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, 2019.
Net income available to common stockholders was $20.4 million,
or $0.51 per diluted share, for the 2019 second quarter, compared
with $68.7 million, or $1.73 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, lower income from unconsolidated joint ventures, higher
depreciation expense and transaction costs, partially offset by
higher revenues.
Funds from Operations (“FFO”) was $29.7 million for the 2019
second quarter, compared with $29.6 million for the comparable 2018
period. FFO per diluted common share was $0.75 for the quarters
ended June 30, 2019 and 2018.
LTC completed the following during the second quarter of
2019:
- Funded an additional $7.5 million under an existing mortgage
loan. The incremental funding bears interest at 9.41%, fixed for
two years, and escalating thereafter by 2.25%;
- Completed construction of and opened a 110-unit seniors housing
community in Wisconsin;
- Transitioned two memory communities in Ohio and Kentucky with a
total of 120-units from Thrive Senior Living (“Thrive”) to a new
operator. The memory care communities are under a 10‑year master
lease with initial cash rent of $1.3 million in year one, $1.5
million in year two, $2.0 million in year three and $2.2 million in
year four. Rent may increase subject to a contingent escalation
formula commencing in year five and annually thereafter; and
- Transitioned a 56-unit memory care community in Texas from
Thrive to an operator in LTC’s current portfolio and added the
property to an existing master lease. Annual cash rent under the
master lease increased by $400,000 and will increase by an
additional $300,000 on June 1, 2020, and 2.5% annually thereafter.
Additionally, LTC will be entitled to incremental rent calculated
as a percentage of increases in gross revenues generated by the
community above an established threshold.
Subsequent to June 30, 2019, LTC:
- Entered into a purchase and sale agreement for the acquisition
of a newly constructed 90-bed skilled nursing center located in
Missouri for approximately $19.5 million. Simultaneously upon
closing, LTC will enter into a 12-year lease agreement with an
operator new to LTC’s portfolio at an initial cash yield of 8.3%.
Additionally, LTC entered into a separate purchase and sale
agreement for the acquisition of a parcel of land and development
of a 90-bed skilled nursing center in Missouri with the same
operator. The commitment totals approximately $18.4 million.
Concurrently with closing on the land acquisition, LTC will enter
into a separate 12-year lease agreement at an initial cash yield of
9.3% effective upon completion of development, certificate of
occupancy and licensure. These transactions are expected to close
in the third quarter of 2019;
- Transitioned two memory care communities in Georgia and South
Carolina with a total of 159-units from Thrive to an existing
operator. The new 2-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; and
- Effective August 1st transitioned the 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 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.
Conference Call
Information
LTC will conduct a conference call on Friday, August 9, 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 June 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
August 9 through August 23, 2019 and may be accessed by dialing
877-344-7529 (domestically) or 412-317-0088 (internationally) and
entering conference number 10132737. 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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
(unaudited)
(unaudited)
Revenues:
Rental income
$
38,277
$
33,930
$
75,901
$
68,435
Interest income from mortgage loans
7,351
7,007
14,662
13,823
Interest and other income
638
535
1,159
1,024
Total revenues
46,266
41,472
91,722
83,282
Expenses:
Interest expense
7,710
7,655
15,177
15,484
Depreciation and amortization
9,860
9,268
19,467
18,712
Provision (recovery) for doubtful
accounts
84
(38
)
167
(30
)
Transaction costs
200
6
200
10
Property tax expense
3,910
(1
)
—
8,296
(1
)
—
General and administrative expenses
4,596
4,716
9,167
9,513
Total expenses
26,360
21,607
52,474
43,689
Other operating income:
Gain on sale of real estate, net
500
48,345
500
48,345
Operating income
20,406
68,210
39,748
87,938
Income from unconsolidated joint
ventures
128
726
1,213
1,357
Net income
20,534
68,936
40,961
89,295
Income allocated to non-controlling
interests
(88
)
—
(169
)
—
Net income attributable to LTC Properties,
Inc.
20,446
68,936
40,792
89,295
Income allocated to participating
securities
(94
)
(278
)
(186
)
(366
)
Net income available to common
stockholders
$
20,352
$
68,658
$
40,606
$
88,929
Earnings per common share:
Basic
$
0.51
$
1.74
$
1.03
$
2.25
Diluted
$
0.51
$
1.73
$
1.02
$
2.25
Weighted average shares used to
calculate earnings per
common share:
Basic
39,577
39,471
39,555
39,461
Diluted
39,769
39,765
39,747
39,750
Dividends declared and paid per common
share
$
0.57
$
0.57
$
1.14
$
1.14
_____________________________________________________
(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 June 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
Six Months Ended
June 30,
June 30,
2019
2018
2019
2018
GAAP net income available to common
stockholders
$
20,352
$
68,658
$
40,606
$
88,929
Add: Depreciation and amortization
9,860
9,268
19,467
18,712
Less: Gain on sale of real estate, net
(500
)
(48,345
)
(500
)
(48,345
)
NAREIT FFO attributable to common
stockholders
29,712
29,581
59,573
59,296
Add: Non-recurring items (1) (2)
—
—
576
—
FFO attributable to common stockholders,
excluding non-recurring items
$
29,712
$
29,581
$
60,149
$
59,296
NAREIT FFO attributable to common
stockholders
$
29,712
$
29,581
$
59,573
$
59,296
Non-cash income:
Less: straight-line rental income
(1,275
)
(2,000
)
(2,513
)
(5,440
)
Add: amortization of lease costs
94
551
181
1,091
Add: Other non-cash expense (1)
—
—
1,926
—
Less: Effective interest income from
mortgage loans
(1,418
)
(1,420
)
(2,833
)
(2,824
)
Less: Deferred income from unconsolidated
joint ventures
(6
)
(31
)
(13
)
(62
)
Net non-cash income
(2,605
)
(2,900
)
(3,252
)
(7,235
)
Non-cash expense:
Add: Non-cash compensation charges
1,623
1,521
3,312
2,897
Add: Non-cash interest related to earn-out
liabilities
—
125
—
251
Less: Capitalized interest
(73
)
(293
)
(333
)
(552
)
Net non-cash expense
1,550
1,353
2,979
2,596
Funds available for distribution (FAD)
28,657
28,034
59,300
54,657
Less: Non-recurring income (2)
—
—
(1,350
)
—
$
28,657
$
28,034
$
57,950
$
54,657
(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
$
0.75
$
0.75
$
1.51
$
1.50
NAREIT Diluted FFO attributable to common
stockholders per share
$
0.75
$
0.75
$
1.50
$
1.50
NAREIT Diluted FFO attributable to common
stockholders
$
29,806
$
29,581
$
59,759
$
59,662
Weighted average shares used to calculate
NAREIT diluted FFO per share
attributable to common stockholders
39,934
39,605
39,908
39,750
Diluted FFO attributable to common
stockholders, excluding non-recurring items
$
29,806
$
29,581
$
60,335
$
59,662
Weighted average shares used to calculate
diluted FFO, excluding non-recurring
items, per share attributable to common
stockholders
39,934
39,605
39,908
39,750
Diluted FAD, excluding non-recurring
items
$
28,751
$
28,034
$
58,136
$
55,023
Weighted average shares used to calculate
diluted FAD, excluding non-recurring
items, per share
39,934
39,605
39,908
39,750
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except per
share)
June 30, 2019
December 31, 2018
ASSETS
(unaudited)
(audited)
Investments:
Land
$
126,028
$
125,358
Buildings and improvements
1,320,895
1,290,352
Accumulated depreciation and
amortization
(332,364
)
(312,959
)
Operating real estate property, net
1,114,559
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
1,118,389
1,106,581
Mortgage loans receivable, net of loan
loss reserve: 2019—$2,539; 2018—$2,447
252,016
242,939
Real estate investments, net
1,370,405
1,349,520
Notes receivable, net of loan loss
reserve: 2019—$204; 2018—$128
20,157
12,715
Investments in unconsolidated joint
ventures
27,521
30,615
Investments, net
1,418,083
1,392,850
Other assets:
Cash and cash equivalents
3,207
2,656
Restricted cash
2,108
2,108
Debt issue costs related to bank
borrowings
2,597
2,989
Interest receivable
23,640
20,732
Straight-line rent receivable, net of
allowance for doubtful accounts: 2019—$0;
2018—$746
43,730
(1
)
73,857
Lease incentives
2,652
(1
)
14,443
Prepaid expenses and other assets
3,463
(2
)
3,985
Total assets
$
1,499,480
$
1,513,620
LIABILITIES
Bank borrowings
$
146,900
$
112,000
Senior unsecured notes, net of debt issue
costs: 2019—$862; 2018—$938
528,938
533,029
Accrued interest
5,290
4,180
Accrued expenses and other liabilities
30,742
(2
)
31,440
Total liabilities
711,870
680,649
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000
shares authorized; shares issued and outstanding: 2019—39,747;
2018—39,657
397
397
Capital in excess of par value
863,993
862,712
Cumulative net income
1,253,748
1,255,764
Cumulative distributions
(1,338,967
)
(1,293,383
)
Total LTC Properties, Inc. stockholders’
equity
779,171
825,490
Non-controlling interests
8,439
7,481
Total equity
787,610
832,971
Total liabilities and equity
$
1,499,480
$
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 June 30, 2019 for further discussion.
(2)
Includes $1,393 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 June
30, 2019 for further discussion.
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version on businesswire.com: https://www.businesswire.com/news/home/20190808005761/en/
Wendy L. Simpson Pam Kessler (805) 981-8655
LTC Properties (NYSE:LTC)
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