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LTC Reports 2018 Second Quarter Results and Discusses Recent Transactions

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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 second quarter ended June 30, 2018.

Net income available to common stockholders was $68.7 million, or $1.73
per diluted share, for the 2018 second quarter, compared with $25.3
million, or $0.64 per diluted share, for the same period in 2017. Funds
from Operations ("FFO") was $29.6 million for the 2018 second quarter,
compared with $31.4 million for the comparable 2017 period. FFO per
diluted common share was $0.75 and $0.79 for the quarters ended June 30,
2018 and 2017, respectively. Revenues were lower in the second quarter
of 2018 due primarily to a previously disclosed defaulted master lease
that was placed on a cash basis in the third quarter of 2017 and a
reduction in rental income related to properties sold during the past
year.

LTC completed the following transactions during the second quarter of
2018:

  • Amended and restated the Company's unsecured credit agreement to
    replace its previous unsecured credit agreement, which was due to
    expire on October 14, 2018. The amended credit agreement maintains the
    $600.0 million aggregate commitment of the lenders under the prior
    agreement and provides for the opportunity to increase the commitment
    size of the credit agreement up to a total of $1.0 billion. The
    amended credit agreement extends the maturity to June 27, 2022 and
    provides for a one-year extension option at LTC's discretion, subject
    to customary conditions. Additionally, the amended credit agreement
    decreases the interest rate margins and converts from the payment of
    unused commitment fees to a facility fee.
  • Sold a portfolio of six assisted living and memory care communities
    with a gross book value of $37.7 million for $67.5 million. As a
    result of the transaction, LTC recognized a net gain on sale of
    $48.3 million in the 2018 second quarter.
  • Completed the acquisition of two memory care communities in Texas,
    totaling 88 units and 133 beds, for $25.2 million. Simultaneously upon
    closing, LTC entered into a 10-year master lease agreement with an
    operator new to LTC's portfolio at an initial cash yield of 7.25%.
  • Entered into a partnership to own the real estate and develop a
    78-unit assisted living and memory care community in Medford, OR for
    $18.1 million and committed to purchase an existing operational
    89-unit independent living community on an adjacent land parcel. We
    anticipate acquiring the independent living community in the third
    quarter of 2018.
  • Completed the development of a 66-unit memory care community in
    Illinois which opened in May 2018.

Conference Call Information

LTC will conduct a conference call on Thursday, August 9, 2018, 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
June 30, 2018. 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 the necessary software.

An audio replay of the conference call will be available from August 10
through August 23, 2018 and may be accessed by dialing 877-344-7529
(domestically) or 412-317-0088 (internationally) and entering conference
number 10122172. 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 Properties (NYSE:LTC) is a self-administered real estate investment
trust that primarily invests in seniors housing and health care
properties primarily through sale-leaseback transactions, mortgage
financing and structured finance solutions including preferred equity
and mezzanine lending. At June 30, 2018, LTC had 199 investments located
in 28 states comprising 102 assisted living communities, 96 skilled
nursing centers and one behavioral health care hospital. Assisted living
communities, independent living communities, memory care communities and
combinations thereof are included in the assisted living property type.
For more information on LTC Properties, Inc., visit the Company's
website 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 Six Months Ended
June 30, June 30,
2018   2017   2018   2017  
(unaudited) (unaudited)
Revenues:
Rental income $ 33,930 $ 35,265 $ 68,435 $ 70,300
Interest income from mortgage loans 7,007 6,625 13,823 13,373
Interest and other income   535     578     1,024     1,417  
Total revenues   41,472     42,468     83,282     85,090  
 
Expenses:
Interest expense 7,655 7,151 15,484 14,622
Depreciation and amortization 9,268 9,308 18,712 18,667
Impairment charges 1,880 1,880
Recovery for doubtful accounts (38 ) (5 ) (30 ) (43 )
Transaction costs 6 10 22
General and administrative expenses   4,716     4,386     9,513     9,126  
Total expenses   21,607     22,720     43,689     44,274  
 
Operating income 19,865 19,748 39,593 40,816
Income from unconsolidated joint ventures 726 575 1,357 1,020
Gain on sale of real estate, net   48,345     5,054     48,345     5,054  
Net income 68,936 25,377 89,295 46,890
Income allocated to participating securities   (278 )   (104 )   (366 )   (201 )
Net income available to common stockholders $ 68,658   $ 25,273   $ 88,929   $ 46,689  
 
Earnings per common share:
Basic $ 1.74   $ 0.64   $ 2.25   $ 1.19  
Diluted $ 1.73   $ 0.64   $ 2.25   $ 1.18  
 
Weighted average shares used to calculate earnings per
common share:
Basic   39,471     39,414     39,461     39,390  
Diluted   39,765     39,794     39,750     39,769  
 
Dividends declared and paid per common share $ 0.57   $ 0.57   $ 1.14   $ 1.14  
 

Supplemental Reporting Measures

FFO, adjusted FFO ("AFFO"), 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, AFFO and FAD as supplemental measures of operating performance. The
Company believes FFO, AFFO 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, AFFO and FAD
facilitate like comparisons of operating performance between periods.
Additionally the Company believes that normalized FFO, normalized AFFO
and normalized FAD provide useful information because they 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. Normalized FFO
represents FFO adjusted for certain items detailed in the
reconciliations. 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 AFFO as FFO excluding the effects of straight-line rent,
amortization of lease inducement, effective interest income and deferred
income from unconsolidated joint ventures. 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. By
excluding the non-cash portion of rental income, interest income from
mortgage loans and income from unconsolidated joint ventures, investors,
analysts and our management can compare AFFO between periods. Normalized
AFFO represents AFFO adjusted for certain items detailed in the
reconciliations.

We define FAD as AFFO excluding the effects of non-cash compensation
charges, capitalized interest and non-cash interest charges. 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. Normalized FAD represents FAD adjusted for
certain items detailed in the reconciliations.

While the Company uses FFO, Normalized FFO, AFFO, Normalized AFFO, FAD
and Normalized 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, AFFO and FAD

The following table reconciles GAAP net income available to common
stockholders to each of NAREIT FFO attributable to common stockholders
and normalized FFO attributable to common stockholders, as well as
normalized AFFO and normalized FAD (unaudited, amounts in thousands,
except per share amounts)
:

                 
Three Months Ended     Six Months Ended
June 30, June 30,
  2018       2017     2018       2017  
 
GAAP net income available to common stockholders $ 68,658 $ 25,273 $ 88,929 $ 46,689
Add: Depreciation and amortization 9,268 9,308 18,712 18,667
Add: Impairment charges 1,880 1,880
Less: Gain on sale of real estate, net   (48,345 )   (5,054 )   (48,345 )   (5,054 )
NAREIT FFO attributable to common stockholders 29,581 31,407 59,296 62,182
 
Less: Non-cash rental income (1,449 ) (1,856 ) (4,349 ) (4,196 )
Less: Effective interest income from mortgage loans (1,420 ) (1,401 ) (2,824 ) (2,708 )
Less: Deferred income from unconsolidated joint ventures   (31 )   (47 )   (62 )   (94 )
Adjusted FFO (AFFO) 26,681 28,103 52,061 55,184
 
Add: Non-cash compensation charges 1,521 1,425 2,897 2,684
Add: Non-cash interest related to earn-out liabilities 125 125 251 351
Less: Capitalized interest   (293 )   (201 )   (552 )   (371 )
Funds available for distribution (FAD) $ 28,034   $ 29,452   $ 54,657   $ 57,848  
                 
 
NAREIT Basic FFO attributable to common stockholders per share $ 0.75   $ 0.80   $ 1.50   $ 1.58  
NAREIT Diluted FFO attributable to common stockholders per share $ 0.75   $ 0.79   $ 1.50   $ 1.57  
 
NAREIT Diluted FFO attributable to common stockholders $ 29,581   $ 31,511   $ 59,662   $ 62,383  
Weighted average shares used to calculate NAREIT diluted FFO per
share
attributable to common stockholders   39,605     39,794     39,750     39,769  
                 
 
Diluted AFFO $ 26,681   $ 28,207   $ 52,427   $ 55,385  
Weighted average shares used to calculate diluted AFFO per share   39,605     39,794     39,750     39,769  
                 
 
Diluted FAD $ 28,034   $ 29,556   $ 55,023   $ 58,049  
Weighted average shares used to calculate diluted FAD per share   39,605     39,794     39,750     39,769  
 

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

   
June 30, 2018 December 31, 2017
ASSETS (unaudited) (audited)
Investments:
Land $ 125,882 $ 124,041
Buildings and improvements 1,269,675 1,262,335
Accumulated depreciation and amortization   (301,458 )   (304,117 )
Operating real estate property, net 1,094,099 1,082,259
Properties held-for-sale, net of accumulated depreciation:
2018—$1,916; 2017—$1,916
  3,830     3,830  
Real property investments, net 1,097,929 1,086,089
Mortgage loans receivable, net of loan loss reserve: 2018—$2,355;
2017—$2,255
  233,823     223,907  
Real estate investments, net 1,331,752 1,309,996
Notes receivable, net of loan loss reserve: 2018—$142; 2017—$166 14,074 16,402
Investments in unconsolidated joint ventures   30,397     29,898  
Investments, net 1,376,223 1,356,296
 
Other assets:
Cash and cash equivalents 4,260 5,213
Restricted cash 2,446
Debt issue costs related to bank borrowings 3,304 810
Interest receivable 17,864 15,050
Straight-line rent receivable, net of allowance for doubtful
accounts: 2018—$707; 2017—$814
70,036 64,490
Lease incentives 21,407 21,481
Prepaid expenses and other assets   4,089     2,230  
Total assets $ 1,499,629   $ 1,465,570  
 
LIABILITIES
Bank borrowings $ 85,500 $ 96,500
Senior unsecured notes, net of debt issue costs: 2018—$1,027;
2017—$1,131
566,940 571,002
Accrued interest 5,105 5,276
Accrued incentives and earn-outs 9,167 8,916
Accrued expenses and other liabilities   27,221     25,228  
Total liabilities 693,933 706,922
 
EQUITY
Stockholders' equity:
Common stock: $0.01 par value; 60,000 shares authorized; shares
issued and outstanding: 2018—39,635; 2017—39,570
396 396
Capital in excess of par value 858,832 856,992
Cumulative net income 1,190,078 1,100,783
Cumulative distributions   (1,248,179 )   (1,203,011 )
Total LTC Properties, Inc. stockholders' equity 801,127 755,160
Non-controlling interests   4,569     3,488  
Total equity   805,696     758,648  
Total liabilities and equity $ 1,499,629   $ 1,465,570  

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