Anthem making progress under LTC Properties' watchful eye

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Wendy Simpson
Wendy Simpson

Anthem Memory Care continues to make progress on community occupancy and leadership stability, LTC Properties' Chairman, President and CEO Wendy Simpson said Thursday during a first-quarter 2018 earnings call.

“But we are continuing to work closely with them to make sure they achieve the goals they committed to for 2018,” she added.

Simpson first told shareholders and analysts in August that LTC had issued a default notice on an Anthem master lease covering 11 memory care communities, two of which were under development. At that time, she also described occupancy and staffing challenges at the company.

At Porter Place in Tinley Park, IL, occupancy was 56% as of April 30, up from 47% at the end of January, Simpson said Thursday. And at Harvester Place in Burr Ridge, IL, occupancy has increased to 71% from 67% on Jan. 31.

Emerald Place, a memory care community in Glenview, IL, that opened in December, was 50% occupied at April 30, up from 24% at Jan. 31. And a newly constructed community,  Grace Point Place in Oak Lawn, IL, expects to admit its first residents later this month.

Emerald Place and Grace Point Place, Chief Financial Officer Pam Kessler said, “are on a month-by-month, quarter-by-quarter review.”

At two Anthem communities that LTC previously was looking to transition to a new operator, Anthem has solidified key leadership roles that were problematic, Simpson said, “which should help position the communities to gain momentum.”

The REIT expects rent from Anthem to be $5.2 million in 2018, she said. “Now Anthem's entire focus is on profitably and operating our portfolio while providing care to their residents.”

Simpson also explained the reasoning behind LTC's sale of several Sunrise Senior Living communities to National Health Investors in a deal announced May 1.

“The master lease related to the portfolio expired on April 30, and we had been seeking to re-lease or sell the collection of six senior living centers in Ohio and Pennsylvania,” she said. “The properties generated good cash flow and are located in strong markets. As a result of a rigorous process to identify a new lessee or buyer, we determined it more prudent to sell the portfolio for $67.5 million and reinvest that capital into newer, more modernized assets.”

Simpson said the REIT's overall strategy includes reducing the average age of properties in its portfolio. So LTC also faces the same choice — sell or re-lease — regarding two California assisted living properties operated under a master lease that is expiring at the end of November.

“The operator has notified us they will not renew the lease, but the communities do generate positive net operating income,” Chief Investment Officer Clint Malin said. Because the properties are approximately 20 years old, he said, a strategic recycling of capital on the assets may be a consideration.

Future asset sales, Malin said, most likely will involve single assets or small portfolios. “We don't foresee the opportunity for any additional large portfolio sales in the near future,” he said.

The REIT has a $50 million acquisition pipeline, Malin said.

Simpson previously expressed a desire to avoid development projects involving stand-alone memory care communities, but they doesn't mean the REIT is staying away from such communities altogether, Malin said.

“We are selectively looking at stand-alone memory care in certain markets where we can work with a well-capitalized operating partner and where there is a solid potential for relationship growth,” Malin said. “Additionally, we are continuing to cultivate several off-market opportunities, both with existing operator partners and with companies that can expand operator diversification within our portfolio.”

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