LTC Properties(US:LTC)2024-07-29 21:20PART I -- Financial Information Item 1. Financial Statements This section presents LTC Properties, Inc.'s unaudited consolidated financial statements as of June 30, 2024, including balance sheets, income, comprehensive income, equity, and cash flow statements, with detailed notes Consolidated Balance Sheets As of June 30, 2024, total assets increased to $1.89 billion, total liabilities decreased to $908.0 million, and total equity rose to $982.8 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (unaudited) | December 31, 2023 (audited) | | :--- | :--- | :--- | | Total Assets | $1,890,716 | $1,855,098 | | Real estate investments, net | $1,696,658 | $1,661,263 | | Financing receivables, net | $357,910 | $196,032 | | Cash and cash equivalents | $6,174 | $20,286 | | Total Liabilities | $907,959 | $938,831 | | Revolving line of credit | $281,750 | $302,250 | | Senior unsecured notes, net | $479,522 | $489,409 | | Total Equity | $982,757 | $916,267 | Consolidated Statements of Income For the six months ended June 30, 2024, total revenues increased to $101.5 million, and net income attributable to LTC Properties, Inc. rose to $43.6 million ($1.00 per diluted share) Income Statement Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenues | $101,482 | $97,746 | | Rental income | $65,206 | $63,272 | | Interest income from mortgage loans | $25,109 | $23,170 | | Total Expenses | $61,321 | $74,008 | | Impairment loss | $0 | $12,510 | | Net Income Attributable to LTC | $43,591 | $39,308 | | Diluted EPS | $1.00 | $0.95 | Consolidated Statements of Cash Flows For H1 2024, net cash from operating activities increased to $57.9 million, while net cash used in investing activities significantly decreased to $1.0 million, and financing activities shifted to a net cash outflow of $71.0 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $57,910 | $46,534 | | Net cash used in investing activities | $(1,009) | $(187,401) | | Net cash (used in) provided by financing activities | $(71,013) | $137,514 | | Decrease in cash and cash equivalents | $(14,112) | $(3,353) | Notes to Consolidated Financial Statements The notes detail accounting policies, real estate portfolio composition, significant lease transitions, new joint ventures, debt structure, equity activities, and major operator concentration - LTC invests primarily in seniors housing (ALF, ILF, MC) and skilled nursing (SNF) properties through various structures like sale-leasebacks, mortgage financing, and joint ventures20 - The 35-property Brookdale master lease that matured in Dec 2023 was resolved by re-leasing 17 properties to Brookdale, transitioning 10 to other operators, and selling 829 - During Q2 2024, the company entered into two new joint ventures with ALG Senior Living, exchanging $102.4 million in mortgage loans for controlling interests in the JVs, accounted for as financing receivables5459 - Prestige Healthcare is the largest operator, representing 16.2% of total revenues and 14.0% of total assets as of June 30, 202497 - Subsequent to quarter-end, an operator repaid $10.4 million of a working capital note, and the company paid down $18.2 million of its senior unsecured notes104 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business strategy, portfolio composition, and financial results, highlighting operator updates, increased H1 2024 revenues and net income, and sufficient liquidity Real Estate Portfolio Overview As of June 30, 2024, LTC's gross investment portfolio totaled approximately $2.2 billion across 194 properties, diversified primarily in Assisted Living (53.3%) and Skilled Nursing (45.8%), with owned properties as the largest investment type Gross Investment Portfolio by Type (June 30, 2024) | Investment Type | Gross Investments (in thousands) | Percentage of Portfolio | | :--- | :--- | :--- | | Owned Properties | $1,342,069 | 61.4% | | Financing Receivables | $361,525 | 16.5% | | Mortgage Loans | $393,375 | 18.0% | | Notes Receivable | $58,995 | 2.7% | | Unconsolidated Joint Ventures | $30,504 | 1.4% | | Total Portfolio | $2,186,468 | 100.0% | - A master lease covering 11 skilled nursing centers in Texas was extended to December 31, 2028, with an immediate annual rent increase from $8.0 million to $9.0 million for 2024123124 Update on Certain Operators LTC formed two new joint ventures with ALG Senior Living by exchanging mortgage loans for controlling interests and agreed to defer interest and provide temporary rent relief, while amending a mortgage loan with Prestige Healthcare to an 8.5% current pay rate - Formed two new JVs with ALG by exchanging $64.5 million and $38.0 million in mortgage loans for controlling interests in the ventures, now cross-collateralized with other ALG investments130131 - Agreed to defer up to $1.5 million in interest from an ALG financing receivable portfolio for July-Dec 2024 and provided rent relief on another ALG-operated property133135 - Amended a mortgage loan with Prestige Healthcare, its largest operator (16.2% of revenue), to an 8.5% current pay rate, using security deposits to receive the full 10.8% contractual interest rate136137 Operating Results Net income available to common stockholders significantly increased to $19.2 million in Q2 2024 from $6.0 million in Q2 2023, and to $43.3 million for H1 2024 from $39.0 million in H1 2023, primarily due to the absence of impairment losses Comparison of Operating Results (in thousands) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $50,116 | $48,246 | $1,870 | | Impairment Loss | $0 | $12,076 | $(12,076) | | Net Income Available to Common Stockholders | $19,188 | $6,028 | $13,160 | Comparison of Operating Results (in thousands) | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $101,482 | $97,746 | $3,736 | | Gain on sale of real estate, net | $3,219 | $15,675 | $(12,456) | | Net Income Available to Common Stockholders | $43,253 | $39,015 | $4,238 | Funds From Operations (FFO) NAREIT FFO attributable to common stockholders increased to $28.2 million in Q2 2024 from $27.2 million in Q2 2023, and to $58.2 million for H1 2024 from $54.4 million in H1 2023 NAREIT FFO Reconciliation (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | GAAP net income available to common stockholders | $19,188 | $6,028 | $43,253 | $39,015 | | Add: Depreciation and amortization | $9,024 | $9,376 | $18,119 | $18,586 | | Add: Impairment loss | $0 | $12,076 | $0 | $12,510 | | Less: Gain on sale of real estate, net | $32 | $(302) | $(3,219) | $(15,675) | | NAREIT FFO attributable to common stockholders | $28,244 | $27,178 | $58,153 | $54,436 | Liquidity and Capital Resources As of June 30, 2024, LTC had total liquidity of $189.3 million, comprising cash, available revolving credit, and ATM equity, deemed sufficient for obligations and dividends, with the credit facility maturity extended to November 2026 Total Liquidity as of June 30, 2024 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $6,174 | | Available under revolving line of credit | $118,250 | | Available under Equity Distribution Agreements | $64,905 | | Total Liquidity | $189,329 | - The company extended the maturity of its $400 million revolving credit facility to November 19, 2026188 - In H1 2024, the company sold 343,800 shares for $11.0 million in net proceeds under its At-The-Market (ATM) program200 Item 3. Quantitative and Qualitative Disclosures about Market Risk There were no material changes in the company's market risk during the six months ended June 30, 2024 - There were no material changes in market risk during the six months ended June 30, 2024208 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2024209 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls210 PART II -- Other Information Item 1. Legal Proceedings The company is involved in various ordinary course claims and lawsuits, none of which are considered material to its financial condition or results of operations - The company is involved in various claims and lawsuits arising in the ordinary course of business, but none are anticipated to be material212 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - No material changes have occurred from the risk factors disclosed in the 2023 Form 10-K213 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None214 Item 5. Other Information The company reported no other information under this item - None214 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and Inline XBRL data files - Exhibits filed include corporate governance documents, CEO/CFO certifications required by the Sarbanes-Oxley Act, and XBRL financial data216