Regarding capital markets
Some thoughts on asset-based financing and private equity
| Asset-based financing We have had a good refinancing result due to both the quality of our assets and financing relationships, as well as relatively conservative loan-to-value ratios. In addition, the fact that the fundamentals of the healthcare industry are holding up much better than those that drive other real estate asset classes didn't hurt either. That being said, the asset-based lending market continues to be a very difficult one. Based on relative terms, loans for higher quality assets are providing for less proceeds, higher interest rates and fees, greater levels of guarantees and much more stringent covenants. In addition, the same characteristics apply to the financing for new development transactions, except that they are exacerbated. Banks in general are very selective, generally making loans to only their best customers. My sense is that smaller regional banks were more willing to make loans to new borrowers; however, it appears that many of those sources have dried up as well. Size was also a threshold for a period of time. $20 million loans seemed to be the magic number ... anything less than that was clearly doable. Again, my sense is that size is no longer an issue; money is simply available on a very limited basis. Private equity After attempting to find new capital sources over the last 18 months with little or no success, things seem to be loosening up a bit. Although the spread between buyers' and sellers' expectations related to property valuations are still wide, they certainly seem to be much closer than they were three to six months ago. We have been out seeking private equity over the last several months in earnest and sources are actually interested in meeting and talking about various pools of capital that they have available to invest. We have even received some unsolicited inquiries about investing in our business. Again, I believe that this has a lot do with the fact that we are in the healthcare sector which has fundamentally held up much better than others. I also believe that investors have been "sitting on the sidelines" waiting for "great deals" that have yet to materialize. This coupled with the fact that there is now talk of moving out of the recession could be forcing investors to reexamine the timing of getting back into the game. | Joe Kurzydym Tags: Asset-based |
