LTC Properties, Inc. Price & Performance (LTC)

Today, as Executive Chairman, my excitement for the company remains as strong as ever. In fact, with RIDEA driving our growth strategy, I could not be more optimistic about our future. I have had the privilege of working alongside this very talented group for more than two decades. They have a proven track record of navigating numerous complex real estate cycles and an unprecedented pandemic, while consistently delivering value to our stakeholders and our industry. Additionally, the recent promotions of Gibson Satterwhite to Executive Vice President, Asset Management and Mike Bowden to Senior Vice President, Investments, further recognizes the talents of our highly experienced team. As we finalize our search for a new Chief Investment Officer, our focus is on adding a seasoned executive who will assist us in growing our RIDEA platform. We anticipate completing the search in the second quarter. The Board is fully confident this team will continue to drive our business The team's depth of experience a Board that brings fresh perspectives with half of its members having joined us in the last five years and an aggressive but achievable plan for growth, LTC is positioned to thrive this year and well into the future. With that, I'll turn things over to Pam.

Thank you, Wendy. Throughout 2024 LTC, we worked to position LTC for long term growth. Of note, we reduced our leverage and continued our policy of having well staggered debt maturities matched to our projected cash flow. For 2025, we are focused on further diversifying our portfolio property type and investment vehicle. And importantly, we are unlocking a strong catalyst for growth by adding a RIDEA After extensive analysis and consultation with industry experts as to implementing a RIDEA platform, we are now moving quickly to execute our strategy, while actively building out the infrastructure As we've discussed, we have identified several opportunities to cooperatively convert selected existing triple net leases into RIDEA structures and are targeting $150,000,000 to $200,000,000 in initial gross investment assets currently on our balance sheet. We expect to complete these conversions from TripleNet to RIDEA during the second quarter. Currently, we expect that year one NOI from these conversions will off Once the conversions are complete, we will provide full year guidance Cece will provide our first quarter guidance during her remarks. In short, for us, RIDEA isn't just a strategy, it has the potential to be transformative. When combined with a robust suite of tailored financing solutions to support operators' success, we will unlock long term growth potential for LTC.

Now I'll turn things over to Cece for a review of our fourth quarter financial results. Thank you, Pam. All the numbers I'll be discussing today for the fourth quarter twenty twenty four compared with the same period in 2023 unless otherwise noted. Net income available to common shareholders decreased by 10,100,000.0 primarily due to a decrease on gain on sale and increase in impairment losses and higher G and A. These were partially offset by a decrease in interest expense, a decrease in our provision for credit losses and an increase in one time straight line rental income related to restoring certain master leases from cash basis to accrual basis as required by GAAP. FFO excluding non recurring items improved $2,100,000 primarily due to lower interest expense, rent increases from fair market rent resets, previously transitioned portfolios and escalations, and increase in interest income from construction loan funding in 2024 and lower transaction costs. The increase was partially offset by lower revenues due to property sales and mortgage loan payoffs as well as higher G and A. On a fully diluted per share basis, FFO was $0.72 compared to $0.57 last year. Core FFO, which excludes non recurring items, was $0.65 per share the twenty twenty four fourth quarter compared with $0.66 per share in the twenty twenty three fourth quarter.

Recapping our fourth quarter activities, some of which was discussed on last quarter's call. We received the payoff of a $51,100,000 mortgage loan secured by a senior housing community in Georgia sold a closed property in Colorado for $5,300,000 and recorded a $1,100,000 gain. Repaid $95,800,000 under our unsecured revolving line of credit, repaid $5,000,000 in scheduled principal paydowns on our senior unsecured notes, entered into a new $400,000,000 ATM program which includes a forward feature and subsequently terminated our $200,000,000 ATM program. We sold 476,370 shares of common stock for $17,500,000 in net proceeds under these ATMs. Programs and paid $25,800,000 in common dividends. Subsequent to the end of the fourth quarter, we sold a 29 unit assisted living property in Oklahoma for 6 and $70,000 Upon sale, the property was removed from a master lease covering five assisted living properties in Oklahoma. Rent under the master lease was not reduced as a result of the sale. Repayed $7,000,000 under our senior unsecured notes and borrowed $15,000,000 under our revolving line of credit. At the end of the last quarter, our total liquidity was approximately September 2024 LTC. We have $9,400,000 of cash on hand dollars $281,000,000 available on our line of credit and $390,000,000 available under our ATM.

Each of these metrics improved from the end of the twenty twenty four third Our debt to annualized adjusted EBITDA for real estate is down to 4.3x from 4.7x for the third quarter and our annualized adjusted fixed charge coverage ratio is up to 4.7 times from 4.2x for the third quarter. Our first quarter twenty twenty five guidance for core FFO is between $0.64 and $0.65 per share, This guidance assumes no additional investments asset sales, financing or equity issuances. Now I'll turn the call over to Clint.

Thank you, Cece.

Is increasing momentum in our pipeline is expanding as a result of our entrance into RIDEA. We're seeing numerous opportunities from both proactive outreach and inbound inquiry. Are having some of the most productive conversations with operators that we've had in recent memory. Our strategy has always been to listen closely to what operators want and need and provide them with a robust set of flexible and innovative solutions. Her idea is now part of that toolbox. And is anchoring our external growth story While RIDEA represents our largest growth opportunity, we will continue to deploy other financing vehicles triple net leases, mortgage loans and structured finance, Currently, our pipeline is valued at approximately $100,000,000 including potential RIDEA transactions. We are in one of the best positions for accretive growth in recent years. Moving on to a few operator updates. ALG paid their contractual rent obligation with no deferral concession for January and February in a timely manner. And we expect the same for March. ALG is continuing to work towards exercising their purchase options, but we don't have a formal timeline as they are still evaluating financing opportunities. We received $4,300,000 from Prestige during the fourth quarter related to retroactive Medicaid payments they received.

The security we now hold of approximately 5,000,000 combined with their current pay should allow us to receive full contractual interest through at least the end of this year. Occupancy in this portfolio increased seven forty basis points from January of last year to January of this year. For our portfolio of 15 properties, subject to market based rent resets, we received $3,700,000 in rent in 2024 and expect that to increase to $4,800,000 in 2025 LTC. We expect all twenty twenty five lease maturities to be addressed by the end of the second quarter and also are actively working on twenty twenty six maturities. Next year, we have about $19,000,000 in annualized GAAP including with two operators in our top 10. To make up 89% of that $19,000,000 One operator is expected to renew. The other has informed us that for strategic reasons, they do not plan to renew. We are actively negotiating offers to sell the Seven Skilled Nursing Centers that make up this portfolio. Based on feedback we're receiving from potential buyers, we believe that we will fully replace the $8,300,000 of annualized GAAP rent for this portfolio by strategically redeploying the capital received from these sales at rates available to us today.

We expect to complete the transactions in the fourth quarter of this year. To summarize, LTC is in one of the best positions for accretive growth have made tremendous progress in diversifying our portfolio shoring up our balance sheet and importantly adding a new investment structure that should become a mainstay for growth. Thank you all for joining us today. Look forward to talking to you again next quarter. Discuss our first quarter results. Operator, we're now ready to take questions.

Certainly. At this time, we will be conducting a question and answer session. Your first question for today is from Austin Wurschmidt with KeyBanc Capital Markets. Was wondering if you could just provide some additional detail about who the operator is [indiscernible] gave notice that they don't intend to renew and then share a little bit more around I guess the sale and redeployment of proceeds and what the timeline of that looks like? I'm not sure I caught everything in the prepared remarks. Thanks.

Sure. Not a problem, Us.

So this operator has they've decided to down size the organization and they've made a strategic decision to exit The States where we the properties in the portfolio. So the assets they cover and we have credit enhancements to secure RIN is paid through the maturity. This is a process we've gone through. It's consistent with our historical recycling of capital On older skilled assets, And this is a strategic decision to recycle capital and sell into a strong market for private buyers of older assets. And by doing this, we feel we're going to be able to reduce our average age of our portfolio. And we'll continue to strategically reduce exposure to skilled nursing. And we think that this the timing of this sale our engines and RIDEA line up [indiscernible] We think that by the end of the year, we'll be able to execute on these transactions. And with the rates available to us today, we think we'll be able to replace the income. This is something similar to our previous maturity with Brookdale. Where we demonstrated our ability to transition assets, whether through sales or releasing to go ahead and recover or in the case of Brookdale, recover more income they were under the existing Brookdale lease.

So you think given where you can sell those assets today that you can redeploy that into shop on an earnings neutral basis? Did I I hear you correctly? Correct.

Yes.

Okay, that's helpful. And then in the prepared remarks, you guys referenced that you expect a neutral earnings impact from the transition from TriConnect to RIDEA. Is that accounting for taking on the CapEx as well for those assets?

And can you share what the yield is on in place NOI for 152 hundred million dollars that are initially being transitioned? Thank you.

Yes, it does. Austin, it takes into account the expected one time expenses.

Related to setting up a platform like establishing a database and all of that.

As far as the in place yield, about 8% That's helpful. That's all for me. Thank you.

Thank you. Your next question is from John Killechaseki with Wells Fargo LTC.

Thank you. Good morning. Thank you. Good morning. I'll start with the conversions in the pipeline.

Sorry, the echo is getting to me a little bit. What percentage of your portfolio by the end of twenty twenty five will maybe expect to be shop versus Netflix?

Well, I think with the conversion that Pam spoke about her prepared remarks, we're currently about fifty-fifty right now. I think you're going to see that over time that's going to continue to increase more weighted towards shop.

Okay. And then maybe just trying to think about building out preparing to talk to the plant, For some of your networks here, we've had your discussion there like, oh, we're not prepared at least internally. What should we expect on the G and A side as you prepare as we move on the shop operations?

After we established the platform, we'll give you a run rate on that increased G and A. But right now, as we said in our prepared remarks, we expect the increase in NOI from the SHOP portfolio to offset those expenses this year.

Got it. Okay. Thank you. Okay. Thank you.

Thank you.

Your next [indiscernible] Just curious if you could elaborate on the alliance that are interested in the RIDEA Sure. Right now, the discussions that we are having with operating companies has been very robust. And as I mentioned in the prepared remarks, we've had some of the most productive conversations in recent memory in regard to RIDEA. We've had I think this is what And you see a lot of companies gravitating towards the RIDEA platform. And so this has really opened up conversations with a big part of the market that we were missing out previously by not doing ideas. So the business development side, we've been probably most active on this front in the last couple of years. So the track evaluating opportunities. [indiscernible] [indiscernible] what's the fee simple loan split and what part of the pipe includes RIDEA?

Sure. Normally, we coat our pipe are under LOI. But given just the ramp up in our underwriting, we have we're going through a number of transactions we're about $100,000,000 I'd say right now that's about 50% right here. And about 50% loans. The majority of it is on private pay assets. And one of the exciting things that we're hearing and talking to operators is really looking at rightsizing the relationship with capital partners And I think that our entrance into IDEA is well timed and it gives offerors different optionality for to work with smaller REITs to right size that alignment of interest between capital You look at you're comparing triple net and, RIDEA, RIDEA really gives us a better long term organic growth outlook.

Then the stated 2% LTC CPI in increases in triple net leases. So I'm really looking at future growth for LTC Vidya really provides an outsized return versus a triple net investment.

And then on the each portfolio, just curious if there's any outside risk on the ability to sustain rents if Medicaid is cut under the new DC administration.

As I mentioned in the prepared remarks, Prestige has done a good job growing occupancy over seven thirty basis points. Over the last year. As when we structured this transaction with Prestige at the end of twenty twenty three, we gave them a long runway to be able to recover occupancy. They've been able to accomplish that 700 basis points from January 2024 to January through December of twenty twenty four. So we're encouraged to see that. We did receive the retroactive Medicaid payment that was due us. We're encouraged by that and our hope is they continue to increase occupancy and improve operational performance.

Thank you.

Your next question for today is from Rich Anderson with Wedbush.

Thanks.

Good morning.

I hope that echo is gone. It was giving me vertigo.

So in terms of like where you go from here, you mentioned $150,000,000 to $200,000,000 of internal transitions to RIDEA. What is the is there a much larger number that you think can execute And the reason why I ask is, I'm wondering when RIDEA can truly make a dent in the portfolio in terms of its influence in your growth profile. It could take a while for it to become a meaningful part of the pie chart, but maybe I'm wrong about that. So that's the question.

We'll have the bucket of transition ask assets or lease up assets, we call them. These are the leases that are currently on market based resets. So if some of those operators wanted to transition to right that would be a natural progression for that. But right now, we are only targeting the two that we discussed in our prepared remarks. We think most of the growth will come from externally from investments through RIDEA.

Okay.

And what's your vision like three three or five years from now that you think you'll get to some level 25% right of the total pie. Do you have something like that in mind right now? [indiscernible] maybe 50% depending on the acquisition volume. [indiscernible] Yes.

Sorry. It's predominantly what we're seeing LTC interest in from from operators, from our customer base and new operators. We've had a lot of inbound calls from new operators that we haven't done business within the past because they don't do triple net. So it's really opened up a big area for us to make entry into.

And also Rich, as we talked about with you specifically about, it really just opens up the opportunity set of conversations and deals that we can look at.

So it really is giving us a lot more opportunities to explore.

Okay.

Is there something about the nature of your portfolio that took this long for you to sort of go after the right day structure? I mean, the law has been around since 02/2007. But has it not been evident just in the corner of the business that you work in that you've really needed until somewhat more recently? Or I'm just I'm wondering about why now, I guess? On Rydalia.

I think a couple of things. One is just lessons learned through the pandemic. And we participated on the downside in the triple net lease, but was was hard to recover and participate in the upside. And then just looking at deal flow and pricing, cash rates of where we can execute on. So the culmination of what we went through through the pandemic then just being able to look at opportunities to invest and where that growth is it's really the right idea to be able to invest at those cap rates. And then meeting the demand, I mean, in all of our meetings with operators, this is what they want and this is what they're requesting. And for so long, we said no, no, no. And in a strategic planning meeting as we're sitting around saying, well, why are we saying no? I mean, because it is a big undertaking. I mean, I don't want to diminish the efforts of, everyone here at LTC. We're a small company to put this platform in place and do it right. But we're fully committed to it once we evaluate it and said, yes, this is the best path forward for LTC for future growth.

And it's really we've been able to experience this recently, Rich, just by the business development front of getting meetings, having conversations, about opportunities, I mean, it is it's ramping up substantially. That wouldn't be happening if it wasn't for RIDEA. So really the ability to to increase the pie of what we're looking at we feel we're getting a lot of traction. Okay.

Just real quickly for you, Clint, the $8,300,000 of rent that's associated with the seven property portfolio, Is there any amount of that that you're vulnerable to missing out on during 2025 LTC you execute the sale and redeployment or do you or does this security deposits cover all that? Deposit cover all that. [indiscernible] Rich, so we're fully expecting the operator to pay. Rent on the portfolio through maturity or sale of the assets. And when does that maturity? January 31. '26. Okay, great.

Okay, got you. Thank you very much. Thank you very much. All right. Thank you. Your next question is from Michael Carroll with RBC Capital Markets.

Yes, thanks. I know in your prepared remarks, Pam, you kind of mentioned and you kind of been talking about in the Q and A about building your infrastructure for your RADIA platform I mean, can you provide some color on what that means? I mean, how are you going to build this infrastructure [indiscernible] to make sure you're tracking those RIDEA investments? And I don't know, are you going to be helping your operators make these types of decisions? Are you going to be letting your operators kind of run this without much advice from you?

It's really that the database to collect all the operational information at the property level and accounting systems and some personnel. We view this as a partnership, a strategic partnership So we'll be working with our operators. But we are the manager would be in charge of the day to day operations. That's That's how RIDEA works. But obviously strategic decisions, capital improvements, [indiscernible] future investments that would be made together with the operator.

So how long does it take to build that type of database? And what type of information are you requesting information? Like are you getting like tour activity and other types of leading indicators from them?

Yes. That type of information is crucial, the tours, the leads, the conversion ratios, all of that. And yes, we will be collecting that from our operators. So that's pretty standard idea information. We talk to people industry experts and our peers. That's the type of information they're collecting, and helping. It really does help the operators to provide them information, not just in our portfolio, but, what's what's happening in the marketplace, better more information helps LTC better inform decisions. Okay. And then related to the January 2026 LTC, expiration, I mean, can you give us an idea of what coverage ratios are on those properties and or at least how it pertains to the averages that you guys quote in the supplemental?

I would say right now, we haven't given coverage by specific assets, but these assets cover and we have strong credit enhancements on it. So the ability to collect rent for the duration of this lease is not a concern for us.

Okay. And then, Clint, I know for Austin's question earlier, you mentioned that the reinvestment of these proceeds were into RADIA assets. Kind of what you're kind of highlighting about your prepared remarks. Did I hear that correctly? Or do you when you think you can regain this $8,000,000 plus of NOI, I mean, as RIDEA investments, right, not debt investments or anything like that? Primarily, Ridea. But look, it's going to be a timing of executing on the sales and then deploying that capital and it will be a combination probably of timing of your ID investments as well as other investments we'd make, which could be loans, triple net leases that really goes back just to the timing. But what we see right now in the market as far as rates available to us today, we think that we can recapture recover, redeploy at the same yield to retain that income in the portfolio.

Great. And then just last one for me.

There was a small tenant that looks like you had a short term one year renewal Can you describe why it was only a one year renewal? If there's any risk to that tenant or are you working on a bigger renewal with them now?

The operator is looking at doing a larger financing and adding these two properties into that larger financing. So this was an accommodation to give them more time to be able to accomplish that. And the purchase option they have is based on fair market [indiscernible] we've increased the floor for that. So really this is a long tenure tenant we've had in our portfolio and a combination to help them to accomplish a larger financing.

Okay, great. Thank you. Yes, great.

Thank you.

Your next question for today is from Amatayo Akusana with Deutsche Bank.

Hey, guys. This is Sam on for Tayo. I was just wondering if you guys could provide some details around the circumstance leading to the restoring of accrual based accounting for the two master leases? [indiscernible] our leases on a quarterly basis, the leases we have on a cash basis of accounting. And with the sustained strong operational performance in these portfolios, we had a higher confidence level that we would receive contractual rent through maturity.

Got you. And maybe if you guys could tell me what the tenants were if you think this will occur again in 2025 LTC?

We haven't disclosed that tenants, we typically don't talk about our tenants on an individual basis. But we do have more. If your question is how many more we have on a cash basis, about 50% of our portfolio is on a cash basis and we're evaluating that quarterly. So it could right now there's none that we have that high of a confidence level that would require us to put them back on a cash basis. But we are looking at it, but possibly in 2026 and 2027 LTC. Especially as you get closer to the maturity of leases and you have that higher level of confidence and insight [indiscernible] you project that they'll be able to pay through maturity. That's really the crux of putting them back on a cash basis. Cool. I'm sorry, accrual. Thank you. Taking them off the cash basis and putting them on accrual. Got it. That's all I got on my end. Thanks guys. Appreciate the time.

We have reached the end of the question and answer session. And I will now turn the call over to Wendy for closing remarks. Again, thank you all for joining us today. We are very excited as you can hear for the future of LTC LTC. And we look forward to talking to you relative to our first quarter results in just a few short months.

Have a great day.

This concludes today's conference. And you may disconnect your lines at this time. [indiscernible]