking off my emphasis on borrowers getting to know the association heads and state-level leadership. Our borrowers want to have those relationships if/when survey issues occur.

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• Star Ratings: This was surfaced as it relates to the massive differences that exist across state lines (and even within states) as it relates to star rating inconsistencies. For good or for bad, star ratings are becoming more relied upon for a variety of measures. It’s a continued concern for operators. For example, the private room add-on or a vent bed add-on in Ohio will not be paid if a facility is a 1-star, SFF candidate or SFF building. If something like that were implemented in Kentucky, just about every SFF and SFF candidate in that state is located in Louisville metro. It's difficult to believe there are no other buildings in Kentucky with clinical issues, but that would have a material negative impact on facilities in the area of that local survey office. That was the example that was brought up in a post-panel discussion with a few operators. 

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Insights into Action at the NIC Spring Conference 2024

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NIC leadership continued to emphasize the challenge, and associated opportunities, of “The Forgotten Middle.” VIUM’s Steve Kennedy participated on an Innovation Lab panel that focused on important considerations for developing more affordable seniors housing projects. Best practices included ensuring a low project basis, involving aligned sponsor and operator teams that have proven experience with affordable products, and leveraging governmental related programs including HUD 232,Low Income Housing Tax Credits (LIHTC’s), and Medicaid-waiver.

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Participants agreed that there is no one-size-fits-all strategy, as solutions are more state specific given various Medicaid programs, LIHTC Qualified Allocation Plans (QAP’s), political leadership, and demographics. However, the opportunity is massive for developers / operators who can “crack the code,” as baby-boomers age and Americans are saving less.

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Kass Matt made note that with interest rate volatility, the overall shape of the yield curve and tightening of banks and agencies (FNMA/Freddie) continues to hinder bridge lending access for many sponsors, especially in seniors housing. Given the volume of debt maturities forecast for 2024 and 2025, there is general concern about near term access to capital for all but the strongest sponsors.

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In addition, Scott Blount noted a difference in the energy and overall atmosphere among the attendees, which he relates to a softening or reversal of the market dislocation between buyers and sellers and borrowers and lenders. Expectations from all parties seem to have been realigned to market realities - higher for longer and tightening credit box for lenders. 

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Understanding the Global Economic Impact on Commercial/Multifamily Finance in 2024

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VIUM’s Steve Kennedy, Kass Matt and Alison Lemle attended the MBA CREF Conference and responded to the below questions from the event.

Q: What insights were gained regarding the global economy impact on commercial/multifamily finance in 2024?

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Keynote speaker Mohamed A. El-Erian, Chief Economic Adviser of Allianz and frequent guest on CNBC and Bloomberg, forecasted that the 10 year Treasury should settle in near 4.00% - 4.25% for the next few years, with the Fed Funds Target Rate gradually decreasing to 2.50% - 3.00%. 

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“El-Erian characterized the US economy as uniquely resilient, especially when compared with economies in other developed countries in Europe.” - Steve Kennedy

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Although it’s a presidential election year in the US (and there are 50 presidential elections around the world in 2024), the result of any election doesn’t even make El-Erian’s top three concerns.

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Tune in to VERSED Podcast with Bob Kramer to hear a deep dive into the presidential election campaigns and what the candidates’ priorities will be.  

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Observations on Tech, AI, and the Future of CRE Financing

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Q: What are your takeaways from discussions regarding tech, AI and the next generation of CRE financing?

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CRE lenders are adopting various forms of AI to automate financial spreading, loan monitoring, and other repeatable functions. Best practices include having a clear AI project champion within the lending company, maintaining flexible terms when renting AI software, and focusing on specific, measurable productivity gains within a process. Lenders that can appropriately adopt and implement AI should be able to more efficiently process the customer’s application and better track underlying property performance.

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Commercial Real Estate Finance: Trends, Challenges, and Opportunities in 2024

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Q: Recap the discussions held surrounding lending in a challenging financing environment.

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• Commercial / multifamily borrowing increased by 13% from 2023 Q3 to Q4, but was still down 25% compared with Q4 2022.

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• 20% of the outstanding $4.7 trillion in commercial mortgages is set to mature in 2024, a 28% increase from the volume set to mature in 2023.

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• Proposed rules regarding bank capital levels, known as Basel III Endgame, would be a major blow to bank commercial real estate finance, as big banks would need to increase their capital reserves by nearly 20%.

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• HUD healthcare leadership provided an update on HUD 232 production. Project application submissions are starting to increase given the Medicaid-rebasing beginning to flow through project income statements and long-term rates settling down over the last few months. The HUD queue is at risk of growing, motivating potential borrowers to submit applications when their respective project is ready.

At VIUM Capital, we're committed to staying ahead of the curve and delivering tailored solutions that meet the evolving needs of our clients. Reach out today and discover how we can turn these takeaways into actionable strategies for your next venture. Let’s work together.