Thomas Herzog
Thomas Herzog

Healthpeak Properties’s senior housing operators are feeling the effects of COVID-19, but pent-up demand should help occupancy rebound as the pandemic eases, top executives predicted Wednesday on the real estate investment trust’s first-quarter earnings call.

The senior housing portfolio has been the REIT’s property type most affected by COVID-19, due to restricted leasing, increased payroll, and costs for personal protective equipment and related supplies.

Based on reports from operators across its 222 properties, Healthpeak said 54 properties managed by 13 different operators reported confirmed COVID-19 cases in residents, and 31 of those affected properties experienced resident deaths.

In the senior housing operating portfolio, occupancy rates declined to 82.2% in the first quarter. Move-ins, driven by shelter-in-place and reduced in-person facility tours, declined 73% in April 2020 versus April 2019. Move-outs in that timeframe increased 22%, driven by involuntary move-outs, but Healthpeak speculated that those rates could return to normal as the infection rate slows.

CEO Tom Herzog estimated overall attrition at 2% to 4% per month in SHOP occupancy for the duration of the pandemic.

“As we come out the other side of this pandemic, we have a belief there will be pent-up demand that will increase move-ins beyond average historical levels,” he said. “In senior housing, the wave of aging baby boomers will increase demand and need for this product over the long run.”

Healthpeak President and Chief Investment Officer Scott Brinker said its senior housing properties have 200 deposits from people waiting to move in across 16,000 units, which shows underlying demand for the product.

“As assisted living and memory care seniors have vital care needs that can no longer be met at home, some level of move-ins continues, subject to screenings and quarantine,” Herzog said, adding that independent living move-ins were minimal during the crisis as it primarily is lifestyle-based.

“Occupancy won’t bounce back as it declined in April, but 1 million seniors live in rental senior housing today and are paying a pretty significant dollar for it,” Brinker said. “This is activity generated during April when we were in severe shelter-in-place across the country. It will be a slow ramp up in senior housing, in particular.”

Herzog added that in conversations with all of the REIT’s major operators, he has heard that adult children who are home caring for their elderly parents are calling to say it’s “much harder than expected.” They also are sharing concerns about caring for their parents when they return to work.

“Some of these vital needs are ones adult children find they cannot handle at home,” Herzog said. “There is a backlog of seniors in most categories waiting to get into communities, subject to screening and quarantine.”

About 50% to 55% of the senior housing properties in Healthpeak’s portfolio are not accepting move-ins, Brinker said. 

“The entire portfolio has gone to all virtual tours, as they are not allowing nonessential visitors,” Brinker said. “The timing of reopening depends in large part on infection rates.”

He added that 80% of the states in which Healthpeak operates have announced first-phase reopenings in April or May. Although senior living probably will be in the third phase, he said it’s a positive initial step.  

In the continuing care retirement communities in Healthpeak’s portfolio, occupancy rates declined to 82.4%. Move-ins declined 89% compared with this time last year, and move-outs declined 22%. New resident leads declined 52% in April, whereas building tours declined 45% compared with last year’s figures. 

In the senior housing triple net lease properties, 97% of April rent payments were received. Capital Senior Living, which has $0.9 million in monthly rent, and Harbor Retirement Associates, which has $1.2 million in monthly rent, each have requested rent deferrals. Despite those requests, Brinker said he does not expect any impact to earnings, and Healthpeak is still planning to part ways with Capital

Healthpeak skilled nursing properties received $10 million of Coronavirus Aid, Relief, and Economic Security (CARES) Act funding in April, representing the pro rata funding provided to all Medicare providers.

Peter Scott, executive vice president and chief financial officer, said he can’t foresee when senior living will return to normal, but Healthpeak has talked to 20 operators to devise a model.

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