LTC Properties has joined forces with upscale rehab provider Ignite Medical Resorts on two projects in Missouri, just one example of how the healthcare real estate investment trust is looking to diversify and decrease the age of its portfolio.
Despite two of its major skilled nursing partners remaining in bankruptcy, company leaders said during an earnings call Friday that they had made “significant progress” in handling the challenges they can control. The company reported its revenues were up $4.8 million from the same quarter last year, although all but about $900,000 of that was due to a new accounting standard that requires companies to report escrow income as revenue.
Still, rent incomes have leveled off or increased from several operators, and the REIT completed its transition of several facilities to new operators during the last three months.
While much of LTC Properties’ second-quarter activity focused on the senior living segment, the company’s portfolio is still about 50% skilled nursing. But it is also aging, and the company’s growth mindset is focused on cautiously pursuing recently built projects or those still in development.
“Pricing is still very strong,” said Clint Malin, executive vice president and chief investment officer. “We’re looking at finding unique opportunities, such as the opportunity we found with Ignite to invest in newer skilled nursing, as well as a development project. And we are seeing a few select opportunities from a price point on the private pay side that we are opportunistic about that we can convert to transactions. But it is trying to find needles in a haystack that are priced appropriately.”
Two things not on the table: pouring money into 1990s-era facilities that need a major influx of cash or spearheading a major, multisite turnaround
LTC Properties joined forces with Anthem Memory Care as a turnaround project — and later ended up issuing a default notice on a master lease for 11 memory care communities. Though the operator is beating LTC’s projections for 2019 rent payments with a 45% increase, Chairman, CEO and President Wendy Simpson said her company doesn’t necessarily have the tolerance for such risk now
“In this environment, to fund another Anthem or something like that, it just wouldn’t be in our wheelhouse,” she said.
Instead, Ignite, with its resort feel and “rapid rehab” tagline, makes better sense as a new partner, Simpson said.
In the first project together, LTC has agreed to purchase Ignite’s 90-bed SNF in Missouri for $19.5 million and lease it to Ignite for 12 years with an annual cash yield of 8.3%. In the second, LTC will fund development of another 90-bed at a cost of $18.4 million, followed by a separate 12-year lease agreement at 9.3%. Both deals are set to close this quarter.