LTC Properties (NYSE: LTC) will continue its effort to prune its senior living portfolio as it prepares for more growth next year, according to Chairman and CEO Wendy Simpson.
Leaders at the Westlake Village, California-based real estate investment trust (REIT) reported investment of $180 million in the first quarter of 2023. With that figure, the REIT’s year-to-date investments rose to $258 million so far amid its most active year for investments since 2015.
The company remains on the hunt to diversify its operating base after Brookdale Senior Living (NYSE: BKD) decided not to renew a lease agreement on a portfolio of 35 LTC-owned properties, of which 14 will be sold, leaders with the company noted during a call with investors and analysts on Friday.
CEO Wendy Simpson said LTC was focused on optimizing the company’s portfolio and reducing leverage to put it in a “position to refocus on additional growth” next year.
Following its aggressive push to optimize its portfolio and invest, LTC Co-President and Chief Investment Officer Clint Malin said the company expects to tie up loose ends related to its $180 million 1Q23 investments in the third quarter.
“Our primary focus for the second half of the year is on reducing leverage through planned asset sales, as well as completing the releasing of the remaining Brookdale assets,” Malin said during Friday’s call.
LTC reported normalized funds from operations (FFO) of $0.66 cents, which exceeded analyst expectations for the quarter by one cent. Overall, the company posted total revenue for the quarter of $48.2 million, down from $49.5 million reported in 1Q23.
In an analyst note, BMO Capital Markets noted that there were “no new problem tenants” for LTC, a positive, and $35 million to $40 million in asset sales are now planned.
“LTC continues to execute on investments, but mainly via loans with acquisitions containing tenant/JV purchase options,” BMO Capital Markets’ Juan Sanabria and John Kim wrote.
LTC stock sat at $34.39 after market close on Friday, representing a loss of 2.27%.
Earlier in the year, LTC invested over $128 million in 12 AL communities in North Carolina, which included an 11-property JV with an existing operator that is under a 10-year lease.
Brookdale will pay rent through December of this year, and LTC is replacing that income by re-leasing and redeploying sales proceeds, while seeking other operators.
“We are confident that between sales of certain properties and new leases, we will not decrease in 2024 FFO from the non-renewal,” Simpson said.
Since January 1, the company has generated $37.8 million in asset sales proceeds, with the company expected to receive sales proceeds in the range of $50 to $55 million throughout the rest of the year, which includes the expected sales of a portion of the Brookdale portfolio, Simpson said.
Rental abatements continued to be offered to a senior living operator, continued from this spring and extended from June of $645,000, with an additional $215,000 was provided this month, Simpson confirmed.
Regarding the properties in abatement, Simpson said the company was “evaluating options” for the two properties that provide IL, AL and memory care services.
Occupancy for LTC’s private pay senior living portfolio was 82% at the end of June, about 5% down from pre-pandemic levels seen in 2019.
While the path to normalization remains a long one, Malin said he believed LTC would be a strong capital partner for senior living operators.
“LTC remains a solid capital partner for the seniors housing and care market,” Malin said. “So we are continuing to identify ways to drive additional growth and accretion.”
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