Higher interest rates and billions in debt maturities coming due will aid LTC Properties (NYSE: LTC) as the company’s leaders execute on a growth strategy for the year ahead.

The current lending environment favors real estate investment trusts (REIT) like Westlake Village, California-based LTC Properties due to their habit of having “conservative investment strategies” and solutions geared towards operators and their needs, according to LTC Chairman and CEO Wendy Simpson.

“As we’ve worked through some previously identified challenges, and made progress on some of the expectations we set for ourselves and for our shareholders,” Wendy said in her prepared remarks during the call. “We’re going into the end of the year on a positive note, with most signs pointing to continued industry recovery.”

The company is watching for situations where sellers of communities have loan maturities coming due and don’t have the ability to refinance their debt. All told, the senior living industry has more than about $10 billion worth of debt maturities coming due in 2023, according to one recent analysis.

“We are now in the planning stages of building a new pipeline for 2024 and beyond, but remain a patient investor,” said LTC Co-President and CIO Clint Malin. 

LTC reported normalized FFO for the quarter at $0.66 cents, up from $0.60 cents in Q322. Overall the company posted $49.3 million in revenue for the quarter, up from $48.2 million in Q2.

LTC Properties holds 207 senior housing properties, about half of which are senior living communities. Occupancy for the company’s senior living portfolio rose to 85%, up from 81% in March and not far behind LTC’s pre-pandemic occupancy rate of 87%.

BMO Capital Markets analysts Juan Sanabria and John Kim noted in an Oct. 26 note to investors that the company is “benefiting from a deferral repayment with no new tenant problems despite a dip in collections.”

LTC’s stock price fell just over 1.5% on Friday, ending the day at $30.65 per share.

‘Evolving market of opportunities’

Although M&A has remained slow in senior living over the last year, LTC management is heartened by what appears to be more chances to grow ahead.

Malin added: “We see an evolving market with opportunities in front of us””

Investments in the third quarter of the year included originating a $17 million mezzanine loan with an affiliate of Galerie Living to recapitalize a 130-unit campus in Georgia and committing to a fund a $19.5 million mortgage loan for the construction of an 85-unit assisted living and memory care community in Michigan.

On the disposition side, the REIT sold five assisted living communities in Pennsylvania and Nebraska for $14.1 million.

Additionally, LTC is again leasing 10 communities in its 35-property Brookdale portfolio after initially seeking to diversify operating base earlier this year. Malin noted there was an amendment to the master lease starting Jan. 1, 2024, and will be $9.3 million, escalating by 2% annually. Brookdale will have purchase options on the properties in 2029.

Of the remaining 18 communities, seven are planned to be sold and 11 will be leased to two different operators. Following the transitions, LTC is not anticipating a funds from operations (FFO) decline in 2024 due to the non-renewal of the Brookdale lease.

Brookdale will operate 17 properties for LTC when all is said and done thanks to the addition of seven more communities to its master lease, the REIT noted.