Welltower Senior Housing Occupancy Falls to 75.3% Amid Pandemic’s Winter Resurgence

Numbers from real estate investment trust Welltower (NYSE: WELL) provide the latest evidence that high Covid-19 infection rates across the country are taking a toll on senior housing communities.

Occupancy in the REIT’s senior housing operating (SHO) portfolio fell 220 basis points in the fourth quarter of 2020, to 76.2%, according to a business update released Tuesday. Through Jan. 15, occupancy slid another 85 basis points, to 75.3%.

Those numbers are not surprising, given the wintertime resurgence of Covid-19 around the country, BMO Capital Markets analysts Juan Sanabria and John Kim observed in a note. And indeed, Covid-19 cases in the SHO portfolio were nearly at a peak through Jan. 15, with only 64% of communities reporting no new cases on a trailing two-week basis. That compares to about 90% of communitie that were reporting no new cases through mid-November.

Though not surprising, Welltower’s occupancy slide is “modestly below” their projections as well as “Street expectations,” Sanabria and Kim wrote. 

And, Welltower collected 97% of triple-net rent due in Q4 2020, compared with 98% in October and November. That implies that December rent collections sagged to about 97%.

“We expect further rent coverage erosion with rent cuts or abatements likely given pressures in [senior housing],” the analysts wrote.

Other recent occupancy updates have painted a similarly bleak picture of where senior housing stands.

Brentwood, Tennessee-based Brookdale Senior Living (NYSE: BKD) — the nation’s largest senior living provider — reported December occupancy of 71.5%. And, occupancy across the primary markets tracked by the National Investment Center for Seniors Housing & Care (NIC) hit a record-low of 80.7% in Q4 2020.

The good news is that Covid-19 vaccine clinics have started to roll out at senior living communities across the country. But with occupancy so low, providers likely face a long road back, according to recent analyst projections. 

For example, Green Street’s Lukas Hartwich last week projected that net operating income (NOI) will hit new lows in mid-2021 before starting a rebound that will lead to new highs in 2024. And the BMO Capital Markets team recently predicted that cash flows and occupancy will not return to pre-pandemic levels until 2025.

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