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, 2018.
Net income available to common stockholders was
$68.7 million, or $1.73 per diluted share, for the 2018 second
quarter, compared with $25.3 million, or $0.64 per diluted share,
for the same period in 2017. Funds from Operations (“FFO”) was
$29.6 million for the 2018 second quarter, compared with
$31.4 million for the comparable 2017 period. FFO per diluted
common share was $0.75 and $0.79 for the quarters ended June 30,
2018 and 2017, respectively. Revenues were lower in the second
quarter of 2018 due primarily to a previously disclosed defaulted
master lease that was placed on a cash basis in the third quarter
of 2017 and a reduction in rental income related to properties sold
during the past year.
LTC completed the following transactions during the second
quarter of 2018:
- Amended and restated the Company’s
unsecured credit agreement to replace its previous unsecured credit
agreement, which was due to expire on October 14, 2018. The amended
credit agreement maintains the $600.0 million aggregate commitment
of the lenders under the prior agreement and provides for the
opportunity to increase the commitment size of the credit agreement
up to a total of $1.0 billion. The amended credit agreement extends
the maturity to June 27, 2022 and provides for a one-year extension
option at LTC’s discretion, subject to customary conditions.
Additionally, the amended credit agreement decreases the interest
rate margins and converts from the payment of unused commitment
fees to a facility fee.
- Sold a portfolio of six assisted living
and memory care communities with a gross book value of
$37.7 million for $67.5 million. As a result of the
transaction, LTC recognized a net gain on sale of
$48.3 million in the 2018 second quarter.
- Completed the acquisition of two memory
care communities in Texas, totaling 88 units and 133 beds, for
$25.2 million. Simultaneously upon closing, LTC entered into a
10-year master lease agreement with an operator new to LTC’s
portfolio at an initial cash yield of 7.25%.
- Entered into a partnership to own the
real estate and develop a 78-unit assisted living and memory care
community in Medford, OR for $18.1 million and committed to
purchase an existing operational 89-unit independent living
community on an adjacent land parcel. We anticipate acquiring
the independent living community in the third quarter of 2018.
- Completed the development of a 66-unit
memory care community in Illinois which opened in May 2018.
Conference Call
Information
LTC will conduct a conference call on Thursday, August 9, 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 June 30, 2018. 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 23, 2018 and may be accessed by dialing
877-344-7529 (domestically) or 412-317-0088 (internationally) and
entering conference number 10122172. 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 Properties (NYSE: 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 preferred equity and mezzanine lending. At
June 30, 2018, LTC had 199 investments located in 28
states comprising 102 assisted living communities, 96 skilled
nursing centers and one 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.
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, 2018 2017 2018 2017
(unaudited) (unaudited) Revenues: Rental income $ 33,930 $ 35,265 $
68,435 $ 70,300 Interest income from mortgage loans 7,007 6,625
13,823 13,373 Interest and other income 535
578 1,024 1,417 Total revenues
41,472 42,468 83,282
85,090 Expenses: Interest expense 7,655 7,151
15,484 14,622 Depreciation and amortization 9,268 9,308 18,712
18,667 Impairment charges — 1,880 — 1,880 Recovery for doubtful
accounts (38 ) (5 ) (30 ) (43 ) Transaction costs 6 — 10 22 General
and administrative expenses 4,716 4,386
9,513 9,126 Total expenses
21,607 22,720 43,689
44,274 Operating income 19,865 19,748 39,593 40,816
Income from unconsolidated joint ventures 726 575 1,357 1,020 Gain
on sale of real estate, net 48,345 5,054
48,345 5,054 Net income 68,936
25,377 89,295 46,890 Income allocated to participating securities
(278 ) (104 ) (366 ) (201 ) Net income
available to common stockholders $ 68,658 $ 25,273 $
88,929 $ 46,689
Earnings per common
share: Basic $ 1.74 $ 0.64 $ 2.25 $ 1.19
Diluted $ 1.73 $ 0.64 $ 2.25 $ 1.18
Weighted average shares used to calculate earnings
per common share: Basic 39,471
39,414 39,461 39,390 Diluted
39,765 39,794 39,750
39,769 Dividends declared and paid per common
share $ 0.57 $ 0.57 $ 1.14 $ 1.14
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,
2018 2017 2018
2017 GAAP net income available to
common stockholders $ 68,658 $ 25,273 $ 88,929 $ 46,689 Add:
Depreciation and amortization 9,268 9,308 18,712 18,667 Add:
Impairment charges — 1,880 — 1,880 Less: Gain on sale of real
estate, net (48,345 ) (5,054 ) (48,345 )
(5,054 ) NAREIT FFO attributable to common stockholders
29,581 31,407 59,296 62,182 Less: Non-cash rental income
(1,449 ) (1,856 ) (4,349 ) (4,196 ) Less: Effective interest income
from mortgage loans (1,420 ) (1,401 ) (2,824 ) (2,708 ) Less:
Deferred income from unconsolidated joint ventures (31 )
(47 ) (62 ) (94 ) Adjusted FFO (AFFO) 26,681
28,103 52,061 55,184 Add: Non-cash compensation charges
1,521 1,425 2,897 2,684 Add: Non-cash interest related to earn-out
liabilities 125 125 251 351 Less: Capitalized interest (293
) (201 ) (552 ) (371 ) Funds available for
distribution (FAD) $ 28,034 $ 29,452 $ 54,657
$ 57,848
NAREIT Basic FFO attributable to common
stockholders per share $ 0.75 $ 0.80 $ 1.50 $
1.58 NAREIT Diluted FFO attributable to common stockholders
per share $ 0.75 $ 0.79 $ 1.50 $ 1.57
NAREIT Diluted FFO attributable to common stockholders $
29,581 $ 31,511 $ 59,662 $ 62,383
Weighted average shares used to calculate NAREIT diluted FFO per
share attributable to common stockholders 39,605
39,794 39,750 39,769
Diluted AFFO $ 26,681 $ 28,207 $ 52,427
$ 55,385 Weighted average shares used to calculate diluted
AFFO per share 39,605 39,794
39,750 39,769
Diluted FAD $ 28,034
$ 29,556 $ 55,023 $ 58,049 Weighted
average shares used to calculate diluted FAD per share
39,605 39,794 39,750
39,769
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per
share)
June 30, 2018 December 31, 2017
ASSETS
(unaudited) (audited) Investments: Land $ 125,882 $ 124,041
Buildings and improvements 1,269,675 1,262,335 Accumulated
depreciation and amortization (301,458 ) (304,117 )
Operating real estate property, net 1,094,099 1,082,259 Properties
held-for-sale, net of accumulated depreciation: 2018—$1,916;
2017—$1,916 3,830 3,830 Real property
investments, net 1,097,929 1,086,089 Mortgage loans receivable, net
of loan loss reserve: 2018—$2,355; 2017—$2,255 233,823
223,907 Real estate investments, net 1,331,752
1,309,996 Notes receivable, net of loan loss reserve: 2018—$142;
2017—$166 14,074 16,402 Investments in unconsolidated joint
ventures 30,397 29,898 Investments, net
1,376,223 1,356,296 Other assets: Cash and cash equivalents
4,260 5,213 Restricted cash 2,446 — Debt issue costs related to
bank borrowings 3,304 810 Interest receivable 17,864 15,050
Straight-line rent receivable, net of allowance for doubtful
accounts: 2018—$707; 2017—$814 70,036 64,490 Lease incentives
21,407 21,481 Prepaid expenses and other assets 4,089
2,230 Total assets $ 1,499,629 $ 1,465,570
LIABILITIES Bank borrowings $ 85,500 $ 96,500
Senior unsecured notes, net of debt issue costs: 2018—$1,027;
2017—$1,131 566,940 571,002 Accrued interest 5,105 5,276 Accrued
incentives and earn-outs 9,167 8,916 Accrued expenses and other
liabilities 27,221 25,228 Total
liabilities 693,933 706,922
EQUITY Stockholders’
equity: Common stock: $0.01 par value; 60,000 shares authorized;
shares issued and outstanding: 2018—39,635; 2017—39,570 396 396
Capital in excess of par value 858,832 856,992 Cumulative net
income 1,190,078 1,100,783 Cumulative distributions
(1,248,179 ) (1,203,011 ) Total LTC Properties, Inc.
stockholders’ equity 801,127 755,160 Non-controlling interests
4,569 3,488 Total equity 805,696
758,648 Total liabilities and equity $
1,499,629 $ 1,465,570
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LTC Properties, Inc.Wendy SimpsonPam Kessler(805) 981-8655
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