LTC Reports 2015 Third Quarter Results and Announces New Investments

–New Acquisitions and Commitments totaling $74.3 Million further
Diversify Real Estate Portfolio–

WESTLAKE VILLAGE, Calif.–(BUSINESS WIRE)–LTC Properties, Inc. (NYSE: LTC), a real estate investment trust that
primarily invests in seniors housing and health care properties, today
announced operating results for its third quarter ended September 30,
2015 and recent investment activity.

Funds from Operations (“FFO”) increased 15.8% to $26.1 million for the
2015 third quarter, up from $22.5 million for the comparable 2014
period. FFO per diluted common share was $0.72 and $0.64 for the
quarters ended September 30, 2015 and 2014, respectively, which
represents a 12.5% per share increase. Normalized FFO increased 18.2% to
$26.6 million for the 2015 third quarter, which excludes acquisition
costs of $0.5 million related to a $142.0 million acquisition discussed
below. Normalized FFO in the 2014 third quarter was $22.5 million.
Normalized FFO per diluted common share increased 14.1% to $0.73 for the
quarter ended September 30, 2015 up from $0.64 in the same period in the
prior year. Net income available to common stockholders was
$18.7 million, or $0.52 per diluted share, for the 2015 third quarter,
compared with $16.2 million, or $0.46 per diluted share, for the same
period in 2014. The increase in FFO, normalized FFO and net income was
primarily due to higher revenues from recent acquisitions, completed
developments, mortgage loan originations and income from an
unconsolidated joint venture, partially offset by higher interest
expense resulting from the sale of senior unsecured notes and increased
utilization of LTC’s unsecured line of credit, as well as additional
general and administrative expenditures related to increased investment
activity and vesting of restricted stock.

During the three months ended September 30, 2015, LTC completed the
previously announced acquisition of a 10-property portfolio providing
independent, assisted living and memory care services totaling 891
units. Nine of the properties are located in Wisconsin and one is
located in Illinois. The aggregate purchase price paid at closing was
$142.0 million. Simultaneously upon closing, LTC entered into a 15-year
triple-net master lease agreement with an affiliate of Senior Lifestyle
Corporation at an initial lease rate of 6.5%, escalating by 25 basis
points upon each of the first and second anniversaries and annually
thereafter by 2.75%. LTC provided the lessee a contingent earn-out
payment up to $10.0 million upon the portfolio achieving a sustainable
stipulated rent coverage ratio. When the contingent payments are funded,
cash rent will increase by the amount funded multiplied by a rate
stipulated in the agreement.

Additionally, LTC acquired a newly constructed 60-unit memory care
property located in Florida for $14.3 million including a $2.0 million
working capital reserve. Concurrently with the purchase, LTC entered
into a 15-year triple-net lease agreement, with an affiliate of Clarity
Pointe, at an initial lease rate of 8% escalating annually by 2.5%, and
provided the lessee a $0.3 million contingent earn-out payment upon the
property achieving a sustainable stipulated rent coverage ratio. When
the working capital reserve and contingent earn-out payments are funded,
cash rent will increase by the amounts funded multiplied by the lease
rate in effect at the time.

Also, during the quarter ended September 30, 2015, LTC purchased a
parcel of land in California for $2.0 million and entered into a
development commitment to construct and equip a 66‐unit memory care
property for a total commitment of $12.6 million including the purchase
of land. Simultaneously with the acquisition, the property was added to
existing master lease agreement with an affiliate of Anthem Memory Care,
and rent on the property will commence upon completion of construction
at an initial lease rate of 9.00% escalating annually by 2.5%.

As previously announced, LTC sold $100.0 million aggregate principal
amount of 4.5% senior unsecured notes due August 31, 2030 to affiliates,
subsidiaries or managed accounts of Prudential Investment Management,
Inc. during the three months ended September 30, 2015. Also, LTC entered
into a shelf agreement with another insurance company which provides for
the possible issuance of up to an additional $100.0 million of senior
unsecured fixed interest rate term notes with a coupon of 4.26%.

“LTC’s long-term strategy of opportunistic investment in a wide range of
properties, geographies and operators has served the company well, as
demonstrated by our third quarter results. Our investment activities
continued subsequent to the end of the quarter, as we completed three
transactions that we are confident will further our long-term growth,”
said Wendy Simpson, LTC’s Chairman and Chief Executive Officer. “The
acquisition of a 10-property, private-pay portfolio providing
independent, assisted living and memory care services in Wisconsin and
Illinois, a newly constructed memory care property in Florida, and a
land parcel in California on which a memory care property will be built,
speaks to LTC’s ability to successfully invest in and diversify its
portfolio while strengthening relationships with key operating partners.
With more than $386.5 million in investments and development commitments
entered into year-to-date and an active pipeline, we are well positioned
to achieve additional growth into the future.”

Subsequent to September 30, 2015, the company took the following actions
and completed the following transactions:

  • Increased its monthly cash dividend on its common stock to $0.18 per
    share for the fourth quarter of 2015, an approximate 5.9% increase
    from the previous $0.17 per share, as previously announced.
  • Purchased a parcel of land in Illinois for $2.8 million and entered
    into a development commitment to construct a 66-unit memory care
    property. The commitment totals $14.8 million, including the land
    purchase. The property was added to an existing master lease with an
    affiliate of Anthem Memory Care. Rent on the property will commence
    upon completion of construction at an initial lease rate of 9.0%
    escalating annually by 2.5%.
  • Purchased a behavioral health care hospital in Nevada comprised of 116
    medical hospital beds and two skilled nursing beds for $9.3 million
    which was added to an existing master lease with an affiliate of
    Fundamental at an initial lease rate of 8.5% escalating annually by
    2.5%. Additionally, LTC committed up to $3.0 million for approved
    capital improvement projects.
  • Originated a $20.0 million, 30-year term mortgage loan to an affiliate
    of Prestige Healthcare, funding $9.5 million at closing, with a
    commitment to fund $5.5 million within 180 days. The $5.0 million
    remaining commitment will be available for approved capital
    improvement projects. The loan is secured by two skilled nursing
    properties with 273 beds in Michigan and bears interest at 9.41% for
    five years, escalating annually thereafter by 2.25%.
  • Exercised the $200.0 million accordion feature of its $400.0 million
    unsecured revolving line of credit increasing the commitments under
    the credit facility to $600.0 million.
  • Locked rate under its shelf agreement with an insurance company on
    $100.0 million senior unsecured notes with a coupon of 4.26% and
    anticipate selling the notes on or about November 20, 2015.

Conference Call Information

LTC will conduct a conference call on Tuesday, November 3, 2015, 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 September
30, 2015. The conference call is accessible by telephone and the
internet. Telephone access will be available by dialing 877-510-2862
(domestically) or 412-902-4134 (internationally). To participate in the
webcast, go to LTC’s website at www.LTCreit.com
15 minutes before the call to download the necessary software.

An audio replay of the conference call will be available from November 3
through November 18, 2015 and may be accessed by dialing 877-344-7529
(domestically) or 412-317-0088 (internationally) and entering conference
number 10074526. Additionally, an audio archive will be available on
LTC’s website on the “Presentations” page of the “Investor Information”
section, which is under the “Investors” tab. LTC’s earnings release and
supplemental information package for the current period will be
available on its website on the “Press Releases” and “Presentations”
pages, respectively, of the “Investor Information” section which is
under the “Investors” tab.

About LTC

LTC is a self-administered real estate investment trust that primarily
invests in seniors housing and health care properties through lease
transactions, mortgage loans and other investments. At September 30,
2015, LTC had 218 investments located in 29 states comprising 104
assisted living properties, 97 skilled nursing properties, 7 range of
care properties, 1 school, 6 parcels of land under development and 3
parcels of land held-for-use. Assisted living properties, independent
living properties, memory care properties and combinations thereof are
included in the assisted living property type. Range of care properties
consist of properties providing skilled nursing and any combination of
assisted living, independent living and/or memory care services. For
more information on LTC Properties, Inc., visit the Company’s website 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.

 
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

       
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015     2014 2015     2014
Revenues:
Rental income $ 28,531 $ 25,098 $ 82,325 $ 75,375
Interest income from mortgage loans 6,117 4,213 15,777 12,445
Interest and other income   295     230     708     386  
Total revenues   34,943     29,541     98,810     88,206  
 
Expenses:
Interest expense 4,296 3,170 11,916 9,445
Depreciation and amortization 7,365 6,335 21,121 18,935
Provision for doubtful accounts and notes 31 40 463 77
Acquisition costs 539 2 564 22
General and administrative expenses   3,739     2,872     11,162     8,468  
Total expenses   15,970     12,419     45,226     36,947  
 
Operating income 18,973 17,122 53,584 51,259
Income from unconsolidated joint ventures 674 1,543
Gain on sale of real estate, net               1,140  
Net income 19,647 17,122 55,127 52,399
 
Income allocated to participating securities (121 ) (123 ) (370 ) (343 )
Income allocated to preferred stockholders   (818 )   (818 )   (2,454 )   (2,454 )
Net income available to common stockholders $ 18,708   $ 16,181   $ 52,303   $ 49,602  
 
Earnings per common share:
Basic $ 0.53   $ 0.47   $ 1.48   $ 1.43  
Diluted $ 0.52   $ 0.46   $ 1.47   $ 1.42  
 
 
Weighted average shares used to calculate earnings per common
share:
Basic   35,341     34,605     35,306     34,596  
Diluted   37,352     36,629     37,319     36,620  
 
 
Dividends declared and paid per common share $ 0.51   $ 0.51   $ 1.53   $ 1.53  
 

Supplemental Reporting Measures

FFO, adjusted FFO (“AFFO”), and Funds Available for Distribution (“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, AFFO and FAD as supplemental measures of operating performance. The
Company believes FFO, AFFO 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, AFFO and FAD
facilitate like comparisons of operating performance between periods.
Additionally the Company believes that normalized FFO, normalized AFFO
and normalized FAD provide useful information because they allow
investors, analysts and our 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. Normalized FFO
represents FFO adjusted for certain items detailed in the
reconciliations. 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 our Company’s FFO to that of
other REITs.

We define AFFO as FFO excluding the effects of straight-line rent,
amortization of lease inducement, effective interest income and deferred
income from unconsolidated joint ventures. 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 our 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 our 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. By
excluding the non-cash portion of rental income, interest income from
mortgage loans and income from unconsolidated joint ventures, investors,
analysts and our management can compare AFFO between periods. Normalized
AFFO represents AFFO adjusted for certain items detailed in the
reconciliations.

We define FAD as AFFO excluding the effects of non-cash compensation
charges, capitalized interest and non-cash interest charges. 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. Normalized FAD represents FAD adjusted for
certain items detailed in the reconciliations.

While the Company uses FFO, Normalized FFO, AFFO, Normalized AFFO, FAD
and Normalized FAD as supplemental performance measures of our 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, AFFO and FAD

The following table reconciles GAAP net income available to common
stockholders to each of NAREIT FFO available to common stockholders and
normalized FFO available to common stockholders, as well as normalized
AFFO and normalized FAD (unaudited, amounts in thousands, except per
share amounts)
:

             
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
2015     2014 2015     2014
GAAP net income available to common stockholders

$

18,708

 

$

16,181

$ 52,303 $ 49,602
Add: Depreciation and amortization 7,365 6,335 21,121 18,935
Less: Gain on sale of real estate, net               (1,140 )
NAREIT FFO available to common stockholders 26,073 22,516 73,424 67,397
Add: Non-recurring one-time items   537  

(1)

 

      937  

(2)

 

   
Normalized FFO available to common stockholders 26,610 22,516 74,361 67,397
Less: Non-cash rental income (2,179 ) (452 ) (5,897 ) (1,369 )
(Less) add: Effective interest income from mortgage loans (1,195 ) (2 ) (2,680 ) 38
Less: Deferred income from unconsolidated joint ventures   (421 )       (1,000 )    
Normalized adjusted FFO (AFFO) 22,815 22,062 64,784 66,066
Add: Non-cash compensation charges 1,012 877 3,093 2,326
Add: Non-cash interest related to earn-out liabilities 96 205
Less: Capitalized interest   (184 )   (474 )   (481 )   (1,216 )
Normalized funds available for distribution (FAD) $ 23,739   $ 22,465   $ 67,601   $ 67,176  
                                         
(1) Represents acquisition costs related to the 10-property senior
housing portfolio acquired during the quarter.
(2) Represents a $400 provision for loan loss reserve related to
additional loan proceeds funded under an existing mortgage loan and
item (1) above.
                         
NAREIT Basic FFO available to common stockholders per share $ 0.74   $ 0.65   $ 2.08   $ 1.95  
NAREIT Diluted FFO available to common stockholders per share $ 0.72   $ 0.64   $ 2.03   $ 1.91  
 
NAREIT Diluted FFO available to common stockholders $ 27,012   $ 23,457   $ 76,248   $ 70,194  
Weighted average shares used to calculate NAREIT diluted FFO per
share available to common stockholders
  37,581     36,869     37,558     36,841  
                         
Basic normalized FFO available to common stockholders per share $ 0.75   $ 0.65   $ 2.11   $ 1.95  
Diluted normalized FFO available to common stockholders per share $ 0.73   $ 0.64   $ 2.06   $ 1.91  
 
Diluted normalized FFO available to common stockholders $ 27,549   $ 23,457   $ 77,185   $ 70,194  
Weighted average shares used to calculate diluted normalized FFO per
share available to common stockholders
  37,581     36,869     37,558     36,841  
                         
Basic normalized AFFO per share $ 0.65   $ 0.64   $ 1.83   $ 1.91  
Diluted normalized AFFO per share $ 0.63   $ 0.62   $ 1.80   $ 1.87  
 
Diluted normalized AFFO $ 23,754   $ 23,003   $ 67,608   $ 68,863  
Weighted average shares used to calculate diluted normalized AFFO
per share
  37,581     36,869     37,558     36,841  
                         
Basic normalized FAD per share $ 0.67   $ 0.65   $ 1.91   $ 1.94  
Diluted normalized FAD per share $ 0.66   $ 0.63   $ 1.88   $ 1.90  
 
Diluted normalized FAD $ 24,678   $ 23,406   $ 70,425   $ 69,973  
Weighted average shares used to calculate diluted normalized FAD per
share
  37,581     36,869     37,558     36,841  
                         
 
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)

       
September 30, 2015 December 31, 2014
ASSETS (unaudited) (audited)
Investments:
Land $ 98,486 $ 80,024
Buildings and improvements 1,056,163 869,814
Accumulated depreciation and amortization   (244,361 )   (223,315 )
Real property investments, net 910,288 726,523
Mortgage loans receivable, net of loan loss reserves: 2015 — $2,065;
2014 — $1,673
  204,476     165,656  
Real estate investments, net 1,114,764 892,179
Investment in unconsolidated joint ventures   21,143      
Investments, net 1,135,907 892,179
 
Other assets:
Cash and cash equivalents 11,729 25,237
Debt issue costs, net 3,289 3,782
Interest receivable 3,384 597

Straight-line rent receivable, net of allowance for doubtful
accounts: 2015 — $802; 2014 — $731

39,641 32,651
Prepaid expenses and other assets 20,775 9,931
Notes receivable   2,190     1,442  
Total assets $ 1,216,915   $ 965,819  
 
LIABILITIES
Bank borrowings $ 165,500 $
Senior unsecured notes 352,467 281,633
Accrued interest 2,554 3,556
Accrued incentives and earn-outs 13,323 3,258
Accrued expenses and other liabilities   21,865     17,251  
Total liabilities 555,709 305,698
 
EQUITY
Stockholders’ equity:
Preferred stock $0.01 par value; 15,000 shares authorized; shares
issued and outstanding: 2015 — 2,000; 2014 — 2,000
38,500 38,500

Common stock: $0.01 par value; 60,000 shares authorized; shares
issued and outstanding: 2015 — 35,570; 2014 — 35,480

356 355
Capital in excess of par value 720,221 717,396
Cumulative net income 910,374 855,247
Accumulated other comprehensive income 56 82
Cumulative distributions   (1,008,301 )   (951,459 )
Total equity 661,206 660,121
   
Total liabilities and equity $ 1,216,915   $ 965,819  
 

Contacts

LTC Properties, Inc.
Wendy L. Simpson
Pam Kessler
805-981-8655