Affiliations and acquisitions are far surpassing new developments within the nonprofit senior living sector, and that trend is likely to continue. That’s according to speakers at the opening session Wednesday of the Ziegler Senior Living Finance + Strategy Virtual Conference.
Ziegler President and CEO Dan Hermann told the conference’s more than 1,000 attendees that although for-profit growth of new locations continues to remain high as private money remains plentiful, nonprofits are more actively reinvesting in unit expansions within existing campuses. Herman noted, for example, that Ziegler anticipates that only 43 new nonprofit senior living communities will open within the next five years.
Hermann also noted that many of the specialty investment bank’s nonprofit senior living clients have continued to expand with home- and community-based services, often through joint ventures, and interest in this has greatly accelerated amidst the pandemic.
Amy Castleberry, managing director at Ziegler, also discussed current credit rating trends, noting that compared with a year ago, the nonprofit senior living sector had experienced a net loss of one rating, according to data from Moody’s, Fitch and S&P. She added that so far in 2020, the sector has seen its weakest upgrade to downgrade ratio since 2003.
“The flip side is that there have been downgrades reflecting additional debt-leverage project risk for organizations that are growing,” Castleberry said. “Boards and managers have made a strategic decision to continue growing and accept a downgrade, which may or may not be temporary.”
And although all of senior living has seen a sharp decline in occupancy rates as a result of the pandemic, nonprofit organizations maintained a relative advantage, she said.
“Occupancy held very steady for life plan communities from the end of June until the end of July, but we know getting those turnover entrance fees and continuing to build up the pipeline now that there’s been a lull in marketing is certainly going to be a challenge,” Castleberry said.
