Most Fitch-rated continuing care retirement / life plan communities have longer operational histories and stronger financial profiles than their unrated peers, putting them in a better position to manage coronavirus operating pressure, according to a Fitch Ratings report released Tuesday.
The firm noted that Fitch-rated life plan communities tend to be weighted more toward independent living units, which generally have been less affected by the pandemic than skilled nursing facilities. Although nearly all long-term care communities are currently facing higher staff and supply costs, most Fitch-rated communities had ample liquidity relative to debt, expenses and debt service, investigators found.
“Investment-grade life plan communities have more cushion to absorb operating challenges without meaningfully affecting their liquidity and leverage profiles,” the report noted.
About a quarter of life-plan communities are rated below investment grade, however, and these communities may be more vulnerable to increasing operating costs and negative rating actions. Lower-rated credits that are currently undergoing expansions in areas heavily affected by the pandemic will come under the most pressure, the firm said.
“There could be some negative rating outlook changes and rating watches, with a few potential rating downgrades following a full review of our portfolio,” the report concluded.