LTC Properties expects to “ramp up” its investment activity over the next 12 to 24 months to “become even more competitive,” the Westlake Village, CA, real estate investment trust’s chairman and CEO, Wendy Simpson, said Friday during a third-quarter earnings call.
The REIT will take a “flexible” and “creative” approach to investing in small, regional operators, she said, noting that banks have been taking a “wait-and-see approach” to senior living and care investments.
By maintaining a conserviative balance sheet, Simpson said, the REIT was able to support its operators during the pandemic and maintain a regular monthly dividend. The third quarter payout to shareholders was $23.1 million, she added. The funds available for distribution ratio was 88% for the quarter, which Simpson said was comparable to the second quarter.
“We are continuing to target our long-term payout ratio of 88%,” she said.
Total revenues for the third quarter increased by $6 million from the same quarter last year, according to Pam Kessler, LTC Properties’ co-president, chief financial officer and secretary.
“This growth was attributable to a $2.3 million increase in rental revenue, primarily due to rent receipts from transitioned portfolios and from our recently acquired Texas [LuxeRehab] properties,” she said.
Another factor that contributed to the increase was revenue from a recently completed development, Kessler said.
The increase in total revenue was partially offset by the sale of three assisted living communities and a skilled nursing facility during the second quarter, as well as the sale of a SNF during 2021 and temporary rent reduction and rent deferrals, she said.
Additionally, according to a press release issued in conjunction with the earnings call, third-quarter results were affected by:
- Higher interest income from financing receivables due to the acquisition of three SNFs.
- Higher interest income from mortgage loans due to mortgage loan originations in 2021 and 2022.
- Higher interest and other income due to a mezzanine loan origination and additional funding under working capital loans, partially offset by loan payoffs.
- Higher interest expense due to 2021 term loan originations, the issuance of $75 million senior unsecured notes during the 2022 second quarter, and higher interest rates on LTC Properties’ revolving line of credit, partially offset by scheduled principal paydowns on its senior unsecured notes.
- Higher provision for credit losses due to the 1% reserve on the 2022 third-quarter acquisition of three SNFs, which is accounted for as a financing receivable, and additional funding under the company’s mortgage loans and note receivables, partially offset by principal paydowns.
- Lower transaction costs due to a third-quarter 2021 settlement payment of $3.9 million, offset by the 2022 third-quarter lease termination fee of $500,000 paid to an operator in exchange for cooperation and assistance in facilitating an orderly transition of 12 assisted living communities to another operator.
- Higher general and administrative expenses due to increased costs related to property maintenance expenses for closed properties, as well as higher incentive compensation, and increases in overall costs due to inflationary pressures.
- Recognized a $1.3 million impairment loss related to a 60-unit assisted living community in Kentucky as a result of classifying the community as held-for-sale.
- Recognized a $434,000 loss on sale related to a closed SNF in Texas.
For more coverage of the earnings call, see McKnight’s Senior Living and McKnight’s Long-Term Care News.
