LTC Properties Inc. (LTC), 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 stockholders.
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. (HCN), one of the competitors of LTC Properties.Read the Full Research Report on LTC
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