-- Completes Several Strategic Transactions
--
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, 2018.
Net income available to common stockholders was
$34.8 million, or $0.88 per diluted share, for the 2018 third
quarter, compared with $20.5 million, or $0.52 per diluted share,
for the same period in 2017. The improvement was primarily due to a
net gain on sale of $14.4 million in 2018 and higher rental and
interest income resulting from acquisitions and mortgage loan
originations, partially offset by a reduction in rental income
resulting from properties sold in the second quarter of 2018,
non-recurring income in the prior year and higher general and
administrative expenses during the 2018 third quarter compared with
the same period in 2017.
Funds from Operations (“FFO”) was $29.9 million for the
2018 third quarter, compared with $30.1 million for the
comparable 2017 period. FFO per diluted common share was $0.75 and
$0.76 for the quarters ended September 30, 2018 and 2017,
respectively. Excluding the $0.8 million non-recurring income in
the third quarter of 2017, FFO increased $0.7 million in the 2018
third quarter compared with the third quarter of 2017.
LTC completed the following transactions during the third
quarter of 2018:
- Under a joint venture agreement,
acquired an 89-unit independent living community in Oregon for
$14.4 million in a sale-leaseback transaction. LTC contributed
$11.5 million of cash, and the non-controlling partner contributed
$2.9 million of equity. Simultaneous with the acquisition, LTC
entered into a 10-year master lease agreement with a new operator
at an initial cash yield of 6.75%.
- Funded $7.1 million under an existing
mortgage loan for the purchase of a 126-bed skilled nursing center
in Michigan. The incremental funding bears interest at 9.41%, fixed
for five years and escalating by 2.25% per year thereafter.
- Sold two skilled nursing centers with a
total of 285 beds in Alabama for $17.5 million. As a result of the
transaction, LTC recognized a net gain on sale of $14.3
million.
Subsequent to September 30, 2018 LTC completed the
following:
- Sold a 60-bed skilled nursing center in
Florida for $5.0 million, which is expected to result in a gain of
$3.4 million in the fourth quarter of 2018.
- Entered into an amendment to a master
lease agreement with an affiliate of Senior Lifestyle Corporation
(“Senior Lifestyle”). Per the provisions of the amendment, LTC may,
at its sole discretion, sell a 48-unit memory care community which
is being operated by Senior Lifestyle. This memory care community
has a gross value of $9.8 million and a carrying value of $9.0
million. Additionally, the amended agreement terminates a
contingent earn-out of up to $10.0 million payable to Senior
Lifestyle. Accordingly, in the 2018 fourth quarter, LTC anticipates
writing-off the accrued earn-out liability of $9.3 million and the
related lease incentive asset of $6.2 million, which will result in
non-recurring net income of approximately $3.0 million.
Conference Call
Information
LTC will conduct a conference call on Tuesday, November 6, 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 September 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
November 6 through November 20, 2018 and may be accessed by dialing
877-344-7529 (domestically) or 412-317-0088 (internationally) and
entering conference number 10124607. 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
September 30, 2018, LTC had 199 investments located in 28
states, comprising 103 assisted living communities, 95 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.
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.
(financial tables follow)
LTC PROPERTIES, INC. CONSOLIDATED STATEMENTS OF
INCOME
(amounts in thousands, except per share
amounts)
Three Months Ended Nine Months Ended September
30, September 30, 2018 2017
2018 2017 (unaudited)
(unaudited) Revenues: Rental income $ 34,211 $ 33,233 $ 102,646 $
103,533 Interest income from mortgage loans 7,087 6,677 20,910
20,050 Interest and other income 478 1,336
1,502 2,753 Total revenues
41,776 41,246 125,058
126,336 Expenses: Interest expense 7,497 7,644
22,981 22,266 Depreciation and amortization 9,447 9,519 28,159
28,186 Impairment charges — — — 1,880 Provision (recovery) for
doubtful accounts 106 (96 ) 76 (139 ) Transaction costs 9 34 19 56
General and administrative expenses 4,879
4,144 14,392 13,270 Total
expenses 21,938 21,245 65,627
65,519 Operating income 19,838 20,001
59,431 60,817 Income from unconsolidated joint ventures 746 615
2,103 1,635 Gain on sale of real estate, net 14,353
— 62,698 5,054 Net income
34,937 20,616 124,232 67,506 Income allocated to non-controlling
interests (17 ) — (17 )
— Net income attributable to LTC Properties,
Inc. 34,920 20,616 124,215 67,506 Income allocated to participating
securities (138 ) (80 ) (504 ) (281 )
Net income available to common stockholders $ 34,782 $
20,536 $ 123,711 $ 67,225
Earnings
per common share: Basic $ 0.88 $ 0.52 $ 3.13
$ 1.71 Diluted $ 0.88 $ 0.52 $ 3.12
$ 1.70
Weighted average shares used to
calculate earnings per common share:
Basic 39,487 39,428 39,470
39,403 Diluted 39,865
39,748 39,845 39,738
Dividends declared and paid per common share $ 0.57 $ 0.57
$ 1.71 $ 1.71
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. Normalized FFO represents FFO adjusted for certain
non-recurring, infrequent or unusual items, if applicable.
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 non-recurring, infrequent or
unusual items, if applicable.
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 non-recurring,
infrequent or unusual items, if applicable.
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, as well as AFFO and FAD (unaudited, amounts in
thousands, except per share amounts):
Three Months Ended Nine Months Ended September
30, September 30, 2018 2017
2018 2017 GAAP net income
available to common stockholders $ 34,782 $ 20,536 $ 123,711 $
67,225 Add: Depreciation and amortization 9,447 9,519 28,159 28,186
Add: Impairment charges — — — 1,880 Less: Gain on sale of real
estate, net (14,353 ) — (62,698 )
(5,054 ) NAREIT FFO attributable to common stockholders
29,876 30,055 89,172 92,237 Less: Non-recurring income
— (842 )
(1)
— (842 )
(1)
FFO attributable to common stockholders excluding non-recurring
income (1) 29,876 29,213 89,172 91,395 Less: Non-cash rental
income (2,629 ) (1,485 ) (6,978 ) (5,681 ) Less: Effective interest
income from mortgage loans (1,441 ) (1,394 ) (4,265 ) (4,102 )
Less: Deferred income from unconsolidated joint ventures (31
) (47 ) (93 ) (141 ) Adjusted FFO (AFFO)
25,775 26,287 77,836 81,471 Add: Non-cash compensation
charges 1,487 1,283 4,384 3,967 Add: Non-cash interest related to
earn-out liabilities 126 125 377 476 Less: Capitalized interest
(298 ) (256 ) (850 ) (627 ) Funds
available for distribution (FAD) $ 27,090 $ 27,439 $ 81,747 $
85,287
(1) Represents net write-off of an
earn-out liability and the related lease incentive.
NAREIT Basic FFO attributable to common stockholders
per share $ 0.76 $ 0.76 $ 2.26 $ 2.34
NAREIT Diluted FFO attributable to common stockholders per share $
0.75 $ 0.76 $ 2.25 $ 2.33 NAREIT
Diluted FFO attributable to common stockholders $ 30,014 $
30,135 $ 89,676 $ 92,518
Weighted average shares used to calculate
NAREIT diluted FFO per share attributable to common
stockholders
39,865 39,748 39,845
39,738 Diluted FFO attributable to
common stockholders, excluding non-recurring income $ 30,014
$ 29,293 $ 89,676 $ 91,676
Weighted average shares used to calculate
diluted FFO excluding non-recurring income per share attributable
to common stockholders
39,865 39,748 39,845
39,738 Diluted AFFO $ 25,913 $
26,367 $ 78,340 $ 81,752 Weighted average
shares used to calculate diluted AFFO per share 39,865
39,748 39,845 39,738
Diluted FAD $ 27,228 $ 27,519 $
82,251 $ 85,568 Weighted average shares used to
calculate diluted FAD per share 39,865 39,748
39,845 39,738
LTC PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per
share)
September 30, 2018 December 31, 2017
ASSETS (unaudited) (audited) Investments: Land $ 125,533 $
124,041 Buildings and improvements 1,280,491 1,262,335 Accumulated
depreciation and amortization (304,337 ) (304,117 )
Operating real estate property, net 1,101,687 1,082,259 Properties
held-for-sale, net of accumulated depreciation: 2018—$2,887;
2017—$1,916 5,356 3,830 Real property
investments, net 1,107,043 1,086,089 Mortgage loans receivable, net
of loan loss reserve: 2018—$2,444; 2017—$2,255 242,609
223,907 Real estate investments, net 1,349,652
1,309,996 Notes receivable, net of loan loss reserve: 2018—$128;
2017—$166 12,642 16,402 Investments in unconsolidated joint
ventures 30,511 29,898 Investments, net
1,392,805 1,356,296 Other assets: Cash and cash equivalents
20,408 5,213 Restricted cash 2,163 — Debt issue costs related to
bank borrowings 3,202 810 Interest receivable 19,290 15,050
Straight-line rent receivable, net of allowance for doubtful
accounts: 2018—$739; 2017—$814 73,114 64,490 Lease incentives
21,102 21,481 Prepaid expenses and other assets 3,767
2,230 Total assets $ 1,535,851 $ 1,465,570
LIABILITIES Bank borrowings $ 120,000 $ 96,500
Senior unsecured notes, net of debt issue costs: 2018—$981;
2017—$1,131 550,986 571,002 Accrued interest 3,468 5,276 Accrued
incentives and earn-outs 9,292 8,916 Accrued expenses and other
liabilities 28,812 25,228 Total
liabilities 712,558 706,922
EQUITY Stockholders’
equity: Common stock: $0.01 par value; 60,000 shares authorized;
shares issued and outstanding: 2018—39,657; 2017—39,570 397 396
Capital in excess of par value 861,226 856,992 Cumulative net
income 1,224,998 1,100,783 Cumulative distributions
(1,270,779 ) (1,203,011 ) Total LTC Properties, Inc.
stockholders’ equity 815,842 755,160 Non-controlling interests
7,451 3,488 Total equity 823,293
758,648 Total liabilities and equity $
1,535,851 $ 1,465,570
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LTC Properties, Inc.Wendy SimpsonPam Kessler(805) 981-8655
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