EXHIBIT 99.1
Published on October 31, 2019
Exhibit 99.1
 |
FOR IMMEDIATE RELEASE
For more information contact: Wendy L. Simpson Pam Kessler (805) 981-8655 |
LTC REPORTS 2019 THIRD QUARTER RESULTS
AND DISCUSSES RECENT ACTIVITIES
WESTLAKE VILLAGE, CALIFORNIA, October 31, 2019 -- 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. |
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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.
(financial tables follow)
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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. |
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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.
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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 | ||||||||||||
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LTC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share)
| September 30, 2019 | December 31, 2018 | |||||||
| (unaudited) | (audited) | |||||||
| ASSETS | ||||||||
| 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. |
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