As the Thrive Senior Living name disappears from real estate investment trust LTC Properties’ portfolio, the Atlanta-based operator said Tuesday that it is a good time to step away from stand-alone memory care communities, which company leaders now view as “insufficient” to meet resident needs.
Westlake Village, CA-based LTC announced Monday that it had moved two former Thrive communities to a new operator, is in the process of transitioning three others to another company and is selling another community. The moves came after the REIT’s May earnings call, when LTC executives said they had issued a notice of default to Thrive as well as a demand for a $2.6 million payment. Tuesday, Thrive said that it had reached a settlement with LTC on all outstanding obligations under its master lease.
“While leases may be a useful capital structure, we entered into one at an inopportune time relative to our company’s growth cycle and compounded the challenges by adding distressed assets,” Thrive founder Jeramy Ragsdale said in a statement.
Thrive said its relationship with LTC Properties began in 2014 and originally included three new properties, among them a stand-alone memory care community. In 2017, three additional stand-alone memory care communities were added. Thrive said that the performance of the communities improved under its management but fell short of lease obligations, ultimately causing the master lease to underperform.
“With other notable stand-alone memory care portfolios having recently undergone distress and transition, we believe this signals the need for a broader look at the product class as a whole,” Ragsdale said.
The stand-alone memory care communities represented a “philosophical disconnect” for Thrive in that they segregated residents from the rest of society, company executives said.
“This experience has deepened our belief that the traditional model for stand-alone memory care in the U.S. is insufficient to meet residents’ needs, and operating these four memory care-only communities for the last few years has taught us that we simply can’t compromise,” Thrive President Les Strech said. “People prosper when living in true community with each other, regardless of age or ability.”
The company now plans to focus on integrated offerings, looking for growth across larger communities in primary and secondary markets. Thrive currently operates 16 properties in Alabama, Florida, Georgia, Kentucky, Ohio, South Carolina, Texas, Virginia and the Washington, D.C., metro area.