LTC Properties Chairman and CEO Wendy Simpson called 2023 a “year of solid execution” as the real estate investment trust “substantially resolved” all of its challenges and looks to 2024 with market fundamentals favoring REITs.
During a fourth-quarter and full-year 2023 earnings call on Friday, Simpson outlined how the Westlake Village, CA-based company more than fully replaced the rent generated by its original Brookdale Senior Living portfolio and transitioned management of one of its portfolios to other operators, among other accomplishments.
“We’re entering 2024 with a stronger, more diversified portfolio and a strong balance sheet, which better positions LTC for future growth,” Simpson said.
Senior living remains strong
“From an industry perspective, demand for seniors housing is strong,” Simpson said, pointing to National Investment for Seniors Housing & Investment Center data showing occupancy rates are on track to recover to pre-pandemic levels in the second half of 2024, particularly as new construction remains muted.
Occupancy for LTC’s same-store private pay portfolio was 87% as of Jan. 31, compared with 85% on June 30.
“We are encouraged by what we’re seeing. Market fundamentals currently favor REITs with interest rates in flux and banks more selective about investments, particularly in real estate and properties not generating positive cash flow,” Simpson said. “We’re preparing for the environment by developing creative financing solutions. Our creativity and flexibility makes it easy for us to act quickly.”
Brookdale portfolio deals completed
During the fourth quarter, LTC completed the previously announced transactions related to its 35-property Brookdale portfolio and expects to fully replace revenue through a combination of new leases, interest related to seller financing, and pre-invested proceeds.
In the Brookdale portfolio, 17 communities across four states were re-leased to Brookdale, five communities in Oklahoma were transferred to Oxford Senior Living, five North Carolina communities were transferred to Navion Senior Solutions and eight properties in Florida, South Carolina and Oklahoma were sold for $27.9 million.
Movement on ALG Senior communities
LTC also shared the status of a portfolio of 12 assisted living communities that it had moved to ALG Senior in 2022 as the REIT looked for a more permanent solution.
Two of those properties, in Mississippi and Florida, were sold during 2023; a Texas community is transitioning to another operator; five Texas communities are expected to be sold this year; two Texas communities are being considered for sale for alternative uses; and two communities, in Georgia and South Carolina, have been transitioned to another operator.
Legacy, Anthem and other transactions
At the end of the fourth quarter, LTC transitioned two assisted living communities in Georgia and South Carolina to Legacy Senior Living. As part of the arrangement, the REIT agreed to fund $900,000 in capital expenditures for the first year of the lease.
Also during the quarter, Anthem Memory Care’s master lease with LTC was amended to set 2024 rent at $10.8 million. Anthem, which operates 11 memory care communities for the REIT, was placed in default in 2017 after it only partially paid its rent. The company paid agreed-on annual cash rent of $10.8 million in 2022 and 2023.
LTC also closed on a transaction to fund a $19.5 million mortgage loan during the quarter, to build an assisted living / memory care community in Michigan. The REIT also sold a Mississippi assisted living community for $1.7 million.
After the quarter, LTC sold its joint venture interest in an assisted living community in Wisconsin for $23.1 million.
Chief Investment Officer Clint Malin said that the REIT is working to rebuild its investment pipeline.
“The bottom line for LTC is, we believe we are in a good position to grow and further diversify our portfolio,” he said. “We believe our structured finance platform offers interesting solutions to complement triple-net acquisitions and joint ventures, and that as a result of the current lending environment, we can grow relationships with the regional operators with whom we don’t already have a relationship.”
