Once again, we are not picking on Welltower, but as the largest healthcare REIT, and the one with the largest seniors housing owned portfolio (or SHOP/RIDEA), we believe they represent a pretty decent proxy as to what is happening.
Occupancy in its SHOP portfolio has been steadily declining since February, but the rate of decline seemed to be abating. Gone are the days of 100+ basis point monthly drops, but October was the first month where the rate of decline (-40 basis points) actually increased since April. Month to date in November, it has already dropped by another 30 basis points (to 77.7%), so if that trend continues, we could see November at a 50-basis point decrease, possibly a little higher.
With positive COVID tests and hospitalizations at a new peak, this is not surprising. Even though 90% of Welltower’s communities were COVID-free on a trailing two-week basis (which is actually great), the number of positive tests in the trailing two weeks (256) was more than double what it was in early June. Our guess is that the local areas where these communities are located are also seeing a significant increase.
Why is this important? Because as we head into the winter months, with COVID spreading faster than last spring, and local shutdowns and sheltering orders increasing, we fear what may happen to seniors housing and the ability to tour and move in. In addition, nursing homes are now seeing a record number of COVID cases, passing last spring, even though the death rate has declined significantly. Unfortunately, the media is not reporting on this drop in the death rate in nursing facilities (they just like the negative stuff for ratings). We may have gotten better at treating the disease, but not so good on stopping the spread.
There is an argument that living in a seniors housing community may be the safest place to be, even with the isolation that comes with visitor bans. But residents of seniors housing are not the spreaders of the virus, instead the unfortunate recipients. And they do want a little more control over their lives, because they know they don’t have many years left (see 60 seconds video today). Sorry, but you know we are direct.
Getting back to Welltower as a proxy, they have some of the best operators in the country, and if they are still having problems with COVID, why would we think others would not? It is going to be a long winter, and hopefully residents will get a vaccine in the first quarter, but that won’t keep census from continuing to drop in the near term. As we said in our November issue, a bottom at 75% occupancy is likely, at least for assisted living, and we hope it does not go lower. But a vaccine will give future residents, and staff, a lot more confidence in their well-being, and when that happens, census will start to climb. We can’t wait.
