The healthcare real estate sector is attracting renewed lender interest as capital markets search for alternatives to traditional multifamily investments. With around $4 billion in annual transaction volume, Eastern Union has become a key player in this trend, mainly through its healthcare division led by Nachum Soroka.
Eastern Union’s healthcare group, active for over eight years, focuses on the full continuum of senior housing, from independent living to skilled nursing facilities. The firm targets middle-market owner-operators, handling deals from $10 million single assets to $100 million portfolios.
Lender Appetite Shifts Toward Healthcare Assets
Lending for healthcare real estate has changed significantly since the banking disruptions of recent years. While regional banks are still active, debt funds have increased their presence in the sector.
“There’s definitely a lot of money out there to be put out,” Soroka says. Life insurance companies that previously avoided healthcare real estate are now entering the space, broadening the lender base.
The sector’s appeal goes beyond yield. Healthcare properties, especially skilled nursing facilities, offer advantages not found in other commercial real estate segments. The combination of higher interest rates and large deposit balances from owner-occupied businesses attracts lenders. For example, a $20 million skilled nursing facility loan can generate $1 million to $1.5 million in average daily deposit balances for banks, an added incentive that office or multifamily properties do not provide.
Market Dynamics and Deal Structure
Current market conditions have changed how deals are structured. Soroka describes a recent transaction involving five skilled nursing facilities with a total of about 500 beds. The sponsor had $40 million in existing debt but sought additional leverage given strong cash flows.
Eastern Union arranged financing to increase the debt from $40 million to $52 million, using bridge financing at approximately 7% interest. The plan is to refinance with HUD in 18 to 24 months, targeting rates below 5% on a 35-year term. This approach allows borrowers to optimize their capital structure now, while positioning for better long-term financing as interest rates potentially decline.
Borrowers are increasingly using bridge-to-HUD strategies to access immediate funds, then lock in lower rates and longer terms once the market stabilizes. This reflects a broader trend among owner-operators to manage capital more actively in response to market volatility.
Geographic Patterns and Investment Flows
Healthcare real estate demand remains steady across regions, challenging the assumption that warm-weather states hold the most promise. Economic fundamentals often make less obvious markets appealing.
Soroka notes that while many assume states like Florida offer the most incredible opportunities, those markets also have more supply and tougher competition. In contrast, states such as Minnesota, Nebraska, and South Dakota may offer better economics for operators and investors, thanks to less competition and more favorable supply-demand dynamics.
Foreign capital continues to flow into the healthcare sector, particularly in equity investments in independent living properties. Demographic trends, particularly the aging population often called the “silver tsunami,” are driving global investment. U.S. funds have expanded internationally, targeting markets in China and England, while foreign pension funds are investing in U.S.-based debt funds. This influx of international capital underscores the sector’s broad appeal and the long-term growth potential that global investors see.
Challenges in New Construction
While established properties are performing well, new construction remains challenging. Properties built in the past three to four years often struggle to lease up, leading to potential distress and discounted sales.
Soroka reports dealing with projects that cost $300,000 to $400,000 per unit to build but have failed to achieve expected occupancy or have experienced rising expenses. In these situations, owners may face losses or be forced to sell at a discount. These distress scenarios are creating opportunities for Eastern Union’s expanded equity division, as some clients consider selling underperforming assets rather than continuing to support properties that are not meeting projections.
This trend is likely to continue as more newly built properties reach stabilization timelines and face slower-than-expected lease-up. Investors and lenders are watching closely, as these assets may present attractive acquisition opportunities or require creative recapitalization strategies.
Loan Terms and Market Conditions
Lending terms have become more cautious since 2022. Recourse requirements, where borrowers provide personal guarantees, are now standard, a significant shift from pre-pandemic lending, when non-recourse loans were more common.
“Recourse has become a requirement and still is a requirement,” Soroka says, noting that while there may be some future easing, lenders remain conservative for now.
Borrowers are generally willing to accept personal guarantees in exchange for higher leverage, especially when loan-to-value ratios exceed traditional thresholds. This trade-off allows operators to access more capital but increases their personal financial exposure if the property underperforms.
In addition, lenders are scrutinizing cash flows and operating performance more closely. Underwriting standards have tightened, with a greater focus on stabilized occupancy, expense controls, and the ability to withstand operational disruptions. This reflects broader caution across commercial real estate lending, but the healthcare sector’s unique characteristics, such as strong demographic demand and government reimbursement streams, continue to attract capital.
Legislative Considerations
While daily operations are stable, long-term legislative issues create uncertainty for the sector. Recent changes to skilled nursing staffing requirements and potential future federal budget impacts could affect profitability and underwriting.
Soroka acknowledges that upcoming legislation could influence the sector, but says lenders are not yet factoring these risks into their decisions. “It’s business as usual, and we’ll cross that bridge when we get there,” he says.
Operators are monitoring regulatory developments, particularly around Medicare and Medicaid reimbursement and staffing mandates, as these factors could significantly alter expense structures and valuation. For now, however, lending and investment activity remains robust, with most participants taking a wait-and-see approach regarding future policy changes.
Looking Forward
Eastern Union’s healthcare division is optimistic about 2026 prospects. The firm recently expanded its equity division and is seeing more regional banks willing to finance healthcare real estate.
“Regional banks are being more and more open to entertain more deals. They have a lot more capital to deploy,” Soroka notes. He expects 2026 to be a strong year for healthcare lending and investment.
Key factors to watch include movements in the 10-year Treasury rate, which directly impacts HUD financing terms, and the resolution of lease-up challenges in new construction projects. As more new properties approach stabilization, the market will reveal which assets can meet performance expectations and which may require restructuring or sale.
Despite broader headwinds in commercial real estate, healthcare continues to attract capital, driven by demographic tailwinds and attractive lending economics. For middle-market operators, this means both greater opportunity and more competition as additional capital sources enter the sector.
Eastern Union’s strategy of providing comprehensive front-end analysis and acting as an in-house consultant, rather than simply brokering transactions, positions the firm to benefit from this expanding market. By serving sophisticated owner-operators and adapting to evolving capital markets, the firm is well-placed to capitalize on the sector’s continued growth.
As the healthcare real estate market matures, success will depend on careful deal structuring, proactive management of new construction risks, and close attention to legislative changes. Lenders and investors who understand the sector’s nuances and who can navigate both its challenges and opportunities are likely to find strong returns, even as other commercial real estate segments struggle.
