Market Conditions Prompt Bullish Investment Outlook for LTC Properties

Market conditions are currently favoring REITs – and leaders with LTC Properties (NYSE: LTC) are feeling “very bullish” on their investment outlook for the year.

LTC executives expressed optimism about the sector’s growth prospects, citing strong market fundamentals and increasing demand for senior housing. Specifically, they see a looming wall of debt maturities coming in 2024 and banks being more selective about doling out financing as competitive advantages.

As such, the Westlake Village, California-based real estate investment trust (REIT) will focus on providing customized financing solutions to operators, and the company anticipates sustained growth in 2024 and beyond, according to LTC Chief Investment Officer Clint Malin.


“For us, it’s going to be looking at loans, mezzanine, preferred equity, joint ventures, acquisitions and triple-net so a little bit of everything,” Malin said during the company’s Q4 earnings call on Friday. “I think we’re going to be considering and looking at a lot of opportunities.”

LTC CEO Wendy Simpson said the company executed investments totaling $262 million and generated $77 million in sales proceeds during the previous year. Simpson praised the LTC team’s efforts in navigating through portfolio transitions and reducing leverage ahead of street expectations.

“From an operational perspective, we successfully transitioned the Brookdale portfolio, resulting in anticipated revenue of half a million dollars more than we generated from the original lease,” she said. “We received full contractual 2023 interest from Prestige Healthcare with expectations for full contractual payments through at least 2025.”


Brookdale will now operate 17 properties under a new master lease with initial rent of $9.3 million and $7.2 million of CapEx to be funded by LTC.

For the overall market outlook, Simpson was cautiously hopeful.

“While we are not in the prediction game, we are encouraged by what we’re seeing,” Simpson said, noting that market fundamentals currently favor REITs with billions of dollars of financing maturities coming to interest rates in flux.

Analysts at Stifel reflected similar sentiment.

“Metrics continue to improve, showing that both AL and SNF operating environments are improving,” they wrote.

Pam Kessler, LTC’s Co-President and CFO, outlined the financial metrics for the fourth quarter, reporting a decrease in total rental revenues by $2.2 million, primarily due to portfolio transitions. However, she said interest income from sale leaseback financing and mortgage loans showed significant increases, contributing to the overall income available to common shareholders.

“By substantially reducing our leverage, LTC is better positioned for growth in 2024 and in the future,” she said.

Skilled nursing portfolio updates

LTC Co-President & Chief Investment Officer Clint Malin gave some updates of tenant Prestige Healthcare and its 15 skilled nursing facilities with LTC in Michigan.

LTC on Jan. 1 amended a mortgage loan secured by 15 skilled nursing centers in Michigan, he noted. The minimum mortgage interest payment due to LTC is now based on an annual current pay rate of eight and a half percent on the outstanding loan balance of $183 million.

Previously, the real estate investment trust (REIT) informed shareholders about postponing $900,000 in interest payments in the third quarter for the tenant. LTC and Prestige reached an agreement to defer payments of up to $1.5 million, or a maximum of $300,000 per month from May to September.

Malin said the new amendment also allows LTC to draw on Prestige’s security to cover the difference between the contractual rate and the current pay rate. LTC received all contractual interest for 2023, including $3.4 million drawn from security, and holds security worth $4 million, with more expected from retroactive Medicaid payments later in 2024.

He also noted that Prestige’s occupancy increased from 73% in September to 75% in January.

For LTC’s skilled nursing portfolio, Malin said that the recent 4% Medicare Market Basket rate increase improved EBIT coverage to 1.24 times when excluding stimulus funds, and that average monthly occupancy for the skilled nursing portfolio was 76% in January.

Although he didn’t make any comment specific to skilled nursing investment, Malin said LTC is in a good position to grow and diversify its portfolio in 2024.

“In terms of how we’re thinking about the current market and potential opportunities, bank maturities will likely be in the billions of dollars this year,” he said. “In many cases, banks are highly selective and only will work with existing customers that are willing and able to put up higher reserves.”