Seniors Housing Business is the magazine that helps you navigate the evolution of the seniors housing industry.
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64 www.seniorshousingbusiness.com Seniors Housing Business n February/March 2017 By Jeff Shaw In an industry with billion-dollar deals and massive REITs, LTC Properties Inc. is perfectly comfortable with its place in the industry. The Westlake Village, Calif.-based company is the eighth largest healthcare REIT and 26th largest overall owner of seniors housing in the United States by total units, according to the American Seniors Housing Association's 2016 rankings. With skilled nursing included, LTC holds investments in 219 properties in 30 states. To put LTC's size into perspective, consider that the equity market cap for Welltower Inc. was $24.2 billion as of Dec. 31, 2016, compared with $1.8 billion for LTC, according to the National Association of Real Estate Investment Trusts. But LTC's executives see their size relative to the industry's REIT giants as a positive, not a negative. "There's tremendous advantage to being a smaller company," says Clint Malin, the com- pany's chief investment officer and executive vice president. "Given that our target market is regional operators, LTC's size aligns with the interests of such companies, giving them rel- evance in our portfolio com- pared to larger peers." LTC was founded in 1992 with an initial capital raise of $150 million. The company's original mandate was to provide mortgages to small skilled nursing companies. LTC later saw the rise of assisted living and began investing in that seg- ment of seniors housing as well. Eventually the company transitioned from a mortgage REIT to an equity REIT, continuing to invest in both skilled nursing and private-pay seniors housing. The company financed the construction of and took ownership of assisted living proper- ties during the 1990s. The company switched its focus to acquisitions in the 2000s. Outside of the portfolio from the '90s, only a small per- centage of LTC's current balance sheet consists of properties where the company financed construction. However, the company began an initiative several years ago to reduce the average age of its portfolio by financing the development of new private-pay assets, and has invested approximately $300 million in this effort over the last five years, especially as assets available for acquisition had became expensive relative to development. The company recently financed construction of an independent living property, but it is much more heavily focused on skilled nursing, assisted living and memory care. Part of LTC's goals for development and acquisition is to reduce the average age of its properties. The executive team has been very stable for several years. Malin, who worked with a lessee of LTC's at the time for Sun Healthcare, joined the company in 2004. The company's current chairman, president and CEO, Wendy Simpson, started as a board member in 1995 before taking on the CFO role in 2000. She was promoted to CEO in 2007. Pam Kessler, executive vice president and CFO, joined the company as a vice president and controller in 2000, which she described as "a tumultuous time" for the seniors housing industry due to the Clinton Balanced Budget Act and reimbursement changes that bank- rupted several skilled nursing providers. In late 2015, the company hired structured finance expert and Lancaster Pollard president Doug Korey to offer a mez- zanine lending platform to operators that has not typi- cally utilized sale-leaseback financing. It's good to be small The company wears its comparatively small size as a badge of honor, and embraces the advantages that come along with that size. For example, the CEO visits nearly every facility before it is acquired, something that would not be possible as a larger company. "I see 99.9 percent of the assets we buy — not pictures, but physically going out and seeing them," says Simpson. Once a year, for the last several years, the board has visited a community. To Simpson's surprise, staff members at the communities were not intimidated or annoyed, but happy to have the owners come for a visit. "They were all so honored that we'd want to see the properties, and the staff was excited to show us around," says Simpson. "I didn't think it was so important to the frontline staff to meet the board, but they loved it. Over the past few years, instead of doing a golf outing, we have gone off-site to our communities in Michigan or Cincinnati, for example." LTC Stays Nimble n Company Profile Seniors housing's eighth largest REIT finds value in being small, agile. LTC financed Coldspring of Campbell County, a transitional care and skilled nursing facility in Cold Spring, Ky. Carespring operates the facility, which was completed in fall 2014. Clint Malin CIO Pam Kessler CFO Wendy Simpson CEO