As the long-term care sector emerges from the pandemic, Fitch Ratings expects that life plan communities will continue to consolidate over the next few years.
“Healthy residential real estate markets and increased market interest in life plan communities are translating into consistent demand for retirement living,” Fitch Director Margaret Johnson said in a statement. “Sales of independent living units have also accelerated following a slowdown in resale activity throughout 2020 due to the coronavirus and related governmental lockdown measures.”
Sixty-three percent of Fitch’s life plan community rating actions year-to-date were rating affirmations, and 10% of the communities were downgraded due largely to the communities borrowing additional debt to finance expansion projects rather than due to operational pressures.
Increasing operating costs, stricter regulatory requirements for long-term care facilities, and staffing shortages will affect the industry, too.
“Lower-rated communities with high exposure to skilled nursing operations, undergoing expansions and that are in areas heavily affected by subsequent waves of the pandemic will be most susceptible to rating pressure,” according to Fitch.