LTC Properties(LTC) - 2021 Q3 - Quarterly Report

PART I -- Financial Information This section presents the company's comprehensive financial statements and management's analysis of its financial condition and operational results Item 1. Financial Statements This section presents the unaudited consolidated financial statements of LTC Properties, Inc. for the period ended September 30, 2021, including balance sheets, income statements, equity statements, cash flow statements, and detailed notes explaining the company's accounting policies, real estate investments, debt, equity, and other financial activities Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity as of September 30, 2021, and December 31, 2020 Consolidated Balance Sheet Highlights (amounts in thousands) | Metric | September 30, 2021 | December 31, 2020 | Change | | :-------------------------------- | :------------------- | :------------------ | :----- | | Total Assets | $1,453,088 | $1,459,486 | $(6,398) | | Cash and cash equivalents | $45,459 | $7,772 | $37,687 | | Real property investments, net | $1,041,916 | $1,102,358 | $(60,442) | | Bank borrowings | $134,400 | $89,900 | $44,500 | | Total liabilities | $700,158 | $683,680 | $16,478 | | Total equity | $752,930 | $775,806 | $(22,876) | Consolidated Statements of Income and Comprehensive Income This section details the company's revenues, expenses, and net income for the three and nine months ended September 30, 2021 and 2020 Consolidated Statements of Income Highlights (amounts in thousands, except per share) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $37,472 | $38,173 | $115,881 | $113,064 | | Total expenses | $29,436 | $26,294 | $81,020 | $79,165 | | Net income attributable to LTC Properties, Inc. | $11,022 | $12,217 | $43,023 | $77,720 | | Net income available to common stockholders | $10,909 | $12,114 | $42,677 | $77,381 | | Basic Earnings per common share | $0.28 | $0.31 | $1.09 | $1.97 | | Diluted Earnings per common share | $0.28 | $0.31 | $1.09 | $1.97 | | Dividends declared and paid per common share | $0.57 | $0.57 | $1.71 | $1.71 | Consolidated Statements of Equity This section outlines changes in the company's equity, including common stock, retained earnings, and comprehensive income Total Equity (in thousands) | Date | Total Equity | | :----------------- | :----------- | | September 30, 2021 | $752,930 |\n| December 31, 2020 | $775,806 |\n| September 30, 2020 | $778,821 |\n| December 31, 2019 | $785,426 | - Common Stock cash distributions for the nine months ended September 30, 2021, totaled $67,287 thousand, while net income attributable to LTC Properties, Inc. was $43,023 thousand for the same period[14] Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the period Consolidated Statements of Cash Flows Highlights (amounts in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $69,581 | $85,629 | | Net cash provided by investing activities | $27,757 | $51,982 | | Net cash used in financing activities | $(59,651) | $(119,044) | | Increase in cash, cash equivalents and restricted cash | $37,687 | $18,567 | | Cash, cash equivalents and restricted cash, end of period | $45,459 | $22,811 | Notes to Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, significant transactions, and financial statement line items 1. General This note describes LTC Properties, Inc.'s business as a healthcare REIT and its primary objectives - LTC Properties, Inc. is a healthcare REIT investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint ventures, and structured finance solutions[18] - The company's primary objectives are to create, sustain, and enhance stockholder equity value and provide current income through real estate investments in seniors housing and health care properties[18] - LTC Properties, Inc. qualifies as a REIT, meaning it is generally not taxed on income distributed to stockholders[20] 2. Real Estate Investments This note details the company's investments in owned properties, including property types, bankruptcies, rent issues, and sales Investments in Owned Properties (September 30, 2021, dollar amounts in thousands) | Type of Property | Gross Investment | Percentage of Investment | Number of Properties | SNF Beds | ALF Units | | :--------------- | :--------------- | :----------------------- | :------------------- | :------- | :-------- | | Assisted Living | $843,015 | 59.9 % | 102 | — | 5,798 |\n| Skilled Nursing | $552,723 | 39.3 % | 50 | 6,154| 212 |\n| Other | $11,360 | 0.8 % | 1 | 118 | — |\n| Total | $1,407,098 | 100.0 % | 153 | 6,272| 6,010 | - Senior Care Centers, LLC and Abri Health Services, LLC filed for Chapter 11 bankruptcy in April 2021, leading to a settlement where LTC paid $3,250,000 in transaction costs during Q3 2021 for property transition[28][31] - As of September 30, 2021, 20 operators (approximately 51% of Q3 2021 rental income) are accounted for on a "cash-basis" due to collectability concerns[33] COVID-19 Related Rent Abatements and Deferrals (Nine Months Ended September 30, 2021, in thousands) | Type | Amount | | :-------------------------------- | :----- | | Rent abatements | $2,639 |\n| Rent deferrals, net of repayments | $3,371 |\n| Total | $6,010 | Property Sales (Nine Months Ended September 30, 2021, dollar amounts in thousands) | State | Type of Properties | Number of Properties | Sales Price | Net Gain (loss) | | :---------- | :----------------- | :------------------- | :---------- | :-------------- | | Florida | ALF | 1 | $2,000 | $(858) |\n| Nebraska | ALF | 1 | $900 | $(198) |\n| Washington | SNF | 1 | $7,700 | $2,562 |\n| Wisconsin | ALF | 3 | $35,000 | $5,594 |\n| Total | | 6 | $45,600 | $7,392 | Mortgage Loans (September 30, 2021, dollar amounts in thousands) | Interest Rate | Maturity | State | Type of Property | Gross Investment | Percentage of Investment | Number of Loans | Number of Properties | | :------------ | :------- | :---- | :--------------- | :--------------- | :----------------------- | :-------------- | :------------------- | | 7.5% | 2022 | MO | OTH | $1,780 | 0.7 % | 1 | — |\n| 10.1% | 2043 | MI | SNF | $185,859 | 71.1 % | 1 | 15 |\n| 9.3% | 2045 | MI | SNF | $39,148 | 15.0 % | 1 | 4 |\n| 9.6% | 2045 | MI | SNF | $19,750 | 7.5 % | 1 | 2 |\n| 9.6% | 2045 | MI | SNF | $14,900 | 5.7 % | 1 | 1 |\n| Total | | | | $261,437 | 100.0 % | 5 | 22 | 3. Investment in Unconsolidated Joint Ventures This note outlines the company's preferred equity investments and financial activities within unconsolidated joint ventures Preferred Equity Investments in Unconsolidated Joint Ventures (September 30, 2021, dollar amounts in thousands) | State | Type of Properties | Type of Investment | Contractual Return | Cash Portion | Carrying Value | | :--------- | :----------------- | :----------------- | :----------------- | :----------- | :------------- | | Washington | UDP | Preferred Equity | 12 % | 7 % | $6,340 |\n| Washington | UDP | Preferred Equity | 12 % | 8 % | $13,000 |\n| Total | | | | | $19,340 | Joint Venture Activity (Nine Months Ended September 30, 2021, in thousands) | Metric | Amount | | :-------------------- | :----- | | Capital Contribution | $8,000 |\n| Income Recognized | $1,041 |\n| Cash Interest Earned | $916 | 4. Notes Receivable This note details the components of notes receivable, including mezzanine and other loans, and changes during the period Notes Receivable Components (in thousands) | Type of Loan | September 30, 2021 | December 31, 2020 | | :---------------- | :----------------- | :---------------- | | Mezzanine loans | $11,816 | $8,445 |\n| Other loans | $7,048 | $6,166 |\n| Loan loss reserve | $(189) | $(146) |\n| Total | $18,675 | $14,465 | - Net increase in notes receivable for the nine months ended September 30, 2021, was $4,296 thousand, primarily from $6,453 thousand in advances under working capital and mezzanine loans[64] - Subsequent to September 30, 2021, LTC provided HMG Healthcare, LLC a $25,000 thousand secured working capital loan maturing in September 2022[62][99] 5. Lease Incentives This note explains the nature and accounting treatment of non-contingent lease incentives provided by the company Lease Incentives (in thousands) | Type | September 30, 2021 | December 31, 2020 | | :------------------------ | :----------------- | :---------------- | | Non-contingent lease incentives | $2,726 | $2,462 | - For the nine months ended September 30, 2021, $650 thousand in non-contingent lease incentives were funded, and $386 thousand were amortized[66] - Lease incentives are amortized as a yield adjustment to rental income over the remaining life of the lease[67] 6. Debt Obligations This note details the company's debt structure, including its unsecured credit agreement and senior unsecured notes - The company has an unsecured credit agreement with a revolving commitment of up to $600,000 thousand, maturing on June 27, 2022, with a one-year extension option, and interest is at LIBOR plus 115 basis points[68] Debt Obligations (September 30, 2021, dollar amounts in thousands) | Debt Obligations | Applicable Interest Rate | Outstanding Balance | Available for Borrowing | | :-------------------------------- | :----------------------- | :------------------ | :---------------------- | | Bank borrowings | 1.23% | $134,400 | $465,600 |\n| Senior unsecured notes, net of debt issue costs | 4.34% | $527,429 | — |\n| Total | 3.71% | $661,829 | $465,600 | - For the nine months ended September 30, 2021, bank borrowings totaled $92,500 thousand, with repayments of $48,000 thousand, while senior unsecured notes had repayments of $32,160 thousand[71] 7. Equity This note provides information on non-controlling interests, common stock, equity distribution agreements, and stock-based compensation - As of September 30, 2021, non-controlling interests totaled $8,413 thousand across five consolidated variable interest entities (VIEs)[73] - The number of common stock shares outstanding on October 21, 2021, was 39,374,044[4] - The company has $200,000 thousand available under Equity Distribution Agreements for common stock issuance as of September 30, 2021[74] Cash Dividends Declared and Paid (in thousands) | Period | Declared | Paid | | :----------------------------- | :------- | :--- | | Nine Months Ended Sep 30, 2021 | $68,051 | $68,051 |\n| Nine Months Ended Sep 30, 2020 | $67,894 | $67,894 | - The 2021 Equity Participation Plan, approved by shareholders, authorizes 1,900,000 shares of common stock for awards, with stock-based compensation expense for the nine months ended September 30, 2021, at $5,785 thousand[80][84] 8. Commitments and Contingencies This note outlines the company's investment commitments and addresses various legal claims and lawsuits Investment Commitments (September 30, 2021, in thousands) | Type of Commitment | Total Investment Commitment | 2021 Commitment Funded | Remaining Commitment | | :-------------------------------- | :-------------------------- | :--------------------- | :------------------- | | Real estate properties | $19,670 | $10,228 | $9,442 |\n| Accrued incentives and earn-out liabilities | $9,130 | $50 | $9,080 |\n| Mortgage loans | $21,000 | $3,699 | $17,301 |\n| Notes receivable | $1,925 | $1,247 | $678 |\n| Total | $51,725 | $15,224 | $36,501 | - The company is a party to various general and professional liability claims and lawsuits, which are not considered material and are believed to be the responsibility of its lessees or borrowers[87] 9. Major Operators This note provides information on the company's major operators and potential risks associated with their financial health Major Operator Information (September 30, 2021) | Operator | SNF Beds | ALF Units | Percentage of Total Revenue | Percentage of Total Assets | | :---------------- | :------- | :-------- | :-------------------------- | :------------------------- | | Prestige Healthcare | 2,845| 93 | 21.4 % | 18.3 % | - The company's financial position and ability to make distributions could be adversely affected if Prestige Healthcare or other lessees/borrowers face financial difficulties, including those related to COVID-19[90] 10. Earnings per Share This note presents the basic and diluted earnings per common share for the three and nine months ended September 30 Earnings per Common Share (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income available to common stockholders | $10,909 | $12,114 | $42,677 | $77,381 |\n| Basic net income per share | $0.28 | $0.31 | $1.09 | $1.97 |\n| Diluted net income per share | $0.28 | $0.31 | $1.09 | $1.97 | 11. Fair Value Measurements This note discusses the fair value measurements of the company's financial instruments and the valuation methodologies used - The company did not elect the fair value option for any of its financial assets and liabilities[94] Carrying Value and Fair Value of Financial Instruments (September 30, 2021, in thousands) | Instrument | Carrying Value | Fair Value | | :------------------------------ | :------------- | :--------- | | Mortgage loans receivable, net | $258,829 | $298,677 |\n| Notes receivable, net | $18,675 | $18,552 |\n| Bank borrowings | $134,400 | $134,400 |\n| Senior unsecured notes, net | $527,429 | $556,841 | - Fair values for mortgage loans, notes receivable, and senior unsecured notes are determined using discounted cash flow analysis (Level 3 classification)[95][97] 12. Subsequent Events This note discloses significant events that occurred after the reporting period, including property transitions and new loans - Subsequent to September 30, 2021, the company transitioned 11 properties previously leased to Senior Care and Abri Health to HMG Healthcare under a one-year master lease[96] - New mortgage loans funded include a $27,047 thousand loan for a 189-bed SNF in Louisiana (7.5% yield) and a $12,530 thousand loan for a 68-unit ALF/MC in Florida (7.75% yield), with an additional $4,177 thousand commitment[98] - A $25,000 thousand secured working capital loan was provided to HMG Healthcare, LLC, maturing in September 2022[99] - Monthly cash dividends of $0.19 per share were declared for October, November, and December 2021[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an executive overview of its business and investment strategy, the impact of COVID-19, a detailed look at its real estate portfolio, updates on key operators, a summary of 2021 activities, and an analysis of key performance indicators and regulatory climate Cautionary Statement Regarding Forward-Looking Statements This statement warns readers about the inherent risks and uncertainties associated with forward-looking information in the report - The report contains forward-looking statements subject to inherent risks and uncertainties, including dependence on operators, COVID-19 impact, government regulation, and capital access[102] - Readers are cautioned not to place undue reliance on forward-looking statements, and the company does not undertake to update or revise them[102] Executive Overview This overview introduces LTC Properties, Inc. as a healthcare REIT and discusses the impact of the COVID-19 pandemic on its operations - LTC Properties, Inc. is a REIT that invests in seniors housing and health care properties, aiming to enhance stockholder equity value and provide current income[103] - The COVID-19 pandemic has adversely affected property operations and occupancy, leading to $3.8 million in rent abatements and $6.1 million in rent deferrals (net of $1.7 million repaid) between April 2020 and September 2021[111] - To support operators, the company reduced 2021 rent and interest escalations by 50%, resulting in a $0.5 million GAAP revenue decrease and a $1.3 million cash revenue decrease for the nine months ended September 30, 2021[112][113] Real Estate Portfolio Overview This section provides a summary of the company's real estate investment portfolio, including owned properties and mortgage loans Real Estate Investment Portfolio (September 30, 2021, dollar amounts in thousands) | Category | Gross Investments | Percentage of Investments | Rental Income (9M 2021) | Interest Income (9M 2021) | Percentage of Revenues | | :----------------- | :---------------- | :------------------------ | :---------------------- | :------------------------ | :--------------------- | | Owned Properties | $1,407,098 | 84.3 % | $80,770 | — | 77.3 % |\n| Mortgage Loans | $261,437 | 15.7 % | — | $23,779 | 22.7 % |\n| Total Portfolio| $1,668,535 | 100.0 % | $80,770 | $23,779 | 100.0 % | - As of September 30, 2021, the net carrying value of real estate investments was $1.3 billion, with 80.1% in owned properties and 19.9% in mortgage loans[117] - For the nine months ended September 30, 2021, rental income accounted for 78.6% of total gross revenues, and interest income from mortgage loans for 20.5%[118] Update on Certain Operators This section provides updates on key operators, including bankruptcy filings, lease extensions, and rent payment issues - Senior Care Centers, LLC and Abri Health Services, LLC filed for Chapter 11 bankruptcy in April 2021; 11 skilled nursing centers were transitioned to HMG Healthcare, LLC on October 1, 2021[120] - Brookdale Senior Living Communities, Inc.'s master lease was extended to December 31, 2022, and they are current on rent payments through October 2021[121] - Senior Lifestyle Corporation failed to pay rent in 2021, leading to a $17.7 million write-off of straight-line rent receivable and lease incentives in 2020, with 18 properties re-leased, and 4 properties were sold for $35.9 million, generating a net gain of $5.4 million[122] 2021 Rent Deferrals, Net of Repayments, and Abatements (in thousands) | Period | Rent Deferrals, net of repayments | Rent Abatements | 50% reduction of 2021 rent & interest escalations | Total | | :----------------- | :-------------------------------- | :-------------- | :------------------------------------------------ | :---- | | March 31, 2021 | $1,122 | $600 | $1,204 | $2,926|\n| June 30, 2021 | $1,121 | $1,069 | $133 | $2,323|\n| September 30, 2021 | $1,300 | $970 | — | $2,270|\n| October 2021 | $438 | $240 | — | $678 | 2021 Activities Overview This overview summarizes the company's investment activities in 2021, including development, improvements, property sales, and loan changes Investment in Development and Improvement Projects (Nine Months Ended September 30, 2021, in thousands) | Type of Property | Developments | Improvements | | :------------------------ | :----------- | :----------- | | Assisted Living Communities | $— | $4,560 |\n| Skilled Nursing Centers | $— | $279 |\n| Total | $— | $4,839 | Properties Sold (Nine Months Ended September 30, 2021, dollar amounts in thousands) | State | Number of Properties | Sales Price | Net Gain (loss) | | :---------- | :------------------- | :---------- | :-------------- | | Florida | 1 | $2,000 | $(858) |\n| Nebraska | 1 | $900 | $(198) |\n| Washington | 1 | $7,700 | $2,562 |\n| Wisconsin | 3 | $35,000 | $5,594 |\n| Total | 6 | $45,600 | $7,392 | - Net increase in mortgage loans receivable was $1,578 thousand, including $2,223 thousand in originations and funding[130] - Investment in unconsolidated joint ventures included an $8,000 thousand capital contribution and recognized $1,041 thousand in income[131] - Net increase in notes receivable was $4,296 thousand, with $6,453 thousand in advances[133] Health Care Regulatory Climate This section discusses the impact of CMS payment updates, government relief programs, and potential legislative changes on healthcare operators - CMS projected aggregate payment increases for skilled nursing facilities (SNFs) of 2.4% for FY 2020, 2.2% for FY 2021, and approximately $410 million for FY 2022[136] - The CARES Act provided $100 billion in grants to healthcare providers, with subsequent distributions and additional funding rounds, including $25.5 billion announced in September 2021[140][145] - Temporary regulatory waivers and funding relief were implemented in response to COVID-19, but future legislative changes or payment reforms could adversely impact operators' financial condition[137][147] Key Performance Indicators, Trends and Uncertainties This section analyzes the company's key performance indicators, including asset mix, operator mix, debt metrics, and EBITDAre - The company evaluates concentration risk by asset mix, real estate investment mix, operator mix, and geographic mix[151] Key Performance Indicators (Gross Investment, in thousands, September 30, 2021) | Category | Amount | | :------------------------ | :----------- | | Real property | $1,407,098 |\n| Loans receivable | $261,437 |\n| Assisted living communities | $843,015 |\n| Skilled nursing centers | $812,380 |\n| Prestige Healthcare | $272,789 |\n| Michigan (top state) | $282,022 | Balance Sheet Metrics (Year to Date September 30, 2021) | Metric | Value | | :---------------------------- | :---- | | Debt to gross asset value | 36.3 %|\n| Debt to market capitalization ratio | 34.7 %|\n| Interest coverage ratio | 4.4 x |\n| Fixed charge coverage ratio | 4.4 x | EBITDAre and Adjusted EBITDAre (Year to Date September 30, 2021, in thousands) | Metric | Amount | | :---------------- | :----- | | Net income | $43,294|\n| EBITDAre | $85,191|\n| Adjusted EBITDAre | $89,844| Operating Results This section analyzes the company's revenues, expenses, and net income for the three and nine months ended September 30 Operating Results (Three Months Ended September 30, in thousands) | Metric | 2021 | 2020 | Difference | | :-------------------------------- | :--- | :--- | :--------- | | Total Revenues | $37,472 | $38,173 | $(701) |\n| Total Expenses | $29,436 | $26,294 | $(3,142) |\n| Net income available to common stockholders | $10,909 | $12,114 | $(1,205) | Operating Results (Nine Months Ended September 30, in thousands) | Metric | 2021 | 2020 | Difference | | :-------------------------------- | :--- | :--- | :--------- | | Total Revenues | $115,881 | $113,064 | $2,817 |\n| Total Expenses | $81,020 | $79,165 | $(1,855) |\n| Net income available to common stockholders | $42,677 | $77,381 | $(34,704) | - The decrease in net income for the nine months ended September 30, 2021, was primarily driven by a significant decrease in net gain on sale of real estate ($36,681 thousand difference) and increased transaction costs ($4,074 thousand difference) compared to the prior year[166] Funds From Operations Available to Common Stockholders This section defines and presents Funds from Operations (FFO), a key non-GAAP metric for evaluating REIT financial performance - Funds from Operations (FFO) is a non-GAAP measure used to evaluate REIT financial performance, excluding gains/losses on real estate sales and impairment write-downs, plus real estate depreciation and amortization[169][171] NAREIT FFO Attributable to Common Stockholders (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | GAAP net income available to common stockholders | $10,909 | $12,114 | $42,677 | $77,381 |\n| NAREIT FFO attributable to common stockholders | $17,669 | $22,791 | $64,132 | $64,101 |\n| Basic FFO per share | $0.45 | $0.58 | $1.64 | $1.63 |\n| Diluted FFO per share | $0.45 | $0.58 | $1.64 | $1.63 | Liquidity and Capital Resources This section assesses the company's liquidity position, including cash, credit availability, and capital raising capabilities - As of September 30, 2021, the company had $45.5 million in cash, $465.6 million available under its unsecured revolving line of credit, and $200.0 million available under Equity Distribution Agreements[174] Cash Flow Summary (Nine Months Ended September 30, in thousands) | Activity | 2021 | 2020 | Change | | :------------------ | :--- | :--- | :----- | | Operating activities| $69,581 | $85,629 | $(16,048) |\n| Investing activities| $27,757 | $51,982 | $(24,225) |\n| Financing activities| $(59,651) | $(119,044) | $59,393 | Debt Obligations (September 30, 2021, dollar amounts in thousands) | Debt Obligations | Outstanding Balance | Available for Borrowing | | :-------------------------------- | :------------------ | :---------------------- | | Bank borrowings | $134,400 | $465,600 |\n| Senior unsecured notes, net of debt issue costs | $527,429 | — |\n| Total | $661,829 | $465,600 | - The company declared and paid $68.1 million in cash dividends for the nine months ended September 30, 2021, and subsequently declared monthly cash dividends of $0.19 per share for October, November, and December 2021[185][186] Critical Accounting Policies This section highlights the significant accounting policies and estimates used in preparing the consolidated financial statements - The consolidated financial statements are prepared in conformity with U.S. GAAP, requiring estimates and assumptions[192] - There have been no material changes to the company's critical accounting policies or estimates since December 31, 2020[194] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there were no material changes in the company's market risk during the nine months ended September 30, 2021, and refers to the Annual Report on Form 10-K for further details - No material changes in market risk occurred during the nine months ended September 30, 2021[195] - Additional information on market risk can be found in Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2020[195] Item 4. Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, and reported no material changes in internal control over financial reporting during the period - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2021[196] - There has been no material change in internal control over financial reporting during the period covered by the report[197] PART II -- Other Information This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company is involved in various legal claims and lawsuits arising in the ordinary course of business, which are not anticipated to be material. Responsibility for these claims is generally attributed to lessees or borrowers under applicable agreements - The company is a party to various general and professional liability claims and lawsuits, which are not considered material to its results of operations or financial condition[200] - These matters are believed to be the responsibility of the company's lessees and borrowers, pursuant to general legal principles and insurance/indemnification provisions in leases or mortgages[200] Item 1A. Risk Factors This section introduces inflation as an additional risk factor, explaining that rising costs could negatively impact tenants' ability to pay rent, despite contractual escalators, especially given recent rent abatements and deferrals provided by the company - Inflation, real or anticipated, could adversely affect the economy and the costs of labor, goods, and services for tenants[202] - Despite lease provisions like rent escalators designed to mitigate inflation, recent rent abatements, deferrals, and 50% reduction in 2021 escalations indicate potential vulnerability[202] - Increased operating costs for tenants, if not matched by revenue increases, could adversely impact their ability to pay rent to the company[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item reports that there were no unregistered sales of equity securities or use of proceeds to disclose for the period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[203] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications required by the Sarbanes-Oxley Act, and Inline XBRL documents - Exhibits include Articles of Restatement, Bylaws, CEO and CFO certifications (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002), and various Inline XBRL documents[205]