LTC Properties(LTC) - 2024 Q1 - Quarterly Results

Company Overview and Q1 2024 Highlights LTC Properties, Inc. is a REIT specializing in senior housing and healthcare properties, reporting mixed financial results for Q1 2024 with decreased net income but increased FFO and FAD Company Profile LTC Properties, Inc. is a REIT primarily investing in senior housing and healthcare properties through various financing solutions, with a portfolio of 194 properties across 26 states - LTC Properties, Inc. (NYSE: LTC) is a real estate investment trust (REIT) primarily investing in senior housing and healthcare properties[1][7] - The investment portfolio comprises 194 properties across 26 states with 32 operating partners, approximately 50% senior housing and 50% skilled nursing properties[7] Q1 2024 Financial Highlights LTC reported a decrease in net income and diluted EPS for Q1 2024 compared to Q1 2023, while NAREIT FFO and FAD showed growth Q1 2024 vs Q1 2023 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Change (YoY) | | :--------------------------------------- | :-------- | :-------- | :----------- | | Net income available to common stockholders | $24,065K | $32,929K | -26.9% | | Diluted earnings per common share | $0.56 | $0.80 | -30.0% | | NAREIT FFO attributable to common stockholders | $29,909K | $27,200K | +10.0% | | NAREIT diluted FFO per common share | $0.69 | $0.66 | +4.5% | | FFO attributable to common stockholders, excluding non-recurring items | $27,532K | $27,462K | +0.3% | | Funds available for distribution ("FAD") | $31,274K | $30,085K | +4.0% | | FAD, excluding non-recurring items | $28,897K | $28,515K | +1.3% | Factors Impacting Q1 2024 Results Q1 2024 results were positively impacted by increased rental and mortgage interest income, partially offset by higher interest expenses and lower other income - Rental income increased, primarily due to the repayment of $2.4 million in rent credits, rent from Q2 2023 acquisitions, timing of cash rent collections, lease renewals, and annual rent escalations, partially offset by property sales and a transitional portfolio[3] - Mortgage loan interest income increased, driven by mortgage loan originations in 2023 and funding of construction loans in 2024[3] - Interest expense increased, primarily due to higher interest rates and an increased outstanding balance on LTC's revolving line of credit, partially offset by scheduled principal payments on senior unsecured notes[3] - A net gain on sale of real estate of $3.3 million was realized in 2024 from the sale of seven assisted living communities[3] Consolidated Financial Statements The consolidated financial statements for Q1 2024 show increased total revenues but a significant decrease in net income, alongside minor changes in total assets and liabilities Consolidated Statements of Income Total revenues increased by 3.8% in Q1 2024, but net income significantly decreased due to a substantial drop in real estate sale gains and higher interest expenses Consolidated Statements of Income (Q1 2024 vs Q1 2023) | Metric (in thousands) | Q1 2024 | Q1 2023 | Change (YoY) | | :-------------------------------- | :-------- | :-------- | :----------- | | Total revenues | $51,366 | $49,500 | +3.8% | | Rental income | $33,549 | $31,735 | +5.7% | | Interest income from mortgage loans | $12,448 | $11,244 | +10.7% | | Total expenses | $30,304 | $31,688 | -4.4% | | Interest expense | $11,045 | $10,609 | +4.1% | | Provision for credit losses | $24 | $1,731 | -98.6% | | Gain on sale of real estate, net | $3,251 | $15,373 | -78.8% | | Net income available to common stockholders | $24,065 | $32,929 | -26.9% | | Diluted EPS | $0.56 | $0.80 | -30.0% | Consolidated Balance Sheets Total assets slightly decreased as of March 31, 2024, primarily due to reduced properties held-for-sale and real property investments, while total liabilities also declined Consolidated Balance Sheets (March 31, 2024 vs December 31, 2023) | Metric (in thousands) | March 31, 2024 | December 31, 2023 | Change | | :-------------------------------- | :------------- | :---------------- | :----- | | Total assets | $1,818,395 | $1,855,098 | -2.0% | | Real property investments, net | $956,366 | $987,965 | -3.2% | | Properties held-for-sale, net | $389 | $18,391 | -97.9% | | Mortgage loans receivable, net | $480,250 | $477,266 | +0.6% | | Cash and cash equivalents | $9,010 | $20,286 | -55.6% | | Total liabilities | $899,553 | $938,831 | -4.2% | | Revolving line of credit | $277,050 | $302,250 | -8.3% | | Total equity | $918,842 | $916,267 | +0.3% | Supplemental Financial Measures (FFO & FAD) This section defines and reconciles FFO and FAD, key non-GAAP metrics for REITs, showing their growth in Q1 2024 despite lower GAAP net income Definition and Purpose of FFO and FAD FFO and FAD are non-GAAP metrics used by REITs to assess operational performance and dividend potential, adjusting net income for non-cash items - Funds From Operations (FFO) and Funds Available for Distribution (FAD) are supplemental non-GAAP financial measures used by REITs to evaluate operating performance[12][14] - NAREIT FFO is defined as GAAP net income attributable to common stockholders, excluding gains or losses from real estate sales and impairment write-downs of depreciable real estate, plus real estate depreciation and amortization, adjusted for unconsolidated partnerships and joint ventures[13] - FAD is defined as FFO less the impact of straight-line rent, amortization of lease inducements, effective interest income, deferred income from unconsolidated joint ventures, non-cash compensation expense, capitalized interest, and non-cash interest expense, serving as a useful measure of cash flow available for distribution to shareholders[14] Reconciliation of FFO and FAD Q1 2024 saw NAREIT FFO attributable to common stockholders increase by 10.0% to $29.9 million and FAD by 4.0% to $31.3 million, indicating improved operational cash flow Reconciliation of FFO and FAD (Q1 2024 vs Q1 2023) | Metric (in thousands) | Q1 2024 | Q1 2023 | Change (YoY) | | :---------------------------------------------------------------- | :-------- | :-------- | :----------- | | GAAP net income available to common stockholders | $24,065 | $32,929 | -26.9% | | NAREIT FFO attributable to common stockholders | $29,909 | $27,200 | +10.0% | | FFO attributable to common stockholders, excluding non-recurring items | $27,532 | $27,462 | +0.3% | | Funds available for distribution (FAD) | $31,274 | $30,085 | +4.0% | | FAD, excluding non-recurring items | $28,897 | $28,515 | +1.3% | | NAREIT Diluted FFO per common share | $0.69 | $0.66 | +4.5% | | Diluted FAD per share | $0.72 | $0.73 | -1.4% | - Non-recurring items in Q1 2024 included the repayment of $2.377 million in rent credits related to the sale of a 110-unit assisted living community in Wisconsin[16] Operational Activities and Strategic Initiatives LTC engaged in various property transactions, debt management, and equity activities during and after Q1 2024, focusing on portfolio optimization and strategic growth Transactions Completed During Q1 2024 LTC completed the sale and re-leasing of 10 assisted living communities, sold a joint venture interest, funded a new construction mortgage, and managed debt and equity activities - Completed the sale and re-leasing process for 10 assisted living communities previously master leased by ALG Senior, which were not generating income[3] - Sold an interest in a 110-unit assisted living community joint venture in Wisconsin for $23.1 million, including the repayment of $2.4 million in rent credits, realizing a $4.0 million gain on sale[4] - Funded $2.9 million under a $19.5 million mortgage loan commitment for the construction of an 85-unit assisted living and memory care community in Michigan[4] - Sold a 60-unit assisted living community in Florida for $4.5 million, recording a $0.319 million loss on sale[4] - Amended and extended the maturity date of the unsecured revolving line of credit to November 19, 2026[4] - Repaid $25.2 million on the revolving line of credit and made a $6.0 million scheduled principal payment on senior unsecured notes[4] - Sold 139,100 shares of common stock through an equity distribution agreement, generating $4.5 million in net proceeds[4] Transactions Completed Subsequent to Q1 2024 Post-Q1, LTC transitioned two properties to new operators, sold five Texas properties, originated a new mortgage loan, and revised a master lease agreement with HMG Healthcare - Transitioned two properties in Georgia and South Carolina to a new operator under a two-year lease with six months of free rent, followed by market rent, and a purchase option exercisable in 2027; LTC agreed to provide up to $0.906 million for capital improvements and a $0.24 million working capital note for the first year[4] - Sold five properties in Texas for $1.6 million, with net proceeds of $0.925 million, recording a $0.356 million loss on sale[4] - Originated a $12.7 million mortgage loan to Ignite Medical Resorts for a skilled nursing and assisted living campus in Texas, expected to generate approximately $0.884 million in revenue in 2024[4] - Reached an agreement in principle with HMG Healthcare to amend the master lease for 11 skilled nursing centers in Texas, extending the term to December 2028; annual rent will increase from $9.0 million in 2024 to $9.5 million in 2025 and $10.0 million in 2026, with 3.3% annual escalations thereafter; HMG will repay a $11.9 million working capital note in Q2 2024[4] - An operator exercised a renewal option, extending the lease for four skilled nursing centers and one behavioral health hospital for five years, from March 2025 to February 2030; annual cash and GAAP rent for 2024 are $8.0 million and $7.0 million, respectively, with 2.5% annual escalations[9] - Sold 204,700 shares of common stock through an equity distribution agreement, generating $6.5 million in net proceeds[9] Management Outlook CEO Wendy Simpson stated that LTC is well-positioned for strategic, long-term, and sustainable growth after optimizing its portfolio in 2023 - CEO Wendy Simpson stated that the company is focused on strategic, long-term, and sustainable growth after optimizing and strengthening its portfolio in 2023[6] Additional Information This section provides details for the Q1 2024 earnings conference call and includes important disclaimers regarding forward-looking statements Conference Call Details LTC will host a conference call on April 30, 2024, at 8:00 AM PT (11:00 AM ET) to discuss Q1 2024 results, accessible via webcast or phone - A conference call is scheduled for April 30, 2024, at 8:00 AM PT (11:00 AM ET) to discuss Q1 2024 results[6] - Accessible via webcast at www.LTCreit.com or by phone (U.S. toll-free: 888-506-0062, International: 973-528-0011, Conference Access Code: 674331)[6] - An audio replay of the conference call will be available until May 14, 2024 (U.S. toll-free: 877-481-4010, International: 919-882-2331, Conference ID: 50325)[6] Forward-Looking Statements This press release contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from expectations - This press release contains forward-looking statements subject to various risks and uncertainties, detailed in LTC's latest annual and quarterly reports filed with the SEC[8] - The company's actual results may differ materially from any forward-looking statements, and the company undertakes no obligation to update such statements[8]