LTC Properties has more than doubled its loan origination volume for the year with a unitranche loan provided to fund the purchase of 13 seniors housing communities in the Carolinas. The $52.5 million loan bears interest at 7.25% for a term of four years, with an IRR of 8%. It also provides for additional commitments of $6.1 million for capital improvements and $650,000 for working capital needs, bringing the total investment commitment to approximately $60 million.
We learned that Patrick Burke of Senior Living Investment Brokerage handled the portfolio sale. Totaling 523 units and 967 beds, the properties include a mix of independent living (2%), assisted living (73%) and memory care (25%). They average more than 20 years in age. Around 55% of the census was Medicaid, with the rest being private pay, and most units operated as double-occupancy rooms. Occupancy averaged 94% in 2019 then dropped to 88% in 2020 before falling to 78% at the beginning of 2021 due to the pandemic. At the time of the sale, however, census had rebounded to 83%. The properties brought in nearly $4.6 million of EBITDAR (as of 2020) on more than $26.9 million of revenues.
The seller was an undisclosed owner/operator based in the Northeast, while the buyer ended up being a regional operator with a current footprint in North and South Carolina and an existing operating relationship with LTC Properties. No purchase price was disclosed, but it has to be above the loan amount, putting the per-unit price above $100,000 per unit.
So far this year, the REIT has announced $45.8 million in loan originations across four single-property transactions, including a $4.4 million mezzanine loan arranged for an independent living community in Bend, Oregon. Other deals include a $27 million unitranche loan arranged for the acquisition of a skilled nursing facility in Louisiana, a $12.5 million loan for the purchase of an assisted living/memory care community in Florida, and a $1.8 million loan secured by a parcel of land for the future development of a SNF in Missouri.
The shift from acquisitions to structured financings has been a strategy of LTC Properties’, since pricing in the M&A market may not be accurately reflecting a property’s value these days. It’s certainly true that fewer stabilized properties have come onto the market in the last 12 months, leaving a pool of buyers to chase a shrinking supply of communities. Those high values could tempt some owners into selling, which could help counteract that pricing premium. At least, we could get more sales comps to determine exactly what “market pricing” is right now. We hope to do that in the 2022 Senior Care Acquistion Report, which will be published in the first quarter of next year.
