LTC Properties (NYSE: LTC) has in 2024 been relatively optimistic about the path ahead, especially with regard to improvement among its operating partners and the prospect of new investments. But the company encountered a bump on that road in the second quarter of 2024.

Management with the Westlake Village, California-based real estate investment trust (REIT) on Tuesday noted that the company had deferred $1.5 million in rent in May and June for a portfolio of 11 assisted living communities managed by ALG Senior in North Carolina. LTC also agreed to defer approximately $250,000 in rent per month through December, up to a total of $1.5 million.

The REIT also waived rent due for one community in May through September, with plans to subsequently reset rent afterward.

An array of issues including occupancy and staffing woes impacted the operator’s ability to generate revenue. A recent cyberattack on Change Healthcare also temporarily hit the operator’s Medicaid reimbursements, according to LTC management.

“We have responded to challenges presented by industry and operator-specific headwinds. Our track record demonstrates that we’ve done so with expediency and transparency, and the ALG situation is no different,” LTC Properties Chairman and CEO Wendy Simpson said during the company’s second-quarter call with investors and analysts Tuesday. “Our philosophy and mission have not changed, and we remain committed to our 2024 guidance and future growth.”

The news regarding ALG Senior was “disappointing” and represented a “surprise flop” for the operator, according to analysts at BMO Capital Markets.

“We see ALG as idiosyncratic with hopefully no read-through for peers,” wrote BMO analysts Juan Sanabria and John Kim.

LTC Properties share value fell more than 6% Tuesday, landing at $35.49 per share by the time financial markets closed Tuesday.

Operator woes, new investments remain limited

On Tuesday, LTC announced it had formed two joint venture investments for 17 properties operated by ALG by exchanging a $64.5 million mortgage loan receivable for 53% interest a JV owning 13 assisted living communities in North Carolina and South Carolina; and exchanging a $38 million mortgage loan for 93% interest in a joint venture covering four assisted living communities and a plot of land in North Carolina.

An affiliate of ALG is leasing the properties under 10-year master leases which mature at the end of June, 2034. The REIT also gave the operator purchase options on the JVs through June, 2028.

“They have had a pretty big drop in this portfolio of about 700 basis points in occupancy,” said LTC Co-President and Chief Investment Officer Clint Malin. “We think with ALG’s focus on being able to build back occupancy through staffing improvements that they’ll be able to get back to a point where they can recover.”

He added: “And in giving the purchase options, what we also did is we created another pathway for recovery of this deferred rent that we provided on the 11-property portfolio, and we think that was an important element to get from a credit standpoint.”

Earlier in the year, Simpson said that the company’s pipeline for new investments was full of “interesting opportunities.” And with around $25 billion in debt maturities coming due through 2026, the investment landscape still looks good on paper for REITs and other well-capitalized companies.

Subsequent to the close of the second quarter, LTC committed to funding a $26.1 million mortgage loan to build a 116-unit independent living, assisted living and memory care community in Illinois. LTC also sold an 80-unit assisted living community in Texas to an operator for $8 million.

Still, Malin said that the company has had fewer opportunities to capitalize on than management previously assumed it would by this time in 2024.

“Part of that is from owners that have had to invest additional money, see the potential for maybe some rate cuts and are holding out hope on that,” Malin said. “So, there’s still a disparity between the bid-and-ask on those types of opportunities.”

He added that LTC is “actively monitoring and watching [the market], and hopefully these opportunities come to fruition.”