LTC Properties revealed in its fourth quarter earnings call that it originated a $25 million mezzanine loan for the recapitalization of five seniors housing properties in Oregon and Montana. The transaction is a continuation of LTC’s strategy focused on higher yield structured finance investments.
Coming with a term of five years and two months, with two one-year extension options, the loan bears an 8% interest rate and an IRR of 11%. The properties, which include independent living, assisted living and memory care, total 621 units and will be managed by The Springs Living, a new operator for LTC.
LTC revealed a few other investments and dispositions in its earnings. So far in 2022, the operator of two assisted living communities LTC owns in California with a total of 232 units exercised its purchase option on the buildings. The expected sale price is $43.7 million, with LTC recognizing a gain on sale of approximately $26 million. The deal should close at the end of the second quarter, and contractual rent for 2022 is approximately $2.8 million.
LTC also sold a 74-unit assisted living community located in Virginia to its current operator for $16.9 million, or $228,400 per unit, which should also close in the second quarter for a gain of sale of about $1.3 million. In connection with the sale, the current operator will pay a $1.2 million lease termination fee, which is one year’s worth of rent.
Finally, LTC announced that it expects to transition two memory care communities, including 88 units in Texas, to an existing operator by the end of this month. The rent from the previous operator was $2 million per year. The new master lease will have a two-year term with $0 in rent for the first four months. Thereafter, cash rent will be based on mutually agreed fair market rent, expected to be around $600,000 in 2022 and a more permanent rent set in 2023.
