LTC Reports 2019 Fourth Quarter Results and Discusses Recent Activities

WESTLAKE VILLAGE, Calif.–(BUSINESS WIRE)–LTC Properties, Inc. (NYSE: LTC), a real estate investment trust that primarily invests in seniors housing and health care properties, today announced operating results for its fourth quarter ended December 31, 2019.

Net income available to common stockholders was $12.4 million, or $0.31 per diluted share, for the 2019 fourth quarter, compared with $30.6 million, or $0.77 per diluted share, for the same period in 2018. The decrease in net income available to common stockholders was primarily due to a net loss on sale during the 2019 fourth quarter, compared with a net gain on sale during the same period in 2018, an impairment loss from investment in unconsolidated joint ventures during the 2019 fourth quarter, and one-time non-recurring other income related to the write-off of a contingent lease incentive and related earn-out liability in the prior year, partially offset by higher rental income from acquisitions and completed developments.

Funds from Operations (“FFO”) was $32.4 million for the 2019 fourth quarter, compared with $32.1 million for the comparable 2018 period. FFO per diluted common share was $0.81 for the quarters ended December 31, 2019 and 2018. Excluding non-recurring items, FFO per diluted common share was $0.76 and $0.73 for the quarters ended December 31, 2019 and 2018, respectively. The improvement in FFO per diluted common share excluding non-recurring items, was primarily due to higher rental income during the 2019 fourth quarter as discussed above.

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

  • Acquired a 76-unit assisted living/memory care community in Auburn Hills, Michigan and an 80-unit memory care community in Sterling Heights, Michigan for an aggregate purchase price of $19.0 million, and entered into a 10-year master lease with an operator new to LTC’s portfolio at an initial cash yield of 7.4%, escalating 2% annually with four, five-year renewal options;
  • Sold a hurricane damaged property in Texas and recognized a $2.1 million net gain on property insurance proceeds. Additionally, as a result of this transaction, LTC recognized a net loss on sale of $0.8 million, resulting in a net gain of $1.3 million when combined with insurance proceeds;
  • Sold two non-revenue producing properties, a 160-bed skilled nursing center in Arizona and a 140‑unit independent living community in Texas, for an aggregate sales price of $7.3 million, recognizing a cumulative loss of $3.8 million; and
  • Issued 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 were used to paydown the Company’s unsecured line of credit.

Subsequent to December 31, 2019, LTC completed the following:

  • Acquired a 140-bed skilled nursing center in Texas for approximately $13.5 million, and entered into a 10-year master lease with an operator new to LTC’s portfolio with an initial cash yield of 8.5%, escalating 2% annually with two, five-year renewal options.

Conference Call Information

LTC will conduct a conference call on Friday, February 21, 2020, 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 December 31, 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 February 21 through March 6, 2020, and may be accessed by dialing 877-344-7529 (domestically) or 412-317-0088 (internationally) and entering conference number 10138686. Additionally, an audio archive will be available on LTC’s website on the “Presentations” page of the “Investor Information” section, which is under the “Investors” tab. LTC’s earnings release and supplemental information package for the current period will be available on its website on the “Press Releases” and “Presentations” pages, respectively, of the “Investor Information” section which is under the “Investors” tab.

About LTC

LTC is a real estate investment trust (REIT) investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions including preferred equity and mezzanine lending. LTC holds more than 200 investments in 28 states with 30 operating partners. The portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties. Learn more at www.LTCreit.com.

Forward Looking Statements

This press release includes statements that are not purely historical and are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward looking statements. These forward-looking statements involve a number of risks and uncertainties. Please see LTC’s most recent Annual Report on Form 10-K, its subsequent Quarterly Reports on Form 10-Q, and its other publicly available filings with the Securities and Exchange Commission for a discussion of these and other risks and uncertainties. All forward-looking statements included in this press release are based on information available to the Company on the date hereof, and LTC assumes no obligation to update such forward looking statements. Although the Company’s management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The actual results achieved by the Company may differ materially from any forward-looking statements due to the risks and uncertainties of such statements.

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

(unaudited)

 

 

(audited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

38,189

 

$

32,759

 

$

152,755

 

$

135,405

 

Interest income from mortgage loans

 

 

7,683

 

 

7,290

 

 

29,991

 

 

28,200

 

Interest and other income

 

 

591

 

 

3,538

 

 

2,558

 

 

5,040

 

Total revenues

 

 

46,463

 

 

43,587

 

 

185,304

 

 

168,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

7,578

 

 

7,215

 

 

30,582

 

 

30,196

 

Depreciation and amortization

 

 

9,817

 

 

9,396

 

 

39,216

 

 

37,555

 

Provision for doubtful accounts

 

 

13

 

 

11

 

 

166

 

 

87

 

Transaction costs

 

 

90

 

 

65

 

 

365

 

 

84

 

Property tax expense

 

 

4,189

(1)

 

 

 

16,755

 

 

 

General and administrative expenses

 

 

4,541

 

 

4,801

 

 

18,453

 

 

19,193

 

Total expenses

 

 

26,228

 

 

21,488

 

 

105,537

 

 

87,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) gain on sale of real estate, net

 

 

(4,630)

 

 

7,984

 

 

2,106

 

 

70,682

 

Operating income

 

 

15,605

 

 

30,083

 

 

81,873

 

 

152,212

 

Gain from property insurance proceeds

 

 

2,111

(2)

 

 

 

2,111

(2)

 

 

Impairment loss from investments in unconsolidated joint ventures

 

 

(5,500)

 

 

 

 

(5,500)

 

 

 

Income from unconsolidated joint ventures

 

 

415

 

 

761

 

 

2,388

 

 

2,864

 

Net income

 

 

12,631

 

 

30,844

 

 

80,872

 

 

155,076

 

Income allocated to non-controlling interests

 

 

(89)

 

 

(78)

 

 

(346)

 

 

(95)

 

Net income attributable to LTC Properties, Inc.

 

 

12,542

 

 

30,766

 

 

80,526

 

 

154,981

 

Income allocated to participating securities

 

 

(93)

 

 

(121)

 

 

(391)

 

 

(625)

 

Net income available to common stockholders

 

$

12,449

 

$

30,645

 

$

80,135

 

$

154,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

$

0.78

 

$

2.03

 

$

3.91

 

Diluted

 

$

0.31

 

$

0.77

 

$

2.02

 

$

3.89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to calculate earnings per

 

 

common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

39,588

 

 

39,501

 

 

39,571

 

 

39,477

 

Diluted

 

 

39,775

 

 

39,864

 

 

39,759

 

 

39,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared and paid per common share

 

$

0.57

 

$

0.57

 

$

2.28

 

$

2.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 Item 8. FINANCIAL STATEMENTS—Note 2. Summary of Significant Accounting Policies. in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion.

(2)

Represents a net gain from property insurance proceeds related to a property that was sold during the fourth quarter of 2019.

Supplemental Reporting Measures

FFO and Funds Available for Distribution (“FAD”) are supplemental measures of a real estate investment trust’s (“REIT”) financial performance that are not defined by U.S. generally accepted accounting principles (“GAAP”). Investors, analysts and the Company use FFO and FAD as supplemental measures of operating performance. The Company believes FFO and FAD are helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO and FAD facilitate like comparisons of operating performance between periods. Occasionally, the Company may exclude non-recurring items from FFO and FAD in order to allow investors, analysts and our management to compare the Company’s operating performance on a consistent basis without having to account for differences caused by unanticipated items.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company’s computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing our Company’s FFO to that of other REITs.

We define FAD as FFO excluding the effects of straight-line rent, amortization of lease inducement, effective interest income, deferred income from unconsolidated joint ventures, non-cash compensation charges, capitalized interest and non-cash interest charges. GAAP requires rental revenues related to non-contingent leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease. This method results in rental income in the early years of a lease that is higher than actual cash received, creating a straight-line rent receivable asset included in our consolidated balance sheet. At some point during the lease, depending on its terms, cash rent payments exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. Similar to the accounting methodology of straight-line rent, the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan thus creating an effective interest receivable asset included in the interest receivable line item in our consolidated balance sheet and reduces down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents annual distributions to common shareholders expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs.

While the Company uses FFO and FAD as supplemental performance measures of our cash flow generated by operations and cash available for distribution to stockholders, such measures are not representative of cash generated from operating activities in accordance with GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.

Reconciliation of FFO and FAD

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

 

 

Three Months Ended

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income available to common stockholders

$

12,449

 

$

30,645

 

 

$

80,135

 

$

154,356

 

Add: Depreciation and amortization

 

9,817

 

 

9,396

 

 

 

39,216

 

 

37,555

 

Add: Impairment loss from investments in unconsolidated joint ventures

 

5,500

 

 

 

 

 

5,500

 

 

 

Less: Gain on sale of real estate, net

 

4,630

 

 

(7,984)

 

 

 

(2,106)

 

 

(70,682)

 

NAREIT FFO attributable to common stockholders

 

32,396

 

 

32,057

 

 

 

122,745

 

 

121,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Non-recurring items

 

(2,111)

(1)

 

(3,074)

(2)

 

 

(1,535)

(5)

 

(3,074)

 

FFO attributable to common stockholders, excluding non-recurring items

$

30,285

 

$

28,983

 

 

$

121,210

 

$

118,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT FFO attributable to common stockholders

$

32,396

 

$

32,057

 

 

$

122,745

 

$

121,229

 

Non-cash income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: straight-line rental income

 

(889)

 

 

(921)

 

 

 

(4,487)

 

 

(9,550)

 

Add: amortization of lease costs

 

104

 

 

441

 

 

 

385

 

 

2,092

 

(Less)/Add: Other non-cash (income)/expense

 

 

 

(3,074)

(2)

 

 

1,926

(3)

 

(3,074)

(2)

Less: Effective interest income from mortgage loans

 

(1,481)

 

 

(1,438)

 

 

 

(5,842)

 

 

(5,703)

 

Less: Deferred income from unconsolidated joint ventures

 

 

 

(15)

 

 

 

(18)

 

 

(108)

 

Net non-cash income

 

(2,266)

 

 

(5,007)

 

 

 

(8,036)

 

 

(16,343)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Add: Non-cash compensation charges

 

1,627

 

 

1,486

 

 

 

6,565

 

 

5,870

 

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

 

 

 

 

 

 

 

 

377

 

Less: Capitalized interest

 

(167)

 

 

(398)

 

 

 

(608)

 

 

(1,248)

 

Net non-cash expense

 

1,460

 

 

1,088

 

 

 

5,957

 

 

4,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds available for distribution (FAD)

 

31,590

 

 

28,138

 

 

 

$120,666

 

 

$109,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Non-recurring income

 

(2,111)

(1)

 

 

 

 

(3,461)

(4)

 

 

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

$

29,479

 

$

28,138

 

 

$

117,205

 

$

109,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Represents a net gain from property insurance proceeds related to a property that was sold during the fourth quarter of 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Represents net write-off of a contingent lease incentive and related earn-out liability.

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) Represents the write-off of straight-line rent due to a lease termination and transition of two senior housing communities to a new operator.

 

 

 

 

 

 

 

 

 

 

 

 

 

(4) Represents deferred rent repayment from an operator and (1) above.

 

 

 

 

 

 

 

 

 

 

 

 

 

(5) Represents (3) and (4) above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT Basic FFO attributable to common stockholders per share

$

0.82

 

$

0.81

 

 

$

3.10

 

$

3.07

 

NAREIT Diluted FFO attributable to common stockholders per share

$

0.81

 

$

0.81

 

 

$

3.08

 

$

3.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT Diluted FFO attributable to common stockholders

$

32,489

 

$

32,178

 

 

$

123,136

 

$

121,854

 

Weighted average shares used to calculate NAREIT diluted FFO per share

 

 

 

 

 

 

 

 

 

 

 

 

 

attributable to common stockholders

 

39,939

 

 

39,864

 

 

 

39,921

 

 

39,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

$

30,378

 

$

29,104

 

 

$

121,601

 

$

118,780

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

items, per share attributable to common stockholders

 

39,939

 

 

39,864

 

 

 

39,921

 

 

39,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted FAD, excluding non-recurring items

$

29,572

 

$

28,259

 

 

$

117,596

 

$

110,510

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

items, per share

 

39,939

 

 

39,864

 

 

 

39,921

 

 

39,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

December 31, 2018

 

ASSETS

 

(audited)

 

(audited)

 

Investments:

 

 

 

 

 

 

 

Land

 

$

126,703

 

$

125,358

 

Buildings and improvements

 

 

1,295,899

 

 

1,290,352

 

Accumulated depreciation and amortization

 

 

(312,642)

 

 

(312,959)

 

Operating real estate property, net

 

 

1,109,960

 

 

1,102,751

 

Properties held-for-sale, net of accumulated depreciation: 2019—$35,113;

2018—$1,916

 

 

26,856

 

 

3,830

 

Real property investments, net

 

 

1,136,816

 

 

1,106,581

 

Mortgage loans receivable, net of loan loss reserve: 2019—$2,560; 2018—$2,447

 

 

254,099

 

 

242,939

 

Real estate investments, net

 

 

1,390,915

 

 

1,349,520

 

Notes receivable, net of loan loss reserve: 2019—$181; 2018—$128

 

 

17,927

 

 

12,715

 

Investments in unconsolidated joint ventures

 

 

19,003

 

 

30,615

 

Investments, net

 

 

1,427,845

 

 

1,392,850

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

4,244

 

 

2,656

 

Restricted cash

 

 

 

 

2,108

 

Debt issue costs related to bank borrowings

 

 

2,164

 

 

2,989

 

Interest receivable

 

 

26,586

 

 

20,732

 

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

 

 

45,703

(1)

 

73,857

 

Lease incentives

 

 

2,552

(1)

 

14,443

 

Prepaid expenses and other assets

 

 

5,115

(2)

 

3,985

 

Total assets

 

$

1,514,209

 

$

1,513,620

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Bank borrowings

 

$

93,900

 

$

112,000

 

Senior unsecured notes, net of debt issue costs: 2019—$812; 2018—$938

 

 

599,488

 

 

533,029

 

Accrued interest

 

 

4,983

 

 

4,180

 

Accrued expenses and other liabilities

 

 

30,412

(2)

 

31,440

 

Total liabilities

 

 

728,783

 

 

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

 

 

867,346

 

 

862,712

 

Cumulative net income

 

 

1,293,482

 

 

1,255,764

 

Cumulative distributions

 

 

(1,384,283)

 

 

(1,293,383)

 

Total LTC Properties, Inc. stockholders’ equity

 

 

776,943

 

 

825,490

 

Non-controlling interests

 

 

8,483

 

 

7,481

 

Total equity

 

 

785,426

 

 

832,971

 

Total liabilities and equity

 

$

1,514,209

 

$

1,513,620

 

(1)

Decrease due to impact of newly adopted ASC 842. See Item 8. FINANCIAL STATEMENTS—Note 2. Summary of Significant Accounting Policies. in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion.

(2)

Includes $1,287 right of use asset/lease liability due to the impact of newly adopted ASC 842. See Item 8. FINANCIAL STATEMENTS—Note 2. Summary of Significant Accounting Policies. in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion.

 

Contacts

For more information contact:

Wendy L. Simpson

Pam Kessler

(805) 981-8655

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