LTC Reports 2024 Second Quarter Results

LTC Properties, Inc. (NYSE:LTC) ("LTC" or the "Company"), a real estate investment trust that primarily invests in seniors housing and health care properties, today announced operating results for the second quarter ended June 30, 2024.

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More detailed financial information is available in the tables at the end of this press release, the Company's Supplemental Operating and Financial Data presentation for the 2024 second quarter, and its Form 10-Q, as filed with the Securities and Exchange Commission, both of which can be found on LTC's investor relations website at ir.LTCreit.com.

Second Quarter 2024 Financial Results:

• Total revenues increased as the result of higher interest income from mortgage and mezzanine loan originations in 2023, construction loan funding in 2024, interest rate escalations, and insurance proceeds related to sold properties.
• Expenses decreased primarily due to the impairment loss in the year-ago period, a decrease in interest expense due to scheduled principal paydowns on the Company's senior unsecured notes, partially offset by an increase in general and administrative expense, and an increase in provisions for credit losses.
• Income from unconsolidated joint ventures increased as a result of a 2024 mortgage loan origination.

2024 Second Quarter Portfolio Update:

Investment

• As previously announced, originated a $12.7 million mortgage loan secured by a skilled nursing and assisted living campus with 78 units and 104 beds in Texas. The five-year mortgage loan is interest only at a current rate of 9.15%. The investment is accounted for as an unconsolidated joint venture, and is expected to generate approximately $884,000 of revenue in 2024.

Operator Update – ALG Senior ("ALG")

• LTC deferred a total of $1.5 million in rent from ALG for May and June of 2024 on a portfolio of 11 assisted living communities in North Carolina that the Company owns through a joint venture accounted for as a financing receivable, with a balance of $121.4 million at June 30, 2024. Additionally, LTC agreed to defer up to approximately $250,000 in rent per month for July through December 2024, or a total of up to $1.5 million.
• LTC also amended a lease on another assisted living community operated by ALG. Under the amendment, no rent is due for May through September 2024, with quarterly market-based rent resets thereafter. Previous annualized rent was approximately $900,000. LTC wrote-off $321,000 of straight-line rent receivable related to this lease during the 2024 second quarter.
• LTC funded $8.3 million under two mortgage loans receivable due from affiliates of ALG.
• Concurrently with the mortgage loans receivable funding, LTC entered into two joint venture investments related to 17 properties operated by ALG in North and South Carolina, as follows:
  • Exchanged its $64.5 million mortgage loan receivable for 53% interest in a joint venture that owns 13 assisted living communities in North Carolina (12) and South Carolina (1).
  • Exchanged its $38.0 million mortgage loans receivable for 93% interest in a joint venture that owns four assisted living communities and a parcel of land in North Carolina.
  • Each of the joint ventures concurrently leased the properties to an affiliate of ALG under separate 10-year master leases maturing at the end of June 2034, with purchase options available through June 2028. Combined contractual annualized cash income under the leases is $7.4 million, compared with $6.9 million of annualized cash interest under the previous mortgage loans, as a result of the additional $8.3 million in cash LTC invested. Due to the purchase options given to the seller, these investments are being accounted for as financing receivables.
• All of LTC's investments with ALG are now cross-defaulted and cross-collateralized, providing the Company with added security.

Asset Sales and Payoff

• Sold two closed properties located in Texas for $500,000, as previously disclosed, and received $397,000 of proceeds, net of transaction cost.
• Received $2.0 million from the payoff of a mortgage loan secured by a parcel of land in Missouri.

Transition

• As previously announced, transitioned a 56-unit assisted living community in Texas to an operator new to LTC.

Amendments and Extensions

• Amended a master lease with HMG Healthcare ("HMG") covering 11 skilled nursing centers in Texas to extend the term through December 2028. As a condition of the amendment, HMG agreed to repay $11.9 million on its $13.5 million working capital note during the 2024 second quarter, which was subsequently amended to July 11, 2024. During and subsequent to the second quarter, the $11.9 million was paid in full. HMG's current working capital note repayment obligation is $1.6 million, which is interest free and will be repaid ratably through the end of 2028.
• An operator exercised its renewal option through February 2030. Annual cash rent for 2024 is $8.0 million, escalating 2.5% annually.

Activities Subsequent to June 30, 2024:

• Committed to fund a $26.1 million mortgage loan for the construction of a 116-unit independent living, assisted living and memory care community in Illinois. The borrower contributed $12.3 million of equity which will initially fund the construction. Once all of the borrower's equity has been drawn, expected in early 2025, LTC will begin funding the commitment. The loan term is approximately six years at a current rate of 9.0% and IRR of 9.5%;
• Sold an 80-unit assisted living community in Texas to the operator for $8.0 million. LTC anticipates recording a gain on sale of approximately $3.6 million. The operator paid $441,000 in rent through the remainder of the initial lease term.
• Recorded $2.6 million of income from former operators related to portfolio transitions in prior years.

Balance Sheet and Liquidity at June 30, 2024:

LTC had total liquidity of $189.3 million, including $6.2 million of cash on hand, $118.2 million available under the Company's unsecured revolving line of credit, and the potential ability to access the capital markets through the issuance of $64.9 million of common stock under LTC's equity distribution agreements.

Conference Call Information

LTC will conduct a conference call on Tuesday, July 30, 2024, 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, 2024. The conference call is accessible by telephone and the internet. Interested parties may access the live conference call via the following:

Additionally, an audio replay of the call will be available one hour after the live call through August 13, 2024 via the following:

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 31 operating partners. Based on its gross real estate investments, LTC's investment portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties. Learn more at www.LTCreit.com.

Forward-Looking Statements

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

Supplemental Reporting Measures

FFO and FAD are supplemental measures of a real estate investment trust's ("REIT") financial performance that are not defined by U.S. generally accepted accounting principles ("GAAP"). Investors, analysts and the Company use FFO and FAD as supplemental measures of operating performance. The Company believes FFO and FAD are helpful in evaluating the operating performance of a REIT. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO and FAD facilitate like comparisons of operating performance between periods. Occasionally, the Company may exclude non-recurring items from FFO and FAD in order to allow investors, analysts and 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 the 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 the 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 the 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 the 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):

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 by reconciling the non-recurring items (unaudited, amounts in thousands):

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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