Executives with LTC Properties (NYSE: LTC) are searching for to additional cut back the corporate’s Senior Way of life holdings this 12 months, whereas on the similar time constructing new operator relationships and rising current ones.
The Westlake Village, California-based actual property funding belief (REIT) yesterday disclosed it had transitioned 11 of its 23 assisted living communities leased to Senior Lifestyle to different operators. However the firm is planning to trim its portfolio with the Chicago-based operator even additional this 12 months, executives stated through the firm’s fourth-quarter earnings name Friday.
As of the top of the fourth quarter of 2020, LTC had a senior housing portfolio consisting of 107 assisted dwelling and 73 expert nursing properties in 29 states.
Engaged on potential operator transitions for Senior Way of life properties has been a months-long process for LTC, as Senior Way of life had fallen behind on its lease funds through the pandemic.
Within the fourth quarter of 2020, Senior Way of life paid $3.9 million in lease, equaling 83% of its $4.7 million complete due. LTC utilized the operator’s letter of credit score and deposits, totaling $3.7 million, to its 2020 second-quarter lease receivable; notes receivable; and its third- and fourth-quarter lease. As of Dec. 31, 2020, the operator’s remaining delinquent steadiness was $1 million, in response to LTC.
LTC reported funds from operations (FFO) of $30.4 million, or $0.78 per share, within the fourth quarter of 2020, beating analysts’ expectations. The corporate didn’t supply steering for 2021, citing many present unknowns associated to the pandemic. However, the truth that occupancy hadn’t modified
“We do consider that the business census is near or has hit backside,” stated LTC Properties CEO and Chairman Wendy Simpson throughout Friday’s fourth-quarter earnings name with traders and analysts. “Nevertheless… we are able to’t predict when which may occur, or when the business will be capable to totally get well from the consequences of the pandemic.”
Whereas the portfolio transitions with Senior Way of life will doubtless weigh on LTC’s future outcomes, its different working companions carried out nicely, given the circumstances, in response to Jordan Sadler, fairness analysis analyst at KeyBanc Capital Markets.
“The remainder of LTC’s portfolio noticed comparatively regular lease collections within the quarter, regardless of difficult circumstances and falling occupancies/coverages, as supplier reduction funds supplied assist,” Sadler wrote.
LTC’s share worth fell about 0.2% to $40.68 by the point the markets closed Friday.
Filling in to handle the 11 former Senior Way of life communities are Lawton, Michigan-based Randall Residence, a present LTC working accomplice that’s taking up six of the communities in Ohio and Illinois; and Chicago-based Encore Senior Dwelling, a brand new working accomplice for LTC that’s taking up 5 of the communities in Wisconsin, the place it’s a “main participant,” in response to Clint Malin, LTC’s co-president and chief funding officer.
“Partnering with regional operators is a vital a part of LTC’s long-term technique,” Malin stated through the firm’s fourth-quarter earnings name Friday. “And increasing our relationship with Randall, whereas constructing a brand new one with Encore, are nice examples of our potential to accomplice with operators who’ve a strong presence of their native markets and areas.”
Of the 12 communities nonetheless leased to Senior Way of life, LTC plans to switch 5 to different operators and dump three extra within the first and second quarters of this 12 months.
The corporate will proceed to weigh its choices for the Senior Way of life communities not transferred or bought, which have a internet guide worth of about $4.5 million. Already, LTC executives have determined to shut one of many 4 and promote it for an “various use.”
“We’re evaluating our choices for the remaining three,” Malin added.
Occupancy for the corporate’s private-pay senior housing portfolio was 71% as of Jan. 31 — although Malin famous that determine consists of barely lower than three-quarters of the corporate’s private-pay items.
LTC additionally collected 98% of its contractual lease and mortgage curiosity within the fourth quarter of 2020.
For its current operators, LTC has pledged to work in 2021 to supply them with extra assist, ought to they want it. The corporate’s leaders are additionally hopeful that senior dwelling operators will obtain extra monetary assist from the roughly $30 billion of still-unallocated assist within the federal authorities’s Supplier Aid Fund.
“We don’t anticipate to have interaction in any giant transactions for the foreseeable future, however we’re seeing fascinating alternatives to take part in progress by way of structured finance offers with diminished danger profiles and robust returns, particularly for improvement tasks that aren’t dependent for fulfillment on instant lease-upor present census,” Simpson stated. “When the market begins to open up, we plan to make use of our appreciable steadiness sheet to supply a variety of regional working companions with the financing they should assist develop their companies.”
Till the corporate’s leaders are assured LTC can full offers for the correct value and the correct return, the REIT will give attention to smaller investments whereas constructing new and current relationships, Malin famous.
One large unknown in LTC’s portfolio is Brookdale Senior Dwelling (NYSE: BKD), which continues to be ready to determine whether or not to resume a grasp lease with the REIT. Final 12 months, LTC consolidated 4 Brookdale leases into one grasp lease and prolonged the time period till Dec. 31, 2021. Brookdale has till April 30 to decide on amongst three renewal choices.
Though Malin famous he was uncertain whether or not Brookdale would in the end lengthen the lease, he’s inspired by the truth that Brookdale is working to spend the roughly $2 million LTC supplied for capital enhancements.
“Even when Brookdale chooses to not renew this, there’s been capital that’s been put into the buildings, which is a optimistic,” Malin stated.
Wanting forward, the corporate believes that there could also be some potential acquisition alternatives coming within the spring or summer season of this 12 months, as LTC is approached by sellers available in the market.
“We’re trying ahead to having the ability to spend a number of the cash that Clint can be creating by promoting a number of the Senior Way of life belongings,” Simpson stated