LTC Properties (NYSE: LTC) is closely monitoring Senior Care Centers after fellow real estate investment trust (REIT) Sabra Health Care REIT announced the termination of its leases with the troubled provider — but it hasn’t yet seen comparable problems.
“They’re not in default in anything relative to our lease,” LTC chairman, CEO, and president Wendy Simpson noted on the REIT’s third-quarter conference call with investors on Tuesday. “So it is a situation that we are totally on top of, and we’ll take action probably a little quicker than we would should they default on anything.”
LTC has 11 properties operated by the Dallas-based Senior Care Centers, which provided it with annual income of $15.77 million as of September 30, according to a report filed November 5 with the Securities and Exchange Commission.
Sabra, meanwhile, disclosed on Monday that Senior Care Centers hasn’t paid any straight-line rent since May, leading to a $1.9 million decline in the company’s revenues for the third quarter. The Irvine, Calif.-based Sabra terminated its leases with Senior Care Centers during the past quarter and has a tentative agreement to sell the entire 38-building portfolio for $405 million, with the deal expected to close in early 2019.
LTC is aware of the situation with Senior Care Centers, chief investment officer and executive vice president Clint Malin said in response to analyst questions on the call.
“We do have coverage, but obviously they have a lot of corporate-level distraction, with new leadership and the challenges that were announced yesterday,” Malin said. “So it’s something we’re definitely actively engaged in monitoring. Wendy and I met with the ownership group last week in Orange County to try to get a better understanding of where they’re at. They’re limited in what information they can provide to us.”
LTC has a lease with Senior Care Centers’ parent company, and it has credit enhancements in the form of security deposits and repair and maintenance reserves, he added.
Still, Senior Care Centers is not 1:1 on coverage, Simpson observed, and cooperating with them on a long-term solution may not be the right answer, given their issues with Sabra.
“We’ve reached out to some of our other Texas operators since this has become public information. We’ve talked to them about their interest in these properties, should they have any,” she said on the call.
LTC has a total of 95 skilled nursing properties.
The Westlake Village, Calif.-based REIT reported net income of $34.8 million, or 88 cents per share, for the third quarter, compared with $20.5 million, or 52 cents per diluted share, in the year-ago period. The REIT sold two SNFs in Alabama in the third quarter for $17.5 million, in addition to funding $7.1 million under an existing mortgage loan for the purchase of a 126-bed skilled nursing center in Michigan.
LTC’s stock closed up 5.67%, or $2.44 per share, at $45.44.