As ground zero for the pandemic, 2020 was a challenging year for healthcare real estate investment trusts. In the first quarter, for example, healthcare REITs saw a 36.8% decline — much of this stemming from COVID-19-related woes within the senior living and skilled nursing sectors. Recent positive news on vaccine approval and its subsequent rollout within the sectors helped healthcare REITs regain a good chunk of this loss, however, ending the year at a 9.8% decline compared with 2019, according to Nareit daily returns.
Even as the distribution of COVID-19 vaccines in long-term care communities began late last month, the rough terrain for the senior living and skilled nursing markets is likely to continue before a full recovery, expected in 2022, according to investment research firm Zacks. Much of the sectors’ challenges stem from the fact that occupancy continues to decline at triple-net properties, affecting operators’ financial strength. Amid this, LTC Properties, a Westlake Village, CA-based long-term care REIT, announced last month that the firm is reducing its 2021 rent escalations by 50% in the form of a rent credit to provide financial support to the majority of its operating partners during the ongoing pandemic.
Rent collection, however, has been less affected. Welltower reported 98% rent receipts in October and November, and National Health Investors said it had received 96.3% and 92.7% of rent for December and the fourth quarter, respectively.
Zacks also noted that with the speed of vaccine deployment, demand for senior living and care has picked up lately and is likely to slowly improve in the second half of the year.
“In fact, the silver tsunami or demographic-driven demand from the aging of baby boomers supports the encouraging outlook for both seniors housing market investment and performance,” the research firm wrote.