Historically, investors often have viewed independent and assisted-living facilities — most often paid for out-of-pocket by residents — as safer bets than skilled nursing facilities, which generally are paid for via government programs such as Medicare and Medicaid. So they encouraged operators in their senior housing portfolios to engage in efforts to attract private-pay residents.
The COVID-19 pandemic may be turning that assumption on its head, according to an article published Thursday by The Motley Fool. This could be good news SNF-focused real estate investment trust Omega Healthcare Investors.
With the move to independent or even assisted living communities often being a choice, not a necessity, the pandemic has led fewer people to consider living in a group setting, where the risk of mortality potentially has increased — at least until the disease can be better controlled or prevented. A move into a SNF, however, typically isn’t optional and often cannot be delayed for the residents considering them. With government-supported payments providing relatively consistent income, suddenly nursing homes look like a pretty desirable segment as it relates to senior housing investments.
Potential investment concerns still abound for Omega, however, as the REIT’s tenants have experienced a greater number of COVID-19 outbreaks, decreased occupancy rates and increased operational costs, all of which will make it more difficult for them to cover rent costs.
“If you are a dividend investor looking at Omega and its hefty 8.2% dividend yield, don’t go in thinking that government pay is a material differentiator,” the article stated. “It may look like a net benefit, but the other factors facing senior housing because of COVID-19 are still going to cause Omega’s tenants — and in turn Omega — material financial strain.”
Editor’s Note: This article appeared in the McKnight’s Business Daily, a free daily newsletter that is a joint effort of McKnight’s Senior Living and McKnight’s Long-Term Care News. For subscription information, visit this page.
