LTC Properties CEO: Senior Living Occupancy Rebound Turns Sluggish, Could Extend Covid Recovery Timeline

When Wendy Simpson, CEO of LTC Properties (NYSE: LTC), heard a colleague at a different real estate investment trust predict a two-year timeline to senior living occupancy recovery, she thought, “That’s just silly.”

But, she no longer thinks so.

“I think later in the year, we should be able to get a better trend, but I’ve got to admit that I thought it would be faster,” Simpson said during a recent SHN+ TALKS appearance.


Still, the picture is mixed. Though the latest quarterly statistics from the National Investment Center for Seniors Housing & Care (NIC) showed occupancy stuck at historically low levels, LTC tenant Brookdale Senior Living (NYSE: BKD) recently reported positive occupancy trends.

Simpson is hopeful that when children return to school in the fall, move-in velocity might pick up again. But her top business concern at the moment is whether occupancy increases can keep up with providers’ cash burn.

Meanwhile, LTC’s transition out of its relationship with Senior Lifestyle Corporation is proceeding.


We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:

  • The reasoning behind LTC’s Senior Lifestyle transition
  • Why triple-net lease structures need to factor in CapEx better
  • Simpson’s take on Brookdale’s strong recent performance
  • Why lagging worker vaccination rates threaten the pace of industry recovery

LTC Properties is based in Westlake Village, California, and its current portfolio consists of about a 103 assisted living, and 73 skilled nursing facilities.

The following has been edited for clarity.

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[00:01:44] Tim: When do you think senior housing occupancy, I’m talking about the private pay side now primarily, will return to pre-pandemic levels?

[00:02:02] Wendy: Earlier in the year, I would have thought it would happen faster than it is happening. It seems to have picked up a little speed, and certainly the good news on Brookdale that has been out in the last couple of days is exciting, but I think I didn’t factor in how disruptive in people’s lives COVID has been.

People reorganized their lives to take care of their parents and things like that, with children at home. I think until children get back to school and the working parents can figure out what their life is, it’ll still be slow in admissions to senior housing. [Family members] have got so much to do to go out and vet and find an opportunity or a place for their loved ones It’s probably not high on their list, plus people really try not to do things like that in the summer.

I think later in the year, we should be able to get a better trend, but I’ve got to admit that I thought it would be faster. When somebody in one of the other REITs said it would be two years, I thought, “Oh, that’s silly.” Now, two years is not out of the range that it might be.

[00:03:29] Tim: We also saw the NIC data from last quarter come in recently and occupancy stayed flat, which I was surprised by.

I think Q3 usually is a good quarter to see occupancy gains. Do you anticipate that? Sounds like you’re anticipating that the seasonal uptick in occupancy might be a little bit lower than usual this year because people are still not moving at their usual velocity?

[00:04:25] Wendy: Right. Yes. Well, I think quarter three is going to be better than quarter two. We don’t get quarter three numbers until quarter four, because we’re one quarter behind in getting occupancy numbers out. We have had some success, or pretty good success, asking our operators to give a spot occupancy. We find that a better indicator. But the summer has been slow.

[00:04:55] Tim: Then there’s this big question about how much pent-up demand is there. I think when people, and the vaccine started to happen and occupancy did start to come back, people got excited, and now I’m starting to hear the message you just delivered, that maybe it’s slowed down a little bit. It sounds again like you’re anticipating there is still some pent-up demand and it will eventually come back once people start going back to work. Am I hearing you correctly?

[00:05:22] Wendy: People didn’t stop aging. We all might want to write off a whole year in 2020, but we did age another year … I think the demand is out there and development slowed down a little bit, so that gave some opportunities for facilities. Anecdotally, I’ve heard that newer facilities are leasing up quicker than they had expected to happen.

We had two or three that were just getting into operation when COVID hit, and they’re seeing better admissions than we had at the end of last year or the beginning of this year. Those things are happening. It’s good news, but it’s not as good as everybody had hoped it would be in the industry.

[00:06:22] Tim: I’m curious what you’re seeing in terms of occupancy returning in skilled nursing facilities.

[00:06:29] Wendy: On the SNF side, it’s about flat, in the low 70s.

Now, when NIC gives like 73% occupancy or something like that, I’m not sure whether that’s on licensed beds or beds in use. I think SNF occupancy seems to have stagnated there a little bit, in the 70s, but this is the summer.

In all of my years of health care, I’ve always had a problem with operations people who say, “We’re going to have a dip in the summer,” and I’m like, “How can you have a dip in the summer? People get sick all the time.” But the electives absolutely make a difference. I think we are not seeing the uptick. Doctors are tired, and I think the third and fourth quarter definitely will be much better for skilled nursing.

[00:07:23] Tim: What are you thinking in terms of different acuity levels going forward? Are you any more bullish on say, assisted living and higher-acuity, needs-based [demand] coming back faster?

[00:07:52] Wendy: Yes. We’ve always been a fan of the acuity, the needs-based operations. That’s one of the reasons we haven’t invested big in independent living. We are seeing the acuity tick up in assisted living and in skilled nursing. It’s still too early to make big predictions.

[00:08:24] Tim: I want to talk a little bit about just some portfolio updates. I think the big one on the private pay side is you’ve been in the process of transitioning 23 Senior Lifestyle communities. Can you provide an update on that?

[00:08:41] Wendy: Our earnings call is July 30th, and I think we’ll have some really good data to tell our investors and the analysts about our transition. It’s really, really close to the end.

[00:08:57] Tim: I know you don’t like to talk about specific operators too much, but I’ll just ask this anyway. To the extent you can, I’m curious what happened with the Senior Lifestyle buildings that led to the rent deferral and the transition plan, because I was thinking that large providers like Senior Lifestyle would be able to weather the Covid crisis a little more smoothly because they had more resources, more manpower, et cetera.

It seems like LTC and maybe some other REITs are transitioning even more quickly toward regional operators. I’m curious if my thoughts about the benefits of scale maybe it didn’t turn out to be true.

[00:09:37] Wendy: Our decision to transfer out of Senior Lifestyle was in process before COVID hit.

In March of 2019, I was out with Gibson, who’s our asset manager, and looking at some of the SLC buildings, and we thought it was time for us to transition out of those buildings or out of our relationship with SLC.

We had an investment with them that we talked about for a year, Golden Pond in Arizona, and it didn’t turn out well for us. We had a really, really good relationship with the company, and we liked the people at the company, but they transitioned to a manager rather than an at-risk operator. The philosophy is a little bit different if you’re just a manager rather than if you have some benefit of getting something at the bottom line.

Over the years, Senior Lifestyle took, in our view, more of a philosophy of, “We’re just a manager, and if there’s a problem at the bottom line, that’s not our problem.” I think we might’ve been the last triple net lease they had. It was a transition of their company’s operating platform and philosophy. We are still a triple net lease REIT. It was those things. Really nice people, but we just had different philosophies of our partnership.

[00:11:25] Tim: Just so I understand, it wasn’t an actual transition they did with LTC from one capital structure to another. They were in triple net leases the whole time, it was just you think their approach to how they were managing the buildings.

Maybe that relates to another question I had, about owner-operator alignment in senior living. I think a lot of the concern I’m hearing revolves mainly around private investors, not so much REITs, but private investor owners working with operators in management contracts. I’m hearing things like the typical 5% management fee is too low, and everyone’s not incentivized in the same way to maximize the value of the property, but I’ve also heard some concerns about the future of triple net. That predated COVID, but we saw a lot of rent deferrals, et cetera, so that again, people are ringing the alarm bells.

That’s a long preamble, but I guess I’m curious, generally, do you think misalignment is a problem in the industry? Do you think that the management model is problematic from an alignment perspective and are there things that LTC or other REITs can do to maximize alignment?

[00:12:51] Wendy: A triple net lease is a financing vehicle. It’s like a mortgage, it’s just a way to capitalize your business. When people say triple net leases don’t work, they don’t work if they’re structured improperly, if the operator is working and not having a benefit of his or her bottom line by doing good operations and running a decent business.

Yes, we had some stress during COVID. We gave some rent deferrals, and some rent abatements, total rent abatements, and early in the year, we proactively gave most of our operators a reduction in their escalations.

When these things happen, yes, we are part of the capital structure, so we do need to participate [in solutions]. I think the reason we’re not really interested in the RIDEA structure is none of us in senior management have real operational experience in either skilled nursing or assisted living, none of us have been at that level.

When I talk to people, operators who are leasing or are managing properties, we hear about the conference calls that they have with their equity people, and the equity people are telling them to do this, do that. It’s like, you’re not out here, you’re not operating. You don’t know what we’re up against.

We also talk to our operators about these things, and we can make suggestions, but we know that they have to run their own business. I’m a big believer that you should have some skin in the game and not just work for a salary. I have a lot of LTC stocks. Yes, I do get a salary, but I have skin in the game relative to how our company performs. I think that is just the American way of commerce. You should care about the profit of your company, or the sustainability. I mean, profit is such a bad word these days, but the sustainability of your company, rather than, every month, I’m going to get X number of dollars based on a number.

We’re talking to people about leases all the time, so there is an interest. I don’t think any business should have only one financing source, I don’t think any business should have all leases. They should have some equity, they should have some buildings that they own themselves, or they can mortgage themselves, and that sort of thing. To get started, maybe a triple net lease is the way to go. In business, you should have levels of your capital stack that you can manage as things change.

[00:16:10] Tim: Do you think the structure of triple-net leases is changing? The most obvious thing I’ve heard is lower escalators than have historically been in place, but are there other provisions of a triple net lease that can also reward providers or incentivize them to maximize operational performance?

[00:16:35] Wendy: I don’t think [escalators are] a big problem, it can be worked out. It’s amazing to me that operators think that we don’t have any cost increases. The escalators basically cover some of our cost increases.

I think the thing that wasn’t well thought out was the CapEx, and that the operator should — repairs and maintenance is just a running of the business cost, but actual CapEx should be funded by the property owner, and we’re doing more of that, we’re making more capital available to our operators.

Because in effect, when they spent CapEx, that was equity money, that was money that had to come out from the bottom line. That was their equity money. I think the triple-net lease has to have a lot of elasticity for CapEx.

[00:17:47] Tim: What do you think is a reasonable CapEx per unit, say, for private pay senior living, or for SNFs for that matter? It sounds to me that you think that triple-net leases have led to historical under-investment. Is that true?

[00:18:03] Wendy: Yes. I think it depends, of course, on the size of the property, and the turnover, but somewhere between $500 and $1,000 a unit a year. I think it’s a little less on skilled nursing but to keep a property fresh and new.

What we don’t comprehend here is the difficulty of doing CapEx when everybody’s living there. It’s fine when you go in and remodel for a unit turnover, or doing the common area, or the dining room, or that sort of thing, but if you’ve got somebody living there for four or five years, they would probably like to have the place painted, and maybe some new carpet, and that sort of thing.

I think as we make more CapEx available to our operators, they would be more proactive in doing some of that, which makes everything nicer for all of the residents, and even the employees. Everybody likes to see something new coming in, or something painted and fresh. I think more CapEx should be spent at the properties, and LTC can make CapEx available as needed.

[00:19:24] Tim: Great. We’ve got a couple of questions from the audience. Has COVID changed how you approach investing in skilled nursing going forward?

[00:19:41] Wendy: No, it hasn’t. We’re all amazed that the prices haven’t really changed that much. It really hasn’t changed our view of skilled nursing.

We don’t have that many opportunities in skilled nursing right now. We’re seeing more opportunities in private pay, in senior living, in terms of our ability to make investments.

Other than Senior Care, our operators have done well because the government has given them adequate capital to work during this period. They have weathered this situation a little bit better than the senior housing side.

[00:20:34] Tim: Do you think that’s going to change? I’ve been puzzling through this on both the private pay and also the skilled side.

We see surveys come out from associations like AHCA/NCAL that only one in four nursing homes is confident they can sustain their business for another year, but then we also haven’t seen a ton of bankruptcies. We haven’t seen a ton of dramatic distress. Pricing on the transaction market has stayed pretty stable.

In my mind, there’s a little bit of a disconnect. I’m wondering if the federal relief is going to run out, and then everyone’s going to really be in a hard spot, and we’re going to see a lot of that distress materialize. Or do you think that things are going to be more stable even after the relief dollars are tapped?

[00:21:20] Wendy: We are cautious about the rest of the year. Our operators indicate that they’re not — everybody’s stressed, but right now they have indicated that they believe they have enough capital to get to at least the end of the year. Unless we see occupancies increase, there’s a lot of things that they’re dealing with now. One of the biggest things is the labor force. Do they have enough labor force to admit as many people as they would like to have in the properties?

Just today with the CPI index going up, inflation is going to hit. That’s another challenge that they’re going to have, so we’re not out of the woods.

The government came through, and our associations have been doing a great job in lobbying. We’re not out of the woods at all. It might be until 2022, 2023 before we can be stable again and look for the next cycle.

[00:22:44] Tim: One more question on SNFs while we’re at it, this from the audience as well. This is just about this SNF model of care and operations in general, do you think it’ll change as a result of the pandemic, and also as we’re seeing increased investment and interest in home health and SNF at home, things like that?

[00:23:05] Wendy: Home health is definitely getting a lot of interest these days and truly, everybody would rather convalesce at home than in a SNF.

If the SNF has a labor force issue, home health has to have a labor force issue, because you can’t get the efficiency of several people. I don’t know that we have a great deal of verifiable data that shows the outcomes of somebody rehabilitating at a SNF — where they’re going to get a PT several times a week and maybe a couple of times a day — as opposed to convalescing at home and getting PT for an hour or so in the home.

Yes, home health has made some incursions into the SNF area, but not everybody has the ability to stay home and have a network of people who are going to help them manage their care at home. I don’t think the SNF is going to be a thing of the past.

[00:24:20] Tim: Do you think that SNF providers might be more interested in finding ways to provide SNF at home services, or to diversify into home health, than they have been in the past?

[00:24:38] Wendy: I think they would be well served to look into providing home health. It connects them more with the whole health care continuum in their cities. Several SNF operators have had home health in the past, and then they spin them out, and sell them, and then they start over again. The same way with rehab. Some people use rehab companies outside, and some people have rehab staff within the facilities. Same with pharmacies. I’m sure those analyses are happening at every property, at every operator.

[00:25:22] Tim: We’ve reported on more than a handful of private pay providers who were starting a home care or a home health business in the last six months. It seems like a trend, a cycle that happens, where the providers get excited about the [home care] opportunity, they start the business, and then often, we see it not go well because it is a very different business than the one that they run [in senior living].

Any sense that things might be different this time because of lessons learned from the past or because the consumer is just really demanding different things now than they did in the past, or do you think maybe we’ll see that cycle repeat itself if people aren’t cautious?

[00:26:13] Wendy: I think it’ll be the same cycle. I think the weak link here right now in this cycle is people available to do the work. I think our labor force is more stressed than I’ve seen it before, in my experience. To find qualified people is a real challenge.

[00:26:48] Tim: Let’s go back to the portfolio on the private pay side and talk about Brookdale a little bit. LTC extended a $4 million capital commitment to Brookdale for CapEx improvement. Any update on projects that have been funded to date? Any color you can provide on what those projects are focused on or what that program has looked like?

[00:27:23] Wendy: From the last information I’ve got, they’ve spent about a little over half of the $4 million so far, and they’ve been doing replacement roofs, and damaged parking lots, and updating fire and alarm systems. They’ve been updating furniture, just investing in refreshing the properties. They’ve been doing a really, really fine job of operating. We’ve always been happy with Brookdale, and Cindy’s getting some reward for all of the bad press she’s gotten in the past.

[00:28:11] Tim: Yes, I guess I can share with listeners in case they aren’t aware, that Brookdale just released its May occupancy … they’ve got positive occupancy and they’ve been doing better than the industry, certainly. They got some good analyst notes, a good write-up in the Wall Street Journal this week.

Clearly, with LTC, [Brookdale is] working on upgrading their buildings, but I guess going forward, what do you see — not even just for Brookdale, but for some of these big legacy providers — to stay relevant and competitive in the years ahead as the market keeps evolving, when they have so many legacy properties? What do you see as the runway there?

[00:29:45] Wendy: It’s the care given. The property is good. I mean, the property is a determinant, but it’s the care given.

I think [Brookdale has] benefited significantly by not having agitators at the board level, or agitators coming to the board to do something that the board determined wasn’t correct. They’ve had, I think, a bit of quiet for the last several months, not counting COVID, and they’ve been able to concentrate on operating. I think Brookdale has always been a good operator.

I think, as they don’t have to spend a lot of time dealing with other outside pressures, I think they have a group of people who will come up with ways to grow Brookdale from this point, whether it’s adding on services in areas that they don’t have services in. Our properties are generally in the secondary markets, so it’s not likely that somebody’s going to come in and build a new important property.

They do very well with the type of properties we have, which are a little bit smaller, but really nice properties for the areas that they’re in. I don’t know if Brookdale would do any deals, like buy another operator. I think they have a real opportunity now with the good care that they provide and their reputation. I still think it’s a good reputation for Brookdale. I’m really hopeful that we won’t have to be talking about Brookdale anymore other than to give them praise.

[00:31:50] Tim: Has the pandemic changed the LTC investment strategy in other ways, in terms of, are you more or less focused on development versus acquisitions, or do you have a greater preference for certain levels of care? I know you like the more needs-based, so I guess I’m wondering if skilled nursing opportunities did start to present themselves, would you want to shift in that direction?

[00:32:25] Wendy: Well, right now, we are seeing a lot of mezz and preferred opportunities.

What happened during the pandemic is banks reduced the amount that they were willing to put into a deal. We’ve been seeing that the equity piece has been going up, the bank piece going down, but there’s still this sliver in the middle on development. We’ve had an opportunity to do a couple of those deals, and provide that interim financial investment.

Now, that’s all good. The rates are good because it’s short-term. What we need to be cognizant of is in three to five years, that goes away. When they pay back, what are we going to be doing with that money, and can we count on that for a dividend in five years? We are finding good opportunities to put money to work in those areas, but we’re cautious about the long-term nature of that type of thing.

We are seeing some ability to invest in assisted living, senior care properties, and not so much in the skilled yet. One of our really great operators was planning on building a property, and then they got the estimate of the costs. Construction costs have gone way high. They said, “Well, we’re going to sit this cycle out a little bit.” That was going to be a skilled asset.

Right now, of all the deals I see Pam and Clint bring to me through Doug, most of them are for senior care properties. Whether they had planned at this point to go to HUD or Fannie Mae or Freddie Mac, now they need some interim financing so that they can get back to the stabilization they need to go to the government financing.

We are not investing in anything we wouldn’t be willing to own. If worst comes to worst, we’re going to end up owning it. We’re not doing anything outside of the skilled nursing and senior care area.

[00:34:53] Tim: A couple of questions on the REIT landscape I saw some data, I want to say it was from Nareit, maybe it was from a different organization, that there have been a lot of REIT mergers in the last few months. We did see a big one in the senior space with Ventas combining with New Senior. I’m curious, have you considered acquiring or merging with another REIT?

[00:35:18] Wendy: Well, there were few silver linings in COVID, but when I saw that question, I thought, “This was a silver lining of COVID. I haven’t had a banker come to me with a deck saying LTC should be bought by NHI, or LTC should be bought by Omega, in like 18 months, so it’s been really good, or LTC should highly lever and buy something else.” It’s always something that we’re going to look at, if that’s the way [we should be] going.

Of course, we looked at things, some smaller REITs that have sold over the last couple of years, but their portfolios were … they had a high concentration of RIDEA properties. We weren’t going to jump into RIDEA that way. We look at packages, but there are fewer and fewer packages out there right now.

I think Susan Givens, who was with Senior, she’s got to be the happiest CEO in the world. She had a hard road in front of her and, I think under the umbrella of Ventas, her properties should do well.

[00:36:43] Tim: We saw that Griffin-American non-traded REITs combined, and they want to go public, and Bridge Investment Group, a private investment platform, filed for an IPO. I’m curious, do you think there’s something about this moment in time that makes it attractive for senior living owners to want to access the public markets?

[00:37:05] Wendy: I think cost of equity is pretty low, and I think the private REITs might’ve had some idea [of] that when they needed to buy out their investors … there’s so much private money out there. I’m surprised that somebody hasn’t come in and given Griffin-American a better deal than to go public. Going public is hard. Being public is really hard, and being public in California is very expensive. Whether they go public, or they get bought by this private equity money that’s around, that’s an option.

[00:37:53] Tim: I’m curious if, coming out of the pandemic, you think that hospitals and insurance companies and health systems are more interested in partnering with the private pay senior living providers than they were before the pandemic, because maybe they have a keener recognition of their place in the healthcare continuum given everything that happened over the last year?

[00:38:36] Wendy: That was happening before COVID, that operators were getting much closer to the payer sources. In the past years, [they] couldn’t get closer to the government because it was too vast, but they can get closer to the insurance companies in their neighborhoods, in their areas. The insurance companies, unlike the government, are very focused on the lowest cost provider, and not necessarily the lowest quality provider, but quality and cost can be very, very big drivers of a business relationship.

I think that the operators are going to have much more interaction with hospitals, and the payer — the private payers, insurance companies — in the future. It just makes sense. It’s a continuum. They can’t fight among themselves like they had in the past.

[00:39:41] Tim: I know LTC has a relationship with Juniper, which has been really at the forefront of Medicare Advantage and creating a more coordinated, integrated care platform. Is that something that you would want to see in future senior living investments, or do you think it takes a Juniper, a particular kind of company with a particular kind of leader and skillset, to pull it off, because it’s difficult?

[00:40:09] Wendy: Juniper is probably one of the most innovative operators out there. [Juniper CEO Lynne Katzmann] thinks way beyond the box.

When managed care came into place, operators needed people who understood managed care, and they never had before. They had people who understood the government reimbursement. I think there’s going to be new skillsets at the corporate level of operators.

I think technology, you have to have people who are really interested and skilled at the new technology. Lynne just has a great group of people. She was early on [Medicare Advantage], and I think she was making good inroads, and then COVID hit. I haven’t talked to her about where she is on that right now, but I’m sure she’s working hard on getting the entire platform to where she envisioned it when she started.

[00:41:16] Tim: I want to talk a little bit more about labor. I know you brought it up a few times already. It seems definitely top of mind as a challenge. Can you elaborate a little more on what you are hearing about the workforce issues that providers are facing out there right now? Are there solutions?

[00:41:56] Wendy: I think operators aren’t as fixed on the wage rate anymore. It’s not like they’re going to pay everybody $20 an hour, but it’s interesting that the press is not talking about a minimum $15 an hour wage in the United States, because it seems to be happening organically. It is happening.

I think the biggest problem our operators are having is people being vaccinated.

If they … insist that all of their employees be vaccinated, it is limiting their employee base. There was an article today, or somewhere recently, that we’re still in the low 50% of the labor force in health care that has been vaccinated, even though it’s in the 80% or 90% [range] for the residents. The labor force is not accepting it as much as we thought they would, or as much as we need them to.

Lynne has an everybody-needs-to-be-vaccinated mandate. Other properties don’t because they say, “If we do that, we don’t get the labor that we need.” Again, until children get back to school and get some sort of normal life, [some providers are implementing] staffing changes that everybody is making 12-hour shifts, so somebody can work three days a week instead of 4.5 or 5. I think most operators are trying to accommodate what the labor force wants. They are raising salaries and they are raising benefits. It’s just going to have to work itself out.

[00:44:40] Tim: Serving the middle market price point is another big topic of conversation in the industry, and especially coming out of the pandemic, where some people lost wealth. The very wealthy I think are doing well, but maybe some people in the middle are now even more limited in their assets. How are you thinking about that as a REIT in terms of that opportunity? Are you looking for providers that can meet that price point?

[00:45:22] Wendy: It’s always been a touchstone of, can a person going into senior housing sell their house? In the 2008 financial crisis it was people couldn’t sell their houses. It seems like real estate is at the top of the top of the top. I think that’s an advantage for families that are looking to transition some of their loved ones to senior housing.

We have heard about some price-cutting, some discounting in new admissions. I think that is helping the admissions go up a little bit, but I haven’t heard of any slashing prices at all. I don’t think that the economics is the problem. I think it’s these social issues that are the problem right now.

[00:46:37] Tim: What’s been the hardest part of leading through the pandemic just for you personally?

[00:47:08] Wendy: Before the pandemic, I would have never thought that we could be effective working remotely, and I was not an advocate of people working from home on a routine basis, like only coming in two days a week, and working from home three days a week. Everybody works at home occasionally, because they’re waiting for a plumber, or the kid’s sick, or something like that, but it really changed my view of, work is coming into the office five days a week. I don’t think I could do that again on a routine basis. It’s really changed my thought process. My thought process has been developed over many, many years, so it really changed my thought process.

I was amazed at how effective we could be in doing Zoom calls with analysts and investors. That worked really well. Now, granted we’re on the West Coast, and so it seems like every trip we take is a far way away. I think we’re going to be thinking very carefully about, is it necessary for us to actually fly there to meet with people? We’re trying to figure that out.

I think [Covid] changed my view of running a company, and asking my co-workers how they want to participate in the company. So it’s really changed me. We would not get as much space [now]. Our lease is up in three years, and we’re talking about that, how much space would we really actually need if this remote working becomes more of a permanent outcome.

We onboarded, I think, three staff people during this period. I thought that would be difficult, in terms of them getting our philosophy and getting integrated, but it seems to have worked. I look forward to seeing them more often, because everybody has culture, every company has a culture, and we want them definitely to participate in ad hoc meetings. You walk down a hallway, and you stop and talk to somebody, and somebody’s sitting in the office that’s not part of the conversation, hears the conversation and gets a little bit more knowledge.

We have 20-some people, so I don’t know how it worked for hundreds of people, but for us, it was amazingly undisruptive.

We were very lucky. We didn’t have any COVID issues. We had a couple of people who got COVID or their children, but we were so lucky in not having any real disasters.

[00:50:53] Tim: Great. Another audience question. Is LTC looking to partner with any active adult developers, owners or operators?

[00:51:09] Wendy: Not yet. We haven’t done that. It is a very different investment, I think, but we’re not against it. It’s the next stepping stone. I wish we had more opportunity to do substance abuse. I think that’s an area that’s just going to grow, and we just don’t have inroads into that business yet.

[00:51:42] Tim: Like behavioral health?

[00:51:43] Wendy: Yes.

[00:51:45] Tim: Is that something that you’re actively looking to invest more in, or is it just on the wish list for now?

[00:51:51] Wendy: We would. They have to have an acute care license, so it’s a different group of business requirements, so yes, we would.

I know some of our competitors have done onesie, twosie [deals]. I don’t think anybody has a real business line of that, but we would be interested. It’s all private pay. I think it’s just going to grow, so we are looking at it.

[00:52:27] Tim: I’m curious about that space, too. We’re seeing some senior living and skilled nursing providers are selling their buildings and they’re getting converted into behavioral health buildings, or they’ve decided to leave one part of the market and focus on the other. Are you seeing any of that as a way in for LTC? To convert a SNF into behavioral health, or any of your operating partners want to get into it and partner on a project, anything like that?

[00:53:03] Wendy: Well, Fundamental, we have a facility with them in Las Vegas that’s behavioral. It’s the only one I think we have. If they wanted to do more and wanted to partner with us to do some financing, that would be great. Converting a SNF as opposed to converting a psychiatric hospital, it’s not acute care licensed, so the cost of converting to an acute care license, I don’t know what it is, but I have heard that it’s sometimes cost-prohibitive to do that in an old SNF.

A company I was with in my past converted a lot of psych hospitals to LTACH hospitals, because they already were acute care licensed. Going the other way, a SNF hospital to up to an acute care license, I’m not sure exactly how much that would cost.

[00:54:10] Tim: I’ve lost track of the trends on LTACHs, but I have a vague memory that there was some talk about that part of the market shrinking. I don’t know if that’s true, but if it is true, do you think that they could go back down, and LTACHs could become behavioral health?

[00:54:27] Wendy: Yes, I think they could. Most of the LTACH businesses now, you can take care of [those patients] in nursing homes. Nursing homes have become quite acute. A lot of the LTACH business went to nursing homes. There’s still some very viable LTACHs out there. It’s a philosophy of the medical community where the pulmonologists believe that the LTACH is the best place for their patients to be, but yes LTACHs, already acute care, might be able to be retrofitted to substance abuse.

[00:55:10] Tim: I’m not an expert in behavioral health, so I’m trying to learn on the fly, but my impression of it is that substance abuse is one area of behavioral health, but there are various other kinds of behavioral health services. Is it specifically substance abuse that you think the biggest opportunity is in or are there other?

[00:55:35] Wendy: No, it’s all behavioral health.

[00:55:37] Tim: It’s all behavioral health?

[00:55:37] Wendy: Yes.

[00:55:40] Tim: Great. Maybe to wrap up here, just a couple of big picture questions. One is, what’s keeping you up at night from a business perspective these days?

[00:55:50] Wendy: It’s whether the occupancy can catch up to the cash burn.

[00:55:58] Tim: If you had the CEOs of the 100 largest senior living operators all in a room, and you could only ask them one question, what would that question be?

[00:56:09] Wendy: It would be, how do we get people vaccinated? It’s so surprising that the health care industry is reluctant to accept this therapy, this medicine. I think we’re going to be somewhat hampered until we get better vaccination rates.

[00:56:43] Tim: I’ll give you the last word. If there’s anything we haven’t talked about that you wanted to share or just any last thoughts that you want to impart to our attendees?

[00:56:53] Wendy: I just appreciate you taking the time to listen to LTC, and where we are, and give us an opportunity to talk to people.

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