How will coronavirus affect Senior Living Facilities?
1/4 of US coronavirus deaths are residents of Senior Living Facilities. Provided the virus persists (in addition to a potential major stock market correction), how does the future look for Senior Living Facility investments?
[{"id": "fyafr3u", "text": "I am interested in this question too.", "replies": [], "depth": 1}, {"id": "fyait73", "text": "I mean there\u2019s a ton of information out there. Most deaths are in SNFs and they\u2019ve bee harder hit than AL/MC. IL has taken a beating since it\u2019s less need based.", "replies": [{"id": "fyao96a", "text": "Can you define those initials please?", "replies": [{"id": "fyap5qz", "text": "snf- skilled nursing\nAl - assisted living\nAlz - Alzheimer\u2019s Care\nIl- independent living", "replies": [{"id": "fyk4zy4", "text": "MC= memory care", "replies": [{"id": "fyk86ji", "text": "Alz / MC are the same thing. MC when used by NIC though typically refers to stand alone MC facilities (which are a terrible investment...)", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fyakw3m", "text": "Many senior living facilities are also affordable housing properties. They will always have high demand and a large waitlist of people waiting for a spot to open. If someone dies from Covid, another person will move in as soon as the unit is turned. We are currently seeing about 88-92% collection rate on our affordable senior deals. Also, tax credits are still being allocated for senior deals and developers are continuing to build/rehab them. \n\nAs for market rate senior deals, I couldn\u2019t tell you.", "replies": [{"id": "fyap9ju", "text": "Affordable seniors with care component or age restricted affordable housing?", "replies": [], "depth": 2}, {"id": "fyavrdl", "text": "You have a 8-12% bad debt write off rn....Jesus", "replies": [{"id": "fyaz22z", "text": "Yea that\u2019s brutal - wouldn\u2019t anticipate that in affordable care.... Medicaid I would think would pick up the tab....", "replies": [{"id": "fybad2d", "text": "Seen some pretty nasty Medicare bad debt with bad operators.", "replies": [{"id": "fybb8rq", "text": "Medicare or Medicaid? Medicaid in my experience was typically a direct pay from the state to the property, the resident never touched the money. I was under the impression that Medicare won\u2019t reimburse for AL/ALZ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fyaqajk", "text": "I think long term it\u2019s kind of good for the industry - it\u2019s been super overbuilt this cycle and a lot of new operators have popped up out of nowhere. Covid is going to cause a lot of pain in the industry, but coming out it will have slowed down overbuilding and should lead to operator consolidation. Right now the segment is at an all time low for occupancy per NIC\u2019s 2Q2020, which reflects higher move-outs (both death and non-death related) coupled with a reluctance to move people in right now. Ultimately seniors is a private pay (and really expensive!) business so the decision to move mom or dad in is a huge financial, emotional, and lifestyle decision for everyone involved. If people are hurt financially they don\u2019t have the $4k+ /month to move a parent into a facility, or they\u2019re laid off and can take care of them, or they just don\u2019t trust their loved ones safety in a facility right now. Bottom line will also get squeezed more as people may elect to move their loved one in once their acuity level has become completely unmanageable, which ends up leading to a much shorter length of stay / higher turnover which isn\u2019t good. \n\nOverall in the very long term the industry will turn out OK, it just might take some time to get occupancy back up to the low 90s and start pushing rate again. The \u201csilver tsunami\u201d is still like 10 years away so there\u2019s time. I think a bigger long term question is what happens to these facilities In 30 years when demographics aren\u2019t in your favor anymore and you need to de convert as the baby boomer generation dies off and leaves behind a smaller gen x cohort to backfill the beds.", "replies": [{"id": "fyavwts", "text": "Nah the silver wave is 4 years away. That\u2019s when the first boomers age into seniors...that being said, there\u2019s some there right now, but for the most part, once they turn older 70s-80\u2019s they become a candidate.\n\nAlso for private pay, they sell their homes...", "replies": [{"id": "fyax9ya", "text": "Silver wave is 10+ off, average move in age is like 87 for Al/ALZ communities. IL and CCRC trends younger but still hasn\u2019t hit. Private pay is still grossly more expensive than most people can afford, there\u2019s a huge push by Beth Mace at NIC to develop a middle income solution through PPP because as is private pay is a luxury. By the time you\u2019ve hit 87 the vast majority of seniors have spent down assets and their children can\u2019t bear a $50k+/yr additional burden.", "replies": [{"id": "fyaxl44", "text": "I\u2019m going to disagree with you on AL/MC age but I\u2019ve just seen different data than you have. Yea they\u2019re outta their retirement savings but they\u2019ve got a ton of home equity. Honestly IL may be a thing of the past after COVID, time will tell.", "replies": [{"id": "fyayyzt", "text": "Out of curiosity what\u2019s your data? Per NIC average move in age for communities offering care is mid 80s, and my experience with a 5,000 unit portfolio trended towards later 80s (although operator was much more medical model)? Spend down is real for a lot of people, SS $ isn\u2019t enough to stay at home for a ton of people and you\u2019re average middle class home in the US won\u2019t sell for enough to cover multiple years of care. \n\nI would agree that IL is toast but in the 15 years I\u2019ve worked with Seniors it\u2019s always performed.... couldn\u2019t tell you why I don\u2019t understand the value prop (not do I get the value prop in 55+ communities, although I do appreciate that Carlyle builds them for easy conversion to AL/ALZ).", "replies": [{"id": "fyb0bmz", "text": "It\u2019s internal data.", "replies": [], "depth": 6}, {"id": "fyb647q", "text": "I'm with you, stoweker.  I don't have access to as much data as I'm used to, but I've always been skeptical that boomers are going to make the move en masse before they absolutely have to.  They're always referred to as the richest generation in basically the history of the earth; I figure they're gonna drag it out in their homes using that money for stair-lifts and in-home care.  And as they get older, more products and services are going to come to market to serve those that aren't willing to admit age is getting the best of them.", "replies": [{"id": "fybabdq", "text": "Which is why ultra high end product struggles (from what I\u2019ve seen). But the upper middle class has to go somewhere and they\u2019ll have to go private pay.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fybek6p", "text": "While there\u2019s a definite decline in occupancy in large facilities, many small facilities (4-8 residents) are seeing increased occupancy. People like the limited number of contacts at these facilities. We\u2019ll see if that holds up long term, but it\u2019s definitely happening now.", "replies": [{"id": "fybhqn7", "text": "Small facilities and stand alone ALZ is the bane of the industries existence tho. One bad winter and you\u2019re hosed. Also what is a 4-8 bed facility, like adult day care in someone\u2019s house? Does that product even exit no idea how you\u2019d make any money operating that", "replies": [{"id": "fyblvqy", "text": "They operate 6 or 8 home each with 4 to 10 patients. They have two full time on site staff and one nurse who makes rounds at each home. This limits the number of potential contacts each patient has.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fyawbpy", "text": "Both of my parents recently had to put one of their parents into the nursing home.  Dad\u2019s mom has had her dementia progress to the point that she can\u2019t live alone, and mom\u2019s dad fell and hit his head hard enough to cause massive cranial bleeding which resulted in confusion and disorientation.  His fall was also dementia related.  \n\nIn both cases my grandparents were mean people their whole lives, who became abusive in their old age.  If my parents were somehow capable of quitting their jobs to provide the round the clock care needed, it would be an awful existence for them.\n\nSo I\u2019m summary, nursing homes are like schools, and businesses.  They represent huge danger points where COVID is concerned, but in the end we\u2019ll just let a lot of people die, because the world would shut down in the alternative.", "replies": [], "depth": 1}, {"id": "fybso1i", "text": "In the short term, facilities have been getting significant support from SBL and CARES act dollars. While the offset of PPE &amp; staffing expenses is largely state-dependent, I think short-term expectations are that they will weather this storm. I don't know the stats off-hand, but anecdotially given the shift to PPM and higher regulatory needs over the last couple years, a lot of operator consolidation has already occured to experienced and capitalized groups to provide an additional backstop. \n\nLong-term, nothing has really changed in the market's eyes. Maybe some lower acquity potential residents may delay being put into a crowded ALF, or skilled mix will shift towards a higher demand for private rooms than there already is, but I don't believe we can expect a fundamental shift in the way business is being run at SNFs. There's some medium-term nuance to changing insurance costs given uncertainty on COVID liability and potential staffing rating cutpoints changes from CMS that might affect values, but I haven't heard of many groups allowing that to effect cap rates - of course there not being many transactions at all right now, so that might be more selection bias than anything.", "replies": [], "depth": 1}, {"id": "fycqroj", "text": "I\u2019ve been working on a 100,000sqft luxury senior living development in the boroughs. Has not slowed down a bit. The project is about 2 years out.", "replies": [], "depth": 1}]