LTC Properties announced an approximate $128 million investment in 12 assisted living/memory care communities with a combined 937 licensed beds in 568 units. Spread out in North Carolina, the communities are currently owned and operated by an existing LTC partner.
The majority of LTC’s investment is structured as a joint venture to acquire 11 of the properties, and a minor portion totaling $11 million is structured as a senior mortgage loan secured by one property with a two-year term and interest-only rate of 7.25%, at an IRR of 9.0%. LTC has a 97% ownership in the $121 million joint venture with the current operator for the purchase of the 11 properties. The communities will be operated under a 10-year master lease with two five‑year renewal options.
LTC expects to receive net rent of approximately $8.5 million during 2023 related to the JV, which is covered by in-place cash flow generated by the properties. The initial annual rent is at a rate of 7.25%, increasing to 7.50% in year three and escalating thereafter based on CPI subject to a floor of 2% and a ceiling of 4%. The master lease also provides the operator with the option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit IRR of 9.00% on any tranche of the properties being purchased. LTC will consolidate the JV’s acquired properties, and the acquisition will be accounted for as a financing receivable due to the seller’s purchase option.
LTC funded the investment through approximately $99 million borrowed under LTC’s line of credit and $29 million of net proceeds from the sale of 757,400 shares of LTC’s common stock under its equity distribution agreements during the 2022 fourth quarter.
