One day after Senior Care Centers filed for bankruptcy, another one of its landlords reported that the skilled nursing provider has fallen behind on rent.
LTC Properties, Inc. (NYSE: LTC) on Wednesday announced that it has not received its December lease payments from the Dallas-based Senior Care Centers, which filed for Chapter 11 bankruptcy protection in federal court on Tuesday. LTC, a Westlake Village, Calif.-based real estate investment trust (REIT), owns 11 of Senior Care Centers’ more than 100 skilled nursing and assisted living properties.
The current lease arrangement brings in $15.8 million per year to LTC’s coffers, according to the REIT, which works out to 9.7% of its total annual revenue.
LTC has a $2 million letter of credit under the leases along with a maintenance and repair escrow of $2.2 million and a $1.8 million property-tax escrow, which CEO Wendy Simpson said would cover the cost of missing rent from the start of the month until bankruptcy was declared a few days later.
The REIT has already begun negotiations with another Texas-based operator to assume control of the buildings, and Simpson said LTC would “highly prefer” that Senior Care Centers reject its current lease during the bankruptcy proceedings — which would allow LTC to seamlessly install the new operator.
“We are doing everything we can to come to an agreement with them to return the leases to us, because we are working now with another operator to take these properties,” Simpson said.
Even if SCC emerges from bankruptcy protection, she said, LTC would prefer to work with the new operator; though Simpson declined to name the company amid ongoing negotiations, she said the firm counts several former SCC employees on its staff.
“They’ve operated those properties when they were Senior Care, so it would be a pretty easy transition,” Simpson said.
She additionally described the 11 buildings as profitable, and took exception with SCC’s assertion that unreasonably high lease payments forced the company into bankruptcy.
“The assets will be going to a new operator who will very successful with them, as Senior Care was,” Simpson said.
When reached for comment Wednesday, Senior Care Centers spokesman Tom Becker offered a similar comment to the one provided in the immediate wake of the bankruptcy filing.
“The company hasn’t yet made final determinations regarding any of the facilities,” Becker said in an e-mail to Skilled Nursing News. “We intend to use this process to identify the best path forward for all of our communities and actively work with the owners while ensuring all of our patients and residents are cared for. Patient and resident care is and will continue to be our main priority.”
LTC isn’t the only landlord that has had trouble collecting from the beleaguered skilled nursing operator, which has 11,000 employees caring for about 10,000 residents. Sabra Health Care REIT (Nasdaq: SBRA) last month reported that Senior Care Centers hadn’t paid its rent since May, which Sabra CEO Rick Matros characterized as a negotiating tactic amid the REIT’s attempt to sell off its 36 SCC-operated buildings.
“Senior Care Centers had been unhappy with the buyer that we had at the table initially, because the buyer didn’t want to retain them as tenants,” Matros said on his company’s third-quarter earnings call on November 6. “Holding back on the rent was really a way for them to try to create some pressure points to affect our decision-making on who we would go with.”
Sabra tops the list of SCC’s creditors, according to a bankruptcy petition filed in the U.S. Bankruptcy Court for the Northern District of Texas, with a total unsecured claim of $31.8 million. The second-largest creditor, vendor Healthcare Services Group, has an unsecured claim of about $8 million; LTC doesn’t show up on SCC’s roster of top 40 creditors.
Sabra has since found another buyer for the properties, and Matros told Skilled Nursing News late Tuesday that SCC’s bankruptcy filing would not have any effect on the ongoing sale process, which is set to be complete sometime early next year. The buildings themselves have great potential under new ownership, he said on the earnings call, and suffered from unstable management under Senior Care Centers’ control.