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, 2023.
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the full release here:
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Three Months Ended
September 30,
2023
2022
(unaudited)
Net income available to common
stockholders
$
22,050
$
13,159
Diluted earnings per common share
$
0.54
$
0.32
NAREIT funds from operations ("FFO")
attributable to common stockholders
$
26,679
$
24,217
NAREIT diluted FFO per common share
$
0.65
$
0.60
FFO attributable to common stockholders,
excluding non-recurring items
$
26,679
$
25,477
Funds available for distribution
("FAD")
$
27,213
$
26,019
FAD, excluding non-recurring items
$
27,213
$
26,519
Third 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 the 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;
- Higher interest and other income due to the origination of a
mezzanine loan during the 2023 third quarter;
- Higher interest expense primarily due to higher interest rates
and a higher outstanding balance on LTC’s revolving line of credit,
partially offset by scheduled principal paydowns on the Company’s
senior unsecured notes; and
- Lower provision for credit losses primarily due to the 2022
third quarter acquisition of three skilled nursing centers
accounted for as a financing receivable, partially offset by the
origination of a mezzanine loan in the 2023 third quarter.
During the third quarter of 2023, LTC completed the following
transactions:
- As previously announced, 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 loan term is five
years at an initial yield of 8.75% and an IRR of 12.0%;
- Committed to fund a $19.5 million mortgage loan for the
construction of an 85-unit assisted living and memory care
community in Michigan. The borrower contributed $12.1 million of
equity which will initially fund the construction. Once all of the
borrower’s equity has been drawn, LTC will begin funding the
commitment which is expected to be in early 2024. The loan term is
approximately three years at a rate of 8.75%, and includes two,
one-year extensions, each of which is contingent on certain
coverage thresholds;
- Sold five assisted living communities with a total of 247 units
for $14.1 million. These communities are located in Pennsylvania
and Nebraska;
- As previously announced, re-leased 10 of the 35 properties in
the existing Brookdale Senior Living (“Brookdale”) portfolio to
Brookdale under a new master lease. This new master lease includes
six properties in Colorado and four in Kansas. The six-year master
lease will commence on January 1, 2024. Rent in the first year is
set at $8.0 million, escalating by approximately 2% annually. The
lease includes a purchase option that can be exercised in 2029. LTC
also agreed to fund $4.5 million for capital expenditures for the
first two years of the lease, at an initial rate of 8%, escalating
by approximately 2% annually thereafter;
- Entered into agreements to sell seven assisted living
communities in the existing Brookdale portfolio. Four properties
located in Florida with a total of 176 units will be sold for
approximately $18.8 million, and three properties located in South
Carolina will be sold for approximately $8.4 million. LTC
anticipates receiving approximately $20.0 million to $21.0 million
in proceeds, net of transaction costs and seller financing, as a
result of these sales;
- Received the full deferred rent repayment of $384,000 related
to a master lease on three assisted living communities with a total
of 258 units;
- Provided $645,000 of abated rent during the 2023 third quarter
and $215,000 of abated rent in October 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;
- Paid $33.1 million in regular scheduled principal payments
under the Company’s senior unsecured notes; and
- Borrowed $35.9 million under the Company’s revolving line of
credit.
Subsequent to September 30, 2023, LTC completed the following
transactions:
- Amended the new Brookdale master lease commencing on January 1,
2024 to add seven additional properties. One property is located in
Ohio with 42 assisted living units and six are located in Texas
with 235 assisted living units. These properties are currently
included in the original Brookdale master lease. As a result of
this amendment, Brookdale will operate 17 properties under the new
master lease with the initial annual rent of $9.3 million and the
capital expenditure commitment will be $7.2 million. Additionally,
the new master lease provides Brookdale with a purchase option on
these seven properties; and
- Leased six assisted living communities located in Oklahoma,
with a total of 219 units, to a current LTC operator under a new
master lease, which is expected to commence on November 1, subject
to the issuance of licensure to the new operator. These properties
are currently included in the original Brookdale master lease. The
lease term is for three years, with one four-year extension period.
Rent in the first year is set at $960,000, increasing to $984,000
in the second year, and $1.2 million in the third year.
Additionally, the master lease includes a purchase option that can
be exercised starting in November 2027 through October 2029 if the
lessee exercises its four-year extension option.
Prestige Healthcare Update:
During the third quarter of 2023 LTC deferred $900,000 in
interest payments under an agreement 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. Subsequent to September 30, 2023, this loan was
amended. As part of the amendment, LTC has drawn $2.8 million from
Prestige Healthcare’s approximate $5.0 million letter of credit to
repay all deferred interest outstanding through October 2023.
Additionally, LTC will draw down approximately $334,000 in each of
November and December 2023 to be applied toward interest then due
on the loan at that point. As a result, LTC expects to receive all
contractual interest of $19.5 million due from Prestige Healthcare
in 2023. Effective January 1, 2024, the minimum mortgage interest
payment due to LTC will be set based on an annual current pay rate
of 8.5% on the outstanding loan balance. The contractual interest
rate on the loan of 10.8% as of January 1, 2024 remains unchanged.
From the retro-active Medicaid funds due to Prestige Healthcare,
LTC expects the letter of credit will be replenished in 2024 and
Prestige Healthcare will be able to pay all contractual interest
during 2024 and 2025.
Conference Call
Information
LTC will conduct a conference call on Friday, October 27, 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 September 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
(888) 506‑0062
International Number
(973) 528‑0011
Conference Access Code
273665
Additionally, an audio replay of the call will be available one
hour after the live call through November 10, 2023 via the
following:
USA Toll-Free Number
(877) 481‑4010
International Number
(919) 882-2331
Conference Number
49044
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 208 properties in 27 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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Revenues:
Rental income
$
31,589
$
31,585
$
94,861
$
93,537
Interest income from financing
receivables(1)
3,832
357
11,413
357
Interest income from mortgage loans
12,247
10,379
35,417
30,112
Interest and other income
1,635
1,182
5,358
3,308
Total revenues
49,303
43,503
147,049
127,314
Expenses:
Interest expense
12,674
7,941
34,595
22,607
Depreciation and amortization
9,499
9,385
28,085
28,202
Impairment loss
—
1,286
12,510
1,286
Provision for credit losses
189
795
2,107
1,454
Transaction costs
329
629
537
728
Property tax expense
3,271
4,179
9,751
12,180
General and administrative expenses
5,959
5,888
18,344
17,407
Total expenses
31,921
30,103
105,929
83,864
Other operating income:
Gain (loss) on sale of real estate,
net
4,870
(387
)
20,545
37,809
Operating income
22,252
13,013
61,665
81,259
Income from unconsolidated joint
ventures
375
376
1,127
1,127
Net income
22,627
13,389
62,792
82,386
Income allocated to non-controlling
interests
(430
)
(99
)
(1,287
)
(301
)
Net income attributable to LTC Properties,
Inc.
22,197
13,290
61,505
82,085
Income allocated to participating
securities
(147
)
(131
)
(440
)
(481
)
Net income available to common
stockholders
$
22,050
$
13,159
$
61,065
$
81,604
Earnings per common share:
Basic
$
0.54
$
0.33
$
1.48
$
2.06
Diluted
$
0.54
$
0.32
$
1.48
$
2.04
Weighted average shares used to
calculate earnings per
common share:
Basic
41,153
40,270
41,127
39,658
Diluted
41,211
40,552
41,185
39,939
Dividends declared and paid per common
share
$
0.57
$
0.57
$
1.71
$
1.71
_________________________
(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
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
GAAP net income available to common
stockholders
$
22,050
$
13,159
$
61,065
$
81,604
Add: Impairment loss
—
1,286
12,510
1,286
Add: Depreciation and amortization
9,499
9,385
28,085
28,202
(Less)/Add: (Gain) loss on sale of real
estate, net
(4,870
)
387
(20,545
)
(37,809
)
NAREIT FFO attributable to common
stockholders
26,679
24,217
81,115
73,283
Add: Non-recurring items
—
1,260
(1
)
262
(4
)
824
(7
)
FFO attributable to common stockholders,
excluding non-recurring items
$
26,679
$
25,477
$
81,377
$
74,107
NAREIT FFO attributable to common
stockholders
$
26,679
$
24,217
81,115
73,283
Non-cash income:
Add: straight-line rental adjustment
747
436
1,635
963
Add: amortization of lease incentives
171
319
610
921
(8
)
Less: Effective interest income
(2,696
)
(1,762
)
(6,524
)
(4,551
)
Net non-cash income
(1,778
)
(1,007
)
(4,279
)
(2,667
)
Non-cash expense:
Add: Non-cash compensation charges
2,123
2,014
6,348
5,951
Add: Provision for credit losses
189
795
(2
)
2,107
(5
)
1,454
Net non-cash expense
2,312
2,809
8,455
7,405
Funds available for distribution (FAD)
$
27,213
$
26,019
85,291
78,021
Less: Non-recurring income
—
500
(3
)
(1,570
)
(6
)
(681
)
(9
)
Funds available for distribution (FAD),
excluding non-recurring items
$
27,213
$
26,519
$
83,721
$
77,340
____________________________
(1)
Represents the net of (2) and (3)
below.
(2)
Includes $760 of provision for credit loss
related to the acquisition of the three skilled nursing centers
accounted for as a financing receivable.
(3)
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.
(4)
Represents the net of (5) and (6)
below.
(5)
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.
(6)
Represents the prepayment fee and exit IRR
related to the payoff of two mezzanine loans.
(7)
Represents (1) from above and (8) from
below and 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) offset by the lease termination fee received in connection
with the sale of a 74-unit assisted living community ($1,181).
(8)
Includes a lease incentive balance
write-off of $173 related to a closed property and lease
termination.
(9)
Represents the lease termination fee
received in connection with the sale of a 74-unit assisted living
community ($1,181) offset by (3) from above.
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,
2023
2022
2023
2022
NAREIT Basic FFO attributable to common
stockholders per share
$
0.65
$
0.60
$
1.97
$
1.85
NAREIT Diluted FFO attributable to common
stockholders per share
$
0.65
$
0.60
$
1.97
$
1.83
NAREIT Diluted FFO attributable to common
stockholders
$
26,826
$
24,348
$
81,555
$
73,283
Weighted average shares used to calculate
NAREIT diluted FFO per share attributable to common
stockholders
41,469
40,781
41,440
39,939
Diluted FFO attributable to common
stockholders, excluding non-recurring items
$
26,826
$
25,608
$
81,817
$
74,107
Weighted average shares used to calculate
diluted FFO, excluding non-recurring items, per share attributable
to common stockholders
41,469
40,781
41,440
39,939
Diluted FAD
$
27,360
$
26,150
$
85,731
$
78,021
Weighted average shares used to calculate
diluted FAD per share
41,469
40,781
41,440
39,939
Diluted FAD, excluding non-recurring
items
$
27,360
$
26,650
$
84,161
$
77,340
Weighted average shares used to calculate
diluted FAD, excluding non-recurring items, per share
41,469
40,781
41,440
39,939
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE
SHEETS
(amounts in thousands, except per
share)
September 30, 2023
December 31, 2022
(unaudited)
(audited)
ASSETS
Investments:
Land
$
123,919
$
124,665
Buildings and improvements
1,260,891
1,273,025
Accumulated depreciation and
amortization
(386,483
)
(389,182
)
Operating real estate property, net
998,327
1,008,508
Properties held-for-sale, net of
accumulated depreciation: 2023—$11,590; 2022—$2,305
9,448
10,710
Real property investments, net
1,007,775
1,019,218
Financing receivables,(1) net of credit
loss reserve: 2023—$1,981; 2022—$768
196,053
75,999
Mortgage loans receivable, net of credit
loss reserve: 2023—$4,777; 2022—$3,930
473,567
389,728
Real estate investments, net
1,677,395
1,484,945
Notes receivable, net of credit loss
reserve: 2023—$637; 2022—$589
63,056
58,383
Investments in unconsolidated joint
ventures
19,340
19,340
Investments, net
1,759,791
1,562,668
Other assets:
Cash and cash equivalents
11,302
10,379
Debt issue costs related to revolving line
of credit
1,719
2,321
Interest receivable
54,605
46,000
Straight-line rent receivable
20,068
21,847
Lease incentives
2,193
1,789
Prepaid expenses and other assets
18,185
11,099
Total assets
$
1,867,863
$
1,656,103
LIABILITIES
Revolving line of credit
$
362,250
$
130,000
Term loans, net of debt issue costs:
2023—$380; 2022—$489
99,620
99,511
Senior unsecured notes, net of debt issue
costs: 2023—$1,307; 2022—$1,477
494,353
538,343
Accrued interest
3,893
5,234
Accrued expenses and other liabilities
47,364
32,708
Total liabilities
1,007,480
805,796
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000
shares authorized; shares issued and outstanding: 2023—41,412;
2022—41,262
413
412
Capital in excess of par value
937,550
931,124
Cumulative net income
1,606,165
1,544,660
Accumulated other comprehensive income
8,596
8,719
Cumulative distributions
(1,727,315
)
(1,656,548
)
Total LTC Properties, Inc. stockholders’
equity
825,409
828,367
Non-controlling interests
34,974
21,940
Total equity
860,383
850,307
Total liabilities and equity
$
1,867,863
$
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/20231026191535/en/
Mandi Hogan (805) 981‑8655
LTC Properties (NYSE:LTC)
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