LTC Properties, Inc.

Greetings. Welcome to the LTC Properties, Inc. fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Before management begins its presentation, please know 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. Please note this event is being recorded. I would now like to turn the conference over to Wendy Simpson.

Thank you, Operator, and welcome everybody to LTC's 2023 Fourth Quarter Conference Call. I am joined today by Pam Kessler, Co-President and Chief Financial Officer and Clint Malan, co-president and chief investment officer. 2023 was a year of solid execution, so I want to begin by recognizing our very talented LTC team. During the year, we completed $262 million in investments and generated $77 million in sales proceeds. The sales resulted in net gains totaling $37 million. Additionally, we received $11.8 million in mezzanine loan payoffs, generating $1.6 million of exit IRR income at a weighted average rate of 12%. From an operational perspective, we successfully transitioned the Brookdale portfolio, resulting in anticipated revenue of half a million dollars more than we generated from the original lease. we received full contractual 2023 interest from Prestige with expectations for full contractual payments through at least 2025. Clint will further discuss this shortly. And importantly, we significantly reduced our leverage ahead of street expectations. From an industry perspective, demand for seniors housing is strong. Occupancy has increased for 10 consecutive quarters And according to Nick, seniors housing occupancy rates are now on track to recover to pre-pandemic levels in the second half of this year, especially as new construction remains muted. While we are not in the prediction game, we are encouraged by what we're seeing. Market fundamentals currently favor REITs with billions of dollars of financing maturities coming due, interest rates in flux, and banks being more selective about their investments, particularly in real estate and for properties that are not currently generating positive cash flow. We have been preparing for this environment by developing creative financing structures, including those with shorter maturities. We believe LTC's creativity and flexibility makes it easier for us to act quickly by providing customized financing solutions based on an operator's needs. Finishing up now with some LTC specific metrics, the FAD payout ratio for the fourth quarter was 79%. We also maintained our monthly dividend payout of 19 cents per share. For the 2024 first quarter, we anticipate that FFO will be in the range of 69 cents to 70 cents per share. FFO excluding non-recurring items will be in the range of 63 to 64 cents per share. The decrease between FFO and FFO excluding non-recurring items is due to the repayment of rent related to a property sale in January. Pam will provide details shortly. We're entering 2024 with a stronger, more diversified portfolio and a stronger balance sheet, better positioning LTC for future growth. Now I'd like to turn things over to Pam. Thank you, Wendy.

All numbers I'm going to discuss today are for the fourth quarter of 2023 compared with the fourth quarter of 2022 unless otherwise stated. Total rental revenues decreased by 2.2 million principally related to portfolio transition, Anthem Street payment in 2022 of a temporary rent reduction, and property sales. This was partially offset by revenue from an acquisition completed in the second quarter of 2023, annual rent escalations, and lease renewals and extensions. Interest income from sale-leaseback financing increased $2.4 million, mainly due to the acquisition of 11 assisted living and memory care communities during the 2023 first quarter, accounted for as a financing receivable in accordance with GAAP. Interest income from mortgage loans increased $1.8 million, primarily due to mortgage loan originations in the first quarter of 2023. Interest expense increased by $3.6 million, primarily due to a higher outstanding balance on our revolving line of credit and higher interest rates. Draws on our line of credit were used primarily to pre-fund 2023 investments. Interest expense was partially offset by scheduled principal paydowns on our senior unsecured notes. We recognized a $16.8 million gain on the sale related to the divestiture of nine assisted living communities, which I'll discuss shortly. Our provision for credit losses increased by $4.2 million, primarily due to a $3.6 million write-off of a working capital note pursuant to a 12 property assisted living master lease with ALG. Additionally, we recorded an impairment loss of $3.3 million related to seven of the Texas properties covered under this lease. Clint will provide additional detail later in the call. Transaction fees increased approximately half a million dollars related to lease transitions and amendments. Net income available to common shareholders increased by 10.2 million, primarily due to the increase in gain on sale and higher interest income from new investments, partially offset by higher interest expense, the previously discussed impairment loss and increase in our provision for credit losses, as well as the decrease in rental income. Fully diluted FFO per share was 57 cents compared with 72 cents. Excluding non-recurring items, which represents the write-off of the working capital note, FFO per share was 66 cents compared with 72 cents. The decrease in FFO excluding non-recurring items was due to higher interest expense, lower rental income, and additional shares outstanding from sales under our ATM program, partially offset by higher interest income from new investments. Now I'll recap our recent divestitures. In total, we sold nine properties with a combined 408 units for $29.6 million. We received proceeds of $24.6 million net of transaction costs and seller financing and recorded gains of approximately $17 million. Eight of the properties were part of our previously disclosed Brookdale transactions. Subsequent to the end of the fourth quarter, we sold our JV interest in a 110 unit assisted living community located in Wisconsin for 23.1 million, which yielded 8.12% to LTC in 2023. The purchase price includes the repayment of 2.4 million of rent credits given to the operator during new construction lease up and the payoff of a $550,000 working capital note. We received net proceeds of $19.6 million net of transaction costs, and we anticipate recording a gain on sale of $4 million in the 2024 first quarter. With the repayment of the rent credits, we effectively received full 2024 rental income during the first quarter. However, in order to provide first quarter FFO guidance, we normalized this $2.4 million of rent as a non-recurring item. Also during the fourth quarter, we sold approximately 1.6 million shares of common stock for net proceeds of 52 million under our ATM program. Subsequent to the end of the quarter, we sold approximately 91,000 shares of common stock for net proceeds of 2.9 million under the program. During the fourth quarter, we repaid 5 million in scheduled principal paydowns on our senior unsecured notes and paid 24 million in common dividends. Importantly, we repaid $60 million under our unsecured revolving line of credit, reducing our debt to annualized adjusted EBITDA for real estate from six times for the 2023 third quarter to 5.5 times for the 2023 fourth quarter. Subsequent to the end of the quarter, we repaid $30.5 million under our unsecured revolving line of credit, reducing our 2023 fourth quarter debt to adjusted EBITDA for real estate ratio from 5.5 times to 5.4 times on a pro forma basis. As Wendy mentioned earlier, by substantially reducing our leverage, LTC is better positioned for growth in 2024 and in the future. Additionally, subsequent to the end of the quarter, we amended our unsecured revolving line of credit to accelerate the one year extension option notice date and exercised our option to extend the maturity date to November 19th, 2026. All other provisions of the agreement remain unchanged. Currently we have 15 million of cash on hand, approximately 128 million available on our line of credit with roughly 272 million outstanding and about 73 million available under our ATM. This gives us total liquidity of almost 217 million. Now I'll hand the mic over to Clint.