LTC Completes Brookdale Portfolio Transaction

Rhea-AI Summary

LTC Properties Inc. (NYSE: LTC) announced the completion of its process involving its 35-property Brookdale Senior Living portfolio, with net proceeds of $23 million and anticipated net gain of $17 million related to property sales. Revenue from the portfolio will be fully replaced through new leases, interest related to seller financing, and pre-invested proceeds at a weighted average yield of 8.5%. The transactions reduce LTC’s revenue concentration from Brookdale by 40%. The company also provided seller financing collateralized by two of the Florida properties, with a total of 92 units.

Insights

Financial Analyst

LTC Properties Inc.'s strategic repositioning of its Brookdale Senior Living portfolio demonstrates a proactive approach to asset management and diversification of revenue sources. The successful lease renegotiations and property sales not only reduce the company's reliance on a single tenant but also enhance the stability of its income streams. The reported weighted average yield of 8.5% is robust, particularly in the context of the current interest rate environment and the competitive landscape of health care REITs. The anticipated net gain of $17 million from property sales is a significant boost to the company's balance sheet, potentially improving its financial ratios and creditworthiness. Furthermore, the reduction in debt levels through the use of sales proceeds aligns with prudent financial management, especially considering the potential headwinds from rising interest rates on real estate investment trusts.

Real Estate Investment Trust Analyst

The diversification of LTC's tenant base by 40% marks a strategic shift that could mitigate tenant-specific risks and improve the REIT's appeal to investors seeking stability in the seniors housing and health care sectors. The introduction of new tenants such as Oxford Senior Living and Navion Senior Solutions could signify a refreshed growth trajectory and operational dynamism. The master lease terms, with durations ranging from three to six years and an attractive yield, provide a forecastable revenue stream, which is critical for the REIT's dividend distribution policy. The seller financing at an interest rate of 8.75% for the Florida properties also indicates a strategic use of capital, optimizing the return on assets while maintaining a stake in the property's performance.

Market Research Analyst

The seniors housing and health care property market is subject to demographic trends, with an aging population driving demand for assisted living facilities. LTC's re-leasing of 17 communities and the addition of new operators could potentially tap into this growing market demand, provided the operators manage the properties effectively. The sale of eight communities and the recording of a substantial gain reflect a strategic capital reallocation that could be reinvested in higher-growth opportunities. LTC's ability to fully replace rent from the previous portfolio without loss of income showcases strong portfolio management and positions the company favorably for future growth within the sector.

-- Three New Master Leases; Net Proceeds of $23 Million; Anticipated Net Gain of $17 Million Related to Property Sales; Full Rent Replaced --

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)-- LTC Properties Inc. (NYSE: LTC) (“LTC” or the “Company”), a real estate investment trust that invests in seniors housing and health care properties, today announced the completion of its previously announced process involving its 35-property Brookdale Senior Living (“Brookdale”) portfolio. Revenue from the portfolio will be fully replaced through a combination of new leases, interest related to seller financing, and pre-invested proceeds at a weighted average yield of 8.5%. The transactions reduce LTC’s revenue concentration from Brookdale by 40%.

The 35-property assisted living portfolio was modified as follows:

• 17 communities across four states including Colorado (six), Texas (six), Kansas (four), and Ohio (one), with a total of 738 units, were re-leased to Brookdale. The new master lease, which commenced in January 2024, is for six years at an initial annual rent of $9.3 million.

• Five communities in Oklahoma, with a total of 184 units, were transferred and are now being operated by Oxford Senior Living, an existing LTC operator. The new master lease, which commenced in November 2023, is for three years, with one four-year extension, at an initial annual rent of $960,000.

• Five communities in North Carolina, with a total of 210 units, were transferred and are now being operated by Navion Senior Solutions, an operator new to LTC. The master lease, which commenced in January 2024, is for six years at an initial annual rent of $3.3 million.

• Eight communities across three states including Florida (four), South Carolina (three), and Oklahoma (one), with a total of 341 units, were sold for $28.0 million. LTC received proceeds of $23.2 million, net of transaction costs and seller financing, and anticipates recording a gain of $17.0 million related to the sales. The Company provided seller financing collateralized by two of the Florida properties, with a total of 92 units. The $4.0 million seller-financed mortgage loan term is two years, with a one-year extension, at an interest rate of 8.75%.

“LTC committed to successfully position the previous Brookdale portfolio by re-leasing some properties and selling others. We are pleased to have reached a favorable outcome,” said Wendy Simpson, LTC’s Chairman and Chief Executive Officer. “Importantly, rent from the previous portfolio has been fully replaced, and we’ve generated sales proceeds to pay down a portion of our debt, which was incurred to pre-fund accretive investments earlier this year.”

About LTC

LTC is a real estate investment trust (REIT) investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions including preferred equity and mezzanine lending. LTC’s investment portfolio includes 200 properties in 27 states with 30 operating partners. Based on its gross real estate investments, LTC’s investment portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties. Learn more at www.LTCreit.com.

Forward-Looking Statements

This press release includes statements that are not purely historical and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. All forward-looking statements included in this press release are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such forward-looking statements. Although the Company’s management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results achieved by the Company may differ materially from any forward-looking statements due to the risks and uncertainties of such statements.

(tables follow)

Brookdale Lease Transition Summary ($ in thousands)
		Number of Properties	Number of Units	State(s)	Year-One Revenue
Brookdale New Master Lease		17	738	CO, KS, OH & TX	$	9,325
Oklahoma Portfolio		5	184	OK		960
North Carolina Portfolio		5	210	NC		3,300
Total Rent from New Leases:		27	1,132		$	13,585
Seller-Financed Mortgage Loan(1)						350
Pre-Invested Net Sales Proceeds(2)						1,975
Total Brookdale Replacement Income					$	15,910
Brookdale 2023 Rental Income					$	15,418
Revenue Increase					$	492
1)	Collateralized by two communities located in Florida with a total of 92 units with a two-year term at a yield of 8.75%.
2)	Represents income from sales proceeds of $23,232 using LTC’s 2023 pre-investment weighted-average yield of 8.5%. See sales table below for further information.

Brookdale Portfolio Sale Summary ($ in thousands)
State		Number of Properties	Number of Units	Sales Price		Net Proceeds		Anticipated Gain
Florida(1)		4	176	$	18,750	$	14,310	$	13,300
South Carolina		3	128		8,409		8,153		3,700
Oklahoma		1	37		800		769		—
Total		8	341	$	27,959	$	23,232	$	17,000
1)	Sale includes $4,000 of seller financing.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240108416286/en/

Mandi Hogan

(805) 981-8655

Source: LTC Properties Inc.

FAQ

What did LTC Properties Inc. (NYSE: LTC) announce?

LTC Properties Inc. (NYSE: LTC) announced the completion of its process involving its 35-property Brookdale Senior Living portfolio, with net proceeds of $23 million and anticipated net gain of $17 million related to property sales.

How will the revenue from the portfolio be replaced?

The revenue from the portfolio will be fully replaced through a combination of new leases, interest related to seller financing, and pre-invested proceeds at a weighted average yield of 8.5%.

By how much does the transactions reduce LTC’s revenue concentration from Brookdale?

The transactions reduce LTC’s revenue concentration from Brookdale by 40%.

What did LTC Properties Inc. provide related to seller financing?

The company provided seller financing collateralized by two of the Florida properties, with a total of 92 units.