Brookdale Senior Living (NYSE: BKD) opted to extend its lease with real estate investment trust LTC Properties (NYSE: LTC) through Dec. 31, 2021.
Brookdale holds an option to extend the lease through April 30, 2022. Rent terms under the master lease did not change. Westlake, California-based LTC also extended a $4 million capital commitment to Brookdale for improvements which runs through December 31 — $2.1 million of which has been funded to date.
LTC leadership believes that Brookdale opted for a short-term lease extension because the operator wants flexibility in a stressed operating environment, but is encouraged by solid census numbers in its buildings, and by seeing the money from the capital commitment being allocated toward building improvements.
“We thought it was a positive move by Brookdale,” LTC Properties Chairman and CEO Wendy Simpson said Friday, during the company’s Q1 2021 earnings call.
LTC reported lower-than-expected rent collections in the first quarter, receiving 86.5% of expected rents, and has deferred, reduced or abated $3.7 million in rents due in the first four months of 2021.
Subsequent to quarter’s end, LTC provided $367,000 of deferrals and $319,000 of abatements in April, with an agreement to defer and abate up to $800,000 in May and June.
As of March 31, $2.2 million of deferrals were outstanding, BMO Capital Markets Analysts John Kim and Juan Sanabria wrote in a note to investors.
The REIT reported funds from operations (FFO) of $24.3 million, or $0.62 per share, in the first quarter of 2021, falling short of analysts’ expectations.
LTC also reported total revenues of $40.3 million in the first quarter, also short of analysts’ consensus. This is down from $46.4 million in Q1 2020, and $46.3 million in the previous quarter.
Senior Lifestyle transitions continue
The ongoing effort to transition 23 Senior Lifestyle Corp. communities to new operators contributed to LTC’s Q1 financial result. Senior Lifestyle’s outstanding rent, excepting money received from transitioned communities, is around $1.1 million.
LTC moved 11 properties formerly managed by Senior Lifestyle to new operators in the first quarter of 2021, as well as an additional building in April.
Of the remaining buildings, three are expected to turn over to new operators by the end of the second quarter, another by the end of Q3, three buildings are under contract to be sold by the end of Q2, and one was closed and is expected to be sold and redeveloped.
LTC is weighing its options on the final three buildings, Co-President and Chief Investment Officer Clint Malin said during Friday’s earnings call.
Senior Lifestyle is not the only struggling tenant in LTC’s roster. Skilled nursing provider Senior Care Centers and its parent company, Abri Health Services, filed for Chapter 11 bankruptcy on April 16, as LTC was working to transition 11 skilled nursing facilities to HMG Healthcare. The REIT has not received rent from Abri/Senior Care since February 2021, and at least $1.2 million in rent is owed.
LTC would not comment on the bankruptcy proceedings, and will not until the situation is resolved, Simpson said.
Completing the Senior Lifestyle transitions will help with LTC’s future performance. So will a gradual rebound in occupancy and net operating income as the industry enters a post-pandemic landscape. But Simpson would not predict when that would happen, and expressed cautious optimism that it would occur.
LTC also declined to offer 2021 guidance, citing the ongoing Senior Lifestyle transition and Abri/Senior Care bankruptcy.
“While we were tested over this last year and continue to be tested, our work culture of treating operators as partners and maintaining a solid balance sheet will serve us well as we continue to find creative ways to enhance our portfolio, diversify our investments, and serve as a growth partner of choice,” Simpson said.
LTC stock held steady in trading Friday, closing up slightly to $42.53 per share.
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