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Vulnerable Yet Resilient: 2021 Senior Housing Outlook

Vulnerable Yet Resilient: 2021 Senior Housing Outlook

The year 2020 will certainly be remembered as one of many things. Whether it’s the pandemic, Zoom calls, remote learning, or the NBA Bubble, it’s certainly a year to best not repeating going forward. COVID-19 has creeped into our lives over the last 9 months and has remained at the forefront of our minds from a health, family, business and investment perspective.

Effects on Seniors Industry

The Senior space has been particularly hard hit. As we all know, serving our most vulnerable population is no easy task, as it must come with patience and compassionate caregiving. With that, every year the Seniors industry prepares for seasonal flu and last December was no different, but we would have never imagined what was to come around the corner in early 2020. Unfortunately, as the virus gained traction, the Skilled Nursing sector was particularly hard hit; Assisted Living was partially spared. I will leave that distinction of “why” up to the operational experts, but what I will say is that the general public is now beginning to understand the difference between the two settings, and I feel that Assisted Living communities will begin to, as some have started to already, turn the tide and see an uptick in occupancy. The monthly census erosion our communities always experience due to standard non-COVID death rates and acuity increases has been significantly hampered by a lack of resident backfill.  Families have been on the sidelines waiting to find a safe time to place mom or dad into an AL care setting. Fortunately, as we all begin to understand how to live with the virus at large, and as quality operators and dedicated vendors work as a team to turn our communities into a safe harbor for residents, I believe that resident backfill will uptick and census will near pre-COVID levels by late Q2 of 2021. The recently announced progress on a vaccine can only better that expectation.

What’s Next

From an investment perspective, and as discussed at this fall’s virtual NIC Conference, I continue to see financial partners hone in on development opportunities, as acquisitions of existing assets remain difficult to underwrite due to COVID and will continue to remain that way for the next quarter or two. Similar to the pull back and underwriting scrutiny that came out of the Great Recession, lenders and capital providers are going to once again seek out only the best of developments brought to market by financially strong sponsors with well-regarded operating partners. Quite frankly, I believe that this is a needed correction due to the amount of new construction and oversupply that the Seniors sector has witnessed over the last few years.

Going forward, the Russell team has forged a Senior Living strategy that continues to seek out developing communities in qualified urban infill and undersupplied suburban locations.  We continue to look for income levels and home valuations significantly higher than the target MSA average and align our development thesis with a deep understanding of the submarkets competitive set. Through this approach, we know that our investment strategy combined with the Russell’s proven integrated project delivery services, fortifies Russell’s position as a premiere Senior Living developer and investment partner for the coming years.

To a healthy and prosperous 2021.