Improving Operational Conditions Lead To Fewer Ccrc Defaults In 2026

Non-profit continuing care retirement communities are defaulting on their credit lines at a lower rate than in the past, according to a new report from Ziegler.

Non-profit CCRCs have not recorded any credit defaults in 2026 and Ziegler reported just one new payment default early on in 2025. Improvements in financial fundamentals in the last couple of years have put fewer borrowers at risk for a payment default, the report’s author, Mike Vitiello, senior vice president of credit surveillance and analytics, wrote.

Since 2000, Ziegler has recorded an average of about 3.3 CCRC defaults per year. During Covid, that average climbed to 5.2. Looking ahead, the report’s authors don’t expect defaults to rise above a “low level” for the next two years.

“We believe this lull may last another year or two, and then we will start to see defaults return to a normal level with a combination of new projects coming online and mature communities slowly degrading,” Vitiello wrote. “We believe that a long-term average of three to four new defaults per year is the natural rate for CCRCs.”

Difficulties in operations, including occupancy and margin challenges, led to the challenges of the last few years for the non-profit CCRC sector. But with demand rising and the rate of newly built communities low, existing communities are on much better footing than they were earlier this decade.

Earlier conditions in the sector led to a wave of bankruptcies among operators of life plan communities and CCRCs, including Lutheran Life Communities and Christian Horizons.

The new report from Ziegler adds to a generally better forecast for CCRCs and life plan communities. That said, as conditions improve, some – like ratings agency Fitch Ratings – believe that operators could struggle to repay debt in the future if they seek debt-funded expansion and repositioning projects.

Recovery adjusted default rates, which includes payments made by CCRCs after missing previous payments, had a rate of 2.8% in 2025, down from 3% in the previous year.

The gross default rate, which measures the par principal amount of initial issuance defaulted on against the universe list of unenhanced original issuance, also showed a decrease in 2025 to 8.3% from 9% in 2024.

The decreasing default rate is credited with the slowing of new development in recent years.

“We believe that the past few years of elevated activity were hastened by the difficult operating environment and we are now entering a lull,” Vitiello wrote. “High risk projects that would now be entering their most vulnerable phase were either delayed or not funded at all.”

There have been two primary methods of recovery for CCRCs that have defaulted: restructuring and sales. Since 1990, there have been a total of 55 sales compared to 22 restructures, but restructuring tends to result in a higher recovery rate for bondholders, with 78% of restructurings resulting in recovery compared to 59% for sales.

Across the entire data set, $71.2 billion in debt was issued for 786 unique borrowers in 1,627 bond issues, and most facilities in the data set are represented at least once, Vitello wrote. A total of 11.8% of the borrowers and 8.6% of issues in the study defaulted at some point, though most defaulted borrowers continued operating through either a bond restructuring or selling to another operator.

The average post-default recovery was around 63 cents on the dollar, according to the report.

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