LTC Properties Inc.
), a healthcare real estate investment trust (REIT), has recently
acquired a 3.16 acre vacant land parcel in Colorado from an
undisclosed seller for $1.9 million. The company has also entered
in to a commitment to the tune of approximately $7.9 million to
fund the construction of the property.
LTC Properties intends to construct a 60-unit free-standing,
private-pay memory care facility on the acquired site. The new
facility is scheduled to be completed within August 2013. On
completion of the project, the facility would be leased for an
initial term of 11 years with four 5-year renewal options and an
annual rent escalation of 2.5%.
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 and pay regular dividends to shareholders. A steady
dividend payout facilitates the long-term strategy of LTC
Properties to provide attractive risk-adjusted returns to its
Investors looking for high dividend yields are also increasingly
favoring REITs like LTC Properties. Solid dividend payouts are
arguably the biggest enticement for REIT investors as the U.S. law
requires REITs to distribute 90% of their annual taxable income in
the form of dividends to shareholders.
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 #3 Rank for
Health Care REIT Inc.
), one of the competitors of LTC Properties.
HEALTH CR REIT (HCN): Free Stock Analysis
LTC PROPERTIES (LTC): Free Stock Analysis
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