Although sector-wide rating changes are not expected in the near term, the increased operating costs and shifts in census associated with the coronavirus disease 19 (COVID-19) outbreak may have negative effects on lower-rated life plan communities (also known as continuing care retirement communities), according to an analysis by Fitch Ratings. Higher-rated life plan communities have more cushion to absorb these operating challenges without meaningfully affecting their credit profiles, Fitch said.
Among the hardest hit would likely be lower-rated communities that currently are undergoing expansions in areas heavily affected by the outbreak, Fitch said, as they have the least financial cushion to weather a period of weak operations and are most affected by increased labor and supply costs as a result of the outbreak. The financial condition of prospective residents as a result of the virus, as well as concerns about community living will likely also temper short-term move-in rates, though the agency still believes this would have only a limited effect on medium to longer-term move in rates, according to the analysis.
