Profitability Rises As CCRC Bounce-Back Continues

After taking a hammering in the economic downturn, continuing care retirement communities (CCRCs) appear to be recovering along with the broader economy. CCRC performance is expected to remain steady through the end of the year and into 2016, and outlook for the sector is stable for the third consecutive year, according to a report released Thursday.

Fitch Ratings’ investment-grade (IG) median ratios indicate further improvement in CCRCs’ core operating performance, with particular stability in IG liquidity and capital ratios, according to the 2015 Median Ratios for Nonprofit CCRCs report. This improved performance is partially the result of the broader housing recovery.

“While Fitch sees continued operating stability throughout the remainder of 2015, the largest driver of negative rating pressure has been, and will continue to be, the impact of additional debt issued to fund campus renovations or expansions,” the report states.


Fitch rated 104 CCRC providers as of Sept. 1, with IG medians including 87 providers and below-investment grade (BIG) medians including 16 providers. This depicts an increase from 59 IG ratings and nine BIG ratings in 2010.

Within the “A” and “BBB” rating categories, median ratios stayed mostly unchanged, though median profitability ratios in the “A” category depicting slightly better improvement relative to the latter category. Meanwhile, median capital spending across all rating categories experienced a sharp increase in 2014, up to 106.6% from 86.4% in 2013.

“A key metric that showed a meaningful change in 2014 was capital spending as a percentage of depreciation expense,” the report states. “Fitch believes the sharp increase…is reflective of higher occupancies across the sector, sustained profitability, attractive interest rates and greater confidence in management.”


Liquid stability can likely be attributed to consistent net entrance fee receipts and solid investment returns, as well as the uptick in capital spending, according to the report.

Rising housing prices and declining mortgage delinquency rates have resulted in an improved United States housing market, according to the report. This, combined with favorable investment returns, has led to better CCRC performance overall, the report states.

Written by Kourtney Liepelt

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