Completion of changes to a 35-community Brookdale Senior Living portfolio owned by Westlake Village, CA-based LTC Properties has resulted in 17 communities being re-leased to Brentwood, TN-based Brookdale, eight communities being sold, the operation of five communities being transferred to Oxford Senior Living, and the operation of five other communities being transferred to Navion Senior Solutions.
The real estate investment trust, which announced the changes late Monday, said it expects net proceeds of $23 million and an anticipated net gain of $17 million related to the property sales.
“We are pleased to have reached a favorable outcome,” LTC Chairman and CEO Wendy Simpson said in a statement. “Importantly, rent from the previous portfolio has been fully replaced, and we’ve generated sales proceeds to pay down a portion of our debt, which was incurred to pre-fund accretive investments earlier this year.”
The transactions resulted in three new master leases. Revenue from the portfolio will be fully replaced through a combination of new leases, interest related to seller financing, and pre-invested proceeds at a weighted average yield of 8.5%, according to the REIT.
LTC’s portfolio still will contain Brookdale communities but said the moves reduce its revenue concentration from Brookdale by 40%. In April, LTC Chief Investment Officer and Co-President Clint Malin said that the REIT would “welcome the opportunity to reduce operator concentration.”
As of Sept. 30, LTC’s senior living and care portfolio included 29 operators and 208 properties. Of them, there were 42 ALG Senior communities, 35 Brookdale properties, 24 Prestige Healthcare communities, 13 HMG Healthcare properties, 12 Anthem Memory care communities, seven Ignite Medical Resorts properties, seven Ark Post-Acute Network facilities, six Genesis Healthcare properties, five Fundamental facilities, four Carespring Health Care Management properties, and 53 settings managed by other senior living and care operators, according to a presentation posted on LTC’s website.
The 17 communities that LTC re-leased to Brookdale are located across four states — Colorado (six), Texas (six), Kansas (four) and Ohio (one) — and have a total of 738 units. The new master lease, which was effective in January, has a duration of six years at an initial annual rent of $9.3 million.
On the REIT’s first-quarter 2023 earnings call, Malin said that the Brookdale properties that LTC planned to keep have “much higher” EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring or rent costs). Rate growth and occupancy trends in LTC’s Brookdale portfolio were similar to those that Brookdale has publicly disclosed for its overall portfolio, he added.
The eight communities that were sold are located across three states — Florida (four), South Carolina (three) and Oklahoma (one) — and have a total of 341 units. LTC said they were sold for $28 million, that REIT received $23.2 million in proceeds net of transaction costs and seller financing, and that it anticipates recording a gain of $17 million related to the sales.
LTC provided financing to the seller, with two of the Florida properties, with a total of 92 units, serving as collateral. The $4 million seller-financed mortgage loan term is two years, with a one-year extension, at an interest rate of 8.75%.
As for the communities for which management was transferred to new operators, the five communities now operated by Oxford are located in Oklahoma and have a total of 184 units. Oxford already operated senior living communities in LTC’s portfolio.
The new master lease, which began in November, has a duration of three years, with one four-year extension, at an initial annual rent of $960,000.
The five communities now operated by Navion are located in North Carolina and have a total of 210 units. Navion did not previously have a relationship with LTC. The master lease, which began in January, has a six-year duration at an initial annual rent of $3.3 million.
In the first half of 2023, LTC Properties had announced plans to sell approximately half of the 35 Brookdale communities it owned and re-lease the other half after Brookdale opted not to renew its lease with the REIT. LTC reported in October, however, that it would be re-leasing 17 of the 35 properties back to Brookdale under a new six-year master lease beginning Jan. 1.
The exact fates of all 35 communities previously had not been announced.
