LTC Properties, Inc.

Good day, and welcome to the LPC Properties Incorporated first quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode, and a question and answer session will follow the form of presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. Before management begins its presentation, please note 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's property 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 call over to Wendy Simpson. Ma'am, the floor is yours.

Thank you, Operator, and welcome, everyone, to LTC's 2024 First Quarter Conference Call. I am joined today by Pam Kessler, Co-President and Chief Financial Officer, and Clint Malen, Co-President and Chief Investment Officer. In 2023, we completed more than $260 million in investments. all while our team devoted significant amount of time to optimizing our portfolio. Now, after successfully selling $77 million of assets last year and re-tenanting others, we are concentrating our efforts on producing strategic long-term and sustainable growth, which is our key focus for 2024. With that in mind, we are evaluating multiple investment opportunities and are confident we have both the bandwidth and resources necessary to strategically allocate capital to enhance our portfolio and achieve the best risk-adjusted returns for our shareholders. The seniors housing and care industry is on a promising upturn after setbacks related to COVID. Thanks to favorable demographic trends, improving margins, and rising occupancy rates, all signs point to a more robust market. We also are encouraged by the reimbursement landscape, particularly with the anticipated 4.1% increase under the SNF payment rule for fiscal 2025. Reimbursement in several states also is expected to rise. In Florida, where we own seven centers, our operators will benefit from an unprecedented 8% Medicaid rate increase. which will result in increased coverage for LTC. Last week, as expected, CMS issued its final SNF minimum staffing rule. Our industry pushed back on the proposed rule during the comment period with more than 46,000 letters, mainly related to the concerns that the mandate is unfunded and that the level of staff required simply does not exist. According to the American Healthcare Association, 81% of skilled nursing centers do not currently meet the rules staffing requirements. We will continue to monitor the situation and support industry organizations and initiatives to oppose this rule. Looking ahead to the second quarter, we expect FFO and FFO excluding non-recurring items to range between 65 cents and 66 cents per share. We also are introducing full-year 2024 guidance, which assumes no additional investment activity, asset sales, financing, or equity issuances, but does assume our loan receivables pay off at maturity and includes the rent increase associated with an HMG lease amendment. FFO, excluding non-recurring items, is expected to be between $2.63 and $2.65 per share for the full year. Non-recurring items include the payment of rent related to a property sale in January and $900,000 of credit reserves that get reversed as loans pay off. In summary, as we redirect our efforts towards strategic growth, the entire LTC team is geared up for a highly productive 2024. Now, I'd like to turn the call over to Pam.

Thank you, Wendy. All numbers I'll discuss today are for the first quarter of 2024 compared with the first quarter of 2023 unless otherwise stated. Total rental revenue increased by $1.8 million due to several factors. First, the receipt of $2.4 million of rent in connection with the sale of a property in Wisconsin in the 2024 first quarter. Second, a property acquisition in Ohio in the 2023 second quarter. Third, more rent paid by HMG. And last, annual escalations and other lease adjustments. The increases were partially offset by lower rent related to property sales and operator transitions. Interest income from sale leaseback financing was comparable year over year, but interest income from mortgage loans increased by 1.2 million, principally related to mortgage loan originations in 2023 and the funding of a construction loan in 2024. Interest and other income decreased by $1.2 million, primarily due to the payoff of two mezzanine loans and the related exit IRR and prepayment fee received in 2023, partially offset by income from a mezzanine loan origination in the third quarter of 2023. Interest expense increased by $436,000, mainly due to higher interest rates and a higher outstanding balance on our revolving line of credit, partially offset by scheduled principal paydowns on our senior unsecured notes. Our provision for credit losses decreased by $1.7 million, mostly due to a higher dollar volume of loan originations in the prior year first quarter. Upon origination, we record a loan loss reserve estimate equal to 1%, which amortizes as the loan principal is repaid. Net income available to common shareholders decreased by $8.9 million primarily due to lower gains on sale of real estate compared with last year's first quarter, as well as the receipt of exit IRR and prepayment fees in connection with mezzanine loan payoffs in last year's period. This was partially offset by an increase in rental income, higher interest income from loan originations, and the lower provision for credit loss. Fully diluted FFO per share was 69 cents compared with 66 cents. Excluding non-recurring items, FFOs per share was 64 cents compared with 67 cents. The decrease in FFO, excluding non-recurring items, was principally due to dilution from sales under our ATM program, the proceeds of which were used to fund investments and reduce our leverage. During the quarter, we sold a total of six properties in Florida and Texas with 268 combined units and sold our interest in a joint venture in Wisconsin. The combined sales price was $26.3 million. We received proceeds of 25.4 million net of transaction costs and recorded gains of approximately 3.3 million. You can find more details about these sales in the press release we issued yesterday afternoon. Subsequent to the end of the first quarter of 2024, we sold two assisted living communities in Texas with a combined 70 units that were built in 1995 and previously had been closed. The combined sales price was $500,000, and we received approximately $400,000 of proceeds net of transaction costs. During the first quarter, we funded $2.9 million of a previously disclosed $19.5 million mortgage loan commitment for the construction of an assisted living and memory care community in Michigan. LTC's investment represents 62% of the estimated project cost. During the first quarter, we sold approximately 139,000 shares of LTC's common stock for net proceeds of $4.5 million under our ATM program. Subsequent to the end of the quarter, we sold approximately 205,000 additional shares of common stock for $6.5 million in net proceeds. Proceeds from the ATM sales were used for investments and to reduce our leverage. Additionally, we repaid $25.2 million under our unsecured revolving line of credit and repaid $6 million in scheduled principal paydowns on our senior unsecured notes. We also paid $24.6 million in common dividends, marking our 216th consecutive monthly dividend payment, which continued throughout the pandemic when other healthcare REITs decreased theirs. Our debt to annualized adjusted EBITDA for real estate stands at 5.5 times, and our annualized adjusted fixed charge coverage ratio was 3.5 times. Although our debt to annualized adjusted EBITDA for real estate metric remains higher than our long-term target, We anticipate we will achieve this metric by year end as a result of recent investments, anticipated pay downs on our line of credit using proceeds from loan payoffs, and scheduled principal pay downs on our senior unsecured notes. You can find more detail about our loan receivable maturities on page 12 of our supplemental. Currently, we have total liquidity of nearly $197 million, including $9 million of cash on hand, $123 million available on our line of credit with $277 million outstanding and roughly $65 million available under our ATM. Now I'll turn the call over to Clint.