Popular Bank Senior Vice President and Director of National Healthcare Financing  Andrew Boland joined fellow industry leaders for the Environmental Banker Association (EBA) panel discussion How COVID Changed Senior Living & Care Underwriting. The panel was hosted on April 29, 2021 and brought together senior housing lending, legal and environmental experts to discuss unique challenges they faced amid COVID-19 disruption and shaping the industry’s future.

In the midst of the COVID-19 health crisis, record-low occupancies, tightened regulations and increased scrutiny continue to pressure to the senior housing industry. Facing this reality, lenders, service partners and investors have shifted strategies to protect their clients and investments. How COVID Changed Senior Living & Care Underwriting provided industry professionals with key insights and best practices to scale for uncertainty and prepare for the future. Leveraging their unique experiences, the panel discussed anticipated senior housing trends, challenges and opportunities following the pandemic.

EBA Panel Key Insights and Takeaways.

1. Adaptability and client-first practices continue to drive industry resiliency.

Managing fear and disruption in the face of a once-in-a-lifetime pandemic continues to be critical. Travel restrictions, limited access to facilities and public records, as well as safety concerns were major underwriting roadblocks in 2020. Industry leaders agreed that adaptability is the key to survival. While a hard pivot toward technology broke down initial barriers, communication, fostering close relationships and client-first practices remain top-of-mind.

“We immediately set up a weekly communication strategy questionnaire to focus on the wellbeing of our clients,” said Boland who discussed Popular Bank’s strategic response to meeting changing client needs. “We asked questions about their safety. Do you have any COVID cases in the building? Are you following current regulations?  Do you have access to PPE? Those first couple of months, we were in crisis management mode.”

In navigating the crisis, underwriters and service providers focused on practicing close client engagement to better mitigate portfolio risk and understand their client needs. Amid disruption, these strategies often meant going above and beyond– helping to connect senior housing facility operators with resources, including access to PPE, real-time data and creative holistic financial solutions.

“Something that we were able to do that I was proud of from an organizational perspective is to set up a deferment program,” said Boland. So, if any of our clients expressed a need for a principal or interest deferment, we looked to put that into place very quickly from an approval and documentation perspective.”

2. Underwriting valuation and lending requirement strategies to shift.

The healthcare and senior housing industry scaled to navigate unique financial conditions in 2020. Federal stimulus packages including the Small Business Administration Paycheck Protection Program (PPP) and the Main Street Lending Program, which provided vital relief for facilities facing liquidity troubles and outstanding expenses. However, the infusion of funds will also complicate short-term lender valuations.

In looking ahead, underwriters will need to take a new approach in understanding and evaluating 2020 asset resiliency and financials. This includes closely understanding cash flow vs. unique expenses, liquidity, net patient occupancy (census) and case-mix reimbursement to create valuations consistent with pre-pandemic lending. Borrowers and lenders alike can anticipate a heightened emphasis on liquidity, including debt service reserves. While values have not seen a dramatic plunge, this new approach to underwriting may adversely impact asset classes that did not have the opportunity to financially stabilize prior to the onset of the pandemic.

3. Looking to the future of healthcare and senior housing sector.

The sector anticipates change across all areas. Hybrid workspaces, growing comfort with technology and patchwork pandemic responses suggest a permanent shift in operations. As valuations, inspections and relationship-building practices continue to evolve, the industry anticipates a new normal, marrying traditional practices with those developed amid disruption.  

Underwriting practices continue to shift and a comprehensive approach will be vital in meeting a new and complex reality. Senior housing faces notable challenges in the coming years, including depressed census, increased scrutiny and tighter regulations. Despite these realities, optimism sustained trading values suggesting a resiliency among knowledgeable key players who understand operators and market demands. 

“We need to look back and reflect and make the right choices for the industry,” said Boland. “This industry has been resilient to many challenges in the past. I know it will survive and it is need-based.”

Watch the full discussion here.