Amid COVID Strains, LTC Properties Records $5.5M Write-Off From Genesis and Unnamed Operator

LTC Properties (NYSE: LTC) joined other real estate investment trusts (REITs) in recording a third-quarter hit from doubts about the future of Genesis Healthcare (NYSE: GEN).

However, the $5.5 million write-off in straight-line rent receivable balances was tied to both Genesis and an unnamed operator, with both leases transitioned to cash-basis accounting as of September 30.

Genesis issued a going concern notice in the second quarter, citing the strains of higher expenses and census declines, prompting a string of writedowns from various landlords, including Omega Healthcare Investors (NYSE: OHI) and Welltower (NYSE: WELL). Sabra Health Care REIT was also considering a write-off for the operator as of late September.

Advertisement

Genesis has stayed current on its rent payments to LTC, and has not requested rent deferrals, LTC CEO and chairman Wendy Simpson said on the REIT’s third-quarter earnings call.

LTC owns six properties leased by Genesis, according to the REIT’s third-quarter supplemental.

The other, unnamed operator did not pay its full contractual rent for the third quarter because of challenges from the pandemic, and LTC provided it with “rent support in the form of deferrals and abatements totaling $756,000,” according to the earnings press release.

“Another operator, not in our top 10, who has been a go-to operator for challenging properties, and has historically performed well, has been adversely impacted by COVID-19 and began short-paying rent in the third quarter and requested deferrals,” Simpson said on the call. “Despite receiving government financial support, this operator is reluctant to actually use those funds to pay rent, for fear that there may be a government payback provision. As a result, we put them on the cash basis and wrote off their straight line balance.”

For the 2020 third quarter, LTC reported net income available to common stockholders of $12.11 million, or 31 cents per share, compared with net income of $27.08 million, or 68 cents per share, in the year-ago period. Total revenue for the 2020 third quarter came in at $38.17 million, compared with $47.12 million in the year-ago period.

The development for a 90-bed SNF in Missouri was completed under budget by $1.3 million during the quarter, LTC chief financial officer and co-president Pam Kessler said on the call.

“We anticipate funding the remaining $3.1 million of project costs in the 2020 fourth quarter,” she said of that project. “The initial yield on our investment is 9.25% escalating annually by 2%.”

Clint Malin, LTC’s co-president and chief investment officer, also noted that the 90-bed Ignite Medical Resorts Blue Springs SNF in Independence, Mo., received its licensure and began accepting patients in early October. As of October 23, the occupancy was at 23%.

LTC’s skilled occupancy data included about 88% of its SNF beds; average monthly occupancy for those beds was 72% at June 30, 70% at September 30, and 70% at October 16, Malin said.

LTC has 73 SNF properties and 107 assisted living facilities, according to its supplemental.

“We are actively continuing to build and enhance operator relationships so that we can return to more standard acquisition and development investments when the time is right, and when those investments meet our underwriting criteria,” Malin said on the call.

LTC’s shares closed at $33.01, down 1.08%.