You can blame the overall plunge in the stock market, but seniors housing stocks crashed disproportionately more than the market as a whole. Capital Senior Living ended Thursday down 22% for the day at just $1.87 per share. This represents a market value of $57.6 million. Brookdale Senior Living plunged 12% to $5.01 on volume seven times its average. Brookdale’s market value is now $923 million. When will it all end?
The problem is that it may not end until there is some clarity on when the coronavirus will run its course and what the ultimate economic impact will be. With both Washington state and California declaring a state of emergency, fears among senior living providers grow. If the virus spreads, more people will delay scheduled move-ins to senior living communities or skilled nursing facilities, and tours will slow to a trickle. In Washington, which has had the biggest problem and so far is the epicenter of deaths from the virus in the U.S., the impact on census across the state will be evident very quickly.
Just think what would happen if more states had Washington’s problems. Everyone wants to play it safe, and restricting who can visit a state’s senior care facilities might seem like an appropriate action, but there can be an overreaction as well. Remember, more than 60,000 people die from the flu every year in this country, and we have had about a dozen deaths from the coronavirus so far. That number will surely grow, but to 60,000? Doubtful.
At the NIC conference in San Diego, it appears as if 10% to 15% of the attendees canceled or did not show up, and the coronavirus is all the talk. Some are concerned, others are not going to let it get in the way of business as usual, other than switching from handshakes to elbow bumps. No harm in that. But there has been a rumor that the plug was just pulled on one very large acquisition, with the coronavirus being blamed. There are smaller transactions where the buyers are concerned about a plummeting census after closing. This is not a good sign, but it is a rational concern.
Meanwhile, with the 10-year Treasury at 0.926%, borrowing costs have never been lower. One attendee asked us whether the combination of the lowest rates ever and the lowest share prices for both Brookdale Senior Living and Capital Senior Living might tempt some buy-out firms to make a move. Our response was that it would not be appropriate for boards of directors to panic and sell out current shareholders based on panic pricing. And we do not think buy-out firms would want to take the census risk until there is some clarity on the path of the virus. So no, not today.
Meanwhile, private meetings continue all day and no one is leaving San Diego early. In other news, the HIMSS annual conference in Orlando next week has just been canceled. As one of the largest healthcare conferences in the country, it has more than 30,000 attendees. Too cautious? Probably. But think of those refunds.
