Life Plan Communities Seek Stability Amid Covid-19 Pressures

Many non-profit life plan communities in the U.S. withstood early Covid-19 pressure and are now seeking stability in these new and uncertain times.

That is among the top takeaways from a new report by Fitch Ratings. The report, released Tuesday, shows that 84.5% of the 159 non-profit life plan communities in the firm’s rated portfolio carried “stable” credit ratings through June 30, lending more evidence to the fact that many non-profit life plan communities have largely withstood early Covid-19 pressures.

“Rather than lead to downgrades specifically because of the coronavirus, what it probably did more often was inhibit upgrades [to ratings],” Margaret Johnson, director of U.S. public finance at Fitch, told Senior Housing News. “But it’s hard to have a positive outlook on a senior living credit when you’re in the midst of a pandemic that is disproportionately affecting their resident base.”


In the first half of 2020, Fitch recorded no rating upgrades, and only 3.6% of its ratings carried positive outlooks. On the flip side, Fitch downgraded 16.7% of its ratings, with 10.7% carrying negative rating outlooks in the first half of the year. The median rating among the portfolio was “BBB,” which was also the most numerous rating at 76, or about 49%, according to the report. For comparison, 37 (24%) of the communities carried an A rating category.

“In an ordinary year, we may see a few more upgrades and positive outlooks,” Johnson said. “[This year], we’ve had a lot of affirmations, which means that our ratings are relatively stable even through the initial part of the pandemic.”

So far, the pandemic has grown expenses and decreased revenues for senior living providers across the board. And the life plan communities in Fitch’s rated portfolio felt pressure as a result of a decline in post-acute rehab volumes, and move-ins that were “severely limited” in April through and mid-June.


Even so, Fitch’s portfolio has kept Covid-19 at bay while withstanding immediate financial pressures. Much of that has to do with the communities’ strong financial cushions going into the pandemic, and the steps they took in the early days of the pandemic to limit the disease’s spread. Many of the communities also received much-needed stimulus funds, such as those doled out through the Paycheck Protection Program (PPP) loan program.

“Most of our communities did not experience a [big] decline in revenues because their occupancy stayed the same,” Johnson said. “For the most part, what we saw in the short term was that the pressure was on the expense side.”

The ratings agency also sees no evidence that the senior living business model is coming under threat as a result of the pandemic, as it once feared in March and April.

“What we’ve heard from a lot of our communities is the exact opposite,” Johnson said. “There is some indication that, for as many residents who are now reluctant to move into a senior living community, there are also residents who can’t wait to move in.”

Still, Johnson is also careful not to draw conclusions for the wider industry, as she believes Fitch’s rated portfolio represents the “cream of the crop” when it comes to non-profit life plan communities.

Looking ahead, Johnson said one trend to watch is home sales, as life plan community residents typically use home equity to fund their entrance fees.

“If it’s more difficult to sell a house, if it takes longer, or [prospective residents] can’t sell a house and have to accept less money, that all could potentially affect life plan communities’ ability to resell vacated independent living units,” Johnson said. “But that’s going to play out over a period of months, and it’s going to be different depending on what part of the country you’re talking about.”

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