EXPERT OPINION: A Conversation with Dan Biron

May 17, 2011

In this "Expert Opinion" interview, Dan Biron, managing director and head of health care platforms at Lancaster Pollard, discusses topical areas in seniors housing finance, specifically tax exempt bonds, HUD, and Fannie Mae.

Dan BironWatch the video      Read the transcript

Daniel J. Biron has nearly 25 years of health care finance experience, including 16 years in various finance capacities with national nursing home operators. His extensive background in health care operations brings a unique perspective to his position as Managing Director of Lancaster Pollard Mortgage Company’s health care programs.

Mr. Biron is responsible for overseeing the firm’s platform of services, including HUD and FannieMae mortgage programs, U.S. Department of Agriculture programs, and Lancaster Pollard’s proprietary programs. He also is responsible for facilitating loan origination and developing new financing options to ensure providers have access to the most creative and appropriate solutions.

Prior to joining Lancaster Pollard Mortgage Company, Mr. Biron was a Director at Credit Suisse within the Real Estate, Finance and Securitization Group, in which he was responsible for structuring and negotiating over $5 billion in public to private securitizations of skilled nursing and assisted living portfolios. Prior to Credit Suisse, he was Senior Vice President of Administration for Life Care Centers of America, a long-term care provider with greater then 300 facilities nationwide, Mr. Biron oversaw a $500 million bridge financing to HUD, the first of its kind in the HUD health care finance arena and numerous other responsibilities

Mr. Biron serves as a Board of Director of the National Investment Center for the Senior Housing & Care Industry (NIC) and the American Senior Housing Association (ASHA). He has spoken at the annual conferences for NIC , American Seniors Housing Association and American Health Care Association.
 

Contact Information:
Mr. Daniel J. Biron
Managing Director, Health Care Programs
Lancaster Pollard Mortgage Company
dbiron@lancasterpollard.com
(212) 332-3456


 
Watch the video of the interview: 


Read the interview transcript:

Steve Monroe:
I'm here today with Dan Biron. He's the managing director and head of health care platforms at the investment bank Lancaster Pollard. Lancaster's involved in a lot of areas of senior housing finance, from tax-exempt bonds to HUD to Fannie Mae. Where do you see the bulk of your financing activities for 2011?

Dan Biron:
2011 at this point is going to be primarily FHA HUD financing 232 programs. With the large queue of HUD, we basically feel that our pipeline's kind of already cooked at this point. We're also looking at a number of Fannie transactions as well, but I think the lion's share is going to be also the 232 FHA program.

Steve Monroe:
Do you think it's going to be easier in 2011 to get deals done than last year?

Dan Biron:
I think it's going to be very consistent on the 232 side. They made an indication that they were going to hire 25 new staff. Of the 25, I believe they've hired six to seven, and the majority of those hires were all in the administration role. They were not underwriters. And so, I think it's still going to be a long queue. We basically tell our clients it's anywhere from 10 to 12 months to obtain a commitment. What appears to be happening now is there's also a closing queue that's occurring, and so, it could take two to three months to close a deal subsequent to a commitment.

The positive, though, is once you have a commitment in hand, you can do your interest rate lock. So you have a sense of you're not going to have that interest rate risk at that point. So the 10 to 12 months to the commitment, you've got interest rate risk at that point that it could spike.

Steve Monroe:
Yes. Because HUD LEAN was supposed to fix some of the problems with the queue, but there was such demand, obviously HUD didn't and couldn't staff up for it. But once you get that—before you lock in that commitment, you have that eight to ten months of risk. What's the time period from then that you have risk to closing?

Dan Biron:
It's probably anywhere from two to three months from commitment to closing.

Steve Monroe:
But that's locked in.

Dan Biron:
But that's locked in so you don't have interest rate risk.

Steve Monroe:
That's right. What's your feeling about the Obama Administration's current proposal to—I guess they call it winding down Fannie Mae and Freddie Mac, and the impact that's going to have on senior housing? Because that's a big takeout area.

Dan Biron:
It is. I think if it stays as proposed, I think it will have a very large impact on the senior housing industry. But I think it's still too early to tell. I think between now and three to four years from now when it gets implemented, I think a lot is going to be changed. There's potential that the same program where the Fannie debt is securitized could be privatized and certain pieces of it could be taken and done more privately.

So I think there are so many different opportunities and it's going to depend on the groups that step up to say, "Hey, there's an opportunity here. Let's benefit from this." So I think it's still very early to tell.

Steve Monroe:
Well, the flip side, if Fannie and Freddie debt, the cost of that debt goes up, it will attract more private capital in theory, so there will be more sources, albeit at a higher cost.

Dan Biron:
That's right.

Steve Monroe:
So hopefully that will be one of the outcomes.

Dan Biron:
And it's still very early to tell.

Steve Monroe:
What are most of your clients trying to achieve in the debt markets today? Is it just purely refinancing to take advantage of these low interest rates right now?

Dan Biron:
The majority of the FHA debt, yes, is to try to get lower interest rates. Our volume of A7s, which is a refinancing of an existing HUD loan, we've done quite a few of those as well because people are seeing that the interest rates are so low. Today, you're probably at 4.75% with mortgage insurance as well included in there. And so, it’s some great rates, and folks that closed loans two or three years ago, four years ago, are basically back saying, "Let's refinance this HUD debt at this point at a lower rate."

Steve Monroe:
With the long queue and the number of properties in there, is HUD favoring the refi or favoring the new finance, since it's kind of like, "Well, we just saw you three or four years ago"?

Dan Biron:
I don't think there's any favoring on either side. They're getting them done as efficiently as they can. And so, they look at the refis. They make sure that the repayment period is reasonable. If the repayment period is excessive, they are going to turn them down. But I think if they are within the ten-year range, I think they'll consider them and they'll approve them.

Steve Monroe:
And from your perspective and looking at these markets, do you see the credit markets at all easing, or is it just pretty much status quo of last year?

Dan Biron:
They're easing. I think since the NIC conference in September in Chicago to now, I think you're seeing more groups stepping up. Interest rate, the cost of money is still staying slightly better than a year ago, but it's starting to appear to loosen up at this point, and I think you're going to see over the next several months it's going to continue to loosen up.

Steve Monroe:
Lancaster Pollard has been doing some work in the M&A side of the business. Is that something that's going to be growing there?

Dan Biron:
We have. And we have an opportunity that we do a lot of work with the not-for-profits. And so, some not-for-profits will approach us and say, "We just want out of this business," and so, that's where we've probably attained the greatest number of M&A transactions. We know a lot of people in the industry, and so we quietly go out to these individuals and say, "Hey, this building is available. Would you be interested in looking at it?" We try not to blanket the market with emails that go across to everyone that's in the industry. We quietly, strategically pick individuals that are doing more of the strategic buy versus the opportunity buy. And so, that's where a lot of our M&A business has come from. That still continues.

Steve Monroe:
So the buyers that you deal with, are they looking more for the stabilized properties and not the opportunistic non-stabilized?

Dan Biron:
It's been a mixed bag. When I say "opportunistic," it’s more the equity buyer. The strategic buyers are who we're presenting to. And so it's been a mixed group. There are some that feel that they're turnaround folks and they can step into a building and turn the thing around. We have some individuals who will even look at buildings that have lost their license and that will flip into there and either attain a license back or change the use of the building. And those transactions are coming from more the FHA distressed assets.

FHA has taken kind of a different attitude in the last two to three years. Several years ago, if a project was going sideways, they'd just put their hands up and say, "Okay, it's an insurance claim." Today, they have a very different attitude. They like partial claims. They like turning a building around. They're getting a new operator in there and not having any claim. So we've been very involved with HUD and the asset management folks to try to be aware of these transactions and getting a strategic buyer who can turn the property around. So it's kind of varied in our M&A business.

Steve Monroe:
Well, I know there's been some on the HUD side. I know the Fannie and Freddie side, there's been very few defaults, if really any. So the track record has been good.

Dan Biron:
Last year for HUD, there were 11 full claims, which is a considerable decline in the number of claims from the years past. They really try to work with the borrower and come up with a solution, or they change the operator.

Steve Monroe:
Eleven out of the entire HUD 232 portfolio.

Dan Biron:
Yes. I think it's in excess of 2,000 HUD loans that the 232 program represents. So that's pretty good. And it's a moneymaking center for the federal government, and so, it's not a bad program. But it's a changed attitude. They really work with the borrower, and if they see troubled issuers, they try to get in there and work with them and come up with a solution.

Steve Monroe:
Too bad the residential housing market doesn't have that same kind of a track record.

Dan Biron:
Yes, it doesn't. It does not.

Steve Monroe:
Well, thanks for the update on what you're doing, and hope you have a busy year this year.

Dan Biron:
I'm sure we will. Thank you.

Steve Monroe:
Okay. Thanks.



 

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