Annotated Bibliography Assignment

SENIORS HOUSING

In Short Supply Following Hurricane Florence, which hit the Carolinas in mid-September, temporary housing may be harder to come by. This is because the storm largely impacted smaller cities in North Carolina, where a lot of rental housing is owned by smaller landlords, the Wall Street Journal reports. A lot of the rental stock in places like Wilmington and Fayetteville is comprised of single-family homes, which tend to be more susceptible to damage from storms than high-rises.

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Another Slump Headwinds facing skilled nursing operators keep impacting occupancy.

The occupancy rate for skilled nursing oper­ ators in the U.S. hit a new low in the second quarter, an ongoing pattern stemming from pressures related to policy changes and shorter lengths of patient stays, according to a new report.

The national occupancy rate dropped to 81.7 percent during the months of April to June, a 79 basis point drop from the quarter before, according to a quarterly report from the National Investment Center for Seniors Housing and Care (NIC). This represents a 137 basis point drop year-over-year. (A shift in the number of properties participating in the NIC’s monthly survey led to a revision of the group’s first-quarter occupancy cal­ culation.) Rural markets posted the sharp­ est decline of 89 basis points quarter-over-quarter, accord­ ing to the report.

The slide in occupancy was not unexpected, as the sector has faced pressure over the last few years from policy changes related to reimbursements and a shift to a value-based healthcare system, says Bill Kauffman, senior principal at the NIC. Patients in need of more skilled nursing care are stay­ ing for lower lengths of time because of these policy changes.

However, there has been a drop in the number of operational beds, even as supply remains a top concern in seniors housing in general. In the second quarter, the NIC tracked 486,787 freestanding campuses in primary U.S. markets, compared to 488,981 during the same period in 2017. Operators are converting semi-private rooms to private rooms and states impose moratoriums on construction or require certificates of need, making it hard to add supply, Kauffman says.

This shrinking supply is not offsetting other headwinds. “The demand decline has been faster over the last few years,” Kauffman says.

And increasingly, many patients go to out-

NREI October 2018

patient or rehab facilities—or even straight home—after procedures. “It’s really the changing dynamics have basically caused the patients to potentially bypass properties,” Kauffman says.

Other longer-term care facilities like assist­ ed living homes also have become more capa­ ble of taking care of residents that otherwise might have gone into nursing properties, says Chris Blanda, a senior vice president at Lancaster Pollard, a financial services firm. “It’s just a continuation of headwinds that have been affecting the nursing home business,” he says.

Despite the sector’s challenges, a summer 2018 report on seniors housing from CBRE asked survey respondents where they see the

biggest opportunity for investment in seniors housing and care, and 17 percent said the nursing sector, the same as in the second half of 2017. However, respondents this year were more interested in opportunities in indepen­ dent living, assisted living and active adult properties.

The cap rates for core class-A nursing-care assets rose 23 basis points to 11.4 percent on average in the first half of 2018 from the sec­ ond half of 2017, according to CBRE. Rates for core class-B assets dropped 4 basis points on average to 12.3 percent; they dropped 10 basis points to 13.6 percent on average for core class-C assets. Cap rates rose for non-core assets in all three segments.

— Mary Diduch

www.nreionline.com

A NEW LOW The national occupancy rate continues to drop for the skilled nursing sector, sliding 79 basis points in the second quarter.

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