COVID hasn't changed those demographic trends, but it has put Ventas in a hole. SHOP occupancy was 78 percent as of April 30, down from 87 percent when the pandemic began, according to company regulatory filings. Net operating income in that portfolio was $97 million during the first quarter, down 42.5 percent year over year.
New COVID-related expenses and rising labor costs at senior housing facilities may make it harder for Ventas to bounce back from those drop-offs and also water down some of the expected upside in the years ahead, says Leon. That's one likely reason Healthpeak is selling off up to $4 billion in senior housing assets and putting more of its eggs in medical offices and properties for pharmaceutical researchers, for example. "Smart money is not moving into senior housing," Leon says.
But higher costs are only part of the challenge for senior housing owners. COVID outbreaks associated with congregate senior living properties and the isolation many residents experienced during the pandemic could make people more hesitant to enter or put elderly relatives into such facilities in the future, says Beth Mace, chief economist for the National Investment Center for Senior Housing & Care, a nonprofit industry organization.
"There's been great reputational risk associated with COVID," Mace says. "We saw negative headlines from a lot of press, and that has penetrated peoples' views on the sector. I think the sector needs to work collectively to talk about the benefits and attributes of it."
Justin Hutchens, a former Healthpeak executive who took over as Ventas' executive vice president of senior housing at the beginning of the pandemic, is quick to point out the perks of senior housing communities and says Ventas is just as bullish today about the sector as it was before the pandemic.
He cites an expected slowdown in new supply—construction starts on new senior housing facilities nationwide during the first quarter sunk to their lowest mark in a decade—and a jump in move-ins and inquiries from prospective residents over the past few months back to pre-COVID levels as signals that a recovery is well underway.