October 2014

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Although healthcare properties have historically provided the smallest share of collateral used for backing CMBS transactions (currently only 0.47%), according to the most recent report from Moody’s Investors Service, “healthcare edged out all other real estate asset classes as the worst-performing property type in Q2 2014.”  This is a stark turn for the sector.  Between 1994 and 2013, healthcare, as a CMBS asset class, had the highest months to liquidation rate at 52.06 days, as compared to 26.71 days for hotel properties, 23.42 days for retail properties, 22.17 days for multifamily properties, 20.1 days for industrial properties, and 20.51 days for office properties.  To be fair, a major reason for the poor Q2 healthcare figures was the inclusion of the abnormally large “105% loss severity on the Senior Living Properties Portfolio, which liquidated with a $117.7 million loss from the GMACC 1998-C1 transaction.”  However, although an outlier due to size, the Senior Living Properties Portfolio insolvency was linked to changes in Medicare and Medicaid reimbursements, a common refrain in the healthcare industry today attributed by many (in varying degrees) to the implementation of the Patient Protection and Affordable Care Act.  (more…)