2022 was a “hard, long, positive” year for LTC Properties, and Chairman and CEO Wendy Simpson anticipates much of the same in 2023. She made the prediction Thursday on the Westlake Village, CA-based real estate investment trust fourth-quarter and full-year 2022 earnings call.
Last year, the REIT invested more than $170 million, making it the company’s strongest investment year since 2015. Simpson said that LTC Properties also was diligent in right-sizing its portfolio by selling underperforming assets and transitioning the properties of struggling operators to new managers.
That momentum, she said, has carried into the new year as the REIT seeks to further strengthen and diversify its portfolio to drive future growth by deepening relationships with strong regional partners.
“Going forward, we believe we’ll see continued progress in our business, as operators find new ways to drive occupancy, increase revenue and lower costs,” Simpson said. “While the road has been long over the last few years, we are beginning to see operating improvements in our portfolio, although we can’t say with certainty how long the 2023 road will be.”
Simpson said that LTC Properties has “substantially stepped up” its investment activity and divested assets no longer performing as expected or no longer core to the REIT’s portfolio.
Already this year, the business development team has closed on more than $128 million in investments and is looking for additional opportunities.
After the first quarter ended, LTC Properties entered into a $121.3 million joint venture with the affiliate of ALG Senior. That joint venture included the purchase of 11 assisted living / memory care communities in North Carolina.
And in the coming days, LTC Properties expects to close on a $51 million investment in an independent / assisted living community in Georgia with an existing partner. After closing this deal, said Clint Malin, the REIT’s co-president and chief investment officer, LTC will have eclipsed its 2022 investment totals.
Industry showing positive signs
Although labor and inflation challenges remain, Simpson said she is seeing positive signs in industry data. Operators, she added, are gaining more stability as they continue recovering from the pandemic. And LTC Properties’ operating partners are raising rates “without much resistance,” Simpson said.
Private-pay senior living occupancy in the REIT’s portfolio averaged 79% as of Jan. 31, down from 81% at Sept. 30. This rate compares with average occupancy levels of 87% in 2019.
Occupancy increases coming out of the pandemic have not been linear due to leadership changes, staffing issues and seasonality, according to Pam Kessler, co-president and chief financial officer. LTC’s portfolio needs to see a 700- to 800-basis-point recovery to get back to pre-pandemic occupancy levels, she added.
“We should expect to continue to see a bumpy road. I don’t think it’s going to be a straight shot upward,” Kessler said, adding that LTC Properties continues to examine its portfolio properties.
“If it’s short-term reasons we think are recoverable, we’ll continue to stay invested in those assets. For those we think the market has turned, or for some reason the area, the demographics or the market is not supporting the product, then we would look to exit those investments.”
