LTC Properties Inc. (LTC), a healthcare real estate investment trust (REIT), has recently acquired a 196-bed skilled nursing facility in Pasadena, Texas for $15.5 million. The acquisition was structured as a sale-lease back transaction, and the property was leased back to a third-party healthcare operator within its existing portfolio pursuant to a 10-year master lease agreement.
In addition, LTC Properties purchased a vacant land parcel in Amarillo, Texas, for $844,000, where it intends to construct a 120-bed skilled nursing facility. The company also entered in to a commitment to the tune of approximately $8.3 million to fund the construction of the property.
The new facility is scheduled to be completed within the next 12 to 18 months. On completion, the new property would replace a 90-bed licensed skilled nursing property in the company’s existing portfolio, and the residents of the erstwhile facility would be relocated to the new building. Subsequently, the existing property would be classified as held-for-sale by the company.
LTC Properties primarily invests in long-term care and other healthcare-related properties through mortgage loans, property lease transactions, and other investments. The company usually leases its healthcare facilities under "triple net" leases, under which the tenant pays all taxes, insurance, and maintenance for the properties, in addition to rent. This insulates the company from short-term market swings that may adversely affect the operations of a particular facility, and provides a relatively steady source of income.
Healthcare is also relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases. The healthcare industry is the single largest industry in the U.S. based on Gross Domestic Product (GDP), and an aging Baby Boomer generation’s demand for assisted and independent living facilities should increase in the coming years.
Consequently, healthcare REITs like LTC Properties is well-poised to benefit from the long-term positive dynamics of the industry. We presently have a Neutral recommendation on LTC Properties, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #4 Rank (short-term Sell) for Health Care REIT Inc. (HCN), one of the competitors of LTC Properties.
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LTC PROPERTIES (LTC): Free Stock Analysis Report
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