Despite the economic turmoil and operational stress in the wake of the COVID-19 pandemic, all parts of the seniors housing — including the lenders, investors, owners and operators — appear to be taking a measured approach, according to Brian Sunday, director with AEW Capital Management.
“We keep preaching patience,” said Sunday. “Occupancies are dipping, expenses are rising, but nobody’s pressing the panic button. It’s a long-term play.”
The comments came on a webinar hosted by France Media Inc. and Seniors Housing Business on Wednesday, May 13. Other panelists included Rich Lerner, partner, Housing & Healthcare Finance; Talya Nevo-Hacohen, chief investment officer, Sabra Health Care REIT; Adam Heavenrich, managing director, Heavenrich & Co.; and moderator J.P. LoMonaco, president, Valuation & Information Group. The event, sponsored by Valuation & Information Group, drew more than 1,400 registrants.
LoMonaco opened by comparing the seniors housing industry to a home that’s had a tree fall on it. Although there is damage, the home will be just as valuable after its repaired he said. The problem is short term.
Working for a publicly traded company, Nevo-Hacohen is on the front line of the short-term damage. She said healthcare REIT stock prices are “somewhere around where casinos and regional malls are.” She paraphrased one investor, who said the industry faces “hurricane-force headwinds.”
“We are at a massive discount to where we were trading in the beginning of March, to the tune of 40 to 50 percent stock price reduction,” said Nevo-Hacohen. “That tells you public investor perception of seniors housing is, that it’s perceived as being equivalent to a mall with 40 percent rent collections.”
“But healthcare REITs are collecting virtually 100 percent of rents,” she noted. “The stock price is not reflective of what’s actually happening. That tells you that investor perception is quite negative on healthcare in general.”
Heavenrich said investors were generally feeling unsure of things, but that the storm would pass. His company recently held a survey of investors that showed 80 percent believe that pricing and transactions will return to normal by first-quarter 2021.
“In the short-term, there is a situation of uncertainty,” said Heavenrich. “It’s not only investors but the lenders.”
Lerner gave credit to the federal government for the stimulus package that helped soften the blow when businesses were forced to close down and unemployment skyrocketed. By helping fund business loans, boosting unemployment benefits and sending Americans cash, the government helped stabilize the financial markets — all tricks learned during the Great Recession, he said.
“There was a week of disruption to the financial markets, and the government stepped in with the playbook from 2008 and it worked. For now, capital markets are working. Banks are not going out of business, people are funding loans, people are funding lines of credit.”
“Reimbursements have really stepped up and offset the financial impact,” added LoMonaco. “A lot of skilled nursing facilities are flush with cash right now.”
Click here to view the full webinar.
— Jeff Shawß