LTC Properties, Inc. (NYSE:LTC) announced Tuesday it is entering into a $19.6 million development commitment with an existing operator partner, Anthem Memory Care, to fund the construction of two standalone memory care communities in Colorado.
In conjunction with the development commitment, the healthcare-focused REIT also closed on two plots of land for a total of $2.1 million and entered an exclusive pipeline agreement with Anthem.
Both of the memory care communities—one with 60 units, the other with 56 units—will be located in the Denver metro area.
Rent for the properties will start at 9.25% a year after each project is completed or no later than Dec. 31, 2014 and will be calculated based on the land purchase price and construction costs funded for each property to include compounded, carried interest thereon of 9.0%.
LTC also announced a pipeline agreement it has entered with Anthem giving the REIT exclusive opportunity to finance any of Anthem’s senior housing development projects or acquisition opportunities through May 2018, unless the agreement is terminated earlier under certain provisions.
Anthem is limited to having five development projects under construction at any time as another provision of the agreement. Any projects or opportunities that LTC finances as part of the agreement will be added to the landlord and tenant’s master lease, with the then-remaining term extended by 10 years at initla lease rates that will range between an estimated 9-10.5% with annual escalations of 2.5%.
“LTC is excited to expand its memory care development initiative with Anthem and to jointly pursue further opportunities through our pipeline agreement. Our first memory care development project with Anthem opened earlier this year with great success, and we look to replicate that success in these new developments,” said Wendy Simpson, LTC’s chairman, CEO and president, in a statement. “In addition to adding new properties to our portfolio at attractive investment yields, our memory care development initiative enhances the quality mix of our portfolio’s underlying payor source.”
Written by Alyssa Gerace