Senior-living occupancy risks 50% drop if COVID-19 disaster hinders move-ins, BMO says
Occupancy at senior living homes could theoretically fall by half in the next year if move-ins come to a halt due to the novel coronavirus pandemic, according to BMO Capital Markets.
Full turnover in senior living usually occurs about every two years. But now during the outbreak, the bank expects occupancy to fall below 70 per cent as tours are cancelled and fears of infection scare away potential new residents and their families, BMO analyst John Kim said in an interview.
Isolation among residents is arguably a larger strain on occupancy than the virus itself, Jefferies analyst Jonathan Petersen said, as visitors are not allowed or severely restricted in these locations. “That makes it difficult for families when senior members are cut off from the rest of the world,” he said in an interview.
Senior living stocks have plunged this year as investors brace for more disruption from the outbreak.
The sector has also been grappling with excess supply ahead of a boost in demand from baby boomers that was expected to hit in a few years. Ventas Inc. has slumped 61 per cent since the start of 2020, while Welltower Inc. and Healthpeak Properties Inc. have fallen more than 40 per cent. The S&P 500 Index is down 23 per cent for the same time frame.
“The headlines combined with the uncertainty make them uninvestable,” Petersen said. The companies need to go through two or three more earnings periods to gauge the impact of the pandemic. Petersen downgraded Ventas and Welltower to a sell-equivalent rating early in March. He has a hold rating on Healthpeak.
Long term, analysts expect the diversified business models in the senior living group will help companies weather the current headwinds. Healthpeak derives less than half its revenue from senior housing, whereas Ventas and Welltower are more reliant on the business.