CCRC operating profitability ratios improve, but margins drop

Continuing care retirement / life plan communities saw an increase in operating profitability ratios in 2022, but operating margins declined due to stock market performance, Ziegler Managing Director Amy Castleberry told the McKnight’s Business Daily Thursday. She was discussing the 2023 “Financial ratios and trends analysis of CARF-accredited continuing care retirement communities,” a joint project of CARF International, Ziegler and Baker Tilly. 

Castleberry sits on the CARF financial advisory panel and helped write the CARF publication.

The current CARF ratios publication shows comparative data (single- and multi-site) for 17 separate financial ratios and uses Fitch credit rating categories for broader comparison. In addition to the CARF report, specialty investment bank Ziegler released its own publication, “Financial ratio medians for not-for-profit entrance fee CCRCs.”

“CARF medians and the Ziegler median generally agree,” Castleberry said, noting that the populations aren’t exactly the same. “The borrowers are probably a little bit stronger in the CARF report than the Ziegler report, but the medians are around the same levels,” she added.

The analysis shows a drop in cash for not-for-profit CCRCs last year. 

“It’s still at a pretty strong level. In fact, through the pandemic, borrower cash had hit historic highs based on this publication, but because of the market, we did see a big drop in cash,” Castleberry said.

One of the reasons for the year-over-year increase in core profitability, she said, is that many CCRCs increased their entrance fees to offset costs. 

“A lot of borrowers were playing catch up with their fee increases as it relates to their expense pressures,” Castleberry said. Additionally, she said, CCRCs have benefited from increased occupancy, particularly in their independent living areas.

But things are looking up as far as cash levels, Castleberry said.

“In terms of the stock market, through the first half of the year, borrowers were telling us —  and I think the market backs that up — that their cash levels were improving based on where they ended their last fiscal year. So I think we should, depending on what happens in the last three months of this year, expect cash to improve or at least stabilize,” she said.