Wendy Simpson
Wendy Simpson

Aided by better-than-anticipated rent collection in the fourth quarter, real estate investment trust LTC Properties beat the expectations of analysts, reporting funds from operations of 78 cents per share. Yet although the Westlake Village, CA-based REIT believes that the industry census is close to or has hit bottom, challenges still remain.

“Right now, we see too many uncertainties in 2021, and we feel we cannot reasonably provide guidance at this time,” LTC Properties CEO Wendy Simpson said Friday on the firm’s fourth-quarter and full-year 2020 earnings call.

For the fourth quarter, LTC reported net income of $17.5 million compared with $12.4 million for the same period in 2019. Funds available for distribution were $30.7 million for the fourth quarter, compared with $29.5 million for the 2019 fourth quarter.

Simpson also pointed to a challenging merger and acquisitions market, noting that the firm does not expect to engage in any large transactions for the foreseeable future.

“While there are deals being done, we do not plan to relax our underwriting standards, opting instead to wait until we can complete deals that provide accretive growth for our shareholders,” she said. The REIT has been considering several growth opportunities available through structured finance deals with reduced risk profiles and strong returns, particularly some development projects that are not dependent for success on immediate lease-up or current census, Simpson added. 

“When the market begins to open up, we plan to use our considerable balance sheet to provide a wide range of regional operating partners with the financing they need to help grow their businesses,” she said. 

Several analysts, however, have expressed concern over LTC’s tenant credit risk. Chicago-based senior housing operator Senior Lifestyle has struggled to pay its rent amid the COVID-19 pandemic. During the fourth quarter, the struggling firm, LTC’s sixth-largest tenant at year-end paid approximately $3.9 million of its approximately $4.7 million contractual rent due. LTC, however, had to draw down on the tenant’s letter of credit and security deposits to collect approximately $3.7 million of accrued 2020 rents receivable from the operator, including fourth quarter rent receivable.

At year-end, Senior Lifestyle’s delinquent rent balance was approximately $1 million, according to LTC. The operator also has not paid rent in 2021.

“We continue to worry that struggling tenants could default on their contractual rent obligations given the COVID-19 pandemic has continued to pressure occupancy and expenses at senior living facilities,” Mizuho analysts Omotayo Okusanya and Zachary Silverberg wrote in an investor note on the REIT’s fourth-quarter results.