Westlake Village, CA-based LTC Properties has a “near-term pipeline” valued at more than $100 million as the long-term care industry is “firmly in the midst of a recovery,” executives said Friday on the real estate investment trust’s third-quarter earnings call.
“It’s a nice mix of opportunities, including private-pay [senior housing] and skilled nursing, and with regional operating partners both new to LTC and existing,” co-President and Chief Investment Officer Clint Malin said of the pipeline.
Chairman and CEO Wendy Simpson described the pipeline as “active and healthy.”
“We remain focused on shorter-term cash flow strategic deals that have what we believe to be reduced risk profiles and look forward to announcing additional investments over the next several months,” she said. Long-term, Simpson said, LTC Properties will focus on engaging with more regional operators.
The REIT recently closed approximately $46 million in investments, executives said. Among them:
- A $4.4 million mezzanine loan for the refinancing of an independent living community in Oregon operated by a regional operator new to LTC Properties. The loan term is for three years and has two 12-month extension options. This loan originated during the third quarter.
- A $12.5 million mortgage loan for the purchase of an assisted living and memory care community in Florida, to be operated by a regional operator new to LTC Properties. This loan closed after the quarter ended.
Among other actions in the quarter, LTC Properties moved six assisted living communities previously managed by Senior Lifestyle to other operators. A Wisconsin community now is managed by an operator new to LTC, two communities in Pennsylvania now are managed by an existing LTC operator, and three communities in Nebraska now are managed by an existing LTC operator. A New Jersey community transition will be complete once the community is licensed, Simpson said.
“With these challenges successfully addressed, we are excited to be working with new operators and solidifying relationships with current operators who have the resources and desire to stabilize operations and further grow occupancy,” she said.
Malin said that 18 former Senior Lifestyle communities now have been transitioned to different operators, and the New Jersey community will be the 19th. “For these 19 buildings, occupancy for the month of December 2020 was 71%, increasing to 75% for the month of September 2021,” he said.
Signs of hope, but workforce issues remain
“While the pandemic certainly caused strife in our industry, I believe we are firmly in the midst of a recovery,” Simpson said. “And while I cannot predict exactly when we’ll return to prepandemic levels of operations, we are seeing continuing signs that give us hope. Occupancy is increasing, demand for needs-based care is growing, and we’re once again making strategic investments.”
Private-pay occupancy in the LTC Properties portfolio, Malin said, was 73% at March 31, 75% at June 30 and 77% at Sept. 30. The information includes approximately 98% of the total same-store, private-pay units in the portfolio and was provided by operators on a voluntary and expedited basis, he said.
Operators in the portfolio have said that occupancy would be even higher if not for labor constraints, Simpson said, calling staffing a “very real” issue.
“I have not spoken to an operator yet that has not had trouble finding and retaining qualified employees. Operators are turning away residents and patients due to the labor shortage and the resulting staffing challenges,” she said.
To try to improve the situation, Simpson said, companies are increasing wages and providing sign-up and retention bonuses. Salaries haven’t increased “for many years,” she said.
“This is a catch-up that’s causing us a whiplash, but it will flow through the system,” Simpson said.
Labor pressures are facing both senior living and skilled nursing providers, although effects vary by market, and the challenge is greater for skilled nursing, she said.
“I would say generally across the United States there are labor problems, but there are pockets where there aren’t any,” Simpson said. “We’ve had some of our skilled nursing operators or our assisted living operators say they closed a floor and are not opening a floor until they can get more labor. But everybody is having to deal with this.”
With many schools open again, more parents are free to re-enter the workforce, she said. “And COVID-19 related add-ons to unemployment insurance have expired, requiring a return to work for some to make up for that income shortfall,” she added.
Although a Child Tax Credit proposed as part of the federal Build Back Better legislation could keep some people from returning to work, bills in some states could help operators, if passed, Simpson said.
For instance, in Texas, where LTC Properties owns 34 communities, the legislature has proposed $178.3 million in grants for assisted living communities and other care-based providers, as well as $200 million in grants for skilled nursing providers, to help fund staffing recruitment and retention.
“We would love to see other states follow this example,” she said.
See McKnight’s Long-Term Care News for additional coverage of the earnings call.
