Senior Housing Industry Tells Investors: Don’t Panic

While senior housing REITs are getting pummeled as investors pull back, fundamentals remain strong and operators are prepared for the crisis.
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From the earliest stages of the coronavirus pandemic, the senior housing industry has been perceived as particularly vulnerable. Elderly Americans are statistically more at risk to be hospitalized and worse if they contract COVID-19, and community spread can lead to a surge in cases of those infected.

Washington State became the first region to be hit hard by the virus when residents of a nursing home near Seattle began testing positive for the respiratory illness starting in late January. Several weeks later, 81 residents out of 120 residents tested positive for the virus and so far, 34 have died.

In the U.S., there are currently about 2.9 million units in a little less than 22,100 senior housing and care properties, according to the National Investment Center for Seniors Housing & Care, a nonprofit organization that provides data and resources for the senior housing industry. As it continues to unfold, the pandemic has left a major impact on senior housing REITs and industry experts anticipate a short-term disruption.

“The REIT stocks have been pummeled and the two major publicly-traded operators, their valuations have been severely impacted,” said Senior Housing Global Advisors’ Principal Mel Gamzon, who has spent four decades in the industry. “We believe as an industry it’s a function of market hysteria out there. There are very few publicly traded companies and they are being impacted, there’s no question.”


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Gamzon, who has been in regular contact with owners, operators and investors of senior housing during the last few weeks, said the industry has been taking an “extremely proactive” approach. Major trade associations, including the American Seniors Housing Association, have been holding bi-weekly conference calls to inform the industry on state and federal actions to secure supplies needed for the safety of residents and staff.

“There’s no panic and we anticipate no panic,” said Gamzon of the industry. “Who is panicking are investors in the publicly-traded companies in this industry.”

While he sees the overall fundamentals of the industry as solid and in better shape at the moment in terms of occupancy than in the last three years, immediate impacts to the segment will be felt in the form of a slowdown in fill rates and potentially some loss of occupancy. Gamzon also expects M&A activity to intensify in the near term.

According to a new survey taken by Great Place to Work, 79 percent of senior housing operators experienced no major change in move-outs last week and no significant changes in occupancy. In fact, 21 percent of operators reported increased occupancy at their properties. The survey was conducted with operators representing 1,078 properties and 100,899 units.

“The data reflect how quickly senior housing operators have adapted lessons learned in Washington state to protect our nation’s vulnerable elders and frontline staff by upholding the highest standards of care,” said Robert Kramer, Founder & Strategic Advisor at the National Investment Center for Seniors Housing and Care, in prepared remarks.

“Recession-Resistant” Sector

The U.S. has long been anticipating what some have dubbed the “Silver Tsunami,” a surge in the population of those aged 65 and older. It’s estimated that about 10,000 Baby Boomers turn 65 each day, a fact that has led to overbuilding in the senior housing sector, which according to a recent Marcus & Millichap report, is starting to even out.

A longtime veteran of the industry, Gamzon has seen the sector thrive throughout several economic headwinds, including the Great Recession. The continued demand and need for the product, he says, is what makes senior housing one of the safest bets for investors.

“Do not panic,” he said. “This is a recession resistant real estate sector that has survived and has prospered as recently as the great recession of 2009.”

Gamzon pointed to four factors that will keep the industry strong through this uncertain time: an abundance of capital, favorable demographics, innovative development models and strategic alliance opportunities.

“If I were to give a message to the development, the multifamily sector, I would say do not slow down your plans, just be aware that we’re in an evolving environment but all steps are being taken,” he said.