Independent Living Facility Bridge Loans


Senior housing bridge financing (including independent living facility bridge loans) is becoming increasingly difficult to obtain because commercial real estate lenders and institutional investors continue to worry about "slop over" from the housing market.  They should be concerned.  As housing inventories swell and prices start to fall, the available capital for personal care (including residency in a senior housing project) is likely to decrease.  This makes new facility lease-ups even more fraught with market risk.  The solution to this is to increase the developer's financial investment leverage by increasing the equity capital in the transaction.  No consideration should be given to bridge loans unless the property is already open and operating at its maximum sustainable operating capacity (or occupancy in the case of independent living facilities).

We know, we know...  You don't want to get diluted.  We agree.  We can cushion the equity dilution by dividing the transaction into two (2) parts; the real estate holding company business opportunity and the ongoing facility operations business.  The investors get the real estate interests and the developer gets the operating business along with an earn-out strategy that would make most developers glow in the dark with envy.

Senior housing bridge loans (and mezzanine loans, for that matter) are currently being offered on a full-recourse basis, so if the deal goes south on the developer, the developer will be personally responsible for repayment; a very poor bargain to be sure.

When the markets tighten credit, the answer is always the same, increase your equity capitalization.  The Rainmaker structured finance consulting approach uses a 5-point approach to financing independent living facilities, assisted living facilities and other forms of senior housing - including entry-fee communities and CCRCs.  Our outcome and goals are based upon syndication support for the project.  The more support the investing-public gives the transaction, the less risky the transaction becomes for both the syndicate investors and the developer, with the ultimate goal being to eliminate the investors' risk exposure to a total loss of investment due to a foreclosure or bankruptcy.

In order of importance, the goals are:

  1. Syndicate enough real property interests to generate equity capital sufficient to close escrow on a construction loan (no regard given for the recourse issue here); then

  2. If the first level is achieved and the investing-public continues to purchase the real property interests, there will come a point in the sales process where there is sufficient sales proceeds to induce a commercial lender (or what amounts to the same thing) into funding a non-recourse construction loan; then

Continued on the next page...


About Rainmaker Marketing Corporation...

Rainmaker Marketing Corporation is a consulting firm that focuses on providing the due diligence services on a business to business (B2B) basis.  Rainmaker Marketing Corporation can trace its roots back to the late '80's and was formally incorporated in 1994.

Over the years, Rainmaker Marketing Corporation consultants have completed hundreds of assignments across the United States (45 states), Mexico, Canada and the Caribbean Basin.  RMC's new construction project due diligence documentation services have led to the successful development of income-producing properties valued (in the aggregate) in the billions of dollars.

Take a few minutes and learn more about RMC.  This website is designed to provide a wealth of planning information pertaining to the capitalization, operations, and organizational program tenets today's savvy entrepreneurial company must embrace for continued growth and success...


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Telephone:

281-537-1200

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15519 Dawnbrook Drive, Houston, Texas 77068

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