UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑K10-K
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(Mark One) | |
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| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, | |
OR | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1‑113141-11314
LTC PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
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2829 Townsgate Road, Suite 350
Westlake Village, California91361
(Address of principal executive offices)
Registrant’s telephone number, including area code: (805) 981‑8655981-8655
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | Trading symbol | Name of Each Exchange on Which Registered |
Common stock, $.01 Par Value | LTC | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by checkmark if the Registrant is a well‑knownwell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by checkmark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑TS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑acceleratednon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act. (Check one):
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Large accelerated filer ☒ | Accelerated filer ☐ |
| Smaller reporting company ☐ | |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b‑212b-2 of the Act). Yes ☐ No ☒
The aggregate market value of voting and non‑votingnon-voting common equity held by non‑affiliatesnon-affiliates of the Registrant was approximately $1,991,870,000$1,783,261,000 as of June 30, 201628, 2019 (the last business day of the Registrant’s most recently completed second fiscal quarter).
The number of shares of common stock outstanding as of February 15, 201714, 2020 was 39,585,320.39,751,704.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement relating to its 20172020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10‑K10-K where indicated.
CAUTIONARY STATEMENT
This annual reportAnnual Report on Form 10-K contains forward‑lookingforward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act of 1995. Statements that are not purely historical may be forward‑looking.forward-looking. You can identify some of the forward‑lookingforward-looking statements by their use of forward‑lookingforward-looking words, such as “believes,” “expects,” “may,” “will,” “could,” “would,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or the negative of those words or similar words. Forward‑ lookingForward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward‑forward- looking statements, including, but not limited to, the status of the economy; the status of capital markets (including prevailing interest rates) and our access to capital; the income and returns available from investments in health care related real estate (including our ability to re‑leasere-lease properties upon expiration of a lease term); the ability of our borrowers and lessees to meet their obligations to us; our reliance on a few major operators; our dependence on operators for revenue and cash flow; the bankruptcy, insolvency or financial deterioration of our lessees; potential limitations on our remedies when mortgage loans default; competition faced by our borrowers and lessees within the health care industry; regulation of the health care industry by federal, state and local governments (including as a result of the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010);governments; changes in Medicare and Medicaid reimbursement amounts (including due to federal and state budget constraints); compliance with and changes to regulations and payment policies within the health care industry; debt that we may incur and changes in financing terms; our ability to continue to qualify as a real estate investment trust; the relative illiquidity of our real estate investments; potential limitations on our remedies when mortgage loans default; and risks and liabilities in connection with properties owned through limited liability companies and partnerships. For a discussion of these and other factors that could cause actual results to differ from those contemplated in the forward‑lookingforward-looking statements, please see the discussion under “Risk Factors” contained in this annual report and in other information contained in this annual report and our publicly available filings with the Securities and Exchange Commission. We do not undertake any responsibility to update or revise any of these factors or to announce publicly any revisions to forward‑lookingforward-looking statements, whether as a result of new information, future events or otherwise.
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LTC Properties, Inc.
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Part I |
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Part II | | ||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 | ||
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | |||
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Part III | | ||
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 94 | ||
Certain Relationships and Related Transactions, and Director Independence | 94 | ||
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Part IV | | ||
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PART I
General
LTC Properties, Inc., a health care real estate investment trust (or REIT)(“REIT”), was incorporated on May 12, 1992 in the State of Maryland and commenced operations on August 25, 1992. We invest primarily in seniorseniors housing and health care properties primarily through sale-leaseback transactions, mortgage financing, joint ventures and structured finance solutions including mezzanine lending. We conduct and manage our business as one operating segment, rather than multiple operating segments, for internal reporting and internal decision making purposes. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniorseniors housing and health care properties managed by experienced operators. To meet these objectives, we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property type and form of investment.
We primarily invest in the following type of properties:
| Skilled nursing |
| Assisted living |
| Independent living |
| Memory care |
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We were organized to qualify,conduct and intend to continue to qualify,manage our business as a REIT. So long as we qualify, with limited exceptions, we may deduct distributions, both preferred dividends and common dividends, to our stockholders from our taxable income. We have made distributions, and intend to continue to make distributions to our stockholders, in order to eliminate any federal tax liability.
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Portfolio
Our real estate investment in senior housing and health care properties is managed and conducted as a singleone operating segment, rather than multiple operating segments, for internal reporting and for internal decision‑makingdecision-making purposes. We include ILF, ALF, ILF, MC, and combinations thereof are included in the ALF property type. Other properties (or Other) property type consistsclassification.
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Portfolio
The following table summarizes our real estate investment portfolio as of December 31, 2016 2019 (dollar amounts in thousands):
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| | | | | | | Twelve Months Ended | | | | | | | | | | ||||
| | | | | Percentage | | December 31, 2019 | | Percentage | | | Number | | Number of | ||||||
| | Gross | | of | | Rental | | Interest | | of | | | of | | SNF | | ALF | |||
Owned Properties | | Investments | | Investments | | Income (1) | | Income | | Revenues | | | Properties (2) | | Beds (3) | | Units (3) | |||
Assisted Living (4) | | $ | 858,852 | | 49.4 | % | $ | 68,641 | | $ | — | | 40.7 | % | | 106 | | — | | 6,086 |
Skilled Nursing | | | 596,370 | | 34.2 | % | | 69,087 | | | — | | 40.9 | % | | 70 | | 8,505 | | 261 |
Under Development (5) | | | 17,989 | | 1.0 | % | | — | | | — | | — | % | | — | | — | | — |
Other (6) | | | 11,360 | | 0.7 | % | | 955 | | | — | | 0.6 | % | | 1 | | 118 | | — |
Total Owned Properties | | | 1,484,571 | | 85.3 | % | | 138,683 | | | — | | 82.2 | % | | 177 | | 8,623 | | 6,347 |
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Mortgage Loans | | | | | | | | | | | | | | | | | | | | |
Skilled Nursing | | | 256,659 | | 14.7 | % | | — | | | 29,991 | | 17.8 | % | | 22 | | 2,892 | | — |
Total Mortgage Loans | | | 256,659 | | 14.7 | % | | — | | | 29,991 | | 17.8 | % | | 22 | | 2,892 | | — |
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Total Portfolio | | $ | 1,741,230 | | 100.0 | % | $ | 138,683 | | $ | 29,991 | | 100.0 | % | | 199 | | 11,515 | | 6,347 |
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| | | | | | | Twelve Months Ended | | | | | | | | | | ||||
| | | | | Percentage | | December 31, 2019 | | Percentage | | | Number | | Number of | ||||||
| | Gross | | of | | Rental | | Interest | | of | | | of | | SNF | | ALF | |||
Summary of Properties by Type | | Investments | | Investments | | Income (1) | | Income | | Revenues | | | Properties (2) | | Beds (3) | | Units (3) | |||
Assisted Living (4) | | $ | 858,852 | | 49.4 | % | $ | 68,641 | | $ | — | | 40.7 | % | | 106 | | — | | 6,086 |
Skilled Nursing | | | 853,029 | | 48.9 | % | | 69,087 | | | 29,991 | | 58.7 | % | | 92 | | 11,397 | | 261 |
Under Development (5) | | | 17,989 | | 1.0 | % | | — | | | — | | — | % | | — | | — | | — |
Other (6) | | | 11,360 | | 0.7 | % | | 955 | | | — | | 0.6 | % | | 1 | | 118 | | — |
Total Portfolio | | $ | 1,741,230 | | 100.0 | % | $ | 138,683 | | $ | 29,991 | | 100.0 | % | | 199 | | 11,515 | | 6,347 |
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| December 31, 2016 |
| Percentage |
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| Number of | ||||||
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| Gross |
| Percentage of |
| Rental |
| Interest |
| of |
| Number of |
| SNF |
| ALF | |||
Type of Property |
| Investments |
| Investments |
| Income(1) |
| Income(2) |
| Revenues |
| Properties(3) |
| Beds(4) |
| Units(4) | |||
Skilled Nursing |
| $ | 753,328 |
| 49.2 | % | $ | 61,429 |
| $ | 25,430 |
| 54.6 | % | 92 |
| 11,644 |
| — |
Assisted Living |
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| 711,645 |
| 46.4 | % |
| 64,380 |
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| 1,171 |
| 41.2 | % | 112 |
| — |
| 5,985 |
Range of Care |
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| 43,140 |
| 2.8 | % |
| 5,774 |
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| — |
| 3.6 | % | 7 |
| 634 |
| 274 |
Under Development(5) |
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| 14,142 |
| 0.9 | % |
| — |
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| — |
| — | % | — |
| — |
| — |
Other(6) |
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| 11,424 |
| 0.7 | % |
| 865 |
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| 111 |
| 0.6 | % | 1 |
| 118 |
| — |
Totals |
| $ | 1,533,679 |
| 100.0 | % | $ | 132,448 |
| $ | 26,712 |
| 100.0 | % | 212 |
| 12,396 |
| 6,259 |
(1) |
| Excludes variable rental income |
(2) |
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| We have investments in |
(3) |
| See Item 2. Properties for discussion of bed/unit count. |
(4) | Includes ILF, ALF, MC, and combinations thereof. |
(5) |
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(6) |
| Includes |
In addition to the information in the table above, see Item 2. Properties for more information about our portfolio.
As of December 31, 20162019, we had $1.3$1.4 billion in carrying value of net real estate investment,investments, consisting of $1.0$1.1 billion or 81.7% invested in owned and leased properties and $0.3 billion or 18.3% invested in mortgage loans secured by first mortgages.
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Owned Properties. The following table summarizes our investment in owned properties at December 31, 2016 2019 (dollar amounts in thousands):
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| | | | | | | | | | | | | Average |
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| | Gross | | of | | of | | SNF | | ALF | | per |
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Type of Property | | Investment | | Investment | | Properties (1) | | Beds (2) | | Units (2) | | Bed/Unit |
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Assisted Living (3) | | $ | 858,852 | | 57.9 | % | 106 | | — | | 6,086 | | $ | 141.12 | |
Skilled Nursing | | | 596,370 | | 40.2 | % | 70 | | 8,505 | | 261 | | $ | 68.03 | |
Under Development (4) | | | 17,989 | | 1.2 | % | — | | — | | — | | | — | |
Other (5) | | | 11,360 | | 0.7 | % | 1 | | 118 | | — | | | — | |
Total | | $ | 1,484,571 | | 100.0 | % | 177 | | 8,623 | | 6,347 | | | | |
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| of |
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| SNF |
| ALF |
| per |
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Type of Property |
| Investments |
| Investments |
| Properties(1) |
| Beds (2) |
| Units (2) |
| Bed/Unit |
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Assisted Living |
| $ | 698,279 |
| 53.6 | % | 104 |
| — |
| 5,715 |
| $ | 122.18 |
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Skilled Nursing |
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| 535,786 |
| 41.2 | % | 69 |
| 8,611 |
| — |
| $ | 62.22 |
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Range of Care |
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| 43,140 |
| 3.3 | % | 7 |
| 634 |
| 274 |
| $ | 47.51 |
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Under Development(3) |
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| 14,142 |
| 1.1 | % | — |
| — |
| — |
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| — |
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Other(4) |
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| 10,216 |
| 0.8 | % | 1 |
| 118 |
| — |
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| — |
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Totals |
| $ | 1,301,563 |
| 100.0 | % | 181 |
| 9,363 |
| 5,989 |
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(1) |
| We have investments in 28 states leased to |
(2) |
| See Item 2. Properties for discussion of bed/unit count. |
(3) |
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(4) |
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(5) |
| Includes three parcels of land |
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Owned properties are leased pursuant to non‑cancelablenon-cancelable operating leases generally with an initial term of 10 to 15 years. Many of the leases contain renewal options. The leases provide for fixed minimum base rent during the initial and renewal periods. The majority of our leases contain provisions for specified annual increases over the rents of the prior year and that increase is generally computed in one of four ways depending on specific provisions of each lease:
(i) | a specified percentage increase over the prior year’s rent, generally between 2.0% and 3.0%; |
(ii) | a calculation based on the Consumer Price Index; |
(iii) | as a percentage of facility revenues in excess of base |
(iv) | specific dollar increases. |
Each lease is a triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non‑capitalnon-capital expenditures and other costs necessary in the operations of the facilities. Generally our leases provide for one or more of the following: security deposits, property tax impounds, and credit enhancements such as corporate or personal guarantees or letters of credit. In addition, our leases are typically structured as master leases and multiple master leases with one operator, and are generally cross defaulted. The following table summarizes the concentration of our top ten operators of owned properties for 20162019 and percentage of rental revenue, excluding rental income from properties sold, variable rental income due to lessee reimbursement of our real estate taxes, and adjustment for collectibility of rental income for those operators for 20162019 and 2015:2018:
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Lessee | | Property Type |
| 2019 |
| 2018 |
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Senior Lifestyle | | ILF/ALF/MC | | 14.6 | % | 14.6 | % |
Senior Care Centers, LLC | | SNF | | 11.6 | % | 10.9 | % |
Brookdale Senior Living Communities, Inc. | | ALF/MC | | 10.3 | % | 12.3 | % |
Carespring Healthcare Management, LLC | | SNF | | 8.0 | % | 5.8 | % |
Preferred Care, Inc. | | ALF/SNF | | 6.3 | % | 7.9 | % |
Fundamental Long Term Care Company | | SNF/OTH | | 6.0 | % | 6.3 | % |
Traditions Senior Management, Inc. | | ILF/ALF/SNF | | 5.9 | % | 6.0 | % |
Genesis Healthcare | | ALF/SNF | | 5.8 | % | 6.2 | % |
Anthem Memory Care | | MC | | 5.4 | % | 3.7 | % |
Juniper Communities, LLC | | ALF/MC | | 4.8 | % | 5.0 | % |
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Lessee |
| Property Type |
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| 2015 |
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Senior Lifestyle |
| ALF/ILF/MC/SNF |
| 14.7 | % | 11.1 | % |
Brookdale Senior Living Communities, Inc. |
| ALF/ILF/MC |
| 11.8 | % | 13.8 | % |
Senior Care Centers, LLC |
| ALF/ILF/MC/SNF |
| 11.8 | % | 11.2 | % |
Preferred Care, Inc. |
| SNF/ALF/ILF |
| 8.3 | % | 9.3 | % |
Anthem Memory Care |
| MC |
| 6.3 | % | 3.7 | % |
Fundamental Long Term Care Company |
| SNF/MC |
| 6.2 | % | 5.3 | % |
Genesis |
| SNF/ALF |
| 5.8 | % | 6.7 | % |
Carespring Healthcare Management, LLC |
| SNF/ALF/ILF |
| 5.7 | % | 6.8 | % |
Traditions Senior Management, Inc. |
| SNF/ALF/ILF |
| 5.3 | % | 6.3 | % |
Juniper Communities, LLC |
| ALF/MC |
| 5.0 | % | 5.9 | % |
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During the years ended December 31, 2016 and 2015, we received $517,000 and $134,000, respectively,
Mortgage Loans. As part of our strategy of making long termlong-term investments in properties used in the provision of long termlong-term health care services, we provide mortgage financing on such properties based on our established investment underwriting criteria. We have also provided construction loans that by their terms convertedconvert into purchase/lease transactions or permanent financing mortgage loans upon completion of construction. Substantially all of our mortgage loan investments currently relate to skilled nursing facilities. The following table summarizes our investments in mortgage loans secured by first mortgages at December 31, 2016 2019 (dollar amounts in thousands):
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| | | | | | | Type | | Percentage | | Number of | | Investment | |||||
| | | | Gross | | of | | of | | | | | | SNF | | per | ||
Interest Rate (1) | | Maturity | | Investment | | Property | | Investment | | Loans (2) | | Properties (3) | | Beds | | Bed/Unit | ||
9.9% | | 2043 | | $ | 186,121 | | SNF | | 72.5 | % | 1 | | 15 | | 2,029 | | $ | 91.73 |
9.2% | | 2045 | | | 36,076 | | SNF | | 14.1 | % | 1 | | 4 | | 501 | | $ | 72.01 |
9.4% | | 2045 | |
| 19,512 | | SNF | | 7.6 | % | 1 | | 2 | | 205 | | $ | 95.18 |
9.4% | | 2045 | | | 14,950 | | SNF | | 5.8 | % | 1 | | 1 | | 157 | | $ | 95.22 |
Total | | | | $ | 256,659 | | | | 100.0 | % | 4 | | 22 | | 2,892 | | $ | 88.75 |
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| of |
| of |
| of |
| SNF |
| ALF |
| per |
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Type of Property |
| Investments |
| Investments |
| Loans |
| Properties(1) |
| Beds (2) |
| Units (2) |
| Bed/Unit |
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Skilled Nursing |
| $ | 217,542 |
| 93.7 | % | 7 |
| 23 |
| 3,033 |
| — |
| $ | 71.73 |
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Assisted Living |
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| 13,366 |
| 5.8 | % | 3 |
| 8 |
| — |
| 270 |
| $ | 49.50 |
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Other(3) |
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| 1,208 |
| 0.5 | % | 1 |
| — |
| — |
| — |
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| — |
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Totals |
| $ | 232,116 |
| 100.0 | % | 11 |
| 31 |
| 3,033 |
| 270 |
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(2) |
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(3) |
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In general, the mortgage loans may not be prepaid except in the event of the sale of the collateral property to a third partythird-party that is not affiliated with the borrower, although partial prepayments (including the prepayment premium) are
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often permitted where a mortgage loan is secured by more than one property upon a sale of one or more, but not all, of the collateral properties to a third partythird-party which is not an affiliate of the borrower. The terms of the mortgage loans generally impose a premium upon prepayment of the loans depending upon the period in which the prepayment occurs, whether such prepayment was permitted or required, and certain other conditions such as upon the sale of the property under a pre‑existingpre-existing purchase option, destruction or condemnation, or other circumstances as approved by us. On certain loans, such prepayment amount is based upon a percentage of the then outstanding balance of the loan, usually declining ratably each year. For other loans, theThe prepayment premium is based on a yield maintenance formula. In addition to a lien on the mortgaged property, the loans are generally secured by certain non‑realnon-real estate assets of the properties and contain certain other security provisions in the form of letters of credit pledged collateral accounts,and/or security deposits, cross‑defaultdeposits.
Investment Policies and cross‑collateralization features and certain guarantees.Strategies
Investment and Other Policies
Objectives and Policies.Our investment policy is to invest primarily in income‑producing seniorincome-producing seniors housing and health care properties. Over the past three years, 2014 through 2016, we acquired SNF, ALF, IL, MChave underwritten acquisitions of seniors housing communities and combinations thereof, plus a behavioral health care hospitalcenters and 94 parcels of land for a total of approximately $306.7$265.7 million.
Historically our investments have consisted of:
● | fee ownership of seniors housing and skilled nursing properties that are leased to operators; |
● | mortgage loans secured by seniors housing and skilled nursing properties; or |
● | participation in such investments indirectly through investments in mezzanine loans and real estate partnerships or other entities that themselves make direct investments in such loans or properties. |
In evaluating potential investments, we consider factors such as:
● | type of property; |
● | location; |
● | competition within the local market and evaluation of the impact resulting from any potential new development projects in construction or anticipated to be approved by local authorities; |
● | construction quality, condition and design of the property; |
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● | current and anticipated cash flow of the property and its adequacy to meet operational needs and lease obligations or debt service obligations; |
● | experience, reputation and solvency of the operating companies providing services; |
● | payor mix of private, managed care, Medicare and Medicaid patients; |
● | growth, tax and regulatory environments of the communities in which the properties are located; |
● | occupancy and demand for similar properties in the area surrounding the property; and |
● | Medicaid reimbursement policies and plans of the state in which the property is located. |
Prior to an investment, we conduct a property site review to assess the general physical condition of the property and the potential of additional services. In addition, we review third-party environmental reports, land surveys, and market studies (if applicable) as well as conduct a financial due diligence review of the property before the investment is made.
We believe skilled nursing centers are the lowest cost provider for certain levels of acuity; therefore, such facilities play a vital role in our nation’s health care delivery system. Our investments include direct ownership, development, first and second mortgages secured by skilled nursing centers and mezzanine loans. We prefer to invest in a property that has a significant market presence in its community and where state certificate of need and/or licensing procedures limit the entry of competing properties.
We believe that assisted living, independent living and memory care communities are an important sector in the seniors housing and health care industry and our investments include direct ownership, development, real estate joint ventures, mezzanine loans and mortgages secured by assisted living, independent living and/or memory care communities.
We may incur additional indebtedness when, in the opinion of our Board of Directors, it is advisable. We may incur such indebtedness to make investments in additional seniors housing and health care properties or to meet the distribution requirements imposed upon REITs under the Internal Revenue Code of 1986, as amended. For other short-term purposes, we may, from time to time, negotiate lines of credit, or arrange for other short-term borrowings from banks or otherwise. We may also arrange for long-term borrowings through public or private offerings or from institutional investors.
In addition, we may incur mortgage indebtedness on real estate which we have acquired through purchase, foreclosure or otherwise. We may also obtain mortgage financing for unleveraged or underleveraged properties in which we have invested or may refinance properties acquired on a leveraged basis.
We seek to diversify our portfolio by operator, by property type, and geographically. Our primary marketing and business development strategy is to increase awareness of our presence and build long termlong-term relationships in the seniors housing and health care industry by supporting targeted industry trade organizations, attending industry specific conferences and events attended by seniors housing and care providers, and seeking out speaking engagements at industry related events as well as interviews in industry publications. We believe this targeted marketing and business development effort has increasedprovided deal flow opportunities and continueswill continue to provide opportunities for new investments in 2017.2020. Since competition from investors as well as other capital providers for large transactions consisting of fully-marketed, multi-property portfolios generally result in valuations above our targeted investment criteria, our marketing and business development efforts focus on sourcing relationships with regionally based operating companies to execute on single property transactions (for acquisition, mortgage financing or development), or smaller multi-property portfolios that are not broadly marketed by third-party intermediaries which complement our historic investment execution and are priced at yields that are accretive to our stockholders.
Historically our investments have consisted of:
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In evaluating potential investments, we consider factors such as:
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Typically, prior to an investment, we conduct a property site review to assess the general physical condition of the property and the potential of additional services. In addition, we review third-party environmental reports, land surveys, and markets studies (if applicable) as well as conduct a financial due diligence review of the property before the investment is made.
We believe skilled nursing facilities are the lowest cost provider for certain levels of acuity; therefore, such facilities play a vital role in our nation’s health care delivery system. Our investments include direct ownership, development, first and second mortgages secured by skilled nursing centers and mezzanine loans. We prefer to invest in a property that has a significant market presence in its community and where state certificate of need and/or licensing procedures limit the entry of competing properties.
We believe that assisted living, independent living and memory care facilities are an important sector in the long term care market and our investments include direct ownership, development, joint ventures, mezzanine loans and mortgages secured by assisted living, independent living and/or memory care communities. We have attempted to diversify our portfolio both geographically and across care levels.
Borrowing Policies. We may incur additional indebtedness when, in the opinion of our Board of Directors, it is advisable. We may incur such indebtedness to make investments in additional senior housing and health care properties or to meet the distribution requirements imposed upon REITs under the Internal Revenue Code of 1986, as amended. For other short‑term purposes, we may, from time to time, negotiate lines of credit, or arrange for other short‑term borrowings from banks or otherwise. We may also arrange for long term borrowings through public or private offerings or from institutional investors.
In addition, we may incur mortgage indebtedness on real estate which we have acquired through purchase, foreclosure or otherwise. We may also obtain mortgage financing for unleveraged or underleveraged properties in which we have invested or may refinance properties acquired on a leveraged basis.
Competition
In the health care industry, we compete for real property investments with health care providers, other health care related REITs, real estate partnerships, banks, private equity funds, venture capital funds and other investors. Many
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of our competitors are significantly larger and have greater financial resources and lower cost of capital than we have available to us. Our ability to compete successfully for real property investments will be determined by numerous factors, including our ability to identify suitable acquisition targets, our ability to negotiate acceptable terms for any such acquisition and the availability and our cost of capital.
The lessees and borrowers of our properties compete on a local, regional and, in some instances, national basis with other health care providers. The ability of the lessee or borrower to compete successfully for patients or residents at our properties depends upon several factors, including the levels of care and services provided by the lessees or borrowers, the reputation of the providers, physician referral patterns, physical appearances of the properties, family preferences, financial condition of the operator and other competitive systems of health care delivery within the community, population and demographics.
REIT Tax Status
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the Internal Revenue Code of 1986, as amended, or the Code. To maintain our qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains. As a REIT, we generally are not subject to U.S. federal income tax on the taxable income we distribute to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax at the generally applicable corporate tax rate. Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income, property or net worth and U.S. federal income and excise taxes on our undistributed income.
Governmental Regulation
Health Care Regulation
Overview
The health care industry is heavily regulated by the government. Our borrowers and lessees who operate health care facilities are subject to extensive regulation by federal, state and local governments. These laws and regulations are subject to frequent and substantial changes resulting from legislation, adoption of rules and regulations, and administrative and judicial interpretations of existing law. These changes may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by both government and other third-party payors. These changes may be applied retroactively. The ultimate timing or effect of these changes cannot be predicted. The failure of any borrower of funds from us or lessee of any of our properties to comply with such laws, requirements and regulations could result in sanctions or remedies such as denials of payment for new Medicare and Medicaid admissions, civil monetary penalties, state oversight and loss of Medicare and Medicaid participation or licensure. Such action could affect our borrower’s or lessee’s ability to operate its facility or facilities and could adversely affect such borrower’s or lessee’s ability to make debt or lease payments to us.
The properties we own and the manner in which they are operated are affected by changes in the reimbursement, licensing and certification policies of federal, state and local governments. Properties may also be affected by changes in accreditation standards or procedures of accrediting agencies. In addition, expansion (including the addition of new beds or services or acquisition of medical equipment) and occasionally the discontinuation of services of health care facilities are, in some states, subjected to state and regulatory approval through “certificate of need” laws and regulations.
Health Care Reform and Other Legislative Developments
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”). The Affordable Care Act is designed to expand access to affordable health insurance, contain health care costs, and institute a variety of health policy reforms. This sweeping law expanded the insured population, but also reduced federal health care spending and imposed additional requirements on our lessees and borrowers. Among other things, the Affordable Care Act: reduced Medicare skilled nursing facility reimbursement by a so-called “productivity adjustment” based on economy-wide productivity gains; required the development of a value-basedvalue-
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based purchasing program for Medicare skilled nursing facility services; established a national pilot program to bundle Medicare payments for hospital and post-acute services that could lead to changes in the delivery ofauthorized bundled payment programs, which can include post-acute services; and provided incentives to state Medicaid programs to promote community-based care as an alternative to institutional long termlong-term care services. The Affordable Care Act also required expanded public disclosure about nursing home ownership and operations, mandatory compliance and quality assurance programs, increased penalties for noncompliance, and expanded fraud and abuse enforcement and penalty provisions. In addition, the Affordable Care Act impacts both us and our lessees and borrowers as employers, including requirements related to the health insurance we offer to our respective employees. Many aspects of the Affordable Care Act have been implemented through regulations and subregulatory guidance, as discussed further below. Moreover, President Trump and some members of Congress have called for repeal of the Affordable Care Act and replacement with alternative reforms. TheIn December 2017, President Trump signed into law a tax reform bill that repeals the Affordable Care Act’s penalty for individuals who fail to maintain health coverage meeting certain minimum standards. Additional revisions of the Affordable Care Act could be made in future, although the details and timing of any such actions are unknown at this time. There can be no assurance that the implementation of the Affordable Care Act or any subsequent repeal and/modifications or reform legislationrelated legal challenges will not adversely impact the operations, cash flows or financial condition of our lessees and borrowers, which subsequently could materially adversely impact our revenue and operations.
Under the termssequestration provisions of the Budget Control Act of 2011, as modified by the American Taxpayer Relief Act, President Obama issued a sequestration order on March 1, 2013 that mandatesamended, a 2% cut to Medicare payments to providers and health plans. Theplans cuts generally applyhas applied to Medicare fee-for-service claims with dates-of-service or dates-of-discharge on or after April 1, 2013. As further amended by subsequent legislation, the Medicare sequestration cuts are currently scheduled to be applied through fiscal year 2025,2029, although Congress and the Administration could enact legislation to extend or modify sequestration at any time, including through alternative budget legislation that includes alternative
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Medicare or Medicaid savings.time. There can be no assurances that enacted or future budget control mechanisms will not have an adverse impact on the financial condition of our borrowers and lessees, which subsequently could materially adversely impact our company.
The Protecting Access to Medicare Act of 2014 requiresrequired the Secretary of the Department of Health and Human Services to develop a skilled nursing facility “value-based purchasing program,” which will tieprogram” tying Medicare payments to skilled nursing facilities to their performance on certain new readmissions measures, applicable to services furnished beginning October 1, 2018. Furthermore, the Improving Medicare Post-Acute Care Transformation Act of 2014 requires the collection of standardized post-acute care assessment data, which eventually could be used as the basis for developing changes to Medicare post-acute care reimbursement policy. The Medicare Access and CHIP Reauthorization Act of 2015 setsset the annual skilled nursing facility prospective payment system update for fiscal year 2018 at 1%., and the Bipartisan Budget Act of 2018 established an update of 2.4% for fiscal year 2019. Additional reforms affecting the payment for and availability of health care services have been proposed at the state level and adopted by certain states. Increasingly state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid costs.
Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies, including potential changes in Medicare and Medicaid payment policy for skilled nursing facility services and other types of post-acute care. For instance, on November 24, 2015, the Centers for Medicare & Medicaid Services (“CMS”) published a final rule that requires hospitals in selected geographic areas to participate in a new Medicare Comprehensive Care for Joint Replacement model beginning April 1, 2016, under which CMS provides a “bundled” payment to participant hospitals for an “episode of care” for lower extremity joint replacement surgery, covering all services provided during the inpatient admission through 90 days post-discharge, including skilled nursing facility care. In addition, on January 3, 2017, CMS published a final rule to establish an episode payment model program targeting care for Medicare beneficiaries receiving acute myocardial infarction, coronary artery bypass graft, and surgical hip/femur fracture treatment in designated geographic areas. Under this program, which is scheduled to begin July 1, 2017, all related care within 90 days of hospital discharge, including post-acute care, will be included in the episode payment. Additional changes in laws, new interpretations of existing laws, or other changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third partythird-party payors. There can be no assurances that enacted or future legislation will not have an adverse impact on the financial condition of our borrowers and lessees, which subsequently could materially adversely impact our company.
Reimbursement
The ability of our borrowers and lessees to generate revenue and profit determines the underlying value of that property to us. Revenues of our borrowers and lessees of skilled nursing centers are generally derived from payments for patient care. Sources of such payments for skilled nursing facilities include the federal Medicare program, state Medicaid programs, private insurance carriers, managed care organizations, preferred provider arrangements, and self-insured employers, as well as the patients themselves.
A significant portion of the revenue of our skilled nursing center borrowers and lessees is derived from governmentally-funded reimbursement programs, such as Medicare and Medicaid. Because of significant health care costs paid by such government programs, both federal and state governments have adopted and continue to consider various health care reform proposals to control health care costs. In many instances, revenues from Medicaid programs are insufficient to cover the actual costs incurred in providing care to Medicaid patients. Moreover, the Kaiser Commission on Medicaid and the Uninsured stated in October 2016 that 38 states reported implementing new Medicaid rate restrictions for at least one provider type in fiscal year 2016, compared to 45 states that implemented at least one provider increase. For fiscal year 2017, 41 states adopted provider rate restrictions while 40 plan rate increases. With regard to nursing facility rates in particular, 32 states increased rates in fiscal years 2016 and 2017, while 19 have adopted rate restrictions. In addition, mostall states have been making changes to their long termlong-term care delivery systems that emphasize home and community-based long termlong-term care services, in some cases coupled with cost controlscost-controls for institutional providers. AccordingIncreasingly, state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to the Kaiser Commission, 46 states took action to expand home and community-based service programs in fiscal year 2016, and 47 took such action in 2017.
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decrease state Medicaid costs. The federal government also has adopted various policies to promote community-based alternatives to institutional services. The Trump Administration and Congress are also considering revising federal payments to state Medicaid programs to be in the form ofestablish block grants or impose per capita limits on
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federal Medicaid payments to states. On January 30, 2020, the Trump Administration announced that states could apply to participate in a new Medicaid “Healthy Adult Opportunity” (“HAO”) Demonstration project, which would reimburse participating states under a capped aggregate or per-capita federal financial participation financing model in exchange for the states gaining greater flexibility in the scope and administration of their Medicaid programs for certain beneficiary populations (individuals qualifying for Medicaid based on need for long-term care services and supports would be exempt). As states and the federal government continue to respond to budget pressures, future reduction in Medicaid payments for skilled nursing facility services could have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.
With regard to the Medicare program, over the years there Overalso have been fundamental changes in theefforts to contain Medicare program that resulted in reduced levelsfee-for-service spending, promote Medicare managed care, and, more recently, tie reimbursement to quality and value of payment for a substantial portion of health care services, including skilled nursing facility services.care. CMS annually updates Medicare skilled nursing facility prospective payment system rates and other policies. On July 30, 2015,31, 2018, CMS released itsissued a final rule updating skilled nursing facility prospective payment system updaterates and policies for fiscal year 2016,2019. The final rule includes a 2.4% payment increase, which CMS projected will increase overall payments to skilled nursing facilities by $820 million in fiscal year 2019 compared with fiscal year 2018 levels. The final rule also replaced the existing Resource Utilization Groups, Version IV (“RUG–IV”) case mix classification system with a new model beginning in fiscal year 2020, which began October 1, 2015.2019. The new case mix classification system, called the “Patient-Driven Payment Model,” bases Medicare payment on resident needs rather than the amount of therapy a resident receives. On July 30, 2019, CMS projected thatissued its final fiscal year 2020 Medicare skilled nursing facility update. Under the final rule, CMS projects Medicare aggregate Medicare payments to skilled nursing facilities will increase by $430$851 million, or 1.2%2.4%, under the final rule. This increase reflects a 2.3% market basket increase, reduced by both a 0.6 percentage point forecast error adjustment and a 0.5 percentage point multifactor productivity adjustment mandated by the Affordable Care Act. On July 29, 2016, CMS issued a final rule updatingfor fiscal year 2017 Medicare payment rates for skilled nursing facilities.2020 compared with fiscal year 2019. The final rule provides for a net market basket increasealso addresses implementation of 2.4 %, beginningthe Patient-Driven Payment Model case mix classification system, changes to the group therapy definition in the skilled nursing facility setting, and various skilled nursing facility Value-Based Purchasing (“VBP”) Program and quality reporting program policies. Under the VBP Program, which went into effect October 1, 2016. This reflects a 2.7% market basket increase, reduced by a 0.3 percentage point multifactor productivity adjustment.2018, CMS estimates that aggregatereduces Medicare payments to skilled nursing facilities underby 2%. CMS then returns approximately 60% of the final rulewithheld amount to skilled nursing facilities based on their relative performance on a readmission measure. The remaining portion of the withheld amount will increase by approximately $920 million. CMS also adopted new measures and policies for the Skilled Nursing Facility Quality Reporting Program and the Value-Based Purchasing Program. In addition, on October 4, 2016, CMS published a final rule that revises the requirements that long term care facilities must meet to participatebe retained in the Medicare and Medicaid programs. This major rule addresses requirements for improving quality of care and patient safety, nursing facility staffing, care planning, binding arbitration agreements (currently not in effect due to litigation challenging the requirement), infection control, residents’ rights, compliance and ethics programs, and several other areas. CMS estimates that the total cost of the final rule will be $831 million in the first year and $736 million annually thereafter, with per-facility costs of $62,900 in the first year and $55,000 annually thereafter. CMS also published a final rule on September 16, 2016 establishing emergency preparedness requirements for Medicare- and Medicaid-participating providers and suppliers, including long-term care facilities, to ensure that they can meet the needs of patients and residents during natural and man-made emergency situations. In addition, CMS published a final rule on May 4, 2016 amending fire safety standards applicable to long-term care facilities and certain other types of Medicare- and Medicaid-participating health care facilities.Trust Fund. There can be no assurance that any future reductions in Medicare skilled nursing facility payment rates or other policy changes impacting long termlong-term care facilities would not have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.
On July 18, 2019, CMS published a final rule that eliminates the prohibition on pre-dispute binding arbitration agreements between long-term care facilities and their residents. The rule also strengthens the transparency of arbitration agreements and makes other changes to arbitration requirements for long-term care facilities. There can be no assurance that these rules or future regulations modifying Medicare skilled nursing facility payment rates or other requirements for Medicare and/or Medicaid participation will not have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.
CMS also has implemented a variety of Medicare bundled payment programs that seek to promote greater care coordination and more efficient use of resources. Certain of these models, such as the Medicare Comprehensive Care for Joint Replacement and Bundled Payments for Care Improvement Advanced models, have impacted post-acute care, including skilled nursing facility services. There can be no assurances that new Medicare payment models will not adversely affect revenues of our skilled nursing center borrowers and lessees and thereby adversely affect those borrowers’ and lessees’ abilities to make their debt or lease payments to us.
Moreover, health care facilities continue to experience pressures from private payors attempting to control health care costs, andcosts; reimbursement from private payors has in manysome cases effectively been reducedfallen relative to levels approaching those of government payors. Governmental and public concern regarding health care costs may result in significant reductions in payment to health care facilities, and there can be no assurance that future payment rates for either governmental or private payors will be sufficient to cover cost increases in providing services to patients. Any changes in reimbursement policies which reduce reimbursement to levels that are insufficient to cover the cost of providing patient care could adversely affect revenues of our skilled nursing center borrowers and lessees and to a much lesser extent our assisted living community borrowers and lessees and thereby adversely affect those borrowers’ and lessees’ abilities to make their debt or lease payments to us. Failure of
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the borrowers or lessees to make their debt or lease payments would have a direct and material adverse impact on us.
Fraud and Abuse Enforcement
Various federal and state laws govern financial and other arrangements between health care providers that participate in, receive payments from, or make or receive referrals for work in connection with government funded health care programs, including Medicare and Medicaid. These laws, known as the fraud and abuse laws, include the federal anti-kickback statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration directly or indirectly in return for, or to induce, the referral, or arrange for the referral, of an individual to a person for the furnishing of an item or service for which payment may be made under federal health care programs. In addition, the federal physician self-referral law, commonly known as the Stark Law, prohibits physicians and certain other types of practitioners from making referrals for certain designated health services paid in whole or in part by Medicare and Medicaid to entities with which the practitioner or a member of the practitioner’s immediate family
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has a financial relationship, unless the financial relationship fits within an applicable exception to the Stark Law. The Stark Law also prohibits the entity receiving the referral from seeking payment under the Medicare program for services rendered pursuant to a prohibited referral. Sanctions for violating the Stark Law include civil monetary penalties of up to $24,253$25,820 per prohibited service provided, assessments equal to three times the dollar value of each such service provided and exclusion from the Medicare and Medicaid programs. Many states have enacted similar fraud and abuse laws which are not necessarily limited to items and services for which payment is made by federal health care programs. Violations of these laws may result in fines, imprisonment, denial of payment for services, and exclusion from federal and/or other state-funded programs. Other federal and state laws authorize the imposition of penalties, including criminal and civil fines and exclusion from participation in federal health care programs for submitting false claims, improper billing and other offenses. Federal and state government agencies have continued rigorous enforcement of criminal and civil fraud and abuse laws in the health care arena. Our borrowers and lessees are subject to many of these laws, and some of them could in the future become the subject of a governmental enforcement action.
Environmental Regulation
Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property or a secured lender (such as us) may be liable for the costs of removal or remediation of hazardous or toxic substances at, under or disposed of in connection with such property, as well as other potential costs relating to hazardous or toxic substances (including government fines and damages for injuries to persons and adjacent property). Such laws often impose such liability without regard to whether the owner or secured lender knew of, or was responsible for, the presence or disposal of such substances and may be imposed on the owner or secured lender in connection with the activities of an operator of the property. The cost of any required remediation, removal, fines or personal or property damages and the owner’s or secured lender’s liability therefore could exceed the value of the property, and/or the assets of the owner or secured lender. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, would reduce our revenues.
Although the mortgage loans that we provide and leases covering our properties require the borrower and the lessee to indemnify us for certain environmental liabilities, the scope of such obligations may be limited and we cannot assure that any such borrower or lessee would be able to fulfill its indemnification obligations.
Insurance
It is our current policy, and we intend to continue this policy, that all borrowers of funds from us and lessees of any of our properties secure adequate comprehensive property and general and professional liability insurance that covers us as well as the borrower and/or lessee. Even thoughAlthough we actively monitor and seek to ensure compliance with our policies, we may be subject to loss for any number of reasons, such as, noncompliance on the part of our lessees/borrowers, losses that is our policy, certain exceed covered limits or that aren’t covered, inability of lessees/borrowers and lessees have been unable to obtain general and professional liability insurance in the specific amounts required by our leaseson commercially reasonable terms, bankruptcy of a carrier, or mortgages because the cost of such insurance and some insurers have stopped offering such insurance for long term care facilities. Additionally, in the past, insurance companies have filed for bankruptcy protection leaving certain of our borrowers and/or lessees without coverage for periods that were believed to be covered prior to such bankruptcies. The unavailability and associated exposure as well as increased cost of such insurance could have a material adverse effect on the lessees and borrowers, including their ability to make lease or mortgage payments. Although weinsufficient tail coverage. We contend that as a non‑possessorynon-possessory landlord we are not generally responsible for what takes place on real estate we do not possess, claims including general and professional liability claims may still be asserted against us which may result in costs and exposure for which insurance is not available. Certain risks may be uninsurable, not economically insurable or insurance may not
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be available and there can be no assurance that we, a borrower or lessee will have adequate funds to cover all contingencies. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, we could be subject to an adverse claim including claims for general or professional liability, could lose the capital that we have invested in the properties, as well as the anticipated future revenue for the properties and, in the case of debt which is with recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the properties. Certain losses, such as losses due to floods or seismic activity if insurance is available, may be insured subject to certain limitations including large deductibles or co‑paymentsco-payments and policy limits.
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Employees
At December 31, 2016,2019, we employed 2422 people. Our employees are not members of any labor union, and we consider our relations with our employees to be excellent.
Taxation of our Company
We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code (or the Code). We believe that we have been organized and have operated in such a manner as to qualify for taxation as a REIT under the Code commencing with our taxable year ending December 31, 1992. We intend to continue to operate in such a manner, but there is no assurance that we have operated or will continue to operate in a manner so as to qualify or remain qualified.
If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on our net income that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” (once at the corporate level when earned and once at stockholder level when distributed) that generally results from investment in a non‑REIT corporation.
However, we will be subject to federal income tax as follows:
First, we will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains.
Second, under certain circumstances, we may be subject to the alternative minimum tax, if our dividend distributions are less than our alternative minimum taxable income.
Third, if we have (i) net income from the sale or other disposition of foreclosure property which is held primarily for sale to customers in the ordinary course of business or (ii) other non‑qualifying income from foreclosure property, we may elect to be subject to tax at the highest corporate rate on such income, if necessary to maintain our REIT status.
Fourth, if we have net income from “prohibited transactions” (as defined below), such income will be subject to a 100% tax.
Fifth, if we fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below), but nonetheless maintain our qualification as a REIT because certain other requirements have been met, we will be subject to a 100% tax on an amount equal to (a) the gross income attributable to the greater of the amount by which we fail the 75% or 95% test multiplied by (b) a fraction intended to reflect our profitability.
Sixth, if we fail to distribute during each calendar year at least the sum of (i) 85% of our ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed.
Seventh, if we acquire an asset which meets the definition of a built‑in gain asset from a corporation which is or has been a C corporation (i.e., generally a corporation subject to full corporate‑level tax) in certain transactions in which the basis of the built‑in gain asset in our hands is determined by reference to the basis of the asset in the hands of the C corporation, and if we subsequently recognize gain on the disposition of such asset during the five‑year period, called the recognition period, beginning on the date on which we acquired the asset, then, to the extent of the built‑in gain (i.e., the excess of (a) the fair market value of such asset over (b) our adjusted basis in such asset, both determined as of the beginning of the recognition period), such gain will be subject to tax at the highest regular corporate tax rate, pursuant to IRS regulations.
Eighth, if we have taxable REIT subsidiaries and they are required to be reported on a combined basis, we would be subject to corporate tax on the taxable income of the taxable REIT subsidiaries. In addition, we will also be subject to a tax of 100% on the amount of any rents from real property, redetermined TRS service income, deductions or excess interest paid to us by any of our taxable REIT subsidiaries that would be reduced through reapportionment under certain federal income tax principles in order to more clearly reflect income for the taxable REIT subsidiary.
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Ninth, if we fail to satisfy any of the REIT asset tests, as described below, by more than a de minimus amount, due to reasonable cause and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the non‑qualifying assets that caused us to fail such test.
Tenth, if we fail to satisfy any provision of the Code that would result in our failure to qualify as a REIT (other than a violation of the REIT gross income tests or certain violations of the asset tests described below) and the violation is due to reasonable cause, we may retain our REIT qualification but we will be required to pay a penalty of $50,000 for each such failure.
Finally, if we own a residual interest in a real estate mortgage investment conduit (or REMIC), we will be taxed at the highest corporate rate on the portion of any excess inclusion income that we derive from the REMIC residual interests equal to the percentage of our shares that is held in record name by “disqualified organization.” A “disqualified organization” includes the United States, any state or political subdivision thereof, any foreign government or international organization, any agency or instrumentality of any of the foregoing, any rural electrical or telephone cooperative and any tax‑ exempt organization (other than a farmer’s cooperative described in Section 521 of the Code) that is exempt from income taxation and from the unrelated business taxable income provisions of the Code. However, to the extent that we own a REMIC residual interest through a taxable REIT subsidiary, we will not be subject to this tax.
Requirements for Qualification. The Code defines a REIT as a corporation, trust or association:
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The Code provides that conditions (1) to (4), inclusive, must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Conditions (5) and (6) do not apply until after the first taxable year for which an election is made to be taxed as a REIT. For purposes of condition (6), pension funds and certain other entities are treated as individuals, subject to a “look‑ through” exception.
Pursuant to the Code and applicable Treasury Regulations, in order to be able to elect to be taxed as a REIT, we must maintain certain records and request certain information from our stockholders designed to disclose the actual ownership of our stock. Based on publicly available information, we believe we have satisfied the share ownership requirements set forth in conditions (5) and (6). In addition, Sections 9.2 and 9.3 of our Charter provide for restrictions regarding the transfer and ownership of shares. These restrictions are intended to assist us in continuing to satisfy the share ownership requirements described in conditions (5) and (6). These restrictions, however, may not ensure that we will, in all cases, be able to satisfy the share ownership requirements described in conditions (5) and (6).
We have complied with, and will continue to comply with, regulatory rules to send annual letters to certain of our stockholders requesting information regarding the actual ownership of our stock. If despite sending the annual letters,
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we do not know, or after exercising reasonable diligence would not have known, whether we failed to satisfy the ownership requirement set forth in condition (6) above, we will be treated as having satisfied such condition. If we fail to comply with these regulatory rules, we will be subject to a monetary penalty. If our failure to comply was due to intentional disregard of the requirement, the penalty would be increased. However, if our failure to comply was due to reasonable cause and not willful neglect, no penalty would be imposed.
Income Tests. There presently are two gross income requirements that we must satisfy to qualify as a REIT:
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Cancellation of indebtedness income generated by us is not taken into account in applying the 75% and 95% income tests discussed above. A “prohibited transaction” is a sale or other disposition of property (other than foreclosure property) held for sale to customers in the ordinary course of business. Any gain realized from a prohibited transaction is subject to a 100% penalty tax.
Rents received by us will qualify as “rents from real property” for purposes of satisfying the gross income tests for a REIT only if several conditions are met:
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For taxable years beginning after August 5, 1997, a REIT has been permitted to render a de minimus amount of impermissible services to tenants and still treat amounts received with respect to that property as rents from real property. The amount received or accrued by the REIT during the taxable year for the impermissible services with respect to a property may not exceed 1% of all amounts received or accrued by the REIT directly or indirectly from the property. If the amount received or accrued by the REIT during the taxable year for impermissible services with respect to a property exceeds 1% of the total amounts received or accrued with respect to such property, then none of the rents received or accrued from such property shall be treated as rents from real property. The amount received for any service or management operation for this purpose shall be deemed to be not less than 150% of the direct cost of the REIT in furnishing or rendering the service or providing the management or operation. Furthermore, impermissible services may be furnished to tenants by a taxable REIT subsidiary subject to certain conditions, and we may still treat rents received with respect to the property as rent from real property.
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The term “interest” generally does not include any amount if the determination of the amount depends in whole or in part on the income or profits of any person, although an amount generally will not be excluded from the term “interest” solely by reason of being based on a fixed percentage of receipts or sales.
If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for the year if we are eligible for relief. These relief provisions will be generally available if our failure to meet the tests was due to reasonable cause and not due to willful neglect and following the identification of the failure to satisfy one or both income tests, a description of each item of gross income is filed in accordance with IRS regulations.
It is not now possible to determine the circumstances under which we may be entitled to the benefit of these relief provisions. If these relief provisions apply, a 100% tax is imposed on an amount equal to (a) the gross income attributable to the greater of the amount by which we failed the 75% or 95% test, multiplied by (b) a fraction intended to reflect our profitability.
Asset Tests. At the close of each quarter of our taxable year, we must also satisfy several tests relating to the nature and diversification of our assets. At least 75% of the value of our total assets must be represented by real estate assets, cash, cash items (including receivables arising in the ordinary course of our operations), and government securities and qualified temporary investments. Although the remaining 25% of our assets generally may be invested without restriction, we are prohibited from owning securities representing more than 10% of either the vote or value of the outstanding securities of any issuer other than a qualified REIT subsidiary, another REIT or a taxable REIT subsidiary (the “10% vote and value test”). Further, no more than 25% of our total assets may be represented by securities of one or more taxable REIT subsidiaries (for tax years beginning prior to July 30, 2008 and after December 31, 2017, 20% of the total value of our assets) and no more than 5% of the value of our total assets may be represented by securities of any non‑governmental issuer other than a qualified REIT subsidiary, another REIT or a taxable REIT subsidiary (or TRS). Each of the 10% vote and value test and the 25% and 5% asset tests must be satisfied at the end of any quarter. There are special rules which provide relief if the value related tests are not satisfied due to changes in the value of the assets of a REIT.
Investments in Taxable REIT Subsidiaries. For taxable years beginning after December 1, 2000, REITs may own more than 10% of the voting and value of securities in a TRS. A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with the REIT to be treated as a TRS. A TRS also includes any corporation other than a REIT with respect to which a TRS owns securities possessing more that 35% of the total voting power or value of the outstanding securities of such corporation. Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non‑customary services to tenants of its parent REIT. A TRS is subject to income tax as a regular C corporation. In addition, a TRS may be prevented from deducting interest on debt funded directly or indirectly by its parent REIT if certain tests regarding the TRS’s debt to equity ratio and interest expense are not satisfied. A REIT’s ownership of a TRS will not be subject to the 10% or 5% asset tests described above, and its operations will be subject to the provisions described above. At this time, we do not have any taxable REIT subsidiaries.
REMIC. A regular or residual interest in a REMIC will be treated as a real estate asset for purposes of the REIT asset tests, and income derived with respect to such interest will be treated as interest on an obligation secured by a mortgage on real property, assuming that at least 95% of the assets of the REMIC are real estate assets. If less than 95% of the assets of the REMIC are real estate assets, only a proportionate share of the assets of and income derived from the REMIC will be treated as qualifying under the REIT asset and income tests. All of our historical REMIC certificates were secured by real estate assets, therefore we believe that our historic REMIC interests fully qualified for purposes of the REIT income and asset tests.
Ownership of Interests in Partnerships, Limited Liability Companies and Qualified REIT Subsidiaries. We own interests in various partnerships and limited liabilities companies. In the case of a REIT which is a partner in a partnership, or a member in a limited liability company treated as a partnership for federal income tax purposes, Treasury Regulations provide that the REIT will be deemed to own its proportionate share of the assets of the partnership or limited liability company, based on its interest in partnership capital, subject to special rules relating to the 10% REIT asset test described above. Also, the REIT will be deemed to be entitled to its proportionate share of income of that entity. The assets and items
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of gross income of the partnership or limited liability company retain the same character in the hands of the REIT for purposes of Section 856 of the Code, including satisfying the gross income tests and the asset tests. Thus, our proportionate share of the assets and items of income of partnerships and limited liability companies taxed as partnerships, in which we are, directly or indirectly through other partnerships or limited liability companies taxed as partnerships, a partner or member, are treated as our assets and items of income for purposes of applying the REIT qualification requirements described in this Annual Report on Form 10‑K (including the income and asset tests previously described).
We also own interests in a number of subsidiaries which are intended to be treated as qualified REIT subsidiaries. The Code provides that such subsidiaries will be ignored for federal income tax purposes and that all assets, liabilities and items of income, deduction and credit of such subsidiaries will be treated as assets, liabilities and such items of our company. If any partnership or qualified real estate investment trust subsidiary in which we own an interest were treated as a regular corporation (and not as a partnership or qualified real estate investment trust subsidiary) for federal income tax purposes, we would likely fail to satisfy the REIT asset test prohibiting a REIT from owning greater than 10% of the voting power of the stock or value of securities of any issuer, as described above, and would therefore fail to qualify as a REIT. We believe that each of the partnerships and subsidiaries in which we own an interest will be treated for tax purposes as a partnership or qualified REIT subsidiary, respectively, although no assurance can be given that the IRS will not successfully challenge the status of any such entity.
Annual Distribution Requirements. In order to qualify as a REIT, we are required to distribute dividends (other than capital gain dividends) to our stockholders annually in an amount at least equal to:
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In addition, if we dispose of any asset we acquired from a corporation which is or has been a C corporation in a transaction in which our basis in the asset is determined by reference to the basis of the asset in the hands of that C corporation, within the five‑year period following our acquisition of such asset, we would be required to distribute at least 90% of the after‑tax gain, if any, we recognized on the disposition of the asset, to the extent that gain does not exceed the excess of (a) the fair market value of the asset on the date we acquired the asset over (b) our adjusted basis in the asset on the date we acquired the asset.
We must pay these annual distributions (1) in the taxable year to which they relate or (2) in the following year if (i) we pay these distributions during January to stockholders of record in either October, November, or December of the prior year or (ii) we elect to declare the dividend before the due date of the tax return (including extensions) and pay on or before the first regular dividend payment date after such declaration.
Amounts distributed prior to January 1, 2015, must not be preferential; that is, every stockholder of the class of stock with respect to which a distribution is made must be treated the same as every other stockholder of that class, and no class of stock may be treated otherwise than in accordance with its dividend rights as a class.
To the extent that we do not distribute all of our net long term capital gain or distribute at least 90% but less than 100%, of our “real estate investment trust taxable income,” as adjusted, we will be subject to tax on such amounts at regular corporate tax rates. Furthermore, we would be subject to an excise tax, as described below, if we should fail to distribute during each calendar year (or, in the case of distributions with declaration and record dates in the last three months of the calendar year, by the end of the following January) at least the sum of:
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The excise tax to which we would be subject is 4% of the excess of such required distributions over the amounts actually distributed. Any real estate investment trust taxable income and net capital gain on which this excise tax is imposed for any year is treated as an amount distributed during that year for purposes of calculating such tax.
We intend to make timely distributions sufficient to satisfy these annual distribution requirements and to avoid the imposition of the 4% excise tax.
Failure to Qualify. If we fail to qualify for taxation as a REIT in any taxable year, and certain relief provisions do not apply, we will be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Distributions to stockholders in any year in which we fail to qualify as a REIT will not be deductible by us, nor will any distributions be required to be made. Unless entitled to relief under specific statutory provisions, we will also be disqualified from re‑electing our REIT status for the four taxable years following the year during which qualification was lost. It is not possible to state whether we would be entitled to the statutory relief in all circumstances. Failure to qualify as a REIT for even one year could substantially reduce distributions to stockholders and could result in our incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating substantial investments in order to pay the resulting taxes.
State and local taxation. We may be subject to state or local taxation in various state or local jurisdictions, including those in which we transact business or reside. The state and local tax treatment of our Company may not conform to the federal income tax consequences discussed above.
Taxation of our Stockholders
Taxation of Taxable U.S. Stockholders. The following summary applies to you only if you are a “U.S. stockholder.” A U.S. stockholder is a stockholder of our shares of stock who, for United State federal income tax purposes, is:
a citizen or resident alien of the United States;
a corporation or partnership or other entity classified as a corporation or partnership for these purposes, created or organized in or under laws of the United States or of any state or in the District of Columbia, unless, in the case of a partnership, Treasury Regulations provide otherwise;
an estate the income of which is subject to United States federal income taxation regardless of its source; or
a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States persons, within the meaning of the Code who have the authority to control all substantial decisions of the trust.
If a partnership or an entity treated as a partnership for federal income tax purposes holds our stock, the federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership holding our stock, you should consult your tax advisor regarding the consequences of the ownership and disposition of shares of our stock by the partnership.
As long as we qualify as a REIT, distributions made to our taxable U.S. stockholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be taken into account by such U.S. stockholders as ordinary income and will not be eligible for the dividends received deduction for corporations. Distributions that are designated as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed our actual net capital gain for the taxable year or are designated as unrecaptured §1250 gain distributions, which are taxable at a 25% rate) without regard to the period for which the stockholder has held its stock. However, corporate stockholders may be required to treat up to 20% of certain capital gain dividends as ordinary income.
The Jobs and Growth Tax Relief Reconciliation Act of 2003 generally reduced the maximum tax rate applicable on long term capital gains recognized on the sale or other disposition of shares of our stock from 20% to 15%. The Jobs
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and Growth Tax Relief Reconciliation Act of 2003 also generally reduced the maximum marginal rate of tax payable by individuals on dividends received from corporations that are subject to a corporate level of tax. As a result of the American Taxpayer Relief Act of 2012, qualified dividends and long term capital gains realized by noncorporate taxpayers are now subject to a 20% maximum tax rate (instead of the prior 15% maximum rate). Except in limited circumstances, this reduced tax rate does not apply to dividends paid to you by us on shares of our stock, because generally we are not subject to federal income tax on the portion of our REIT taxable income or capital gains distributed to our stockholders. The reduced maximum federal income tax rate will apply to that portion, if any, of dividends received by you with respect to shares of our stock held by you that are attributable to (1) dividends received by us from non-REIT corporations or taxable REIT subsidiaries, (2) income from the prior year with respect to which we were required to pay federal corporate income tax during the prior year (if, for example, we did not distribute 100% of our REIT taxable income for the prior year) and (3) distributions by us that we designate as long-term capital gains dividends (except for some distributions taxable to you at a maximum rate of 25%).
Distributions in excess of our current and accumulated earnings and profits will not be currently taxable to you to the extent that they do not exceed the adjusted basis of your stock, but rather will reduce the adjusted basis of such stock. To the extent that distributions in excess of current and accumulated earnings and profits exceed the adjusted basis of your stock, such distributions will be included in income as long-term capital gain (or short-term capital gain if the stock has been held for one year or less) assuming you hold the stock as a capital asset. In addition, any distribution declared in October, November or December of any year and payable to you as a stockholder of record on a specified date in any such month, will be treated as both paid by us and received by you on December 31 of the applicable year, provided that we actually pay the distribution during January of the following calendar year. Stockholders may not include in their individual income tax returns any of our net operating losses or capital losses.
If we elect to retain and pay income tax on any net long-term capital gain, you would include in income, as long-term capital gain, your proportionate share of this net long-term capital gain. You would also receive a refundable tax credit for your proportionate share of the tax paid by us on these retained capital gains and you would have an increase in the basis of your shares of our stock in an amount equal to your includable capital gains less your share of the tax deemed paid.
We will be treated as having sufficient earnings and profits to treat as a dividend any distribution up to the amount required to be distributed in order to avoid imposition of the 4% excise tax discussed under “Taxation of Our Company—General” and “Taxation of Our Company —Annual Distribution Requirements” above. As a result, you may be required to treat as taxable dividends certain distributions that would otherwise result in a tax-free return of capital. Moreover, any “deficiency dividend” will be treated as a dividend (an ordinary dividend or a capital gain dividend, as the case may be), regardless of our earnings and profits. Any other distributions in excess of current or accumulated earnings and profits will not be taxable to you to the extent these distributions do not exceed the adjusted tax basis of your shares of our stock. You will be required to reduce the tax basis of your shares of our stock by the amount of these distributions until the basis has been reduced to zero, after which these distributions will be taxable as capital gain, if the shares of our stock are held as a capital asset. The tax basis as so reduced will be used in computing the capital gain or loss realized upon sale of the shares of our stock. Any loss upon a sale or exchange of shares of our stock which were held for six months or less (after application of certain holding period rules) will generally be treated as a long-term capital loss to the extent you previously received capital gain distributions with respect to these shares of our stock.
Upon the sale or exchange of any shares of our stock to or with a person other than us or a sale or exchange of all shares of our stock (whether actually or constructively owned) with us, you will generally recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange and your adjusted tax basis in these shares of our stock. This gain or loss will be capital if you held these shares of our stock as a capital asset.
If we redeem any of your shares in us, the treatment can only be determined on the basis of particular facts at the time of redemption. In general, you will recognize gain or loss (as opposed to dividend income) equal to the difference between the amount received by you in the redemption and your adjusted tax basis in your shares redeemed if such redemption results in a “complete termination” of your interest in all classes of our equity securities, is a “substantially disproportionate redemption” or is “not essentially equivalent to a dividend” with respect to you. In applying these tests, there must be taken into account your ownership of all classes of our equity securities (e.g.,
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Common Stock or Preferred Stock). You also must take into account any equity securities that are considered to be constructively owned by you.
If, as a result of a redemption by us of your shares, you no longer own (either actually or constructively) any of our equity securities or only own (actually and constructively) an insubstantial percentage of our equity securities, then it is probable that the redemption of your shares would be considered “not essentially equivalent to a dividend” and, thus, would result in gain or loss to you. However, whether a distribution is “not essentially equivalent to a dividend” depends on all of the facts and circumstances, and if you rely on any of these tests at the time of redemption, you should consult your tax advisor to determine their application to the particular situation.
Generally, if the redemption does not meet the tests described above, then the proceeds received by you from the redemption of your shares will be treated as a distribution taxable as a dividend to the extent of the allocable portion of current or accumulated earnings and profits. If the redemption is taxed as a dividend, your adjusted tax basis in the redeemed shares will be transferred to any other shareholdings in us that you own. If you own no other shareholdings in us, under certain circumstances, such basis may be transferred to a related person, or it may be lost entirely.
Gain from the sale or exchange of our shares held for more than one year is taxed at a maximum long-term capital gain rate, which is currently 20% for noncorporate taxpayers (prior to the effective date of the American Taxpayer Relief Act of 2012, described above, the maximum long-term capital gain rate was 15%). Pursuant to Internal Revenue Service guidance, we may classify portions of our capital gain dividends as gains eligible for the long-term capital gains rate or as gain taxable to individual stockholders at a maximum rate of 25%.
Taxation of Tax-Exempt Stockholders. In general, a stockholder that is a tax-exempt entity not subject to tax on its investment income will not be subject to tax on our distributions. In Revenue Ruling 66-106, 1966-1 C.B. 151, the IRS ruled that amounts distributed as dividends by a REIT do not constitute unrelated business taxable income as defined in the Code when received by a qualified plan. Based on that ruling, regardless of whether we incur indebtedness in connection with the acquisition of properties, our distributions paid to a stockholder that is a tax-exempt entity will not be treated as unrelated business taxable income, provided that (i) the tax-exempt entity has not financed the acquisition of its stock with acquisition indebtedness within the meaning of the Code and the stock otherwise is not used in an unrelated trade or business of the tax-exempt entity and (ii) we are not a pension-held REIT. This ruling applies to a stockholder that is an organization that qualifies under Code Section 401(a), an IRA or any other tax-exempt organization that would compute unrelated business taxable income, if any, in accordance with Code Section 512(a)(1). However, if we are a pension-held REIT and a qualified plan owns more than 10% of the value of all of our stock, such stockholder will be required to recognize as unrelated business taxable income that percentage of the dividends that it receives from us as is equal to the percentage of our gross income that would be unrelated business taxable income to us if we were a tax-exempt entity required to recognize unrelated business taxable income. A REIT is a pension-held REIT if at least one qualified trust holds more than 25% of the value of all of our stock or one or more qualified trusts, each of whom own more than 10% of the value of all of our stock, hold more than 50% of the value of all of our stock.
For social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans exempt from federal income taxation under Code Sections 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, income from an investment in us will constitute unrelated business taxable income unless the organization is able to deduct amounts set aside or placed in reserve for certain purposes so as to offset the unrelated business taxable income generated by its investment in us. Such prospective stockholders should consult their own tax advisors concerning these “set aside” and reserve requirements.
Taxation of Foreign Stockholders. The rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships and other foreign stockholders are complex. We have not attempted to provide more than a summary of these rules. Prospective non-U.S. stockholders should consult with their own tax advisors to determine the impact of federal, state and local income tax laws with regard to an investment in stock, including any reporting requirements.
Distributions that are not attributable to gain from our sales or exchanges of U.S. real property interests and not designated by us as capital gains dividends will be treated as dividends of ordinary income to the extent that they are
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made out of our current or accumulated earnings and profits. Such distributions will ordinarily be subject to a withholding tax equal to 30% of the gross amount of the distribution unless an applicable tax treaty reduces or eliminates that tax. However, if income from the investment in the stock is treated as effectively connected with the non-U.S. stockholder’s conduct of a U.S. trade or business, the non-U.S. stockholder generally will be subject to a tax at graduated rates, in the same manner as U.S. stockholders are taxed with respect to such distributions and may also be subject to the 30% branch profits tax in the case of a stockholder that is a foreign corporation. We expect to withhold U.S. income tax at the rate of 30% on the gross amount of any such distributions made to a non-U.S. stockholder unless (i) a lower treaty rate applies and the holder provides us with a properly executed IRS Form W-8BEN (or successor form) or (ii) the non-U.S. stockholder provides us with a properly executed IRS Form W-8ECI (or successor form) claiming that the distribution is effectively connected income.
Distributions in excess of our current and accumulated earnings and profits will not be taxable to a stockholder to the extent that such distributions do not exceed the adjusted basis of the stockholder’s stock, but rather will reduce the adjusted basis of such stock. To the extent that distributions in excess of current accumulated earnings and profits exceed the adjusted basis of a non-U.S. stockholder’s stock, such distributions will give rise to tax liability if the non-U.S. stockholder would otherwise be subject to tax on any gain from the sale or disposition of our stock, as described below. If it cannot be determined at the time a distribution is made whether or not distributions will be in excess of current and accumulated earnings and profit, the distributions will be subject to withholding at the same rate as dividends. However, amounts thus withheld are refundable if it is subsequently determined that such distribution was, in fact, in excess of our current and accumulated earnings and profits.
We are required to withhold 15% (10% for distributions prior to February 16, 2016) of any distribution that exceeds our current and accumulated earnings and profits, subject to certain exceptions provided in the applicable Treasury Regulations. Thus, to the extent we do not withhold 30% on the entire amount of any distribution, we will withhold at a rate of 15% on any portion of a distribution not subject to withholding at a rate of 30%.
For any year in which we qualify as a REIT, distributions that are attributable to gain from our sales or exchanges of U.S. real property interests will be taxed to a non-U.S. stockholder under the provisions of the Foreign Investment in Real Property Tax Act of 1980 or FIRPTA. Under FIRPTA, distributions attributable to gain from sales of U.S. real property interests are taxed to a non-U.S. stockholder as if such gain were effectively connected with a U.S. business. Non-U.S. stockholders would thus be taxed at the normal capital gain rates applicable to U.S. stockholders (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals) for distributions that are designated as capital gain dividends and at the normal graduated rates for US shareholders on distributions that are not so designated. Also, distributions subject to FIRPTA may be subject to a 30% branch profits tax if a foreign corporate stockholder is not entitled to treaty exemption. We are required by applicable Treasury Regulations to withhold 35% for foreign individuals and 35% for foreign corporations of any distribution that we could designate as a capital gains dividend. This amount is creditable against the non-U.S. stockholder FIRPTA tax liability. If we designate prior distributions as capital gains dividends, then subsequent distributions up to the amount of such prior distributions will be treated as capital gains dividends for purposes of withholding.
Gain recognized by a non-U.S. stockholder upon a sale of our equity securities generally will not be taxed under FIRPTA if we are a “domestically controlled real estate investment trust,” defined generally as a real estate investment trust in which at all times during a specified testing period less than 50% in value of the stock were held directly or indirectly by foreign persons. We currently anticipate that we will be a “domestically controlled real estate investment trust,” and therefore the sale of equity securities will not be subject to taxation under FIRPTA. Additionally, the sale of our equity securities will not be taxed under FIRPTA if the class of stock is regularly traded on an established securities market and the selling non-U.S. stockholder has not held more than 10% (5% prior to December 18, 2015) of the class of stock at any time during the preceding five-year period. However, gain not subject to FIRPTA will be taxable to a non-U.S. stockholder if the investment in the stock is effectively connected with the non-U.S. stockholder’s U.S. trade or business, in which case the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain. Also, if the non-U.S. stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, the nonresident alien individual will be subject to a 30% tax (unless reduced or exempted by treaty) on the individual’s capital gains. A non-resident alien individual could, however, elect to treat such gain as effectively connected income and pay tax as a U.S. stockholder
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would. If the gain on the sale of stock were to be subject to taxation under FIRPTA, the non-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain.
If the proceeds of a disposition of our equity securities are paid by or through a U.S. office of a broker, the payment is subject to information reporting and to backup withholding unless the disposing non-U.S. stockholder certifies as to his name, address and non-U.S. status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds if the payment is made outside the United States through a non-U.S. office of a non-U.S. broker. U.S. information reporting requirements (but not backup withholding) will apply, however, to a payment of disposition proceeds outside the United States if (i) the payment is made through an office outside the United States of a broker that is either (a) a U.S. person, (b) a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, (c) a controlled foreign corporation for U.S. federal income tax purposes, or (d) a foreign partnership more than 50% of the capital or profits of which is owned by one or more U.S. persons or which engages in a U.S. trade or business and (ii) the broker fails to initiate documentary evidence that the stockholder is a non-U.S. stockholder and that certain conditions are met or that the non-U.S. stockholder otherwise is entitled to an exemption.
Recently enacted legislation will generally impose a 30% withholding tax on dividends paid on our stock, interest paid on our notes, and the gross proceeds of a disposition of our stock or notes paid to a foreign financial institution, unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). This legislation will also generally impose a 30% withholding tax on dividends paid on our stock, interest paid on our notes, and the gross proceeds of a disposition of our stock or notes paid to a non-financial foreign entity unless such entity provides the withholding agent with a certification identifying the direct and indirect U.S. owners of the entity. Under certain circumstances, a non-U.S. holder of our common stock might be eligible for refunds or credits of such taxes and may be required to file a U.S. federal income tax return to claim such refunds or credits. Under recently promulgated Treasury Regulations, these rules will be phased in over the next several years. Investors are encouraged to consult with their own tax advisors regarding the possible implications of this legislation on their investment in our stock and notes.
Other Tax Consequences. You should recognize that the present federal income tax treatment of an investment in us may be modified by legislative, judicial or administrative action at any time and that any action may affect investments and commitments previously made. The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes. Revisions in federal tax laws and interpretations of these laws could adversely affect the tax consequences of an investment in us.
Although the timing and nature of legislative changes is uncertain, based on recent comments made by the Administration and Congress, the possibility exists that there will be significant tax reform legislation considered by the current Congress. Among other things, measures impacting investments in real property could include tax rate reductions with base broadening including changes to the interest deduction, expensing of property improvements, and provisions related to infrastructure spending. Overseas property investment may also be impacted by international tax reform. Investments in pass-through entities may be impacted by tax reform. Any material alterations with respect to nonrecognition treatment for partnership contributions and distributions may affect the performance of our investment. Congress may enact all or none of these or adopt additional measures not mentioned. Consult a tax advisor with respect to legislative developments and their effect on an investment in us.
Investor Information
We make available to the public free of charge through our internet website our Annual Report on Form 10‑K,10-K, Quarterly Reports on Form 10‑Q,10-Q, Current Reports on Form 8‑K,8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and Exchange Commission (or
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SEC)(“SEC”). Our internet website address is www.LTCreit.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10‑K.10-K.
Posted on our website www.LTCreit.com under “Corporate Governance” in the “Investors” section are our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee Charters, our Corporate Governance Guidelines, and Code of Business Conduct and Ethics governing our directors, officers and employees. Within the time period required by the SEC and the New York Stock Exchange (or NYSE), we will post on our website any amendment to the Code of Business Conduct and Ethics and any waiver applicable to our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Directors. In addition, our website under “SEC Filings” in Investors section includes information concerning purchases and sales of our equity securities by our executive officers and directors.
You may read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 1‑800‑SEC‑0330. The SEC also maintains an Internet siteinternet website that contains reports, proxy statements and other information we file. The internet address of the SEC website is www.sec.gov.
You also may contact our Investor Relations Department at:
LTC Properties, Inc.
2829 Townsgate Road, Suite 350
Westlake Village, California 91361
Attn: Investor Relations
(805) 981‑8655981-8655
This section discusses risk factors that may affect our business, operations, and financial condition. If any of these risks, as well as other risks and uncertainties that we have not yet identified or that we currently think are not material, actually occur, we could be materially adversely affected and the value of our securities could decline. In addition, these risk factors contain “forward‑looking“forward-looking statements” as discussed above under the heading “Cautionary Statement.” The following information should be read in conjunction with Management’s Discussion and Analysis, and the consolidated financial statements and related notes in this Annual Report on Form 10‑ K.10-K.
A Failure to Maintain or Increase our Dividend Could Reduce the Market Price of Our Stock.The ability to maintain or raise our common dividend is dependent, to a large part, on growth of funds available for distribution. This growth in turn depends upon increased revenues from additional investments and loans, rental increases and mortgage rate increases.
At Times, We May Have Limited Access to Capital At Times, Which Will SlowCould Cause Our Growth.Growth to Slow. A REIT is required to make dividend distributions and retains little cash flow for growth. As a result, growth for a REIT is generally through the steady investment of new capital in real estate assets. ThereAt December 31, 2019, we had $4.2 million of cash on hand, $506.1 million available under our unsecured revolving line of credit. We also have the potential ability to access the capital markets through the issuance of $200.0 million of common stock under our equity distribution agreement and an indeterminate amount through the issuance of debt and/or equity securities under an automatic shelf registration statement. As a result, we currently believe our liquidity and various sources of available capital are sufficient to fund operations and development commitments, meet debt service obligations (both principal and interest), make dividend distributions and finance future investments should we determine such future investments are financially
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feasible. However, there may be times when we will have limited access to capital from the equity and/or debt markets. During such periods, virtually all of our available capital would be required to meet existing commitments and to reduce existing debt. We may not be able, during such periods, to obtain additional equity and/or debt capital or dispose of assets on favorable terms, if at all, at the time we require additional capital to acquire health care properties on a competitive basis or meet our obligations. At December 31, 2016, we had $8.0 million of cash on hand, $492.9 million available under our unsecured revolving line of credit and $22.5 million available under our shelf agreement with Prudential Investment Management, Inc. (or Prudential). Subsequent to December 31, 2016, we paid $4.2 million in regular scheduled principal payments and amended our shelf agreement with Prudential to increase our shelf commitment to $337.5 million. Additionally, subsequent to December 31, 2016, we sold 15-year senior unsecured notes in the aggregate amount of $100.0 million to a group of institutional investors, which included Prudential, in a private placement transaction. We used the proceeds to repay our outstanding balance under our unsecured revolving line of credit. Subsequent to these transactions, we have $36.7 million available under our amended shelf agreement with Prudential and $600.0 million available under our unsecured line of credit.
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Also, we also have the potential ability to access the capital markets through the issuance of $200.0 million of common stock under our equity distribution agreement and an indeterminate amount through the issuance of debt and/or equity securities under an effective shelf registration statement. Subsequent to December 31, 2016, we sold 312,881 shares of common stock for $14.6 million under our equity distribution agreement. Accordingly, we have $185.2 million available under this agreement.
As a result, we currently believe our liquidity and various sources of available capital are sufficient to fund operations and development commitments, meet debt service obligations (both principal and interest), make dividend distributions and finance some future investments should we determine such future investments are financially feasible.
Income and Returns from Health Care Facilities Can be Volatile. The There is a possibility that the health care properties in which we invest will not generate income sufficient to meet operating expenses, will generate income and capital appreciation, if any, at rates lower than those anticipated or will yield returns lower than those available through investments in comparable real estate or other investments are additional risks of investing in health care related real estate.investments. Income from properties and yields from investments in suchour properties may be affected by many factors, including changes in governmental regulation (such as zoning laws and government payment), general or local economic conditions (such as fluctuations in interest rates and employment conditions), the available local supply of and demand for improved real estate, a reduction in rental income as the result of an inability to maintain occupancy levels, natural disasters (such as hurricanes, earthquakes and floods) or similar factors.
We Depend on Lease Income and Mortgage PaymentsInterest Income from Real Property.Estate Investments. Approximately 99.5%98.6% of our revenue for the year ended December 31, 2016,2019, was derived from lease income and mortgage paymentsinterest income from real property.estate investments. Our revenue would be adversely affected if a significant number of our borrowers or lessees were unable to meet their obligations to us or if we were unable to lease our properties or make mortgage loans on economically favorable terms. There can be no assurance that any lessee will exercise its option to renew its lease upon the expiration of the initial term. There can be no assurance that if such failure to renew were to occur, or if we did not re‑leasere-lease a property to a current lessee, we could lease the property to others on favorable terms, at the same rent as the current rent, or on a timely basis.
We Rely on a Few Major Operators. During the year ended December 31, 2019, approximately 35.8% of our Operators.revenues from leases and interest income from real estate investments were generated from three operators. The failure, inability or unwillingness of these operators to meet their obligations to us could materially reduce our cash flow as well as our results of operations, which could in turn reduce the amount of dividends we pay, cause our stock price to decline and have other material adverse effects on our business, results of operations and financial condition.
We Depend on our Operators For Revenue and Cash Flow. Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals and interest earned on outstanding loans receivable. Our investments in owned properties and mortgage loans represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. Our financial position and ability to make distributions may be adversely affected by financial difficulties experienced by any of our lessees or borrowers, including bankruptcies, inability to emerge from bankruptcy, insolvency or general downturn in business of any such operator, or in the event any such operator does not renew and/or extend its relationship with us or our borrowers when it expires.
The Bankruptcy, Insolvency or Financial Deterioration of our Lessees Could Delay or Prevent Us From Collecting Unpaid Rents or Require Us to Find New Tenants to Operate our Properties. We have limited control over the success or failure of our operators’ businesses. If an operator experiences financial or legal difficulties, the operator may fail to make its rent payments when due or declare bankruptcy, either of which could result in the termination of the operator’s lease and adversely affect us. In the case of a master lease, this risk is magnified, as an operator default could reduce or eliminate rental revenue from several properties. Over the past three years, four of our operators have had or continue to have financial or legal difficulties resulting in non-payment of rent or bankruptcy. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview—Portfolio Overview—Update on Certain Operators for further discussion. If an operator is unable to comply with the terms of its leases, we may be forced to modify the leases in ways that are unfavorable to us. Alternatively, the failure of an operator to perform its obligations under its lease or other agreements with us could force us to declare a default, terminate the lease and transition or sell the property. We cannot provide any assurances that we would be able to find a suitable replacement operator, re-lease the property on substantially equivalent or better terms than the prior lease, or at all, successfully reposition the property for other uses, or sell the property on terms that are favorable to us. If a lessee seeks bankruptcy protection, the Bankruptcy Court may impose an automatic stay that would preclude us from collecting pre-bankruptcy obligations from that operator or seizing its property. An operator bankruptcy could also delay our efforts to collect past
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due amounts owed to us under the applicable lease and ultimately preclude collection of all or a portion of those amounts. In such a case, we may recover substantially less than the full value of any secured or unsecured claims we hold.
Our Remedies May Be Limited When Mortgage Loans Default. To the extent we invest in mortgage loans, such mortgage loans may or may not be recourse obligations of the borrower and generally will not be insured or guaranteed by governmental agencies or otherwise. In the event of a default under such obligations, we may have to foreclose on the property underlying the mortgage or protect our interest by acquiring title to a property and thereafter make substantial improvements or repairs in order to maximize the property’s investment potential. Borrowers may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against such enforcement and/or bring claims for lender liability in response to actions to enforce mortgage obligations. If a borrower seeks bankruptcy protection, the Bankruptcy Court may impose an automatic stay that would preclude us from enforcing foreclosure or other remedies against the borrower. Declines in the value of the property may prevent us from realizing an amount equal to our mortgage loan upon foreclosure.
Our Borrowers and Lessees Face Competition in the Health Care Industry. The long termlong-term care industry is highly competitive and we expect that it may become more competitive in the future. Our borrowers and lessees are competing with numerous other companies providing similar long termlong-term care services or alternatives such as home health agencies, hospices, life care at home, community-based service programs, retirement communities and convalescent centers. Additionally, our borrowers and lessees are employers who compete for labor. Accordingly, our borrowers and lessees are sensitive to changes in the labor market and wages and benefits offered to their employees, which can impact their ability to remain competitive. There can be no assurance that our borrowers and lessees will not encounter increased competition in the future which could limit their ability to attract residents or expand their businesses and therefore affect their ability to make their debt or lease payments to us.
The Health Care Industry is Heavily Regulated by the Government. Our borrowers and lessees who operate health care facilities are subject to extensive regulation by federal, state and local governments. These laws and regulations are subject to frequent and substantial changes resulting from legislation, adoption of rules and regulations, and administrative and judicial interpretations of existing law. These changes may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by both government and other third-party payors. These changes may be applied retroactively. The ultimate timing or effect of these changes cannot be predicted. For instance, the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”) may be subject to revision, replacement, or repeal. In addition, CMS has adopted regulations that impose new standards for long-term care facilities participating in the Medicare and Medicaid programs. See Item 1. Business—Health Care Regulation. The failure of any borrower of funds from us or lessee of any of our properties to comply with such laws, requirements and regulations could affect its ability to operate its facility or facilities and could adversely affect such lessee’s or borrower’s ability to make lease or debt payments to us.
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In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”). The Affordable Care Act is designed to expand access to affordable health insurance, contain health care costs, and institute a variety of health policy reforms. The provisions of this sweeping law may affect us directly, as well as impact our lessees and borrowers. While certain provisions, such as expanding the insured population, may positively impact the revenues of our lessees and borrowers, other provisions, particularly those intended to reduce federal health care spending, could have a negative impact on our lessees and borrowers. Among other things, the Affordable Care Act: reduced Medicare skilled nursing facility reimbursement by a so-called “productivity adjustment” based on economy-wide productivity gains beginning in fiscal year 2012; required the development of a value-based purchasing program for Medicare skilled nursing facility services; established a national voluntary pilot program to bundle Medicare payments for hospital and post-acute services that could lead to changes in the delivery of post-acute services; and provided incentives to state Medicaid programs to promote community-based care as an alternative to institutional long term care services. The Affordable Care Act also expanded public disclosure about nursing home ownership and operations, instituted mandatory compliance and quality assurance programs, increased penalties for noncompliance, and expanded fraud and abuse enforcement and penalty provisions that could impact our operators. In addition, the Affordable Care Act impacts both us and our lessees and borrowers as employers, including requirements related to the health insurance we offer to our respective employees. Many aspects of the Affordable Care Act have been implemented through regulations and subregulatory guidance. Moreover, President Trump and some members of Congress have called for repeal of the Affordable Care Act and replacement with alternative reforms. The details and timing of any such actions are unknown at this time. There can be no assurance that the Affordable Care Act or any subsequent repeal and/or reform legislation will not adversely impact the operations, cash flows or financial condition of our lessees and borrowers, which subsequently could materially adversely impact our revenue and operations.
The Protecting Access to Medicare Act of 2014 requires the Secretary of the Department of Health and Human Services to develop a skilled nursing facility “value-based purchasing program,” which will tie Medicare payments to skilled nursing facilities to their performance on certain new readmissions measures, applicable to services furnished beginning October 1, 2018. Furthermore, the Improving Medicare Post-Acute Care Transformation Act of 2014 requires the collection of standardized post-acute care assessment data, which eventually could be used as the basis for developing changes to Medicare post-acute care reimbursement policy. The Medicare Access and CHIP Reauthorization Act of 2015 sets the annual skilled nursing facility prospective payment system update for fiscal year 2018 at 1%.
Additional reforms affecting the payment for and availability of health care services have been proposed at the state level and adopted by certain states. Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies along with other cost-control measures. For instance, under the terms of the Budget Control Act of 2011, as modified by the American Taxpayer Relief Act, President Obama issued a sequestration order on March 1, 2013 that mandates a 2% cut to Medicare payments to providers and health plans. The cuts generally apply to Medicare fee-for-service claims with dates-of-service or dates-of-discharge on or after April 1, 2013. As amended by subsequent legislation, the Medicare sequestration cuts are currently scheduled to be applied through fiscal year 2025, although Congress and the Administration could enact legislation at any time that modifies sequestration.
CMS has also adopted regulations that impose new standards that long-term care facilities must meet to participate in the Medicare and Medicaid programs, including an October 4, 2016 final rule that addresses requirements for improving quality of care and patient safety, nursing facility staffing, care planning, binding arbitration agreements, infection control, residents’ rights, compliance and ethics programs, and several other areas. Separately, CMS published a final rule on September 16, 2016 establishing emergency preparedness requirements for Medicare- and Medicaid-participating providers and suppliers, including long-term care facilities, to ensure that they can meet the needs of patients and residents during natural and man-made emergency situations. In addition, CMS published a final rule on May 4, 2016 amending fire safety standards applicable to long-term care facilities and certain other types of Medicare- and Medicaid-participating health care facilities. These and other changes in the law or regulations, such as the adoption of new requirements for participation in the Medicare and Medicaid programs, new interpretations of existing laws, or changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third party payors.
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Federal and State Health Care Cost Containment Measures Including Reductions in Reimbursement From Third PartyThird-Party Payors Such as Medicare and Medicaid Could Adversely Affect Us and The Ability of Our Operators to Make Payments to Us. The ability of our borrowers and lessees to generate revenue and profit determines the underlying value of that property to us. Revenues of our borrowers and skilled nursing center lessees are generally derived from payments for patient care. Sources of such payments include the federal Medicare program, state Medicaid programs, private insurance carriers, health care service plans, health maintenance organizations, preferred provider arrangements, self-insured employers, as well as the patients themselves.
The health care industry continues to face increased government and private payor pressure on health care providers to control costs. Certain of these initiatives have had the result of limiting Medicare and Medicaid reimbursement for nursing facility services. Federal legislative and regulatory policies have been adopted and may continue to be proposed that would reduce Medicare and/or Medicaid payments to nursing facilities. Moreover, state budget pressures continue to result in adoption of Medicaid provider payment reductions in some states. No assurances can be given that any additional Medicare orIncreasingly, state Medicaid legislation or regulatory policies adopted by the federal government or the states would not reduce Medicare orprograms are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid reimbursement to nursing facilities or result in additional costs for operators of nursing facilities.
Congress also has given states greater flexibility to expand access to home and community based services as an alternative to nursing facility services. These provisions could further increase state funding for home and community based services, while prompting states to cut funding for nursing facilities and homes for persons with disabilities.costs. The Trump Administration and Congress are also considering revising federal payments to state Medicaid programs to be in the form ofestablish block grants or impose per capita limits on federal Medicaid payments to states.states, and the Trump Administration has announced that states may apply to receive payment on such a basis for limited patient populations under a new “Healthy Adult Opportunity” (HAO) Demonstration. See Item 1. Business—Health
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Care Regulation. In light of continuing federal and state Medicaid program reforms, budget cuts, and regulatory initiatives, no assurance can be given that the implementation of such regulations and reforms will not have a material adverse effect on the financial condition or results of operations of our lessees and/or borrowers which, in turn, could affect their ability to meet their contractual obligations to us.
Insurance Coverage Maintained by Our Borrowers and Lessees May Not Adequately Insure Against Losses.As a non-possessory landlord, we contend we are not generally responsible for what takes place on real estate we do not possess. Although we require our borrowers and lessees to secure adequate comprehensive liability insurance that covers us as well as the borrower or lessee, we may be subject to losses due to noncompliance or insufficient coverage. In addition, certain risks may be uninsurable, not economically insurable or insurance may not be available. There can be no assurance that we, a borrower or lessee will have adequate insurance or funds to cover all contingencies. If an uninsured loss occurs or a loss exceeds policy limits, we could lose both invested capital and anticipated revenues from a property, thereby reducing a property’s cash flow and asset value.
We Could Incur More Debt. We operate with a policy of incurring debt when, in the opinion of our Board of Directors, it is advisable. We may incur additional debt by borrowing under our unsecured revolving line of credit, or the uncommitted private shelf agreement, mortgaging properties we own and/or issuing debt securities in a public offering or in a private transaction. Accordingly, we could become more highly leveraged. The degree of leverage could have important consequences to stockholders, including affecting our ability to obtain, in the future, additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes and making us more vulnerable to a downturn in business or the economy generally.
The Phase-out of LIBOR Could Affect Interest Rates. LIBOR is used as a reference rate for unsecured revolving line of credit. On July 27, 2017, the United Kingdom's Financial Conduct Authority announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. It is unclear if LIBOR will cease to exist at that time, if a new method of calculating LIBOR will be established, or if an alternative reference rate will be established. The Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to U.S. dollar LIBOR in derivatives and other financial contracts. We are not able to predict when LIBOR will cease to be available or if SOFR, or another alternative rate reference rate, attains market traction as a LIBOR replacement. If LIBOR ceases to exist, we will need to agree upon a benchmark replacement index for our unsecured revolving line of credit. The new rate may not be as favorable as those in effect prior to any LIBOR phase-out. Furthermore, the transition process may result in delays in funding, higher interest expense, additional expenses, and increased volatility in markets for instruments that currently rely on LIBOR, all of which could negatively impact our cash flow.
We Could Fail to Collect Amounts Due Under Our Straight‑lineStraight-line Rent Receivable Asset. GAAP U.S. generally accepted accounting principles (“GAAP”) requires us to calculate the total rent we will receive asfrom leases that contain fixed annual rental escalations and/or have annual rental escalations that are contingent upon changes in the Consumer Price Index, on a fixed amountstraight-line basis over the life ofminimum lease period. If the lease and recognize that revenue evenly over that life. Inincome is calculated on a situation where a lease calls for fixed rental increasesstraight-line basis during the life of the lease, rental income recorded in the early years of a lease is higher than the actual cash rent received which creates an asset on the consolidated balance sheet called straight‑linestraight-line rent receivable. At some point during the lease, depending on the rent levels and terms, this reverses and the cash rent payments received during the later years of the lease are higher than the rental income recognized which reduces the straight‑linestraight-line rent receivable balance to zero by the end of the lease. We periodicallyPer ASC 842, lessors are required to assess the collectabilityprobability of collecting substantially all of the straight‑line rent receivable.lease payments. The standard defines collectibility as lessee’s ability and intent to pay. If during our assessment we determined that we were unlikely to collectcollectibility of substantially all of the lease payments through maturity is not probable, all or a portion orof the entire straight‑linestraight-line rent receivable asset, weand other lease receivables may provide a reserve againstbe written-off, and the previouslyrental income recorded during the period would be limited to lesser of the income that would have been recognized straight‑line rent receivable asset for a portion or up to its full value that we estimate may not be recoverable.if collection were probable, and the lease payments received. Our assessment of collectibility of leases includes evaluating the date and assumptions used in determining whether substantially all of the future lease payments were probable based on the lessee’s payment history, the financial strength of the lessees, future contractual rents, and the timing of expected payments.
Our Assets May be Subject to Impairment Charges. We periodically but not less than quarterly evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, operator performance and legal structure. If we determine that a significant
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an impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset which could have a material adverse effect on our results of operations and a non‑cash impact on funds from operations in the period in which the write‑offwrite-off occurs.
A Failure to Reinvest Cash Available to Us Could Adversely Affect Our Future Revenues and Our Ability to Increase Dividends to Stockholders; There is Considerable Competition in Our Market for Attractive Investments. From
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time to time, we will have cash available from (1) proceeds of sales of shares of securities, (2) proceeds from new debt issuances, (3) principal payments on our mortgages and other investments, (4) sale of properties, and (5) funds from operations. We may reinvest this cash in health care investments and in accordance with our investment policies, repay outstanding debt or invest in qualified short termshort-term or long termlong-term investments. We compete for real estate investments with a broad variety of potential investors. The competition for attractive investments negatively affects our ability to make timely investments on acceptable terms. Delays in acquiring properties or making loans will negatively impact revenues and perhaps our ability to increase distributions to our stockholders.
Our Failure to Qualify as a REIT Would Have Serious Adverse Consequences to Our Stockholders. We intend to operate so as to qualify as a REIT under the Internal Revenue Code of 1986, as amended, or the Code. We believe that we have been organized and have operated in a manner which would allow us to qualify as a REIT under the Code beginning with our taxable year ended December 31, 1992. However, it is possible that we have been organized or have operated in a manner which would not allow us to qualify as a REIT, or that our future operations could cause us to fail to qualify. Qualification as a REIT requires us to satisfy numerous requirements (some on an annual and quarterly basis) established under highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must be derived from qualifying sources, and we must pay dividends to stockholders aggregating annually at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and by excluding capital gains). Legislation, new regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal and state income tax (including any applicable alternative minimum tax)tax for taxable years ending prior to January 1, 2018) on our taxable income at regular corporate rates. Unless we are entitled to relief under statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost qualification. If we lose our REIT status, our net earnings available for investment or distribution to stockholders would be significantly reduced for each of the years involved. In addition, we would no longer be required to make distributions to stockholders.
Recent Changes to the U.S. Tax Laws Could Have a Significant Negative Impact on the Overall Economy, Our Tenants, Our Investors, and Our Business. On December 22, 2017, H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”) was signed into law making significant changes to the Code. Relevant changes include, but are not limited to the following:
● | a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, |
● | an immediate 100% deduction of the cost of certain capital asset investments (generally excluding real estate assets), subject to a phase-down of the deduction percentage over time, |
● | restrictions to the deductibility of interest expense by businesses (generally, to 30% of the business’ adjusted taxable income) except, among others, real property businesses electing out of such restriction; generally, we expect our business to qualify as such a real property business, |
● | the use of the less favorable alternative depreciation system to depreciate real property in the event a real property business elects to avoid the interest deduction restriction above, |
● | elimination of the corporate alternative minimum tax, |
● | restriction limiting the benefits of like-kind exchanges that defer capital gains for tax purposes to exchanges of real property; and |
● | implementation of a one-time transition tax on the mandatory deemed repatriation of foreign earnings. |
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While the changes in the TCJA generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisions in the Code may have unanticipated effects on us or our stockholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be reviewed in subsequent tax legislation. At this point, it is not clear when Congress will address these issues or when the Internal Revenue Service will issue administrative guidance on the changes made in the TCJA.
As a result of the changes to U.S. federal tax laws implemented by the TCJA, our taxable income and the amount of distributions to our stockholders required in order to maintain our REIT status, and our relative tax advantage as a REIT, may significantly change. The long-term impact of the TCJA on the overall economy, government revenues, our tenants, us, and the real estate industry cannot be reliably predicted at this early stage of the new law’s implementation. Furthermore, the TCJA may negatively impact certain of our tenants’ operating results, financial condition, and future business plans. The TCJA may also result in reduced government revenues, and therefore reduced government spending, which may negatively impact some of our tenants that rely on government funding. There can be no assurance that the TCJA will not negatively impact our operating results, financial condition, and future business operations.
Provisions in Our Articles of Incorporation May Limit Ownership of Shares of Our Capital Stock. In order for us to qualify as a REIT, no more than 50% in value of the outstanding shares of our stock may be beneficially owned, directly or indirectly, by five or fewer individuals at any time during the last half of each taxable year. To ensure qualification under this test, our Articles of Incorporation provide that, subject to exceptions, no person may beneficially own more than 9.8% of outstanding shares of any class or series of our stock, including our common stock. Our Board of Directors may exempt a person from the 9.8% ownership limit upon such conditions as the Board of Directors may direct. However, our Board of Directors may not grant an exemption from the 9.8% ownership limit if it would result in the termination of our status as a REIT. Shares of capital stock in excess of the 9.8% ownership limitation that lack an applicable exemption may lose rights to dividends and voting, and may be subject to redemption. As a result of the limitations on ownership set forth in our Articles of Incorporation, acquisition of any shares of capital stock that would result in our disqualification as a REIT may be limited or void. The 9.8% ownership limitation also may have the effect of delaying, deferring, or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our capital stock.
Our Real Estate Investments are Relatively Illiquid. Real estate investments are relatively illiquid and, therefore, tend to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. All of our properties are “special purpose” properties that cannot be readily converted to general residential, retail or office use. Health care facilities that participate in Medicare or Medicaid must meet extensive program requirements, including physical plant and operational requirements, which are revised from time to time. Such requirements may include a duty to admit Medicare and Medicaid patients, limiting the ability of the facility to increase its private pay census beyond certain limits. Medicare and Medicaid facilities are regularly inspected to determine compliance, and may be excluded from the programs—in some cases without a prior hearing—for failure to meet program requirements. Transfers of operations of nursing homes and other health care‑relatedcare-related facilities are subject to regulatory approvals not required for transfers of other types of commercial operations and other types of real estate. Thus, if the operation of any of our properties becomes unprofitable due to competition, age of improvements or other factors such that our lessee or
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borrower becomes unable to meet its obligations on the lease or mortgage loan, the liquidation value of the property may be substantially less than the net book value or the amount owing on any related mortgage loan, than would be the case if the property were readily adaptable to other uses. The receipt of liquidation proceeds or the replacement of an operator that has defaulted on its lease or loan could be delayed by the approval process of any federal, state or local agency necessary for the transfer of the property or the replacement of the operator with a new operator licensed to manage the facility. In addition, certain significant expenditures associated with real estate investment, such as real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment. Should such events occur, our income and cash flows from operations would be adversely affected.
Our Remedies May Be Limited When Mortgage Loans Default. To the extent we invest in mortgage loans, such mortgage loans may or may not be recourse obligations of the borrower and generally will not be insured or guaranteed by governmental agencies or otherwise. In the event of a default under such obligations, we may have to foreclose on the property underlying the mortgage or protect our interest by acquiring title to a property and thereafter make substantial improvements or repairs in order to maximize the property’s investment potential. Borrowers may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against such enforcement and/or bring claims for lender liability in response to actions to enforce mortgage obligations. If a borrower seeks bankruptcy protection, the Bankruptcy Court may impose an automatic stay that would preclude us from enforcing foreclosure or other remedies against the borrower. Declines in the value of the property may prevent us from realizing an amount equal to our mortgage loan upon foreclosure.
We are Subject to Risks and Liabilities in Connection with Properties Owned Through Limited Liability Companies and Partnerships. We currently have an investment in a limited liability company and we may make
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additional investments through these ventures in the future. Partnership or limited liability company investments may involve risks such as the following:
| our partners or |
| our partners or |
| our partners or |
| agreements governing limited liability companies and partnerships often contain restrictions on the transfer of a member’s or partner’s interest or |
We will, however, generally seek to maintain sufficient control of our partnerships and limited liability companies to permit us to achieve our business objectives. Our organizational documents do not limit the amount of available funds that we may invest in partnerships or limited liability companies. The occurrence of one or more of the events described above could have a direct and adverse impact on us.
Risks Associated with Property Development that Can Render a Project Less Profitable or Not Profitable, and, Under Certain Circumstances, Prevent Completion of Development Activities Undertaken. Our business includes development of seniorseniors housing and health care properties. Ground up development presents additional risk, including but not limited to the following:
| a development opportunity may be abandoned after expending significant resources resulting in the loss of deposits or failure to recover expenses already incurred; |
| the development and construction costs of a project may exceed original estimates due to increased interest rates and higher materials, transportation, labor, leasing or other costs, which could make completion of the development project less profitable; |
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| construction and/or permanent financing may not be available on favorable terms or at all; |
| the project may not be completed on schedule, which can result in increases in construction costs and debt service expenses as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, regulatory hurdles, civil unrest and acts of war; and |
| occupancy rates and rents at a newly completed property may not meet expected levels and could be insufficient to make the property profitable. |
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent completion of development activities once undertaken, any of which could have a material adverse effect on our business, results of operations and financial condition.
The Failure, Inadequacy, Interruption or Security Failure of Our Information Technology Could Harm Our Business. We rely on information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, operator and lease data. We purchase some of our information technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential operator and other customer information, such as individually identifiable information, including information relating to financial accounts. Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not be able to prevent the systems’ improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks. Because our operators also rely on information technology networks, systems and software, we may be exposed to cyber-attacks on our operators. Security
19
breaches of our or our operators’ networks and systems, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information. Any failure to maintain proper function, security and availability of our and our operators’ information systems and the data maintained in those systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties, harm our business relationships or increase our security and insurance costs, which could have a material adverse effect on our business, results of operations and financial condition.
Item 1B. UNRESOLVED STAFF COMMENTSCOMMENTS
None.
20
29
Item 2. PROPERTIES
Here and throughout this Annual Report on Form 10‑K10-K wherever we provide details of our properties’ bed/unit count, the number of beds/units applies to skilled nursing, assisted living, independent living, memory care and behavioral health care properties only. This number is based upon unit/bed counts shown on operating licenses provided to us by lessees/borrowers or units/beds as stipulated by lease/mortgage documents. These numbers often differ, usually not materially by property, from units/beds in operation at any point in time. The differences are caused by such things as operators converting a patient/resident room for alternative uses, such as offices or storage, or converting a multi‑patientmulti-patient room/unit into a single patient room/unit. We monitor our properties on a routine basis through site visits and reviews of current licenses. In an instance where such change would cause a de‑licensingde-licensing of beds or in our opinion impact the value of the property, we may take action against the lessee/borrower to preserve the value of the property/collateral.
Owned Properties. The following table sets forth certain information regarding our owned properties as of December 31, 20162019 (dollars amounts in thousands):
| | | | | | | | | | | | | | | | | | |
|
| |
| |
| |
| |
| | |
| Remaining |
| | | |
|
| | No. of | | No. of | | No. of | | No. of | | | | | Lease | | Gross | |
| |
Location | | SNFs | | ALFs | | Others | | Beds/Units | | Encumbrances | | Term (1) | | Investments | |
| ||
Alabama |
| 1 |
| — |
| — | | 174 | | $ | — | | 76 | | $ | 9,734 | | |
Arizona |
| 4 |
| — |
| — | | 807 | |
| — | | 49 | |
| 32,667 | | |
California |
| 2 |
| 5 |
| — | | 755 | |
| — | | 104 | |
| 103,240 | | |
Colorado |
| 3 |
| 13 |
| — | | 980 | |
| — | | 84 | |
| 114,923 | | |
Florida |
| 4 |
| 7 |
| — | | 823 | |
| — | | 66 | |
| 72,169 | | |
Georgia |
| — |
| 1 |
| — | | 70 | |
| — | | 18 | |
| 14,382 | | |
Illinois |
| — |
| 5 |
| — | | 418 | |
| — | | 140 | |
| 87,604 | | |
Iowa |
| 7 |
| — |
| — | | 544 | |
| — | | — | (2) |
| 14,610 | | |
Kansas |
| 3 |
| 8 |
| — | | 681 | |
| — | | 84 | |
| 71,505 | | |
Kentucky |
| 2 |
| 1 |
| — | | 346 | |
| — | | 156 | |
| 62,715 | | |
Michigan |
| — |
| 2 |
| — | (3) | 156 | |
| — | | 114 | |
| 20,083 | | |
Mississippi |
| — |
| 1 |
| — | | 62 | |
| — | | 60 | |
| 9,430 | | |
Missouri | | 1 | | 1 | | — | | 163 | | | — | | 102 | | | 40,379 | (4) | |
Nebraska |
| — |
| 4 |
| — | | 159 | |
| — | | 141 | |
| 10,104 | | |
Nevada | | — | | — | | 1 | | 118 | | | — | | 62 | | | 10,416 | | |
New Jersey |
| — |
| 4 |
| — | | 205 | |
| — | | 98 | |
| 62,146 | | |
New Mexico |
| 7 |
| — |
| — | | 843 | |
| — | | 73 | |
| 50,912 | | |
N. Carolina |
| — |
| 5 |
| — | | 210 | |
| — | | 12 | |
| 13,096 | | |
Ohio |
| 2 |
| 7 |
| — | | 580 | |
| — | | 149 | |
| 86,474 | | |
Oklahoma |
| — |
| 6 |
| — | | 219 | |
| — | | 12 | |
| 12,315 | | |
Oregon |
| 1 |
| 1 |
| — | | 188 | |
| — | | 51 | |
| 33,408 | (5) | |
Pennsylvania |
| — |
| 2 |
| — | | 129 | |
| — | | 141 | |
| 9,714 | | |
S. Carolina |
| 2 |
| 5 |
| — | | 515 | |
| — | | 35 | |
| 48,155 | | |
Tennessee |
| 2 |
| — |
| — | | 141 | |
| — | | 48 | |
| 5,275 | | |
Texas |
| 23 |
| 17 |
| — | | 4,033 | |
| — | | 92 | |
| 284,697 | | |
Virginia |
| 4 |
| 1 |
| — | | 574 | |
| — | | 86 | |
| 47,104 | | |
Washington |
| 1 |
| — |
| — | | 123 | |
| — | | 19 | |
| 8,024 | | |
Wisconsin |
| 1 |
| 10 |
| — | | 954 | |
| — | | 129 | |
| 149,290 | | |
TOTAL |
| 70 |
| 106 |
| 1 | | 14,970 | | $ | — | | 96 | | $ | 1,484,571 | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Remaining |
|
|
|
|
|
| No. of |
| No. of |
| No. of |
| No. of |
| No. of |
| No. of |
|
|
|
| Lease |
| Gross |
| |
Location |
| SNFs |
| ALFs |
| ROCs |
| UDPs |
| Others |
| Beds/Units |
| Encumbrances |
| Term(1) |
| Investments |
| ||
Alabama |
| 2 |
| — |
| 1 |
| — |
| — |
| 459 |
| $ | — |
| 70 |
| $ | 18,622 |
|
Arizona |
| 5 |
| — |
| — |
| — |
| — |
| 967 |
|
| — |
| 40 |
|
| 40,764 |
|
California |
| 2 |
| 3 |
| — |
| — |
| — |
| 574 |
|
| — |
| 81 |
|
| 62,889 |
|
Colorado |
| 2 |
| 13 |
| 1 |
| — |
| — |
| 980 |
|
| — |
| 122 |
|
| 114,923 |
|
Florida |
| 5 |
| 7 |
| — |
| — |
| — |
| 852 |
|
| — |
| 103 |
|
| 74,609 |
|
Georgia |
| 2 |
| 1 |
| — |
| — |
| — |
| 327 |
|
| — |
| 158 |
|
| 19,242 |
|
Illinois |
| — |
| 3 |
| — |
| — | (2) | — |
| 286 |
|
| — |
| 153 |
|
| 63,233 |
|
Indiana |
| — |
| 3 |
| — |
| — |
| — |
| 140 |
|
| — |
| 177 |
|
| 10,104 |
|
Iowa |
| 6 |
| 1 |
| 1 |
| — |
| — |
| 579 |
|
| — |
| 80 |
|
| 17,630 |
|
Kansas |
| 3 |
| 8 |
| — |
| — |
| — |
| 689 |
|
| — |
| 115 |
|
| 70,569 |
|
Kentucky |
| 1 |
| 1 |
| — |
| — | (3) | — |
| 203 |
|
| — |
| 124 |
|
| 43,628 |
|
Michigan |
| — |
| — |
| — |
| — |
| — | (4) | — |
|
| — |
| — |
|
| 943 |
|
Mississippi |
| — |
| 1 |
| — |
| — |
| — |
| 62 |
|
| — |
| 96 |
|
| 9,430 |
|
Nebraska |
| — |
| 4 |
| — |
| — |
| — |
| 157 |
|
| — |
| 177 |
|
| 9,595 |
|
Nevada |
| — |
| — |
| — |
| — |
| 1 |
| 118 |
|
| — |
| 98 |
|
| 9,274 |
|
New Jersey |
| — |
| 4 |
| — |
| — |
| — |
| 205 |
|
| — |
| 134 |
|
| 62,042 |
|
New Mexico |
| 7 |
| — |
| — |
| — |
| — |
| 843 |
|
| — |
| 109 |
|
| 50,913 |
|
N. Carolina |
| — |
| 5 |
| — |
| — |
| — |
| 210 |
|
| — |
| 48 |
|
| 13,096 |
|
Ohio |
| 2 |
| 11 |
| — |
| — |
| — |
| 772 |
|
| — |
| 99 |
|
| 99,300 |
|
Oklahoma |
| — |
| 6 |
| — |
| — |
| — |
| 219 |
|
| — |
| 48 |
|
| 12,315 |
|
Oregon |
| 1 |
| 1 |
| — |
| — |
| — |
| 135 |
|
| — |
| 34 |
|
| 7,347 |
|
Pennsylvania |
| — |
| 3 |
| — |
| — |
| — |
| 199 |
|
| — |
| 103 |
|
| 18,040 |
|
S. Carolina |
| — |
| 4 |
| 2 |
| — |
| — |
| 428 |
|
| — |
| 104 |
|
| 35,290 |
|
Tennessee |
| 2 |
| — |
| — |
| — |
| — |
| 141 |
|
| — |
| 84 |
|
| 5,275 |
|
Texas |
| 24 |
| 16 |
| 1 |
| — |
| — |
| 4,340 |
|
| — |
| 126 |
|
| 268,955 |
|
Virginia |
| 3 |
| — |
| 1 |
| — |
| — |
| 500 |
|
| — |
| 97 |
|
| 29,378 |
|
Washington |
| 1 |
| — |
| — |
| — |
| — |
| 123 |
|
| — |
| 55 |
|
| 8,024 |
|
Wisconsin |
| 1 |
| 9 |
| — |
| — |
| — |
| 844 |
|
| — |
| 168 |
|
| 126,133 |
|
TOTAL |
| 69 |
| 104 |
| 7 |
| — |
| 1 |
| 15,352 |
| $ | — |
| 117 |
| $ | 1,301,563 |
|
(1) |
| Weighted average remaining months in lease term as of December 31, |
(2) |
|
|
(3) |
|
|
| Includes three parcels of land |
(4) | Includes amounts relating to the development cost of a 90-bed SNF. |
(5) | Includes amounts relating to the development cost of a 78-unit ALF/MC. |
21
30
The following chart represents 10 states with the highest percentage of gross investment for our owned properties as of December 31, 2019:
The following table sets forth certain information regarding our lease expirations for our owned properties as of December 31, 2016 2019 (dollars amounts in thousands):
| | | | | | | | | | | | | | | | |
|
| |
| |
| |
| |
| |
| Annualized |
| % of Annualized | ||
| | No. of | | No. of | | No. of | | No. of | | No. of | | Rental | | Rental Income | ||
Year | | SNFs | | ALFs | | Others | | Beds/Units | | Operators | | Income (1) | | Expiring | ||
2020 |
| — |
| 35 |
| — |
| 1,471 |
| 1 | | $ | 13,648 |
| 10.2 | % |
2021 |
| 3 |
| 2 |
| — |
| 493 |
| 3 | | | 3,958 |
| 2.9 | % |
2022 |
| 1 |
| — |
| — |
| 121 |
| 1 | | | 771 |
| 0.6 | % |
2023 |
| 5 |
| — |
| — |
| 456 |
| 3 | | | 3,332 |
| 2.5 | % |
2024 |
| 3 |
| 11 |
| — |
| 1,140 |
| 2 | | | 5,140 |
| 3.8 | % |
2025 |
| 6 |
| 1 |
| 1 |
| 981 |
| 2 | | | 9,087 |
| 6.8 | % |
2026 |
| 13 |
| — |
| — |
| 1,678 |
| 2 | | | 16,429 |
| 12.2 | % |
2027 |
| — |
| 9 |
| — |
| 611 |
| 3 | | | 11,257 |
| 8.4 | % |
2028 |
| — |
| 3 |
| — |
| 177 |
| 2 | | | 2,873 |
| 2.1 | % |
2029 |
| 1 |
| 11 |
| — |
| 1,098 |
| 8 | | | 10,314 |
| 7.7 | % |
Thereafter |
| 16 |
| 34 |
| — |
| 4,237 |
| 5 | | | 57,562 |
| 42.8 | % |
TOTAL |
| 48 | (2) | 106 | | 1 |
| 12,463 | (2) | | | $ | 134,371 | (2) | 100.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Annualized |
| % of Annualized |
| |
|
| No. of |
| No. of |
| No. of |
| No. of |
| No. of |
| No. of |
| Rental |
| Rental Income |
| |
Year |
| SNFs |
| ALFs |
| ROCs |
| Others |
| Beds/Units |
| Operators |
| Income(1) |
| Expiring |
| |
2017 |
| 1 |
| — |
| — |
| — |
| 60 |
| 1 |
|
| 359 |
| 0.3 | % |
2018 |
| 2 |
| 9 |
| 1 |
| — |
| 1,061 |
| 4 |
|
| 9,297 |
| 6.7 | % |
2019 |
| 3 |
| — |
| — |
| — |
| 613 |
| 1 |
|
| 1,571 |
| 1.1 | % |
2020 |
| 1 |
| 35 |
| — |
| — |
| 1,639 |
| 2 |
|
| 13,826 |
| 9.9 | % |
2021 |
| 26 |
| — |
| 4 |
| — |
| 3,450 |
| 4 |
|
| 14,091 |
| 10.1 | % |
2022 |
| 1 |
| — |
| — |
| — |
| 121 |
| 1 |
|
| 771 |
| 0.6 | % |
2023 |
| 4 |
| — |
| — |
| — |
| 326 |
| 2 |
|
| 2,539 |
| 1.8 | % |
2024 |
| — |
| 10 |
| — |
| — |
| 471 |
| 1 |
|
| 2,611 |
| 1.9 | % |
2025 |
| 6 |
| 3 |
| — |
| 1 |
| 1,166 |
| 3 |
|
| 11,181 |
| 8.0 | % |
2026 |
| 11 |
| — |
| 2 |
| — |
| 1,755 |
| 2 |
|
| 15,490 |
| 11.0 | % |
Thereafter |
| 14 |
| 46 |
| — |
| — |
| 4,654 |
| 7 |
|
| 67,992 |
| 48.6 | % |
TOTAL |
| 69 |
| 103 | (2) | 7 |
| 1 |
| 15,316 |
|
| (3) | $ | 139,728 |
| 100.0 | % |
(1) |
|
|
(2) |
| Excludes |
|
|
22
Mortgage Loans. The following table sets forth certain information regarding our mortgage loans as of December 31, 20162019 (dollars amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
|
| |
| |
| |
| |
| |
| Average |
| Original |
| | |
| Current |
| ||
| | No. of | | No. of | | No. of | | No. of | | Interest | | Months to | | Face Amount | | Gross | | Annual Debt |
| |||
Location | | SNFs | | ALFs | | OTHs | | Beds/ Units | | Rate | | Maturity | | of Mortgage Loans | | Investments | | Service (1) |
| |||
Michigan (2) |
| 22 |
| — |
| — |
| 2,892 |
| 9.2%-9.9% | | 292 | | $ | 258,171 | | $ | 256,659 | | $ | 25,007 | |
TOTAL |
| 22 |
| — |
| — |
| 2,892 | | | | 292 | | $ | 258,171 | | $ | 256,659 | | $ | 25,007 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average |
| Original |
|
|
|
| Current |
| ||
|
| No. of |
| No. of |
| No. of |
| No. of |
| Interest |
| Months to |
| Face Amount |
| Gross |
| Annual Debt |
| |||
Location |
| SNFs |
| ALFs |
| OTHs |
| Beds/ Units |
| Rate |
| Maturity |
| of Mortgage Loans |
| Investments |
| Service(1) |
| |||
Arizona |
| — |
| 1 |
| — |
| 100 |
| 7.5% |
| 31 |
| $ | 3,257 |
| $ | 3,210 |
| $ | 357 |
|
Michigan |
| 20 |
| — |
| — |
| 2,748 |
| 9.41%-9.53% |
| 314 |
|
| 207,639 |
|
| 214,142 |
|
| 20,227 |
|
Missouri |
| 1 |
| — |
| — |
| 100 |
| 11.6% |
| 12 |
|
| 1,500 |
|
| 2,120 |
|
| 487 |
|
Pennsylvania |
| — |
| 1 |
| — |
| 70 |
| 7.32% |
| 3 |
|
| 5,100 |
|
| 4,686 |
|
| 418 |
|
Texas |
| 1 |
| 6 |
| — |
| 201 |
| 10.70%-13.95% |
| 18 |
|
| 8,315 |
|
| 5,593 |
|
| 1,046 |
|
Utah |
| 1 |
| — |
| — |
| 84 |
| 11.05% |
| 35 |
|
| 1,400 |
|
| 1,158 |
|
| 174 |
|
Virginia |
| — |
| — |
| — | (2) | — |
| 9.00% |
| 3 |
|
| 1,208 |
|
| 1,207 |
|
| 112 |
|
TOTAL |
| 23 |
| 8 |
| — |
| 3,303 |
|
|
| 291 |
| $ | 228,419 |
| $ | 232,116 |
| $ | 22,821 |
|
(1) |
| Includes principal and interest payments. |
(2) |
|
|
Item 3. LEGAL PROCEEDINGS
We are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of our business, which in our opinion are not singularly or in the aggregate anticipated to be material to our results of operations or financial condition. Claims and lawsuits may include matters involving general or professional liability asserted against the lessees or borrowers of our properties, which we believe under applicable legal principles are not our responsibility as a non‑possessorynon-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims and lawsuits.
31
Item 4. MINE SAFETY DISCLOSURES
Not applicable
PART II
Item 5. MARKETMARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is listed on the NYSE under the symbol “LTC”. Set forth below are the high and low reported sale prices for
Holders
As of February 19, 2020, we had approximately 365 holders of our common stock, as reported ondetermined by counting our record holders and the NYSE for eachnumber of participants reflected in a security position listing provided to us by the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
| 2015 |
| ||||||||
|
| High |
| Low |
| High |
| Low |
| ||||
First quarter |
| $ | 46.29 |
| $ | 40.55 |
| $ | 48.85 |
| $ | 41.42 |
|
Second quarter |
| $ | 51.74 |
| $ | 44.90 |
| $ | 46.98 |
| $ | 40.70 |
|
Third quarter |
| $ | 54.20 |
| $ | 49.83 |
| $ | 44.77 |
| $ | 38.64 |
|
Fourth quarter |
| $ | 52.05 |
| $ | 43.17 |
| $ | 44.84 |
| $ | 40.02 |
|
Holders of Record
As of February 15, 2017 we had approximately 391 stockholders of recordDepository Trust Company. Because such “DTC participants” are brokers and other institutions holding shares of our common stock.stock on behalf of their customers, we do not know the actual number of unique stockholders represented by these record holders.
23
Dividend Information
We declared and paid total cash distributions on common stock as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Declared |
| Paid |
| |||||||||||||||||||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 |
| |||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||
| | Declared | | Paid |
| |||||||||||||||||||||
| | 2019 | | 2018 | | 2019 | | 2018 |
| |||||||||||||||||
First quarter |
| $ | 0.54 |
| $ | 0.51 |
| $ | 0.54 |
| $ | 0.51 |
|
| $ | 0.57 |
| $ | 0.57 |
| $ | 0.57 |
| $ | 0.57 | |
Second quarter |
| $ | 0.54 |
| $ | 0.51 |
| $ | 0.54 |
| $ | 0.51 |
| | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
Third quarter |
| $ | 0.54 |
| $ | 0.51 |
| $ | 0.54 |
| $ | 0.51 |
| | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
Fourth quarter |
| $ | 0.57 |
| $ | 0.54 |
| $ | 0.57 |
| $ | 0.54 |
| | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
|
| $ | 2.19 |
| $ | 2.07 |
| $ | 2.19 |
| $ | 2.07 |
| |||||||||||||
| | $ | 2.28 | | $ | 2.28 | | $ | 2.28 | | $ | 2.28 | |
We intend to distribute to our stockholders an amount at least sufficient to satisfy the distribution requirements of a REIT. Cash flows from operating activities available for distribution to stockholders will be derived primarily from interest and rental payments from our real estate investments. All distributions will be made subject to approval of our Board of Directors and will depend on our earnings, our financial condition and such other factors as our Board of Directors deem relevant. In order to qualify for the beneficial tax treatment accorded to REITs by Sections 856 through 860 of the Internal Revenue Code, we are required to make distributions to holders of our shares equal to at least 90% of our REIT taxable income. (See “Annual Distribution Requirements”.)
32
Issuer Purchases of Equity Securities
The numberNone.
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| Maximum |
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| Purchased as |
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| Average |
| Part of |
| Shares that May |
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| Price |
| Publicly |
| Yet Be |
| |
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| of Shares |
| Paid per |
| Announced |
| Purchased |
| |
Period |
| Purchased(1) |
| Share |
| Plan (2) |
| Under the Plan |
| |
October 1- October 31, 2016 |
| — |
| $ | — |
| — |
| — |
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November 1 - November 30, 2016 |
| — |
| $ | — |
| — |
| — |
|
December 1 - December 31, 2016 |
| 311 |
| $ | 47.00 |
| — |
| — |
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Total |
| 311 |
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| — |
| — |
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Stock Performance Graph
The National Association of Real Estate Investment Trusts (or NAREIT)(“NAREIT”), an organization representing U.S. REITs and publicly traded real estate companies, classifies a company with 50% or more of assets directly or indirectly in the equity ownership of real estate as an equity REIT. Our equity ownership of real estate assets was more than 75% during 2016.
33
2019.
This graph compares the cumulative total stockholder return on our common stock from December 31, 20112014 to December 31, 20162019 with the cumulative stockholder total return of (1) the Standard & Poor’s 500 Stock Index and (2) the NAREIT Equity REIT Index. The comparison assumes $100 was invested on December 31, 20112014 in our common stock and in each of the foregoing indices and assumes the reinvestment of dividends.
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| | Period Ending |
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Index |
| 12/31/11 |
| 12/31/12 |
| 12/31/13 |
| 12/31/14 |
| 12/31/15 |
| 12/31/16 |
| | 12/31/14 | | 12/31/15 | | 12/31/16 | | 12/31/17 | | 12/31/18 | | 12/31/19 |
|
LTC Properties, Inc. | $ | 100.00 | $ | 120.42 | $ | 127.11 | $ | 163.38 | $ | 171.22 | $ | 195.28 |
| $ | 100.00 | $ | 104.80 | $ | 119.52 | $ | 116.22 | $ | 117.55 | $ | 132.58 | |
NAREIT Equity |
| 100.00 |
| 118.06 |
| 120.97 |
| 157.43 |
| 162.46 |
| 176.30 |
| $ | 100.00 | $ | 103.20 | $ | 111.99 | $ | 117.84 | $ | 112.39 | $ | 141.61 | |
S&P 500 |
| 100.00 |
| 116.00 |
| 153.57 |
| 174.60 |
| 177.01 |
| 198.18 |
| $ | 100.00 | $ | 101.38 | $ | 113.51 | $ | 138.29 | $ | 132.23 | $ | 173.86 | |
The stock performance depicted in the above graph is not necessarily indicative of future performance.
The stock performance graph shall not be deemed incorporated by reference into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent that we specifically incorporate such information by reference, and shall not otherwise be deemed filed under such Acts.
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Item 6. SELECTEDSELECTED FINANCIAL DATA
The following table of selected financial information should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10‑K.10-K.
| | | | | | | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| |||||
| | (In thousands, except per share amounts) |
| |||||||||||||
Operating information: |
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| |
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| |
| |
Total revenues | | $ | 185,304 | | $ | 168,645 | | $ | 168,065 | | $ | 161,583 | | $ | 136,203 | |
Net income | | $ | 80,872 | (1) | $ | 155,076 | (2) | $ | 87,340 | | $ | 85,115 | | $ | 73,081 | |
Income allocated to non-controlling interests | | $ | 346 | | $ | 95 | | $ | — | | $ | — | | $ | — | |
Income allocated to participating securities | | $ | 391 | | $ | 625 | | $ | 362 | | $ | 385 | | $ | 484 | |
Income allocated to preferred stockholders | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 2,454 | |
Net income available to common stockholders | | $ | 80,135 | | $ | 154,356 | (2) | $ | 86,978 | | $ | 84,730 | | $ | 70,143 | |
Per share information: | | | | | | | | | | | | | | | | |
Earning per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 2.03 | (1) | $ | 3.91 | (2) | $ | 2.21 | | $ | 2.21 | | $ | 1.97 | |
Diluted | | $ | 2.02 | (1) | $ | 3.89 | (2) | $ | 2.20 | | $ | 2.21 | | $ | 1.94 | |
| | | | | | | | | | | | | | | | |
Common stock distributions declared | | $ | 2.28 | | $ | 2.28 | | $ | 2.28 | | $ | 2.19 | | $ | 2.07 | |
Common stock distributions paid | | $ | 2.28 | | $ | 2.28 | | $ | 2.28 | | $ | 2.19 | | $ | 2.07 | |
Balance sheet information: | | | | | | | | | | | | | | | | |
Real estate investments, net | | $ | 1,390,915 | | $ | 1,349,520 | | $ | 1,309,996 | | $ | 1,255,503 | | $ | 1,164,950 | |
Total assets | | $ | 1,514,209 | | $ | 1,513,620 | | $ | 1,465,570 | | $ | 1,394,896 | | $ | 1,275,424 | |
Total debt (3) | | $ | 693,388 | (4) | $ | 645,029 | | $ | 667,502 | (4) | $ | 609,391 | (4) | $ | 571,872 | |
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| 2016 |
| 2015 |
| 2014 |
| 2013 |
| 2012 |
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Operating information: |
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Total revenues |
| $ | 161,583 |
| $ | 136,203 |
| $ | 118,961 |
| $ | 104,974 |
| $ | 92,482 |
|
Income from continuing operations |
|
| 85,115 |
|
| 73,081 |
|
| 73,399 |
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| 55,405 |
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| 50,306 |
|
Income allocated to non-controlling interests(1) |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 37 |
|
Income allocated to participating securities |
|
| 385 |
|
| 484 |
|
| 481 |
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| 383 |
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| 377 |
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Income allocated to preferred stockholders |
|
| — |
|
| 2,454 |
|
| 3,273 |
|
| 3,273 |
|
| 3,273 |
|
Net income available to common stockholders |
|
| 84,730 |
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| 70,143 |
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| 69,645 |
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| 54,159 |
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| 47,640 |
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Per share information: |
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Net income per common share from continuing operations available to common stockholders: |
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Basic |
| $ | 2.21 |
| $ | 1.97 | (2) | $ | 2.01 |
| $ | 1.56 |
| $ | 1.54 |
|
Diluted |
| $ | 2.21 |
| $ | 1.94 | (2) | $ | 1.99 |
| $ | 1.56 |
| $ | 1.54 |
|
Net income per common share available to common stockholders: |
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Basic |
| $ | 2.21 |
| $ | 1.97 | (2) | $ | 2.01 |
| $ | 1.64 |
| $ | 1.58 |
|
Diluted |
| $ | 2.21 |
| $ | 1.94 | (2) | $ | 1.99 |
| $ | 1.63 |
| $ | 1.57 |
|
Common stock distributions declared |
| $ | 2.19 |
| $ | 2.07 |
| $ | 2.04 |
| $ | 1.91 |
| $ | 1.79 |
|
Common stock distributions paid |
| $ | 2.19 |
| $ | 2.07 |
| $ | 2.04 |
| $ | 1.91 |
| $ | 1.79 |
|
Balance sheet information: |
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Total assets |
| $ | 1,394,896 |
| $ | 1,275,424 |
| $ | 964,770 |
| $ | 930,305 |
| $ | 788,446 |
|
Total debt(3) |
|
| 609,391 | (4) |
| 571,872 | (4) |
| 280,584 |
|
| 277,730 |
|
| 302,789 |
|
(1) |
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|
(2) | Increased primarily due to |
(3) |
| Includes bank borrowings and senior unsecured notes (net of debt issue costs) |
(4) |
| Increase primarily due to the sale of senior unsecured |
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Executive Overview
Business and Investment Strategy
We are a self-administered health care real estate investment trust (or REIT)(“REIT”) that invests primarily in seniors housing and health care properties primarily through sale-leaseback transactions, mortgage financing, joint ventures and structured finance solutions including mezzanine lending. We conduct and manage our business as one operating segment, rather than multiple operating segments, for internal reporting and internal decision makingdecision-making purposes. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators. Our primary seniors housing and health care property classifications include skilled nursing centers (or SNF)(“SNF”), assisted living communities (or ALF)(“ALF”), independent living communities (or ILF)(“ILF”), memory care communities (or MC)(“MC”) and combinations thereof. ILF, ALF, ILF, MC, and combinations thereof are included in the ALF propertycommunities classification. Range of care communities (or ROC) property classification consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services. As of December 31, 2016, seniors housing and long-term health care properties comprised approximately 99% of our real estate investment portfolio. We have been operating since August 1992.
Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, and interest earned on outstanding loans receivable.receivable and income from investment in unconsolidated joint ventures. Our investments in owned properties and mortgage loans represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by theproperty type of health care facility and operator. Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance.
In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases and loans are credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the operator and its affiliates.
Depending upon the availability and cost of external capital, we anticipate making additional investments in health care related properties. New investments are generally funded from cash on hand, temporary borrowings under our unsecured revolving line of credit and internally generated cash flows. Our investments generate internal cash from rent and interest receipts and principal payments on mortgage loans receivable. Permanent financing for future investments, which replaces funds drawn under our unsecured revolving line of credit, is expected to be provided through a combination of public and private offerings of debt and equity securities and secured and unsecured debt financing. The timing, source and amount of cash flows provided by financing activities and used in investing activities are sensitive to the capital marketsmarkets’ environment, especially to changes in interest rates. Changes in the capital markets’ environment may impact the availability of cost‑effectivecost-effective capital.
We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators. Traditionally, we have taken a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise.
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Portfolio Overview
The following tabletables summarizes our real estate investment portfolio as of December 31, 20162019 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | Twelve Months Ended | | | | | | | | | | ||||
| | | | | Percentage | | December 31, 2019 | | Percentage | | | Number | | Number of | ||||||
| | Gross | | of | | Rental | | Interest | | of | | | of | | SNF | | ALF | |||
Owned Properties | | Investments | | Investments | | Income (1) | | Income | | Revenues | | | Properties (2) | | Beds (3) | | Units (3) | |||
Assisted Living (4) | | $ | 858,852 | | 49.4 | % | $ | 68,641 | | $ | — | | 40.7 | % | | 106 | | — | | 6,086 |
Skilled Nursing | | | 596,370 | | 34.2 | % | | 69,087 | | | — | | 40.9 | % | | 70 | | 8,505 | | 261 |
Under Development (5) | | | 17,989 | | 1.0 | % | | — | | | — | | — | % | | — | | — | | — |
Other (6) | | | 11,360 | | 0.7 | % | | 955 | | | — | | 0.6 | % | | 1 | | 118 | | — |
Total Owned Properties | | | 1,484,571 | | 85.3 | % | | 138,683 | | | — | | 82.2 | % | | 177 | | 8,623 | | 6,347 |
| | | | | | | | | | | | | | | | | | | | |
Mortgage Loans | | | | | | | | | | | | | | | | | | | | |
Skilled Nursing | | | 256,659 | | 14.7 | % | | — | | | 29,991 | | 17.8 | % | | 22 | | 2,892 | | — |
Total Mortgage Loans | | | 256,659 | | 14.7 | % | | — | | | 29,991 | | 17.8 | % | | 22 | | 2,892 | | — |
| | | | | | | | | | | | | | | | | | | | |
Total Portfolio | | $ | 1,741,230 | | 100.0 | % | $ | 138,683 | | $ | 29,991 | | 100.0 | % | | 199 | | 11,515 | | 6,347 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | Twelve Months Ended | | | | | | | | | | ||||
| | | | | Percentage | | December 31, 2019 | | Percentage | | | Number | | Number of | ||||||
| | Gross | | of | | Rental | | Interest | | of | | | of | | SNF | | ALF | |||
Summary of Properties by Type | | Investments | | Investments | | Income (1) | | Income | | Revenues | | | Properties (2) | | Beds (3) | | Units (3) | |||
Assisted Living (4) | | $ | 858,852 | | 49.4 | % | $ | 68,641 | | $ | — | | 40.7 | % | | 106 | | — | | 6,086 |
Skilled Nursing | | | 853,029 | | 48.9 | % | | 69,087 | | | 29,991 | | 58.7 | % | | 92 | | 11,397 | | 261 |
Under Development (5) | | | 17,989 | | 1.0 | % | | — | | | — | | — | % | | — | | — | | — |
Other (6) | | | 11,360 | | 0.7 | % | | 955 | | | — | | 0.6 | % | | 1 | | 118 | | — |
Total Portfolio | | $ | 1,741,230 | | 100.0 | % | $ | 138,683 | | $ | 29,991 | | 100.0 | % | | 199 | | 11,515 | | 6,347 |
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| Twelve Months Ended |
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| December 31, 2016 |
| Percentage |
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| Number of | ||||||
|
| Gross |
| Percentage of |
| Rental |
| Interest |
| of |
| Number of |
| SNF |
| ALF | |||
Type of Property |
| Investments |
| Investments |
| Income(1) |
| Income(2) |
| Revenues |
| Properties(3) |
| Beds(4) |
| Units(4) | |||
Skilled Nursing |
| $ | 753,328 |
| 49.2 | % | $ | 61,429 |
| $ | 25,430 |
| 54.6 | % | 92 |
| 11,644 |
| — |
Assisted Living |
|
| 711,645 |
| 46.4 | % |
| 64,380 |
|
| 1,171 |
| 41.2 | % | 112 |
| — |
| 5,985 |
Range of Care |
|
| 43,140 |
| 2.8 | % |
| 5,774 |
|
| — |
| 3.6 | % | 7 |
| 634 |
| 274 |
Under Development(5) |
|
| 14,142 |
| 0.9 | % |
| — |
|
| — |
| — | % | — |
| — |
| — |
Other(6) |
|
| 11,424 |
| 0.7 | % |
| 865 |
|
| 111 |
| 0.6 | % | 1 |
| 118 |
| — |
Totals |
| $ | 1,533,679 |
| 100.0 | % | $ | 132,448 |
| $ | 26,712 |
| 100.0 | % | 212 |
| 12,396 |
| 6,259 |
(1) |
| Excludes variable rental income |
(2) |
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|
| We have investments in |
(3) |
| See Item 2. Properties for discussion of bed/unit count. |
(4) | Includes ILF, ALF, MC, and combinations thereof. |
(5) |
|
(6) |
| Includes |
As of December 31, 20162019, we had $1.3$1.4 billion in carrying value of net real estate investments, consisting of $1.0$1.1 billion or 81.7% invested in owned and leased properties and $0.3 billion or 18.3% invested in mortgage loans secured by first mortgages.
For the year ended December 31, 2016,2019, rental income and interest income from mortgage loans represented 82.6%82.4% and 16.9%16.2%, respectively, of total gross revenues. In most instances, our lease structure contains annual rental escalations. Our leases that contain fixed or estimable annual rental escalations whichand/or have annual rental escalations that are contingent upon changes in the Consumer Price Index, are generally recognized on a straight‑linestraight-line basis over the minimum lease period. Certain leases have annual rental escalations that are contingent upon changes in the Consumer Price Index and/or changes in the gross operating revenues of the property. This revenue is not recognized until the appropriate contingencies have been resolved. During the years ended December 31, 2019 and 2018 and 2017, we recognized $0.5 million of contingent rental income. For the year ended December 31, 2016,2019, we recognized $13.5$4.5 million in straight‑linestraight-line rental income and recorded $0.1$0.4 million in amortization of straight‑line rent receivable reserve.lease incentives. For the remaining leases in place at December 31, 2016,2019, assuming no modification or replacement of existing leases and no new leased investments are added to our portfolio, except for the subsequent acquisitions, lease extensions, completed developments in 2020 and the leases reported below under Update on Certain Operators, we currently expect that straight‑linestraight-line rental income will decrease from $13.5$4.5 million in 20162019 to $8.8$2.5 million for projected annual 2017. Conversely, our2020. Our cash rental income is projected to increase from $122.0$150.6 million in 20162019 to $133.3$150.8 million for projected annual 2017. During the year ended December 31, 2016, we received $122.0 million of cash rental revenue and recorded $1.9 million of lease incentives.2020. At December 31, 2016,2019, the straight‑linestraight-line rent receivable balance net of reserves, on the consolidated balance sheet was $55.3$45.7 million.
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Many of our existing leases contain renewal options that, if exercised, could result in the amount of rent payable upon renewal being greater or less than that currently being paid. During the year ended December 31, 2016,2019, there were no lease renewals. Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. See Item 8. FINANCIAL STATEMENTS— Note 5. Real Estate Investments. Owned Properties for a table that includes information about purchase options included in our lease agreements.
Update on Certain Operators
During 2016,2017, we amended an existingissued a notice of default to Anthem Memory Care (“Anthem”) resulting from Anthem’s partial payment of minimum rent. Anthem operates 11 memory care communities under a master lease. During 2019, Anthem paid the agreed upon minimum cash rent of $7.5 million. This amount represents approximately 50% of the contractual amount due under the lease in 2019. In accordance with Accounting Standard Codification (“ASC”) Topic 842, Leases (“ASC 842”), at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Anthem and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. We receive regular financial performance updates from Anthem and continue to monitor Anthem’s performance obligations under the master lease agreement.
On December 4, 2018, Senior Care Centers, LLC. and affiliates and subsidiaries (“Senior Care”) filed for Chapter 11 bankruptcy as a result of lease terminations from certain landlords and on-going operational challenges. Senior Care did not pay us December 2018 rent and accordingly, in December 2018, we placed Senior Care on a cash basis. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balance related to extendSenior Care and determined it was not probable that we would collect substantially all of the termscontractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance.
In July 2019, Senior Care filed a motion to affirm the lease, which caused us to file an objection in opposition to Senior Care’s motion. During the fourth quarter of 2019, the court rejected our motion and accordingly, our master lease with Senior Care was affirmed. Furthermore, we received the court ordered reimbursement from Senior Care for an additional five years. Additionally during 2016, we consolidated six individualthe December 2018 unpaid rent, late fees and legal costs totaling $1.6 million. Senior Care has paid us January 2019 to February 2020 rent, real estate property tax and maintenance deposits.
During 2017, Preferred Care, Inc. (“Preferred Care”) and affiliated entities filed for Chapter 11 bankruptcy as a result of a multi-million-dollar judgment in a lawsuit in Kentucky against Preferred Care and certain affiliated entities. The affiliated entities named in the lawsuit operate properties in Kentucky and New Mexico. Preferred Care leased 24 properties under two master leases from us and none of the 24 properties are located in Kentucky or New Mexico. Those 24 properties are in Arizona, Colorado, Iowa, Kansas and Texas. The Preferred Care operating entities that sublease those properties did not file for bankruptcy. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Preferred Care and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. Preferred Care did not affirm our master leases and began paying only $55,000 of monthly rent in the third quarter of 2019. The monthly contractual obligation under the master leases was approximately $1.0 million. We applied all of their security deposit to rental income during the third quarter and recorded only the $55,000 monthly cash received in the fourth quarter of 2019 to rental income. During the fourth quarter of 2019, we entered into multiple contracts, subject to standard due diligence and other contingencies, to sell a majority of the properties. Two of these contracts were completed during the fourth quarter of 2019, resulting in the sale of two properties in Arizona and Texas. See Item 8. FINANCIAL STATEMENTS— Note 5. Real Estate Investments. Property Sales for further discussion. At December 31, 2019, the 20 properties under purchase and sale agreements met the criteria under GAAP as held-for-sale. Accordingly, these properties have been classified as held-for-sale at December 31, 2019.
During the three operators into three single master leases.
months ended March 31, 2019, we placed Thrive Senior Living, LLC (“Thrive”) on a cash basis due to short-payment of contractual rent in November 2018 and non-payment of rent in December 2018 totaling $0.7 million. Thrive subsequently paid the delinquent rent in 2019 but failed to pay 2019 contractual rent. In April 2019, we issued a notice of default to Thrive. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we
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evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Thrive and determined that it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance.
2016 Transaction overview
InvestmentDuring 2019, we completed the following for all of the properties in Owned Properties
The following table summarizes our acquisitions for the twelve months endedThrive portfolio. As of December 31, 2016 (dollar amounts2019, Thrive does not operate any properties in thousands):our portfolio:
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| Total |
| Number |
| Number | |
|
| Purchase |
| Transaction |
| Acquisition |
| of |
| of | |||
Type of Property |
| Price |
| Costs(1) |
| Costs |
| Properties |
| Beds/Units | |||
Skilled Nursing(2) |
| $ | 16,000 |
| $ | 45 |
| $ | 16,045 |
| 1 |
| 126 |
Assisted Living(3) |
|
| 53,550 |
|
| 423 |
|
| 53,973 |
| 4 |
| 250 |
Land(4) |
|
| 6,891 |
|
| 108 |
|
| 6,999 |
| — |
| — |
Totals |
| $ | 76,441 |
| $ | 576 |
| $ | 77,017 |
| 5 |
| 376 |
|
|
|
|
|
|
● | Transitioned two memory care communities in |
| Transitioned the remaining 60-unit memory care community located in Florida to an existing operator effective August 1, 2019. The new 10-year lease provides the lessee twelve months free rent, rent of $0.5 million in year two and $0.6 million in year three and thereafter. In year two, the lessee has the option to defer rent in an amount not to exceed $0.2 million. Rent may increase subject to a contingent escalation formula commencing in year three and annually thereafter. Additionally, the lease provides the lessee with a purchase option available between 2028 and 2029. See Item 8. FINANCIAL STATEMENTS— Note 5. Real Estate Investments. Owned Properties for a table that summarizes information about purchase options included in our lease agreements. |
30
2019 Transactions Overview
The following tables summarizes our transactions in 2019 (dollar amounts in thousand):
Investment in Owned Properties
| | | | | | | | | | | | | | | | | | | |
| | Number | | Type | | Number | | Initial | | | | | | | Total | | | Total | |
| | of | | of | | of | | Cash | | | | Purchase | | | Transaction | | | Acquisition | |
State (1) | | Properties | | Properties | | Beds/Units | | Yield | | | | Price | | | Costs | | | Costs | |
California | | — | (2) | Land | | — | | N/A | | | $ | 110 | | $ | 28 | | $ | 138 | |
Michigan | | 2 | | ALF/MC | | 156 | | 7.4 | % | | | 19,000 | | | 139 | | | 19,139 | |
Missouri | | 1 | (3) | SNF/Land | | 90 | | (3) | % | | | 22,122 | | | 120 | | | 22,242 | |
Virginia | | 1 | (4) | ALF/MC | | 74 | | 7.4 | % | | | 16,719 | | | 176 | | | 16,895 | |
Total | | 4 | | | | 320 | | | | | $ | 57,951 | | $ | 463 | | $ | 58,414 | |
(1) | Subsequent to December 31, 2019, we acquired a 140-bed SNF located in Texas for approximately $13,500 and entered into a 10-year master lease agreement with an initial cash yield of 8.5%, escalating 2% annually starting in the second year of the lease, with two five-year renewal options. |
(2) | We acquired a parcel of land adjacent to an existing SNF in California. |
(3) | We acquired a newly constructed 90-bed SNF located in Missouri for $19,500. The initial cash yield is 8.3% with annual escalation of 2% effective December 2019 and |
(4) | We entered into a |
Sold Properties
| | | | | | | | | | | | | | | | |
| | Type | | Number | | Number | | | | | | | | | Net | |
| | of | | of | | of | | | Sales | | | Carrying | | | Gain | |
State | | Properties | | Properties | | Beds/Units | | | Price | | | Value | | | (Loss) | |
N/A | | N/A | | — | | — | | $ | — | | $ | — | | $ | 500 | (1) |
Arizona, Georgia and Texas | | SNF | (2) | 3 | | 478 | | | 15,310 | | | 8,995 | | | 5,556 | |
Texas | | ALF | (3) | 1 | | 140 | | | 1 | | | 3,830 | | | (3,950) | |
Total | | | | 4 | | 618 | | $ | 15,311 | | $ | 12,825 | | $ | 2,106 | |
(1) | Gain recognized due to the receipt of funds held in escrow related to a portfolio of six ALFs sold during the second quarter of 2018. |
(2) | We sold a property located in Texas, previously operated by Preferred Care, with a carrying value of $871 for $140. Additionally, we sold a SNF from Preferred Care portfolio located in Arizona with a carrying value of $6,485 for $7,250. This transaction includes a holdback of $1,091 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. Using the expected value model per ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we estimated and recorded the holdback value of $613. Also, we sold a SNF located in Georgia with a carrying value of $1,639 for $7,920. |
(3) | We sold an ALF located in Texas with a carrying value of $3,830. |
Development Projects
| | | | | | |
| | Developments | | Improvements | ||
Assisted Living Communities | | $ | 14,088 | | $ | 2,544 |
Skilled Nursing Centers | | | 6,436 | | | — |
Other | | | — | | | 295 |
Total | | $ | 20,524 | | $ | 2,839 |
31
Completed Developments
| | | | | | | | | | | |
| | Number | | Type | | Number | | | | | |
| | of | | of | | of | | | | | Total |
Type of Project | | Properties | | Property | | Beds/Units | | State | | Investment | |
Development | | 1 | | SNF | | 143 | | Kentucky | | $ | 24,974 |
Development | | 1 | | ILF/ALF/MC | | 110 | | Wisconsin | | | 21,999 |
| | 2 | | | | 253 | | | | $ | 46,973 |
| | | | | | | | | | | |
Investment in Mortgage Loans
| | | | |
Originations and funding under mortgage loans receivable | | $ | 12,342 | (1) |
Scheduled principal payments received | | | (1,065) | |
Mortgage loan premium amortization | | | (4) | |
Provision for loan loss reserve | | | (113) | |
Net increase in mortgage loans receivable | | $ | 11,160 | |
(1) | During 2019, we funded an additional $7,500 under an existing mortgage loan. The incremental funding bears interest at 9.41% fixed for two years and escalating by 2.25% thereafter. |
Investment in Unconsolidated Joint Ventures
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Type | | Type | | Total | | | Currently | | | Number | | | | | | | | | | | | | | | Cash | |
| | of | | of | | Preferred | | | Paid in | | | of | | | Investment | | | Carrying | | | Capital | | | Income | | | Interest | |
State | | Properties | | Investment | | Return | | | Cash | | | Beds/ Units | | | Commitment | | | Value | | | Contribution | | | Recognized | | | Received | |
Arizona | | ALF/MC/ILF | | Preferred Equity | | 15 | % | | 8 | % | (1) | 585 | | $ | — | | $ | 19,003 | (1) | $ | 472 | | $ | 1,029 | | $ | 1,580 | |
Florida (2) | | ALF/ILF/MC | | Mezzanine | | N/A | % | | N/A | % | | N/A | | | — | (2) | | — | (2) | | — | | | 955 | (2) | | 979 | (2) |
Florida (3) | | UDP/ALF/MC | | Mezzanine | | N/A | % | | N/A | % | | N/A | | | — | (3) | | — | (3) | | — | | | 404 | (3) | | 432 | (3) |
| | | | | | | | | | | | 585 | | $ | — | | $ | 19,003 | | $ | 472 | | $ | 2,388 | | $ | 2,991 | |
(1) | Effective second quarter of 2019, this JV was placed on cash basis due to delinquency of our preferred return. In November 2019, the JV signed a contract for the sale of the four properties comprising the JV. The contract was subject to standard due diligence and other contingencies to close, all of which were met in January 2020. Accordingly, based on the information available to us regarding alternatives and courses of action as of December 31, 2019, we performed a recoverability test on the carrying value of our preferred equity investment and concluded that a portion of our preferred equity investment will not be recoverable. Therefore, we recorded an impairment loss from investment in unconsolidated joint ventures of $5,500 and wrote our preferred equity investment down to its estimated fair value. |
(2) | We had a $2,900 mezzanine loan commitment for a 99-unit seniors housing community in Florida with a total preferred return of |
(3) | We had a $3,400 mezzanine loan commitment for the development of a |
Investment in Notes Receivable
| | | | | |
Advances under notes receivable |
| $ | 8,967 | (1) |
|
Principal payments received under notes receivable | | | (3,503) | | |
Reclassed to real estate under development (2) | | | (200) | (2) | |
Notes receivable reserve | | | (52) | | |
Net increase in notes receivable | | $ | 5,212 | | |
(1) | We originated a $6,800 mezzanine loan commitment for the development of a 204-unit ILF/ALF/MC in Georgia. The mezzanine loan has a five-year term and a 12.0% return, a portion of which is paid in cash, and the remaining portion of which is deferred during the first 46 months. Additionally, we |
(2) | Represents interim working capital loan related to a development |
Sold Properties
During 2016, we sold a 48-unit assisted living community located in Florida for $1.8 million which was previously written down to its estimated sale price in the fourth quarter of 2015. Additionally, we sold two skilled nursing centers in Texas and an assisted living community in Florida for an aggregate price of $11.9 million. As a result of these sales, we recognized a net gain on sale of $3.8 million. Also, we sold a school in New Jersey for $3.9 million and recorded a net loss on sale in the amount of $193,000.Subsequent to December 31, 2016, we entered into a contingent purchase and sale agreement to sell an 85-unit ROC community in Texas for $1.2 million. We performed a recoverability analysis on the property as of December 31, 2016 and determined that a portion of the carrying value of the property was not recoverable. Accordingly, we recorded an impairment charge of $0.8 million to write the property down to its estimated sale price at December 31, 2016.
During 2015, we sold a 112-bed skilled nursing center located in Texas for $1.6 million, resulting in net sales proceed of $1.5 million and a net gain on sale of $0.6 million. No properties were sold during 2014.
Development Projects
The following table summarizes our investment in development and improvement projects for the year ended December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
| ||
|
| Development |
| Improvements | ||
ALF/ ILF/ MC |
| $ | 41,859 |
| $ | 3,034 |
SNF |
|
| 483 |
|
| 3,758 |
|
| $ | 42,342 |
| $ | 6,792 |
38
Completed Developments
During the twelve months ended December 31, 2016, we completed the following projects (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number |
|
|
| Number |
|
|
|
|
|
|
|
|
|
|
| of |
| Type of |
| of |
|
|
|
|
|
|
|
|
|
Type of Project |
| Properties |
| Property |
| Beds/Units |
| State |
| 2016 Funding |
| Total Funding |
| ||
Development |
| 1 |
| MC |
| 66 |
| Illinois |
| $ | 2,980 |
| $ | 12,248 |
|
Development |
| 1 |
| MC |
| 56 |
| Texas |
|
| 1,110 |
|
| 11,776 |
|
Development |
| 1 |
| MC |
| 66 |
| Illinois |
|
| 7,331 |
|
| 11,962 |
|
Development |
| 1 |
| MC |
| 66 |
| California |
|
| 7,716 |
|
| 12,400 |
|
Development |
| 1 |
| ALF/MC |
| 89 |
| South Carolina |
|
| 9,170 |
|
| 15,080 |
|
Development |
| 1 |
| ILF |
| 108 |
| Kansas |
|
| 11,235 |
|
| 13,423 |
|
Improvement |
| 1 |
| SNF |
| 160 |
| Arizona |
|
| 3,432 |
|
| 4,672 |
|
|
| 7 |
|
|
| 611 |
|
|
| $ | 42,974 |
| $ | 81,561 |
|
Investment in Mortgage Loans
A summary of our mortgage loan origination and funding for the year ended December 31, 2016, is as follows (in thousands):
|
| |||
| ||||
|
Investment in Unconsolidated Joint Ventures
We have made a preferred equity investment in an entity (or the JV) that owns four properties in Arizona that provide independent, assisted living and memory care services. At closing, we provided an initial preferred capital contribution of $20.1 million and have committed to provide an additional preferred capital contribution of $5.5 million for a total preferred capital contribution of $25.6 million. As the preferred member of the JV, we are entitled to receive a 15% preferred return, a portion of which is paid in cash and a portion of which is deferred if the cash flow of the JV is insufficient to pay all of the accrued preferred return. Any unpaid accrued preferred return, whether recorded or unrecorded by us, will be paid upon redemption. During 2016, we provided an additional preferred capital contribution of $1.8 million. Accordingly, we have a remaining preferred capital contribution commitment of $3.7 million.
Additionally, during 2016 we entered into a $3.4 million seven-year term mezzanine loan commitment for the development of a 127-unit senior housing community in Florida which will provide a combination of assisted living, memory care and independent living services. In accordance with the terms of the loan agreement, we are entitled to receive a 15% preferred return, a portion of which, subject to minimum payment requirements, is paid in cash and the remaining unpaid portion is deferred and subsequently paid to us at times set forth in the loan agreement. We evaluated this acquisition, development and construction (or ADC) arrangement and determined that the characteristics are similar to a jointly-owned investment or partnership, and accordingly, the investment is accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting.
39
Notes Receivable
The following table summarizes our notes receivable activities (dollar amounts in thousands):
| |||
|
| ||
| |||
| |||
| |||
|
|
|
|
During 2016, we purchased a $12.5 million mezzanine loan on a portfolio32
Key Transactions During the Quarter
During the fourth quarter, we purchased a parcel of land in Illinois and entered into a development commitment to construct a memory care community. The commitment totals $14.5 million, including the land purchase. Subsequent to December 31, 2016, we entered into a contingent purchase and sale agreement to sell an 85-unit ROC community in Texas for $1.2 million.
During the quarter we completed the development of a 108-unit independent living community in Kansas.
During the fourth quarter, we entered into a $3.4 million seven-year term mezzanine loan commitment for development of a 127-unit senior housing community in Florida which will provide a combination of assisted living, memory care and independent living services. In accordance with the terms of the loan agreement, we are entitled to receive a 15% preferred return, a portion of which, subject to minimum payment requirements, is paid in cash and the remaining unpaid portion is deferred and subsequently paid to us at times set forth in the loan agreement. Additionally, we purchased a $12.5 million mezzanine loan on a portfolio of 64 skilled nursing centers located in eight states. The mezzanine loan has a five-year term and a face rate of LIBOR plus 11.75%.
Subsequent to December 31, 2016, we sold 312,881 shares of common stock for $14.6 million in net proceeds under our equity distribution agreement. Accordingly, we have approximately $185.2 million available under these agreements.
Key Performance Indicators, Trends and Uncertainties
We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results in making operating decisions and for budget planning purposes.
Concentration Risk. We evaluate by gross real estate investment our concentration risk in terms of asset mix, real estate investment mix, operator mix and geographic mix. Concentration risk is valuable to understand what portion of our real estate investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our real estate investments that are real property or mortgage loans. In order to qualify as an equity REIT, at least 50 percent of our total assets must be represented by real estate assets, cash, cash items and government securities. Investment mix measures the portion of our investments that relate to our various property types. Operator mix measures the portion of our real estate investments that relate to our top five operators. Geographic mix measures the portion of our real estate investment that relate to our top five states.
40
The following table reflects our recent historical trends of concentration risk (gross investment, in thousands):
| | | | | | | | | | | | | | | | |
| | 12/31/19 | | 9/30/19 | | 6/30/19 | | 3/31/19 | | 12/31/18 |
| |||||
Asset mix: | | |
| | |
| | |
| | |
| | |
| |
Real property | | $ | 1,484,571 | | $ | 1,474,692 | | $ | 1,452,669 | | $ | 1,445,596 | | $ | 1,421,456 | |
Loans receivable | | | 256,659 | | | 255,737 | | | 254,555 | | | 246,775 | | | 245,386 | |
Real estate investment mix: | | | | | | | | | | | | | | | | |
Skilled nursing centers | | $ | 853,029 | | $ | 861,500 | | $ | 844,136 | | $ | 834,185 | | $ | 830,485 | |
Assisted living communities | | | 858,852 | | | 844,635 | | | 843,682 | | | 840,926 | | | 820,686 | |
Under development | | | 17,989 | | | 12,934 | | | 8,167 | | | 6,193 | | | 4,606 | |
Other (1) | | | 11,360 | | | 11,360 | | | 11,239 | | | 11,067 | | | 11,065 | |
Operator mix: | | | | | | | | | | | | | | | | |
Prestige Healthcare (1) | | $ | 269,792 | | $ | 268,869 | | $ | 267,688 | | $ | 259,907 | | $ | 258,519 | |
Senior Lifestyle Corporation | | | 191,283 | | | 191,283 | | | 190,758 | | | 190,368 | | | 190,368 | |
Senior Care Centers | | | 138,109 | | | 138,109 | | | 138,109 | | | 138,109 | | | 138,109 | |
Anthem Memory Care | | | 136,484 | | | 136,483 | | | 136,397 | | | 136,397 | | | 136,397 | |
Carespring Health Care Management | | | 102,520 | | | 102,042 | | | 102,038 | | | 99,997 | | | 97,461 | |
Remaining operators | | | 903,042 | | | 893,643 | | | 872,234 | | | 867,593 | | | 845,988 | |
Geographic mix: | | | | | | | | | | | | | | | | |
Texas | | $ | 284,697 | | $ | 292,238 | | $ | 292,159 | | $ | 292,091 | | $ | 292,317 | |
Michigan (1) | | | 276,742 | | | 256,680 | | | 255,498 | | | 247,718 | | | 246,329 | |
Wisconsin | | | 149,290 | | | 149,184 | | | 149,064 | | | 146,750 | | | 143,657 | |
Colorado | | | 114,923 | | | 114,923 | | | 114,923 | | | 114,923 | | | 114,923 | |
California | | | 103,240 | | | 102,561 | | | 102,412 | | | 102,254 | | | 102,254 | |
Remaining states | | | 812,338 | | | 814,843 | | | 793,168 | | | 788,635 | | | 767,362 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12/31/16 |
| 9/30/16 |
| 6/30/16 |
| 3/31/16 |
| 12/31/15 |
| |||||
Asset mix: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property |
| $ | 1,301,563 |
| $ | 1,292,459 |
| $ | 1,291,386 |
| $ | 1,229,756 |
| $ | 1,198,686 |
|
Loans receivable |
|
| 232,116 |
|
| 236,707 |
|
| 235,243 |
|
| 225,299 |
|
| 219,719 |
|
Investment mix: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skilled nursing centers |
| $ | 753,328 |
| $ | 757,490 |
| $ | 755,287 |
| $ | 750,663 |
| $ | 726,865 |
|
Assisted living communities (1) |
|
| 711,645 |
|
| 706,279 |
|
| 702,386 |
|
| 636,059 |
|
| 623,449 |
|
Range of care communities |
|
| 43,140 |
|
| 43,907 |
|
| 43,907 |
|
| 43,907 |
|
| 43,907 |
|
Under development(1) |
|
| 14,142 |
|
| 10,065 |
|
| 4,354 |
|
| 3,731 |
|
| 3,489 |
|
Other(2) |
|
| 11,424 |
|
| 11,425 |
|
| 20,695 |
|
| 20,695 |
|
| 20,695 |
|
Operator mix: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prestige Healthcare(2) |
| $ | 227,274 |
| $ | 226,204 |
| $ | 224,220 |
| $ | 213,690 |
| $ | 207,092 |
|
Senior Lifestyle Corporation |
|
| 201,862 |
|
| 201,227 |
|
| 200,515 |
|
| 200,357 |
|
| 199,349 |
|
Senior Care Centers |
|
| 138,109 |
|
| 138,109 |
|
| 138,109 |
|
| 138,109 |
|
| 138,109 |
|
Brookdale Senior Living |
|
| 126,991 |
|
| 126,991 |
|
| 126,991 |
|
| 126,991 |
|
| 126,991 |
|
Anthem Memory Care |
|
| 111,620 |
|
| 106,637 |
|
| 102,714 |
|
| 71,655 |
|
| 62,821 |
|
Remaining operators |
|
| 727,823 |
|
| 729,998 |
|
| 734,080 |
|
| 704,253 |
|
| 684,043 |
|
Geographic mix: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas |
| $ | 274,547 |
| $ | 280,486 |
| $ | 281,795 |
| $ | 287,187 |
| $ | 270,759 |
|
Michigan |
|
| 215,085 |
|
| 214,014 |
|
| 212,029 |
|
| 201,501 |
|
| 194,902 |
|
Wisconsin |
|
| 126,133 |
|
| 125,990 |
|
| 125,680 |
|
| 125,680 |
|
| 125,680 |
|
Colorado |
|
| 114,923 |
|
| 114,924 |
|
| 114,924 |
|
| 114,924 |
|
| 114,924 |
|
Ohio |
|
| 99,300 |
|
| 99,133 |
|
| 98,997 |
|
| 98,957 |
|
| 98,647 |
|
Remaining states |
|
| 703,691 |
|
| 694,619 |
|
| 693,204 |
|
| 626,806 |
|
| 613,493 |
|
(1) |
|
|
| We have |
Credit Strength. We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to gross asset value and debt to market capitalization. The leverage ratios indicate how much of our consolidated balance sheet capitalization is related to long termlong-term obligations. Our coverage ratios include interest coverage ratio and fixed charge coverage ratio. The coverage ratios indicate our ability to service interest and fixed charges (interest plus preferred dividends)(interest). The coverage ratios are based on adjusted earnings before gain or loss on sale of real estate, interest, taxes, depreciation and amortization (orfor real estate (“EBITDAre”) as defined by National Association of Real Estate Investment Trusts (“NAREIT”). EBITDAre is calculated as net income (computed in accordance with GAAP) excluding (i) interest expense, (ii) income tax expense, (iii) real estate depreciation and amortization, (iv) impairment write-downs of depreciable real estate, (v) gains or losses on the sale of depreciable real estate, and (vi) adjustments for unconsolidated partnerships and joint ventures. Adjusted EBITDA).EBITDAre is calculated as EBITDAre adjusted for non-recurring items. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The following table reflects the recent historical trends for our credit strength measures:
33
41
Balance Sheet Metrics
| | | | | | | | | | | | | | | | | |
| | Year Ended | | Quarter Ended | | ||||||||||||
| | 12/31/19 | | 12/31/19 | | | 9/30/19 | | | 6/30/19 | | | 3/31/19 | | | 12/31/18 | |
Debt to gross asset value | | 37.2 | % | 37.2 | % | (1) | 36.8 | % | | 36.8 | % | (4) | 37.1 | % | (5) | 35.2 | % |
Debt to market capitalization ratio | | 28.0 | % | 28.0 | % | (2) | 25.1 | % | (3) | 27.1 | % | | 27.1 | % | (3) | 28.1 | % |
Interest coverage ratio (7) | | 4.9 | x | 4.9 | x | | 4.9 | x | | 4.8 | x | | 4.9 | x | (6) | 5.2 | x |
Fixed charge coverage ratio (7) | | 4.9 | x | 4.9 | x | | 4.9 | x | | 4.8 | x | | 4.9 | x | (6) | 5.2 | x |
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| Year Ended |
| Quarter Ended |
| ||||||||||||
|
| 12/31/16 |
| 12/31/16 |
|
| 9/30/16 |
|
| 6/30/16 |
|
| 3/31/16 |
|
| 12/31/15 |
|
Debt to gross asset value |
| 36.4 | % | 36.4 | % | (1) | 35.9 | % | (4) | 36.8 | % | (6) | 38.5 | % | (1) | 37.4 | % |
Debt to market capitalization ratio |
| 24.9 | % | 24.9 | % | (2) | 22.4 | % | (5) | 23.1 | % | (4) | 26.2 | % | (7) | 26.1 | % |
Interest coverage ratio(9) |
| 5.2 | x | 5.3 | x | (3) | 5.2 | x | (3) | 5.1 | x |
| 5.1 | x | (8) | 5.7 | x |
Fixed charge coverage ratio(9) |
| 5.2 | x | 5.3 | x | (3) | 5.2 | x | (3) | 5.1 | x |
| 5.1 | x | (8) | 5.7 | x |
(1) |
| Increased |
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Increased due to decrease in market capitalization |
(3) |
| Decreased |
(4) | Decreased due to increase in gross asset value from additional mortgage loan, development and capital improvement funding. |
(5) | Increased due to increase in outstanding |
(6) |
|
(7) | In calculating our interest coverage and fixed charge coverage ratios above, we use |
|
|
|
|
|
|
|
|
|
|
|
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|
|
| ||||||||||||||||||||||||
|
| Year Ended |
| Quarter Ended |
| |||||||||||||||||||||||||||||||||
|
| 12/31/16 |
| 12/31/16 |
| 9/30/16 |
| 6/30/16 |
| 3/31/16 |
| 12/31/15 |
| |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
| | Year to Date | | Quarter Ended | | |||||||||||||||||||||||||||||||||
| | 12/31/19 | | 12/31/19 | | 9/30/19 | | 6/30/19 | | 3/31/19 | | 12/31/18 | | |||||||||||||||||||||||||
Net income |
| $ | 85,115 |
| $ | 20,666 |
| $ | 22,411 |
| $ | 22,180 |
| $ | 19,858 |
| $ | 17,954 |
| | $ | 80,872 | | $ | 12,631 | | $ | 27,280 | | $ | 20,534 | | $ | 20,427 | | $ | 30,844 | |
Less: Gain on sale |
|
| (3,582) |
|
| — |
|
| (1,780) |
|
| (1,802) |
|
| — |
|
| (586) |
| |||||||||||||||||||
Add: Impairment on real estate for sale |
|
| 766 |
|
| 766 |
|
| — |
|
| — |
|
| — |
|
| 2,250 |
| |||||||||||||||||||
Less: (Gain)/ loss on sale | | | (2,106) | | | 4,630 | | | (6,236) | | | (500) | | | — | | | (7,984) | | |||||||||||||||||||
Add: Impairment loss from investment in unconsolidated joint ventures | | | 5,500 | | | 5,500 | | | — | | | — | | | — | | | — | | |||||||||||||||||||
Add: Interest expense |
|
| 26,442 |
|
| 6,856 |
|
| 6,836 |
|
| 6,750 |
|
| 6,000 |
|
| 5,581 |
| | | 30,582 | | | 7,578 | | | 7,827 | | | 7,710 | | | 7,467 | | | 7,215 | |
Add: Depreciation and amortization |
|
| 35,932 |
|
| 9,309 |
|
| 9,155 |
|
| 8,907 |
|
| 8,561 |
|
| 8,310 |
| | | 39,216 | | | 9,817 | | | 9,932 | | | 9,860 | | | 9,607 | | | 9,396 | |
Total adjusted EBITDA |
| $ | 144,673 |
| $ | 37,597 |
| $ | 36,622 |
| $ | 36,035 |
| $ | 34,419 |
| $ | 33,509 |
| |||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
EBITDAre | | $ | 154,064 | | $ | 40,156 | | $ | 38,803 | | $ | 37,604 | | $ | 37,501 | | $ | 39,471 | | |||||||||||||||||||
Less: Non-recurring one-time items | | | (1,535) | | | (2,111) | | | — | | | — | | | 576 | | | — | | |||||||||||||||||||
Adjusted EBITDAre | | $ | 152,529 | | $ | 38,045 | | $ | 38,803 | | $ | 37,604 | | $ | 38,077 | | $ | 39,471 | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Interest expense |
| $ | 26,442 |
| $ | 6,856 |
| $ | 6,836 |
| $ | 6,750 |
| $ | 6,000 |
| $ | 5,581 |
| | $ | 30,582 | | $ | 7,578 | | $ | 7,827 | | $ | 7,710 | | $ | 7,467 | | $ | 7,215 | |
Add: Capitalized interest |
|
| 1,408 |
|
| 215 |
|
| 251 |
|
| 256 |
|
| 686 |
|
| 346 |
| | | 608 | | | 167 | | | 108 | | | 73 | | | 260 | | | 398 | |
Interest incurred |
| $ | 27,850 |
| $ | 7,071 |
| $ | 7,087 |
| $ | 7,006 |
| $ | 6,686 |
| $ | 5,927 |
| | $ | 31,190 | | $ | 7,745 | | $ | 7,935 | | $ | 7,783 | | $ | 7,727 | | $ | 7,613 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Interest coverage ratio |
|
| 5.2 | x |
| 5.3 | x |
| 5.2 | x |
| 5.1 | x |
| 5.1 | x |
| 5.7 | x | | | 4.9 | x | | 4.9 | x | | 4.9 | x | | 4.8 | x | | 4.9 | x | | 5.2 | x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Interest incurred |
| $ | 27,850 |
| $ | 7,071 |
| $ | 7,087 |
| $ | 7,006 |
| $ | 6,686 |
| $ | 5,927 |
| | $ | 31,190 | | $ | 7,745 | | $ | 7,935 | | $ | 7,783 | | $ | 7,727 | | $ | 7,613 | |
Total fixed charges |
| $ | 27,850 |
| $ | 7,071 |
| $ | 7,087 |
| $ | 7,006 |
| $ | 6,686 |
| $ | 5,927 |
| | $ | 31,190 | | $ | 7,745 | | $ | 7,935 | | $ | 7,783 | | $ | 7,727 | | $ | 7,613 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||
Fixed charge coverage ratio |
|
| 5.2 | x |
| 5.3 | x |
| 5.2 | x |
| 5.1 | x |
| 5.1 | x |
| 5.7 | x | | | 4.9 | x | | 4.9 | x | | 4.9 | x | | 4.8 | x | | 4.9 | x | | 5.2 | x |
34
42
We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved and actual results may differ materially from our expectations. This may be a result of various factors, including, but not limited toto:
| The status of the economy; |
| The status of capital markets, including prevailing interest rates; |
| Compliance with and changes to regulations and payment policies within the health care industry; |
| Changes in financing terms; |
| Competition within the health care and |
| Changes in federal, state and local legislation. |
Management regularly monitors the economic and other factors listed above. We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company‑specificcompany-specific trends.
35
43
Operating Results
Year ended December 31, 20162019 compared to year ended December 31, 20152018 (in thousands):
| | | | | | | | | | |
| | Years ended December 31, | | | | |||||
| | 2019 | | 2018 | | Difference | | |||
Revenues: | | | | | | | | | | |
Rental income | | $ | 152,755 | | $ | 135,405 | | $ | 17,350 | (1) (2) |
Interest income from mortgage loans | | | 29,991 | | | 28,200 | | | 1,791 | (3) |
Interest and other income | | | 2,558 | | | 5,040 | | | (2,482) | (4) |
Total revenues | | | 185,304 | | | 168,645 | | | 16,659 | |
| | | | | | | | | | |
Expenses: | | | | | | | | | | |
Interest expense | | | 30,582 | | | 30,196 | | | (386) | |
Depreciation and amortization | | | 39,216 | | | 37,555 | | | (1,661) | (5) |
Provision for doubtful accounts | | | 166 | | | 87 | | | (79) | |
Transaction costs | | | 365 | | | 84 | | | (281) | |
Property tax expense | | | 16,755 | | | — | | | (16,755) | (2) |
General and administrative expenses | | | 18,453 | | | 19,193 | | | 740 | (6) |
Total expenses | | | 105,537 | | | 87,115 | | | (18,422) | |
| | | | | | | | | | |
Other operating income: | | | | | | | | | | |
Gain on sale of real estate, net | | | 2,106 | (7) | | 70,682 | (8) | | (68,576) | |
Operating income | | | 81,873 | | | 152,212 | | | (70,339) | |
Gain from property insurance proceeds | | | 2,111 | | | — | | | 2,111 | (9) |
Impairment loss from investments in unconsolidated joint ventures | | | (5,500) | | | — | | | (5,500) | (10) |
Income from unconsolidated joint ventures | | | 2,388 | | | 2,864 | | | (476) | |
Net income | | | 80,872 | | | 155,076 | | | (74,204) | |
Income allocated to non-controlling interests | | | (346) | | | (95) | | | (251) | |
Net income attributable to LTC Properties, Inc. | | | 80,526 | | | 154,981 | | | (74,455) | |
Income allocated to participating securities | | | (391) | | | (625) | | | 234 | |
Net income available to common stockholders | | $ | 80,135 | | $ | 154,356 | | $ | (74,221) | |
|
|
|
|
|
|
|
|
|
|
|
|
| Years ended December 31, |
|
|
| |||||
|
| 2016 |
| 2015 |
| Difference |
| |||
Revenues: |
|
|
|
|
|
|
|
|
|
|
Rental income |
| $ | 133,527 |
| $ | 113,080 |
| $ | 20,447 | (1) |
Interest income from mortgage loans |
|
| 27,321 |
|
| 22,119 |
|
| 5,202 | (2) |
Interest and other income |
|
| 735 |
|
| 1,004 |
|
| (269) | (3) |
Total revenues |
|
| 161,583 |
|
| 136,203 |
|
| 25,380 |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 26,442 |
|
| 17,497 |
|
| (8,945) | (4) |
Depreciation and amortization |
|
| 35,932 |
|
| 29,431 |
|
| (6,501) | (1) |
Impairment on real estate for sale |
|
| 766 |
|
| 2,250 |
|
| 1,484 | (5) |
Provision for doubtful accounts |
|
| 457 |
|
| 619 |
|
| 162 |
|
Transaction costs |
|
| 179 |
|
| 744 |
|
| 565 | (6) |
General and administrative expenses |
|
| 17,412 |
|
| 14,986 |
|
| (2,426) | (7) |
Total expenses |
|
| 81,188 |
|
| 65,527 |
|
| (15,661) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 80,395 |
|
| 70,676 |
|
| 9,719 |
|
Income from unconsolidated joint ventures |
|
| 1,138 |
|
| 1,819 |
|
| (681) | (8) |
Gain on sale of real estate, net |
|
| 3,582 |
|
| 586 |
|
| 2,996 | (9) |
Net income |
|
| 85,115 |
|
| 73,081 |
|
| 12,034 |
|
Income allocated to participating securities |
|
| (385) |
|
| (484) |
|
| 99 |
|
Income allocated to preferred stockholders |
|
| — |
|
| (2,454) |
|
| 2,454 | (10) |
Net income available to common stockholders |
| $ | 84,730 |
| $ | 70,143 |
| $ | 14,587 |
|
(1) |
| Increased due to (2) below and increased rent from acquisitions and developments partially offset by decreased rent from sold properties and |
(2) |
|
(3) | Increased primarily due to mortgage |
(4) |
| Decreased |
|
|
(5) | Increased due to acquisitions and completed developments partially offset by sold properties. |
(6) | Decreased primarily due to lower accrual of incentive compensation in 2019. |
(7) | Represents the net gain resulting from sale of |
(8) |
|
(9) | Relates to remaining insurance proceeds for remediation of a property in our portfolio, which was sold in 2019. See Item 8. FINANCIAL STATEMENTS—Note 2. Summary of Significant Accounting Policies. for more information. |
(10) |
|
|
|
|
|
|
|
|
|
|
|
36
44
Year ended December 31, 20152018 compared to year ended December 31, 20142017 (in thousands)
| | | | | | | | | | |
| | Years ended December 31, | | | | | ||||
| | 2018 | | 2017 | | Difference | | |||
Revenues: |
| |
|
| |
|
| |
| |
Rental income | | $ | 135,405 | | $ | 137,657 | | $ | (2,252) | (1) |
Interest income from mortgage loans | |
| 28,200 | |
| 26,769 | |
| 1,431 | (2) |
Interest and other income | |
| 5,040 | |
| 3,639 | |
| 1,401 | (3) |
Total revenues | |
| 168,645 | |
| 168,065 | |
| 580 | |
| | | | | | | | | | |
Expenses: | | | | | | | | | | |
Interest expense | |
| 30,196 | |
| 29,949 | |
| (247) | (4) |
Depreciation and amortization | |
| 37,555 | |
| 37,610 | |
| 55 | |
Impairment on real estate for sale | |
| — | |
| 1,880 | |
| 1,880 | (5) |
Provision for doubtful accounts | | | 87 | | | (206) | | | (293) | |
Transaction costs | | | 84 | | | 56 | | | (28) | |
General and administrative expenses | |
| 19,193 | |
| 17,513 | |
| (1,680) | (6) |
Total expenses | |
| 87,115 | |
| 86,802 | |
| (313) | |
| | | | | | | | | | |
Other operating income: | | | | | | | | | | |
Gain on sale of real estate, net | | | 70,682 | (7) | | 3,814 | (8) | | 66,868 | (7) |
Operating income | | | 152,212 | |
| 85,077 | |
| 67,135 | |
Income from unconsolidated joint ventures | | | 2,864 | | | 2,263 | | | 601 | (8) |
Net income | |
| 155,076 | |
| 87,340 | |
| 67,736 | |
Income allocated to non-controlling interests | |
| (95) | |
| — | |
| (95) | |
Net income attributable to LTC Properties, Inc. | |
| 154,981 | |
| 87,340 | |
| 67,641 | |
Income allocated to participating securities | |
| (625) | |
| (362) | |
| (263) | |
Net income available to common stockholders | | $ | 154,356 | | $ | 86,978 | | $ | 67,378 | |
|
|
|
|
|
|
|
|
|
|
|
|
| Years ended December 31, |
|
|
|
| ||||
|
| 2015 |
| 2014 |
| Difference |
| |||
Revenues: |
|
|
|
|
|
|
|
|
|
|
Rental income |
| $ | 113,080 |
| $ | 101,849 |
| $ | 11,231 | (1) |
Interest income from mortgage loans |
|
| 22,119 |
|
| 16,553 |
|
| 5,566 | (2) |
Interest and other income |
|
| 1,004 |
|
| 559 |
|
| 445 | (3) |
Total revenues |
|
| 136,203 |
|
| 118,961 |
|
| 17,242 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 17,497 |
|
| 13,128 |
|
| (4,369) | (4) |
Depreciation and amortization |
|
| 29,431 |
|
| 25,529 |
|
| (3,902) | (1) |
Impairment on real estate for sale |
|
| 2,250 |
|
| — |
|
| (2,250) | (5) |
Provision for doubtful accounts |
|
| 619 |
|
| 32 |
|
| (587) | (2) |
Acquisition costs |
|
| 744 |
|
| 195 |
|
| (549) | (6) |
General and administrative expenses |
|
| 14,986 |
|
| 11,637 |
|
| (3,349) | (7) |
Total expenses |
|
| 65,527 |
|
| 50,521 |
|
| (15,006) |
|
Operating income |
|
| 70,676 |
|
| 68,440 |
|
| 2,236 |
|
Income from unconsolidated joint ventures |
|
| 1,819 |
|
| — |
|
| 1,819 | (8) |
Gain on sale of real estate, net |
|
| 586 |
|
| 4,959 |
|
| (4,373) | (9) |
Income from continuing operations |
|
| 73,081 |
|
| 73,399 |
|
| (318) |
|
Income allocated to participating securities |
|
| (484) |
|
| (481) |
|
| (3) |
|
Income allocated to preferred stockholders |
|
| (2,454) |
|
| (3,273) |
|
| 819 | (10) |
Net income available to common stockholders |
| $ | 70,143 |
| $ | 69,645 |
| $ | 498 |
|
(2) |
|
|
| Increased primarily due to mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
Funds From Operations
Funds from Operations (or FFO) (“FFO”) attributable to common stockholders, basic FFO attributable to common stockholders per share and diluted FFO attributable to common stockholders per share are supplemental measures of a REIT’s financial performance that are not defined by U.S. GAAP. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with U.S. GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO facilitates comparisons of operating performance between periods.
37
We use FFO as a supplemental performance measurement of our cash flow generated by operations. FFO does not represent cash generated from operating activities in accordance with U.S. GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.
We calculate and report FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (or NAREIT).NAREIT. FFO, as defined by NAREIT, means net income available to common stockholders (computed in accordance with U.S. GAAP) excluding gains or losses on the sale of real estate and impairment write‑downswrite-downs of depreciable real estate plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that have a different interpretation of the current NAREIT definition from us; therefore, caution should be exercised when comparing our FFO to that of other REITs.
The following table reconciles net income available to common stockholders to FFO attributable to common stockholders (unaudited, amounts in thousands, except per share amounts):
| | | | | | | | | | |
| | | | | | | | | | |
| | For the year ended December 31, |
| |||||||
| | 2019 | | 2018 | | 2017 |
| |||
GAAP net income available to common stockholders | | $ | 80,135 |
| $ | 154,356 |
| $ | 86,978 | |
Add: Depreciation and amortization | |
| 39,216 | |
| 37,555 | |
| 37,610 | |
Add: Impairment charges | | | 5,500 | | | — | | | 1,880 | |
Less: Gain on sale of real estate, net | |
| (2,106) | |
| (70,682) | |
| (3,814) | |
NAREIT FFO attributable to common stockholders | | $ | 122,745 | | $ | 121,229 | | $ | 122,654 | |
NAREIT FFO attributable to common stockholders per share: | | | | | | | | | | |
Basic | | $ | 3.10 | | $ | 3.07 | | $ | 3.11 | |
Diluted | | $ | 3.08 | (1) | $ | 3.06 | (1) | $ | 3.10 | (1) |
Weighted average shares used to calculate NAREIT FFO per share: | | | | | | | | | | |
Basic | |
| 39,571 | |
| 39,477 | |
| 39,409 | |
Diluted | |
| 39,921 | (2) |
| 39,839 | (2) |
| 39,637 | (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the year ended December 31, |
| |||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||
GAAP net income available to common stockholders |
| $ | 84,730 |
| $ | 70,143 |
| $ | 69,645 |
|
Add: Depreciation and amortization |
|
| 35,932 |
|
| 29,431 |
|
| 25,529 |
|
Add: Impairment on real estate for sale |
|
| 766 |
|
| 2,250 |
|
| — |
|
Less: Gain on sale of real estate, net |
|
| (3,582) |
|
| (586) |
|
| (4,959) |
|
NAREIT FFO attributable to common stockholders |
| $ | 117,846 |
| $ | 101,238 |
| $ | 90,215 |
|
NAREIT FFO attributable to common stockholders per share: |
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 3.07 |
| $ | 2.84 |
| $ | 2.61 |
|
Diluted |
| $ | 3.06 | (1) | $ | 2.77 | (2) | $ | 2.55 | (2) |
Weighted average shares used to calculate NAREIT FFO per share: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 38,388 |
|
| 35,590 |
|
| 34,617 |
|
Diluted |
|
| 38,597 | (3) |
| 37,563 | (4) |
| 36,866 | (4) |
(1) |
| Includes the effect of participating securities. |
(2) |
|
|
| Diluted weighted average shares used to calculate FFO per share |
|
|
46
Critical Accounting Policies
See Item 8. FINANCIAL STATEMENTS—Note 2. Summary of Significant Accounting Policies.
Liquidity and Capital Resources
Sources and Uses of Cash
As of December 31, 2016,2019, we had a total of$8.04.2 million of cash and cash equivalents, $492.9$506.1 million available under our unsecured revolving line of credit and $22.5$21.5 million available under our senior unsecured note shelf agreement.agreement which expired in February 16, 2020. Subsequent to December 31, 2016,2019, we amended our shelf agreement, issued senior unsecured notes and used the proceeds to repayborrowed $18.0 million under our unsecured revolving line of credit. Accordingly, we have $600.0$111.9 million availableoutstanding under our unsecured revolving line of credit and $36.7$488.1 million available under our shelf agreement.for borrowing. See Item 8. FINANCIAL STATEMENTS—Debt Obligations below for further discussion.
Additionally, we have the potential ability to access the capital markets through the issuance of $200.0 million of common stock underby means of our equity distribution agreement and unlimited amount through the issuance of debt and/ or equity securitiesagreements under our effectiveautomatic shelf registration. Subsequent to December 31, 2016, we sold shares of common stock under our equity distribution agreement. Accordingly, we have $185.2 million available under these agreements.registration statement. See Equity below for further discussion.
We have an automatic shelf registration statement on file with the SEC, and currently have the ability to file additional automatic shelf registration statements, to provide us with capacity to offer an indeterminate amount of
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common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time publicly raise capital under our automatic shelf registration statement in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.
We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows providedused by financing activities and used in investing activities are sensitive to the capital marketsmarkets’ environment, especially to changes in interest rates. We continuously evaluate the availability of cost-effective capital and believe we have sufficient liquidity for additional capital investments in 2017.2020.
We expect our future income and ability to make distributions from cash flows from operationsprovided by operating activities to depend on the collectabilitycollectibility of our rents and mortgage loans receivable. The collection of these loans and rents will be dependent, in large part, upon the successful operation by the operators of the seniors housing and health care properties we own or that are pledged to us. The operating results of the facilities willmay be impacted by various factors over which the operators/owners may have no control. Those factors include, without limitation, the status of the economy, changes in supply of or demand for competing seniors housing and health care facilities, ability to control rising operating costs, and the potential for significant reforms in the health care industry. In addition, our future growth in net income and cash flow may be adversely impacted by various proposals for changes in the governmental regulations and financing of the health care industry. We cannot presently predict what impact these proposals may have, if any. We believe that an adequate provision has been made for the possibility of loans proving uncollectible but we will continually evaluate the financial status of the operations of the seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary.
Our investments, principally our investments in mortgage loans and owned properties, are subject to the possibility of loss of their carrying values as a result of changes in market prices, interest rates and inflationary expectations. The effects on interest rates may affect our costs of financing our operations and the fair market value of our financial assets. Generally, our loans have predetermined increases in interest rates and our leases have agreed upon annual increases. Inasmuch as weWe may initially fund some of our investments with variable interest rate debt and, if so, we would be at risk of net interest margin deterioration if medium and long-term rates were to increase.
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Our primary sources of cash include rent and interest receipts, borrowings under our primary unsecured credit facility public issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable.dispositions. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures and construction advances), loan advances and general and administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below (in thousands):
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| Change |
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| | Year Ended December 31, | | | Change | | |||||||||||||||||
Cash provided by (used in): |
| 2016 |
| 2015 |
|
| $ |
|
| % |
| | 2019 | | 2018 | | | $ | | ||||
Operating activities |
| $ | 105,708 |
| $ | 102,341 |
| $ | 3,367 |
|
| 3.3 | % | | $ | 122,469 | | $ | 115,535 | | $ | 6,934 | |
Investing activities |
|
| (139,898) |
|
| (326,820) |
|
| 186,922 |
|
| (57.2) | % | | | (78,988) | | | (3,609) | | | (75,379) | |
Financing activities |
|
| 29,239 |
|
| 212,184 |
|
| (182,945) |
|
| (86.2) | % | | | (44,001) | | | (112,375) | | | 68,374 | |
(Decrease) increase in cash and cash equivalents |
|
| (4,951) |
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| (12,295) |
|
| 7,344 |
|
| 59.7 | % | ||||||||||
Cash and cash equivalents, beginning of period |
|
| 12,942 |
|
| 25,237 |
|
| (12,295) |
|
| (48.7) | % | ||||||||||
Cash and cash equivalents, end of period |
| $ | 7,991 |
| $ | 12,942 |
| $ | (4,951) |
|
| (38.3) | % | ||||||||||
Decrease in cash, cash equivalents and restricted cash | | | (520) | | | (449) | | | (71) | | |||||||||||||
Cash, cash equivalents and restricted cash, beginning of period | | | 4,764 | | | 5,213 | | | (449) | | |||||||||||||
Cash, cash equivalents and restricted cash, end of period | | $ | 4,244 | | $ | 4,764 | | $ | (520) | |
Operating Activities. Cash provided by operating activities for the year ended December 31, 2016, increased to $105.7 million compared to $102.3 million for the year ended December 31, 2015 due to increased operating cash flow from acquisitions, completed developments and capital improvement projects.
Investing Activities. Cash used in investing activities decreased from $326.8 million for the year ended December 31, 2015 compared to $139.9 million for the year ended December 31, 2016 primarily due to decreased acquisitions and loan originations partially offset by increased real estate development and capital improvement projects in 2016.
Financing Activities. Cash provided by financing activities decreased to $29.2 million for the year ended December 31, 2016, from $212.2 million for the comparable 2015 period. The decrease in cash provided by financing activities is primarily attributable to decreased bank borrowings partially offset by proceeds from common stock offerings during 2016, and an increase in distributions paid to stockholders.
Debt Obligations
Bank Borrowings. We have an Unsecured Credit Agreement that provides for a revolving line of credit up to $600.0 million.million in aggregate commitment of the lenders and the opportunity to increase the commitment size of the credit agreement up to a total of $1.0 billion. The Unsecured Credit Agreement matures on October 14, 2018June 27, 2022 and provides for a one-year extension option at our discretion, subject to customary conditions.Based on our leverage at December 31, 2016,2019, the facility provides for interest annually at LIBOR plus 150115 basis points and an unused commitmenta facility fee of 35 20
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basis points. During 2016, we borrowed $123.6 million and repaid $137.0 million under our Unsecured Credit Agreement. At December 31, 2016,2019, we were in compliance with all covenants. Subsequent to December 31, 2016, we repaid our outstanding balance of $107.1 million using proceeds from the sale of senior unsecured notes, as discussed below. Accordingly, we have $600.0 million available under our revolving line of credit.
Senior Unsecured Notes. During the twelve months ended December 31, 2016, we sold $37.5We have a $337.5 million senior unsecured notes toshelf agreement with affiliates and managed accounts of Prudential Investment Management,PGIM, Inc. (or Prudential)(“Prudential”), with an annual fixed rate of 4.15%. The notes have an average 10-year life, scheduled principal payments and mature in 2028. During the twelve months ended December 31, 2016, we paid $26.721.5 million in regular scheduled principal payments under our Prudential senior unsecured notes. Accordingly,available for borrowings at December 31, 2016, we had $22.5 million available under our shelf agreement with Prudential.
Subsequent to December 31, 2016, we paid $4.2 million in regular scheduled principal payments and amended our shelf agreement with Prudential to increase our shelf commitment to $337.5 million. Additionally, subsequent to December 31, 2016, we sold 15-year senior unsecured notes in the aggregate amount of $100.0 million to a group of institutional investors,2019, which included Prudential, in a private placement transaction. The notes bear interest at an annual fixed rate of 4.5%, have scheduled principal payments and matureexpired for new issuance on February 16, 2032. Accordingly, we have $36.7 million available under our amended shelf agreement with Prudential.2020.
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Additionally, during the twelve months ended December 31, 2016, we amended our agreement with AIG Asset Management (U.S.) LLC (or AIG) which provided for the possible issuance of up to an additional of $40.0 million of senior unsecured notes and sold $40.0 million senior unsecured term notes with a fixed rate of 3.99% to affiliated insurance company investment advisory clients of AIG. The notes have an average 10-year life, scheduled principal payments and will mature in 2031.
The following table summarizes information regarding debt obligations by component as of December 31, 2016 2019 are as follows (dollar amounts in thousands):
| | | | | | | | |
| | Applicable | | | | | Available | |
| | Interest | | Outstanding | | for | ||
Debt Obligations | | Rate (1) | | Balance | | Borrowing | ||
Bank borrowings (2) | | 3.14% | | $ | 93,900 | | $ | 506,100 |
Senior unsecured notes, net of debt issue costs | | 4.39% | | | 599,488 | | | 21,500 |
Total | | 4.22% | | $ | 693,388 | | $ | 527,600 |
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| Applicable |
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| Available | |
|
| Interest |
| Outstanding |
| for | ||
Debt Obligations |
| Rate(1) |
| Balance |
| Borrowing | ||
Bank borrowings (2) |
| 2.25% |
| $ | 107,100 |
| $ | 492,900 |
Senior unsecured notes, net of debt issue costs (3) |
| 4.50% |
|
| 502,291 |
|
| 22,500 |
Total |
| 4.11% |
| $ | 609,391 |
| $ | 515,400 |
(1) |
| Represents weighted average of interest rate as of December 31, |
(2) |
| Subsequent to December 31, |
Our debt borrowings and repayments during the year ended December 31, 2019, are as follows (in thousands):
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| | | | | | |
Debt Obligations | | | Borrowings | | | Repayments |
Bank borrowings | | $ | 107,900 | | $ | (126,000) |
Senior unsecured notes | | | 100,000 | | | (33,667) |
Total | | $ | 207,900 | | $ | (159,667) |
Equity
At December 31, 2016,2019, we had 39,221,37039,751,704 shares of common stock outstanding, equity on our balance sheet totaled $740.0$785.4 million and our equity securities had a market value of $1.8 billion. During the year ended December 31, 2019, we declared and paid $90.9 million of cash dividends.
At-The-Market Program. During 2015, we entered intoCommon Stock. We have an equity distribution agreement (or Original Agreement)with sales agents to issue and sell, from time to time, up to $200.0 million in aggregate offering price of our common shares. SalesThe equity distribution agreement provides for sales of common shares areto be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. During the twelve months endedAt December 31, 2016,2019, we sold 1,643,017 shares of common stock for $78.6 million in net proceeds under the Original Agreement.
During the twelve months ended December 31, 2016, we terminated the Original Agreement and entered into a new equity distribution agreement (or Equity Distribution Agreement) to issue and sell, from time to time, up tohad $200.0 million in aggregate offering price of our company common shares. As of December 31, 2016, no shares were issued under this agreement. Subsequent to December 31, 2016, we sold 312,881 shares of common stock for $14.6 million under our Equity Distribution Agreement. Accordingly, we have $185.2 million available under thisour equity distribution agreement.
During 2016,2019, we acquired 49,405 shares of common stock held by the employees who tendered shares to satisfy tax withholding obligations. Subsequent to December 31, 2016, we acquired 23,69145,030 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2019, we acquired 34,016 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2019, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 2020, payable on January 31, February 28 and March 31, 2020, respectively, to stockholders of record on January 23, February 20 and March 23, 2020, respectively.
Non-controlling Interests. We may, enter into partnerships to develop and/or own real estate. Given that our limited members do not have substantive kick-out rights, liquidation rights, or participation rights, we have concluded that the partnerships are VIEs. Since we exercise power over and receive benefits from the VIEs, we are considered the primary beneficiary. Accordingly, we consolidate the VIEs and record the non-controlling interests at cost. During 2019, we invested in the following consolidated VIEs (in thousands):
| | | | | | | | | | | | |
| | | | | | | | Gross | | | | |
| | | Property | | | | | Consolidated | | | Non-Controlling | |
| Purpose | | Type | | State | | | Assets | | | Interests | |
| Owned real estate | | ALF/MC | | VA | | $ | 16,895 | | $ | 919 | |
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Stock Based Compensation Plans.During 2015, we adopted, and our shareholdersstockholders approved the 2015 Equity Participation Plan (or the 2015 Plan)(the “2015 Plan”) which replaces the 2008 Equity Participation Plan (or the 2008 Plan). Under the 2015 Plan, 1,400,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2015 Plan are set by our compensation committee at its discretion.
Restricted Stock and Performance-based Stock Units. During the twelve months ended December 31, 2016, no stock options were granted under this plan.
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During 2016,2019, we granted 127,087147,608 shares of restricted common stock and performance-based stock units under the 2015 Plan as follows:
| | | | | | |
No. of | | Price per | | | | |
Shares | | Share | | Vesting Period | | |
78,276 | | $ | 46.54 | | ratably over 3 years | |
60,836 | | $ | 46.54 | | TSR targets (1) | |
8,496 | | $ | 44.73 | | May 29, 2020 | |
147,608 | | | | | | |
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| Price per |
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| |
Year |
| No. of Shares/Units |
| Share |
| Vesting Period |
| |
2016 |
| 65,300 |
| $ | 43.24 |
| ratably over 3 years |
|
|
| 54,107 |
| $ | 46.87 |
| TSR targets (1) |
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| 7,680 |
| $ | 46.87 |
| June 1, 2017 |
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| 127,087 |
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(1) |
| Vesting is based on achieving certain total shareholder return |
Subsequent to December 31, 2016,2019, we granted 74,76076,464 shares of restricted common stock at $45.76$48.95 per share. These sharesshare, which vest ratably from the grant date over a three-year period.
At December 31, 2016,2019, the total number of restricted common stock and performance-based stock units that are scheduled to vest and remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock and performance-based stock units are as follows:follows (dollar amounts in thousands):
| | | | | |
| | Number | | Remaining | |
| | of | | Compensation | |
Vesting Date | | Awards |
| Expense | |
2020 | | 139,534 | (1) | $ | 4,619 |
2021 | | 119,168 | (2) | | 2,503 |
2022 | | 86,931 | (3) | | 189 |
Total | | 345,633 | | $ | 7,311 |
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| Number |
| Remaining | |
|
| of |
| Compensation | |
Vesting Date |
| Awards |
| Expense | |
2017 |
| 85,343 |
|
| 3,428,000 |
2018 |
| 49,352 |
|
| 2,071,000 |
2019 |
| 75,878 | (1) |
| 236,000 |
|
| 210,573 |
| $ | 5,735,000 |
(1) |
| Includes |
(2) | Includes 66,171 performance-based stock units. See (1) above for valuation methodology. |
(3) | Includes 60,836 performance-based stock units. See (1) above for valuation methodology. |
Stock Options. We did not issue any stock options during the year ended December 31, 2016.2019. During 2016,2019, a total of 6,6675,000 stock options were exercised at a total option value of $159,000$123,000 and a total market value on the date of exercise of $311,000.$233,000. At December 31, 2016,2019, we have 33,33415,000 stock options outstanding of which 28,334 of those stock options areand exercisable.
Available Shelf Registrations. We had an automatic shelf registration statement which was filed in 2013 and provided us with the capacity to publicly offer up to $800.0 million in common stock, preferred stock, warrants, debt, depositary shares, or units. In advance of the three-year expiration of the 2013 automatic shelf registration statement, we filed a new automatic shelf registration statement with the SEC on January 29, 2016 to provide us with additional capacity to publicly offer an indeterminate amount of common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time raise capital under the automatic registration statement we filed in 2016 (until its expiration on January 29, 2019) in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering.
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50
Contractual Obligations
We monitor our contractual obligations and commitments detailed above to ensure funds are available to meet obligations when due. The following table represents our long termlong-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 2016,2019, excluding the effects of interest and debt issue costs (in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| | Total | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter |
| |||||||
Bank borrowings | | $ | 93,900 | (1) | $ | — | | $ | — | | $ | 93,900 | | $ | — | | $ | — | | $ | — | |
Senior unsecured notes | |
| 600,300 | |
| 40,160 | |
| 47,160 | |
| 48,160 | |
| 49,160 | | | 49,160 | |
| 366,500 | |
| | $ | 694,200 | | $ | 40,160 | | $ | 47,160 | | $ | 142,060 | | $ | 49,160 | | $ | 49,160 | | $ | 366,500 | |
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| Total |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| Thereafter |
| |||||||
Bank borrowings |
| $ | 107,100 | (1) | $ | — |
| $ | 107,100 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Senior unsecured notes |
|
| 503,300 | (2) |
| 31,167 |
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| 38,167 |
|
| 33,666 |
|
| 40,160 |
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| 40,160 |
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| 319,980 |
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|
| $ | 610,400 |
| $ | 31,167 |
| $ | 145,267 |
| $ | 33,666 |
| $ | 40,160 |
| $ | 40,160 |
| $ | 319,980 |
|
(1) |
| Subsequent to December 31, |
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The following table represents our projected interest expense, excluding capitalized interest, amortization of debt issue costs, bank fees and earn-out accretion, as of December 31, 2016 and including the effects of the subsequent borrowing and repayment of our outstanding debt as discussed above2019 (in thousands):
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| Total |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| Thereafter |
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| Total |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| Thereafter |
| |||||||||||||||||||||||||||||
Bank borrowings |
| $ | 3,797 |
| $ | 2,129 |
| $ | 1,668 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| | $ | 7,469 | | $ | 2,998 | | $ | 2,989 | | $ | 1,482 | | $ | — | | $ | — | | $ | — | |
Senior unsecured notes |
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| 195,318 |
|
| 25,694 |
|
| 24,979 |
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| 23,377 |
|
| 21,808 |
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| 19,715 |
|
| 79,745 |
| |
| 161,051 | |
| 25,658 | |
| 23,565 | |
| 21,281 | |
| 19,003 | |
| 16,747 | |
| 54,797 | |
|
| $ | 199,115 |
| $ | 27,823 |
| $ | 26,647 |
| $ | 23,377 |
| $ | 21,808 |
| $ | 19,715 |
| $ | 79,745 |
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| | $ | 168,520 | | $ | 28,656 | | $ | 26,554 | | $ | 22,763 | | $ | 19,003 | | $ | 16,747 | | $ | 54,797 | |
Off‑BalanceOff-Balance Sheet Arrangements:
We had no off‑balanceoff-balance sheet arrangements as of December 31, 2016.2019.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
You are cautioned that statements contained in this section are forward looking and should be read in conjunction with the disclosure under the heading “Cautionary Statements”Statement” and the “Risk Factors” set forth above.
We are exposed to market risks associated with changes in interest rates as they relate to our mortgage loans receivable and debt. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.
We do not utilize interest rate swaps, forward or option contracts, or foreign currencies or commodities, or other types of derivative financial instruments nor do we engage in “off‑balance“off-balance sheet” transactions. The purpose of the following disclosure is to provide a framework to understand our sensitivity to hypothetical changes in interest rates as of December 31, 2016.2019.
Our future earnings, cash flows and estimated fair values relating to financial instruments are dependent upon prevalent market rates of interest, such as LIBOR or term rates of U.S. Treasury Notes. Changes in interest rates generally impact the fair value, but not future earnings or cash flows, of mortgage loans receivable and fixed rate debt. Our mortgage loans receivable and debt, such as our senior unsecured notes, are primarily fixed‑ratefixed-rate instruments. For variable rate debt, such as our revolving line of credit, changes in interest rates generally do not impact the fair value, but do affect future earnings and cash flows.
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At December 31, 2016,2019, the fair value of our mortgage loans receivable using an 8.2%a 9.0% discount rate was approximately $294.3$312.8 million. A 1% increase in such ratesrate would decrease the estimated fair value of our mortgage loans by approximately $26.7$27.0 million while a 1% decrease in such ratesrate would increase their estimated fair value by approximately $31.6$31.5 million. At December 31, 2016,2019, the fair value of our senior unsecured notes using a 4.47%3.70% discount rate for those maturing before year 2026 and 4.60%3.90% discount rate for those maturing at or beyond year 2026 was approximately $498.9$612.4 million. A 1% increase in such ratesrate would decrease the estimated fair value of our senior unsecured notes by approximately $26.9$31.7 million while a 1% decrease in such ratesrate would increase their estimated fair
42
value by approximately $29.1$34.2 million. These discount rates were measured based upon management’s estimates of rates currently prevailing for comparable loans available to us and instruments of comparable maturities.
The estimated impact of changes in interest rates discussed above are determined by considering the impact of the hypothetical interest rates on our borrowing costs, lending rates and current U.S. Treasury rates from which our financial instruments may be priced. We do not believe that future market rate risks related to our financial instruments will be material to our financial position or results of operations. These analyses do not consider the effects of industry specific events, changes in the real estate markets, or other overall economic activities that could increase or decrease the fair value of our financial instruments. If such events or changes were to occur, we would consider taking actions to mitigate and/or reduce any negative exposure to such changes. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our capital structure.
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52
LTC Properties, Inc.
Index to Consolidated Financial Statements
and Financial StatementStatements Schedules
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| Page | |
| 45 | | |
Consolidated Balance Sheets as of December 31, | | 48 | |
Consolidated Statements of Income | |||
| 49 | | |
Consolidated Statements of Equity for the years ended December 31, | | 50 | |
| 51 | | |
| 52 | | |
Consolidated Financial Statement Schedules | | | |
| 83 | | |
| 84 | | |
| 89 | |
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53
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of LTC Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of LTC Properties, Inc. (the “Company”) as of December 31, 20162019 and 2015,2018, and the related consolidated statements of income and comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2016. Our audits also included2019, and the related notes and the financial statement schedules listed in the Index at Item 15. These15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements and schedules arepresent fairly, in all material respects, the responsibilityfinancial position of the Company’s management. Our responsibility is to express an opinion on these financial statementsCompany at December 31, 2019 and schedules based on our audits.2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We conducted our auditsalso have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 20, 2020, expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases effective January 1, 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842) and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements referredthat were communicated or required to above present fairly,be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in all material respects, the consolidated financial position of LTC Properties, Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, inany way our opinion on the related financial statement schedules, when considered in relation to the basicconsolidated financial statements, taken as a whole, present fairly in all material respects,and we are not, by communicating the information set forth therein.critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
We also have audited, in accordance with the standards
45
| |
Impairment of Real Property Investments | |
Description of the Matter |
Auditing the Company’s evaluation of whether its Assets are impaired was complex and involved a high degree of subjectivity in the identification of indicators of impairment and management’s assumptions in estimating future cash flows as estimates underlying the determination of fair value were based on assumptions about future market and economic conditions. Where indicators of impairment exist, the estimation required in the undiscounted future cash flow assumption includes management’s probability-weighting of various scenarios including whether the Company modifies the lease with the existing operator or identifying a replacement operator and the assumed market lease rate underlying projected future rental cash flows. |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls related to the monitoring for indicators of impairment and, as indicators are present, management’s determination of future cash flows and probability assessment. For example, we tested controls over the Company’s data and assumptions used in the Company’s estimation of undiscounted cash flow and the determination of fair value. Among other audit procedures over management’s monitoring for indicators of impairment, we assessed the completeness of the identification of delinquent lessees by inspecting summaries of management’s review meetings and site inspection reports and observing the site inspection process. For properties with identified indicators of impairment, we performed audit procedures over the Company’s projection of the undiscounted future cash flows. For example, we re-calculated the estimates using management’s model and compared the lease rate assumptions to industry data and recently executed lease agreements for similar property types. For significant assumptions, we performed sensitivity analyses to evaluate the changes in the undiscounted cash flows of the properties that would result from changes in the assumptions. We analyzed the historical accuracy of management’s estimate of cash flows by vouching subsequent cash receipt activity and estimated lease rates by inspecting executed agreements or amendments. |
| |
Collectibility of Lease Payments | |
Description of the Matter | During 2019, the Company recognized rental income of $152.8 million and recorded a straight-line rent receivable of $45.7 million at December 31, 2019. As described in Note 2 to the consolidated financial statements, the Company adopted ASC 842 which requires the Company to assess the probability of collecting substantially all of the lease payments plus any amount necessary to satisfy a residual value guarantee (provided by the lessee or any other unrelated third party). Upon adoption, the Company recorded a $42.8M transition adjustment to write-off straight line rent and other lease receivables. Subsequently, if collectibility of substantially all of the remaining lease payments is not probable, all or a portion of the straight-line rent receivable and other lease receivables may be written off, and the rental income recorded during the period would be limited to the lesser of the income that would have been recognized if collection were probable, or the lease payments, including variable lease payments, that have been collected from the lessee. |
46
Auditing the Company's collectibility assessment is complex due to the judgment involved in the Company’s determination of the collectibility of remaining lease payments from its operators. The determination involves consideration of experience with the lessee, including the lessee’s payment history, if any, an assessment of the financial strength of the lessee, remaining lease payments, and the timing of expected payments. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over rental income, including controls over management’s assessment of the collectibility of future lease payments. For example, we tested controls over management’s consideration of the factors mentioned above used in assessing collectibility and controls over the completeness and accuracy of the data used in management’s analyses. To test the rental income recognized, we performed audit procedures that included, among others, evaluating the data and assumptions used in determining whether collection of substantially all of the lease payments was probable based on the factors mentioned above. In addition, we tested the completeness and accuracy of the data that was used in management’s collectibility analyses. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1992.
Los Angeles, California
February 20, 2020
February 22, 2017
47
54
LTC PROPERTIES, INC.
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
| December 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
ASSETS |
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
Land |
| $ | 116,096 |
| $ | 106,841 |
|
Buildings and improvements |
|
| 1,185,467 |
|
| 1,091,845 |
|
Accumulated depreciation and amortization |
|
| (275,861) |
|
| (251,265) |
|
Real property investments, net |
|
| 1,025,702 |
|
| 947,421 |
|
Mortgage loans receivable, net of loan loss reserve: 2016—$2,315; 2015—$2,190 |
|
| 229,801 |
|
| 217,529 |
|
Real estate investments, net |
|
| 1,255,503 |
|
| 1,164,950 |
|
Notes receivable, net of loan loss reserve: 2016—$166; 2015—$0 |
|
| 16,427 |
|
| 1,961 |
|
Investments in unconsolidated joint ventures |
|
| 25,221 |
|
| 24,042 |
|
Investments, net |
|
| 1,297,151 |
|
| 1,190,953 |
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| 7,991 |
|
| 12,942 |
|
Debt issue costs related to bank borrowings |
|
| 1,847 |
|
| 2,865 |
|
Interest receivable |
|
| 9,683 |
|
| 4,536 |
|
Straight-line rent receivable, net of allowance for doubtful accounts: 2016—$960; 2015—$833 |
|
| 55,276 |
|
| 42,685 |
|
Prepaid expenses and other assets |
|
| 22,948 |
|
| 21,443 |
|
Total assets |
| $ | 1,394,896 |
| $ | 1,275,424 |
|
LIABILITIES |
|
|
|
|
|
|
|
Bank borrowings |
| $ | 107,100 |
| $ | 120,500 |
|
Senior unsecured notes, net of debt issue costs: 2016—$1,009; 2015—$1,095 |
|
| 502,291 |
|
| 451,372 |
|
Accrued interest |
|
| 4,675 |
|
| 3,974 |
|
Accrued incentives and earn-outs |
|
| 12,229 |
|
| 12,722 |
|
Accrued expenses and other liabilities |
|
| 28,553 |
|
| 27,654 |
|
Total liabilities |
|
| 654,848 |
|
| 616,222 |
|
EQUITY |
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2016—39,221; 2015—37,548 |
|
| 392 |
|
| 375 |
|
Capital in excess of par value |
|
| 839,005 |
|
| 758,676 |
|
Cumulative net income |
|
| 1,013,443 |
|
| 928,328 |
|
Accumulated other comprehensive income |
|
| — |
|
| 47 |
|
Cumulative distributions |
|
| (1,112,792) |
|
| (1,028,224) |
|
Total equity |
|
| 740,048 |
|
| 659,202 |
|
Total liabilities and equity |
| $ | 1,394,896 |
| $ | 1,275,424 |
|
| | | | | | | |
|
| | |
| | |
|
|
| December 31, |
| ||||
| | 2019 | | 2018 |
| ||
ASSETS | | | | | | | |
Investments: | | | | | | | |
Land | | $ | 126,703 | | $ | 125,358 | |
Buildings and improvements | |
| 1,295,899 | |
| 1,290,352 | |
Accumulated depreciation and amortization | |
| (312,642) | |
| (312,959) | |
Operating real estate property, net | |
| 1,109,960 | |
| 1,102,751 | |
Properties held-for-sale, net of accumulated depreciation: 2019—$35,113; 2018—$1,916 | |
| 26,856 | |
| 3,830 | |
Real property investments, net | |
| 1,136,816 | |
| 1,106,581 | |
| | | | | | | |
Mortgage loans receivable, net of loan loss reserve: 2019—$2,560; 2018—$2,447 | |
| 254,099 | |
| 242,939 | |
Real estate investments, net | |
| 1,390,915 | |
| 1,349,520 | |
Notes receivable, net of loan loss reserve: 2019—$181; 2018—$128 | |
| 17,927 | |
| 12,715 | |
Investments in unconsolidated joint ventures | | | 19,003 | | | 30,615 | |
Investments, net | |
| 1,427,845 | |
| 1,392,850 | |
| | | | | | | |
Other assets: | | | | | | | |
Cash and cash equivalents | |
| 4,244 | |
| 2,656 | |
Restricted cash | | | — | | | 2,108 | |
Debt issue costs related to bank borrowings | |
| 2,164 | |
| 2,989 | |
Interest receivable | |
| 26,586 | |
| 20,732 | |
Straight-line rent receivable, net of allowance for doubtful accounts: 2019—$0; 2018—$746 | |
| 45,703 | |
| 73,857 | |
Lease incentives | | | 2,552 | | | 14,443 | |
Prepaid expenses and other assets | |
| 5,115 | |
| 3,985 | |
Total assets | | $ | 1,514,209 | | $ | 1,513,620 | |
LIABILITIES | | | | | | | |
Bank borrowings | | $ | 93,900 | | $ | 112,000 | |
Senior unsecured notes, net of debt issue costs: 2019—$812; 2018—$938 | |
| 599,488 | |
| 533,029 | |
Accrued interest | |
| 4,983 | |
| 4,180 | |
Accrued expenses and other liabilities | |
| 30,412 | |
| 31,440 | |
Total liabilities | |
| 728,783 | |
| 680,649 | |
EQUITY | | | | | | | |
Stockholders’ equity: | | | | | | | |
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2019—39,752; 2018—39,657 | |
| 398 | |
| 397 | |
Capital in excess of par value | |
| 867,346 | |
| 862,712 | |
Cumulative net income | |
| 1,293,482 | |
| 1,255,764 | |
Cumulative distributions | |
| (1,384,283) | |
| (1,293,383) | |
Total LTC Properties, Inc. stockholders’ equity | |
| 776,943 | |
| 825,490 | |
Non-controlling interests | |
| 8,483 | |
| 7,481 | |
Total equity | |
| 785,426 | |
| 832,971 | |
Total liabilities and equity | | $ | 1,514,209 | | $ | 1,513,620 | |
See accompanying notes.
48
55
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended December 31, |
| |||||||
|
|
| 2016 |
| 2015 |
| 2014 |
| |||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
| $ | 133,527 |
| $ | 113,080 |
| $ | 101,849 |
|
Interest income from mortgage loans |
|
|
| 27,321 |
|
| 22,119 |
|
| 16,553 |
|
Interest and other income |
|
|
| 735 |
|
| 1,004 |
|
| 559 |
|
Total revenues |
|
|
| 161,583 |
|
| 136,203 |
|
| 118,961 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
| 26,442 |
|
| 17,497 |
|
| 13,128 |
|
Depreciation and amortization |
|
|
| 35,932 |
|
| 29,431 |
|
| 25,529 |
|
Impairment of real estate for sale |
|
|
| 766 |
|
| 2,250 |
|
| — |
|
Provision for doubtful accounts |
|
|
| 457 |
|
| 619 |
|
| 32 |
|
Transaction costs |
|
|
| 179 |
|
| 744 |
|
| 195 |
|
General and administrative expenses |
|
|
| 17,412 |
|
| 14,986 |
|
| 11,637 |
|
Total expenses |
|
|
| 81,188 |
|
| 65,527 |
|
| 50,521 |
|
Operating income |
|
|
| 80,395 |
|
| 70,676 |
|
| 68,440 |
|
Income from unconsolidated joint ventures |
|
|
| 1,138 |
|
| 1,819 |
|
| — |
|
Gain on sale of real estate, net |
|
|
| 3,582 |
|
| 586 |
|
| 4,959 |
|
Net income |
|
|
| 85,115 |
|
| 73,081 |
|
| 73,399 |
|
Income allocated to participating securities |
|
|
| (385) |
|
| (484) |
|
| (481) |
|
Income allocated to preferred stockholders |
|
|
| — |
|
| (2,454) |
|
| (3,273) |
|
Net income available to common stockholders |
|
| $ | 84,730 |
| $ | 70,143 |
| $ | 69,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| $ | 2.21 |
| $ | 1.97 |
| $ | 2.01 |
|
Diluted |
|
| $ | 2.21 |
| $ | 1.94 |
| $ | 1.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used to calculate earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
| 38,388 |
|
| 35,590 |
|
| 34,617 |
|
Diluted |
|
|
| 38,597 |
|
| 37,329 |
|
| 36,640 |
|
| | | | | | | | | | |
| | |
| |||||||
| | Year Ended December 31, | | |||||||
|
| 2019 |
| 2018 |
| 2017 |
| |||
Revenues: | | | | | |
| | |
| |
Rental income | | $ | 152,755 | | $ | 135,405 | | $ | 137,657 | |
Interest income from mortgage loans | |
| 29,991 | |
| 28,200 | |
| 26,769 | |
Interest and other income | |
| 2,558 | |
| 5,040 | |
| 3,639 | |
Total revenues | |
| 185,304 | |
| 168,645 | |
| 168,065 | |
Expenses: | | | | | | | | | | |
Interest expense | |
| 30,582 | |
| 30,196 | |
| 29,949 | |
Depreciation and amortization | |
| 39,216 | |
| 37,555 | |
| 37,610 | |
Impairment charges | | | — | | | — | | | 1,880 | |
Provision for doubtful accounts | |
| 166 | |
| 87 | |
| (206) | |
Transaction costs | | | 365 | | | 84 | | | 56 | |
Property tax expense | | | 16,755 | | | — | | | — | |
General and administrative expenses | |
| 18,453 | |
| 19,193 | |
| 17,513 | |
Total expenses | |
| 105,537 | |
| 87,115 | |
| 86,802 | |
Other operating income: | | | | | | | | | | |
Gain on sale of real estate, net | | | 2,106 | | | 70,682 | | | 3,814 | |
Operating income | |
| 81,873 | |
| 152,212 | |
| 85,077 | |
Gain from property insurance proceeds | | | 2,111 | | | — | | | — | |
Impairment loss from investments in unconsolidated joint ventures | | | (5,500) | | | — | | | — | |
Income from unconsolidated joint ventures | | | 2,388 | | | 2,864 | | | 2,263 | |
Net income | | | 80,872 | | | 155,076 | | | 87,340 | |
Income allocated to non-controlling interests | |
| (346) | |
| (95) | |
| — | |
Net income attributable to LTC Properties, Inc. | |
| 80,526 | |
| 154,981 | |
| 87,340 | |
Income allocated to participating securities | |
| (391) | |
| (625) | |
| (362) | |
Net income available to common stockholders | | $ | 80,135 | | $ | 154,356 | | $ | 86,978 | |
| | | | | | | | | | |
Earnings per common share: | | | | | | | | | | |
Basic | | $ | 2.03 | | $ | 3.91 | | $ | 2.21 | |
Diluted | | $ | 2.02 | | $ | 3.89 | | $ | 2.20 | |
| | | | | | | | | | |
Weighted average shares used to calculate earnings per common share: | | | | | | | | | | |
Basic | |
| 39,571 | |
| 39,477 | |
| 39,409 | |
Diluted | |
| 39,759 | |
| 39,839 | |
| 39,637 | |
| | | | | | | | | | |
Comprehensive Income: | | | | | | | | | | |
Net income | | $ | 80,872 | | $ | 155,076 | | $ | 87,340 | |
Comprehensive income | | $ | 80,872 | | $ | 155,076 | | $ | 87,340 | |
See accompanying notes.
49
56
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended December 31, |
| |||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||
Net income |
| $ | 85,115 |
| $ | 73,081 |
| $ | 73,399 |
|
Reclassification adjustment (See Note 9) |
|
| (47) |
|
| (35) |
|
| (35) |
|
Comprehensive income |
| $ | 85,068 |
| $ | 73,046 |
| $ | 73,364 |
|
See accompanying notes.
57
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
|
|
|
|
|
|
| Capital in |
| Cumulative |
|
|
|
|
|
|
|
|
|
| ||||
|
| Preferred |
| Common |
| Preferred |
| Common |
| Excess of |
| Net |
| Accumulated |
| Cumulative |
| Total |
| |||||||
|
| Stock |
| Stock |
| Stock |
| Stock |
| Par Value |
| Income |
| OCI |
| Distributions |
| Equity |
| |||||||
Balance—December 31, 2013 |
| 2,000 |
| 34,746 |
| $ | 38,500 |
| $ | 347 |
| $ | 688,654 |
| $ | 781,848 |
| $ | 117 |
| $ | (877,028) |
| $ | 632,438 |
|
Reclassification adjustment |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (35) |
|
| — |
|
| (35) |
|
Issuance of common stock |
| — |
| 600 |
|
| — |
|
| 6 |
|
| 24,638 |
|
| — |
|
| — |
|
| — |
|
| 24,644 |
|
Issuance of restricted stock |
| — |
| 95 |
|
| — |
|
| 1 |
|
| (1) |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 73,399 |
|
| — |
|
| — |
|
| 73,399 |
|
Vesting of restricted stock |
| — |
| — |
|
| — |
|
| — |
|
| 3,241 |
|
| — |
|
| — |
|
| — |
|
| 3,241 |
|
Stock option exercises |
| — |
| 45 |
|
| — |
|
| 1 |
|
| 1,070 |
|
| — |
|
| — |
|
| — |
|
| 1,071 |
|
Vested stock options |
| — |
| — |
|
| — |
|
| — |
|
| 12 |
|
| — |
|
| — |
|
| — |
|
| 12 |
|
Preferred stock dividends |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,273) |
|
| (3,273) |
|
Common stock cash distributions ($2.04 per share) |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (71,158) |
|
| (71,158) |
|
Other |
| — |
| (6) |
|
| — |
|
| — |
|
| (218) |
|
| — |
|
| — |
|
| — |
|
| (218) |
|
Balance—December 31, 2014 |
| 2,000 |
| 35,480 |
|
| 38,500 |
|
| 355 |
|
| 717,396 |
|
| 855,247 |
|
| 82 |
|
| (951,459) |
|
| 660,121 |
|
Reclassification adjustment |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (35) |
|
| — |
|
| (35) |
|
Issuance of restricted stock |
| — |
| 92 |
|
| — |
|
| 1 |
|
| (1) |
|
| — |
|
| — |
|
| — |
|
| — |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 73,081 |
|
| — |
|
| — |
|
| 73,081 |
|
Vesting of restricted stock |
| — |
| — |
|
| — |
|
| — |
|
| 3,992 |
|
| — |
|
| — |
|
| — |
|
| 3,992 |
|
Vesting of stock options |
| — |
| — |
|
| — |
|
| — |
|
| 14 |
|
| — |
|
| — |
|
| — |
|
| 14 |
|
Stock option exercises |
| — |
| 3 |
|
| — |
|
| — |
|
| 79 |
|
| — |
|
| — |
|
| — |
|
| 79 |
|
Conversion of Series C Preferred Stock |
| (2,000) |
| 2,000 |
|
| (38,500) |
|
| 20 |
|
| 38,480 |
|
| — |
|
| — |
|
| — |
|
| — |
|
Preferred stock dividends |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,454) |
|
| (2,454) |
|
Common stock cash distributions ($2.07 per share) |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (74,311) |
|
| (74,311) |
|
Other |
| — |
| (27) |
|
| — |
|
| (1) |
|
| (1,284) |
|
| — |
|
| — |
|
| — |
|
| (1,285) |
|
Balance—December 31, 2015 |
| — |
| 37,548 |
|
| — |
|
| 375 |
|
| 758,676 |
|
| 928,328 |
|
| 47 |
|
| (1,028,224) |
|
| 659,202 |
|
Reclassification adjustment |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (47) |
|
| — |
|
| (47) |
|
Issuance of common stock |
| — |
| 1,643 |
|
| — |
|
| 16 |
|
| 78,120 |
|
| — |
|
| — |
|
| — |
|
| 78,136 |
|
Issuance of restricted stock |
| — |
| 73 |
|
| — |
|
| 1 |
|
| (42) |
|
| — |
|
| — |
|
| — |
|
| (41) |
|
Net income |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| 85,115 |
|
| — |
|
| — |
|
| 85,115 |
|
Vesting of restricted stock |
| — |
| — |
|
| — |
|
| — |
|
| 4,265 |
|
| — |
|
| — |
|
| — |
|
| 4,265 |
|
Vesting of stock options |
| — |
| — |
|
| — |
|
| — |
|
| 15 |
|
| — |
|
| — |
|
| — |
|
| 15 |
|
Stock option exercises |
| — |
| 7 |
|
| — |
|
| — |
|
| 159 |
|
| — |
|
| — |
|
| — |
|
| 159 |
|
Common stock cash distributions ($2.19 per share) |
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (84,568) |
|
| (84,568) |
|
Other |
| — |
| (50) |
|
| — |
|
| — |
|
| (2,188) |
|
| — |
|
| — |
|
| — |
|
| (2,188) |
|
Balance—December 31, 2016 |
| — |
| 39,221 |
| $ | — |
| $ | 392 |
| $ | 839,005 |
| $ | 1,013,443 |
| $ | — |
| $ | (1,112,792) |
| $ | 740,048 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Capital in | | Cumulative | | | | | Total | | Non- | | | |
| ||||
| Common Stock | | Excess of | | Net | | Cumulative | | Stockholders’ | | controlling | | Total |
| ||||||||||
|
| shares |
| Amount |
| Par Value |
| Income |
| Distributions |
| Equity |
| Interests |
| Equity |
| |||||||
Balance—December 31, 2016 | | 39,221 | | $ | 392 | | $ | 839,005 | | $ | 1,013,443 | | $ | (1,112,792) | | $ | 740,048 | | $ | — | | $ | 740,048 | |
Issuance of common stock | | 313 | |
| 3 | |
| 14,526 | |
| — | |
| — | |
| 14,529 | |
| — | |
| 14,529 | |
Issuance of restricted stock |
| 85 | |
| 1 | |
| (21) | |
| — | |
| — | |
| (20) | |
| — | |
| (20) | |
Net income |
| — | |
| — | |
| — | |
| 87,340 | |
| — | |
| 87,340 | |
| — | |
| 87,340 | |
Stock-based compensation expense |
| — | |
| — | |
| 5,247 | |
| — | |
| — | |
| 5,247 | |
| — | |
| 5,247 | |
Vesting of stock options | | — | | | — | | | 2 | | | — | | | — | | | 2 | | | — | | | 2 | |
Stock option exercises |
| 8 | |
| — | |
| 202 | |
| — | |
| — | |
| 202 | |
| — | |
| 202 | |
Non-controlling interest contributions |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 3,488 | |
| 3,488 | |
Common stock cash distributions ($2.28 per share) |
| — | |
| — | |
| — | |
| — | |
| (90,219) | |
| (90,219) | |
| — | |
| (90,219) | |
Other |
| (57) | |
| — | |
| (1,969) | |
| — | |
| — | |
| (1,969) | |
| — | |
| (1,969) | |
Balance—December 31, 2017 |
| 39,570 | |
| 396 | |
| 856,992 | |
| 1,100,783 | |
| (1,203,011) | |
| 755,160 | |
| 3,488 | |
| 758,648 | |
Issuance of common stock |
| 22 | |
| — | |
| 929 | |
| — | |
| — | |
| 929 | |
| — | |
| 929 | |
Issuance of restricted stock |
| 91 | |
| 1 | |
| (9) | |
| — | |
| — | |
| (8) | |
| — | |
| (8) | |
Net income |
| — | |
| — | |
| — | |
| 154,981 | |
| — | |
| 154,981 | |
| 95 | |
| 155,076 | |
Stock-based compensation expense |
| — | |
| — | |
| 5,870 | |
| — | |
| — | |
| 5,870 | |
| — | |
| 5,870 | |
Stock option exercises |
| 5 | |
| — | |
| 123 | |
| — | |
| — | |
| 123 | |
| — | |
| 123 | |
Non-controlling interest contributions |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 3,963 | |
| 3,963 | |
Non-controlling interest distributions | | — | | | — | | | — | | | — | | | — | | | — | | | (65) | | | (65) | |
Common stock cash distributions ($2.28 per share) |
| — | |
| — | |
| — | |
| — | |
| (90,372) | |
| (90,372) | |
| — | |
| (90,372) | |
Other |
| (31) | |
| — | |
| (1,193) | |
| — | |
| — | |
| (1,193) | |
| — | |
| (1,193) | |
Balance—December 31, 2018 |
| 39,657 | |
| 397 | |
| 862,712 | |
| 1,255,764 | |
| (1,293,383) | |
| 825,490 | |
| 7,481 | |
| 832,971 | |
Cumulative effect of the adoption of the ASC 842 | | — | | | — | | | — | | | (42,808) | | | — | | | (42,808) | | | — | | | (42,808) | |
Balance-as adjusted at January 1, 2019 | | 39,657 | | | 397 | | | 862,712 | | | 1,212,956 | | | (1,293,383) | | | 782,682 | | | 7,481 | | | 790,163 | |
Issuance of restricted stock |
| 86 | | | | | | (7) | | | — | | | — | |
| (7) | |
| — | |
| (7) | |
Net income |
| — | | | — | | | — | | | 80,526 | | | — | |
| 80,526 | |
| 346 | |
| 80,872 | |
Stock-based compensation expense |
| — | | | — | | | 6,566 | | | — | | | — | |
| 6,566 | |
| — | |
| 6,566 | |
Vesting of performance-based stock units | | 48 | | | — | | | — | | | — | | | (301) | | | (301) | | | — | | | (301) | |
Stock option exercises |
| 5 | | | 1 | | | 122 | | | — | | | — | |
| 123 | |
| — | |
| 123 | |
Non-controlling interest contributions |
| — | | | — | | | — | | | — | | | — | |
| — | |
| 965 | |
| 965 | |
Non-controlling interest distributions | | — | | | — | | | — | | | — | | | — | | | — | | | (309) | | | (309) | |
Common stock cash distributions ($2.28 per share) |
| — | | | — | | | — | | | — | | | (90,599) | |
| (90,599) | |
| — | |
| (90,599) | |
Other |
| (44) | | | — | | | (2,047) | | | — | | | — | |
| (2,047) | |
| — | |
| (2,047) | |
Balance—December 31, 2019 |
| 39,752 | | $ | 398 | | $ | 867,346 | | $ | 1,293,482 | | $ | (1,384,283) | | $ | 776,943 | | $ | 8,483 | | $ | 785,426 | |
See accompanying notes.
50
58
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended December 31, |
| |||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 85,115 |
| $ | 73,081 |
| $ | 73,399 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 35,932 |
|
| 29,431 |
|
| 25,529 |
|
Stock-based compensation expense |
|
| 4,280 |
|
| 4,006 |
|
| 3,253 |
|
Impairment on real estate |
|
| 766 |
|
| 2,250 |
|
| — |
|
Gain on sale of assets, net |
|
| (3,582) |
|
| (586) |
|
| (4,959) |
|
Income from unconsolidated joint ventures |
|
| (1,138) |
|
| (1,819) |
|
| — |
|
Income distributions from unconsolidated joint ventures |
|
| 1,695 |
|
| 552 |
|
| — |
|
Straight-line rental income |
|
| (13,477) |
|
| (10,136) |
|
| (3,002) |
|
Amortization of lease incentive |
|
| 1,945 |
|
| 1,680 |
|
| 841 |
|
Provision for doubtful accounts |
|
| 457 |
|
| 619 |
|
| 32 |
|
Non-cash interest related to contingent liabilities |
|
| 684 |
|
| 409 |
|
| 18 |
|
Other non-cash items, net |
|
| 1,216 |
|
| 985 |
|
| 779 |
|
(Increase) decrease in interest receivable |
|
| (5,147) |
|
| (3,939) |
|
| 105 |
|
Increase in accrued interest payable |
|
| 701 |
|
| 418 |
|
| 132 |
|
Net change in other assets and liabilities |
|
| (3,739) |
|
| 5,390 |
|
| (365) |
|
Net cash provided by operating activities |
|
| 105,708 |
|
| 102,341 |
|
| 95,762 |
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Investment in real estate properties |
|
| (74,923) |
|
| (206,340) |
|
| (11,650) |
|
Investment in real estate developments |
|
| (42,342) |
|
| (25,929) |
|
| (34,135) |
|
Investment in real estate capital improvements |
|
| (6,792) |
|
| (7,534) |
|
| (13,967) |
|
Capitalized interest |
|
| (1,408) |
|
| (827) |
|
| (1,506) |
|
Proceeds from sale of real estate, net |
|
| 17,369 |
|
| 1,537 |
|
| 33,593 |
|
Investment in real estate mortgage loans receivable |
|
| (20,685) |
|
| (67,134) |
|
| (9,374) |
|
Principal payments received on mortgage loans receivable |
|
| 8,278 |
|
| 4,808 |
|
| 9,155 |
|
Investments in unconsolidated joint ventures |
|
| (1,770) |
|
| (23,042) |
|
| — |
|
Payment of working capital reserve |
|
| (2,756) |
|
| (805) |
|
| — |
|
Advances and originations under notes receivable |
|
| (14,969) |
|
| (1,554) |
|
| (1,263) |
|
Principal payments received on notes receivable |
|
| 100 |
|
| — |
|
| 113 |
|
Net cash used in investing activities |
|
| (139,898) |
|
| (326,820) |
|
| (29,034) |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Bank borrowings |
|
| 123,600 |
|
| 291,000 |
|
| 37,500 |
|
Repayment of bank borrowings |
|
| (137,000) |
|
| (170,500) |
|
| (58,500) |
|
Proceeds from issuance of senior unsecured notes |
|
| 77,500 |
|
| 200,000 |
|
| 30,000 |
|
Principal payments on senior unsecured notes |
|
| (26,667) |
|
| (29,167) |
|
| (4,167) |
|
Principal payments on bonds payable |
|
| — |
|
| — |
|
| (2,035) |
|
Proceeds from common stock issued |
|
| 78,592 |
|
| — |
|
| 24,644 |
|
Stock option exercises |
|
| 159 |
|
| 79 |
|
| 1,071 |
|
Distributions paid to stockholders |
|
| (84,568) |
|
| (76,765) |
|
| (74,431) |
|
Financing costs paid |
|
| (147) |
|
| (1,178) |
|
| (2,132) |
|
Other |
|
| (2,230) |
|
| (1,285) |
|
| (219) |
|
Net cash provided by (used in) financing activities |
|
| 29,239 |
|
| 212,184 |
|
| (48,269) |
|
(Decrease) increase in cash and cash equivalents |
|
| (4,951) |
|
| (12,295) |
|
| 18,459 |
|
Cash and cash equivalents, beginning of period |
|
| 12,942 |
|
| 25,237 |
|
| 6,778 |
|
Cash and cash equivalents, end of period |
| $ | 7,991 |
| $ | 12,942 |
| $ | 25,237 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
Interest paid |
| $ | 24,490 |
| $ | 16,078 |
| $ | 12,188 |
|
Non-cash investing and financing transactions: |
|
|
|
|
|
|
|
|
|
|
See Note 4: Supplemental Cash Flow Information for further discussion. |
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
| | Year Ended December 31, |
| |||||||
|
| 2019 |
| 2018 |
| 2017 |
| |||
OPERATING ACTIVITIES: | | |
| | |
| | |
| |
Net income | | $ | 80,872 | | $ | 155,076 | | $ | 87,340 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | |
Depreciation and amortization | |
| 39,216 | |
| 37,555 | |
| 37,610 | |
Stock-based compensation expense | |
| 6,566 | |
| 5,870 | |
| 5,249 | |
Impairment charges | | | 5,500 | | | — | | | 1,880 | |
Gain on sale of real estate, net | |
| (2,106) | |
| (70,682) | |
| (3,814) | |
Income from unconsolidated joint ventures | |
| (2,388) | |
| (2,864) | |
| (2,263) | |
Income distributions from unconsolidated joint ventures | | | 2,991 | | | 2,371 | | | 1,738 | |
Insurance proceeds for damaged property | | | — | | | 2,619 | | | — | |
Payment for remediation of damaged property | | | — | | | (508) | | | — | |
Straight-line rental income | | | (4,487) | |
| (9,550) | | | (10,694) | |
Adjustment for collectibility of rental income | | | 1,926 | | | — | | | | |
Lease incentives funded | | | (387) | | | (1,272) | | | (6,544) | |
Amortization of lease incentives | | | 385 | | | 2,092 | | | 2,209 | |
Provision for (recovery of) doubtful accounts | |
| 166 | |
| 87 | |
| (206) | |
Non-cash interest related to contingent liabilities | |
| — | |
| 377 | |
| 602 | |
Non-cash income related to earn-out and related lease incentive write-off | | | — | | | (3,074) | | | (842) | |
Other non-cash items, net | |
| 1,016 | |
| 1,180 | |
| 1,282 | |
Increase in interest receivable | |
| (5,854) | |
| (5,682) | |
| (5,367) | |
Increase (decrease) in accrued interest payable | |
| 803 | |
| (1,096) | |
| 601 | |
Net change in other assets and liabilities | |
| (1,750) | |
| 3,036 | |
| (3,476) | |
Net cash provided by operating activities | |
| 122,469 | |
| 115,535 | |
| 105,305 | |
INVESTING ACTIVITIES: | | | | | | | | | | |
Investment in real estate properties | |
| (58,414) | |
| (40,408) | |
| (82,405) | |
Investment in real estate developments | |
| (20,524) | |
| (35,279) | |
| (22,901) | |
Investment in real estate capital improvements | |
| (2,839) | |
| (3,249) | |
| (2,899) | |
Capitalized interest | | | (608) | | | (1,248) | | | (908) | |
Proceeds from sale of real estate, net | |
| 14,009 | |
| 92,749 | |
| 15,413 | |
Investment in real estate mortgage loans receivable | |
| (12,342) | |
| (21,364) | |
| (11,913) | |
Principal payments received on mortgage loans receivable | |
| 1,065 | |
| 2,136 | |
| 17,863 | |
Investments in unconsolidated joint ventures | |
| (472) | |
| (670) | | | (3,848) | |
Proceeds from dissolution of unconsolidated joint ventures | | | 6,601 | | | — | | | — | |
Payment of working capital reserve | | | — | | | — | | | (439) | |
Advances and originations under notes receivable | |
| (8,967) | |
| (124) | |
| — | |
Principal payments received on notes receivable | |
| 3,503 | |
| 3,848 | |
| 25 | |
Net cash used in investing activities | |
| (78,988) | |
| (3,609) | |
| (92,012) | |
FINANCING ACTIVITIES: | | | | | | | | | | |
Bank borrowings | |
| 107,900 | |
| 116,200 | |
| 113,000 | |
Repayment of bank borrowings | |
| (126,000) | |
| (100,700) | |
| (123,600) | |
Proceeds from issuance of senior unsecured notes | |
| 100,000 | |
| — | |
| 100,000 | |
Principal payments on senior unsecured notes | | | (33,667) | | | (38,166) | | | (31,167) | |
Proceeds from common stock issued | |
| — | |
| 1,005 | |
| 14,578 | |
Stock option exercises | |
| 123 | |
| 123 | |
| 202 | |
Distributions paid to stockholders | |
| (90,899) | |
| (90,372) | |
| (90,219) | |
Contribution from non-controlling interests | |
| 965 | |
| 3,963 | |
| 3,488 | |
Distributions paid to non-controlling interests | |
| (309) | |
| (65) | |
| — | |
Financing costs paid | |
| (61) | |
| (3,162) | |
| (363) | |
Other | |
| (2,053) | |
| (1,201) | |
| (1,990) | |
Net cash used in financing activities | |
| (44,001) | |
| (112,375) | |
| (16,071) | |
Decrease in cash, cash equivalents and restricted cash | |
| (520) | |
| (449) | |
| (2,778) | |
Cash, cash equivalents and restricted cash, beginning of period | |
| 4,764 | |
| 5,213 | |
| 7,991 | |
Cash, cash equivalents and restricted cash, end of period | | $ | 4,244 | | $ | 4,764 | | $ | 5,213 | |
| | | | | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | |
Interest paid | | $ | 28,767 | | $ | 30,116 | | $ | 28,070 | |
See accompanying notes.
5951
LTC Properties, Inc. (or LTC)(“LTC”), a Maryland corporation, commenced operations on August 25, 1992. LTC is a real estate investment trust (or REIT)(“REIT”) that invests primarily in seniorseniors housing and health care properties primarily through sale-leaseback transactions, mortgage financing joint ventures and structured finance solutions including preferred equity and mezzanine lending. We conduct and manage our business as 1 operating segment, rather than multiple operating segments, for internal reporting and internal decision-making purposes. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators. Our primary seniors housing and health care property classifications include skilled nursing centers (“SNF”), assisted living communities (“ALF”), independent living communities (“ILF”), memory care communities (“MC”) and combinations thereof. ILF, ALF, MC and combinations thereof are included in the ALF classification.
2. Summary of Significant Accounting Policies
Basis of Presentation. The accompanying consolidated financial statements include the accounts of LTC, our wholly-owned subsidiaries, and our wholly‑owned subsidiaries.consolidated companies. All intercompany investments, accounts and transactions have been eliminated.
Consolidation of entities is based on determination of the primary beneficiary. In order to be considered the primary beneficiary, the member should be able to exercise power over and receive benefits from the entity. Power over the company is based on the provisions of the operating agreement that provides us with a controlling financial interest in the entity. Under the terms of the operating agreement, we, as the general member, are responsible for the management of the company’s assets, business and affairs. Our rights and duties in management of the company include making all operating decisions, setting the capital budget, executing all contracts, making all employment decisions, and handling the purchase and disposition of assets, among others. We, as the general member, are responsible for the ongoing, major, and central operations of the company and make all management decisions. In addition, we, as the general member, assume the risk for all operating losses, capital losses, and are entitled to substantially all capital gains (appreciation) and accordingly, receive substantial benefits from the company.
The Financial Accounting Standards Board (“FASB”) created a framework for evaluating whether a general partner or a group of general partners controls a limited partnership or a managing member or a group of managing members can exercise power over a limited liability company, and therefore should consolidate the entity. The guidance states that the presumption of general partner or managing member control would be overcome only when the limited partners or non-managing members have certain specific rights as described in the guidance. The limited members have virtually no rights and are precluded from taking part in the operation, management or control of the company. The limited members are also precluded from transferring their interests without the expressed permission of the general member. However, general partners could transfer their interest without consultation or permission of the limited members. We consolidated the companies in accordance with the guidance.
The FASB requires the classification of non-controlling interests as a component of consolidated equity in the consolidated balance sheet subject to the provisions of the rules governing classification and measurement of redeemable securities. The guidance requires consolidated net income to be reported at the amounts attributable to both the controlling and non-controlling interests. The calculation of earnings per share will be based on income amounts attributable to the controlling interest.
Any reference to the number of properties or facilities, number of units, number of beds, number of operators, and yield on investments in real estate are unaudited and outside the scope of our independent registered public
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accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.
Certain reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation, including changes in presentation of Acquisition costs to incorporate costs related to terminated transactions which was reclassified from General and administrative expenses.These adjustments are normal and recurring in nature.
Going Concern. In August 2014, the Financial Accounting Standards Board (or FASB)FASB issued Accounting Standards Update (or ASU)(“ASU”) 2014-15, Presentation of Financial Statements— Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in this update define management’s responsibility under U.S. generally accepted accounting principles (or GAAP)(“GAAP”) to evaluate when and how substantial doubt about the organization’s ability to continue as a going concern should be disclosed in the financial statement footnotes. This ASU expands disclosure requirements about principal conditions or events that raise substantial doubt. It also requires disclosing management’s evaluation of the significance of those conditions or events in relationship to the organization’s ability to meet its obligations, and management’s plans that are intended to either alleviate substantial doubt or to mitigate conditions or events that raise substantial doubt. ASU No. 2014-15 is effective for annual periods ending after December 15, 2016. We adopted this ASU in 2017. The adoption of this ASU did not have a material impact on the Company’sour financial statements or disclosures.
Use of Estimates. Preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents. Cash equivalents consist of highly liquid investments with a maturity of three months or less when purchased and are stated at cost which approximates market.
Restricted Cash. In November 2016, the FASB issued ASU No 2016-18 (“ASU 2016-18”), Restricted Cash. ASU 2016-18 requires an entity to reconcile and explain the period over period change in total cash, cash equivalent and restricted cash within its consolidated statement of cash flows.ASU 2016-18 is effective for annual periods ending after December 15, 2017. We adopted this ASU in 2018. The adoption of this ASU did not have a material impact on our financial statements or disclosures.
During the third quarter of 2017, a 170-bed skilled nursing center in our portfolio (the “Property”), located in Texas, was evacuated due to damages caused by Hurricane Harvey. The Property was under a triple net master lease agreement. We periodically evaluate properties for impairment when events or changes in circumstances indicate that the asset may be impaired or the carrying amount of the asset may not be recoverable through future undiscounted cash flows. Based upon a quarterly assessment of the Property using the recoverability test, we concluded the Property was not impaired.
The provisions of our triple net lease agreements impose certain obligations on our operators including:
● | Acquire property insurance, subject to certain criteria; |
● | Continue paying rent in the event of any property damage or destruction; and |
● | Return the leased property back to us at the end of the lease term, in the same condition originally received. |
During the second quarter of 2018, our operator provided us with insurance proceeds of $2,619,000 for remediation of the Property as noted in the provisions of our master lease agreement. Accordingly, we classified the insurance proceeds as Restricted cash on our consolidated balance sheets at December 31, 2018. During the fourth quarter of 2019, we sold the Property and recognized a loss on sale of $782,000. Therefore, we released our operator from its contractual obligation to return the Property back to its original condition. Additionally, we took possession of the remaining insurance proceeds of $2,111,000 and reclassified this amount to Gain from Property insurance proceeds on the Consolidated Statements of Income and Comprehensive Income at December 31, 2019.
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Owned Properties. We make estimates as part of our allocation of the purchase price of acquisitions to the various components of the acquisition based upon the fair value of each component. In determining fair value, we use current appraisals or other third partythird-party opinions of value. The most significant components of our allocations are typically the allocation of fair value to land and buildings and, for certain of our acquisitions, in‑placein-place leases and other intangible assets. In the case of the fair value of buildings and the allocation of value to land and other intangibles, the estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the value of in‑placein-place leases, we make best estimates based on the evaluation of the specific characteristics of each tenant’s lease. Factors considered include estimates of carrying costs during hypothetical expected lease‑uplease-up periods, market conditions and costs to execute similar leases. These assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in‑placein-place leases. We evaluate each purchase transaction to determine whether the acquired assets meet the
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definition of an asset acquisition or a business.business combination. Transaction costs related to acquisitions that are not deemed to be businesses are included in the cost basis of the acquired assets, while transaction costs related to acquisitions that are deemed to be businesses are expensed as incurred.
In January 2017, the FASB issued ASU No. 2017-01(or “ASU 2017-01)2017-01”), Business Combinations (Topic(Topic 805): Clarifying Definition of a Business.Business. ASU 2017-01 clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. This updateASU 2017-01 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for transactions that have not been reportedpermitted. We early adopted this standard in previously issued (or available to be issued) financial statements. Historically, our acquisitions qualified as either2017. As a business combination or asset acquisition. Upon adoptionresult of thisadopting ASU we believe2017-01, most of our acquisitions of investment properties would continue towill qualify as asset acquisitions.
In February 2017, the FASB issued ASU No. 2017-05 (“ASU 2017-05”), Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets. ASU 2017-05 defines an in-substance nonfinancial asset acquisition; therefore, we do not believeand clarifies guidance related to partial sales of nonfinancial assets. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. We adopted this standard willin 2018. The adoption of this ASU did not have a material impact on our results of operations orthe consolidated financial condition.statements and related notes.
We capitalize direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a real estate asset. We capitalize construction and development costs while substantive activities are ongoing to prepare an asset for its intended use. We consider a construction project as substantially complete and held available for occupancy upon the issuance of the certificate of occupancy. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred. For redevelopment, renovation and expansion of existing operating properties, we capitalize the cost for the construction and improvement incurred in connection with the redevelopment, renovation and expansion. Costs previously capitalized related to abandoned acquisitions or developments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred.
Depreciation is computed principally by the straight‑linestraight-line method for financial reporting purposes over the estimated useful lives of the assets, which range from 3 to 5 years for computers, 35 to 15 years for furniture and equipment, 35 to 50 years for buildings, 10 to 20 years for site improvements, 10 to 50 years for building improvements and the respective lease term for acquired lease intangibles.
Consolidation. At inception, and on an ongoing basis, as circumstances indicate the need for reconsideration, we evaluate each legal entity that is not wholly-owned by us for consolidation, first under the variable interest entity
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(“VIE”), then under the voting model. Our evaluation considers all of our variable interests, including common or preferred equity ownership, loans, and other participating instruments. The variable interest model applies to entities that meet both of the following criteria:
● | A legal structure has been established to conduct business activities and to hold assets. |
● | LTC has a variable interest in the entity - i.e. it has equity ownership or other financial interests that change with changes in the fair value of the entity's net assets. |
If an entity does meet the above criteria and doesn’t qualify for a scope exception from the VIE model, we will determine whether the entity is a VIE.
A legal entity is determined to be a VIE if it has any of the following three characteristics:
1. | The entity does not have sufficient equity to finance its activities without additional subordinated financial support; |
2. | The equity holders, as a group lack the characteristics of a controlling financial interest, as evidenced by all of the following characteristics: |
● | The power, through voting rights or similar rights, to direct the activities of the entity that most significantly impact the entity's economic performance; |
● | The obligation to absorb the entity's expected losses; |
● | The right to receive the entity's expected residual returns; or |
3. | The entity is established with non-substantive voting rights (i.e. the entity is structured such that majority economic interest holder(s) have disproportionately few voting rights). |
If any of the three characteristics of a VIE are met, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.
If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits - that is (i) we have the power to direct the activities of a VIE that most significantly impact the VIE's economic performance (power), and (ii) we have the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). If we have a variable interest in a VIE but we are not the primary beneficiary, we account for our investment using the equity method of accounting.
If a legal entity fails to meet any of the three of the characteristics of a VIE, we evaluate such entity under the voting interest model. Under the voting interest model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting shares or if we are the general partner or managing member of the entity and the limited partners or non-managing members do not have substantive participating, liquidation, or kick-out rights that preclude our presumption of control.
Mortgage Loans Receivable, Net of Loan Loss Reserve. Mortgage loans receivable we originate are recorded on an amortized cost basis. Mortgage loans we acquire are recorded at fair value at the time of purchase net of any related premium or discount which is amortized as a yield adjustment to interest income over the life of the loan. Additionally, we record an estimated allowance for doubtful accounts, as described below.
Mezzanine Loans. In 2015 the Companywe strategically decided to allocate a portion of itsour capital deployment toward mezzanine loans to grow relationships with operating companies that have not typically utilized sale leaseback financing
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as a component of their capital structure. Mezzanine financing sits between senior debt and common equity in the capital structure, and typically is used to finance development projects or value-add opportunities on existing operational properties. We seek market-based, risk-adjusted rates of return typically between 12-18%12-14% with the loan term typically between four to eightfive years. Security for mezzanine loans can include all or a portion of the following credit enhancements; secured second mortgage, pledge of equity interests and personal/corporate guarantees. Mezzanine loans can beare recorded for GAAP purposes as either a loan, under notes receivable, or joint venture, under investment in unconsolidated JVs, depending upon specifics of the loan terms and related credit enhancements.
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Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts. The allowance for doubtful accounts is based upon the expected collectability of our receivables and is maintained at a level believed adequate to absorb potential losses in our receivables. In determining the allowance, we perform a quarterly evaluation of all receivables. If this evaluation indicates that there is a greater risk of receivable charge‑offs, additional allowances are recorded in current period earnings.
Investment in unconsolidated joint ventures. From time to time, we provide funding to third partythird-party operators for the acquisition, development and construction (or ADC)(“ADC”) of a property. Under an ADC arrangement, we may participate in the residual profits of the project through the sale or refinancing of the property. We evaluate theThese ADC arrangement to determine if it hasarrangements can have characteristics similar to a loan or if the characteristics are more similar to a joint venture (“JV”) or partnership such as participating in the risks and rewards of the project as an owner or an investment partner. If we determine that the ADC arrangement characteristics are more similar to a jointly-owned investment or partnership, we account for the ADC arrangement as an investment in an unconsolidated joint ventureJV under the equity method of accounting or a direct investment (consolidated basis of accounting) instead of applying loan accounting. If we determine the
We evaluate our ADC arrangement should be accounted for as an investment rather than a loan, we evaluate the investmentarrangements first pursuant to ASC 805, Consolidation, to determine whether the ADC arrangement meets the definition of a variable interest entity (or VIE)VIE, as explained above, and whether we are the primary beneficiary. If the ADC arrangement is deemed to be a VIE but we are not the primary beneficiary, or if it is deemed to be a voting interest entity but we do not have a controlling financial interest, we account for our investment in the ADC arrangement using the equity method. Under the equity method, we initially record our investment at cost and subsequently recognize our share of net earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate. Allocations of net income or loss may be subject to preferred returns or allocation formulas defined in operating agreements and may not be according to percentage ownership interests. In certain circumstances where we have a substantive profit-sharing arrangement which provides a priority return on our investment, a portion of our equity in earnings may consist of a change in our claim on the net assets of the underlying joint venture.JV. Distributions of operating profit from the joint venturesJVs are reported as part of operating cash flows, while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities.
Debt Issuance Cost.We periodically perform evaluation of our investment in unconsolidated JVs to determine whether the fair value of each investment is less than the carrying value, and, if such decrease in value is deemed to be other-than-temporary, we write the investment down to its estimated fair value as of the measurement date.
We have a preferred equity investment in a JV that own 4 properties in Arizona. Based on the information available to us regarding alternatives and courses of action as of December 31, 2019, we performed a recoverability test on the carrying amount of our preferred equity investment and determined that a portion of our preferred equity investment is not recoverable. Therefore, we recorded an impairment loss from investment in unconsolidated joint ventures of $5,500,000 and wrote our preferred equity investment down to its estimated fair value. See Note 6. Investment in Unconsolidated Joint Ventures for further information.
In April 2015,March 2016, FASB issued ASU No. 2015-03 (or 2016-07 (“ASU 2015-03)2016-07”), InterestInvestments – Imputation of Interest (Subtopic 835-30)Equity Method and Joint Ventures (Topic 323): Simplifying the PresentationTransition to the Equity Method of Debt Issuance Costs.Accounting. ASU 2015-032016-07 eliminates retroactive adjustment of an investment upon an investment qualifying for the equity method of accounting and requires debt issuance costs relatedthe equity method investor to a recognized debt liability be presented inadopt the balance sheetequity method of accounting as a direct reduction from the carrying amount of the debt liability, consistent with debt discounts. date the investment becomes qualified for equity method accounting.
Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts. The allowance for doubtful accounts depends on the expected collectibility of our receivables which is based on considerations including the
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certainty of payment, payment history and other relevant factors. The allowance for doubtful accounts is maintained at a level believed adequate to absorb potential losses in our receivables. In August 2015,2016, the FASB issued ASU No. 2015-15, Presentation and Subsequent2016-13 (“ASU 2016-13”), Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting) (or ASU 2015-15)Credit Losses on Financial Instruments (Topic 326). ASU 2015-15 allows debt issuance costs related to line of credit agreementsThis standard requires a new forward looking “expected loss” model to be presented in the balance sheet as an asset. used for receivables, held-to-maturity debt, loans, and other instruments. ASU 2015-032016-13 is effective for fiscal years, and ASU 2015-15 are effectiveinterim periods within those years, beginning after December 15, 2019, and early adoption is permitted for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted.2018. We early adopted ASU 2015-03 and ASU 2015-15 in 2015 usingare currently evaluating the full retrospective method as required by these ASUs and we elected to present debt issuance costs related to our unsecured revolving line of credit as an assetimpact that the standard will have on our consolidated balance sheets.financial statements.
Accrued incentives and earn-outs. As part of our acquisitions and/or amendments, we may commit to provide contingent payments to our sellers or lessees, upon the properties achieving certain rent coverage ratios. Typically, when the contingent payments are funded, cash rent will increase by the amount funded multiplied by a rate stipulated in the agreement. If it is deemed probable, at acquisition, the contingent payment is recorded as a liability at the estimate fair value calculated using a discounted cash flow analysis and accreted to the settlement amount of the estimated payment date. If the contingent payment is an earn-out provided to the seller, the estimated fair value is capitalized to the property’s basis. If the contingent payment is provided to the lessee, the estimated fair value is recorded as a lease incentive included in the prepaid and other assets line item in our consolidated balance sheet and is amortized as a yield adjustment over the life of the lease. This fair value measurement is based on significant inputs not observable in the
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market and thus represents a Level 3 measurement. The fair value of these contingent liabilities are evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates.
Impairments. Assets that are classified as held-for-use and mortgage loans are periodically evaluated for impairment when events or changes in circumstances indicate that the asset may be impaired or the carrying amount of the asset may not be recoverable through future undiscounted cash flows. Management assessesWhere indicators of impairment exist, the estimation required in the undiscounted future cash flow assumption includes management’s probability-weighting of various scenarios including whether the management modifies the lease with the existing operator versus identifying a replacement operator and the assumed market lease rate underlying projected future rental cash flows. When indicators are identified for mortgage loans, management calculates an impairment of properties individually and impairment losses are calculatedcharge as the excess ofdifference between the carrying amount overof the estimatedmortgage loan receivable and the discounted cash flows expected to be received, or if foreclosure is probable, the fair value of assets as of the measurement date.collateral securing the mortgage. In determining fair value, we use current appraisals or other third partythird-party opinions of value and other estimates of fair value such as estimated discounted future cash flows. Based on our assessment, during the years ended December 31, 2019, 2018 and 2017, we recognized impairment charges of $0, $0 and $1,880,000 respectively, related to our real property investments.
Also, we evaluate the carrying values of mortgage loans receivable on an individual basis. Management periodically evaluates the realizability of future cash flows from the mortgage loan receivable when events or circumstances, such as the non‑receiptnon-receipt of principal and interest payments and/or significant deterioration of the financial condition of the borrower, indicate that the carrying amount of the mortgage loan receivable may not be recoverable. An impairment charge is recognized in current period earnings and is calculated as the difference between the carrying amount of the mortgage loan receivable and the discounted cash flows expected to be received, or if foreclosure is probable, the fair value of the collateral securing the mortgage.
Fair Value of Financial Instruments. The FASB requires the disclosure of fair value information about financial instruments for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Accordingly, the aggregate fair market value amounts presented in the notes to these consolidated financial statements do not represent our underlying carrying value in financial instruments.
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The FASB provides guidance for using fair value to measure assets and liabilities, the information used to measure fair value, and the effect of fair value measurements on earnings. The FASB emphasizes that fair value is a market‑basedmarket-based measurement, not an entity‑specificentity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the FASB establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices).
The fair value guidance issued by the FASB excludes accounting pronouncements that address fair value measurements for purposes of lease classification or measurement. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value, regardless of whether those assets and liabilities are related to leases.
In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses on items for which the fair value option has been elected reported in earnings. We have not elected the fair value option for any of our financial assets or liabilities.
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The FASB requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. See Note 14.15. Fair Value Measurements for the disclosure about fair value of our financial instruments.
Consolidation. At inception, and on an ongoing basis, as circumstances indicate the need for reconsideration, we evaluate each legal entity that is not wholly-owned by us for consolidation, first under the variable interest model, then under the voting model. Our evaluation considers all of our variable interests, including common or preferred equity ownership, loans, and other participating instruments. The variable interest model applies to entities that meet both of the following criteria:
• A legal structure been established to conduct business activities and to hold assets.
• LTC has a variable interest in the entity - i.e. it has equity ownership or other financial interests that change with changes in the fair value of the entity's net assets.
If an entity does not meet these criteria, or qualifies for a scope exception from the variable interest model, then we evaluate such entity under the voting model or apply other GAAP, including the cost or equity method of accounting.
A legal entity is determined to be a VIE if it has any of the following three characteristics:
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• The power, through voting rights or similar rights, to direct the activities of the entity that most significantly impact the entity's economic performance;
• The obligation to absorb the entity's expected losses;
• The right to receive the entity's expected residual returns; or
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If any of the three characteristics of a VIE are met, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.
If an entity is determined to be a variable interest entity VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits - that is (i) we have the power to direct the activities of a VIE that most significantly impact the VIE's economic performance (power), and (ii) we have the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). If we have a variable interest in a VIE but we are not the primary beneficiary, we account for our investment using the equity method of accounting.
If a legal entity fails to meet any of the three of the characteristics of a VIE, we evaluate such entity under the voting interest model. Under the voting interest model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting shares or if we are the general partner or managing member of the entity and the limited partners or non-managing members do not have substantive participating, liquidation, or kick-out rights that preclude our presumption of control.
In February 2015, FASB issued ASU No. 2015-02 (or ASU 2015-02), Consolidation (Topic 810): Amendments
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to the Consolidation Analysis. ASU 2015-02 amends the consolidation guidance for variable interest entities and voting interest entities, among other items, by eliminating the consolidation model previously applied to limited partnerships, emphasizing the risk of loss when determining a controlling financial interest and reducing the frequency of the application of related-party guidance when determining a controlling financial interest. ASU 2015-02 is effective for periods beginning after December 15, 2015, for public companies. The adoption of this ASU did not have a material impact on our consolidated financial statements.
We perform a quarterly evaluation of our investment in unconsolidated joint ventures to determine whether the fair value of each investment is less than the carrying value, and, if such decrease in value is deemed to be other-than-temporary, write the investment down to its estimated fair value as of the measurement date.
In March 2016, FASB issued ASU No. 2016-07 (or ASU 2016-07), Investments – Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. ASU 2016-07 eliminates retroactive adjustment of an investment upon an investment qualifying for the equity method of accounting and requires the equity method investor to adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. ASU 2016-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the effects of this ASU on our consolidated financial statements.
Revenue Recognition. Rental income from operating leases is generally recognized on a straight‑linestraight-line basis over the terms of the leases. Substantially all of our leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one1 of four4 methods depending on specific provisions of each lease as follows:
(i) | a specified annual increase over the prior year’s rent, generally between 2.0% and 3.0%; |
(ii) | a calculation based on the Consumer Price Index; |
(iii) | as a percentage of facility revenues in excess of base amounts or |
(iv) | specific dollar increases. |
The FASB does not provide for thepermit recognition of contingent revenue until all possible contingencies have been eliminated. We consider the operating history of the lessee and the general condition of the industry when evaluating whether all possible contingenciesresolved. Historically, we have been eliminated and have historically, and expect in the future, to not includeincluded contingent rents as income until received.received and will we continue our historical policy. During the years ended December 31, 2019, 2018 and 2017, we received $464,000, $470,000 and $457,000, respectively, of contingent rental income. We follow a policy related to rental income whereby we consider a lease to be non‑performingnon-performing after 60 days of non‑paymentnon-payment of past due amounts and do not recognize unpaid rental income from that lease until the amounts have been received.
Rental revenues relating to non‑contingent leases that contain specified rental increases over the life of the lease are recognized on the straight‑line basis. Recognizing income on a straight‑line basis requires us to calculate the total non‑contingent rent containing specified rental increases over the life of the lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight‑line rent receivable asset included in our consolidated balance sheet. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight‑line rent which results in the straight‑line rent receivable asset decreasing to zero over the remainder of the lease term. We assess the collectability of straight‑line rent in accordance with the applicable accounting standards and our reserve policy. If the lessee becomes delinquent in rent owed under the terms of the lease, we may provide a reserve against the recognized straight‑line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable.
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Interest income on mortgage loans is recognized using the effective interest method. We follow a policy related to mortgage interest whereby we consider a loan to be non‑performingnon-performing after 60 days of non‑paymentnon-payment of amounts due and do not recognize unpaid interest income from that loan until the past due amounts have been received. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. Similar to the accounting methodology of straight-line rent, the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan thus creating an effective interest receivable
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asset included in the interest receivable line item in our consolidated balance sheet and reduces down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate.
Payments made to or on behalf of our lessees represent incentives that are deferred and amortized as a yield adjustment over the term of the lease on a straight-line basis. Net loan fee income and commitment fee income are amortized over the life of the related loan.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (or (“ASU 2014-09)2014-09”), Revenue from Contracts with Customers: Topic 606. ASU 2014-09 provides for a single comprehensive principles based standard for the recognition of revenue across all industries through the application of the following five-step process:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
ASU 2014-09 requires expanded disclosures aboutstates that “an entity recognizes revenue to depict the nature,transfer of promised goods or services to customers in an amount timingthat reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In doing so, companies may need to use more judgment and uncertainty of revenue and cash flows arising frommake more estimates. While this ASU specifically references contracts with customers.customers, it may apply to certain other transactions such as the sale of real estate. Additionally, the FASB has issued targeted updates to clarify specific implementation issues of ASU 2014-09. These updates include ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Identifying Performance Obligations and Licensing, and ASU 2016-12, Narrow-Scope Improvements and Practical Expedients. ASU 2014-09 and its amendments have now formally entered into the FASB codification as Accounting Standard Codification (“ASC”) Topic 606, Contracts with Customers (“ASC 606”). The new standard and its amendments are effective on January 1, 2018, permitsand permit reporting entities to apply the standard using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or full retrospective or cumulative effects transition method and allows for early adoption on January 1, 2017.approach. We expect to adopthave adopted this standard using the modified retrospective adoption method on January 1, 2018. We are currently evaluating the impact of this ASU but we do not believeconcluded that this standard willdid not have a material impact on our results of operations or financial condition, as a substantial portion of our revenues consists of rental income from leasing arrangements and interest income from loan arrangements, both of which isare specifically excluded from ASU 2014-09.
Leases. Leases:In February 2016, the FASB issued ASU No. 2016-02 (or (“ASU 2016-02)2016-02”), Leases (Topic 842). ASU 2016-02 modifiesand its amendments have now formally entered into the FASB codification as ASC Topic 842, Leases (“ASC 842”). The objective of ASC842 is to establish the principles for lessees and lessors to apply for reporting useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease.
ASC 842 requires lessees to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for off-balance sheet treatmentof operating leases.
ASC 842 requires the lessors to identify lease and non-lease components of a lessees’lease agreement. Revenue related to non-lease components under lease agreements are subject to the revenue recognition standard, upon adoption of this standard. Also, the new standard narrows definition of initial direct costs. Accordingly, upon adoption of the new standard, certain costs (primarily legal costs related to lease negotiations) are expensed rather than capitalized.
Further, per ASC 842, lessors are required to assess the probability of collecting substantially all of the lease payments. The standard defines collectibility as lessee’s ability and intent to pay. If collectibility of substantially all of
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the lease payments through maturity is not probable, the lease income recorded during the period would be limited to lesser of the income that would have been recognized if collection were probable, and the lease payments received. If the assessment of collectibility changes, any difference between the lease income that would have been recognized and the lease payments should be recognized as an adjustment to lease income. At adoption, lessors are required to perform a lease-by-lease analysis for collectibility of all lease payments through maturity. If at adoption, it is not probable that substantially all of the lease obligations through maturity will be collected, a cumulative adjustment to equity should be made to reflect all of the lease obligations which are not probable to be collected.
Additionally, ASC 842 provides lessors with the option to elect a practical expedient allowing them to not separate lease and non-lease components and instead, to account for those components as a single lease component. This practical expedient is limited to circumstances in which: (i) the timing and pattern of transfer are the same for the non-lease component and the related lease component and (ii) the lease component, if accounted for separately, would be classified as an operating lease. This practical expedient causes an entity to assess whether a contract is predominantly lease-based or service-based and recognize the entire contract under the relevant accounting guidance (i.e., predominantly lease-based would be accounted for under ASC 842 and predominantly service-based would be accounted for under the ASC 606). This practical expedient option is available as a single election that must be consistently applied to all existing leases at the date of adoption. Also, ASC 842 provides a practical expedient that allows companies to use an optional transition method. Under the optional transition method, a cumulative adjustment to equity during the period of adoption is recorded and prior periods would not require restatement. Consequently, entities that elect both the practical expedient and the optional transitional method will apply the new lease ASC prospectively to leases commencing or modified after January 1, 2019 and will not be required to apply the disclosures under the new lease standard to comparative periods.
ASC 842 has subsequently been amended by requiring lesseesother ASUs to recognizeclarify and improve the standard as well as to provide certain practical expedients. In December 2018, the FASB issued ASU 2018-20 (“ASU 2018-20”), Narrow-Scope Improvements for Lessors, which amends ASC 842 to require the lessors to exclude the lessor costs that are directly paid by the lessee to third parties on lessor’s behalf from variable payments. However, the lessor costs that are paid by the lessor and reimbursed by the lessee are required to be included in variable payments. Furthermore, ASC 842 allows for several practical expedients which permit the following: no reassessment of lease assetsclassification or initial direct costs and use of the standard’s effective date as the date of initial application. In March 2019, the FASB issued ASU 2019-01 (“ASU 2019-01”), Leases (Topic 842),Codification Improvements which provides clarification regarding presentation and disclosures. ASC 842 and its amendments are effective January 1, 2019.
On January 1, 2019, we adopted ASC 842using the modified retrospective approach as of the adoption date, whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated.
Upon adoption of the standard, we elected the practical expedients provided for in ASC 842, including:
● | No reassessment of whether any expired or existing contracts were or contained leases; |
● | No reassessment of the lease classification for any expired or existing leases; |
● | No reassessment of initial direct costs for any existing leases; and |
● | No separation of lease and non-lease components. |
As a lessee, we have an office lease liabilities. Under ASU 2016-02, lessor accounting is largely unchanged. Consistentagreement with present standards, wea 5-year remaining term which was classified as an operating lease under ASC 840. Due to election of the package of practical expedients, upon adoption of ASC 842 this lease agreement will continue to account forbe classified as operating lease. For the year ended December 31, 2019, we recorded $299,000 of rent expense related to this lease revenue onagreement. Adoption of ASC 842 resulted in recording a straight-line basis for mostright-of use asset and a lease liability which represents the present value of the remaining minimum lease payments using our incremental borrowing rate. At December 31, 2019, the balance of the right-of use asset and the lease liability related to our office
60
lease agreement were $1,287,000.
As a lessor, our properties are leased subject to non-cancelable operating leases. ASU 2016-02Each lease is effective for fiscal years beginning aftera triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non-capital expenditures and other costs necessary in the operations of the facilities. Upon adoption of ASC 842, we recorded real estate taxes that are reimbursed by our operators as Rental Income with a corresponding Property tax expense in the Consolidated Statements of Income and Comprehensive Income. For the year ended December 15, 2018, including interim periods within those fiscal years. Early31, 2019, we have recognized $15,998,000 in Rental Income related to reimbursement of real estate taxes from our operators.
Furthermore, upon adoption is permitted. We have begun our process for implementing this guidance, including identifying any non-lease components inof ASC 842, we assessed the probability of collecting substantially all of our lease arrangements. We are continuingpayments through maturity. As previously reported, we have been monitoring Anthem Memory Care (“Anthem”), Thrive Senior Living, LLC (“Thrive”), Preferred Care, Inc. (“Preferred Care”) and Senior Care Centers, LLC (“Senior Care”) due to evaluate this guidancecash flow concerns, performance concerns and/or bankruptcy filing. In conjunction with adoption of ASC 842, we evaluated our straight-line rent receivable and lease incentive balances related to the noted operators and determined that we do not have the level of collectibility certainty required by the standard to record the straight-line rent receivable. Accordingly, we wrote-off the straight-line rent receivable and lease incentive balances associated with these leases. Also, we wrote-off our 1% general straight-line rent receivable reserve. These balances totaled $42,808,000 and were written-off to equity effective January 1, 2019 as required by ASC 842. Subsequently, if collectibility of substantially all of the lease payments through maturity is not probable, all or a portion of the straight-line rent receivable and other lease receivables may be written off, and the impactrental income recorded during the period would be limited to us, as both lessorlesser of the income that would have been recognized if collection were probable, and lessee,the lease payments received. Our assessment of collectibility of leases includes evaluating the data and assumptions used in determining whether substantially all of the future lease payments were probable based on our consolidatedthe lessee’s payment history, the financial statements.strength of the lessees, future contractual rents, and the timing of expected payments.
During the year ended December 31, 2019, we received cash rent from Anthem, Thrive, Preferred Care and Senior Care. The total amount of rental income received from these operators was $33,238,000 and is included in Rental Income on the Consolidated Statements of Income and Comprehensive Income. Of the $33,238,000 received, $27,225,000 of the cash payments received relate to amounts previously written-off in transition to ASC 842 (“Recoveries”) during the twelve months ended December 31, 2019.
Federal Income Taxes. LTC qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and as such, no0 provision for Federal income taxes has been made. A REIT is required to distribute at least 90% of its taxable income to its stockholders and a REIT may deduct dividends in computing taxable income. If a REIT distributes 100% of its taxable income and complies with other Internal Revenue Code requirements, it will generally not be subject to Federal income taxation.
For Federal tax purposes, depreciation is generally calculated using the straight‑linestraight-line method over a period of 27.5 years. Earnings and profits, which determine the taxability of distributions to stockholders, use the straight‑linestraight-line method over 40 years. Both Federal taxable income and earnings and profits differ from net income for financial statement purposes principally due to the treatment of certain interest income, rental income, other expense items, impairment charges and the depreciable lives and basis of assets. At December 31, 2016,2019, the tax basis of our net depreciable assets exceeds our book basis by approximately $43,840,680 (unaudited)$25,436,000 (unaudited), primarily due to an investment recorded as an acquisition for tax and a mortgage loan for GAAP.
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GAAP, and to differences previously mentioned above.
The FASB clarified the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The guidance utilizes a two‑steptwo-step approach for evaluating tax positions. Recognition (step one) occurs when a company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (step two) is
61
only addressed if step one has been satisfied (i.e., the position is more likely than not to be sustained). Under step two, the tax benefit is measured as the largest amount of benefit (determined on a cumulative probability basis) that is more likely than not to be realized upon ultimate settlement. We currently do not have any uncertain tax positions that would not be sustained on its technical merits on a more‑likelymore-likely than not basis.
We may from time to time be assessed interest or penalties by certain tax jurisdictions. In the event we have received an assessment for interest and/or penalties, it has been classified in our consolidated financial statements as general and administrative expenses.
Concentrations of Credit Risk.Financial instruments which potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, mortgage loans receivable, marketable debt securities and operating leases on owned properties. Our financial instruments, mortgage loans receivable and operating leases, are subject to the possibility of loss of carrying value as a result of the failure of other parties to perform according to their contractual obligations or changes in market prices which may make the instrument less valuable. We obtain various collateral and other protective rights, and continually monitor these rights, in order to reduce such possibilities of loss. In addition, we provide reserves for potential losses based upon management’s periodic review of our portfolio. See Note 3. Major Operators for further discussion of concentrations of credit risk from our tenants.
Properties held-for-sale. Properties classified as held‑for‑saleheld-for-sale on the consolidated balance sheet include only those properties available for immediate sale in their present condition and for which management believes that it is probable that a sale of the property will be completed within one year. Properties held‑for‑saleheld-for-sale are carried at the lower of cost or fair value less estimated selling costs. No depreciation expense is recognized on properties held‑for‑saleheld-for-sale once they have been classified as such. Under ASU No. 2014-08 (or (“ASU 2014-08)2014-08”), Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. We have not reclassified results of operations for properties disposed as discontinued operations as these disposals do not represent strategic shifts in our operations.
Extraordinary Items. In January 2015, FASB issued ASU No. 2015-01 (or ASU 2015-01), Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the separate classification, presentation and disclosure of extraordinary events and transactions. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We elected early adoption of ASU 2015-01 as of January 1, 2015. The adoption did not have a material impact on our consolidated financial statements.
Net Income Per Share. Basic earnings per share is calculated using the weighted‑averageweighted-average shares of common stock outstanding during the period excluding common stock equivalents. Diluted earnings per share includes the effect of all dilutive common stock equivalents.
In accordance with the accounting guidance regarding the determination of whether instruments granted in share‑basedshare-based payments transactions are participating securities, we have applied the two‑classtwo-class method of computing basic earnings per share. This guidance clarifies that outstanding unvested share‑basedshare-based payment awards that contain rights to
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non‑forfeitable non-forfeitable dividends participate in undistributed earnings with common stockholders and are considered participating securities.
Stock‑BasedStock-Based Compensation. The FASB requires all share‑basedshare-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. We use the Black‑Scholes‑MertonBlack-Scholes-Merton formula to estimate the value of stock options granted to employees. Also, we use the Monte Carlo model to estimate the value of performance basedperformance-based stock units granted to employees. These models require management to make certain estimates including stock volatility, expected dividend yield and the expected term. If management incorrectly estimates these variables, the results of operations could be affected. The FASB also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. Because we qualify as a REIT under the Internal Revenue Code of 1986, as amended, we are generally not subject to
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Federal income taxation. Therefore, this reporting requirement does not have an impact on our statementsthe Consolidated Statements of cash flows.Cash Flows.
In March 2016, FASB issued ASU No. 2016-09 (or ASU 2016-09), Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 addresses several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. ASU 2016-09 is effective for public companies for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We early adopted ASU 2016-09. The adoption of this guidance did not have a material impact on the Company’s financial statements or disclosures.
Cash Flow Presentation. In August 2016, FASB issued authoritative guidance that reduces the diversity in practice of the classification of certain cash receipts and cash payments within the statement of cash flows. This guidance is effective for fiscal periods beginning after December 15, 2017 and allows for early adoption. The anticipated impact of the adoption of this guidance on the Company’s financial statements is still being evaluated.
Segment Disclosures. The FASB accounting guidance regarding disclosures about segments of an enterprise and related information establishes standards for the manner in which public business enterprises report information about operating segments. Our investment decisions in seniorseniors housing and health care properties, including mortgage loans, property lease transactions and other investments, are made and resulting investments are managed as a single operating segment for internal reporting and for internal decision‑makingdecision-making purposes. Therefore, we have concluded that we operate as a single segment.
3. Major Operators
We have four2 operators from each of which we derive approximately 10% or more of our combined rental revenue and interest income from mortgage loans. The following table sets forth information regarding our major operators as of December 31, 20162019:
| | | | | | | | | | | | | | | |
| | Number of | | Number of | | Percentage of | | ||||||||
| | | | | | SNF | | ALF | | Total | | | Total | | |
Operator | | SNF | | ALF | | Beds | | Units | | Revenue (1) | | | Assets | | |
Prestige Healthcare | | 24 | | — | | 3,010 | | 93 | | 17.1 | % | | 17.4 | % | |
Senior Lifestyle Corporation | | — | | 23 | | — | | 1,457 | | 10.8 | % | | 10.2 | % | |
Total | | 24 | | 23 | | 3,010 | | 1,550 | | 27.9 | % | | 27.6 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number of |
| Number of |
| Percentage of |
|
| |||||||||
|
|
|
|
|
|
|
| SNF |
| ALF |
| Total |
|
| Total |
|
|
Operator |
| SNF |
| ALF |
| ROC |
| Beds |
| Units |
| Revenue (1) |
|
| Assets |
|
|
Prestige Healthcare |
| 20 |
| — |
| 2 |
| 2,866 |
| 93 |
| 16.3 | % |
| 15.9 | % |
|
Senior Lifestyle Corporation |
| — |
| 27 |
| — |
| — |
| 1,632 |
| 12.2 | % |
| 12.7 | % |
|
Brookdale Senior Living |
| — |
| 37 |
| — |
| — |
| 1,704 |
| 9.8 | % |
| 5.4 | % |
|
Senior Care Centers |
| 11 |
| — |
| — |
| 1,444 |
| — |
| 9.8 | % |
| 8.4 | % |
|
Totals |
| 31 |
| 64 |
| 2 |
| 4,310 |
| 3,429 |
| 48.1 | % |
| 42.4 | % |
|
(1) |
| Includes rental income from owned properties and interest income from mortgage |
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Our financial position and ability to make distributions may be adversely affected if Prestige Healthcare, Senior Lifestyle Corporation Brookdale Senior Living, Senior Care Centers or any of our lessees and borrowers face financial difficulties, including any bankruptcies, inability to emerge from bankruptcy, insolvency or general downturn in business of any such operator, or in the event any such operator does not renew and/or extend its relationship with us or our borrowers when it expires.us.
4. Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
| For the year ended |
| |||||||
|
| December 31, |
| |||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||
|
| (in thousands) |
| |||||||
Non-cash investing and financing transactions: |
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivable applied against purchase price to acquire real estate (See Note 5) |
| $ | — |
| $ | 10,600 |
| $ | — |
|
Land conveyance applied to a mortgage and construction loan receivable (See Note 5) |
|
| — |
|
| 670 |
|
| — |
|
Contingent liabilities related to real estate investments (See Note 5) |
|
| 1,847 |
|
| 1,847 |
|
| — |
|
Contingent liabilities related to lease incentives (See Note 10) |
|
| — |
|
| 8,013 |
|
| 3,240 |
|
Reclassification of pre-development loans (See Note 7) |
|
| 237 |
|
| 1,035 |
|
| 304 |
|
Restricted stock issued, net of cancellations (See Note 9) |
|
| 1 |
|
| 1 |
|
| 1 |
|
Preferred stock conversion (See Note 9) |
|
| — |
|
| 38,500 |
|
| — |
|
| | | | | | | | | | |
| | | | | | | | | |
|
| | Year Ended December 31, |
| |||||||
|
| 2019 |
| 2018 |
| 2017 |
| |||
| | (in thousands) |
| |||||||
Non-cash investing and financing transactions: | | |
| | |
| | |
| |
Reclassification of notes receivable to lease incentives (Note 7) | | $ | 200 | | $ | — | | $ | — | |
Restricted stock issued, net of cancellations (Note 10) | |
| — | |
| 1 | |
| 1 | |
5. Real Estate Investments
Owned Properties.AssistedAs of December 31, 2019, we owned 177 health care real estate properties located in 28 states and consisting of 106 ALFs, 70 SNFs and 1 behavioral health care hospital. These properties are operated by 30 operators.
Independent living communities, independentassisted living communities, memory care communities and combinations thereof are included in the assisted living property classification (or collectively ALF)(collectively “ALF”). Range of care communities (or ROC) property classification consists of properties providing skilled nursing and any combination of assisted living, independent living and/or memory care services.
Any reference to the number of properties, number of units, number of beds, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s review of our consolidated financial statements in accordance
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with the standards of the Public Company Accounting Oversight Board.
As ofDepreciation expense on buildings and improvements, including properties classified as held-for-sale, was $39,094,000, $37,416,000, and $37,492,000 for the years ended December 31, 2016,2019, 2018 and 2017, respectively.
Future minimum base rents receivable under the remaining non-cancelable terms of operating leases excluding the effects of straight-line rent, amortization of lease inducement and renewal options are as follows (in thousands):
| | | | |
|
| Cash |
| |
| | Rent (1) |
| |
2020 | | $ | 135,173 | |
2021 | |
| 126,914 | |
2022 | |
| 128,196 | |
2023 | |
| 129,846 | |
2024 | |
| 126,320 | |
Thereafter | |
| 625,158 | |
(1) | Represents contractual annual cash rent, except for 2 master leases which are based on agreed upon cash rents. See below for more information. Includes rental income due to lessee reimbursement of our real estate taxes and subsequent acquisitions and excludes properties held-for-sale at December 31, 2019. |
During 2017, we owned 181 healthissued a notice of default to Anthem Memory Care (“Anthem”) resulting from Anthem’s partial payment of minimum rent. Anthem operates 11 memory care communities under a master lease. During 2019, Anthem paid the agreed upon minimum cash rent of $7,500,000. This amount represents approximately 50% of the contractual amount due under the lease in 2019. In accordance with Accounting Standard Codification (“ASC”) Topic 842, Leases (“ASC 842”), at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Anthem and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. We receive regular financial performance updates from Anthem and continue to monitor Anthem’s performance obligations under the master lease agreement.
On December 4, 2018, Senior Care Centers, LLC. and affiliates and subsidiaries (“Senior Care”) filed for Chapter 11 bankruptcy as a result of lease terminations from certain landlords and on-going operational challenges. Senior Care did not pay us December 2018 rent and accordingly, in December 2018, we placed Senior Care on a cash basis. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balance related to Senior Care and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance.
In July 2019, Senior Care filed a motion to affirm the lease, which caused us to file an objection in opposition to Senior Care’s motion. During the fourth quarter of 2019, the court rejected our motion and accordingly, our master lease with Senior Care was affirmed. Furthermore, we received the court ordered reimbursement from Senior Care for the December 2018 unpaid rent, late fees and legal costs totaling $1,596,000. Senior Care has paid us January 2019 to February 2020 rent, real estate property tax and maintenance deposits.
During 2017, Preferred Care, Inc. (“Preferred Care”) and affiliated entities filed for Chapter 11 bankruptcy as a result of a multi-million-dollar judgment in a lawsuit in Kentucky against Preferred Care and certain affiliated entities. The affiliated entities named in the lawsuit operate properties in Kentucky and New Mexico. Preferred Care leased 24 properties under two master leases from us and none of the 24 properties are located in 28 states and consisting of 104 ALFs, 69 SNFs, 7 ROCs and 1 behavioral health care hospital. TheseKentucky or New Mexico. Those 24 properties are operated by 27 operators. Please see Item 1. Business Portfolio for a tablein Arizona, Colorado, Iowa, Kansas and Texas. The Preferred Care operating entities that summarizes our owned properties as of December 31, 2016.
sublease
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those properties did not file for bankruptcy. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Preferred Care and determined it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance. Preferred Care did not affirm our master leases and began paying only $55,000 of monthly rent in the third quarter of 2019. The monthly contractual obligation under the master leases was approximately $1,000,000. We applied all of their security deposit to rental income during the third quarter and recorded only the $55,000 monthly cash received in the fourth quarter of 2019 to rental income. During the fourth quarter of 2019, we entered into multiple contracts, subject to standard due diligence and other contingencies, to sell a majority of the properties. NaN of these contracts were completed during the fourth quarter of 2019, resulting in the sale of 2 properties in Arizona and Texas. See Property Sales below for further discussion. At December 31, 2019, 20 of the properties under purchase and sale agreements met the criteria under GAAP as held-for-sale. Accordingly, these properties have been classified as held-for-sale at December 31, 2019.
During the three months ended March 31, 2019, we placed Thrive Senior Living, LLC (“Thrive”) on a cash basis due to short-payment of contractual rent in November 2018 and non-payment of rent in December 2018 totaling $700,000. Thrive subsequently paid the delinquent rent in 2019 but failed to pay 2019 contractual rent. In April 2019, we issued a notice of default to Thrive. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility of straight-line rent receivable and lease incentive balances related to Thrive and determined that it was not probable that we would collect substantially all of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity as of January 1, 2019, as required by the ASC 842 transition guidance.
During 2019, we completed the following for all of the properties in the Thrive portfolio. As of December 31, 2019, Thrive does not operate any properties in our portfolio:
● | Transitioned 2 memory care communities located in Ohio and Kentucky with a total of 120-units to an operator new to our portfolio during the second quarter of 2019. The memory care communities are under a 10-year lease term with initial cash rent of $1,250,000 in year one, $1,500,000 in year two, $1,975,000 in year three and $2,150,000 in year four. Rent may increase subject to a contingent escalation formula commencing in year five and annually thereafter. The lease provides the lessee with a purchase option available between 2028-2029; |
● | Transitioned a 56-unit memory care community located in Texas to an existing operator and added the memory care community to an existing master lease during the second quarter of 2019. As a result of this transition, annual cash rent under the existing master lease was increased by $400,000 effective June 1, 2019 and will increase by an additional $300,000 on June 1, 2020 and 2.5% annually thereafter. Additionally, LTC will be entitled to incremental rent calculated as a percentage of increases in gross revenues generated by the property above an established threshold; |
● | Transitioned 2 memory care communities in Georgia and South Carolina with a total of 159-units to an existing operator during the third quarter of 2019. The new 2-year lease agreement has an initial annual cash rent of $1,762,000. Rent increases 3.5% in year two; and |
● | Transitioned the remaining 60-unit memory care community located in Florida to an existing operator effective August 1, 2019. The new 10-year lease provides the lessee twelve months free rent, rent of $450,000 in year two and $600,000 in year three and thereafter. In year two, the lessee has the option to defer rent in an amount not to exceed $150,000. Rent may increase subject to a contingent escalation formula commencing in year three and annually thereafter. Additionally, the lease provides the lessee with a purchase option available between 2028 and 2029. See below for a table that summarizes information about purchase options included in our lease agreements. |
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AcquisitionsLTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes components of our rental income for the years ended December 31, 2019, 2018 and Developments.2017 (in thousands):
| | | | | | | | | | |
| | Year Ended December 31, | | |||||||
Rental Income | | | 2019 | | | 2018 | | | 2017 | |
Base cash rental income | | $ | 134,117 | (1) | $ | 127,477 | | $ | 128,715 | |
Variable cash rental income | | | 16,462 | (2) | | 470 | (2) | | 457 | (2) |
Straight-line rent | | | 4,487 | (3) | | 9,550 | | | 10,694 | |
Adjustment for collectibility of rental income | | | (1,926) | (4) | | — | | | — | |
Amortization of lease incentives | | | (385) | | | (2,092) | | | (2,209) | |
Total | | $ | 152,755 | | $ | 135,405 | | $ | 137,657 | |
(1) | Increased due to acquisitions, developments and capital improvements partially offset due to reduced rent from sold properties and properties transitioned to other operators. |
(2) | The year ended December 31, 2019 variable rental income includes $464 related to contingent rental income and $15,998 related to real estate taxes which were reimbursed by our operators. Per the provisions of ASC 842, any lessor cost, paid by the lessor and reimbursed by the lessee must be included as a variable lease payment. As discussed above, we adopted ASC 842 using a modified retrospective approach as of the adoption date of January 1, 2019. Accordingly, we are not required to report this revenue stream for periods prior to January 1, 2019. For the year ended December 31, 2018, and 2017, the variable income represents contingent rental income. |
(3) | In accordance with ASC 842 lease accounting guidance, we evaluated the collectibility of lease payments through maturity and determined it was not probable that we would collect substantially all of the contractual obligations from Anthem, Thrive, Preferred Care and Senior Care leases through maturity. Decreased due to these leases being accounted for on cash-basis as of January 1, 2019. |
(4) | During the first quarter of 2019, we terminated a lease agreement and transitioned 2 operating seniors housing communities under the lease agreement to a new operator. As a result of the lease termination, we wrote-off $1,926 straight-line rent receivable to contra-revenue in accordance with ASC 842. |
Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. The following table summarizes information about purchase options included in our lease agreements (dollar amount in thousands):
| | | | | | | | | | | | | |
| | Type | | Number | | | | | | | | | |
| | of | | of | | | Gross | | | Carrying | | Option | |
State | | Property | | Properties | | | Investments | | | Value | | Window | |
California | | ALF/MC | | 2 | | $ | 38,895 | | $ | 36,542 | | 2024-2029 | |
California | | ALF | | 2 | | | 28,926 | | | 16,056 | | 2021-TBD | (1) |
Florida | | MC | | 1 | | | 14,201 | | | 12,757 | | 2028-2029 | |
Kentucky and Ohio | | MC | | 2 | | | 30,126 | | | 27,859 | | 2028-2029 | |
Texas | | MC | | 2 | | | 25,265 | | | 24,335 | | 2025-2027 | |
South Carolina | | ALF/MC | | 1 | | | 11,680 | | | 10,794 | | 2028-2029 | |
Total | | | | | | $ | 149,093 | | $ | 128,343 | | | |
(1) | The option window ending date will be either 24 months or 48 months after the option window commences, based on certain contingencies. |
66
Acquisitions. The following table summarizes our acquisitions for the twelve monthsyears ended December 31, 2016 2019 through 2017. (dollar amounts in thousands):
| | | | | | | | | | | | | | | |
| | | | | | | | | Total | | Number | | Number | ||
| | | | Purchase | | Transaction | | Acquisition | | of | | of | |||
Year (1) | | Type of Property | | Price | | Costs (2) | | Costs | | Properties | | Beds/Units | |||
2019 | | Assisted Living (3) | | $ | 35,719 | | $ | 315 | | $ | 36,034 | | 3 | | 230 |
| | Skilled Nursing (4) | | | 19,500 | | | 97 | | | 19,597 |
| 1 | | 90 |
| | Land (5) | | | 2,732 | | | 51 | | | 2,783 | | — | | — |
Total | | | | $ | 57,951 | | $ | 463 | | $ | 58,414 | | 4 | | 320 |
| | | | | | | | | | | | | | | |
2018 | | Assisted Living (6) (7) | | $ | 39,600 | | $ | 65 | | $ | 39,665 | | 3 | | 177 |
| | Land (7) | | | 695 | | | 48 | | | 743 | | — | | — |
Total | | | | $ | 40,295 | | $ | 113 | | $ | 40,408 | | 3 | | 177 |
| | | | | | | | | | | | | | | |
2017 | | Assisted Living (8) | | $ | 81,018 | | $ | 569 | | $ | 81,587 |
| 5 | | 400 |
| | Land (9) | |
| 800 | |
| 18 | |
| 818 |
| — |
| — |
Total | | | | $ | 81,818 | | $ | 587 | | $ | 82,405 |
| 5 |
| 400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| Number |
| Number | |
|
| Purchase |
| Transaction |
| Acquisition |
| of |
| of | |||
Type of Property |
| Price |
| Costs(1) |
| Costs |
| Properties |
| Beds/Units | |||
Skilled Nursing(2) |
| $ | 16,000 |
| $ | 45 |
| $ | 16,045 |
| 1 |
| 126 |
Assisted Living(3) |
|
| 53,550 |
|
| 423 |
|
| 53,973 |
| 4 |
| 250 |
Land(4) |
|
| 6,891 |
|
| 108 |
|
| 6,999 |
| — |
| — |
Totals |
| $ | 76,441 |
| $ | 576 |
| $ | 77,017 |
| 5 |
| 376 |
(1) |
|
(2) | Represents cost associated with our acquisitions; however, |
(3) | We entered into a JV (consolidated on our financial statements) to purchase an existing operational 74-unit ALF/MC community. The non-controlling partner contributed $919 of equity and we contributed $15,976 in cash. Our economic interest in the real estate JV is approximately 95%. See Note 10. Equity for further discussion related to |
|
|
|
|
(4) |
|
(5) | We acquired a parcel of land |
(6) | We acquired 2 MC in Texas. |
(7) | We entered into a JV (consolidated on our financial statements) to purchase an existing operational 89-unit ILF for $14,400 and to own the |
(8) | We acquired an ALF and a MC in California, a MC in Ohio and an ALF/MC in Missouri. Furthermore, we entered into a JV and acquired an ALF/MC community. |
(9) | We entered into a JV for the acquisition of land and development of an ILF/ALF/MC community in Wisconsin. |
For further discussion related to the JV transactions discussed above and our partnerships and non-controlling interests, see Note 10. Equity.
7067
The following table summarizes our acquisitions for the twelve months ended December 31, 2015 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| Number |
| Number | |
|
| Purchase |
| Transaction |
| Acquisition |
| of |
| of | |||
Type of Property |
| Price |
| Costs(1) |
| Costs |
| Properties |
| Beds/Units | |||
Skilled Nursing(2) |
| $ | 36,946 |
| $ | 87 |
| $ | 37,033 |
| 3 |
| 360 |
Assisted Living(3) |
|
| 156,097 |
|
| 590 |
|
| 156,687 |
| 11 |
| 951 |
Other(4) |
|
| 9,250 |
|
| 42 |
|
| 9,292 |
| 1 |
| 118 |
Land(5) |
|
| 16,333 |
|
| 352 |
|
| 16,685 |
| — |
| — |
Totals |
| $ | 218,626 |
| $ | 1,071 |
| $ | 219,697 |
| 15 |
| 1,429 |
|
|
|
|
|
|
|
|
|
|
The following table summarizes our investment in developmentDevelopments and improvement projects forImprovements. During the years ended December 31, 20162019, 2018 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year ended December 31, 2016 |
| Year ended December 31, 2015 | ||||||||
|
| Development |
| Improvements |
| Development |
| Improvements | ||||
ALF/ILF/MC |
| $ | 41,859 |
| $ | 3,034 |
| $ | 24,099 |
| $ | 3,950 |
SNF |
|
| 483 |
|
| 3,758 |
|
| 1,830 |
|
| 3,584 |
|
| $ | 42,342 |
| $ | 6,792 |
| $ | 25,929 |
| $ | 7,534 |
71
During the twelve months ended December 31, 2016,2017, we completedinvested the following in development and improvementprojects(dollar amounts in (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number |
|
|
| Number |
|
|
|
|
|
|
|
|
|
|
| of |
| Type of |
| of |
|
|
|
|
|
|
|
|
|
Type of Project |
| Properties |
| Property |
| Beds/Units |
| State |
| 2016 Funding |
| Total Funding |
| ||
Development |
| 1 |
| MC |
| 66 |
| Illinois |
| $ | 2,980 |
| $ | 12,248 |
|
Development |
| 1 |
| MC |
| 56 |
| Texas |
|
| 1,110 |
|
| 11,776 |
|
Development |
| 1 |
| MC |
| 66 |
| Illinois |
|
| 7,331 |
|
| 11,962 |
|
Development |
| 1 |
| MC |
| 66 |
| California |
|
| 7,716 |
|
| 12,400 |
|
Development |
| 1 |
| ALF/MC |
| 89 |
| South Carolina |
|
| 9,170 |
|
| 15,080 |
|
Development |
| 1 |
| ILF |
| 108 |
| Kansas |
|
| 11,235 |
|
| 13,423 |
|
Improvement |
| 1 |
| SNF |
| 160 |
| Arizona |
|
| 3,432 |
|
| 4,672 |
|
|
| 7 |
|
|
| 611 |
|
|
| $ | 42,974 |
| $ | 81,561 |
|
| | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 | | ||||||||||||
Type of Property | | Developments | | Improvements | | Developments | | Improvements | | Developments | | Improvements | | ||||||
Assisted Living Communities | | $ | 14,088 | | $ | 2,544 | | $ | 27,505 | | $ | 2,292 | | $ | 17,667 | | $ | 1,152 | |
Skilled Nursing Centers | | | 6,436 | | | — | | | 7,774 | | | 500 | | | 5,234 | | | 1,356 | |
Other | | | — | | | 295 | | | — | | | 457 | | | — | | | 391 | |
Total | | $ | 20,524 | | $ | 2,839 | | $ | 35,279 | | $ | 3,249 | | $ | 22,901 | | $ | 2,899 | |
Completed Projects.The following table summarizes our completed projects during the twelve monthsyears ended December 31, 2015 2019, 2018 and 2017 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number |
|
|
| Number |
|
|
|
|
|
|
|
|
|
|
| of |
| Type of |
| of |
|
|
|
|
|
|
|
|
|
Type of Project |
| Properties |
| Property |
| Beds/Units |
| State |
| 2015 Funding |
| Total Funding |
| ||
Development |
| 1 |
| MC |
| 60 |
| Colorado |
| $ | 1,522 |
| $ | 10,703 |
|
Improvements |
| 1 |
| SNF |
| 121 |
| California |
|
| 1,481 |
|
| 1,481 |
|
Improvements |
| 1 |
| SNF |
| 196 |
| Texas |
|
| 522 |
|
| 522 |
|
Improvements |
| 2 |
| SNF |
| 141 |
| Tennessee |
|
| 39 |
|
| 2,200 |
|
|
| 5 |
|
|
| 518 |
|
|
| $ | 3,564 |
| $ | 14,906 |
|
| | | | | | | | | | | | | |
| | | | Number | | Type | | Number | | | | | |
| | | | of | | of | | of | | | | | Total |
Year | | Type of Project | | Properties | | Property | | Beds/Units | | State | | Investment | |
2019 | | Development | | 1 | | SNF | | 143 | | Kentucky | | $ | 24,974 |
| | Development | | 1 | | ILF/ALF/MC | | 110 | | Wisconsin | | | 21,999 |
Total | | | | 2 | | | | 253 | | | | $ | 46,973 |
| | | | | | | | | | | | | |
2018 | | Development | | 1 | | MC | | 66 | | Illinois | | $ | 14,998 |
Total | | | | 1 | | | | 66 | | | | $ | 14,998 |
| | | | | | | | | | | | | |
2017 | | Development | | 1 | | MC | | 66 | | Illinois | | $ | 13,498 |
Total | | | | 1 | | | | 66 | | | | $ | 13,498 |
During 2016, we sold a 48-unit assisted living community located in Florida for $1,750,000 which was previously written down to its estimated sale price in the fourth quarter of 2015. Additionally, we sold two skilled nursing centers in Texas and an assisted living community in Florida for an aggregate price of $11,850,000. As a result of these sales, we recognized a net gain on sale of $3,775,000. Also, we sold a school in New Jersey for $3,850,000 and recorded a net loss on sale in the amount of $193,000.During 2015, we sold a 112-bed skilled nursing center located in Texas for $1,600,000, resulting in net sales proceed of $1,537,000 and a net gain on sale of $586,000. NoProperties held-for-sale. The following table summarizes our properties were sold during 2014.
Subsequent toheld-for-sale at years ended December 31, 2016, we entered into a contingent purchase2019 and sale agreement to sell an 85-unit ROC community2018 (dollar amounts in Texas for $1,200,000. We performed a recoverability analysis on thethousands):
| | | | | | | | | | | | | | | |
| | | | Type | | Number | | Number | | | | | | | |
| | | | of | | of | | of | | | Gross | | | Accumulated | |
At December 31, | | State | | Property | | Properties | | Beds/units | | | Investment | | | Depreciation | |
2019 | | Colorado | | SNF | | 3 | | 275 | | $ | 8,045 | | $ | 3,774 | |
| | Iowa | | SNF | | 7 | | 544 | | | 14,610 | | | 9,723 | |
| | Kansas | | SNF | | 3 | | 250 | | | 14,111 | | | 6,674 | |
| | Texas | | SNF | | 7 | | 1,148 | | | 25,203 | | | 14,942 | |
Total | | | | | | 20 | | 2,217 | | $ | 61,969 | | $ | 35,113 | |
| | | | | | | | | | | | | | | |
2018 | | Texas | | ILF | | 1 | | 140 | | $ | 5,746 | | $ | 1,916 | |
Total | | | | | | 1 | | 140 | | $ | 5,746 | | $ | 1,916 | |
68
Property Sales. The following table summarizes property as of December 31, 2016 and determined that a portion of the carrying value of the property was not recoverable. Accordingly, we recorded an impairment charge of $766,000, included in our consolidated statement of income, to write the property down to its estimated sale price at December 31, 2016.
Depreciation expense on buildings and improvements, including properties classified as held‑for‑sale, was $35,809,000, $29,329,000, and $25,424,000 forsales during the years ended December 31, 2016, 2015 and 2014, respectively.2019 through 2017 (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | Type | | Number | | Number | | | | | | | | | Net | |
| | | | of | | of | | of | | | Sales | | | Carrying | | | Gain | |
Year | | State | | Properties | | Properties | | Beds/Units | | | Price | | | Value | | | (Loss) | |
2019 | | N/A | | N/A | | — | | — | | $ | — | | $ | — | | $ | 500 | (1) |
| | Arizona, Georgia and Texas | | SNF | (2) | 3 | | 478 | | | 15,310 | | | 8,995 | | | 5,556 | |
| | Texas | | ALF | (3) | 1 | | 140 | | | 1 | | | 3,830 | | | (3,950) | |
Total 2019 | | | | | | 4 | | 618 | | $ | 15,311 | | $ | 12,825 | | $ | 2,106 | |
| | | | | | | | | | | | | | | | | | |
2018 | | Alabama | | SNF | | 4 | | 454 | | $ | 27,975 | | $ | 5,695 | | $ | 21,987 | |
| | Kansas | | ALF | (4) | — | | — | | | 350 | | | 346 | | | — | |
| | Ohio and Pennsylvania | | ALF | | 6 | | 320 | | | 67,500 | | | 16,352 | | | 48,695 | |
Total 2018 | | | | | | 10 | | 774 | | $ | 95,825 | | $ | 22,393 | | $ | 70,682 | |
| | | | | | | | | | | | | | | | | | |
2017 | | Indiana, Iowa and Oregon | | ALF | | 5 | | 211 | | $ | 15,650 | | $ | 10,107 | | $ | 4,985 | |
| | Texas | | SNF | (5) | 1 | | 85 | | | — | | | 1,170 | | | (1,171) | |
Total 2017 | | | | | | 6 | | 296 | | $ | 15,650 | | $ | 11,277 | | $ | 3,814 | |
| | | | | | | | | | | | | | | | | | |
72
(1) | Gain recognized due to the receipt of funds held in escrow related to a portfolio of 6 ALFs sold during the second quarter of 2018. |
(2) | We sold a property, previously operated by Preferred Care, located in Texas with a carrying value of $871 for $140. Additionally, we sold a property, previously operated by Preferred Care, located in Arizona with a carrying value of $6,485 for $7,250. This transaction includes a holdback of $1,091 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. Using the expected value model per ASC 606, we estimated and recorded the holdback value of $613. Also, we sold a SNF located in Georgia with a carrying value of $1,639 for $7,920. |
(3) | We sold an ALF located in Texas with a carrying value of $3,830. |
(4) | We sold land adjacent to an existing ALF community in Kansas. |
(5) | We donated a SNF located in Texas, with a carrying value of $1,170 to a nonprofit health care provider. |
Future minimum base rents receivable under the remaining non‑cancelable terms of operating leases excluding the effects of straight‑line rent, amortization of lease inducement and renewal options are as follows (in thousands):
|
|
|
|
|
|
| Annual Cash |
| |
|
| Rent |
| |
2017 |
| $ | 133,296 |
|
2018 |
|
| 133,873 |
|
2019 |
|
| 129,482 |
|
2020 |
|
| 131,377 |
|
2021 |
|
| 117,298 |
|
Thereafter |
|
| 797,716 |
|
Mortgage Loans. At December 31, 2016,2019, the mortgage loans had interest rates ranging from 7.3%9.2% to 13.9%9.9% and maturities ranging from 20172043 to 2045. In addition, some loans contain certain guarantees, provide for certain facility fees and generally have 20‑year to 30‑year amortization schedules. The majority of the mortgage loans provide for annual increases in the interest rate based upon a specified increase of 10 to 25 basis points.fees. Please see Item 1. Business Business—Portfolio for a table that summarizes our loaned properties as of December 31, 2016.2019.
69
The following table summarizes our mortgage loan activity for the twelve monthsyears ended December 31, 20162019, 2018 and 20152017 (in thousands):
| | | | | | | | | | |
| | | | | | | | | | |
| | 2019 | | 2018 | | 2017 |
| |||
Originations and funding under mortgage loans receivable | | $ | 12,342 | (1) | $ | 21,364 | (2) | $ | 11,913 | |
Pay-offs received | | | — | | | (1,086) | | | (16,665) | |
Scheduled principal payments received | | | (1,065) | | | (1,050) | | | (1,198) | |
Mortgage loan premium amortization | | | (4) | | | (4) | | | (4) | |
(Provision for) recovery of loan loss reserve | | | (113) | | | (192) | | | 60 | |
Net increase (decrease) in mortgage loans receivable | | $ | 11,160 | | $ | 19,032 | | $ | (5,894) | |
|
|
|
|
|
|
|
|
|
| Year ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| ||
Origination/Funding |
| $ | 20,685 |
| $ | 67,134 |
|
Pay-offs |
|
| 6,036 |
|
| 2,487 |
|
Scheduled principal payments received |
|
| 2,242 |
|
| 2,321 |
|
(1) | During 2019, we funded an additional $7,500 under an existing mortgage loan. The incremental funding bears interest at 9.41% fixed for two years and escalating by 2.25% thereafter. |
(2) | During 2018, we funded an additional $7,400 under an existing mortgage loan for the purchase of a 112-bed SNF in Michigan. The incremental funding bears interest at 8.7%, fixed for five years, and escalating by 2.25% thereafter. Also, we funded additional loan proceeds of $7,125 under an existing mortgage loan for the purchase of a 126-bed SNF in Michigan. This incremental funding bears interest at 9.41%, fixed for five years, and escalating by 2.25% thereafter. |
At December 31, 20162019 and 20152018 the carrying values of the mortgage loans were $229,801,000$254,099,000 and $217,529,000,$242,939,000, respectively. Scheduled principal payments on mortgage loan receivables are as follows (in thousands):
|
|
|
|
| ||||
|
| Scheduled |
| |||||
|
| Principal |
| |||||
2017 |
| $ | 7,674 |
| ||||
2018 |
|
| 8,297 |
| ||||
2019 |
|
| 5,092 |
| ||||
| | | | | ||||
|
| Scheduled |
| |||||
| | Principal |
| |||||
2020 |
|
| 8,815 |
| | $ | 1,065 | |
2021 |
|
| 1,065 |
| |
| 1,175 | |
2022 | |
| 1,175 | | ||||
2023 | |
| 1,175 | | ||||
2024 | |
| 1,175 | | ||||
Thereafter |
|
| 201,173 |
| |
| 250,894 | |
Total |
| $ | 232,116 |
| | $ | 256,659 | |
DuringThe following table summarizes our early mortgage loan payoffs during the twelve months ended December 31, 2016, 2015years 2019, 2018 and 2014, we received $2,242,000, $2,321,000, and $2,159,000, respectively2017 (dollar amounts in regularly scheduled principal payments. During 2016, we received $6,036,000 plus accrued interest related to the early payoffthousands):
| | | | | | | | |
| | | | | | | | |
| | | Early | | Number | | | |
| | | Principal | | of | | | |
| | | Payoff | | Loans | | State | |
2019 | | $ | — | | — | | N/A | |
2018 | | $ | 1,086 | | 1 | | UT | |
2017 | | $ | 10,795 | | 4 | | AZ/MO/TX | |
70
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Investment in Unconsolidated Joint Ventures
We have madeThe following table summarizes our investment in unconsolidated joint ventures (dollar amounts in thousands):
| | | | | | | | | | | | | | | | | | | |
| | Type | | Type | | Total | | | Currently | | | Number | | | | | | | |
| | of | | of | | Preferred | | | Paid in | | | of | | | Investment | | | Carrying | |
State | | Properties | | Investment | | Return | | | Cash | | | Beds/ Units | | | Commitment | | | Value | |
Arizona | | ILF/ALF/MC | | Preferred Equity | (1) | 15 | % | | 8 | % | (2) | 585 | | $ | — | | $ | 19,003 | (3) |
Total | | | | | | | | | | | | 585 | | $ | — | | $ | 19,003 | |
(1) | We have concluded that the JV is a VIE in accordance with GAAP. However, because we do not control the entity, nor do we have any role in the day-to-day management, we are not the primary beneficiary of the JV. Therefore, we account for the JV investment using the equity method. |
(2) | Effective second quarter of 2019, this JV was placed on cash basis due to delinquency of our preferred return. |
(3) | During the fourth quarter of 2019, we recorded an impairment loss of $5,500 to write our preferred equity investment down to its estimated sale price. See below for more detail. |
As previously discussed, in October 2019, the JV in which we hold our preferred equity investment signed a letter of intent for the sale of the 4 properties comprising the JV (the “Properties”). Concurrently, the JV was pursuing a refinancing alternative to take advantage of lower interest rates in today’s market. Based upon the information available to us regarding available alternatives and courses of action, we performed a recoverability test on the carrying value of our preferred equity investment and concluded the preferred equity was not impaired at September 30, 2019.
In November 2019, the JV signed a contract to sell the Properties. Additionally, its refinancing efforts came to a halt. The contract was subject to standard due diligence and other contingencies to close, all of which were met in January 2020. Accordingly, based on the information available to us regarding alternatives and courses of action as of December 31, 2019, we performed a recoverability test on the carrying value of our preferred equity investment and concluded that a portion of our preferred equity investment will not be recoverable. Therefore, we recorded an entity (or the JV) that owns four propertiesimpairment loss from investments in Arizona that provide independent, assisted livingunconsolidated joint ventures of $5,500,000 and memory care services. At closing, we provided an initialwrote our preferred capitalequity investment down to its estimated fair value.
7371
contribution of $20,143,000The following table summarizes our capital contributions, income recognized, and have committedcash interest received related to provide an additional preferred capital contribution of $5,507,000 for a total preferred capital contribution of $25,650,000. As the preferred member of the JV, we are entitled to receive a 15% preferred return, a portion of which is paidour investments in cash and a portion of which is deferred if the cash flow of the JV is insufficient to pay all of the accrued preferred return. The unpaid accrued preferred return is accrued up to the common member’s capital account balance in the underlying JV (as determined in accordance with GAAP). We did not accrue the deferred portion of the preferred returnunconsolidated joint ventures during the twelve monthsyears ended December 31, 2016. We continue to evaluate our claim on the estimated net assets2019, 2018 and 2017 (in thousands):
| | | | | | | | | | | | |
| | Type | | | | |||||||
| | of | | | Capital | | | Income | | | Cash Interest | |
Year | | Properties | | | Contribution | | | Recognized | | | Received | |
2019 | | ILF/ALF/MC | | $ | 472 | | $ | 1,029 | | $ | 1,580 | |
| | ILF/ALF/MC | (1) | | — | (1) | | 955 | (1) | | 979 | (1) |
| | ALF/MC | (2) | | — | (2) | | 404 | (2) | | 432 | (2) |
Total | | | | $ | 472 | | $ | 2,388 | | $ | 2,991 | |
| | | | | | | | | | | | |
2018 | | ILF/ALF/MC | | $ | 670 | | $ | 2,041 | | $ | 1,975 | |
| | ILF/ALF/MC | (1) | | — | (1) | | 511 | (1) | | 396 | (1) |
| | ALF/MC | (2) | | — | (2) | | 312 | (2) | | — | (2) |
Total | | | | $ | 670 | | $ | 2,864 | | $ | 2,371 | |
| | | | | | | | | | | | |
2017 | | ILF/ALF/MC | | $ | 1,101 | | $ | 1,560 | | $ | 1,436 | |
| | ILF/ALF/MC | | | — | (1) | | 511 | (1) | | 302 | (1) |
| | UDP-ALF/MC | | | 2,747 | (2) | | 192 | (2) | | — | (2) |
Total | | | | $ | 3,848 | | $ | 2,263 | | $ | 1,738 | |
(1) | We had a $2,900 mezzanine loan commitment for a 99-unit seniors housing community in Florida with a total preferred return of 15%. The mezzanine loan was an ADC arrangement which we determined it to have characteristics similar to a jointly-owned arrangement and recorded it as an unconsolidated joint venture. Since interest payments were deferred and no interest was recorded for the first twelve months of the loan, we used the effective interest method in accordance with GAAP to recognize interest income and recorded the difference between the effective interest income and cash interest income to loan principal balance. During the third quarter of 2019, the mezzanine loan was paid off. |
(2) | We had a $3,400 mezzanine loan commitment for the development of a 127-unit seniors housing community in Florida with a total preferred return of 15%. The mezzanine loan was an ADC arrangement which we determined it to have characteristics similar to a jointly-owned arrangement and recorded it as an unconsolidated joint venture. During the first quarter of 2019, the mezzanine loan was paid off. |
7. Notes Receivable
Notes receivable consists of the underlying joint venture quarterly. Any unpaid accrued preferred return, whether recorded or unrecorded by us, will be paid upon redemption.
The JV is intended to be self-financingmezzanine loans and other thanloan arrangements. The following table is a summary of our preferred capital contributions, we are not required to provide any direct support and we are not entitled to share in the JV’s earnings or losses. As a result, we believe our maximum exposure to loss due to our investment in the JV would be limited to our preferred capital contributions plus any unpaid accrued preferred return. We have concluded that the JV meets the accounting criteria to be considered a variable interest entity (or VIE). However, because we do not control the entity, nor do we have any role in the day-to-day management, we are not the primary beneficiary of the JV. Therefore, we account for our JV investment using the equity method. During the twelve months endednotes receivable components at December 31, 2016, we provided an additional preferred capital contribution of $1,770,000. Accordingly, we have a remaining preferred capital contribution commitment of $3,737,000. During the twelve months ended December 31, 2016, we recognized $1,139,000 2019 and 2018 (in income from our preferred equity investment in the JV compared to $1,819,000 for the same period in 2015. Additionally, during the twelve months ended December 31, 2016, we received $1,695,000 from our preferred equity investment in the JV compared to $552,000 for the same period in 2015.thousands):
| | | | | | |
| At December 31, | |||||
| 2019 | | 2018 |
| ||
Mezzanine loans | $ | 13,284 | | $ | 9,868 | |
Other loans | | 4,824 | | | 2,975 | |
Notes receivable reserve | | (181) | | | (128) | |
Total | $ | 17,927 | | $ | 12,715 | |
During 2016, we entered into a $3,400,000 seven-year term mezzanine loan commitment for the development of a 127-unit senior housing community in Florida which will provide a combination of assisted living, memory care and independent living services. In accordance with the terms of the loan agreement, we are entitled to receive a 15% preferred return, a portion of which, subject to minimum payment requirements, is paid in cash and the remaining unpaid portion is deferred and subsequently paid to us at times set forth in the loan agreement. We evaluated this ADC arrangement and determined that the characteristics are similar to a jointly-owned investment or partnership, and accordingly, the investment is accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting.
During 2015, we originated a $2,900,000 mezzanine loan to develop a 99-unit combination ALF, MC and ILF community. The loan matures on November 1, 2020 and bears interest at 10% for the first two years escalating to 12% until November 1, 2018 and, 15% thereafter. Interest is deferred for a period ending on the earlier of February 1, 2017 or the effective date of the certificate of occupancy. During this period, the borrower is not required to pay any interest; however, the unpaid deferred interest accrues to the loan principal balance. In addition to the interest payments, the borrower is required to make cash flow participation payments. We have evaluated this ADC arrangement and determined that the characteristics are similar to a jointly-owned investment or partnership, and accordingly, the investment is accounted for as an unconsolidated joint venture under the equity method of accounting instead of loan accounting.
7472
7. Notes Receivable
Notes receivable consist of various loans, and line of credit agreements with certain operators. During 2016, we committed to fund three new loans to existing operators as follows (dollar amounts in thousands):
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|
| Total |
| Interest |
| Maturity |
| |
Type of Property |
| Commitment |
| Rate |
| Date |
| |
Skilled Nursing |
| $ | 1,400 |
| 15.00 | % | 2021 |
|
Assisted Living |
|
| 325 |
| 12.00 | % | 2018 |
|
Skilled Nursing |
|
| 12,500 |
| 12.41 | % | 2021 |
|
Totals |
| $ | 14,225 |
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|
|
|
|
During 2016, we originated a $1,400,000 mezzanine loan on two skilled nursing centers, funding $1,200,000 at closing with a commitment to fund an additional $200,000 upon achieving certain coverage ratios. The skilled nursing centers are located in Oregon and totaling 146 beds. The mezzanine loan has a five-year term and a rate of 15%. We have evaluated this ADC arrangement and determined that the characteristics are similar to a loan, and accordingly, the investment is recorded as a loan. Additionally, we purchased a $12,500,000 mezzanine loan on a portfolio of 64 skilled nursing centers located in eight states. The mezzanine loan has a five-year term and a rate of LIBOR plus 11.75%. We have evaluated this ADC arrangement and determined that the characteristics are similar to a loan, and accordingly, the investment is recorded as a loan.
The following table summarizes our notes receivable activitiesactivity for the fiscal years 2016, 2015 and 2014 ended December 31, 2019 through 2017 (dollar amounts in thousands)thousands):
| | | | | | | | |
| Year ended December 31, | |||||||
| | 2019 | | | 2018 | | | 2017 |
Advances under notes receivable | $ | 8,967 | (1) | $ | 124 | | $ | — |
Principal payments received under notes receivable | | (3,503) | | | (3,848) | | | (25) |
Reclassified to lease incentives (2) | | (200) | (2) | | — | | | — |
Notes receivable reserve | | (52) | | | 37 | | | — |
Total | $ | 5,212 | | $ | (3,687) | | $ | (25) |
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|
|
|
|
|
|
|
| Year ended December 31, | |||||||
| 2016 |
| 2015 |
| 2014 | |||
Advances and Originations under notes receivable | $ | 14,969 |
| $ | 1,554 |
| $ | 1,263 |
Principal payments received under notes receivable |
| (100) |
|
| — |
|
| (113) |
Reclassified to real estate under development (1) |
| (237) |
|
| (1,035) |
|
| (304) |
Notes Receivable reserve |
| (166) |
|
| — |
|
| — |
Net increase in notes receivable | $ | 14,466 |
| $ | 519 |
| $ | 846 |
(1) |
|
(2) | Represents |
8. Lease Incentives
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8. Debt Obligations
The following table sets forth information regarding debt obligationssummarizes lease incentives by component as of December 31, 20162019 and 2015 2018 (dollar amounts in thousands):
| | | | | | |
| | At December 31, | ||||
| | | 2019 | | | 2018 |
Non-contingent lease incentives | | $ | 2,552 | | $ | 14,443 |
The following table summarizes our lease incentive activity for the years ended December 31, 2019, 2018 and 2017 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 | | |||||||||||||||||||||
| | | Funding | | | Amortization | | | Write-off | | | Funding | | | Amortization | | | Write-off | | | Funding | | | Amortization | | | Write-off | |
Non-contingent lease incentives | | $ | 387 | | $ | (385) | | $ | (11,893) | (1) | $ | 1,272 | | $ | (1,733) | | $ | — | | $ | 6,544 | | $ | (1,590) | | $ | (1,205) | (3) |
Contingent lease incentives | | | — | | | — | | | — | | | — | | | (359) | | | (6,219) | (2) | | — | | | (619) | | | (2,634) | (4) |
Net increase (decrease) | | $ | 387 | | $ | (385) | | $ | (11,893) | | $ | 1,272 | | $ | (2,092) | | $ | (6,219) | | $ | 6,544 | | $ | (2,209) | | $ | (3,839) | |
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| ||||||||||
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|
|
| At December 31, 2016 |
| At December 31, 2015 |
| ||||||||
|
| Applicable |
|
|
| Available |
|
|
| Available |
| ||||
|
| Interest |
| Outstanding |
| for |
| Outstanding |
| for |
| ||||
Debt Obligations |
| Rate(1) |
| Balance |
| Borrowing |
| Balance |
| Borrowing |
| ||||
Bank borrowings (2) |
| 2.25% |
| $ | 107,100 |
| $ | 492,900 |
| $ | 120,500 |
| $ | 479,500 |
|
Senior unsecured notes, net of debt issue costs (3) |
| 4.50% |
|
| 502,291 |
|
| 22,500 |
|
| 451,372 |
|
| 33,333 |
|
Total |
| 4.11% |
| $ | 609,391 |
|
|
|
| $ | 571,872 |
|
|
|
|
(1) |
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|
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|
|
|
(2) | We entered into an amended |
(3) | Represents the write-off of |
(4) | Represents the write-off of a lease incentive related to an ALF due to a change to the business model at the property that resulted in lower net operating income and |
Non-contingent lease incentives represent payments made to our lessees for various reasons including entering into a new lease or lease amendments and extensions. Contingent lease incentives represent potential contingent earn-out
73
payments that may be made to our lessees in the future, as part of our lease agreements. From time to time, we may commit to provide contingent payments to our lessees, upon our properties achieving certain rent coverage ratios. Once the contingent payment becomes probable and estimable, the contingent payment is recorded as a lease incentive. Lease incentives are amortized as a yield adjustment to rental income over the remaining life of the lease.
9. Debt Obligations
Bank Borrowings. We have an Unsecured Credit Agreement that provides for a revolving line ofDuring 2018, weamended and restated our unsecured credit upagreement to $600,000,000. The Unsecured Credit Agreement maturesreplace the previous unsecured credit agreement, prior to its expiration on October 14, 20182018. The amended credit agreement maintains the $600,000,000 aggregate commitment of the lenders under the prior agreement and provides for the opportunity to increase the commitment size of the credit agreement up to a total of $1,000,000,000. The amended credit agreement extends the maturity of the credit agreement to June 27, 2022 and provides for a one‑yearone-year extension option at our discretion, subject to customary conditions. Additionally, the amended credit agreement decreases the interest rate margins and converts from the payment of unused commitment fees to a facility fee. Based on our leverage ratios at December 31, 2016,2019, the amended facility provides for interest annually at LIBOR plus 150115 basis points and the unused commitmenta facility fee was 35of 20 basis points. At December 31, 2019 and 2018 we were in compliance with all covenants.
Financial covenants contained in the Unsecured Credit Agreement, which are measured quarterly, require us to maintain, among other things:
(i) | a ratio of total indebtedness to total asset value not greater than 0.5 to 1.0; |
(ii) | a ratio of secured debt to total asset value not greater than 0.35 to 1.0; |
(iii) | a ratio of unsecured debt to the value of the unencumbered asset value not greater than 0.6 to 1.0; and |
(iv) | a ratio of EBITDA, as calculated in the Unsecured Credit Agreement, to fixed charges not less than 1.50 to 1.0. |
Senior Unsecured Notes. We have a $337,500,000 shelf agreement with affiliates and managed accounts of PGIM, Inc. (“Prudential”), with availability of $21,500,000 at December 31, 2019, which expired for new issuance on February 16, 2020. During the fourth quarter of 2019, we sold $100,000,000 aggregate principal amount of 3.85% senior unsecured notes maturing in 2031 to Prudential.
The following table sets forth information regarding debt obligations by component as of December 31, 2019 and 2018 (dollar amounts in thousands):
| | | | | | | | | | | | | | | |
| | | | At December 31, 2019 | | At December 31, 2018 | | ||||||||
| | Applicable | | | | Available | | | | Available | | ||||
| | Interest | | Outstanding | | for | | Outstanding | | for | | ||||
Debt Obligations | | Rate (1) | | Balance | | Borrowing | | Balance | | Borrowing | | ||||
Bank borrowings (2) | | 3.14% | | $ | 93,900 | | $ | 506,100 | | $ | 112,000 | | $ | 488,000 | |
Senior unsecured notes, net of debt issue costs | | 4.39% | | | 599,488 | | | 21,500 | | | 533,029 | | | 93,833 | |
Total | | 4.22% | | $ | 693,388 | | $ | 527,600 | | $ | 645,029 | | $ | 581,833 | |
(1) | Represents weighted average of interest rate as of December 31, 2019. |
(2) | Subsequent to December 31, 2019, we borrowed $18,000 under our unsecured revolving line of credit, accordingly we have $111,900 outstanding balance and $488,100 available for borrowing under our unsecured revolving line of credit. |
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Our borrowings and repayments for the years ended December 31, 20162019, 2018 and 2015, we borrowed $123,600,000 and $291,000,000, respectively, under our Unsecured Credit Agreement. Additionally, during the years ended December 31, 2016 and 2015, we repaid $137,000,000 and $170,500,000, respectively, under our unsecured revolving line of credits. At December 31, 2016 and 2015, we were 2017 are as follows (in compliance with all covenants. Subsequent to December 31, 2016, we repaid our outstanding balance of $107,100,000 as discussed below. Accordingly, we have $600,000,000 available for borrowing.thousands):
| | | | | | | | | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 | ||||||||||||
Debt Obligations | | | Borrowings | | | Repayments | | Borrowings | | Repayments | | | Borrowings | | | Repayments | ||
Bank borrowings | | $ | 107,900 | | $ | (126,000) | | $ | 116,200 | | $ | (100,700) | | $ | 113,000 | | $ | (123,600) |
Senior unsecured notes | | | 100,000 | (1) | | (33,667) | | | — | | | (38,166) | | | 100,000 | (2) | | (31,167) |
Total | | $ | 207,900 | | $ | (159,667) | | $ | 116,200 | | $ | (138,866) | | $ | 213,000 | | $ | (154,767) |
(1) | During the fourth quarter of 2019, we sold $100,000 senior unsecured notes to Prudential. See above to further discussion. |
(2) | During 2017, we sold 15-year senior unsecured notes in the aggregate amount of $100,000 to a group of investors, which included Prudential, in a private placement transaction. The notes bear interest at an annual rate of 4.5%, have scheduled principal payments and mature on February 16, 2032. |
Senior Unsecured Notes. During the twelve months ended December 31, 2016, we sold $37,500,000 senior unsecured notes to affiliates and managed accounts of Prudential Investment Management, Inc. (or Prudential) with an annual fixed rate of 4.15%. The notes have an average 10-year life, scheduled principal payments and mature in 2028. During the twelve months ended December 31, 2016, we paid $26,667,000 in regular scheduled principal payments under our Prudential senior unsecured notes. Accordingly, at December 31, 2016, we had $22,500,000 available under our shelf agreement with Prudential.
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Subsequent to December 31, 2016, we paid $4,167,000 in regular scheduled principal payments and amended our shelf agreement with Prudential to increase our shelf commitment to $337,500,000. Additionally, subsequent to December 31, 2016, we sold 15-year senior unsecured notes in the aggregate amount of $100,000,000 to a group of institutional investors, which included Prudential, in a private placement transaction. The notes bear interest at an annual fixed rate of 4.5%, have scheduled principal payments and mature on February 16, 2032. Subsequent to this transaction, we have $36,667,000 available under our amended shelf agreement with Prudential.
During 2016, we amended our agreement with AIG Asset Management (U.S.) LLC (or AIG) which provides for the possible issuance of up to an additional $40,000,000 unsecured notes. During 2016, we sold $40,000,000 senior unsecured term notes under our amended agreement with AIG to affiliated insurance company investment advisory clients of AIG with a coupon of 3.99%. The notes have an average 10-year life, fixed interest rate and will mature in 2031.
During the year ended December 31, 2015, we repaid $29,167,000 in regularly scheduled principal payments. Additionally, we sold $100,000,000 senior unsecured term notes to Prudential with an annual fixed rate of 4.5% under this shelf agreement. Also, during 2015, we entered into a $100,000,000 note purchase and private shelf agreement with AIG for a three-year term and we sold $100,000,000 senior unsecured term notes to affiliates of AIG with an annual fixed rate of 4.26%. These notes have periodic scheduled principal payments and will mature on November 20, 2028.
Bonds Payable. During 2014, we paid off a $1,400,000 multifamily tax‑exempt revenue bond that was secured by five assisted living communities in Washington. These bonds bore interest at a variable rate that reset weekly. During 2014, we paid $635,000 in regularly scheduled principal payments.
Scheduled Principal Payments. The following table represents our long termlong-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 2016,2019, and excludes the effects of interest and debt issue costs (in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
|
| Total |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| 2024 |
| Thereafter |
| |||||||
Bank borrowings | | $ | 93,900 | (1) | $ | — | | $ | — | | $ | 93,900 | | $ | — | | $ | — | | $ | — | |
Senior unsecured notes | |
| 600,300 | |
| 40,160 | |
| 47,160 | |
| 48,160 | |
| 49,160 | |
| 49,160 | |
| 366,500 | |
| | $ | 694,200 | | $ | 40,160 | | $ | 47,160 | | $ | 142,060 | | $ | 49,160 | | $ | 49,160 | | $ | 366,500 | |
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|
|
| Total |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| Thereafter |
| |||||||
Bank borrowings |
| $ | 107,100 | (1) | $ | — |
| $ | 107,100 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Senior unsecured notes |
|
| 503,300 | (2) |
| 31,167 |
|
| 38,167 |
|
| 33,666 |
|
| 40,160 |
|
| 40,160 |
|
| 319,980 |
|
|
| $ | 610,400 |
| $ | 31,167 |
| $ | 145,267 |
| $ | 33,666 |
| $ | 40,160 |
| $ | 40,160 |
| $ | 319,980 |
|
(1) |
| Subsequent to December 31, |
|
|
9.
10. Equity
PreferredCommon Stock. Historically, During 2016, we had 2,000,000 sharesentered into separate equity distribution agreements (collectively, “Original Equity Distribution Agreements”) to offer and sell, from time to time, up to $200,000,000 in aggregate offering price of our 8.5% Series C Cumulative Convertible Preferred Stock (or Series C preferred stock) outstanding. Our Series C preferred stock was convertible into 2,000,000 shares of ourcompany common stock at $19.25 per share and dividends were payable quarterly. shares.
During the year ended December 31, 2015, the sole holder of our Series C Preferred stock elected to convert all of its preferred shares into 2,000,0002017, we sold 312,881 shares of common stock.stock for $14,600,000 in net proceeds under the Original Equity Distribution Agreements. In conjunction with the sale of common stock, we paid $260,000 as compensation to our sales agents and we reclassified $49,000 of accumulated costs associated with this agreement to additional paid in capital.
During the year ended December 31, 2018, we sold 22,244 shares of common stock for $1,005,000 in net proceeds under the Original Equity Distribution Agreements. In conjunction with the sale of common stock, we paid $18,000 as compensation to our sales agents and we reclassified $76,000 of accumulated costs associated with this agreement to additional paid in capital. Accordingly, at December 31, 2018, we had no preferred stock outstanding as of December 31, 2016.$184,139,000 available under the Original Equity Distribution Agreements.
Common Stock.During 2015,2019, the Original Equity Distribution Agreements expired, and we entered into annew separate equity distribution agreement (or Original Agreement)agreements (collectively “Equity Distribution Agreements”) to issueoffer and sell, from time to time, up to $200,000,000 in aggregate offering price of ourshares of common shares. Sales of
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common shares will be made by means of ordinary brokers’ transactions, which may include block trades or transactions that are deemed to be “at the market” offerings. During the twelve months ended December 31, 2016, we sold 1,643,017 shares of common stock for $78,600,000 in net proceeds under the Original Agreement. In conjunction with the sale of common stock, we reclassified $463,000 of accumulated costs associated with the Original Agreement to additional paid in capital. During 2015, we did not sell shares of common stock under the Original Agreement.
During 2016, we terminated the Original Agreement and entered into a new equity distribution agreement (or Equity Distribution Agreement) to issue and sell, from time to time, up to $200,000,000 in aggregate offering price of our company common shares. As of December 31, 2016, no2019, 0 shares were issued under the Equity Distribution Agreement.Agreements. Accordingly, at December 31, 2019, we had $200,000,000 available under this agreement. Subsequent to December 31, 2016, we sold 312,881 shares of common stock for $14,578,000 in net proceeds under ourthe Equity Distribution Agreement. Accordingly, we have approximately $185,162,000 available under this agreement.Agreements.
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During 2016the years 2019, 2018 and 2015,2017, we acquired 49,40545,030 shares, 31,326 shares and 26,99342,089 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2016,2019, we acquired 23,69134,016 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.
Available Non-controlling Interests. During the years 2019, 2018 and 2017, we entered into partnerships to develop and/or own real estate. Given that our limited members do not have the substantive kick-out rights, liquidation rights, or participation rights, we have concluded that the partnerships are VIEs. Since we exercise power over and receive benefits from the VIEs, we are considered the primary beneficiary. Accordingly, we consolidate the VIEs and record the non-controlling interests at cost. As of December 31, 2019, we have the following consolidated VIEs (in thousands):
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| | | | | | | | | Gross | | | | |
Investment | | | | Property | | | | | Consolidated | | | Non-Controlling | |
Year | | Purpose | | Type | | State | | | Assets | | | Interests | |
2019 | | Owned real estate | | ALF/MC | | VA | | $ | 16,895 | | $ | 919 | |
2018 | | Owned real estate | | ILF | | OR | | | 14,400 | (1) | | 2,857 | (1) |
2018 | | Owned real estate and development | | UDP | | OR | | | 13,831 | (1) | | 1,081 | (1) |
2017 | | Owned real estate and development | | ILF/ALF/MC | | WI | | | 21,999 | (2) | | 2,318 | (2) |
2017 | | Owned real estate | | ALF/MC | | SC | | | 11,680 | | | 1,308 | |
Total | | | | | | | | $ | 78,805 | | $ | 8,483 | |
(1) | We entered into a JV to develop, purchase and own seniors housing properties. During the second quarter of 2018, the JV purchased land for the development of a 78-unit ALF/MC for a total anticipated project cost of $18,108. The non-controlling partner contributed $1,081 of cash and we committed to fund the remaining $17,027 project cost. During the third quarter of 2018, in a sale-leaseback transaction, the JV purchased an existing operational 89-unit ILF adjacent to the 78-unit ALF/MC we are developing for $14,400. The non-controlling partner contributed $2,857 of equity and we contributed $11,543 in cash. Upon completion of the development project, our combined economic interest in the JV will be approximately 88%. |
(2) | We entered into a JV to own the real estate and develop a 110-unit ILF/ALF/MC community in Wisconsin. This development project completed during the second quarter of 2019. |
Shelf Registration.Registration Statement. We hadhave an automatic shelf registration statement which was filed in 2013 and provided uson file with the capacitySEC, and currently have the ability to publicly offer up to $800,000,000 in common stock, preferred stock, warrants, debt, depositary shares, or units. In advance of the three-year expiration of thefile additional automatic shelf registration statement we filed in 2013, we filed a new automatic shelf registration statement with the SEC on January 29, 2016statements, to provide us with additional capacity to publicly offer an indeterminate amount of common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time publicly raise capital under theour automatic shelf registration statement we filed in 2016 (until its expiration on January 29, 2019) in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. Our shelf registration statement expires on February 28, 2022.
Distributions. We declared and paid the following cash dividends (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | ||||||||||||||||
| | 2019 | | 2018 | | 2017 |
| | ||||||||||||
| | Declared | | Paid | | Declared | | Paid | | Declared | | Paid |
| | ||||||
Common Stock (1) | | $ | 90,899 | | $ | 90,899 | | $ | 90,372 | | $ | 90,372 | | $ | 90,219 | | $ | 90,219 | | |
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| Year Ended |
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| December 31, 2016 |
| December 31, 2015 |
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| Declared |
| Paid |
| Declared |
| Paid |
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| ||||
Preferred Stock Series C |
| $ | — |
| $ | — |
| $ | 2,454 |
| $ | 2,454 |
|
|
Common Stock |
|
| 84,568 | (1) |
| 84,568 | (1) |
| 74,311 | (2) |
| 74,311 | (2) |
|
Total |
| $ | 84,568 |
| $ | 84,568 |
| $ | 76,765 |
| $ | 76,765 |
|
|
(1) |
| Represents |
|
|
In January 2017,2020, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 20172020 payable on January 31, February 28 and March 31, 2017,2020, respectively, to stockholders of record on January 23, February 1720 and March 23, 2017,2020, respectively.
Accumulated Other Comprehensive Income. During prior years, we had investments in Real Estate Mortgage Investment Conduit (or REMIC) Certificates, and retained the non‑investment grade certificates issued in the securitizations. During 2005, a loan was paid off in the last remaining REMIC pool which caused the last third party
7876
REMIC Certificate holders entitled to any principal payments to be paid off in full. After this transaction, we became the sole holder of the remaining REMIC Certificates and were therefore entitled to the entire principal outstanding of the loan pool underlying the remaining REMIC Certificates. Under the FASB accounting guidance relating to accounting for changes that result in a transferor regaining control of financial assets sold, a Special Purpose Entity (or SPE) may become non‑qualified or tainted which generally results in the “repurchase” by the transferor of all the assets sold to and still held by the SPE. Since we were the sole REMIC Certificate holder entitled to principal from the underlying loan pool, we had all the risks and were entitled to all the rewards from the underlying loan pool. As required by the accounting guidance, the repurchase for the transferred assets was accounted for at fair value. The accumulated other comprehensive income balance represents the fair market value adjustment offset by any previously adjusted impairment charge which is amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC pool. At December 31, 2016 and 2015, accumulated other comprehensive income was $0 and $47,000, respectively.
Stock Based Compensation Plans. During 2015, we adopted, and our shareholdersstockholders approved the 2015 Equity Participation Plan (or the 2015 Plan) which replaces the 2008 Equity Participation Plan (or the 2008 Plan(the “2015 Plan”). Under the 2015 Plan, 1,400,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. As of December 31, 2019, we have 617,013 shares of common stock reserved for awards under the 2015 Plan. The terms of the awards granted under the 2015 Plan are set by our compensation committee at its discretion. During
Restricted Stock and Performance-Based Stock Units. Restricted stock and performance-based stock units activity for the twelve monthsyears ended December 31, 2016, no stock options were2019, 2018 and 2017 was as follows:
| | | | | | | | | | |
|
| 2019 |
| 2018 | | 2017 |
| |||
Outstanding, January 1 |
| | 325,750 |
| | 244,181 | | | 210,573 | |
Granted |
| | 147,608 |
| | 156,718 | | | 143,057 | |
Vested |
| | (127,725) | (1) | | (75,149) | | | (85,343) | |
Cancelled |
| | — |
| | — | | | (24,106) | |
Outstanding, December 31 |
| | 345,633 |
| | 325,750 | | | 244,181 | |
| | | | | | | | | | |
Compensation expense related to restricted stock and performance-based stock units for the year | | $ | 6,566,000 | | $ | 5,870,000 | | $ | 5,247,000 | |
(1) | Includes 48,225 performance-based stock units. |
During 2019, 2018 and 2017, we granted under this plan. During 2016, 127,087147,608, 156,718 and 143,057 shares of restricted common stock were grantedand performance-based stock units, respectively, under the 2015 Plan. plan as follows:
| | | | | | | | |
| | No. of | | Price per | | | | |
Year | | Shares/Units | | Share | | Vesting Period | | |
2019 | | 78,276 | | $ | 46.54 | | ratably over 3 years | |
| | 60,836 | | $ | 46.54 | | TSR targets (1) | |
| | 8,496 | | $ | 44.73 | | May 29, 2020 | |
| | 147,608 | | | | | | |
| | | | | | | | |
2018 | | 81,819 | | $ | 38.18 | | ratably over 3 years | |
| | 66,171 | | $ | 38.18 | | TSR targets (1) | |
| | 8,728 | | $ | 41.25 | | May 30, 2019 | |
| | 156,718 | | | | | | |
| | | | | | | | |
2017 | | 74,760 | | $ | 45.76 | | ratably over 3 years | |
| | 57,881 | | $ | 45.76 | | TSR targets (1) | |
| | 7,416 | | $ | 48.55 | | June 1, 2018 | |
| | 3,000 | | $ | 50.50 | | ratably over 3 years | |
| | 143,057 | | | | | | |
(1) | Vesting is based on achieving certain total shareholder return (“TSR”) targets in 4 years with acceleration opportunity in 3 years. |
Subsequent to December 31, 2016,2019, we granted 74,76076,464 shares of restricted common stock at $45.76$48.95 per share. These sharesshare which vest ratably from the grant date over a three-year period.
Restricted Stock and performance-based stock units. Restricted stock and performance based stock units activity for the years ended December 31, 2016 and 2015 was as follows:
|
|
|
|
|
|
|
|
|
| 2016 |
| 2015 |
| ||
Outstanding, January 1 |
|
| 187,347 |
|
| 214,168 |
|
Granted |
|
| 127,087 |
|
| 92,150 |
|
Vested |
|
| (103,861) |
|
| (118,331) |
|
Canceled |
|
| — |
|
| (640) |
|
Outstanding, December 31 |
|
| 210,573 |
|
| 187,347 |
|
|
|
|
|
|
|
|
|
Compensation expense related to restricted stock and performance based stock units for the year |
| $ | 4,265,000 |
| $ | 3,992,000 |
|
7977
During 2016 and 2015, we granted 127,087 and 92,150 shares of restricted common stock, respectively, under the 2015 plan and 2008 Plan as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| Price per |
|
|
| |
Year |
| No. of Shares/Units |
| Share |
| Vesting Period |
| |
2016 |
| 65,300 |
| $ | 43.24 |
| ratably over 3 years |
|
|
| 54,107 |
| $ | 46.87 |
| TSR targets (1) |
|
|
| 7,680 |
| $ | 46.87 |
| June 1, 2017 |
|
|
| 127,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
| 65,750 |
| $ | 44.45 |
| ratably over 3 years |
|
|
| 18,000 |
| $ | 42.30 |
| ratably over 3 years |
|
|
| 8,400 |
| $ | 42.30 |
| June 2, 2016 |
|
|
| 92,150 |
|
|
|
|
|
|
|
|
At December 31, 2016,2019, the total number of restricted common stock and performance-based stock units that are scheduled to vest and remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock and performance-based stock units are as follows:follows (dollar amount in thousands):
| | | | | |
| | Number | | Remaining | |
| | of | | Compensation | |
Vesting Date | | Awards |
| Expense | |
2020 | | 139,534 | (1) | $ | 4,619 |
2021 | | 119,168 | (2) | | 2,503 |
2022 | | 86,931 | (3) | | 189 |
Total | | 345,633 | | $ | 7,311 |
|
|
|
|
|
|
|
| Number |
| Remaining | |
|
| of |
| Compensation | |
Vesting Date |
| Awards |
| Expense | |
2017 |
| 85,343 |
|
| 3,428,000 |
2018 |
| 49,352 |
|
| 2,071,000 |
2019 |
| 75,878 | (1) |
| 236,000 |
|
| 210,573 |
| $ | 5,735,000 |
(1) |
| Includes |
(2) | Includes 66,171 performance-based stock units. See (1) above for valuation methodology. |
(3) | Includes 60,836 performance-based stock units. See (1) above for valuation methodology. |
Stock Options. During 20162019, 2018 and 2015,2017, we did not issue any stock options. Nonqualified stock option activity for the years ended December 31, 20162019, 2018 and 2015,2017, was as follows:
| | | | | | | | | | | | | | | | |
| | | | | | | | Weighted Average |
| |||||||
| | Shares | | Price |
| |||||||||||
| | 2019 | | 2018 | | 2017 | | 2019 | | | 2018 | | 2017 |
| ||
Outstanding, January 1 |
| 20,000 | | 25,000 |
| 33,334 |
| $ | 34.99 | | $ | 32.92 |
| $ | 30.76 | |
Granted |
| — | | — |
| — | | | N/A | | | N/A | | | N/A | |
Exercised |
| (5,000) | | (5,000) |
| (8,334) | | $ | 24.65 | | $ | 24.65 | | $ | 24.31 | |
Canceled |
| — | | — |
| — | | | N/A | | | N/A | | | N/A | |
Outstanding, December 31 |
| 15,000 | | 20,000 |
| 25,000 | | $ | 38.43 | | $ | 34.99 | | $ | 32.92 | |
| | | | | | | | | | | | | | | | |
Exercisable, December 31(1) |
| 15,000 | | 20,000 |
| 25,000 | | $ | 38.43 | | $ | 34.99 | | $ | 32.92 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted Average |
| ||||
|
| Shares |
| Price |
| ||||||
|
| 2016 |
| 2015 |
| 2016 |
| 2015 |
| ||
Outstanding, January 1 |
| 40,001 |
| 43,334 |
| $ | 29.60 |
| $ | 29.16 |
|
Granted |
| — |
| — |
| $ | — |
| $ | — |
|
Exercised |
| (6,667) |
| (3,333) |
| $ | 23.79 |
| $ | 23.79 |
|
Canceled |
| — |
| — |
| $ | — |
| $ | — |
|
Outstanding, December 31 |
| 33,334 |
| 40,001 |
| $ | 30.76 |
| $ | 29.60 |
|
Exercisable, December 31(1) |
| 28,334 |
| 30,001 |
| $ | 45.45 |
| $ | 31.99 |
|
(1) |
| The aggregate intrinsic value of exercisable options at December 31, |
80
The options exercised during 20162019, 2018 and 20152017 were as follows:
| | | | | | | | | | | | |
| | | | Weighted | | | | | | |
| |
| | | | Average | | | | | | |
| |
| | Options | | Exercise | | Option | | Market |
| |||
| | Exercised | | Price | | Value | | Value (1) |
| |||
2019 | | 5,000 | | $ | 24.65 | | $ | 123,000 | | $ | 233,000 | |
2018 | | 5,000 | | $ | 24.65 | | $ | 123,000 | | $ | 205,000 | |
2017 | | 8,334 | | $ | 24.31 | | $ | 202,000 | | $ | 410,797 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
| |
|
|
|
| Average |
|
|
|
|
|
|
| |
|
| Options |
| Exercise |
| Option |
| Market |
| |||
|
| Exercised |
| Price |
| Value |
| Value(1) |
| |||
2016 |
| 6,667 |
| $ | 23.79 |
| $ | 159,000 |
| $ | 311,000 |
|
2015 |
| 3,333 |
| $ | 23.79 |
| $ | 79,000 |
| $ | 140,000 |
|
(1) |
| As of the exercise dates. |
We use the Black‑Scholes‑MertonBlack-Scholes-Merton formula to estimate the value of stock options granted to employees. This model requires management to make certain estimates including stock volatility, expected dividend yield and the expected term. The weighted average exercise share price of the options was $30.76 and $29.60 and the weighted average remaining contractual life was 2.9 and 2.6 years as of December 31, 2016 and 2015, respectively. Compensation expense related to the vesting of stock options for the twelve monthsyears ended December 31, 2016,2019, 2018 and 2017 was $15,000 compared to $14,000 for the same period in 2015.$0, $0 and $2,000, respectively.
78
We have no stock options outstanding that are scheduled to vest beyond 2017. LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Commitments and Contingencies
At December 31, 2016, the total number of stock options outstanding that are scheduled to vest through 2017 is 5,000. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2017 is $3,000.
10. Commitments and Contingencies
At December 31, 2016,2019, we had commitments as follows (in thousands):
| | | | | | | | | | | | |
| | | | | | | | Total | | | | |
| | Investment | | 2019 | | Commitment | | Remaining | ||||
| | Commitment | | Funding | | Funded | | Commitment | ||||
Real estate properties (Note 5. Real Estate Investments) | | $ | 41,266 | (1) | $ | 13,847 | | $ | 18,361 | | $ | 22,905 |
Accrued incentives and earn-out liabilities (Note 8. Lease Incentives) | | | 9,000 | | | — | | | — | | | 9,000 |
Mortgage loans (Note 5. Real Estate Investments) | | | 27,200 | (2) | | 2,264 | | | 5,944 | | | 21,256 |
Notes receivable (Note 7. Notes Receivable) | | | 2,250 | | | 2,039 | | | 2,063 | | | 187 |
Total | | $ | 79,716 | | $ | 18,150 | | $ | 26,368 | | $ | 53,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
| |
|
| Investment |
| 2016 |
| Commitment |
| Remaining |
| ||||
|
| Commitment |
| Funding |
| Funded |
| Commitment |
| ||||
Real estate properties (See Note 5) |
| $ | 66,224 | (1) | $ | 13,614 |
| $ | 17,405 |
| $ | 48,819 |
|
Accrued incentives and earn-out liabilities (2) |
|
| 16,600 |
|
| 1,560 |
|
| 1,560 |
|
| 15,040 |
|
Lease incentives |
|
| 12,957 |
|
| 3,509 |
|
| 3,964 |
|
| 8,993 |
|
Mortgage loans (See Note 5) |
|
| 51,490 | (1) |
| 4,405 |
|
| 5,698 |
|
| 45,792 |
|
Joint venture investments (See Note 6) |
|
| 29,050 |
|
| 1,770 |
|
| 21,913 |
|
| 7,137 |
|
Notes receivable (See Note 7) |
|
| 200 |
|
| — |
|
| — |
|
| 200 |
|
Totals |
| $ | 176,521 |
| $ | 24,858 |
| $ | 50,540 |
| $ | 125,981 |
|
(1) |
| Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand |
(2) |
|
|
Also, some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. See Note 5. Real Estate Investments for a table summarizing information about our purchase options.
We are a party from time to time to various general and professional liability claims and lawsuits asserted against the lessees or borrowers of our properties, which in our opinion are not singularly or in the aggregate material to our results of operations or financial condition. These types of claims and lawsuits may include matters involving general or professional liability, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principalsprinciples and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims.
81
11.12. Distributions
We must distribute at least 90% of our taxable income in order to continue to qualify as a REIT. This distribution requirement can be satisfied by current year distributions or, to a certain extent, by distributions in the following year.
For federal tax purposes, distributions to stockholders are treated as ordinary income, capital gains, return of capital or a combination thereof. Distributions for 2016, 20152019, 2018 and 20142017 were cash distributions. The federal income tax classification of the per share common stock distributions are as follows (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
| Year Ended December 31, |
| |||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||
Ordinary taxable distribution |
| $ | 1.485 |
| $ | 1.690 |
| $ | 1.474 |
|
Return of capital |
|
| 0.556 |
|
| 0.357 |
|
| 0.196 |
|
Unrecaptured Section 1250 gain |
|
| 0.149 |
|
| 0.023 |
|
| 0.370 |
|
Total |
| $ | 2.190 |
| $ | 2.070 |
| $ | 2.040 |
|
| | | | | | | | | | |
| | Year Ended December 31, |
| |||||||
| | 2019 | | 2018 | | 2017 |
| |||
Ordinary taxable distribution |
| $ | 2.084 |
| $ | 0.349 |
| $ | 1.607 | |
Return of capital | |
| — | |
| — | |
| 0.444 | |
Unrecaptured Section 1250 gain | |
| 0.132 | |
| 0.636 | |
| 0.163 | |
Long-term capital gain | |
| 0.064 | |
| 1.295 | |
| 0.066 | |
Total | | $ | 2.280 | | $ | 2.280 | | $ | 2.280 | |
12.
79
13. Net Income Per Common Share
Basic and diluted net income per share was as follows (in thousands except per share amounts):
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| For the year ended December 31, |
| |||||||||||||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||||||||||||
Income from continuing operations |
| $ | 85,115 |
| $ | 73,081 |
| $ | 73,399 |
| ||||||||||
Less net income allocated to participating securities: |
|
|
|
|
|
|
|
|
|
| ||||||||||
| | | | | | | | | | | ||||||||||
| | |
| |||||||||||||||||
| | For the year ended December 31, |
| |||||||||||||||||
| | 2019 | | 2018 | | 2017 | | |||||||||||||
Net income | | $ | 80,872 |
| $ | 155,076 |
| $ | 87,340 | | ||||||||||
Less income allocated to non-controlling interests | |
| (346) | |
| (95) | |
| — | | ||||||||||
Less income allocated to participating securities: | | | | | | | | | | | ||||||||||
Non-forfeitable dividends on participating securities |
|
| (373) |
|
| (480) |
|
| (465) |
| |
| (372) | |
| (357) | |
| (350) | |
Income allocated to participating securities |
|
| (12) |
|
| (4) |
|
| (16) |
| |
| (19) | |
| (268) | |
| (12) | |
Total net income allocated to participating securities |
|
| (385) |
|
| (484) |
|
| (481) |
| |
| (391) | |
| (625) | |
| (362) | |
Less net income allocated to preferred stockholders: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Preferred stock dividends |
|
| — |
|
| (2,454) |
|
| (3,273) |
| ||||||||||
Total net income allocated to preferred stockholders |
|
| — |
|
| (2,454) |
|
| (3,273) |
| ||||||||||
Net income available to common stockholders |
|
| 84,730 |
|
| 70,143 |
|
| 69,645 |
| |
| 80,135 | |
| 154,356 | |
| 86,978 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
Participating securities |
|
| 385 |
|
| — |
|
| — |
| | | — | | | 625 | | | 362 | |
Convertible preferred securities |
|
| — |
|
| 2,454 |
|
| 3,273 |
| ||||||||||
Total effect of dilutive securities |
|
| 385 |
|
| 2,454 |
|
| 3,273 |
| ||||||||||
Net income for diluted net income per share |
| $ | 85,115 |
| $ | 72,597 |
| $ | 72,918 |
| | $ | 80,135 | | $ | 154,981 | | $ | 87,340 | |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| | | | | | | | | | | ||||||||||
Shares for basic net income per share |
|
| 38,388 |
|
| 35,590 |
|
| 34,617 |
| |
| 39,571 | |
| 39,477 | |
| 39,409 | |
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
Stock options |
|
| 13 |
|
| 13 |
|
| 23 |
| |
| 4 | |
| 3 | |
| 10 | |
Performance-based stock units |
|
| 27 |
|
| — |
|
| — |
| | | 184 | | | 203 | | | 67 | |
Participating securities |
|
| 169 |
|
| — |
|
| — |
| | | — | | | 156 | | | 151 | |
Convertible preferred securities |
|
| — |
|
| 1,726 |
|
| 2,000 |
| ||||||||||
Total effect of dilutive securities |
|
| 209 |
|
| 1,739 |
|
| 2,023 |
| |
| 188 | |
| 362 | |
| 228 | |
Shares for diluted net income per share |
|
| 38,597 |
|
| 37,329 |
|
| 36,640 |
| |
| 39,759 | |
| 39,839 | |
| 39,637 | |
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| | | | | | | | | | | ||||||||||
Basic net income per share |
| $ | 2.21 |
| $ | 1.97 |
| $ | 2.01 |
| | $ | 2.03 | | $ | 3.91 | | $ | 2.21 | |
Diluted net income per share |
| $ | 2.21 |
| $ | 1.94 |
| $ | 1.99 |
| | $ | 2.02 | | $ | 3.89 | | $ | 2.20 | |
8280
13.14. Quarterly Financial Information
| | | | | | | | | | | | | |
| | For the quarter ended |
| ||||||||||
| | March 31, | | June 30, | | September 30, | | December 31, |
| ||||
| | (unaudited, in thousands except per share amounts) |
| ||||||||||
2019 |
| |
|
| |
|
| |
|
| |
| |
Revenues | | $ | 45,456 | | $ | 46,266 | | $ | 47,119 | | $ | 46,463 | |
Net income available to common stockholders | | $ | 20,254 | | $ | 20,352 | | $ | 27,080 | | $ | 12,449 | |
Net income per common share available to common stockholders: | | | | | | | | | | | | | |
Basic | | $ | 0.51 | | $ | 0.51 | | $ | 0.68 | | $ | 0.31 | |
Diluted | | $ | 0.51 | | $ | 0.51 | | $ | 0.68 | | $ | 0.31 | |
Dividends per share declared | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
Dividends per share paid | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
2018 | | | | | | | | | | | | | |
Revenues | | $ | 41,810 | | $ | 41,472 | | $ | 41,776 | | $ | 43,587 | |
Net income available to common stockholders | | $ | 20,271 | | $ | 68,658 | | $ | 34,782 | | $ | 30,645 | |
Net income per common share available to common stockholders: | | | | | | | | | | | | | |
Basic | | $ | 0.51 | | $ | 1.74 | | $ | 0.88 | | $ | 0.78 | |
Diluted | | $ | 0.51 | | $ | 1.73 | | $ | 0.88 | | $ | 0.77 | |
Dividends per share declared | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
Dividends per share paid | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | | $ | 0.57 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the quarter ended |
| ||||||||||
|
| March 31, |
| June 30, |
| September 30, |
| December 31, |
| ||||
|
| (unaudited, in thousands except per share amounts) |
| ||||||||||
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 38,604 |
| $ | 39,996 |
| $ | 40,842 |
| $ | 42,141 |
|
Net income available to common stockholders |
| $ | 19,757 |
| $ | 22,075 |
| $ | 22,321 |
| $ | 20,577 |
|
Net income per common share available to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.53 |
| $ | 0.58 |
| $ | 0.57 |
| $ | 0.53 |
|
Diluted |
| $ | 0.53 |
| $ | 0.58 |
| $ | 0.57 |
| $ | 0.53 |
|
Dividends per share declared |
| $ | 0.54 |
| $ | 0.54 |
| $ | 0.54 |
| $ | 0.57 |
|
Dividend per share paid |
| $ | 0.54 |
| $ | 0.54 |
| $ | 0.54 |
| $ | 0.57 |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 31,480 |
| $ | 32,387 |
| $ | 34,943 |
| $ | 37,393 |
|
Net income available to common stockholders |
| $ | 16,611 |
| $ | 16,984 |
| $ | 18,708 |
| $ | 17,840 |
|
Net income per common share available to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.47 |
| $ | 0.48 |
| $ | 0.53 |
| $ | 0.49 |
|
Diluted |
| $ | 0.47 |
| $ | 0.48 |
| $ | 0.52 |
| $ | 0.48 |
|
Dividends per share declared |
| $ | 0.51 |
| $ | 0.51 |
| $ | 0.51 |
| $ | 0.54 |
|
Dividend per share paid |
| $ | 0.51 |
| $ | 0.51 |
| $ | 0.51 |
| $ | 0.54 |
|
| |
NOTE: | Quarterly and |
81
15. Fair Value Measurements
In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings. We did not adopt the elective fair market value option for our financial assets and financial liabilities.
83
The carrying amount of cash and cash equivalents approximates fair value because of the short‑termshort-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and fair value of our financial instruments as of December 31, 20162019 and 20152018 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):
| | | | | | | | | | | | | |
| | At December 31, 2019 | | At December 31, 2018 | | ||||||||
| | Carrying | | Fair | | Carrying | | Fair | | ||||
| | Value | | Value | | Value | | Value | | ||||
Mortgage loans receivable | | $ | 254,099 | | $ | 312,824 | (1) | $ | 242,939 | | $ | 295,492 | (1) |
Bank borrowings | |
| 93,900 | | | 93,900 | (2) | | 112,000 | | | 112,000 | (2) |
Senior unsecured notes, net of debt issue costs | |
| 599,488 | | | 612,375 | (3) | | 533,029 | | | 508,613 | (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At December 31, 2016 |
| At December 31, 2015 |
| ||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair |
| ||||
|
| Value |
| Value |
| Value |
| Value |
| ||||
Mortgage loans receivable |
| $ | 229,801 |
| $ | 294,319 | (1) | $ | 217,529 |
| $ | 257,335 | (1) |
Bank borrowings |
|
| 107,100 |
|
| 107,100 | (2) |
| 120,500 |
|
| 120,500 | (2) |
Senior unsecured notes, net of debt issue costs |
|
| 502,291 |
|
| 498,915 | (3) |
| 451,372 |
|
| 451,420 | (3) |
Accrued incentives and earn-outs |
|
| 12,229 |
|
| 12,229 | (4) |
| 12,722 |
|
| 12,722 | (4) |
(1) |
| Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at December 31, |
(2) |
| Our bank borrowings bear interest at a variable interest rate. The estimated fair value of our bank borrowings approximated their carrying values at December 31, |
(3) |
| Our obligation under our senior unsecured notes is classified as Level 3 and thus the fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is measured based upon management’s estimates of rates currently prevailing for comparable loans available to us, and instruments of comparable maturities. At December 31, |
|
|
15.16. Subsequent Events
The following events occurred subsequent to the balance sheet date.
Real Estate: Estate. We acquired a 140-bed SNF located in Texas for approximately $13,500,000 and entered into a contingent purchase and sale agreement to sell an 85-unit ROC community in Texas for $1,200,000.
Debt: We paid $4,167,000 in regular scheduled principal payments and amended our shelf10-year master lease agreement with Prudential to increase our shelf commitment to $337,500,000. Additionally, we sold 15-year senior unsecured notesan initial cash yield of 8.5%, escalating 2% annually starting in the aggregate amountsecond year of $100,000,000 to a group of institutional investors, which included Prudential, in a private placement transaction. The notes bear interest at an annual fixed rate of 4.5%, have scheduled principal payments and mature on February 16, 2032. Subsequent to this transaction, we have $36,667,000 availablethe lease, with 2 five-year renewal options.
Debt: We borrowed $18,000,000, under our amended shelf agreement with Prudential. We used the proceeds from our private placement to repay the outstanding balance of our unsecured revolving line of credit. Accordingly, we have no$111,900,000 outstanding balance and $600,000,000$488,100,000 available for borrowing under our unsecured revolving line of credit.
84
Equity: We declared a monthly cash dividend of $0.19$0.19 per share on our common stock for the months of January, February and March 2017,2020, payable on January 31, February 28, and March 31, 2017,2020, respectively, to stockholders of record on January 23, February 17,20, and March 23, 2017,2020, respectively. Additionally, we sold 312,881 shares of common stock for $14,578,000. Accordingly, we have $185,162,000 available under our Equity Distribution Agreement. Also, we acquired 23,69134,016 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations and we granted 74,76076,464 shares of restricted common stock at $45.76$48.95 per share. These sharesshare, which vest ratably from the grant date over a three-year period.
8582
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
| | | | | | | | | | | | | | | | |
| | | | | Additions | | | | | | |
| ||||
| | | | | (Recovered) | | | | | | | | | |
| |
| | Balance at | | charged to | | Charged to | | | | | | |
| |||
| | beginning of | | costs and | | other | | | | | Balance at end |
| ||||
Account Description | | period | | expenses | | accounts (1) | | Deductions (2) | | of period |
| |||||
Year ended December 31, 2017 |
| |
|
| |
|
| |
|
| |
|
| |
| |
Loan loss reserves | | $ | 2,315 | | $ | (60) | | $ | — | | $ | — | | $ | 2,255 | |
Other notes receivable allowance | | | 166 | | | — | | | — | | | — | | | 166 | |
Straight-line rent receivable allowance | |
| 960 | |
| (146) | |
| — | |
| — | |
| 814 | |
| | $ | 3,441 | | $ | (206) | | $ | — | | $ | — | | $ | 3,235 | |
Year ended December 31, 2018 | | | | | | | | | | | | | | | | |
Loan loss reserves | | $ | 2,255 | | $ | 192 | | $ | — | | $ | — | | $ | 2,447 | |
Other notes receivable allowance | | | 166 | | | (38) | | | — | | | — | | | 128 | |
Straight-line rent receivable allowance | |
| 814 | |
| (68) | |
| — | |
| — | |
| 746 | |
| | $ | 3,235 | | $ | 86 | | $ | — | | $ | — | | $ | 3,321 | |
Year ended December 31, 2019 | | | | | | | | | | | | | | | | |
Loan loss reserves | | $ | 2,447 | | $ | 113 | | $ | — | | $ | — | | $ | 2,560 | |
Other notes receivable allowance | | | 128 | | | 53 | | | — | | | — | | | 181 | |
Straight-line rent receivable allowance | |
| 746 | |
| — | |
| (746) | |
| — | |
| — | |
| | $ | 3,321 | | $ | 166 | | $ | (746) | | $ | — | | $ | 2,741 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additions |
|
|
|
|
|
|
| ||||
|
|
|
|
| (Recovered) |
|
|
|
|
|
|
|
|
|
| |
|
| Balance at |
| charged to |
|
|
|
|
|
|
|
|
|
| ||
|
| beginning of |
| costs and |
| Charged to |
|
|
|
| Balance at end |
| ||||
Account Description |
| period |
| expenses |
| other accounts |
| Deductions (1) |
| of period |
| |||||
Year ended December 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan loss reserves |
| $ | 1,671 |
| $ | 2 |
| $ | — |
| $ | — |
| $ | 1,673 |
|
Straight-line rent receivable allowance |
|
| 1,541 |
|
| 30 |
|
| — |
|
| (840) |
|
| 731 |
|
|
| $ | 3,212 |
| $ | 32 |
| $ | — |
| $ | (840) |
| $ | 2,404 |
|
Year ended December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan loss reserves |
| $ | 1,673 |
| $ | 517 |
| $ | — |
| $ | — |
| $ | 2,190 |
|
Straight-line rent receivable allowance |
|
| 731 |
|
| 102 |
|
| — |
|
| — |
|
| 833 |
|
|
| $ | 2,404 |
| $ | 619 |
| $ | — |
| $ | — |
| $ | 3,023 |
|
Year ended December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan loss reserves |
| $ | 2,190 |
| $ | 125 |
| $ | — |
| $ | — |
| $ | 2,315 |
|
Other notes receivable allowance |
|
| — |
|
| 166 |
|
| — |
|
| — |
|
| 166 |
|
Straight-line rent receivable allowance |
|
| 833 |
|
| 166 |
|
| — |
|
| (39) |
|
| 960 |
|
|
| $ | 3,023 |
| $ | 457 |
| $ | — |
| $ | (39) |
| $ | 3,441 |
|
(1) |
|
(2) | Deductions represent uncollectible accounts written off. |
8683
LTC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| capitalized |
| Gross amount at which carried at |
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
| Initial cost to company |
| subsequent |
| December 31, 2016 |
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Building and |
| to |
|
|
|
| Building and |
|
|
|
| Accum |
| Construction/ |
| Acquisition |
| |||||||||||||||||||||||||||||||||
|
| Encumbrances |
| Land |
| improvements |
| acquisition |
| Land |
| improvements |
| Total(1) |
| deprec. |
| renovation date |
| date |
| |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | Costs | | | | | | | | | | | | | | | | |
| ||||||||||||||||||||||||||||||
| | | | | | | | | | | capitalized | | Gross amount at which carried at | | | | | | | |
| |||||||||||||||||||||||||||||||||||||
| | | | | Initial cost to company | | subsequent | | December 31, 2019 | | | | | | | |
| |||||||||||||||||||||||||||||||||||||||||
| | | | | | | | Building and | | to | | | | | Building and | | | | | Accum | | Construction/ | | Acquisition |
| |||||||||||||||||||||||||||||||||
| | Encumbrances | | Land | | improvements | | acquisition | | Land | | improvements | | Total (1) | | deprec. | | renovation date | | date |
| |||||||||||||||||||||||||||||||||||||
Skilled Nursing Properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
| |
134 Alamogordo, NM |
| $ | — |
| $ | 210 |
| $ | 2,593 |
| $ | 641 |
| $ | 210 |
| $ | 3,234 |
| $ | 3,444 |
| $ | 1,158 |
| 1985 |
| 2001 |
|
| $ | — |
| $ | 210 |
| $ | 2,593 |
| $ | 641 |
| $ | 210 |
| $ | 3,234 |
| $ | 3,444 |
| $ | 1,504 |
| 1985 |
| 2001 | |
218 Albuquerque, NM |
|
| — |
|
| 1,696 |
|
| 3,891 |
|
| 530 |
|
| 1,696 |
|
| 4,421 |
|
| 6,117 |
|
| 1,616 |
| 2008 |
| 2005 |
| |
| — | |
| 1,696 | |
| 3,891 | |
| 530 | |
| 1,696 | |
| 4,421 | |
| 6,117 | |
| 1,954 |
| 2008 |
| 2005 | |
219 Albuquerque, NM |
|
| — |
|
| 1,950 |
|
| 8,910 |
|
| 207 |
|
| 1,950 |
|
| 9,117 |
|
| 11,067 |
|
| 3,249 |
| 1982 |
| 2005 |
| |
| — | |
| 1,950 | |
| 8,910 | |
| 207 | |
| 1,950 | |
| 9,117 | |
| 11,067 | |
| 3,881 |
| 1982 |
| 2005 | |
220 Albuquerque, NM |
|
| — |
|
| 2,463 |
|
| 7,647 |
|
| 9 |
|
| 2,463 |
|
| 7,656 |
|
| 10,119 |
|
| 2,717 |
| 1970 |
| 2005 |
| |
| — | |
| 2,463 | |
| 7,647 | |
| 9 | |
| 2,463 | |
| 7,656 | |
| 10,119 | |
| 3,234 |
| 1970 |
| 2005 | |
042 Altoona, IA |
|
| — |
|
| 105 |
|
| 2,309 |
|
| 444 |
|
| 105 |
|
| 2,753 |
|
| 2,858 |
|
| 1,787 |
| 1973 |
| 1996 |
| |
| — | |
| 105 | |
| 2,309 | |
| 444 | |
| 105 | |
| 2,753 | |
| 2,858 | |
| 1,987 |
| 1973 |
| 1996 | |
252 Amarillo, TX |
|
| — |
|
| 844 |
|
| — |
|
| 7,925 |
|
| 844 |
|
| 7,925 |
|
| 8,769 |
|
| 1,285 |
| 2013 |
| 2011 |
| |
| — | |
| 844 | |
| — | |
| 7,925 | |
| 844 | |
| 7,925 | |
| 8,769 | |
| 2,025 |
| 2013 |
| 2011 | |
214 Aransas Pass, TX |
|
| — |
|
| 154 |
|
| 1,276 |
|
| 589 |
|
| 154 |
|
| 1,865 |
|
| 2,019 |
|
| 783 |
| 2008 |
| 2004 |
| |||||||||||||||||||||||||||||
247 Arlington, TX |
|
| — |
|
| 1,016 |
|
| 13,649 |
|
| — |
|
| 1,016 |
|
| 13,649 |
|
| 14,665 |
|
| 2,959 |
| 2007 |
| 2011 |
| |
| — | |
| 1,016 | |
| 13,649 | |
| — | |
| 1,016 | |
| 13,649 | |
| 14,665 | |
| 4,097 |
| 2007 |
| 2011 | |
171 Atlanta, GA |
|
| — |
|
| 175 |
|
| 1,282 |
|
| 3 |
|
| 175 |
|
| 1,285 |
|
| 1,460 |
|
| 735 |
| 1968 |
| 1999 |
| |||||||||||||||||||||||||||||
040 Atmore, AL |
|
| — |
|
| 131 |
|
| 2,877 |
|
| 196 |
|
| 131 |
|
| 3,073 |
|
| 3,204 |
|
| 1,843 |
| 1974 |
| 1996 |
| |||||||||||||||||||||||||||||
221 Beaumont, TX |
|
| — |
|
| 370 |
|
| 1,141 |
|
| 106 |
|
| 370 |
|
| 1,247 |
|
| 1,617 |
|
| 488 |
| 1950 |
| 2005 |
| |
| — | |
| 370 | |
| 1,141 | |
| 106 | |
| 370 | |
| 1,247 | |
| 1,617 | |
| 563 |
| 1950 |
| 2005 | |
213 Beeville, TX |
|
| — |
|
| 186 |
|
| 1,197 |
|
| 70 |
|
| 186 |
|
| 1,267 |
|
| 1,453 |
|
| 433 |
| 1974 |
| 2004 |
| |
| — | |
| 186 | |
| 1,197 | |
| 70 | |
| 186 | |
| 1,267 | |
| 1,453 | |
| 518 |
| 1974 |
| 2004 | |
007 Bradenton, FL |
|
| — |
|
| 330 |
|
| 2,720 |
|
| 160 |
|
| 330 |
|
| 2,880 |
|
| 3,210 |
|
| 1,959 |
| 2012 |
| 1993 |
| |
| — | |
| 330 | |
| 2,720 | |
| 160 | |
| 330 | |
| 2,880 | |
| 3,210 | |
| 2,189 |
| 2012 |
| 1993 | |
256 Brownwood, TX |
|
| — |
|
| 164 |
|
| 6,336 |
|
| — |
|
| 164 |
|
| 6,336 |
|
| 6,500 |
|
| 937 |
| 2011 |
| 2012 |
| |
| — | |
| 164 | |
| 6,336 | |
| — | |
| 164 | |
| 6,336 | |
| 6,500 | |
| 1,562 |
| 2011 |
| 2012 | |
043 Carroll, IA |
|
| — |
|
| 47 |
|
| 1,033 |
|
| 213 |
|
| 47 |
|
| 1,246 |
|
| 1,293 |
|
| 807 |
| 1969 |
| 1996 |
| |
| — | |
| 47 | |
| 1,033 | |
| 213 | |
| 47 | |
| 1,246 | |
| 1,293 | |
| 898 |
| 1969 |
| 1996 | |
177 Chesapeake, VA |
|
| — |
|
| 388 |
|
| 3,469 |
|
| 1,423 |
|
| 388 |
|
| 4,892 |
|
| 5,280 |
|
| 3,050 |
| 2007 |
| 1995 |
| |
| — | |
| 388 | |
| 3,469 | |
| 2,777 | |
| 388 | |
| 6,246 | |
| 6,634 | |
| 3,581 |
| 2017 |
| 1995 | |
257 Cincinnati, OH |
|
| — |
|
| 1,890 |
|
| 25,110 |
|
| — |
|
| 1,890 |
|
| 25,110 |
|
| 27,000 |
|
| 2,543 |
| 2009 |
| 2012 |
| |
| — | |
| 1,890 | |
| 25,110 | |
| — | |
| 1,890 | |
| 25,110 | |
| 27,000 | |
| 4,303 |
| 2009 |
| 2012 | |
125 Clovis, NM |
|
| — |
|
| 561 |
|
| 5,539 |
|
| 307 |
|
| 561 |
|
| 5,846 |
|
| 6,407 |
|
| 2,305 |
| 2006 |
| 2001 |
| |
| — | |
| 561 | |
| 5,539 | |
| 307 | |
| 561 | |
| 5,846 | |
| 6,407 | |
| 2,730 |
| 2006 |
| 2001 | |
129 Clovis, NM |
|
| — |
|
| 598 |
|
| 5,902 |
|
| 59 |
|
| 598 |
|
| 5,961 |
|
| 6,559 |
|
| 2,375 |
| 1995 |
| 2001 |
| |
| — | |
| 598 | |
| 5,902 | |
| 59 | |
| 598 | |
| 5,961 | |
| 6,559 | |
| 2,805 |
| 1995 |
| 2001 | |
268 Coldspring, KY |
|
| — |
|
| 2,050 |
|
| 21,496 |
|
| — |
|
| 2,050 |
|
| 21,496 |
|
| 23,546 |
|
| 2,158 |
| 2014 |
| 2012 |
| | | — | | | 2,050 | | | 21,496 | | | — | | | 2,050 | | | 21,496 | | | 23,546 | | | 4,928 | | 2014 | | 2012 | |
253 Colton, CA |
|
| — |
|
| 2,342 |
|
| 15,158 |
|
| — |
|
| 2,342 |
|
| 15,158 |
|
| 17,500 |
|
| 2,222 |
| 1990 |
| 2011 |
| |
| — | |
| 2,474 | |
| 15,158 | |
| — | |
| 2,474 | |
| 15,158 | |
| 17,632 | |
| 3,512 |
| 1990 |
| 2011 | |
211 Commerce City, CO |
|
| — |
|
| 236 |
|
| 3,217 |
|
| 167 |
|
| 236 |
|
| 3,384 |
|
| 3,620 |
|
| 1,376 |
| 1964 |
| 2004 |
| |
| — | |
| 236 | |
| 3,217 | |
| 167 | |
| 236 | |
| 3,384 | |
| 3,620 | |
| 1,606 |
| 1964 |
| 2004 | |
212 Commerce City, CO |
|
| — |
|
| 161 |
|
| 2,160 |
|
| 95 |
|
| 161 |
|
| 2,255 |
|
| 2,416 |
|
| 895 |
| 1967 |
| 2004 |
| |
| — | |
| 161 | |
| 2,160 | |
| 95 | |
| 161 | |
| 2,255 | |
| 2,416 | |
| 1,051 |
| 1967 |
| 2004 | |
246 Crowley, TX |
|
| — |
|
| 2,247 |
|
| 14,276 |
|
| — |
|
| 2,247 |
|
| 14,276 |
|
| 16,523 |
|
| 2,939 |
| 2007 |
| 2011 |
| |
| — | |
| 2,247 | |
| 14,276 | |
| — | |
| 2,247 | |
| 14,276 | |
| 16,523 | |
| 4,196 |
| 2007 |
| 2011 | |
235 Daleville, VA |
|
| — |
|
| 279 |
|
| 8,382 |
|
| — |
|
| 279 |
|
| 8,382 |
|
| 8,661 |
|
| 1,994 |
| 2005 |
| 2010 |
| |
| — | |
| 279 | |
| 8,382 | |
| — | |
| 279 | |
| 8,382 | |
| 8,661 | |
| 2,611 |
| 2005 |
| 2010 | |
258 Dayton, OH |
|
| — |
|
| 373 |
|
| 26,627 |
|
| — |
|
| 373 |
|
| 26,627 |
|
| 27,000 |
|
| 2,716 |
| 2010 |
| 2012 |
| |
| — | |
| 373 | |
| 26,627 | |
| — | |
| 373 | |
| 26,627 | |
| 27,000 | |
| 4,598 |
| 2010 |
| 2012 | |
168 Des Moines, IA | | | — | | | 115 | | | 2,096 | | | 1,433 | | | 115 | | | 3,529 | | | 3,644 | | | 2,194 | | 1972 | | 1999 | | |||||||||||||||||||||||||||||
196 Dresden, TN |
|
| — |
|
| 31 |
|
| 1,529 |
|
| 1,073 |
|
| 31 |
|
| 2,602 |
|
| 2,633 |
|
| 896 |
| 2014 |
| 2000 |
| |
| — | |
| 31 | |
| 1,529 | |
| 1,073 | |
| 31 | |
| 2,602 | |
| 2,633 | |
| 1,192 |
| 2014 |
| 2000 | |
298 Forth Worth, TX |
|
| — |
|
| 2,785 |
|
| 7,546 |
|
| — |
|
| 2,785 |
|
| 7,546 |
|
| 10,331 |
|
| 471 |
| 1998 |
| 2015 |
| | | — | | | 2,785 | | | 7,546 | | | — | | | 2,785 | | | 7,546 | | | 10,331 | | | 1,776 | | 1998 | | 2015 | |
026 Gardendale, AL | | | — | | | 100 | | | 7,550 | | | 2,084 | | | 100 | | | 9,634 | | | 9,734 | | | 6,166 | | 2011 | | 1996 | | |||||||||||||||||||||||||||||
185 Gardner, KS |
|
| — |
|
| 896 |
|
| 4,478 |
|
| 4,150 |
|
| 896 |
|
| 8,628 |
|
| 9,524 |
|
| 3,346 |
| 2011 |
| 1999 |
| |
| — | |
| 896 | |
| 4,478 | |
| 4,150 | |
| 896 | |
| 8,628 | |
| 9,524 | |
| 3,987 |
| 2011 |
| 1999 | |
248 Granbury, TX |
|
| — |
|
| 836 |
|
| 6,693 |
|
| — |
|
| 836 |
|
| 6,693 |
|
| 7,529 |
|
| 1,967 |
| 2008 |
| 2011 |
| |
| — | |
| 836 | |
| 6,693 | |
| — | |
| 836 | |
| 6,693 | |
| 7,529 | |
| 2,631 |
| 2008 |
| 2011 | |
044 Granger, IA |
|
| — |
|
| 62 |
|
| 1,356 |
|
| 221 |
|
| 62 |
|
| 1,577 |
|
| 1,639 |
|
| 989 |
| 1979 |
| 1996 |
| |
| — | |
| 62 | |
| 1,356 | |
| 221 | |
| 62 | |
| 1,577 | |
| 1,639 | |
| 1,113 |
| 1979 |
| 1996 | |
205 Grapevine, TX |
|
| — |
|
| 431 |
|
| 1,449 |
|
| 188 |
|
| 431 |
|
| 1,637 |
|
| 2,068 |
|
| 848 |
| 1974 |
| 2002 |
| |
| — | |
| 431 | |
| 1,449 | |
| 188 | |
| 431 | |
| 1,637 | |
| 2,068 | |
| 938 |
| 1974 |
| 2002 | |
172 Griffin, GA |
|
| — |
|
| 500 |
|
| 2,900 |
|
| — |
|
| 500 |
|
| 2,900 |
|
| 3,400 |
|
| 1,560 |
| 1969 |
| 1999 |
| |||||||||||||||||||||||||||||
250 Hewitt, TX |
|
| — |
|
| 1,780 |
|
| 8,220 |
|
| 99 |
|
| 1,780 |
|
| 8,319 |
|
| 10,099 |
|
| 1,324 |
| 2008 |
| 2011 |
| |
| — | |
| 1,780 | |
| 8,220 | |
| 99 | |
| 1,780 | |
| 8,319 | |
| 10,099 | |
| 2,057 |
| 2008 |
| 2011 | |
194 Holyoke, CO | | | — | | | 211 | | | 1,513 | | | 283 | | | 211 | | | 1,796 | | | 2,007 | | | 1,118 | | 1963 | | 2000 | | |||||||||||||||||||||||||||||
051 Houston, TX |
|
| — |
|
| 365 |
|
| 3,769 |
|
| 1,598 |
|
| 365 |
|
| 5,367 |
|
| 5,732 |
|
| 3,258 |
| 1968 |
| 1996 |
| |
| — | |
| 365 | |
| 3,769 | |
| 1,598 | |
| 365 | |
| 5,367 | |
| 5,732 | |
| 3,613 |
| 1968 |
| 1996 | |
054 Houston, TX |
|
| — |
|
| 202 |
|
| 4,458 |
|
| 1,426 |
|
| 202 |
|
| 5,884 |
|
| 6,086 |
|
| 3,700 |
| 2007 |
| 1996 |
| |
| — | |
| 202 | |
| 4,458 | |
| 1,426 | |
| 202 | |
| 5,884 | |
| 6,086 | |
| 4,119 |
| 2007 |
| 1996 | |
055 Houston, TX |
|
| — |
|
| 202 |
|
| 4,458 |
|
| 1,359 |
|
| 202 |
|
| 5,817 |
|
| 6,019 |
|
| 3,581 |
| 2008 |
| 1996 |
| |
| — | |
| 202 | |
| 4,458 | |
| 1,359 | |
| 202 | |
| 5,817 | |
| 6,019 | |
| 4,004 |
| 2008 |
| 1996 | |
208 Jacksonville, FL |
|
| — |
|
| 486 |
|
| 1,981 |
|
| 30 |
|
| 486 |
|
| 2,011 |
|
| 2,497 |
|
| 897 |
| 1987 |
| 2002 |
| |||||||||||||||||||||||||||||
045 Jefferson, IA |
|
| — |
|
| 86 |
|
| 1,883 |
|
| 296 |
|
| 86 |
|
| 2,179 |
|
| 2,265 |
|
| 1,348 |
| 1972 |
| 1996 |
| |
| — | |
| 86 | |
| 1,883 | |
| 296 | |
| 86 | |
| 2,179 | |
| 2,265 | |
| 1,522 |
| 1972 |
| 1996 | |
318 Kansas City, MO | | | — | | | 1,229 | | | 18,368 | | | — | | | 1,229 | | | 18,368 | | | 19,597 | | | 213 | | 2018 | | 2019 | | |||||||||||||||||||||||||||||
008 Lecanto, FL |
|
| — |
|
| 351 |
|
| 2,665 |
|
| 2,737 |
|
| 351 |
|
| 5,402 |
|
| 5,753 |
|
| 3,459 |
| 2012 |
| 1993 |
| |
| — | |
| 351 | |
| 2,665 | |
| 2,737 | |
| 351 | |
| 5,402 | |
| 5,753 | |
| 3,873 |
| 2012 |
| 1993 | |
300 Mansfield, TX |
|
| — |
|
| 2,890 |
|
| 13,110 |
|
| — |
|
| 2,890 |
|
| 13,110 |
|
| 16,000 |
|
| 448 |
| 2015 |
| 2016 |
| | | — | | | 2,890 | | | 13,110 | | | — | | | 2,890 | | | 13,110 | | | 16,000 | | | 1,912 | | 2015 | | 2016 | |
053 Mesa, AZ |
|
| — |
|
| 305 |
|
| 6,909 |
|
| 1,876 |
|
| 305 |
|
| 8,785 |
|
| 9,090 |
|
| 5,142 |
| 1996 |
| 1996 |
| |
| — | |
| 305 | |
| 6,909 | |
| 1,876 | |
| 305 | |
| 8,785 | |
| 9,090 | |
| 5,876 |
| 1996 |
| 1996 | |
226 Mesa, AZ |
|
| — |
|
| 1,095 |
|
| 2,330 |
|
| 4,673 |
|
| 1,095 |
|
| 7,003 |
|
| 8,098 |
|
| 915 |
| 2016 |
| 2006 |
| |||||||||||||||||||||||||||||
242 Mission, TX |
|
| — |
|
| 1,111 |
|
| 16,602 |
|
| — |
|
| 1,111 |
|
| 16,602 |
|
| 17,713 |
|
| 3,071 |
| 2004 |
| 2010 |
| |
| — | |
| 1,111 | |
| 16,602 | |
| — | |
| 1,111 | |
| 16,602 | |
| 17,713 | |
| 4,441 |
| 2004 |
| 2010 | |
041 Montgomery, AL |
|
| — |
|
| 242 |
|
| 5,327 |
|
| 115 |
|
| 242 |
|
| 5,442 |
|
| 5,684 |
|
| 3,332 |
| 1974 |
| 1996 |
| |||||||||||||||||||||||||||||
115 Nacogdoches, TX |
|
| — |
|
| 100 |
|
| 1,738 |
|
| 168 |
|
| 100 |
|
| 1,906 |
|
| 2,006 |
|
| 1,084 |
| 1973 |
| 1997 |
| |
| — | |
| 100 | |
| 1,738 | |
| 168 | |
| 100 | |
| 1,906 | |
| 2,006 | |
| 1,203 |
| 1973 |
| 1997 | |
233 Nacogdoches, TX |
|
| — |
|
| 394 |
|
| 7,456 |
|
| 268 |
|
| 394 |
|
| 7,724 |
|
| 8,118 |
|
| 1,687 |
| 1991 |
| 2010 |
| |
| — | |
| 394 | |
| 7,456 | |
| 268 | |
| 394 | |
| 7,724 | |
| 8,118 | |
| 2,270 |
| 1991 |
| 2010 | |
249 Nacogdoches, TX |
|
| — |
|
| 1,015 |
|
| 11,109 |
|
| — |
|
| 1,015 |
|
| 11,109 |
|
| 12,124 |
|
| 2,684 |
| 2007 |
| 2011 |
| |
| — | |
| 1,015 | |
| 11,109 | |
| — | |
| 1,015 | |
| 11,109 | |
| 12,124 | |
| 3,729 |
| 2007 |
| 2011 | |
245 Newberry, SC | | | — | | | 439 | | | 4,639 | | | 608 | | | 439 | | | 5,247 | | | 5,686 | | | 1,902 | | 1995 | | 2011 | | |||||||||||||||||||||||||||||
244 Newberry, SC | | | — | | | 919 | | | 5,454 | | | 131 | | | 919 | | | 5,585 | | | 6,504 | | | 1,796 | | 2001 | | 2011 | | |||||||||||||||||||||||||||||
046 Norwalk, IA |
|
| — |
|
| 47 |
|
| 1,033 |
|
| 239 |
|
| 47 |
|
| 1,272 |
|
| 1,319 |
|
| 826 |
| 1975 |
| 1996 |
| |
| — | |
| 47 | |
| 1,033 | |
| 239 | |
| 47 | |
| 1,272 | |
| 1,319 | |
| 925 |
| 1975 |
| 1996 | |
176 Olathe, KS |
|
| — |
|
| 520 |
|
| 1,872 |
|
| 313 |
|
| 520 |
|
| 2,185 |
|
| 2,705 |
|
| 1,288 |
| 1968 |
| 1999 |
| |
| — | |
| 520 | |
| 1,872 | |
| 313 | |
| 520 | |
| 2,185 | |
| 2,705 | |
| 1,443 |
| 1968 |
| 1999 | |
251 Pasadena, TX |
|
| — |
|
| 1,155 |
|
| 14,345 |
|
| 522 |
|
| 1,155 |
|
| 14,867 |
|
| 16,022 |
|
| 2,115 |
| 2005 |
| 2011 |
| |
| — | |
| 1,155 | |
| 14,345 | |
| 522 | |
| 1,155 | |
| 14,867 | |
| 16,022 | |
| 3,461 |
| 2005 |
| 2011 | |
210 Phoenix, AZ |
|
| — |
|
| 334 |
|
| 3,383 |
|
| 456 |
|
| 334 |
|
| 3,839 |
|
| 4,173 |
|
| 1,686 |
| 1982 |
| 2004 |
| |
| — | |
| 334 | |
| 3,383 | |
| 456 | |
| 334 | |
| 3,839 | |
| 4,173 | |
| 1,923 |
| 1982 |
| 2004 | |
193 Phoenix, AZ |
|
| — |
|
| 300 |
|
| 9,703 |
|
| 92 |
|
| 300 |
|
| 9,795 |
|
| 10,095 |
|
| 5,098 |
| 1985 |
| 2000 |
| |
| — | |
| 300 | |
| 9,703 | |
| 92 | |
| 300 | |
| 9,795 | |
| 10,095 | |
| 5,853 |
| 1985 |
| 2000 | |
047 Polk City, IA |
|
| — |
|
| 63 |
|
| 1,376 |
|
| 153 |
|
| 63 |
|
| 1,529 |
|
| 1,592 |
|
| 967 |
| 1976 |
| 1996 |
| |
| — | |
| 63 | |
| 1,376 | |
| 153 | |
| 63 | |
| 1,529 | |
| 1,592 | |
| 1,085 |
| 1976 |
| 1996 | |
094 Portland, OR |
|
| — |
|
| 100 |
|
| 1,925 |
|
| 2,652 |
|
| 100 |
|
| 4,577 |
|
| 4,677 |
|
| 2,737 |
| 2007 |
| 1997 |
| |
| — | |
| 100 | |
| 1,925 | |
| 3,152 | |
| 100 | |
| 5,077 | |
| 5,177 | |
| 3,414 |
| 2007 |
| 1997 | |
254 Red Oak, TX |
|
| — |
|
| 1,427 |
|
| 17,173 |
|
| — |
|
| 1,427 |
|
| 17,173 |
|
| 18,600 |
|
| 2,448 |
| 2002 |
| 2012 |
| |
| — | |
| 1,427 | |
| 17,173 | |
| — | |
| 1,427 | |
| 17,173 | |
| 18,600 | |
| 3,995 |
| 2002 |
| 2012 | |
124 Richland Hills, TX |
|
| — |
|
| 144 |
|
| 1,656 |
|
| 427 |
|
| 144 |
|
| 2,083 |
|
| 2,227 |
|
| 1,072 |
| 1976 |
| 2001 |
| |
| — | |
| 144 | |
| 1,656 | |
| 427 | |
| 144 | |
| 2,083 | |
| 2,227 | |
| 1,189 |
| 1976 |
| 2001 | |
197 Ripley, TN |
|
| — |
|
| 20 |
|
| 985 |
|
| 1,638 |
|
| 20 |
|
| 2,623 |
|
| 2,643 |
|
| 850 |
| 2014 |
| 2000 |
| |
| — | |
| 20 | |
| 985 | |
| 1,638 | |
| 20 | |
| 2,623 | |
| 2,643 | |
| 1,224 |
| 2014 |
| 2000 | |
8784
LTC PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| capitalized |
| Gross amount at which carried at |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Initial cost to company |
| subsequent |
| December 31, 2016 |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Building and |
| to |
|
|
| Building and |
|
|
|
| Accum |
| Construction/ |
| Acquisition |
| ||||||||||||||||||||||||||||||||||
|
| Encumbrances |
| Land |
| improvements |
| acquisition |
| Land |
| improvements |
| Total(1) |
| deprec. |
| renovation date |
| date |
| |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
| | | | | | | | | | | Costs | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
| | | | | | | | | | | capitalized | | Gross amount at which carried at | | | | | | | | | |||||||||||||||||||||||||||||||||||||
| | | | | Initial cost to company | | subsequent | | December 31, 2019 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||
| | | | | | | | Building and | | to | | | | | Building and | | | | | Accum | | Construction/ | | Acquisition | | |||||||||||||||||||||||||||||||||
| | Encumbrances |
| Land | | improvements | | acquisition | | Land | | improvements | | Total (1) | | deprec. |
| renovation date |
| date |
| |||||||||||||||||||||||||||||||||||||
133 Roswell, NM |
| $ | — |
| $ | 568 |
| $ | 5,235 |
| $ | 1,396 |
| $ | 568 |
| $ | 6,631 |
| $ | 7,199 |
| $ | 2,310 |
| 1975 |
| 2001 |
|
| $ | — |
| $ | 568 |
| $ | 5,235 |
| $ | 1,396 |
| $ | 568 |
| $ | 6,631 |
| $ | 7,199 |
| $ | 2,981 | | 1975 | | 2001 | |
081 Sacramento, CA |
|
| — |
|
| 220 |
|
| 2,929 |
|
| 1,481 |
|
| 220 |
|
| 4,410 |
|
| 4,630 |
|
| 1,960 |
| 2015 |
| 1997 |
| | | — |
| | 220 | | | 2,929 | | | 1,481 | | | 220 | | | 4,410 | | | 4,630 | | | 2,510 | | 2015 | | 1997 | |
085 Salina, KS |
|
| — |
|
| 100 |
|
| 1,153 |
|
| 628 |
|
| 100 |
|
| 1,781 |
|
| 1,881 |
|
| 1,114 |
| 1985 |
| 1997 |
| | | — | | | 100 | | | 1,153 | | | 628 | | | 100 | | | 1,781 | | | 1,881 | | | 1,244 | | 1985 | | 1997 | |
281 Slinger, WI |
|
| — |
|
| 464 |
|
| 13,482 |
|
| — |
|
| 464 |
|
| 13,482 |
|
| 13,946 |
|
| 976 |
| 2014 |
| 2015 |
| | | — | | | 464 | | | 13,482 | | | — | | | 464 | | | 13,482 | | | 13,946 | | | 2,572 | | 2014 | | 2015 | |
234 St. Petersburg, FL |
|
| — |
|
| 1,070 |
|
| 7,930 |
|
| 500 |
|
| 1,070 |
|
| 8,430 |
|
| 9,500 |
|
| 1,671 |
| 1988 |
| 2010 |
| | | — |
| | 1,070 | | | 7,930 | | | 500 | | | 1,070 | | | 8,430 | | | 9,500 | | | 2,286 | | 1988 | | 2010 | |
243 Stephenville, TX |
|
| — |
|
| 670 |
|
| 10,117 |
|
| 500 |
|
| 670 |
|
| 10,617 |
|
| 11,287 |
|
| 2,032 |
| 2009 |
| 2010 |
| | | — | | | 670 | | | 10,117 | | | 500 | | | 670 | | | 10,617 | | | 11,287 | | | 2,923 | | 2009 | | 2010 | |
225 Tacoma, WA |
|
| — |
|
| 723 |
|
| 6,401 |
|
| 901 |
|
| 723 |
|
| 7,302 |
|
| 8,025 |
|
| 2,717 |
| 2009 |
| 2006 |
| | | — |
| | 723 | | | 6,401 | | | 901 | | | 723 | | | 7,302 | | | 8,025 | | | 3,294 | | 2009 | | 2006 | |
178 Tappahannock, VA |
|
| — |
|
| 375 |
|
| 1,327 |
|
| 397 |
|
| 375 |
|
| 1,724 |
|
| 2,099 |
|
| 1,438 |
| 1978 |
| 1995 |
| | | — | | | 375 | | | 1,327 | | | 397 | | | 375 | | | 1,724 | | | 2,099 | | | 1,507 | | 1978 | | 1995 | |
270 Trinity, FL |
|
| — |
|
| 1,653 |
|
| 12,748 |
|
| — |
|
| 1,653 |
|
| 12,748 |
|
| 14,401 |
|
| 1,306 |
| 2008 |
| 2013 |
| | | — |
| | 1,653 | | | 12,748 | | | — | | | 1,653 | | | 12,748 | | | 14,401 | | | 2,544 | | 2008 | | 2013 | |
192 Tucson, AZ |
|
| — |
|
| 276 |
|
| 8,924 |
|
| 112 |
|
| 276 |
|
| 9,036 |
|
| 9,312 |
|
| 4,697 |
| 1992 |
| 2000 |
| | | — |
| | 276 | | | 8,924 | | | 112 | | | 276 | | | 9,036 | | | 9,312 | | | 5,394 | | 1992 | | 2000 | |
305 Union, KY | | | — | | | 858 | | | 24,116 | | | — | | | 858 | | | 24,116 | | | 24,974 | | | 743 | | 2019 | | 2016 | | |||||||||||||||||||||||||||||
299 Weatherford, TX |
|
| — |
|
| 836 |
|
| 11,902 |
|
| — |
|
| 836 |
|
| 11,902 |
|
| 12,738 |
|
| 606 |
| 1996 |
| 2015 |
| | | — | | | 836 | | | 11,902 | | | — | | | 836 | | | 11,902 | | | 12,738 | | | 2,285 | | 1996 | | 2015 | |
236 Wytheville, VA | | | — | | | 647 | | | 12,167 | | | — | | | 647 | | | 12,167 | | | 12,814 | | | 4,618 | | 1996 | | 2010 | | |||||||||||||||||||||||||||||
Skilled Nursing Properties |
|
| — |
|
| 48,196 |
|
| 441,762 |
|
| 45,828 |
|
| 48,196 |
|
| 487,590 |
|
| 535,786 |
|
| 133,250 |
|
|
|
|
| | $ | — |
| $ | 50,063 | | $ | 499,692 | | $ | 46,615 | | $ | 50,063 | | $ | 546,307 | | $ | 596,370 | | $ | 183,391 | | | | | |
Assisted Living Properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
317 Abington, VA | | | — | | | 541 | | | 16,355 | | | — | | | 541 | | | 16,355 | | | 16,896 | | | 390 | | 2015 | | 2019 | | |||||||||||||||||||||||||||||
077 Ada, OK |
|
| — |
|
| 100 |
|
| 1,650 |
|
| — |
|
| 100 |
|
| 1,650 |
|
| 1,750 |
|
| 845 |
| 1996 |
| 1996 |
| | | — |
| | 100 | | | 1,650 | | | — | | | 100 | | | 1,650 | | | 1,750 | | | 966 | | 1996 | | 1996 | |
136 Arlington, OH |
|
| — |
|
| 629 |
|
| 6,973 |
|
| — |
|
| 629 |
|
| 6,973 |
|
| 7,602 |
|
| 2,695 |
| 1993 |
| 2001 |
| |||||||||||||||||||||||||||||
105 Arvada, CO |
|
| — |
|
| 100 |
|
| 2,810 |
|
| 6,960 |
|
| 100 |
|
| 9,770 |
|
| 9,870 |
|
| 2,226 |
| 2014 |
| 1997 |
| | | — |
| | 100 | | | 2,810 | | | 6,960 | | | 100 | | | 9,770 | | | 9,870 | | | 3,262 | | 2014 | | 1997 | |
304 Athens, GA |
|
| — |
|
| 1,056 |
|
| 13,326 |
|
| ��— |
|
| 1,056 |
|
| 13,326 |
|
| 14,382 |
|
| 214 |
| 2016 |
| 2016 |
| | | — | | | 1,056 | | | 13,326 | | | — | | | 1,056 | | | 13,326 | | | 14,382 | | | 1,314 | | 2016 | | 2016 | |
063 Athens, TX |
|
| — |
|
| 96 |
|
| 1,510 |
|
| 66 |
|
| 96 |
|
| 1,576 |
|
| 1,672 |
|
| 824 |
| 1995 |
| 1996 |
| | | — |
| | 96 | | | 1,510 | | | 104 | | | 96 | | | 1,614 | | | 1,710 | | | 982 | | 1995 | | 1996 | |
320 Auburn Hills, MI | | | — | | | 1,964 | | | 4,569 | | | — | | | 1,964 | | | 4,569 | | | 6,533 | | | — | | 1995 | | 2019 | | |||||||||||||||||||||||||||||
269 Aurora, CO |
|
| — |
|
| 850 |
|
| 8,583 |
|
| — |
|
| 850 |
|
| 8,583 |
|
| 9,433 |
|
| 783 |
| 2014 |
| 2013 |
| | | — |
| | 850 | | | 8,583 | | | — | | | 850 | | | 8,583 | | | 9,433 | | | 1,917 | | 2014 | | 2013 | |
260 Aurora, CO |
|
| — |
|
| 831 |
|
| 10,071 |
|
| — |
|
| 831 |
|
| 10,071 |
|
| 10,902 |
|
| 1,213 |
| 1999 |
| 2012 |
| | | — |
| | 831 | | | 10,071 | | | — | | | 831 | | | 10,071 | | | 10,902 | | | 2,122 | | 1999 | | 2012 | |
203 Bakersfield, CA |
|
| — |
|
| 834 |
|
| 11,986 |
|
| 812 |
|
| 834 |
|
| 12,798 |
|
| 13,632 |
|
| 5,497 |
| 2002 |
| 2001 |
| | | — |
| | 834 | | | 11,986 | | | 1,039 | | | 834 | | | 13,025 | | | 13,859 | | | 6,428 | | 2002 | | 2001 | |
117 Beatrice, NE |
|
| — |
|
| 100 |
|
| 2,173 |
|
| 140 |
|
| 100 |
|
| 2,313 |
|
| 2,413 |
|
| 1,075 |
| 1997 |
| 1997 |
| | | — |
| | 100 | | | 2,173 | | | 231 | | | 100 | | | 2,404 | | | 2,504 | | | 1,287 | | 1997 | | 1997 | |
137 Bexley, OH |
|
| — |
|
| 306 |
|
| 4,196 |
|
| — |
|
| 306 |
|
| 4,196 |
|
| 4,502 |
|
| 1,623 |
| 1992 |
| 2001 |
| |||||||||||||||||||||||||||||
277 Burr Ridge, IL |
|
| — |
|
| 1,400 |
|
| 11,102 |
|
| — |
|
| 1,400 |
|
| 11,102 |
|
| 12,502 |
|
| 353 |
| 2016 |
| 2014 |
| | | — | | | 1,400 | | | 11,102 | | | — | | | 1,400 | | | 11,102 | | | 12,502 | | | 1,668 | | 2016 | | 2014 | |
278 Castle Rock, CO |
|
| — |
|
| 759 |
|
| 9,041 |
|
| — |
|
| 759 |
|
| 9,041 |
|
| 9,800 |
|
| 420 |
| 2012 |
| 2014 |
| | | — | | | 759 | | | 9,041 | | | — | | | 759 | | | 9,041 | | | 9,800 | | | 1,032 | | 2012 | | 2014 | |
311 Cedarburg, WI | | | — | | | 924 | | | 21,075 | | | — | | | 924 | | | 21,075 | | | 21,999 | | | 629 | | 2019 | | 2017 | | |||||||||||||||||||||||||||||
160 Central, SC |
|
| — |
|
| 100 |
|
| 2,321 |
|
| — |
|
| 100 |
|
| 2,321 |
|
| 2,421 |
|
| 949 |
| 1998 |
| 1999 |
| | | — |
| | 100 | | | 2,321 | | | — | | | 100 | | | 2,321 | | | 2,421 | | | 1,101 | | 1998 | | 1999 | |
263 Chatham, NJ |
|
| — |
|
| 5,365 |
|
| 36,399 |
|
| — |
|
| 5,365 |
|
| 36,399 |
|
| 41,764 |
|
| 4,198 |
| 2002 |
| 2012 |
| | | — |
| | 5,365 | | | 36,399 | | | — | | | 5,365 | | | 36,399 | | | 41,764 | | | 7,347 | | 2002 | | 2012 | |
307 Clovis, CA | | | — | | | 2,542 | | | 19,126 | | | — | | | 2,542 | | | 19,126 | | | 21,668 | | | 1,374 | | 2014 | | 2017 | | |||||||||||||||||||||||||||||
308 Clovis, CA | | | — | | | 3,054 | | | 14,172 | | | — | | | 3,054 | | | 14,172 | | | 17,226 | | | 979 | | 2016 | | 2017 | | |||||||||||||||||||||||||||||
279 Corpus Christi, TX |
|
| — |
|
| 880 |
|
| 11,369 |
|
| — |
|
| 880 |
|
| 11,369 |
|
| 12,249 |
|
| 267 |
| 2016 |
| 2015 |
| | | — | | | 880 | | | 11,440 | | | 147 | | | 880 | | | 11,587 | | | 12,467 | | | 1,619 | | 2016 | | 2015 | |
292 De Forest, WI |
|
| — |
|
| 485 |
|
| 5,568 |
|
| 4 |
|
| 485 |
|
| 5,572 |
|
| 6,057 |
|
| 241 |
| 2006 |
| 2015 |
| | | — | | | 485 | | | 5,568 | | | 43 | | | 485 | | | 5,611 | | | 6,096 | | | 744 | | 2006 | | 2015 | |
156 Denison, IA |
|
| — |
|
| 100 |
|
| 2,713 |
|
| 207 |
|
| 100 |
|
| 2,920 |
|
| 3,020 |
|
| 1,285 |
| 1998 |
| 1998 |
| |||||||||||||||||||||||||||||
057 Dodge City, KS |
|
| — |
|
| 84 |
|
| 1,666 |
|
| 4 |
|
| 84 |
|
| 1,670 |
|
| 1,754 |
|
| 914 |
| 1995 |
| 1995 |
| | | — |
| | 84 | | | 1,666 | | | 4 | | | 84 | | | 1,670 | | | 1,754 | | | 1,034 | | 1995 | | 1995 | |
083 Durant, OK |
|
| — |
|
| 100 |
|
| 1,769 |
|
| — |
|
| 100 |
|
| 1,769 |
|
| 1,869 |
|
| 890 |
| 1997 |
| 1997 |
| | | — |
| | 100 | | | 1,769 | | | — | | | 100 | | | 1,769 | | | 1,869 | | | 1,020 | | 1997 | | 1997 | |
107 Edmond, OK |
|
| — |
|
| 100 |
|
| 1,365 |
|
| 526 |
|
| 100 |
|
| 1,891 |
|
| 1,991 |
|
| 931 |
| 1996 |
| 1997 |
| | | — |
| | 100 | | | 1,365 | | | 526 | | | 100 | | | 1,891 | | | 1,991 | | | 1,071 | | 1996 | | 1997 | |
122 Elkhart, IN |
|
| — |
|
| 100 |
|
| 2,435 |
|
| 41 |
|
| 100 |
|
| 2,476 |
|
| 2,576 |
|
| 1,183 |
| 1997 |
| 1997 |
| |||||||||||||||||||||||||||||
155 Erie, PA |
|
| — |
|
| 850 |
|
| 7,477 |
|
| — |
|
| 850 |
|
| 7,477 |
|
| 8,327 |
|
| 3,530 |
| 1998 |
| 1999 |
| |||||||||||||||||||||||||||||
163 Ft. Collins, CO |
|
| — |
|
| 100 |
|
| 2,961 |
|
| 3,405 |
|
| 100 |
|
| 6,366 |
|
| 6,466 |
|
| 1,734 |
| 2014 |
| 1999 |
| | | — |
| | 100 | | | 2,961 | | | 3,405 | | | 100 | | | 6,366 | | | 6,466 | | | 2,510 | | 2014 | | 1999 | |
170 Ft. Collins, CO |
|
| — |
|
| 100 |
|
| 3,400 |
|
| 4,622 |
|
| 100 |
|
| 8,022 |
|
| 8,122 |
|
| 1,931 |
| 2014 |
| 1999 |
| | | — |
| | 100 | | | 3,400 | | | 4,622 | | | 100 | | | 8,022 | | | 8,122 | | | 2,797 | | 2014 | | 1999 | |
132 Ft. Meyers, FL |
|
| — |
|
| 100 |
|
| 2,728 |
|
| 9 |
|
| 100 |
|
| 2,737 |
|
| 2,837 |
|
| 1,305 |
| 1998 |
| 1998 |
| | | — |
| | 100 | | | 2,728 | | | 9 | | | 100 | | | 2,737 | | | 2,837 | | | 1,507 | | 1998 | | 1998 | |
230 Ft. Wayne, IN |
|
| — |
|
| 594 |
|
| 3,461 |
|
| 731 |
|
| 594 |
|
| 4,192 |
|
| 4,786 |
|
| 1,110 |
| 1996 |
| 2009 |
| |||||||||||||||||||||||||||||
229 Ft. Worth, TX |
|
| — |
|
| 333 |
|
| 4,385 |
|
| 1,028 |
|
| 333 |
|
| 5,413 |
|
| 5,746 |
|
| 1,797 |
| 2009 |
| 2008 |
| |||||||||||||||||||||||||||||
315 Ft. Worth, TX | | | — | | | 1,534 | | | 11,099 | | | — | | | 1,534 | | | 11,099 | | | 12,633 | | | 474 | | 2014 | | 2018 | | |||||||||||||||||||||||||||||
100 Fremont ,OH |
|
| — |
|
| 100 |
|
| 2,435 |
|
| 69 |
|
| 100 |
|
| 2,504 |
|
| 2,604 |
|
| 1,213 |
| 1997 |
| 1997 |
| | | — |
| | 100 | | | 2,435 | | | 115 | | | 100 | | | 2,550 | | | 2,650 | | | 1,442 | | 1997 | | 1997 | |
267 Frisco, TX |
|
| — |
|
| 1,000 |
|
| 5,154 |
|
| — |
|
| 1,000 |
|
| 5,154 |
|
| 6,154 |
|
| 516 |
| 2014 |
| 2012 |
| | | — |
| | 1,000 | | | 5,154 | | | — | | | 1,000 | | | 5,154 | | | 6,154 | | | 1,189 | | 2014 | | 2012 | |
314 Frisco, TX | | | — | | | 2,216 | | | 10,417 | | | — | | | 2,216 | | | 10,417 | | | 12,633 | | | 456 | | 2015 | | 2018 | | |||||||||||||||||||||||||||||
296 Glenview, IL | | | | | | 2,800 | | | 14,248 | | | — | | | 2,800 | | | 14,248 | | | 17,048 | | | 1,120 | | 2017 | | 2015 | | |||||||||||||||||||||||||||||
167 Goldsboro, NC |
|
| — |
|
| 100 |
|
| 2,385 |
|
| 1 |
|
| 100 |
|
| 2,386 |
|
| 2,486 |
|
| 908 |
| 1998 |
| 1999 |
| | | — |
| | 100 | | | 2,385 | | | 1 | | | 100 | | | 2,386 | | | 2,486 | | | 1,055 | | 1998 | | 1999 | |
056 Great Bend, KS |
|
| — |
|
| 80 |
|
| 1,570 |
|
| 21 |
|
| 80 |
|
| 1,591 |
|
| 1,671 |
|
| 962 |
| 1995 |
| 1995 |
| | | — |
| | 80 | | | 1,570 | | | 21 | | | 80 | | | 1,591 | | | 1,671 | | | 1,097 | | 1995 | | 1995 | |
102 Greeley, CO |
|
| — |
|
| 100 |
|
| 2,310 |
|
| 270 |
|
| 100 |
|
| 2,580 |
|
| 2,680 |
|
| 1,268 |
| 1997 |
| 1997 |
| | | — |
| | 100 | | | 2,310 | | | 270 | | | 100 | | | 2,580 | | | 2,680 | | | 1,459 | | 1997 | | 1997 | |
284 Green Bay, WI |
|
| — |
|
| 1,660 |
|
| 19,079 |
|
| 56 |
|
| 1,660 |
|
| 19,135 |
|
| 20,795 |
|
| 878 |
| 2004 |
| 2015 |
| | | — | | | 1,660 | | | 19,079 | | | 402 | | | 1,660 | | | 19,481 | | | 21,141 | | | 2,617 | | 2004 | | 2015 | |
164 Greenville, NC |
|
| — |
|
| 100 |
|
| 2,478 |
|
| 2 |
|
| 100 |
|
| 2,480 |
|
| 2,580 |
|
| 1,061 |
| 1998 |
| 1999 |
| | | — |
| | 100 | | | 2,478 | | | 2 | | | 100 | | | 2,480 | | | 2,580 | | | 1,231 | | 1998 | | 1999 | |
062 Greenville, TX |
|
| — |
|
| 42 |
|
| 1,565 |
|
| 47 |
|
| 42 |
|
| 1,612 |
|
| 1,654 |
|
| 849 |
| 1995 |
| 1996 |
| | | — |
| | 42 | | | 1,565 | | | 84 | | | 42 | | | 1,649 | | | 1,691 | | | 996 | | 1995 | | 1996 | |
161 Greenwood, SC |
|
| — |
|
| 100 |
|
| 2,638 |
|
| — |
|
| 100 |
|
| 2,638 |
|
| 2,738 |
|
| 1,154 |
| 1998 |
| 1999 |
| | | — |
| | 100 | | | 2,638 | | | — | | | 100 | | | 2,638 | | | 2,738 | | | 1,339 | | 1998 | | 1999 | |
241 Gulf Breeze, FL |
|
| — |
|
| 720 |
|
| 3,780 |
|
| 261 |
|
| 720 |
|
| 4,041 |
|
| 4,761 |
|
| 815 |
| 2000 |
| 2010 |
| | | — |
| | 720 | | | 3,780 | | | 261 | | | 720 | | | 4,041 | | | 4,761 | | | 1,223 | | 2000 | | 2010 | |
295 Jacksonville, FL |
|
| — |
|
| 1,389 |
|
| 12,756 |
|
| — |
|
| 1,389 |
|
| 12,756 |
|
| 14,145 |
|
| 422 |
| 2015 |
| 2015 |
| | | — | | | 1,389 | | | 12,756 | | | 56 | | | 1,389 | | | 12,812 | | | 14,201 | | | 1,444 | | 2015 | | 2015 | |
066 Jacksonville, TX |
|
| — |
|
| 100 |
|
| 1,900 |
|
| 31 |
|
| 100 |
|
| 1,931 |
|
| 2,031 |
|
| 1,020 |
| 1996 |
| 1996 |
| | | — |
| | 100 | | | 1,900 | | | 77 | | | 100 | | | 1,977 | | | 2,077 | | | 1,195 | | 1996 | | 1996 | |
310 Kansas City, MO | | | | | | 1,072 | | | 15,552 | | | — | | | 1,072 | | | 15,552 | | | 16,624 | | | 839 | | 2017 | | 2017 | | |||||||||||||||||||||||||||||
285 Kenosha, WI |
|
| — |
|
| 936 |
|
| 12,361 |
|
| 70 |
|
| 936 |
|
| 12,431 |
|
| 13,367 |
|
| 456 |
| 2008 |
| 2015 |
| | | — | | | 936 | | | 12,361 | | | 240 | | | 936 | | | 12,601 | | | 13,537 | | | 1,515 | | 2008 | | 2015 | |
255 Littleton, CO |
|
| — |
|
| 1,882 |
|
| 8,248 |
|
| — |
|
| 1,882 |
|
| 8,248 |
|
| 10,130 |
|
| 1,024 |
| 2013 |
| 2012 |
| | | — | | | 1,882 | | | 8,248 | | | — | | | 1,882 | | | 8,248 | | | 10,130 | | | 1,718 | | 2013 | | 2012 | |
268 Littleton, CO |
|
| — |
|
| 1,200 |
|
| 8,688 |
|
| — |
|
| 1,200 |
|
| 8,688 |
|
| 9,888 |
|
| 921 |
| 2014 |
| 2013 |
| | | — | | | 1,200 | | | 8,688 | | | — | | | 1,200 | | | 8,688 | | | 9,888 | | | 2,007 | | 2014 | | 2013 | |
148 Longmont, CO |
|
| — |
|
| 100 |
|
| 2,640 |
|
| — |
|
| 100 |
|
| 2,640 |
|
| 2,740 |
|
| 1,248 |
| 1998 |
| 1998 |
| | | — | | | 100 | | | 2,640 | | | — | | | 100 | | | 2,640 | | | 2,740 | | | 1,443 | | 1998 | | 1998 | |
060 Longview, TX |
|
| — |
|
| 38 |
|
| 1,568 |
|
| 93 |
|
| 38 |
|
| 1,661 |
|
| 1,699 |
|
| 866 |
| 1995 |
| 1995 |
| | | — | | | 38 | | | 1,568 | | | 127 | | | 38 | | | 1,695 | | | 1,733 | | | 1,034 | | 1995 | | 1995 | |
261 Louisville, CO |
|
| — |
|
| 911 |
|
| 11,703 |
|
| — |
|
| 911 |
|
| 11,703 |
|
| 12,614 |
|
| 1,379 |
| 2000 |
| 2012 |
| | | — | | | 911 | | | 11,703 | | | — | | | 911 | | | 11,703 | | | 12,614 | | | 2,414 | | 2000 | | 2012 | |
301 Louisville, KY |
|
| — |
|
| 1,021 |
|
| 13,157 |
|
| — |
|
| 1,021 |
|
| 13,157 |
|
| 14,178 |
|
| 235 |
| 2016 |
| 2016 |
| |||||||||||||||||||||||||||||
114 Loveland, CO |
|
| — |
|
| 100 |
|
| 2,865 |
|
| 270 |
|
| 100 |
|
| 3,135 |
|
| 3,235 |
|
| 1,526 |
| 1997 |
| 1997 |
| |||||||||||||||||||||||||||||
068 Lufkin, TX |
|
| — |
|
| 100 |
|
| 1,950 |
|
| 58 |
|
| 100 |
|
| 2,008 |
|
| 2,108 |
|
| 1,043 |
| 1996 |
| 1996 |
|
8885
LTC PROPERTIES, INC.
SCHEDULE III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| capitalized |
| Gross amount at which carried at |
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
| Initial cost to company |
| subsequent |
| December 31, 2016 |
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
| Building and |
| to |
|
|
|
| Building and |
|
|
|
| Accum |
| Construction/ |
| Acquisition |
| |||
|
| Encumbrances |
| Land |
|
| improvements |
| acquisition |
| Land |
| improvements |
| Total(1) |
| deprec. |
| renovation date |
| date |
| |||||||
119 Madison, IN |
|
| — |
|
| 100 |
|
| 2,435 |
|
| 207 |
|
| 100 |
|
| 2,642 |
|
| 2,742 |
|
| 1,204 |
| 1997 |
| 1997 |
|
061 Marshall, TX |
|
| — |
|
| 38 |
|
| 1,568 |
|
| 503 |
|
| 38 |
|
| 2,071 |
|
| 2,109 |
|
| 1,108 |
| 1995 |
| 1995 |
|
293 McHenry, IL |
|
| — |
|
| 1,289 |
|
| 28,976 |
|
| 45 |
|
| 1,289 |
|
| 29,021 |
|
| 30,310 |
|
| 1,200 |
| 2005 |
| 2015 |
|
058 McPherson, KS |
|
| — |
|
| 79 |
|
| 1,571 |
|
| 4 |
|
| 79 |
|
| 1,575 |
|
| 1,654 |
|
| 952 |
| 1994 |
| 1995 |
|
239 Merritt Island, FL |
|
| — |
|
| 550 |
|
| 8,150 |
|
| 100 |
|
| 550 |
|
| 8,250 |
|
| 8,800 |
|
| 1,604 |
| 2004 |
| 2010 |
|
104 Millville, NJ |
|
| — |
|
| 100 |
|
| 2,825 |
|
| 645 |
|
| 100 |
|
| 3,470 |
|
| 3,570 |
|
| 1,407 |
| 1997 |
| 1997 |
|
286 Milwaukee, WI |
|
| — |
|
| 818 |
|
| 8,014 |
|
| 25 |
|
| 818 |
|
| 8,039 |
|
| 8,857 |
|
| 346 |
| 2007 |
| 2015 |
|
231 Monroeville, PA |
|
| — |
|
| 526 |
|
| 5,334 |
|
| 435 |
|
| 526 |
|
| 5,769 |
|
| 6,295 |
|
| 1,352 |
| 1997 |
| 2009 |
|
280 Murrells Inlet, SC |
|
| — |
|
| 2,490 |
|
| 13,000 |
|
| — |
|
| 2,490 |
|
| 13,000 |
|
| 15,490 |
|
| 122 |
| 2016 |
| 2015 |
|
294 Murrieta, CA |
|
| — |
|
| 2,022 |
|
| 10,666 |
|
| — |
|
| 2,022 |
|
| 10,666 |
|
| 12,688 |
|
| 124 |
| 2016 |
| 2015 |
|
289 Neenah, WI |
|
| — |
|
| 694 |
|
| 20,839 |
|
| 115 |
|
| 694 |
|
| 20,954 |
|
| 21,648 |
|
| 840 |
| 1991 |
| 2015 |
|
166 New Bern, NC |
|
| — |
|
| 100 |
|
| 2,427 |
|
| 1 |
|
| 100 |
|
| 2,428 |
|
| 2,528 |
|
| 943 |
| 1998 |
| 1999 |
|
118 Newark, OH |
|
| — |
|
| 100 |
|
| 2,435 |
|
| 182 |
|
| 100 |
|
| 2,617 |
|
| 2,717 |
|
| 1,197 |
| 1997 |
| 1997 |
|
074 Newport, OR |
|
| — |
|
| 621 |
|
| 2,050 |
|
| — |
|
| 621 |
|
| 2,050 |
|
| 2,671 |
|
| 1,290 |
| 1996 |
| 1996 |
|
143 Niceville, FL |
|
| — |
|
| 100 |
|
| 2,680 |
|
| — |
|
| 100 |
|
| 2,680 |
|
| 2,780 |
|
| 1,267 |
| 1998 |
| 1998 |
|
095 Norfolk, NE |
|
| — |
|
| 100 |
|
| 2,123 |
|
| 33 |
|
| 100 |
|
| 2,156 |
|
| 2,256 |
|
| 1,061 |
| 1997 |
| 1997 |
|
290 Oshkosh, WI |
|
| — |
|
| 1,525 |
|
| 9,192 |
|
| 34 |
|
| 1,525 |
|
| 9,226 |
|
| 10,751 |
|
| 768 |
| 2009 |
| 2015 |
|
291 Oshkosh, WI |
|
| — |
|
| 475 |
|
| 7,364 |
|
| 39 |
|
| 475 |
|
| 7,403 |
|
| 7,878 |
|
| 310 |
| 2005 |
| 2015 |
|
302 Overland Park, KS |
|
| — |
|
| 2,297 |
|
| 11,882 |
|
| — |
|
| 2,297 |
|
| 11,882 |
|
| 14,179 |
|
| 220 |
| 2013 |
| 2016 |
|
232 Pittsburgh, PA |
|
| — |
|
| 470 |
|
| 2,615 |
|
| 333 |
|
| 470 |
|
| 2,948 |
|
| 3,418 |
|
| 763 |
| 1994 |
| 2009 |
|
165 Rocky Mount, NC |
|
| — |
|
| 100 |
|
| 2,494 |
|
| 1 |
|
| 100 |
|
| 2,495 |
|
| 2,595 |
|
| 997 |
| 1998 |
| 1999 |
|
141 Rocky River, OH |
|
| — |
|
| 760 |
|
| 6,963 |
|
| — |
|
| 760 |
|
| 6,963 |
|
| 7,723 |
|
| 3,242 |
| 1998 |
| 1999 |
|
059 Salina, KS |
|
| — |
|
| 79 |
|
| 1,571 |
|
| 4 |
|
| 79 |
|
| 1,575 |
|
| 1,654 |
|
| 952 |
| 1994 |
| 1995 |
|
084 San Antonio, TX |
|
| — |
|
| 100 |
|
| 1,900 |
|
| — |
|
| 100 |
|
| 1,900 |
|
| 2,000 |
|
| 955 |
| 1997 |
| 1997 |
|
092 San Antonio, TX |
|
| — |
|
| 100 |
|
| 2,055 |
|
| — |
|
| 100 |
|
| 2,055 |
|
| 2,155 |
|
| 1,027 |
| 1997 |
| 1997 |
|
288 Sheboygan, WI |
|
| — |
|
| 1,168 |
|
| 5,382 |
|
| — |
|
| 1,168 |
|
| 5,382 |
|
| 6,550 |
|
| 258 |
| 2006 |
| 2015 |
|
149 Shelby, NC |
|
| — |
|
| 100 |
|
| 2,805 |
|
| 2 |
|
| 100 |
|
| 2,807 |
|
| 2,907 |
|
| 1,326 |
| 1998 |
| 1998 |
|
150 Spring Hill, FL |
|
| — |
|
| 100 |
|
| 2,650 |
|
| — |
|
| 100 |
|
| 2,650 |
|
| 2,750 |
|
| 1,253 |
| 1998 |
| 1998 |
|
103 Springfield, OH |
|
| — |
|
| 100 |
|
| 2,035 |
|
| 270 |
|
| 100 |
|
| 2,305 |
|
| 2,405 |
|
| 1,131 |
| 1997 |
| 1997 |
|
162 Sumter, SC |
|
| — |
|
| 100 |
|
| 2,351 |
|
| — |
|
| 100 |
|
| 2,351 |
|
| 2,451 |
|
| 986 |
| 1998 |
| 1999 |
|
140 Tallahassee, FL |
|
| — |
|
| 100 |
|
| 3,075 |
|
| — |
|
| 100 |
|
| 3,075 |
|
| 3,175 |
|
| 1,457 |
| 1998 |
| 1998 |
|
098 Tiffin, OH |
|
| — |
|
| 100 |
|
| 2,435 |
|
| 43 |
|
| 100 |
|
| 2,478 |
|
| 2,578 |
|
| 1,207 |
| 1997 |
| 1997 |
|
282 Tinley Park, IL |
|
| — |
|
| 702 |
|
| 11,481 |
|
| — |
|
| 702 |
|
| 11,481 |
|
| 12,183 |
|
| 210 |
| 2016 |
| 2015 |
|
088 Troy, OH |
|
| — |
|
| 100 |
|
| 2,435 |
|
| 541 |
|
| 100 |
|
| 2,976 |
|
| 3,076 |
|
| 1,371 |
| 1997 |
| 1997 |
|
080 Tulsa, OK |
|
| — |
|
| 200 |
|
| 1,650 |
|
| — |
|
| 200 |
|
| 1,650 |
|
| 1,850 |
|
| 839 |
| 1997 |
| 1997 |
|
093 Tulsa, OK |
|
| — |
|
| 100 |
|
| 2,395 |
|
| — |
|
| 100 |
|
| 2,395 |
|
| 2,495 |
|
| 1,193 |
| 1997 |
| 1997 |
|
238 Tupelo, MS |
|
| — |
|
| 1,170 |
|
| 8,230 |
|
| 30 |
|
| 1,170 |
|
| 8,260 |
|
| 9,430 |
|
| 1,699 |
| 2000 |
| 2010 |
|
075 Tyler, TX |
|
| — |
|
| 100 |
|
| 1,800 |
|
| — |
|
| 100 |
|
| 1,800 |
|
| 1,900 |
|
| 920 |
| 1996 |
| 1996 |
|
202 Vacaville, CA |
|
| — |
|
| 1,662 |
|
| 11,634 |
|
| 1,141 |
|
| 1,662 |
|
| 12,775 |
|
| 14,437 |
|
| 5,441 |
| 2002 |
| 2001 |
|
091 Waco, TX |
|
| — |
|
| 100 |
|
| 2,235 |
|
| — |
|
| 100 |
|
| 2,235 |
|
| 2,335 |
|
| 1,115 |
| 1997 |
| 1997 |
|
096 Wahoo, NE |
|
| — |
|
| 100 |
|
| 2,318 |
|
| 50 |
|
| 100 |
|
| 2,368 |
|
| 2,468 |
|
| 1,153 |
| 1997 |
| 1997 |
|
108 Watauga, TX |
|
| — |
|
| 100 |
|
| 1,668 |
|
| — |
|
| 100 |
|
| 1,668 |
|
| 1,768 |
|
| 827 |
| 1996 |
| 1997 |
|
287 Waukesha, WI |
|
| — |
|
| 992 |
|
| 15,183 |
|
| 111 |
|
| 992 |
|
| 15,294 |
|
| 16,286 |
|
| 561 |
| 2009 |
| 2015 |
|
109 Weatherford, OK |
|
| — |
|
| 100 |
|
| 1,669 |
|
| 592 |
|
| 100 |
|
| 2,261 |
|
| 2,361 |
|
| 1,110 |
| 1996 |
| 1997 |
|
276 Westminster, CO |
|
| — |
|
| 1,425 |
|
| 9,575 |
|
| — |
|
| 1,425 |
|
| 9,575 |
|
| 11,000 |
|
| 707 |
| 2015 |
| 2013 |
|
110 Wheelersburg, OH |
|
| — |
|
| 29 |
|
| 2,435 |
|
| 123 |
|
| 29 |
|
| 2,558 |
|
| 2,587 |
|
| 1,197 |
| 1997 |
| 1997 |
|
303 Wichita, KS |
|
| — |
|
| 1,422 |
|
| 9,957 |
|
| — |
|
| 1,422 |
|
| 9,957 |
|
| 11,379 |
|
| 188 |
| 2011 |
| 2016 |
|
259 Wichita, KS |
|
| — |
|
| 730 |
|
| — |
|
| 9,682 |
|
| 730 |
|
| 9,682 |
|
| 10,412 |
|
| 1,278 |
| 2013 |
| 2012 |
|
283 Wichita, KS |
|
| — |
|
| 624 |
|
| 13,131 |
|
| — |
|
| 624 |
|
| 13,131 |
|
| 13,755 |
|
| 29 |
| 2016 |
| 2015 |
|
076 Wichita Falls, TX |
|
| — |
|
| 100 |
|
| 1,850 |
|
| — |
|
| 100 |
|
| 1,850 |
|
| 1,950 |
|
| 945 |
| 1996 |
| 1996 |
|
120 Wichita Falls, TX |
|
| — |
|
| 100 |
|
| 2,750 |
|
| 100 |
|
| 100 |
|
| 2,850 |
|
| 2,950 |
|
| 1,364 |
| 1997 |
| 1997 |
|
265 Williamstown, NJ |
|
| — |
|
| 711 |
|
| 6,637 |
|
| — |
|
| 711 |
|
| 6,637 |
|
| 7,348 |
|
| 858 |
| 2000 |
| 2012 |
|
264 Williamstown, NJ |
|
| — |
|
| 711 |
|
| 8,649 |
|
| — |
|
| 711 |
|
| 8,649 |
|
| 9,360 |
|
| 1,011 |
| 2000 |
| 2012 |
|
138 Worthington, OH |
|
| — |
|
| — |
|
| 6,102 |
|
| — |
|
| — |
|
| 6,102 |
|
| 6,102 |
|
| 5,732 |
| 1993 |
| 2001 |
|
139 Worthington, OH |
|
| — |
|
| — |
|
| 3,402 |
|
| — |
|
| — |
|
| 3,402 |
|
| 3,402 |
|
| 3,201 |
| 1995 |
| 2001 |
|
099 York, NE |
|
| — |
|
| 100 |
|
| 2,318 |
|
| 40 |
|
| 100 |
|
| 2,358 |
|
| 2,458 |
|
| 1,153 |
| 1997 |
| 1997 |
|
Assisted Living Properties |
|
| — |
|
| 57,010 |
|
| 606,034 |
|
| 35,235 |
|
| 57,010 |
|
| 641,269 |
|
| 698,279 |
|
| 126,768 |
|
|
|
|
|
Range of Care Properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199 Brownsville, TX (2) |
|
| — |
|
| 302 |
|
| 1,089 |
|
| 835 |
|
| 302 |
|
| 1,924 |
|
| 2,226 |
|
| 1,058 |
| 2010 |
| 2004 |
|
168 Des Moines, IA |
|
| — |
|
| 115 |
|
| 2,096 |
|
| 1,433 |
|
| 115 |
|
| 3,529 |
|
| 3,644 |
|
| 1,955 |
| 1972 |
| 1999 |
|
26A Gardendale, AL |
|
| — |
|
| 100 |
|
| 7,550 |
|
| 2,084 |
|
| 100 |
|
| 9,634 |
|
| 9,734 |
|
| 5,209 |
| 2011 |
| 1996 |
|
194 Holyoke, CO |
|
| — |
|
| 211 |
|
| 1,513 |
|
| 283 |
|
| 211 |
|
| 1,796 |
|
| 2,007 |
|
| 1,020 |
| 1963 |
| 2000 |
|
245 Newberry, SC |
|
| — |
|
| 439 |
|
| 4,639 |
|
| 608 |
|
| 439 |
|
| 5,247 |
|
| 5,686 |
|
| 1,358 |
| 1995 |
| 2011 |
|
244 Newberry, SC |
|
| — |
|
| 919 |
|
| 5,454 |
|
| 131 |
|
| 919 |
|
| 5,585 |
|
| 6,504 |
|
| 1,251 |
| 2001 |
| 2011 |
|
236 Wytheville, VA |
|
| — |
|
| 647 |
|
| 12,692 |
|
| — |
|
| 647 |
|
| 12,692 |
|
| 13,339 |
|
| 3,743 |
| 1996 |
| 2010 |
|
Range of Care Properties |
|
| — |
|
| 2,733 |
|
| 35,033 |
|
| 5,374 |
|
| 2,733 |
|
| 40,407 |
|
| 43,140 |
|
| 15,594 |
|
|
|
|
|
89
LTC PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| capitalized |
| Gross amount at which carried at |
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
| Initial cost to company |
| subsequent |
| December 31, 2016 |
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
| Building and |
| to |
|
|
|
| Building and |
|
|
|
| Accum |
| Construction/ |
| Acquisition |
| ||||
|
| Encumbrances |
| Land |
| improvements |
| acquisition |
| Land |
| improvements |
| Total(1) |
| deprec. |
| renovation date |
| date |
| ||||||||
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
297 Las Vegas, NV |
|
| — |
|
| 1,965 |
|
| 7,308 |
|
| — |
|
| 1,965 |
|
| 7,308 |
|
| 9,273 |
|
| 249 |
| 1990/1994 |
| 2015 |
|
Properties |
|
| — |
|
| 1,965 |
|
| 7,308 |
|
| — |
|
| 1,965 |
|
| 7,308 |
|
| 9,273 |
|
| 249 |
|
|
|
|
|
Land: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271 Howell, MI |
|
| — |
|
| 420 |
|
| — |
|
| — |
|
| 420 |
|
| — |
|
| 420 |
|
| — |
| N/A |
| 2013 |
|
275 Yale, MI |
|
| — |
|
| 73 |
|
| — |
|
| — |
|
| 73 |
|
| — |
|
| 73 |
|
| — |
| N/A |
| 2013 |
|
999 Milford, MI |
|
| — |
|
| 450 |
|
| — |
|
| — |
|
| 450 |
|
| — |
|
| 450 |
|
| — |
| N/A |
| 2014 |
|
Land |
|
| — |
|
| 943 |
|
| — |
|
| — |
|
| 943 |
|
| — |
|
| 943 |
|
| — |
|
|
|
|
|
Other Properties |
|
| — |
|
| 2,908 |
|
| 7,308 |
|
| — |
|
| 2,908 |
|
| 7,308 |
|
| 10,216 |
|
| 249 |
|
|
|
|
|
Properties Under Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305 Union, KY |
|
| — |
|
| 858 |
|
| 5,046 |
|
| — |
|
| 858 |
|
| 5,046 |
|
| 5,904 |
|
| — |
| N/A |
| 2016 |
|
296 Glenview, IL |
|
| — |
|
| 2,800 |
|
| 3,186 |
|
| — |
|
| 2,800 |
|
| 3,186 |
|
| 5,986 |
|
| — |
| N/A |
| 2015 |
|
306 Oaklawn, IL |
|
| — |
|
| 1,591 |
|
| 661 |
|
| — |
|
| 1,591 |
|
| 661 |
|
| 2,252 |
|
| — |
| N/A |
| 2016 |
|
Properties Under Development |
|
| — |
|
| 5,249 |
|
| 8,893 |
|
| — |
|
| 5,249 |
|
| 8,893 |
|
| 14,142 |
|
| — |
|
|
|
|
|
|
| $ | — |
| $ | 116,096 |
| $ | 1,099,030 |
| $ | 86,437 |
| $ | 116,096 |
| $ | 1,185,467 |
| $ | 1,301,563 | (3) | $ | 275,861 |
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Costs | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | capitalized | | Gross amount at which carried at | | | | | | | |
| ||||||||
| | | | | Initial cost to company | | subsequent | | December 31, 2019 | | | | | | | |
| ||||||||||||
| | | | | | | | | Building and | | to | | | | | Building and | | | | | Accum | | Construction/ | | Acquisition |
| |||
|
| Encumbrances |
| Land |
| | improvements |
| acquisition |
| Land |
| improvements |
| Total (1) |
| deprec. |
| renovation date |
| date |
| |||||||
301 Louisville, KY | | $ | — | | $ | 1,021 | | $ | 13,157 | | $ | 17 | | $ | 1,021 | | $ | 13,174 | | $ | 14,195 | | $ | 1,288 | | 2016 | | 2016 | |
114 Loveland, CO | | | — | | | 100 | | | 2,865 | | | 270 | | | 100 | | | 3,135 | | | 3,235 | | | 1,758 | | 1997 | | 1997 | |
068 Lufkin, TX | | | — | | | 100 | | | 1,950 | | | 94 | | | 100 | | | 2,044 | | | 2,144 | | | 1,229 | | 1996 | | 1996 | |
061 Marshall, TX | | | — | | | 38 | | | 1,568 | | | 534 | | | 38 | | | 2,102 | | | 2,140 | | | 1,298 | | 1995 | | 1995 | |
293 McHenry, IL | | | — | | | 1,289 | | | 28,976 | | | 243 | | | 1,289 | | | 29,219 | | | 30,508 | | | 3,777 | | 2005 | | 2015 | |
058 McPherson, KS | | | — | | | 79 | | | 1,571 | | | 4 | | | 79 | | | 1,575 | | | 1,654 | | | 1,086 | | 1994 | | 1995 | |
316 Medford, OR | | | — | | | 750 | | | 13,650 | | | — | | | 750 | | | 13,650 | | | 14,400 | | | 575 | | 1984 | | 2018 | |
239 Merritt Island, FL | | | — | | | 550 | | | 8,150 | | | 100 | | | 550 | | | 8,250 | | | 8,800 | | | 2,347 | | 2004 | | 2010 | |
104 Millville, NJ | | | — | | | 100 | | | 2,825 | | | 749 | | | 100 | | | 3,574 | | | 3,674 | | | 1,754 | | 1997 | | 1997 | |
286 Milwaukee, WI | | | — | | | 818 | | | 8,014 | | | 61 | | | 818 | | | 8,075 | | | 8,893 | | | 1,084 | | 2007 | | 2015 | |
231 Monroeville, PA | | | — | | | 526 | | | 5,334 | | | 435 | | | 526 | | | 5,769 | | | 6,295 | |
| 1,866 |
| 1997 | | 2009 | |
280 Murrells Inlet, SC | | | — | | | 2,490 | | | 14,185 | | | — | | | 2,490 | | | 14,185 | | | 16,675 | | | 1,762 | | 2016 | | 2015 | |
294 Murrieta, CA | | | — | | | 2,022 | | | 11,136 | | | — | | | 2,022 | | | 11,136 | | | 13,158 | | | 1,432 | | 2016 | | 2015 | |
289 Neenah, WI | | | — | | | 694 | | | 20,839 | | | 244 | | | 694 | | | 21,083 | | | 21,777 | | | 2,606 | | 1991 | | 2015 | |
166 New Bern, NC | | | — | | | 100 | | | 2,427 | | | 1 | | | 100 | | | 2,428 | | | 2,528 | |
| 1,095 |
| 1998 | | 1999 | |
118 Newark, OH | | | — | | | 100 | | | 2,435 | | | 284 | | | 100 | | | 2,719 | | | 2,819 | |
| 1,436 |
| 1997 | | 1997 | |
143 Niceville, FL | | | — | | | 100 | | | 2,680 | | | — | | | 100 | | | 2,680 | | | 2,780 | |
| 1,465 |
| 1998 | | 1998 | |
095 Norfolk, NE | | | — | | | 100 | | | 2,123 | | | 301 | | | 100 | | | 2,424 | | | 2,524 | |
| 1,277 |
| 1997 | | 1997 | |
306 Oak Lawn, IL | | | — | | | 1,591 | | | 13,772 | | | — | | | 1,591 | | | 13,772 | | | 15,363 | | | 792 | | 2018 | | 2016 | |
290 Oshkosh, WI | | | — | | | 1,525 | | | 9,192 | | | 184 | | | 1,525 | | | 9,376 | | | 10,901 | | | 2,526 | | 2009 | | 2015 | |
291 Oshkosh, WI | | | — | | | 475 | | | 7,364 | | | 44 | | | 475 | | | 7,408 | | | 7,883 | | | 982 | | 2005 | | 2015 | |
302 Overland Park, KS | | | — | | | 1,951 | | | 11,882 | | | 281 | | | 1,951 | | | 12,163 | | | 14,114 | | | 1,344 | | 2013 | | 2016 | |
232 Pittsburgh, PA | | | — | | | 470 | | | 2,615 | | | 333 | | | 470 | | | 2,948 | | | 3,418 | |
| 1,046 |
| 1994 | | 2009 | |
165 Rocky Mount, NC | | | — | | | 100 | | | 2,494 | | | 1 | | | 100 | | | 2,495 | | | 2,595 | |
| 1,157 |
| 1998 | | 1999 | |
059 Salina, KS | | | — | | | 79 | | | 1,571 | | | 4 | | | 79 | | | 1,575 | | | 1,654 | |
| 1,086 |
| 1994 | | 1995 | |
084 San Antonio, TX | | | — | | | 100 | | | 1,900 | | | — | | | 100 | | | 1,900 | | | 2,000 | |
| 1,094 |
| 1997 | | 1997 | |
092 San Antonio, TX | | | — | | | 100 | | | 2,055 | | | — | | | 100 | | | 2,055 | | | 2,155 | |
| 1,178 |
| 1997 | | 1997 | |
288 Sheboygan, WI | | | — | | | 1,168 | | | 5,382 | | | 184 | | | 1,168 | | | 5,566 | | | 6,734 | | | 854 | | 2006 | | 2015 | |
149 Shelby, NC | | | — | | | 100 | | | 2,805 | | | 2 | | | 100 | | | 2,807 | | | 2,907 | |
| 1,533 |
| 1998 | | 1998 | |
312 Spartanburg, SC | | | — | | | 254 | | | 9,906 | | | 1,520 | | | 254 | | | 11,426 | | | 11,680 | | | 886 | | 1999 | | 2017 | |
150 Spring Hill, FL | | | — | | | 100 | | | 2,650 | | | — | | | 100 | | | 2,650 | | | 2,750 | |
| 1,449 |
| 1998 | | 1998 | |
103 Springfield, OH | | | — | | | 100 | | | 2,035 | | | 270 | | | 100 | | | 2,305 | | | 2,405 | |
| 1,300 |
| 1997 | | 1997 | |
321 Sterling Heights, MI | | | — | | | 1,133 | | | 11,473 | | | — | | | 1,133 | | | 11,473 | | | 12,606 | | | — | | 1997 | | 2019 | |
162 Sumter, SC | | | — | | | 100 | | | 2,351 | | | — | | | 100 | | | 2,351 | | | 2,451 | |
| 1,143 |
| 1998 | | 1999 | |
140 Tallahassee, FL | | | — | | | 100 | | | 3,075 | | | — | | | 100 | | | 3,075 | | | 3,175 | |
| 1,684 |
| 1998 | | 1998 | |
098 Tiffin, OH | | | — | | | 100 | | | 2,435 | | | 279 | | | 100 | | | 2,714 | | | 2,814 | |
| 1,424 |
| 1997 | | 1997 | |
282 Tinley Park, IL | | | — | | | 702 | | | 11,481 | | | — | | | 702 | | | 11,481 | | | 12,183 | | | 1,509 | | 2016 | | 2015 | |
088 Troy, OH | | | — | | | 100 | | | 2,435 | | | 605 | | | 100 | | | 3,040 | | | 3,140 | |
| 1,641 |
| 1997 | | 1997 | |
080 Tulsa, OK | | | — | | | 200 | | | 1,650 | | | — | | | 200 | | | 1,650 | | | 1,850 | |
| 959 |
| 1997 | | 1997 | |
093 Tulsa, OK | | | — | | | 100 | | | 2,395 | | | — | | | 100 | | | 2,395 | | | 2,495 | |
| 1,370 |
| 1997 | | 1997 | |
238 Tupelo, MS | | | — | | | 1,170 | | | 8,230 | | | 30 | | | 1,170 | | | 8,260 | | | 9,430 | |
| 2,437 |
| 2000 | | 2010 | |
075 Tyler, TX | | | — | | | 100 | | | 1,800 | | | — | | | 100 | | | 1,800 | | | 1,900 | |
| 1,052 |
| 1996 | | 1996 | |
202 Vacaville, CA | | | — | | | 1,662 | | | 11,634 | | | 1,770 | | | 1,662 | | | 13,404 | | | 15,066 | |
| 6,442 |
| 2002 | | 2001 | |
091 Waco, TX | | | — | | | 100 | | | 2,235 | | | — | | | 100 | | | 2,235 | | | 2,335 | |
| 1,280 |
| 1997 | | 1997 | |
096 Wahoo, NE | | | — | | | 100 | | | 2,318 | | | 161 | | | 100 | | | 2,479 | | | 2,579 | |
| 1,378 |
| 1997 | | 1997 | |
108 Watauga, TX | | | — | | | 100 | | | 1,668 | | | — | | | 100 | | | 1,668 | | | 1,768 | |
| 949 |
| 1996 | | 1997 | |
287 Waukesha, WI | | | — | | | 992 | | | 15,183 | | | 210 | | | 992 | | | 15,393 | | | 16,385 | | | 1,884 | | 2009 | | 2015 | |
109 Weatherford, OK | | | — | | | 100 | | | 1,669 | | | 592 | | | 100 | | | 2,261 | | | 2,361 | |
| 1,278 |
| 1996 | | 1997 | |
309 West Chester, OH | | | — | | | 2,355 | | | 13,553 | | | 22 | | | 2,355 | | | 13,575 | | | 15,930 | | | 978 | | 2017 | | 2017 | |
276 Westminster, CO | | | — | | | 1,425 | | | 9,575 | | | — | | | 1,425 | | | 9,575 | | | 11,000 | | | 1,867 | | 2015 | | 2013 | |
110 Wheelersburg, OH | | | — | | | 29 | | | 2,435 | | | 250 | | | 29 | | | 2,685 | | | 2,714 | |
| 1,437 |
| 1997 | | 1997 | |
303 Wichita, KS | | | — | | | 1,422 | | | 9,957 | | | 285 | | | 1,422 | | | 10,242 | | | 11,664 | | | 1,159 | | 2011 | | 2016 | |
259 Wichita, KS | | | — | | | 730 | | | — | | | 9,682 | | | 730 | | | 9,682 | | | 10,412 | |
| 2,270 |
| 2013 | | 2012 | |
283 Wichita, KS | | | — | | | 624 | | | 13,846 | | | — | | | 624 | | | 13,846 | | | 14,470 | | | 1,245 | | 2016 | | 2015 | |
076 Wichita Falls, TX | | | — | | | 100 | | | 1,850 | | | — | | | 100 | | | 1,850 | | | 1,950 | |
| 1,081 |
| 1996 | | 1996 | |
120 Wichita Falls, TX | | | — | | | 100 | | | 2,750 | | | 131 | | | 100 | | | 2,881 | | | 2,981 | |
| 1,607 |
| 1997 | | 1997 | |
265 Williamstown, NJ | | | — | | | 711 | | | 6,637 | | | — | | | 711 | | | 6,637 | | | 7,348 | |
| 1,502 |
| 2000 | | 2012 | |
264 Williamstown, NJ | | | — | | | 711 | | | 8,649 | | | — | | | 711 | | | 8,649 | | | 9,360 | |
| 1,769 |
| 2000 | | 2012 | |
099 York, NE | | | — | | | 100 | | | 2,318 | | | 78 | | | 100 | | | 2,396 | | | 2,496 | |
| 1,359 |
| 1997 | | 1997 | |
Assisted Living Properties | | $ | — | | $ | 75,001 | | $ | 744,850 | | $ | 39,001 | | $ | 75,001 | | $ | 783,851 | | $ | 858,852 | | $ | 163,473 | | | | | |
86
LTC PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Costs | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | capitalized | | Gross amount at which carried at | | | | | | | |
| ||||||||
| | | | | Initial cost to company | | subsequent | | December 31, 2019 | | | | | | | |
| ||||||||||||
| | | | | | | | Building and | | to | | | | | Building and | | | | | Accum | | Construction/ | | Acquisition |
| ||||
|
| Encumbrances |
| Land |
| improvements |
| acquisition |
| Land |
| improvements |
| Total (1) |
| deprec. |
| renovation date |
| date |
| ||||||||
Other: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Properties: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
297 Las Vegas, NV | | | — | | | 1,965 | | | 7,308 | | | 1,144 | | | 1,965 | | | 8,452 | | | 10,417 | | | 891 | | 1990/1994 | | 2015 | |
Properties | | | — | | | 1,965 |
| | 7,308 | | | 1,144 | | | 1,965 |
| | 8,452 |
| | 10,417 | | | 891 | | | | | |
Land: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
271 Howell, MI | | | — | | | 420 |
| | — | | | — | | | 420 |
| | — |
| | 420 | | | — | | N/A | | 2013 | |
272 Milford, MI | | | — | | | 450 |
| | — | | | — | | | 450 |
| | — |
| | 450 | | | — | | N/A | | 2014 | |
275 Yale, MI | | | — | | | 73 |
| | — | | | — | | | 73 |
| | — |
| | 73 | | | — | | N/A | | 2013 | |
Land | | | — | | | 943 |
| | — | | | — | | | 943 |
| | — |
| | 943 | | | — | | | | | |
Other Properties | | | — | | | 2,908 |
| | 7,308 | | | 1,144 | | | 2,908 |
| | 8,452 |
| | 11,360 | | | 891 | | | | | |
Properties Under Development: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
319 Independence, MO | | | — | | | 2,644 | | | 1,514 | | | — | | | 2,644 | | | 1,514 | | | 4,158 | | | — | | N/A | | 2019 | |
313 Medford, OR | | | — | | | 636 | | | 13,195 | | | — | | | 636 | | | 13,195 | | | 13,831 | | | — | | N/A | | 2018 | |
Properties Under Development | | | — | | | 3,280 |
| | 14,709 | | | — | | | 3,280 |
| | 14,709 |
| | 17,989 | | | — | | | | | |
| | $ | — | | $ | 131,252 | | $ | 1,266,559 | | $ | 86,760 | | $ | 131,252 | | $ | 1,353,319 | | $ | 1,484,571 | (2) | $ | 347,755 | | | | | |
(1) |
| Depreciation is computed principally by the |
(2) |
|
|
| As of December 31, |
9087
LTC PROPERTIES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
(in thousands)
Activity for the years ended December 31, 2016, 20152019, 2018 and 20142017 is as follows:
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| For the Year Ended December 31, |
| |||||||||||||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||||||||||||
| | | | | | | | | | | ||||||||||
| | For the Year Ended December 31, |
| |||||||||||||||||
| | 2019 | | 2018 | | 2017 |
| |||||||||||||
Reconciliation of real estate: |
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| |
| |
Carrying cost: |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
Balance at beginning of period |
| $ | 1,198,686 |
| $ | 949,838 |
| $ | 937,617 |
| | $ | 1,421,456 | | $ | 1,392,122 | | $ | 1,301,563 | |
Acquisitions |
|
| 74,923 |
|
| 206,340 |
|
| 11,650 |
| |
| 58,414 | |
| 40,408 | |
| 82,405 | |
Improvements |
|
| 49,134 |
|
| 33,463 |
|
| 48,102 |
| |
| 23,363 | |
| 38,528 | |
| 25,800 | |
Conversion of mortgage loans into owned properties |
|
| — |
|
| 10,600 |
|
| — |
| ||||||||||
Capitalized interest |
|
| 1,408 |
|
| 827 |
|
| 1,506 |
| |
| 608 | |
| 1,248 | |
| 908 | |
Other non-cash items (See Note 4) |
|
| 2,460 |
|
| 2,882 |
|
| 304 |
| ||||||||||
Conveyed land (See Note 4) |
|
| — |
|
| (670) |
|
| — |
| ||||||||||
Cost of real estate sold |
|
| (24,282) |
|
| (2,344) |
|
| (49,341) |
| |
| (19,270) | |
| (50,850) | |
| (18,554) | |
Impairment on real estate for sale |
|
| (766) |
|
| (2,250) |
|
| — |
| ||||||||||
Ending balance |
| $ | 1,301,563 |
| $ | 1,198,686 |
| $ | 949,838 |
| | $ | 1,484,571 | | $ | 1,421,456 | | $ | 1,392,122 | |
Accumulated depreciation: |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | |
Balance at beginning of period |
| $ | 251,265 |
| $ | 223,315 |
| $ | 218,700 |
| | $ | 314,875 | | $ | 306,033 | | $ | 275,861 | |
Depreciation expense |
|
| 35,809 |
|
| 29,329 |
|
| 25,424 |
| |
| 39,094 | |
| 37,416 | |
| 37,492 | |
Cost of real estate sold |
|
| (11,213) |
|
| (1,379) |
|
| (20,809) |
| |
| (6,214) | |
| (28,574) | |
| (7,320) | |
Ending balance |
| $ | 275,861 |
| $ | 251,265 |
| $ | 223,315 |
| | $ | 347,755 | | $ | 314,875 | | $ | 306,033 | |
9188
LTC PROPERTIES, INC.
MORTGAGE LOANS RECEIVABLE ON REAL ESTATE
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Principal |
| |
| | | | | | | | | | | | | | | | | | | | | | Amount of |
| |
| | | | | | | | | | | | | | | | | | | Carrying | | Loans |
| ||
| | | | | | | | | | | | | Current | | | | | Amount of | | Subject to |
| |||
| | (Unaudited) | | | | | | | | | Monthly | | Face | | Mortgages | | Delinquent |
| ||||||
| | Number of | | | | Final | | Balloon | | Debt | | Amount of | | December 31, | | Principal or |
| |||||||
State | | Properties | | Units/Beds (3) | | Interest Rate (1) | | Maturity Date | | Amount (2) | | Service | | Mortgages | | 2018 | | Interest |
| |||||
MI | | 15 | | 2,029 | | 9.92% | | 2043 | | $ | 161,966 | | $ | 1,535 | | $ | 188,966 | | $ | 184,265 | | $ | — | |
MI |
| 4 |
| 501 | | 9.24% | | 2045 | |
| 32,286 | |
| 278 | |
| 36,116 | |
| 35,715 | |
| — | |
MI |
| 1 |
| 157 | | 9.41% | | 2045 | |
| 14,325 | |
| 117 | |
| 15,000 | |
| 14,801 | |
| — | |
MI | | 2 | | 205 | | 9.41% | | 2045 | | | 19,513 | | | 154 | | | 19,513 | | | 19,318 | | | — | |
|
| 22 | (4) | 2,892 | | | | | | $ | 228,090 | | $ | 2,084 | | $ | 259,595 | | $ | 254,099 | | $ | — | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Principal |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Amount of |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrying |
| Loans |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| Current |
|
|
|
| Amount of |
| Subject to |
| |||
|
| (Unaudited) |
|
|
|
|
|
|
|
| Monthly |
| Face |
| Mortgages |
| Delinquent |
| ||||||
|
| Number of |
|
|
| Final |
| Balloon |
| Debt |
| Amount of |
| December 31, |
| Principal or |
| |||||||
State |
| Properties |
| Units/Beds(3) |
| Interest Rate(1) |
| Maturity Date |
| Amount(2) |
| Service |
| Mortgages |
| 2016 |
| Interest |
| |||||
MI |
| 15 |
| 2,102 |
| 9.53% |
| 2043 |
| $ | 153,770 |
| $ | 1,427 |
| $ | 175,083 |
| $ | 180,940 |
| $ | — |
|
MI |
| 1 |
| 157 |
| 9.41% |
| 2045 |
|
| 8,825 |
|
| 77 |
|
| 9,806 |
|
| 9,872 |
|
| — |
|
MI |
| 2 |
| 273 |
| 9.41% |
| 2045 |
|
| 13,920 |
|
| 120 |
|
| 15,000 |
|
| 15,565 |
|
| — |
|
MI |
| 2 |
| 216 |
| 9.41% |
| 2020 |
|
| 7,750 |
|
| 62 |
|
| 7,750 |
|
| 7,765 |
|
|
|
|
Various |
| 11 |
| 555 |
| 7.32%-13.95% |
| 2017-2019 |
|
| 16,746 |
|
| 216 |
|
| 20,781 |
|
| 15,659 |
|
| — |
|
|
| 31 | (4) | 3,303 |
|
|
|
|
| $ | 201,011 |
| $ | 1,902 |
| $ | 228,420 |
| $ | 229,801 |
| $ | — |
|
(1) |
| Represents current stated interest rate. Generally, the loans have |
(2) |
| Balloon payment is due upon maturity. |
(3) |
| This number is based upon unit/bed counts shown on operating licenses provided to us by borrowers or units/beds as stipulated by mortgage documents. We have found during the years that these numbers often differ, usually not materially, from units/beds in operation at any point in time. The differences are caused by such things as operators converting a patient/resident room for alternative uses, such as offices or storage, or converting a |
(4) |
| Includes |
| | | | | |
Number of Loans | Original loan amounts | ||||
| |
| |||
| | $ 500 - $2,000 | | ||
0 | | | $2,001 - $3,000 | | |
| | | $3,001 - $4,000 | | |
0 | | | $4,001 - $5,000 | | |
| | | $5,001 - $6,000 | | |
| | | $6,001 - $7,000 | | |
4 | | | $7,001 + | |
9289
Mortgage loans receivable activity for the years ended December 31, 2016, 20152019, 2018 and 20142017 is as follows:
|
| ||
| |||
| |||
| |||
| |||
|
| ||
| |||
|
| ||
| |||
| |||
| |||
| |||
| |||
| |||
|
| ||
| |||
|
| ||
| |||
| |||
| |||
| |||
| |||
|
| ||
| |||
|
| ||
|
|
| | | |
| | | |
Balance— December 31, 2016 |
| $ | 229,801 |
New mortgage loans | |
| — |
Other additions | |
| 11,913 |
Land conveyance | | | — |
Amortization of mortgage premium | |
| (4) |
Collections of principal | |
| (17,863) |
Foreclosures | |
| — |
Loan loss reserve | |
| 60 |
Other deductions | |
| — |
Balance— December 31, 2017 | |
| 223,907 |
New mortgage loans | |
| 14,525 |
Other additions | |
| 6,839 |
Land conveyance | | | — |
Amortization of mortgage premium | |
| (4) |
Collections of principal | |
| (2,136) |
Foreclosures | |
| — |
Loan loss reserve | |
| (192) |
Other deductions | |
| — |
Balance— December 31, 2018 | |
| 242,939 |
New mortgage loans | |
| 7,500 |
Other additions | |
| 4,842 |
Land conveyance | | | — |
Amortization of mortgage premium | |
| (4) |
Collections of principal | |
| (1,065) |
Foreclosures | |
| — |
Loan loss reserve | |
| (113) |
Other deductions | |
| — |
Balance— December 31, 2019 | | $ | 254,099 |
9390
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLSCONTROLS AND PROCEDURES
Disclosure Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report our disclosure controls and procedures were effective.
Internal Control Over Financial Reporting.
The Management Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth on the following pages.
There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
9491
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a‑15(f)13a-15(f) or 15d‑15(f)15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the issuer’s principal executive and principal financial officers and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; |
| Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and |
| Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements on a timely basis. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2016.2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (or COSO)(“COSO”) in Internal Control— Integrated Framework (2013 Framework). Based on this assessment, our management concluded that, as of the end of the fiscal year ended December 31, 2016,2019, our internal control over financial reporting was effective.
The effectiveness of our internal control over financial reporting as of December 31, 2016,2019, has been audited by Ernst &Young LLP, independent registered public accounting firm. Ernst & Young LLP’s report on our internal control over financial reporting appears on the following pagepage.
9592
.
The Board of Directors and Shareholders of LTC Properties, Inc.
Opinion on Internal Control over Financial Reporting
We have audited LTC Properties, Inc.’s internal control over financial reporting as of December 31, 2016,2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, LTC Properties, Inc.’s (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, and the related consolidated statements of income and comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and the financial statement schedules listed in the Index at Item 15(a) and our report dated February 20, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control overOver Financial Reporting. Our responsibility is to express an opinion on the company’sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, LTC Properties, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria./s/ Ernst & Young LLP
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of LTC Properties, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2016, and our report dated Los Angeles, California
February 22, 2017 expressed an unqualified opinion thereon.
| |
|
20, 2020
9693
On February 16, 2017, we entered into a second amendment to the third amended and restated note purchase and private shelf agreement with Prudential Investment Management, Inc. (or Prudential) to (a) increase the aggregate commitment to $337.5 million, compared to $200.0 million previously, (b) increase the aggregate principal amount of notes that can be outstanding under the shelf agreement to $350 million, compared to $300 million previously, (c) increase the maximum principal amount of notes that can be outstanding and held by Prudential to $275 million, compared to $250 million previously, and (d) extend the issuance period until February 16, 2020. None.
On February 16, 2017, we also sold $100.0 million aggregate principal amount senior unsecured notes to a group of institutional investors, which included Prudential, pursuant to a note purchase agreement. The notes bear interest at an annual fixed rate of 4.5%, have scheduled principal payments, and mature on February 16, 2032. The notes are subject to financial covenants that are substantially similar to the covenants in the shelf agreement with Prudential and our existing credit facility. These financial covenants include provisions that (i) maximum total indebtedness shall not exceed 50% of total asset value, (ii) maximum secured debt shall not exceed 35% of total asset value, (iii) maximum unsecured debt shall not exceed 60% of the unencumbered asset value, (iv) EBITDA shall not be below 150% of fixed charges, and (v) eligible property NOI shall not be below 200% of interest expense on unsecured debt. Other covenants in the note purchase agreement include limitations on our and our subsidiaries’ abilities to (i) incur liens, (ii) make investments, (iii) engage in mergers or consolidations or sell properties, and (iv) enter agreements that restrict our subsidiaries’ ability to make dividend payments or loans to us.
The second amendment to the amended and restated note purchase and private shelf agreement with Prudential is attached as an exhibit to this Annual Report on Form 10-K. The note purchase agreement also is attached as an exhibit to this Annual Report on Form 10-K. The descriptions herein related to the shelf agreement as amended with Prudential and the note purchase agreement are qualified in their entirety by reference to the corresponding exhibits filed hereto.
PART III
Item 10. DIRECTORS,DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to our definitive proxy statement for the 20172020 Annual Meeting of Stockholders (to be filed with the Securities and Exchange CommissionSEC within 120 days of our December 31, 20162019 fiscal year end) under the headings “Proposal 1 Election of Directors,” “Corporate Governance Principles and Board Matters,” and “Executive Officers.”
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to our definitive proxy statement for the 20172020 Annual Meeting of Stockholders (to be filed with the Securities and Exchange CommissionSEC within 120 days of our December 31, 20162019 fiscal year end) under the headings “Executive Compensation Discussion and Analysis,” “ExecutiveCompensation Tables,” “Director Compensation,” and “Compensation Committee Report.”
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to our definitive proxy statement for the 20172020 Annual Meeting of Stockholders (to be filed with the Securities and Exchange CommissionSEC within 120 days of our December 31, 20162019 fiscal year end) under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
97
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to our definitive proxy statement for the 20172020 Annual Meeting of Stockholders (to be filed with the Securities and Exchange CommissionSEC within 120 days of our December 31, 20162019 fiscal year end) under the heading “Certain Relationships and Related Transactions, and Director Independence.”
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to our definitive proxy statement for the 20172020 Annual Meeting of Stockholders (to be filed with the Securities and Exchange CommissionSEC within 120 days of our December 31, 20162019 fiscal year end) under the heading “Independent Registered Public Accounting Firm Fees and Services.”
9894
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The following documentsfinancial statements of LTC Properties, Inc. are filed as a partincluded in Part II, Item 8 of this report:Annual Report on Form 10-K:
| |||
| |||
|
|
| |
| | | |
Consolidated Balance Sheets as of December 31, | | | |
Consolidated Statements of Income for the years ended December 31, | | | |
| | | |
Consolidated Statements of Equity for the years ended December 31, | | | |
| | | |
| | | |
(a)(2) Financial Statement Schedules The following financial statement schedules of LTC Properties, Inc. are included in Part II, Item 8 of this Annual Report on Form 10-K: | | | |
| | | |
| | | |
| | |
All other schedules are omitted because they are not applicable or not present in amounts sufficient to require submission of the schedule or the required information is shown in the Consolidated Financial Statements and the Notes thereto.
Exhibits
The exhibits required by Item 601 of Regulation S‑K are set forth in the index to exhibits of this annual report.
99
| | | | |||
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Exhibit | Description | | ||||
3.1 | | | ||||
3.2 | | | ||||
4.1 | | Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 | | |||
10.1 | |
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10.6 | | |
95
100
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21 | | | |
23.1 | | | |
31.1 | | | |
31.2 | | | |
32 | | | |
| |
| |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
+ | Management contract or compensatory plan or arrangement in which an executive officer or director of the Company participates |
+Management contract or compensatory plan or arrangement in which an executive officer or director of the Company participatesItem 16. FORM 10-K SUMMARY
101
LTC PROPERTIES, INC.None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
| LTC PROPERTIES, INC. | |
Dated: February | | |
96
| By: | /s/ Pamela J. Kessler PAMELA J. KESSLER |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| ||
/s/ Wendy L. Simpson WENDY L. SIMPSON | Chairman, Chief Executive Officer, | February |
| | |
/s/ Pamela J. Kessler PAMELA J. KESSLER | Executive Vice President, Chief Financial | February |
| | |
/s/ Boyd Hendrickson BOYD HENDRICKSON | Director | February |
| | |
/s/ Devra G. Shapiro DEVRA G. SHAPIRO | Director | February |
| | |
/s/ JAMES J. JAMES J. PIECZYNSKI | Director | February |
| | |
/s/ Timothy J. Triche TIMOTHY J. TRICHE | Director | February |
10297