Curious about what happened with asking rates and actual rate discounting in 2021 or how move-in patterns differed by care segment? Then read on for key takeaways from the recently released 4Q2021 NIC MAP^® Seniors Housing Actual Rates Report, available to NIC MAP^® subscribers.

In the recently released report, national monthly data through December 2021 of actual rates and leasing velocity is presented, including data on rate discounting and move-in/move-out trends. NIC MAP subscribers have access to the full report, which includes national data and additional key takeaways as well as data for the Atlanta, Philadelphia, and Phoenix metropolitan markets. 

Select takeaways from the 4Q2021 NIC MAP^® Seniors Housing Actual Rates Report are listed below. These key takeaways are pulled from the Segment Type report. Care segments refer to the levels of care and services provided to a resident living in an assisted living, memory care, or independent living unit.

Key Takeaways

• All three senior housing segment types—independent living, assisted living, and memory care—experienced the highest growth in year-over-year asking rates in the fourth quarter of 2021 since NIC MAP began reporting the data in 2017. Assisted living (6.6%) had the highest increase of the three levels of care, followed by independent living (6.0%), then memory care (3.5%). These gains continue the trend of growth in asking rates that started earlier in 2021 following the immense pandemic-related pressures of 2020.

• For the third quarter in a row, move-ins outpaced move-outs for all three care segments (independent living, assisted living, memory care) in fourth quarter 2021. This marks ten consecutive months of move-ins outpacing move-outs from March 2021 through December 2021. Move-ins for assisted living segments were at 3.4% in October and December of 2021, down from the recorded high of 3.9% in June 2021.
• Average initial rates for residents moving in were discounted below asking rates for all three care segments. Initial rate discounts were slightly greater in the fourth quarter of 2021 than in the third quarter for independent living segments and memory care segments. Of the three segments, memory care had the largest initial rate discounting of 10.2% ($719) in December 2021. On an annualized basis, this discount is equivalent to 1.2 months. This discounting is comparable to the discounting one year earlier in December 2020 of 10.3% ($702 or 1.2 months.) The least discounting in the year 2021 for memory care segments was still high at 7.9% ($547) in August.

• Of the three metropolitan markets that are currently reported, the largest discounting in initial rates from asking rates for residents moving into senior housing was Atlanta’s assisted living segment (December 2021) and Phoenix’s independent living segment (November 2021) which were both at 17.1% (or 2.1 months on an annualized basis).
  

NIC MAP Vision CEO Explains the Importance of Actual Rates Data Initiative

Arick Morton, CEO of NIC MAP Vision, discusses the importance of the actual rates data initiative for the company and the senior housing industry at large. Operators can learn more about actual rates by visiting the NIC MAP Vision actual rates page.

Our Software Partners Support this Initiative

At the 2021 NIC Fall Conference in Houston, Texas, Glennis Solutions and Eldermark were proudly announced as certified Actual Rates Software Partners. Glennis Solutions and Eldermark now offer their senior housing operator customers the ability to share their data more efficiently in the official NIC Actual Rates format. To receive certification, a software provider works with the NIC MAP Vision team to develop reports that meet the NIC Actual Rates standard format. They are then required to provide six months of actual rates data for two or more operators using those reports.

NIC and NIC MAP Vision appreciate the time, effort, and commitment from our software partners and thank them for their partnerships .

The Actual Rates Data Initiative is driven by the need to continually increase transparency in the senior housing sector and achieve greater parity to data that is available in other real estate asset types. Now, more than ever, having access to accurate data on the actual monthly rates that a senior housing resident pays as compared to property level asking rates helps the sector achieve this goal.

About the Report

The NIC MAP^® Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,600 properties across the U.S. operated by 25 to 30 senior housing providers. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as we currently require participating operators to manage 5 or more properties. Note that this monthly time series is comprised of end-of-month data for each respective month.

While these trends are certainly interesting aggregated across the states, actual rates data are even more useful at the metro level. NIC MAP Vision is continuing to work towards reporting more markets.

Interested in Participating?

The Actual Rates Data Initiative is an effort to expand senior housing data and we are looking for operators who have five or more properties to participate. We have expertise in extracting data from industry leading software systems, such as Yardi, PointClickCare, Alis, MatrixCare, Glennis Solutions, and Eldermark and can facilitate the process for you.

Operators contributing data to the NIC MAP^® Actual Rates report receive a complimentary report which allows them to compare their own data against national, and metropolitan market benchmarks.

In addition to receiving a complimentary report, your organization benefits through:

• More informed benchmarking, strategic planning, and day-to-day business operations,
• Increased transparency, aligning with other commercial real estate assets in terms of data availability,
• Saved time, Actual Rates data is collected electronically directly from operators’ corporate           offices, removing the need for telephone calls to individual properties, and
• Enhanced investment and efficiency across the sector.

Learn more.

Introduction

This blog presents an abbreviated portion of the recently released white paper by NIC Analytics. Understanding the population demographics and prevalence of chronic kidney disease (CKD) by market can provide insights about potentially targeting select metropolitan areas in which to develop communities with specialized offerings for senior housing residents with CKD. Due to the differing levels of Medicare beneficiaries (MB) with CKD by metropolitan area, operators may be able target specific markets where they can gain increased resident interest as well as potential additional income by offering services tailored to residents with CKD such as in-home dialysis and specialized dietary support.

Serving the kidney health needs of residents is an opportunity for senior housing operators. About 37 million Americans are estimated to have chronic kidney disease, but many people do not know they have it and are undiagnosed. The CDC estimates that as many as 90% of people who have CKD do not know, and as many as 40% of people with severe CKD do not know. Chronic kidney disease is more common among seniors, with an estimated 38% of people aged 65 and older having CKD.

Most people who have CKD do not reach the point of needing dialysis, but nearly 800,000 Americans do have End Stage Renal Disease (ESRD) with 71% of them requiring dialysis and the remaining 29% receiving a transplant. Older Americans with ESRD comprise ~1% of Medicare patients, but account for ~7% of Medicare spending. In-home dialysis improves patient comfort and flexibility in care plan scheduling, as they have greater ability to adjust the hours and frequency of their treatment.

Dialysis within senior housing properties. Could dialyzing at home in senior housing present a “win-win” for all parties involved? Residents may be more satisfied with their dialysis care and operators can capture Medicare reimbursement. In addition to offering in-home dialysis, operators could distinguish a focus on treatment for CKD by offering additional features like specialized dining, as high protein diets are often recommended. Operators with their own Medicare Advantage or I-SNP plan may be able to capture increased Medicare reimbursement for in-home dialysis done at their properties. Additionally, considering the high rates of underdiagnosis of CKD, operators choosing to specialize care in this area could test residents for CKD to determine unmet needs for kidney health.

The recently released white paper and this blog illustrate how NIC MAP Vision data can help operators understand the local dynamics of a market. In addition to industry-leading senior housing supply and occupancy data, NIC MAP Vision offers subscribers different counts of Medicare beneficiaries (MB) with different types of diagnoses that can be drilled down to local geographies.

For this analysis, we use Medicare beneficiaries (MB) with chronic kidney disease to demonstrate how NIC MAP Vision can support an evaluation of potential demand for this niche specialization. We investigate trends in chronic kidney disease in potential senior housing residents, existing supply of senior housing (inventory), and usage of senior housing (occupancy). A full description of the methodology and limitations and caveats to the analysis can be found here. A similar analysis of the incidence in dementia was recently published by NIC Analytics.

The Medicare beneficiary data do not specify the level of severity of CKD and ESRD is not broken out (that level of detail is not available to NIC MAP Vision from Medicare). As a result, the number of Medicare beneficiaries with CKD included in this analysis is not directly equivalent to the number of people who will need dialysis and at the same time these data also understate the incidence of CKD due to underdiagnosis. These data are still useful in understanding incidence of CKD and market evaluation for operators who may be considering a focused offering for residents with CKD.

Key Findings

Certain metropolitan markets have higher shares of Medicare beneficiaries with chronic kidney disease, but even markets with lower shares may still hold opportunity. As the chart below demonstrates, the markets with the highest shares of Medicare beneficiaries with chronic kidney disease include:

• • Tampa (35.5%, 200,351 total MB with CKD)
  • Orlando (35.3%, 118,241 total MB with CKD)
  • Detroit (34.2%, 223,545 total MB with CKD)
  • Miami (34.0%, 352,802 total MB with CKD)
  • St. Louis (32.7%, 139,738 total MB with CKD)
  • San Antonio (32.4%, 94,801 total MB with CKD)

Markets with the lowest shares of Medicare beneficiaries with chronic kidney disease in the Primary Markets include:

• • Portland (21.6%, 69,870 total MB with CKD)
  • Minneapolis (23.1%, 103,658 total MB with CKD)
  • Pittsburgh (23.7%, 104,159 total MB with CKD)
  • Seattle (24.1%, 112,675 total MB with CKD)
  • San Diego (24.4%, 103,680 total MB with CKD)

Interestingly, Portland, Minneapolis, and Seattle are metros with higher penetration rates of senior housing more generally. Penetration rates are a way to measure use or availability of senior housing and can be calculated in several different ways. NIC has traditionally defined penetration as the sum of senior housing inventory divided by the number of households aged 75+. Some people also think of penetration rates as a proxy for consumer familiarity (higher penetration rates meaning higher levels of familiarity with senior housing as a product). It is interesting that three metros where senior housing is a well-known and established concept are areas where there are lower amounts of Medicare beneficiaries with CKD.

It’s also valuable to note the total numbers of seniors on Medicare with CKD per metro area. Although San Diego has a smaller share of Medicare beneficiaries with CKD than San Antonio, San Diego has a larger total number of Medicare beneficiaries with CKD by nearly 9,000 people.

As previously mentioned, Minneapolis (32.7%), Portland (30.5%), and Seattle (22.4%) are all markets with higher rates of senior housing penetration and have higher levels of senior housing as a share of MB with CKD. Senior housing is a well-established concept in these three metro markets. Interestingly, Kansas City (20.4%) and Denver (20.0%) are also markets with higher levels of senior housing as a share of MB with CKD. Las Vegas (4.9%), New York (5.5%), Los Angeles (7.1%), Riverside (7.3%), and Miami (7.3%) are the five metro markets in the Primary Markets with the lowest shares of senior housing over MB with CKD. The three Florida metros (Tampa, Orlando, and Miami) that are in the top 5 metros of the 31 Primary Markets that have high shares of total MBs with CKD are all under 12% for senior housing as a share of MB with CKD. New York (824,213) and Los Angeles (515,152) are unsurprisingly the two metro markets with the highest total number of MB with CKD.

This demonstrates that in addition to differing incidence of chronic kidney disease among the Medicare beneficiaries, there are also varying levels of senior housing inventory, with some markets like Miami having a high share of MB with CKD, high total numbers, and lower levels of senior housing inventory. However, Miami is a market that was still facing notable occupancy challenges in the fourth quarter of 2021.

The white paper presents additional data findings. Selected metrics provide a baseline for evaluating potential demand, current supply, and current utilization rates of available supply when considering a senior housing product offering tailored to serving the population of seniors with CKD or ESRD. NIC MAP Vision offers these data at more localized levels along with additional data that would be useful to planning a product offering including data on income levels and locations and drive times for hospitals.

Discussion

This analysis demonstrates differing levels in incidence of diagnosed chronic kidney disease among potential residents of senior housing in the Primary Markets and differing levels of senior housing supply and utilization. Improving diagnosis of CKD would also enhance the health of residents and provide additional opportunities for income for operators. The number of people who have CKD is projected to grow in the coming years, meaning that product offerings focused on serving the needs of seniors with chronic kidney disease may have added future demand as well.

With the trends toward increasing dialysis at home, senior housing operators could consider adding opportunities for residents to receive dialysis at home in senior housing to offer additional convenience and potentially create an additional revenue stream. The Medicare beneficiary data as well as the supply and occupancy data sourced from NIC MAP Vision can help support analyses evaluating potential local demand for at home dialysis or other product offerings focused on serving seniors with CKD or ESRD.

For further information on CKD, a case study of an operator serving this market, additional findings from our analysis, well as the full caveats and limitations, please download our white paper. 

Sources

ⁱ CDC – Chronic Kidney Disease in the US 2021 – https://www.cdc.gov/kidneydisease/publications-resources/CKD-national-facts.html
ⁱⁱ United States Renal Data System, 2020 Annual Report; Transplantation (https://adr.usrds.org/2020/end-stage-renal-disease/6-transplantation)
ⁱⁱⁱ Medicare, VisionLTC data, powered by NIC MAP Vision – https://visionltc.nicmapvision.com/

Omicron within skilled nursing facilities accounted for about seven percent of U.S. fatalities, higher than the Delta but far below the Fall 2020 spike.

While COVID-19 cases in the country and within skilled nursing facilities (SNFs) were very high during the Omicron surge in January 2022, data shows that fatalities among SNF residents remained significantly below the fall 2020 spike prior to the vaccine rollout.

The high caseload recorded in January 2022 exacerbated staffing shortages due to sickness-related absenteeism among SNF workers. However, SNF occupancy (based on CMS data) remained relatively stable compared with the sharp downturn during the fall 2020 spike prior to the vaccine rollout. This is mainly due to the fast retreat of Omicron, the reduced level of severe illness and fatalities, and pandemic preparedness among operators acquired from prior waves.

In this analysis, we provide a summary of the COVID-19 situation within SNFs and assess the impact of the Omicron spike on occupancy for skilled nursing facilities compared with the Delta and fall 2020 COVID-19 spikes. The analysis also showcases the noteworthy contribution and essential role of vaccines in mitigating the risk of severe illness and limiting fatalities among SNF residents.

Weekly COVID-19 cases in the country and within SNFs are currently dropping fast and at the same pace in which they peaked.

NIC’s Skilled Nursing COVID-19 Tracker, featuring CDC data as of February 13, 2022 (U.S. cases data) and CMS data as February 6, 2022 (SNF cases data), shows that COVID-19 cases in the country and within SNFs are falling fast and at the same pace in which they peaked. Weekly COVID-19 cases in the country fell by 80% from their January 16 peak of 5.58 million cases to 1.13 million cases on February 13 and are now near pre-Omicron levels.

Similarly, case counts within SNFs are falling sharply and following the same trajectory as weekly tallies in the country. New cases among SNF workers have fallen by 63% from their January 16 peak of nearly 68,000 to less than 23,000 cases on February 6. Over the same period, newly confirmed cases among residents have fallen by 55%, from about 48,000 cases on January 16 to less than 22,000 on February 6.

For the week ending February 6, 2022, per-resident rate of new COVID-19 infections dropped to 2% (about 200 in 10,000 residents tested positive), down 2.3 percentage points (pps) from its record high in mid-January 2022 of 4.3%.

Regionally, SNFs in the South region reported the highest per-resident rate of new COVID-19 infections at 2.75% (down 1.85pps from January 16), followed by the Midwest (1.71% – down 1.67pps from January 16), the West (1.53% – down 2.56pps from January 16), then the Northeast (1.35% – down 3.45pps from January 16).

Weekly COVID-19 fatalities among SNF residents falling and remained relatively low compared with the highest level seen during the fall 2020 spike.

At the height of the Omicron surge in January 2022, weekly COVID-19 cases among SNF residents set a new record at about 48,000 new cases, 45% above the peak recorded in December 2020 of about 33,000 new cases. However, weekly COVID-19 fatalities remained relatively low and far below the highest level seen back in fall 2020 prior to the vaccine rollout. In fact, weekly COVID-19 fatalities among residents during the Omicron surge peaked at about 1,500 on January 23, 2022, 75% less than the peak recorded on December 20, 2020 of nearly 6,000 new fatalities.

Per-resident rate of COVID-19 fatalities stood at 0.10% on February 6, down 3 basis points from its peak during the Omicron surge on January 23, 2022 and is now 44 basis points below the fall 2020 peak of 0.54% on December 20, 2020.

SNF Occupancy held its ground despite high caseload and severe staffing challenges.

The high COVID-19 caseload exacerbated staffing shortages among SNF workers in January 2022. The exhibit below shows that the declining case tallies within SNFs started to alleviate staffing shortages caused by sickness-related absenteeism among workers. Notably, the share of SNFs reporting staffing shortages among nursing staff, aides, and other staff took a downward trend following the sharp decline in case counts. For the week ending February 6, 2022, about 28.6% of SNFs reported shortages of aides, 26.7% reported shortages of nursing staff, and 17% reported shortages of other staff.

Interestingly, occupancy for SNFs (based on CMS data) held its ground and remained somewhat stable during both the Omicron and Delta spikes compared with the fall 2020 spike. During the Omicron spike, SNF occupancy fell by 0.7pps, from 72.4% on December 19, 2021 to 71.7% on January 23, 2022, then inched up 0.2pps to 71.9% on February 6, 2022. Similarly, SNF occupancy during the Delta spike fell by 0.3pps, from 71.9% on August 1, 2021 to 71.6% on September 12, 2021.

The fall 2020 spike weighed heavily on SNF occupancy. The exhibit below shows that occupancy dropped by 3.7pps, from 71% on October 11, 2020 to 67.3% on January 10, 2021 (the lowest level of occupancy since the onset of the pandemic). This was mainly due to a relatively long-lasting fall 2020 spike and the high level of fatalities in the early days of the pandemic prior to the vaccine rollout.

COVID-19 vaccines made an extraordinary contribution to mitigate the risk of severe illness and limit fatalities among SNF residents.

The analysis below shows that during the fall 2020 spike prior to widespread vaccinations among SNF residents, COVID-19 fatalities among SNF residents accounted for 30% of total fatalities in the country. over 52,000 SNF residents died over the period from the week ending October 11, 2020 to the week ending January 10, 2021.

During the Delta spike. As vaccines have been administered for most residents of skilled nursing facilities (as of August 1, 2021, 83% of residents had been fully vaccinated before the Delta took hold), fatalities among SNF residents as a share of total fatalities in the U.S. dropped to 4.7%, down over 25pps from the share recorded during the fall 2020 spike.

During the Omicron spike. At 7%, fatalities among SNF residents as a share of total fatalities in the country remained far below the share recorded during fall 2020 spike (30%), but 2.3pps higher than the share during the Delta spike (4.7%).

The COVID-19 stats below show that the Omicron spike has caused more fatalities among SNF residents than the Delta spike. This is partly due to the relatively high case counts and the lagging booster shots. As the Omicron variant took hold in December 2022, only 52% of fully vaccinated residents had received a booster, and only21% of staff.

Booster rates are increasing but still lagging. As of February 6, 2022, 60% of residents within SNFs had received a COVID-19 vaccine booster and roughly 30% of staff.

To gain in-depth insights and track vaccination coverage, U.S. weekly cases, and the week-over-week change rate for new resident cases and fatalities of COVID-19 within skilled nursing facilities at the state and county levels, visit NIC.org.

The following analysis examines current conditions and year-over-year changes in inventory, occupancy, and same-store asking rent growth—by care segments within entrance fee CCRCs compared to rental CCRCs—to focus a lens on the relative performance of care segments within CCRCs during the fourth quarter of 2021. Overall CCRC occupancy by profit status and CCRC vs. non-CCRC occupancy differences by care segment will also be addressed. Note: this analysis was originally published by Ziegler Investment Banking, Senior Living Finance Z-News for the week of January 31, 2022.

NIC MAP^® data, powered by NIC MAP Vision, collects primary data on occupancy, asking rents, demand, inventory, and construction for more than 15,000 independent living assisted living, memory care, skilled nursing, and continuing care retirement communities (CCRCs—also referred to as life plan communities) across 140 U.S. metropolitan markets. The dataset analyzed here includes 1,104 not-for-profit and for-profit entrance fee and rental CCRCs in the 99 combined Primary and Secondary Markets. 

4Q 2021 CCRC Market Fundamentals 

CCRC occupancy reached 85.7% in the fourth quarter of 2021 for the combined 99 Primary and Secondary Markets, 1.4 percentage points above its pandemic low in the first two quarters and 5.8 percentage points below its pre-pandemic occupancy rate in the first quarter of 2020. Currently, CCRC occupancy is equal to the level reached in the fourth quarter one year ago.  

In 4Q 2021, entrance fee CCRC occupancy (88.0%) was 6.3 percentage points higher than rental CCRCs (81.7%), and not-for-profit CCRC occupancy (87.1%) was 5.4 percentage points higher than for-profit CCRCs (81.7%). Rental CCRCs are currently 7.4 percentage points below their pre-pandemic occupancy levels, while entrance fee CCRCs are 4.9 percentage points lower. 

CCRCs vs. Non-CCRCs: Care Segment Occupancy Difference 

The table below compares occupancy in CCRCs with non-CCRCs for each care segment in the Primary and Secondary Markets tracked by NIC MAP Vision. CCRCs outpaced non-CCRCs in each care segment. The difference in overall occupancy rates was highest for independent living units (7.8 percentage points) and lowest for nursing care units (2.7 percentage points) in 4Q 2021. 

Entrance Fee CCRCs vs. Rental CCRCs by Care Segment 

Among the 1,104 CCRCs spread across the 99 Primary and Secondary Markets tracked by NIC MAP Vision, approximately 51% are operated as entrance fee CCRCs, and 49% are operated on a rental basis. Referenced in the NIC Investment Guide: Sixth Edition, most CCRC residents initially live in an independent living apartment. CCRCs serve a predominately single-female population, however, entrance fee CCRCs have a higher percentage of married couples (42%) than rental CCRCs (29%).  

The table below illustrates the relative market performance of entrance fee CCRCs compared to rental CCRCs by care segment in 4Q 2021 and includes year-over-year changes in occupancy, inventory, and asking rent growth. Note that CCRCs often offer both entrance fee and rental contracts to give residents financial choice and flexibility. NIC categorizes CCRC communities by the contract type the majority of residents have. 

Entrance Fee CCRCs Have Higher Occupancy Rates and Stronger Rent Growth and Inventory Growth. By payment type, entrance fee CCRCs have higher 4Q 2021 occupancy rates than rental CCRCs for each care segment. The entrance fee CCRC independent living care segment had the highest 4Q 2021 occupancy (90.5%), followed by entrance fee CCRC assisted living and memory care (86.7% and 86.8%, respectively). The difference in 4Q 2021 occupancy between entrance fee CCRCs and rental CCRCs was the highest for the memory care segment (7.5 percentage points), followed by assisted living (6.0 percentage points), independent living (5.4 percentage points), and nursing care (1.6 percentage points). On a year-over-year basis, the nursing care segment had the most substantial change in occupancy (up 1.5 and 1.2 percentage points, respectively). 

As shown in the table below, entrance fee CCRCs are comprised of a greater proportion of independent living units. Independent living occupancy is higher than in the other care segments, explaining the more robust overall occupancy performance of entrance fee CCRCs. 

CCRCs attract residents who are planners drawn to the continuum of care. However, entrance fee contract residents generally differ from rental contract residents in terms of higher net worth, lower age of entry, and longer tenure in the community. CCRC entrance fees (often similar to resident home sales values) typically subsidize a community’s monthly fees to some extent. Conventional wisdom would suggest that average rental CCRC monthly fee levels would therefore be higher. However, as shown in the table, in addition to higher occupancy rates—which tend to translate into community pricing power—any or all of these factors may help to explain the reasons why average entrance fee CCRC monthly fee levels are higher than rental CCRC monthly fees for each care segment.  

The highest year-over-year asking rent growth was in the entrance fee CCRC assisted living segment (4.4%), followed by nursing care (3.4%) and memory care (2.5%). Entrance fee and rental CCRC asking rent growth were similar in the independent living segment. Note these figures are for asking rates and do not consider any discounting that may be occurring.  

The number of units in a community differs significantly by payment model. Referenced in the NIC Investment Guide: Sixth Edition, the median size of entrance fee CCRCs is approximately 345 units, compared to 230 units for rental CCRCs. According to the NIC MAP Vision data, both entrance fee and rental CCRCs experienced negative year-over-year inventory growth in one or more care segments. Negative inventory growth can occur when units/beds that are temporarily or permanently taken offline or converted to another care segment outweigh added inventory.  

During the past four quarters, rental CCRCs reduced (or shifted) their inventory in each care segment except memory care. Entrance fee CCRCs increased their inventory in all but nursing care. Both entrance fee and rental CCRCs reduced nursing care inventory by -2.1% and -2.4%, year-over-year. Rental CCRCs had the highest reduction in their inventory for the assisted living care segment (-3.1%), while entrance fee CCRCs added 1.2% to their assisted living inventory. Entrance fee CCRCs added more memory care than rental CCRCs (2.4% vs. 1.1%). Rental CCRCs reduced (or shifted) more independent living than entrance fee CCRCs (-2.9% vs. 0.3%). 

Entrance Fee CCRC Occupancy is Highest in the Pacific Region. In 4Q 2021, the Pacific, Mid-Atlantic, and Northeast regions had the strongest CCRC occupancy rates ranging from 88.5% to 88.2%. The weakest CCRC occupancy was in the Southwest region at 80.8%. Considering payment type, as shown in the table below, entrance fee occupancy was highest in the Pacific region (90.9%), whereas rental occupancy was the highest in the Mid-Atlantic region (85.8%). The most significant difference between entrance fee and rental occupancy was reported for the Pacific region, where entrance fee CCRC occupancy was 7.1 percentage points higher than rental. 

Look for future blog posts from NIC to delve deep into the performance of CCRCs. 

Are you interested in learning more? 

To learn more about NIC MAP^® data, powered by NIC MAP Vision, and about accessing the data featured in this article, schedule a meeting with a product expert today. 

Stakeholders at 2021 NIC Fall Conference weigh in on the latest trends.

Considering the dramatic impact of the pandemic on senior housing and care, it’s surprising how well valuations have held up over the last two years. Investors like what they see. The worst seems to be over as the Omicron variant subsides. Occupancy is recovering. Demand is projected to only get stronger from pent-up demand in the near-term and demographic trends in the longer term.

“Senior living is headed in a positive direction,” said Zach Bowyer, managing director at JLL. He co-hosted a session on valuations at the 2021 NIC Fall Conference along with Ben Firestone, executive managing director & co-founder at Blueprint.

In a fun twist, the session was patterned after SNL’s “Weekend Update.” The hosts interviewed guest panelists about the latest valuations news.

Providing context, Bowyer noted that total commercial real estate transaction volume (all property types) totaled $450 billion through the end of the third quarter of 2021. That level of investment had not been seen since 2007. “There’s a lot of capital chasing commercial real estate,” he said.

Valuations on individual senior housing and care properties vary quite a bit. Bowyer showed the difference in performance among four properties. “The devil is in the details,” he said. In general, Bowyer expects occupancy to restabilize at 90-91% in three years. And he thinks increased consumer demand will require supply growth to eventually double.

Up next was Stephen Monroe, managing director at Levin Associates. He writes about the sector, so the moderators asked about the biggest stories of the pandemic. “The big story was census,” said Monroe. His firm researched 11 straight years of assisted living occupancy and found that it never increased in the first quarter of any single year. Occupancy might not be back to pre-pandemic levels until 2025.

Monroe worries that a “new normal” could be lower occupancies going forward. The market could get overbuilt if multifamily developers jump into senior housing sensing a big demand from baby boomers. “There might not be the demand they expect,” said Monroe.

The biggest story for the next decade will be the labor shortage, according to Monroe. A flood of new capital and development without a better labor situation could result in lower equity yields because of higher labor expenses. “The industry has to be a leader in wages,” said Monroe.

Nikhil Chaudhri spoke about valuations from the REIT perspective. He is senior vice president, co-head of U.S. Investments at Welltower.

In the last 18 months, Welltower deployed $6 billion, predominantly to purchase senior living properties. “This has been a good opportunity to purchase properties at low values,” she noted.

Government assistance helped senior living businesses to stay afloat which helped operators maintain their assets and care for their residents. But it was a one-time event and is not a factor in valuations, according to Chaudhri.

Chauhri said Welltower is taking what he called a RIDEA 3.0 approach, a new spin on the REIT Investment Diversification and Empowerment Act (RIDEA). It allows REITs to participate in net operating income. Welltower will align the interests of stakeholders. Higher revenues produce higher management fees. “It all comes down to alignment,” he said.

Operations Key

On the development and operations side, Bryan Schachter, CIO at Watermark Retirement Communities, said that the company brought in more capital during the pandemic and continued to grow. Watermark opened six projects last year.

Independent living is driving success. Watermark’s residents like the wellness and hospitality approach along with the multiple dining venues. The company’s new projects are 50-60% independent living, resulting in higher margins and lower cap rates. The new projects opened over the last several years have strong margins despite the labor challenges.

Transaction volume is rebounding, according to Blake Peeper, partner & co-CIO at Bridge Investment Group. “There’s opportunity to buy across the spectrum,” he said. But he cautions, valuations are asset specific depending on occupancy growth assumptions. “We don’t want to be too far ahead of that,” he noted.

Peeper doesn’t expect any compression of cap rates until occupancies stabilize, though the company’s portfolio has seen an uptick in occupancies. That mirrors national trends. Demand increased by 21,029 units in the NIC MAP^® Primary Markets in the third and fourth quarters of 2021, the strongest two-quarter unit increase since NIC MAP Vision began reporting the data in 2005.

Staffing remains a concern, Peeper said, especially around the uptick in overtime and the cost of labor from third-party agencies. “Clearly the overall ability to attract and retain talent is key,” he said.

For skilled nursing, Jason Dopoulos said newer assets are trading in the 10-11% cap rate range. Dopoulos is managing principal at White Oak Healthcare Partners, a non-bank lender. When funding deals, the company focuses on the operator. Does it have other operations in the state? Can it attract staff and access supplies? What is the operator’s incentive? “We dig into operations,” he said. “Property managers have woken up to the value they add.”

Gain more insights at the 2022 NIC Spring Conference, March 23-25, 2022, in Dallas, TX. See scheduled sessions, and register today.