Q1 2025 LTC Properties Inc Earnings Call
Speaker Change: Good day ladies and gentlemen and welcome to the LTC Properties Incorporated 1st quarter 2025 earnings call.
Speaker Change: At this time, all participants are on a listen-only mode, and a question and answer session will follow the formal presentation
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: Before management begins its presentation, please know that today's comments, including the question and answer session, may include forward looking statements.
Speaker Change: Subject to risks 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 10K dated December 31, 2024.
Speaker Change: LTC undertakes an obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation.
Speaker Change: Please note, this event is being recorded. I would now like to turn the conference over to your host, Mr. Chris Malin. Sir, the floor is yours.
Speaker Change: Hello and welcome everyone to our first quarter 2025 earnings call. With me today are Wendy Simpson and our executive chairman, Pam Kessler, our co-CEO, C-C-C-K-L, or CFO , and Gibson Satter White, our executive vice president of asset management.
Speaker Change: This year is off to a great start. Through our idea platform, we now have a shop portfolio totaling 176 million in gross book value, through the cooperative conversion of 13 properties from triple net leases.
Speaker Change: We completed the conversion with anthem memory care on May 1st and expected completed conversion with new perspective senior living within the next 30 days.
Speaker Change: What's more, we've added LTC's bench strength with the appointment of our new chief investment officer and demonstrated the depth of talent in our company with the promotions of several executives as discussed last quarter.
Speaker Change: The implementation of our idea strategy has resulted in an increase in our investment pipeline, giving us a clear pathway to growth by more fully aligning our interest with those of our existing and new operators and unlocking additional opportunities for performance-driven
Speaker Change: Currently, our pipeline stands at 300 million of which idea opportunities are present approximately 50 percent.
Speaker Change: We welcomed our new chief investment officer, Dave Boytono, on April 21st
Speaker Change: Dave adds even deeper expertise to our team. Spending most of his career in seniors housing at VENTAS, he played a pivotal role in sourcing investments and had direct underwriting responsibility for $5 billion in transactions.
Speaker Change: As we expand our idea platform, Dave's experience and substantial industry relationships will contribute to our future growth. You will be hearing directly from Dave on our next quarterly call.
Speaker Change: We've clearly laid the foundation for transformative expansion and with growth as our focus for 2025, we are moving into the future with momentum and confidence. Next, I'll turn the call over to CC for review of our first quarter financial results.
CeCe: Thank you, Clint. All of the members I'll be discussing today are for the first quarter of 2025 compared with the same period in 2024, unless otherwise noted. In yesterday's earnings release, we provided a detailed description of our financial results. So this morning I'll focus my comments on items of note. Thank you, thank you. Thank you.
CeCe: Bully diluted FFO per share excluding non-recurring items or core FFO grew to 65 cents from 64 cents. Bully diluted FAD per share excluding non-recurring items or core FAD increase 70 cents from 67 cents.
CeCe: Core FFO and Core FAD increase primarily related to a decrease in interest expense, rent increases from fair market rent resets, escalations and amendments, and increase in income from consolidated joint ventures and an increase in interest income from additional loan funding.
CeCe: These were partially offset by lower interest income due to mortgage loan payoffs and principal paydowns, an increase in GNA and lower rental income from property sold.
CeCe: During and subsequent to the first quarter, we sold shares under our ATM for net proceeds of $9.6 million. These proceeds are being used to fund the initial investment in our idea of platform.
CeCe: comprised of our purchase of Anson's lease hold improvement for $1.4 million, which will be capitalized and a 6.5 million lease termination fee to new perspective, which will be expense.
CeCe: as well as one-time idea platform transaction costs of approximately 1.1 to 1.5 million.
CeCe: Our total liquidity is approximately 681 million. Our debt to analyze adjusted EBDA for real estate is 4.3 times, and our annualized adjusted fixed charge coverage ratio improved to 5.0 times from 4.7 times for the fourth quarter of last year.
CeCe: Today, we are providing full-year 2025 guidance for Core FFO per share between 265 and 269.
CeCe: and Core Fad for Share of Between 278 and 282. Please refer to our supplemental for our assumptions for this guidance. Now I'll turn things over to Gibson.
Gibson Satterwhite: Thanks, CC. We'll start with idea where we've made meaningful strides since our last update and close collaboration with our partner Anthem on May 1st we transition 12 memory care properties from triple net leases into our shop portfolio.
Gibson Satterwhite: The Anthem Portfolio currently is 81% occupied. Additionally, we have agreed to cooperatively convert one independent and assisted living property operated by new perspectives into the Portfolio, with the target closing data tuned first.
Gibson Satterwhite: The new perspective property is stabilized, while Anthem offers some upside as that portfolio progresses toward increased occupancy.
Gibson Satterwhite: In 2025 for current shop portfolio, we are projecting shop NOI in the range of $9.4 million to $10.3 million.
Speaker Change: Note that these figures are reflected in the guidance CC shared earlier. In addition to the six to 800,000 fat cat-backed estimate outlined in our earnings release, we've committed $4 million for renovations.
Speaker Change: Regarding prestige, we received full contractual cash interest of $5 million through $3.8 million of cash interest paid in the application of $1.2 million from their security.
Speaker Change: Subsequent to March 31st, prestige received 2.3 million and retroactive Medicaid payments, which were funded into our security deposit, which now equals approximately 6 million.
Speaker Change: When combined with the current cash pay, we expect to receive full contractual interest at least through May, 2026.
Speaker Change: As a reminder, our loan modification in the fall of 2023 introduced a current paid interest component and a mechanism to increase our security from prestigious retroactive Medicaid payments.
Speaker Change: It also included LTC's participation in excess cash generated by the portfolio beginning in 2025.
Speaker Change: This structure was designed to provide more than a two-year runway for prestige to recover from occupancy challenges experienced during a pandemic. With the level of security we now hold and increased occupancy and performance, our investment is on much stronger flooding and is continuing to improve.
Speaker Change: From our portfolio 14 property subject to market-based rent resets, we expect to collect $5.1 million of revenue this year, up from guidance of $4.4 million last quarter on a same property
Speaker Change: Current guidance for this portfolio on the same property basis represents an approximate 50% increase from the 3.4 million of rent received related to these properties in 2024.
Speaker Change: Regarding the operative decision not to renew their lease on seven skilled nursing centers for a strategic reasons, we are continuing the sale process remain committed to replacing at least 8.3 million, but 2025 gap rent.
Speaker Change: We plan to strategically deploy sale proceeds in the growth opportunities we have discussed.
Speaker Change: One property is currently under contract, and we expect the remaining six to be under contract in the second quarter with all sales expected to close in the fourth quarter of this year. Now I'll hand this call over to Pam.
Pam Kessler: Thank you, Gibson. With momentum building and growth as our key priority, we're actively pursuing and underwriting opportunities to add newer, stabilized assets with prospects for improved performance that enhance portfolio quality and amplify LTC's upside potential.
Pam Kessler: We expect shop to represent a growing share of our portfolio as we scale our platform.
Pam Kessler: By complementing our idea strategy with investments in traditional and structured finance transactions that offer compelling initial yields, we're building a resilient performance driven portfolio structured for long term value creation.
Pam Kessler: We see an idea as a game changer for LTC. backed by a seasoned team, ample access to capital and a growing investment pipeline were prepared to execute with discipline and precision to capture new opportunities ahead.
Pam Kessler: Before we open the call to questions, I'll turn things over to Wendy for closing remarks.
Wendy Simpson: Thank you, Pam. The entire board and I are energized by the progress LTC has made, and even more enthusiastic about the opportunities ahead.
Wendy Simpson: Before transitioning to Q&A, I'd like to recognize Doug Corey, who recently retired to focus on his health and family after a remarkable 40-year career in the industry. LTC was fortunate to have him as part of our team for the last decade.
Wendy Simpson: Doug was instrumental in broadening our strategy beyond traditional triple met investments, was a champion for innovative and flexible structured finance solutions that expanded our capabilities and deepened our industry connections.
Wendy Simpson: We will miss Doug's sharp insight, dry humor, and steady hand, and we wish him and his family all the best in this next chapter. Operator, we're ready for questions from the audience.
Speaker Change: Thank you. At this time we will be conducting our question and answer session.
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One moment please, while we pull for questions.
Thank you.
Speaker Change: Our first question is coming from Juan Sanabria with BMO Capital Markets. Your line is lies.
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Speaker Change: ALG, what's assuming guidance with regards to their option to buy those assets and how's that process going in their ability to sit here for an adjunct to?
to move that process forward.
Pam Kessler: Thanks Juan, this is Pam. Yeah, they are still working on their financing in this uncertain rate environment with the wild swings and treasuries you can imagine. And often on sort of prospect at this point, but we are.
Speaker Change: hopeful that they will be able to refinance this year however our guidance assumes that they don't and that they continue to pay for rent.
I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Great. And then just on the new perspective, if you could just give a little bit more color on the least entertainment that you're paying there, a six and a half million and how that was kind of arrived at and the payback period you guys are thinking about given I think you said that after there's a bit more stabilized so just hoping for a little bit more color there.
Speaker Change: It is a stabilized asset, and with new perspective, it's a company we've known for many years looking at doing investments with them. We only have the one asset with them.
Speaker Change: And they do have shop experience with other REITs, so we see them as a growth opportunity for LTC going forward and really they've been very successful with this asset we have with them and really
Speaker Change: I'm paying this an after-least termination was really to reward them for the value creation that they've created.
Speaker Change: and gives us really a runway with them to be able to look at new opportunities.
Speaker Change: and grow our shop portfolio. So that was our rationale in doing that with new perspective and really for us to launch this platform. With these assets we were familiar with, with both Anthem and new perspective, it was a great starting point for us.
Speaker Change: Thanks, and then just one more for me. Just on the shop platform, should we expect other triple net to shop conversions? And on the pipeline, what percentage would you say is kind of a fee simple shop of the $300 billion?
Speaker Change: I mentioned in my remarks one that is 50% represents idea for the pipeline. There's going to be some opportunity for potential triple nut conversions, not a scale. We're really
Thank you, good luck!
Thank you.
Speaker Change: Thank you. Our next question is coming from Austin Wurschmidt with key bank capital markets. Your line is nice.
Austin Werschmidt: Thanks. Good morning, everybody. You just talk about how you arrived at the NOI range for the shop assets, you know, over the remaining eight months of the year and kind of what that range implies for, you know, either sequential or year-over-year breath.
Sure off and hide if it gets in
Um.
Let me get to it one second.
Austin Werschmidt: So, we looked at the shot portfolio because these are conversions.
Austin Werschmidt: We looked at 2024 on a pro form of basis so that we have similar accounting treatments.
Om
Austin Werschmidt: So if you look at 2024, the portfolio is 85% occupied.
Austin Werschmidt: So we're always assuming 85% occupancy for 2025 and I can get into some detail why later. Right now, on a full year basis, 2025 over 2024.
Austin Werschmidt: We've got 15.2 million versus 14 million. So this 15.2 in 2025, over 14 million for 2024. A big driver of the growth going forward from where we are now is continued lease up in the Anthem portfolio. They had a little bit of...
Austin Werschmidt: They had hired the normal discharge as in Q4 and we expect them to get back to Oxman C that they had in Q3 last year.
Speaker Change: And then beyond occupancy are there other opportunities on the expense front just curious, you know, how you're thinking about the growth profile of this portfolio as we think about the next several years.
Speaker Change: Well, with respect to the portfolio that we talked about converting, I think that we do have some upside beyond the end of 2025.
Speaker Change: But we end up in 2025 assuming about 87% occupancy for on a unit basis for the portfolio.
Speaker Change: There are some, you know, we try to we try to make realistic budgets [inaudible]
Speaker Change: Anthem has made some progress on cost reductions and efficiencies in their staffing model in Q4-24. And so we feel like we have some room and try to give ourselves multiple paths to be able to hit the guidance so we provide it.
Thank you for joining us. Thank you.
Speaker Change: And then just last one here, I guess for that 50% of the investment pipeline that includes
Speaker Change: I mean, how are we thinking about going in, you know, cap rates on those deals and just as you're building out your senior housing portfolio?
Speaker Change: How are you balancing, I guess, operator in geographic diversification versus trying to kind of build some scale with the assets you already have? Thanks.
Speaker Change: We'll definitely focus on operator concentration, and that's a key element for us as we look at it.
Speaker Change: Having ALG exercise, a purchase option to reduce that concentration. So something is very much on the forefront. And primarily in our investment pipeline, we're looking at deals that are one or two assets. There's a couple small portfolios where a focus really is on one or two assets being cognizant of that diversification with operators. And we've actually been actively pre-marketing idea over the course last five, six months.
Speaker Change: Giving traction and a number of deals in our pipeline or off market, which we're very encouraged by. I would say on the shopfront, we're looking at probably 7% going in yields plus or minus.
with them the...
Speaker Change: forward looking yield going up to you know seven and a half to eight percent as you look at cost reductions rate growth and occupancy improvement in shop and we're looking at balancing that as Pam mentioned in her pair of marks with you know Lisa's loans and structural finance products that have higher initial yield to offset those.
shop, initial shop yields as we're growing the portfolio.
It's helpful. Thank you
Thank you.
Speaker Change: Thank you. Our next question is coming from Rich Anderson with Wedbush. Your line is nice. Hey, thanks. Good morning. So this 176 million is roughly...
Speaker Change: using your enterprise value about 7% of the company. I think I have that math right. I'm just curious if you can.
sort of share a pipeline.
Speaker Change: What's the pipeline of internal conversions that you see going forward? And what's the pace to get to something like 25 or 30% of the company in the next couple of years?
I rich, we currently, we don't have plans to convert
Speaker Change: Triple Netlaces probably become less inclined to want to transition to the shop platform, but if they have created value in their portfolios and they would like to be rewarded for that, we would entertain doing something similar to what we did with new perspective.
Speaker Change: Okay, great, thanks for that color, Pam. The other thing is you're converting to shop, a memory care portfolio with anthem, you know, higher acuity assets and so on. Is that, um,
Speaker Change: Do you think you'll kind of be looking down stream a little bit in terms of lower acuity for future shop transactions in your external growth strategy, or do you like the memory care sort of thesis in a shop wrapper?
Speaker Change: Well, we like, I mean, we like memory care obviously. We were, you know, one of the first entrants into the standalone memory care and we developed these properties with entrants.
But we're, you know, as...
Speaker Change: being a very aware of concentration and the fluctuations that memory care experiences and the shorter average length of stay, we're not looking at that property type to grow in, I'm not excluding that.
Speaker Change: but it's not a focus of ours. We're really looking at larger properties that are more of a continuum of care, IL, AL, with some memory care, but not to stand alone. Okay, last question for me is Omega had a little minor...
Speaker Change: That's fine as well. Since we have received the May rent rich and we have no request from Genesis for any assistance, our portfolio has strong coverage and located in core markets for the Genesis operating.
Okay, fair enough. Thanks very much. Thank you.
Thank you.
Michael Carroll: Our next question is coming from Michael Carroll with RBC capital markets. Your line is live.
Michael Carroll: Yeah, thanks. Clint, I know. I appreciate some of the comments on your projections for the Anthem portfolio and the general shop portfolio. Can you maybe spend some time and talk about how those assets have performed over the past few years?
Speaker Change: I know that they've been struggling in them. I was a little surprised where the shop at Hawaii is coming out, at versus where the triple net lease rate is for Anthem. So, did Anthem have a pullback in their operations or how should we think about that portfolio and maybe the longer-term outlook of it?
Speaker Change: Well, Mike is Gibson mentioned in the Q&A portion earlier that they did have a dip in occupancy and Q4 relating to some clinical discharges. I mean, that's something that, you know, as it's an earning season, we've seen other reads have similar dips.
and occupancy, so that wasn't unexpected.
Speaker Change: but we're going into the key selling season that started in May.
Speaker Change: and we think there will be an upside for improvement in occupancy. There's not a lot of new supply being delivered, so we think that's beneficial to occupancy growth. So we're looking at the key selling season to be an upside opportunity for Anthem.
[inaudible]
Speaker Change: So was that, I guess, how can you maybe provide some comments on how anthems perform the past few years? I mean, have they been recovering as you originally would have expected and they just had this blip in the fourth quarter that kind of took them lower? I mean, I guess how meaningful is that blip and how have they performed the past few years?
Speaker Change: We need their husband a few dips on a quarter by quarter basis, but they have recovered previously, so we don't expect to expect similar here.
Speaker Change: Thank you for watching. Please subscribe to my channel. I hope to see you again soon.
Speaker Change: Okay. And then I guess on the shop at a lie, if that included both the anthem and the new perspective tenets. I mean, can you break out how much of that projected in a lie is new perspective and how much of that is is anthem?
Speaker Change: Yes, sure. It's at the midpoint. Anthem is 1.2 million of the increase and a new perspective is 1.6.
Thank you for joining us. Have a great day.
Speaker Change: So it's a total of 2.8 million over if you were looking at the combined lease rates so it is it is a substantial pickup from converting to right
Speaker Change: Okay. And then it's a plan to grow with new perspective, are they going to be one of your core operators, where you're going to add assets within that shop structure over the next, I guess, several quarters, or maybe execute this current investment pipeline with them. [inaudible]
Speaker Change: Absolutely. I mean, they're an ideal company for us to work with. I mean, they have the ability to develop. They have strong culture.
you know, a long-tenured family business.
Speaker Change: They have their stocks compliant, they are familiar with idea.
Speaker Change: So we see them as an excellent opportunity and a great partner to grow with [inaudible]
Speaker Change: And that was part of the catalyst for us looking at this opportunity to put them into the initial round of our shop portfolio. Yeah, they they demonstrated through our triple net lease with them an incredible ability to increase value.
Okay. Great. Well, thank you very much.
Thank you.
Speaker Change: Thank you. Once again, ladies and gentlemen, if you have any questions, you may press star one on your telephone keypad.
Speaker Change: Our next question is coming from Amiteo, Augustania, from Deutsche Bank. Your line is
I'm a tale I think you might be on me.
Hello
It's really nice, sir.
Speaker Change: Okay, perfect, so good morning, everyone. Nice to see all this progress on the shopfront.
Speaker Change: Just curious again, you've bought a couple of assets, you've hired days.
Speaker Change: Anything else from institutionalizing the platform that still needs to happen at this point? Is there still a need to hire data scientists? Or just kind of curious of making sure everything is kind of really, you've dotted your eyes and cross your teeth, what else still needs to happen?
Pam Kessler: Hi, Tio, it's Pam. Yes, we will continue to build out the platform as we add investments.
Pam Kessler: into it. Yeah, we still will need analysts, FPNA. I mean, as the platform grows, you obviously have to scale up. But we're confident with what we have right now supports the conversion platform.
Speaker Change: So that's helpful. And then ALG, it didn't look like in this quarter you gave any rent before. All is that correct? And if that's the case, you just kind of help us understand what's happening with the overall financial performance of ALG.
Speaker Change: Yeah, that is correct. We did not give it deferral this quarter and their occupancy has increased 150 basis points from year end with increased lead generations and conversion rates.
Speaker Change: Higher, it increases the eligibility threshold for Medicaid, and if you'll recall, this portfolio has Medicaid in it, and what happened during the pandemic and inflation was the eligibility requirements for Medicaid were not increased in North Carolina and with increases in people of Social Security and other forms.
Speaker Change: pool of potential residents. We expect our occupancy to continue to increase.
Speaker Change: , , , , , , , , , , , , , ,
Speaker Change: That's all put one way if you don't mind so you can ask them now goes to shop you have kind of redone the end core lease. Any other leases out there that also that still have quarterly market-based research that we should be aware of at this point?
Speaker Change: Just just the 14 that Clint talked about, or I'm sorry, the gift I'm talking about and his prepared remarks and the encore lease just just remind you it's it's not been redone it's just it has
Speaker Change: Set Market Base
Speaker Change: Resets on, is it quarterly or it's quarterly? So they're quarterly. So you're going to see this on a quarterly basis. We have some that are on six month basis and some that are on quarterly basis in that portfolio. And you should see over the next year, you know, we're hoping those continue to increase as occupancy and performance improves in that portfolio. And those were...
Speaker Change: that basket of properties, those were properties that were with other operators that during COVID we transitioned to these new operators and that is, you know, that's the part of our portfolio outside of RIDIA that has upside.
Speaker Change: We didn't deferrance and report receivable, like some of our peers, so we don't have any receivable sitting on our balance sheet. So all the increases that come from improved performance in that portfolio will hit the financial statements.
Speaker Change: It will be shown through income versus, you know, hitting a reef hit. And we're very much encouraged by the trending of increasing guidance that portfolio. Yeah.
Thank you very much. Awesome. Good luck.
Thanks.
Speaker Change: As we have reached the end of our question and answer session, I would like to turn the call back over to Wendy Simpson for closing remarks.
Wendy Simpson: As you can see, we are committed to growth and are successfully executing our strategy. We appreciate you all for joining us on today's call and look forward to talking to you again next quarter.
Wendy Simpson: Thank you, ladies and gentlemen. This does conclude today's call. You made disconnect your lines at this time and we thank you for your participation.