Senior living operators represented in LTC Properties’ portfolio are seeing labor costs creep up, but the shrinking labor pool represents a greater challenge to them, Wendy Simpson, the REIT’s chairwoman, CEO and president, told those participating in a third-quarter earnings call Thursday.

“Our operators are paying a lot of attention to employee retention and the cost of the employees,” she said.

Six operators represent more than 60% of LTC’s portfolio, according to documents filed with the Securities and Exchange Commission: Prestige Healthcare (22 properties and 15.7% of annual income), Senior Lifestyle Corp. (27 properties, 12%), Brookdale Senior Living (37 properties, 9.7%), Senior Care Centers (11 properties, 9.7%), Preferred Care (30 properties, 7.2%), Anthem Memory Care (9 properties, 6.5%).

Through 2025, the senior living industry as a whole will need to hire 1.2 million new employees to serve the increasing number of older adults becoming senior living residents and to replace existing workers who leave their jobs, according to a report by Argentum. The positions with the biggest needs, according to “Getting to 2025: A Senior Living Roadmap,” will be nursing assistant (278,500 openings), home health aide (183,700), personal care aide (113,400), food server (96,300), maid and housekeeping cleaner (70,800) and cook (60,600).

Meanwhile, providers in many states and cities already facing proposed or effective minimum wage increases, and a new overtime rule, set to go into effective Dec. 1, will double the salary threshold — from $23,660 to $47,476 per year — under which most salaried workers will be guaranteed overtime pay when they work more than 40 hours per week.

Depending on the market in which they operate, providers also may be facing increased competition, LTC Executive Vice President and Chief Investment Officer Clint Malin said. “We have not seen specific concerns,” he said, “but our operators are talking about it, and they’re aware of the potential.” Development has slowed as operators focus on their existing properties, he added.

LTC’s portfolio has seen a small decline in assisted living occupancy — putting it below average, according to data from the National Investment Center for Seniors Housing & Care, primarily because of its Brookdale properties, Malin said.

“That’s something we’ll continue to monitor from an asset management standpoint to see where that progresses,” Malin said.

The performance of Brookdale properties in LTC’s portfolio, however, remains “very strong overall,” Malin said.

“As an organization, they’ve had a lot of pressure and a lot of distraction, so we have seen a little bit of deterioration on occupancy on the Brookdale properties, but still very strong overall,” he said.

Third quarter and beyond

Among activities in the third quarter, according to company executives:

  • LTC sold an assisted living community in Florida for $5.1 million, resulting in a net gain on sale of $2 million.
  • LTC completed construction of a 66-unit memory care community in California, a 66-unit memory care community in Illinois and an 89-unit combination assisted living and memory care community in South Carolina.
  • Anthem Memory Care opened two LTC-owned private-pay memory care communities, and Thrive Senior Living received its certificate of occupancy for a 89-unit assisted living and memory care community. As of Nov. 2, the Thrive property had 31 deposits funded for new resident move-ins and expected to receive its license the week of Nov. 7.

After Sept. 30, according to the REIT, LTC acquired a parcel of land in Illinois for $1.6 million and entered into a development commitment to construct a 66-unit memory care community. The commitment totals $14.5 million, including the land purchase.

LTC expects an additional private-pay development project to open near year-end, Malin said, bringing the REIT’s 2016 new development openings to six.

New development commitments decreased from $112 million in 2015 to $39 million to date this year, Malin said. “As the development cycle matures, our pace of new development commitment has slowed,” he said. “We attribute this slowing pace to land sites becoming more challenging to identify, as well as increasing costs associated with land, labor and materials.”

LTC began its development financing program in 2011 and anticipated a five- to seven-year development cycle at that time, he added.

“The transaction environment for the deals we’re interested in pursuing is not robust at this time,” Simpson said. “Despite this, I believe LTC is positioned to provide its shareholders with real growth in 2017 and 2018 without additional transactions.”

LTC has approximately $50 million of development opportunities in the pipeline with existing operating partners, Malin said. “These opportunities are comprised of replacement projects, expansions and new development both for private-pay and post-acute care properties.”