The second quarter went “generally according to plan” except for challenges with occupancy issues at some assisted living communities operated by one company and a major cyberattack that disrupted that operator and the industry overall, LTC Properties Chairman and CEO Wendy Simpson said Tuesday during a second-quarter earnings call.
But the Westlake Village, CA-based real estate investment trust’s philosophy and mission have not changed, and it remains committed to future growth, she said.
“This quarter, we worked cooperatively with one of our largest operating partners to help them address a challenge while improving our security and gaining a majority ownership position in our investments,” Simpson said. “I’m proud of the LTC track record with respect to successfully mitigating challenges as they arise, and that we’ve done so quickly and transparently. With continued improvement across our industry, I remain optimistic we are on the right path for growth.”
LTC Properties, the CEO said, “quickly provided solutions” to second-quarter challenges to neutralize the effects on the REIT and others involved.
ALG Senior’s challenges
Issues involving ALG Senior, the operator that has the largest presence in LTC’s portfolio — with 30 senior living communities — came to light in May in the form of occupancy challenges attributed to staffing issues in 12 communities in smaller markets as well as “temporary, short-term” effects to Medicaid reimbursements to an affordable senior housing property in North Carolina due to the Change Healthcare cyberattack earlier this year, Co-President and Chief Investment Officer Clint Malin said
To address those challenges, LTC deferred $1.5 million in rent from ALG for May and June on a portfolio of 11 assisted living communities in North Carolina that the company owns through a joint venture. LTC also agreed to defer up to $250,000 in rent per month for July through December, for a total of up to $1.5 million in rent deferrals.
Malin said that the rent deferrals are needed so the properties can build back occupancy for the rest of the year.
LTC also amended a lease on another assisted living community operated by ALG. No rent is due May through September — amounting to $321,000, according to Malin — with quarterly market-based rent resents thereafter.
He said that LTC has established pathways for ALG to repay the deferred rent through purchase options, occupancy improvements or proceeds from potential sales of properties to third parties.
Also during the quarter, the REIT entered into two joint ventures as a result of funding two mortgage loans receivable due from affiliates of ALG, giving LTC a majority ownership stake in the properties. The joint ventures are related to 17 properties operated by ALG in North Carolina and South Carolina. LTC now has a 53% interest in a joint venture that owns 13 assisted living communities in North Carolina and South Carolina and a 93% interest in a joint venture that owns four assisted living communities and a parcel of land in North Carolina.
Each of the joint ventures concurrently leased the properties to an affiliate of ALG under separate 10-year master leases maturing at the end of June 2034, with purchase options available through June 2028.
Other transactions in the quarter saw LTC sell two closed properties in Texas and transition a 56-unit assisted living community in Texas to a new operator.
After the second quarter ended, the REIT committed to fund a $26.1 million mortgage loan for the construction of a 116-unit independent living, assisted living and memory care community in Illinois and sold an 80-unit assisted living community in Texas.
