Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LTC Properties Inc (LTC, Financial) successfully managed lease maturities in 2024, including a significant extension with HMG.
- The company converted mortgage loans into joint ventures, gaining majority ownership in 17 assets, enhancing portfolio security.
- LTC Properties Inc (LTC) maintained its full-year guidance for FFO, excluding non-recurring items, demonstrating confidence in financial stability.
- The company has a strong liquidity position with nearly $190 million available, including cash and credit facilities.
- LTC Properties Inc (LTC) committed to funding a $26.1 million mortgage loan for a new seniors' housing community, indicating growth potential.
Negative Points
- Occupancy issues at select assisted living communities operated by ALG Senior required rent deferrals and restructuring.
- LTC Properties Inc (LTC) wrote off $321,000 of straight-line rent receivable due to rental assistance provided.
- The company faced higher general and administrative expenses and provisions for credit loss, impacting net income.
- There is uncertainty regarding the timing of deferred rent recovery, which is not included in current earnings guidance.
- The skilled nursing facility (SNF) occupancy showed a seasonal decline, raising concerns about potential revenue impacts.
Q & A Highlights
Q: Could you elaborate on the issues with ALG that led to rent deferrals and changes? Why provide them a purchase option, and what did you gain in return?
A: Clint Malin, Co-President and Chief Investment Officer, explained that ALG faced occupancy challenges due to staffing issues and a temporary impact on Medicaid revenues from a cyberattack. The purchase options were part of a negotiation to convert mortgage loans into equity positions, providing LTC with cross-default and cross-collateralization across investments, enhancing security.
Q: Are the deferrals affecting guidance, and how do they impact FFO and FAD?
A: Pamela Shelley-Kessler, Co-President and CFO, confirmed that the deferrals do not affect FFO guidance due to effective interest accounting. However, they do impact FAD, but the $3.1 million collected in the third quarter offsets the deferrals for the year.
Q: What happened with SNF occupancy, and is it a concern?
A: Clint Malin noted that the decline in skilled nursing facility (SNF) occupancy is likely seasonal and not a significant concern, as there are no abnormal impacts observed.
Q: Are there alternative routes considered for ALG portfolios, and were there signs of distress before May?
A: Clint Malin stated that ALG was exploring financing alternatives, but the need for deferrals became evident in May due to the cyberattack's impact. LTC's objective remains for ALG to acquire the buildings through agency financing.
Q: How do you assess the risk of purchase options, and will they be necessary for future deals?
A: Pamela Shelley-Kessler explained that purchase options are not expected to be exercised soon due to the current interest rate environment. They provide operators with future optionality, and LTC is careful in laddering these options to manage cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
