LTC Properties (NYSE: LTC) has continued its relationship with Senior Lifestyle Corp. almost ended, expanding its partnerships with Juniper Communities and Oxford Senior Living.
LTC – a real estate investment trust (REIT) based in Westlake Village, California – decided, ahead of the Covid-19 pandemic, to expand its portfolio operated by Chicago-based Senior Lifestyle, one of the largest providers in the United States, to move.
By April 2021, 12 of LTC’s senior lifestyle properties had been transferred to other operators, namely Randall Residences, Encore Senior Living and Graceful Senior Living. In the second quarter of 2021, LTC sold three senior lifestyle-operated assisted living communities for approximately $ 35 million and a fourth for $ 900,000, LTC co-president and chief investment officer Clint Malin said Thursday at the company’s quarterly earnings statement Company.
Of the remaining seven senior lifestyle buildings, three will be transferred to Juniper in Bloomfield, New Jersey and three to Oxford Senior Living in Wichita, Kansas. And a property in Wisconsin is operated by a regional company that represents a new relationship for LTC, even though the REIT did not publicly disclose the operator’s name.
LTC has long-standing relationships with both Juniper and Oxford that Malin said will be important as the REIT and operators work together to drive performance improvements in the transitional communities.
Juniper and Oxford will not pay cash rent for the first three months, after which the amount will be “determined based on mutually agreed market rent,” Malin said.
The goal is to ultimately convert the Juniper buildings into long-term leases as the communities – two of which are in Pennsylvania and one in New Jersey – fit into the operator’s footprint.
The Oxford parishes are located in Nebraska. Given that LTC doesn’t have a “large presence” in this state, the REIT will likely consider selling these communities after they stabilize, Malin said.
Rent deferrals, reductions
LTC’s earnings results in the second quarter of 2021 were impacted by certain rent deferrals and cuts that the REIT granted to operators affected by Covid-19.
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Total rental deferrals and cuts increased to $ 2.3 million in the second quarter of 2021 from $ 1.7 million in the previous quarter. For the quarter to date, deferrals and cuts have reached $ 0.7 million, and that number should increase by at least $ 1.6 million due to the August and September agreements, analysts with Stifel noted.
The lower cash recoveries caused LTC to miss analyst consensus expectations for earnings in the second quarter of 2021. According to the Stifel analysts, the uncertainty about moving in rent could remain a problem for another year or two.
“The unknown timing and extent of revenue recovery during this period will increase earnings volatility,” they wrote in a July 29 announcement.
LTC no longer sees calls for significant rent relief, noted CEO Wendy Simpson in the conference call.
Positioned for offense
While LTC actively reviewed “a variety of transactions” during the first half of the year, most of them did not fit well due to a combination of property performance and asking prices, Simpson said.
LTC now focuses mainly on structured financing options such as the provision of mezzanine loans or preferred equity. However, the company has approximately $ 721 million in liquidity and is poised to seize opportunities as they arise.
The current pipeline is active, with potential short-term deals valued at approximately $ 130 million and medium- and long-term opportunities totaling about an additional $ 90 million, Malin said.
“While sales cycles remain elongated and prices for some properties do not accurately reflect their true value, we are more optimistic than ever about our ability to return to long-term strategic investments that will position LTC for future growth,” he said.
Simpson repeated this point.
“We are able to play offensively and are looking for ways to strengthen LTC now and in the future,” she said.