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 second quarter ended June 30, 2023.
Three Months Ended
June 30,
2023
2022
(unaudited)
Net income available to common
stockholders
$
6,028
$
54,065
Diluted earnings per common share
$
0.15
$
1.36
NAREIT funds from operations ("FFO")
attributable to common stockholders
$
27,178
$
25,350
NAREIT diluted FFO per common share
$
0.66
$
0.64
FFO attributable to common stockholders,
excluding non-recurring items
$
27,178
$
24,491
Funds available for distribution
("FAD")
$
27,935
$
26,779
FAD, excluding non-recurring items
$
27,935
$
25,598
Second quarter 2023 financial results were impacted by:
- Higher interest income from financing receivables due to the
acquisition of 11 assisted living and memory care communities
during 2023 first quarter, and three skilled nursing centers during
the 2022 third quarter. These acquisitions are being accounted for
as financing receivables in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”);
- Higher interest income from mortgage loans resulting from
mortgage loan originations in the 2023 first quarter and 2022
second quarter;
- Lower interest and other income due to the payoff of two
mezzanine loans during the 2023 first quarter;
- Higher interest expense primarily due to a higher outstanding
balance and higher interest rates on LTC’s revolving line of
credit, and the issuance of $75.0 million senior unsecured notes
during the 2022 second quarter; and
- Recorded a $12.1 million impairment loss to reduce the carrying
value of two assisted living communities to their estimated fair
value as a result ongoing negotiations for the potential sale these
communities. One of these properties is non-revenue generating, and
the other produces minimal rent.
During the second quarter of 2023, LTC completed the following
transactions:
- As previously announced, contributed $45.0 million to a $54.1
million joint venture for the purchase of a 242-unit independent
living, assisted living and memory care campus in Ohio. The campus,
which was built between 2019 and 2022, is now operated by current
LTC operator, Encore Senior Living (“Encore”). The seller, LTC’s JV
partner, has the option to purchase the campus during the third and
fourth lease years, with an exit IRR of 9.75%. The lease term is 10
years at an initial yield of 8.25% on LTC’s allocation of the JV
investment. LTC committed to fund $2.1 million of lease incentives
under the new lease. Rent is expected to be approximately $3.9
million per year;
- As previously announced, originated a $16.5 million mortgage
loan secured by a skilled nursing center in Illinois. The center,
which was built in 2010 and renovated in 2021, has 150 beds and is
now operated by current LTC operator, Ignite Medical Resorts. The
loan term is five years at an interest rate of 8.75%;
- As previously disclosed, sold a 70‑unit assisted living
community in Florida for $4.9 million;
- Sold a 39-unit assisted living community in New Jersey for $2.0
million;
- Entered into an agreement to sell two assisted living
communities in Pennsylvania with a total of 130 units for $11.5
million. The sale is expected to close during the third quarter of
2023. Accordingly, the Company anticipates recording a gain on sale
of approximately $5.2 million from these non-revenue producing
assets;
- As previously disclosed, LTC agreed to defer up to $1.5
million, or up to $300,000 per month for May through September
2023, in interest payments due on a mortgage loan secured by 15
skilled nursing centers located in Michigan and operated by
Prestige Healthcare. LTC deferred $600,000 in interest payments
during the 2023 second quarter and deferred $300,000 in interest
payments in July 2023;
- Provided $645,000 of abated rent during the 2023 second quarter
and $215,000 of abated rent in July 2023 to the same operator for
whom abated rent has been previously provided. LTC has agreed to
provide rent abatements up to $215,000 per month through the end of
2023;
- As previously announced, transitioned a portfolio of eight
assisted living communities with 500 units in Illinois, Ohio and
Michigan to Encore. LTC agreed to provide assistance in the 2023
second quarter to the former operator of this portfolio and as part
of the transition, LTC received repayment of $1.3 million of
deferred rent which represents $934,000 of April and May 2023
deferred rent and $316,000 of unrecorded deferred rent provided in
2022. Cash rent under the new two-year lease with Encore is based
on mutually agreed upon fair market rent beginning in month four of
the lease (September 2023);
- Paid $4.0 million in regular scheduled principal payments under
the Company’s senior unsecured notes; and
- Borrowed $56.3 million under the Company’s revolving line of
credit.
Subsequent to June 30, 2023, LTC completed the following
transactions:
- Originated a $17.0 million mezzanine loan with an affiliate of
Galerie Living. The mezzanine loan was utilized to recapitalize an
existing 130-unit assisted living, memory care and independent
living campus in Georgia, as well as the construction of 89
additional units. The existing campus was built in 2020 and is 95%
occupied. The loan term is five years at an initial yield of 8.75%
and an IRR of 12.0%;
- Paid $17.2 million in regular scheduled principal payments
under the Company’s senior unsecured notes; and
- Borrowed $34.0 million under the Company’s revolving line of
credit.
Conference Call
Information
LTC will conduct a conference call on Friday, July 28, 2023, 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, 2023. 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
1-888‑506‑0062
International Number
1-973‑528‑0011
Conference Access Code
152241
Additionally, an audio replay of the call will be available one
hour after the live call through August 11, 2023 via the
following:
USA Toll-Free Number
1‑877‑481‑4010
International Number
1-919-882-2331
Conference Number
48641
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 213 properties in 29 states
with 29 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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues:
Rental income
$
31,537
$
31,628
$
63,272
$
61,952
Interest income from financing
receivables(1)
3,830
—
7,581
—
Interest income from mortgage loans
11,926
10,097
23,170
19,733
Interest and other income
953
1,299
3,723
2,126
Total revenues
48,246
43,024
97,746
83,811
Expenses:
Interest expense
11,312
7,523
21,921
14,666
Depreciation and amortization
9,376
9,379
18,586
18,817
Impairment loss
12,076
—
12,510
—
Provision for credit losses
187
305
1,918
659
Transaction costs
91
67
208
99
Property tax expense
3,187
4,019
6,480
8,001
General and administrative expenses
6,091
5,711
12,385
11,519
Total expenses
42,320
27,004
74,008
53,761
Other operating income:
Gain on sale of real estate, net
302
38,094
15,675
38,196
Operating income
6,228
54,114
39,413
68,246
Income from unconsolidated joint
ventures
376
376
752
751
Net income
6,604
54,490
40,165
68,997
Income allocated to non-controlling
interests
(430
)
(107
)
(857
)
(202
)
Net income attributable to LTC Properties,
Inc.
6,174
54,383
39,308
68,795
Income allocated to participating
securities
(146
)
(318
)
(293
)
(407
)
Net income available to common
stockholders
$
6,028
$
54,065
$
39,015
$
68,388
Earnings per common share:
Basic
$
0.15
$
1.37
$
0.95
$
1.74
Diluted
$
0.15
$
1.36
$
0.95
$
1.73
Weighted average shares used to
calculate earnings per common share:
Basic
41,145
39,492
41,113
39,347
Diluted
41,232
39,665
41,200
39,520
Dividends declared and paid per common
share
$
0.57
$
0.57
$
1.14
$
1.14
_______________
(1)
Represents rental income from
acquisitions through sale-leaseback transactions, subject to leases
which contain purchase options. In accordance with GAAP, the
properties are required to be presented as financing receivables on
our Consolidated Balance Sheets and the rental income to be
presented as Interest income from financing receivables 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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
GAAP net income available to common
stockholders
$
6,028
$
54,065
$
39,015
$
68,388
Add: Impairment loss
12,076
—
12,510
—
Add: Depreciation and amortization
9,376
9,379
18,586
18,817
Less: Gain on sale of real estate, net
(302
)
(38,094
)
(15,675
)
(38,196
)
NAREIT FFO attributable to common
stockholders
27,178
25,350
54,436
49,009
Add: Non-recurring items
—
(859
)
(4)
262
(1)
(436
)
(6)
FFO attributable to common stockholders,
excluding non-recurring items
$
27,178
$
24,491
$
54,698
$
48,573
NAREIT FFO attributable to common
stockholders
$
27,178
$
25,350
54,436
49,009
Non-cash income:
Add: straight-line rental adjustment
423
293
888
527
Add: amortization of lease incentives
230
206
439
602
(7)
Less: Effective interest income
(2,220
)
(1,387
)
(3,828
)
(2,789
)
Net non-cash income
(1,567
)
(888
)
(2,501
)
(1,660
)
Non-cash expense:
Add: Non-cash compensation charges
2,137
2,012
4,225
3,937
Add: Provision for credit losses
187
305
1,918
(2)
659
Net non-cash expense
2,324
2,317
6,143
4,596
Funds available for distribution (FAD)
$
27,935
$
26,779
58,078
51,945
Less: Non-recurring income
—
(1,181
)
(5)
(1,570
)
(3)
(1,181
)
(5)
Funds available for distribution (FAD),
excluding non-recurring items
$
27,935
$
25,598
$
56,508
$
50,764
_______________
(1)
Represents the net of (2) and (3)
below.
(2)
Includes $1,832 of provision for
credit losses related to the $121,321 acquisition accounted for as
a financing receivable and $61,900 of mortgage loan
originations.
(3)
Represents the prepayment fee and
exit IRR related to the payoff of two mezzanine loans.
(4)
Represents (5) below partially
offset by the provision for credit losses related to the
origination of two mortgage loans during 2022 second quarter
($322).
(5)
Represents the lease termination
fee received in connection with the sale of a 74-unit assisted
living community.
(6)
Represents (5) from above
partially offset by the provision for credit losses related to the
origination of two mortgage loans during the second quarter of 2022
and a $25,000 mezzanine loan during the first quarter of 2022
($572) and (7) below.
(7)
Includes a lease incentive
balance write-off of $173 related to a closed property and lease
termination.
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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
NAREIT Basic FFO attributable to common
stockholders per share
$
0.66
$
0.64
$
1.32
$
1.25
NAREIT Diluted FFO attributable to common
stockholders per share
$
0.66
$
0.64
$
1.32
$
1.24
NAREIT Diluted FFO attributable to common
stockholders
$
27,324
$
25,350
$
54,729
$
49,009
Weighted average shares used to calculate
NAREIT diluted FFO per share attributable to common
stockholders
41,489
39,665
41,454
39,520
Diluted FFO attributable to common
stockholders, excluding non-recurring items
$
27,324
$
24,491
$
54,991
$
48,573
Weighted average shares used to calculate
diluted FFO, excluding non-recurring items, per share attributable
to common stockholders
41,489
39,665
41,454
39,520
Diluted FAD
$
28,081
$
26,779
$
58,371
$
51,945
Weighted average shares used to calculate
diluted FAD per share
41,489
39,665
41,454
39,520
Diluted FAD, excluding non-recurring
items
$
28,081
$
25,598
$
56,801
$
50,764
Weighted average shares used to calculate
diluted FAD, excluding non-recurring items, per share
41,489
39,665
41,454
39,520
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except per
share)
June 30, 2023
December 31, 2022
ASSETS
(unaudited)
(audited)
Investments:
Land
$
124,901
$
124,665
Buildings and improvements
1,286,615
1,273,025
Accumulated depreciation and
amortization
(393,449
)
(389,182
)
Operating real estate property, net
1,018,067
1,008,508
Properties held-for-sale, net of
accumulated depreciation: 2023—$3,691; 2022—$2,305
6,053
10,710
Real property investments, net
1,024,120
1,019,218
Financing receivables,(1) net of credit
loss reserve: 2023—$1,981; 2022—$768
196,075
75,999
Mortgage loans receivable, net of credit
loss reserve: 2023—$4,761; 2022—$3,930
471,978
389,728
Real estate investments, net
1,692,173
1,484,945
Notes receivable, net of credit loss
reserve: 2023—$463; 2022—$589
45,949
58,383
Investments in unconsolidated joint
ventures
19,340
19,340
Investments, net
1,757,462
1,562,668
Other assets:
Cash and cash equivalents
7,026
10,379
Debt issue costs related to revolving line
of credit
1,925
2,321
Interest receivable
50,593
46,000
Straight-line rent receivable
20,815
21,847
Lease incentives
1,360
1,789
Prepaid expenses and other assets
19,061
11,099
Total assets
$
1,858,242
$
1,656,103
LIABILITIES
Revolving line of credit
$
326,350
$
130,000
Term loans, net of debt issue costs:
2023—$417; 2022—$489
99,583
99,511
Senior unsecured notes, net of debt issue
costs: 2023—$1,364; 2022—$1,477
527,456
538,343
Accrued interest
3,870
5,234
Accrued expenses and other liabilities
41,368
32,708
Total liabilities
998,627
805,796
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000
shares authorized; shares issued and outstanding: 2023—41,409;
2022—41,262
413
412
Capital in excess of par value
935,427
931,124
Cumulative net income
1,583,968
1,544,660
Accumulated other comprehensive income
8,568
8,719
Cumulative distributions
(1,703,710
)
(1,656,548
)
Total LTC Properties, Inc. stockholders’
equity
824,666
828,367
Non-controlling interests
34,949
21,940
Total equity
859,615
850,307
Total liabilities and equity
$
1,858,242
$
1,656,103
_______________
(1)
Represents acquisitions through
sale-leaseback transactions, subject to leases which contain
purchase options. In accordance with GAAP, the properties are
required to be presented as financing receivables on our
Consolidated Balance Sheets.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230727604615/en/
Mandi Hogan (805) 981‑8655
LTC Properties (NYSE:LTC)
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