Continuing care retirement / life plan communities that charge an entrance fee have fared better lately in terms of occupancy than rental communities, according to specialty investment bank Zigler.
The difference in occupancy between the two types of life plan communities has been increasing since 2015, and the gap has been widening since the start of the COVID-19 pandemic, according to the data. The difference reached double digits in 2020 and 2021. Entrance-fee CCRCs experienced a relatively smaller decline in occupancy throughout that time than did rental ones.
“The largest differences in occupancy between entrance fee and rental were reported for the West North Central region, where entrance fee [life plan community] occupancy was 7.2 percentage points higher than rental, followed by the Mountain (5.6 percentage points), and the Southeast (5.4percentage points),” wrote Omar Zahraoui, principal at the National Investment Center for Seniors Housing & Care as a special contributor to a recent issue of the bank’s e-newsletter.
Zahraoui’s analysis examined occupancy and year-over-year changes in inventory and same-store asking rent growth by care segment within the two types of communities in the 99 primary and secondary markets followed by NIC MAP Vision.
One reason for the difference in occupancy, Zahraoui said, is that residents of entrance-fee CCRCs tend to be better off financially than older adults who move into rental properties, “mainly due to the screening of financial conditions prior to admission.” Additionally, he said, people moving into entrance-fee CCRCs tend to be younger and healthier than others.
Further, he said, operators of entrance-fee CCRCs often have greater access to capital compared with operators of rental competitors, due to “substantial upfront revenue generated from entrance fees, often financed through the sale of residents’ homes,” and they typically have access to different financing options.
Overall, although CCRCs did a better job of maintaining occupancy before and during the pandemic, occupancy levels had bounced back faster in other areas of senior living as of the first quarter of 2022, according to a May 2022 analysis published by Ziegler.
