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 third quarter
ended September 30, 2019.
Net income available to common stockholders was $27.1 million,
or $0.68 per diluted share, for the 2019 third quarter, compared
with $34.8 million, or $0.88 per diluted share, for the same period
in 2018. The decrease in net income available to common
stockholders was primarily due to a higher gain on sale in the
prior year, partially offset by an increase in revenues principally
related to acquisitions, mortgage and mezzanine loan originations,
funding of additional loan proceeds, capital improvements and
completed developments.
Funds from Operations (“FFO”) was $30.8 million for the 2019
third quarter, compared with $29.9 million for the comparable 2018
period. FFO per diluted common share was $0.77 and $0.75 for the
quarters ended September 30, 2019 and 2018, respectively. The
improvement was primarily due to an increase in revenues mainly due
to acquisitions, mortgage and mezzanine loan originations, funding
of additional loan proceeds, capital improvements and completed
developments.
LTC completed the following transactions during the third
quarter of 2019:
- Acquired a newly constructed, 90-bed skilled nursing center
located in Missouri for $19.5 million, and entered into a 12-year
lease agreement with an operator new to LTC’s portfolio at an
initial cash yield of 8.25% escalating by 2.0% in December 2019 and
annually thereafter. Additionally, LTC acquired a parcel of land
and committed $17.4 million (including land purchase) to develop a
90-bed skilled nursing center in Missouri with the same operator,
and entered into a separate 12-year lease agreement at an initial
cash yield of 9.25% effective upon completion of development,
certificate of occupancy and licensure;
- Completed the transition of two memory care communities in
Georgia and South Carolina with a total of 159 units from Thrive to
an existing operator. The new two-year lease has an initial cash
rent of $1.8 million. The lease provides the lessee one month free
rent and the option to defer up to 50% of contractual rent for the
next five months. The rent increases 3.5% in year two;
- Completed the transition of the Company’s remaining Thrive
property, a 60-unit memory care community located in Florida, to an
existing operator. The new 10-year lease provides the lessee twelve
months free rent with rent increasing to $450,000 in year two and
$600,000 in year three and thereafter. In year two, the lessee has
the option to defer rent in an amount not to exceed $150,000. Rent
may increase subject to a contingent escalation formula commencing
in year three and annually thereafter; and
- Sold a 148-bed skilled nursing center in Georgia for $7.9
million, recognizing a net gain on sale of $6.2 million. LTC
received $7.8 million in net proceeds which were used to pay down
the Company’s line of credit. This property was leased under a
master lease and rent under the master lease was not reduced as a
result of this sale.
Subsequent to September 30, 2019, LTC completed the
following:
- Sold senior unsecured notes in the aggregate amount of $100.0
million to affiliates and managed accounts of PGIM, Inc. The notes
bear interest at 3.85%, have scheduled principal payments and
mature on October 20, 2031. The proceeds of the notes were used to
pay down the Company’s line of credit.
Conference Call
Information
LTC will conduct a conference call on Friday, November 1, 2019,
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 September 30, 2019. 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
any necessary software.
An audio replay of the conference call will be available from
November 1 through November 15, 2019, and may be accessed by
dialing 877-344-7529 (domestically) or 412-317-0088
(internationally) and entering conference number 10134627.
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 real estate investment trust (REIT) investing in
seniors housing and health care properties primarily through
sale-leasebacks, mortgage financing, joint-ventures and structured
finance solutions including preferred equity and mezzanine lending.
LTC holds more than 200 investments in 28 states with 30 operating
partners. The portfolio is comprised of approximately 50% seniors
housing and 50% skilled nursing properties. Learn more at
www.LTCreit.com.
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
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
(unaudited)
(unaudited)
Revenues:
Rental income
$
38,665
$
34,211
$
114,566
$
102,646
Interest income from mortgage loans
7,646
7,087
22,308
20,910
Interest and other income
808
478
1,967
1,502
Total revenues
47,119
41,776
138,841
125,058
Expenses:
Interest expense
7,827
7,497
23,004
22,981
Depreciation and amortization
9,932
9,447
29,399
28,159
(Recovery) provision for doubtful
accounts
(14
)
106
153
76
Transaction costs
75
9
275
19
Property tax expense
4,270
(1)
—
12,566
—
General and administrative expenses
4,745
4,879
13,912
14,392
Total expenses
26,835
21,938
79,309
65,627
Other operating income:
Gain on sale of real estate, net
6,236
14,353
6,736
62,698
Operating income
26,520
34,191
66,268
122,129
Income from unconsolidated joint
ventures
760
746
1,973
2,103
Net income
27,280
34,937
68,241
124,232
Income allocated to non-controlling
interests
(88
)
(17
)
(257
)
(17
)
Net income attributable to LTC Properties,
Inc.
27,192
34,920
67,984
124,215
Income allocated to participating
securities
(112
)
(138
)
(298
)
(504
)
Net income available to common
stockholders
$
27,080
$
34,782
$
67,686
$
123,711
Earnings per common share:
Basic
$
0.68
$
0.88
$
1.71
$
3.13
Diluted
$
0.68
$
0.88
$
1.69
$
3.12
Weighted average shares used to
calculate earnings per
common share:
Basic
39,586
39,487
39,565
39,470
Diluted
39,965
39,865
39,944
39,845
Dividends declared and paid per common
share
$
0.57
$
0.57
$
1.71
$
1.71
(1)
The new income statement line item
“property tax expense” is due to the impact of newly adopted
Accounting Standard Codification 842, Leases (“ASC 842”). See
Footnote 1 in our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2019 for further discussion.
Supplemental Reporting
Measures
FFO 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 and FAD as supplemental measures of operating
performance. The Company believes FFO 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 and FAD facilitate like comparisons of
operating performance between periods. Occasionally, the Company
may exclude non-recurring items from FFO and FAD in order to 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. 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 FAD as FFO excluding the effects of straight-line
rent, amortization of lease inducement, effective interest income,
deferred income from unconsolidated joint ventures, non-cash
compensation charges, capitalized interest and non-cash interest
charges. 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. 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.
While the Company uses FFO and 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 and
FAD
The following table reconciles GAAP net income available to
common stockholders to each of NAREIT FFO attributable to common
stockholders and FAD (unaudited, amounts in thousands, except per
share amounts):
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
GAAP net income available to common
stockholders
$
27,080
$
34,782
$
67,686
$
123,711
Add: Depreciation and amortization
9,932
9,447
29,399
28,159
Less: Gain on sale of real estate, net
(6,236
)
(14,353
)
(6,736
)
(62,698
)
NAREIT FFO attributable to common
stockholders
30,776
29,876
90,349
89,172
Add: Non-recurring items (1) (2)
—
—
576
—
FFO attributable to common stockholders,
excluding non-recurring items
$
30,776
$
29,876
$
90,925
$
89,172
NAREIT FFO attributable to common
stockholders
$
30,776
$
29,876
$
90,349
$
89,172
Non-cash income:
Less: straight-line rental income
(1,085
)
(3,189
)
(3,598
)
(8,629
)
Add: amortization of lease costs
100
560
281
1,651
Add: Other non-cash expense (1)
—
—
1,926
—
Less: Effective interest income from
mortgage loans
(1,528
)
(1,441
)
(4,361
)
(4,265
)
Less: Deferred income from unconsolidated
joint ventures
(5
)
(31
)
(18
)
(93
)
Net non-cash income
(2,518
)
(4,101
)
(5,770
)
(11,336
)
Non-cash expense:
Add: Non-cash compensation charges
1,626
1,487
4,938
4,384
Add: Non-cash interest related to earn-out
liabilities
—
126
—
377
Less: Capitalized interest
(108
)
(298
)
(441
)
(850
)
Net non-cash expense
1,518
1,315
4,497
3,911
Funds available for distribution (FAD)
29,776
27,090
$89,076
$81,747
Less: Non-recurring income (2)
—
—
(1,350
)
—
$
29,776
$
27,090
$
87,726
$
81,747
(1) Represents the write-off of
straight-line rent due to a lease termination and transition of two
senior housing communities to a new operator.
(2) Represents deferred rent repayment
from an operator.
NAREIT Basic FFO attributable to common
stockholders per share
$
0.78
$
0.76
$
2.28
$
2.26
NAREIT Diluted FFO attributable to common
stockholders per share
$
0.77
$
0.75
$
2.26
$
2.25
NAREIT Diluted FFO attributable to common
stockholders
$
30,888
$
30,014
$
90,647
$
89,676
Weighted average shares used to calculate
NAREIT diluted FFO per share attributable to common
stockholders
40,129
39,865
40,106
39,845
Diluted FFO attributable to common
stockholders, excluding non-recurring items
$
30,888
$
30,014
$
91,223
$
89,676
Weighted average shares used to calculate
diluted FFO, excluding non-recurring
items, per share attributable to common
stockholders
40,129
39,865
40,106
39,845
Diluted FAD, excluding non-recurring
items
$
29,888
$
27,228
$
88,024
$
82,251
Weighted average shares used to calculate
diluted FAD, excluding non-recurring
items, per share
40,129
39,865
40,106
39,845
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except per
share)
September 30, 2019
December 31, 2018
ASSETS
(unaudited)
(audited)
Investments:
Land
$
129,403
$
125,358
Buildings and improvements
1,339,543
1,290,352
Accumulated depreciation and
amortization
(340,505
)
(312,959
)
Operating real estate property, net
1,128,441
1,102,751
Properties held-for-sale, net of
accumulated depreciation: 2019—$1,916; 2018—$1,916
3,830
3,830
Real property investments, net
1,132,271
1,106,581
Mortgage loans receivable, net of loan
loss reserve: 2019—$2,551; 2018—$2,447
253,186
242,939
Real estate investments, net
1,385,457
1,349,520
Notes receivable, net of loan loss
reserve: 2019—$177; 2018—$128
17,552
12,715
Investments in unconsolidated joint
ventures
24,426
30,615
Investments, net
1,427,435
1,392,850
Other assets:
Cash and cash equivalents
3,960
2,656
Restricted cash
2,108
2,108
Debt issue costs related to bank
borrowings
2,380
2,989
Interest receivable
25,099
20,732
Straight-line rent receivable, net of
allowance for doubtful accounts: 2019—$0; 2018—$746
44,814
(1)
73,857
Lease incentives
2,590
(1)
14,443
Prepaid expenses and other assets
3,845
(2)
3,985
Total assets
$
1,512,231
$
1,513,620
LIABILITIES
Bank borrowings
$
165,400
$
112,000
Senior unsecured notes, net of debt issue
costs: 2019—$831; 2018—$938
518,469
533,029
Accrued interest
3,996
4,180
Accrued expenses and other liabilities
30,472
(2)
31,440
Total liabilities
718,337
680,649
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000
shares authorized; shares issued and outstanding: 2019—39,752;
2018—39,657
398
397
Capital in excess of par value
865,721
862,712
Cumulative net income
1,280,940
1,255,764
Cumulative distributions
(1,361,625
)
(1,293,383
)
Total LTC Properties, Inc. stockholders’
equity
785,434
825,490
Non-controlling interests
8,460
7,481
Total equity
793,894
832,971
Total liabilities and equity
$
1,512,231
$
1,513,620
(1)
Decrease due to impact of newly adopted
ASC 842. See Footnote 1 in our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2019 for further discussion.
(2)
Includes $1,354 right of use asset/lease
liability due to the impact of newly adopted ASC 842. See Footnote
1 in our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019 for further discussion.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191031005746/en/
Wendy L. Simpson Pam Kessler 805-981-8655
LTC Properties (NYSE:LTC)
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