Q2 2025 LTC Properties Inc Earnings Call
Conference Operator: Greetings, and welcome to the LTC Properties' second quarter 2025 earnings call. At this time, all participants are in a listen-only mode. 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 10-K dated December 31st, 2024. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note that this event is being recorded. I would now like to turn the conference over to LTC management.
Greetings, and welcome to.
The LTC properties second quarter 2025 earnings call.
At this time, all participants are in a listen-only mode.
From time to time including the company's most recent 10K dated December, 31st 2024.
LTC undertakes, no obligation to revise or update these 4 looking statements to reflect events or circumstances after the date of this presentation.
Please note that this event is being recorded.
Pam Kessler: Hello and welcome, everyone, to our second quarter 2025 earnings call. With me today, in order of speaker, are CeCe Chikhale, Chief Financial Officer; Gibson Satterwhite, Executive Vice President of Asset Management; Dave Boitano, Chief Investment Officer; and Clint Malin, Co-CEO. LTC has been focused on transformation and execution. We executed on strengthening our team through promotions, the addition of a new Chief Investment Officer, and a new board member with extensive REIT experience. We executed on initiating a Ritea platform, which will transform LTC from a small cap triple net REIT to a larger, more diversified senior housing-focused REIT. We executed on enhancing liquidity. We are executing on growth, and driving additional accretive growth remains our top priority. Our momentum is evident. Last quarter, we increased our pipeline to 300 million.
I would now like to turn the conference over to LTC management.
Hello and welcome everyone to our second quarter 2025 earnings call with me today. In order of speaker, our CC, chal Chief Financial Officer Gibson, sat white Executive Vice President of asset management. Dave Bono Chief investment officer and Clint mailing Co CEO.
LTC has been focused on transformation and execution, we executed on strengthening our team through promotions, the addition of a new Chief investment officer and a new board member with extensive Reed experience.
We executed on initiating a right idea platform which will transform LTC from a small cap. Triple net rate to a larger more Diversified senior housing focused rate
We executed on enhancing liquidity, we are executing on growth and driving additional accretive growth remains our top priority. Our momentum is evident
Pam Kessler: Today, we are increasing guidance again to 400 million of investments in 2025, which will more than double the size of our existing shop portfolio. It will also expand our shop operators to five, three of whom are new relationships for LTC. We have established a strong platform for meaningful growth, and with ample access to capital, we're moving through the year with energy and optimism as we continue to successfully deliver on our plans. Now, I'll turn things over to CeCe for a review of our financials, a liquidity update, and increased guidance.
Last quarter, we increased our pipeline to 300 million.
Today, we are increasing guidance again to 400 million of investments in 2025, which will more than double the size of our existing shop portfolio.
It will also expand our shop operators to 5. 3 of whom are new relationships for LTC.
We have established a strong platform for Meaningful growth and with ample access to Capital. We're moving through the year with energy and optimism as we continue to successfully deliver on our plan.
CeCe Chikhale: Thank you, Pam. The numbers I'll be discussing today are for the second quarter of 2025 compared to the same period in 2024, unless otherwise noted. I will focus my comments on key items as a detailed description of our financial results was provided in yesterday's earnings release and supplemental. Core FFO improved to 68 cents from 67 cents. Core FAD improved by 5 cents to 71 cents versus 66 cents. The increase in core FFO primarily was related to a decrease in interest expense, an increase in fair market rent resets, and an increase in shop NOI. These were partially offset by lower interest income due to mortgage loan payoffs and principal paydowns and higher GNA. Core FAD increase principally related to these same factors, plus rent escalations and increases from the turnaround impact of deferred rent provided in the second quarter of last year.
Now, I'll turn things over to Cece for a review of our financials. A liquidity update and increased guidance,
Thank you, Pam, the numbers. I'll be discussing today are for the second quarter of 2025 compared to the same period in 2024. Unless otherwise noted, I will focus my comments on key items as a detailed description of our financial results was provided in yesterday's earnings release at supplemental.
Poor ffo improved to 68 cents from 67 cents. Core. Fad improved by 5 cents to 71 cents versus 66 cents. The increase in core ffo primarily was related to a decrease in interest expense, and increase in Fair market. Rent, resets and an increase in shop. Noi.
CeCe Chikhale: To further strengthen our capital position, subsequent to the end of the second quarter, we entered into a new four-year unsecured credit agreement with a solid group of banks. The new unsecured credit agreement matures in July 2029 and provides a one-year extension option. Aggregate commitments on the revolver increased from 425 million to 600 million, and we have the ability to further increase the loan commitments up to 1.2 billion. Additionally, we rolled two 50 million term loans that were maturing over the next 16 months into the revolver, keeping the swap agreements intact through November 2025 at 2.3% and November 2026 at 2.4% based on current margins. At June 30th, our debt to annualized adjusted EBITDA for real estate was 4.2 times, and our annualized adjusted fixed charge coverage ratio was 5.1 times. Our current total liquidity stands at 674 million.
These were partially offset by lower interest income due to mortgage loan payoffs and principal pay downs and higher GNA core fad. Increased principally related to these same factors, plus rent, escalations and increases from the turnaround impact of deferred rent. Provided in the second quarter of last year.
To further strengthen our Capital position subsequent to the end of the second quarter. We entered into a new 4-year unsecured credit agreement with a solid group of banks. The new and secured credit agreement. Matures in July 2029 and provides a 1 year extension option.
Aggregate commitments on the revolver, increased from 425 million to 600 million and we have the ability to further increase the loan commitments up to 1.2 billion.
Additionally, we rolled 250 million term loans that were maturing over the next 16 months into the revolver. Keeping the swap agreements intact through November 2025 at 2.3% and November 2026 at 2.4% based on current margins at June 30th. Our debt to annualized adjusted, EBA for Real Estate was 4.2 times.
and our annualized adjusted fixed charge coverage ratio was 5.1 times
CeCe Chikhale: We have increased our full-year 2025 core FFO guidance range by 2 cents to 267 and 271. The low end of this guidance includes only those investments made to date, while the high end includes 320 million in investments that are expected to close in the next 60 days. Dave will provide more color on these investments shortly. Additional assumptions underpinning this guidance can be found in the supplemental posted on our website. Now I'll turn things over to Gibson for a portfolio review and update on shop.
Our current total liquidity stands at $674 million.
Gibson Satterwhite: Thanks, CeCe. To execute on our goals of managing operator concentration and lowering exposure to older skilled nursing assets, we have agreed to allow Prestige an option to prepay their $180 million loan secured by 14 skilled nursing centers in Michigan without penalty. The 12-month window to prepay the loan opens in July 2026. With improving operating performance in this portfolio and in consideration for granting the prepayment window, Prestige has agreed to eliminate the current pay rate and revert monthly interest payments to the full contractual interest rate of 11.14% effective July 1st, 2025, and escalates annually. Additionally, we are now under contract to sell all of the seven skilled nursing centers tied to the lease with the operator who chose not to renew for strategic reasons.
We have increased our full-year 2025 core FFO guidance range by 2 cents to $2.67 and $2.71. The low end of this guidance includes only those investments made to date, while the high end includes $320 million in investments that are expected to close in the next 60 days. Dave will provide more color on these investments shortly. Additional assumptions underpinning this guidance can be found in the supplemental posted on our website. Now, I'll turn things over to Gibson for a portfolio review and update on SHOP.
Thanks cc to execute on our goals and managing operator concentration and lowering exposure to older skilled nursing assets. We have agreed to allow for Prestige and option to prepay their $180 million loan, secured by 14 skilled, nursing centers in Michigan without penalty.
The 12-month window to prepay the loan, opens in July 2026.
Payment window Prestige has agreed to eliminate. The current pay rate and revert monthly interest payments to the full contractual interest rate of 11.14% effective, July 1st 2025, and escalates annually.
Gibson Satterwhite: We expect these transactions to close in the first part of the fourth quarter, generating net proceeds of about 120 million against our gross book value of 72 million. We anticipate recording a gain on sale of approximately 80 million in connection with the sales. With the generated proceeds and the potential of Prestige's loan prepayment, we are working towards strategically recycling capital out of older skilled nursing assets and into newer seniors' housing communities. We have increased our assumptions for the expected rent due to LTC on the portfolio of 14 properties subject to market-based RIP resets and now expect to collect revenue of 5.7 million this year, up 10% from the 5.1 million we discussed last quarter, and up 64% from the rent collected from these properties last year. We have received full contractual rent from Genesis through August.
Additionally, we are now under contract to sell all of the 7. Skilled nursing centers tied to the lease with the operator who chose not to renew for strategic reasons.
We expect these transactions to close in the first part of the fourth quarter to generating net proceeds of about 120 million against our gross Book, value of 72 million.
We anticipate recording a gain on sale of approximately 80 million in connection with the sales.
With the generated proceeds and the potential of prestigious loan. Prepayment, we are working towards strategically recycling, Capital, out of older, skilled nursing assets and into newer seniors housing communities.
We have increased our assumptions for the expected rent due to LTC on the portfolio of 14 properties subject to market-based RIT presets.
And now we expect to collect revenue of $5.7 million this year.
Up 10% from the 5.1 million we discussed last quarter and up 64% from the rent collected from these properties last year.
Gibson Satterwhite: Our properties are in core markets for them, and in early June, they exercised their first five-year extension option, making the new expiration date April 30th, 2031. We continue to believe that our shop portfolio is highly transformative. Average occupancy in the portfolio for the second quarter was 81%, and shop NOI totaled 2.5 million. As of the end of the quarter, our shop portfolio consisted of triple net leases converted to Ritea. For comparative purposes, we generated about 780,000 more income in the second quarter than we did under the triple net leases for the same period last year. Our prior guidance for the 13 properties recently converted into our shop portfolio remains unchanged at 9.4 to 10.3 million of shop NOI. Now I'll hand the call over to Dave for a discussion of our investment activity.
We have received full contractual rent from Genesis through August. Our properties are in core markets for them and an early June. They exercise their first 5 year extension option.
Making the new expiration date: April 30, 2031.
We continue to believe that our shop portfolio is highly transformative, average occupancy in the portfolio. For the second quarter was 81% and Shop. Noi total 2.5 million
As of the end of the quarter, our shop portfolio consisted of triple net leases converted to RIA.
For comparative purposes, we generated about $780,000 more in income in the second quarter than we did under the triple net leases for the same period last year.
Our prior guidance for the 13th. Recently, converted into our shop portfolio. Remains unchanged at 9.4 to 10.3 million of shop. Noi.
Dave Boitano: Thank you, Gibson. I'm excited to be speaking with you today on my first earnings call since joining the company as Chief Investment Officer, and I will begin with what drew me to LTC. Beyond the strength and collaboration of a deeply experienced team, what really stood out is how well-positioned LTC is for the future. With the addition of SHOP, LTC is exceptionally equipped to seize the growing opportunity to partner with seniors' housing operators, particularly strong, regionally focused operators who bring deep healthcare expertise and experience and a profound understanding of their local markets. Late last month, we added to our SHOP portfolio with the acquisition of a 67-unit stabilized assisted living and memory care community in California, built in 2019. We invested 35 million at an estimated initial yield of 7%.
Now, I'll hand the call over to Dave for a discussion of our investment activity.
Thank you, Gibson.
I'm excited to be speaking with you today on my first earnings call since joining, the company is Chief investment officer.
And I will begin with what drew me to LTC.
Beyond the strength and collaboration of a deeply experienced team.
What really stood out is, how well, positioned, LTC is for the future.
With the addition of shop, LTC is exceptionally equipped to seize the growing opportunity to partner with seniors, housing operators, particularly strong, regionally focused operators, who bring deep Health, Care, expertise and experience. In a profound understanding of their local markets.
Late. Last month, we added to our shop portfolio with the acquisition of a 67 unit stabilized, assisted living, and Memory Care community in California built in 2019.
Dave Boitano: The community will continue to be operated by an affiliate of Discovery Senior Living, a new SHOP operating partner for LTC. Our SHOP investment sites are on accretion, and we're focused on accelerating growth through the acquisition of newer, stabilized properties with strong operating partners. However, we will continue to make shorter-term accretive investments for financial and strategic purposes. As such, during the second quarter, we originated a $42 million mortgage loan secured by a 250-unit senior housing community in Florida, built in 2021. This five-year loan carries a fixed interest rate of 8.5%. These two transactions bring 2025 year-to-date investments to nearly 80 million, with approximately 320 million more expected to close over the next 60 days. Of this, approximately 60 million represents an 8.25% five-year mortgage loan.
We invested 35 million at an estimated initial yield to 7%.
The community will continue to be operated by an affiliate of Discovery. Senior Living a new shop operating partner for LCC.
Our shop investment sites are on accretion and we're focused on accelerating growth through the acquisition of newer stabilized properties with strong operating partners.
However, we will continue to make shorter term a creative Investments for financial and strategic purposes.
as such during the second quarter, we originated a 42 million mortgage loan secured by 250 unit senior housing community in Florida built in 2021
This 5-year loan carries a fixed interest rate of 8.5%.
These two transactions bring 2025 year-to-date investments to nearly $80 million, with approximately $320 million more expected to close over the next 60 days.
Dave Boitano: The remaining 260 million represents stabilized SHOP investments with an average age of six years and at an estimated average year-one yield of 7%. Our targeted unlevered IRR on these stabilized SHOP communities is north of 10%. At completion, these investments will drive our SHOP portfolio's gross book value to approximately 475 million, up from our initial 175 million. Upon closing, SHOP will represent nearly 20% of our total portfolio, cementing our transformation through Ritea. Even with the significant amount of investment activity we've discussed today, we are working to backfill our pipeline, which includes several SHOP transactions for which we've already issued LOIs. On our last earnings call, we highlighted our expanded investment pipeline, and we have expanded it further. The LTC team is delivering on external growth. I'll pass the call to Clint now.
Of this approximately 60 million represents an 8.25% 5-year mortgage loan.
The remaining 260 million represents stabilized shop Investments, with an average age of 6 years. And at an estimated average year 1 yield to 7%
For targeted unlevered irr on these stabilized, shop. Communities is north of 10%.
Up from our initial $175 million.
Upon closing.
Shop will represent nearly 20% of our total portfolio, cementing our transformation through our idea.
even with the significant amount of investment activity, we've discussed today,
We are working to backfill our pipeline which includes several shock transactions for which we've already issued Louis.
On our last earnings call, we highlighted our expanded investment pipeline, and we have expanded it further.
The LTC team is delivering on external growth.
Clint Malin: Thanks, Dave. We're glad to have you on board. The pace of external growth through SHOP is just beginning for LTC. Not only did our confidence in Anthem and New Perspective drive the cooperative conversions with them, but the conversions were a cost-effective GNA approach to launching our SHOP platform with assets already familiar to us. Now, with the acceleration of new investments, we are focused on scaling our accounting and asset management teams to manage our growth. So, with growth front and center for LTC, I share the enthusiasm of my colleagues when I say that I have never been more excited about our future opportunities. Operator, we're ready for questions from the audience.
I'll pass the call to Clinton now.
Thanks. Dave, we're glad to have you on board, the pace of external growth through shop is just beginning for LTC, not only did our confidence in Anthem and New Perspective, Drive The Cooperative conversions with them.
But the conversions were a cost-effective GNA approach to launching our shop platform with assets already familiar to us. Now, with the acceleration of new Investments, we are focused on scaling our accounting and asset management teams to manage our growth.
Conference Operator: Thank you. And at this time, we will conduct our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. And our first question comes from John Kilichaski with Wells Fargo. Please state your question.
So with growth front and center for LTC, I share the enthusiasm of my colleagues. When I say that, I have never been more excited about our future opportunities, operator, everybody for questions from the audience.
Thank you. And at this time, we will conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.
You may press Start 2. If you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Moment, please while we pull for questions.
Analyst: Good morning. Thank you, and congrats on the quarter. First question for me is just on how do you think about funding all of these new investments here, especially given where your cost of equity is and kind of the going in seven-cap yields?
And our first question comes from John kilichowski with Wells. Fargo, please State your question.
Pam Kessler: So, as we've talked about on previous calls, we anticipate in the long term to fund these on a leverage neutral basis or perhaps even overequitize them. You know, we've been blending in higher yielding loans. So, with the total blend, you know, we feel our cost of capital is adequate to fund them with debt and equity. And we also have some loan, I'm sorry, sales proceeds coming at the end of the year, about 120 million, as we've discussed previously, that we'll use to fund these.
Uh, good morning. Thank you. And, uh, congrats on the quarter. Um, first question for me is just on how you think about funding all of these new investments here, especially given where your cost of equity is and kind of the going in 7 cap yields.
So, as we've talked about on previous calls, we anticipate in the long term to fund these, uh, on a leverage neutral basis. Um, or perhaps even, um, over Equitable them. Um, you know, we've been blending in higher yielding loans. So with the total uh blend, um, you know, we feel our cost of capital is adequate to to fund them with uh, debt and equity. And we also have some loan. Um, I'm sorry. Sales proceeds coming at the end of the year about 120 million as
we've uh, discussed previously that we'll use to fund these
Analyst: Okay, that's helpful. Thank you. And then maybe on the underwriting here for these, what are you thinking about NOI growth on these shop acquisitions in years two and three, let's say?
Okay, that's helpful. Thank you. And then maybe on the, on the underwriting here for these. What are you thinking about? Noi growth on these these shop acquisitions?
in years 2 and 3, let's say,
Clint Malin: I think when we're looking, I mean, go ahead. Go ahead, Dave. I mean, we're projecting out fairly 3% sort of growth over the years, right? We think there's considerable upside on top of that, but for fuller purposes, we're buying stable buildings and projecting out normalized growth.
I think we were looking. I mean, go ahead, go ahead. I mean, we're we're projecting out.
Fairly, um, 3 percentage sort of growth over the years, right? We think there's considerable upside on top of that, but for for for purposes, we're buying stable buildings and projecting out normalized growth.
Analyst: Okay, that's helpful.
Pam Kessler: Their acquisitions, they're not deep value add. You know, we've discussed the characteristics of the assets that we're looking to acquire, which are stabilized with good cash flows. So, we don't have any outsized NOI projections, although we do believe that margins can be improved, but by and large, occupancy is stabilized.
Analyst: Okay, that's very helpful. And then the last one for me is just on, you know, you transitioned 13 properties in the quarter. Maybe could you talk about what, you know, what's the potential for the rest of the year in terms of what you've identified from your net lease portfolio that could be transitioned still?
Okay, that's helpful. You know, they're not, they're not, um, they're not deep value. Add, um, you know, we've discussed the the characteristics of the, um, the, the, the the assets that we're looking to acquire, which are stabilized, uh, with good, cash flows. So we don't have any outside, um, in a wide projections. Although, we do believe that margins can be in, uh, improved. But by and large occupancy is stabilized.
Clint Malin: Sure. This is Clint. We've talked about this on previous calls. You know, we launched the shop portfolio with the cooperative conversions of both Anthem and New Perspective. There could be a handful of other buildings that could be added, such as the transition portfolio that Gibson spoke about in prepared remarks. But we've said all along, this really is an external growth story, which really goes to our pipeline and what we've guided to in bringing in new operators into the portfolio. So, we see that the majority of the growth of the SHOP platform is going to be through external growth.
Okay, that's very helpful. And then last 1 for me is just on, you know, you transitioned 13 properties in the quarter, maybe could you talk about what, you know, what's the the potential for the rest of the year, in terms of of what you've identified from your net lease portfolio, that could be transitioned still
Shall we? This is Clint, uh, you've talked about this on previous calls. You know, we launched the, um, shop portfolio with the Cooperative conversions, with both ants of A New Perspective. There could be a handful of uh other buildings. That could be added such as the, uh, transition portfolio. That Gibson spoke about in prepared, remarks. But we've said, all along this really is an external growth story, which really goes to our our Pipeline and what we've guided to and bringing in new offers into the portfolio. So we see that the majority of the growth of the shop platform is going to be through external growth.
Analyst: Got it. Very helpful. And congrats again.
Clint Malin: Thank you.
Pam Kessler: Thank you.
Got it very helpful. Congrats again.
Thank you. Thank you.
Conference Operator: Your next question comes from Austin Wershmit with KeyBank Capital Markets. Please state your question.
Analyst: Hey, good morning, everyone. So, don't want to get too far ahead of ourselves, but I am curious, you know, just how large the pipeline of additional SHOP LOIs that Gibson referenced beyond what you have here ready to close in the months ahead and just whether there are additional deals like mortgage loans you referenced beyond those SHOP deals also kind of in that pipeline beyond the 320 that you disclosed this quarter. Thanks.
Austin wormit with keybanc capital markets, please State your question.
Clint Malin: Thanks, Dawson. Well, we're being selective in deal flow, and we're very encouraged to see the amount of investments we've been able to put into guidance so far. So, as Dave mentioned on prepared remarks, I mean, there are other opportunities that we have put out LOIs, but you know, what we're focused on, we're focused on single asset transactions, small portfolios of stabilized assets, newer vintage properties, and that's really where our target is. So, we're seeing more opportunities, but we're able to vet through those and really focus in to where we're trying to grow the platform. So, we are focused on execution of the remaining investments in our pipeline, but there are still other opportunities that we are going to pursue.
Hey, good morning everyone. Um, so don't want to get too far ahead of ourselves but I am curious, you know, just how large, um, the pipeline of additional shop Louis that Gibson reference Beyond, uh, what you have here, ready to close in the months ahead. And and just whether there are additional deals, um, like mortgage loans, you referenced, um, Beyond those shop deals, um, also kind of in that pipeline beyond the 320 that you disclose this quarter. Thanks.
Analyst: Do you think this upset of opportunities in front of you are enough to sustain this sort of investment pace that you've outlined kind of pretty much through really the back half of 2025, or was there something unique about sort of this initial foray into SHOP where it kind of brought to you a larger number of opportunities at the outset?
Thanks Tyson. Well, we'll be, we're being selective in in Deal flows and we're very encouraged to see the amount of Investments. We've been able to put into to guidance so far. So, as Dave mentioned on comparative marks, I mean there are other other opportunities that we have put out Louis. But you know what, we're focused on, we're focused on single asset transactions, small portfolios, uh, of stabilized assets newer, vintage properties, and that's really where our Target is so we we're seeing more, um, opportunities. But we're able to that through those and really focus in to what we're trying to grow the platform. So I I, we are, uh, we are focused on execution, uh, the of the remaining investments in our pipeline. But there are still other opportunities that we are going to pursue.
Clint Malin: Well, we're definitely seeing more deals in the market, and a big part of where we're at today is the intentional focus that we made when CeCe and Gibson's teams were focused on the cooperative conversion of Anthem and New Perspective. We've been out in the market pre-marketing this SHOP platform with the broker community, with owners that we know in the industry, with operators speaking about this. So, I think where you see today is really a culmination of intentional efforts to get the word out and pre-market what we're trying to do through external growth. So, we do see that there's going to be other opportunities, but it is also competitive out there. There's, you know, anybody that has a SHOP platform is looking at investment, so it definitely is a competitive landscape.
Do, do you think the subset of opportunities in front of you are enough to sustain this sort of investment Pace that you've outlined kind of, pretty much through, really the back half of 2025, or was there something a unique about sort of this initial foray into the shop where it it kind of brought to you? Um, a larger number of opportunities at at the outset?
Oh, we're definitely seeing more more deals in the market and, and a big part of where we're at today is the intentional Focus that we made when Cece and Gibson's teams were focused on the Cooperative conversion of Anthem and New Perspective. We've been out in the market pre-marketing. Uh, this shop platform with the broker Community with owners that we know in the industry with operators speaking about this. So I think where you see today is really a culmination of intentional efforts um to get the word out and pre-market, what we're trying to do through external growth.
So, we do see that there's going to be other opportunities.
Clint Malin: But we think given the size of LTC, we have a competitive advantage that we can actually focus on smaller deals, which have better price points to drive accretive growth for our shareholders.
Analyst: That's helpful. And then just last one, with respect to the 2025 NFO guidance, the SHOP NOI contribution was up fairly meaningfully versus what you provided last quarter. I guess just can you share what's all included in that updated figure? And I think you said that the Anthem and New Perspective NOI contribution from last quarter is unchanged. So, can you kind of sort through the moving pieces and then what drove the lift in annual guidance this quarter? Thanks.
Um, but it is also competitive out there. There's, you know, anybody that has a shop platform is looking at investment. So it definitely is a competitive landscape. But we think that, given the size of LTC, we have a competitive advantage that we can actually focus on smaller deals, which have better price points to drive accretive growth for our shareholders.
That's helpful. And then just last 1 with respect to the 2025 nfo Guidance. The the shop in Hawaii contribution was up, you know, fairly meaningfully versus, you know what, you provided last quarter, I guess, just can you share? What's all included in that update updated figure. And I think you said that the anthem and New Perspective, noi contribution from last quarters unchanged. So can you kind of sort through the moving pieces? And then what drove the lift in in annual guidance? This quarter thanks
Dave Boitano: Hi, this is Gibson. So, I'll talk just a little bit about what was in the 13 properties, and then I'll turn it over to talk about our growth assumptions layered on top of that. We came in about $400,000 higher than our internal expectations on SHOP NOI in Q2, and there were a few factors at play. So, New Perspective got converted a little bit later. Anthem's occupancy was like a little bit lower, but that was more than offset by expense savings. But you know, after two months, we're not willing to change our full-year guidance. We'll just wait and see if those expenses are subject to mean reversion as we get through the year.
Um, hi, this is Gibson. So, I'll talk just a little bit about, um, what was in the 130s and then I'll turn it over to talk about our growth assumptions. Layered, on top of that. Um, we we came in about 400,000 dollars higher than our internal expectations on shop in oy, in Q2, and there were a few factors at play. So New Perspective, we got converted a little bit later. Um, Anthony's occupancy was like a little bit lower.
And but that was more than offset by expense savings. Um, but you know, after 2 months, we're not willing to change our full year guidance. Um,
Dave Boitano: They have caught up on the occupancy front, so we feel pretty good that, you know, we have a good chance to meet our expectations going forward on occupancy, and so we'll monitor expenses. When we get through Q3, we'll circle back and tighten up guidance.
Pam Kessler: And then the other increase is due to the projected new deals that were coming on board.
We'll just we'll just wait and see if those expenses are subject to mean reversion. As we get through here, they have caught up on the occupancy front. So we feel pretty good that, you know, we have a good chance to meet our expectations going forward on occupancy. And so we'll monitor expenses. Um, when we get through Q3, we'll Circle back and tighten up guidance.
And then the other increases due to the um, projected new deals that were coming on board.
Analyst: Got it. Understood. Thank you.
Clint Malin: Thank you.
Understood, thank you.
Thank you.
Conference Operator: And your next question comes from Michael Carroll with RBC Capital Markets. Please state your question.
Analyst: Yep, thanks. I wanted to touch on the Prestige change that you guys made, allowing them to potentially prepay some of their loans. I mean, it sounds like this doesn't open up until the back half of 2026. I mean, how are those discussions going? Does Prestige need to get new financing to be able to pay those down? I mean, I'm assuming that they want to do this, and that's why you gave them this change in the lease or the mortgage agreements?
And your next question comes from Michael. Carroll with RBC Capital markets, please State your question,
Clint Malin: Correct. They would have to find that financing. I mean, most likely HUD would be an option for them. It would probably be the best fit for this portfolio.
Um, I wanted to touch on the, The Prestige change that you guys made, um, allowing them to potentially prepay some of their loans. I mean, it sounds like this is, doesn't open up until the back half of 2026. I mean how have those discussions going does prestige need to get new financing, to be able to pay those down. I mean, I'm assuming that they want to do this and that's why you gave them this um this this change in the lease or the the mortgage agreements.
Option. But for them, it would probably be the best fit for this portfolio.
Analyst: And then can you talk about the size of this? I know you gave us related to the communities, but what is the, how are the, is it kind of equal weighted by the communities? We can just do a weighted average of how much these loans represent, or can you give us a number of how much they could potentially prepay?
Pam Kessler: Well, it's an all or none. It's the whole portfolio. It's the $175 million loan.
And then can you talk about the the size of this? I know you gave us related to the communities but what is the how are the is it kind of equal weighted by the community? So we can just do a weighted average of of how much these loans represent um or can you give us a number of how much they could potentially prepay?
Analyst: Okay. And then can you give us an update on ALG? I know they have a couple of purchase options. Is that something that they plan on exercising? I know in the prior calls, they were saying that they could potentially do it by the end of the year. Is that something that could still occur?
The well, it's a, it's a all or none. It's the the whole portfolio, it's the 175 million loan.
Okay.
Clint Malin: Well, last call we talked about, given where our interest rates were at, that it would probably fall into something in 2026. So, I think at this point, we really have to wait and see where our interest rates shake out. But at this point, we're not expecting this year, and if more likely, probably 2027 would be our guess when they would be able to be in a position to execute on that. But it's going to come down to continued performance improvement, which we've been seeing, and then just where interest rates shake out.
And then, can you give us an update on a LG? Um, I know they have a couple purchase options. Is that something that they plan on exercising? I know, in the prior calls, they were saying that they could potentially do it by the end of the year. Is that something that could still occur?
Analyst: Okay. And then just lastly for me, Pam, can you give us an update on LTC's longer-term leverage targets? I know with the pipeline, it does imply that your leverage is going to tick up. Obviously, you're going to need to fund those. So, maybe there is new equity coming to fund part of that. But do you want to be below the low five, or sorry, low four net debt to EBITDA range? Is that kind of what you want to target, or how are you thinking about that?
Well, last call, we talked about giving our interest rates were at that. It would probably fall into something in 2026. So, I think, at this point, we really have to wait and see where, um, or interest rates shake out, but at this point, we're not expecting this year, and if more likely probably 2027, Would Be Our Guest when they would be able to be in a position to execute it on that. But it's going to come down to continue to Performance Improvement. Uh, which we've been seeing and then just were interest rates of shake out.
Pam Kessler: Yeah, I mean, you know, being at 4.2 right now gives us the flexibility to be able to fund our near-term investments with debt and then, you know, take it out long-term with equity or long-term debt as the interest rates come down. So, yeah, this really hasn't changed. Our target hasn't really changed over the past decade. We've always targeted, you know, below fives, and sitting in the low fours gives us the optionality. During COVID, we did flex up a little higher in order to do some acquisitions. But long-term, we're still targeting the low fours.
Okay, and then just lastly, for me. Pam, can you give us an update on ltc's longer term? Leverage targets. I know with the the pipeline, it does imply, that your Leverage is going to tick up, obviously, you're going to need to fund those. So maybe there is some new Equity coming, um, to fund Parts part of that. Um, but do you want to be below the, the low 5A range is that kind of what you want to Target or or how you thinking about that?
Analyst: Okay, great. Thank you.
Yeah. I mean, you know, being the being at 4.2 right now gives us the flexibility to be able to fund, um, our near-term investments with debt, and then, you know, take it out long term with, uh, Equity or long-term debt as the, um, interest rates, uh, come down. Um, so yeah, I, I, this really hasn't changed our Target, hasn't really changed over the past decade. We've always targeted, you know, below 5s and sitting in the, in the, the low, the low fours, uh, gives us the optionality during Co, we did Flex up a little higher, um, in order to do some Acquisitions. Um, but long term, we're still Target the low Force
Okay, great. Thank you.
Conference Operator: Thank you. And just a reminder to the audience to ask a question, press star one on your phone now. Our next question comes from Onotaru Otusana with Deutsche Bank. Please state your question.
Thank you and just a reminder to the audience to ask a question press star 1 on your phone now.
Analyst: Hi, yes. Good morning, everyone. First of all, on Prestige with the loan, now that they're back to contractual rate, could you just talk a little bit about why there's a lot of confidence that they can maintain that in the near term without potentially having to access the security deposit?
Our next question comes from Ona with Deutsche Bank, please State your question.
Clint Malin: Sure, Dow. This is Clint. You know, as we've talked about in previous quarters, they have been making performance improvements through occupancy gains. You know, when we modified the loan during the pandemic because of reimbursement challenges they had, I mean, we sort of foresaw that this would be, they would be able to come back in over a period of time. And when we did this, we gave them like a two-and-a-half-year runway to be able to make performance improvements both in bottom line as well as occupancy gains, which they've been doing. And so we sort of designed this and expected that it would eventually get back to contractual at some point in time. So we're kind of where we expected this to be. I think they see an opportunity to get long-term financing, maybe at better rates.
Hi. Yes, good morning everyone. Uh, first of all, on Prestige, with the loan now that they're back to contractual rates, could you just talk a little bit about why there's a lot of confidence that they can maintain that in the near term without potentially having to access the security deposit?
Clint Malin: And so that's where they're looking at exploring this in '26 to be able to take out to long-term, maybe cheaper financing.
Analyst: Gotcha. That's helpful. And then with the Ritea portfolio, could you just talk a little bit about, again, the process you're going through to make sure you have the right operator for these assets? Could you talk a little bit about, again, the structure of the management contracts and how the operators are set up to be aligned with your goals to kind of grow bottom line NOI?
Sure to this is uh, Clint. Um, you know, as we've talked about in previous quarters, they have been making uh performance improvements through occupancy gains, you know, when we um, modified the loan, during the pandemic, because of reimbursement challenges, they had, I mean, we sort of foresaw that this would be, they would be able to come back and over a period of time. And and we did this. We gave them like a 2 and a half year Runway, to be able to make, uh, performance improvements, both in bottom line, as well as occupancy gains, which they've been doing. Um, and so we sort of designed this and expected it. It would eventually get back to contractual at some point in time. Um, so we're kind of where we expected this to be. Um, I think they see an opportunity to get long-term financing maybe a better rate and so that's where they're looking at, uh, exploring this in um, you know, 26 to be able to take out a longterm, maybe cheaper financing.
Clint Malin: Sure. Well, I guess first of all, Dow, regarding the operators, I mean, we're fortunate in the deals that we're looking at that are newer vintage, stabilized. Every asset has a continuing operator. So it's not like we're coming in and changing operators. So that's been an important element as we turn to external growth of SHOP. So that's been a key element on this. So we think given the performance and the operators have all been in for a number of years, that should continue. So we're encouraged by that as we execute on external growth. And in regard to the contracts, I mean, we've looked, we engaged third-party resources to help us structure these management agreements and really look at an alignment of interest through financial incentives for both parties. So we're looking at compositions of management fees on top line and on bottom line.
Gotcha, that's helpful. Uh and then with the rear uh uh uh portfolio, could you just talk a little bit about again the process? You're going through to make sure you have the right, operator for these assets. Could you talk a little bit about again the structure of the management contracts and how The Operators are set up to be aligned, uh, with your goals to kind of grow bottom line, uh, bottom line, uh, noi
Clint Malin: We're looking at short-term and long-term performance goals. This has been well received by operators, and I think that a choice of capital for operators is refreshing as well. And our conversations have been very productive with operators.
Analyst: Gotcha. Last one from me, if you don't mind. Is there at any point where you can see yourself doing more of the value-add type Ritea transactions? Again, low occupancy, you guys focus on lifting it up and kind of driving really large things to NOI growth like some of the other healthcare reach too?
Um, yeah, in regard to the contracts. I mean, we've looked, you know, we engaged third-party resources to help us structure uh, these management agreements and really look at an alignment of interests, uh, through financial incentives for both parties. So, you know, we're looking at compositions of uh, management fees on Topline and on bottom line. Uh, we're looking at short-term and long-term uh, performance goals. Um, this has been well received by operators and I I think that a choice of capital uh, for operators is refreshing as well. And and our conversations have been very productive uh, with operators.
Clint Malin: I guess it depends on where our stock price goes and our cost of capital.
Gotcha. Last 1 from me, if you don't mind. Is there any point where you can see yourself doing more of the value ad type of Rhea? Uh, transactions? Again low occupancy, you guys focus on leasing it up and kind of driving, you know, really large things. So I know I have a group like some of the the other Healthcare leads do.
Analyst: Yeah, yeah.
Yes, it depends on where our stock price goes and our cost of capital.
Clint Malin: For right now, we'll continue on. So right now, we'll continue on our focus, which is single assets, smaller portfolios, newer assets is what our focus is going to be. And there's always going to be an opportunity, maybe here or there, for a value-add opportunity, but that's not our primary focus at this point.
yeah, yeah yeah, you know, for for right now we'll continue on
Pam Kessler: Yeah, I think especially as we launched the SHOP portfolio, Tayo, I mean, looking at the value add, I think that's something that you can do when you have more scale because that takes time, you know, and it's a little messy. Turnarounds are not easy. And for right now, I think building a very strong base in our shop with newer stabilized assets with good cash flow, that's the most prudent way to build this platform from the beginning.
So right now we do we'll continue on on our Focus which is you know, single assets, uh smaller portfolios, you know newer assets um is what our focus is going to be and and uh there's always going to be an opportunity maybe here or there for a value ad opportunity. But that's not our primary focus at this point.
Clint Malin: We can get better risk adjusted return in our mind to be able to drive shareholder value.
Analyst: Well said. Thank you.
Yeah, I think, especially as we launched the the shop portfolio tile. I mean, those looking at the the value, add, I think that's something that you can do when you have, you know, more scale. Um, because that that takes time, you know, and it's a, it's a little messy, turnarounds are not easy. Um, and for right now, I think, building a very strong base in our shop with, with, with newer stabilized assets with good cash flow. That's, that's the most, um, prudent way to build this platform in the beginning, it would be a better risk, adjusted return in our mind to be able to, uh, for to drive shareholder value.
Clint Malin: Thank you.
Well said, thank you.
Thank you.
Conference Operator: Thank you. And ladies and gentlemen, there are no further questions at this time. I'll hand it back to Pam Kessler for closing remarks. Thank you.
Pam Kessler: We are very excited about the opportunities ahead as we are committed as ever to driving growth and shareholder value for years to come. Thank you all for joining us today, and we look forward to speaking with you again next quarter.
Thank you, and ladies and gentlemen. There are no further questions at this time. I'll hand it back to Pam Kessler for closing remarks. Thank you.
Conference Operator: This concludes today's conference. All parties may disconnect. Have a good day.
We are very excited about the opportunities ahead as we are committed as ever to driving growth and shareholder value for years to come. Thank you all for joining us today and we look forward to speaking with you again next quarter.
This concludes today's conference. All participants, disconnect and have a good day.