As the pandemic continues to create a “somewhat uneasy road” for the senior living industry, real estate investment trust LTC Properties will continue providing support to its operators while balancing its commitments to its shareholders, CEO Wendy Simpson said Friday during a fourth-quarter and full-year 2020 earnings call.
Squeezed margins, move-in challenges, labor exhaustion, decreasing length of stay, home health care growth and holds on elective surgeries are creating challenges to long-term care operators, she said.
“We do believe industry census is close to or has hit bottom,” Simpson said. “As the current vaccines — and a third from Johnson & Johnson — become more widely available and utilized, visitation opens up, communities and facilities continue to aggressively market their services, and consumer confidence in these settings improves, we should see the current census stabilize and even improve,” Simpson said.
Although unsure when the industry will fully recover from the effects of the pandemic, Simpson said that LTC’s focus remains on supporting its operators.
“We can continue to provide support to our operators, if needed, and take advantage of investment opportunities as they arise without placing undue strain on LTC,” she said. “The need for senior care hasn’t abated, and states in which we have some of our highest concentration of properties are also states with the highest projected increases in the 80-plus population cohort over the next 10 years.”
Support provided by the REIT has included $689,000 in rent deferrals and $360,000 in abatements to three private-pay senior living operators in 2021, as well as reduced 2021 rent escalations by 50% for eligible operators. On the whole, LTC collected 98% of its contractual rent and mortgage interest in the fourth quarter.
Senior Lifestyle portfolio
During the first quarter of 2021, LTC transitioned 11 assisted living communities in Illinois, Ohio and Wisconsin from Senior Lifestyle to other operators after the Chicago-based operator fell behind on rent payments during the pandemic.
Six of those communities — five in Ohio and one in Illinois — were transferred to Lawton, MI-based Randall Residence, which LTC began working with in 2019. With the addition of the six communities comprising 344 units, Randall now operates eight LTC properties in Ohio and Illinois.
The other five communities, comprising 374 units in Wisconsin, were transferred to Chicago-based Encore Senior Living. Encore is a major player in Wisconsin, and executives said the move emphasized LTC’s strategy to partner with strong regional operators.
Of the 12 remaining communities in the Senior Lifestyle portfolio, Chief Investment Officer Clint Malin said that LTC will transfer five and sell three by the end of the second quarter. Of the four remaining communities, one is being closed and sold for an alternative use; LTC will continue to evaluate options for the other three.
Senior Lifestyle paid $3.9 million of its $4.7 million in contractual rent due the fourth quarter. As of Dec. 31, the operator has a delinquent rent balance of $1 million, according to LTC. The operator also has not paid rent in 2021.
Weatherly Court by Fields Senior Living in Medford, OR, came online in September after its opening was delayed by the pandemic. Occupancy was at 23% as of Feb. 15, up from 10% in October.
Malin said that, for now, LTC will focus on smaller investments while building new and existing relationships that will serve the REIT into the future.
“When we are confident we can complete deals at the right price for the right return, we will use our liquidity to provide strong regional operators with the growth capital they need,” he said.
“As a company that has always viewed its operators as partners, and a company that has worked hard to build a balance sheet capable to withstanding the very type of crisis through which we have been managing, LTC is ready and able to continue enhancing its portfolio, diversifying its investments and generating new opportunities to allow us to continue to serve as a growth partner of choice — as a REIT done differently,” Simpson said.