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 fourth
quarter ended December 31, 2017.
Net income available to common stockholders was
$19.8 million, or $0.50 per diluted share, for the 2017 fourth
quarter, compared with $20.6 million, or $0.53 per diluted share,
for the same period in 2016. The decrease in net income available
to common stockholders was primarily due to: a $1.2 million net
loss on the sale of an assisted living community; donation of a
skilled nursing center in the fourth quarter of 2017; higher
interest expense resulting from the sale of $100.0 million senior
unsecured notes in 2017; a reduction in rental income related to
the properties sold in 2017; and a defaulted master lease that was
placed on a cash basis during the third quarter of 2017, partially
offset by higher income from unconsolidated joint ventures and
mezzanine loans.
Funds from Operations (“FFO”) was $30.4 million for the
2017 fourth quarter, compared with $30.7 million for the
comparable 2016 period. FFO per diluted common share was $0.77 and
$0.78 for the quarters ended December 31, 2017 and 2016,
respectively. The decrease in FFO and FFO per diluted common share
was primarily due to the same factors that impacted net income
available to common stockholders, except for the net loss on sale
which is added back to FFO.
During the fourth quarter of 2017, LTC completed the following
transactions:
- Acquired a newly constructed 73-unit
assisted living and memory care community in Missouri for $16.6
million. The property was added to an existing master lease
agreement at an initial annual lease rate of 7.0%.
- Entered into a partnership agreement
with a 90% controlling interest to develop a 110-unit independent
living, assisted living and memory care community in Wisconsin. The
total estimated project cost, including the purchase of land, is
$22.5 million. LTC anticipates entering into a 10-year lease
agreement at an initial cash yield of 7.5% with a new
operator.
- Entered into a partnership agreement
with a 90% controlling interest to acquire an 87-unit assisted
living and memory care community in South Carolina for $10.0
million. Simultaneously with the acquisition, LTC entered into a
10-year master lease agreement with a new operator at an initial
cash yield of 7.25%.
- Completed the development of a 66-unit
memory care community in Illinois which opened in December
2017.
- Sold a 36-unit closed assisted living
community in Oregon for $1.4 million and recorded a net loss on
sale of $70,000.
- Donated an 85-bed skilled nursing
center located in Texas to a nonprofit health care provider
organization. The net book value of this property was $1.2
million.
Conference Call
Information
LTC will conduct a conference call on Friday, March 2, 2018, 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 December 31, 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
March 2 through March 16, 2018 and may be accessed by dialing
877-344-7529 (domestically) or 412-317-0088 (internationally) and
entering conference number 10115647. 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
December 31, 2017, LTC had 202 investments located in 29
states comprising 105 assisted living communities, 96 skilled
nursing centers and 1 behavioral health care hospital. 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 Twelve Months Ended
December 31, December 31, 2017 2016 2017
2016 (unaudited) (audited) Revenues: Rental
income $ 34,124 $ 34,822 $ 137,657 $ 133,527 Interest income from
mortgage loans 6,719 6,974 26,769 27,321 Interest and other income
886 345 3,639 735
Total revenues 41,729 42,141
168,065 161,583 Expenses:
Interest expense 7,683 6,856 29,949 26,442 Depreciation and
amortization 9,424 9,309 37,610 35,932 Impairment charges — 766
1,880 766 (Recovery) provision for doubtful accounts (67 ) 212 (206
) 457 Transaction costs — 83 56 179 General and administrative
expenses 4,243 4,548 17,513
17,412 Total expenses 21,283
21,774 86,802 81,188
Operating income 20,446 20,367 81,263 80,395 Income from
unconsolidated joint ventures 628 299 2,263 1,138 (Loss) gain on
sale of real estate, net (1,240 ) —
3,814 3,582 Net income 19,834 20,666 87,340
85,115 Income allocated to participating securities (81 )
(89 ) (362 ) (385 ) Net income available to
common stockholders $ 19,753 $ 20,577 $ 86,978
$ 84,730
Earnings per common share: Basic $
0.50 $ 0.53 $ 2.21 $ 2.21 Diluted $
0.50 $ 0.53 $ 2.20 $ 2.21
Weighted average shares used to calculate earnings per
common share: Basic 39,429 39,065
39,409 38,388 Diluted
39,645 39,260 39,637
38,597 Dividends declared and paid per common share $
0.57 $ 0.57 $ 2.28 $ 2.19
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 Twelve Months
Ended December 30, December 30, 2017
2016 2017 2016
GAAP net income available to common stockholders $ 19,753 $ 20,577
$ 86,978 $ 84,730 Add: Depreciation and amortization 9,424 9,309
37,610 35,932 Add: Impairment charges — 766 1,880 766 Loss (Gain)
on sale of real estate, net 1,240 —
(3,814 ) (3,582 ) NAREIT FFO attributable to common
stockholders 30,417 30,652 122,654 117,846 Less: Non-cash
rental income (2,804 ) (4,777 ) (8,485 ) (11,532 ) Less: Non-cash
other income — — (842 ) — Less: Effective interest income from
mortgage loans (1,398 ) (1,349 ) (5,500 ) (5,256 ) Less: Deferred
income from unconsolidated joint ventures (36 ) —
(177 ) — Adjusted FFO (AFFO) 26,179
24,526 107,650 101,058 Add: Non-cash compensation charges
1,282 1,131 5,249 4,280 Add: Non-cash interest related to earn-out
liabilities 126 146 602 684 Less: Capitalized interest (281
) (215 ) (908 ) (1,408 ) Funds available for
distribution (FAD) $ 27,306 $ 25,588 $ 112,593
$ 104,614 NAREIT Basic FFO attributable to
common stockholders per share $ 0.77 $ 0.78 $ 3.11
$ 3.07 NAREIT Diluted FFO attributable to common
stockholders per share $ 0.77 $ 0.78 $ 3.10 $
3.06 NAREIT Diluted FFO attributable to common
stockholders $ 30,498 $ 30,741 $ 123,016 $
118,231 Weighted average shares used to calculate NAREIT
diluted FFO per share attributable to common stockholders
39,645 39,260 39,637
38,597
Diluted AFFO $ 26,260
$ 24,615 $ 108,012 $ 101,443 Weighted
average shares used to calculate diluted AFFO per share
39,645 39,260 39,637
38,597
Diluted FAD $ 27,387 $
25,677 $ 112,955 $ 104,999 Weighted average
shares used to calculate diluted FAD per share 39,645
39,260 39,637 38,597
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per
share)
December 31, 2017 December 31, 2016
ASSETS (audited) (audited) Investments: Land $ 124,041 $
116,096 Buildings and improvements 1,262,335 1,185,467 Accumulated
depreciation and amortization (304,117 ) (275,861 )
Operating real estate property, net 1,082,259 1,025,702 Properties
held-for-sale, net of accumulated depreciation: 2017—$1,916;
2016—$0 3,830 — Real property
investments, net 1,086,089 1,025,702 Mortgage loans receivable, net
of loan loss reserve: 2017—$2,255; 2016—$2,315 223,907
229,801 Real estate investments, net 1,309,996
1,255,503 Notes receivable, net of loan loss reserve: 2017—$166;
2016—$166 16,402 16,427 Investments in unconsolidated joint
ventures 29,898 25,221 Investments, net
1,356,296 1,297,151 Other assets: Cash and cash equivalents
5,213 7,991 Debt issue costs related to bank borrowings 810 1,847
Interest receivable 15,050 9,683 Straight-line rent receivable, net
of allowance for doubtful accounts: 2017—$814; 2016—$960 64,490
55,276 Prepaid expenses and other assets 23,711
22,948 Total assets $ 1,465,570 $ 1,394,896
LIABILITIES Bank borrowings $ 96,500 $ 107,100
Senior unsecured notes, net of debt issue costs: 2017—$1,131;
2016—$1,009 571,002 502,291 Accrued interest 5,276 4,675 Accrued
incentives and earn-outs 8,916 12,229 Accrued expenses and other
liabilities 25,228 28,553 Total
liabilities 706,922 654,848
EQUITY Stockholders’
equity: Common stock: $0.01 par value; 60,000 shares authorized;
shares issued and outstanding: 2017—39,570; 2016—39,221 396 392
Capital in excess of par value 856,992 839,005 Cumulative net
income 1,100,783 1,013,443 Cumulative distributions
(1,203,011 ) (1,112,792 ) Total LTC Properties, Inc.
stockholders’ equity 755,160 740,048 Non-controlling interests
3,488 — Total equity 758,648
740,048 Total liabilities and equity $
1,465,570 $ 1,394,896
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LTC Properties, Inc.Wendy L. SimpsonPam Kessler(805)
981-8655
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