LTC Properties is trying to determine whether market or operator issues are negatively affecting occupancy at the Thrive communities in its portfolio, executives said Tuesday on the real estate investment trust’s third-quarter earnings call.

“There has not been a lot of traction on occupancy,” Executive Vice President and Chief Executive Officer Clint Malin said, noting that occupancy was 72% as of October and had been 67%. “So we’ve been very engaged with them and trying to make that assessment of, is it the market or is it the operator, but these are all relatively new buildings. Some areas have more competition than others.”

The operator has “exhausted” the $1.4 million in deferred rent LTC announced last quarter, President and CEO Wendy Simpson said.

“Unfortunately, we had anticipated that the deferred rent would provide a longer runway toward stabilization, under modest lease-up assumptions, through the second half of the year, and that has not yet materialized,” she said. “We are currently working with Thrive to understand the extent to which they will be able to meet their contractual 2019 rent obligations with combined cash flow from the portfolio and corporate guarantors.”

The REIT is focused on generating the best outcome for shareholders, Simpson said.

Anthem Memory Care making progress

LTC is continuing to “closely monitor” the progress Anthem Memory Care is making on its 2018 goals, and results are improving, Simpson said.

“They continue to pay rent in line with our expectations and are showing progress,” she added.

Harvester Place in Burr Ridge, IL, and Emerald Place in Glenview, IL, are seeing “solid gains,” with occupancies of 77% and 64%, respectively, the CEO said. And occupancy at Vineyard Place in Murrieta, CA, is “holding steady” at approximately 89%, she added.

Occupancy at Porter Place in Tinley Park, IL, is down slightly, Simpson said. She was encouraged by the 30% occupancy at Grace Point Place in Oak Lawn, IL, which began admitting residents in late May.

Acquisitions and sales

During the third quarter:

  • LTC, under a joint venture agreement, acquired an 89-unit independent living community in Oregon for $14.4 million in a sale-leaseback transaction. LTC contributed $11.5 million of cash, and the non-controlling partner contributed $2.9 million of equity. Simultaneously, LTC entered into a 10-year master lease agreement with a new operator.
  • The REIT funded $7.1 million under an existing mortgage loan to buy a 126-bed skilled nursing center in Michigan.
  • LTC sold two older Alabama skilled nursing facilities back to the operator for $17.5 million; they have a total of 285 beds. The operator’s lease was scheduled to expire in 2018, Malin said. The REIT recognized a net gain of $14.3 million on the sale.

After the quarter:

  • LTC sold a 60-bed skilled nursing facility in Florida to the lessee for $5 million. The sale is expected to result in a gain of $3.4 million in the fourth quarter.
  • The REIT and Senior Lifestyle Corp. amended a master lease agreement. Per the deal, LTC may, at its discretion, sell a 48-unit memory care community that is being operated by Senior Lifestyle. The community has a gross value of $9.8 million and a carrying value of $9 million.

“We anticipate selling three additional properties in our portfolio,” Malin said. Two of the communities are are under contract, and the third is a memory care community being marketed by a broker, he said.

Year to date, LTC has closed on $73 million in new investments and sold properties with a gross book value of almost $47 million, resulting in net proceeds of $82.5 million and a combined gain on sale of $62.7 million, Malin said.