UPDATED, March 24, 11 a.m.: Senior housing, one of South Florida’s hottest asset classes, is bracing for the impact from coronavirus — and some developers are already feeling the economic pain.
Last week, Atria Willow Wood, an assisted living facility in Fort Lauderdale, reported three deaths, with all of the individuals having tested positive for Covid-19, according to the Sun Sentinel. And with the pandemic spreading, and more than 1,000 coronavirus cases in Florida, operators of senior living facilities are preparing for a potential outbreak.
Real estate investment trusts with South Florida senior housing projects in their portfolios and other senior housing developers are taking a nosedive, and some industry experts believe there will be signs of distress in the coming months.
More broadly, developers of senior housing in South Florida are preparing for a potential outbreak.
Matt Rieger, president and CEO of Housing Trust Group, which is not a REIT but has affordable senior housing projects in Fort Lauderdale and Homestead, said his company is going to waive late fees for residents that are able to pay by the 20th of the month.
One major concern, Rieger said, is that Housing Trust Group has new communities under construction. The pandemic could impact the supply chain for building and construction materials, as well as the availability of labor.
“We have very hard deadlines on delivery of new developments or we’re at risk of losing our tax credit funding,” Rieger said via email. “So that’s a very real and present concern for us.”
Stocks have fallen for REITs that are heavily invested in senior living facilities.
Shares of Toledo, Ohio-based Welltower, which owns the Stratford Court of Boca Pointe in Boca Raton and has other senior living facilities in its portfolio, have dropped more than 51 percent to $42.42 over the past month.
Chicago-based Ventas, a healthcare REIT that owns Meridian Senior Living in Hollywood, is down 65 percent to $21.62 during the same time period.
Billy Meyer, of Seattle-based investment firm Columbia Pacific Advisors, who handles the group’s real estate lending, said the possible distress for senior housing depends on the type of housing: assisted living, memory care, or independent living. With assisted living or memory care, residents don’t have much time to wait to move in because of medical conditions.
“Independent living, they are going to be massively impacted. Their lease-up ability is going to be really tough,” Meyer said. “People aren’t moving in.”
A World Health Organization study found that those 65 and older are six times more susceptible to infection by the novel coronavirus than people 15 to 44 years old, and the Covid-19 fatality rate has been far greater for the elderly.
Last week, Florida Gov. Ron DeSantis suspended all visits to assisted living facilities and nursing homes from friends and family after the Center for Medicare and Medicaid Service stopped most of their inspections to nursing homes, according to the Miami Herald.
In South Florida, senior living has been an attractive opportunity for developers as more baby boomers seek senior housing.
Greg West, the CEO of multifamily developer Zom Living, said at a conference in February that senior housing monthly rents can produce about an 8 percent yield compared to the typical 6 percent yield of regular apartment buildings. “The exit [rate of return is] higher than conventional multifamily,” he said.
In South Florida, developers are seeking to build upscale senior housing projects, mirroring the amenities and standard of living found in the area’s luxury condos.
Baptist Health South Florida is partnering with Belmont Village Senior Living to build a luxury senior living facility on a 2.8-acre site at 250 Bird Road in Coral Gables. Other examples include The Palace Group’s The Palace at Weston, which secured a $95 million construction loan for a 320-unit luxury senior living development that is planned to be completed this year.