Q2 2024 LTC Properties Inc Earnings Call

Good day and welcome to the LTC Properties Incorporated second quarter 2024 earnings call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session.

Operator: Incorporated, second quarter, 2024, earnings call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session.

Operator: 2nd Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.

Operator: After management's prepared remarks, there will be a question and answer session. Before management begins its presentation, please note that today's comments, including the question and answer session, may include forward-looking statements, subject to risk and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC Properties' filings with the Securities and Exchange Commission from time to time, including the company's most recent 10k dated December 31st, 2023. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation.

Operator: Before management begins its presentation, please note that today's comments, including the question-and-answer session, may include forward-looking statements, subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC Properties' filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2023. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation.

Speaker Change: Before management begins its presentation, please note that today's comments, including the question and answer session, may include forward-looking statements, subject to risk and uncertainties that may cause actual results and events to differ materially.

Speaker Change: These risks and uncertainties are detailed in LTC Properties' filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K, dated December 31, 2023.

Speaker Change: LTC undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances after the date of this presentation.

Operator: Please note that this event is being recorded.

Operator: Please note that this event is being recorded. I would now like to turn the conference over to Wendy Simpson. Please do so.

Operator: I would now like to turn the conference over to Wendy Simpson. Please go ahead.

Speaker Change: Please note that this event is being recorded. I would now like to turn the conference over to Wendy Simpson. Please go ahead.

Wendy L. Simpson: Thank you, Operator, and welcome everyone to LTC's 2024 Second Quarter Conference Call. On the call with me today are Clint Malin, Co-President and Chief Investment Officer, and Pam Kessler, Co-President and Chief Financial Officer. The second quarter went generally according to plan.

Wendy Simpson: Thank you, operator, and welcome everyone to LTC's 2024 second quarter conference call. On the call with me today, our Clint Malin, Co-President and Chief Investment Officer, and Pam Kessler, Co-President and Chief Financial Officer. The second quarter went generally according to plan.

Wendy L. Simpson: Thank you operator and welcome everyone to LTC's 2024 second quarter conference call. On the call with me today are Clint Malin, co-president and chief investment officer, and Pam Kessler, co-president and chief financial officer.

Wendy L. Simpson: We did encounter a challenge with respect to occupancy issues at select assisted living communities operated by ALG Senior, but we very quickly provided solutions that were in the best interest of LTC, our partner, and our shareholders. With the full cooperation of ALG, we were able to neutralize the impact on LTC while enhancing our portfolio and providing us with additional security. Clint will explain as part of his portfolio review. As with other REITs, over the years, we have responded to challenges presented by industry and operator-specific headwinds. Our track record demonstrates that we've done so with expediency and transparency, and the ALG situation is no different. Our philosophy and mission have not changed, and we remain committed to our 2024 guidance and future growth.

Wendy Simpson: We did encounter a challenge with respect to occupancy issues at select assisted living communities operated by ALG Senior, but we very quickly provided solutions that are in the best interest of LTC, our partner, and our shareholders. With the full cooperation at VLG, we were able to neutralize the impact to LTC while enhancing our portfolio and providing us with additional security.

Speaker Change: The second quarter went generally according to plan.

Speaker Change: We did encounter a challenge with respect to occupancy issues at select assisted living communities operated by ALG Senior.

Speaker Change: but we very quickly provided solutions that are in the best interest of LTC, our partner, and our shareholders.

Speaker Change: With the full cooperation of ALG, we were able to neutralize the impact to LTC while enhancing our portfolio and providing us with additional security.

Wendy Simpson: Clint will explain as part of his portfolio review. As with other reads, over the years, we have responded to challenges presented by industry and operator-specific headwinds. Our track record demonstrates that we've done so with expediency and transparency, and the ALG situation is no different.

Speaker Change: Clint will explain as part of his portfolio review.

Clint B. Malin: As with other REITs, over the years we have responded to challenges presented by industry and operator-specific headwinds.

Speaker Change: Our track record demonstrates that we've done so with expediency and transparency, and the ALG situation is no different. Our philosophy and mission have not changed, and we remain committed to our 2024 guidance and future growth.

Wendy Simpson: Our philosophy and mission have not changed, and we remain committed to our 2024 guidance and future growth.

Clint B. Malin: Thank you, Wendy. I'll first discuss the steps we took to address the occupancy issues underlying some of our ALG investments. At a high level, we provided rent assistance for two of our investments at the end of the second quarter and, in exchange, reconfigured mortgage loans due from affiliates of ALG into two joint venture investments. First, we agreed to defer a total of $1.5 million in rent from ALG for May and June related to an 11-property assisted living portfolio in North Carolina that we own through a joint venture accounted for as a financing receiv This receivable had a balance of $121.4 million at June 30, 2024.

Clint Malin: Thank you, Wendy. I'll first discuss the steps we took to address the occupancy issues underlying some of our ALG investments. At a high level, we provided rent assistance for two of our investments at the end of the second quarter, and in exchange reconfigured mortgage loans due from affiliates of ALG into two joint venture investments. First, we agreed to defer a total of 1.5 million in rent from ALG for May and June related to an 11-property assisted living portfolio in North Carolina that we owned through a joint venture accounted for as a financing receivable. This receivable had a balance of $121.4 million at June 30, 2024.

Wendy L. Simpson: Thank you, Wendy. I'll first discuss the steps we took to address the occupancy issues underlying some of our ALG investments.

Clint B. Malin: Additionally, we agreed to defer up to $250,000 in rent per month, as needed, as they build back their census to the remainder of 2024. The maximum deferred rent from July through December would be $1.5 million. Second, we agreed to pay no rent on a single property lease in South Carolina for May through September 2024, with quarterly market-based rent resets thereafter. As of June 30, 2024, this property had a gross book value of $11.7 million and a net book value of $8.2 million. In conjunction with the rent assistance, LTC wrote off $321,000 of straight-line rent receivable in the second quarter.

Wendy L. Simpson: At a high level, we provided rent assistance for two of our investments at the end of the second quarter and, in exchange, reconfigured mortgage loans due from affiliates of ALG into two joint venture investments.

Wendy L. Simpson: First, we agreed to defer a total of $1.5 million in rent from ALG for May and June related to an 11-property assisted living portfolio in North Carolina that we own through a joint venture accounted for as a financing receivable.

Wendy L. Simpson: This receivable had a balance of $121.4 million at June 30, 2024.

Clint Malin: Additionally, we agreed to defer up to $250,000 per month as needed as they build back census to the remainder of 2024. The maximum deferred rent from July through December would be $1.5 million.

Wendy L. Simpson: Additionally, we agreed to defer up to $250,000 in rent per month, as needed, as they build back census through the remainder of 2024. The maximum deferred rent from July through December would be $1.5 million.

Clint Malin: 2nd, we agreed to no rent on a single property lease in South Carolina for May through September 2024, with quarterly market-based rent resets thereafter. At June 30, 2024, this property had a close book value of 11.7 million and a net book value of 8.2 million. In conjunction with the rent assistance, LTC rode off 321,000, a straight line rent receivable in the second quarter. Previous annualized rent on this lease was approximately $900,000. Third, we funded 8.3 million under two mortgage loans. In consideration for the rent assistance I discussed, these mortgage loans were converted to two joint ventures, giving us a majority ownership stake in 17 assets, 13 in one joint venture and four in another.

Wendy L. Simpson: Second, we agreed to no rent on a single property lease in South Carolina for May through September 2024, with quarterly market-based rent resets thereafter.

Wendy L. Simpson: At June 30, 2024, this property had a gross book value of $11.7 million and a net book value of $8.2 million.

Wendy L. Simpson: In conjunction with the rent assistance, LTC wrote off $321,000 of straight-line rent receivable in the second quarter.

Clint B. Malin: The previous annualized rent on this lease was approximately $900,000. Third, we funded $8.3 million under two mortgages. In consideration for the rent assistance I discussed, these mortgage loans were converted to two joint ventures, giving us a majority ownership stake in 17 assets, 13 in one joint venture and four in another. After the $8.3 million of additional loan funding, the joint venture investments related to these 17 properties are configured as follows. We exchanged our $64.5 million mortgage loan for a 53% interest in a joint venture that now owns 13 assisted living communities, one in South Carolina and the rest in North Carolina.

Wendy L. Simpson: Previous annualized rent on this lease was approximately $900,000.

Wendy L. Simpson: Third, we funded $8.3 million under two mortgage loans.

Wendy L. Simpson: In consideration for the rent assistance I discussed, these mortgage loans were converted to two joint ventures, giving us majority ownership stake in 17 assets, 13 in one joint venture, and 4 in another.

Clint Malin: After the 8.3 million of additional loan funding, the joint venture investments related to these 17 properties are configured as follows. We exchanged our $64.5 million mortgage loan for a 53% interest in a joint venture that now owns 13 assisted living communities, one in South Carolina and the rest in North Carolina. We exchanged our $38 million mortgage loan for a 93% interest in a joint venture that now owns four assisted living communities in North Carolina. Each of these joint ventures then lease the properties to an affiliate of ALG under 10-year master leases maturing at the end of June 2034, with purchase options available through June 2028.

Wendy L. Simpson: After the $8.3 million of additional loan funding, the joint venture investments related to these 17 properties are configured as follows.

Wendy L. Simpson: We exchanged our $64.5 million mortgage loan for a 53% interest in a joint venture that now owns 13 assisted living communities, one in South Carolina and the rest in North Carolina.

Clint B. Malin: We exchanged our $38 million mortgage loan for a 93% interest in a joint venture that now owns four assisted living communities in North Carolina. Each of these joint ventures then leases the properties to an affiliate of ALG under 10-year master leases maturing at the end of June 2034, with purchase options available through June 2028. In accordance with GAAP, these investments are being accounted for as a financing receivable. The combined contractual annual rent under the two new master leases is $7.4 million, compared with $6.9 million of annualized cash interest due under the previous mortgage loans.

Wendy L. Simpson: We exchanged our $38 million mortgage loan for a 93% interest in a joint venture that now owns four assisted living communities in North Carolina.

Wendy L. Simpson: Each of these joint ventures then lease the properties to an affiliate of ALG under 10-year master leases, maturing at the end of June 2034, with purchase options available through June 2028.

Clint Malin: In accordance with GAAP, these investments are being accounted for as a financing receivable. Combined contractual annual rent under the two new master leases is $7.4 million compared with $6.9 million of annualized cash interest due under the previous mortgage loans as a result of the additional $8.3 million in cash we invested. For the month of July, we received total contractual rent and interest related to our ALG investments, less a $250,000 deferral. All of our investments with ALG are now cross-defaulted and cross-collateralized, providing us with added security. Our pathways for repayment of the deferred rent are through ALG's exercise of their purchase options, occupancy improvements within our investments, or through proceeds from potential sales of properties to a third party.

Wendy L. Simpson: In accordance with GAAP, these investments are being accounted for as a financing receivable.

Clint B. Malin: As a result of the additional $8.3 million in cash we invested, for the month of July, we received total contractual rent and interest related to our ALG investments, plus a $250,000 deferral. All of our investments with ALG are now cross-defaulted and cross-collateralized, providing us with added security.

Wendy L. Simpson: Combined contractual annual rent under the two new master leases is $7.4 million compared with $6.9 million of annualized cash interest due under the previous mortgage loans as a result of the additional $8.3 million in cash we invested.

Wendy L. Simpson: For the month of July , we received total contractual rent and interest related to our ALG investments, plus a $250,000 deferral.

Wendy L. Simpson: All of our investments with ALG are now cross-defaulted and cross-collateralized, providing us with added security.

Clint B. Malin: Our pathways for repayment of the deferred rent are through ALG's exercise of their purchase options, occupancy improvements within our investments, or through proceeds from potential sales of properties to a third party. We have successfully managed all these maturities in 2024, including our HMG extension, through which they repaid $1.5 million on their $13.5 million working capital note in the second quarter and an additional $10.4 million in July. Lease maturities in 2025 will represent 3% of rental income.

Wendy L. Simpson: Our pathways for repayment of the deferred rent are through ALG's exercise of their purchase options, occupancy improvements within our investments, or through proceeds from potential sales of properties to a third party.

Clint Malin: We have successfully managed all these maturities in 2024, including our HMG extension through which they repaid 1.5 million on their 13.5 million working capital note in the second quarter. And an additional 10.4 million in July lease maturities in 2025 represent 3% of rental income. We collected contractual rent from former operators related to properties previously transitioned as panel discuss, as detailed in our supplemental on page 16. Coverage continues to increase across our portfolio with respect to our pipeline subsequent to the end of the second quarter.

Wendy L. Simpson: We have successfully managed all lease maturities in 2024, including our HMG extension, through which they repaid $1.5 million on their $13.5 million working capital note in the second quarter and an additional $10.4 million in July .

Wendy L. Simpson: Lease maturities in 2025 represent 3% of rental income.

Clint B. Malin: We collected contractual rent from former operators related to properties previously transitioned, as Pam will discuss. As detailed in our supplementary on page 16, coverage continues to increase across our portfolio. With respect to our pipeline, subsequent to the end of the second quarter, we committed to fund a $26.1 million mortgage loan for the construction of a seniors housing community in Illinois. We expect to begin funding this commitment in early 2025 after the borrower has contributed $12.3 million of equity to initially fund the construction.

Pamela J. Shelley: We collected contractual rent from former operators related to properties previously transitioned, as Pam will discuss.

Pamela J. Shelley: As detailed in our supplemental on page 16, coverage continues to increase across our portfolio.

Clint Malin: We committed to fund a $26.1 million mortgage loan for the construction of a senior housing community in Illinois. We expect to begin funding this commitment in early 2025 after the borrow has contributed 12.3 million of equity to initially fund the construction. The loan term is approximately six years at a current rate of 9% in an IRR of 9.5%. Look forward to updating you on the progress of our pipeline next quarter.

Pamela J. Shelley: With respect to our pipeline, subsequent to the end of the second quarter, we committed to fund a $26.1 million mortgage loan for the construction of a seniors housing community in Illinois.

Pamela J. Shelley: We expect to begin funding this commitment in early 2025 after the borrower has contributed $12.3 million of equity to initially fund the construction.

Clint B. Malin: The loan term is approximately six years at a current rate of 9% and an IRR of 9.5%. We look forward to updating you on the progress of our pipeline next quarter. Now, I'll turn things over to Pam for a review of our financial results.

Pamela J. Shelley: The loan term is approximately 6 years at a current rate of 9% and an IRR of 9.5%.

Pamela J. Shelley: We look forward to updating you on the progress of our pipeline next quarter. Now I'll turn things over to Pam for a review of our financial results.

Pam Kessler: Now we'll turn things over to Pam for a review of our financial results. Thank you, Clint, because we have provided significant detail on our press release, supplemental, and Form 10-Q, I will keep my remarks at a high level today. Please note that all numbers discussed are for the second quarter of 2024, compared to the same period in 2023 unless otherwise noted.

Pamela J. Shelley: Thank you, Clint. Because we have provided significant detail in our press release, supplemental, and Form 10-Q, I will keep my remarks at a high level today. Please note that all numbers discussed are for the second quarter of 2024, compared to the same period in 2023, unless otherwise noted. I'll start with liquidity.

Pamela J. Shelley: Thank you Clint. Because we have provided significant detail on our press release, supplemental, and Form 10-Q , I will keep my remarks at a high level today.

Pamela J. Shelley: Please note that all numbers discussed are for the second quarter of 2024 compared to the same period in 2023 unless otherwise noted. I'll start with liquidity.

Pam Kessler: I'll start with liquidity. At June 30, we had total liquidity of nearly 190 million, including just over 6 million of cash on hand, about 118 million available on our line of credit, and roughly 65 million available under our ATM. Moving to our second quarter financial results, net income available to common shareholders increase, principally due to an impairment loss last year, higher interest income from loan originations, receipt of insurance proceeds, at lower interest expense, partially offset by higher G&A expense and provision for credit loss. Fully diluted FFO for share with 65 cents compared with 66 cents, excluding non-recurring items, FFO for share with 67 cents compared with 66 cents.

Pamela J. Shelley: At June 30, we had total liquidity of nearly $190 million, including just over $6 million of cash on hand, about $118 million available on our line of credit, and roughly $65 million available under our ATM. Moving to our second quarter financial results, net income available to common shareholders increased principally due to an impairment loss last year, higher interest income from loan originations, receipt of insurance proceeds, and lower interest expense, partially offset by higher G&A expense and provision for credit losses. Fully diluted FFO per share was $0.65 compared with $0.66. Excluding non-recurring items, FFO per share was $0.67 compared with $0.66.

Pamela J. Shelley: At June 30, we had total liquidity of nearly $190 million, including just over $6 million of cash on hand, about $118 million available on our line of credit, and roughly $65 million available under our ATM.

Pamela J. Shelley: Moving to our second quarter financial results, net income available to common shareholders increased principally due to an impairment loss last year.

Pamela J. Shelley: Higher interest income from loan originations, receipt of insurance proceeds, and lower interest expense, partially offset by higher G&A expense and provision for credit loss.

Pamela J. Shelley: Fully diluted FFO per share was $0.65 compared with $0.66, excluding non-recurring items, FFO per share was $0.67 compared with $0.66.

Pam Kessler: As discussed last quarter as subsequent events, we originated a 12.7 million mortgage loan to Ignite Medical Resorts and recorded 295,000 of revenue from this investment during the second quarter. We expect to record approximately 884,000 of revenue for the full year. We funded 3.9 million of a previously disclosed 19.5 million dollar mortgage loan commitment, with 12.6 million remaining. Subsequent to the end of the second quarter, we sold an assisted living community for 8 million and anticipate recording a gain on sale of approximately 3.6 million in the third quarter. As part of the transaction, we received contractual rent through the remainder of the lease term, which would have expired in January 2025 in the amount of $441,000.

Pamela J. Shelley: As discussed last quarter at subsequent events, we originated a $12.7 million mortgage loan to Ignite Medical Resorts and recorded $295,000 of revenue from this investment during the second quarter. We expect to record approximately $884,000 of revenue for the full year. We funded $3.9 million of a previously disclosed $19.5 million mortgage loan commitment with $12.6 million remaining. Subsequent to the end of the second quarter, we sold an assisted living community for $8 million, and we anticipate recording a gain on sale of approximately $3.6 million in the third quarter.

Pamela J. Shelley: As discussed last quarter at subsequent events, we originated a $12.7 million mortgage loan to Ignite Medical Resorts and recorded $295,000 of revenue from this investment during the second quarter.

Pamela J. Shelley: We expect to record approximately $884,000 of revenue for the full year. We funded $3.9 million of a previously disclosed $19.5 million mortgage loan commitment, with $12.6 million remaining.

Pamela J. Shelley: Subsequent to the end of the second quarter, we sold an assisted living community for $8 million and anticipate recording a gain on sale of approximately $3.6 million in the third quarter.

Pamela J. Shelley: As part of the transaction, we received contractual rent through the remainder of the lease term, which would have expired in January 2025, in the amount of $441,000. As Clint mentioned, subsequent to the end of the quarter, we recorded $2.6 million of income from former operators related to portfolio transitions in prior years, and we received a $10.4 million paydown on HMG's working capital note. We also expect two maturing loan receivables totaling $80.5 million to be paid off before the end of the year.

Pamela J. Shelley: As part of the transaction, we received contractual rent through the remainder of the lease term, which would have expired in January 2025 in the amount of $441,000.

Pam Kessler: As Clint mentioned, subsequent to the end of the quarter, we recorded 2.6 million of income from former operators related to portfolio transitions in prior years, and we received a 10.4 million paydown on HMG's working capital note. We also expect two maturing loan receivables totaling 80.5 million to pay off before the end of the year. During the second quarter, we sold 204,700 shares of LTC's common stock, or net proceeds of 6.5 million, under our ATM program. We paid 4 million in scheduled principal paydowns on our senior unsecured notes during the quarter and repaid an additional 18.2 million subsequent to June 30.

Pamela J. Shelley: As Clint mentioned, subsequent to the end of the quarter, we recorded $2.6 million of income from former operators related to portfolio transitions in prior years, and we received a $10.4 million paydown on HMG's working capital note.

Speaker Change: We also expect two maturing loan receivables totaling $80.5 million to pay off before the end of the year.

Pamela J. Shelley: During the second quarter, we sold 204,700 shares of LTC's common stock for net proceeds of $6.5 million under our ATM program. We paid $4 million in scheduled principal paydowns on our senior unsecured notes during the quarter and repaid an additional $18.2 million subsequent to June 30. During the second quarter, we also paid $24.8 million in monthly dividends of $0.19 per share and borrowed $4.7 million under our unsecured revolving line of credit.

Pamela J. Shelley: During the second quarter, we sold 204,700 shares of LTC's common stock for net proceeds of $6.5 million under our ATM program.

Pamela J. Shelley: We paid $4 million in scheduled principal paydowns on our senior unsecured notes during the quarter and repaid an additional $18.2 million subsequent to June 30.

Pam Kessler: During the second quarter, we also paid 24.8 million in monthly dividends of 19 cents per share and borrowed 4.7 million under our unsecured revolving line of credit. Our debt to annualize adjusted EBITDA for real estate is down to 5.3 times from 5.5 times for the prior quarter. And our annualized adjusted fixed charge coverage ratio is up to 3.7 times from 3.5 times for the prior quarter. Our third-order guidance for FFO, excluding non-recurring items, is between 66 and 67 cents per share. Non-recurring items for the third order relate to the 3.1 million in income from former operators and the rent collected in connection with the property sale, as discussed earlier.

Pamela J. Shelley: During the second quarter, we also paid $24.8 million in monthly dividends of $0.19 per share and borrowed $4.7 million under our unsecured revolving line of credit.

Pamela J. Shelley: Our debt to annualized adjusted EBITDA for real estate is down to 5.3 times from 5.5 times for the prior quarter, and our annualized adjusted fixed charge coverage ratio is up to 3.7 times from 3.5 times for the prior quarter. Our third quarter guidance for FFO, excluding non-recurring items, is between $0.66 and $0.67 per share. Non-recurring items for the third quarter relate to $3.1 million in income from former operators and the rent collected in connection with the property sale, as discussed earlier.

Pamela J. Shelley: Our debt to annualized adjusted EBITDA for real estate is down to 5.3 times from 5.5 times for the prior quarter, and our annualized adjusted fixed charge coverage ratio is up to 3.7 times from 3.5 times for the prior quarter.

Pamela J. Shelley: Our third quarter guidance for FFO excluding non-recurring items is between $0.66 and $0.67 per share.

Pamela J. Shelley: Non-recurring items for the third quarter relate to the $3.1 million in income from former operators and the rent collected in connection with the property sale as discussed earlier.

Pam Kessler: Our full-year guidance for FFO, excluding non-recurring items, remains $2.63 to $2.65 per share. Non-recurring items for the full year include the 3.1 million expected for the third order as well as the non-recurring items recognized to date, as detailed in our earnings for these. This guidance assumes no additional investment activity, asset sales, financing, or equity issuances, but does assume that the loans receivable I mentioned pay off that maturity.

Pamela J. Shelley: Our full-year guidance for FFO, excluding non-recurring items, remains $2.63 to $2.65 per share. Non-recurring items for the full year include the $3.1 million expected for the third quarter, as well as the non-recurring items recognized to date as detailed in our earnings release. This guidance assumes no additional investment activity, asset sales, financing, or equity issuances but does assume that the loans receivable I mentioned pay off at that maturity. Now I'll turn the call back to Wendy for closing remarks.

Pamela J. Shelley: Our whole year guidance for FFO, excluding non-recurring items, remains $2.63 to $2.65 per share.

Pamela J. Shelley: Non-recurring items for the full year include the $3.1 million expected for the third quarter as well as the non-recurring items recognized to date as detailed in our earnings release.

Pamela J. Shelley: This guidance assumes no additional investment activity, asset sales, financing, or equity issuances, but does assume that the loans receivable I mentioned pay off that maturity.

Wendy Simpson: Now I'll turn the call back to Wendy for closing remarks. Thank you, Pam Anclint. This quarter we worked cooperatively with one of our largest operating partners to help them address a challenge while improving our security and gaining a majority ownership position in our investments. I'm very proud of LTC's track record with respect to successfully mitigating challenges as they arise, and that we've done so quickly and transparently. With continued improvement across our industry, I remain optimistic that we are on the right path for growth.

Wendy L. Simpson: Thank you, Pam and Clint. This quarter, we worked cooperatively with one of our largest operating partners to help them address a challenge while improving our security and gaining a majority ownership position in our investments. I'm very proud of LTC's track record with respect to successfully mitigating challenges as they arise, and that we've done so quickly and transparently. With continued improvement across our industry, I remain optimistic that we are on the right path for growth.

Pamela J. Shelley: Now, I'll turn the call back to Wendy for closing remarks.

Wendy L. Simpson: Thank you, Pam and Clint.

Speaker Change: This quarter, we worked cooperatively with one of our largest operating partners to help them address a challenge while improving our security and gaining a majority ownership position in our investments.

Wendy L. Simpson: I'm very proud of LTC's track record with respect to successfully mitigating challenges as they arise, and that we've done so quickly and transparently.

Wendy L. Simpson: With continued improvement across our industry, I remain optimistic that we are on the right path for growth.

Wendy Simpson: Before closing, I would like to welcome our new board member, Bradley Preaver. Brad is the chairman of our audit committee and comes to LTC after retiring as CEO of Grant Thornton. We look forward to his contributions.

Wendy L. Simpson: Before closing, I would like to welcome our new board member, Bradley Preber. Brad is the chairman of our audit committee and comes to LTC after retiring as CEO of Grant Thornton. We look forward to his contribution. Thank you to everyone who joined us today. We look forward to talking to you again after the third quarter. Operator, we're ready to take questions.

Speaker Change: Before closing, I would like to welcome our new board member, Bradley Preber. Brad is the chairman of our audit committee and comes to LTC after retiring as CEO of Grant Thornton. We look forward to his contributions.

Wendy Simpson: Thank you to everyone who joined us today. We look forward to talking to you again after the third quarter.

Speaker Change: Thank you to everyone who joined us today. We look forward to talking to you again after the third quarter.

Operator: Our operator, we're ready to take questions. Certainly, the floor is now open for questions.

Speaker Change: Operator, we are ready to take questions.

Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while asking your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we pull for questions. Your first question is coming from Juan Sanabria with BMO Capital Markets. Please pose your question. Your line is live.

Operator: If you have any questions or comments, please press star one on your phone at the time. We ask that while posing your questions, you please pick up your handset or list out a speakerphone to provide optimum sound quality. Please hold just a moment while we pull for questions.

Speaker Change: Certainly. The floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we pull for questions.

Juan Sanabria: Your first question is coming from one Synabria with BMO Capital Markets. Please pose your question. Your line is live.

Speaker Change: Your first question is coming from Juan Sanabria with BMO Capital Markets. Please pose your question. Your line is live.

Clint Malin: Hi, our good morning and thanks for the time. Just on ALG, I guess could you be a little bit more specific about the issues that happen that caused the deferrals and all these changes to take place? As part of that, maybe you could comment a little bit on why provide them a purchase option and kind of what you got in return as part of the negotiations.

Juan Carlos Sanabria: Hi, good morning, and thanks for the time. Just on ALG, could you be a little bit more specific about the issues that happened that caused the deferrals and all these changes to take place? And as part of that, maybe you could comment a little bit on why provide them with a purchase option and kind of what you got in return as part of the negotiation?

Juan Carlos Sanabria: Hi, good morning and thanks for the time.

Juan Carlos Sanabria: Just on ALG, I guess, could you be a little bit more specific about...

Juan Carlos Sanabria: the issues that happened that caused the deferrals and all these changes to take place. As part of that, maybe you could comment a little bit on why provide them a purchase option and kind of what you got in return as part of the negotiations.

Clint Malin: Sure, one. Really, it's a function of two issues that surfaced on ALG, which these challenges came to light in May. One was the occupancy challenge that Wendy referred to in a prepared remarks on 12 of the communities. On those 12 communities in smaller markets, there were some staffing challenges, and some of those staffing challenges were really evident in a decline in occupancy. An additional impact to the buildings is these investments have the component of an affordable senior living product that has a Medicaid waiver component. In North Carolina, they've had a long-standing Medicaid waiver program. You probably recall the cyber attack that happened on Change Healthcare did have impacts on reimbursement aspects for Medicaid and Medicare through intermediaries.

Clint B. Malin: Sure, Juan. So really, it's a function of two issues that surfaced on ALG, these challenges coming to light in May. One was the occupancy challenge that Wendy referred to in her prepared remarks about 12 of the communities. And in those 12 communities in some of the smaller markets, there were some staffing challenges, and some of those staffing challenges were really evident in a decline in occupancy. An additional impact to the buildings is these investments have a component of an affordable senior living product that has a Medicaid waiver component. And in North Carolina, they've had a longstanding Medicaid waiver program.

Juan Carlos Sanabria: Sure Juan. So really it's a function of two issues that surfaced on ALG which these challenges came to light in May.

Speaker Change: One was the occupancy challenge that Wendy referred to in her prepared remarks on 12 of the communities.

Speaker Change: And on those 12 communities in some of the smaller markets, there were some staffing challenges. And some of those staffing challenges

Speaker Change: were really evident in a decline in occupancy. An additional impact to the buildings is these investments have a component of an affordable senior living product that has a Medicaid waiver component.

Clint B. Malin: And as you probably recall, the cyber attack that happened on Change Healthcare did have impacts on reimbursement aspects for Medicaid and Medicare through intermediaries. And that did impact ALG on their Medicaid revenues, which was a short-term, temporary impact that they felt. And further exacerbating that is ALG did not have a line of credit in place for Medicaid receivables, which you typically find in skilled nursing. Why we didn't see, I think, which is the reason why we didn't see this in our skilled nursing portfolio as far as impact goes.

Speaker Change: And in North Carolina, they've had a long-standing Medicaid waiver program. And as you probably recall, the cyber attack that happened on Change Healthcare did have impacts on reimbursement aspects for Medicaid and Medicare through intermediaries.

Clint Malin: That did impact ALG on their Medicaid revenues, which was a short-term temporary impact that they felt.

Speaker Change: And that did impact ALG on their Medicaid revenues, which was a short-term, temporary impact.

Clint Malin: Further exacerbating that is, ALG did not have a line of credit in place for Medicaid receivables, which you typically find on skilled nursing; why we didn't see, I think, which is the reason why we didn't see this in our skilled nursing portfolio as far as impact. Really, it was this staffing challenges at certain communities that has led to occupancy declines in certain assets. Then this short-term impact that was experienced through this cyber attack, which is evidenced by us giving a less-remounted deferred rent starting in July. and really on the, as far as the purchase options, these investments were always intended to be a shorter term for ALG to take these out through agency financing, so we kept the integrity of that.

Speaker Change: that they felt, and further exacerbating that is...

Speaker Change: ALG did not have a line of credit in place for Medicaid receivables, which you typically find on skilled nursing, which is the reason why we didn't see this in our skilled nursing portfolio as far as impact. So really it was this staffing challenges at certain communities that has led to occupancy declines in certain assets.

Clint B. Malin: So really, it was these staffing challenges at certain communities that led to occupancy declines in certain assets, and then this short-term impact that was experienced through this cyber attack, which is evidenced by us giving a lesser amount of deferred rent starting in July. And really, as far as the purchase options are concerned, these investments were always intended to be a shorter term for ALG to take these out through agency financing. So we kept the integrity of that.

Speaker Change: and then this short-term impact that was experienced through this cyber attack, which is evidenced by us giving a lesser amount of deferred rent starting in July .

Speaker Change: And really on the, as far as the purchase options, you know, the

Speaker Change: These investments were always, you know, intended to be

Speaker Change: shorter term for ALG to take these out through agency financing. So we kept the integrity of that.

Clint B. Malin: Obviously, it was a negotiation because we had different investments, and ALG had different investors in those pools. So an important aspect for us was being able to convert our mortgages from a mortgage position into an equity position, and that was an important part of that. In exchange for that, of getting across default and cross-collateralization across all investments, that was the negotiation which facilitated the purchase options that we allowed ALG to maintain. Additionally, on this portfolio that we provided the deferred rent, when we underwrote it, I mean, it had positive coverage when we acquired the buildings. They have had a pretty big drop in this portfolio of about 700 basis points in occupancy. That really is having an impact.

Clint Malin: Obviously, it was negotiation because we had different investments. ALG had different investors in those pools, so an important aspect for us was being able to convert our mortgages from a mortgage position into an equity position, and that was an important part of that. In exchange for that, getting across to folk and cross collateralization across all investments, that was the negotiation which facilitated the purchase options that we allowed ALG to maintain. Additionally, on this portfolio that we provided the deferred rent, when we underwrote it, I mean it had positive coverage when we acquired the buildings. They have had a pretty big drop in this portfolio of about 700 basis points in occupancy that really is an impact, so that we think with ALG's focus on being able to build back occupancy through staffing improvements, that they'll be able to get back to a point where they can cover.

Speaker Change: Obviously, it was a negotiation because we had different investments.

Speaker Change: ALG had different investors in those pools.

Speaker Change: So, you know, an important aspect for us was being able to convert our mortgages from a mortgage position into an equity position.

Speaker Change: And that was an important part of that. In exchange for that, of getting across default and cross-collateralization across all investments, that was the negotiation which facilitated.

Speaker Change: the purchase options that we allowed ALG to maintain.

Speaker Change: Additionally, on this portfolio that we provided the deferred rent, when we underwrote it, I mean, it had positive coverage when we acquired the buildings.

Speaker Change: They have had a pretty big drop in this portfolio of about 700 basis points.

Clint B. Malin: So we think with ALG's focus on being able to build back occupancy through staffing improvements, they'll be able to get back to a point where they can cover. And in giving the purchase options, what we also did is we created another pathway for recovery of this deferred rent that we provided on the 11-property portfolio. And we think that was an important element to get from a credit standpoint.

Speaker Change: and occupancy that really is an impact. So we think with ALG's focus on being able to build back occupancy through

Speaker Change: staffing improvements that they'll be able to get back to.

Clint Malin: And in giving the purchase options, what we also did is we created another pathway for recovery of this deferred rent that we provided on the 11 property portfolio, and we think that was an important element to get from a credit standpoint.

Speaker Change: a point where they can cover. And in giving the purchase options, what we also did is we created another pathway for recovery of this deferred rent that we provided on the 11 property portfolio. And we think that was an important element to get from a credit standpoint.

Juan Sanabria: Okay, thank you for that, and then just so I understand, the deferrals are not reducing guidance because you're sticking with straight-line accounting; you're not cash accounting for ALG, is that correct? That's correct one. Yeah, there's the effective interest method similar to mortgage loans, so there was no difference in FSO between mortgage loans and the own properties accounted for as financing receivables.

Juan Carlos Sanabria: Okay, thank you for that. And then just so I understand, the deferrals are not... Reducing guidance because you're sticking with straight line accounting; you're not cash accounting for ALG, is that correct?

Speaker Change: Okay, thank you for that. And then just so I understand, the deferrals are not...

Speaker Change: reducing guidance because you're sticking with straight-line accounting is that you're not cash accounting for ALG, is that correct?

Clint B. Malin: That's correct, Juan. Yeah, the effective interest method is similar to mortgage loans, so there was no difference in FFO between mortgage loans and the owned properties accounted for as financing receivables.

Speaker Change: That's correct, Juan. Yeah, there's the effective interest method similar to mortgage loans, so there was no difference in FFO between mortgage loans and the owned properties accounted for as financing receivables.

Juan Carlos Sanabria: And how should we think about the difference between FAD and FSO? Presumably, you won't capture the deferrals through normalized FAD, correct? Yes.

Clint Malin: And how should we think about the difference between SAT and FSO? Presumably you won't capture the deferrals through normalized SAT, correct? Yeah, that is correct, but as I said, in my prepared remarks, we have about 3.1 million that we're collecting in the third quarter, so those offset for the year.

Speaker Change: And how should we think about the difference between FAD and FSO? Presumably you won't capture the deferrals through normalized FAD.

Clint B. Malin: Yeah, that is correct, but as I said in my prepared remarks, we have about $3.1 million that we're collecting in the third quarter, so those are offset for the year.

Speaker Change: correct yeah that is correct but as I said in my prepared remarks we have about 3.1 million that we're collecting in the third quarter so those those offset for the year

Juan Sanabria: Okay, great.

Juan Carlos Sanabria: Okay, great. And then just one last thing for me, sorry to hog the mic here to start, but what happened on the SNF occupancy side? It looks like that declined as well, looking at the footnote of disclosure for the latest June trend in the sub. I think that probably is more.

Juan Sanabria: And then just one last thing for me, Sarah, to hug the mic here to start, but what happened on the SNF occupancy side? It looks like that the client as well looking at the footnoted disclosure for the latest June trends in the stuff. I think that probably is more just sees now looking at summer. I don't see any big impact to that. So you do see some deaths in summer months, and I don't think there's anything that's abnormal.

Speaker Change: Okay, great. And then just one last thing for me, sorry to hog the mic here to start, but what happened on the SNF occupancy side? It looks like that declined as well, looking at the footnote of disclosure for the latest June trends.

Clint B. Malin: I think that probably is more just he's now looking at summer. I don't see any big impact from that. Yeah, you do see some dips in the summer months, and I don't think that's anything that's abnormal.

Speaker Change: in the sub.

Speaker Change: I think that probably is more just he's now looking at summer. I don't see any big impact, you know, to that. Yeah, you do see some dips in summer months and I don't think that's anything that's abnormal.

Juan Sanabria: Great, thank you very much. Thank you.

Austin Wurschmidt: Your next question is coming from Austin Worshmit with KeyBank Capital Markets. Please pose your question. Your line is live.

Speaker Change: Great. Thank you very much.

Operator: Your next question is coming from Austin Wurschmidt with KeyBank Capital Markets. Please pose your question. Your line is live.

Speaker Change: Thank you.

Speaker Change: Your next question is coming from Austin Wurschmidt with KeyBank Capital Markets. Please pose your question. Your line is live.

Austin Todd Wurschmidt: Hey, good morning everybody. Just sticking with ALG here, I guess following the sale and release of some of the older rural ALG assets earlier this year, I mean, did you consider any alternative routes, I guess, for these portfolios as well? And, you know, were there signs of distress leading up to some of the items you highlighted that impacted them? It sounded like in May.

Austin Wurschmidt: Hey, good morning everybody. Just sticking with ALG here. I guess following the sale.

Austin Todd Wurschmidt: Hey, good morning everybody. Just sticking with ALG here, I guess following the sale and releasing of some of the older rural ALG assets earlier this year, I mean,

Clint Malin: In releasing of some of the older rural ALGS that's earlier this year, I mean, did you consider any alternative routes, I guess, for these portfolios as well, and, you know, were there signs of distress leading up to some of the items you highlighted that impacted them? It sounded like in May.

Speaker Change: Did you consider any alternative routes, I guess, for these portfolios as well, and were there signs of distress leading up to some of the items you highlighted that impacted them? It sounded like in May.

Clint Malin: Well, there was an alternative. ALG was looking at alternatives for financing and paying off these investments because of the deferral and the timing. You know, we didn't want to wait and allow them to pay it off and not sure when the other financing would close. So for us to be able to provide the deferral, we needed to execute on the ownership of that. But ultimately, for ALG, taking out this portfolio through agency financing, I think will benefit them long-term. And I think that remains our objective on this. And as far as the impact for us really became more obvious in May when they needed assistance, I think that was sort of the impact of the change, healthcare issue catching up with them.

Clint B. Malin: Well, there is an alternative. ALG was looking at alternatives for financing and paying off these investments. Because of the deferral, the timing, you know, we didn't want to wait and allow them to pay it off, and we weren't sure when the other financing would close. So, for us to be able to provide the deferral, we needed to execute on the ownership of that.

Speaker Change: Well, there is an alternative. ALG was looking at alternatives for financing and paying off these investments because of the deferral, the timing.

Speaker Change: You know, we didn't want to wait and allow them to pay it off and not sure when the other financing would close.

Austin Todd Wurschmidt: But ultimately, for ALG, taking out this portfolio through agency financing will benefit them long term, and I think that remains their objective in this. And as far as, you know, the impact for us really became more obvious in May when they needed assistance. I think that was sort of the impact of the change healthcare issue catching up with them. But we still think that their execution to be able to acquire these buildings is still in their interest.

Speaker Change: So, for us to be able to provide the deferral, we needed to execute on the ownership of that. But ultimately, for ALG, taking out this portfolio through agency financing, I think will benefit them long-term, and I think that remains their objective on this.

Speaker Change: And as far as, you know, the impact for us really became more obvious in May when they needed assistance. I think that was sort of the impact of the change healthcare issue catching up with them.

Clint Malin: But we still think that their execution would be able to acquire these buildings still in their interest.

Speaker Change: But we still think that, you know, their execution to be able to acquire these buildings is still in their interest.

Austin Wurschmidt: Got it.

Clint B. Malin: Got it. And then, sorry if I missed this, but, I mean, are you starting to see occupancy of these assets begin to recover, and have they addressed some of the staffing challenges that you highlighted in your prepared remarks or in response to an earlier question, maybe?

Clint Malin: And then, sorry if I missed this, but I mean, are you starting to see occupancy of these assets begin to recover, and have they addressed some of the staffing challenges that you highlighted in your prepared remarks or in response to an earlier question, maybe? One thing, too, right now, on the portfolio that of the 13 buildings, May ALG is pursuing agency financing and has gotten on the process of getting appraisal. So that's already, you mentioned the works that ALG has been working on. So we do have that. Really, the challenge primarily was just in this portfolio. This 11 building portfolio starts occupancy concerns.

Speaker Change: And then, sorry if I missed this, but I mean, are you starting to see occupancy of these assets begin to recover and have they addressed some of the staffing challenges that you highlighted in your prepared remarks or in response to an earlier question, maybe?

Austin Todd Wurschmidt: One thing too, right now, on this portfolio of the 13 buildings, ALG has been pursuing agency financing, and it is in the process of getting appraisals, so that's already, you know, in the works that ALG has been working on. So we do have that. Really, the challenge primarily was just in this portfolio, this 11-building portfolio, as far as occupancy concerns were concerned. The two other portfolios, occupancy has been stable or increasing in the other, so it really seems to be focused on this, and we're working with ALG to understand those staffing challenges and regain occupancy, which they had at one point in this portfolio.

Speaker Change: One thing too, right now on this portfolio of the 13 buildings, ALG has been pursuing agency financing, has gotten in the process of getting appraisals, so that's already in the works that ALG has been working on.

Speaker Change: that really the challenge primarily was just in this 11-building portfolio as far as occupancy concerns.

Clint Malin: The two other portfolios' occupancy has been stable or increasing in the other. So it really seems to be focused on this. And we're working with ALG to understand those staffing challenges and being able to regain occupancy, which they had at one point in this portfolio. Got it.

Speaker Change: The two other portfolios, occupancy has been stable or increasing in the other. So it really seems to be focused on this and we're working with ALG.

Speaker Change: to understand those staffing challenges and being able to regain occupancy, which they had at one point in this portfolio.

Clint B. Malin: And then just last one for me, just on the deferral balances that, you know, you've had a couple of these one-time collections you've highlighted. I guess, you know, how big of a balance is that, and what agreements do you have in place to recover those rents over time?

Austin Wurschmidt: And then just last one for me, just on the deferral balances that you've had a couple of these one-time collections you've highlighted, I guess, you know, how big of a balance is that? And what agreements do you have in place to recover those rents over time? Well, our primary balance understanding is probably a little bit over $3 million from one operator specifically. We have various security instruments in place from assets, personal guarantees. So we have a pathway to recovery. We did not include it, obviously, in our earnings, not certain when we'd be able to collect.

Speaker Change: And then just last one for me, just on the deferral balances that you know you've had a couple of these one-time collections you've highlighted, I guess you know how big of a balance is that and and what agreements do you have in place to recover those rents over time?

Austin Todd Wurschmidt: Well, our primary balance of standing is probably a little bit over $3 million from one, three and a half, from one operator specifically. We have various security instruments in place, such as assets and personal guarantees. We have a pathway to recovery. But we did not include it, obviously, in our earnings. Not certain when we'd be able to collect, but timing is uncertain, which is why we don't include it in guidance and why we didn't accrue it when we negotiated the deferral several years ago.

Speaker Change: Well, our primary balance of standing is probably a little bit over three million dollars from one, three and a half, from one operator specifically.

Speaker Change: We have various security instruments in place.

Speaker Change: from Assets, Personal Guarantees. We have a pathway to recovery. We did not include it, obviously, in our earnings. Not certain when we'd be able to collect, but... Yeah, the timing is uncertain, which is why we don't include it in guidance and why we didn't accrue it when we

Clint Malin: Yeah, the timing is uncertain, which is why we don't include it in guidance, and why we didn't accrue it when we negotiated the deferral several years ago.

Speaker Change: when we, you know, negotiated the deferral several years ago.

Austin Wurschmidt: Understood. And so you're just recognizing that, and that's the offset, you know, from the deferral, the new deferrals that you provided. to ALG, just to make sure I'm understanding that correctly. Correct, yes, it does not apply to; it's not related to this operator. It was a transition that happened actually earlier last year.

Clint B. Malin: And so you're just recognizing that, and that's the offset, you know, from the deferral, the new deferrals that you provided to ALG, just to make sure I'm understanding that correctly.

Speaker Change: understood and so you're just recognizing that and that's the offset you know from the deferral the new deferrals that you provided to ALG just to make sure I'm understanding that correctly

Austin Todd Wurschmidt: Correct. Yes, it does not apply to, it's not related to this operator. It was a transition that happened actually earlier last year.

Speaker Change: Correct. Yes, it does not apply to, it's not related to this operator. It was a transition that happened actually earlier last year.

Operator: Understood. Thanks for the time.

Austin Wurschmidt: Understood, thanks for the time.

John Kylikowski: Your next question is coming from John Kylikowski with Wells Fargo. Please pose your question; your line is live.

John Kielikowski: Your next question is coming from John Kielikowski with Wells Fargo. Please pose your question; your line is live.

Speaker Change: Thanks for the time.

Speaker Change: Thank you.

Speaker Change: Your next question is coming from John Kielikowski with Wells Fargo. Please pose your question. Your line is live.

Clint Malin: Hi, thank you. I guess first, it felt like on the last call you started to get more positive on the potential for a, a larger investment pipeline and be more fee simple asset acquisitions. Are we nearing that? Like should we expect a positive inflection in the second half of the year? Right now, we have nip published data. There's 25 billion dollars in debt maturities through 2026. And we've been talking about this wall of debt for a while. We haven't seen the opportunities come to fruition as we thought. And I think part of that is owners that have had to invest additional money, see the potential for maybe some rate cuts and or maybe holding out hope on that.

John Kielikowski: Hi, thank you. First, it felt like on the last call you started to get more positive on the potential for A, a larger investment pipeline and B, more C, simple asset acquisitions. Are we nearing that? Like, should we expect a positive inflection in the second half of the year?

John Kielikowski: Hi, thank you. I guess first, it felt like on the last call, you started to get more positive on the potential for A, a larger investment pipeline and B, more C, simple asset acquisitions. Are we nearing that? Like, should we expect a positive inflection in the second half of the year?

Clint B. Malin: Well, right now, we have published data. There are $25 billion in debt maturities through 2026. And we've been talking about this wall of debt for a while. But we haven't seen the opportunities come to fruition as we thought. And I think part of that is owners that have had to invest additional money see the potential for maybe some rate cuts or maybe holding out hope on that. So there's still a disparity between the bid and ask on those types of opportunities. And so we're still actively monitoring and watching, and hopefully these opportunities will come to fruition.

Speaker Change: Well, right now we have published data, there's $25 billion in debt maturities through 2026.

Speaker Change: And, you know, we've been talking about this wall of debt for a while. We haven't seen the opportunities come to fruition as we thought. And I think part of that is owners that have had to invest additional money see the potential for maybe some rate cuts.

Clint Malin: So there's still a disparity between the bid and ask on those type of opportunities. And so we're still, we're actively monitoring and watching, and hopefully these opportunities come to fruition. Got it.

Speaker Change: and are maybe holding out hope on that. So there's still a disparity between the bid and ask on those type of opportunities. And so we're still, we're actively monitoring and watching and hopefully these opportunities come to fruition.

John Kielikowski: Got it. And then maybe if you could take a minute to dive into the purchase options you have outstanding, how do you size the risk of the portfolio of those in terms of estimating what you think will be executed on? And as you go forward, how necessary will it be to continue to provide funds to execute deals?

John Kylikowski: Maybe if you could take a minute to dive into the purchase options, you have outstanding. How do you size the risk of portfolio of those in terms of estimating what you think will be executed on?

Speaker Change: Got it. And then maybe if you could take a minute to dive into the purchase options you have outstanding. How do you size the risk of the portfolio of those in terms of estimating what you think will be executed on? And as you go forward, how necessary will it be to continue to provide any needs to execute deals?

Clint Malin: And as you go forward, how necessary will it be to continue to provide any of these execute deals? Well, currently we're not projecting any of the purchase options in the near term to be exercised. A lot of these were given in a much lower interest rate environment. So I'm not sure the math is there from equity and debt raising standpoint. And you know, when we've talked to investors, we're, you know, there is a big distinction between a debt maturity and a purchase option. A debt maturity is certain, and it comes. And a purchase option is just that.

Clint B. Malin: Well, currently, we're not projecting any of the purchase options in the near term to be exercised. A lot of these were given in a much lower interest rate environment, so I'm not sure the math is there from an equity and debt-raising standpoint.

Speaker Change: Well, currently, we're not projecting any of the purchase options in the near term to be exercised. A lot of these were given in a much lower interest rate environment, so I'm not sure the math.

Speaker Change: is there from an equity and debt-raising standpoint. And when we've talked to investors, there is a big distinction between a debt maturity and a purchase option. A debt maturity is certain and it comes, and a purchase option is just that. It's something that gives the operator optionality in the future. For them, it's very important psychologically to be able to, at some point in the future, control their asset.

John Kielikowski: And when we've talked to investors, there is a big distinction between a debt maturity and a purchase option. A debt maturity is certain, and it comes, and a purchase option is just that. It's something that gives the operator optionality in the future. And for them, it's very important psychologically to be able to, at some point in the future, control their asset. And so it doesn't seem to be a difficult thing for us to give up, actually.

Clint Malin: It's something that gives the operator optionality in the future. And for them, it's very important psychologically to be able to, at some point in the future, control their asset. And so it doesn't seem to be a difficult thing for us to give on. Actually, the assets that we have sold have not been subject to purchase options. We've elected to sell certain assets to operators. And in my recent memory, I don't believe we've even had a purchase option exercised. You would say if you're in a good relationship with your capital provider and everything's going, you know, smoothly, why would you want to exercise a purchase option?

Speaker Change: And so it doesn't seem to be a...

Speaker Change: difficult thing for us to give on. Actually, the assets that we have sold have not been subject to purchase options. We've elected to sell certain assets to operators, and in my recent memory, I don't believe we've even had a purchase option exercised. You would say if you're in a good relationship with your capital provider,

Clint B. Malin: The assets that we have sold have not been subject to purchase options. Instead, we've elected to sell certain assets to operators. And in my recent memory, I don't believe we've even had a purchase option exercised. You would say if you're in a good relationship with your capital provider, and everything's going, you know, smoothly, why would you want to? If you exercised a purchase option, the only reason you would do it is if the math is really compelling and you could raise that much equity to take it out.

Speaker Change: and everything's going smoothly, why would you want to...

Clint Malin: The only reason you would do it is if the math is really compelling, and you could raise that much equity to take it out. But we're very careful in lathering our purchase options so that we don't have a ton of cash coming back in any one year. Yeah, correct. They're not all; they're not all in one year. Just like our debt maturity ladder, our purchase option windows are laddered as well.

Speaker Change: exercise a purchase option, the only reason you would do it is if the math is really compelling and you could raise that much equity.

John Kielikowski: But we're very careful in laddering our purchase options so that we don't have a ton of cash coming back in any one year.

Speaker Change: to take it out. But we're very careful in laddering our purchase options so that we don't have a

Speaker Change: ton of cash coming back in any one year? Yeah, correct. They're not all. They're not all in one year, just like our debt maturity ladder, our purchase option.

Clint Malin: And the other thing we've done, John, on this too, is in some of our perceptions, we've provided an alternative of an urn out as opposed to a purchase option. So really giving an operator flexibility on that. But our goal, obviously, is we build relationships, get purchase options. As we do additional deals, you can extend out that purchase option, and there's different ways to work proactively with operating partners to address those purchase options the day as we continue to focus on the lathering of those purchase options.

John Kielikowski: And the other thing we've done, John , on this, too, is in some of our purchase options, we've provided an alternative of an earn-out as opposed to a purchase option, so really giving an operator flexibility on that.

John Kielikowski: But our goal, obviously, is we, you know, build relationships, get purchase options as we do additional deals.

John Kielikowski: I mean, you can extend out that purchase option and there's, you know, different ways to work proactively with our operating partners to address those purchase options the day as we continue to focus on the laddering of those purchase options.

Rich Anderson: Thank you.

John Kielikowski: Thank you.

Rich Anderson: Your next question is coming from Rich Anderson with Wedbush. Please pose your question. Your line is live.

Clint B. Malin: [inaudible]

John Kielikowski: Thank you.

Speaker Change: Your next question is coming from Rich Anderson with Wedbush. Please pose your question. Your line is live.

John Kielikowski: And the other thing we've done, John, on this, too, is in some of our purchase options, we've provided an alternative of an earn-out as opposed to a purchase option, so really giving an operator flexibility on that. But our goal, obviously, is to build relationships and get purchase options. As we do additional deals, you can extend out that purchase option, and there are different ways to work proactively with our operating partners to address those purchase options. The date, as we continue to focus on the laddering of those purchase options.

Rich Anderson: Thank you.

Rich Anderson: Good morning. Just so I apologize.

Rich Anderson: I just need a little bit more clarity. There's 3.1 million of deferral collections in the third quarter; net offsets the 3 million of deferrals that you're offering, potentially offering ALG. Is that right?

Richard Charles Anderson: Thank you. Good morning. Just so I apologize. I just need a little bit more clarity. There's 3.1 million of Deferral collections in the third quarter and that offsets the 3 million of deferrals that you're offering potentially offering ALG is that is that right?

Operator: Your next question is coming from Rich Anderson with Wedbush. Please pose your question. Your line is live. Thank you.

Richard Charles Anderson: Thank you, good morning. Just so I apologize; I just need a little bit more clarification. There's $3.1 million of deferral collections in the third quarter, and that offsets the $3 million of deferrals that you're offering, potentially offering ALG. Is that right? That is correct. Okay, but the $3.1 million will come in in the third quarter, whereas the $3 million would be routably through to the end of the year, right?

Pam Kessler: That is correct.

Pam Kessler: Okay, and but the 3.1 will come in in the third quarter, whereas the 3 million would be radically, you know, through to the end of the year, right? So just in terms of modeling. Yes, that's right. You have 1.5 million coming in the second quarter for the May and June, and then you have 1.5 million coming July through December. So that's the deferral side. And then yes, the 3.1 million of cash received from previous deferrals, if you want to call it that. And then one, you know, there was the 400,000 related to the asset that we sold, where we collected rent through the initial term.

Speaker Change: That is correct. Okay, but the $3.1 million will come in in the third quarter, whereas the $3 million would be ratably, you know, through to the end of the year, right? So I'm just thinking in terms of modeling.

Richard Charles Anderson: Yes, that's right. You have $1.5 million coming in the second quarter for May and June, and then you have $1.5 million coming July through December, so that's the deferral side. And then, yes, the $3.1 million of cash received from previous deferrals, if you want to call it that, and then there was the $400,000 related to the asset that we sold where we collected rent through the initial term. That comes in the second – I mean, I'm sorry, the third quarter. All in the third quarter. So, yes, but you'll probably normalize. Well, the offset is in the third quarter, the $3.1 million, but the impact, the negative impact from the $250,000 per month is relatively small in the third and fourth quarters.

Speaker Change: Yes, that's right. You have 1.5 million coming in the second quarter for the May and June , and then you have 1.5 million coming July through December , so that's the deferral side. And then, yes, the 3.1 million of cash received from previous deferrals, if you want to call it that, and then one, you know, there was the $400,000 related to the asset that we sold where we collected rent through the initial term.

Richard Charles Anderson: Correct. Okay. In terms of the purchase option, you said you don't expect it to be exercised. Do you feel that way also about what you just offered ALG?

Pam Kessler: That comes in the second. I mean, I'm sorry, the third quarter, all in the third quarter. So, yeah, which will probably normalize. Well, also in the third quarter, the 3.1, but the impact, the negative impact from the 250 per month is radically over the third and fourth quarter. Correct.

Speaker Change: That comes in the second, I mean, I'm sorry, the third quarter, all in the third quarter, so, yeah, which you'll probably, you'll probably normalize. Well, all set is in the third quarter, the 3.1, but the impact, the negative impact from the 250 per month is radibly over the third and fourth quarter.

Pam Kessler: Okay. In terms of the purchase option, do you said you don't expect them to be exercised? Do you feel that way also for what you just offered? No, that is always intended to be a take out to agency financing. So I would think that they still said they were already in process of agency financing. So we think that will continue. Yeah, that we do expect. I mean, anticipate.

Speaker Change: Correct. Okay. In terms of the purchase option, you said you don't expect them to be exercised. Do you feel that way also for what you just offered ALG?

Clint B. Malin: No, that was always intended to be a take out to agency financing. So we think that they still said they were already in the process of agency financing. So we think that will continue.

Speaker Change: No, that was always intended to be a take out to agency financing, so we think that they still, like I said, they were already in process of agency financing, so we think that will continue. Yeah, that we do expect, I mean anticipate.

Richard Charles Anderson: Yeah, that we do expect. I mean, anticipate.

Clint B. Malin: Any, you know, you have it out to 2028, depending on what we're talking about, what should we expect, you know, something happening this year or, you know, any idea when this could start?

Pam Kessler: Any, you know, you have it out to 2028, depending on what we're talking about, what should we expect? You know, something happening this year or, you know, any idea when this could trigger? It'll probably be; it'll probably be not all at one time. It will be some properties at different times. So possibly a few at the end of the year, but probably mostly 25, and I would say sort of pro out of through 25. And you're saying the payback happens in one way through the purchase option exercise because then you, you just, you, you figure that into the purchase option.

Speaker Change: Any, you know, you have it out to 2028, depending on what we're talking about, what should we expect, you know, something happening this year or, you know, any idea of when this could trigger?

Richard Charles Anderson: It will probably not be all at one time; it will be some properties at different times, so possibly a few at the end of the year, but mostly it's 25, and I would say sort of pro ata through 25.

Speaker Change: It will probably be not all at one time, it will be some properties at different times, so possibly a few at the end of the year, but mostly it's 25, and I would say sort of Proata through 25.

Clint B. Malin: And you're saying the payback happens in one way through the purchase option exercise because then you just factor that into the purchase option math, is that right? And to get it right, because of the cross-collateralization, funds received in excess of the purchase price would relieve other liabilities owed to LTC across all investments.

Speaker Change: And you're saying the payback happens in one way through the purchase option exercise because then you you just

Pam Kessler: And math, is that right? And to get correct because what because of the cross collateralization, funds received in excess of the purchase price would relieve other liabilities of LTC across all investments. Okay.

Speaker Change: You figure that into the purchase option math, is that right? Correct, because of the cross-collateralization, funds received in excess of the purchase price would relieve other liabilities owed to LTC across all investments.

Clint Malin: So I guess I'm curious as to why you gave a purchase option on all three JVs and not just the one where there's problems. Is it your intention to really essentially get out of, you know, I know ALG has come to the rescue for you, and if they've been a partner in many ways, but is your ultimate goal to sort of exit entirely? And that's why you get the purchase options across the board. The original had a purchase option. So the 11, the 11 property portfolio, which we gave the deferrals that already had the purchase option.

Richard Charles Anderson: OK. So, I guess I'm curious as to why you gave a purchase option on all three JVs and not just the one where there are problems. Is it your intention to really essentially get out of, you know, I know ALG has come to the rescue for you, and they've been a partner in many ways, but is your ultimate goal to sort of exit entirely, and that's why you get the purchase options across the board?

Speaker Change: Okay.

Speaker Change: So, I guess I'm curious as to why you gave a purchase option on all three JVs and not just the one where there's problems.

Speaker Change: Is it your intention to really essentially get out of, you know, I know ALG has come to the rescue for you, and they've been a partner in many ways, but is your ultimate goal to sort of exit entirely and that's why you get the purchase options across the board?

Clint B. Malin: The original had a purchase option. So the 11 property portfolio on which we gave the deferrals, that already had the purchase option. Right, right. The other two loans that converted. Yeah, we gave purchase options on the two loans that converted to retain the integrity of what the original investment was, which, as Clint pointed out, was a short-term kind of bridged to $800,000.

Speaker Change: The original had a purchase option. So the 11, the 11 property portfolio on which we gave the deferrals, that already had the purchase option. Right, right. The other two loans that converted. Yeah, we gave, we gave purchase options on the two loans that converted.

Clint Malin: Right. The other two loans that converted. Yeah, we gave, we gave purchase options on the two loans that converted to retain the integrity of what the original investment was, which is pointed out was short-term kind of bridge to agency financing. Okay.

Speaker Change: to retain the integrity of what the original investment was, which, as Clint pointed out, was short-term, kind of bridge to agency financing.

Clint Malin: You can reach on that to just see it because they're Medicaid waiver affordable senior living product. We just think that's probably a better long-term solution from permanent financing through agency. Okay.

Richard Charles Anderson: Okay, fair enough. I think, too, that's on that. Yeah, go ahead. And you can reach out on that, too, just to see if it gets their Medicaid waiver affordable senior living product.

Speaker Change: Okay, fair enough. Okay, fine. Yeah, go ahead. Yeah, you can reach out to that too, just see if it gets their Medicaid waiver affordable senior living product. We just think that's probably a better long-term solution from permanent financing through agency. Okay. Last for me.

Clint B. Malin: We just think that's probably a better long-term solution through permanent financing through agency. Okay. Last for me. Not an ALG question but, you know, more big, big picture, you know. I think we're all hoping for the end of the word deferral to happen soon, you know, post-pandemic, would you say that? Barring this situation, you're really sort of in a much better spot from that standpoint, or could you still be talking about some sort of deferral situation for other operators down the road as sort of a watch list that you still have your eye on? Thanks. You know, right now, we've seen coverage.

Rich Anderson: Last for me.

Wendy Simpson: not an ALG question, but a more big picture. I think we're all hoping for the end of the word deferral to happen soon. Post-pandemic, would you say that, barring this situation, you're really sort of in a much better spot from that standpoint, or could you still be talking about some sort of deferral situation for other operators down the road? Is there like a sort of a watch list that you still have your eye on?

Speaker Change: Not an ALG question, but you know, more big, big picture, you know.

Speaker Change: I think we're all hoping for the end of the word deferral.

Speaker Change: To happen soon, you know, post-pandemic, would you say that...

Speaker Change: Barring this situation you're really sort of in a much better spot from that standpoint or could you still be talking about some sort of deferral situation for other operators down the road as they're like a sort of a watch list that you you're still have your eye on. Thanks.

Clint Malin: Thanks. Right now we've seen coverage starting to take up a little bit in our portfolio on the private pay side. We do that to be positive. Skill nursing is getting Medicaid rate increases. So right now, those are positive aspects going forward.

Richard Charles Anderson: You know, right now, we've seen coverage starting to tick up a little bit in our portfolio on the private pay side, and we view that to be positive. Skilled nursing is getting Medicaid rate increases, so right now, those are positive aspects going forward.

Speaker Change: You know, right now we've seen coverage starting to tick up a little bit in our portfolio on the private pay side. We view that to be positive. Skilled nursing is getting Medicaid rate increases, so right now those are positive aspects going forward.

Clint Malin: Okay, thanks very much. Thank you.

Michael Carroll: Your next question is coming from Michael Carroll with RBC Capital Markets. Please pose your question. Your line is live. Yep, thanks. Just real quick on ALG. How broad-based have been issue is it? I know you offered the deferrals on one group of assets, but then you did give them incremental dollars related to a new mortgage loan on another group of assets. So is it the issue just the problem with the assets that you gave the deferrals? Or did the other group need additional capital through the incremental mortgage loan that you provided? The assets we gave the deferral on?

Speaker Change: Okay, thanks very much.

Operator: Your next question is coming from Michael Carroll with RBC Capital Markets. Please pose your question. Your line is live.

Speaker Change: Thank you.

Speaker Change: Your next question is coming from Michael Carroll with RBC Capital Markets. Please pose your question. Your line is live.

Michael Albert Carroll: Yep, thanks. Just real quick on ALG. How broad-based of an issue is it?

Michael Albert Carroll: Thanks. Just real quick on ALG, how broad-based of an issue is it? I know you offered the deferrals on one group of assets.

Michael Albert Carroll: I know you offered the deferrals on one group of assets, but then you did give them incremental dollars related to a new mortgage loan on another group of assets. So is the issue just the problem with the assets that you gave the deferrals to, or did the other group need additional capital through the incremental mortgage loan that you provided? Yeah.

Michael Albert Carroll: But then you did give them incremental dollars related to a new mortgage loan on another group of assets. So is it the issue just the problem with the assets that you gave the deferrals to or did the other group need additional capital through the incremental mortgage loan that you provided?

Clint B. Malin: The assets we gave the deferral on.

Michael Albert Carroll: The assets we gave the deferral on.

Clint Malin: So what was the reasoning behind the? What was the reasoning behind the mortgage loans? So why did you, when you transition your your investment in the JV from a mortgage loan to a JV, you provided an additional capital to that JV? So what was the reason in providing that additional capital? Well, they had different investor groups in those two portfolios, and we were buying into that where there was positive value. So we had to contribute to participate in that. There were some funds that were used for security. We hold as part of the overall negotiation, and we're holding security security deposit on that real estate tax and pounds things of that nature.

Michael Albert Carroll: So what was the reasoning behind the...

Michael Albert Carroll: So what was the reasoning behind the... So what was the reasoning behind the mortgage loan? So why did you, when you transitioned your investment in the JV from a mortgage loan to a JV, you provided additional capital too to that JV. So what's the reason for providing that additional capital?

Speaker Change: What was the reasoning behind the mortgage loan? So why did you, when you transitioned your investment in the JV from a mortgage loan to a JV, you provided an additional capital too to that JV. So what was the reason in providing that additional capital?

Clint B. Malin: Well, they had different investor groups in those two portfolios, and we were buying into them when there was positive value. So we had to contribute to participate in that. There were some funds, though, that were used for security. We hold, as part of the overall negotiation, a security deposit on that, real estate tax in pounds, things of that nature. So it was... and nothing came out of that portfolio. So it was just part of the overall transaction on the conversion.

Speaker Change: Well, they had different investor groups in those two portfolios, and we were buying into that where there was positive value.

Speaker Change: We had to contribute to participate in that.

Speaker Change: There were some funds that were used for security, we hold as part of the overall negotiation, we're holding security, a security deposit on that, real estate tax in pounds, things of that nature.

Clint Malin: So it was nothing came out of that portfolio. So they're just part of the overall transaction on the conversion. Okay, did they pay out investors with that additional eight million? I think it was eight million dollars, or was it just to go pay back like a crude taxes? Is that what you said? Taxes, we look security. They brought current some AP things like that all stayed within the portfolio. There were no distributions, love.

Speaker Change: And nothing came out of that portfolio, so it was just part of the overall transaction on the conversion.

Michael Albert Carroll: Okay, did they pay out investors with that additional $8 million? I think it was $8 million, or was it just to pay back like accrued taxes? Is that what you said?

Speaker Change: Okay, did they pay out investors with that additional 8 million? I think it was 8 million dollars or is it just to go pay back like accrued taxes? Is that what you said?

Clint B. Malin: Taxes, security, they brought current, some AP, things like that. It all stayed within the portfolio. There were no distributions allowed.

Speaker Change: taxes, we took security, they brought to current some AP, things like that. It all stayed within the portfolio. There were no distributions allowed.

Michael Albert Carroll: Okay. And then, related to the agency debt, I guess then the purchase options over the next few years. I mean, how long does it take to get agency debt? I thought that was like a 12-month process. I mean, do they need to stabilize the assets at a certain level before they want to access them? Is that why the purchase option is over the next few years?

Clint Malin: Okay, and then related to the agency dead. I guess then the purchase options over the next few years. And how long does it take to get agency dead? I thought that was like a 12 months process. I mean, do they need to stabilize the assets at a certain level before they want to go access it? Is that why the purchase option is over the next few years? Correct. Just afford them time to go into it. Let's take a while. Although on the portfolio that has the 13 properties for 65 now, and they've already been in the process of that.

Speaker Change: Okay. Um, and then...

Speaker Change: Related to the agency debt, I guess, and the purchase options over the next few years, how long does it take to get agency debt? I thought that was like a 12-month process. I mean, do they need to stabilize the assets at a certain level before they want to go access it? Is that why the purchase option is over the next few years?

Clint B. Malin: Correct. Just afford them time to go ahead and do it. It does take a while, although on the portfolio that has the 13 properties for $65 million, they've already been in the process of that. And, in addition, they are looking at the USDA as financing, as this is an affordable senior living product. There is a financing mechanism through the USDA that does provide agency financing to rural markets, and that is a product that they were pursuing, and the rates are advantageous for them to use that financing mechanism.

Speaker Change: Correct, just afford them time to go ahead and do it. It does take a while, although on the portfolio that has the 13 properties for $65 million, they've already been in the process of that.

Clint Malin: And in addition, they are looking at the USDA as financing, as this is an affordable senior living product. There is a financing mechanism through the USDA that does provide agency financing to rural markets. And that is a product that they were pursuing, and the rates are advantageous for them to use that financing mechanism. And this operator has experience in that he already has USDA financing. So he knows how to do it and the qualifications thereof. Okay, could we expect these purchase options to happen sooner rather than later if they're already in the process of getting some of the secured financing?

Speaker Change: In addition, they are looking at the USDA as financing, as this is an affordable senior living product, there is a financing mechanism to the USDA that does provide agency financing to rural markets, and that is a product that they were pursuing, and the rates are advantageous.

Michael Albert Carroll: And this operator has experience in that. He already has USDA financing, so he knows how to do it and the qualifications for it.

Speaker Change: for them to use that financing mechanism. And this operator has experience in that. He already has USDA financing, so he knows how to do it and the qualifications thereof.

Clint B. Malin: Okay, could we expect these purchase options to happen sooner rather than later if they're already in the process of getting some of the secured financing?

Speaker Change: Okay, could we expect these purchase options to happen sooner rather than later if they're already in the process of getting some of the secured financing?

Michael Albert Carroll: I think you're probably going to see it. There could be some toward the end of this year, Mike, but as I mentioned previously, it's probably going to be over the course of 2025. It will not all be funded at one time. It will be in chunks, but we would expect that to happen over the course of 2025.

Clint Malin: I think you're probably going to see it. There could be some toward the end of this year, Mike, but as I mentioned previously, it's probably going to be over the course of 2025. It will all not; it will not all be financed out at one time. It'll be in chunks, but we would expect that to happen over the course of 2025. But first money out, we are first money out, Mike, so it's not like the, it's going to be a percentage allocation on the first asset that gets sold or gets refinanced. We're first money out.

Speaker Change: I think you're probably going to see it. There could be some toward the end of this year, Mike, but as I mentioned previously, it's probably going to be over the course of 2025. It will not all be financed out at one time. It'll be in chunks, but we would expect that to happen over the course of 2025.

Clint B. Malin: But we're the first money out. We are the first money out, Mike, so... You know, it's not like the, it's going to be a percentage allocation on the first asset that gets sold or gets refinanced. We're the first money out.

Speaker Change: But we're first money out. We are first money out, Mike, so...

Mike: You know, it's not like it's going to be a percentage allocation on the first asset that gets sold or gets refinanced. We're first money out.

Michael Carroll: Okay, thank you.

Austin Wurschmidt: Thank you. You have a follow-up question from Austin Wurschmidt with Keybag Capital Markets. Please pose your question.

Mike: Okay, thank you.

Operator: You have a follow-up question from Austin Wurschmidt with KeyBag Capital Markets. Please ask your question; your line is live.

Mike: Thank you.

Speaker Change: You have a follow-up question from Austin Wurschmidt with KeyBag Capital Markets. Please pose your question. Your line is live.

Austin Todd Wurschmidt: Hi, thanks. Just one clarification for me. I understand the puts and takes for annual guidance being affirmed, but what more than offsets the $1.5 million rent deferral in 2Q versus the quarterly guidance you gave last quarter?

Austin Wurschmidt: Your line is left.

Austin Wurschmidt: Hi, thanks. Just one clarification for me. I understand the puts and takes for annual guidance being affirmed, but what more than offset the one and a half million rent deferral in 2Q versus the quarterly guidance you gave last quarter?

Austin Todd Wurschmidt: Hi, thanks. Just one clarification for me. I understand the puts and takes for annual guidance being affirmed, but what more than offset the $1.5 million rent deferral in 2Q versus the quarterly guidance you gave last quarter?

Pam Kessler: I'm not sure I understand the question you're saying because it was converted to financing. Oh, yeah. So it's in FFO guidance. So you're financing receivable and you're mortgage loan receivable. It has the same effective interest method. So the accounting is not any different. So the deferral then go through FFO because of effective interest. It does affect FAD. But the guidance we're giving is FFO guidance. Right, right. And then you still came in, I guess, a penny above the hand of that range. Was there something else just specific that I guess drove the quarterly achieved them out higher than what you had forecasted?

Clint B. Malin: I'm not sure I understand the question you're saying because it was converted to financing. Oh, yeah, so it's in FFO guidance. So your financing receivable and your mortgage loan receivable have the same effective interest method, so the accounting is not any different. So the deferral doesn't go through FFO because of effective interest. It does affect FAD, but the guidance we're giving is FFO guidance.

Speaker Change: I'm not sure I understand the question you're saying. Because it was converted to financing. Oh yeah, so it's in FFO guidance.

Speaker Change: So, your financing receivable and your mortgage loan receivable, it has the same effective interest method. So, it's...

Speaker Change: The accounting is not any different, so the deferral doesn't go through FFO because of effective interest. It does affect FAD, but the guidance we're giving is FFO guidance.

Austin Todd Wurschmidt: Right, right. And then you still came in, I guess, a penny above the high end of that range. Was there something specific that I guess drove the quarterly, you know, achieved amount higher than what you had forecast? No, it was just, it was basically rounded.

Speaker Change: Right, right. And then you still came in, I guess, a penny above the high end of that range. Was there something else just specific that I guess drove the quarterly, you know, achieved amount higher than what you had forecasted?

Austin Wurschmidt: No, it was just; it was basically rounding. Understood. Thank you.

Clint B. Malin: No, it was just that it was basically rounding.

Speaker Change: No, it was just, it was basically rounding.

Speaker Change: Understood. Thank you.

Operator: There are no additional questions in the queue at this time.

Operator: There are no additional questions in the queue at this time. I would now like to turn the floor back over to Wendy Simpson for any closing remarks.

Speaker Change: Thank you.

Wendy Simpson: I would now like to turn the floor back over to Wendy Simpson for any closing remarks. Thank you again, everyone, for joining us and having these clarifying questions. I know it was a complicated transaction, and we tried to explain up both in our queue and our supplemental and in our prepared remarks. But indeed, if you still have questions to run your model, call Pam.

Speaker Change: There are no additional questions in the queue at this time. I would now like to turn the floor back over to Wendy Simpson for any closing remarks.

Wendy L. Simpson: Thank you again everyone for joining us and having these clarifying questions. I know it was a complicated transaction, and we tried to explain it both in our queue and our supplementary and in our prepared remarks, but indeed, if you still have questions about running your model, call Pam. And we look forward to talking to you next quarter.

Wendy L. Simpson: Thank you again, everyone, for joining us and having these.

Wendy L. Simpson: clarifying questions. I know it was a complicated transaction and we tried to explain it both in our queue and our supplemental and in our prepared remarks but indeed if you still have questions to run your model call Pam.

Wendy Simpson: Can we look forward to talking to you next quarter? Have a great day. Thank you, everyone.

Wendy L. Simpson: And we look forward to talking to you next quarter.

Operator: Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Operator: This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Wendy L. Simpson: Have a great day.

Speaker Change: Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.