Coverage floors, not leverage, separate asset classes
Almost everything in our credit box sits near 65% LTV. What separates one asset class from another is the coverage floor, and seniors housing runs an entire ladder by itself.
- Coverage floors run from 1.25x on industrial to 1.40x on hospitality and up to 1.75x on seniors housing, a wider spread than most leverage grids show.
- Seniors housing runs an acuity ladder: 1.45x independent living, 1.55x assisted living, 1.60x AL with skilled nursing beds, 1.75x stand-alone memory care.
- Sponsors negotiate leverage. Lenders decide on coverage, and coverage is the number that kills a marginal deal.
- A memory care facility priced like multi-family will get a proceeds number that’s simply wrong, not just tight.
The number sponsors argue over isn’t the number that governs
Most acquisition conversations start with LTV, and most CRE assets in our box land somewhere close to 65% regardless of type. What differs, sharply, by asset class is the coverage floor, and that’s the number a lender won’t move on.
Compare that to industrial at 1.25x and hospitality at 1.40x, and the leverage headline (65% to 70% LTV across all of them) stops telling you anything useful about how much loan the income will support.
"Sponsors argue leverage because leverage is the number they can negotiate. Coverage is the number the lender decided months before your call, and it’s the one that kills a marginal deal."
The mismatch that costs sponsors real money
The most common version of this mistake: a memory care facility priced and shopped as multi-family. It clears a clean 75% LTV, 1.25x DSCR solve on paper, and every number in that solve is wrong, because memory care clears at 1.75x and a different lender set entirely. That’s not a tight number, it’s the wrong number, and it shows up as a lender pass rather than a lower proceeds figure.