The Northwind Group announced Thursday the closing of its second health care debt fund, which raised $342.5 million and exceeded its $250 million target. About 70% of the capital is expected to go toward financing skilled nursing assets, a sector the company’s leaders described as more stable and rebounding amid limited supply.
Less than 30% of the funds are expected to be allocated to senior housing, Ran Eliasaf, managing partner and founder of the Northwind Group, told Skilled News’ sister publication, Senior Housing News.
Besides limited inventory, the preference for skilled nursing is also due to its necessity-driven nature, in contrast to senior housing, which faces oversupply issues and slower leasing, Eliasaf said.
“[U]nlike senior housing, where there’s really no limits on supply, the supply side on the skilled nursing side – at least in the states we’re focused on – is more limited,” he said.
Other factors at play for Northwind’s prioritizing of skilled nursing stem from the differences in the financial performance of the two asset classes.
“Senior Housing has been lagging a bit in leasing and overall performance,” he said. “Skilled nursing has [been] very stable, even through Covid … It’s a highly complex operational environment, but [has seen] a very steady rebound.”
The Northwind Group’s investment strategy focuses on regional operators with deep local market knowledge, avoiding large-scale, multi-state operators. This regional focus has been successful because these operators can build strong community ties, which is crucial in the senior housing sector.
The company’s strategy to focus on skilled nursing has reaped financial rewards.
“If you look at our credit book ever since we started lending in 2019 in this strategy, we don’t have a single loan that missed a single monthly interest payment. And I think that’s quite unique in private lending and credit,” Eliasaf said.
Moreover, the skilled nursing sector has been less impacted by interest rate fluctuations compared to senior housing, which behaves similarly to multifamily properties in terms of market performance, he noted.
And even though over the 12 to 24 months, Northwind plans to continue investing primarily in skilled nursing, it is keeping a close eye on the senior housing market for improvements, especially in occupancy, he added.
Plans for a third debt fund
Looking ahead, Eliasaf did not confirm plans for a third fund but suggested it could begin once the current fund is 80% to 90% deployed, with a focus on states with stable Medicaid policies and managed supply, such as Ohio, Florida, and Virginia.
Northwind Group’s healthcare credit platform provides structured financing and bridge-to-HUD loans secured by income-producing portfolios of skilled nursing and senior housing properties, acquired by leading owner/operators focused on high-barrier-to-entry markets with strong demographics and supportive healthcare policies.
“The final close of NHDF II capital raise represents a significant milestone for our health care credit platform and is our largest fund to date in the strategy,” Eliasaf said, adding that Northwind provides acquisition-bridge capital to providers that emphasize patient care, strong culture, and innovative clinical technologies.
Since launching the Northwind Group’s health care platform in 2016, Northwind has been involved in providing $4.6 billion in financing to 423 skilled nursing and senior living assets across 26 states with over 48,000 beds/units, the company noted in a press release.
“Within the U.S. health care value chain, senior living residences and skilled nursing facilities serve as essential care settings,” Jonathan Slusher, partner and head of senior living, said in the press release. “Each location is a critical economic and health care hub for the residents, team members, and the community in which it serves.”
