LTC Properties (NYSE: LTC) on Friday announced a $38 million pair of transactions that will see the real estate investment trust (REIT) strike up a new relationship with transitional-care operator Ignite Medical Resorts.
The two separate agreements consist of a $19.5 million deal to purchase a recently constructed 90-bed skilled nursing facility in the Kansas City market, and an $18.4 million land-and-development deal for a second 90-bed SNF set to open in the fall of 2020, LTC chief investment officer Clint Malin said during the company’s second-quarter earnings call.
The Niles, Ill.-based Ignite Medical Resorts, a chain with a focus on high-end transitional care properties, will serve as the operator for the two Missouri buildings, with Avenue Development handling the design and construction process for the new property.
The twin deals will close sometime during the third quarter, according to the Westlake Village, Calif.-based LTC; Ignite will lease both properties from the REIT under 12-year agreements.
The news came during an upbeat earnings call that saw CEO Wendy Simpson declare that many of the problems that have dragged down the REIT — from the bankruptcy of tenants Senior Care Centers and Preferred Care, to other issues with senior living operator Thrive — will soon be over.
“We are confident that at the end of the year, the challenges under our control will be behind us,” Simpson said Friday.
That said, she also noted that the Senior Care Centers situation is “the one issue over which we have the most limited control,” as the protracted bankruptcy process that started in December continues to wind its way through the courts. As she told SNN, Simpson noted that after the bankrupt operator filed a motion to assume its leases earlier this week, the REIT responded with an objection, though the Dallas-based SCC remains current on its lease with no change in coverage from quarter to quarter.
LTC has long insisted that it has a new operator ready and willing to take over the 11 SCC-operated buildings in its portfolio, but such a move would require court approval — and SCC has the legal right to either affirm or reject its leases as part of the bankruptcy process.
“Bankruptcy doesn’t always make the most business sense as far as the process, the duration, and decisions that the courts make,” Malin said. “The main concern that we have in looking at the Senior Care Centers potential plan of reorganization is just understanding: Who is that management team that is going to continue to operate those buildings if they’re successful in being able to emerge from bankruptcy?”
A hearing on the most recent motion and objection was pushed back to August 30, Malin said.
LTC also remains “in active negotiations” to reduce its exposure to Preferred Care, Simpson said, either by selling the properties or leasing them to new tenants — an initiative announced earlier this year. Preferred Care entered Chapter 11 bankruptcy protection in November 2017, citing an untenable volume of personal injury lawsuits.
LTC likely won’t know the exact number of Preferred Care properties to be sold or transferred to new operators until the company’s third-quarter earnings call later this year, Malin said, though he confirmed that the majority will likely be sold — and Preferred Care has additionally expressed interest in hanging onto a few of the buildings.
“We’re actively engaged in the process and trying to bring a conclusion to it as quickly as possible,” Malin said.
The REIT recorded $20.4 million in net income during the second quarter of 2019, down from $68.7 million over the same period in 2018; management attributed the drop to higher-than-usual sale gains last year, as well as a decline in income from unconsolidated joint ventures and elevated costs related to depreciation expenses and transactions.
LTC shares rose $0.29 or 0.62% in midday trading, reaching $47.22 at noon Eastern time.