Equity and debt partners are looking a little differently at the relationships among revenues, expenses and returns than they did before the pandemic, according to panelists at yesterday’s Leadership Huddle of the National Investment Center for Seniors Housing & Care.
A shift has occurred in the mindset behind investing, according to Morgin Morris, senior vice president at KeyBank Real Estate Capital.
“The traditional boxes are kind of gone right now. After 2020, everything is customized,” she said. “Each deal has a story, and no matter whether performances were strong or up, our job right now is to unpack that story and really understand what happened at the property.”
The meaning of “stabilization” has changed in 2021, the experts agreed.
“It’s our job to get a little more creative. For example, we used to use 85% occupancy as sort of a baseline metric for stabilization,” Morris said. “Traditional stabilized metrics are sort of gone and now we’re looking on a case-by-case basis.”
Kathleen P. Ryser, senior director, seniors housing underwriting and credit at Freddie Mac, said that relationships are more nuanced than ever before.
“We never closed shop. We continued to provide liquidity all throughout 2020 and the pandemic,” she said. “I do feel like we’ve turned a corner.”
Factors such as occupancy and lead activity, Ryser said, are “telling us that things are going to start improving. “
It will be a while for occupancy to return to pre-pandemic levels, the speakers said.
“We’re leaning in on improved [net operating income], but the properties just aren’t there yet,” Ryser said.
Morris estimated that it will take, on average, 12 months for occupancy to get back to where it was before the pandemic. Some properties will get there in three to six months, she said, whereas others may take up to 18 months to rebound from the effects of the past year and a half.
