LTC Properties, Inc.

LTC Properties First Quarter Analyst and Investor Call. All participants will be in listen-only mode. If you need assistance, please signal a conference presence by pressing the star key followed by zero. After today's presentation will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Ms. Wendy Sosa, CEO. Please go ahead.

Thank you, Operator, and welcome to everyone joining us today for LTC's 2021 First Quarter Conference Call. With me on the call are Pam Kessler, Co-President and Chief Financial Officer, and Clint Malen, Co-President and Chief Investment Officer. For the last year, I've started our calls by offering thanks and gratitude to our operators for all they have done to keep their patients, residents, and staff safe. Today is no different. Now, however, for the first time in a long while, I am cautiously optimistic that some of the more daunting challenges presented by the pandemic and the many, many lives lost are mostly behind us and that we have entered the recovery stage. With the high percentages of vaccinations administered to the senior population, skilled nursing centers and assisted living memory care communities should begin welcoming new patients and residents at increasing frequencies from the lower levels that we've seen over the last 12 months. We don't know with any certainty when census numbers will return to pre-pandemic levels, but anecdotal evidence from some of our operating partners is encouraging. As in 2020, some of our operators have needed rent deferrals and abatements. First quarter rent and mortgage interest income collections were 86.5%, excluding the first quarter reduced 2021 rent escalations we provided to eligible operators in the form of rent credits. The credits were provided to give eligible operators additional working capital during the first quarter of 2021 and are expected to have an approximate $530,000 impact on our 2021 gap revenue and an approximate $1.3 million impact on our 2021 FAD. Approximately $292,000 and $1.2 million respectively was recognized during the first quarter. We expect to recognize a decrease of approximately $170,000 and $133,000 in GAAP and FAD revenue respectively in the second quarter and a much smaller amount in the last six months of 2021. Currently, we don't anticipate providing additional across-the-board relief, but we'll continue to review relief requests, if any, on a case-by-case basis, keeping in mind the operator's ongoing operations, rent coverage, and corporate financial health and liquidity. Pam will discuss the specifics of current rent deferrals and abatements a bit later. One additional way we've helped our operators through the pandemic is by providing attractive financing to our operators through our Smart Design program. This program creates safer physical environments for residents, family, and staff by utilizing state-of-the-art infection control protocols, including air filtration, bipolar ionization, UV sanitation devices, custom dividers, and touchless equipment. We are working in partnership with Avenue Development to assist our operators with turnkey and customizable retrofitting options. To date, smart design is being implemented in 13 of our communities. Next, I'll talk briefly about senior lifestyle. We are making progress on transitioning this portfolio with several of the transactions expected to close in the second and third quarters. As we disclosed in a recent 8K filing, Senior Lifestyle has not paid rent in 2021. Clint will provide details on this portfolio shortly. Regarding an update on Senior Care Centers, I'll refer you to the same 8K which was filed with the SEC on April 19th. Although the M&A market has not changed much since we last spoke, and we do not believe that LTC will engage in any large transactions in the immediate future. Deal flow has picked up meaningfully. Over the last month in particular, we've seen a healthy uptick in inbound inquiries regarding preferred equity and mezzanine financing. We are performing due diligence on a host of these opportunities, which we believe have reduced risk profiles and strong returns. especially for development projects whose success is not dependent on immediate lease-up or current census. With respect to more traditional acquisitions, however, we are seeing more and more potential investments where pricing does not accurately represent what we see as the current value of the underlying properties. We have the ability to act quickly on investment opportunities as they arise. and if they are a creative and provide value to LTC and our shareholders. I believe that LTC remains well positioned in an industry that despite the pandemic has strong long-term fundamentals, which point to an increasing need for senior housing and care solutions. We are starting to see some stability in our operators. However, it is too early to predict the timing of a full recovery. In light of the matters discussed above, together with the uncertainty regarding the senior care bankruptcy, we do not plan to provide guidance again until occupancy and census increases gain additional traction. It has been our Board's practice to support a dividend payout ratio of approximately 80% of FAD. As a result of the financial support we are providing, some of our operators and the significant lease defaults of senior lifestyle and senior care, our 2021 dividend payout ratio will likely exceed the 80% target. However, we see our 2022 FAD recovering as we are able to totally transition the senior lifestyle portfolio to more stable operators and the issues involving LTC in the senior care bankruptcy are resolved. Before turning the call over to Pam, I'd like to recognize our newest board member, Cornelia Cheng. Her addition brings to 50% the number of LTC directors who are women. Cornelia will be instrumental as we further develop our diversity and ESG initiatives. With that, please go ahead, Pam.

Thank you, Wendy. Total revenue declined $6.1 million compared with last year's first quarter. impacting our results for the decreased rental revenue related to non-payment of lease obligations by senior lifestyle, partially offset by rent received from 11 properties from this portfolio that were transitioned. Results were further impacted by abated and deferred rent granted in the quarter, a reduction in property tax revenue, and a one-time 50% reduction of 2021 rent and interest escalation to provide eligible operators with additional working capital in recognition of increased costs due to COVID-19. Additionally, we wrote off straight-line rent receivable related to the transition of an operator's lease to cash basis accounting. The decrease was partially offset by rent from acquisitions and completed development projects and higher rent payments from Anthem. Interest expense decreased by $738,000 due to lower interest rates under our line of credit in the 2021 first quarter, partially offset by lower capitalized interest. During the 2021 first quarter, we sold a closed assisted living community in Florida and recognized a loss of 861,000. Comparatively, during the first quarter of 2020, we sold 21 skilled nursing properties and recognized a total gain on sale of 43.9 million. As a result of the items discussed, net income available to common shareholders for the first quarter of 2021 decreased by $49.7 million, primarily due to a gain on sale in the prior year period and the revenue declines already discussed. This was partially offset by lower interest expense. NAREIT FFO per fully diluted share decreased 12 cents to 62 cents in the 2021 first quarter, compared with 74 cents in the 2020 first quarter. Excluding the straight line rent receivable write-off, FFO per fully diluted share was $0.64 this quarter compared to $0.74 last year. During the first quarter of 2021, we received $1.6 million related to the payoff of a mezzanine loan and $936,000 related to the payoff of a note receivable. Additionally, we borrowed $17 million under our unsecured revolving line of credit at 1.3%. Moving on to our investment activity. During the 2021 first quarter, we invested the remaining 8 million of our 13 million preferred equity commitment to develop a 267-unit independent living and assisted living community in Vancouver, Washington. The preferred equity investment earns an initial cash rate of 8% and a 12% IRR and is accounted for as an unconsolidated joint venture. We also funded 1 million in capital improvement projects on properties we own and 158,000 under existing mortgage loans. We have a remaining commitment under a mortgage loan of 1.6 million related to the expansion and renovation on one property. We also paid 7 million in regularly scheduled principal payments under our senior unsecured notes and paid 22.4 million in common dividends. Subsequent to the end of the first quarter, we repaid 5 million under our unsecured line of credit. Including this repayment, we have 8.2 million in cash, 498.1 million available under our line of credit, under which 101.9 million is outstanding, and 200 million under our ATM program, providing LTC with liquidity of 706.3 million. As a reminder, we have no significant long-term debt maturities over the next five years. At the end of the 2021 first quarter, our credit metrics remain strong, with net debt to annualized adjusted EBITDA for real estate of 5.1 times, an annualized adjusted fixed charge coverage ratio of 4.6 times, and a debt to enterprise value of 28.6%. Next, I'll touch on rent deferrals and abatements. As Wendy mentioned, we collected 86.5% of first quarter rent and mortgage interest income, excluding the 50% reduction of the 2021 rent and interest escalations provided to eligible operators in the form of rent credits in the first quarter, which reduced cash revenue by $1.2 million and gap revenue by $292,000. Additionally, during the quarter, we provided $1.1 million in rent deferrals, net of repayments, and $600,000 in rent abatements. As Wendy mentioned, Senior Lifestyle has not paid us rent thus far in 2021, but we did receive rent from the operators to whom we transitioned former Senior Lifestyle communities to date. In April 2021, rent deferrals net of repayments totaled $367,000 and rent abatements were $319,000. Additionally, we provided $133,000 in abated rent in April through a rent credit related to the rent escalation reduction already discussed. We also have agreed to provide rent deferrals and abatements of up to $800,000 for each of May and June 2021. Now I'd like to turn the call over to Clint.