LTC Properties Inc. (LTC), a healthcare real estate investment trust (REIT), has recently completed its equity offer of 3.5 million shares at $27.25 each. The company also sold an additional 0.5 million shares as the underwriters exercised their over-allotment options.
LTC raised gross proceeds of approximately $108.7 million from the secondary offering, including the over-allotment options. KeyBanc Capital Markets Inc. – the investment banking division of KeyCorp (KEY); Wells Fargo Securities – the investment banking segment of Wells Fargo & Company (WFC); RBC Capital Markets – a Canadian investment bank; and BMO Capital Markets – a leading North American financial services provider acted as joint book-running managers for the offering.
LTC 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 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 is well-poised to benefit from the long-term positive dynamics of the industry. We presently have a ‘Neutral’ recommendation on LTC, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.
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