Anthem Memory Care occupancy, earnings improving, LTC CEO says
Anthem Memory Care continues to make progress on occupancy and earnings, LTC Properties Chairman, President and CEO Wendy Simpson said Friday during the Westlake Village, CA-based real estate investment trust's fourth-quarter and full-year 2017 earnings call.
“Overall at this time, Anthem has made solid adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and improvements,” she said, adding the Anthem had made reduction to overhead as requested by LTC. “We will continue to closely monitor their progress.”
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. Simpson said the staffing issues had abated and that occupancy was improving as of the REIT's third-quarter 2017 earnings call in November.
Friday, she said that occupancy at Anthem's Harvester Place in Burr Ridge, IL, was 67% as of Jan. 31, up from 64% as of Oct. 31. At Porter Place in Tinley Park, IL, occupancy was 47% as of Jan. 31, up from 42% as of Oct. 31, she said. Occupancy at Greenridge Place in Westminster, CO, Simpson said, “recently reach[ed] stabilization.”
Early lease-up figures at Anthem's Emerald Place in Glenview, IL, “are encouraging,” Simpson said. The memory care community opened in December, and occupancy was at 24% as of Jan. 31, she added.
LTC's remaining construction project with Anthem, Grace Point Place in Oak Lawn, IL, is on track for a May opening, Simpson said. LTC expects that Anthem will reduce overhead further once construction is complete, she added.
LTC expects rent from Anthem to increase over the course of 2018, Simpson said. “Currently, we expect to receive $1.1 million of rent from Anthem in the first quarter, $1.2 million in the second quarter, $1.4 million in the third quarter and $1.5 million in the fourth quarter, for a total of 5.2 million of rent in 2018,” she said.
A planned transition of two Anthem communities in Kansas — Morningside Place in Overland Park, KS, and Chisholm Place in Wichita, KS — into the master lease of an existing operating partner of LTC will not proceed, Simpson said.
“While we had an agreement in principle to transition these properties during the first quarter of 2018, we were not able to come to specific terms,” she said. “So for the time being, we have decided to keep them with Anthem. We have a great relationship with our other operator and expect to continue to grow with them, but Kansas just wasn't right for that opportunity.”
Simpson characterized the REIT's active pipeline for 2018 as “moderate, with anticipated growth during the year.”
Executive Vice President and Chief Investment Officer Clint Malin said LTC's pipeline is approximately $50 million, which he said it “fairly typical for us at this time of year.”
The REIT has three potential transactions on the immediate horizon, he said. One is for a loan with a current operating partner related to a skilled nursing facility in suburban Detroit, and the other two involve an operator in the Pacific Northwest, Malin added.
“The deal, which is structured as a real estate joint venture in the state of Oregon, was originally for the development of an assisted living and memory care community,” he said. “We have since expanded the deal to include the acquisition of an independent living community on an adjacent land parcel to create an integrated campus.”
Other highlights of the earnings call:
Brookdale Senior Living. Simpson said that the leases on two Brookdale Senior Living communities are expiring this year and that LTC will look to transition them to another operator or sell the communities, which are located in Bakersfield and Vacaville, CA. “Brookdale doesn't want to renew that lease,” she said, noting that the properties came through the company's merger with Emeritus Senior Living. LTC's master lease with Brookdale, which includes all other Brookdale properties in the REIT's portfolio, matures in 2020, Simpson said. Malin said that Brookdale communities in LTC's portfolio are “performing well.”
Sunrise Senior Living. During and after the fourth quarter, Simpson said, LTC entered into an agreement to sell six Sunrise Senior Living communities, five in Ohio and one in Pennsylvania. The anticipated closing date for the sale is May 1, she added. Sunrise did not want to renew the master lease when it expires April 30, Malin said during LTC's previous earnings call. LTC expects to see a “sizeable gain on the sale,” he said Friday.
Thrive Senior Living. Two memory care communities in LTC's portfolio that formerly were operated by Clarity Pointe were added to the master lease of Thrive Senior Living, as discussed in LTC's third-quarter 2017 earnings call. At one of them, the community now known as Thrive Memory Care in Louisville, KY, and formerly known as Clarity Pointe Louisville, occupancy saw a dip as of the end of December but was up to 73% as of Jan. 31, Malin said. That was down from 77% as of Oct. 31 and 75% as of June 30 but in line with September numbers, he said. “There were a number of very high-acuity residents in that community, and when Thrive came in and transitioned that, they ended up discharging some residents because of levels of care,” Malin said. Occupancy was 58% at a 60-unit memory care community in West Chester, OH, that LTC acquired in the second quarter and leased to Thrive, he said. The community had opened June 23 and had 48% occupancy as of Oct 31, Malin said on the third-quarter call.
Acquisitions. LTC closed on three new investments in the fourth quarter, totaling $49 million, Simpson and Malin said. The REIT acquired a 73-unit newly built assisted living and memory care community in Kansas City, MO. The operator is an existing partner, Oxford Senior Living, which now runs three private-pay communities owned by LTC. The other two completed transactions were real estate joint ventures with operators that are new to LTC. One agreement, previously announced, is to jointly develop a 110-unit assisted living, memory care and independent living community in Wisconsin with Tealwood Senior Living and developer Tukka Properties for $22.5 million. Construction has begun, and the community is expected to open in spring 2019, Malin said. Through the second real estate joint venture agreement completed in the fourth quarter, LTC acquired an 87-unit assisted living and memory care community in South Carolina for $10 million with Affinity Living Group.
Dispositions. LTC also sold a 36-unit closed assisted living community in Oregon for $1.4 million and donated a skilled nursing facility in Texas to a nonprofit healthcare provider.