LTC Offloads Sunrise Portfolio, Sees Anthem Improvements

LTC Properties Inc. (NYSE: LTC) is optimistic that one of its troubled tenants, Anthem Memory Care, will eventually regain its footing, though it remains to be seen exactly when that might occur.

At the same time, the company is offloading a premium operator in Sunrise Senior Living, though it plans to remain active on the investment front, with LTC President and CEO Wendy Simpson noting that there are “pockets of opportunity” for the company in 2018.

“We remain positive about our prospects, and more importantly LTC’s ability to drive profitable growth over the long-term,” Simpson said during the company’s fourth-quarter and full-year 2017 earnings call on Friday.

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The California-based real estate investment trust’s (REIT) fourth-quarter 2017 FFO of 77 cents beat analysts’ expectations by 2 cents; its rental revenue of approximately $34.1 million beat analysts’ expectations by $440,000.

Anthem improvements

As an operator, Lake Oswego, Oregon-based Anthem Memory Care is making “solid adjustments and improvements,” Simpson assured analysts.

A few quarters back, though, that wasn’t the case.

For instance, in the second quarter of 2017, LTC issued a monitory default notice on its master lease with Anthem because the provider failed to pay its quarterly rent in full. Then, a few months later, LTC signed a forbearance agreement with Anthem, the terms of which necessitated that LTC would not pursue enforcement related to its default through the end of the year so long as Anthem paid at least $400,000 per month in rent.

On Friday, Simpson explained that numerous properties in the Anthem portfolio, including buildings in Tinley Park and Burr Ridge, Illinois, are continuing to make progress in terms of occupancy. At the same time, LTC anticipates that Anthem will be able to pay greater sums in rent as 2018 goes on.

“We expect rent from them to escalate over the course of a year,” Simpson said. Specifically, in the first quarter of 2018, Anthem will pay LTC $1.1 million in rent; in the second quarter, it’s expected to pay $1.2 million; in the third quarter, it’s expected to pay $1.4 million; and in the fourth quarter, it’s expected to pay $1.5 million.

Pipeline and future growth

Come the end of 2018, LTC’s property count will look a bit different, executives suggested.

LTC is currently evaluating single-asset transactions, according to Simpson, though its pipeline encompasses “a variety of deal structures and property types.”

The REIT also recently decided to sell off six properties operated by Sunrise Senior Living in Ohio and Pennsylvania. The sale is expected to close on May 1, according to Clint Malin, LTC’s executive vice president and chief investment officer.

The decision to offload its entire Sunrise portfolio was made after LTC considered the prices the properties could attract, and how exactly LTC could redeploy the resulting capital.

“We do expect to report a sizable gain on the sale,” Malin said on the earnings call.

As of market close on Friday, LTC’s share price had risen 0.58% to $37.97.

Written by Mary Kate Nelson

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