Press Release


LTC Reports 2019 Third Quarter Results and Discusses Recent Activities

Company Release - 10/31/2019 4:30 PM ET

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)-- 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, 2019.

Net income available to common stockholders was $27.1 million, or $0.68 per diluted share, for the 2019 third quarter, compared with $34.8 million, or $0.88 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, partially offset by an increase in revenues principally related to acquisitions, mortgage and mezzanine loan originations, funding of additional loan proceeds, capital improvements and completed developments.

Funds from Operations (“FFO”) was $30.8 million for the 2019 third quarter, compared with $29.9 million for the comparable 2018 period. FFO per diluted common share was $0.77 and $0.75 for the quarters ended September 30, 2019 and 2018, respectively. The improvement was primarily due to an increase in revenues mainly due to acquisitions, mortgage and mezzanine loan originations, funding of additional loan proceeds, capital improvements and completed developments.

LTC completed the following transactions during the third quarter of 2019:

  • Acquired a newly constructed, 90-bed skilled nursing center located in Missouri for $19.5 million, and entered into a 12-year lease agreement with an operator new to LTC’s portfolio at an initial cash yield of 8.25% escalating by 2.0% in December 2019 and annually thereafter. Additionally, LTC acquired a parcel of land and committed $17.4 million (including land purchase) to develop a 90-bed skilled nursing center in Missouri with the same operator, and entered into a separate 12-year lease agreement at an initial cash yield of 9.25% effective upon completion of development, certificate of occupancy and licensure;
  • Completed the transition of two memory care communities in Georgia and South Carolina with a total of 159 units from Thrive to an existing operator. The new two-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;
  • Completed the transition of the Company’s 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 with 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; and
  • Sold a 148-bed skilled nursing center in Georgia for $7.9 million, recognizing a net gain on sale of $6.2 million. LTC received $7.8 million in net proceeds which were used to pay down the Company’s line of credit. This property was leased under a master lease and rent under the master lease was not reduced as a result of this sale.

Subsequent to September 30, 2019, LTC completed the following:

  • Sold senior unsecured notes in the aggregate amount of $100.0 million to affiliates and managed accounts of PGIM, Inc. The notes bear interest at 3.85%, have scheduled principal payments and mature on October 20, 2031. The proceeds of the notes were used to pay down the Company’s line of credit.

Conference Call Information

LTC will conduct a conference call on Friday, November 1, 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 September 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 November 1 through November 15, 2019, and may be accessed by dialing 877-344-7529 (domestically) or 412-317-0088 (internationally) and entering conference number 10134627. 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

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

38,665

 

 

$

34,211

 

 

$

114,566

 

 

$

102,646

 

 

Interest income from mortgage loans

 

 

7,646

 

 

 

7,087

 

 

 

22,308

 

 

 

20,910

 

 

Interest and other income

 

 

808

 

 

 

478

 

 

 

1,967

 

 

 

1,502

 

 

Total revenues

 

 

47,119

 

 

 

41,776

 

 

 

138,841

 

 

 

125,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

7,827

 

 

 

7,497

 

 

 

23,004

 

 

 

22,981

 

 

Depreciation and amortization

 

 

9,932

 

 

 

9,447

 

 

 

29,399

 

 

 

28,159

 

 

(Recovery) provision for doubtful accounts

 

 

(14

)

 

 

106

 

 

 

153

 

 

 

76

 

 

Transaction costs

 

 

75

 

 

 

9

 

 

 

275

 

 

 

19

 

 

Property tax expense

 

 

4,270

 

(1)

 

 

 

12,566

 

 

 

 

General and administrative expenses

 

 

4,745

 

 

 

4,879

 

 

 

13,912

 

 

 

14,392

 

 

Total expenses

 

 

26,835

 

 

 

21,938

 

 

 

79,309

 

 

 

65,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate, net

 

 

6,236

 

 

 

14,353

 

 

 

6,736

 

 

 

62,698

 

 

Operating income

 

 

26,520

 

 

 

34,191

 

 

 

66,268

 

 

 

122,129

 

 

Income from unconsolidated joint ventures

 

 

760

 

 

 

746

 

 

 

1,973

 

 

 

2,103

 

 

Net income

 

 

27,280

 

 

 

34,937

 

 

 

68,241

 

 

 

124,232

 

 

Income allocated to non-controlling interests

 

 

(88

)

 

 

(17

)

 

 

(257

)

 

 

(17

)

 

Net income attributable to LTC Properties, Inc.

 

 

27,192

 

 

 

34,920

 

 

 

67,984

 

 

 

124,215

 

 

Income allocated to participating securities

 

 

(112

)

 

 

(138

)

 

 

(298

)

 

 

(504

)

 

Net income available to common stockholders

 

$

27,080

 

 

$

34,782

 

 

$

67,686

 

 

$

123,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.68

 

 

$

0.88

 

 

$

1.71

 

 

$

3.13

 

 

Diluted

 

$

0.68

 

 

$

0.88

 

 

$

1.69

 

 

$

3.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to calculate earnings per

 

 

 

 

 

 

 

 

 

 

 

 

 

common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

39,586

 

 

 

39,487

 

 

 

39,565

 

 

 

39,470

 

 

Diluted

 

 

39,965

 

 

 

39,865

 

 

 

39,944

 

 

 

39,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

 

$

0.57

 

 

$

0.57

 

 

$

1.71

 

 

$

1.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 September 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

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2019

 

2018

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income available to common stockholders

$

27,080

 

 

$

34,782

 

 

 

$

67,686

 

 

$

123,711

 

 

Add: Depreciation and amortization

 

9,932

 

 

 

9,447

 

 

 

 

29,399

 

 

 

28,159

 

 

Less: Gain on sale of real estate, net

 

(6,236

)

 

 

(14,353

)

 

 

 

(6,736

)

 

 

(62,698

)

 

NAREIT FFO attributable to common stockholders

 

30,776

 

 

 

29,876

 

 

 

 

90,349

 

 

 

89,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Non-recurring items (1) (2)

 

 

 

 

 

 

576

 

 

 

 

FFO attributable to common stockholders, excluding non-recurring items

$

30,776

 

 

$

29,876

 

 

 

$

90,925

 

 

$

89,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT FFO attributable to common stockholders

$

30,776

 

 

$

29,876

 

 

 

$

90,349

 

 

$

89,172

 

 

Non-cash income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: straight-line rental income

 

(1,085

)

 

 

(3,189

)

 

 

 

(3,598

)

 

 

(8,629

)

 

Add: amortization of lease costs

 

100

 

 

 

560

 

 

 

 

281

 

 

 

1,651

 

 

Add: Other non-cash expense (1)

 

 

 

 

 

 

1,926

 

 

 

 

Less: Effective interest income from mortgage loans

 

(1,528

)

 

 

(1,441

)

 

 

 

(4,361

)

 

 

(4,265

)

 

Less: Deferred income from unconsolidated joint ventures

 

(5

)

 

 

(31

)

 

 

 

(18

)

 

 

(93

)

 

Net non-cash income

 

(2,518

)

 

 

(4,101

)

 

 

 

(5,770

)

 

 

(11,336

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Non-cash compensation charges

 

1,626

 

 

 

1,487

 

 

 

 

4,938

 

 

 

4,384

 

 

Add: Non-cash interest related to earn-out liabilities

 

 

 

126

 

 

 

 

 

 

377

 

 

Less: Capitalized interest

 

(108

)

 

 

(298

)

 

 

 

(441

)

 

 

(850

)

 

Net non-cash expense

 

1,518

 

 

 

1,315

 

 

 

 

4,497

 

 

 

3,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds available for distribution (FAD)

 

29,776

 

 

 

27,090

 

 

 

 

$89,076

 

 

 

$81,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Non-recurring income (2)

 

 

 

 

 

 

(1,350

)

 

 

 

 

$

29,776

 

 

$

27,090

 

 

 

$

87,726

 

 

$

81,747

 

 

(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

$

0.78

 

 

$

0.76

 

 

 

$

2.28

 

 

$

2.26

 

 

NAREIT Diluted FFO attributable to common stockholders per share

$

0.77

 

 

$

0.75

 

 

 

$

2.26

 

 

$

2.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT Diluted FFO attributable to common stockholders

$

30,888

 

 

$

30,014

 

 

 

$

90,647

 

 

$

89,676

 

 

Weighted average shares used to calculate NAREIT diluted FFO per share attributable to common stockholders

 

40,129

 

 

 

39,865

 

 

 

 

40,106

 

 

 

39,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted FFO attributable to common stockholders, excluding non-recurring items

$

30,888

 

 

$

30,014

 

 

 

$

91,223

 

 

$

89,676

 

 

Weighted average shares used to calculate diluted FFO, excluding non-recurring

 

 

 

 

 

 

 

 

 

 

 

 

 

items, per share attributable to common stockholders

 

40,129

 

 

 

39,865

 

 

 

 

40,106

 

 

 

39,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted FAD, excluding non-recurring items

$

29,888

 

 

$

27,228

 

 

 

$

88,024

 

 

$

82,251

 

 

Weighted average shares used to calculate diluted FAD, excluding non-recurring

 

 

 

 

 

 

 

 

 

 

 

 

 

items, per share

 

40,129

 

 

 

39,865

 

 

 

 

40,106

 

 

 

39,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

December 31, 2018

 

ASSETS

 

(unaudited)

 

(audited)

 

Investments:

 

 

 

 

 

 

 

Land

 

$

129,403

 

 

$

125,358

 

 

Buildings and improvements

 

 

1,339,543

 

 

 

1,290,352

 

 

Accumulated depreciation and amortization

 

 

(340,505

)

 

 

(312,959

)

 

Operating real estate property, net

 

 

1,128,441

 

 

 

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

 

 

1,132,271

 

 

 

1,106,581

 

 

Mortgage loans receivable, net of loan loss reserve: 2019—$2,551; 2018—$2,447

 

 

253,186

 

 

 

242,939

 

 

Real estate investments, net

 

 

1,385,457

 

 

 

1,349,520

 

 

Notes receivable, net of loan loss reserve: 2019—$177; 2018—$128

 

 

17,552

 

 

 

12,715

 

 

Investments in unconsolidated joint ventures

 

 

24,426

 

 

 

30,615

 

 

Investments, net

 

 

1,427,435

 

 

 

1,392,850

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

3,960

 

 

 

2,656

 

 

Restricted cash

 

 

2,108

 

 

 

2,108

 

 

Debt issue costs related to bank borrowings

 

 

2,380

 

 

 

2,989

 

 

Interest receivable

 

 

25,099

 

 

 

20,732

 

 

Straight-line rent receivable, net of allowance for doubtful accounts: 2019—$0; 2018—$746

 

 

44,814

 

(1)

 

73,857

 

 

Lease incentives

 

 

2,590

 

(1)

 

14,443

 

 

Prepaid expenses and other assets

 

 

3,845

 

(2)

 

3,985

 

 

Total assets

 

$

1,512,231

 

 

$

1,513,620

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Bank borrowings

 

$

165,400

 

 

$

112,000

 

 

Senior unsecured notes, net of debt issue costs: 2019—$831; 2018—$938

 

 

518,469

 

 

 

533,029

 

 

Accrued interest

 

 

3,996

 

 

 

4,180

 

 

Accrued expenses and other liabilities

 

 

30,472

 

(2)

 

31,440

 

 

Total liabilities

 

 

718,337

 

 

 

680,649

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2019—39,752; 2018—39,657

 

 

398

 

 

 

397

 

 

Capital in excess of par value

 

 

865,721

 

 

 

862,712

 

 

Cumulative net income

 

 

1,280,940

 

 

 

1,255,764

 

 

Cumulative distributions

 

 

(1,361,625

)

 

 

(1,293,383

)

 

Total LTC Properties, Inc. stockholders’ equity

 

 

785,434

 

 

 

825,490

 

 

Non-controlling interests

 

 

8,460

 

 

 

7,481

 

 

Total equity

 

 

793,894

 

 

 

832,971

 

 

Total liabilities and equity

 

$

1,512,231

 

 

$

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 September 30, 2019 for further discussion.

(2)

Includes $1,354 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 September 30, 2019 for further discussion.

 

Wendy L. Simpson
Pam Kessler
805-981-8655

Source: LTC Properties, Inc.