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LTC Properties CEO: Labor Challenges Still Putting Damper on Occupancy Gains

With a senior housing recovery underway, LTC Properties (NYSE: LTC) Chairman and CEO Wendy Simpson is cautiously optimistic about the road ahead – but staffing challenges continue to weigh on the company’s operating partners in the short term. 

In the third quarter of 2021, Simpson said that workforce issues were constraining occupancy growth. Those conditions continued through the end of the year, and are still ongoing.

“I won’t belabor the point, but I did want to recognize that census could remain somewhat constrained until the staffing problems are mitigated,” Simpson said Friday during the company’s fourth-quarter 2021 earnings call with investors and analysts.

Despite those headwinds, Simpson believes in both the Westlake Village, California-based real estate investment trust (REIT) and in the wider industry’s future.

“I steadfastly believe that, as an industry, we will persevere and come out of this stronger than we were before,” Simpson said. “We will successfully adapt to whatever becomes the new normal.”

LTC Properties logged funds from operations (FFO) of 56 cents in 4Q21, missing analysts’ expectations by one cent. The company’s quarterly revenue of just over $39 million surpassed analysts’ expectations by almost $4.4 million.

Although LTC’s tenants are not yet out of the woods with regard to staffing and census, recent moves have given the company forward momentum, according to KeyBanc Capital Markets Analyst Jordan Sadler.

“It seems that the combination of recent investments and portfolio repositioning efforts in 2021 could translate into an improving earnings trajectory in 2022,” Sadler wrote in a Feb. 17 note to investors.

LTC’s investment portfolio spans 193 properties in 28 states with 35 operating partners, including 119 assisted living communities.

Staffing remains tricky

Operators on both sides of LTC’s portfolio – skilled nursing and assisted living – were “hit hard” with cost increases related to using agency staffing, according to Co-President, CFO and Secretary Pam Kessler.

“Normally, you don’t see a lot of agency [staffing] in assisted living, and we’re hearing that from our assisted living operators,” she said.

Occupancy for the company’s same-property assisted living segment hit 73.1% in 3Q21, a decline of about 90 basis points from 2Q.

The company granted a total of $867,000 in deferred rent and $480,000 of rent abatement in January and February. The company also has agreed to provide rent deferrals of up to $452,000 and abatements of up to $240,000 in March.

Simpson noted that occupancy and private-pay rates were trending up for the company’s tenants, and thus she doesn’t expect to see a sizable change in rent deferrals and abatements in the first quarter of this year.

Still, she said she anticipates providing some amount of relief to the REIT’s tenants until occupancy gains become more permanent.

LTC leaders anticipate the REIT’s funds available for distribution (FAD) payout ratio will continue to decline this year, approaching its target of 80% by the end of 2022 or the beginning of 2023.

LTC closed on $103.3 million investments in the fourth quarter, including a $52.5 million mortgage loan for 13 assisted living communities in North Carolina and South Carolina operated by an existing LTC operator.

The loan includes additional commitments of $6.1 million for capital improvements and $650,000 for working capital.

LTC is also “virtually complete” with re-leasing 19 properties previously leased to Senior Lifestyle Corporation, with all but one property in New Jersey transitioned to new operators.

Looking ahead, the REIT is sitting on a pipeline with a value just north of $110 million, including a $25 million transaction expected to close by the end of the month. And the company sees potential acquisition opportunities ahead.

“Our pipeline remains robust as we’ve continued to work towards enhancing relationships with existing operators and building relationships with new operators who have the resources and desire to grow,” Simpson said.

Update on Anthem

LTC expressed continued confidence in Anthem Memory Care and Simpson reported the Lake Oswego, Oregon-based operator has made “considerable progress” since LTC first reported those challenges in 2017.

“We are proud of the strides they have made,” said Simpson. “I would also note that Anthem is now expanding their footprint, which we see as a positive sign.”

Indeed, Anthem announced the addition of nine communities in January, expanding into four new states and nearly doubling its total portfolio.

Anthem has “bounced back” to pre-Covid occupancy levels, CEO Isaac Scott told Senior Housing News in January.

The post LTC Properties CEO: Labor Challenges Still Putting Damper on Occupancy Gains appeared first on Senior Housing News.

Source: For the full article please visit Senior Housing News

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