LTC Reports 2024 First Quarter Results and Discusses Recent Activities
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240429003451/en/
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Three Months Ended |
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2024 |
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2023 |
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(unaudited) |
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Net income available to common stockholders |
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$ |
24,065 |
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$ |
32,929 |
Diluted earnings per common share |
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$ |
0.56 |
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$ |
0.80 |
NAREIT funds from operations ("FFO") attributable to common stockholders |
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$ |
29,909 |
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$ |
27,200 |
NAREIT diluted FFO per common share |
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$ |
0.69 |
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$ |
0.66 |
FFO attributable to common stockholders, excluding non-recurring items |
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$ |
27,532 |
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$ |
27,462 |
Funds available for distribution ("FAD") |
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$ |
31,274 |
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$ |
30,085 |
FAD, excluding non-recurring items |
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$ |
28,897 |
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$ |
28,515 |
First quarter 2024 financial results were impacted by:
-
Higher rental revenue due to the repayment of
$2.4 million of rent credit in connection with the sale of a 110-unit assisted living community, discussed below, rent received from a 2023 second quarter acquisition, the timing of cash rent received, lease renewals, and annual rent escalations, partially offset by property sales and transitioned portfolios; - Higher interest income from mortgage loans resulting from mortgage loan originations during 2023, and funding under a construction loan in 2024;
- Lower interest and other income primarily due to the exit IRR and prepayment fee received in 2023 in connection to the payoff of two mezzanine loans, partially offset by a 2023 mezzanine loan origination;
- 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 LTC’s senior unsecured notes;
- Decrease in provision for credit losses primarily due to higher dollar volume of loan originations in the 2023 first quarter than in the 2024 first quarter; and
-
A
$3.3 million net gain on sale in 2024 related to seven assisted living communities, of which five were located inTexas , one was located inFlorida and one was located inWisconsin . See below for further discussion of the sales transactions.
During the first quarter of 2024, LTC completed the following transactions:
-
Completed the previously announced sale and re-lease process for 10 assisted living communities under the ALG Senior (“ALG”) master lease. These properties, seven of which were built in the 90s, are primarily located in small rural towns, were non-revenue generating, and were temporarily transitioned to ALG in
July 2022 following the COVID pandemic, allowing LTC time to find a more permanent solution for the portfolio, as follows:-
Transitioned two of the properties located in
Georgia andSouth Carolina to an operator new to LTC. The lease term is two years with two one-year extension options. The initial rent for the first six months is zero, after which rent will be based on mutually agreed upon fair market rent. The master lease includes a purchase option that can be exercised in 2027, if the two one-year lease extensions are exercised. Additionally, LTC agreed to fund up to$906,000 for capital improvements for the first year, and up to$240,000 for a working capital note, at 8.25%, maturing onDecember 31, 2025 ; -
Sold five of the properties located in
Texas for$1.6 million , as mentioned above. LTC received$925,000 of proceeds, net of transaction costs, and recorded a loss on sale of$356,000 ; -
In
April 2024 , two of the properties located inTexas , that were closed in 2023 and 2024, were sold for$500,000 . LTC received proceeds of approximately$400,000 , net of transaction costs, and anticipates recording a minimal gain on sale in the second quarter of 2024; and -
In
April 2024 , transitioned one of the properties located inTexas to an operator new to LTC. The lease term is for two years with two one-year extension options, each of which is contingent on certain coverage thresholds. The initial rent for the first six months is zero, after which rent will be based on mutually agreed upon fair market rent. The master lease includes a purchase option that can be exercised beginning in 2026, if the one-year lease extension is exercised. Additionally, LTC agreed to fund up to$570,000 for capital improvements for the first year of the lease, and up to$290,000 for a working capital note, at a rate of 9.0%, maturing concurrently with the master lease maturity.
-
Transitioned two of the properties located in
-
As previously announced, sold its interest in a joint venture investment in a 110-unit assisted living community in
Wisconsin for$23.1 million , which yielded 8.1% to LTC in 2023. The purchase price included repayment of$2.4 million of rent credit provided to the operator during new construction lease-up, as well as the payoff of a$550,000 note receivable. LTC received net proceeds of$20.2 million , net of transaction costs, and recorded a gain on sale of$4.0 million ; -
Sold a 60-unit assisted living community in
Florida for$4.5 million , as mentioned above. LTC received proceeds of$4.3 million , net of transaction costs, and recorded a loss on sale of$319,000 ; -
Funded
$2.9 million under a$19.5 million mortgage loan commitment for the construction of an 85-unit assisted living and memory care community inMichigan . The borrower contributed$12.1 million of equity upon origination inJuly 2023 , which was used to initially fund the construction. The loan has a term of approximately three years, and is interest only at a rate of 8.75%. The loan includes two, one-year extensions, each of which is contingent on certain coverage thresholds; -
As previously announced, amended its unsecured revolving line of credit to accelerate the one-year extension option notice date to
January 4, 2024 . Concurrently, LTC exercised its option to extend the maturity date on its unsecured revolving line of credit toNovember 19, 2026 . All other provisions of the agreement remain unchanged; -
Repaid
$25.2 million under LTC’s revolving line of credit; -
Paid
$6.0 million in regular scheduled principal payments under LTC’s senior unsecured notes; and -
Sold 139,100 shares of LTC’s common stock for
$4.5 million in net proceeds under its equity distribution agreements.
Subsequent to
-
As previously announced, originated a
$12.7 million mortgage loan toIgnite Medical Resorts . The mortgage loan is secured by a skilled nursing and assisted living campus inTexas . The campus was built in 2017, and includes 78 units (48 skilled nursing and 30 assisted living) and 104 licensed beds (70 skilled nursing and 34 assisted living). The five-year mortgage loan is interest only at a current rate of 9.15%. The investment will be accounted for as an unconsolidated joint venture, and is expected to generate approximately$884,000 of revenue in 2024; -
Transitioned an assisted living community located in
Texas from ALG to an operator new to LTC, and sold two former ALG assisted living communities for$500,000 , as mentioned above; -
Executed a term sheet with
HMG Healthcare (“HMG”), whereby an agreement has been reached, in principle, to amend the master lease covering 11 skilled nursing centers inTexas to extend the term throughDecember 2028 . Annual rent will increase by$1.0 million to$9.0 million for 2024. Rent will increase to$9.5 million in 2025, to$10.0 million in 2026 and then escalating 3.3% annually thereafter through 2028. The amended master lease provides HMG with two five-year renewal options, with rent in the initial year of the first renewal term adjusting to fair market rent subject to a collar between 2.5% and 12.5%. As a condition of the amendment, HMG will repay$11.9 million on its$13.5 million working capital note during the 2024 second quarter. Upon the repayment, the remaining balance of the working capital note will be interest-free, and will be repaid in installments through 2028; -
An operator exercised its renewal option for another five years, from
March 2025 throughFebruary 2030 . Annual cash and GAAP rent for 2024 are$8.0 million and$7.0 million , respectively, escalating 2.5% annually. The master lease covers 666 beds across four skilled nursing centers, three inTexas and one inWisconsin , and a behavioral health care hospital inNevada ; and -
Sold 204,700 shares of common stock for
$6.5 million in net proceeds under its equity distribution agreements.
“After solid execution in 2023 during which we further optimized and strengthened our portfolio, we entered this year stronger and in a better position to concentrate on growing our company,” said
Conference Call Information
LTC will conduct a conference call on
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Webcast |
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(888) 506‑0062 |
International Number |
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(973) 528‑0011 |
Conference Access Code |
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674331 |
Additionally, an audio replay of the call will be available one hour after the live call through
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(877) 481‑4010 |
International Number |
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(919) 882-2331 |
Conference Number |
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50325 |
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 194 properties in 26 states with 32 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
CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share amounts) |
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Three Months Ended |
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2024 |
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2023 |
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(unaudited) |
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Revenues: |
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Rental income |
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$ |
33,549 |
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$ |
31,735 |
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Interest income from financing receivables(1) |
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3,830 |
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3,751 |
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Interest income from mortgage loans |
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12,448 |
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11,244 |
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Interest and other income |
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1,539 |
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2,770 |
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Total revenues |
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51,366 |
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49,500 |
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Expenses: |
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Interest expense |
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11,045 |
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10,609 |
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Depreciation and amortization |
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9,095 |
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9,210 |
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Impairment loss |
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— |
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434 |
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Provision for credit losses |
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24 |
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1,731 |
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Transaction costs |
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266 |
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117 |
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Property tax expense |
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3,383 |
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3,293 |
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General and administrative expenses |
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6,491 |
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6,294 |
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Total expenses |
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30,304 |
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31,688 |
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Other operating income: |
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Gain on sale of real estate, net |
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3,251 |
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15,373 |
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Operating income |
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24,313 |
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33,185 |
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Income from unconsolidated joint ventures |
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376 |
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376 |
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Net income |
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24,689 |
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33,561 |
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Income allocated to non-controlling interests |
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(459 |
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(427 |
) |
Net income attributable to |
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24,230 |
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33,134 |
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Income allocated to participating securities |
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(165 |
) |
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(205 |
) |
Net income available to common stockholders |
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$ |
24,065 |
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$ |
32,929 |
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Earnings per common share: |
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Basic |
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$ |
0.56 |
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$ |
0.80 |
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Diluted |
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$ |
0.56 |
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$ |
0.80 |
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Weighted average shares used to calculate earnings per |
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common share: |
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Basic |
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42,891 |
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41,082 |
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Diluted |
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43,032 |
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41,189 |
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Dividends declared and paid per common share |
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$ |
0.57 |
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$ |
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
FFO, as defined by the
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):
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Three Months Ended |
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2024 |
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2023 |
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GAAP net income available to common stockholders |
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$ |
24,065 |
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$ |
32,929 |
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Add: Impairment loss |
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— |
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434 |
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Add: Depreciation and amortization |
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9,095 |
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9,210 |
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Less: Gain on sale of real estate, net |
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(3,251 |
) |
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(15,373 |
) |
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NAREIT FFO attributable to common stockholders |
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29,909 |
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27,200 |
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Add: Non-recurring items |
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(2,377 |
) |
(1 |
) |
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262 |
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(2 |
) |
FFO attributable to common stockholders, excluding non-recurring items |
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$ |
27,532 |
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$ |
27,462 |
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NAREIT FFO attributable to common stockholders |
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$ |
29,909 |
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$ |
27,200 |
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Non-cash income: |
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Add: straight-line rental adjustment |
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550 |
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465 |
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Add: amortization of lease incentives |
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233 |
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209 |
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Less: Effective interest income |
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(1,644 |
) |
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(1,608 |
) |
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Net non-cash income |
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(861 |
) |
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(934 |
) |
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Non-cash expense: |
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Add: Non-cash compensation charges |
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2,202 |
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|
2,088 |
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Add: Provision for credit losses |
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24 |
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1,731 |
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(3 |
) |
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Net non-cash expense |
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2,226 |
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|
|
3,819 |
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Funds available for distribution (FAD) |
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$ |
31,274 |
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$ |
30,085 |
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Less: Non-recurring income |
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(2,377 |
) |
(1 |
) |
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(1,570 |
) |
(4 |
) |
Funds available for distribution (FAD), excluding non-recurring items |
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$ |
28,897 |
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$ |
28,515 |
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(1) |
Represents the repayment of rent credit received in connection with the sale of a 110-unit assisted living community in |
(2) |
Represents the net of (3) and (4) below. |
(3) |
Includes |
(4) |
Represents the exit IRR and prepayment fee received in 2023 in connection to the payoff of two mezzanine loans. |
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):
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Three Months Ended |
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2024 |
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2023 |
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NAREIT Basic FFO attributable to common stockholders per share |
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$ |
0.70 |
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$ |
0.66 |
NAREIT Diluted FFO attributable to common stockholders per share |
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$ |
0.69 |
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$ |
0.66 |
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NAREIT Diluted FFO attributable to common stockholders |
|
$ |
30,074 |
|
$ |
27,200 |
Weighted average shares used to calculate NAREIT diluted FFO per share attributable to common stockholders |
|
|
43,309 |
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|
41,189 |
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|
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|
|
|
|
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|
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Diluted FFO attributable to common stockholders, excluding non-recurring items |
|
$ |
27,697 |
|
$ |
27,462 |
Weighted average shares used to calculate diluted FFO, excluding non-recurring items, per share attributable to common stockholders |
|
|
43,309 |
|
|
41,189 |
|
|
|
|
|
|
|
|
|
|
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|
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|
Diluted FAD |
|
$ |
31,439 |
|
$ |
30,085 |
|
|
|
|
|
|
|
Weighted average shares used to calculate diluted FAD per share |
|
|
43,309 |
|
|
41,189 |
|
|
|
|
|
|
|
|
|
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|
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Diluted FAD, excluding non-recurring items |
|
$ |
29,062 |
|
$ |
28,515 |
Weighted average shares used to calculate diluted FAD, excluding non-recurring items, per share |
|
|
43,309 |
|
|
41,189 |
|
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|
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|
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|
CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share, audited) |
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(unaudited) |
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(audited) |
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ASSETS |
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Investments: |
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Land |
|
$ |
120,137 |
|
|
$ |
121,725 |
|
Buildings and improvements |
|
|
1,219,622 |
|
|
|
1,235,600 |
|
Accumulated depreciation and amortization |
|
|
(383,782 |
) |
|
|
(387,751 |
) |
Operating real estate property, net |
|
|
955,977 |
|
|
|
969,574 |
|
Properties held-for-sale, net of accumulated depreciation: 2024—$2,773; 2023—$3,616 |
|
|
389 |
|
|
|
18,391 |
|
Real property investments, net |
|
|
956,366 |
|
|
|
987,965 |
|
Financing receivables,(1) net of credit loss reserve: 2024—$1,980; 2023—$1,980 |
|
|
196,010 |
|
|
|
196,032 |
|
Mortgage loans receivable, net of credit loss reserve: 2024—$4,845; 2023—$4,814 |
|
|
480,250 |
|
|
|
477,266 |
|
Real estate investments, net |
|
|
1,632,626 |
|
|
|
1,661,263 |
|
Notes receivable, net of credit loss reserve: 2024—$605; 2023—$611 |
|
|
59,946 |
|
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|
60,490 |
|
Investments in unconsolidated joint ventures |
|
|
19,340 |
|
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|
19,340 |
|
Investments, net |
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|
1,711,912 |
|
|
|
1,741,093 |
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Other assets: |
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Cash and cash equivalents |
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|
9,010 |
|
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|
20,286 |
|
Debt issue costs related to revolving line of credit |
|
|
1,786 |
|
|
|
1,557 |
|
Interest receivable |
|
|
55,842 |
|
|
|
53,960 |
|
Straight-line rent receivable |
|
|
19,075 |
|
|
|
19,626 |
|
Lease incentives |
|
|
3,578 |
|
|
|
2,607 |
|
Prepaid expenses and other assets |
|
|
17,192 |
|
|
|
15,969 |
|
Total assets |
|
$ |
1,818,395 |
|
|
$ |
1,855,098 |
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LIABILITIES |
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Revolving line of credit |
|
$ |
277,050 |
|
|
$ |
302,250 |
|
Term loans, net of debt issue costs: 2024—$305; 2023—$342 |
|
|
99,695 |
|
|
|
99,658 |
|
Senior unsecured notes, net of debt issue costs: 2024—$1,194; 2023—$1,251 |
|
|
483,466 |
|
|
|
489,409 |
|
Accrued interest |
|
|
4,861 |
|
|
|
3,865 |
|
Accrued expenses and other liabilities |
|
|
34,481 |
|
|
|
43,649 |
|
Total liabilities |
|
|
899,553 |
|
|
|
938,831 |
|
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|
|
|
|
|
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||
EQUITY |
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Common stock: |
|
|
433 |
|
|
|
430 |
|
Capital in excess of par value |
|
|
996,631 |
|
|
|
991,656 |
|
Cumulative net income |
|
|
1,658,625 |
|
|
|
1,634,395 |
|
Accumulated other comprehensive income |
|
|
6,488 |
|
|
|
6,110 |
|
Cumulative distributions |
|
|
(1,775,928 |
) |
|
|
(1,751,312 |
) |
|
|
|
886,249 |
|
|
|
881,279 |
|
Non-controlling interests |
|
|
32,593 |
|
|
|
34,988 |
|
Total equity |
|
|
918,842 |
|
|
|
916,267 |
|
Total liabilities and equity |
|
$ |
1,818,395 |
|
|
$ |
1,855,098 |
(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/20240429003451/en/
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