Capital improvements: more money is becoming available, especially for solid performers.(LTC Finance)

For operators who need capital, this is already a very good year. Whether the goal is refurbishing, expanding services or even purchasing new facilities, old and new funding sources are readily available--with terms that are especially inviting. Perhaps too inviting, those with long memories might caution.

Certainly there are signs that some established players--such as LaSalle Bank in Chicago and Sovereign Bank in Philadelphia--are gearing up in a big way to handle heavier loan volumes. "The majority of our business is in the skilled sector, but we are looking at an increased number of opportunities in assisted living and senior housing," says LaSalle's Michael Monticello.

In fact, many traditional lenders are bullish, notes Curt Schaller, director for the Healthcare Finance Group at Merrill Lynch Capital. High capitalization rates, solid operator performance and relatively decent reimbursement rates have made more lenders comfortable doing business in this sector, he says.

As a whole, the senior living industry has seen an approximate 15% increase in market capitalization--that is, net profit returns converted to a capitalized investment value--in the past six years, according to an update just released by the National Investment Center for the Seniors Housing & Care Industries (NIC).

NIC President Robert G. Kramer says the new information will help lenders and investors better understand the relative strength of the sector, especially when compared to others that haven't performed as well.

"With the growth of the seniors housing and care industry approaching the size of the lodging industry, it is becoming increasingly clear that this is a real estate class that should not be overlooked," Kramer added.

John P. Fogarty says institutional investors will have lots of company. The senior vice president and managing director for GMAC Commercial Mortgage's Healthcare Financing Group sees both traditional and new funding sources ramping up to serve the marketplace's capital needs. Among the latest arrivals: pension funds, foreign investors and private equity, firms.