LTC Properties, Inc. (NYSE: LTC) (“LTC” or the
“Company”), a real estate investment trust that primarily invests
in seniors housing and health care properties, today announced
operating results for the third quarter ended September 30,
2022.
Three Months Ended
September 30,
2022
2021
(unaudited)
Net income available to common
stockholders
$
13,159
$
10,909
Diluted earnings per common share
$
0.32
$
0.28
NAREIT funds from operations ("FFO”)
attributable to common stockholders
$
24,217
$
17,669
NAREIT diluted FFO per common share
$
0.60
$
0.45
FFO attributable to common stockholders,
excluding non-recurring items
$
25,477
$
21,564
Funds available for distribution
("FAD")
$
26,019
$
18,441
FAD, excluding non-recurring items
$
26,519
$
22,336
Third quarter 2022 results were impacted by:
- Higher rental income due to:
- rent received from transitioned portfolios;
- rent received from the acquisition of four skilled nursing
centers during the 2022 second quarter;
- increases in property tax revenue from a transitioned
portfolio, and the acquisition of four skilled nursing centers as
noted above; and
- rental income from completed development projects, and annual
rent escalations.
- The increase in rental income was partially offset by:
- the sale of three assisted living communities and a skilled
nursing center during the 2022 second quarter, and a skilled
nursing center during 2021; and,
- temporary rent reduction and rent deferrals.
- Higher interest income from financing receivables due to the
acquisition of three skilled nursing centers, which is accounted
for as a financing receivable in accordance with U.S. Generally
Accepted Accounting Principles (“GAAP”).
- Higher interest income from mortgage loans due to mortgage loan
originations in 2022 and 2021.
- Higher interest and other income due to a mezzanine loan
origination and additional funding under working capital loans,
partially offset by loan payoffs.
- Higher interest expense due to 2021 term loan originations, the
issuance of $75.0 million senior unsecured notes during the 2022
second quarter, and higher interest rates on LTC’s revolving line
of credit, partially offset by scheduled principal paydowns on its
senior unsecured notes.
- Higher provision for credit losses due to the 1% reserve on the
2022 third quarter acquisition of three skilled nursing centers,
which is accounted for as a financing receivable, and additional
funding under the Company’s mortgage loans and note receivables,
partially offset by principal paydowns.
- Lower transaction costs due to the 2021 third quarter
settlement payment of $3.9 million, offset by the 2022 third
quarter lease termination fee of $500,000 paid to an operator in
exchange for cooperation and assistance in facilitating an orderly
transition of 12 assisted living communities to another
operator.
- Higher general and administrative expenses due to increased
costs related to property maintenance expenses for closed
properties, as well as higher incentive compensation, and increases
in overall costs due to inflationary pressures.
- Recognized a $1.3 million impairment loss related to a 60-unit
assisted living community in Kentucky as a result of classifying
the community as held-for-sale.
- Recognized a $434,000 loss on sale related to a closed skilled
nursing center in Texas.
During the third quarter of 2022, LTC completed the
following:
- Contributed $61.7 million into a joint venture that purchased
three skilled nursing centers located in Florida for $75.8 million,
and leased the properties to affiliates of PruittHealth, Inc.
(“PruittHealth”) under a 10-year master lease, with two five-year
renewal options. Additionally, the master lease provides
PruittHealth with a purchase option exercisable at the beginning of
the fourth year through the end of the fifth year. In accordance
with GAAP, the purchased assets are required to be presented as a
financing receivable on LTC’s balance sheet instead of owned real
estate assets, since the joint venture purchased the properties
from an entity and leased the properties back to the same entity
under a master lease with a purchase option. LTC expects to receive
net income from this investment of approximately $700,000 during
the fourth quarter of 2022, and approximately $4.6 million during
2023.
- Sold a closed skilled nursing center located in Texas for
$485,000, as discussed above.
- Terminated a master lease covering 12 assisted living
communities with a total of 625 units, and transitioned the
communities to an existing LTC operator. The former operator was
one of the few for whom the Company had provided assistance in form
of rent deferrals and abatements.
- in connection with the lease termination, LTC abated rent for
June 2022 and has forgiven the former operator’s outstanding
deferred rent balance of $7.1 million. Also, LTC paid the former
operator a $500,000 lease termination fee in exchange for
cooperation and assistance in facilitating an orderly transition;
and,
- the new master lease has a two-year term, with zero rent for
each of July, August, September, and October of 2022. Thereafter,
cash rent will be based on mutually agreed upon fair market rent.
In connection with the new master lease, LTC paid the new operator
a $410,000 lease incentive payment which will be amortized as a
yield adjustment to rental income over the two-year lease
term.
- Provided a temporary reduction of rent totaling $900,000 in the
third quarter 2022 to Anthem, bringing the total temporary
reduction for 2022 to $1.5 million. The annual agreed upon rent
from Anthem is $10.8 million of which $6.6 million was paid through
the end of September 2022. In October 2022, to date, LTC received
an additional $1.2 million of rent and still expects to receive a
total of $10.8 million by year end, upon Anthem receiving
additional money from the Employee Retention Tax Credit and from
improving operating results.
- Provided $200,000 of net deferred rent, which excludes the
temporary rent reduction provided to Anthem discussed above, and
$720,000 of abated rent.
- Paid $36.2 million in regular scheduled principal payments
under the Company’s senior unsecured notes at a weighted average
rate of 4.75%.
- Borrowed $95.0 million under the Company’s revolving line of
credit.
- Sold 125,200 shares of common stock for $4.8 million in net
proceeds under the Company’s equity distribution agreement and used
the proceeds for general corporate purposes.
Subsequent to September 30, 2022, LTC completed the
following:
- Provided $240,000 of abated rent in October 2022, and agreed to
provide rent abatements up to $215,000 for each of November and
December 2022 to an operator pursuant to a master lease covering
two assisted living communities.
Conference Call
Information
LTC will conduct a conference call on Friday, October 28, 2022,
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, 2022. The conference call is accessible by
telephone and the internet. Interested parties may access the live
conference call via the following:
Webcast
www.LTCReit.com
USA Toll-Free Number
1-844-200-6205
Canada Toll-Free Number
1-833-950-0062
Conference Access Code
741477
Additionally, an audio replay of the call will be available one
hour after the live call and through November 11, 2022 via the
following:
USA Toll-Free Number
1-866-813-9403
Canada Local Number
1-226-828-7578
International Toll-Free Number
+44 204 525 0658
Conference Number
284664
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’s investment portfolio includes 204 properties in 29 states
with 32 operating partners. Based on its gross real estate
investments, LTC’s investment 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
(unaudited, amounts in thousands,
except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
Revenues:
Rental income
$
31,585
$
29,320
$
93,537
$
91,097
Interest income from financing
receivable(1)
357
—
357
—
Interest income from mortgage loans
10,379
7,924
30,112
23,779
Interest and other income
1,182
228
3,308
1,005
Total revenues
43,503
37,472
127,314
115,881
Expenses:
Interest expense
7,941
6,610
22,607
20,442
Depreciation and amortization
9,385
9,462
28,202
28,847
Impairment loss
1,286
—
1,286
—
Provision for credit losses
795
68
1,454
59
Transaction costs
629
4,046
728
4,271
Property tax expense
4,179
3,932
12,180
11,713
General and administrative expenses
5,888
5,318
17,407
15,688
Total expenses
30,103
29,436
83,864
81,020
Other operating income:
(Loss) gain on sale of real estate,
net
(387
)
2,702
37,809
7,392
Operating income
13,013
10,738
81,259
42,253
Income from unconsolidated joint
ventures
376
376
1,127
1,041
Net income
13,389
11,114
82,386
43,294
Income allocated to non-controlling
interests
(99
)
(92
)
(301
)
(271
)
Net income attributable to LTC Properties,
Inc.
13,290
11,022
82,085
43,023
Income allocated to participating
securities
(131
)
(113
)
(481
)
(346
)
Net income available to common
stockholders
$
13,159
$
10,909
$
81,604
$
42,677
Earnings per common share:
Basic
$
0.33
$
0.28
$
2.06
$
1.09
Diluted
$
0.32
$
0.28
$
2.04
$
1.09
Weighted average shares used to
calculate earnings per common share:
Basic
40,270
39,177
39,658
39,149
Diluted
40,552
39,177
39,939
39,149
Dividends declared and paid per common
share
$
0.57
$
0.57
$
1.71
$
1.71
_______________
(1)
Represents rental income from three
skilled nursing centers acquired through a sale-leaseback
transaction, subject to a lease which contains a purchase option.
In accordance with GAAP, the properties are required to be
presented as a financing receivable on our Consolidated Balance
Sheets and the rental income to be presented as Interest income
from financing receivable on our Consolidated Statements of
Income.
Supplemental Reporting
Measures
FFO and 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,
2022
2021
2022
2021
GAAP net income available to common stockholders
$
13,159
$
10,909
$
81,604
$
42,677
Add: Depreciation and amortization
9,385
9,462
28,202
28,847
Add: Impairment loss
1,286
—
1,286
—
Add (Less): Loss (gain) on sale of real estate, net
387
(2,702
)
(37,809
)
(7,392
)
NAREIT FFO attributable to common stockholders
24,217
17,669
73,283
64,132
Add: Non-recurring items
1,260
(1)
3,895
(5)
824
(6)
5,078
(9)
FFO attributable to common stockholders, excluding non-recurring
items
$
25,477
$
21,564
$
74,107
$
69,210
NAREIT FFO attributable to common stockholders
$
24,217
$
17,669
$
73,283
$
64,132
Non-cash income:
Less: straight-line rental adjustment (income)
436
44
963
(619
)
(10)
Add: amortization of lease incentives
319
158
921
(7)
386
Add: Other non-cash expense
—
—
—
758
(11)
Less: Effective interest income from mortgage loans
(1,762
)
(2)
(1,473
)
(4,551
)
(2)
(4,700
)
(10)
Net non-cash income
(1,007
)
(1,271
)
(2,667
)
(4,175
)
Non-cash expense:
Add: Non-cash compensation charges
2,014
1,975
5,951
5,785
Less: Provision for credit losses
795
(3)
68
1,454
59
Net non-cash expense
2,809
2,043
7,405
5,844
Funds available for distribution (FAD)
26,019
18,441
78,021
65,801
Add: Non-recurring items
500
(4)
3,895
(5)
(681
)
(8)
5,232
(12)
FAD, excluding non-recurring items
$
26,519
$
22,336
$
77,340
$
71,033
(1)
Represents (3) and (4) below.
(2)
Includes $357 of effective interest from
three skilled nursing centers acquired through a sale-leaseback
transaction, subject to a lease which contains a purchase option.
In accordance with GAAP, the properties are required to be
presented as a financing receivable on our Consolidated Balance
Sheets and the rental income to be presented as Interest income
from financing receivable on our Consolidated Statements of
Income.
(3)
Includes $760 of provision for credit loss
reserve related to the acquisition of the three skilled nursing
centers accounted for as a financing receivable.
(4)
Represents the lease termination fee of
$500 paid to a former operator of 12 assisted living communities in
exchange for cooperation and assistance in facilitating an orderly
transition of the communities to another operator.
(5)
Represents the Senior Care and Abri Health
settlement payment ($3,895) in accordance with a settlement
agreement approved by the United States Bankruptcy Court.
(6)
Represents (1) from above and (7) from
below and the provision for credit losses related to the
origination of two mortgage loans during 2022 second quarter and a
$25,000 mezzanine loan during the first quarter of 2022 ($572)
offset by the lease termination fee received in connection with the
sale of a 74-unit assisted living community ($1,181).
(7)
Includes a lease incentive balance
write-off of $173 related to a closed property and subsequent lease
termination.
(8)
Represents the lease termination fee
received in connection with the sale of a 74-unit assisted living
community ($1,181) offset by (4) from above.
(9)
Represents (5) from above, (11) from
below, and the GAAP impact of the 50% reduction of 2021 rent and
interest escalation ($425).
(10)
Includes the straight-line rent ($649) and
effective interest ($263) impact of the 50% reduction of 2021 rent
and interest escalation.
(11)
Represents a straight-line rent receivable
write-off ($758) due to transitioning rental revenue to cash
basis.
(12)
Represents (5) from above and the cash
impact of the 50% reduction of 2021 rent and interest escalation
($1,337).
Reconciliation of FFO and FAD
(continued)
The following table continues the reconciliation between GAAP
net income available to common stockholders and 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,
2022
2021
2022
2021
NAREIT Basic FFO attributable to common
stockholders per share
$
0.60
$
0.45
$
1.85
$
1.64
NAREIT Diluted FFO attributable to common
stockholders per share
$
0.60
$
0.45
$
1.83
$
1.64
NAREIT Diluted FFO attributable to common
stockholders
$
24,348
$
17,669
$
73,283
$
64,132
Weighted average shares used to calculate
NAREIT diluted FFO per share attributable to common
stockholders
40,781
39,177
39,939
39,149
Diluted FFO attributable to common
stockholders, excluding non-recurring items
$
25,608
$
21,564
$
74,107
$
69,556
Weighted average shares used to calculate
diluted FFO, excluding non-recurring items, per share attributable
to common stockholders
40,781
39,177
39,939
39,346
Diluted FAD
$
26,150
$
18,441
$
78,021
$
65,801
Weighted average shares used to calculate
diluted FAD per share
40,781
39,177
39,939
39,149
Diluted FAD, excluding non-recurring
items
$
26,650
$
22,336
$
77,340
$
71,379
Weighted average shares used to calculate
diluted FAD, excluding non-recurring items, per share
40,781
39,177
39,939
39,346
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except per
share)
September 30, 2022
December 31, 2021
ASSETS
(unaudited)
(audited)
Investments:
Land
$
124,665
$
123,239
Buildings and improvements
1,270,722
1,285,318
Accumulated depreciation and
amortization
(379,915
)
(374,606
)
Operating real property investments,
net
1,015,472
1,033,951
Properties held-for-sale, net of
accumulated depreciation: 2022—$2,305; 2021—$0
10,710
—
Real property investments, net
1,026,182
1,033,951
Financing Receivable,(1) net of loan loss
reserve: 2022—$760; 2021—$0
75,507
—
Mortgage loans receivable, net of loan
loss reserve: 2022—$3,862; 2021—$3,473
383,006
344,442
Real estate investments, net
1,484,695
1,378,393
Notes receivable, net of loan loss
reserve: 2022—$590; 2021—$286
58,424
28,337
Investments in unconsolidated joint
ventures
19,340
19,340
Investments, net
1,562,459
1,426,070
Other assets:
Cash and cash equivalents
6,478
5,161
Debt issue costs related to revolving line
of credit
2,480
3,057
Interest receivable
44,290
39,522
Straight-line rent receivable
22,253
24,146
Lease incentives
2,001
2,678
Prepaid expenses and other assets
12,004
4,191
Total assets
$
1,651,965
$
1,504,825
LIABILITIES
Revolving line of credit
$
151,000
$
110,900
Term loans, net of debt issue costs:
2022—$526; 2021—$637
99,474
99,363
Senior unsecured notes, net of debt issue
costs: 2022—$1,533; 2021—$524
543,287
512,456
Accrued interest
3,120
3,745
Accrued expenses and other liabilities
29,915
33,234
Total liabilities
826,796
759,698
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000
shares authorized; shares issued and outstanding: 2022—40,505;
2021—39,374
404
394
Capital in excess of par value
899,921
856,895
Cumulative net income
1,526,721
1,444,636
Accumulated other comprehensive income
(loss)
9,445
(172
)
Cumulative distributions
(1,633,241
)
(1,565,039
)
Total LTC Properties, Inc. stockholders’
equity
803,250
736,714
Non-controlling interests
21,919
8,413
Total equity
825,169
745,127
Total liabilities and equity
$
1,651,965
$
1,504,825
_______________
(1)
Represents three skilled nursing centers
acquired through a sale-leaseback transaction, subject to a lease
which contains a purchase option. In accordance with GAAP, the
properties are required to be presented as a financing receivable
on our Consolidated Balance Sheets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221027006018/en/
Mandi Hogan (805) 981-8655
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