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Commercial Department: Q&A: Chris Honn, Fannie Mae: September 2015


Q&A: Chris Honn, Fannie Mae

Chris Honn, seniors Housing Product Manager, Fannie Mae

Senior-housing market is coming of age

With the graying of America, senior housing is a tempting market for investors. But its components — independent-living, assisted-living and memory-care facilities — present unique regulatory and financing challenges. We talked about the senior-housing market with Chris Honn, who runs the senior-housing finance program for Fannie Mae.

You see this statistic a lot: 10,000 baby boomers are turning 65 every day. That indicates great potential demand for senior housing. Are providers keeping up with that demand?

The demographics are undeniable. There’s a tremendous amount of new development going on all over the country by various customers of ours, and prospects of ours. Generally speaking, the units being developed are being absorbed in a timely fashion. But folks that are 65 years old are still one of the primary marketing targets for the owner-operators in this business, because they may have parents who are 85-90 years old, and those are the folks that are moving into retirement communities that we finance. Not folks that are as young as 65.

How is the market affected by those demographic trends, such as increased longevity, and the idea that people want to stay in their homes as long as they can?

If you ask our customers, who own and operate retirement communities all over the country, who their biggest competitor is, they’ll generally tell you it’s the single-family home. Fannie Mae financed $1.5 billion in senior housing last year and $1.6 billion in 2013.

How is this year shaping up?

This year, due to various positive factors in the business, we thought that we could generate more production than we did last year. Unfortunately, we don’t announce where we stand year to date production wise, but I can tell you that this year is beyond our expectations.

What segments of the senior-housing market are growing faster than others?

The sweet spot for our product is independent living, assisted living and memory care, either as a combination of services in one location, or as a standalone property. The demand for memory care, or Alzheimer’s services, continues to grow substantially, and that’s probably the fastest growing part of our business. During the recession, independent living took the biggest hit in loss of occupancy. So assisted living and memory care were outpacing independent living for a few years in a row. Lately, independent living has emerged as the unit-type that has the highest occupancy.

What are the basic things that you would tell a commercial mortgage originator who is getting into this market for the first time?

This is a highly specialized industry. Senior housing is a highly intensive operational business that happens to take place inside commercial real estate; there’s no way around that. That’s the first thing lenders need to know. You need to understand what the different regulations are in each state. There’s this thing called licensure that exists in our industry that you wouldn’t have in an apartment building, or office, or retail strip-mall type of financing.

Also, because you’re taking care of residents on a daily basis, 24/7, you need to have a tremendously strong risk-management culture, and very comprehensive professional- and general-liability insurance coverage.

What characteristics do you look for in an operator of a senior-housing facility?

What we look for primarily is experience: Management experience at the management-company level, and the experience of the folks they hire that are out in the field taking care of the residents every day — folks like executive directors, caregivers, chefs, food-and-beverage managers.

Is there anything else you would like to add that’s relevant to commercial mortgage originators?

One last parting remark would be that the providers of senior housing have, generally speaking, far fewer permanent debt-solution alternatives than multifamily does, or hotel, or real estate owners do. So we’re in the market every day. We’re in all markets, all the time, every day, and we will continue to do that.

Chris Honn has been with Fannie Mae since February 2003 in various roles managing Fannie Mae’s senior-housing products. When he joined Fannie Mae, the senior-housing loan portfolio totaled$2.3 billion. As of March 31, 2015, the portfolio had grown nearly sixfold to $12.6 billion. Honn is a frequent speaker at industry events and is an executive board member with the American Seniors Housing Association. Reach him at (312) 368-6200.


Bill Lewis was editor of Scotsman Guide Commercial Edition. For questions about this article, call (800) 297-6061 or e-mail

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