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LTC Reports 2023 First Quarter Results and Discusses Recent Activities

04/27/2023

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 first quarter ended March 31, 2023.

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

 

(unaudited)

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

32,929

 

$

14,275

Diluted earnings per common share

 

$

0.80

 

 

$

0.36

 

NAREIT funds from operations ("FFO") attributable to common stockholders

 

$

27,200

 

 

$

23,611

 

NAREIT diluted FFO per common share

 

$

0.66

 

 

$

0.60

 

FFO attributable to common stockholders, excluding non-recurring items

 

$

27,462

 

 

$

24,034

 

Funds available for distribution ("FAD")

 

$

30,085

 

 

$

25,118

 

FAD, excluding non-recurring items

 

$

28,515

 

 

$

25,118

 

First quarter 2023 financial results were impacted by:

  • Higher rental income from transitioned portfolios, the acquisition of four skilled nursing centers during the 2022 second quarter, completed development projects and annual rent escalations. The increase in rental income was partially offset by 2023 first quarter sales, discussed below, and 2022 second quarter sale of three assisted living communities and a skilled nursing center.
  • 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.
  • Higher interest and other income due to the payoff of two mezzanine loans and the related exit IRR and prepayment fee during the 2023 first quarter, and a mezzanine loan origination during the 2022 first quarter.
  • Higher interest expense 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, partially offset by scheduled principal paydowns on the Company’s senior unsecured notes.
  • Higher provision for credit losses resulting from more originations in the first quarter of 2023, than in the same quarter in 2022.
  • Higher general and administrative expenses due to higher non-cash compensation and increases in overall costs due to inflationary pressures and the timing of certain expenditures.
  • The recording of a $434,000 impairment loss related to a 70-unit assisted living community. See subsequent events below for further discussion.

During the first quarter of 2023, LTC completed the following:

  • As previously announced, invested $128.3 million in 12 assisted living and memory care communities as follows:
    • Entered into a $121.3 million joint venture (“JV”) with an existing LTC operator, and contributed $117.5 million into the JV that purchased 11 assisted living and memory care communities with a total of 523 units. The communities are located in North Carolina and are operated under a 10-year master lease, with two five-year renewal options. The initial annual rent is at a rate of 7.25%, increasing to 7.50% in year three, then escalating thereafter based on CPI, subject to a floor of 2% and ceiling of 4%. The master lease provides the operator with the option to buy up to 50% of the properties at the beginning of the third lease year, and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit IRR of 9.00% on any portion of the properties being purchased. LTC consolidates the joint venture’s acquired properties and the acquisition is accounted for as a financing receivable due to the seller’s purchase option. LTC expects to record consolidated GAAP and cash rent interest income from financing receivable during 2023 of $9.7 million and $8.8 million, respectively, related to the joint venture investment;
    • Originated a $10.8 million mortgage loan secured by a 45-unit memory care community located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.00%;
  • As previously announced, invested $51.1 million in a 203-unit independent living, assisted living, and memory care community located in Georgia through participation in an existing senior mortgage loan by refinancing existing banks including LTC’s outstanding $7.5 million mezzanine loan. The rate on the senior mortgage loan, which expires in October 2024, is 7.50%, with an IRR of 7.75%;
  • As discussed above, a $7.5 million mezzanine loan was prepaid in connection with LTC’s $51.1 million investment in an existing mortgage loan. In connection with the mezzanine loan prepayment, LTC recorded $1.4 million of interest income related to the exit IRR;
  • As previously announced, received $4.5 million from a mezzanine loan prepayment, which includes a prepayment fee and the exit IRR totaling $190,000. The mezzanine loan was related to a 136-unit independent living community in Oregon;
  • As previously announced, sold two skilled nursing centers with a total of 235 beds located in New Mexico for $21.3 million, and recorded a gain on sale of $15.3 million;
  • Sold a 60-unit assisted living community in Kentucky for $11.0 million;
  • Provided $645,000 of abated rent to the same operator for which LTC has been providing assistance;
  • Paid $7.0 million in regular scheduled principal payments under the Company’s senior unsecured notes;
  • Borrowed $140.1 million under the Company’s revolving line of credit primarily for investments in 2023; and
  • Sold 48,500 shares of LTC’s common stock for $1.8 million in net proceeds under its equity distribution agreements.

Subsequent to March 31, 2023, LTC completed the following:

  • Sold a 70-unit assisted living community located in Florida for $4.9 million. In connection with the sale, LTC recorded a $434,000 impairment loss during the first quarter of 2023, as discussed above;
  • Repaid $6.0 million under its unsecured revolving line of credit;
  • Agreed to defer up to $1.5 million in interest payments due on a mortgage loan secured by 15 skilled nursing centers located in Michigan which are operated by Prestige Healthcare. The deferral will be available from May through September 2023 capped at $300,000 per month;
  • Agreed to defer each of April and May 2023 rent of $467,000 for an operator for whom LTC previously provided assistance. LTC is in the process of transitioning this portfolio of eight assisted living communities with a total of 500 units to another LTC operator, and expect to complete the transaction during the 2023 second quarter. After the portfolio is transitioned, cash rent will be based on mutually agreed fair market rent; and
  • Provided $215,000 of abated rent in April 2023 to the same operator for whom abated rent has been previously provided. LTC has agreed to provide rent abatements up to $215,000 for each of May and June 2023.

Conference Call Information

LTC will conduct a conference call on Friday, April 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 March 31, 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

1-833-470-1428

Canada Toll-Free Number

1-833-950-0062

Conference Access Code

796837

Additionally, an audio replay of the call will be available one hour after the live call and through May 12, 2023 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

313430

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 212 properties in 29 states with 31 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

 

 

March 31,

 

 

2023

 

2022

Revenues:

 

 

 

 

 

 

Rental income

 

$

31,735

 

 

$

30,324

 

Interest income from financing receivables(1)

 

 

3,751

 

 

 

 

Interest income from mortgage loans

 

 

11,244

 

 

 

9,636

 

Interest and other income

 

 

2,770

 

 

 

827

 

Total revenues

 

 

49,500

 

 

 

40,787

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

Interest expense

 

 

10,609

 

 

 

7,143

 

Depreciation and amortization

 

 

9,210

 

 

 

9,438

 

Impairment loss

 

 

434

 

 

 

 

Provision for credit losses

 

 

1,731

 

 

 

354

 

Transaction costs

 

 

117

 

 

 

32

 

Property tax expense

 

 

3,293

 

 

 

3,982

 

General and administrative expenses

 

 

6,294

 

 

 

5,808

 

Total expenses

 

 

31,688

 

 

 

26,757

 

 

 

 

 

 

 

 

Other operating income:

 

 

 

 

 

 

Gain on sale of real estate, net

 

 

15,373

 

 

 

102

 

Operating income

 

 

33,185

 

 

 

14,132

 

Income from unconsolidated joint ventures

 

 

376

 

 

 

375

 

Net income

 

 

33,561

 

 

 

14,507

 

Income allocated to non-controlling interests

 

 

(427

)

 

 

(95

)

Net income attributable to LTC Properties, Inc.

 

 

33,134

 

 

 

14,412

 

Income allocated to participating securities

 

 

(205

)

 

 

(137

)

Net income available to common stockholders

 

$

32,929

 

 

$

14,275

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

Basic

 

$

0.80

 

 

$

0.36

 

Diluted

 

$

0.80

 

 

$

0.36

 

 

 

 

 

 

 

 

Weighted average shares used to calculate earnings per common share:

 

 

 

 

 

 

Basic

 

 

41,082

 

 

 

39,199

 

Diluted

 

 

41,189

 

 

 

39,349

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

 

$

0.57

 

 

$

0.57

 

_______________

(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

 

 

March 31,

 

 

2023

 

2022

 

 

 

 

 

 

 

 

GAAP net income available to common stockholders

$

32,929

 

 

$

14,275

 

 

Add: Impairment loss

 

434

 

 

 

 

 

Add: Depreciation and amortization

 

9,210

 

 

 

9,438

 

 

Less: Gain on sale of real estate, net

 

(15,373

)

 

 

(102

)

 

NAREIT FFO attributable to common stockholders

 

27,200

 

 

 

23,611

 

 

 

 

 

 

 

 

Add: Non-recurring items

 

262

 

(1)

 

423

 

(4)

FFO attributable to common stockholders, excluding non-recurring items

$

27,462

 

 

$

24,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT FFO attributable to common stockholders

$

27,200

 

 

$

23,611

 

 

Non-cash income:

 

 

 

 

 

 

Add: straight-line rental adjustment

 

465

 

 

 

234

 

 

Add: amortization of lease incentives

 

209

 

 

 

396

 

(5)

Less: Effective interest income

 

(1,608

)

 

 

(1,402

)

 

Net non-cash income

 

(934

)

 

 

(772

)

 

 

 

 

 

 

 

Non-cash expense:

 

 

 

 

 

 

Add: Non-cash compensation charges

 

2,088

 

 

 

1,925

 

 

Add: Provision for credit losses

 

1,731

 

(2)

 

354

 

(6)

Net non-cash expense

 

3,819

 

 

 

2,279

 

 

 

 

 

 

 

 

Funds available for distribution (FAD)

$

30,085

 

 

$

25,118

 

 

 

 

 

 

 

 

Less: Non-recurring income

 

(1,570

)

(3)

 

 

 

Funds available for distribution (FAD), excluding non-recurring items

$

28,515

 

 

$

25,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 the sum of (5) and (6) below.

(5)

Includes a lease incentive balance write-off of $173 related to a closed property and subsequent lease termination.

(6)

Includes $250 of provision for credit losses related to the origination of a $25,000 mezzanine loan during 2022 first quarter.

 

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

 

March 31,

 

2023

 

2022

 

 

 

 

 

 

NAREIT Basic FFO attributable to common stockholders per share

$

0.66

 

$

0.60

NAREIT Diluted FFO attributable to common stockholders per share

$

0.66

 

 

$

0.60

 

 

 

 

 

 

 

NAREIT Diluted FFO attributable to common stockholders

$

27,200

 

 

$

23,611

 

 

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

 

41,189

 

 

 

39,349

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

27,462

 

 

$

24,171

 

 

Weighted average shares used to calculate diluted FFO, excluding non-recurring items, per share attributable to common stockholders

 

41,189

 

 

 

39,575

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted FAD

$

30,085

 

 

$

25,255

 

 

 

 

 

 

 

Weighted average shares used to calculate diluted FAD per share

 

41,189

 

 

 

39,575

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted FAD, excluding non-recurring items

$

28,515

 

 

$

25,255

 

 

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

 

41,189

 

 

 

39,575

 

 

 

 

 

 

 

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

 

 

 

 

 

 

 

 

 

March 31, 2023

 

December 31, 2022

ASSETS

 

(unaudited)

 

(audited)

Investments:

 

 

 

 

 

 

Land

 

$

123,338

 

 

$

124,665

 

Buildings and improvements

 

 

1,258,721

 

 

 

1,273,025

 

Accumulated depreciation and amortization

 

 

(390,013

)

 

 

(389,182

)

Operating real estate property, net

 

 

992,046

 

 

 

1,008,508

 

Properties held-for-sale, net of accumulated depreciation: 2023—$3,088; 2022—$2,305

 

 

4,075

 

 

 

10,710

 

Real property investments, net

 

 

996,121

 

 

 

1,019,218

 

Financing receivables,(1) net of credit loss reserve: 2023—$1,981; 2022—$768

 

 

196,096

 

 

 

75,999

 

Mortgage loans receivable, net of credit loss reserve: 2023—$4,569; 2022—$3,930

 

 

452,955

 

 

 

389,728

 

Real estate investments, net

 

 

1,645,172

 

 

 

1,484,945

 

Notes receivable, net of credit loss reserve: 2023—$469; 2022—$589

 

 

46,467

 

 

 

58,383

 

Investments in unconsolidated joint ventures

 

 

19,340

 

 

 

19,340

 

Investments, net

 

 

1,710,979

 

 

 

1,562,668

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

Cash and cash equivalents

 

 

5,538

 

 

 

10,379

 

Debt issue costs related to revolving line of credit

 

 

2,132

 

 

 

2,321

 

Interest receivable

 

 

48,079

 

 

 

46,000

 

Straight-line rent receivable

 

 

21,238

 

 

 

21,847

 

Lease incentives

 

 

1,571

 

 

 

1,789

 

Prepaid expenses and other assets

 

 

9,319

 

 

 

11,099

 

Total assets

 

$

1,798,856

 

 

$

1,656,103

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

Revolving line of credit

 

$

270,100

 

 

$

130,000

 

Term loans, net of debt issue costs: 2023—$455; 2022—$489

 

 

99,545

 

 

 

99,511

 

Senior unsecured notes, net of debt issue costs: 2023—$1,420; 2022—$1,477

 

 

531,400

 

 

 

538,343

 

Accrued interest

 

 

4,122

 

 

 

5,234

 

Accrued expenses and other liabilities

 

 

29,074

 

 

 

32,708

 

Total liabilities

 

 

934,241

 

 

 

805,796

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2023—41,396; 2022—41,262

 

 

413

 

 

 

412

 

Capital in excess of par value

 

 

933,370

 

 

 

931,124

 

Cumulative net income

 

 

1,577,794

 

 

 

1,544,660

 

Accumulated other comprehensive income

 

 

7,357

 

 

 

8,719

 

Cumulative distributions

 

 

(1,680,111

)

 

 

(1,656,548

)

Total LTC Properties, Inc. stockholders’ equity

 

 

838,823

 

 

 

828,367

 

Non-controlling interests

 

 

25,792

 

 

 

21,940

 

Total equity

 

 

864,615

 

 

 

850,307

 

Total liabilities and equity

 

$

1,798,856

 

 

$

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.

 

Mandi Hogan
(805) 981-8655

Source: LTC Properties, Inc.

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