LTC Properties (NYSE: LTC) is executing on its plans to scale its senior housing operating portfolio (SHOP) in 2025, as evidenced by the company’s flurry of activity in the first quarter.

This comes as the Westlake Village, California-based company continues on its effort to convert triple-net leases to REIT Investment Diversification and Empowerment Act (RIDEA) structures, forecasting a $300 million investment pipeline of which RIDEA deals will consist of approximately 50% of those investments.

“We expect SHOP to represent a growing share of our portfolio as we scale our platform,” said Co-CEO Pam Kessler, adding that the company views its RIDEA opportunity as “a game-changer” for LTC, as previously reported by SHN.

In the first quarter, LTC’s total revenue decreased in part due to a $2.4 million rent credit received in connection with the sale of a 110-unit assisted living community and lower revenue from property sales and mortgage loan payoffs. Rent increases and higher income from sale lease-back financing offset some of those decreases.

LTC holds 187 properties with 28 operators in 25 states.

In the first quarter, LTC sold shares for net proceeds of $9.6 million that are being used to fund the initial investment in the company’s RIDEA platform, paying $1.6 million to Anthem Memory Care, and a $6.5 million payment to New Perspective Senior Living as part of a lease termination fee.

On May 1, LTC converted 12 memory care properties from triple-net lease agreements to the real estate investment trust’s SHOP segment operated by Anthem Memory Care. Currently, the portfolio has 81% occupancy. Additionally, LTC has agreed to convert one independent living property with New Perspective into the SHOP segment that is anticipated to close on June 1.

Going forward, the company projected a SHOP net operating income (NOI) in the range of $9.4 million to $10.3 million, according to LTC guidance shared on Tuesday.

In a note to investors, BMO Capital Markets Managing Director Juan Sanabria called the company’s flurry of SHOP activity akin to a “SHOP Pinata Party,” as the company’s funds after disruption beat previous guidance and LTC expands its acquisition pipeline to $300 million, up from $100 million.

New Perspective manages one community on behalf of LTC, but LTC Co-CEO Clint Malin said he views the Minnetonka, Minnesota-based operator “as a growth opportunity,” as the company is “looking at doing investments” with New Perspective going forward.

“Paying this amount for lease termination was really to reward them for the value creation that they’ve created, and gives us really a runway with them to be able to look at new opportunities and grow our SHOP portfolio,” Malin said during the question and answer portion of Tuesday’s earnings call.

Malin said both Anthem and New Perspective triple-net lease conversions served as a “great starting point” for the company’s launch of its SHOP segment, viewing it as “an external growth story.”

New Perspective is the “ideal company” for LTC to partner with, given the company’s strong culture, family business structure and compliance necessary to grow with institutional capital, Malin said.

“We see them as an excellent opportunity and a great partner to grow with, and that was part of the catalyst for us looking at this opportunity to put them into the initial round of our SHOP portfolio,” Malin added.

LTC Executive Vice President of Asset Management Gibson Shatterwhite said a “big driver” for the company’s near-term is the continued lease up across the company’s portfolio managed by Anthem following “higher than normal discharges” in the fourth quarter of last year and the company projects an occupancy recovery to take place by the third quarter of 2025.

Other REITs have lamented move-outs due to mortality during first quarter earnings calls this year, including Ventas (NYSE: VTR).

Comparing building scale and diversifying its operating partners, Malin said the company is “definitely focused on operator concentration” and looking at acquisition opportunities that consist of one or two assets. As for cap rates on the company’s SHOP segment, Malin noted the company was seeing 7% yields upwards of 8%.

“We’re looking at balancing that with leases, loans and structured finance products that have higher initial yields to offset those SHOP yields as we’re growing the portfolio,” Malin said.

But going forward, standalone memory care is not a property type the company is looking to invest in for most cases, with a focus on looking at larger properties that have a full continuum of care, Simpson said.