Long-term care operators felt “some stress” in the first quarter as they continued to confront labor pressures and inflation, LTC Properties Chairman and CEO Wendy Simpson said Friday during the Westlake Village, CA-based real estate investment trust’s first-quarter earnings call.
“Several of our private-pay operators have implemented rent hikes to offset higher labor and supply costs,” she said, adding that “[n]one have reported pushback from residents or their families.”
For a “small subset” of operators, that stress translated into a collective $1.3 million in rent deferrals and $720,000 in rent abatements in the first quarter. So far in the second quarter, LTC has deferred $376,000 in rent and abated $240,000 in rent. The REIT reported that it also has agreed to provide rent abatements of up to $240,000 for each of May and June.
LTC Co-president and Chief Financial Officer Pam Kessler said that the actions involve ”the same small subset of operators that have been receiving assistance from us.” One operator for which LTC has reduced rent is Anthem Memory Care.
“Anthem experienced an occupancy decline and cost increases resulting from a surge of the omicron variant in [the first quarter] that may make it difficult for them to pay the full second-quarter cash rent of $2.7 million,” Simpson said, noting that the company has experienced similar short-term occupancy declines resulting from surges of other variants and rebuilt census “rapidly” in each case. “We believe occupancy will recover, and with Anthem’s expected receipt of additional stimulus funds, we still anticipate receiving total cash rent from Anthem in 2022 of approximately $10.8 million, in line with prior guidance,” she said.
The REIT now expects only $2.1 million in rent from Anthem in the second quarter, however, Simpson said. Kessler said the figure factors in a $300,000 reduction for each of May and June. Anthem has paid its agreed-on rent through April, LTC reported in a press release issued in conjunction with the call.
Despite the deferrals or abatements needed by some providers, Simpson said she believes that the long-term care industry is “steadily moving toward a pre-pandemic environment.”
“Our industry is seeing evidence of the recovery slowly coming together, and we are hopeful about turning the corner on COVID,” she said. “As a needs-based industry, I believe the long-term picture for our industry remains positive based on solid demographics and fundamental needs for the care of our senior population.”
Occupancy in the REIT’s same-store private-pay senior housing portfolio was 78% as of March 31, Co-president and Chief Investment Officer Clint Malin said. The percentage was equal to that of Jan. 31 and up from the 76% occupancy rate seen as of Sept. 30.
Operators provided the information to LTC on a “voluntary and expedited basis,” Malin said, adding that the rate includes approximately 63% of the total same-store private-pay units in the REIT’s portfolio.
Simpson said the REIT’s focus in 2022 “is on a return to growth.” Toward that end, she said, LTC has closed on approximately $77 million in investments year to date and has identified several more investments “that will advance our growth.”
Malin characterized the REIT’s pipeline as “robust,” adding that “it hasn’t really slowed down since late last summer.”
He said that the current pipeline is valued at approximately $70 million, spans private-pay senior living and skilled nursing, is geographically diverse and includes new and existing operating partners. “The [pipeline] opportunities are also varied in terms of financing vehicle, including development joint ventures and mezzanine and mortgage loans,” Malin said.
Only one current investment opportunity involves skilled nursing, he said, and it’s a development project with Ignite Medical Resorts. “We provided them a loan to acquire a piece of land in Missouri,” he said.
LTC reported that during the first quarter:
After the end of the quarter:
Simpson said LTC was honored to be mentioned in the new book of Brookdale President and CEO Cindy Baier, titled “Heroes Work Here.”
“One of the things that make this book so interesting to me is that LTC is featured as a flexible capital partner, something on which we pride ourselves,” she said. “A few months into the pandemic, we worked collaboratively with Brookdale to consolidate four leases into one master lease. As Cindy said in the book, through collaboration, a focus on finding solutions that work for both parties and a renewed commitment to our partnership, we were able to achieve a positive outcome that protected Brookdale’s interests in the midst of substantial uncertainty.”
Simpson also announced that LTC Properties is taking its environmental, social and governance initiative to the next level by encouraging the operators in its portfolios to do some introspection and possibly make some changes. Read more here.
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