By mid-summer 2020, the skilled nursing sector hadn’t even come close to healing its financial hemorrhaging.
Occupancy rates plunged in July to 74.6% , down 10.1 percentage points from the February rate of 84.7%, according to the National Investment Center for Seniors Housing & Care. Personal protective equipment and testing expenses were blowing up balance sheets. And American Health Care Association/National Center for Assisted Living surveys portended as many as 40% outright closures in the not-too-distant future if conditions didn’t change. Meanwhile, potential CARES Act stimulus money lay mired in political limbo.
Those who went hat in hand to lenders were faced with a lot of difficult questions, according to Michael Gehl, chief investment officer, Housing & Healthcare Finance LLC.
“The more dramatic the impact, especially occupancy, the harder it’s becoming to finance the cash flow on the assumption that normalcy will be achieved in the near future and financial performance will return to pre-COVID numbers,” Gehl said.
Katie Smith Sloan, president and CEO, LeadingAge, said there seemed no end to rising costs. Seven months into the pandemic, she noted that at least five of the association’s noprofit members had closed or planned on closing from pandemic-related financial pressures.
“This crisis is not over,” she said, stressing the need for “significant continued investment” and separate aging services funding.
Brighter side of borrowing
Proven operators will likely fare best because of “comfort with their ability to navigate in these uncertain times,” said Jeff Binder, managing director at Senior Living Investment Brokerage.
Most critical for every borrower is their ability to integrate COVID-19-related revenue (i.e., stimulus funding) and expenses into financial data in a manner that allows for ease of interpretation, he added.
Scott Thurman, chief credit officer, FHA lending, Greystone, noted the pandemic has also had an unexpected result in keeping interest rates low, making it “an ideal environment to pursue refinancing.”