Sustainable signs of recovery in the long-term care market leave Westlake Village, CA-based LTC Properties’ leaders “cautiously optimistic” as the sector continues to deal with the effects from the pandemic, they said Friday during the real estate investment trust’s fourth-quarter and full year 2021 earnings call.
As COVID-19 cases from the omicron variant continue to trend downward, LTC Chairman and CEO Wendy Simpson said, operators will continue the recovery process. Although the federal government took steps in 2020 to assist the industry through the Provider Relief Fund and state assistance to the tune of $10 billion was distributed in 2021, additional financial support is needed by the industry, she said.
“Although we are not completely out of the woods, I steadfastly believe as an industry we will persevere and come out of this stronger than we were before,” Simpson said, adding that LTC and the industry as a whole will successfully adapt to a new normal. “The long-term outlook is positive.”
LTC investments
LTC closed on $103.3 million in investments in the fourth quarter. Future funding commitments include $6.7 million in capital improvements in 13 assisted living communities in North Carolina and South Carolina and $4.2 million to fund a memory care addition to an assisted living community in Florida, according to a press release issued in conjunction with the call.
After 2021 ended, LTC entered into an agreement to sell a 74-unit assisted living community in Virginia for $16.9 million. And an operator of two assisted living communities in California exercised the $43.7 million purchase option under its lease. The REIT also expects to transition two memory care communities in Texas to an existing operator in its portfolio by the end of February.
In 2021, LTC transitioned 18 of 19 assisted living communities previously leased to Senior Lifestyle to five new operators. The REIT expects to transition the remaining New Jersey community to an existing operator in its portfolio during the first quarter.
Also in the fourth quarter, LTC transitioned 11 skilled nursing facilities previously leased to Senior Care and Abri Health to HMG.
“We continue to have active and healthy pipelines moving into 2022, the value of which is north of $110 million,” Simpson said, adding that the pipeline spans private-pay senior living as well as skilled nursing facilities and includes acquisitions, development joint ventures, mezzanine loans and mortgage loans.
Co-President and Chief Financial Officer Pam Kessler said that LTC expects to close on a $25 million investment in five senior living communities in Oregon and Montana by the end of the month.
Operator relief
During the fourth quarter, LTC deferred $1.3 million in rent and abated $720,000 in rent for a “small set of operators.” In January and February, the REIT provided $867,000 in rent deferrals and $480,000 in rent abatements. LTC has agreed to provide up to $452,000 in rent deferrals and $240,000 in abatements for March.
Citing increasing occupancy, rents and pent-up demand for needs-based care, Simpson said she does not expect to see big changes in rent deferrals and abatements in the first quarter. She added, however, that she expects to provide some relief to providers until occupancy gains are more permanent.
Occupancy for same-property assisted living communities was at 80% as of Jan. 31, compared with 78% on Sept. 30, 2021, and 76% on June 30, 2021. Occupancy for properties previously leased to Senior Lifestyle was at 78% on Jan. 31 compared with 71% on Dec. 31, 2020.
