LTC Buys Skilled Nursing Facility, Plans Another In Missouri
Zacks Investment Research | Aug 28, 2019 08:00AM ET
LTC Properties, Inc. (NYSE:LTC) recently announced investments worth $37 million to strengthen its acute skilled nursing portfolio. The company acquired a 90-bed post-acute skilled nursing center in Kansas City, MO, for $19.5 million. Simultaneously, it has also purchased another land parcel for developing a 90-bed post-acute skilled nursing center in Independence, MO.
Both centers will be operated by the new-to-portfolio operator Ignite Medical Resorts.
The Kansas-City facility has a lease term of 12 years at an initial cash yield of 8.3%, with additional annual escalations of 2%. The lease also carries two five-year renewals. The center was constructed in 2018, its average occupancy being 90%. The acquisition will be accretive to top-line growth as it generates more than $1 million in monthly revenues.
Additionally, the company’s commitment to develop a similar product on the acquired land aggregates $17.4 million. The center will have similar lease terms and an initial cash yield of 9.3%. The project, being managed by Avenue Development, is scheduled for completion by the fall of 2020.
Management is optimistic about Ignite’s innovative approach of using a resort-style setting in the skilled nursing space. However, the skilled nursing fundamentals have remained soft for the past few quarters.
Specifically, policy-makers’ efforts to reduce aggregate healthcare costs as well ad policy changes enacted under the Affordable Care Act have resulted in lower reimbursement rates, shorter lengths of stay and affected occupancy rates at these facilities. Further, operator struggle continues to trouble the skilled nursing segment.
In fact, according to NIC Zacks Investment Research
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