US$1.19B loan defaults in US retirement living sector as COVID kills new occupancy

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Unlike Australia, potential new residents are staying at home rather than joining a ‘retirement village’, causing significant operator loan defaults.

The NIC MAP® Data Service (NIC MAP) reports that Continuum of Care Retirement Communities (CCRCs – similar to our integrated continuum of care villages) have held occupancy up better than the US independent living only villages.

CCRCs in the December 2020 quarter averaged 89.6% occupancy versus 80.9% for the independent living only villages.

Given the American model is rental income based, empty homes directly hits their bottom line (and ability to repay debt).

COVID pushed $765.8 million of municipal bonds issued for senior living communities into default last year, and this year $425.1 million of municipals have already been defaulted on, according to data compiled by Bloomberg – a total of US$1.19 billion.

CCRCs also held up better than independent standalone segments. For instance, within CCRCs their assisted living and memory care units each averaged 84.2% occupancy. Non CCRC stand alone assisted living operators averaged 77.8%, memory care 76.7%, and nursing care 74.9%.

Reports are that the decline in occupancy continues in 2021 despite 29 million people aged 65-plus being vaccinated and there being no limitations on home inspections (like we had in Australia).

The outtake is that the continuum of care model has stood up better as a customer proposition than stand alone independent living, assisted living, memory care or skilled nursing (aged care homes).

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About Author

Chris has been a journalist and weekly commentator on the retirement village and aged care sectors for 15 years. He has interviewed residents and management at over 250 villages nationally, plus visited aged care homes across the country and studied homes and management in America and Africa. As Co-founder of The DCM Group, he has guided the business growth and is a sought after advisor to operator boards and management.