LTC Properties, Inc.

Good day and welcome to the LTC Properties Incorporated second quarter 2024 earnings call. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. 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 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 that this event is being recorded. I would now like to turn the conference over to Wendy Simpson. Please go ahead.

Thank you, Operator, and welcome everyone to LTC's 2024 Second Quarter Conference Call. On the call with me today are Clint Malin, Co-President and Chief Investment Officer, and Pam Kessler, Co-President and Chief Financial Officer. The second quarter went generally according to plan. We did encounter a challenge with respect to occupancy issues at select assisted living communities operated by ALG Senior, but we very quickly provided solutions that are in the best interest of LTC, our partner, and our shareholders. With the full cooperation of ALG, we were able to neutralize the impact to LTC while enhancing our portfolio and providing us with additional security. Clint will explain as part of his portfolio review. As with other REITs, over the years, we have responded to challenges presented by industry and operator-specific headwinds. Our track record demonstrates that we've done so with expediency and transparency, and the ALG situation is no different. Our philosophy and mission have not changed, and we remain committed to our 2024 guidance and future growth.

Thank you, Wendy. I'll first discuss the steps we took to address the occupancy issues underlying some of our ALG investments. At a high level, we provided rent assistance for two of our investments at the end of the second quarter and, in exchange, reconfigured mortgage loans due from affiliates of ALG into two joint venture investments. First, we agreed to defer a total of $1.5 million in rent from ALG for May and June related to an 11-property assisted living portfolio in North Carolina that we owned through a joint venture investment. counted for as a financing receivable. This receivable had a balance of $121.4 million at June 30, 2024. Additionally, we agreed to defer up to $250,000 in rent per month as needed as they build back census to the remainder of 2024. The maximum deferred rent from July through December would be $1.5 million. We agreed to no rent on a single property lease in South Carolina for May through September 2024 with quarterly market-based rent resets thereafter. At June 30, 2024, this property had a gross book value of $11.7 million and a net book value of $8.2 million. In conjunction with the rent assistance, LTC wrote off $321,000 of straight-line rent receivable in the second quarter. Previous annualized rent on this lease was approximately $900,000. Third, we funded $8.3 million under two mortgage loans. In consideration for the rent assistance I discussed, these mortgage loans were converted to two joint ventures, giving us majority ownership stake in 17 assets, 13 in one joint venture, and four in another. After the $8.3 million of additional loan funding, The joint venture investments related to these 17 properties are configured as follows. We exchanged our $64.5 million mortgage loan for a 53% interest in a joint venture that now owns 13 assisted living communities, one in South Carolina and the rest in North Carolina. We exchanged our $38 million mortgage loan for a 93% interest in a joint venture that now owns four assisted living communities in North Carolina. Each of these joint ventures then lease the properties to an affiliate of ALG under 10-year master leases maturing at the end of June 2034 with purchase options available through June 2028. In accordance with GAAP, these investments are being accounted for as a financing receivable. Combined contractual annual rent under the two new master leases is $7.4 million compared with $6.9 million of annualized cash interest due under the previous mortgage loans as a result of the additional $8.3 million in cash we invested. For the month of July, we received total contractual rent and interest related to our ALG investments, less a $250,000 deferral. All of our investments with ALG are now cross-defaulted and cross-collateralized, providing us with added security. Our pathways for repayment of the deferred rent are through ALG's exercise of their purchase options, occupancy improvements within our investments, or through proceeds from potential sales of properties to a third party. We have successfully managed all these maturities in 2024, including our HMG extension, through which they repaid 1.5 million on their 13.5 million working capital note in the second quarter, and an additional 10.4 million in July. Lease maturities in 2025 represent 3% of rental income. We collected contractual rent from former operators related to properties previously transitioned, as Pam will discuss. As detailed in our supplemental on page 16, coverage continues to increase across our portfolios. With respect to our pipeline, subsequent to the end of the second quarter, we committed to fund a $26.1 million mortgage loan for the construction of a seniors housing community in Illinois. We expect to begin funding this commitment in early 2025 after the borrower has contributed $12.3 million of equity to initially fund the construction. The loan term is approximately six years at a current rate of 9%, and an IRR of 9.5%. We look forward to updating you on the progress of our pipeline next quarter. Now we'll turn things over to Pam for a review of our financial results.