Senior Living Stands Up to the Challenge: Thought Leader Matthew Ruark is Bullish on the Sector

Where does the senior living industry now stand 18 months into a brutal pandemic? Matthew Ruark has a quick reply. “The sector may have been hit hard by Covid-19 , but it’s still standing. The fundamentals of the business are sound,” said the senior vice president of commercial and healthcare mortgage production at KeyBank Real Estate Capital Group.

As a lender, Ruark observed that the pandemic highlighted several industry dynamics: the importance of operations; the advantage of senior living’s needs-based nature; the labor shortage; a shift to short-term borrowing amid occupancy declines; and the necessity for an affordable senior housing option as the older population grows.

Long-term, Ruark said, “We are bullish on senior housing and care.” He added that KeyBank has been committed to the sector for over 30 years, providing a full suite of financing products.

Ruark is among the thought leaders attending the 2021 NIC Fall Conference in Houston. The Conference is NIC’s first in-person convening of leaders in senior housing and care since the pandemic began. Many industry leaders plan to attend the Conference to share ideas with others experiencing the same challenges, while also building relationships to help them succeed in the future.

“The sector may have been hit hard by Covid-19 , but it’s still standing. The fundamentals of the business are sound.”

As occupancies dropped because of the pandemic, project sponsors have been relying on more short-term, bridge financing. “Borrowers are looking for more flexible financing,” said Ruark.

Occupancies have started to inch up again, but are not yet at 90%, the traditional level of stabilization. As occupancies improve, Ruark expects investment sales activity to jump and borrowers to transition to permanent loan structures. “There is a lot of capital on the sidelines,” he said.

Some investors, especially those that had entered the market just prior to the pandemic, didn’t understand the operational intensity of senior living, Ruark noted. He thinks many of those investors will pivot out of the sector. “From a lender’s perspective, the pandemic reaffirmed the importance of a strong operator,” he said, adding that operators are better prepared now to deal with the Delta variant than they were for the initial COVID-19 outbreak.

The sector faces two big challenges: affordability and a labor shortage. A growing number of elders will need an affordable housing and care option. In 2019, NIC conducted a study, The Forgotten Middle, showcasing the need for more affordable senior living options. “If we don’t get out in front of this issue, it could be a real crisis,” said Ruark.

With great respect for the frontline workers and operators who care for the most vulnerable elderly, Ruark noted that the labor crunch has only gotten worse during the pandemic. The industry will need creative solutions that include education, talent development, and retention strategies. “Labor is the number one challenge facing the industry,” he said.

Overall, the needs-based nature of the sector is a big benefit. Senior living weathered the Great Recession and the COVID-19 healthcare crisis because senior housing is need-based driven. Also, senior living hasn’t suffered the pandemic-related rent delinquencies like those seen in the multifamily sector. The elderly typically have stable incomes unlike multifamily tenants who may have lost their jobs due to the pandemic.

Another big plus: the demographics of an aging population will support the industry in the long run. “We are true believers in the sector,” said Ruark.