Executives for LTC Properties (NYSE: LTC) said Friday that the company’s focus on skilled nursing assets has yielded promising results, demonstrating a steady progress in the overall industry recovery, even as occupancy levels are making a slow grind back to pre-pandemic levels.
“The increase in occupancy rate has been decelerating,” CEO Wendy Simpson said during LTC’s second quarter earnings conference call. “I’m not sure what a catalyst would be nationwide for occupancy to improve dramatically over the course of this year,” she said, adding, “It’s going to continue to be a long, slow grind upward back toward pre-COVID occupancy rates.”
LTC reported a second quarter profit that held steady from the prior quarter and slightly beat analyst expectations as rental income and expenses edged down during the quarter.
The Westlake Village, Calif.-based REIT beat Wall Street expectations by a penny for the second quarter, with funds from operations (FFO) at 66 cents per share – unchanged from the prior quarter and increased from 64 cents in the year-earlier period. Meanwhile, total revenue of $48.2 million slipped from $49.5 million in the first quarter and advanced from $43 million a year ago.
One notable accomplishment in the second quarter for LTC was its agreement with Prestige Healthcare, the operator of 15 skilled nursing facilities (SNFs) in Michigan. As a sign of the ongoing recovery, Prestige Healthcare was allowed to defer up to $1.5 million in interest payments, spanning from May through September 2023, at a rate of up to $300,000 per month.
“We consider this a sign that the recovery continues to progress nicely,” analysts at Stifel analysts noted.”
Metrics for both the assisted living (AL) and SNF operating environments within LTC’s portfolio showed improvement during the second quarter of 2023, according to executives. The company reported that the same store AL portfolio occupancy increased by 70 basis points to reach 79.9%, compared to the previous quarter. . Similarly, SNF occupancy experienced a rise of 90 basis points, reaching 71.3%.
Simpson noted that recovery would be much slower for skilled nursing than for senior living.
In addition to new acquisitions, LTC originated a $16.5 million mortgage loan for the purchase of a skilled nursing center in Illinois. The facility, which was originally built in 2010 and renovated in 2021, offers 150 beds and is now operated by current LTC operator, Ignite Medical Resorts.
Moreover, the company actively managed its portfolio by selling non-revenue producing assets. During the period, LTC successfully sold two facilities for a total of $6.9 million. Additionally, the company entered into an agreement to sell two assisted living communities in Pennsylvania, comprising a total of 130 units, for $11.5 million. The closing of this transaction is expected to occur in the third quarter of 2023, with the company anticipating a gain on sale of approximately $5.2 million from these dispositions.
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