LTC Properties Chairman, CEO and President Wendy Simpson
Given some of the more daunting challenges of the COVID-19 pandemic that are “mostly” behind the senior housing industry, Wendy Simpson, chairman and CEO of LTC Properties, said on Friday that she was cautiously optimistic that the industry has entered the recovery phase.
During a conference call on first quarter results, Simpson said that while it remains unknown when utilization levels will return to pre-pandemic levels, anecdotal evidence from operators is encouraging. High COVID-19 vaccination rates among residents mean that assisted shared apartments and skilled care facilities are increasingly taking in new residents and patients, she said.
“If there’s one thing we’ve learned, it’s that we’re resilient,” said Simpson. “It is this resilience that will help us recover as we work to return to normal before the pandemic.”
But not all are out of the collective forest yet.
Westlake Village, Calif. Based Healthcare Real Estate Investment Trust reported that it had accumulated 86.5% of rental and interest income from operators in its portfolio in the first quarter. The company has introduced a one-time rent increase of 50% on rent and mortgage interest in 2021 in the form of a rental credit to provide financial support to eligible operating partners. As of the end of the first quarter, rent deferrals totaled $ 1.1 million and rent reductions totaled $ 600,000.
The REIT saw a failure to pay its lease obligations by Senior Lifestyle Corp. lower rental income in the first quarter. A subsidiary of Senior Lifestyle operated 23 senior residential properties for LTC under a master lease.
LTC has turned 11 of the assisted living communities in Wisconsin, Ohio and Illinois, previously rented to Senior Lifestyle, to two operators. In April, the REIT moved a Colorado memory maintenance community to a new operator. Of the remaining 11 assisted living communities, three are expected to be transferred to an existing LTC operator by the end of the second quarter, three are expected to be sold by the end of the second quarter, one is expected to be transferred to a new operator by the end of July, one is closed and will be closed for one alternative uses are being sold and options are being explored for the remaining communities.
Senior Care Centers also did not pay rent and additional fees owed under the master lease. As a result of the bankruptcy filing and the senior care center’s bankruptcy, LTC is working to transfer senior care properties in its portfolio to Texas-based HMG Healthcare by the end of the second quarter.
The REIT also saw lower property tax revenues related to non-payment of rents and trusts by other operators. During the first quarter, LTC extended the grace period for an operator who had previously postponed lease until March 31 by an additional three months. Another assisted living community under this operator closed last fall and sold in the first quarter, LTC said.
As of March 31, LTC raised $ 367,000 in deferred rentals in April and agreed to grant rental deferrals and reductions of up to $ 800,000 each in May and June.
“We do not expect to provide additional flat-rate relief, but will continue to review requests for assistance on a case-by-case basis, taking into account ongoing operations of the operator, rental coverage, and the company’s financial health and liquidity,” said Simpson.
The CEO said LTC has helped its operators through the pandemic with, among other things, its Smart Design program, which provides funding to retrofit communities with cutting-edge infection control protocols to create safer physical environments. Thirteen communities have used the program to install air filter units, bipolar ionization, UV disinfection devices, custom partitions and non-contact devices, she said.
In terms of investments, LTC invested the remaining $ 8 million of a $ 13 million commitment to develop an independent residential community of 267 units in Vancouver, WA.
Clint Malin, co-president and chief investment officer, reported that Weatherly Court, an assisted living and memory maintenance community operated by Field Senior Living in Medford, OR, began accepting residents in September, with one in March Occupancy of 24% was reported.
The 2021 growth pipeline is more active than ever, he said, with opportunities mainly in privately paid senior housing. LTC is bidding more and more, he said, despite being unable to provide details of the deals as the market has not yet returned to normal and the sales cycle is “extended”.
LTC’s “right price for the right return” strategy is to provide strong regional operators with the capital they need, Malin said. Currently, the REIT is focused on smaller investments with a better risk / return profile, including mezzanine loans and preferential equity financing.
“Partnering with regional operators is an important part of our ongoing strategy and we will continue to build relationships with those who have strong operating records and are experts in their local markets and regions,” he said.
The disruption caused by the pandemic has turned the world and the senior housing industry on its head, but has also highlighted the strengths of the industry, Simpson said.
“We move forward with cautious optimism due to the ramp-up in vaccine rollout, the government’s focus and attention to ending the pandemic, and an industry that continues to work steadfastly to stabilize occupancy and restore consumer confidence,” she said.
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