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AHLA's Speaking of Health Law
COVID-19 and Long Term Care Financing
Mary O’Kelley, Shareholder, Baker Donelson, speaks with Neil Gamss, Senior Vice President, HHC Finance, Luann Gutierrez, Managing Director, Greystone & Co., Amy Heller, President, Healthcare Lending, Congressional Bank, and Hedy Rubinger, Partner, Arnall Golden & Gregory, about the current state of health care financing and how terms have changed since pre-COVID deals. The podcast also discusses how lenders are underwriting new deals, on-site due diligence, how lenders might handle defaults in health care loans, and risk management practices. From AHLA's Post-Acute and Long Term Services Practice Group.
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Thanks for joining us. This is Mary O. Kelly. I am a shareholder in the Chattanooga, Tennessee office of Baker Donaldson and a member of our long-term care transactions team. I represent lenders and bridge mezzanine and other balance sheet loans, and I represent owners and operators and financing, leasing, acquisitions and dispositions of long-term care and seniors housing facilities. Um, we have assembled a great panel to discuss the impacts we're seeing on financing and the industry as a result of the pandemic. So I'm gonna introduce everyone. Our first panelist is Neil Gams. Neil is a senior VP at Hhc Finance, in addition to HH C'S regular HU lending. Neil is also the co-lead of the Capital Advisory Group that specializes in placing bridge me preferred equity and working capital loans with lenders and clients across the country. Since, uh, co-founding the group four years ago, they have closed over 2.5 billion in arranged loans. Next we have Luann Gutierrez. Luann is a managing director at Greystone Servicing Company, where she leads the healthcare portfolio and bridge finance team for spilled nursing and seniors housing. Luann has been in the healthcare and seniors industry for over 21 years on the lending side with Greystone for more than 13 years, and GM a c commercial mortgage for eight years before Greystone. Prior to specializing in long-term care, Luann spent nine years in metal market lending, mortgage warehouse lending, insurance lending, corporate finance, and private banking. Our third panelist is Amy Heller. Amy is the president of Healthcare lending at Congressional Bank. Amy and her team of 17 experienced professionals are responsible for sourcing, underwriting, and managing loans in the healthcare industry with a strong focus on healthcare, asset based lending and real estate bridge to HUD loans. Since joining Congressional Bank in 2013, Amy has successfully built a portfolio of high quality healthcare loans with current loan commitments of over 400 million. And last but not least, we have he Rubinger. Hedy is a partner and chair of the healthcare practice at Arnold Gold and Gregory in Atlanta. She represents providers, investors, REIT developers, managers and lenders in the healthcare space. She provides counsel for all regulatory aspects of healthcare transactions and is actively engaged with federal and state regulators throughout the country. Eddie is a proud graduate of the University of Texas at Austin and Columbia Law School. So thanks very much to all of you for joining me today and let's jump right into our discussion. Neil, let's start with you and let's talk about what's going on in the market right now. Are deals sitting done, and who are you seeing that is open and closed and how terms have changed since pre covid?
Speaker 2:Thank you so much, Mary, for the introduction and thank you so much for the thoughtful question. So, uh, what's going on the market now? Uh, it's interesting because, you know, we've been telling clients and we've been speaking to a lot of clients on many different lenders, uh, that things are really changing week by week. Um, for the most part we have been closing deals throughout the crisis. So deals that were signed up pre covid, we managed to get closed, you know, during the Covid crisis. And then now once things seem to be hopefully normalizing a little bit, we're getting the opportunity to sign up new deals with new lenders and clients are once again looking at new acquisitions and refinances. Um, many, many lenders are open for business. Some lenders are on pause right now cuz they just wanna see what the long term effect, uh, um, of covid are on their current portfolio and how they're, because you know, things are still shaking out over there. But, um, there are banks that are still open for business for sure. Things, you know, deals that are being signed up right now are definitely different than they were pre covid. Uh, lenders are putting a much greater focus than they were before, I would say, on who they're lending to. So experience and personal balance sheet of the sponsors is incredibly important right now. Um, additionally deals that were, you know, large turnarounds that, you know, pre covid were getting done pretty regularly, whether they were expense turnarounds or even certain revenue enhancement turnarounds. Lenders are scrutinizing much more right now. Cause in an environment where, you know, costs are going up and staffing costs are going up and if supplies clusters are going up, um, it's a little bit difficult to make the case of, Hey, we're gonna get in there and start cutting X, y, and Z expenses. Um, leverage is probably down a little bit, but not drastically in what we're seeing in terms and spreads are probably a little bit higher to, uh, you know, to account for additional risk. Um, but, but for, for the right deal on the right market and the right sponsor, there are definitely lenders that are lending now, but that term sheet won't look exactly the way that it did before Covid, that's for sure.
Speaker 1:Right. Yeah, I, I think, um, that sounds consistent with what we're seeing over here. Luann, do you have any thoughts on that as well? How things are changing? And I know Greystone has, has definitely backed down a little bit from the bridge on the bridge side
Speaker 3:That Yes, that is correct, Mary. Um, we, um, are seeing, you know, many borrowers still are interested. Um, they're still out there looking for financing, but I agree with Neil in that we definitely, um, the deals that we have heard of that are getting done are at lower leverage and the pricing is going up. Um, the spread is definitely there. And then we definitely believe, you know, we have to definitely scrutinize the expense cuts, um, that people are proposing and especially on turnarounds as Neil alluded to as well. We definitely think margins are gonna be a little bit thinner than they were pre, pre covid. Um, I've also been speaking with, um, this week with our head of our HUD platform and he mentioned that, um, refinances are very active and loans are definitely getting done. Um, they are doing some new, um, loan request as well, but he also mentioned that HUD is requiring some additional level of analysis, uh, and as it pertains to Covid, um, and that, you know, they're wanting to know a lot of the details of how many cases do they have in the building, um, along this whole process. Are they increasing, are they decreasing, are they staying about level? They're just wanting to know what is the pol the property's policies and procedures as it pertains to Covid, um, how's it affecting their staffing cost? And there is supply cost. Um, so they're taking a much deeper dive than they used to previously. Um, not that HUD didn't do a good job, but they're just doing a little bit more in depth at this time cuz they're just wanting to make sure you know where the situation is at the property. Additionally, he said something new that HUD has never done before is that they have put a condition, a special condition in their firm, commitments that up until the day of closing, HUD reserves the right to be able to pull the commitment if they need to. And again, they're just very, uh, cautious right now. They're wanting to make sure that when they are making the loan for obviously a long term that they know, um, where the credit is at the time of closing. Um, he also mentioned that on the appraisal reports that he has seen recently, cap rates have gone up anywhere from 25 to 50 bibs. So he is seeing a little bit of a change in that regard as well. Amy, what about, um, congressional, I know you have indicated you guys have been pretty busy, but can you talk about what you're seeing as well? Sure. First of all, thanks Mary for having me today. Um, at Congressional, I I would say, uh, you know, Neil probably could have been my paid personal spokesman. Uh, we are very active, uh, on the, uh, accounts receivable financing side of the business. Uh, people are still looking for financing. Maybe they didn't have lines of credit in the past or maybe they're working on, uh, operator transfers, uh, and are looking for financing or just continuing along. Uh, we've closed a handful of bridge loans since the pandemic, but we did have to right size them a little bit in concert with our borrowers. Um, and I would say on the new loan transactions for real estate, you know, exactly what Neil said, we're looking, uh, if we're looking at'em, we're asking whether or not the price was a PREPA pandemic price or a post pandemic price. To the extent that there's not much of a differential, we're wanting to know why. Um, we think leverage should be a little bit lower, uh, than we had historically been lending. Uh, and I I agree, it's all about who you're lending to, what their experience in the industry is, what kind of a balance sheet they have. Uh, I think people, uh, are needing to put up more recourse to get deals done, at least here at the bank, um, and, and make sure that, uh, you know, they've got the liquidity to get them through whatever they need to get through. Uh, and when we're underwriting, we're underwriting, uh, with some assumptions on census decline and how are they going to get through and, and expense increases and, and making sure that the deal still makes sense, uh, even after being sensitized.
Speaker 1:Makes sense. Heti, are you seeing anything, uh, any different out there?
Speaker 4:Um, yes. I guess in a way I'm seeing, um, a few things with respect to deals that have been, um, closing over the past few months. I guess first and foremost, it seems like the hospice and home health deals, the non real estate based deals, are moving forward with a bit more. Um, you know, they're, they're getting signed, they're actually closing. Um, whereas I guess the first few weeks into the pandemic, we were sort of putting on hold and spending a lot of time as attorneys coming up with creative ways to, I guess not, you know, make sure that a deal, a deal stayed alive while everybody was assessing the new norm. But, um, u using a lot of creativity and provisions we put in a few months ago wouldn't even necessarily be applicable now as we've learned more about the virus and how it impacts healthcare, um, providers. Um, but, uh, so, so I'm definitely seeing a good bit of action with respect to non real estate. Then the other deals, and some of them have been quite large, where deals that were well underway and they were with parties that had already worked together previously. So there was a level of trust and um, I think we were continuing to see that. So deals with parties that had some knowledge of each other, some level of comfort separate and apart from just this one deal. And then I guess somewhat surprisingly, um, we've seen an uptick in skilled nursing facility deals just in the past, say, two weeks. And I think when I think about it, there's maybe a few reasons for that. Um, one, you know, there's been a good bit of CARES act funding that the skilled nursing facilities have been able to avail themselves of. Um, there's also government reimbursement that is, you know, certain to come in. Um, I would say once elective surgeries, um, start resuming throughout the country, then I think there's like a general consensus that census will increase. And then there's also a lot of transparency with respect to skilled nursing facilities. Like their COVID cases are, are reported. It's very clear to see where they are with respect to staffing, with respect to residents. Um, and now it's even gonna be on nursing home compare. So I think that might be where we see a bit more action just based on a case study of like the last 10 days in my one practice. So that, that's generally what I'm seeing.
Speaker 1:Yeah, that's really interesting. I know on, on our end at Baker Donaldson, we've seen the acquisition side be pretty active. It's just that the terms are a little different than they have been in terms of like the due diligence period is more open-ended and, um, you know, they might have a material adverse effect clause or something like that, that that deal with covid so that if there is a big surprise or a big shock that it's, it can be dealt with. Um, what are you seeing in terms of like creative workarounds for due diligence on deals like that since people can't enter the building and, you know,
Speaker 4:<crosstalk>? Exactly. So Mary, just what you were mentioning with respect to an extended period of time, we're definitely seeing, you know, longer periods for a variety of reasons. You know, one, just even dealing with like government offices, whereas some offices are moving along actually faster than they've ever have in the past, but some are closed and there's just not access to information that during a diligence period you might wanna get from the government if you're dealing with a, you know, a government regulated, um, industry. But, you know, at the beginning of the pandemic we were seeing a lot of, um, inquiries about, you know, if they're just about covid in general and infection control, but it wasn't, nobody really had their arms around it like they do now. Now the questions are a little bit more specific with respect to just general compliance with the guidelines that come from, you know, the states as well as the, um, you know, cdc d So we're seeing just more confirmation of that and more inquiry, like, just like actually where the purchaser is getting on the phone with the person, you know, at the seller that's in charge of infection control. Typically, that is not what happened in the past. Um, so anyway, that's really what we're seeing.
Speaker 1:Amy, how are you guys handling, you know, due diligence when you can't actually do in-person site inspections?
Speaker 3:So on the receivable side of the business, uh, Mary, we, um, we've generally done our, our diligence remotely, so that's pretty easy and, uh, seamless. And then on the real estate side, I think we've tried to closely follow, uh, HUD's lead on things like virtual tours, uh, and virtual, uh, third parties. Um, luckily the, the couple of deals that we've closed, uh, since the pandemic, we had completed all of our third parties ahead of time. Um, but, uh, but we're gonna have to be creative, uh, in this new world. Uh, things like, um, showing up and, and maybe walking the perimeter to the building while uh, an administrator or another staff member is able to lead, uh, via virtual tour. Um, it's really, uh, it creativity at its finest.
Speaker 1:Right. Yeah. I know Neil, um, you had indicated that radon is sort of the biggest challenge to that because there is no getting around being in the building. Um, what are you seeing hug you about that so far?
Speaker 2:So for now, exactly like Amy said, regarding the regular engineer report and the phase one environmental report and the appraisal, all of that has being done virtually. And we've done a bunch of, you know, I'm involved with a bunch of hot deals right now that we're doing that, and it's been going very, very well. Actually. All of the third party companies really stepped up and, and really found ways to innovate and, and it's working on the radon, like you said, you gotta get into the building to place those canisters. There is my understanding, um, for now we are submitting to HUD without radon results and they're okay with it, uh, with the hopes that before closing, you know, once we're in the closing process, we'll be able to get that rate undone as a spec special condition. Um, if things don't change and CMS doesn't allow visitors into the buildings for another nine months, we'll we'll see how that develops.
Speaker 1:Let's turn now to how lenders are thinking through the CARES Act program. Um, I know obviously the P P P loans have been very popular. Um, people have asked about the payroll tax deferrals and for a little while there are the Medicare advanced payments were of interest. Um, Amy, can you talk about how you guys are looking at each of those at Congressional?
Speaker 3:Sure. I mean, I think, you know, each one is a separate category, uh, that we need to think through, but it is as a holistic, um, view. You know, I think our operators are, are being very cautious, uh, in determining how to document and spend any money that they receive as a result of any of the programs. Nobody wants to run afoul of, of government regulations. Um, in terms of cares act money, uh, you know, under some of the, the stimulus payments, I think they are documenting and spending in accordance with, uh, how things are prescribed. Um, and uh, and there's really nothing specific I think that, that we're doing from our end as it relates to P P P loans. Uh, many of our clients did receive them if they believed they were eligible. Some through us and some through other sources. Um, and so we have, uh, or we are in the process of documenting all of those, uh, items as, uh, getting acknowledgements from our borrowers that it is an additional indebtedness, uh, to the extent that it's not, uh, converted to a grant, uh, and that the borrowers need to acknowledge that you know, it's debt, uh, that's not permissible under our loan agreements. Uh, and then, you know, to the extent that it's not all forgiven, we'll have to determine whether or not we wanna allow for them to keep that indebtedness outstanding or require them to repay that money. Um, in my mind, payroll tax deferrals, uh, particularly on, uh, our receivables loans are items that could come ahead of us in a liquidation scenario. So we're really not big proponents of the payroll tax deferral plan. Um, it's really not helpful and at the end of the day, uh, they're gonna have to pay this money back. And I think the last big one is, uh, the Medicare advance payments. Um, and really, uh, as you know, uh, that's just money that was received, uh, in advance of, uh, Medicare sort of as an emergency payment. And so that is going to have to be repaid on some sort of schedule. Uh, I've heard that it may be modified from what was originally published, but we've established a partial reserve on borrowing basis. Uh, and then we're building that reserve to ensure that the borrower has the money to pay back, uh, when the government comes to recoup it.
Speaker 1:That makes a lot of sense. Um, Luann what about Greystone? How are you guys looking at those and, and how are you thinking about these terms of, in terms of financial covenant calculations?
Speaker 3:Yeah, so we're pretty much doing what Amy outlined the same thing. We're just making sure, you know, especially as it pertains to the P P P loans that the borrowers do understand that that is directly prohibited in our loan doc. So we, you know, we're doing all the same things Amy mentioned. Um, we too are not in, um, favor of the payroll tax deferrals or the Medicare advanced payments just because those are monies that while you might get them now, they do ultimately have to be paid back. Um, so we're kind of doing, again along the same lines as what, uh, Amy outlined as far as covenants go. What we are doing, um, at this time is we have asked the borrowers to be sure that they designate those expenses, uh, on their operating statements as far as what pertains to uh, P P P expenses. Um, and you know, how their costs have increased, whether it's in salaries, whether it's in, uh, supplies, just the various, um, areas that it might affect. We've asked them to designate that. So then what we're planning to do, cuz we are starting to get April financials in, and we are starting to see this on their financials, um, we're looking at'em, um, in two, in a twofold, um, we're looking at where the covenants would come out, out with the expenses included, but then because we'll have them segregated, we're gonna look at'em below the line to see where the covenants are gonna come out, um, with with them excluded. Um, one thing that we are trying to keep in mind that I know the operators will have to also look to as well, is I do think some of these expenses, while they are somewhat inflated right now because this is all still new and still evolving, um, I think some of them will flatten out over time, but some of them are here to stay. I definitely know that the, um, supply expense for P P E is definitely gonna be there for the foreseeable future. So there's some level of we can't exclude the expenses completely because it is gonna be something that's gonna be an ongoing expense, uh, into the near future that we know of. So we are planning to look at'em in both, uh, respects. The biggest thing I can say is just have an open dialogue with your, um, borrower and lender so that we can both make sure we're on the same page because our goal is not to put them in covenant default, um, by any means, but we also wanna have that open dialogue door where we can talk through it and figure out a solution that works for both of us.
Speaker 4:Yeah.
Speaker 1:Anything to add on that, on the covenant population? Amy?
Speaker 3:No, I, I I think that, uh, Luann, you know, hit the nail on the head. I mean, we're just, we're waiting and seeing and, uh, we're gonna seek some guidance from, uh, you know, accountants as to how to appropriately account for all of this good stuff.
Speaker 4:Mm-hmm.<affirmative>,
Speaker 1:Um, HETI, any thoughts on that from your end on, on the
Speaker 4:Yeah, well I do, from really the regulatory perspective at Arnold, Goldman and Gregory, we have been advising, you know, clients throughout the country on the Medicare relief funds and they're very, very tricky, at least at this point. And ultimately there might be further guidance, but you know, right now, you know, each day that the HHS is releasing FAQs, um, you know, they're trickling out. So at this point in time there have been certainly winners and losers with respect to getting Medicare relief funds. There have been two tranches that have been released as well as, um, I guess a segments, um, strictly, um, allocated to skilled nursing facilities. So from what I can see at my vantage point, there have been real winners and then some losers, so thus far, um, but what's gonna be tricky is that the government has understandably made it very clear that there's no double dipping. So there will be borrowers that have a lot of money sitting in their accounts right now, but they are ultimately gonna need to return, but it might be premature to return it now because they don't yet know what their covid related expenses or lost revenue are gonna be. We're still in the middle of the pandemic. So doing a deal right now is especially tricky in being a lender right now is especially tricky cuz you have to figure out what to do with this like, bucket of money. And then to make matters a little bit more complicated is how is this all gonna be addressed if there's a change of ownership mm-hmm.<affirmative>, so you know, who keeps the money, what do we do because of automatic assignment of Medicare provider agreements and therefore liabilities, it's gonna get trickier before we figure it all out. So there is a lot of room for creativity. So for those of us that, you know, stay up at night and ponder all these things, it's very interesting. But it is, you know, to be the lender, um, or the purchaser, like, we just need to like do the best we can addressing these in the deal documents and thinking about and contemplating all this uncertainty,
Speaker 1:What are you seeing he from your clients who have already completed a purchase, but they're in the midst of a chow, so the money is going to the old operator. And my understanding is that HHS had initially indicated that you could transfer the old, the money from the old operator to the new operator, but now they've said no, the old operator has to send the money back. Is that your understanding as well?
Speaker 4:Right. Well at that this point in time, there was, I guess there's like a, a period of time that for which, if you did a chow, um, and I think the period of time really was 2019, that, um, that you really at this point, um, in an unfortunate situation because the seller, if you will, the outgoing operator is supposed to reject those funds and the acquirer is not yet eligible for them. So, um, I know there's been a lot of request including from Arnold, Goldman and Gregory to HHS to make that system a little bit more fair. So I think the advantage now is because we know of this uncertainty, we can address it more in the deal documents. Um, and so, you know, if if a if a provider's getting the money now, then we are in a better position to address it with a deal that's gonna be closing in the next few weeks. But, um, yeah, there still is uncertainty and my hope is that HHS will, number one, do the right thing and make it at least fair so that just because you had a chow in the last, you know, say 18 months or so, you're not in an, you know, you're not out of luck. Um, so anyway, that, but my understanding is the same as yours, Mary.
Speaker 1:Okay. Well I think, so there's one more program we haven't hit on and the CARES Act and just the main street lending program. Has anyone seen any interest in that, both on the bank side, Amy trying to, wanting to make the loans or Neil from the borrower side interested in getting them, anyone hearing yet?
Speaker 4:So, uh,
Speaker 3:I've had a couple people inquire about Main Street Lending. Um, I would say maybe one borrower initially was inquiring, although I, I think that they determined that they were eligible under P P P. Uh, another non borrower is interested in the program. But I, I would say that, you know, from what I've been reading that the program itself hasn't really launched well, uh, and hasn't really gained a lot of traction. So we, we may be working to process this one individual loan, but uh, it's certainly not the exuberance that we saw around, uh, P P P, um, from a borrower perspective.
Speaker 2:Yeah. For nothing like the PPP Madness that we all witnessed, that's for sure. Um, we, uh, I I have not even had one borrower that that inquired about it. Uh, I am in touch with a, a lender in additional to congressional that they're pretty, they're, they were preparing to really, uh, set up a real mainstream funding program, you know, uh, of staff and people that would be dedicated to it, but it didn't seem like they had much demand for it either in the healthcare space for sure.
Speaker 1:Let's turn now to what you're seeing on the servicing side. Are you seeing defaults start to pick up yet Luann and, um, requests for modific modifications and consents and how are you guys looking at that or expecting it?
Speaker 3:So, so far, um, all of our borrowers have been, have weathered the storm pretty well. A lot of it because of all the government, uh, subsidies, that's kind of helped everyone. Um, so I think that has what kept, has kept a lot of the borrowers, um, rocking along and not having any, um, concerns just yet. I do believe that perhaps once we start getting the may, june, july financials, I think that's where we're gonna start seeing some of the, the problems arise. Because by that point, most of the operators are going to have used up all of their P p P funds and some of the other monies that they've gotten from HHS and the various entities, government entities. So I, I do believe that at that time is when we're gonna see some challenges. Um, but today we, we have not received any, at least on our portfolio. Um, but I will say once that starts happening, cuz we, we realize that that's probably going to happen. And so we've already started, um, thinking about it, discussing it here internally and one of our main things is what I mentioned earlier, we just wanna have an open dialogue with the borrower. We're definitely gonna be discussing things with them. We're gonna try to find a workable solution that, um, is a win-win for both sides for us and for them because it's definitely not our goal to, um, cause the borrowers to, um, default on their loans or to see them struggle financially that that's not what our end game is here.
Speaker 1:Yeah. And Amy, it you've seen the same thing on your end?
Speaker 3:A hundred percent. I think, you know, Luann and I are both relationship lenders. Uh, and so, you know, here at Congressional we've always taken a stance of, of wanting to work with our borrowers and, uh, you know, get to the right place. I don't think it makes sense to, you know, do things like, you know, uh, get over zealous and charge default interest and, and impose fees and the, like, we're in a, a pandemic and we have to understand that our borrowers are busy fighting a battle every single day trying to care for, you know, our elderly population and they're less concerned about whether or not they meet our financial governances than they are about, you know, caring for, uh, residents and, and their staff members. So, you know, once we start getting, uh, you know, some of the April and may financial statements, certainly I expect to see some of the defaults. But luckily as Lua mentioned, everybody, uh, has, you know, a fair, most people anyhow have a fair amount of stim, stimulus cash, uh, and we haven't had any payment defaults or the like.
Speaker 1:That's good news. What about, um, Hetti, I wonder if you talked a little bit about what risk management practices lenders should be inquiring about and, um, you know, what they wanna see what they should be asking their borrowers to see to manage the additional risks from Covid?
Speaker 4:So yeah, so I think I alluded to it before, but, um, really it's all about infection control, which is, you know, certainly a topic that was, you know, probably on a checklist before, but not top of mind. So we're seeing, you know, just a, a great deal of focus and, you know, at the beginning of the pandemic there was great concern, you know, was there any covid in the building? You know, was it staff, was it residents? What were the deaths? Now, at least in portions of the country, it's really the norm that there has been some covid and we're talking about healthcare facilities. So whether we're talking about long-term care or hospitals or short-term hospital, it's across the board. You know, covid is prevalent in the healthcare space. So, um, but when you, when you get into diligence, it's really, you know, just asking the questions to see how did the operator respond initially. And you can really put together a timeline. Like it's, you know, the guidance kept changing, but you know, was was the, your the lender, excuse me, the borrower, um, or the potential borrower, you know, were they keeping up with it? And that's a good indicator of how they're gonna operate in the future as well. So that's where we're seeing the most focus. And as I mentioned as well, we're seeing, you know, extended diligence periods, um, but more information about employees. Um, you know, one unintended consequence of this is that actually staffing in many cases has been, um, there's been an increase in staffing and availability of staff. Um, as you know, the job market has changed. And so we're seeing a bit of more information in digging in on that in part because waivers were granted, so background checks that normally would've been completed and, you know, some steps were skipped along the way, and ultimately the regulators will most likely go back and fill those in as well as the operators should. Good practice. But it's important from a diligence standpoint to ask all those questions.
Speaker 1:That's
Speaker 4:Great. And then what is, and yes, and then yeah, just to say, and then from risk management, it's the same thing. Like just, you know, are they checking those boxes? Um, we're also seeing just one more thing that just came to mind, like addendum to admission agreements if we're talking about long-term care so that it's clear to all the parties involved. And if I was a lender, I'd be very interested in seeing, you know, does the borrower, have they taken the steps to make sure that admission agreements have been amended so that it's clear to everyone that Covid is out there. And you know, in some ways it's really at this point, you know, consumer beware. Like if you're coming in and admitting your loved one, you know, just some acknowledgement that you understand the risks of living in a congregate living setting.
Speaker 1:Mm-hmm.<affirmative>, and I know we've seen certain states have been working to, uh, you know, pass laws granting immunity to long-term care facilities based on covid. And, um, we'll see whether that becomes more widespread or on a federal level as well. But that would be a huge benefit to all of these operators for sure. What about, um, what does everyone think will, you know, this is crystal ball here, but what do you think needs to happen before some level of normalcy returns to the financing sector? Um, and, and what do you think in terms of lending and underwriting practices that, that have changed due to covid? What do you think will be lasting, um, in the industry once some level of normalcy returns? I think, let's see. You wanna start Neil, maybe with that?
Speaker 2:Yeah, for sure. So listen, what what we're seeing is that week by week, uh, things are getting, I guess a little bit more normal, uh, lenders we're seeing that the bridge lenders, for the most part, the banks for sure, they have to put out money. Um, and they're, I'm getting calls from lenders and although we discuss that terms are gonna be a little bit different perhaps, and that, and that they're gonna be a little bit more selective. They still are. They're, they're, they're still eager to put out money. That's o one thing that we're seeing. Um, in terms of, uh, when it's gonna get back to pre covid levels, obviously we could talk about, uh, vaccines. We could talk about the fact that there, there hasn't seems to been to have been much social distancing going on for the past two weeks for sure in the metro areas. And I'm, I'm very curious just in general to what that's gonna do to covid cases in 14 days from now. Mm-hmm.<affirmative>, I'm curious, uh, where things are at that point. Uh, in terms of underwriting, I think that what's gonna be kind of lasting, and this is something that HUD was always focused on, was three or four bed wards, uh, that got a lot of, uh, press that, you know, you, you, that, that, that residents are too close together and that they need to either have private rooms or double rooms, but too many residents in one room could be an issue for infection control. And I'm curious if other bridge lenders or non HUD lenders also, um, you know, are gonna start changing their policies based on that. Uh, and I think that we're gonna see lenders focusing much more on what the infection control, even post vaccine, what is the facility's infection control policy in case they're, this can be a one in 500 year virus, but what, what are we gonna do by the flu season next year? I think that's gonna have more, uh, scrutiny as well.
Speaker 1:That's great. Yeah. Uh, what about lianne? Do you have any thoughts on that?
Speaker 3:Um, yeah, I mean, I agree with Neil. I definitely think, you know, uh, vaccines are definitely gonna be a turning point for a lot of people to get comfortable, but what I kind of am liking this to is, uh, post nine 11, how the recovery took some time, people took baby steps and we're slow, but like Neil alluded to, banks need to lend money, uh, financial institutions, we need to get it out there. So I, I definitely think it's going to happen. Um, some of the different, um, webinars and discussions that I've watched or been part of, a lot of people are saying that they believe, um, that it won't be even semi-normal until first quarter of 2021. Um, there is some that think, well, we'll pick up and start having a little bit of normalcy in the fourth quarter of this year. But by and large, the majority that I, that at least I've spoken with or heard talk, have all pointed toward the first quarter of 2021. Um, and I think it's just because everybody's just trying to make sure, are we through the storm or is there, are we in a little lull right now? And then it's about to spike up again. So I think everyone's just being cautious because this is an unknown. As Neil said, this might be a one time and 500 year pandemic, we don't know. Um, and so I think that's what's keeping everyone, um, cautious is the unknown factor of this.
Speaker 2:The other, this is Neil again. Sorry. The, the other thing to mention obviously is, uh, unemployment numbers that came out this morning that were, I think a lot of people were surprised by that and in a, in a very good way, not close to the 20% that some economists were expecting. So
Speaker 3:I, I would agree with that, Neil, that I read that this morning too, and I was like, like, thank goodness. And I, and I will say in all of this, that's the one thing that is helping this industry, the long-term care in seniors, is because of all of the job layoffs and the companies that were having to, um, eliminate a few staff positions, that has helped us because that has improved our labor market because some of the groups that we were competing against for the same, um, labor force, they're having to lay people off. And that just makes it a better labor pool for us for this industry.
Speaker 1:Absolutely. And that's always such a, a challenge for our operators to try to keep the staffing ratios where they need'em. Amy, any thoughts from our crystal ball on your side?
Speaker 3:Uh, I think the biggest thing, uh, you know, in terms of, you know, what might change going forward, you know, in the short term, but certainly in the long term. I mean, I, I, I can see us all on every single one of our site visits, if we ever get back to in-person site visits talking about things like infection control show, introduce me to your, you know, head of, of infection control, which I think will be a new position that will be required. And tell me what your protocol is and how, how do you deal with outbreaks of anything? Um, you know, how do you cohort, how do you isolate things that maybe we weren't as focused on in the past? We're absolutely going to be focused on forever in the future.
Speaker 1:Absolutely. Heti, anything to add?
Speaker 4:Um, I guess what I would add is, yeah, this is, um, you know, it's, it's crystal ball for the future, but it's also current. So from a regulatory perspective, interestingly, this is actually a really good time in many jurisdictions to get a deal done. Um, so for example, I'll just give a few examples. Um, we have clients that have been wanting to expand their Medicare beds, expand their number of Medicaid beds with all of the various waivers that are in place right now, what would've otherwise taken, say nine months can be done in a matter of days. There's just a lot happening on the regulatory standpoint that can happen very quickly to then tee Tee, um, you know, a provider up for a transaction, so whether that be a refinancing or a sale, but there's a lot that's coming out of that. Um, similarly with respect to just chows, I mean, we, you know, process, we work on chows all throughout the country, so we have a pretty good vantage point to see that many, many, many states, whereas the process would say, take 60 days, it's taking like six, like everything is happening faster. And there's a few reasons for that. One, just the regulators are just home, like the rest of us, you know, working from their, you know, home offices and are just getting things done more quickly. Two, there's been some direction, um, to get things done more quickly, um, from, you know, their state or the federal guidance. And then, um, and then they're also coming up with a few workarounds so that, like in a few states, um, where, uh, a child survey is required, they're either postponing the child survey or they're encouraging to close with a bridge. So, um, so anyway, so I, that, that's just been from a regulatory perspective, like an interesting outcome of where we are right now.
Speaker 1:That is, yeah, that's the opposite of what I would've guessed would happen. I would think it would just make everything longer. Is that the case in more in the states that have not been as hard hit, the states like Massachusetts and Newark, and are those states
Speaker 4:Being, it's really across the board. It's really across the board. It's very, yeah, it's, it's, yeah, the northeast, it's the west coast, it's everywhere. It's certainly the southeast. So, and I mean, I think in part it's just maybe all of us might say we've been more productive. Like nobody's traveling. There's no commute time. I mean, so, you know, these are like human beings that are processing, um mm-hmm.<affirmative>, you know, these various filings. And so like the rest of us, you know, they're also, you know, just getting things done very quickly and efficiently.
Speaker 1:Well, let's hope that's a lasting, uh, effect of this<laugh>. Well, I guess thanks everybody for joining me. This has been really interesting and fun. Um, I hope you all enjoyed the discussion as well.
Speaker 4:Thank you, Mary.
Speaker 1:Thank you so much. Thanks, Mary.
Speaker 4:Thanks everybody.