Fitch Ratings has announced potential revisions to its rating criteria for life plan communities and is seeking public feedback before finalizing the changes. The proposed adjustments aim to more accurately assess the risks faced by LPCs, according to Fitch Senior Director Margaret Johnson.
Johnson highlighted the smaller market draw and higher risk profile of LPCs as key factors driving the proposed revisions. The updated criteria would better account for the large-scale capital plans often undertaken by LPCs relative to their revenue size, providing greater transparency in the rating process.
It is estimated that around 10% of all LPC ratings would be affected by the updated criteria, with potential downgrades limited to one notch. Fitch’s decision to revisit the rating criteria comes after issuing a “deteriorating” rating for the LPC sector for the second consecutive year in January.
The proposed changes include an expanded ratings category and enhanced guidance for lower ratings, as well as a focus on evaluating the impact of capital projects on ratings. Sub-assessments would also be introduced to differentiate between the risks of multi-site LPCs and single-site locations.
Last November, average occupancy rates in life plan communities surpassed 90%, outperforming the wider senior living industry. This positive trend followed an improvement in demand outlook for CCRCs, signaling a more stable outlook for the sector.
