Even as census rate declines within senior living communities begin to slow as a result of vaccine rollouts and COVID-19 case declines within the sector, some experts say headwinds are expected to continue affecting profitability and returns for some time.
“We’ve seen the full gamut of occupancy disruptions within our loan portfolio over the past year,” Chris Honn, managing director of the Healthcare Real Estate Group at Regions Securities told McKnight’s Business Daily. “We saw a lot of our operators deal with extreme reductions in occupancy, but recently we’ve had two customers in the last couple weeks report occupancies at their highest in the property’s history.”
This much improvement is certainly not the case everywhere, he added, noting that recovery has varied market by market. Honn said he doesn’t expect to see a full occupancy recovery nationwide until the second half of this year at the earliest. Within oversaturated markets or among weak-performing properties pre-pandemic, however, that full recovery likely will take even longer.
Despite the uncertainties, Honn said he feels confident that deal activity among healthcare real estate investment trusts and standalone operators is likely to rebound post-pandemic as the appetite for new deals, combined with ample cash on the sidelines, helps power the market.
“I’ve actually lost count of the number of new construction loan requests we’ve received over the past several months,” Honn said. “These are amenity-rich properties in high demand areas with a strong track record in senior living.”
When it comes to acquisitions, however, buyers and sellers continue to be at odds over property values — which in turn trickles down to lenders, who are left with the challenge of trying to underwrite a lease-up situation on a going forward basis, Honn said.
“Some of our projects have recast their budgets more times than I can count at this point, because they keep hitting roadblocks,” he said. “A good deal of folks are really challenged right now in terms of how they can consistently grow occupancy.”
