A NIC report developed to provide timely insights from owners and C-suite operators and executives on the pulse of seniors housing and skilled nursing sectors.

NIC’s weekly Executive Survey of operators in seniors housing and skilled nursing is designed to deliver transparency into market fundamentals in the seniors housing and care space at a time where market conditions are rapidly changing—providing both capital providers and capital seekers with data as to how COVID-19 is impacting the space, helping leaders make informed decisions. 

This Wave 8 survey sample includes responses collected May 25-June 7, 2020 from owners and executives of 150 seniors housing and skilled nursing operators from across the nation. Detailed reports for each “wave” of the survey can be found on the NIC COVID-19 Resource Center webpage under Executive Survey Insights.

Join other operators in the sector and participate in the next wave.

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In an effort to balance the time commitment of operators responding to our surveys while simultaneously continuing to provide transparency through the delivery of timely and informative data during the COVID-19 pandemic, NIC is separating the existing Executive Survey Insights into two alternating surveys:

• Executive Survey Insights: Market Fundamentals – Researches the impact of COVID-19 on occupancy rates, move-in and move-out rates, development pipelines, staffing, and supports for frontline community employees and staff.
• Executive Survey Insights: COVID-19 – Provides insights into how COVID-19 penetration differs across care segments from both a cumulative and in-place perspective.

Surveys will be distributed on a staggered, every other week basis and the analysis of the survey responses will be made public on our website in the NIC Notes blog. Responses from both surveys will continue to be shared with survey participants in advance of public release. Additionally, the historical Executive Survey Insights can be accessed on the NIC COVID-19 Resource Center.

Wave 8 Summary of Insights and Findings

The pace of move-ins and move-outs improved across all segments, resulting in a smaller share of organizations reporting month-over-month and week-over-week declines in occupancy than in prior waves of the survey. Of those with bans on move-ins, either self-imposed or government-imposed, two of every three organizations anticipate lifting restrictions on move-ins within one month, while approximately one in four specified no time frame.

• While most organizations continue to report a deceleration in move-ins in the past 30-days, in Wave 8 of the survey, the shares of organizations reporting deceleration is the lowest—across each of the care segments—since the first two waves of the survey (data collected March 24-31 and April 1-12). Furthermore, the shares of organizations reporting an acceleration in move-ins was the most of any wave to date.
• Reasons cited for a deceleration in move-ins continue primarily to be slow leads conversions/sales resulting in difficulty replacing residents who have passed away or moved out. However, about 15% fewer organizations cite an organization-imposed ban on move-ins in Wave 8 compared to Wave 5, as all states have begun to loosen social and economic restrictions. About one-half of respondents continue to cite resident or family member concerns about moving in. Others continue to note fewer hospital referrals or elective surgeries that bring in residents for rehabilitation and therapy.
• Fewer organizations saw a month-over-month decrease in occupancy compared to earlier survey waves. Additionally, the shares of organizations reporting an increase in occupancy from the prior month increased to the highest since the first two waves of the survey (between 14% and 25% in Wave 8). Respondents with independent living, assisted living, and memory care segment units report slightly higher shares of stable or improving occupancy rates from a week ago.
• Approximately one in four organizations indicated that both access to PPE and access to COVID-19 testing kits has improved considerably, while 58% indicated it has improved somewhat for PPE and 47% for test kits. Roughly one in four organizations report that it is still difficult to obtain enough testing kits.

Wave 8 Summary Demographics

• Responses were collected May 25-June 7, 2020 from owners and executives of 150 seniors housing and skilled nursing operators from across the nation.
• Two-thirds of respondents were exclusively for-profit providers (66%), about one-quarter (27%) were exclusively nonprofit providers, and 7% operate both for-profit and nonprofit seniors housing and care organizations.
• Owner/operators with 1 to 10 properties comprise 53% of the sample. Operators with 11 to 25 properties make up 25% while operators with 26 properties or more make up 22% of the sample.
• Many respondents in the sample report operating combinations of property types. Across their entire portfolios of properties, 81% of the organizations operate seniors housing properties (IL, AL, MC), 34% operate nursing care properties, and 28% operate CCRCs (aka Life Plan Communities).

Key Survey Results

Pace of Move-Ins and Move-Outs

Respondents were asked: “Considering my organization’s entire portfolio of properties, overall, the pace of move-ins and move-outs by care segment in the past 30-days has…”

• The shares of organizations reporting a deceleration in move-ins in the past 30-days is the lowest, across each of the care segments, since the first two waves of the survey (data collected March 24-31 and April 1-12), while the share of organizations reporting an acceleration is the highest.
• In Wave 8 of the survey, between 39% to 46% of organizations reporting on their independent living, assisted living and memory care segments, and 64% of organizations with nursing care beds indicated that the pace of move-ins decelerated in the past 30-days—a continuing trend in improvement.
• Additionally, approximately 20% of organizations with independent living, assisted living, and memory care segments and about one-quarter of organizations with nursing care beds saw an acceleration in move-ins in the past 30-days.

Reasons for Deceleration in Move-Ins

Respondents were asked: “The deceleration in move-ins is due to…”

• Significantly fewer respondents in recent surveys cited an organization-imposed ban on settling new residents into their communities than in earlier waves (45% in Wave 8 versus 59% in Wave 5).
• In Wave 8 of the survey—in similar proportions to the prior three waves—roughly two-thirds of respondents attribute a deceleration in move-ins to a slowdown in leads conversions/sales. Around one-half of organizations cite resident or family member concerns, and about one-quarter cite a mandatory government-imposed ban. Others cite fewer hospital referrals and elective surgeries that bring residents in for rehabilitation and therapy.

When Organizations Will Lift Restrictions on Move-Ins

Respondents that reported having an organization-wide ban or mandatory government-imposed ban were asked: “My organization anticipates lifting restrictions on settling new residents into some or all of our communities…”

• In Wave 8, two of every three organizations anticipate lifting restrictions on move-ins within one month, while approximately one in four specified no timeframe.

Move-Outs

• Between 63% and 68% of organizations reporting on their independent living, assisted living, and memory care units in Wave 8 saw no change in move-outs in the past 30-days, similar to Wave 7, while approximated 20% reported decelerations.

Change in Occupancy by Care Segment

Respondents were asked: “Considering the entire portfolio of properties, overall, my organization’s occupancy rates by care segment are… (Most Recent Occupancy, Occupancy One Month Ago, Occupancy One Week Ago, Percent 0-100)”

• Approximately one-half of organizations reporting on their independent living, assisted living, and memory care units in Wave 8 of the survey—across their respective portfolios of properties—experienced a decrease in occupancy from the prior month, while roughly one-third report no change (32% to 37%).
• Notably, one in four organizations with nursing care beds reported an increase in occupancy from the prior month, and 14%-15% of organizations with independent living, assisted living units or memory care units report an increase in occupancy in the past month. This was the highest since earlier waves of the survey.

• The chart below breaks out the rates of change in occupancy by care segment with greater granularity, comparing the current timeframe (Wave 8 data collected between May 25 to June 7), to the prior survey (Wave 7 data collected between May 11 and May 24), and earlier in the pandemic at the start of this survey when the majority of independent living, assisted living and memory care segments had yet to report major changes in current occupancy compared to one month prior (Wave 1 data collected between March 24 and March 31).
• As shown in the chart, near the beginning of the pandemic (Wave 1), the share of operators that reported month-over-month occupancy rate declines increased as the pandemic progressed. More recently in Wave 8, the share reporting downward changes in occupancy has declined for all segments but independent living. The majority of those reporting occupancy declines in independent living reported declines between 0.1% and 3.0%.

• Regarding the change in occupancy from one week ago, respondents with independent living units consistently report the fewest declines in occupancy from one week earlier while assisted living and memory care saw fewer organizations reporting declines (27%, respectively) than in prior surveys.

• Most organizations with independent living, assisted living and memory care segment units note no change (57% to 70%); however, slightly higher shares of organizations with independent living and memory care segment units report an increase in occupancy from one week ago. Organizations reporting on nursing care beds reported the highest share of higher occupancy rates from the prior week (17%), the same as in Wave 7.

Improvement in Access to PPE and COVID-19 Testing Kits

Respondents were asked: “Considering access to PPE (personal protective equipment) and COVID-19 testing kits, my organization has experienced that access has improved…”

• Approximately one in four organizations responding to this inquiry indicated that both access to PPE and access to COVID-19 testing kits has improved considerably, while 58% indicated it has improved somewhat for PPE and 47% for test kits. Roughly one in four organizations report that it is still difficult to obtain enough test kits.

NIC wishes to thank survey respondents for their valuable input and continuing support for this effort to bring clarity and transparency into market fundamentals in the seniors housing and care space at a time where trends are rapidly changing. NIC also thanks both ASHA and Argentum for their support in encouraging participation in the Executive Survey Insights: COVID-19 survey. The results of our joint efforts to provide timely and informative data to the market in this challenging time have been significant and noteworthy.

The Executive Survey Insights: COVID-19 survey is now open. To respond to the survey, please click here.

If you are an owner or C-suite executive of seniors housing and care properties and have not received an email invitation but would like to participate in the current Executive Survey, please send a message to insight@nic.org to be added to the email distribution list.

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A frank discussion on what works and where we’re headed now.

Operators are the best source of practical insights into the pandemic. They understand the realities and challenges of a disease outbreak that impacts vulnerable elders.

To provide a discussion forum, NIC held a virtual (by email) roundtable with four operators from different size companies around the country to ask them about their experiences to date.

Participants included: Ken Segarnick, chief corporate officer, Brandywine Living, in the Northeast; Marilynn Duker, CEO, Brightview Senior Living, in the East; Kris Engskov, president, Aegis Living, in the West; and Sarabeth Hanson, president and CEO, Harbor Retirement Associates (HRA), in the Midwest, South and East.

Some common themes emerged: communicate, support staff, and show the wider community why seniors housing is a safe place for loved ones.

What follows is an edited version of their remarks.

Q: What has been the biggest operational challenge during the crisis?

Segarnick: There are, of course, many. One that we have found to be especially challenging is the insidious nature of the virus given how it can be silently spread by asymptomatic carriers. 

Duker: The biggest challenge for us has been the lack of available testing, particularly for asymptomatic associates and residents. This no doubt contributed to the spread of the virus in ways that would not have occurred had testing been readily available. 

Engskov:  We’re in Seattle where the virus first took off in February. People’s safety has been 50% of the challenge and that’s number one. The other half is keeping them healthy and well. People cannot stay behind closed doors all day. And that’s the challenge we face now. 

Hanson: The most difficult thing has been the necessity to disrupt our residents’ lives by ceasing communal dining, life enrichment activities and visitation. It’s forced our teams to be very innovative and to put in a great deal of extra effort to ensure that our residents have remained engaged and mentally, physically and spiritually stimulated.

Q: Any silver linings?

Segarnick: History says there’s a silver lining to everything, but I’m not sure we have visibility on that right now. For epicenter markets like the ones where Brandywine operates in the Northeast, we’re still in the middle of combat conditions. Still, even now, it’s evident that quality operators around the country have taken extraordinary action and innovative approaches to contain and mitigate the spread of the virus and have not hesitated to communicate and share their best-practices and experiences with each other. 

Duker: A silver lining for us has been the acceleration of innovation and technology.  Our talent acquisition team became deeply involved in frontline recruiting during the pandemic to take the workload off the communities. That has led to a much deeper understanding of how we can better support our communities.

Engskov: The pandemic has given us an opportunity to prove to our families why they made the decision to move a loved one here in the first place. We designed this business to keep people safe and healthy and improve their wellness. We have strengthened our capabilities around clinical care and shown families that there is no safer place for their mom or dad than here.

Hanson: Obviously, improved infection control protocols have proven to reduce all communicable illnesses, but the true silver lining is that we are seeing the cohesive culture, mission and core values of HRA really shine through. Daily Zoom meetings are bringing the field and the operational support team together even more than in pre-COVID days.

Q: Can you give an example of a positive operational change? 

Segarnick: So many of our residents have embraced technology like Zoom as a means of keeping in contact with their families and have even connected with extended family members they have not seen in a long time. We were surprised at first by how well the residents adapted to the technology. From both a social and healthcare perspective, the pace in which technology has increased its utility in our environment is phenomenal. We will continue to see wider use of technology in many aspects of our community operations.

Duker: Because of the rapidly changing nature of dealing with the pandemic, we began communicating regular updates to families and residents early in the crisis. We have gotten great feedback from families and residents that this is helpful at assuaging worry and unease. We also issue a daily COVID bulletin to our home office and communities every morning at 7 a.m. The bulletin includes links on our intranet to new protocols around cleaning, dining, activities, associate screenings and best practices. The executive directors review each day’s bulletin at morning stand-up meetings with their team, so everyone starts the day on the same page.

Engskov: We made a decision from the beginning that we would be 110% transparent with families, residents and staff. We communicate with families about every other day unless we have a case in the community then we communicate every day. That has made a big difference in helping our families understand what was happening—both good and bad news. We have seen the benefit of being over communicative in a crisis.

Hanson: This pandemic has shown us how helpful increased communication can be. Daily calls from our executive directors to the families with updates, calls to capital partners daily on our new processes and enhanced standards, and our increased use of video technology to connect with families, prospective residents, and referral sources are all enhancements which we will continue to utilize.

Q: Do you anticipate making any operational change permanent?

Segarnick: One of the things we struggled with is how to reduce the risk of exposure for our team members outside of the workplace. This was necessary to mitigate the threat of silent spreading by those carrying the virus without knowing it. One measure we instituted is “Choose Brandywine,” a requirement that team members commit to Brandywine as the exclusive healthcare setting in which they work during the COVID-19 crisis. Put simply, we can’t solve what’s happening in any other building and we can’t fix what we don’t know. While it’s hard to see beyond the pandemic at this point, this is an operational change we’re considering for the future.

Duker: The ways in which we use technology are highly likely to be permanent. These include wide adoption of telehealth, FaceTime and Skype, Microsoft Teams for meetings, and the use of our in-house TV channel for programming and classes. We also accelerated the planned implementation of a new business intelligence software program. We track a whole new set of metrics and the program enabled us to stay on top of all the important measures.   

Engskov: We gave our team, within strict protocols, some creative ability to go out and make people happy and saw great results. We’ve had hallways concerts and hallway exercise programs. We launched Aegis Live, a talk show we filmed every two days and broadcast to residents.

Hanson: We will absolutely continue our infection control protocols and our enhanced communications.

Q: How is staff recruitment going?

Segarnick: Coming into this fight with a stable and quality workforce on the ground has made a significant difference. That said, the availability, quality and cost of labor will continue to be a challenge for our entire industry. We ramped up recruitment in anticipation of team members either becoming a victim of the virus or unable to work because they were affected in other ways, particularly in our markets where the virus has been rampant. The new troops have provided us with added reinforcement, bench strength and versatility to respond to conditions existing both within the community and the immediate area.

Duker: We urged all our communities to staff up at the beginning of the pandemic and turned attention to frontline recruiting because we knew our community teams were already stretched. We’ve had great success, hiring over 400 new associates over a 6-week period. That’s an increase of 35-40% over the same time period pre-pandemic and most were from outside the industry.  

Engskov: Hiring great people is always hard. In California and Washington where lots of people have been laid off, we have been actively recruiting. There are a lot of people joining senior living who have done different things. They’ll see how they like it. But we are encouraged.

Hanson: At the outset of the pandemic, our corporate director of talent acquisition anticipated the need for additional manpower and immediately launched a campaign to recruit talent from the hospitality industry. This industry which was, obviously, hit very hard by closures, has provided a ready pool of talent from which we have been able to source additional associates to fill vacancies and to enhance our staffing as cooks, servers, housekeeping personnel, maintenance associates and concierges.

 Q: How has staff training changed?

Segarnick: This is beyond any flu season we’ve ever seen. So, in addition to the costs of personal protective equipment (PPE), we’ve had to intensively train the staff on its use and the importance of continued compliance at all times. This will become a permanent part of our training paradigm. 

Duker: With the exception of the “must have” regulatory training, there is certainly more “on the job” training than in the past and the jobs, in many cases, have been different than what they were before the pandemic (e.g. delivering meals to apartments as opposed to serving a restaurant-style meal in our dining room). We recognize that as the communities begin to open again that we will likely need to go back and do a second round of training as we evolve to a new set of operating protocols. 

Engskov: We’ve made a big pivot to focus on the things that are most urgent. Staff must follow protocols with PPE and infection control. We are working on a more customized curriculum for coronavirus focused on how to keep people engaged and identify mental health issues especially with memory care residents when there are restrictions to work around. Training will be different.

Hanson: Obviously, there’s a huge need for training, particularly with recruitment from outside our industry. Our team has worked tirelessly to implement a virtual training system to allow our associates to learn not only the normal functions of their roles, but also the enhanced measures and standards that we have put in place since the beginning of the pandemic. Our teams created videos illustrating the enhanced standards and proper procedures for prevention and the care of COVID residents, sanitization, handwashing, and donning, doffing and care of PPE.

Q: What have you learned from this experience?

Segarnick:  The power of transparency. We’re amazed at how our residents, families and team members appreciated our transparent communications with them, even when the numbers were difficult to look at.

Duker: Our experience during the pandemic has reinforced that our focus on culture and on selection and retention of people who are a great fit with that culture must remain paramount.

Engskov: You need to care as much or more about the team as the residents. Our staff people have the same fears all of us have. They are taking care of residents and going home and taking care of their families. A big way to keep residents safe is to keep staff safe and supported. The right PPE is super basic to keep the staff and their families safe.

Hanson: We have always known that communication is key, but it has been more evident with COVID. Regular prayer, devotional, and fellowship sessions offered company-wide, daily zoom meetings sharing new standards, best practices, and good news were all very helpful to our teams during a stressful time. Our enhanced, proactive communications with our residents’ families and our stakeholders was met with such appreciation, that it will continue to be a cornerstone of our operations moving forward.      

Q: What concerns do you have for your company or for the industry in terms of the long-term impact of the COVID-19 crisis?

Segarnick:  We’re the invisible industry.  Assisted living communities are not nursing homes, though the media has fueled misperceptions by conflating these very different types of environments. Because assisted living has been overlooked in its distinct role in the healthcare ecosystem, we have not yet been included in the federal relief programs that have been extended to other healthcare providers. We provide essential care services to the population that has been most affected by COVID-19. We are exhausting enormous resources in sourcing and procuring PPE, maintaining adequate staffing, obtaining and providing testing, and protecting our vulnerable residents during this crisis.  Funding and support should follow the need.  

Duker: The industry has a significant need for assistance with access to and funding the cost of widespread, frequent testing. Unfortunately, most of the assistance to date from the federal and state governments has been for nursing homes. The cost of doing the frequency of testing necessary to keep the virus out of seniors housing communities is prohibitive. Without the ability to conduct frequent testing, the value proposition from a resident’s perspective, will be affected due to the continuation of social distancing and other steps that will be necessary to reduce the risk of transmission. This could conceivably slow move-ins and add expenses which would result in downward pressure on operating margins. 

Engskov: People desperately want to get back to the way it was, and it is not going to happen for a long time because we are caring for very vulnerable people. We will need to manage expectations of families, caregivers and vendors. We need to remind people why our environments are safe. There are great operators out there adding in extra levels of protection. I want people to look at our communities and say those are the safest places you can be while also living your life.

Hanson: One of our large concerns moving forward is how we safely resume some of the operational pieces that we have changed or ceased altogether. Having visitors in our communities, resuming communal dining in our upscale restaurants, reopening our bars and salon parlors, and resuming group life enrichment are all challenges on which we are thoughtfully strategizing now.  Some of these things will require us to, once again, be creative and innovative in devising solutions. There will be costs associated with these things, such as increased staffing, rapid testing, and an increased stock of PPE supplies.

Q: How are you planning to address that issue for your own company?

Segarnick: We need to get people to see us for who we are.  We offer both a social and safe place to live for older adults. Healthcare is inextricably bound up in everything we do. We need to do a better job at communicating the role we play in protecting and improving the lives of seniors.

Duker: We have developed a national relationship with a lab to provide us with testing capacity, but the ability to get assistance with funding the cost will be a factor in how frequently we can test. 

Engskov: We are introducing a number of innovations. Training and benefits for staff, infection and environmental controls, and outside expertise to help us stay smart. 

Hanson: We have begun our plans to thoughtfully begin reopening some of our dining venues, on a limited basis, following stringent sanitation processes and social-distancing protocols. We have initiated testing in communities for associates and residents, and are attempting to source rapid testing equipment

Q: Any other thoughts?

Segarnick:  Be ready for a second wave; ready, but not overwhelmed. We’ll get through this, one step at a time. We’re fortunate to have the opportunity to do what we do.

Engskov: We’re really proud of our team. Staffers have risen to the occasion. This is a remarkable career opportunity for someone who wants to get into a growth industry where there is a real mission and great development opportunities.

Hanson: The threat of COVID remains constant but the protocols established have worked to keep the infection rate below 1% for our residents and associates.  We created a “Pledge of Love” for HRA which, by signing, our associates commit to following the stringent protocols we have in place both at work and at home in order to ensure that our residents are as safe and cared for as we can possibly make them. This was an initiative we rolled out to the entire company. As the president and CEO, I led the way by being the first to sign.   

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The latest installment of NIC’s highly popular “Leadership Huddle” webinar series, titled “A Conversation with Brokers During a Pandemic,” took place Thursday, June 4. As thousands of attendees have come to expect, a panel of industry leaders provided timely insights in a lively discussion moderated by NIC Chief Economist, Beth Mace. Thursday’s discussion focused on the perspectives of the nation’s top brokerage firms on the impact of COVID-19 on their businesses.

In her opening remarks, Mace reflected on the continuing need for the webinar series, which was launched in the middle of March in response to the need for information as the seniors housing and care sectors found themselves on the frontlines of the COVID-19 pandemic. “We continue to hold them because so much uncertainty remains in the market today.” She acknowledged that operators across the sector, “continue to work around-the-clock to protect residents and support front line workers,” adding that, “many of the challenges that were evident in the first days of the pandemic remain, unfortunately, especially when it comes to testing and tracing.” As in previous webinars, Mace highlighted the ongoing need for sufficient PPE, testing, and tracing in seniors housing and care properties, and acknowledged the tireless efforts and sacrifice of operators and frontline care workers who are fighting to protect residents’ lives across the country.

Join the next complimentary NIC Leadership Huddle

June 18, 2020, 11:00 AM

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Mace also addressed the need for transparency across the sector: “In a continuation of our mission, NIC encourages transparency in our collective understanding of the virus. As the COVID-19 pandemic has developed, it has become increasingly clear that the availability of data on impact of the virus on the seniors housing and skilled nursing communities is vitally important.” She expressed gratitude to the many operators and capital providers who continue to provide NIC with their data, “even during these very difficult times, so that we can provide transparency into the market. These data providersare improving transparency which leads to credibility, and ultimately trust, by educating not just investors and other operators, but also policy-makers and the general public.”

As the discussion kicked off, Charles Bissell, Managing Director in JLL’s Seniors Housing Capital Markets Group, reflected on his experience dating back to 1986 during the savings and loan crisis, which he experienced in hard-hit Texas. “I can tell you that was probably the deepest cycle that I’ve seen in my career. In Texas not a deal was getting done for a period of several years,” he said. “I’ve seen a few cycles and learned how to get through them, and I do know there’s light at the end of the tunnel here with the COVID pandemic.”

Panelists shared how their businesses are being impacted today. Bissell said, “I’d say, from a broad perspective it’s slowed down a little. We had a lot of things in the pipeline that we were starting to market. Those deals that got signed up pre-COVID ultimately have closed, but some have had some adjustments. Depending on the nature of the seller, some deals are ploughing forward, while other sellers have asked us to put things on hold to see when things become a little more normalized. Now, we are also getting some new requirements: re-financings, people that are having to restructure their debt situations, some sales where people have a need for liquidity or they may have had very successful projects that are still doing well and they don’t want to sit around for who knows how long and they want to test the market. So…we’re busy, but it’s different.”

Richard Swartz, Vice Chairman, Cushman & Wakefield, has had a similar experience. “At the time COVID hit the U.S., we had about $2 billion of assets somewhere in our pipeline, either in marketing or under letter of intent (LOI) or under contract. The vast majority of that has been put on pause. Some of the transactions have continued to move forward slowly. There are significant barriers to getting a transaction done at present. Everything from how do you get a lender to tour the building, how do you get your third parties done, how do you effect a license transfer, how do you even record the deeds when in some cases the county offices are closed. Those barriers have really slowed the transaction flow down. Like Rick said, we are starting to get more inquiries. I’d say the last two weeks have probably been more active than all of April and May together in terms of calls and people starting to look at going back to market, looking for financing, looking for equity for new developments, even. So, we are starting to see signs of life and hope that continues forward.”

Ben Firestone, Executive Managing Director and Co-Founder, Blueprint Healthcare Real Estate Advisors, said that about half of his business is skilled nursing focused. “That submarket has been impacted perhaps more greatly as it relates to actual census and operating expenses. But, it’s a little bit more resilient and need-driven. The capital markets and buyers and the cap rate environment continue to prevail.”

Asked whether government reimbursement was adding investor confidence in skilled nursing, Firestone replied that stimulus money could be temporary relief for a sector hard-hit with dropping occupancy rates and rising costs. He pointed to recent actions from HUD to loosen restrictions and provide an easier path to financing as playing a role, as well as the nature of skilled nursing buyers. “The behavior of the buyers in the (skilled nursing) market is a little bit different,” he said, contrasting them to seniors housing buyers’ behavior, “which is more in line with commercial real estate, traditionally.”

Going back to underwriting, Bissell acknowledged a lack of comparable sales, saying “we’re not even trying to look at comps now. It is very much property by property and it’s very much focused on discounted cash flow. Take the pre-COVID financials, see what happens to the property during COVID, and then make some reasonable go-forward assumptions over a five or seven-year hold period. Some properties experience a significant hit to occupancy. We’ve heard of some dropping 10, maybe even 15 percentage points. Some, on the other hand, have really experienced no change. So, obviously the underwriting for those two properties would be quite different.”

He said investors don’t expect much rental-rate growth for the next 18 months, “but in tight markets you may see some growth.” He also pointed to elevated expenses, “We’ve had elevated expenses due to COVID in relation to the purchase of PPE, hero pay, and  higher staffing expenses just overall, using agency and other sources. So, depending on how aggressive you want to get, you burn those down over time. What we try to do is talk to the buyers, find out what they’re doing, and if the buyers are forecasting a burn down of those expenses over twelve months, that’s how we would model it.”

On finance, Bissell pointed out that rates are attractive for Fannie, Freddie, and HUD, and activity in lending markets is beginning to pick up. “You’re able to layer that debt in and do an after-debt cash-flow analysis. The leveraged cash-flow returns for most of the investors we’re talking to haven’t really changed. They’re still seeking the same type of leveraged return. They’re just being more selective, and they may stress-test that cash-flow a lot more aggressively and run a lot more variations to determine their pricing at the end of the day.”

On the elevated expenses associated with fighting COVID, such as PPE and additional staffing costs, Bissell said, “buyers and lenders will recognize those as one-time non-recurring expenses. The properties will not be hit with those (expenses) going forward. Any operator out there that’s not isolating those expenses, should be.”

Firestone agreed, “we’re underwriting one-time expenses and trying to put those ‘below the line’ where possible.” On cap rates, he said, “I think cap rates on skilled nursing in particular will stay stable. From a leveraged stand-point, from the seniors side you’re still seeing attractive rates…but you’re seeing sizing go down, which is an indication of risk and how the institutions are looking at risk and…that’s going to affect pricing eventually.” He sees pro formas “stretching out to longer time horizons,” impacting seniors housing.

In skilled nursing, Firestone said, “in the short run we are going to see Medicaid rate increases in various states, which is going to help, and probably out-pace that seniors housing private-pay rent growth acceleration.” He pointed out that economic factors that impact consumers’ willingness to pay, such as jobs and home values, will have less impact on skilled nursing, which is “far more based on entitlement programs and reimbursement rates.”

Mace asked Swartz for his perspective, particularly on whether the agencies are requiring greater reserves. “Yeah, the agency requirements for reserve sizing have definitely tightened up.” he said. “I would say we still look, as a metric, at stabilized NOI with a traditional cap rate as a starting point, and then we’ll maybe deduct out of that capitalized costs for additional COVID-related expenses over, say, 18-24 months and we’ll do the same thing for occupancy. Even pre-COVID we were used to marketing a lot of properties that were still in their lease-up.” Swartz said buyers are looking for safety in those 12-24 months, “so, I think we’re going to see some structured deals as well, to help compensate for that.”

Despite the impacts of COVID-19, and a barrage of headlines, capital remains available, according to the panelists. “There’s a lot of capital in the market. The groups that we know that were running funds are still raising capital. I think they believe that long-term the demand for seniors housing is not going to change. In fact, we all know demographically its going to keep growing; it’s a need-based service.” Said Swartz.

“It seems every phone call I get is a little bit more optimistic,” said Bissell. “I agree with Rick. The long-term outlook for seniors housing hasn’t changed. There could be a few side-effects of this situation that benefit us. We could see a slow-down in new development, which will eventually result in increasing occupancy levels.” He also pointed to decreased construction costs and the prospect of a “much more favorable” labor market as potential boons to the sector in the long-term.

Firestone’s perspective is similar, “There’s so much capital on the sidelines that needs to enter into this space and will support pricing in the long-run.” Comparing seniors housing to other property types, such as hospitality, retail, and industrial, Firestone said, “We saw last recession seniors housing was last in, first out, and I think hopefully we’ll see that again, with therapies and vaccines and different ways to contain the pandemic…I like the 80 million baby boomers coming on line and I like that eventually that story of putting your loved one in a seniors housing community will come back with a vengeance; so, I’m optimistic.”

Panelists see signs that investors are beginning to see opportunities in the market. “There’s a lot of private equity capital out there that has been waiting years for the opportunity to buy on a distressed basis in the senior housing space.” Said Bissell, who described several deals currently in the works on distressed properties. “I think we’re going to see quite a lot of activity and…a lot of it will be lender-driven.”

Although also seeing interest from potential buyers, Firestone doesn’t see distressed properties becoming “bottom-feeding” deals. “I just don’t think it’s there yet…that bid/ask spread is still too wide. You’ve got so many bidders and so much money and so many buyers out there, so that’s eventually going to support pricing. I don’t think we’re going to see an environment of deeply discounted sweetheart deals. They’re going to be few and far between.”

The Labor Department reported that jobs rose by 2.5 million in May, while the jobless rate fell to 13.3%, a surprising outcome given the severity of pandemic-related lockdowns on the economy and other recent less bullish measures of economic performance. The increase in May followed a loss in jobs of 20.7 million in April, which was the largest decline in records dating back to 1939. Analysts had predicted an increase in the employment rate to 19% and a decline of 7.5 million jobs in payrolls.

The May unemployment rate was down 1.4 percentage points from 14.7% in April to 13.3% in May. As recently as February it was at a 50-year low of 3.5%. During the 2008/2009 recession, the unemployment rate peaked at 10%.

The underemployment rate or the U-6 jobless rate slipped back to 21.2% from 22.8% in April.
This figure includes those who have quit looking for a job because they are discouraged about their prospects and people working part-time but desiring a full work week. In the previous 2008/2009 recession, this rate peaked at 17.2%.

In the BLS report, the following comment was provided to explain the surprising drop in jobless number: “If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.”

Revisions also subtracted thousands of jobs in the prior two months. The change in total nonfarm payroll employment for March was revised down by 492,000 from a loss of 881,000 to a loss of 1.4 million and the change for April was revised down by 150,000 from a loss of 20.5 million to a loss of 20.7 million. With these revisions, employment in March and April combined was 642,000 less than previously reported. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.

Average hourly earnings for all employees on private nonfarm payrolls rose in May fell by 29 cents to $29.75 but was up 6.7% from year-earlier levels.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work edged up by 0.6 percentage point to 60.8%. Total employment, as measured by the household survey rose by 3.8 million in May to 137.2 million, following a large decline in April.

Separately, the Labor Department reported yesterday that initial claims for unemployment insurance totaled 1.9 million jobs in the week ending May 30. Continuing claims, a measure of ongoing unemployment reported with a one-week lag increased to 21.5 million. Also the Federal Reserve’s Beige Book showed economic activity continuing to deteriorate even in regions that started to remove lockdown measures at the end of April and the beginning of May, suggesting a rebound in jobs will still be limited.

Today’s report was much stronger than expected and is welcome news because it could indicate that the labor market is starting to stabilize. However, while some businesses may gradually return to “normal”, not every sector will recover at the same pace. In the meanwhile, and tragically, millions of people are suffering from illnesses, anxieties and deaths associated with the pandemic and from the human tragedies associated with of the collapse in the national and global economies.

NIC’s Executive Survey of operators in seniors housing and skilled nursing is designed to deliver transparency into market fundamentals in the seniors housing and care space at a time where market conditions are rapidly changing—providing both capital providers and capital seekers with data as to how COVID-19 is impacting the space, helping leaders make informed decisions.

This report is a subset of the findings from NIC’s Executive Survey. Highlights of the responses from owner/operators of CCRC organizations are compared to responses from non-CCRC owner/operator organizations collected near the beginning of the COVID-19 pandemic through the end of May. Detailed reports for each “wave” of the survey can be found on the NIC COVID-19 Resource Center webpage under Executive Survey Insights.

Key Findings

1. The COVID-19 pandemic has caused the pace of move-ins for all seniors housing and care communities to slow. However, CCRC properties have experienced less disruption on move-in rates and have seen greater stability in occupancy rates than non-CCRC properties.
2. The impact of the virus among non-CCRC seniors housing and care properties has been swifter and more significant than for CCRCs.
3. The pace of move-outs for CCRC properties has been less effected than for non-CCRC properties over the course of the pandemic to date. More non-CCRC organizations have reported growing shares of acceleration in move-outs by care segment than CCRCs.
4. The largest impact on move-ins and move-outs among care segments has been on nursing care. As the highest acuity care segment, nursing care has experienced the most negative impact of the COVID-19 pandemic on occupancy levels and this has grown over time.

Pace of Move-Ins and Move-Outs

• Approximately one-third to one half of CCRC organizations reporting on their independent living, assisted living, and memory care units in Waves 6 and 7, across their respective portfolios of properties, saw a deceleration in move-ins from the prior month (52%, 42% and 32%, respectively). This compares to 42%, 31% and 21% in Waves 1 and 2—amounting to roughly a ten-percentage point difference—highlighting the growing influence of the COVID-19 pandemic on move-ins as time has passed.
• In contrast, the virus’s effect on move-in patterns among non-CCRC seniors housing and care segments was more significant. Approximately two-thirds to three-quarters of non-CCRC organizations reporting on their independent living, assisted living, and memory care units in Waves 6 and 7 saw a deceleration in move-ins from the prior month (65%, 72% and 68%, respectively). This compares to 67%, 69% and 62% in Waves 1 and 2.
• The CCRC memory care and assisted living segments reported the least change in the pace of move-ins in both timeframes, and the CCRC memory care segment saw a greater share of acceleration in move-ins in across the board in Waves 6 and 7.

• The largest impact among care segments has been on nursing care. Nearly two-thirds of the sample’s CCRC organizations with nursing care beds (65%) saw decelerations in the pace of move-ins in Waves 6 and 7, compared to just over half in Waves 1 and 2 (53%). However, more non-CCRC organizations with nursing care beds noted declines in the pace of-move-ins. Nearly three-quarters of the survey sample’s non-CCRC organizations with nursing care beds (73%) noted decelerations in the pace of move-ins more recently than in the earlier days of the COVID-19 crisis (68%).
• There is greater stability in the pace of move-outs reported by CCRC organizations compared to non-CCRC organizations. A potential reason for this survey finding could be that CCRCs offer multiple care segments (at a minimum, independent living and nursing care) typically by a single provider on one campus, and this full range of services allows residents to remain within the community as their care needs change.
• The majority of both CCRC and non-CCRC respondents noted no change in the pace of move-outs across the duration of the pandemic to date, apart from the non-CCRC nursing care segment. However, for non-CCRC properties, each care segment showed larger shares of organizations reporting an acceleration in move-outs as the COVID-19 pandemic progressed.

• Some possible explanations for the relatively better performance of CCRCs during the pandemic may include the following considerations:
  • While many CCRCs accept nursing care residents from outside of the community, the majority guarantee access to current residents. Furthermore, non-CCRC organizations with nursing care beds may have seen a greater effect on move-ins as the virus caused hospitals to curtail elective surgeries, reducing the amount of short-term, rehabilitation residents.
  • Non-CCRC residents tend to move in older and have more care needs, especially in the higher acuity settings. CCRC residents, on the other hand, tend to enter the independent living care segment of the community at younger ages and in better health both physically and cognitively, having planned to live on a campus that can meet any care needs they may have in the future without having to make a move from the community.
  • Multiple levels of care often spread out across a large footprint may make it easier for CCRC operators to distance vulnerable residents from others augmenting protection from contagion that is harder to do in properties that are home to residents with more diversity of care needs under one roof.

Changes in Occupancy Rates

• The highest acuity segments have experienced the most negative impact of the coronavirus on occupancy levels and this has grown over time. Shares of CCRC and non-CCRC organizations reporting a decrease in occupancy in the past 30-days are higher in Waves 6 and 7 than in Waves 1 and 2.
• The nursing care segment for both CCRCs and non-CCRCs reported the highest shares of organizations with occupancy declines over time (from 61% to 67% for CCRCs and from 68% to 78% for non-CCRCs).
• The memory care and assisted living care segments have seen the most change in occupancy from earlier in the pandemic to recently. Roughly three-quarters of CCRC organizations with memory care segment units (73%) and more than half with assisted living (59%) reported no change in occupancy from the month prior in Waves 1 and 2 compared to 43% and 47%, respectively, in Waves 6 and 7.
• Conversely, among the same non-CCRC care segments, there were more organizations reporting a deceleration in occupancy which widened over time—from 49% to 75% in assisted living—and from 42% to 70% for memory care.
• The independent living care segment has seen less downward pressure on occupancy compared to the assisted living, memory care and nursing care segments. Only about one-third of CCRC organizations reported occupancy declines in independent living between when the survey began to recent times (29% and 33%, respectively). However, more non-CCRC organizations with independent living reported occupancy declines in both timeframes (42% and 63%, respectively).

In conclusion, while the pace of move-ins has decelerated with the progression of the COVID-19 pandemic across all types of seniors housing and care communities, CCRCs have experienced less disruption, translating into more occupancy stability than non-CCRCs. 

These survey results are consistent with what has been reported in the NIC MAP^® data analysis of the performance of CCRC care segments compared to non-CCRC care segments in the past. As detailed in a recent blog post breaking down the market fundamentals at the care segment-level, CCRCs have reported stronger occupancy rates than freestanding and combined non-CCRC care segments.

During the great recession, CCRCs struggled with declining occupancy due to a strong development pipeline that delivered inventory during a devastated housing market, which made it difficult for residents to sell their homes to move into CCRCs. Additionally, adverse and uncertain economic conditions raised barriers to moving into choice-based, lifestyle-focused CCRCs. However, CCRC occupancy rebounded during the recovery period following the great recession, and since then, CCRC inventory growth has been muted compared to other seniors housing property types. For the past several years, CCRC occupancy rates have outpaced their non-CCRC counterparts.

Going forward, CCRCs entered the COVID-19 pandemic from a position of relative occupancy strength and have performed better than non-CCRCs in terms of move-ins, move-outs and changes in occupancy rates. Time will tell how well CCRCs will weather the current COVID-19 crisis and potential economic consequences to come.

Survey Demographics

• Waves 1 and 2 responses combined, collected between March 24 and April 12, 2020, included 48 responses from owners and executives of CCRC operators. Single-site CCRC operators made up 60% of the sample, and 96% of the organizations responding were exclusively nonprofit owner/operators.
• Non-CCRC operators included 148 responses from owners and executives. The Waves 1 & 2 combined sample was comprised of 75% multi-site operators (5 or more properties). The majority (82%) were exclusively for-profit providers.
• Waves 6 and 7 responses combined, collected between April 27 and May 24, 2020, included 51 responses from owners and executives of CCRC operators. Single-site CCRC operators made up 75% of the sample, and 94% of the organizations responding were exclusively nonprofit owner/operators.
• Non-CCRC operators included 218 responses from owners and executives. The Waves 6 & 7 combined sample was comprised of 74% multi-site operators (5 or more properties). The majority (78%) were exclusively for-profit providers.

NIC wishes to thank survey respondents for their valuable input and continuing support for this effort to bring clarity and transparency into market fundamentals in the seniors housing and care space at a time where trends are rapidly changing. Your support helps provide both capital providers and capital seekers with data as to how COVID-19 is impacting the space, helping leaders make informed decisions. 

If you are an owner or C-suite executive of seniors housing and care properties and have not received an email invitation but would like to participate in the Executive Survey, please click here for the current online questionnaire.