LTC Properties, Inc. (NYSE: LTC), a real estate investment trust
that primarily invests in seniors housing and health care
properties, today announced operating results for its second
quarter ended June 30, 2017.
Net income available to common stockholders was
$25.3 million, or $0.64 per diluted share, for the 2017 second
quarter compared with $22.1 million, or $0.58 per diluted share,
for the same period in 2016. The improvement was primarily due to
higher revenues from prior year acquisitions, mezzanine loan
originations, completed development projects and a net gain on sale
of $5.1 million, resulting from the sale of four assisted living
communities during the 2017 second quarter. This was partially
offset by an impairment charge related to the transition of two
memory care communities to another operator, as discussed below,
and general and administrative expenditures related to the
implementation of performance-based stock awards.
Funds from Operations (“FFO”) increased 7.6% to
$31.4 million for the 2017 second quarter, up from
$29.2 million for the comparable 2016 period. FFO per diluted
common share was $0.79 and $0.77 for the quarters ended
June 30, 2017 and 2016, respectively, on approximately
4.3% more diluted weighted average shares outstanding. The increase
in FFO was primarily due to the same factors that impacted net
income available to common stockholders, except for the impairment
charge which is added back to FFO.
LTC completed the following transactions during the second
quarter of 2017:
- Sold four assisted living communities
in Indiana and Iowa, totaling 175 units for an aggregate sales
price of $14.3 million, and recognized a net gain on sale of $5.1
million. Rental revenue is expected to decrease by $951,000 on an
annual basis as a result of the sale;
- Acquired a 107-unit assisted living
community and a senior housing community with 25 independent living
and 48 memory care units, both in California, for an aggregate
purchase price of $38.8 million. Simultaneously upon closing, LTC
entered into a 15-year master lease agreement with a new operator
at an initial cash yield of 7.0% and added the properties to the
master lease agreement;
- Issued a default notice on a master
lease covering 11 memory care communities, two of which are under
development. LTC is currently negotiating the transition of two of
the operational properties to another operator in its portfolio.
Accordingly, as of June 30, 2017, LTC wrote off approximately $1.9
million of straight-line rent and other receivables related to
these two properties. LTC is currently in negotiations with the
operator regarding the remaining properties and is exploring
options which may include transitioning some or all of the
properties to another operator and/or a possible sale of some or
all of the properties. Subsequent to June 30, 2017, the rent paid
by this operator will be recorded on a cash basis. Annual GAAP rent
under the master lease is approximately $11.7 million, and at June
30, 2017 the net book value of the properties was $111.6 million.
LTC had $8.6 million in straight-line rent receivable and $6.6
million in other assets on its balance sheet at June 30, 2017;
and
- Entered into agreements to transition
two memory care communities to a different operator in its
portfolio, contingent upon licensure by the new operator, which is
anticipated to occur in the third quarter of 2017. Additionally,
LTC purchased a newly constructed 60-unit memory care community in
Ohio for $15.7 million and added it to a master lease with the same
operator who is taking over the management of the two memory care
communities noted above. Based on the timing of the transition and
funds held in escrow, LTC estimates a potential write-off of
straight-line rent receivable ranging from $0 to $383,000. Annual
GAAP rent under the lease being terminated related to the two
communities being transitioned was $2.4 million and annual GAAP
rent under the master lease prior to the addition of all three
properties was approximately $3.8 million, which will increase to
$6.3 million after the additions.
Conference Call
Information
LTC will conduct a conference call on Thursday, August 10, 2017,
at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time), to provide
commentary on its performance and operating results for the quarter
ended June 30, 2017. The conference call is accessible by
telephone and the internet. Telephone access will be available by
dialing 877-510-2862 (domestically) or 412-902-4134
(internationally). To participate in the webcast, go to LTC’s
website at www.LTCreit.com 15 minutes before the call to download
the necessary software.
An audio replay of the conference call will be available from
August 10 through August 24, 2017 and may be accessed by dialing
877-344-7529 (domestically) or 412-317-0088 (internationally) and
entering conference number 10110624. Additionally, an audio archive
will be available on LTC’s website on the “Presentations” page of
the “Investor Information” section, which is under the “Investors”
tab. LTC’s earnings release and supplemental information package
for the current period will be available on its website on the
“Press Releases” and “Presentations” pages, respectively, of the
“Investor Information” section which is under the “Investors”
tab.
About LTC
LTC is a self-administered real estate investment trust that
primarily invests in seniors housing and health care properties
primarily through sale-leaseback transactions, mortgage financing
and structured finance solutions including mezzanine lending. At
June 30, 2017, LTC had 207 investments located in 28
states comprising 103 assisted living communities, 97 skilled
nursing centers, 1 behavioral health care hospital, 3 parcels of
land under development and 3 parcels of land held-for-use. Assisted
living communities, independent living communities, memory care
communities and combinations thereof are included in the assisted
living property type. For more information on LTC Properties, Inc.,
visit the Company’s website at www.LTCreit.com, or connect with us
on Twitter @LTCreit and LinkedIn.
Forward Looking
Statements
This press release includes statements that are not purely
historical and are “forward looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended,
including statements regarding the Company’s expectations, beliefs,
intentions or strategies regarding the future. All statements other
than historical facts contained in this press release are forward
looking statements. These forward looking statements involve a
number of risks and uncertainties. Please see LTC’s most recent
Annual Report on Form 10-K, its subsequent Quarterly Reports on
Form 10-Q, and its other publicly available filings with the
Securities and Exchange Commission for a discussion of these and
other risks and uncertainties. All forward looking statements
included in this press release are based on information available
to the Company on the date hereof, and LTC assumes no obligation to
update such forward looking statements. Although the Company’s
management believes that the assumptions and expectations reflected
in such forward looking statements are reasonable, no assurance can
be given that such expectations will prove to have been correct.
The actual results achieved by the Company may differ materially
from any forward looking statements due to the risks and
uncertainties of such statements.
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF
INCOME
(amounts in thousands, except per share
amounts)
Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017
2016 (unaudited) (audited) Revenues:
Rental income $ 35,265 $ 33,072 $ 70,300 $ 64,952 Interest income
from mortgage loans 6,625 6,811 13,373 13,389 Interest and other
income 578 113 1,417
259 Total revenues 42,468 39,996
85,090 78,600 Expenses:
Interest expense 7,151 6,750 14,622 12,750 Depreciation and
amortization 9,308 8,907 18,667 17,468
Impairment charges
1,880 — 1,880 — (Recovery) provision for doubtful accounts (5 ) 118
(43 ) 202 Transaction costs — 4 22 94 General and administrative
expenses 4,386 4,117 9,126
8,400 Total expenses 22,720
19,896 44,274 38,914
Operating income 19,748 20,100 40,816 39,686 Income from
unconsolidated joint ventures 575 278 1,020 550 Gain on sale of
real estate, net 5,054 1,802
5,054 1,802 Net income 25,377 22,180 46,890
42,038 Income allocated to participating securities (104 )
(105 ) (201 ) (206 ) Net income available to
common stockholders $ 25,273 $ 22,075 $ 46,689
$ 41,832
Earnings per common share: Basic $
0.64 $ 0.58 $ 1.19 $ 1.11 Diluted $
0.64 $ 0.58 $ 1.18 $ 1.11
Weighted average shares used to
calculate earnings per common share:
Basic 39,414 37,969 39,390
37,707 Diluted 39,794
38,164 39,769 37,720
Dividends declared and paid per common share $ 0.57 $ 0.54
$ 1.14 $ 1.08
Supplemental Reporting
Measures
FFO, adjusted FFO (“AFFO”), and Funds Available for Distribution
(“FAD”) are supplemental measures of a real estate investment
trust’s (“REIT”) financial performance that are not defined by U.S.
generally accepted accounting principles (“GAAP”). Investors,
analysts and the Company use FFO, AFFO and FAD as supplemental
measures of operating performance. The Company believes FFO, AFFO
and FAD are helpful in evaluating the operating performance of a
REIT. Real estate values historically rise and fall with market
conditions, but cost accounting for real estate assets in
accordance with GAAP assumes that the value of real estate assets
diminishes predictably over time. We believe that by excluding the
effect of historical cost depreciation, which may be of limited
relevance in evaluating current performance, FFO, AFFO and FAD
facilitate like comparisons of operating performance between
periods. Additionally the Company believes that normalized FFO,
normalized AFFO and normalized FAD provide useful information
because they allow investors, analysts and our management to
compare the Company’s operating performance on a consistent basis
without having to account for differences caused by unanticipated
items.
FFO, as defined by the National Association of Real Estate
Investment Trusts (“NAREIT”), means net income available to common
stockholders (computed in accordance with GAAP) excluding gains or
losses on the sale of real estate and impairment write-downs of
depreciable real estate, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures. Normalized FFO represents FFO adjusted for
certain items detailed in the reconciliations. The Company’s
computation of FFO may not be comparable to FFO reported by other
REITs that do not define the term in accordance with the current
NAREIT definition or have a different interpretation of the current
NAREIT definition from that of the Company; therefore, caution
should be exercised when comparing our Company’s FFO to that of
other REITs.
We define AFFO as FFO excluding the effects of straight-line
rent, amortization of lease inducement, effective interest income
and deferred income from unconsolidated joint ventures. GAAP
requires rental revenues related to non-contingent leases that
contain specified rental increases over the life of the lease to be
recognized evenly over the life of the lease. This method results
in rental income in the early years of a lease that is higher than
actual cash received, creating a straight-line rent receivable
asset included in our consolidated balance sheet. At some point
during the lease, depending on its terms, cash rent payments exceed
the straight-line rent which results in the straight-line rent
receivable asset decreasing to zero over the remainder of the lease
term. Effective interest method, as required by GAAP, is a
technique for calculating the actual interest rate for the term of
a mortgage loan based on the initial origination value. Similar to
the accounting methodology of straight-line rent, the actual
interest rate is higher than the stated interest rate in the early
years of the mortgage loan thus creating an effective interest
receivable asset included in the interest receivable line item in
our consolidated balance sheet and reduces down to zero when, at
some point during the mortgage loan, the stated interest rate is
higher than the actual interest rate. By excluding the non-cash
portion of rental income, interest income from mortgage loans and
income from unconsolidated joint ventures, investors, analysts and
our management can compare AFFO between periods. Normalized AFFO
represents AFFO adjusted for certain items detailed in the
reconciliations.
We define FAD as AFFO excluding the effects of non-cash
compensation charges, capitalized interest and non-cash interest
charges. FAD is useful in analyzing the portion of cash flow that
is available for distribution to stockholders. Investors, analysts
and the Company utilize FAD as an indicator of common dividend
potential. The FAD payout ratio, which represents annual
distributions to common shareholders expressed as a percentage of
FAD, facilitates the comparison of dividend coverage between REITs.
Normalized FAD represents FAD adjusted for certain items detailed
in the reconciliations.
While the Company uses FFO, Normalized FFO, AFFO, Normalized
AFFO, FAD and Normalized FAD as supplemental performance measures
of our cash flow generated by operations and cash available for
distribution to stockholders, such measures are not representative
of cash generated from operating activities in accordance with
GAAP, and are not necessarily indicative of cash available to fund
cash needs and should not be considered an alternative to net
income available to common stockholders.
Reconciliation of FFO, AFFO and
FAD
The following table reconciles GAAP net income available to
common stockholders to each of NAREIT FFO attributable to common
stockholders and normalized FFO attributable to common
stockholders, as well as normalized AFFO and normalized FAD
(unaudited, amounts in thousands, except per share amounts):
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 GAAP net income
available to common stockholders $ 25,273 $ 22,075 $ 46,689 $
41,832 Add: Depreciation and amortization 9,308 8,907 18,667 17,468
Add: Impairment charges
1,880 — 1,880 — Less: Gain on sale of real estate, net
(5,054 ) (1,802 ) (5,054 ) (1,802 ) NAREIT FFO
attributable to common stockholders 31,407 29,180 62,182 57,498
Less: Non-cash rental income (1,856 ) (2,160 ) (4,196 )
(4,477 ) Less: Effective interest income from mortgage loans (1,401
) (1,293 ) (2,708 ) (2,555 ) Less: Deferred income from
unconsolidated joint ventures (47 ) —
(94 ) — Adjusted FFO (AFFO) 28,103 25,727 55,184
50,466 Add: Non-cash compensation charges 1,425 1,029 2,684
2,019 Add: Non-cash interest related to earn-out liabilities 125
166 351 315 Less: Capitalized interest (201 ) (256 )
(371 ) (942 ) Funds available for distribution (FAD)
$ 29,452 $ 26,666 $ 57,848 $ 51,858
NAREIT Basic FFO attributable to common stockholders
per share $ 0.80 $ 0.77 $ 1.58 $ 1.52
NAREIT Diluted FFO attributable to common stockholders per share $
0.79 $ 0.77 $ 1.57 $ 1.52 NAREIT
Diluted FFO attributable to common stockholders $ 31,511 $
29,285 $ 62,383 $ 57,704
Weighted average shares used to calculate
NAREIT diluted FFO per share attributable to common
stockholders
39,794 38,164 39,769
37,902 Diluted AFFO $ 28,207 $
25,832 $ 55,385 $ 50,672 Weighted average
shares used to calculate diluted AFFO per share 39,794
38,164 39,769 37,902
Diluted FAD $ 29,556 $ 26,771 $
58,049 $ 52,064 Weighted average shares used to
calculate diluted FAD per share 39,794 38,164
39,769 37,902
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per
share)
June 30, 2017 December 31, 2016
ASSETS
Investments: Land $ 122,851 $ 116,096 Buildings and improvements
1,229,290 1,185,467 Accumulated depreciation and amortization
(288,442 ) (275,861 ) Operating real estate property,
net 1,063,699 1,025,702 Properties held-for-sale, net of
accumulated depreciation: 2017—$1,058; 2016—$0 1,170
— Real property investments, net 1,064,869 1,025,702
Mortgage loans receivable, net of loan loss reserve: 2017—$2,219;
2016—$2,315 220,385 229,801 Real estate
investments, net 1,285,254 1,255,503 Notes receivable, net of loan
loss reserve: 2017—$166; 2016—$166 16,402 16,427 Investments in
unconsolidated joint ventures 29,702 25,221
Investments, net 1,331,358 1,297,151 Other assets:
Cash and cash equivalents 9,299 7,991 Debt issue costs related to
bank borrowings 1,349 1,847 Interest receivable 12,255 9,683
Straight-line rent receivable, net of allowance for doubtful
accounts: 2017—$1,013; 2016—$960 59,287 55,276 Prepaid expenses and
other assets 27,010 22,948 Total assets
$ 1,440,558 $ 1,394,896
LIABILITIES
Bank borrowings $ 45,000 $ 107,100 Senior unsecured notes, net of
debt issue costs: 2017—$1,235; 2016—$1,009 597,898 502,291 Accrued
interest 4,543 4,675 Accrued incentives and earn-outs 12,140 12,229
Accrued expenses and other liabilities 23,810
28,553 Total liabilities 683,391 654,848
EQUITY Stockholders’ equity: Common stock: $0.01 par value;
60,000 shares authorized; shares issued and outstanding:
2017—39,564; 2016—39,221 396 392 Capital in excess of par value
854,340 839,005 Cumulative net income 1,060,333 1,013,443
Cumulative distributions (1,157,902 ) (1,112,792 )
Total equity 757,167 740,048 Total
liabilities and equity $ 1,440,558 $ 1,394,896
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LTC Properties, Inc.Wendy L. SimpsonPam Kessler(805)
981-8655
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