LTC Properties had its strongest investment year since 2015, company leaders said Thursday, with Chairman and CEO Wendy Simpson touting $170 million in annual investment as proof of a “hard-won positive year.”
“We anticipate much of the same for 2023,” Simpson said in kicking off a fourth-quarter earnings call.
The seniors care and housing-focused real estate trust also reported higher rent and interest income for the final quarter of 2022, with momentum carrying over into 2023. LTC Properties has committed to more than $172 million in deals so far this year, already eclipsing its 2022 total.
On the skilled side, leaders said their confidence had been buoyed by operators’ improving performance and the ability to bring average SNF occupancy closer to 80%.
“Census in long-term care has been more challenged than it has been in shorter stays,” said Clint Malin, co-president and chief investment officer. “In skilled nursing, taking on higher acuity patients, especially now with the implementation of PDPM. That’s been beneficial to the industry through the pandemic. I think you see reaching up into higher acuity is where a lot of operators are going.
“That’s reflective of the investments we made last year, both with Ignite Medical Resorts, as well as Pruitt in Florida. Operators are focusing on that higher acuity model and being able to take on patients that are in hospitals and other higher-acuity settings. We think that has traction,” he added.
As the REIT braces for potential impacts of the May 11 end of the public health emergency, Malin said Medicaid increases in Texas and Michigan, where LTC has core skilled nursing assets, would be a critical offset.
“We’ll have to see if that rate increase comes about,” Malin said. “Everyone is hopeful that will happen in Texas, but we won’t know for certain until the legislative session ends.”
Michigan lawmakers are pursuing a rebasing effort, and Malin said LTC’s local operators are expecting about a 9% rate increase in October, with retroactive payments.
He and Simpson noted that the REIT also renewed a lease with two skilled nursing facilities in Florida, which saw a large rate increase last year.
New Welltower developments
Welltower also held its fourth-quarter earnings call on Thursday.
The real estate investment trust announced it had $412 million of gross investments late last year, including $223 million in acquisitions and loan funding, as well as $188 million in development funding.
It opened several new development projects, mainly in the senior living sector.
Welltower also began transitioning skilled nursing properties that were formerly part of its ProMedica joint venture to new operators. Overseeing the transition is Integra, a little-known management firm that has also begun acquiring a stake in the properties.
In December, Welltower sold Integra a 15% stake in 54 skilled nursing assets for approximately $73 million. Last month, Integra paid about $74 million for a 15% stake in 31 additional skilled nursing assets. The transactions, Welltower said, represent the first two tranches in the formation of an 85/15 joint venture. The stake in the remaining facilities is expected to be sold in the second half of 2023.
Integra entered into master leases for the entire portfolio and will bear financial responsibility for all assets, including assets where it has not yet acquired an ownership stake, according to a press release detailing fourth-quarter results.
“Integra’s business plan entails entering into sub-leases with approximately 15 regional operators with strong performance track records in their respective markets,” the release noted. McKnight’s Long-Term Care News previously reported that a sizeable share of those properties in Pennsylvania and Colorado had been assigned to Genesis.
But on Thursday’s call, Tim McHugh, Welltower executive vice president and chief financial officer, said that about a quarter of the portfolio remains in limbo.
“As for the underlying operations, the subleasing of the portfolio is progressing,” McHugh said. “Seventy-five percent of the beds have already transitioned management, with the remainder of the portfolio waiting state-specific approvals.”
For more earnings call coverage, see the McKnight’s Business Daily.