The stocks of senior living and skilled nursing-focused real estate investment trusts have outperformed expectations since the first COVID-19 vaccine announcement last November raised hopes of a quick recovery. Yet despite the tremendous drop in COVID-19 cases at these facilities post vaccine rollout, challenges within both sectors still remain, Mark Parkinson, CEO of the American Healthcare Association and the National Center for Assisted Living said Tuesday during a keynote address to attendees of Mizuho’s second annual Healthcare REIT Summit.
“There are green shoots indicating occupancy is finally troughing, but the pace at which occupancy recovers remains uncertain,” Parkinson said. According to an analysis of Parkinson’s address by Mizuho analysts Omotayo Okusanya and Corey DeVito, the CEO told attendees that from his perspective, skilled nursing is likely to return to pre-COVID occupancy in a year, whereas senior living recovery will take 12 to 24 months.
“If this bears out, tenant credit in skilled nursing would improve faster than we are anticipating, which mainly benefits CareTrust REIT, Sabra Health Care REIT and Omega Healthcare Investors,” the analysts wrote. “Senior housing occupancy fully recovering in 12 months feels built into the consensus outlook for the senior housing operating platforms for Ventas and Welltower given operating leverage. A slower recovery — we estimate at least two years to full occupancy recovery — suggests downward earnings revision risk in 2021 and 2022, and likely weighs on the stocks given premium valuations.”
Parkison told investors that several factors still are at play in terms of how and when occupancy will recover, including a potential fourth wave of COVID-19, recovery of consumer confidence in the senior living product and how quickly some caregivers may return to the office rather than work from home where they can provide elderly care.
