Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20192022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-11314

GraphicGraphic

LTC PROPERTIES, INC.

(Exact name of Registrantregistrant as specified in its charter)

Maryland
(State or other jurisdiction of incorporation or
organization)

71-0720518
(I.R.S. Employer Identification No.)

2829 Townsgate Road, Suite 350

Westlake Village, California 91361

(Address of principal executive offices)

Registrant’s telephone number, including area code: (805) 981-8655

Securities registered pursuant to Section 12(b) of the Act:

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 Registrantregistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

Indicate by checkmark if the Registrantregistrant 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 Registrantregistrant (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 Registrantregistrant 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer 

Accelerated filer 

Non-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 Registrantregistrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 

The aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrantregistrant was approximately $1,783,261,000$1,515,770,000 as of June 28, 201930, 2022 (the last business day of the Registrant’sregistrant’s most recently completed second fiscal quarter).

The number of shares of common stock outstanding as of February 14, 20209, 2023 was 39,751,704.41,372,589.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’sregistrant’s definitive proxy statement relating to its 20202023 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

Table of Contents

CAUTIONARY STATEMENTCautionary Statement on Forward-Looking Statements

This Annual Report on Form 10-K contains forward-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. You can identify some of the forward-looking statements by their use of forward-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-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- 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-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 our operators for revenue and cash flow; the bankruptcy, insolvency or financial deteriorationduration and extent of our lessees; potential limitations on our remedies when mortgage loans default; competition faced by our borrowers and lessees within the health care industry;effects of the COVID-19 pandemic;government regulation of the health care industry by federal, state and local governments; changes in Medicare and Medicaid reimbursement amounts (including due toindustry; federal and state budget constraints); compliance with and changes to regulations and payment policies within the health care industry; debt that we may incurcost containment measures including reductions in reimbursement from third-party payors such as Medicare and changes in financing terms;Medicaid; required regulatory approvals for operation of health care facilities; a failure to comply with federal, state, or local regulations for the operation of health care facilities; the adequacy of insurance coverage maintained by our operators; our reliance on a few major operators; our ability to continue to qualify as a renew leases or enter into favorable terms of renewals or new leases; the impact of inflation; operator financial or legal difficulties; the sufficiency of collateral securing mortgage loans; an impairment of our real estate investment trust;investments; the relative illiquidity of our real estate investments; our ability to develop and riskscomplete construction projects; our ability to invest cash proceeds for health care properties; a failure to qualify as a REIT; our ability to grow if access to capital is limited; and liabilities in connection with properties owned through limited liability companies and partnerships.a failure to maintain or increase our dividend. For a discussion of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements, please see the discussion under “Risk Factors” contained in this report and in other information contained in this 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-looking statements, whether as a result of new information, future events or otherwise.

2

Table of Contents

LTC Properties, Inc.

Table of Contents

Page

Part I

Item 1.

Business

4

Item 1A.

Risk Factors

1318

Item 1B.

Unresolved Staff Comments

2027

Item 2.

Properties

2128

Item 3.

Legal Proceedings

2330

Item 4.

Mine Safety Disclosures

2330

Part II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

2330

Item 6.

Selected Financial DataReserved

2632

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2733

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

4251

Item 8.

Financial Statements

4453

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

9197

Item 9A.

Controls and Procedures

9197

Item 9B.

Other Information

94100

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

100

Part III

Item 10.

Directors, Executive Officers and Corporate Governance

94100

Item 11.

Executive Compensation

94100

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

94100

Item 13.

Certain Relationships and Related Transactions, and Director Independence

94100

Item 14.

Principal Accountant Fees and Services

94100

Part IV

Item 15.

Exhibits and Financial Statement Schedules

95101

Item 16.

Form 10-K Summary

96102

SIGNATURES

96103

3

Table of Contents

PART I

Item 1. BUSINESS

General

LTC Properties, Inc., is a health care real estate investment trust (“REIT”), was incorporated on May 12, 1992 in the State of Maryland and commenced operations on August 25, 1992. We invest primarily that invests in seniors housing and health care properties through sale-leaseback transactions,sale-leasebacks, mortgage financing, joint ventures, construction financing and structured finance solutions including preferred equity and mezzanine lending. Our investments in owned properties, mortgage loans, mezzanine loans and preferred equity investments represent our primary objectives aresource of income. We depend upon the performance of our operators with respect to create, sustainthe daily management and enhance stockholder equity value and provide current income for distribution to stockholders throughmarketing of long-term health care services offered at our properties.

Our real estate investments in seniors 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 ininclude the following typetypes of properties:

Skilled nursing centers (“SNF”) provide restorative, rehabilitative and nursing care for people not requiring the more extensive and sophisticated treatment available at acute care hospitals. Many skilled nursing facilities provide ancillary services that include occupational, speech, physical, respiratory and IVmedical therapies, as well as sub-acute care services which are paid either by the patient, the patient’s family, private health insurance, or through the federal Medicare or state Medicaid programs.
Assisted living communities (“ALF”) serve people who require assistance with activities of daily living, but do not require the constantdegree of supervision that skilled nursing facilities provide. Services are usually available 24 hours a day and include personal supervision and assistance with eating, bathing, grooming and administering medication. TheMany assisted living facilities provide a combination of housing, supportive services, personalized assistance and health care designed to respond to individual needs.
Independent living communities (“ILF”), also known as retirement communities or senior apartments, offer a sense of community and numerous levels of service, such as laundry, housekeeping, dining options/meal plans, exercise and wellness programs, transportation, social, cultural and recreational activities, on-site security and emergency response programs. Many independent living communities offer on-site conveniences like beauty/barber shops, fitness facilities, game rooms, libraries and activity centers.
Memory care communities (“MC”) offer specialized options for people with Alzheimer’s disease and other forms of dementia. PurposeThese purpose built, free-standing memory care facilities offer an attractive alternative for private-pay residents affected by memory loss in comparison to other accommodations that typically have been provided within a secured unit of an assisted living or skilled nursing facility. TheseMemory care facilities offer dedicated care, with staff usually available 24 hours a day, and specialized programming for various conditions relating to memory loss in a securedan environment that is typically smaller in scale and more residential in nature than traditional assisted living and skilled nursing facilities. Residents require a higher level
Other property types (“OTH”) we also invest in other types of properties such as land parcels, projects under development (“UDP”) and behavioral health care and more assistance with activities of daily living than in assisted living facilities. Therefore, these facilities have staff available 24 hours a day to respond to the unique needs of their residents.hospitals.

We conductinclude independent living facilities and manage our businessmemory care as one operating segment, rather than multiple operating segments, for internal reportingpart of the assisted living property classification in some parts of this Annual Report on Form 10-K. Unless otherwise expressly stated or the context otherwise requires, when we refer to “we,” “our,” “us,” “registrant,” “the company,” or similar terms in this Annual Report on Form 10-K, we mean LTC Properties, Inc. and internal decision-making purposes. We include ILF, ALF, MC, and combinations thereof in the ALF property classification.its consolidated subsidiaries.

4

Table of Contents

Portfolio

The following table summarizes our real estate investment portfolio as of December 31, 20192022 (dollar amounts in thousands):

Twelve Months Ended

Twelve Months Ended

December 31, 2022

Percentage

December 31, 2019

Percentage

Number

Number of 

Number of 

Percentage

Percentage

Gross

of 

Rental

Interest

of

of

SNF

ALF

Number of

SNF

ALF

Gross

of 

Rental

of Total

Owned Properties

Investments

Investments

Income (1)

Income

Revenues

Properties (2)

Beds (3)

Units (3)

Properties (1)

Beds (2)

Units (2)

Investments

Investments

Revenue

Revenues

Assisted Living (4)

$

858,852

49.4

%

$

68,641

$

40.7

%

106

6,086

Assisted Living

99

5,497

$

797,813

40.7

%

$

53,923

34.1

%

Skilled Nursing

596,370

34.2

%

69,087

40.9

%

70

8,505

261

52

6,348

236

600,974

30.7

%

55,126

34.8

%

Under Development (5)

17,989

1.0

%

%

Other (6)(3)

11,360

0.7

%

955

0.6

%

1

118

1

118

11,918

0.6

%

991

0.6

%

Total Owned Properties

1,484,571

85.3

%

138,683

82.2

%

177

8,623

6,347

152

6,466

5,733

1,410,705

72.0

%

110,040

(5)

69.5

%

Number of 

Percentage

Interest Income

Percentage

Number of

SNF

ALF

Gross

of 

from Financing

of Total

Financing Receivable

Properties (1)

Beds

Units

Investments

Investments

Receivable

Revenues

Skilled Nursing

3

299

76,767

3.9

%

1,762

1.1

%

Total Financing Receivable

3

299

76,767

3.9

%

1,762

1.1

%

Number of 

Percentage

Interest Income

Percentage

Number of

SNF

ALF

Gross

of 

from Mortgage

of Total

Mortgage Loans

Properties (1)

Beds

Units

Investments

Investments

Loans

Revenues

Assisted Living

18

808

103,626

5.4

%

6,730

4.3

%

Skilled Nursing

256,659

14.7

%

29,991

17.8

%

22

2,892

23

2,891

287,349

14.6

%

33,692

21.3

%

Other (4)

2,683

0.1

%

178

0.1

%

Total Mortgage Loans

256,659

14.7

%

29,991

17.8

%

22

2,892

41

2,891

808

393,658

20.1

%

40,600

25.7

%

Number of 

Percentage

Interest

Percentage

Number of

SNF

ALF

Gross

of 

and other

of Total

Notes Receivable

Properties (1)

Beds

Units

Investments

Investments

Income

Revenues

Assisted Living

7

961

43,662

2.2

%

3,590

2.3

%

Skilled Nursing

15,311

0.8

%

720

0.4

%

Total Notes Receivable

7

961

58,973

3.0

%

4,310

2.7

%

Number of 

Percentage

Income from

Percentage

Number of

SNF

ALF

Gross

of 

Unconsolidated

of Total

Unconsolidated Joint Ventures

Properties (1)

Beds

Units

Investments

Investments

Joint Ventures

Revenues

Assisted Living

1

95

6,340

0.3

%

450

0.3

%

Under Development

13,000

0.7

%

1,054

0.7

%

Total Unconsolidated Joint Ventures

1

95

19,340

1.0

%

1,504

1.0

%

Total Portfolio

$

1,741,230

100.0

%

$

138,683

$

29,991

100.0

%

199

11,515

6,347

204

9,656

7,597

$

1,959,443

100.0

%

$

158,216

100.0

%

Twelve Months Ended

Percentage

December 31, 2019

Percentage

Number

Number of

Number

Number of

Percentage

Gross

of

Rental

Interest

of

of

SNF

ALF

of

SNF

ALF

Gross

of

Summary of Properties by Type

Investments

Investments

Income (1)

Income

Revenues

Properties (2)

Beds (3)

Units (3)

Properties (1)

Beds (2)

Units (2)

Investments

Investments

Skilled Nursing

78

9,538

236

$

980,401

50.0

%

Assisted Living (4)

$

858,852

49.4

%

$

68,641

$

40.7

%

106

6,086

125

7,361

951,441

48.6

%

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

Under Development

13,000

0.7

%

Other (3) (4)

1

118

14,601

0.7

%

Total Portfolio

$

1,741,230

100.0

%

$

138,683

$

29,991

100.0

%

199

11,515

6,347

204

9,656

7,597

$

1,959,443

100.0

%

(1)Excludes variable rental income of $15,998 related to lessee reimbursement of our real estate taxes and $1,926 adjustment for collectibility of rental income.

(2)We have investments in 28owned properties, financing receivable, mortgage loans, notes receivable and unconsolidated joint ventures in 29 states leased or mortgaged to 3032 different operators.

(3)(2)See Item 2. Properties for discussion of bed/unit count.

(4)Includes ILF, ALF, MC, and combinations thereof.

(5)Represents two development projects, consisting of a 78-unit ALF/MC located in Oregon and a 90-bed SNF in Missouri.

(6)(3)Includes three parcels of land held-for-use and one behavioral health care hospital.

(4)Includes one parcel of land in Missouri securing a first mortgage held for future development of a post-acute SNF and one parcel of land in North Carolina securing a first mortgage held for future development of a seniors housing community.

(5)Excludes $15,459 variable rental income from lessee reimbursement of our real estate taxes and $2,745 rental income from sold properties.

In addition to the information in the table above, see Item 2. Properties for more information about our portfolio.

As of December 31, 2019, we had $1.42022, our total investment portfolio included $1.6 billion in carrying value of net real estate investments consisting of $1.1$1.0 billion or 81.7%65.2% invested in owned and leased properties, and $0.3$76.0 million or 4.9% invested in financing receivable, $0.4 billion or 18.3%24.9% invested in mortgage loans secured by first mortgages.mortgages, $58.4 million or 3.7% in notes receivable and $19.3 million or 1.3% in unconsolidated joint ventures.

5

Table of Contents

Owned Properties. The following table summarizes our investment in owned properties at December 31, 20192022 (dollar amounts in thousands):

Average

 

Average

 

Percentage

Number

Number of

Investment

 

Percentage

Number

Number of

Investment

 

Gross

of

of

SNF

ALF

per

 

Gross

of

of

SNF

ALF

per

 

Type of Property

Investment

Investment

Properties (1)

Beds (2)

Units (2)

Bed/Unit

 

Investment

Investment

Properties (1)

Beds (2)

Units (2)

Bed/Unit

 

Assisted Living (3)

$

858,852

57.9

106

6,086

$

141.12

$

797,813

56.6

99

5,497

$

145.14

Skilled Nursing

596,370

40.2

%

70

8,505

261

$

68.03

600,974

42.6

%

52

6,348

236

$

91.28

Under Development (4)

17,989

1.2

Other (5)

11,360

0.7

1

118

Other (3)

11,918

0.8

1

118

Total

$

1,484,571

100.0

177

8,623

6,347

$

1,410,705

100.0

152

6,466

5,733

(1)We have investments in 2826 states leased to 3024 different operators.

(2)See Item 2. Properties for discussion of bed/unit count.

(3)Includes ILF, ALF, MC, and combinations thereof.

(4)Represents two development projects, consisting of a 78-unit ALF/MC located in Oregon and a 90-bed SNF located in Missouri.

(5)Includes three parcels of land held-for-use and one behavioral health care hospital.

Owned properties are leased pursuant to non-cancelable operating leases generally with an initial term of 102 to 15 years. Many of the leases contain renewal options. TheEach lease is a 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. Many of the leases contain renewal options and 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;Index or Medicare Market Basket Rate;
(iii)as a percentage of facility revenues in excess of base amounts; or
(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-capital expenditures and other costs necessaryOur leases that contain fixed annual rental escalations and/or have annual rental escalations that are contingent upon changes in the operationsConsumer Price Index or the Medicare Market Basket Rate, are generally recognized on a straight-line basis over the minimum lease period. Certain leases have annual rental escalations that are contingent upon changes in the gross operating revenues of the facilities. property. This revenue is not recognized until the appropriate contingencies have been resolved.

Generally, our leases provide for one or more of the following: security deposits, property tax impounds, repair and maintenance, escrows 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.

6

Table of Contents

The following table summarizes the concentration of our top ten operators of owned properties for 20192022 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 collectibilitycollectability of rental income for those operators for 20192022 and 2018:2021:

Percent of

 

Percent of

 

Rental Revenue

 

Rental Revenue

 

Lessee

Property Type

    

2019

    

2018

 

Property Type

    

2022

    

2021

 

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

%

ALF/MC

13.5

%  

13.4

%

Carespring Healthcare Management, LLC

SNF

8.0

%  

5.8

%

SNF

10.2

%  

10.4

%

Preferred Care, Inc.

ALF/SNF

6.3

%  

7.9

%

Anthem Memory Care

MC

9.8

%  

10.1

%

Genesis Healthcare

ALF/SNF

7.9

%  

7.8

%

Fundamental Long Term Care Company

SNF/OTH

6.0

%  

6.3

%

SNF/OTH

7.7

%  

7.8

%

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

%

Ark Post Acute Network

ILF/ALF/SNF

7.5

%  

7.7

%

HMG Partners

SNF

7.2

%  

1.8

%

Juniper Communities, LLC

ALF/MC

4.8

%  

5.0

%

ALF/MC

5.9

%  

6.1

%

Ignite

SNF

4.9

%  

3.0

%

Randall Residence

ILF/ALF/MC

4.6

%

4.0

%

Financing Receivable. During 2022, we entered into a joint venture and contributed $61.7 million into the JV that purchased three skilled nursing centers located in Florida for $75.8 million. Our JV partner contributed the remaining $14.3 million of equity. The JV leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year. Accordingly, the transaction has been accounted for as a Financing receivable on our Consolidated Balance Sheets. During 2022, we recognized $1.8 million of Interest income from financing receivable on our Consolidated Statements of Income. Additionally, in conjunction with the origination of this investment, we recorded $0.8 million provision for expected loan losses.

Subsequent to December 31, 2022, we entered into a $121.3 million JV with an affiliate of an existing operator and contributed $117.9 million into the JV that purchased 11 assisted living and memory care communities from an affiliate of our JV partner. The JV leased the communities back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a floor of 2.0% and a ceiling of 4.0%. Additionally, the JV provided the seller-lessee with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit Internal Rate of Return (“IRR”) of 9.0%. In accordance with GAAP, the communities acquired by the JV are required to be presented as a Financing receivable on our Consolidated Balance Sheets.

67

Table of Contents

Mortgage Loans. As part of our strategy of making long-term investments in properties used in the provision of long-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 convert 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, 20192022 (dollar amounts in thousands):

Type

Percentage

Number of

Investment

Type

Percentage

Number of

Investment

Gross

of

of

SNF

per

Gross

of

of

SNF

ALF

per

Interest Rate (1)

Maturity

Investment

Property

Investment

Loans (2)

Properties (3)

Beds

Bed/Unit

Maturity (1)

State

Investment

Property

Investment

Loans (2)

Properties (3)

Beds

Units

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

7.5%

2023

MO

$

1,886

OTH

0.5

%

1

(4)

$

n/a

7.5%

2024

LA

29,347

SNF

7.5

%

1

1

189

$

155.28

7.8%

2025

FL

14,308

ALF

3.6

%

1

1

68

$

210.41

7.3% (5)

2025

NC/SC

56,317

ALF

14.3

%

1

13

523

$

107.68

7.3%

2026

NC

33,001

ALF

8.4

%

1

4

217

$

152.08

7.3%

2026

NC

797

OTH

0.2

%

1

(6)

$

10.4% (7)

2043

MI

184,351

SNF

46.8

%

1

15

1,875

$

98.32

9.5% (7)

2045

MI

39,026

SNF

9.9

%

1

4

480

  

$

81.30

9.9% (7)

2045

MI

 

19,750

SNF

5.0

%

1

2

201

 

$

98.26

10% (7)

2045

MI

14,875

SNF

3.8

%

1

1

146

$

101.88

Total

$

256,659

100.0

%

4

22

2,892

$

88.75

$

393,658

100.0

%

10

41

2,891

 

808

$

106.42

(1)Subsequent to December 31, 2022, we originated a $10,750 mortgage loan secured by a MC located in North Carolina. The majorityloan carries a two-year term with an interest-only rate of the mortgage loans provide for annual increases in the interest rate after a certain time period based upon a specified increase7.25% and an IRR of 2.25%9.0%.

(2)Some loans contain certain guarantees and/or provide for certain facility fees.

(3)Our mortgage loans are secured by properties located in one statesix states with one borrower.five borrowers.

(4)Represents a mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF.

(5)Represents the initial rate. This loan has an IRR of 8%.

(6)Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community.

(7)Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period.

In general, the mortgage loans may not be prepaid except in the event of the sale of the collateral property to a third-party that is not affiliated with the borrower, although partial prepayments (including theany prepayment premium) are 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-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-existing purchase option, destruction or condemnation, or other circumstances as approved by us. The 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-real estate assets of the properties and contain certain other security provisions in the form of letters of credit and/or security deposits.

8

Table of Contents

Notes Receivable. Our investment in notes receivable consists of mezzanine loans and other loan arrangements. The following table summarizes our investments in notes receivable at December 31, 2022 (dollar amounts in thousands):

Interest

Type of

Gross

Type of

Rate

IRR

Maturity

Loan

Investment

# of loans

Property

5.0%

2023

Working capital

$

380

1

ALF

7.0%

2023

Working capital

500

1

ALF

8.0%

12.0%

2023

Mezzanine

7,460

1

ALF

5.0%

2024

Working capital

184

1

ALF

8.0%

10.5%

2024

Mezzanine

4,355

(1)

1

ILF

4.0%

2024

Working capital

13,531

1

SNF

  

5.0%

2025

Working capital

932

1

ALF

7.5%

2027

Working capital

550

1

ALF

8.0%

11.0%

2027

Mezzanine

25,000

1

ALF

6.5%

2030

Working capital

138

1

SNF

7.1%

2030

Working capital

1,607

2

ALF

7.0%

2031

Working capital

2,693

1

ALF

8.0%

2032

Working capital

1,642

1

SNF

$

58,972

14

(1)Subsequent to December 31, 2022, we received $4,545 which includes a prepayment fee and the exit IRR totaling $190, from a mezzanine loan early payoff. The mezzanine loan was on a 136-unit in Oregon.

Unconsolidated Joint Ventures. From time to time, we provide funding to third-party operators for the acquisition, development and construction (“ADC”) of a property. If 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 venture under the equity method of accounting. The following table summarizes our investment in unconsolidated joint ventures at December 31, 2022 (dollar amounts in thousands):

Total

Contractual

Type

Number

Preferred

Cash

of

of

Carrying

Type of

Return

Portion

State

Investment

Beds/Units

Value

Property

12%

7%

WA

Preferred Equity

95

$

6,340

ALF/MC

12%

8%

WA

Preferred Equity

13,000

(1)

UDP

95

$

19,340

(1)Subsequent to December 31, 2022, we received a notice of intent to redeem our $13,000 preferred equity investment in a joint venture to develop a 267-unit ILF and ALF in Washington. We anticipate receiving $1,675 of additional income in 2023 associated with the redemption representing the 14% exit IRR.

Investment Policies and Strategies

Our investment policy is to invest primarily in income-producing seniors housing and health care properties. Over the past three years, we have underwritten acquisitions ofinvestments in seniors housing communities and health care centers and 4 parcels of land for a total of approximately $265.7$320.7 million. Additionally, during the past three years, we have disposed of properties for a total sales price of $194.7 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.

9

Table of Contents

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;

7

Table of Contents

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-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 provided deal flow opportunities and will continue to provide opportunities for new investments in 2020.2023. 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 or structured 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.

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. Although 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 exceed covered limits or that are not covered, inability of lessees/borrowers to obtain insurance on commercially reasonable terms, bankruptcy of a carrier, or insufficient tail coverage.  For investments in which we own fee simple title to the property and lease it to a third-party tenant, we are a non-possessory landlord and are not responsible for what takes place on such property. Nonetheless, claims including those pertaining to general and professional liability may be asserted against us which may result in costs and exposure for which insurance is not available.

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

8

Table of Contents

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

10

Table of Contents

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

We have elected to be taxed as a REIT under Sections 856 through 860 of 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 U.S. federal income tax provisions on certain specific transactions and property, as well as certain state and local taxes on our income, property or net worth and U.S. federal income and excise taxes on our undistributed income.

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 lawFederal health care reform, including the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”). The Affordable Care Act is designed to expand, has expanded access to affordable health insurance, containreduced health care costs, and institute a variety ofinstituted various 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-

9

Table of Contents

basedvalue-based purchasing program for Medicare skilled nursing facility services; authorized 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-term care services. In addition, the Affordable Care Act impacts both us and

11

Table of Contents

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. President Trump and some members of Congress have called for repeal of the Affordable Care Act and replacement with alternative reforms.sub-regulatory guidance. In 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. While there have been efforts to repeal the law and enact alternative reforms, the Biden Administration has indicated it will support and expand upon the Affordable Care Act. 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 modifications or related 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 sequestration provisions of the Budget Control Act of 2011, as amended, a 2% cut to Medicare payments to providers and health plans cuts generally has applied to Medicare fee-for-service claims 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 2029, although Congress and the Administration could enact legislation to extend or modify sequestration at any 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 required the Secretary of the Department of Health and Human Services to develop a skilled nursing facility “value-based purchasing program” tying Medicare payments to skilled nursing facilities to their performance on certain new readmissions measures, applicable to services furnished beginning October 1, 2018. The Medicare Access and CHIP Reauthorization Act of 2015 set 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.

President Biden, 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. 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-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. In addition, all states have been making changes to their long-term care delivery systems that emphasize home and community-based long-term care services, in some cases coupled with cost-controls for institutional providers. Increasingly, state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to

10

Table of Contents

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 consideringconsidered revising federal payments to state Medicaid programs to establish block grants or impose per capita limits on 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.

12

Table of Contents

With regard to the Medicare program, over the years there have been efforts to contain Medicare fee-for-service spending, promote Medicare managed care, and, more recently, tie reimbursement to quality and value of care. CMS annually updates Medicare skilled nursing facility prospective payment system rates and other policies. On July 31, 2018, CMS issued a final rule updating skilled nursing facility rates and policies for fiscal year 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, 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 issued its final fiscal year 2020 Medicare skilled nursing facility update. Under the final rule, CMS projectsprojected Medicare aggregate payments to skilled nursing facilities willwould increase by $851 million, or 2.4%, for fiscal year 2020 compared with fiscal year 2019. The final rule also addressesaddressed implementation of the Patient-Driven Payment Model case mix classification system that became effective on October 1, 2019, 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,

On April 10, 2020, CMS issued a proposed rule to update SNF rates and policies for fiscal year 2021, which went into effectstarted October 1, 2018,2020, and issued the final rule on July 31, 2020. CMS reduces Medicareestimates that payments to skilled nursing facilitiesSNFs would increase by 2%.$750 million, or 2.2%, for fiscal year 2021 compared to fiscal year 2020. CMS then returns approximately 60%also adopted revised geographic delineations to identify a provider’s status as an urban or rural facility and to calculate the wage index, applying a 5% cap on any decreases in a provider’s wage index from fiscal year 2020 to fiscal year 2021. Finally, CMS also finalized updates to the SNF value-based purchasing program to reflect previously finalized policies, updated the 30-day phase one review and correction deadline for the baseline period quality measure quarterly report, and announced performance periods and performance standards for the fiscal year 2023 program year. On April 8, 2021, CMS issued a proposed rule to update SNF rates and policies for fiscal year 2022, which started October 1, 2021, and issued the final rule on July 29, 2021. CMS estimated that the aggregate impact of the withheld amountpayment policies in the final rule would result in an increase of approximately $410 million in Medicare Part A payments to skilled nursing facilities based on their relative performance onSNFs in fiscal year 2022. The final rule also includes several policies that update the SNF Quality Reporting Program and the SNF Value-Based Program for fiscal year 2022. On April 11, 2022, CMS issued a readmission measure. The remaining portionproposed rule to update SNF rates and policies for fiscal year 2023. CMS estimated that the aggregate impact of the withheld amount will be retainedpayment policies in the Medicare Trust Fund. There can be no assurance that any future reductionsproposed rule would result in a decrease of approximately $320 million in Medicare skilled nursing facility payment rates or other policy changes impactingPart A payments to SNFs in fiscal year 2023 compared to fiscal year 2022. CMS also sought input on the effects of direct care staffing requirements to improve long-term care requirements for participation and promote thoughtful, informed staffing plans and decisions within facilities would not have an adverse effectto meet residents’ needs, including maintaining or improving resident function and quality of life. Specifically, CMS sought input 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 arbitrationestablishing minimum staffing requirements for long-term care facilities. On June 29, 2022, CMS issued updates to guidance on minimum health and safety standards that long-term care facilities must meet to participate in Medicare and Medicaid and updated and developed new guidance in the State Operations Manual to address issues that significantly affect residents of long-term care facilities. On July 29, 2022, CMS issued a final rule to update SNF rates and policies for fiscal year 2023. CMS estimated that the aggregate impact of the payment policies in the final rule would result in an increase of 2.7%, or approximately $904 million, in Medicare Part A payments to SNFs in fiscal year 2023 compared to fiscal year 2022. CMS also finalized a permanent 5% cap on annual wage index decreases to smooth year-to-year changes in providers’ wage index payments. In addition, CMS indicated that it would continue to review the comments it received in response to its request for information on establishing minimum staffing requirements for long-term care facilities, and that it intends to issue proposed rules on a minimum staffing level measure within one year.

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.

Since the announcement of the COVID-19 pandemic and beginning as of March 13, 2020, CMS has issued numerous temporary regulatory waivers and new rules to assist health care providers, including SNFs, in response to the COVID-19 pandemic. These include, waiving the SNFs 3-day qualifying inpatient hospital stay requirement, flexibility in calculating a new Medicare benefit period, waiving timing for completing functional assessments, waiving requirements for health care professional licensure, survey and certification, provider enrollment, and reimbursement for

13

Table of Contents

services performed by telehealth, among many others. CMS also announced a temporary expansion of its Accelerated and Advance Payment Program to allow SNFs and certain other Medicare providers to request accelerated or advance payments in an amount up to 100% of the Medicare Part A payments they received from October–December 2019; this expansion was suspended April 26, 2020 in light of other CARES Act funding relief. The Continuing Appropriations Acts, 2021 and Other Extensions Act, enacted on October 1, 2020, amended the repayment terms for all providers and suppliers that requested and received accelerated and advance payments during the COVID-19 public health emergency. Specifically, Congress gave providers and suppliers that received Medicare accelerated and advance payment(s) one year from when the first loan payment was made to begin making repayments. In addition, CMS enhanced requirements for nursing facilities to report COVID-19 infections to local, state and federal authorities. On January 11, 2023, Department of Health and Human Services (“HHS”) Secretary Becerra announced that he had renewed, effective January 16, 2022, the declared public health emergency for an additional 90-day period.

On March 26, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), sweeping legislation intended to bolster the nation’s response to the COVID-19 pandemic. In addition to offering economic relief to individuals and impacted businesses, the law expands coverage of COVID-19 testing and preventative services, addresses health care workforce needs, eases restrictions on telehealth services during the crisis, and increases Medicare regulatory flexibility, among many other provisions. Notably, the CARES Act temporarily suspended the 2% across-the-board “sequestration” reduction of all Medicare Fee-For-Service (“FFS”) payments under the Medicare program that had previously been in effect since April 1, 2013, for the period May 1, 2020 through December 31, 2020, and extended the current Medicare sequester requirement through fiscal year 2030. In addition, the law provides $100 billion in grants to eligible health care providersfor health care related expenses or lost revenues that are attributable to COVID-19. On April 10, 2020, CMS announced the distribution of $30 billion in funds to Medicare providers based upon their 2019 Medicare fee for service revenues. Eligible providers were required to agree to certain terms and conditions in receiving these grants. In addition, HHS authorized $20 billion of additional funding for providers that have already received funds from the initial distribution of $30 billion. Unlike the first round of funds, which came automatically, providers were required to apply for these additional funds and submit the required supporting documentation, using the online portal provided by HHS. Providers were required to attest to and agree to specific terms and conditions for the use of such funds. HHS expressed a goal of allocating the whole $50 billion proportionally across all providers based on those providers’ proportional share of 2018 net Medicare fee-for-service revenue, so that some providers would not be eligible for additional funds. On May 22, 2020, HHS announced that it had begun distributing $4.9 billion in additional relief funds to SNFs to offset revenue losses and assist nursing homes with additional costs related to responding to the COVID-19 public health emergency and the shipments of personal protective equipment provided to nursing homes by the Federal Emergency Management Agency. On June 9, 2020, HHS announced that it expected to distribute approximately $15 billion to eligible providers that participate in state Medicaid and Children’s Health Insurance Program (“CHIP”) programs and have not received a payment from the Provider Relief Fund General Allocation. On July 22, 2020, President Trump announced that HHS would devote $5 billion in Provider Relief Funds to Medicare-certified long-term care facilities and state veterans’ homes to build nursing home skills and enhance nursing homes’ response to COVID-19, including enhanced infection control. Nursing homes must participate in the Nursing Home COVID-19 training to be qualified to receive this funding. On August 27, 2020, HHS announced that it had distributed almost $2.5 billion to nursing homes to support increased testing, staffing, and personal protective equipment needs. On September 3, 2020, HHS announced a $2 billion performance-based incentive payment distribution to nursing homes and SNFs. Finally, on October 1, 2020, HHS announced $20 billion in new funding for several types of providers, including those who previously received, rejected, or accepted a general distribution provider relief fund payment. The application deadline for these Phase 3 funds was November 6, 2020.

On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (H.R. 133). The $1.4 trillion omnibus appropriations legislation funds the government through September 30, 2021 and was attached to a $900 billion COVID-19 relief package. Of the $900 billion in COVID-19 relief, $73 billion was allocated to HHS. Notably, the bill adds an additional $3 billion to the Provider Relief Fund, includes language specific to reporting requirements, and allows providers to use any reasonable method to calculate lost revenue, including the difference between such provider’s budgeted and actual revenue budget if such budget had been established and approved prior to March 27, 2020. This change reverts to HHS’ previous guidance from June 2020 on how to calculate lost revenues. In addition, the Consolidated Appropriations Act, 2021 also extended the CARES Act’s sequestration suspension to March 31, 2021. On January 15, 2021, HHS announced that it would be amending the reporting timeline for Provider Relief Funds and indicated that it was working to update the Provider Relief Fund requirements to be consistent with the

14

Table of Contents

passage of the Consolidated Appropriations Act, 2021.

On June 11, 2021, HHS issued revised reporting requirements for recipients of Provider Relief Fund payments. The announcement included expanding the amount of time providers would have to report information, aimed to reduce burdens on smaller providers, and extended key deadlines for expending Provider Relief Fund payments for recipients who received payments after June 30, 2020. The revised reporting requirements are applicable to providers who received one or more payments exceeding, in the aggregate, $10,000 during a single Payment Received Period from the PRF General Distributions, Targeted Distributions, and/or Skilled Nursing Facility and Nursing Home Infection Control Distributions. On July 1, 2021, HHS, through the Health Resources and Services Administration (“HRSA”), notified recipients of Provider Relief Fund payments by e-mail that the Provider Relief Fund Reporting Portal was open for recipients who were required to report on the use of funds in Reporting Period 1, as described by HHS’s June 11, 2021 update to the reporting requirements. On September 10, 2021, HHS announced a final 60-day grace period of the September 30, 2021 reporting deadline for Provider Relief Funds exceeding $10,000 in aggregate payments received from April 10, 2020 to June 30, 2020. Although the September 30, 2021 reporting deadline remained in place, HHS explained that recoupment or other enforcement actions would not be initiated during the 60-day grace period, which began on October 1, 2021 and ended on November 30, 2021.

Reporting Period 2, for providers who received one or more payments exceeding $10,000, in the aggregate, from July 1, 2020, to December 31, 2020, was from January 1, 2022, to March 31, 2022. Reporting Period 3, for providers who received one or more payments exceeding $10,000, in the aggregate, from January 1, 2021, to June 30, 2021, was from July 1, 2022, to September 30, 2022. Reporting Period 4, for providers who received one or more payments exceeding $10,000, in the aggregate, from July 1, 2021, to December 31, 2021, opened on January 1, 2023, and extends to March 31, 2023. Reporting Period 5, for providers who received one or more payments exceeding $10,000, in the aggregate, from January 1, 2022, to June 30, 2022, opens on July 1, 2023.

On September 10, 2021, the Biden Administration announced $25.5 billion in new funding for health care providers affected by the COVID-19 pandemic, including $8.5 billion in American Rescue Plan (“ARP”) resources for providers who serve rural Medicaid, CHIP, or Medicare patients, and an additional $17 billion for Phase 4 Provider Relief Funds for a broad range of providers who could document revenue loss and expenses associated with the pandemic, including assisted living facilities that were state-licensed/certified on or before December 31, 2020. Approximately 25% of the Phase 4 allocation was for bonus payments based on the amount and type of services provided to Medicaid, CHIP, and Medicare beneficiaries from January 1, 2019 through September 30, 2020. On December 14, 2021, HHS announced the distribution of approximately $9 billion in Provider Relief Fund Phase 4 payments to health care providers who have experienced revenue losses and expenses related to the COVID-19 pandemic. Further, on January 25, 2022, HHS announced that it would be making more than $2 billion in Provider Relief Fund Phase 4 General Distribution payments to more than 7,600 providers across the country that same week. On March 22, 2022, HHS announced more than $413 million in Provider Relief Fund Phase 4 payments to more than 3,600 providers across the country. On April 13, 2022, HRSA announced the disbursement of more than $1.75 billion in Provider Relief Fund payments to 3,680 providers across the country.

Following prior legislation in 2021 suspending sequestration, on December 10, 2021, President Biden signed the Protecting Medicare and American Farmers from Sequester Cuts Act, which suspended the Medicare 2% sequestration reduction through March 31, 2022, and then reduced the sequestration cuts to 1% from April through June 2022. As of July 1, 2022, cuts of 2% were re-imposed.

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 costs; reimbursement from private payors has in some cases fallen relative to government payors. Governmental and public concern regarding health care costs may result in significant reductions in payment to health care facilities, and

15

Table of Contents

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

11

Table of Contents

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 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 $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.

InsuranceHuman Capital

It is our current policy, and we intend to continue this policy, that all borrowers of funds from us and lessees of anyLTC recognizes the value of our properties secure adequate comprehensive propertyemployees and generalstrives to cultivate a cohesive company culture. We are committed to being a workplace that encourages respect, collaboration, communication, transparency, and professional liability insurance that covers us as well as the borrower and/or lessee. Although we actively monitor andintegrity. We seek to ensure compliancehire employees 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 exceed covered limits or that aren’t covered, inability of lessees/borrowers to obtain insurance on commercially reasonable terms, bankruptcy of a carrier, or insufficient tail coverage.  We contend that as a non-possessory landlord we are not generally responsible for what takes place on real estate we do not possess, claims including generaldiverse backgrounds 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 notperspectives.

1216

Table of Contents

be availableOur success starts and there can be no assuranceends with having the best talent, and as a result, we are focused on attracting, developing and retaining our employees. The average tenure of our employees is more than 10 years with LTC.

We offer employees a competitive and comprehensive benefits package that we believe meets or exceeds market standards. LTC fully pays heath care premiums for employees and all eligible dependents. For qualified employees, we offer a borrower or lessee will have adequate funds401(k) retirement plan with an employer contribution matching program.

We support employees attending industry conferences. For employees with at least one year of service, we grant up to cover all contingencies. If an uninsured loss or a loss in excessthree days leave to take professional licensing examinations. We also pay their annual renewal fees for professional licenses.

As 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-payments and policy limits.

Employees

At December 31, 2019,2022, we employed 2224 people. Our employees are not members of any labor union, and we consider our relations with our employees to be excellent.

Investor Information

We make available to the public free of charge through our internet website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 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 (“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.

The SEC also maintains an internet website that contains reports, proxy statements and other information we file. The internet address of the SEC website is www.sec.gov.

You may contact our Investor Relations Department at:

LTC Properties, Inc.

2829 Townsgate Road, Suite 350

Westlake Village, California 91361

Attn: Investor Relations

(805) 981-8655

17

Table of Contents

Item 1A. RISK FACTORS

This section discusses risk factors that maycould 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 thinkbelieve 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 statements” as discussed above under the heading “Cautionary Statement.Statement on Forward-Looking Statements.” 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.

A FailureRisks Related 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 investmentsBusiness and loans, rental increases and mortgage rate increases.

We May Have Limited Access to Capital At Times, Which Could Cause Our 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. At 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

13Industry

Table of Contents

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.

Income and Returns from Health Care Facilities Can be Volatile. 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. Income from properties and yields from investments in our 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 and Interest Income from Real Estate Investments. Approximately 98.6% of our revenue for the year ended December 31, 2019, was derived from lease and interest income from real 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-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 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 effectsare dependent on our business, results of operationsoperators for revenue and financial condition.cash flow.

We Depend on our Operators For Revenue and Cash Flow.Substantially all of our revenuesrevenue and sources of cash flows from operations are derived from operating lease rentals and interest earned on outstanding financing receivables, loans receivable.receivable and income from our preferred equity investments in unconsolidated joint ventures. Our investments in owned properties, and mortgage loans, mezzanine loans, financing receivables and preferred equity investments represent our primary source of liquidity to fund distributionsdistributions. We do not implement operational decisions with respect to the daily management and marketing of care services offered at our properties. We therefore are dependent upon the performance of theour operators on their lease and loan obligations and the income and rates earned thereon.we earn on leases and loans. A decrease in occupancy and/or increase in operating costs could have an adverse effect on our lessees and borrowers. For example, due to the COVID-19 pandemic and related public health measures, our lessees and borrowers have experienced a decrease in occupancy and an increase in operating costs. There can be no assurance that our lessees and borrowers will have sufficient assets, income, and access to financing to enable them to satisfy, in full, their respective obligations to us. Our financial positioncondition and ability to make distributions maypay dividends could be adversely affected by financial difficulties experienced by any of our lessees or borrowers, or in the event any such operator does not renew and/or extend its relationship with us at similar or better financial terms.

The duration and extent of the effects of the COVID-19 pandemic remains uncertain.

The COVID-19 pandemic and related public health measures have adversely affected our borrowers whenoperations through the affect it expires.

The Bankruptcy, Insolvency or Financial Deteriorationhas had on the financial results 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 overoperators. The operations and occupancy levels at the success or failureseniors housing and health care facilities of our lessees and borrowers have been adversely affected by COVID-19 and could be further adversely affected by COVID-19 or another pandemic especially if there are infections on a large scale at our properties. The impact of COVID-19 has included, and another pandemic could include early resident move-outs, our operators delaying accepting new residents due to quarantines, potential occupants postponing moves to our operators’ businesses. If an operator experiences financial facilities, and/or legal difficulties,hospitals cancelling or significantly reducing elective surgeries thereby reducing the operator may failnumber of people in need of skilled nursing care. Operating costs of our lessees and borrowers also have risen due to make itsthe impact of COVID-19, including cost increases in staffing and pay, purchases of additional personal protective equipment (“PPE”), and implementation of additional safety protocols and higher than normal inflationary pressures.

Additionally, health orders, rent payments when due moratoriums, and other initiatives by federal, state, and local authorities could affect our operators and our ability to collect rent and/or declare bankruptcy, either ofenforce remedies for the failure to pay rent. The extent to which COVID-19 or another pandemic could result in the termination of the operator’s leaseimpact our operations 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, fourthose of our operators have hadwill depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, spread and severity of the pandemic, the actions taken to contain the pandemic or continuemitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. Further, if COVID-19 results in an extended adverse trend away from seniors housing and health care facilities to have financial or legal difficulties resulting in non-paymentat-home and alternative care services, the occupancy rates of rent or bankruptcy. See Item 7. Management’s Discussionour operators and Analysisthe value 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 mayour real estate investments could 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

14negatively impacted.

Table of Contents

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-termhealth 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-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 Regulatedheavily regulated by the Governmentgovernment.

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

18

Table of Contents

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, repeal or repeal.expansion. 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.

Federal and State Health Care Cost Containment Measures Including Reductionsstate health care cost containment measures including reductions in Reimbursement From Third-Party Payors Suchreimbursement from third-party payors such as Medicare and Medicaid Could Adversely Affect Uscould adversely affect us and The Abilitythe ability of Our Operatorsour operators to Make Paymentsmake payments to Us.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. 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. 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. The Trump Administration and Congress are also considering revising federal payments to state Medicaid programs to establish block grants or impose per capita limits on federal Medicaid payments to 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

15

Table of Contents

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 materialan 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.

Required regulatory approvals could delay operation of health care facilities. 

Operators of skilled nursing and other health care facilities must be licensed under applicable state law and, depending upon the type of facility, certified or approved under the Medicare and/or Medicaid programs. A new operator in certain states also must receive change-of-ownership approvals under certificate of need laws. Delays in an operator receiving regulatory approvals from the applicable federal, state, or local government agencies, or the inability of an operator to receive such approvals, could prolong the period during which we are unable to receive lease or loan payments. We also could incur expenses in connection with any licensing, certification, or change-of-ownership proceedings. 

Failure to comply with federal, state, or local regulations could prohibit operation of health care facilities.

The failure of our operators to comply with federal, state, or local regulations could result in penalties which could include loss or restriction of license, loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from federal and state health care programs, or closure of the facility. These regulations have increased in response to COVID-19. The loss or imposition of restrictions on any required license, registration, certificate of need, provider agreement or certification would prevent a facility from operating in the manner intended by the operator. Additionally, failure by any of our operators to comply with applicable laws and regulations could result in adverse publicity and reputational harm, and therefore could harm our business. 

Insurance Coverage Maintainedcoverage maintained by Our Borrowers and Lessees May Not Adequately Insure Against Losses.our operators could be inadequate to protect against contingencies.

Operators of health care facilities may become subject to claims that their services have resulted in injury or other adverse effects. For example, due to the enhanced danger to senior citizens, COVID-19 infections at our properties

19

Table of Contents

could lead to increased legal claims against our operators. As a non-possessorynon-possessory landlord, we contend we are not generally responsible for what takes place on real estateat properties we do not possess. Although we require our borrowers and lesseesoperators to secure adequate comprehensive liability insurance that covers us as well as the borrower or lessee,operator, we maycould be subject to losses due to noncompliance or insufficient coverage. In addition, certain risks maycould be uninsurable not economically insurable or insurance may not be available.unavailable. There can be no assurance that we a borrower or lesseeour operators 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 revenue from a property.

We rely on a few major operators.

During the year ended December 31, 2022, approximately 33.4% of our revenues from a property, thereby reducing a property’sleases and interest income from real estate investments were generated from three operators. The failure, inability, or unwillingness of any of these operators to meet their obligations to us could materially reduce our cash flow and asset value.as well as our results of operations.

Inflation could adversely impact the operating expenses of our tenants.

We Could Incur More Debt.Inflation, both real or anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services to our tenants. Because tenants are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not directly affect us. Increased operating costs could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us. An increase in our tenants’ expenses and a failure of their revenues to increase at least with inflation could adversely impact our tenants’ and our financial condition and our results of operations.

We operateInflation could rise at rates that outpace contractual or actual increases in rental income.

Our long-term leases and loans typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation. However, in 2021 we provided deferred and abated rent to certain operators and reduced 2021 rent and interest escalations by 50% to support eligible operators during the continuing COVID-19 crisis. If the contractual or actual increases in rental income we receive from our operators do not keep pace with a policyrise in inflation, our financial condition and our results of incurring debt when, inoperations could be adversely impacted.

We maybe unable to renew leases, or the opinionterms of renewals or new leases could be less favorable than current leases.

Approximately 73.2% of our Board of Directors, it is advisable. We may incur additional debt by borrowing under our unsecured revolving line of credit, mortgaging propertiesrevenue for the year ended December 31, 2022, was derived from operating lease rentals. There can be no assurance that a lessee will operate its lease through expiration or that a lessee will exercise an option to renew its lease upon expiration. In such scenarios, there can be no assurance that we own and/would be able to find a suitable replacement operator, re-lease the property on substantially equivalent or issuing debt securities in a public offeringbetter terms than the prior lease, if at all. Additionally, to retain current or in a private transaction. Accordingly,attract new operators, we could become more highly leveraged. The degree of leverage could have important consequencesbe asked to stockholders, including affecting our ability to obtain, in the future, additional financing for working capital,provide rent concessions or undertake capital expenditures acquisitions, developmentto improve properties.

20

Table of Contents

Operator financial or legal difficulties could delay or prevent collection of rent.

If a lessee experiences financial or legal difficulties, it could fail to pay us rent when due, assert counterclaims, or seek bankruptcy protection. In the case of a master lease, this risk is magnified, as a default could reduce or eliminate rental revenue from several properties. Over the past three years, five 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. Additionally, the COVID-19 pandemic has caused, and depending on its scope and duration could continue to cause, financial and legal difficulties for certain of our lessees. If an operator is unable to comply with the terms of its leases, we could be asked to defer rent or be forced to modify the leases in ways that are unfavorable to us. Alternatively, the failure of an operator to perform its obligations under a lease or other general corporate purposesagreements with us could force us to declare a default and making us more vulnerable to a downturn in business orterminate 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 atlease. There can be no assurance that time, if a new method of calculating LIBOR willwe would 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 availablefind a suitable replacement operator, re-lease the property on substantially equivalent 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-line Rent Receivable Asset. U.S. generally accepted accounting principles (“GAAP”) requires us to calculate the total rent we will receive from 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 straight-line basis over the minimum lease period. If the lease income is calculated on a straight-line basis during the life of the lease, rental income recorded in the early years of a lease is higherbetter terms than the actual cash rent received which creates an asset onprior lease, if at all. If a lessee seeks bankruptcy protection, it could delay our efforts to collect past due amounts owed to us under the consolidated balance sheet called straight-line rent receivable. At some point during theapplicable lease depending on the rent levels and terms, this reverses and the cash rent payments received during the later yearsultimately preclude collection of the lease are higher than the rental income recognized which reduces the straight-line rent receivable balance to zero by the end of the lease. 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 the lease payments through maturity is not probable, all or a portion of those amounts.

Collateral securing mortgage loans could be insufficient.

If a borrower defaults under a mortgage loan, we could be obligated to foreclose on or otherwise protect our investment by acquiring title to the straight-line rent receivableproperty. In such a scenario, the borrower could contest enforcement of foreclosure, assert counterclaims, or seek bankruptcy protection. This could limit or delay our ability to recover unpaid principal and/or interest and exercise other lease receivables may be written-off,rights and remedies. Declines in the rental income recorded during the period would be limited to lesservalue of the income that would have been recognizedproperty could prevent us from realizing an amount equal to our investment. Additionally, it could be difficult to expeditiously find a suitable replacement operator, if collection were probable, andat all, or otherwise successfully operate or occupy the lease payments received. property, which could adversely affect our ability to recover our investment.

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.real estate investments could become impaired.

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

16

Table of Contents

an impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset which could have a materialan adverse effect on our results of operations in the period in which the write-off occurs.

Our real estate investments are relatively illiquid and could be difficult to sell for book value.

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. The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, and other factors, including supply and demand, that are beyond our control. All of our real estate investments are special purpose properties that cannot be readily converted to other health care related services, general residential, retail, or office use. Transfers of operations of health care facilities are subject to regulatory approvals not required for transfers of other types of commercial operations and other types of real estate. If the operation of any of our properties becomes unprofitable or a lessee or borrower becomes unable to meet its obligations on the lease or mortgage loan, the liquidation value of the property could 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.

Development and construction risks could affect the profitability and completion of properties.

Our business includes development and construction of seniors housing and health care properties. Construction and development projects involve risks such as the following:

development of a project could be abandoned after expending significant resources resulting in the loss of deposits or failure to recover expenses already incurred;

21

A FailureTable of Contents

development and construction costs of a project could exceed original estimates due to increased interest rates and higher materials, transportation, labor, leasing, or other costs, which could make completion less profitable;
financing for a project could be unavailable on favorable terms or at all;
project delays could 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, and regulatory hurdles; and
occupancy rates and rents at a newly completed property could fail to meet expected levels and could be insufficient to make the property profitable.

We may be unable to Reinvest Cash Availableinvest cash proceeds due to Us Could Adversely Affect Our Future Revenues and Our Ability to Increase Dividends to Stockholders; There is Considerable Competition in Our Marketcompetition for Attractive Investments.health care properties.

From time to time, we will have cash available from (1) proceedsthe sale of sales of shares of securities, (2) proceeds from newequity and debt issuances, (3) principal payments on our mortgages and other investments, (4)capital, sale of properties, and (5) funds from operations. WeWith these cash proceeds, we may reinvest this cashseek to invest in health care investmentsproperties as part of our business and in accordance with our investment policies, repay outstanding debt or invest in qualified short-term or long-term investments.growth strategy. We compete for real estatehealth care property investments with a broad varietydevelopers, public and private REITs, and other investors, some of potential investors.whom may have greater financial resources than us. The competition for attractive investments negatively affectshealth care properties could affect our ability to make timely investments on acceptable terms. Delays in acquiring properties or making loans will negatively impact revenues and perhapsterms, which could adversely affect our ability to increase distributionsgrow or acquire properties profitably or with attractive return.

Our operators face competition providing seniors housing and health care services.

The business of providing seniors housing and health care is highly competitive. Our operators compete with other companies providing similar 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 operators 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 operators 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 lease or loan payments to us.

Risks Related to Our Status as a REIT

Our failure to qualify as a REIT would have serious adverse consequences 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 for taxable years ending prior to January 1, 2018) on our taxable income at regular corporate rates. We note that REITs are specifically excluded from the application of the corporate alternative minimum tax that was enacted as part of the Inflation Reduction Act of 2022 (H.R. 5376). 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

22

Table of Contents

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 ChangesLegislation, new regulations, administrative interpretations and/or court decisions could occur at any time and significantly change the tax laws with respect to our qualification as a REIT or the federal income tax consequences of such qualification. We cannot predict if or when any new or amended law, regulation, administrative interpretation, or case will be adopted, promulgated, decided or become effective, and any such change may apply retroactively. The last significant legislation affecting REITs was The Tax Cuts and Jobs Act, effective for tax years beginning in 2018. We and our security holders may be adversely affected by any new or amended law, regulation, administrative interpretation, or case law.

Prospective investors are urged to consult with their tax advisors with respect 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 asimpact of the Tax Cuts and Jobs Act (the “TCJA”) was signed into law making significant changesand any other regulatory, administrative or judicial developments and proposals and their potential effect on an investment in our securities.

Risks Related to Our Capital Structure

Limited access to capital could affect our growth.

As a REIT, we are required to distribute at least 90% of our taxable income. Our growth therefore is generally through the investment of new capital in real estate assets. As of December 31, 2022, we had $10.4 million of cash on hand and $270.0 million available under our unsecured revolving line of credit. We also have the ability to access the capital markets through the issuance of $130.6 million of common stock under our equity distribution agreements and an indeterminate amount through the issuance of debt and/or equity securities under an automatic shelf registration statement. We currently believe our liquidity and various sources of available capital are sufficient to fund operations and development commitments, meet debt service obligations, make dividend distributions, and finance potential investments. In the future, however, our ability to access the equity and/or debt markets could be limited. During such times, most of our available capital would be required to meet existing commitments. Limited access to the Code. Relevant changesequity and/or debt markets could negatively impact our growth if we are unable to obtain additional capital, dispose of assets on favorable terms, or acquire health care properties on a competitive basis.

We could incur more debt.

We operate with a policy of incurring debt when it is advisable in the opinion of our Board of Directors. As of December 31, 2022, our indebtedness represented approximately 37.4% of our gross assets. We could incur additional debt by borrowing under our unsecured revolving line of credit, mortgaging properties we own, and/or issuing debt securities in public offerings or private transactions. The degree of indebtedness could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or other corporate purposes and make us more vulnerable to a downturn in business or the economy generally.

Covenants related to our indebtedness could limit our operations.

The terms of our current indebtedness as well as debt instruments that we enter into in the future are subject to customary financial and operational covenants. These include but are not limitedrequiring us to maintain debt service coverage, leverage ratios, and minimum net worth requirements. We may be unable to maintain compliance with these covenants and, if we fail to do so, we may be unable to obtain waivers and/or amend the following:covenants. If some or all of our debt is accelerated and becomes immediately due and payable, we may be unable repay or refinance the debt. Our continued ability to incur debt and operate our business is subject to compliance with these covenants, which could limit operational flexibility.

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.

An increase in market interest rates could increase our debt cost and impact our stock price.

We have entered into debt obligations, such as our unsecured revolving line of credit and term loans, with interest and related payments that vary with the movement of certain indices. In the future, we could incur additional indebtedness in connection with the entry into new credit facilities or the financing of acquisitions or development activity. If market interest rates increase, so could our interest costs. This could make the financing of any acquisition

1723

Table of Contents

Whilemore costly. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. Further, the changesdividend yield on our common stock will influence its price. An increase in market interest rates could lead prospective purchasers of our common stock to expect a higher dividend yield, which could adversely affect the market price of our common stock.

Ownership through partnerships and joint ventures could limit property performance.

We have in the TCJA generally appear to be favorable with respect to REITs, the extensive changes to non-REIT provisionspast and may in the Code may have unanticipated effects on us future develop and/or our stockholders. Moreover, Congressional leaders have recognized that the processacquire properties in partnerships and similar joint ventures, including those in which we own a preferred interest, when we believe circumstances warrant this type 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 isinvestment. Our organizational documents do 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 andlimit the amount of distributionsavailable funds that we can invest in partnerships or other joint venture structures.As of December 31, 2022, we had six active joint ventures with a total LTC equity investment of $141.0 million. Investments in partnerships and joint ventures, including limited liability companies, involve risks such as the following:

our partners could become bankrupt, in which event we and any other remaining partners would generally remain liable for the liabilities of the venture;
our partners could have economic or other business interests or goals which are inconsistent with our business objectives;
our partners or co-members could be in a position to take action contrary to our instructions, requests or objectives, including our policy with respect to maintaining our qualification as a REIT; and
governing agreements often contain restrictions on the transfer of an interest or “buy-sell” or other provisions which could result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms.

We generally will seek to maintain sufficient control of a partnerships or joint venture to permit us to achieve our business objectives. However, in the event that it fails to meet expectations or becomes insolvent, we could lose our investment in the partnership or joint venture.

Risks Related to Our Stock

A failure to maintain or increase our dividend could reduce the market price of our common stock.

The decision to declare and pay dividends on our common stock, as well as the timing, amount, and composition of any future dividends, will be at the sole discretion of our Board of Directors. The ability to maintain or raise the dividend on our common stock 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. Any change in our dividend policy could have an adverse effect on the market price of our common stock.

Your ownership percentage in our common stock could be diluted.

From time to time, we could issue additional shares of our common stock in connection with sales under our equity distribution agreement or other capital market transactions. These issuances could cause your percentage ownership in our common stock to be diluted in the future and could have a dilutive effect on our earnings per share and reduce the value of our common stock. Additionally, our charter authorizes us to issue, without the approval of our stockholders, required in order to maintainone or more classes or series of preferred stock having such designations, powers, privileges, preferences, including preferences over our REIT status,common stock respecting dividends and ourdistributions, terms of redemption and relative tax advantage as a REIT, may significantly change. The long-term impactparticipation, optional or other rights, if any, of the TCJA onshares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as our Board of Directors determines. The terms of one or more classes or series of preferred stock could dilute the overall economy, government revenues, our tenants, us, andvoting power or reduce the real estate industry cannot be reliably predicted at this early stage of the new law’s implementation. Furthermore, the TCJA may negatively impact certainvalue of our tenants’ operating results, financial condition, and future business plans. The TCJA may also resultcommon stock.

24

Table of Contents

Provisions in reduced government revenues, and therefore reduced government spending, which may negatively impact someour charter limit ownership of shares 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.stock.

Provisions in Our Articles of Incorporation May Limit Ownership of Shares of Our Capital Stock. In order for us to qualify as a REIT, noNo more than 50% in value of the outstanding shares of our stock maya REIT can 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 Incorporationcharter provide that, subject to exceptions, no person mayis permitted to 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 maycould decide to 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 itunless doing so would result in the termination of our status as a REIT. Shares of capitalour 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,Additionally, acquisition of any shares of capitalour stock that would result in our disqualification as a REIT may be limited or void. The 9.8% ownership limitation also maycould have the effect of delaying, deferring, or preventing a change in control of us, including an extraordinary transaction (such as a merger or acquisition or tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our capital stock.

Maryland law could increase the difficulty of acquiring us.

 Provisions of Maryland law, our charter, and our bylaws could have the effect of discouraging, delaying, or preventing transactions that involve an actual or threatened change in control. These provisions include the following:

The Maryland Business Combination Act provides that unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10% or more of its assets, certain issuances of shares of stock, and other specified transactions, with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10% or more of the voting power of the outstanding stock of a Maryland corporation. Our Board of Directors has not exempted us from this statute.
The Maryland Control Share Acquisition Act provides that “control shares” of a corporation acquired in a control share acquisition shall have no voting rights except to the extent approved by the stockholders by a vote of two-thirds of the votes eligible to be cast on the matter under the Maryland Control Share Acquisition Act. “Control Shares” means shares of stock that, if aggregated with all other shares of stock previously acquired by the acquiror, would entitle the acquiror to exercise voting power in electing directors within certain ranges. If voting rights of control shares are not approved at a stockholder’s meeting, then subject to certain conditions and limitations, the issuer may redeem any or all of the control shares for fair value. Our bylaws contain a provision by which we have opted-out of the Maryland Control Share Acquisition Act. However, we could, by resolutions adopted by our Board of Directors and without stockholder approval, elect to become subject to the Maryland Control Share Acquisition Act. 

These and other provisions of Maryland law could increase the difficulty of acquiring us, even if the acquisition would be in the best interests of our stockholders.

General Risk Factors

We are dependent on key personnel. 

Our Real Estate Investments are Relatively Illiquid.three executive officers and other senior officers have a significant role in our success. Our ability to retain our management group or to attract suitable replacements should any member of the management group leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely affect our business and could be negatively perceived in the capital markets.

Real estateOur investments are relatively illiquidconcentrated in a single sector.

Our investments are concentrated in health care properties. A downturn in the health care property sector could have a greater adverse effect on our business and therefore, tend to limit our ability to vary our portfolio promptlyfinancial condition than if we had investments in response to changesmultiple industries and sectors. A downturn 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. Healththe 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, limitingproperty sector also could adversely impact the ability of the facilityour operators 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-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 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.

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

1825

Table of Contents

additional investments through these venturesmeet their obligations to us and maintain residents and occupancy rates. Additionally, a downturn in the future. Partnership or limited liability company investments may involve risks such ashealth care property sector could adversely affect the following:

our partners or co-members might become bankrupt (in which event we and any other remaining general partners or members would generally remain liable for the liabilities of the partnership or limited liability company);
our partners or co-members might at any time have economic or other business interests or goals which are inconsistent with our business interests or goals;
our partners or co-members may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT; and
agreements governing limited liability companies and partnerships often contain restrictions on the transfer of a member’s or partner’s interest or “buy-sell” or other provisions which may result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms.

We will, however, generally seek to maintain sufficient controlvalue of our partnershipsproperties and limited liability companiesour ability to permitsell properties at prices or on terms acceptable to us.

Disruptions in the capital markets could affect the price of our common stock and our ability to obtain financing

The United States capital markets could experience significant price volatility, dislocations, and liquidity disruptions, due to global economic impact and infectious disease outbreaks. This has caused market prices of many securities, including our common stock, to fluctuate substantially. Uncertainty in the stock and credit markets could negatively impact our ability to access financing at reasonable terms, which could negatively impact our ability to acquire properties and otherwise pursue our investment strategy. A prolonged downturn in the stock or credit markets could cause other unknown negative impacts on us and the economy.

Catastrophic weather and natural disasters could affect our properties.

Some of our properties are located in areas susceptible to achievecatastrophic weather and natural disasters, including fires, snow or ice storms, windstorms or hurricanes, earthquakes, flooding, or other severe conditions. Adverse weather and natural events could cause damage to our business objectives. Our organizational documents do not limitproperties. If our operators suffer losses from catastrophic weather or natural disasters, we could lose our invested capital and anticipated future revenue from the amountproperty.

We could incur costs associated with hazardous substances and contamination.

Under various federal, state, and local environmental laws, owners or operators of available funds that we may invest in partnershipsreal estate could be required to investigate and remediate the effects of contamination of currently or limited liability companies. The occurrenceformerly owned real estate by hazardous substances, often regardless of oneknowledge of or moreresponsibility for the contamination. Although our operators are primarily responsible for the condition of the events described aboveproperty they occupy, we also could havebe held liable to a directgovernmental authority or to third parties for property damage, personal injuries, and adverse impact on us.for investigation and clean-up costs incurred in connection with the contamination or we could be required to incur additional costs to change how the property is constructed or operated due to presence of such substances. The presence of hazardous substances or a failure to properly remediate any resulting contamination could adversely affect our ability to lease, mortgage, or sell an affected property.

Risks Associated with Property Development that Can Render a Project Less ProfitableInformation technology failures or Not Profitable,data breaches could harm our business.

We and Under Certain Circumstances, Prevent Completion of Development Activities Undertaken. Our business includes development of seniors 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;
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. Weoperators 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.data, and other confidential information. We purchase someare not aware of any material losses to our business or results of operations due to information technology from vendors, on whom ourfailures, data breaches, or cyber-attacks. However, information technology systems depend. We rely on commercially available systems, software, tools and monitoringare vulnerable to provide security for processing, transmission and storage of confidential operator and other customer information, such as individually identifiable information, including information relatingfailure, breaches, or attacks due 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 improperand unauthorized 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

Table of Contents

breaches of our or our operators’ networks and systems, includingfrom physical or electronic break-ins, computer viruses, attacks and similar disruptions, including by hackers, foreign governments, and cyber terrorists. This risk has increased since the outbreak of the COVID-19 pandemic as we and our operators have increased reliance on information technology. We and our operators also rely on numerous third-party providers for information technology services, and we and our operators face similar breaches, can create system disruptions, shutdownsrisks relating to these providers. We cannot be certain that their information security protocols are sufficient to withstand a data breach or unauthorized disclosure of confidential information. Any failurecyber-attack. The inability 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, whichcosts. Further, an information technology failure, data breach, or cyber-attack on an operator could have a material adverse effect on our business, results ofimpact their operations and financial condition.ability to perform under the terms of their lease with us. While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of information security risks, such insurance coverage may be insufficient to cover all losses. As information security risks continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and to investigate and remediate any information security vulnerabilities.

Data privacy security failures or breaches could expose us to regulatory and other liability.

We and our operators are subject to various federal and state laws governing privacy and security of personally identifiable information. Despite safeguards by us and our operators, a data privacy security failure or breach could occur

26

Table of Contents

as a result of unintentional or deliberate acts to obtain unauthorized access to information, or to destroy, manipulate, or sabotage data. Information technology failures or data breaches also could result in the loss or release of personally identifiable information. A privacy or security failure or breach could cause a loss of business, regulatory enforcement, substantial legal liability, and reputational harm. Where the failure or breach affects an operator, this could jeopardize the operator’s ability to fulfill its obligations to us. Further, the adoption of new privacy and security laws at the federal and state level could require us and our operators to incur significant compliance costs.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

2027

Table of Contents

Item 2. PROPERTIES

Here and throughout this Annual Report on Form 10-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-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-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, 20192022 (dollars amounts in thousands):

  

  

  

  

  

  

Remaining

  

 

  

  

  

  

  

  

Remaining

  

 

No. of

No. of

No. of

No. of

Lease

Gross

 

No. of

No. of

No. of

No. of

Lease

Gross

 

Location

SNFs

ALFs

Others

Beds/Units

Encumbrances

Term (1)

Investments

 

ALFs

SNFs

Others

Beds/Units

Encumbrances

Term (1)

Investments

 

Alabama

 

1

 

 

174

$

76

$

9,734

 

 

1

174

$

40

$

9,734

Arizona

 

4

 

 

807

 

49

 

32,667

 

 

3

613

 

20

 

28,496

California

 

2

 

5

 

755

 

104

 

103,240

 

3

 

1

402

 

70

 

69,685

Colorado

 

3

 

13

 

980

 

84

 

114,923

 

13

 

705

 

58

 

104,795

Florida

 

4

 

7

 

823

 

66

 

72,169

 

6

 

4

762

 

36

 

67,816

Georgia

 

 

1

 

70

 

18

 

14,382

 

1

 

70

 

18

 

14,493

Illinois

 

 

5

 

418

 

140

 

87,604

 

5

 

418

 

101

 

88,347

Iowa

 

7

 

 

544

 

(2)

 

14,610

Kansas

 

3

 

8

 

681

 

84

 

71,505

 

8

 

431

 

72

 

57,928

Kentucky

 

2

 

1

 

346

 

156

 

62,715

 

1

 

2

346

 

105

 

61,731

Michigan

 

 

2

 

(3)

156

 

114

 

20,083

 

2

 

(2)

156

 

92

 

22,387

Mississippi

 

 

1

 

62

 

60

 

9,430

 

1

 

67

 

18

 

9,452

Missouri

1

1

163

102

40,379

(4)

1

2

253

90

52,952

Nebraska

 

 

4

 

159

 

141

 

10,104

 

3

 

117

 

7

 

7,633

Nevada

1

118

62

10,416

1

118

26

10,975

New Jersey

 

 

4

 

205

 

98

 

62,146

 

4

 

205

 

57

 

62,832

New Mexico

 

7

 

 

843

 

73

 

50,912

 

 

7

843

 

37

 

50,912

N. Carolina

 

 

5

 

210

 

12

 

13,096

 

5

 

210

 

12

 

14,318

Ohio

 

2

 

7

 

580

 

149

 

86,474

 

7

 

2

580

 

99

 

87,569

Oklahoma

 

 

6

 

219

 

12

 

12,315

 

6

 

219

 

12

 

13,080

Oregon

 

1

 

1

 

188

 

51

 

33,408

(5)

 

2

 

1

266

 

77

 

38,279

Pennsylvania

 

 

2

 

129

 

141

 

9,714

 

2

 

130

 

7

 

9,744

S. Carolina

 

2

 

5

 

515

 

35

 

48,155

 

5

 

2

515

 

32

 

49,735

Tennessee

 

2

 

 

141

 

48

 

5,275

 

 

2

141

 

12

 

5,275

Texas

 

23

 

17

 

4,033

 

92

 

284,697

 

17

 

20

3,268

 

36

 

327,490

Virginia

 

4

 

1

 

574

 

86

 

47,104

 

 

4

500

 

37

 

30,209

Washington

 

1

 

 

123

 

19

 

8,024

Wisconsin

 

1

 

10

 

954

 

129

 

149,290

 

7

 

1

690

 

86

 

114,838

TOTAL

 

70

 

106

 

1

14,970

$

96

$

1,484,571

 

99

 

52

1

12,199

$

59

$

1,410,705

(1)Weighted average remaining months in lease term as of December 31, 2019.2022.

(2)Relates to 7 SNFs totaling 544 beds operated by Preferred Care, Inc. (“Preferred Care”) lease. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsExecutive OverviewPortfolio OverviewUpdate on Certain Operators for further discussion.

(3)Includes three parcels of land held-for-use.

(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.

2128

Table of Contents

The following chart represents the 10 states with the highest percentage of gross investment for our owned properties as of December 31, 2019:2022:

GraphicGraphic

The following table sets forth certain information regarding our lease expirations for our owned properties as of December 31, 20192022 (dollars amounts in thousands):

    

    

    

    

    

    

Annualized

    

% of Annualized

    

    

    

    

    

    

Annualized

    

% of Annualized

No. of

No. of

No. of

No. of

No. of

Rental

Rental Income

No. of

No. of

No. of

No. of

No. of

Rental

Rental Income

Year

SNFs

ALFs

Others

Beds/Units

Operators

Income (1)

Expiring

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

%

2023 (2)

 

4

 

43

 

 

2,234

 

6

$

19,143

 

16.4

%

2024

 

3

 

11

 

 

1,140

 

2

5,140

 

3.8

%

 

14

 

14

 

 

2,775

 

4

8,359

 

7.2

%

2025

 

6

 

1

 

1

 

981

 

2

9,087

 

6.8

%

 

6

 

1

 

1

 

981

 

2

9,120

 

7.8

%

2026

 

13

 

 

 

1,678

 

2

16,429

 

12.2

%

 

15

 

 

 

1,889

 

3

18,072

 

15.5

%

2027

 

 

9

 

 

611

 

3

11,257

 

8.4

%

 

 

9

 

 

611

 

3

11,341

 

9.8

%

2028

 

 

3

 

 

177

 

2

2,873

 

2.1

%

 

1

 

1

 

 

188

 

2

1,965

 

1.7

%

2029

 

1

 

11

 

 

1,098

 

8

10,314

 

7.7

%

 

2

 

4

 

 

656

 

4

7,311

 

6.3

%

2030

 

1

 

9

 

 

668

 

3

8,715

 

7.5

%

2031

 

 

17

 

 

1,146

 

3

15,316

 

13.2

%

2032

 

5

 

 

 

429

 

2

5,843

 

5.0

%

Thereafter

 

16

 

34

 

 

4,237

 

5

57,562

 

42.8

%

 

4

 

 

 

574

 

1

11,195

 

9.6

%

TOTAL

 

48

(2)

106

1

 

12,463

(2)

$

134,371

(2)

100.0

%

 

52

98

(3)

1

 

12,151

(3)

$

116,380

100.0

%

(1)IncludesRepresents annualized contractual GAAP rent for leased properties, exceptexcluding variable rental income from lessee reimbursement of our real estate taxes for two master leases which are based on agreed upon cash rents.investments as of December 31, 2022.

(2)Excludes 22Subsequent to December 31, 2022, a master lease covering two SNFs operated by Preferred Care totaling withthat was scheduled to mature in 2023 was renewed at the contractual rate for another five years extending the maturity to November 2028. The centers have a total of 2,507 beds. 20 of these properties216 beds and are held-for-sale at December 31, 2019. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsExecutive OverviewPortfolio OverviewUpdate on Certain Operators for further discussion.located in Florida.

(3)Excludes a 48-unit closed ALF located in Colorado.

2229

Table of Contents

Mortgage Loans. The following table sets forth certain information regarding our mortgage loans as of December 31, 20192022 (dollars amounts in thousands):

   

   

   

   

   

   

Average

   

Original

   

   

Current

 

   

   

   

   

   

   

Average

   

Original

   

   

Current

 

No. of

No. of

No. of

No. of

Interest

Months to

Face Amount

Gross

Annual Debt

 

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)

 

SNFs (1)

ALFs (1)

OTHs (1)

Beds/ Units

Rate

Maturity

of Mortgage Loans

Investments

Service (2)

 

Michigan (2)

 

22

 

 

 

2,892

 

9.2%-9.9%

292

$

258,171

$

256,659

$

25,007

Florida

1

68

7.75%

32

$

13,123

$

14,308

$

1,101

Louisiana

 

1

 

 

 

189

 

7.5%

  

21

 

27,347

 

29,347

 

2,232

Michigan

 

22

 

 

 

2,702

 

9.6%-10.6%

256

264,370

258,003

26,657

Missouri

7.5%

6

1,886

1,886

143

North Carolina (3)

16

695

7.25%

37

81,437

85,328

6,394

South Carolina (3)

1

45

7.25%

35

4,529

4,786

360

TOTAL

 

22

 

 

 

2,892

292

$

258,171

$

256,659

$

25,007

 

23

 

18

 

 

3,699

179

$

392,692

$

393,658

$

36,887

(1)Consists of ten mortgage loans in six states with five borrowers.

(2)Includes principal and interest payments.

(2)(3)Consists of fourRepresents a single mortgage loans with one borrower that contain cross collateral and cross default provisions.loan secured by 13 ALFs. The mortgage loan was allocated by state for reporting purposes only.

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-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.

Item 4. MINE SAFETY DISCLOSURES

Not applicable

PART II

Item 5. MARKET 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”.

Holders

As of February 19, 2020,9, 2023, we had approximately 365402 holders of our common stock, as determined by counting our record holders and the number of participants reflected in a security position listing provided to us by the Depository Trust Company. Because such “DTC participants” are brokers and other institutions holding shares of our common stock on behalf of their customers, we do not know the actual number of unique stockholders represented by these record holders.

2330

Table of Contents

Dividend

We declared and paid total cash distributions on common stock as set forth below:

Declared

Paid

 

Declared

Paid

 

2019

2018

2019

2018

 

2022

2021

2022

2021

 

First quarter

  

$

0.57

  

$

0.57

  

$

0.57

  

$

0.57

  

$

0.57

  

$

0.57

  

$

0.57

  

$

0.57

Second quarter

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

Third quarter

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

Fourth quarter

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

2.28

$

2.28

$

2.28

$

2.28

$

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.

Issuer Purchases of Equity Securities

None.

2431

Table of Contents

Stock Performance Graph

The National Association of Real Estate Investment Trusts (“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%approximately 70% during 2019.2022.

This graph compares the cumulative total stockholder return on our common stock from December 31, 20142017 to December 31, 20192022 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, 20142017 in our common stock and in each of the foregoing indices and assumes the reinvestment of dividends.

GraphicGraphic

Period Ending

 

Period Ending

 

Index

12/31/14

12/31/15

12/31/16

12/31/17

12/31/18

12/31/19

 

12/31/17

12/31/18

12/31/19

12/31/20

12/31/21

12/31/22

 

LTC Properties, Inc.

$

100.00

$

104.80

$

119.52

$

116.22

$

117.55

$

132.58

$

100.00

$

101.12

$

114.06

$

105.44

$

98.30

$

108.65

NAREIT Equity

$

100.00

$

103.20

$

111.99

$

117.84

$

112.39

$

141.61

$

100.00

$

95.38

$

120.17

$

110.56

$

158.36

$

119.77

S&P 500

$

100.00

$

101.38

$

113.51

$

138.29

$

132.23

$

173.86

$

100.00

$

95.62

$

125.72

$

148.85

$

191.58

$

156.88

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.

Item 6. Reserved

2532

Table of Contents

Item 6. SELECTED 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.

2019

2018

2017

2016

2015

 

(In thousands, except per share amounts)

 

Operating information:

    

    

    

    

    

    

    

    

    

    

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

(1)Decrease due to a lower gain on sale, an impairment loss from investment in unconsolidated joint ventures during 2019, and a one-time non-recurring other income related to the write-off of a contingent lease incentive and related earn-out liability in 2018, partially offset by higher rental income and gain on property insurance proceeds. See Item 7. Management’s Discussion and Analysis. Operating Results for further detail.

(2)Increased primarily due to gain on sale of six ALF and four SNF properties during 2018.

(3)Includes bank borrowings and senior unsecured notes (net of debt issue costs).

(4)Increase primarily due to the sale of senior unsecured notes and increased borrowings.

26

Table of Contents

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 (“REIT”) that invests primarily in seniors housing and health care properties through sale-leaseback transactions,sale-leasebacks, financing leases, mortgage financing, joint ventures and structured finance solutions including preferred equity and 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 areseek 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 centersfacilities (“SNF”), assisted living communitiesfacilities (“ALF”), independent living communitiesfacilities (“ILF”), memory care communities (“MC”) and combinations thereof. We also invest in other (“OTH”) types of properties, such as land parcels, projects under development (“UDP”) and behavioral health care hospitals. 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 classification and form of investment.

We conduct and manage our business as one operating segment for internal reporting and internal decision-making purposes. For purposes of this Annual Report on Form 10-K and other presentations, we generally include ALF, ILF, ALF,and MC and combinations thereof are included in the ALF communitiesproperty classification. We have been operating since August 1992.

The following graph summarizes our gross investments as of December 31, 2022:

Graphic

Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on outstanding loans receivable and income from investmentinvestments in unconsolidated joint ventures. Our investments in owned properties, andfinancing leases, mortgage loans, mezzanine loans and preferred equity investments 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 property type and operator. Our monitoring process

33

Table of Contents

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, financing 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 markets’ environment, especially to changes in interest rates. Changes in the capital markets’ environment may impact the availability of cost-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.

COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of coronavirus (“COVID-19”) as a pandemic, and on March 13, 2020, the United States declared a national emergency with regard to COVID-19. The COVID-19 pandemic has had repercussions across regional and global economies and financial markets. The outbreak of COVID-19 in many countries, including the United States, has significantly and adversely impacted public health and economic activity, and has contributed to significant volatility, dislocations and liquidity disruptions in financial markets.

The operations and occupancy levels at our properties have been adversely affected by COVID-19 and could be further adversely affected by COVID-19 or another pandemic especially if there are infections on a large scale at our properties. The impact of COVID-19 has included, and another pandemic could include, early resident move-outs, our operators delaying accepting new residents due to quarantines or admission suspensions, potential occupants postponing moves to our operators’ facilities, and/or hospitals cancelling or significantly reducing elective surgeries thereby there were fewer people in need of skilled nursing care. Additionally, as our operators have responded to the pandemic, operating costs have begun to rise. A decrease in occupancy, ability to collect rents from residents and/or increase in operating costs could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us, including the payment of rent or interest. In recognition of the pandemic impact affecting our operators, we provided assistance in form of rent abatements and rent deferrals and may continue to provide assistance as needed.

2734

Table of Contents

Portfolio Overview

The following tables summarizessummarize our real estate investment portfolio as of December 31, 20192022 (dollar amounts in thousands):

Twelve Months Ended

Twelve Months Ended

December 31, 2022

Percentage

December 31, 2019

Percentage

Number

Number of 

Number of 

Percentage

Percentage

Gross

of 

Rental

Interest

of

of

SNF

ALF

Number of

SNF

ALF

Gross

of 

Rental

of Total

Owned Properties

Investments

Investments

Income (1)

Income

Revenues

Properties (2)

Beds (3)

Units (3)

Properties (1)

Beds (2)

Units (2)

Investments

Investments

Revenue

Revenues

Assisted Living (4)

$

858,852

49.4

%

$

68,641

$

40.7

%

106

6,086

Assisted Living

99

5,497

$

797,813

40.7

%

$

53,923

34.1

%

Skilled Nursing

596,370

34.2

%

69,087

40.9

%

70

8,505

261

52

6,348

236

600,974

30.7

%

55,126

34.8

%

Under Development (5)

17,989

1.0

%

%

Other (6)(3)

11,360

0.7

%

955

0.6

%

1

118

1

118

11,918

0.6

%

991

0.6

%

Total Owned Properties

1,484,571

85.3

%

138,683

82.2

%

177

8,623

6,347

152

6,466

5,733

1,410,705

72.0

%

110,040

(5)

69.5

%

Number of 

Percentage

Interest Income

Percentage

Number of

SNF

ALF

Gross

of 

from Financing

of Total

Financing Receivable

Properties (1)

Beds

Units

Investments

Investments

Receivable

Revenues

Skilled Nursing

3

299

76,767

3.9

%

1,762

1.1

%

Total Financing Receivable

3

299

76,767

3.9

%

1,762

1.1

%

Number of 

Percentage

Interest Income

Percentage

Number of

SNF

ALF

Gross

of 

from Mortgage

of Total

Mortgage Loans

Properties (1)

Beds

Units

Investments

Investments

Loans

Revenues

Assisted Living

18

808

103,626

5.4

%

6,730

4.3

%

Skilled Nursing

256,659

14.7

%

29,991

17.8

%

22

2,892

23

2,891

287,349

14.6

%

33,692

21.3

%

Other (4)

2,683

0.1

%

178

0.1

%

Total Mortgage Loans

256,659

14.7

%

29,991

17.8

%

22

2,892

41

2,891

808

393,658

20.1

%

40,600

25.7

%

Number of 

Percentage

Interest

Percentage

Number of

SNF

ALF

Gross

of 

and other

of Total

Notes Receivable

Properties (1)

Beds

Units

Investments

Investments

Income

Revenues

Assisted Living

7

961

43,662

2.2

%

3,590

2.3

%

Skilled Nursing

15,311

0.8

%

720

0.4

%

Total Notes Receivable

7

961

58,973

3.0

%

4,310

2.7

%

Number of 

Percentage

Income from

Percentage

Number of

SNF

ALF

Gross

of 

Unconsolidated

of Total

Unconsolidated Joint Ventures

Properties (1)

Beds

Units

Investments

Investments

Joint Ventures

Revenues

Assisted Living

1

95

6,340

0.3

%

450

0.3

%

Under Development

13,000

0.7

%

1,054

0.7

%

Total Unconsolidated Joint Ventures

1

95

19,340

1.0

%

1,504

1.0

%

Total Portfolio

$

1,741,230

100.0

%

$

138,683

$

29,991

100.0

%

199

11,515

6,347

204

9,656

7,597

$

1,959,443

100.0

%

$

158,216

100.0

%

Twelve Months Ended

Percentage

December 31, 2019

Percentage

Number

Number of

Number

Number of

Percentage

Gross

of

Rental

Interest

of

of

SNF

ALF

of

SNF

ALF

Gross

of

Summary of Properties by Type

Investments

Investments

Income (1)

Income

Revenues

Properties (2)

Beds (3)

Units (3)

Properties (1)

Beds (2)

Units (2)

Investments

Investments

Skilled Nursing

78

9,538

236

$

980,401

50.0

%

Assisted Living (4)

$

858,852

49.4

%

$

68,641

$

40.7

%

106

6,086

125

7,361

951,441

48.6

%

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

Under Development

13,000

0.7

%

Other (3) (4)

1

118

14,601

0.7

%

Total Portfolio

$

1,741,230

100.0

%

$

138,683

$

29,991

100.0

%

199

11,515

6,347

204

9,656

7,597

$

1,959,443

100.0

%

(1)Excludes variable rental income of $15,998 related to lessee reimbursement of our real estate taxes and $1,926 adjustment for collectibility of rental income.

(2)We have investments in 28owned properties, financing receivable, mortgage loans, notes receivable and unconsolidated joint ventures in 29 states leased or mortgaged to 3032 different operators.

(3)(2)See Item 2. Properties for discussion of bed/unit count.

(4)Includes ILF, ALF, MC, and combinations thereof.

(5)Represents two development projects, consisting of a 78-unit ALF/MC located in Oregon and a 90-bed SNF located in Missouri.

(6)(3)Includes three parcels of land held-for-use and one behavioral health care hospital.

(4)Includes one parcel of land in Missouri securing a first mortgage held for future development of a post-acute SNF and one parcel of land in North Carolina securing a first mortgage held for future development of a seniors housing community.

(5)Excludes $15,459 variable rental income from lessee reimbursement of our real estate taxes and $2,745 rental income from sold properties.

As of December 31, 2019,2022, we had $1.4$1.6 billion in carrying value of net real estate investments, consisting of $1.1$1.0 billion or 81.7%65.2% invested in owned and leased properties, and $0.3$76.0 million or 4.9% invested in financing receivable, $0.4 billion or 18.3%

35

Table of Contents

24.9% invested in mortgage loans secured by first mortgages.mortgages, $58.4 million or 3.7% in notes receivable and $19.3 million or 1.3% in unconsolidated joint ventures.

For the year ended December 31, 2019, rentalRental income, income from financing receivable and interest income from mortgage loans represented 82.4%73.2%, 1% and 16.2%23.2%, respectively, of total gross revenues.Total revenues on the Consolidated Statements of Income for the year ended December 31, 2022. In most instances, our lease structure contains annual rental escalations. Our leases that contain fixed annual rental escalations and/or have annual rental escalations that are contingent upon changes in the Consumer Price Index or the Medicare Market Basket Rate, are generally recognized on a straight-line basis over the minimum lease period. Certain leases have annual rental escalations that are contingent upon 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, 2019,2022, we recognized $4.5a $1.4 million in straight-line rental adjustment reflecting higher cash rent received than recorded as rental income and $0.4$1.1 million in amortization and write-off of lease incentives. For the remaining leases in place at December 31, 2019,2022, assuming no modification or replacement of existing leases and no new leased investments are added to our portfolio, except for the potential subsequent acquisitions, lease extensions completed developments in 2020 and the leases reported below under Update on Certain Operators, we currently expect that the non-cash straight-line rent portion of rental income will decrease from $4.5negative $1.4 million in 20192022 to $2.5negative $1.9 million for projected annual 2020.2023 which represents higher cash rent received than recorded as rental income. Our cash rental income is projected to increase from $150.6$130.7 million in 20192022 to $150.8$120.8 million for projected annual 2020.2023. At December 31, 2019,2022, the straight-line rent receivable balance on the consolidated balance sheet was $45.7$21.8 million.

28

Table of Contents

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, 2019, there were no2022, we renewed one lease renewals. covering a 99-bed skilled nursing center in Oregon and a master lease covering 11 skilled nursing centers in Texas with a total of 1,444 beds. See Update on Certain Operators and Former Operators below for discussion regarding renewal of a master lease subsequent to December 31, 2022.

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 and Former Operators

During 2017, we issued a notice of default to Anthem Memory Care

Anthem Memory Care (“Anthem”) resulting from Anthem’s partial payment of minimum rent. Anthem operates 11 memory care communities under a master lease.lease and was placed in default in 2017 resulting from Anthem’s partial payment of its minimum rent. However, we did not enforce our rights and remedies pertaining to the event of default, under the stipulation that Anthem achieves sufficient performance and pays agreed upon rent. Anthem increased their rent payment every year between 2017 and 2021. During 2019,the second and third quarter of 2022, we agreed to a certain temporary rent reduction totaling $1.5 million. During the fourth quarter of 2022, we received payment of Anthem’s $1.5 million temporary rent reduction and a return to Anthem’s previously agreed upon rent of $0.9 million per month. Accordingly, Anthem paid us the agreed upon minimumannual cash rent of $7.5 million. This amount represents approximately 50% of the contractual amount due under the lease$10.8 million in 2019. In accordance with Accounting Standard Codification (“ASC”) Topic 842, Leases (“ASC 842”), at2022. Anthem is current on agreed upon rent payments through 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. February 2023. We receive regular financial performance updates from Anthem and continue to monitor Anthem’stheir performance obligations under the master lease agreement.

OnBrookdale Senior Living Communities, Inc

The Brookdale master lease matures on December 4, 2018, Senior Care Centers, LLC.31, 2023 and affiliatesprovides three renewal options consisting of a two-year renewal option, a five-year renewal option and subsidiaries (“Senior Care”) fileda 10-year renewal option. The first renewal option expires on February 28, 2023. The master lease provides Brookdale a $4.0 million capital commitment, which matures on February 28, 2023, at a yield of 7% with a reduced rate 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.qualified ESG projects. During the fourth quarter of 2019, the court rejected our motion and accordingly, our master lease with Senior Care was affirmed. Furthermore,2022, we received the court ordered reimbursement from Senior Care for the 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 propertiesfunded $1.5 million 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.Brookdale’s capital commitment. Accordingly, we wrote-off the balances to equity ashave a remaining commitment of $0.9 million. Brookdale is current on rent payments through 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 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, weFebruary 2023.

2936

Table of Contents

evaluatedOther Operators

During the collectibilitythird quarter of straight-line2022, we terminated a master lease with an operator and transitioned the communities to an existing LTC operator. In connection with the lease termination, we abated rent receivablefor June 2022 and have forgiven the former operator’s outstanding deferred rent balance of $7.1 million. Also, we paid the former operator a $0.5 million lease termination fee in exchange for cooperation and assistance in facilitating an orderly transition. The transitioned communities are operated pursuant to a new master lease with a two-year term, with zero rent for each of July, August, September, and October of 2022. Thereafter, cash rent is based on mutually agreed upon fair market rent. In conjunction with the new master lease, we paid the new operator a $0.4 million lease incentive balances relatedpayment which will be amortized as a yield adjustment to Thrive and determined that it was not probable that we would collect substantially allrental income over the two-year lease term. LTC is evaluating options for this portfolio.

A master lease covering two assisted living communities is scheduled to mature during 2023. One of the two communities is located in Kentucky. During the third quarter of 2022, we classified this community as held-for-sale and recorded an impairment loss of $1.3 million as a result of our decision to sell the community below our carrying value. We are negotiating a new lease for the other community which is located in Ohio.

Subsequent to December 31, 2022, a master lease covering two skilled nursing centers that was scheduled to mature in 2023 was renewed at the contractual rate for another five years extending the maturity to November 2028. The centers have a total 216 beds and are located in Florida.

Senior Care Centers, LLC – Former Operator

Senior Care Centers, LLC and affiliates and subsidiaries (“Senior Care”) filed for Chapter 11 bankruptcy in December 2018. During 2019, while in bankruptcy, Senior Care assumed LTC’s master lease and, in March 2020, Senior Care emerged from bankruptcy. Concurrent with their emergence from bankruptcy, in accordance with the order confirming Senior Care’s plan of reorganization, Abri Health Services, LLC (“Abri Health”) was formed as the parent company of reorganized Senior Care and became co-tenant and co-obligor with reorganized Senior Care under our master lease. In March 2021, Senior Care and Abri Health (collectively, “Lessee”) failed to pay rent and additional obligations through maturity.owed under the master lease. Accordingly, we wrote-offsent the balanceslessee a notice of default and applied proceeds from letters of credit to equity ascertain obligations owed under the master lease. Furthermore, we sent the Lessee a notice of Januarytermination of the master lease to be effective April 17, 2021. On April 16, 2021, the Lessee filed for Chapter 11 bankruptcy. In August 2021, the United States Bankruptcy Court approved a settlement agreement between Lessee and LTC. The settlement provided for, among other things, a one-time payment of $3.3 million from LTC to the affiliates of Lessee in exchange for cooperation and assistance in facilitating an orderly transition of the 11 skilled nursing centers from the Lessee and its affiliates to affiliates of HMG Healthcare, LLC (“HMG”) which occurred on October 1, 2019, as required by the ASC 842 transition guidance.2021. As of October 1, 2021, Senior Care and Abri Health no longer operate any properties in our portfolio.

Senior Lifestyle Corporation

During 2019,2020, an affiliate of Senior Lifestyle (“Senior Lifestyle”) failed to pay its contractual obligations under its master lease. As a result, we completedapplied their letter of credit and deposits to past due rent and to their outstanding notes receivable. Senior Lifestyle did not pay rent or its other obligations under the followingmaster lease since 2021. During 2021, we transitioned 18 assisted living communities previously leased to Senior Lifestyle to six operators. These communities are located in Illinois, Ohio, Wisconsin, Colorado, Pennsylvania and Nebraska. Also, during 2021, we sold three Wisconsin communities and a closed community in Nebraska previously leased to Senior Lifestyle for alla combined total of $35.9 million. We received total proceeds of $34.8 million and recorded a net gain on sale of $5.4 million. During 2022, an assisted living community located in Colorado, which transitioned from Senior Lifestyle to a new operator during the propertiesfirst quarter of 2021, was closed and the lease was terminated. Additionally, during 2022, we transitioned the remaining community located in New Jersey under the Thrive portfolio. AsSenior Lifestyle master lease to an existing operator. Accordingly, as of December 31, 2019, Thrive2022, Senior Lifestyle does not operate any properties in our portfolio:portfolio.

Transitioned two 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 $1.3 million in year one, $1.5 million in year two, $2.0 million in year three and $2.2 million 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 $0.4 million effective June 1, 2019 and will increase by an additional $0.3 million 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 two 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 $1.8 million. 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 $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.

3037

Table of Contents

20192022 Transactions Overview

The following tables summarizes our transactions in 20192022 (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

Number

Type

Number

Initial

Total

Total

of

of

of

Cash

Purchase

Transaction

Acquisition

State

Properties

Properties

Beds/Units

Yield

Price

Costs

Costs

Texas (1)

4

SNF

339

8.0

%

$

51,534

$

283

$

51,817

(1)The properties are leased to an affiliate of an existing operator under a 10-year lease with two 5-year renewal options. Additionally, the lease allows the operator to elect for either an earn-out payment or purchase option. If neither option is elected within the timeframe defined in the lease, both elections are terminated. The earn-out payment is available, contingent on achieving certain thresholds per the lease, beginning at the end of the second lease year through the end of the fifth lease year. The purchase option is available beginning in the sixth lease year through the end of the seventh lease year. The initial cash yield is 8% for the first lease year increasing to 8.25% for the second year, then increases annually by 2.0% to 4.0% based on the change in the Medicare Market Basket Rate. In connection with the transition, we provided the lessee a 10-year working capital loan for up to $2,000 at 8% for the first year, increasing to 8.25% for the second year, then increasing annually with the lease rate. At December 31, 2022, the working capital loan had an outstanding balance of $1,642.

Investment in Development and Improvement Projects

Developments

Improvements

Assisted Living Communities

$

105

$

5,538

Skilled Nursing Centers

2,897

Other

559

Total

$

105

$

8,994

Sold Properties

Type

Number

Number

of

of

of

Sales

Carrying

Net

State

Properties

Properties

Beds/Units

Price

Value

Gain (Loss) (1)

California

ALF

2

232

$

43,715

$

17,832

$

25,867

California

SNF

1

121

13,250

1,846

10,846

Texas

SNF

1

485

697

(441)

Virginia

ALF

1

74

16,895

15,549

1,344

(2)

n/a

n/a

214

(3)

5

427

$

74,345

$

35,924

$

37,830

(1)Subsequent to December 31, 2019, we acquired a 140-bed SNF located in Texas for approximately $13,500Calculation of net gain (loss) includes cost of sales and entered into a 10-year masterwrite-off of straight-line rent receivable and 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.incentives, when applicable.

(2)We acquiredIn connection with this sale, the former operator paid us a parcellease termination fee of land adjacent to an existing SNF$1,181 which is not included in California.the gain on sale.

(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 thereafter. Additionally, we acquired a parcel of land and committed to develop a 90-bed SNF in Missouri. The commitment totals approximately $17,400. The initial cash yield upon completion of the development will be 9.3%.

(4)We entered into a joint venture (“JV”) to purchase an existing operational 74-unit ALF/MC. The non-controlling partner contributed $919 of equity and we contributed $15,976 in cash. Our economic interest in real estate JV is approximately 95%.

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 additional gain due to the receiptreassessment adjustment of funds held in escrowthe holdbacks related to a portfolio of six ALFsproperties 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. Using2020 and 2019, under 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 ProjectsFinancing Receivable

Financing Receivable. During 2022, we entered into a joint venture and contributed $61.7 million into the JV that purchased three skilled nursing centers located in Florida for $75.8 million. Our JV partner contributed the remaining $14.3 million of equity. The JV leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year. Accordingly, the transaction has been accounted for as a Financing receivable on our Consolidated Balance Sheets. During 2022, we recognized $1.8 million of Interest income from financing receivable on our Consolidated Statements of Income. Additionally, we recorded $0.8 million provision for expected loan losses during 2022.

Developments

Improvements

Assisted Living Communities

$

14,088

$

2,544

Skilled Nursing Centers

6,436

Other

295

Total

$

20,524

$

2,839

Subsequent to December 31, 2022, we entered into a $121.3 million JV with an affiliate of an existing operator

3138

Table of Contents

and contributed $117.9 million into the JV that purchased 11 assisted living and memory care communities from an affiliate of our JV partner. The JV leased the communities back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a floor of 2.0% and a ceiling of 4.0%. Additionally, the JV provided the seller-lessee with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit Internal Rate of Return (“IRR”) of 9.0%. In accordance with GAAP, the communities acquired by the JV are required to be presented as a Completed DevelopmentsFinancing receivable on our Consolidated Balance Sheets.

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)

$

40,732

(1) (2)

Application of interest reserve

6,192

Scheduled principal payments received

(1,065)

(1,175)

Mortgage loan premium amortization

(4)

(6)

Provision for loan loss reserve

(113)

(457)

Net increase in mortgage loans receivable

$

11,160

$

45,286

(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 dueSubsequent 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, 2019,2022, we performedoriginated a recoverability test on the carrying value$10,750 mortgage loan secured by a MC located in North Carolina. The loan carries a two-year term with an interest-only rate of our preferred equity investment7.25% and concluded that a portionan IRR 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.9.0%.

(2)We hadoriginated two senior mortgage loans, secured by four ALFs operated by an existing operator, as well as a $2,900 mezzanine loan commitment forland parcel in North Carolina. The communities have a 99-unit seniors housing community in Floridacombined total of 217 units, with a total preferred returnan average age of 15%. Since interest payments were deferredless than four years. The land parcel is approximately 7.6 acers adjacent to one of the ALFs and no interest was recordedis being held for the first twelve months of the loan, we used the effective interest income method in accordance with GAAP to recognize interest income and recorded the difference between the effective interest income and cash interest income to the loan principal balance. During the third quarter of 2019, the mezzanine loan was paid off.

(3)We had a $3,400 mezzanine loan commitment for thefuture development of a 127-unit seniors housing community in Florida withcommunity. The mortgage loans have a total preferred returnfour-year term, an interest rate of 15%7.25% and an IRR of 8%. During the first quarter of 2019, the mezzanine loan was paid off.We also funded an additional $2,000 under an existing mortgage loan.

Investment in Notes Receivable

Advances under notes receivable

    

$

8,967

(1)

 

    

$

37,192

(1)

 

Principal payments received under notes receivable(2)

(3,503)

(6,843)

Reclassed to real estate under development (2)

(200)

(2)

Notes receivable reserve

(52)

Provision for credit losses

(303)

Net increase in notes receivable

$

5,212

$

30,046

(1)We originatedIncludes origination of a $6,800$25,000 mezzanine loan commitment for the developmentrecapitalization of five ALFs located in Oregon and Montana. Additionally includes origination of a 204-unit ILF/ALF/MC in Georgia. The mezzanineworking capital loan hasfor a five-year term and a 12.0% return, a portioncommitment of up to $2,000, of which is paid in cash,$1,867 has been funded and the remaining portion$9,761 of which is deferred during the first 46 months. Additionally, we originatedfunding under a $1,400 note agreement, funding $1,304 with a commitmentworking capital loan to fund $96. The note bears interest at 7.0%. Further, we originated a $550 note agreement, funding $500 with a commitment to fund $50. The note bears interest at 7.5%.HMG.

(2)Represents interim working capitalSubsequent to December 31, 2022, we received $4,545, which includes a prepayment fee and the exit IRR totaling $190, from a mezzanine loan related toearly payoff. The mezzanine loan was on a development project which matured upon completion of the development project and commencement of the lease.136-unit ILF in Oregon.

32

Table of Contents

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. 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.

39

Table of Contents

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

 

12/31/22

9/30/22

6/30/22

3/31/22

12/31/21

 

Asset mix:

    

    

    

    

    

    

    

    

    

    

Real property

$

1,484,571

$

1,474,692

$

1,452,669

$

1,445,596

$

1,421,456

$

1,410,705

$

1,408,402

$

1,409,937

$

1,409,625

$

1,408,557

Financing receivable

76,767

76,267

Loans receivable

256,659

255,737

254,555

246,775

245,386

393,658

386,868

383,647

350,037

347,915

Notes receivable

58,973

59,014

58,794

62,127

28,623

Unconsolidated joint ventures

19,340

19,340

19,340

19,340

19,340

Real estate investment mix:

Assisted living communities

$

951,441

$

945,552

$

942,581

$

956,642

$

929,113

Skilled nursing centers

$

853,029

$

861,500

$

844,136

$

834,185

$

830,485

980,401

976,753

901,911

858,150

849,182

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

13,000

13,000

13,000

13,000

13,000

Other (1)

11,360

11,360

11,239

11,067

11,065

14,601

14,586

14,226

13,337

13,140

Operator mix:

Prestige Healthcare (1)

$

269,792

$

268,869

$

267,688

$

259,907

$

258,519

$

271,476

$

271,851

$

271,853

$

272,326

$

272,453

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

ALG Senior

192,699

189,533

110,075

76,715

74,888

HMG Healthcare

175,835

174,107

175,532

180,662

171,920

Anthem Memory Care

136,484

136,483

136,397

136,397

136,397

139,176

139,176

139,176

139,176

139,176

Carespring Health Care Management

102,520

102,042

102,038

99,997

97,461

Brookdale Senior Living

106,010

104,461

103,831

103,136

102,921

Remaining operators

903,042

893,643

872,234

867,593

845,988

1,074,247

1,070,763

1,071,251

1,069,114

1,043,077

Geographic mix:

Texas

$

284,697

$

292,238

$

292,159

$

292,091

$

292,317

$

327,490

$

325,380

$

326,983

$

274,803

$

274,626

Michigan (1)

276,742

256,680

255,498

247,718

246,329

Michigan

280,389

280,932

280,934

281,407

281,512

Florida

158,892

158,175

81,525

80,815

80,540

Wisconsin

149,290

149,184

149,064

146,750

143,657

114,838

114,838

114,729

114,729

114,538

Colorado

114,923

114,923

114,923

114,923

114,923

104,795

104,760

104,651

104,514

104,514

California

103,240

102,561

102,412

102,254

102,254

Remaining states

812,338

814,843

793,168

788,635

767,362

973,039

965,806

962,896

984,861

948,705

(1)WeAs of December 31, 2022, we have three parcels of land as of December 31, 2019.land. These parcels are located adjacent to properties securing the Prestige Healthcare mortgage loan and are managed by Prestige.

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 sheetConsolidated Balance Sheet capitalization is related to long-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). The coverage ratios are based on earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) as defined by National Association of Real Estate Investment Trusts (“NAREIT”). EBITDAre is calculated as net income available to common stockholders (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 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:

3340

Table of Contents

Balance Sheet Metrics

Year Ended

Quarter Ended

Year Ended

Quarter Ended

12/31/19

12/31/19

9/30/19

6/30/19

3/31/19

12/31/18

12/31/22

12/31/22

9/30/22

6/30/22

3/31/22

12/31/21

Debt to gross asset value

37.2

37.2

%

(1)

36.8

%

36.8

%

(4)

37.1

%

(5)

35.2

%

37.4

37.4

%

(1)

38.9

%

(3)

37.6

%

(1)

39.6

%

(3)

38.4

%

Debt to market capitalization ratio

28.0

28.0

%

(2)

25.1

%

(3)

27.1

%

27.1

%

(3)

28.1

%

34.4

34.4

%

34.4

%

(4)

32.2

%

(5)

33.4

%

(6)

35.0

%

Interest coverage ratio (7)

4.9

x

4.9

x

4.9

x

4.8

x

4.9

x

(6)

5.2

x

4.3

x

4.4

x

(2)

4.2

x

4.3

x

4.4

x

4.3

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

4.3

x

4.4

x

(2)

4.2

x

4.3

x

4.4

x

4.3

x

(1)Decreased due to decrease in outstanding debt and increase in gross asset value.

(2)Increased due to increase in interest expense partially offset by increase in rental income and interest income from financing receivable.

(3)Increased due to increase in outstanding debt partially offset by increase in gross asset value. The increase in asset value was primarily due to acquisitions, developments and capital improvement funding partially offset by property sales.

(2)(4)Increased due to decrease in market capitalization and increase in outstanding debt.

(3)Decreased duedebt primarily related to increase in market capitalization.

(4)Decreased due to increase in gross asset value from additional mortgage loan, development and capital improvement funding.investments.

(5)IncreasedDecreased due to increasedecrease in outstanding debt and decreaseincrease in gross asset value. The decrease in gross asset value was primarily due to adoption of ASC 842 during the three months ended March 31, 2019. ASC 842 requires a lease-by-lease collectibility analysis of receivables and related balances. Based on our assessment, we determined that it was not probable that we would collect substantially all of the contractual lease obligations for certain leases through maturity. Accordingly, we wrote-off the balance of straight-line rent receivable and lease incentives related to these leases as a cumulative adjustment to equity, as required by the transition guidance.market capitalization.

(6)Decreased due to decrease in other income compared to the fourth quarter of 2018. The increase in other income during the fourth quarter of 2018 was from the net write-off of a contingent lease incentive and related earn-out liability.market capitalization partially offset by increase in outstanding debt.

(7)In calculating our interest coverage and fixed charge coverage ratios above, we use EBITDAre, which is a financial measure not derived in accordance with U.S. generally accepted accounting principles (“GAAP”)GAAP (non-GAAP financial measure). EBITDAre and Adjusted EBITDAre are not alternatives to net income, operating income or cash flows from operating activities as calculated and presented in accordance with GAAP. You should not rely on EBITDAre and Adjusted EBITDAre as a substitute for any such GAAP financial measures or consider it in isolation, for the purpose of analyzing our financial performance, financial position or cash flows. Net income is the most directly comparable GAAP measure to EBITDAre and Adjusted EBITDAre.

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

$

80,872

$

12,631

$

27,280

$

20,534

$

20,427

$

30,844

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

30,582

7,578

7,827

7,710

7,467

7,215

Add: Depreciation and amortization

39,216

9,817

9,932

9,860

9,607

9,396

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

$

30,582

$

7,578

$

7,827

$

7,710

$

7,467

$

7,215

Add: Capitalized interest

608

167

108

73

260

398

Interest incurred

$

31,190

$

7,745

$

7,935

$

7,783

$

7,727

$

7,613

Interest coverage ratio

4.9

x

4.9

x

4.9

x

4.8

x

4.9

x

5.2

x

Interest incurred

$

31,190

$

7,745

$

7,935

$

7,783

$

7,727

$

7,613

Total fixed charges

$

31,190

$

7,745

$

7,935

$

7,783

$

7,727

$

7,613

Fixed charge coverage ratio

4.9

x

4.9

x

4.9

x

4.8

x

4.9

x

5.2

x

3441

Table of Contents

Year to Date

Quarter Ended

12/31/22

12/31/22

9/30/22

6/30/22

3/31/22

12/31/21

Net income

$

100,584

$

18,198

$

13,389

$

54,490

$

14,507

$

12,930

Less/Add: (Gain)/loss on sale

(37,830)

(21)

387

(38,094)

(102)

(70)

Add: Impairment loss

3,422

2,136

1,286

Add: Interest expense

31,437

8,830

7,941

7,523

7,143

6,933

Add: Depreciation and amortization

37,496

9,294

9,385

9,379

9,438

9,449

EBITDAre

$

135,109

$

38,437

$

32,388

$

33,298

$

30,986

$

29,242

Add (less): Non-recurring one-time items

824

(1) (2) (3)

1,260

(1)

(859)

(2)

423

(3)

869

(4)

Adjusted EBITDAre

$

135,933

$

38,437

$

33,648

$

32,439

$

31,409

$

30,111

Interest expense

$

31,437

$

8,830

$

7,941

$

7,523

$

7,143

$

6,933

Interest incurred

$

31,437

$

8,830

$

7,941

$

7,523

$

7,143

$

6,933

Interest coverage ratio

4.3

x

4.4

x

4.2

x

4.3

x

4.4

x

4.3

x

Interest incurred

$

31,437

$

8,830

$

7,941

$

7,523

$

7,143

$

6,933

Total fixed charges

$

31,437

$

8,830

$

7,941

$

7,523

$

7,143

$

6,933

Fixed charge coverage ratio

4.3

x

4.4

x

4.2

x

4.3

x

4.4

x

4.3

x

(1)Represents $500 lease termination fee paid to a former operator in exchange for cooperation in facilitating an orderly transition and $760 provision for credit losses related to the origination of financing receivable during the third quarter of 2022.

(2)Represents the $1,181 lease termination fee income received in connection with the sale of a 74-unit ALF partially offset by $322 provision for credit losses related to the origination of two mortgage loans during the second quarter of 2022.

(3)Represents the provision for credit losses related to the origination of a $25,000 mezzanine loan ($250) and a lease incentive balance write-off ($173) related to a closed property and subsequent lease termination.

(4)Represents the provision for credit losses related to the origination of $86,900 of mortgage loans.

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 to:

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 seniors housing industries; and
Changes in federal, state and local legislation.legislation;
The duration, spread and severity of the COVID-19 outbreak.

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-specific trends.

3542

Table of Contents

Operating Results

Year ended December 31, 20192022 compared to year ended December 31, 20182021 (in thousands):

Years ended December 31, 

Years ended December 31, 

2019

2018

Difference

2022

2021

Difference

Revenues:

Rental income

$

152,755

$

135,405

$

17,350

(1) (2)

$

128,244

$

121,125

$

7,119

(1)

Interest income from financing receivable

1,762

1,762

(2)

Interest income from mortgage loans

29,991

28,200

1,791

(3)

40,600

32,811

7,789

(3)

Interest and other income

2,558

5,040

(2,482)

(4)

4,547

��

1,386

3,161

(4)

Total revenues

185,304

168,645

16,659

175,153

155,322

19,831

Expenses:

Interest expense

30,582

30,196

(386)

31,437

27,375

(4,062)

(5)

Depreciation and amortization

39,216

37,555

(1,661)

(5)

37,496

38,296

800

(6)

Provision for doubtful accounts

166

87

(79)

Impairment loss

3,422

(3,422)

(7)

Provision for credit losses

1,528

1,021

(507)

(8)

Transaction costs

365

84

(281)

828

4,433

3,605

(9)

Property tax expense

16,755

(16,755)

(2)

15,486

15,392

(94)

General and administrative expenses

18,453

19,193

740

(6)

23,706

21,460

(2,246)

(10)

Total expenses

105,537

87,115

(18,422)

113,903

107,977

(5,926)

Other operating income:

Gain on sale of real estate, net

2,106

(7)

70,682

(8)

(68,576)

37,830

(11)

7,462

(12)

30,368

Operating income

81,873

152,212

(70,339)

99,080

54,807

44,273

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)

1,504

1,417

87

Net income

80,872

155,076

(74,204)

100,584

56,224

44,360

Income allocated to non-controlling interests

(346)

(95)

(251)

(560)

(363)

(197)

Net income attributable to LTC Properties, Inc.

80,526

154,981

(74,455)

100,024

55,861

44,163

Income allocated to participating securities

(391)

(625)

234

(580)

(458)

(122)

Net income available to common stockholders

$

80,135

$

154,356

$

(74,221)

$

99,444

$

55,403

$

44,041

(1)Increased primarily due to (2) below and increased rent received from transitioned portfolios, lease termination fee income of $1,181 received in connection with the sale of a 74-unit ALF, rental income from acquisitions, completed development projects and developmentsannual rent escalations partially offset by decreased rent from sold properties and properties transitioned to other operators.property sales.

(2)Increased due to recording $15,998 real estate taxes that are reimbursed by our operators as rental incomeRepresents revenue from the acquisition of three SNFs located in Florida for $75,825. In accordance with a corresponding property tax expense. We adopted ASC 842, using a modified retrospective approachthis transaction is presented as Financing Receivable on our Consolidated Statements of the adoption date of January 1, 2019. Accordingly, we are not required to report the expense and revenue streamBalance Sheet. See Note 5. Real Estate Investments within our consolidated financial statements for periods prior to January 1, 2019.more information.

(3)Increased primarily due to mortgage loan originations during 2022 and capital improvement funding.2021 fourth quarter.

(4)DecreasedIncreased primarily due to a mezzanine loan origination during the other income from net impactfirst quarter of the write-off2022 and third quarter of an earn-out liability2021 and the related lease incentive asset during 2018additional funding under working capital loans partially offset by increase in other income during 2019 due to mezzanine loan originations.payoffs.

(5)Increased primarily due to acquisitionsthe origination of two $50,000 term loans in the fourth quarter of 2021, issuance of $75,000 senior unsecured notes during the second quarter of 2022 and completed developments partially offset by sold properties.higher interest rates on our line of credit in 2022.

(6)Decreased primarily due to lower accrual of incentive compensation in 2019.property sales.

(7)Represents the net gain resulting from sale of three SNFs and an ALF during 2019. Additionally, represents an additional $500 net gain on sale due to receipt of funds held in escrowimpairment loss related to a portfolio of six ALFs sold60-unit ALF in 2018. See (8) below.

(8)Represents the net gain on sale related to six ALFsKentucky, a 70-unit ALF in Florida and four SNFs during 2018.

(9)Relates to remaining insurance proceeds for remediation of a propertyclosed MC located in our portfolio, which was sold in 2019.Florida. See Item 8. FINANCIAL STATEMENTS—Note 25. Real Estate Investments. Summary of Significant Accounting Policies. within our consolidated financial statements for more information.

(8)Increased primarily due to the financing receivable origination, as discussed in (2) above, mortgage and mezzanine loan originations and capital improvement funding offset by scheduled principal paydowns.

(9)Decreased primarily due to the Senior Care and Abri Health settlement and related fees paid during 2021.

(10)Based on the information availableIncreased due to us regarding alternativesconference sponsorships and courses of action as of December 31, 2019, we performed a recoverability test on the carrying amount of our preferred equity investmenttravel, property maintenance expense for closed properties, higher incentive compensation charges and determined that a portion of our preferred equity investment is not recoverable. Therefore, we recorded an impairment loss from investmentincrease in unconsolidated joint ventures of $5,500 and wrote our preferred equity investment downoverall costs due to its estimated fair value. See Item 8. FINANCIAL STATEMENTS—Note 6. Investment in Unconsolidated Joint Ventures for further information.inflationary pressures.

(11)Represents the net gain on sale of $38,057 related to a SNF located in California and three ALFs located in Virginia and California and $214 quarterly reassessment of prior years’ sale holdbacks partially offset by the net loss on sale of $441 related to a closed SNF in Texas.

(12)Represents the net gain on sale of $8,157 related to a SNF in Washington and three ALFs in Wisconsin and $363 quarterly reassessment of prior years’ sale holdbacks partially offset by the net loss of sale of $1,058 related to a closed ALF in Nebraska and a closed ALF in Florida.

3643

Table of Contents

Year ended December 31, 20182021 compared to year ended December 31, 20172020 (in thousands):

Years ended December 31,

 

Years ended December 31,

 

2018

2017

Difference

 

2021

2020

Difference

 

Revenues:

  

    

    

    

    

    

  

    

    

    

    

    

Rental income

$

135,405

$

137,657

$

(2,252)

(1)

$

121,125

$

126,094

$

(4,969)

(1)

Interest income from mortgage loans

 

28,200

 

26,769

 

1,431

(2)

 

32,811

 

31,396

 

1,415

(2)

Interest and other income

 

5,040

 

3,639

 

1,401

(3)

 

1,386

 

1,847

 

(461)

(3)

Total revenues

 

168,645

 

168,065

 

580

 

155,322

 

159,337

 

(4,015)

Expenses:

Interest expense

 

30,196

 

29,949

 

(247)

(4)

 

27,375

 

29,705

 

2,330

(4)

Depreciation and amortization

 

37,555

 

37,610

 

55

 

38,296

 

39,071

 

775

Impairment on real estate for sale

 

 

1,880

 

1,880

(5)

Provision for doubtful accounts

87

(206)

(293)

Impairment loss

 

 

3,977

 

3,977

(5)

Provision (recovery) for credit losses

1,021

(3)

(1,024)

(6)

Transaction costs

84

56

(28)

4,433

299

(4,134)

(7)

Property tax expense

15,392

15,065

(327)

General and administrative expenses

 

19,193

 

17,513

 

(1,680)

(6)

 

21,460

 

19,710

 

(1,750)

(8)

Total expenses

 

87,115

 

86,802

 

(313)

 

107,977

 

107,824

 

(153)

Other operating income:

Gain on sale of real estate, net

70,682

(7)

3,814

(8)

66,868

(7)

7,462

(9)

44,117

(10)

(36,655)

Operating income

152,212

 

85,077

 

67,135

54,807

 

95,630

 

(40,823)

Gain from property insurance proceeds

373

(11)

(373)

Loss on unconsolidated joint ventures

(11)

(758)

(12)

758

Impairment loss from investments in unconsolidated joint ventures

Income from unconsolidated joint ventures

2,864

2,263

601

(8)

1,417

432

985

(13)

Net income

 

155,076

 

87,340

 

67,736

 

56,224

 

95,677

 

(39,453)

Income allocated to non-controlling interests

 

(95)

 

 

(95)

 

(363)

 

(384)

 

21

Net income attributable to LTC Properties, Inc.

 

154,981

 

87,340

 

67,641

 

55,861

 

95,293

 

(39,432)

Income allocated to participating securities

 

(625)

 

(362)

 

(263)

 

(458)

 

(422)

 

(36)

Net income available to common stockholders

$

154,356

$

86,978

$

67,378

$

55,403

$

94,871

$

(39,468)

(1)Decreased due the reduction of rent related to the properties sold during 2018 and Senior Care Centers non-payment of December rent as a result of the bankruptcy filing, partially offset by acquisitions and capital improvements.
(1)Decreased primarily due to defaults of lease obligations from Senior lifestyle and Senior Care and Abri Health, abated and deferred rent, net of repayment, a $758 straight-line rent receivable write-off during 2021, a decrease in property tax revenue, reduced rent from sold properties and 50% reduction of 2021 rent escalations partially offset by a $23,214 write-off of straight-line rent receivable and lease incentive balances related to three operators during 2020, increased rent from re-leasing 18 properties previously leased to Senior lifestyle, completed development projects and contractual rent increases.

(2)Increased due to mortgage loan originations and capital improvement funding offset by scheduled principal paydowns and 50% reduction of 2021 interest escalations.

(3)Decreased primarily due to the payoff of a mezzanine loan offset by additional notes receivable funding.

(4)Decreased due to scheduled principal payments on our senior unsecured notes and lower interest rates under our unsecured revolving line of credit partially offset by higher interest rates on $100,000 of new term loans in fourth quarter of 2021 and higher outstanding balances under our unsecured revolving line of credit.

(5)Represents impairment losses related to a 48-unit ALF in Colorado and a 61-unit ALF in Florida.

(6)Increased primarily due to mortgage originations and capital improvement funding partially offset by payoffs.scheduled principal paydowns.

(3)Increased primarily due to the net impact of the write-off of an earn-out liability and the related lease incentive asset during 2018 partially offset by decrease in interest income due to mezzanine loan payoffs and write-off of an earn-out liability and related lease incentive asset during 2017.
(7)Increased due to Senior Care and Abri Health settlement and related fees.

(4)Increased primarily due to a higher average outstanding balance on our line of credit and an increase in LIBOR rates, partially offset by scheduled principal payments under our senior unsecured notes and an increase in capitalized interest related to development projects.
(8)Increased primarily due to higher incentive compensation expense, an increase in non-cash restricted stock and performance-based stock vesting expense and additional employees.

(5)Represents the write-off of straight-line rent and other receivables in 2017 related to two properties due to negotiations to transition these properties to another operator in our portfolio.
(9)Represents the net gain on sale of $2,562 related to a SNF in Washington, $5,595 related to three ALFs in Wisconsin and $363 of quarterly reassessment of the prior years’ sale holdbacks partially offset by the net loss on sale of $200 related to a closed ALF in Nebraska and the net loss on sale of $858 related to a closed property in Florida.

(6)Increased primarily due to lower incentive compensation in the prior year related to a previously disclosed defaulted master lease.
(10)Represents net gain on sale of 21 SNFs and additional gain due to quarterly reassessment of prior years’ sale holdbacks.

(7)Represents the net gain on sale of six ALF and four SNF properties during 2018, partially offset by a net gain on sale of five ALF and a donation of a SNF during 2017.
(11)Represents gain on insurance proceeds related to a 114-bed SNF in Texas sold during the first quarter of 2020.

(12)Relates to the sale of properties comprising a joint venture in which we had a preferred equity investment with Senior lifestyle.

(13)Increased due to preferred equity investments in two unconsolidated joint ventures.

44

(8)Increased primarily due to income generated from additional funding under a preferred capital contribution commitment and income from a mezzanine loan accounted for as an unconsolidated joint venture in accordance with GAAP which was previously deferred.

Table of Contents

Funds From Operations

Funds from Operations (“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 GAAP. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with 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

Table of Contents

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 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 NAREIT. FFO, as defined by NAREIT, means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-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,

 

For the Year Ended December 31,

 

2019

2018

2017

 

2022

2021

2020

 

GAAP net income available to common stockholders

$

80,135

    

$

154,356

    

$

86,978

$

99,444

    

$

55,403

    

$

94,871

Add: Depreciation and amortization

 

39,216

 

37,555

 

37,610

 

37,496

 

38,296

 

39,071

Add: Impairment charges

5,500

1,880

Add: Impairment loss

3,422

3,977

Add: Loss on unconsolidated joint ventures

758

Less: Gain on sale of real estate, net

 

(2,106)

 

(70,682)

 

(3,814)

 

(37,830)

 

(7,462)

 

(44,117)

NAREIT FFO attributable to common stockholders

$

122,745

$

121,229

$

122,654

$

102,532

$

86,237

$

94,560

NAREIT FFO attributable to common stockholders per share:

Basic

$

3.10

$

3.07

$

3.11

$

2.57

$

2.20

$

2.41

Diluted

$

3.08

(1)

$

3.06

(1)

$

3.10

(1)

$

2.56

(1)

$

2.20

$

2.41

Weighted average shares used to calculate NAREIT FFO per share:

Basic

 

39,571

 

39,477

 

39,409

 

39,894

 

39,156

 

39,179

Diluted

 

39,921

(2)

 

39,839

(2)

 

39,637

(2)

 

40,296

(2)

 

39,156

 

39,264

(3)

(1)Includes the effect of participating securities.

(2)Diluted weighted average shares used to calculate FFO per share includes the effect of performance-based stock option equivalents,units and participating securities andsecurities.

(3)Diluted weighted average shares used to calculate FFO per share includes the effect of performance-based stock units.

Critical Accounting Policies and Estimates

SeeOur accounting policies are more fully described under Item 8. FINANCIAL STATEMENTS—NoteFootnote 2. Summary of Significant Accounting Policies. As discussed in Footnote 2, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Listed below are those policies and estimates that we believe are critical and require the use of significant judgement in their application.

45

Table of Contents

Impairment of Long-Lived Assets

Assets that are classified as held-for-use 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. Where indicators of impairment exist, the estimation required in the undiscounted future cash flow assumption includes management’s probability-weighting of various scenarios such as modifying the lease with the existing operator, identifying a replacement operator or sale of the real property investment. In addition, the undiscounted future cashflows include management’s assumptions of rental revenues, net operating income, capitalization rates and expected hold periods. In determining fair value, we use current appraisals or other third-party opinions of value and other estimates of fair value such as estimated discounted future cash flows.

Collectability of operator obligations

We assess the collectability of substantially all our lease payments through maturity. If collectability is not probable, all or a portion of our straight-line rent receivables and other lease receivables may be written-off. In order to assess our lease payments for collectability, we make assumptions that include evaluating lessee’s payment history, the financial strength of the lessee, future market conditions and contractual rents, and timing of expected payments. Our ability to accurately predict collectability of substantially all of our lease payments impacts the timing of straight-line rent and other lease receivable write-offs, if any. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our consolidated financial statements.

Liquidity and Capital Resources

Sources and Uses of Cash

As of December 31, 2019,2022, we had a total of $4.210.4 million of cash and cash equivalents, $506.1$270.0 million available under our unsecured revolving line of credit and $21.5the potential ability to access the capital markets through the issuance of $130.6 million availableof common stock under our senior unsecured note shelf agreement which expired in February 16, 2020. Subsequent to December 31, 2019, we borrowed $18.0 million under our unsecured revolving line of credit. Accordingly, we have $111.9 million outstanding under our unsecured revolving line of credit and $488.1 million available for borrowing. See Item 8. FINANCIAL STATEMENTS—Debt Obligations for further discussion.

Additionally,Equity Distribution Agreements. Furthermore, we have the ability to access the capital markets through the issuance of $200.0 million common stock by means of ourdebt and/or equity distribution agreementssecurities under ouran automatic shelf 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

38

Table of Contents

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 used by financing and investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. We continuously evaluate the availabilityIn addition, COVID-19 has adversely affected and is expected to continue to adversely affect our operators’ business, results of cost-effective capital and believe we have sufficient liquidity for additional capital investments in 2020.

We expect our future income and ability to make distributions fromoperations, cash flows provided by operating activities to depend on the collectibility ofand financial condition which could, in turn, adversely affect 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. financial position.

The operating results of the facilities mayproperties will be impacted by various factors over which the operators/owners may have no control. Those factors include, without limitation, the statushealth of the economy, inflation pressures, employee availability and cost, changes in supply of or demand for competing seniors housing and health care facilities, ability to hire and maintain qualified staff, ability to control rising operating costs, and the potential for significant reforms in the health care industry.industry, and the ongoing impact of COVID-19. 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.industry, and the continuing impact of COVID-19 or the impact of any other infectious disease outbreaks. We cannot presently predict what impact these proposalspotential events may have, if any. We believe that an adequate provision has been made for the possibility of loans proving uncollectibleuncollectable 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.

Depending on our borrowing capacity, compliance with financial covenants, ability to access the capital markets, and the payment of dividends may be negatively impacted. We continuously evaluate the availability of cost-effective capital and believe we have sufficient liquidity for our current dividend, corporate expenses and additional capital investments in 2023.

46

Table of Contents

Our investments, principally our investments in owned properties, financing leases and 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 leases have agreed upon annual increases and our loans have predetermined increases in interest rates and our leases have agreed upon annual increases. Werates. Inasmuch as we 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.

Our primary sources of cash include rent and interest receipts, borrowings under our primary unsecured credit facility, public and private issuance of debt and equity securities, proceeds from investment dispositions.dispositions and principal payments on loans receivable. 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):

Year Ended December 31, 

Change

Year Ended December 31, 

Change

Cash provided by (used in):

2019

2018

$

2022

2021

$

Operating activities

$

122,469

$

115,535

$

6,934

$

105,586

$

91,184

$

14,402

Investing activities

(78,988)

(3,609)

(75,379)

(119,949)

(69,786)

(50,163)

Financing activities

(44,001)

(112,375)

68,374

19,581

(24,009)

43,590

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)

Increase (decrease) in cash and cash equivalents

5,218

(2,611)

7,829

Cash and cash equivalents, beginning of period

5,161

7,772

(2,611)

Cash and cash equivalents, end of period

$

10,379

$

5,161

$

5,218

Debt Obligations

Bank Borrowings.Unsecured Credit Facility. We havehad an Unsecuredunsecured credit agreement (the “Original Credit AgreementAgreement”) that providesprovided for a revolving line of credit up to $600.0 million in aggregate commitment of the lenders andof up to $600.0 million with the opportunity to increase the commitment size of the credit agreement up to a total of $1.0 billion. The UnsecuredOriginal Credit Agreement maturesAgreement’s maturity was on June 27, 2022 and provided for a one-year extension option at our discretion, subject to customary conditions.

In advance of expiration of the Original Credit Agreement, during the fourth quarter of 2021, we entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) to replace the Original Credit Agreement. The Credit Agreement decreased the aggregate commitment of the lenders under the Original Credit Agreement to $500.0 million comprised of a $400.0 million revolving credit facility (the “Revolving Line of Credit”) and two $50.0 million term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans commitments up to a total of $1.0 billion, extends the maturity of the Revolving Line of Credit to November 19, 2025 and provides for a one-year extension option at our discretion, subject to customary conditions. The Term Loans mature on November 19, 2025 and November 19, 2026. During the fourth quarter of 2022, we entered into the First Amendment to the Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) to replace London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”), plus a credit spread adjustment of 10 basis points, (“Adjusted SOFR”) as the reference rate for purpose of calculating interest under the Amended Credit Agreement. Other material terms of the Credit Agreement remain unchanged. Based on our leverage at December 31, 2019,2022, the facilityRevolving Line of Credit provides for interest annually at LIBORAdjusted SOFR plus 115 basis points and a facility fee of 20 basis point and the Term Loans provide for interest annually at Adjusted SOFR plus 135 points.

Interest Rate Swap Agreement. In connection with entering into the Term Loans as discussed above, we entered into two receive variable/pay fixed interest rate swap agreements (“Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loan borrowings over the four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on our Consolidated Balance Sheets at fair value, with changes in the fair value of these instruments recognized in Accumulated other comprehensive income (loss) on our Consolidated Balance Sheets. In connection with entering into the Amended Credit Agreement discussed above, we entered into amendments to our Interest Rate Swaps to account for SOFR as the updated reference rate in the Amended Credit Agreement. During 2022 and 2021, we recorded a $8.9 million increase and $0.2 million decrease, respectively, in fair value of Interest Rate Swaps.

Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates

3947

Table of Contents

basis points. At December 31, 2019,ranging from 3.66% to 5.03%. The senior unsecured notes mature between 2024 and 2033. During 2022, we weresold $75.0 million aggregate principal amount of 3.66% senior unsecured notes. The notes have an average 10-year life, scheduled principal payments and mature in compliance with all covenants.

Senior Unsecured Notes. We have a $337.5 million shelf agreement with affiliates and managed accounts of PGIM, Inc. (“Prudential”), with 21.5 million available for borrowings at December 31, 2019, which expired for new issuance on February 16, 2020.May 2033.

The debt obligations by component as of December 31, 20192022 are as follows (dollar amounts in thousands):

Applicable

Available

Applicable

Available

Interest

Outstanding

for

Interest

Outstanding

for

Debt Obligations

Rate (1)

Balance

Borrowing

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

Revolving line of credit (2)

5.38%

$

130,000

$

270,000

Term loans, net of debt issue costs

2.69%

99,511

Senior unsecured notes, net of debt issue costs (3)

4.25%

538,343

Total

4.22%

$

693,388

$

527,600

4.24%

$

767,854

$

270,000

(1)Represents weighted average of interest rate as of December 31, 2019.2022.

(2)Subsequent to December 31, 2019,2022, we borrowed $18,000$162,700 under our unsecured revolving lineRevolving Line of credit, accordinglyCredit. Accordingly, we have $111,900$292,700 outstanding and $488,100$107,300 available for borrowing.borrowing under our Revolving Line of Credit.

(3)Subsequent to December 31, 2022, we paid $7,000 under our senior unsecured notes. Accordingly, we have $531,343 outstanding, net of debt issue costs, under our senior unsecured notes.

Our debt borrowings and repayments during the year ended December 31, 2019,2022, are as follows (in thousands):

Debt Obligations

Borrowings

Repayments

Revolving line of credit (1)

$

194,000

$

(174,900)

Senior unsecured notes (2)

75,000

(48,160)

Total

$

269,000

$

(223,060)

(1)Subsequent to December 31, 2022, we borrowed $162,700 under our Revolving Line of Credit. Accordingly, we have $292,700 outstanding and $107,300 available for borrowing under our Revolving Line of Credit.

Debt Obligations

Borrowings

Repayments

Bank borrowings

$

107,900

$

(126,000)

Senior unsecured notes

100,000

(33,667)

Total

$

207,900

$

(159,667)

(2)Subsequent to December 31, 2022, we paid $7,000 under our senior unsecured notes. Accordingly, we have $531,343 outstanding, net of debt issue costs, under our senior unsecured notes.

48

Table of Contents

Equity

At December 31, 2019, we had 39,751,704 shares of common stock outstanding, equity on our balance sheet totaled $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.

Common Stock. We have an equity distribution 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. The equity distribution agreement provides for sales of common shares to be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings. At December 31, 2019, we had $200.0 million available under our equity distribution agreement.

During 2019, we acquired 45,030 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, enterhave entered 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,As of December 31, 2022, we invested inhave the following consolidated VIEs (in thousands):

Gross

Gross

Property

Consolidated

Non-Controlling

Purpose

Type

State

Assets

Interests

Owned real estate

ALF/MC

VA

$

16,895

$

919

Investment

Property

Consolidated

Non-Controlling

Year (1)

Purpose

Type

State

Assets

Interests

2022

Owned real estate

(2)

SNF

FL

$

76,767

$

14,325

2018

Owned real estate

ILF

OR

14,650

2,906

2018

Owned real estate and development

ALF/MC

OR

18,452

1,164

2017

Owned real estate and development

ILF/ALF/MC

WI

22,007

2,305

2017

Owned real estate

ALF/MC

SC

11,680

1,241

Total

$

143,556

$

21,941

(1)Subsequent to December 31, 2022, we entered into a $121,321 JV with an affiliate of an existing operator and contributed $117,900 into the JV that purchased 11 ALF and MC from an affiliate of our JV partner. The JV leased the communities back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a floor of 2.0% and a ceiling of 4.0%. Additionally, the JV provided the seller-lessee with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit IRR of 9.0%. In accordance with GAAP, the communities acquired by the JV are required to be presented as a Financing receivable on our Consolidated Balance Sheets. See Note 2. Summary of Significant Accounting Policies and Note 5. Real Estate Investments for more information.

(2)During 2022, we entered into a joint venture and contributed $61,661 into the JV that purchased three SNFs located in Florida for $75,825. Our JV partner contributed the remaining $14,325 of equity. The JV leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year. In accordance with GAAP, the centers acquired by the JV are required to be presented as a Financing receivable on our Consolidated Balance Sheets. See Note 2. Summary of Significant Accounting Policies and Note 5. Real Estate Investments for more information.

At December 31, 2022, we had 41,262,191 shares of common stock outstanding, equity on our balance sheet totaled $850.3 million and our equity securities had a market value of $1.5 billion. During the year ended December 31, 2022, we declared and paid $91.5 million of cash dividends.

Common Stock. We have separate equity distribution agreements (collectively, “Equity Distribution Agreements”) to offer and sell, from time to time, up to $200.0 million in aggregate offering price of our common shares. The Equity Distribution Agreements provide for sales of common shares to 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 year ended December 31, 2022, we sold 1,792,400 shares of common stock for $68.2 million in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $0.5 million costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. At December 31, 2022, we had $130.6 million available under our equity distribution agreement.

During 2022, we acquired 39,463 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. Subsequent to December 31, 2022, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 2023, payable on January 31, February 28 and March 31, 2023, respectively, to stockholders of record on January 23, February 17, and March 23, 2023, respectively.

Stock Based Compensation Plans. During 2021, we adopted, and our shareholders approved the 2021 Equity Participation Plan (the “2021 Plan”) which replaces the 2015 Equity Participation Plan (the “2015 Plan”). Under the 2021 Plan, 1,900,000 shares of common stock have been authorized and reserved for awards, less one share for every one share that was subject to an award granted under the 2015 Plan after December 31, 2020 and prior to adoption. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited

4049

Table of Contents

Stock Based Compensation Plans. During 2015, we adopted,or cancelled after December 31, 2020 will be added to and our stockholders approvedagain be available for awards under the 2015 Equity Participation2021 Plan. Under the 2021 Plan, (the “2015 Plan”) which 1,400,000the shares of common stock have beenwere authorized and 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 2021 Plan and the 2015 Plan are set by our compensation committee at its discretion.

Restricted Stock and Performance-based Stock Units. During 2019,2022, we granted 147,608221,542 shares of restricted common stock and performance-based stock units under the 20152021 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

No. of

Price per

Shares

Share

Award Type

Vesting Period

122,865

$

33.94

Restricted stock

ratably over 3 years

86,332

$

33.94

Performance-based stock units

TSR targets (1)

12,345

$

38.48

Restricted stock

May 25,2023

221,542

(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, 2019, we granted 76,464 shares of restricted common stock at $48.95 per share, which vest ratably from the grant date over a three-year period.

At December 31, 2019,2022, 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 (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

(1)Includes 55,057 performance-based stock units. The performance-based stock units are valued utilizing a lattice-binomial option pricing model based on Monte Carlo simulations. The company recognizes the fair value of the awards over the applicable vesting period as compensation expense.

Remaining

Compensation

Vesting Date

Expense

2023

$

5,603

2024

2,853

2025

309

Total

$

8,765

(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, 2019. During 2019, a total of 5,000 stock options were exercised at a total option value of $123,000 and a total market value on the date of exercise of $233,000.2022. At December 31, 2019,2022, we have 15,00010,000 stock options outstanding and exercisable.

4150

Table of Contents

Contractual ObligationsMaterial Cash Requirements

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-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 2019,2022, excluding the effects of interest and debt issue costs (in thousands):

Total

2020

2021

2022

2023

2024

Thereafter

 

Total

2023

2024

2025

2026

2027

Thereafter

 

Bank borrowings

$

93,900

(1)

$

$

$

93,900

$

$

$

Revolving line of credit

$

130,000

(1)

$

$

$

130,000

(1)

$

$

$

Term loans

100,000

50,000

50,000

Senior unsecured notes

 

600,300

 

40,160

 

47,160

 

48,160

 

49,160

49,160

 

366,500

 

539,820

(2)

 

49,160

(2)

 

49,160

 

49,500

 

51,500

54,500

 

286,000

$

694,200

$

40,160

$

47,160

$

142,060

$

49,160

$

49,160

$

366,500

$

769,820

$

49,160

$

49,160

$

229,500

$

101,500

$

54,500

$

286,000

(1)Subsequent to December 31, 2019,2022, we borrowed $18,000had a net borrowing of $162,700 under our unsecured revolving line of credit. Accordingly, we have $111,900$292,700 outstanding and $488,100$107,300 available for borrowing under our unsecured revolving line of credit.

(2)Subsequent to December 31, 2022, we paid $7,000 under our senior unsecured notes, accordingly we have $531,343 outstanding, net of debt issue costs, under our senior unsecured notes.

The following table represents our projected interest expense, excluding capitalized interest, amortization of debt issue costs and bank fees, and earn-out accretion, as of December 31, 20192022 (in thousands):

  

Total

  

2020

  

2021

  

2022

  

2023

  

2024

  

Thereafter

 

  

Total

  

2023

  

2024

  

2025

  

2026

  

2027

  

Thereafter

 

Bank borrowings

$

7,469

$

2,998

$

2,989

$

1,482

$

$

$

Revolving line of credit

$

22,475

$

7,898

$

7,919

$

6,658

$

$

$

Term loans

9,265

2,727

2,734

2,570

1,234

Senior unsecured notes

 

161,051

 

25,658

 

23,565

 

21,281

 

19,003

 

16,747

 

54,797

 

114,749

 

21,748

 

19,492

 

17,281

 

15,218

 

13,154

 

27,856

$

168,520

$

28,656

$

26,554

$

22,763

$

19,003

$

16,747

$

54,797

$

146,489

$

32,373

$

30,145

$

26,509

$

16,452

$

13,154

$

27,856

Also, see Off-Balance Sheet Arrangements:Item 8. FINANCIAL STATEMENTS— Note 11. Commitments and Contingencies for additional information regarding our contractual commitments.

We had no off-balance sheet arrangements as of December 31, 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 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, with exception of interest rate swaps, nor do we engage in “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, 2019.2022.

Our future earnings, cash flows and estimated fair values relating to financial instruments are dependent upon prevalent market rates of interest, such as LIBORSOFR 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-rate instruments. Also, we have two interest rate swap agreements to effectively lock-in the forecasted interest payments on our term loans which are based on SOFR. 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.

At December 31, 2019,2022, the fair value of our financing receivable using a 7.6% discount rate was approximately $76.0 million. A 1% increase in such rate would decrease their estimated fair value by $1.9 million while a 1% decrease in such rate would increase their value by $2.0 million. At December 31, 2022, the fair value of our mortgage loans receivable using a 9.0%9.3% discount rate was approximately $312.8$461.3 million. A 1% increase in such rate would decrease the estimated fair value of our mortgage loans by approximately $27.0$30.8 million while a 1% decrease in such rate would

51

Table of Contents

increase their estimated fair value by approximately $35.1 million. At December 31, 2022, the fair value of our notes receivable using a 7.1% discount rate approximately $61.9 million. A 1% increase in such rate would decrease the estimated fair value of our notes receivable by approximately $1.7 million. while a 1% decrease in such rate would increase their estimated fair value by approximately $31.5$1.8 million. At December 31, 2019,2022, the fair value of our senior unsecured notes using a 3.70%6.5% discount rate for those maturing before year 20262030 and 3.90%7.0% discount rate for those maturing at or beyond year 20262030 was approximately $612.4$477.7 million. A 1% increase in such rate would decrease the estimated fair value of our senior unsecured notes by approximately $31.7$19.7 million while a 1% decrease in such rate would increase their estimated fair

42

Table of Contents

value by approximately $34.2$21.0 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.

4352

Table of Contents

ITEM 8. FINANCIAL STATEMENTS

LTC Properties, Inc.

Index to Consolidated Financial Statements

and Financial Statements Schedules

    

 

    

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)

4554

Consolidated Balance Sheets as of December 31, 20192022 and 20182021

4856

Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020

57

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 20182022, 2021 and 20172020

4958

Consolidated Statements of Equity for the years ended December 31, 2019, 20182022, 2021 and 20172020

5059

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 20182022, 2021 and 20172020

5160

Notes to Consolidated Financial Statements

5261

Consolidated Financial Statement Schedules

Schedule II—Valuation and Qualifying Accounts

8389

Schedule III—Real Estate and Accumulated Depreciation

8490

Schedule IV—Mortgage Loans on Real Estate

8995

4453

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and 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”)Company) as of December 31, 20192022 and 2018, and2021, 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, 2019,2022, and the related notes and the financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2022, in conformity with U.S. generally accepted accounting principles.

We also 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, 2019,2022, 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, 2020,16, 2023 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, 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 regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit MattersMatter

The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.it relates.

Impairment of Real Property Investments

Description of the Matter

At December 31, 2022, the carrying value of the Company’s real property investments was $1.0 billion. As discussed in Note 2 of the consolidated financial statements, the real property investments are periodically evaluated for events or changes in circumstances that indicate the assets may be impaired or the carrying amount of the assets may not be recoverable. When impairment indicators are identified, management calculates the future undiscounted cash flows for the real property investment.

Auditing the Company’s evaluation of whether its real estate investments are recoverable was complex and involved a high degree of subjectivity in evaluating management’s assumptions in estimating future cash flows as they are based on assumptions about future market and economic conditions. The estimation required in

4554

Table of Contents

Impairment of Real Property Investments

Description of the Matter

At December 31, 2019, the carrying value of the Company’s portfolio of real estate investments was $1.4 billion, which includes real property investments and mortgage loans receivable secured by first mortgages (collectively, “Assets”). As discussed in Note 2 of the consolidated financial statements, the Assets are periodically evaluated for events or changes in circumstances that indicate the Assets may be impaired or the carrying amount of the Assets may not be recoverable. When impairment indicators are identified for real property investments, management calculates the undiscounted cash flows for the properties. When the carrying amount of the properties are not recoverable based on the undiscounted cash flows, management calculates an impairment charge as the excess of the carrying amount of the properties over the estimated fair value as of the measurement date. When indicators are identified for mortgage loans, management calculates an impairment charge 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.

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 assumptionassumptions includes management’s probability-weighting of various scenarios including whether the Company modifiessuch as modifying the lease with the existing operator, or identifying a replacement operator, or sale of the real property investment.  In addition, the undiscounted future cash flows include management’s assumptions of rental revenues, net operating income, capitalization rates and the assumed market lease rate underlying projected future rental cash flows.expected hold periods.

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 toover the monitoring for indicators ofCompany’s real property investments impairment and, as indicators are present, management’s determination of future cash flows and probability assessment.assessment process.  For example, we tested controls over management’s process for estimating and evaluating the Company’s data and assumptions used in the Company’s estimationcalculations of the future undiscounted cash flow and the determination of fair value.flows for real property investments where impairment indicators existed.

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 propertiesreal property investments with identified indicators of impairment, we performed audit procedures over the Company’s projectionestimation of the real property investments’ undiscounted future cash flows. For example, we re-calculatedcompared significant assumptions used to estimate future cash flows to the estimates usingCompany’s historical accounting records or to available market data. We also tested the mathematical accuracy of management’s model and compared the lease rate assumptions to industry data and recently executed lease agreementsforecasted cash flows.  Additionally, for similar property types. For significantcertain assumptions, we performed sensitivity analyses to evaluate the changes in the undiscounted cash flows of the propertiesreal property investments 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

Table of Contents

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, 202016, 2023

4755

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

    

    

 

    

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

    

    

 

    

December 31, 

 

2022

2021

 

ASSETS

Investments:

Land

$

124,665

$

123,239

Buildings and improvements

 

1,273,025

 

1,285,318

Accumulated depreciation and amortization

 

(389,182)

 

(374,606)

Operating real estate property, net

 

1,008,508

 

1,033,951

Properties held-for-sale, net of accumulated depreciation: 2022—$2,305; 2021—$0

 

10,710

 

Real property investments, net

 

1,019,218

 

1,033,951

Financing receivable, net of credit loss reserve: 2022—$768; 2021—$0

75,999

Mortgage loans receivable, net of credit loss reserve: 2022—$3,930; 2021—$3,473

 

389,728

 

344,442

Real estate investments, net

 

1,484,945

 

1,378,393

Notes receivable, net of credit loss reserve: 2022—$589; 2021—$286

 

58,383

 

28,337

Investments in unconsolidated joint ventures

19,340

19,340

Investments, net

 

1,562,668

 

1,426,070

Other assets:

Cash and cash equivalents

 

10,379

 

5,161

Debt issue costs related to revolving line of credit

 

2,321

 

3,057

Interest receivable

 

46,000

 

39,522

Straight-line rent receivable

 

21,847

 

24,146

Lease incentives

1,789

2,678

Prepaid expenses and other assets

 

11,099

 

4,191

Total assets

$

1,656,103

$

1,504,825

LIABILITIES

Revolving line of credit

$

130,000

$

110,900

Term loans, net of debt issue costs: 2022—$489; 2021—$637

99,511

99,363

Senior unsecured notes, net of debt issue costs: 2022—$1,477; 2021—$524

 

538,343

 

512,456

Accrued interest

 

5,234

 

3,745

Accrued expenses and other liabilities

 

32,708

 

33,234

Total liabilities

 

805,796

 

759,698

EQUITY

Stockholders’ equity:

Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2022—41,262; 2021—39,374

 

412

 

394

Capital in excess of par value

 

931,124

 

856,895

Cumulative net income

 

1,544,660

 

1,444,636

Accumulated other comprehensive income (loss)

 

8,719

 

(172)

Cumulative distributions

 

(1,656,548)

 

(1,565,039)

Total LTC Properties, Inc. stockholders’ equity

 

828,367

 

736,714

Non-controlling interests

 

21,940

 

8,413

Total equity

 

850,307

 

745,127

Total liabilities and equity

$

1,656,103

$

1,504,825

See accompanying notes.

4856

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

 

 

Year Ended December 31, 

Year Ended December 31, 

 

2019

  

2018

  

2017

 

  

2022

  

2021

  

2020

 

Revenues:

    

    

    

    

Rental income

$

152,755

$

135,405

$

137,657

$

128,244

$

121,125

$

126,094

Interest income from financing receivable

1,762

Interest income from mortgage loans

 

29,991

 

28,200

 

26,769

 

40,600

 

32,811

 

31,396

Interest and other income

 

2,558

 

5,040

 

3,639

 

4,547

 

1,386

 

1,847

Total revenues

 

185,304

 

168,645

 

168,065

 

175,153

 

155,322

 

159,337

Expenses:

Interest expense

 

30,582

 

30,196

 

29,949

 

31,437

 

27,375

 

29,705

Depreciation and amortization

 

39,216

 

37,555

 

37,610

 

37,496

 

38,296

 

39,071

Impairment charges

1,880

Provision for doubtful accounts

 

166

 

87

 

(206)

Impairment loss

3,422

3,977

Provision (recovery) for credit losses

 

1,528

 

1,021

 

(3)

Transaction costs

365

84

56

828

4,433

299

Property tax expense

16,755

15,486

15,392

15,065

General and administrative expenses

 

18,453

 

19,193

 

17,513

 

23,706

 

21,460

 

19,710

Total expenses

 

105,537

 

87,115

 

86,802

 

113,903

 

107,977

 

107,824

Other operating income:

Gain on sale of real estate, net

2,106

70,682

3,814

37,830

7,462

44,117

Operating income

 

81,873

 

152,212

 

85,077

 

99,080

 

54,807

 

95,630

Gain from property insurance proceeds

2,111

373

Impairment loss from investments in unconsolidated joint ventures

(5,500)

Loss on unconsolidated joint ventures

(758)

Income from unconsolidated joint ventures

2,388

2,864

2,263

1,504

1,417

432

Net income

80,872

155,076

87,340

100,584

56,224

95,677

Income allocated to non-controlling interests

 

(346)

 

(95)

 

 

(560)

 

(363)

 

(384)

Net income attributable to LTC Properties, Inc.

 

80,526

 

154,981

 

87,340

 

100,024

 

55,861

 

95,293

Income allocated to participating securities

 

(391)

 

(625)

 

(362)

 

(580)

 

(458)

 

(422)

Net income available to common stockholders

$

80,135

$

154,356

$

86,978

$

99,444

$

55,403

$

94,871

Earnings per common share:

Basic

$

2.03

$

3.91

$

2.21

$

2.49

$

1.41

$

2.42

Diluted

$

2.02

$

3.89

$

2.20

$

2.48

$

1.41

$

2.42

Weighted average shares used to calculate earnings per common share:

Basic

 

39,571

 

39,477

 

39,409

 

39,894

 

39,156

 

39,179

Diluted

 

39,759

 

39,839

 

39,637

 

40,067

 

39,156

 

39,264

Comprehensive Income:

Net income

$

80,872

$

155,076

$

87,340

Comprehensive income

$

80,872

$

155,076

$

87,340

See accompanying notes.

4957

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

Year Ended December 31, 

 

 

2022

  

2021

  

2020

 

Net income

$

100,584

$

56,224

$

95,677

Unrealized gain (loss) on cash flow hedges before reclassification

 

9,181

 

(172)

 

(Gains) reclassified from accumulated other comprehensive income to interest expense

(290)

Comprehensive income

109,475

56,052

95,677

Less: Comprehensive income allocated to non-controlling interests

 

(560)

 

(363)

 

(384)

Comprehensive income attributable to LTC Properties, Inc.

$

108,915

$

55,689

$

95,293

58

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except per share amounts)

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

Capital in

Cumulative

Total

Non-

 

Common Stock

Excess of

Net

Accumulated

Cumulative

Stockholders’

controlling

Total

 

  

shares

  

Amount

  

Par Value

  

Income

  

OCI

  

Distributions

  

Equity

  

Interests

  

Equity

 

Balance—December 31, 2019

39,752

$

398

$

867,346

$

1,293,482

$

$

(1,384,283)

$

776,943

$

8,483

$

785,426

Repurchase of common stock

 

(616)

 

(6)

(18,006)

(18,012)

(18,012)

Issuance of restricted stock

 

101

1

(1)

 

 

 

Net income

 

95,293

 

95,293

 

384

 

95,677

Stock-based compensation expense

 

7,012

 

7,012

 

 

7,012

Vesting of performance-based stock units, including the payment of distributions

82

(586)

(586)

(586)

Non-controlling interest distributions

(463)

(463)

Common stock cash distributions ($2.28 per share)

 

(89,676)

 

(89,676)

 

 

(89,676)

Cash paid for taxes in lieu of common shares

(77)

(1)

(3,565)

(3,566)

(3,566)

Other

 

(6)

 

(6)

 

 

(6)

Balance—December 31, 2020

 

39,242

392

852,780

1,388,775

(1,474,545)

767,402

8,404

775,806

Issuance of restricted stock

 

110

1

(1)

 

 

 

Net income

 

55,861

 

55,861

 

363

 

56,224

Stock-based compensation expense

 

7,760

 

7,760

 

 

7,760

Vesting of performance-based stock units, including the payment of distributions

109

1

(1)

(764)

(764)

(764)

Non-controlling interest contributions

 

 

 

9

 

9

Non-controlling interest distributions

(363)

(363)

Common stock cash distributions ($2.28 per share)

 

(89,730)

 

(89,730)

 

 

(89,730)

Cash paid for taxes in lieu of common shares

(87)

(3,573)

(3,573)

(3,573)

Fair market valuation adjustment for interest rate swap

(172)

(172)

(172)

Other

 

(70)

 

(70)

 

 

(70)

Balance—December 31, 2021

39,374

394

856,895

1,444,636

(172)

(1,565,039)

736,714

8,413

745,127

Issuance of common stock

 

1,792

18

67,625

 

67,643

 

 

67,643

Issuance of restricted stock

 

135

1

(1)

 

 

 

Net income

 

100,024

 

100,024

 

560

 

100,584

Stock-based compensation expense

 

7,964

 

7,964

 

 

7,964

Non-controlling interest contributions

 

 

 

14,375

 

14,375

Non-controlling interest distributions

(1,406)

(1,406)

Common stock cash distributions ($2.28 per share)

 

(91,509)

 

(91,509)

 

 

(91,509)

Cash paid for taxes in lieu of common shares

(39)

(1)

(1,354)

(1,355)

(1,355)

Fair market valuation adjustment for interest rate swap

8,891

8,891

8,891

Other

 

(5)

 

(5)

 

(2)

 

(7)

Balance—December 31, 2022

 

41,262

$

412

$

931,124

$

1,544,660

$

8,719

$

(1,656,548)

$

828,367

$

21,940

$

850,307

See accompanying notes.

5059

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

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

Year Ended December 31, 

 

  

2022

  

2021

  

2020

 

OPERATING ACTIVITIES:

    

    

    

Net income

$

100,584

$

56,224

$

95,677

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

37,496

 

38,296

 

39,071

Stock-based compensation expense

 

7,964

 

7,760

 

7,012

Impairment loss

3,422

3,977

Gain on sale of real estate, net

 

(37,830)

 

(7,462)

 

(44,117)

Loss on unconsolidated joint ventures

758

Income from unconsolidated joint ventures

 

(1,504)

 

(1,417)

 

(432)

Income distributions from unconsolidated joint ventures

351

432

Straight-line rental adjustment (income)

1,369

 

(467)

(1,778)

Adjustment for collectability of lease incentives and rental income

256

758

23,214

Amortization of lease incentives

877

608

426

Provision (recovery) for credit losses

 

1,528

 

1,021

 

(3)

Application of interest reserve

(6,192)

(150)

Amortization of debt issue costs

1,139

1,122

1,029

Other non-cash items, net

 

113

 

 

4

Change in operating assets and liabilities

Lease incentives funded

(418)

(824)

(220)

Increase in interest receivable

 

(7,173)

 

(6,776)

 

(6,161)

Increase (decrease) in accrued interest payable

 

1,489

 

(471)

 

(767)

Net change in other assets and liabilities

 

2,115

 

2,962

 

(2,021)

Net cash provided by operating activities

 

105,586

 

91,184

 

116,101

INVESTING ACTIVITIES:

Investment in real estate properties

 

(51,817)

 

 

(13,581)

Investment in real estate developments

 

(105)

 

 

(16,699)

Investment in real estate capital improvements

 

(8,994)

 

(6,298)

 

(6,913)

Capitalized interest

(354)

Proceeds from sale of real estate, net

 

72,620

 

43,627

 

72,141

Investment in financing receivable

(61,747)

Investment in real estate mortgage loans receivable

 

(40,732)

 

(88,955)

 

(4,253)

Principal payments received on mortgage loans receivable

 

1,175

 

1,175

 

1,065

Investments in unconsolidated joint ventures

 

 

(5,676)

(8,520)

Proceeds from liquidation of investments in unconsolidated joint ventures

17,848

Advances and originations under notes receivable

 

(37,192)

 

(16,353)

 

(2,078)

Principal payments received on notes receivable

 

6,843

 

2,694

 

5,275

Net cash (used in) provided by investing activities

 

(119,949)

 

(69,786)

 

43,931

FINANCING ACTIVITIES:

Borrowings from revolving line of credit

 

194,000

 

204,400

 

24,000

Borrowings from term loans

100,000

Repayment of revolving line of credit

 

(174,900)

 

(183,400)

 

(28,000)

Proceeds from issuance of senior unsecured notes

 

75,000

 

 

Principal payments on senior unsecured notes

(48,160)

(47,160)

(40,160)

Stock repurchase plan

(18,012)

Proceeds from common stock issued

 

68,156

 

 

Distributions paid to stockholders

 

(91,509)

 

(90,494)

 

(90,262)

Contribution from non-controlling interests

 

50

 

9

 

Distributions paid to non-controlling interests

 

(487)

 

(363)

 

(463)

Financing costs paid

 

(1,208)

 

(3,358)

 

(35)

Cash paid for taxes in lieu of shares upon vesting of restricted stock and performance-based stock units

(1,355)

(3,573)

(3,566)

Other

 

(6)

 

(70)

 

(6)

Net cash provided by (used in) financing activities

 

19,581

 

(24,009)

 

(156,504)

Increase (decrease) in cash and cash equivalents

 

5,218

 

(2,611)

 

3,528

Cash and cash equivalents, beginning of period

 

5,161

 

7,772

 

4,244

Cash and cash equivalents, end of period

$

10,379

$

5,161

$

7,772

Supplemental disclosure of cash flow information:

���

Interest paid

$

28,809

$

26,724

$

29,443

See accompanying notes.

5160

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. The Company

LTC Properties, Inc. (“LTC”), a Maryland corporation, commenced operations on August 25, 1992. LTC is a real estate investment trust (“REIT”) that invests primarily in seniors housing and health care properties primarily through sale-leaseback transactions,sale-leasebacks, mortgage financing, joint ventures and structured finance solutions including preferred equity and mezzanine lending. We conduct and manage our business as 1one 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. We also invest in other (“OTH”) types of properties, such as land parcels, projects under development (“UDP”) and behavioral health care hospitals. 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 consolidated companies. All intercompany investments, accounts and transactions have been eliminated.

ConsolidationAny 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 accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

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 (“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 does not qualify for a scope exception from the VIE model, we will determine whether the entity is based on determinationa 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.

61

Table of Contents

If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. In order to be considered theThe 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 member shouldpower 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 ablesignificant to exercise power over andthe VIE, or the right to receive benefits from the entity. Power overVIE that potentially could be significant to the company is based onVIE (benefits). If we have a variable interest in a VIE but we are not the provisionsprimary beneficiary, we account for our investment using the equity method of accounting.

If a legal entity fails to meet any of the operating agreement that provides us withthree of the characteristics of a controlling financialVIE, we evaluate such entity under the voting interest in the entity.model. Under the termsvoting interest model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the operating agreement,voting shares or if we asare 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 whenof the entity and the limited partners or non-managing members do not 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, managementsubstantive participating, liquidation, 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.kick-out rights.

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

52

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Going Concern. In August 2014, the FASB issued Accounting Standards Update (“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 (“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 our financial statements or disclosures.

Use of Estimates. Preparation of the consolidated financial statements in conformity with GAAPGenerally Accepted Accounting Principles (“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. Our most significant assumptions and estimates are related to the valuation of real estate, purchase price allocation of acquired assets, revenue recognition including the collectability of tenant receivables and asset impairment.

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.

53

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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-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-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-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-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-place leases. We evaluate each purchase transaction to determine whether the acquired assets meet the definition of an asset acquisition or a business combination. Transaction costs related to acquisitions that are not deemed to be businessesbusiness combinations are included in the cost basis of the acquired assets, while transaction costs related to acquisitions that are deemed to be businessesbusiness combinations are expensed as incurred.

In January 2017, the FASB issued ASU No. 2017-01(“ASU 2017-01”), Business Combinations(Topic 805): Clarifying Definition of a 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. ASU 2017-01 is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We early adopted this standard in 2017. As a result of adopting ASU 2017-01, most of our acquisitions of investment properties will 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 and 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 in 2018. The adoption of this ASU did not have a material impact on the consolidated financial 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.

62

Table of Contents

Depreciation is computed principally by the straight-line method for financial reporting purposes over the estimated useful lives of the assets, which range from 3 to 5 years for computers, 5 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. Financing Receivable.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

54

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(“VIE”), then under the voting model. Our evaluation considers all As part of our variable interests, including common or preferred equity ownership, loans,acquisitions, we may from time to time, invest in sale and other participating instruments. The variable interest model appliesleaseback transactions. In accordance with ASC Topic 842, Leases (“ACS 842”), we are required 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 issale and leaseback transaction qualifies as a VIE.

A legal entity is determinedsale. ASC 842 clarifies that an option for the seller-lessee to berepurchase a VIE if it has anyreal estate asset would generally preclude accounting for the transfer 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 anyasset as a sale. Therefore, a sale and leaseback transaction of real estate that includes a seller-lessee repurchase option is accounted for as a failed sale and leaseback transaction. As a result, the purchased assets of a failed sale and leaseback transaction would be presented as a Financing receivable on our Consolidated Balance Sheets and the rental revenue from these properties is recorded as Interest income from financing receivable on our Consolidated Statements of Income. Furthermore, upon expiration of the three characteristics of a VIE are met, we conclude thatpurchase option if the entity is a VIE and evaluate it for consolidation underpurchase option remains unexercised by the variable interest model.

If an entity is determinedseller-lessee, the purchased assets will be reclassified from Financing receivable to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis basedReal property investments 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.Consolidated Balance Sheets.

Mortgage Loans Receivable, Net of Loan Loss Reserve. Mortgage loans receivable we originate are recorded on an amortized cost basis. Mortgage

Working Capital Loans. Our investment in working capital loans we acquire are recorded at fair value at the timeconsists of purchase net of any related premium or discount which is amortized as a yield adjustment toloan arrangements with interest income over the life of the loan. Additionally, we record an estimated allowance for doubtful accounts, as described below.ranging between 4% and 8% and maturities between 2023 and 2032.

Mezzanine Loans. In 2015 we strategically decided to allocate a portion of our capital deployment toward mezzanine loans to grow relationships with operating companies that have not typically utilized sale leaseback financing

55

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 12-14%7-12% with the loan term typically between four to five 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 are recorded for GAAP purposes as either a loan, under notes receivable, or joint venture (“JV”), under investment in unconsolidated JVs, depending upon specifics of the loan terms and related credit enhancements.

InvestmentInvestments in unconsolidated joint ventures. From time to time, we provide funding to third-party operators for the acquisition, development and construction (“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. These ADC arrangements can have characteristics similar to a loan or similar to a joint venture (“JV”)JV or partnership such as participating in the risks and rewards of the project as an owner or an investment partner. If 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 JV under the equity method of accounting or a direct investment (consolidated basis of accounting) instead of applying loan accounting.

We evaluate our ADC arrangements first pursuant to ASC 805,Accounting Standard Codification (“ASC”) 810, Consolidation, to determine whether the ADC arrangement meets the definition of a 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 JV. Distributions of operating profit from the JVs 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. Currently we do not have any ADC arrangements.

We periodically perform evaluation of our investment in unconsolidated JVs to determine whether the fair

63

Table of Contents

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 $5,500,000Loan Loss Reserve. and wrote our preferred equity investment down to its estimated fair value. SeeASC 326, Note 6. Investment in Unconsolidated Joint Ventures for further information.

In March 2016, FASB issued ASU No. 2016-07 (“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.

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

56

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”), Measurement ofFinancial Instruments- Credit Losses on Financial Instruments (Topic 326). This standard requires a new forward looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. ASU 2016-13 is effective for fiscal years,When shared risk characteristics exist, ASC 326 requires a collective basis measurement of expected credit losses of the financial assets.

We adopted ASC 326 on January 1, 2020 and interim periodsdetermined our Mortgage loans receivable and Notes receivable are within those years, beginning after December 15, 2019,the scope of this ASU. We utilize the probability of default and early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluatingdiscounted cash flow methods to estimate expected credit losses. Additionally, we stress-test the results to reflect the impact of unknown adverse future events including recessions. Upon adoption, we concluded that the standard willadoption of ASC 326 did not have a material impact on our consolidated financial statements.

We elected not to measure an allowance for expected credit losses on accrued interest receivable under the expected credit loss standard as we have a policy in place to reserve or write off accrued interest receivable in a timely manner through our quarterly review of the loan and property performance. Therefore, we elected the policy to write off accrued interest receivable by reversing interest income and/or recognizing credit loss expense. As of December 31, 2022, the total balance of accrued interest receivable of $46,000,000 was not included in the measurement of expected credit loss. For the years ended December 31, 2022, 2021 and 2020, Company did not recognize any write-off related to accrued interest receivable.

Accrued incentives and earn-outs.incentives. 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 incentive payments are funded, cash rent will increase by the amount funded multiplied by a rate stipulated in the agreement. If it is deemed probable, 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 valuepayment is recorded as a lease incentive included in the prepaidPrepaid expenses and otherassets line item in our consolidated balance sheetConsolidated Balance Sheets and is amortized as a yield adjustment over the life of the lease. The fair value of these contingent liabilities is evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates. This fair value measurement is based on significant inputs not observable in the 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. 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 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 charge 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. In determining fair value, we use current appraisals or other third-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, 20182022, 2021 and 2017,2020, we recognized impairment chargeslosses of $0,$3,422,000, $0 and $1,880,000$3,977,000, respectively, related to our real property investments.

Also, we evaluateProperties held-for-sale. Properties classified as held-for-sale on 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-receipt of principalConsolidated Balance Sheets include only those properties available for immediate sale in their present condition and interest payments and/or significant deteriorationfor which management believes that it is probable that a sale of the financial conditionproperty will be completed within one year. Properties held-for-sale are carried at the lower of the borrower, indicate that the carrying amount of the mortgage loan receivable may not be recoverable. An impairment chargecost or fair value less estimated selling costs. No depreciation expense is recognized on properties held-for-sale once they have been classified as such. Only disposals representing a strategic shift in current period earningsoperations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and is calculatedfinancial 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 the difference between the carrying amountdiscontinued operations as these disposals do not represent strategic shifts in our operations.

64

Table 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.Contents

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.

57

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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-based measurement, not an entity-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.

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 15. Fair Value Measurements for the disclosure about fair value of our financial instruments.

Derivative Instruments. As of December 31, 2022, we had two interest rate swaps that were designated as cash flow hedges of interest rate risk with a total notional amount of $100,000,000. See Note 9. Debt Obligations within our consolidated financial statements for further detail on our interest rate swaps. We record cash flow hedges either as an asset or a liability measured at fair value. If hedge accounting is applied to a derivative instrument, the entire change in the fair value of the derivative designated and qualified as cash flow hedge is recorded in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. We estimate the fair value of our interest rate swaps using the assistance of a third-party using inputs that are observable in the market which include forward yield curves and other relevant information. Additionally, we are exposed to credit risk of the counterparty to our interest rate swap agreements in the event of non-performance under the terms of the agreements.We have determined that the majority of the inputs used to value our derivative instruments fall within level 2 of the fair value hierarchy.

In March 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The practical expedients are optional and may be elected over time as reference rate reform activities occur. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. In December

65

Table of Contents

2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848, which defers the sunset date from December 31, 2022 to December 31, 2024.

In December 2022, we amended our unsecured credit agreement to update the benchmark provisions to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”), plus a credit spread of 10 basis points, as the reference rate for the purpose of calculating interest under the agreement. In connection with amending the unsecured credit agreement, we also amended our fixed interest rate swap agreements to update reference rate to SOFR. As a result, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients maintains the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of the ASU and may apply other elections, as applicable, as additional changes in the market occur. Our election to apply the hedge accounting expedients did not have a material impact on our consolidated financial statements. See Note 9. Debt Obligations within our consolidated financial statements for further detail on our unsecured credit agreement.

Revenue Recognition.Recognition- Rental Income. Rental income from operating leases is generally recognized on a straight-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 1one of 4four 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;Index or the Medicare Market Basket Rate;
(iii)as a percentage of facility revenues in excess of base amounts or
(iv)specific dollar increases.

The FASB does not permit recognition of contingent revenue until all possiblethe contingencies have been resolved. Historically, we have not included contingent rents as income until received and we will we continue our historical policy. During the years ended December 31, 2019, 20182022, 2021 and 2017,2020, we received $464,000, $470,000$57,000, $0 and $457,000,$111,000, respectively, of contingent rental income. We follow a policy related to rental income whereby we consider a lease to be non-performing after 60 days of non-payment of past due amounts and do not recognize unpaid rental income from that lease until the amounts have been received.

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-performing after 60 days of non-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

58

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 (“ASU 2014-09”), Revenue from Contractsaccordance 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 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that 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 make more estimates. While this ASU specifically references contracts with 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, and 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 approach. We have adopted this standard using the modified retrospective adoption method on January 1, 2018. We concluded that this standard did 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 are specifically excluded from ASU 2014-09.

Leases: In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 and 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 of operating leases.

ASC 842 requires the lessors to identify lease and non-lease components of a 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

59

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 other ASUs to clarify 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 classification 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 agreement with a 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 be classified as operating lease. For the year ended December 31, 2019, we recorded $299,000 of rent expense related to this lease agreement. Adoption of ASC 842 resulted in recording a right-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

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

lease agreement were $1,287,000.

As a lessor, our properties are leased subject to non-cancelable operating leases. Each lease is a 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 recordedreport real estate taxes that are reimbursed by our operators as Rental Incomeincome with a corresponding Property tax expensein the Consolidated Statements of Income and Comprehensive Income. ForFurthermore, we assess the year ended December 31, 2019, we have recognized $15,998,000 in Rental Income related to reimbursementcollectability of real estate taxes from our operators.

Furthermore, upon adoption of ASC 842, we assessed the probability of collecting substantially all of our lease payments through maturity. As previously reported, we have been monitoring Anthem Memory Care (“Anthem”), Thrive Senior Living, LLC (“Thrive”), Preferred Care, Inc. (“Preferred Care”)maturity and Senior Care Centers, LLC (“Senior Care”) due to cash 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 maturitycollectability is not probable, all or a portion of theour 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, and the lease payments received. Our assessment of collectibilitycollectability of leases includes evaluating the data 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.

DuringIn April 2020, the year ended December 31, 2019, we received cashFASB staff released guidance regarding accounting for lease concessions in response to the novel coronavirus (“COVID-19”) pandemic. The FASB staff guidance indicates that lessors could elect an accounting policy to not evaluate whether rent from Anthem, Thrive, Preferred Care and Senior Care. The totalconcessions provided in response to the COVID-19 pandemic are lease modifications. When only the timing of payments is impacted by the rent deferrals, but the amount of the consideration is substantially the same as required by the original lease agreement, the FASB listed two methods for lessors to account for the rent deferrals. We elected to account for the rent deferrals as if there were no changes made to the lease agreement. Accordingly, we increased the lease receivable and continued to recognize income. We recognized the rent abatements given to the operators where we accrue rent on a straight-line basis, over the remaining life of those respective leases. Payments made to or on behalf of our lessees represent incentives that are deferred and amortized over the term of the lease on a straight-line basis.

Revenue Recognition- Interest Income. Interest income on mortgage loans receivable and notes receivable is recognized using the effective interest method. Exit fee income and commitment fee income are also amortized over the life of the related loan under the effective interest method. 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. When the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan, an effective

66

Table of Contents

interest receivable asset is created and included in the Interest receivable line item in our Consolidated Balance Sheets and begins reducing down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. We consider a loan to be non-performing after 60 days of non-payment of amounts due and do not recognize unpaid interest income from that loan until the past due amounts have been received.

As previously discussed under Financing Receivable above, rental income received from these operators was $33,238,000 andproperties acquired through a sale leaseback, subject to a seller-lessee repurchase option, is included inrecorded as Rental IncomeInterest income from financing receivable on theour Consolidated Statements of Income and Comprehensive IncomeIncome.. Of Interest income on financing receivable is recognized using the $33,238,000 received, $27,225,000effective interest method. The recognition of interest income will stop when Financing receivable is reclassified to Real estate investments when the purchase option remains unexercised upon expiration of the cash payments received relatepurchase option.

Gains on sale of Real Estate, Net. Recognition of gains or losses from sales of investments in real estate requires that we:

a)meet certain revenue recognition criteria in accordance withASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets; and
b)transfer control of the real estate to the buyer.

The gain or loss recorded is measured as the difference between the sales price, less costs to amounts previously written-off in transition to ASC 842 (“Recoveries”) duringsell, and the twelve months ended December 31, 2019.carrying value of the real estate when we sell it.

Federal Income Taxes. LTC qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and as such, 0no 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-line method over a period of 27.5 years. Earnings and profits, which determine the taxability of distributions to stockholders, use the straight-line method over 40 years. Both30 years. The determination of Federal taxable income and earnings and profits differ from net income for financial statement purposes principally due to the treatment of certain investments in joint ventures, timing of interest income, rental income, other expense items, recognition of impairment charges, and the depreciable lives and basisbases of assets. At December 31, 2019,2022, the taxnet book basis of our net depreciable assets exceedsexceeded our booknet tax basis by approximately $25,436,000$41,202,000 (unaudited), primarily due to an investment recorded as an acquisition for tax and a mortgage loan for GAAP, and to differencesthe difference previously mentioned above.mentioned.

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-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

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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-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 Consolidated Statements of Income as generalGeneral and administrative expenses.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.properties, financing receivable and mortgage loans receivable. Our financial instruments, operating leases, financing receivable and 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

67

Table of Contents

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-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-sale are carried at the lower of cost or fair value less estimated selling costs. No depreciation expense is recognized on properties held-for-sale once they have been classified as such. Under ASU No. 2014-08 (“ASU 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.

Net Income Per Share. Basic earnings per share is calculated using the weighted-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-based payments transactions are participating securities, we have applied the two-class method of computing basic earnings per share. This guidance clarifies that outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common stockholders and are considered participating securities.

Stock-Based Compensation. The FASB requires all share-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-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-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

62

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Federal income taxation. Therefore, this reporting requirement does not have an impact on the Consolidated Statements of Cash Flows.

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 seniors housing and health care properties, including mortgage loans, property lease transactions, financing receivable, mortgage loans, and other investments, are made and resulting investments are managed as a single operating segment for internal reporting and for internal decision-making purposes. Therefore, we have concluded that we operate as a single segment.

3. Major Operators

We have 2 operatorsone operator from each of which we derive approximately 10% or more of our combined rental revenue and interest income from mortgage loans.total revenues. The following table sets forth information regarding our major operatorsoperator as of December 31, 2019:2022:

Number of

Number of

Percentage of

Number of

Number of

Percentage of

SNF

ALF

Total

Total

SNF

ALF

Total

Total

Operator

SNF

ALF

Beds

Units

Revenue (1)

Assets

SNF

ALF

Beds

Units

Revenues (1)

Assets (2)

Prestige Healthcare(3)

24

3,010

93

17.1

%

17.4

%

24

2,820

93

18.6

%

16.0

%

Senior Lifestyle Corporation

23

1,457

10.8

%

10.2

%

Total

24

23

3,010

1,550

27.9

%

27.6

%

(1)Includes rental incometotal revenues for the twelve months ended December 31, 2022.

(2)Represents the net carrying value of the mortgage loans and properties we own divided by the Total assets on the Consolidated Balance Sheets.

(3)The majority of the revenue derived from owned properties andthis operator relates to interest income from mortgage loans as of December 31, 2019 and excludes rental income due to lessee reimbursement of our real estate taxes and adjustment for collectibility of rental income.loans.

Our financial position and ability to make distributions may be adversely affected if Prestige Healthcare, Senior Lifestyle Corporation 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, impact upon services or occupancy levels due to infectious disease outbreaks, or in the event any such operator does not renew and/or extend its relationship with us.

68

Table of Contents

4. Supplemental Cash Flow Information

 

 

Year Ended December 31,

 

Year Ended December 31,

 

  

2019

  

2018

  

2017

 

  

2022

  

2021

  

2020

 

(in thousands)

 

(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

Contribution of financing receivable from non-controlling interests (See Note 5. Real Estate Investments)

$

14,325

$

$

Mortgage loans receivable reserve withheld at origination (See Note 5. Real Estate Investments)

107

298

Accretion of interest reserve recorded as mortgage loan receivable (See Note 5. Real Estate Investments)

(6,192)

Preferred return reserve related to investment in unconsolidated joint ventures (See Note 6. Investment in Unconsolidated Joint Ventures)

351

2,324

2,878

Notes receivable reserve withheld at origination (See Note 7. Notes Receivable)

353

Reclassification of notes receivable to lease incentives (Note 8. Lease Incentives)

300

Change in fair value of interest rate swap agreements (Note 9. Debt Obligations )

(8,891)

172

5. Real Estate Investments

Owned Properties. As of December 31, 2019,2022, we owned 177152 health care real estate properties located in 28 states and consisting of 10699 ALFs, 7052 SNFs and 1one behavioral health care hospital.hospital located in 26 states. These properties are operated by 3024 operators.

Independent living communities, assisted living communities, memory care communities and combinations thereof are included in the assisted living property classification (collectively “ALF”). 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 reviewaudit of our consolidated financial statements in accordance

63

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

with the standards of the Public Company Accounting Oversight Board.

Depreciation expense on buildings and improvements, including properties classified as held-for-sale, was $39,094,000, $37,416,000,$37,394,000, $38,192,000, and $37,492,000$38,945,000 for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, 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 inducementincentives and renewal options are as follows (in thousands):

    

 Cash

 

    

 Cash

 

Rent (1)

 

Rent (1)

 

2020

$

135,173

2021

 

126,914

2022

 

128,196

2023

 

129,846

$

120,817

2024

 

126,320

 

113,003

2025

 

103,690

2026

 

71,044

2027

 

67,087

Thereafter

 

625,158

 

200,663

(1)Represents contractual annual cash rent, except for 2certain master leases which are based on agreed upon cash rents. See below for more information.estimated cash. Includes rental income due to lessee reimbursement of our real estate taxes andrent from subsequent acquisitions and excludes properties held-for-sale at December 31, 2019.rent from subsequent dispositions. See Note 16. Subsequent Events for more information.

During 2017, we issued a noticeMany of defaultour existing leases contain renewal options that, if exercised, could result in the amount of rent receivable upon renewal being greater of less than that currently being paid. Subsequent to Anthem Memory Care (“Anthem”) resulting from Anthem’s partial payment of minimum rent. Anthem operates 11 memory care communities underDecember 31, 2022, a master lease. During 2019, Anthem paid the agreed upon minimum cash rent of $7,500,000. This amount represents approximately 50% oflease covering two skilled nursing centers that was scheduled to mature in 2023 was renewed at the contractual amount due underrate for another five years extending the leasematurity to November 2028. The centers have a total 216 beds and are located in 2019. In accordance with Accounting Standard Codification (“ASC”) Topic 842, Leases (“ASC 842”), at January 1, 2019, we evaluatedFlorida.

We monitor the collectibilitycollectability of our receivable balances, including deferred rent receivable balances, on an ongoing basis. We write-off uncollectable operator receivable balances, including straight-line rent receivable and lease incentiveincentives balances, relatedas a reduction to Anthem and determined it was notrental income in the period such balances are no longer probable that we would collect substantially allof being collected. Therefore, recognition of rental income is limited to the lesser of the contractual lease obligations through maturity. Accordingly, we wrote-off the balances to equity asamount 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 Carecash collected or rental income reflected on a cash basis. In accordance with ASC 842 lease accounting guidance, at January 1, 2019, we evaluated the collectibility ofstraight-line basis for those customer receivable balances deemed uncollectable. We wrote-off straight-line rent receivable and lease incentive balance related to Senior Careincentives balances of $256,000, $758,000 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$23,214,000 for the years ended December 2018 unpaid rent, late fees31, 2022, 2021 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 Kentucky or New Mexico. Those 24 properties are in Arizona, Colorado, Iowa, Kansas and Texas. The Preferred Care operating entities that subleaserespectively.

6469

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

65

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We continue to take into account the current financial condition of our operators, including consideration of the impact of COVID-19, in our estimation of uncollectable accounts and deferred rents receivable at December 31, 2022. We are closely monitoring the collectability of such rents and will adjust future estimations as appropriate as further information becomes known.

The following table summarizes components of our rental income for the years ended December 31, 2019, 20182022, 2021 and 20172020 (in thousands):

Year Ended December 31,

December 31, 

Rental Income

2019

2018

2017

2022

2021

2020

Base cash rental income

$

134,117

(1)

$

127,477

$

128,715

$

115,230

(1)

$

107,692

(2)

$

132,789

Variable cash rental income

16,462

(2)

470

(2)

457

(2)

15,516

(3)

14,332

(3)

15,167

(3)

Straight-line rent

4,487

(3)

9,550

10,694

(1,369)

(4)

467

(5)

1,778

Adjustment for collectibility of rental income

(1,926)

(4)

Adjustment for collectability of lease incentives and rental income

(256)

(6)

(758)

(6)

(23,214)

(6)

Amortization of lease incentives

(385)

(2,092)

(2,209)

(877)

(608)

(426)

Total

$

152,755

$

135,405

$

137,657

$

128,244

$

121,125

$

126,094

(1)Increased primarily due to rent received from transitioned portfolios, rental income from acquisitions, developmentscompleted development projects, annual rent escalations, and capital improvementslease termination fee income of $1,181 received in connection with the sale of a 74-unit ALF partially offset due to reducedby decreased rent from the sold properties and properties transitioned to other operators.properties.

(2)The year ended December 31, 2019 variable rental income includes $464 relatedDecreased primarily due to contingent rental incomedefaults of payments for lease obligations from Senior Lifestyle and $15,998 relatedSenior Care, abated and deferred rent and reduced rent from a sold property. This decrease was partially offset by increased rent from re-leasing 18 properties previously leased to real estate taxes which were reimbursed by our operators. Per the provisionsSenior Lifestyle, completion of ASC 842, any lessor cost, paid by the lessordevelopment projects 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.contractual rent increases.

(3)In accordance with ASC 842 lease accounting guidance, we evaluatedThe variable cash rental income for the collectibilityyears ended December 31, 2022, 2021 and 2020 primarily includes reimbursement 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.real estate taxes by our lessees.

(4)During the first quarter of 2019, we terminated a lease agreement and transitioned 2 operating seniors housing communities under the lease agreementDecreased primarily due to a new operator. As a resultdeferred rent repayment, normal amortization and the impact of the lease termination, we wrote-off $1,92650% reduction of 2021 rent escalations for those leases accounted for on a straight-line basis.

(5)Decreased due to more leases accounted for on a cash basis, normal amortization and the impact of the 50% reduction of 2021 rent escalations for those leases accounted for on a straight-line basis.

(6)Represents straight-line rent receivable to contra-revenue in accordance with ASC 842.and lease incentives write-offs.

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

Type

Number

of

of

Gross

Carrying

Option

of

of

Gross

Carrying

Option

State

Property

Properties

Investments

Value

Window

Property

Properties

Investments

Value

Window

California

ALF/MC

2

$

38,895

$

36,542

2024-2029

ALF/MC

2

$

38,895

$

33,719

2023-2029

California

ALF

2

28,926

16,056

2021-TBD

(1)

Florida

MC

1

14,201

12,757

2028-2029

MC

1

15,201

12,500

2029

Kentucky and Ohio

MC

2

30,126

27,859

2028-2029

Florida

SNF

3

76,767

75,999

2025-2027

(1)

Nebraska

ALF

3

7,633

2,948

TBD

(2)

South Carolina

ALF/MC

1

11,680

9,052

2029

Texas

MC

2

25,265

24,335

2025-2027

SNF

4

51,837

50,848

2027-2029

(3)

South Carolina

ALF/MC

1

11,680

10,794

2028-2029

Total

$

149,093

$

128,343

$

202,013

$

185,066

(1)During 2022, we entered into a joint venture to purchase three SNFs. For more information regarding this transaction, see Financing Receivable below.

(2)Subject to the properties achieving certain coverage ratios.

(3)During 2022, we purchased four SNFs and leased these properties under a 10-year lease with an existing operator. The option window ending date will belease allows the operator to elect either 24 monthsan earn-out payment or 48 months afterpurchase option. If neither is elected within the option window commences, based on certain contingencies.timeframe defined in the lease, both elections are terminated. For more information regarding the earn-out see Note 11 Commitments and Contingencies.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. At December 31, 2022, in conjunction with the continued levels of uncertainty related to the adverse effects of COVID-19,

6670

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

we assessed the probability of collecting substantially all of our lease payments through maturity and concluded that we did not have sufficient information available to evaluate the impact of COVID-19 on the collectability of our lease payments. The extent to which COVID-19 could impact our operators and the collectability of our future lease payments will depend on the future developments including the financial impact significance, government support and subsidies and the duration of the pandemic.

In recognition of the pandemic impact affecting our operators, we have agreed to provide assistance in form of rent abatements and rent deferrals and we may continue to provide assistance as needed.

Acquisitions. Impairment Loss.The following table summarizes During 2022, we made the decision to sell an assisted living community located in Kentucky which decreased the period over which we could recover the carrying value of the community. As a result of our acquisitions fordecision to sell, we determined that the years endedcommunity’s carrying value would not be fully recoverable and recorded an impairment loss of $1,286,000. This community was classified as held-for sale at December 31, 20192022. See Properties Held-for-Sale below for more information regarding this community. Additionally, during 2022, we concluded that the carrying value of a 70-unit assisted living community in Florida and a closed memory care community in Colorado may not be recoverable through 2017. (dollar amounts in thousands):future undiscounted cash flows, Accordingly, we recorded a combined impairment loss of $2,136,000 which represents the amount by which the carrying value of these properties exceeds their estimated fair value.

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

(1)Subsequent to December 31, 2019, we acquired a 140-bed SNF located in Texas for approximately $13,500 million 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 2 five-year renewal options.

71

(2)Represents cost associated with our acquisitions; however, upon adoption of ASU 2017-01, our acquisitions meet the definition of an asset acquisition resulting in capitalization of transaction costs to the properties’ basis. For our land purchases with forward development commitments, transaction costs are capitalized as part of construction in progress. Transaction costs per Consolidated Statements of Income and Comprehensive Income represent current and prior year transaction costs due to timing and terminated transactions.

(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 our partnerships and non-controlling interests. Additionally, we acquired an 80-unit MC and a 76-unit ALF/MC in Michigan for an aggregate purchase price of $19,000.

(4)We acquired a newly constructed 90-bed SNF located in Missouri.

(5)We acquired a parcel of land adjacent to an existing SNF in California. Additionally, we acquired a parcel of land and committed to develop a 90-bed SNF in Missouri. The commitment totals approximately $17,400.

(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 real estate and develop a 78-unit ALF/MC for $18,108 in Oregon
(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.

67

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Properties Held-for-Sale.The following summarizes our held for sale as of December 31, 2022 (dollar amounts in thousands):

Type

Number

Number

of

of

of

Gross

Accumulated

State (1)

Property

Properties

Beds/units

Investment

Depreciation

KY

ALF

1

60

$

13,015

$

2,305

(1)During 2022, we recorded an impairment loss of $1,286 to write-down the carrying value of the community to its anticipated selling price.

Acquisitions. The following table summarizes our acquisitions for the years ended December 31, 2022 through 2020 (dollar amounts in thousands):

Total

Number

Number

Purchase

Transaction

Acquisition

of

of

Year

Type of Property

Price

Costs

Costs

Properties

Beds/Units

2022 (1)

SNF

$

51,534

$

283

$

51,817

4

339

2021

n/a

$

$

$

(1)The properties are located in Texas and are leased to an affiliate of an existing operator under a 10-year lease with two 5-year renewal options. Additionally, the lease allows the operator to elect either an earn-out payment or purchase option. If neither option is elected within the timeframe defined in the lease, both elections are terminated. The earn-out payment is available, contingent on achieving certain thresholds per the lease, beginning at the end of the second lease year through the end of the seventh lease year. The initial cash yield is 8% for the first year, increasing to 8.25% for the second year, then increases annually by 2.0% to 4.0% based on the change in the Medicare Market Basket Rate. In connection with transaction, we provided the lessee a 10-year working capital loan for up to $2,000 at 8% for first year, increasing to 8.25% for the second year, then increasing annually with the lease rate. At December 31, 2022, the working capital loan had an outstanding balance of $1,642.

Developments and Improvements. During the years ended December 31, 2019, 20182022, 2021 and 2017,2020, we invested the following in development and improvement projects (in thousands):

2019

2018

2017

Type of Property

Developments

Improvements

Developments

Improvements

Developments

Improvements

2022

2021

2020

Developments

Improvements

Developments

Improvements

Developments

Improvements

Assisted Living Communities

$

14,088

$

2,544

$

27,505

$

2,292

$

17,667

$

1,152

$

105

$

5,538

$

$

5,846

$

4,491

$

6,842

Skilled Nursing Centers

6,436

7,774

500

5,234

1,356

2,897

452

12,208

71

Other

295

457

391

559

Total

$

20,524

$

2,839

$

35,279

$

3,249

$

22,901

$

2,899

$

105

$

8,994

$

$

6,298

$

16,699

$

6,913

Completed Projects. During the years ended December 31, 2022 and 2021, we had no completed development projects. The following table summarizes our completed development projects during the years ended December 31, 2019, 2018 and 20172020 (dollar amounts in thousands):

Number

Type

Number

Number

Type

Number

of

of

of

Total

of

of

of

Total

Year

Type of Project

Properties

Property

Beds/Units

State

Investment

Properties

Property

Beds/Units

State

Investment

2019

Development

1

SNF

143

Kentucky

$

24,974

2020

1

ALF/MC

78

Oregon

$

18,447

Development

1

ILF/ALF/MC

110

Wisconsin

21,999

1

SNF

90

Missouri

16,587

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

Total 2020

2

168

$

35,034

Properties held-for-sale. The following table summarizes our properties held-for-sale at years ended December 31, 2019 and 2018 (dollar amounts in thousands):

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

72

68

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property Sales. The following table summarizes property sales during the years ended December 31, 20192022 through 20172020 (dollar(dollar amounts in thousands):

Type

Number

Number

Net

Type

Number

Number

of

of

of

Sales

Carrying

Gain

of

of

of

Sales

Carrying

Net

Year

State

Properties

Properties

Beds/Units

Price

Value

(Loss)

State

Properties

Properties

Beds/Units

Price

Value

Gain (loss) (1)

2019

N/A

N/A

$

$

$

500

(1)

2022

California

ALF

2

232

$

43,715

$

17,832

$

25,867

Arizona, Georgia and Texas

SNF

(2)

3

478

15,310

8,995

5,556

California

SNF

1

121

13,250

1,846

10,846

Texas

ALF

(3)

1

140

1

3,830

(3,950)

Texas

SNF

1

485

697

(441)

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

Virginia

ALF

1

74

16,895

15,549

1,344

(2)

Ohio and Pennsylvania

ALF

6

320

67,500

16,352

48,695

n/a

n/a

214

(3)

Total 2018

10

774

$

95,825

$

22,393

$

70,682

Total 2022

5

427

$

74,345

$

35,924

$

37,830

2017

Indiana, Iowa and Oregon

ALF

5

211

$

15,650

$

10,107

$

4,985

2021

Florida

ALF

1

$

2,000

$

2,626

$

(858)

Texas

SNF

(5)

1

85

1,170

(1,171)

Nebraska

ALF

1

40

900

1,079

(200)

Total 2017

6

296

$

15,650

$

11,277

$

3,814

Washington

SNF

1

123

7,700

4,513

2,562

Wisconsin

ALF

3

263

35,000

28,295

5,595

n/a

n/a

363

(3)

Total 2021

6

426

$

45,600

$

36,513

$

7,462

2020

Arizona

SNF

1

194

$

12,550

$

2,229

$

10,293

Colorado

SNF

3

275

15,000

4,271

10,364

Iowa

SNF

7

544

14,500

4,886

9,051

Kansas

SNF

3

250

9,750

7,438

1,993

Texas

SNF

7

1,148

23,000

10,260

12,287

n/a

n/a

129

(3)

Total 2020

21

2,411

$

74,800

$

29,084

$

44,117

(1)Gain recognized due to the receiptCalculation of funds held in escrow related to a portfolionet gain (loss) includes cost of 6 ALFs sold during the second quartersales and write-off of 2018.straight-line rent receivable and lease incentives, when applicable.

(2)We soldIn connection with this sale, the former operator paid us a property, previously operated by Preferred Care, located in Texas with a carrying valuelease termination fee 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$1,181 which is heldnot included in an interest-bearing account with an escrow holderthe gain 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.sale.

(3)We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold an ALF located in Texasduring 2020 and 2019, under the expected value model per ASC Topic 606, Contracts with a carrying value of Customers$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..

During 2020, we sold a 114-bed skilled nursing center in Texas and recorded $373,000 from insurance proceeds related to the property’s roof damage as Mortgage Loans. Gain from property insurance proceedsAt on the Consolidated Statements of Income.

Financing Receivable. During 2022, we entered into a joint venture and contributed $61,661,000 into the JV that purchased three skilled nursing centers located in Florida for $75,825,000. Our JV partner contributed the remaining $14,325,000 of equity. The JV leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year. Accordingly, the transaction has been accounted for as a Financing receivable on our Consolidated Balance Sheets. During 2022, we recognized $1,762,000 of Interest income from financing receivable on our Consolidated Statements of Income. Additionally, we recorded $768,000 Provisions for expected loan losses during 2022.

Subsequent to December 31, 2019,2022, we entered into a $121,321,000 JV with an affiliate of an existing operator and contributed $117,900,000 into the mortgage loans had interest rates rangingJV that purchased 11 assisted living and memory care communities from 9.2%an affiliate of our JV partner. The JV leased the communities back to 9.9%an affiliate of the seller under a 10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a floor of 2.0% and maturities ranging from 2043a ceiling of 4.0%. Additionally, the JV provided the seller-lessee with a purchase option to 2045.buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit Internal Rate of Return (“IRR”) of 9.0%. In addition, some loans contain certain guarantees, provide for certain facility fees. Please seeaccordance with GAAP, the communities acquired by the JV are required to be presented as a Item 1. Business—PortfolioFinancing receivable for a table that summarizeson our loaned properties as of December 31, 2019.Consolidated Balance Sheets.

6973

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our mortgage loan activity for the years ended December 31, 2019, 2018 and 2017 (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)

(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, 2019 and 2018 the carrying values of the mortgage loans were $254,099,000 and $242,939,000, respectively. Scheduled principal payments on mortgage loan receivables are as follows (in thousands):

    

Scheduled

 

Principal

 

2020

$

1,065

2021

 

1,175

2022

 

1,175

2023

 

1,175

2024

 

1,175

Thereafter

 

250,894

Total

$

256,659

The following table summarizes our early mortgage loan payoffs during the years 2019, 2018 and 2017 (dollar amounts in thousands):

Early

Number

Principal

of

Payoff

Loans

State

2019

$

N/A

2018

$

1,086

1

UT

2017

$

10,795

4

AZ/MO/TX

70

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Investment in Unconsolidated Joint Ventures

The 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 impairment loss from investments in unconsolidated joint ventures of $5,500,000 and wrote our preferred equity investment down to its estimated fair value.

71

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures during the years ended December 31, 2019, 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 mezzanine loans and other loan arrangements. Mortgage Loans. The following table is a summary ofsummarizes our notes receivable componentsinvestments in mortgage loans secured by first mortgages at December 31, 2019 and 2018 2022 (dollar amounts in thousandsthousands):):

At December 31,

Type

Percentage

Number of

Investment

2019

2018

 

Gross

of

of

SNF

ALF

per

Mezzanine loans

$

13,284

$

9,868

Other loans

4,824

2,975

Notes receivable reserve

(181)

(128)

Interest Rate

Maturity

State

Investment (1)

Property

Investment

Loans (2)

Properties (3)

Beds

Units

Bed/Unit

7.5%

2023

MO

$

1,886

OTH

0.5

%

1

(4)

$

n/a

7.5%

2024

LA

29,347

SNF

7.5

%

1

1

189

$

155.28

7.8%

2025

FL

14,308

ALF

3.6

%

1

1

68

$

210.41

7.3% (5)

2025

NC/SC

56,317

ALF

14.3

%

1

13

523

$

107.68

7.3%

2026

NC

33,001

ALF

8.4

%

1

4

217

$

152.08

7.3%

2026

NC

797

OTH

0.2

%

1

(6)

$

10.6% (7)

2043

MI

184,351

SNF

46.8

%

1

15

1,875

$

98.32

9.6% (7)

2045

MI

39,026

SNF

9.9

%

1

4

480

  

$

81.30

9.8% (7)

2045

MI

 

19,750

SNF

5.0

%

1

2

201

 

$

98.26

10.1% (7)

2045

MI

14,875

SNF

3.8

%

1

1

146

$

101.88

Total

$

17,927

$

12,715

$

393,658

100.0

%

10

41

2,891

 

808

$

106.42

(1)Subsequent to December 31, 2022, we originated a $10,750 mortgage loan secured by a MC located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%.

(2)Some loans contain certain guarantees and/or provide for certain facility fees.

(3)Our mortgage loans are secured by properties located in six states with five borrowers.

(4)Represents a mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF.

(5)Represents the initial rate. This loan has an IRR of 8%.

(6)Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community.

(7)Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period.

7274

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our notes receivablemortgage loan activity for the years ended December 31, 2019 through 20172022, 2021 and 2020 (in 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)

Year Ended December 31,

2022

2021

2020

 

Originations and funding under mortgage loans receivable

$

40,732

(1) (2)

$

88,955

(3)

$

4,253

(4)

Application of interest reserve

6,192

298

Scheduled principal payments received

(1,175)

(1,175)

(1,065)

Mortgage loan premium amortization

(6)

(6)

(4)

Provision for loan loss reserve

(457)

(881)

(32)

Net increase in mortgage loans receivable

$

45,286

$

87,191

$

3,152

(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,Subsequent to December 31, 2022, we originated a $1,400 note agreement, funding $1,304$10,750 mortgage loan secured by a MC located in North Carolina. The loan carries a two-year term with a commitment to fund $96. The note bears interest at 7.0%. Further, we originated a $550 note agreement, funding $500 with a commitment to fund $50. The note bears interest at 7.5%an interest-only rate of 7.25% and an IRR of 9.0%.

(2)RepresentsWe originated two senior mortgage loans, secured by four ALFs operated by an interim working capital loan relatedexisting operator, as well as a land parcel in North Carolina. The communities have a combined total of 217 units, with an average age of less than four years. The land parcel is approximately 7.6 acres adjacent to a development project which matured upon completionone of the ALFs and is being held for the future development projectof a seniors housing community. The mortgage loans have a four-year term, an interest rate of 7.25% and commencementan IRR of 8%. We also funded an additional $2,000 under an existing mortgage loan.

(3)We funded the following:
a.$1,638 mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF in Missouri and withheld an interest reserve of $142. The mortgage loan term is one year at a yield of 7.5%;
b.$27,047 mortgage loan secured by a 189-bed SNF in Louisiana with a regional operator new to us. The mortgage loan has a three-year term with one 12-month extension option and a yield of 7.5%;
c.$11,724 mortgage loan secured by a 68-unit ALF and MC in Florida operated by a regional operator new to us. At origination, we withheld an interest reserve of $806 and applied $156 of the lease.reserve during 2021. The mortgage loan term is approximately 4 years at a 7.75% yield and includes an additional $4,177 loan commitment for the construction of a memory care addition to the property to be funded at a later date subject to satisfaction of various conditions;
d.$48,006 mortgage loan for the purchase of a 13-property seniors housing portfolio located in North (12) and South Carolina (1). The communities are operated by an existing LTC operator. At origination, we withheld an interest reserve of $4,496. The loan term is 4 years at a 7.25% yield and includes a commitment of $6,097 for capital improvements and $650 for working capital; and

e.$540 additional capital funding under our existing mortgage loans.

(4)We funded an additional $2,000 under an existing mortgage loan.

At December 31, 2022 and 2021 the carrying values of the mortgage loans were $389,728,000 and $344,442,000, respectively. Scheduled principal payments on mortgage loan receivables are as follows (in thousands):

    

Scheduled

 

Principal

 

2023

$

3,061

2024

 

30,522

2025

 

71,801

2026

 

34,972

2027

 

1,175

Thereafter

 

252,127

Total

$

393,658

75

Table of Contents

6. Investments in Unconsolidated Joint Ventures

During 2020, we provided preferred capital contribution commitments to two joint ventures. We determined that each of these JVs meets the accounting criteria to be considered a VIE. We are not the primary beneficiary of the VIEs as we do not have both: 1) the power to direct the activities that most significantly affect the VIE’s economic performance, and 2) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. However, we do have significant influence over the JVs. Therefore, we account for the joint venture investments using the equity method of accounting. The following table provides information regarding these preferred equity investments (dollar amounts in thousands):

Type

Type

Total

Contractual

Number

of

of

Preferred

Cash

of

Carrying

State

Properties

Investment

Return

Portion

Beds/ Units

Value

Washington

ALF/MC

Preferred Equity

(1)

12

%

7

%

95

$

6,340

(1)

Washington

UDP

Preferred Equity

(2)

12

%

8

%

13,000

(2)

Total

95

$

19,340

(1)Represents a preferred equity in an entity that developed and owns a 95-unit ALF and MC in Washington. Our investment

represents 15.5% of the total investment. The preferred equity investment earns an initial cash rate of 7% increasing to 9% in year four until the internal rate of return (“IRR”) is 8%. After achieving an 8% IRR, the cash rate drops to 8% until achieving an IRR ranging between 12% to 14%, depending upon timing of redemption. During the fourth quarter of 2021, the entity completed the development project and received its certificate of occupancy. We have the option to require the JV partner to purchase our preferred equity interest at any time between August 17, 2031 and December 31, 2036.

(2)Represents a preferred equity in an entity that will develop and own a 267-unit ILF and ALF in Washington. Our investment represents 11.6% of the estimated total investment. The preferred equity investment earns an initial cash rate of 8% with an IRR of 12%. The JV partner has the option to buy out our investment at any time after August 31, 2023 at the IRR rate. Also, we have the option to require the JV partner to purchase our preferred equity interest at any time between August 31, 2027 and, upon project completion and leasing the property, prior to the end of the first renewal term of the lease. Subsequent to December 31, 2022, we received a notice of intent to redeem our $13,000 preferred equity investment in the joint venture.

The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures during the years ended December 31, 2022, 2021 and 2020 (in thousands):

Type

of

Capital

Income

Cash Interest

Application of

Year

Properties

Contribution

Recognized

Earned

Interest Reserve

2022

ALF/MC

$

$

450

$

$

450

UDP

1,054

351

703

Total

$

$

1,504

$

351

$

1,153

2021

ALF/MC

$

$

450

$

$

412

UDP

8,000

967

880

Total

$

8,000

$

1,417

$

$

1,292

2020

ILF/ALF/MC

(1)

$

58

$

231

$

231

$

UDP

6,340

169

169

UDP

5,000

32

32

Total

$

11,398

$

432

$

432

$

(1)We had a preferred equity investment in an unconsolidated joint venture that owned four ALFs located in Arizona, providing independent living, assisted living and memory care services. During the year ended December 31, 2020, upon sale of the four properties comprising the JV, we received liquidation proceeds totaling $17,848 and incurred an additional $758 of loss.

76

Table of Contents

7. Notes Receivable

Notes receivable consists of mezzanine loans and working capital loans. The following table summarizes our investments in notes receivable at December 31, 2022 (dollar amounts in thousands):

Interest

Type of

Gross

Type of

Rate

IRR

Maturity

Loan

Investment

# of loans

Property

5.0%

2023

Working capital

$

380

1

ALF

7.0%

2023

Working capital

500

1

ALF

8.0%

12.0%

2023

Mezzanine

7,460

1

ALF

5.0%

2024

Working capital

184

1

ALF

8.0%

10.5%

2024

Mezzanine

4,355

(1)

1

ILF

4.0%

2024

Working capital

13,531

1

SNF

  

5.0%

2025

Working capital

932

1

ALF

7.5%

2027

Working capital

550

1

ALF

8.0%

11.0%

2027

Mezzanine

25,000

1

ALF

6.5%

2030

Working capital

138

1

SNF

7.1%

2030

Working capital

1,607

2

ALF

7.0%

2031

Working capital

2,693

1

ALF

8.0%

2032

Working capital

1,642

1

SNF

$

58,972

14

(1)Subsequent to December 31, 2022, we received $4,545 which includes a prepayment fee and the exit IRR totaling $190, from a mezzanine loan early payoff. The mezzanine loan was on a 136-unit in Oregon.

The following table is a summary of our notes receivable components at December 31, 2022 and 2021 (in thousands):

At December 31,

2022

2021

 

Mezzanine loans (1) (2)

$

36,815

$

11,815

Other loans

22,157

16,808

Notes receivable credit loss reserve

(589)

(286)

Total

$

58,383

$

28,337

(1)Subsequent to December 31, 2022, we received $4,545, which includes a prepayment fee and the exit IRR totaling $190 from a mezzanine loan early payoff. The mezzanine loan was on a 136-unit ILF in Oregon.

(2)During 2022, we originated a $25,000 mezzanine loan for the recapitalization of a five-property seniors housing portfolio. The mezzanine loan has a term of approximately five years, with two one-year extension options and bears interest at 8% with an IRR of 11%. The five communities are located in Oregon and Montana, have a total of 621 units, and include ILF, ALF and MC.

77

Table of Contents

The following table summarizes our notes receivable activity for the years ended December 31, 2022 through 2020 (in thousands):

Year Ended December 31, 

2022

2021

2020

Advances under notes receivable

$

37,192

(1)

$

16,353

(2)

$

2,078

Interest reserve withheld

353

Principal payments received under notes receivable (3)

(6,843)

(2,694)

(5,275)

Reclassified to lease incentives

(300)

(4)

Provision (recovery) for credit losses

(303)

(140)

35

Net increase (decrease) in notes receivable

$

30,046

$

13,872

$

(3,462)

(1)Includes origination of a $25,000 mezzanine loan for the recapitalization of five ALFs located in Oregon and Montana. Additionally includes origination of a working capital loan for a commitment of up to $2,000, of which $1,867 has been funded and $9,761 of funding under a working capital loan to HMG Healthcare, LLC.

(2)Funding under working capital notes and mezzanine loans with interest ranging between 4.0% and 8.0%. During 2021, we originated a $4,355 mezzanine loan and withheld a $353 interest reserve. The mezzanine loan has a three-year term with two 12-month extensions. The initial rate is 8.0% for the first 18 months increasing to 10.5% thereafter with an 10.5% IRR. Additionally, we provided an operator a $25,000 secured working capital loan to facilitate the transition of the 11 properties from Senior Care and Abri Health and funded $9,900 under this working capital loan.

(3)Subsequent to December 31, 2022, we received $4,545, which includes a prepayment fee and the exit IRR totaling $190, from a mezzanine loan early payoff. The mezzanine loan was on a 136-unit ILF in Oregon.

(4)Represents an interim working capital loan related to a development project which matured upon completion of the development project and commencement of the lease.

8. Lease Incentives

The following table summarizes lease incentives by component as of December 31, 20192022 and 20182021 (in thousands):

At December 31,

December 31,

2019

2018

2022

2021

Non-contingent lease incentives

$

2,552

$

14,443

$

1,789

$

2,678

The following table summarizes our non-contingent lease incentive activity for the years ended December 31, 2019, 20182022, 2021 and 20172020 (in thousands):

2019

2018

2017

Year Ended December 31,

Funding

Amortization

Write-off

Funding

Amortization

Write-off

Funding

Amortization

Write-off

2022

2021

2020

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)

Lease incentives funded

$

418

$

824

$

220

Amortization of lease incentives

(877)

(608)

(426)

Adjustment for collectability of lease incentives

(256)

(1)

Other adjustments

(174)

(2)

115

(3)

Net (decrease) increase in non-contingent lease incentives

$

(889)

$

216

$

(91)

(1)In accordance with ASC 842Represents the lease standard adopted on January 1, 2019, we wrote-off $12,093 of lease incentivesincentive balance write-off related to leases for which we determined it is not probable we will collect substantially alla closed property and subsequent lease termination and lease incentive balance write-off related to 12 ALFs transitioned to an existing operator.

(2)Primarily relates to the sale of two ALFs in California during the contractual lease obligation through maturity. See Note 2. Summarysecond quarter of Significant Accounting Policies2022.

(3) for further discussion. Additionally, weWe reclassified a $200$300 interim working capital loan as lease incentive. See Note 7. Notes Receivablefor further discussion.

(2)We entered into an amended master lease agreement with Senior Lifestyle Management, LLC (“Senior Lifestyle”). Among the provisions of the amendment, the contingent lease incentive payable to Senior Lifestyle was removed. Therefore, Additionally, we wrote-off the Senior Lifestyle contingent lease incentive.

(3)Represents the write-off$185 of lease incentives related to 2 MC communities due to negotiations to transition these properties to another operator in our portfolio that never materialized.

(4)Represents the write-off of a lease incentive related to an ALF due to a change tomaster lease for which we determined it was not probable we will collect substantially all of the business model at the property that resulted in lower net operating income and the improbability of paying the earn-out.contractual lease obligations through maturity. See Note 5. Real Estate Investments for further discussion.

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

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

78

Table of Contents

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.Unsecured Credit Facility. During 2018, weamended and restated ourWe have an unsecured credit agreement to replace the previous unsecured credit agreement, prior to its expiration on October 14, 2018. The amended credit agreement maintains the $600,000,000 (the “Credit Agreement”)that provides for anaggregate commitment of the lenders underof up to $500,000,000 comprising of a $400,000,000 revolving credit facility (the “Revolving Line of Credit”) and two $50,000,000 term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the prior agreementRevolving Line of Credit and provides for the opportunity to increase the commitment size of the credit agreementTerm Loans commitments up to a total of $1,000,000,000. The amended credit agreement extends the maturityRevolving Line of the credit agreement to June 27, 2022Credit matures on November 19, 2025 and provides for a one-year extension option at our discretion, subject to customary conditions. Additionally,The Term Loans mature on November 19, 2025 and November 19, 2026. During the amendedfourth quarter of 2022, we entered into the First Amendment (the “Amended Credit Agreement”) to replace LIBOR with SOFR, plus a credit agreement decreasesspread adjustment of 10 basis points (“Adjusted SOFR”), as the reference rate for purpose of calculating interest rate margins and converts fromunder the paymentAmended Credit Agreement. Other material terms of unused commitment fees to a facility fee. the Credit Agreement remain unchanged.

Based on our leverage at December 31, 2019,2022, the facilityRevolving Line of Credit provides for interest annually at LIBORAdjusted SOFR plus 115 basis points and a facility fee of 20 basis point and the Term Loans provide for interest annually at Adjusted SOFR plus 135 points. At

Interest Rate Swap Agreements. In connection with entering into the Term Loans as discussed above, we entered into two receive variable/pay fixed interest rate swap agreements (“Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loans’ borrowings over the four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on our Consolidated Balance Sheets at fair value, with changes in the fair value of these instruments recognized in Accumulated other comprehensive income (loss) on our Consolidated Balance Sheets. In connection with entering into the Amended Credit Agreement discussed above, we entered into amendments to our Interest Rate Swaps to account for SOFR as the updated reference rate in the Amended Credit Agreement. During the year ended December 31, 20192022 and 20182021, we recorded $8,891,000 increase and $172 decrease, respectively, in fair value of Interest Rate Swaps.

As of December 31, 2022, the terms of our Interest Rate Swaps were as follows (dollar amounts in compliancethousands):

Notional

Fair Value at

Date Entered

Maturity Date

Swap Rate

Rate Index

Amount

December 31, 2022

November 2021

November 19, 2025

2.62

%

1-month SOFR

$

50,000

$

4,003

November 2021

November 19, 2026

2.76

%

1-month SOFR

50,000

4,716

$

100,000

$

8,719

Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with all covenants.interest rates ranging from 3.66% to 5.03%. The senior unsecured notes mature between 2024 and 2033. During the twelve months ended December 31, 2022, we sold $75,000,000 aggregate principal amount of 3.66% senior unsecured notes. The notes have an average 10-year life, scheduled principal payments and mature in May 2033.

Financial covenants contained in the UnsecuredThe senior unsecured notes and Credit Agreement, including the Revolving Line of Credit and the Term Loans, contain financial covenants, 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 atAt December 31, 2019, which expired for new issuance on February 16, 2020. During the fourth quarter of 2019,2022, we sold $100,000,000 aggregate principal amount of 3.85% senior unsecured notes maturingwere in 2031 to Prudential.

The following table sets forth information regardingcompliance with all applicable financial covenants. These debt obligations by component asalso contain additional customary covenants and events of December 31, 2019default that are subject to a number of important and 2018 (dollar amounts in thousands):

79

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.

74

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our borrowings and repayments for the years ended December 31, 2019, 2018 and 2017 are as follows (in 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.

Scheduled Principal Payments. The following table represents our long-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 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

(1)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.

10. Equity

Common Stock. During 2016, we entered 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 company common shares.

During the year ended December 31, 2017, we sold 312,881 shares of common 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 $184,139,000 available under the Original Equity Distribution Agreements.

During 2019, the Original Equity Distribution Agreements expired, and we entered into new separate equity distribution agreements (collectively “Equity Distribution Agreements”) to offer and sell, from time to time, up to $200,000,000 in aggregate offering price of shares of common shares. Sales of 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. As of December 31, 2019, 0 shares were issued under the Equity Distribution Agreements. Accordingly, at December 31, 2019, we had $200,000,000 available under the Equity Distribution Agreements.

75

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

significant limitations, qualifications and exceptions.

The following table sets forth information regarding debt obligations by component as of December 31, 2022 and 2021 (dollar amounts in thousands):

At December 31, 2022

At December 31, 2021

Applicable

Available

Available

Interest

Outstanding

for

Outstanding

for

Debt Obligations

Rate (1)

Balance

Borrowing

Balance

Borrowing

Revolving line of credit (2)

5.38%

$

130,000

$

270,000

$

110,900

$

289,100

Term loans, net of debt issue costs

2.69%

99,511

99,363

Senior unsecured notes, net of debt issue costs (3)

4.25%

538,343

512,456

Total

4.24%

$

767,854

$

270,000

$

722,719

$

289,100

(1)Represents weighted average of interest rate as of December 31, 2022.

(2)Subsequent to December 31, 2022, we had a net borrowing of $162,700 under our unsecured revolving line of credit. Accordingly, we have $292,700 outstanding and $107,300 available for borrowing under our unsecured revolving line of credit.

(3)Subsequent to December 31, 2022, we paid $7,000 under our senior unsecured notes, accordingly we have $531,343 outstanding, net of debt issue costs, under our senior unsecured notes.

Our borrowings and repayments for the years ended December 31, 2022, 2021 and 2020 are as follows (in thousands):

Year Ended December 31, 

2022

2021

2020

Debt Obligations

Borrowings

Repayments

Borrowings

Repayments

Borrowings

Repayments

Revolving line of credit (1)

$

194,000

$

(174,900)

$

204,400

$

(183,400)

$

24,000

$

(28,000)

Term loans

100,000

Senior unsecured notes (2)

75,000

(48,160)

(47,160)

(40,160)

Total

$

269,000

$

(223,060)

$

304,400

$

(230,560)

$

24,000

$

(68,160)

(1)Subsequent to December 31, 2022, we had a net borrowing of $162,700 under our unsecured revolving line of credit. Accordingly, we have $292,700 outstanding and $107,300 available for borrowing under our unsecured revolving line of credit.

(2)Subsequent to December 31, 2022, we paid $7,000 under our senior unsecured notes, accordingly we have $531,343 outstanding, net of debt issue costs, under our senior unsecured notes.

Scheduled Principal Payments.The following table represents our long-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 2022, and excludes the effects of interest and debt issue costs (in thousands):

Total

2023

2024

2025

2026

2027

Thereafter

 

Revolving line of credit

$

130,000

(1)

$

$

$

130,000

(1)

$

$

$

Term loans

100,000

50,000

50,000

Senior unsecured notes

 

539,820

(2)

 

49,160

(2)

 

49,160

 

49,500

 

51,500

54,500

 

286,000

$

769,820

$

49,160

$

49,160

$

229,500

$

101,500

$

54,500

$

286,000

(1)Subsequent to December 31, 2022, we borrowed $162,700 under our unsecured revolving line of credit. Accordingly, we have $292,700 outstanding and $107,300 available for borrowing under our unsecured revolving line of credit.

(2)Subsequent to December 31, 2022, we paid $7,000 under our senior unsecured notes, accordingly we have $531,343 outstanding, net of debt issue costs, under our senior unsecured notes.

80

Table of Contents

During the years 2019, 2018 and 2017, we acquired 45,030 shares, 31,326 shares and 42,089 shares, respectively, 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.10. Equity

Non-controlling Interests. During the years 2019, 2018 and 2017, weWe have 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. SinceAs 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.on the consolidated financial statements. As of December 31, 2019,2022, we have the following consolidated VIEs (in thousands):

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

Gross

Investment

Property

Consolidated

Non-Controlling

Year (1)

Purpose

Type

State

Assets

Interests

2022

Owned real estate

(2)

SNF

FL

$

76,767

$

14,325

2018

Owned real estate

ILF

OR

14,650

2,906

2018

Owned real estate and development

ALF/MC

OR

18,452

1,164

2017

Owned real estate and development

ILF/ALF/MC

WI

22,007

2,305

2017

Owned real estate

ALF/MC

SC

11,680

1,240

Total

$

143,556

$

21,940

(1)WeSubsequent to December 31, 2022, we entered into a $121,321 JV to develop, purchasewith an affiliate of an existing operator and own seniors housing properties. During the second quarter of 2018,contributed $117,900 into the JV that purchased land for11 ALF and MC from an affiliate of our JV partner. The JV leased the developmentcommunities back to an affiliate of the seller under a 78-unit ALF/MC for10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a total anticipated project costfloor of $18,108. The non-controlling partner contributed $1,0812.0% and a ceiling of cash4.0%. Additionally, the JV provided the seller-lessee with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and we committed to fund the remaining $17,027 project cost. Duringproperties at the third quarterbeginning of 2018, in a sale-leaseback transaction,the fourth lease year through the end of the sixth lease year, with an exit IRR of 9.0%. In accordance with GAAP, the communities acquired by the JV purchased an existing operational 89-unit ILF adjacentare required to the 78-unit ALF/MC we are developing be presented as a Financing receivable on our Consolidated Balance Sheets. See Note 2. Summary of Significant Accounting Policies and Note 5. Real Estate Investments 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%.more information.

(2)WeDuring 2022, we entered into a joint venture and contributed $61,661 into the JV that purchased three SNFs located in Florida for $75,825. Our JV partner contributed the remaining $14,325 of equity. The JV leased the centers back to ownan affiliate of the real estateseller under a 10-year master lease, with two five-year renewal options and developprovided the seller-lessee with a 110-unit ILF/ALF/MC community in Wisconsin. This development project completed duringpurchase option, exercisable at the second quarterbeginning of 2019.the fourth year through the end of the fifth year. In accordance with GAAP, the centers acquired by the JV are required to be presented as a Financing receivable on our Consolidated Balance Sheets. See Note 2. Summary of Significant Accounting Policies and Note 5. Real Estate Investments for more information.

Common Stock. We have separate equity distribution agreements (collectively, “Equity Distribution Agreements”) to offer and sell, from time to time, up to $200,000,000 in aggregate offering price of shares of our common shares. The Equity Distribution Agreements provide for sales of common shares to 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 years ended December 31, 2021 and 2020, no shares were issued under the Equity Distribution Agreements. During the year ended December 31, 2022, we sold 1,792,400 shares of common stock for $68,156,000 in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $513,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. At December 31, 2022, we had $130,631,000 available under the Equity Distribution Agreements.

During the years 2022, 2021 and 2020, we acquired 39,463 shares, 87,249 shares and 76,574 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Stock Repurchase Plan. In March 2020, our Board of Directors authorized the repurchase of up to 5,000,000 outstanding shares of common stock. Due to the rising level of uncertainty in financial markets and the adverse effects of COVID-19 on the public health and our operators, our Board of Directors terminated the stock repurchase plan on March 25, 2020. During the year ended December 31, 2020, we purchased 615,827 shares at an average price of $29.25 per share, including commissions, for a total purchase price of $18,012,000.

Shelf Registration Statement. 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 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 our automatic shelf registration statement in amounts, at prices, and on

81

Table of Contents

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, 2022.17, 2025.

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

Year Ended December 31, 

 

2022

2021

2020

 

Declared

Paid

Declared

Paid

Declared

Paid

 

Common Stock (1)

$

91,509

$

91,509

$

90,494

(2)

$

90,494

(2)

$

90,262

(2)

$

90,262

(2)

(1)Represents $0.19 per share per month.month for the years ended December 31, 2022, 2021 and 2020.

(2)During the years ended December 31, 2021 and 2020, we paid $764 and $586, respectively as a result of vesting of the performance-based stock units.

In January 2020,2023, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 20202023 payable on January 31, February 28, and March 31, 2020,2023, respectively, to stockholders of record on January 23, February 2017, and March 23, 2023, respectively.

Stock Based Compensation Plans. During 2021, we adopted, and our stockholders approved the 2021 Equity Participation Plan (the “2021 Plan”) which replaces the 2015 Equity Participation Plan (the “2015 Plan”). Under the 2021 Plan, 1,900,000 shares of common stock have been authorized and reserved for awards, less one share for every one share that was subject to an award granted under the 2015 plan after December 31, 2020 and prior to adoption. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited or cancelled after December 31, 2020 will be added to and again be available for awards under the 2021 Plan. Under the 2021 Plan, the shares were authorized and reserved for awards to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2021 Plan and the 2015 Plan are set by our compensation committee at its discretion. As of December 31, 2022, we have 1,545,722 shares of common stock reserved for awards under the 2021 Plan.

Restricted Stock and Performance-Based Stock Units. Restricted stock activity for the years ended December 31, 2022, 2021 and 2020 was as follows:

Year Ended December 31,

2022

2021

2020

 

Outstanding, January 1

197,422

180,440

163,569

Granted

135,210

110,348

101,348

Vested

(103,396)

(93,366)

(84,477)

Outstanding, December 31

229,236

197,422

180,440

During the years ended December 31, 2022, 2021 and 2020, we granted 86,332, 71,892 and 66,027, respectively, of performance-based stock units. Additionally, no performance-based stock units vested during the twelve months ended December 31, 2022. During the years ended December 31, 2021 and 2020, the number of vested performance-based stock units were 108,720 and 81,574, respectively. Total compensation expense related to restricted stock and performance-based stock units for the years ended December 31, 2022, 2021 and 2020 were $7,964,000, $7,760,000 and $7,012,000.

7682

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock Based Compensation Plans. During 2015, we adopted, and our stockholders approved the 2015 Equity Participation 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.

Restricted Stock and Performance-Based Stock Units. Restricted stock and performance-based stock units activity for the years ended December 31, 2019, 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, 20182022, 2021 and 2017,2020, we granted 147,608, 156,718221,542, 182,240 and 143,057167,375 shares of restricted common stock and performance-based stock units, respectively, under the 2021 Plan and 2015 planPlan as follows:

No. of 

Price per

No. of 

Price per

Year

Shares/Units

Share

Vesting Period

Shares/Units

Share

Reward Type

Vesting Period

2019

78,276

$

46.54

ratably over 3 years

2022

122,865

$

33.94

Restricted stock

ratably over 3 years

60,836

$

46.54

TSR targets (1)

86,332

$

33.94

Performance-based stock units

TSR targets (1)

8,496

$

44.73

May 29, 2020

12,345

$

38.48

Restricted stock

May 25,2023

147,608

221,542

2018

81,819

$

38.18

ratably over 3 years

2021

95,293

$

42.27

Restricted stock

ratably over 3 years

66,171

$

38.18

TSR targets (1)

71,892

$

42.27

Performance-based stock units

TSR targets (1)

8,728

$

41.25

May 30, 2019

12,055

$

39.40

Restricted stock

May 26, 2022

156,718

3,000

$

43.14

Restricted stock

April 1, 2022

182,240

2017

74,760

$

45.76

ratably over 3 years

2020

76,464

$

48.95

Restricted stock

ratably over 3 years

57,881

$

45.76

TSR targets (1)

66,027

$

49.98

Performance-based stock units

TSR targets (1)

7,416

$

48.55

June 1, 2018

9,884

$

38.45

Restricted stock

May 27, 2021

3,000

$

50.50

ratably over 3 years

15,000

$

38.45

Restricted stock

ratably over 3 years

143,057

167,375

(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, 2019, we granted 76,464 shares of restricted common stock at $48.95 per share which vest ratably from the grant date over a three-year period.

77

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At December 31, 2019,2022, 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 (dollar amount in thousands):

Remaining

Compensation

Vesting Date

Expense

2023

$

5,603

2024

2,853

2025

309

Total

$

8,765

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

(1)Includes 55,057 performance-based stock units. The performance-based stock units are valued utilizing a lattice-binomial option pricing model based on Monte Carlo simulations. The company recognizes the fair value of the awards over the applicable vesting period as compensation expense.

(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 2019, 20182022, 2021 and 2017,2020, we did not issue any stock options. Nonqualified stock option activity for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, 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

 

2022

2021

2020

2022

2021

2020

 

Outstanding, January 1

    

15,000

15,000

    

15,000

    

$

38.43

$

38.43

    

$

38.43

Granted

 

 

n/a

n/a

n/a

Exercised

 

 

n/a

n/a

n/a

Canceled

 

(5,000)

 

$

38.43

n/a

n/a

Outstanding, December 31

 

10,000

15,000

 

15,000

$

38.43

$

38.43

$

38.43

Exercisable, December 31(1)

 

10,000

15,000

 

15,000

$

38.43

$

38.43

$

38.43

(1)The aggregate intrinsic value of exercisable options at December 31, 2019,2022, based upon the closing price of our common shares at December 31, 2019,30, 2022, the last trading day of 2019,2022, was approximately $95,000.$0. Options exercisable at December 31, 2019, 20182022, 2021 and 20172020 have a weighted average remaining contractual life of approximately 3.20.7 years, 3.31.2 years, and 3.52.2 years, respectively.

The options exercised during 2019, 2018 and 2017 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

(1)As of the exercise dates.

We use the Black-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. Compensation expense related to the vesting of stock options for the years ended December 31, 2019, 20182022, 2021 and 20172020 was $0, $0 and $2,000, respectively.$0.

7883

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Commitments and Contingencies

At December 31, 2019,2022, we had commitments as follows (in thousands):

Total

Total

Investment

2019

Commitment

Remaining

Investment

2022

Commitment

Remaining

Commitment

Funding

Funded

Commitment

Commitment

Funding

Funded

Commitment

Real estate properties (Note 5. Real Estate Investments)

$

41,266

(1)

$

13,847

$

18,361

$

22,905

Real estate properties (Note 5. Real Estate Investments)

$

22,102

(1)

$

7,263

$

8,315

$

13,787

Accrued incentives and earn-out liabilities (Note 8. Lease Incentives)

9,000

9,000

19,000

(2)

19,000

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

Mortgage loans (Note 5. Real Estate Investments)

32,507

(3)

5,873

9,613

22,894

Notes receivable (Note 7. Notes Receivable)

27,541

12,192

15,962

11,579

Total

$

79,716

$

18,150

$

26,368

$

53,348

$

101,150

$

25,328

$

33,890

$

67,260

(1)Represents commitments to purchase land and improvements, if applicable, and to develop, re-develop, renovate or expand seniors housing and health care properties.

(2)Includes an earn-out payment of up to $3,000 to an operator under a master lease on four SNFs in Texas which were acquired during 2022. The master lease allows either an earn-out payment up to $3,000 or a purchase option. The earn-out payment is available, contingent on achieving certain thresholds per the lease, beginning at the end of the second lease year through the end of the fifth lease year. If neither option is elected within the timeframe defined in the lease, both elections are terminated.

(3)Represents $9,200$14,507 of commitments to expand and renovate the seniors housing and health care properties securing the mortgage loans and $18,000 represents contingent funding upon the borrower achieving certain coverage ratios.

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 principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims.

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 2019, 20182022, 2021 and 20172020 were cash distributions. The federal income tax classification of the per share common stock distributions are as follows (unaudited):

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

Year Ended December 31,

 

2022

2021

2020

 

Ordinary taxable distribution

    

$

1.095

    

$

1.220

    

$

0.936

Return of capital

 

 

0.750

 

Unrecaptured Section 1250 gain

 

0.502

 

0.252

 

0.894

Long-term capital gain

 

0.683

 

0.058

 

0.450

Total

$

2.280

$

2.280

$

2.280

7984

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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,

 

For the year ended December 31,

 

2019

2018

2017

2022

2021

2020

Net income

$

80,872

    

$

155,076

    

$

87,340

$

100,584

    

$

56,224

    

$

95,677

Less income allocated to non-controlling interests

 

(346)

 

(95)

 

 

(560)

 

(363)

 

(384)

Less income allocated to participating securities:

Non-forfeitable dividends on participating securities

 

(372)

 

(357)

 

(350)

 

(531)

 

(458)

 

(397)

Income allocated to participating securities

 

(19)

 

(268)

 

(12)

 

(49)

 

 

(25)

Total net income allocated to participating securities

 

(391)

 

(625)

 

(362)

 

(580)

 

(458)

 

(422)

Net income available to common stockholders

 

80,135

 

154,356

 

86,978

 

99,444

 

55,403

 

94,871

Effect of dilutive securities:

Participating securities(1)

625

362

Net income for diluted net income per share

$

80,135

$

154,981

$

87,340

$

99,444

$

55,403

$

94,871

Shares for basic net income per share

 

39,571

 

39,477

 

39,409

 

39,894

 

39,156

 

39,179

Effect of dilutive securities:

Stock options(2)

 

4

 

3

 

10

 

 

 

Performance-based stock units

184

203

67

173

(3)

85

Participating securities(1)

156

151

Total effect of dilutive securities

 

188

 

362

 

228

 

173

 

 

85

Shares for diluted net income per share

 

39,759

 

39,839

 

39,637

 

40,067

 

39,156

 

39,264

Basic net income per share

$

2.03

$

3.91

$

2.21

$

2.49

$

1.41

$

2.42

Diluted net income per share

$

2.02

$

3.89

$

2.20

$

2.48

$

1.41

$

2.42

(1)For the years ended December 31, 2022, 2021 and 2020, the participating securities were excluded from the computation of diluted net income per share as such inclusion would be anti-dilutive.

(2)For the years ended December 31, 2022, 2021and 2020, the stock options were excluded from the computation of diluted net income per share as such inclusion would be anti-dilutive.

(3)For the year ended December 31, 2021, no performance-based stock units would be earned based on TSR targets.

8085

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Quarterly Financial Information

For the quarter ended

 

For the quarter ended

 

March 31,

June 30,

September 30,

December 31,

 

March 31,

June 30,

September 30,

December 31,

 

(unaudited, in thousands except per share amounts)

 

(unaudited, in thousands except per share amounts)

 

2019

    

    

    

    

    

    

    

    

2022

    

    

    

    

    

    

    

    

Revenues

$

45,456

$

46,266

$

47,119

$

46,463

$

40,787

$

43,024

$

43,503

$

47,839

Net income available to common stockholders

$

20,254

$

20,352

$

27,080

$

12,449

$

14,275

$

54,065

$

13,159

$

17,809

Net income per common share available to common stockholders:

Basic

$

0.51

$

0.51

$

0.68

$

0.31

$

0.36

$

1.37

$

0.33

$

0.44

Diluted

$

0.51

$

0.51

$

0.68

$

0.31

$

0.36

$

1.36

$

0.32

$

0.44

Dividends per share declared

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

Dividends per share paid

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

2018

2021

Revenues

$

41,810

$

41,472

$

41,776

$

43,587

$

40,280

$

38,129

$

37,472

$

39,441

Net income available to common stockholders

$

20,271

$

68,658

$

34,782

$

30,645

$

13,642

$

18,126

$

10,909

$

12,726

Net income per common share available to common stockholders:

Basic

$

0.51

$

1.74

$

0.88

$

0.78

$

0.35

$

0.46

$

0.28

$

0.32

Diluted

$

0.51

$

1.73

$

0.88

$

0.77

$

0.35

$

0.46

$

0.28

$

0.32

Dividends per share declared

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

Dividends per share paid

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

$

0.57

NOTE:

Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with the per share amounts for the year.

8186

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The carrying amount of cash and cash equivalents approximates fair value because of the short-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, 20192022 and 20182021 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, 2022

At December 31, 2021

Carrying

Fair

Carrying

Fair 

Value

Value

Value

Value

Financing receivable, net of credit loss reserve

$

75,999

$

76,033

(1)

$

$

Mortgage loans receivable, net of credit loss reserve

389,728

461,276

(2)

344,442

405,162

(2)

Notes receivable, net of credit loss reserve

 

58,383

 

61,858

(3)

 

28,337

 

28,653

(3)

Revolving line of credit

 

130,000

130,000

(4)

110,900

110,900

(4)

Term loans, net of debt issue costs

99,511

100,000

(4)

99,363

100,000

(4)

Senior unsecured notes, net of debt issue costs

 

538,343

477,653

(5)

512,456

540,045

(5)

(1)Our investment in financing 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 used to value our future cash inflows of the financing receivable at December 31, 2022 was 7.6%.

(2)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, 20192022 and 20182021 was 9.0%.9.3% and 9.5%, respectively.

(2)(3)Our bank borrowingsinvestments in notes receivable are classified as Level 3. 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 flows of the notes receivable at December 31, 2022 and 2021, were 7.1% and 5.6%, respectively.

(4)Our revolving line of credit and term loans bear interest at a variable interest rate. The estimated fair value of our bank borrowingsrevolving line of credit and term loans approximated their carrying values at December 31, 20192022 and 20182021 based upon prevailing market interest rates for similar debt arrangements.

(3)(5)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, 2019,2022, the discount rate used to value our future cash outflow of our senior unsecured notes was 3.70%6.50% for those maturing before year 20262030 and 3.90%7.00% for those maturing at or beyond year 2026.2030. At December 31, 2018,2021, the discount rate used to value our future cash outflow of our senior unsecured notes was 5.15%3.0% for those maturing before year 20262030 and 5.40%3.25% for those maturing beyond year 2026.2030.

16. Subsequent Events

The following events occurred subsequent to the balance sheet date.date:

Real Estate.Lease Renewals. We acquiredA master lease covering two skilled nursing centers that was scheduled to mature in 2023 was renewed at the contractual rate for another five years extending the maturity to November 2028. The centers have a 140-bed SNFtotal 216 beds and are located in Texas for approximately $13,500,000 andFlorida.

Financing Receivable. We entered into a $121,321,000 JV with an affiliate of an existing operator and contributed $117,900,000 into the JV that purchased 11 assisted living and memory care communities from an affiliate of our JV partner. The JV leased the communities back to an affiliate of the seller under a 10-year master lease, agreement with antwo five-year renewal options. The contractual initial cash yield of 8.5%, escalating 2% annually starting7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a floor of 2.0% and a ceiling of 4.0%. Additionally, the second yearJV provided the seller-lessee

87

Table of Contents

with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with 2 five-year renewal options.an exit IRR of 9.0%. In accordance with GAAP, the communities acquired by the JV are required to be presented as a Financing receivable on our Consolidated Balance Sheets. See Note 2. Summary of Significant Accounting Policies and Note 5. Real Estate Investments for more information.

Debt:Mortgage Loans. We originated a $10,750,000 mortgage loan secured by a memory care community located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%.

Notes Receivable. We received $4,545,000, which includes a prepayment fee and the exit IRR totaling $190,000, from a mezzanine loan repayment. The mezzanine loan was on a 136-unit independent living community in Oregon.

Unconsolidated Joint Ventures. We received a note of intent to redeem our $13,000,000 preferred equity investment in a joint venture to develop a 267-unit independent and assisted living community in Washington. We anticipate receiving $1,675,000 of additional income associated with the redemption representing the 14% IRR.

Revolving Line of Credit. We borrowed $18,000,000,$162,700,000 under our unsecured revolving line of credit. Accordingly, we have $111,900,000$292,700,000 outstanding and $488,100,000$107,300,000 available for borrowing under our unsecured revolving line of credit.

Equity:Senior Unsecured Notes. We repaid $7,000,000 in regular scheduled principal payments under our senior unsecured notes. Accordingly, we have $531,343,000 outstanding, net of debt issue costs, under our senior unsecured notes.

Equity. We declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February, and March 22023020,, payable on January 31, February 28, and March 31, 2020,2023, respectively, to stockholders of record on January 23, February 20,17, and March 23, 2020,2023, respectively. Also, we acquired 34,016 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations and we granted 76,464 shares of restricted common stock at $48.95 per share, which vest ratably from the grant date over a three-year period.

8288

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Additions

 

Additions

 

(Recovered)

 

(Recovered)

 

Balance at

charged to

Charged to

 

Balance at

charged to

Charged to

 

beginning of

costs and

other

Balance at end

 

beginning of

costs and

other

Balance at end

 

Account Description

period

expenses

 accounts (1)

Deductions (2)

of period

 

period

expenses

 accounts (1)

Deductions (2)

of period

 

Year ended December 31, 2017

    

    

    

    

    

    

    

    

    

    

Year ended December 31, 2020

    

    

    

    

    

    

    

    

    

    

Loan loss reserves

$

2,315

$

(60)

$

$

$

2,255

$

2,560

$

32

$

$

$

2,592

Other notes receivable allowance

166

166

181

(35)

146

Straight-line rent receivable allowance

 

960

 

(146)

 

 

 

814

 

 

 

 

 

$

3,441

$

(206)

$

$

$

3,235

$

2,741

$

(3)

$

$

$

2,738

Year ended December 31, 2018

Year ended December 31, 2021

Loan loss reserves

$

2,255

$

192

$

$

$

2,447

$

2,592

$

881

$

$

$

3,473

Other notes receivable allowance

166

(38)

128

146

140

286

Straight-line rent receivable allowance

 

814

 

(68)

 

 

 

746

 

 

 

 

 

$

3,235

$

86

$

$

$

3,321

$

2,738

$

1,021

$

$

$

3,759

Year ended December 31, 2019

Year ended December 31, 2022

Loan loss reserves

$

2,447

$

113

$

$

$

2,560

$

3,473

$

457

$

$

$

3,930

Financing receivable loss reserve

768

768

Other notes receivable allowance

128

53

181

286

303

589

Straight-line rent receivable allowance

 

746

 

 

(746)

 

 

$

3,321

$

166

$

(746)

$

$

2,741

$

3,759

$

1,528

$

$

$

5,287

(1)In conjunction with adoption of ASC 842, we wrote-off our 1% general straight-line reserve. The write-off was chargedThere were no charges to retained earnings.other accounts.

(2)Deductions represent uncollectibleuncollectable accounts written off.

89

83

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

(in thousands)

Costs

 

Costs

 

capitalized

Gross amount at which carried at

 

capitalized

Gross amount at which carried at

 

Initial cost to company

subsequent

December 31, 2019

 

Initial cost to company

subsequent

December 31, 2022

 

Building and

to

Building and

Accum

Construction/

Acquisition

 

Building and

to

Building and

Accum

Construction/

Acquisition

 

Encumbrances

Land

improvements

acquisition

Land

improvements

Total (1)

deprec.

renovation date

date

 

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

  

$

1,504

  

1985

  

2001

  

$

  

$

210

  

$

2,593

  

$

641

  

$

210

  

$

3,234

  

$

3,444

  

$

1,742

  

1985

  

2001

218 Albuquerque, NM

 

 

1,696

 

3,891

 

530

 

1,696

 

4,421

 

6,117

 

1,954

 

2008

 

2005

 

 

1,696

 

3,891

 

530

 

1,696

 

4,421

 

6,117

 

2,293

 

2008

 

2005

219 Albuquerque, NM

 

 

1,950

 

8,910

 

207

 

1,950

 

9,117

 

11,067

 

3,881

 

1982

 

2005

 

 

1,950

 

8,910

 

207

 

1,950

 

9,117

 

11,067

 

4,513

 

1982

 

2005

220 Albuquerque, NM

 

 

2,463

 

7,647

 

9

 

2,463

 

7,656

 

10,119

 

3,234

 

1970

 

2005

 

 

2,463

 

7,647

 

9

 

2,463

 

7,656

 

10,119

 

3,751

 

1970

 

2005

042 Altoona, IA

 

 

105

 

2,309

 

444

 

105

 

2,753

 

2,858

 

1,987

 

1973

 

1996

252 Amarillo, TX

 

 

844

 

 

7,925

 

844

 

7,925

 

8,769

 

2,025

 

2013

 

2011

 

 

844

 

 

7,925

 

844

 

7,925

 

8,769

 

2,488

 

2013

 

2011

247 Arlington, TX

 

 

1,016

 

13,649

 

 

1,016

 

13,649

 

14,665

 

4,097

 

2007

 

2011

 

 

1,016

 

13,649

 

132

 

1,016

 

13,781

 

14,797

 

4,988

 

2007

 

2011

221 Beaumont, TX

 

 

370

 

1,141

 

106

 

370

 

1,247

 

1,617

 

563

 

1950

 

2005

213 Beeville, TX

 

 

186

 

1,197

 

70

 

186

 

1,267

 

1,453

 

518

 

1974

 

2004

325 Austin, TX

896

9,562

896

9,562

10,458

202

2017

2022

319, Blue Springs, MO

2,644

13,942

73

2,644

14,015

16,659

1,508

2020

2019

007 Bradenton, FL

 

 

330

 

2,720

 

160

 

330

 

2,880

 

3,210

 

2,189

 

2012

 

1993

 

 

330

 

2,720

 

160

 

330

 

2,880

 

3,210

 

2,418

 

2012

 

1993

256 Brownwood, TX

 

 

164

 

6,336

 

 

164

 

6,336

 

6,500

 

1,562

 

2011

 

2012

 

 

164

 

6,336

 

29

 

164

 

6,365

 

6,529

 

2,188

 

2011

 

2012

043 Carroll, IA

 

 

47

 

1,033

 

213

 

47

 

1,246

 

1,293

 

898

 

1969

 

1996

177 Chesapeake, VA

 

 

388

 

3,469

 

2,777

 

388

 

6,246

 

6,634

 

3,581

 

2017

 

1995

 

 

388

 

3,469

 

2,777

 

388

 

6,246

 

6,634

 

4,110

 

2017

 

1995

257 Cincinnati, OH

 

 

1,890

 

25,110

 

 

1,890

 

25,110

 

27,000

 

4,303

 

2009

 

2012

 

 

1,890

 

25,110

 

224

 

1,890

 

25,334

 

27,224

 

5,945

 

2009

 

2012

125 Clovis, NM

 

 

561

 

5,539

 

307

 

561

 

5,846

 

6,407

 

2,730

 

2006

 

2001

 

 

561

 

5,539

 

307

 

561

 

5,846

 

6,407

 

3,155

 

2006

 

2001

129 Clovis, NM

 

 

598

 

5,902

 

59

 

598

 

5,961

 

6,559

 

2,805

 

1995

 

2001

 

 

598

 

5,902

 

59

 

598

 

5,961

 

6,559

 

3,236

 

1995

 

2001

268 Coldspring, KY

2,050

21,496

2,050

21,496

23,546

4,928

2014

2012

267 Cold Spring, KY

2,050

21,496

196

2,050

21,692

23,742

6,014

2014

2012

253 Colton, CA

 

 

2,474

 

15,158

 

 

2,474

 

15,158

 

17,632

 

3,512

 

1990

 

2011

 

 

2,474

 

15,158

 

 

2,474

 

15,158

 

17,632

 

4,803

 

1990

 

2011

211 Commerce City, CO

 

 

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

 

1,051

 

1967

 

2004

246 Crowley, TX

 

 

2,247

 

14,276

 

 

2,247

 

14,276

 

16,523

 

4,196

 

2007

 

2011

 

 

2,247

 

14,276

 

187

 

2,247

 

14,463

 

16,710

 

5,266

 

2007

 

2011

235 Daleville, VA

 

 

279

 

8,382

 

 

279

 

8,382

 

8,661

 

2,611

 

2005

 

2010

 

 

279

 

8,382

 

 

279

 

8,382

 

8,661

 

3,180

 

2005

 

2010

258 Dayton, OH

 

 

373

 

26,627

 

 

373

 

26,627

 

27,000

 

4,598

 

2010

 

2012

 

 

373

 

26,627

 

 

373

 

26,627

 

27,000

 

6,344

 

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

 

1,192

 

2014

 

2000

 

 

31

 

1,529

 

1,073

 

31

 

2,602

 

2,633

 

1,400

 

2014

 

2000

298 Forth Worth, TX

2,785

7,546

2,785

7,546

10,331

1,776

1998

2015

2,785

7,546

413

2,785

7,959

10,744

3,086

1998

2015

326 Forth Worth, TX

922

12,268

922

12,268

13,190

267

2017

2022

026 Gardendale, AL

100

7,550

2,084

100

9,634

9,734

6,166

2011

1996

100

7,550

2,084

100

9,634

9,734

7,078

2011

1996

185 Gardner, KS

 

 

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

 

2,631

 

2008

 

2011

 

 

836

 

6,693

 

363

 

836

 

7,056

 

7,892

 

3,132

 

2008

 

2011

044 Granger, IA

 

 

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

 

938

 

1974

 

2002

250 Hewitt, TX

 

 

1,780

 

8,220

 

99

 

1,780

 

8,319

 

10,099

 

2,057

 

2008

 

2011

 

 

1,780

 

8,220

 

391

 

1,780

 

8,611

 

10,391

 

2,787

 

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

 

3,613

 

1968

 

1996

054 Houston, TX

 

 

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

 

4,004

 

2008

 

1996

045 Jefferson, IA

 

 

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

1,229

18,369

69

1,229

18,438

19,667

1,755

2018

2019

008 Lecanto, FL

 

 

351

 

2,665

 

2,737

 

351

 

5,402

 

5,753

 

3,873

 

2012

 

1993

 

 

351

 

2,665

 

2,737

 

351

 

5,402

 

5,753

 

4,287

 

2012

 

1993

322 Longview, TX

1,405

12,176

1,405

12,176

13,581

1,274

2014

2020

300 Mansfield, TX

2,890

13,110

2,890

13,110

16,000

1,912

2015

2016

2,890

13,110

2,890

13,110

16,000

3,377

2015

2016

053 Mesa, AZ

 

 

305

 

6,909

 

1,876

 

305

 

8,785

 

9,090

 

5,876

 

1996

 

1996

 

 

305

 

6,909

 

1,876

 

305

 

8,785

 

9,090

 

6,610

 

1996

 

1996

242 Mission, TX

 

 

1,111

 

16,602

 

 

1,111

 

16,602

 

17,713

 

4,441

 

2004

 

2010

 

 

1,111

 

16,602

 

82

 

1,111

 

16,684

 

17,795

 

5,727

 

2004

 

2010

115 Nacogdoches, TX

 

 

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

 

2,270

 

1991

 

2010

 

 

394

 

7,456

 

268

 

394

 

7,724

 

8,118

 

2,848

 

1991

 

2010

249 Nacogdoches, TX

 

 

1,015

 

11,109

 

 

1,015

 

11,109

 

12,124

 

3,729

 

2007

 

2011

 

 

1,015

 

11,109

 

358

 

1,015

 

11,467

 

12,482

 

4,575

 

2007

 

2011

245 Newberry, SC

439

4,639

608

439

5,247

5,686

1,902

1995

2011

439

4,639

879

439

5,518

5,957

2,374

1995

2011

244 Newberry, SC

919

5,454

131

919

5,585

6,504

1,796

2001

2011

919

5,454

200

919

5,654

6,573

2,277

2001

2011

046 Norwalk, IA

 

 

47

 

1,033

 

239

 

47

 

1,272

 

1,319

 

925

 

1975

 

1996

176 Olathe, KS

 

 

520

 

1,872

 

313

 

520

 

2,185

 

2,705

 

1,443

 

1968

 

1999

251 Pasadena, TX

 

 

1,155

 

14,345

 

522

 

1,155

 

14,867

 

16,022

 

3,461

 

2005

 

2011

 

 

1,155

 

14,345

 

522

 

1,155

 

14,867

 

16,022

 

4,685

 

2005

 

2011

210 Phoenix, AZ

 

 

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

 

5,853

 

1985

 

2000

 

 

300

 

9,703

 

92

 

300

 

9,795

 

10,095

 

6,608

 

1985

 

2000

047 Polk City, IA

 

 

63

 

1,376

 

153

 

63

 

1,529

 

1,592

 

1,085

 

1976

 

1996

094 Portland, OR

 

 

100

 

1,925

 

3,152

 

100

 

5,077

 

5,177

 

3,414

 

2007

 

1997

 

 

100

 

1,925

 

3,152

 

100

 

5,077

 

5,177

 

4,147

 

2007

 

1997

254 Red Oak, TX

 

 

1,427

 

17,173

 

 

1,427

 

17,173

 

18,600

 

3,995

 

2002

 

2012

 

 

1,427

 

17,173

 

244

 

1,427

 

17,417

 

18,844

 

5,550

 

2002

 

2012

124 Richland Hills, TX

 

 

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

 

1,224

 

2014

 

2000

 

 

20

 

985

 

1,638

 

20

 

2,623

 

2,643

 

1,468

 

2014

 

2000

8490

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

(in thousands)

Costs

Costs

capitalized

Gross amount at which carried at

capitalized

Gross amount at which carried at

Initial cost to company

subsequent

December 31, 2019

Initial cost to company

subsequent

December 31, 2022

Building and

to

Building and

Accum

Construction/

Acquisition

Building and

to

Building and

Accum

Construction/

Acquisition

Encumbrances

  

Land

improvements

acquisition

Land

improvements

Total (1)

deprec.

  

renovation date

  

date

 

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

  

$

2,981

1975

2001

  

$

  

$

568

  

$

5,235

  

$

1,396

  

$

568

  

$

6,631

  

$

7,199

  

$

3,521

1975

2001

081 Sacramento, CA

 

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

1,244

1985

1997

325 San Antonio, TX

1,676

15,470

20

1,676

15,490

17,166

320

2018

2022

281 Slinger, WI

464

13,482

464

13,482

13,946

2,572

2014

2015

464

13,482

464

13,482

13,946

3,916

2014

2015

234 St. Petersburg, FL

 

1,070

7,930

500

1,070

8,430

9,500

2,286

1988

2010

 

1,070

7,930

500

1,070

8,430

9,500

2,892

1988

2010

243 Stephenville, TX

670

10,117

500

670

10,617

11,287

2,923

2009

2010

670

10,117

616

670

10,733

11,403

3,811

2009

2010

225 Tacoma, WA

 

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

1,507

1978

1995

375

1,327

397

375

1,724

2,099

1,569

1978

1995

270 Trinity, FL

 

1,653

12,748

1,653

12,748

14,401

2,544

2008

2013

 

1,653

12,748

1,653

12,748

14,401

3,781

2008

2013

192 Tucson, AZ

 

276

8,924

112

276

9,036

9,312

5,394

1992

2000

 

276

8,924

112

276

9,036

9,312

6,091

1992

2000

305 Union, KY

858

24,116

858

24,116

24,974

743

2019

2016

858

24,116

858

24,116

24,974

3,426

2019

2016

299 Weatherford, TX

836

11,902

836

11,902

12,738

2,285

1996

2015

836

11,902

280

836

12,182

13,018

3,962

1996

2015

323 Webster, TX

2,310

8,713

2,310

8,713

11,023

200

2018

2022

236 Wytheville, VA

647

12,167

647

12,167

12,814

4,618

1996

2010

647

12,167

647

12,167

12,814

5,363

1996

2010

Skilled Nursing Properties

$

 

$

50,063

$

499,692

$

46,615

$

50,063

$

546,307

$

596,370

$

183,391

$

 

$

53,990

$

513,766

$

33,218

$

53,990

$

546,984

$

600,974

$

182,308

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

966

1996

1996

 

100

1,650

180

100

1,830

1,930

1,106

1996

1996

105 Arvada, CO

 

100

2,810

6,960

100

9,770

9,870

3,262

2014

1997

 

100

2,810

7,072

100

9,882

9,982

4,027

2014

1997

304 Athens, GA

1,056

13,326

1,056

13,326

14,382

1,314

2016

2016

1,056

13,326

111

1,056

13,437

14,493

2,422

2016

2016

063 Athens, TX

 

96

1,510

104

96

1,614

1,710

982

1995

1996

 

96

1,510

113

96

1,623

1,719

1,125

1995

1996

320 Auburn Hills, MI

1,964

4,569

1,964

4,569

6,533

1995

2019

1,964

4,577

1,149

1,964

5,726

7,690

1,056

1995

2019

269 Aurora, CO

 

850

8,583

850

8,583

9,433

1,917

2014

2013

 

850

8,583

850

8,583

9,433

2,566

2014

2013

260 Aurora, CO

 

831

10,071

831

10,071

10,902

2,122

1999

2012

 

831

10,071

327

831

10,398

11,229

2,866

1999

2012

203 Bakersfield, CA

 

834

11,986

1,039

834

13,025

13,859

6,428

2002

2001

117 Beatrice, NE

 

100

2,173

231

100

2,404

2,504

1,287

1997

1997

 

100

2,173

243

100

2,416

2,516

1,517

1997

1997

277 Burr Ridge, IL

1,400

11,102

1,400

11,102

12,502

1,668

2016

2014

1,400

11,102

1,400

11,102

12,502

2,735

2016

2014

278 Castle Rock, CO

759

9,041

759

9,041

9,800

1,032

2012

2014

759

5,091

759

5,091

5,850

1,573

2012

2014

311 Cedarburg, WI

924

21,075

924

21,075

21,999

629

2019

2017

924

21,083

924

21,083

22,007

2,946

2019

2017

160 Central, SC

 

100

2,321

100

2,321

2,421

1,101

1998

1999

 

100

2,321

119

100

2,440

2,540

1,272

1998

1999

263 Chatham, NJ

 

5,365

36,399

5,365

36,399

41,764

7,347

2002

2012

 

5,365

36,399

587

5,365

36,986

42,351

10,105

2002

2012

307 Clovis, CA

2,542

19,126

2,542

19,126

21,668

1,374

2014

2017

2,542

19,126

2,542

19,126

21,668

3,022

2014

2017

308 Clovis, CA

3,054

14,172

3,054

14,172

17,226

979

2016

2017

3,054

14,172

3,054

14,172

17,226

2,154

2016

2017

279 Corpus Christi, TX

880

11,440

147

880

11,587

12,467

1,619

2016

2015

880

11,440

298

880

11,738

12,618

2,753

2016

2015

292 De Forest, WI

485

5,568

43

485

5,611

6,096

744

2006

2015

485

5,568

47

485

5,615

6,100

1,191

2006

2015

057 Dodge City, KS

 

84

1,666

4

84

1,670

1,754

1,034

1995

1995

 

84

1,666

30

84

1,696

1,780

1,156

1995

1995

083 Durant, OK

 

100

1,769

100

1,769

1,869

1,020

1997

1997

 

100

1,769

157

100

1,926

2,026

1,162

1997

1997

107 Edmond, OK

 

100

1,365

526

100

1,891

1,991

1,071

1996

1997

 

100

1,365

659

100

2,024

2,124

1,226

1996

1997

163 Ft. Collins, CO

 

100

2,961

3,405

100

6,366

6,466

2,510

2014

1999

 

100

2,961

3,674

100

6,635

6,735

3,147

2014

1999

170 Ft. Collins, CO

 

100

3,400

4,622

100

8,022

8,122

2,797

2014

1999

 

100

3,400

4,928

100

8,328

8,428

3,669

2014

1999

132 Ft. Meyers, FL

 

100

2,728

9

100

2,737

2,837

1,507

1998

1998

 

100

2,728

272

100

3,000

3,100

1,717

1998

1998

315 Ft. Worth, TX

1,534

11,099

1,534

11,099

12,633

474

2014

2018

1,534

11,099

34

1,534

11,133

12,667

1,424

2014

2018

100 Fremont ,OH

 

100

2,435

115

100

2,550

2,650

1,442

1997

1997

 

100

2,435

203

100

2,638

2,738

1,663

1997

1997

267 Frisco, TX

 

1,000

5,154

1,000

5,154

6,154

1,189

2014

2012

266 Frisco, TX

 

1,000

5,154

1,000

5,154

6,154

1,667

2014

2012

314 Frisco, TX

2,216

10,417

2,216

10,417

12,633

456

2015

2018

2,216

10,417

119

2,216

10,536

12,752

1,367

2015

2018

296 Glenview, IL

2,800

14,248

2,800

14,248

17,048

1,120

2017

2015

2,800

14,248

2,800

14,248

17,048

2,764

2017

2015

167 Goldsboro, NC

 

100

2,385

1

100

2,386

2,486

1,055

1998

1999

 

100

2,385

170

100

2,555

2,655

1,217

1998

1999

056 Great Bend, KS

 

80

1,570

21

80

1,591

1,671

1,097

1995

1995

 

80

1,570

68

80

1,638

1,718

1,234

1995

1995

102 Greeley, CO

 

100

2,310

270

100

2,580

2,680

1,459

1997

1997

 

100

2,310

612

100

2,922

3,022

1,686

1997

1997

284 Green Bay, WI

1,660

19,079

402

1,660

19,481

21,141

2,617

2004

2015

1,660

19,079

475

1,660

19,554

21,214

4,448

2004

2015

286 Greenfield, WI

818

8,014

232

818

8,246

9,064

1,755

2007

2015

164 Greenville, NC

 

100

2,478

2

100

2,480

2,580

1,231

1998

1999

 

100

2,478

198

100

2,676

2,776

1,418

1998

1999

062 Greenville, TX

 

42

1,565

84

42

1,649

1,691

996

1995

1996

 

42

1,565

105

42

1,670

1,712

1,134

1995

1996

161 Greenwood, SC

 

100

2,638

100

2,638

2,738

1,339

1998

1999

 

100

2,638

337

100

2,975

3,075

1,544

1998

1999

241 Gulf Breeze, FL

 

720

3,780

261

720

4,041

4,761

1,223

2000

2010

295 Jacksonville, FL

1,389

12,756

56

1,389

12,812

14,201

1,444

2015

2015

1,389

12,756

1,056

1,389

13,812

15,201

2,702

2015

2015

066 Jacksonville, TX

 

100

1,900

77

100

1,977

2,077

1,195

1996

1996

 

100

1,900

90

100

1,990

2,090

1,361

1996

1996

310 Kansas City, MO

1,072

15,552

1,072

15,552

16,624

839

2017

2017

1,072

15,552

1,072

15,552

16,624

2,071

2017

2017

285 Kenosha, WI

936

12,361

240

936

12,601

13,537

1,515

2008

2015

936

12,361

498

936

12,859

13,795

2,625

2008

2015

255 Littleton, CO

1,882

8,248

1,882

8,248

10,130

1,718

2013

2012

1,882

8,248

1,882

8,248

10,130

2,226

2013

2012

268 Littleton, CO

1,200

8,688

1,200

8,688

9,888

2,007

2014

2013

1,200

8,688

1,200

8,688

9,888

2,670

2014

2013

148 Longmont, CO

100

2,640

100

2,640

2,740

1,443

1998

1998

100

2,640

64

100

2,704

2,804

1,645

1998

1998

060 Longview, TX

38

1,568

127

38

1,695

1,733

1,034

1995

1995

38

1,568

134

38

1,702

1,740

1,180

1995

1995

261 Louisville, CO

911

11,703

911

11,703

12,614

2,414

2000

2012

911

11,703

390

911

12,093

13,004

3,283

2000

2012

8591

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

(in thousands)

Costs

 

Costs

 

capitalized

Gross amount at which carried at

 

capitalized

Gross amount at which carried at

 

Initial cost to company

subsequent

December 31, 2019

 

Initial cost to company

subsequent

December 31, 2022

 

Building and

to

Building and

Accum

Construction/

Acquisition

 

Building and

to

Building and

Accum

Construction/

Acquisition

 

  

Encumbrances

  

Land

  

improvements

  

acquisition

  

Land

  

improvements

  

Total (1)

  

deprec.

  

renovation date

  

date

 

  

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

$

$

1,021

$

11,871

$

123

$

1,021

$

11,994

$

13,015

$

2,305

2016

2016

114 Loveland, CO

100

2,865

270

100

3,135

3,235

1,758

1997

1997

100

2,865

324

100

3,189

3,289

1,995

1997

1997

068 Lufkin, TX

100

1,950

94

100

2,044

2,144

1,229

1996

1996

100

1,950

106

100

2,056

2,156

1,400

1996

1996

061 Marshall, TX

38

1,568

534

38

2,102

2,140

1,298

1995

1995

38

1,568

544

38

2,112

2,150

1,477

1995

1995

293 McHenry, IL

1,289

28,976

243

1,289

29,219

30,508

3,777

2005

2015

1,289

28,976

987

1,289

29,963

31,252

6,257

2005

2015

058 McPherson, KS

79

1,571

4

79

1,575

1,654

1,086

1994

1995

79

1,571

67

79

1,638

1,717

1,223

1994

1995

313 Medford, OR

636

17,816

636

17,816

18,452

1,788

2020

2018

316 Medford, OR

750

13,650

750

13,650

14,400

575

1984

2018

750

13,650

250

750

13,900

14,650

1,874

2005

2018

239 Merritt Island, FL

550

8,150

100

550

8,250

8,800

2,347

2004

2010

550

6,928

115

550

7,043

7,593

3,056

2004

2010

104 Millville, NJ

100

2,825

749

100

3,574

3,674

1,754

1997

1997

100

2,825

848

100

3,673

3,773

2,174

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

526

5,334

439

526

5,773

6,299

 

2,317

 

1997

2009

280 Murrells Inlet, SC

2,490

14,185

2,490

14,185

16,675

1,762

2016

2015

2,490

14,185

129

2,490

14,314

16,804

3,278

2016

2015

294 Murrieta, CA

2,022

11,136

2,022

11,136

13,158

1,432

2016

2015

2,022

11,136

2,022

11,136

13,158

2,586

2016

2015

289 Neenah, WI

694

20,839

244

694

21,083

21,777

2,606

1991

2015

694

20,839

251

694

21,090

21,784

4,316

1991

2015

166 New Bern, NC

100

2,427

1

100

2,428

2,528

 

1,095

 

1998

1999

100

2,427

170

100

2,597

2,697

 

1,254

 

1998

1999

118 Newark, OH

100

2,435

284

100

2,719

2,819

 

1,436

 

1997

1997

100

2,435

383

100

2,818

2,918

 

1,703

 

1997

1997

143 Niceville, FL

100

2,680

100

2,680

2,780

 

1,465

 

1998

1998

100

2,680

108

100

2,788

2,888

 

1,676

 

1998

1998

095 Norfolk, NE

100

2,123

301

100

2,424

2,524

 

1,277

 

1997

1997

100

2,123

311

100

2,434

2,534

 

1,541

 

1997

1997

306 Oak Lawn, IL

1,591

13,772

1,591

13,772

15,363

792

2018

2016

1,591

13,772

1,591

13,772

15,363

2,325

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

1,951

11,882

281

1,951

12,163

14,114

2,496

2013

2016

232 Pittsburgh, PA

470

2,615

333

470

2,948

3,418

 

1,046

 

1994

2009

470

2,615

360

470

2,975

3,445

 

1,264

 

1994

2009

165 Rocky Mount, NC

100

2,494

1

100

2,495

2,595

 

1,157

 

1998

1999

100

2,494

378

100

2,872

2,972

 

1,359

 

1998

1999

059 Salina, KS

79

1,571

4

79

1,575

1,654

 

1,086

 

1994

1995

79

1,571

303

79

1,874

1,953

 

1,250

 

1994

1995

084 San Antonio, TX

100

1,900

100

1,900

2,000

 

1,094

 

1997

1997

100

1,900

45

100

1,945

2,045

 

1,240

 

1997

1997

092 San Antonio, TX

100

2,055

100

2,055

2,155

 

1,178

 

1997

1997

100

2,055

577

100

2,632

2,732

 

1,411

 

1997

1997

288 Sheboygan, WI

1,168

5,382

184

1,168

5,566

6,734

854

2006

2015

1,168

5,382

379

1,168

5,761

6,929

1,384

2006

2015

149 Shelby, NC

100

2,805

2

100

2,807

2,907

 

1,533

 

1998

1998

100

2,805

312

100

3,117

3,217

 

1,782

 

1998

1998

312 Spartanburg, SC

254

9,906

1,520

254

11,426

11,680

886

1999

2017

254

9,906

1,520

254

11,426

11,680

2,627

1999

2017

150 Spring Hill, FL

100

2,650

100

2,650

2,750

 

1,449

 

1998

1998

100

2,650

104

100

2,754

2,854

 

1,662

 

1998

1998

103 Springfield, OH

100

2,035

270

100

2,305

2,405

 

1,300

 

1997

1997

100

2,035

363

100

2,398

2,498

 

1,490

 

1997

1997

321 Sterling Heights, MI

1,133

11,473

1,133

11,473

12,606

1997

2019

1,133

11,487

1,133

1,133

12,620

13,753

1,643

1997

2019

162 Sumter, SC

100

2,351

100

2,351

2,451

 

1,143

 

1998

1999

100

2,351

656

100

3,007

3,107

 

1,393

 

1998

1999

140 Tallahassee, FL

100

3,075

100

3,075

3,175

 

1,684

 

1998

1998

100

3,075

140

100

3,215

3,315

 

1,925

 

1998

1998

098 Tiffin, OH

100

2,435

279

100

2,714

2,814

 

1,424

 

1997

1997

100

2,435

366

100

2,801

2,901

 

1,678

 

1997

1997

282 Tinley Park, IL

702

11,481

702

11,481

12,183

1,509

2016

2015

702

11,481

702

11,481

12,183

2,608

2016

2015

088 Troy, OH

100

2,435

605

100

3,040

3,140

 

1,641

 

1997

1997

100

2,435

821

100

3,256

3,356

 

1,950

 

1997

1997

080 Tulsa, OK

200

1,650

200

1,650

1,850

 

959

 

1997

1997

200

1,650

148

200

1,798

1,998

 

1,091

 

1997

1997

093 Tulsa, OK

100

2,395

100

2,395

2,495

 

1,370

 

1997

1997

100

2,395

42

100

2,437

2,537

 

1,553

 

1997

1997

238 Tupelo, MS

1,170

8,230

30

1,170

8,260

9,430

 

2,437

 

2000

2010

1,170

8,230

52

1,170

8,282

9,452

 

3,133

 

2000

2010

075 Tyler, TX

100

1,800

100

1,800

1,900

 

1,052

 

1996

1996

100

1,800

144

100

1,944

2,044

 

1,207

 

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

100

2,235

770

100

3,005

3,105

 

1,563

 

2021

1997

096 Wahoo, NE

100

2,318

161

100

2,479

2,579

 

1,378

 

1997

1997

100

2,318

166

100

2,484

2,584

 

1,628

 

1997

1997

108 Watauga, TX

100

1,668

100

1,668

1,768

 

949

 

1996

1997

100

1,668

38

100

1,706

1,806

 

1,076

 

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

100

1,669

698

100

2,367

2,467

 

1,454

 

1996

1997

309 West Chester, OH

2,355

13,553

22

2,355

13,575

15,930

978

2017

2017

2,355

13,553

212

2,355

13,765

16,120

2,235

2017

2017

276 Westminster, CO

1,425

9,575

1,425

9,575

11,000

1,867

2015

2013

1,425

9,575

1,425

9,575

11,000

2,660

2015

2013

110 Wheelersburg, OH

29

2,435

250

29

2,685

2,714

 

1,437

 

1997

1997

29

2,435

349

29

2,784

2,813

 

1,720

 

1997

1997

303 Wichita, KS

1,422

9,957

285

1,422

10,242

11,664

1,159

2011

2016

1,422

9,957

285

1,422

10,242

11,664

2,162

2011

2016

259 Wichita, KS

730

9,682

730

9,682

10,412

 

2,270

 

2013

2012

730

9,682

730

9,682

10,412

 

2,911

 

2013

2012

283 Wichita, KS

624

13,846

624

13,846

14,470

1,245

2016

2015

624

13,946

624

13,946

14,570

2,373

2016

2015

076 Wichita Falls, TX

100

1,850

100

1,850

1,950

 

1,081

 

1996

1996

100

1,850

126

100

1,976

2,076

 

1,225

 

1996

1996

120 Wichita Falls, TX

100

2,750

131

100

2,881

2,981

 

1,607

 

1997

1997

100

2,750

143

100

2,893

2,993

 

1,841

 

1997

1997

264 Williamstown, NJ

711

6,637

711

6,637

7,348

 

1,982

 

2000

2012

265 Williamstown, NJ

711

6,637

711

6,637

7,348

 

1,502

 

2000

2012

711

8,649

711

8,649

9,360

 

2,411

 

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

$

$

68,788

$

678,526

$

50,499

$

68,788

$

729,025

$

797,813

$

207,529

8692

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

(in thousands)

Costs

 

Costs

 

capitalized

Gross amount at which carried at

 

capitalized

Gross amount at which carried at

 

Initial cost to company

subsequent

December 31, 2019

 

Initial cost to company

subsequent

December 31, 2022

 

Building and

to

Building and

Accum

Construction/

Acquisition

 

Building and

to

Building and

Accum

Construction/

Acquisition

 

  

Encumbrances

  

Land

  

improvements

  

acquisition

  

Land

  

improvements

  

Total (1)

  

deprec.

  

renovation date

  

date

 

  

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

1,965

7,308

1,702

1,965

9,010

10,975

1,650

1990/1994

2015

Properties

1,965

 

7,308

1,144

1,965

 

8,452

 

10,417

891

1,965

 

7,308

1,702

1,965

 

9,010

 

10,975

1,650

Land:

271 Howell, MI

420

 

420

 

 

420

N/A

2013

420

 

420

 

 

420

N/A

2013

272 Milford, MI

450

 

450

 

 

450

N/A

2014

450

 

450

 

 

450

N/A

2014

275 Yale, MI

73

 

73

 

 

73

N/A

2013

73

 

73

 

 

73

N/A

2013

Land

943

 

943

 

 

943

943

 

943

 

 

943

Other Properties

2,908

 

7,308

1,144

2,908

 

8,452

 

11,360

891

2,908

 

7,308

1,702

2,908

 

9,010

 

11,918

1,650

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

$

$

125,686

$

1,199,600

$

85,419

$

125,686

$

1,285,019

$

1,410,705

(2)

$

391,487

(1)Depreciation is computed principally by the straight-line method for financial reporting purposes which generally range of a life from 5 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.

(2)As of December 31, 2019,2022, our aggregate cost for Federal income tax purposes was $1,501.$1,420,258 (unaudited).

8793

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

(in thousands)

Activity for the years ended December 31, 2019, 20182022, 2021 and 20172020 is as follows:

For the Year Ended December 31,

 

For the Year Ended December 31,

 

2019

2018

2017

 

2022

2021

2020

 

Reconciliation of real estate:

    

    

    

    

    

    

    

    

    

    

    

    

Carrying cost:

Balance at beginning of period

$

1,421,456

$

1,392,122

$

1,301,563

$

1,408,557

$

1,452,001

$

1,484,571

Acquisitions

 

58,414

 

40,408

 

82,405

 

51,817

 

 

13,581

Improvements

 

23,363

 

38,528

 

25,800

 

9,099

 

6,298

 

23,612

Capitalized interest

 

608

 

1,248

 

908

 

 

 

354

Cost of real estate sold

 

(19,270)

 

(50,850)

 

(18,554)

 

(55,346)

 

(49,742)

 

(66,140)

Impairment loss from real estate investments

 

(3,422)

 

 

(3,977)

Ending balance

$

1,484,571

$

1,421,456

$

1,392,122

$

1,410,705

$

1,408,557

$

1,452,001

Accumulated depreciation:

Balance at beginning of period

$

314,875

$

306,033

$

275,861

$

374,606

$

349,643

$

347,755

Depreciation expense

 

39,094

 

37,416

 

37,492

 

37,394

 

38,192

 

38,945

Cost of real estate sold

 

(6,214)

 

(28,574)

 

(7,320)

 

(20,513)

 

(13,229)

 

(37,057)

Ending balance

$

347,755

$

314,875

$

306,033

$

391,487

$

374,606

$

349,643

8894

Table of Contents

LTC PROPERTIES, INC.

SCHEDULE IV

MORTGAGE LOANS RECEIVABLE ON REAL ESTATE

(in thousands)

Principal

 

Principal

 

Amount of

 

Amount of

 

Carrying

Loans

 

Carrying

Loans

 

Current

Amount of

Subject to

 

Current

Amount of

Subject to

 

(Unaudited)

Monthly

Face

Mortgages

Delinquent

 

(Unaudited)

Monthly

Face

Mortgages

Delinquent

 

Number of

Final

Balloon

Debt

Amount of

December 31,

Principal or

 

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

 

Properties

Units/Beds (1)

Interest Rate (2)

Maturity Date

Amount (3)

Service

Mortgages

2022

Interest

 

MI

15

2,029

9.92%

2043

$

161,966

$

1,535

$

188,966

$

184,265

$

15

1,875

10.60%

2043

$

163,214

$

1,623

$

190,214

$

182,514

$

MI

 

4

 

501

9.24%

2045

 

32,286

 

278

 

36,116

 

35,715

 

 

4

 

480

9.60%

2045

 

35,576

 

311

 

39,406

 

38,636

 

MI

 

1

 

157

9.41%

2045

 

14,325

 

117

 

15,000

 

14,801

 

 

1

 

146

10.10%

2045

 

14,325

 

125

 

15,000

 

14,726

 

MI

2

205

9.41%

2045

19,513

154

19,513

19,318

2

201

9.80%

2045

19,750

162

19,750

19,553

FL

1

68

7.80%

2025

14,308

92

14,308

14,165

LA

1

189

7.50%

2024

29,346

186

29,346

29,054

MO

7.50%

2023

1,887

12

1,887

1,867

NC

4

217

7.30%

2026

33,000

209

33,000

32,670

NC

7.30%

2026

796

5

796

788

NC

12

(4)

478

7.30%

2025

51,531

318

51,531

51,016

SC

1

(4)

45

7.30%

2025

4,787

30

4,787

4,739

 

22

(4)

2,892

$

228,090

$

2,084

$

259,595

$

254,099

$

 

41

(5)

3,699

$

368,520

$

3,073

$

400,025

$

389,728

$

(1)Represents current stated interest rate. Generally, the loans have a 30-year amortization with principal and interest payable at varying amounts over the life to maturity with annual interest adjustments through specified fixed rate increases effective either on the first anniversary or calendar year of the loan.

(2)Balloon payment is due upon maturity.

(3)This number is based upon unit/bed counts shown on operating licenses provided to us by lessee/borrowers or units/beds as stipulated by lease/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 multi-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-licensing of beds or in our opinion impact the value of the property, we would take action against the borrower to preserve the value of the property/collateral.

(2)Represents current stated interest rate. Generally, the loans have principal and interest payable at varying amounts over the life to maturity with annual interest adjustments through specified fixed rate increases effective either on the first anniversary or calendar year of the loan.

(3)Balloon payment is due upon maturity.

(4)Represents a single mortgage loan secured by 13 ALFs. The mortgage loan was allocated by state for reporting purposes only.

(5)Includes 410 first-lien mortgage loans as follows:

Number of Loans

    

Original loan amounts

 

02

$ 500 - $2,000

0

$2,001 - $3,000

0

$3,001 - $4,000

0

$4,001 - $5,000

0

$5,001 - $6,000

0

$6,001 - $7,000

48

$7,001 +

8995

Table of Contents

Mortgage loans receivable activity for the years ended December 31, 2019, 20182022, 2021 and 20172020 is as follows:

Balance— December 31, 2016

    

$

229,801

Balance— December 31, 2019

    

$

254,099

New mortgage loans

 

 

Other additions

 

11,913

 

4,253

Land conveyance

Amortization of mortgage premium

 

(4)

 

(4)

Collections of principal

 

(17,863)

 

(1,065)

Foreclosures

 

 

Loan loss reserve

 

60

 

(32)

Other deductions

 

 

Balance— December 31, 2017

 

223,907

Balance— December 31, 2020

 

257,251

New mortgage loans

 

14,525

 

88,415

Other additions

 

6,839

 

540

Land conveyance

Application of interest reserve

298

Amortization of mortgage premium

 

(4)

 

(6)

Collections of principal

 

(2,136)

 

(1,175)

Foreclosures

 

 

Loan loss reserve

 

(192)

 

(881)

Other deductions

 

 

Balance— December 31, 2018

 

242,939

Balance— December 31, 2021

 

344,442

New mortgage loans

 

7,500

 

31,965

Other additions

 

4,842

 

8,767

Land conveyance

Application of interest reserve

6,192

Amortization of mortgage premium

 

(4)

 

(6)

Collections of principal

 

(1,065)

 

(1,175)

Foreclosures

 

 

Loan loss reserve

 

(113)

 

(457)

Other deductions

 

 

Balance— December 31, 2019

$

254,099

Balance— December 31, 2022

$

389,728

9096

Table of Contents

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS 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.

9197

Table of Contents

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) or 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, 2019.2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“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, 2019,2022, our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2019,2022, 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 page.

9298

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TheTo the Stockholders and the Board of Directors and Shareholders of LTC Properties, Inc.

Opinion on Internal Control overOver Financial Reporting

We have audited LTC Properties, Inc.’s internal control over financial reporting as of December 31, 2019,2022, 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. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2022, 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, 20192022 and 2018,2021, 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, 2019,2022, and the related notes and the financial statement schedules listed in the Index at Item 15(a) and our report dated February 20, 202016, 2023 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 Over Financial Reporting. Our responsibility is to express an opinion on the Company’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 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.

/s/ Ernst & Young LLP

Los Angeles, California

February 20, 202016, 2023

9399

Table of Contents

Item 9B. OTHER INFORMATION

None.

Item 9.C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION

Notapplicable.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item is incorporated by reference to our definitive proxy statement for the 20202023 Annual Meeting of Stockholders (to be filed with the SEC within 120 days of our December 31, 20192022 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 20202023 Annual Meeting of Stockholders (to be filed with the SEC within 120 days of our December 31, 20192022 fiscal year end) under the headings “Executive Compensation Discussion and Analysis,” “Executive Compensation 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 20202023 Annual Meeting of Stockholders (to be filed with the SEC within 120 days of our December 31, 20192022 fiscal year end) under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

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 20202023 Annual Meeting of Stockholders (to be filed with the SEC within 120 days of our December 31, 20192022 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 20202023 Annual Meeting of Stockholders (to be filed with the SEC within 120 days of our December 31, 20192022 fiscal year end) under the heading “Independent Registered Public Accounting Firm Fees and Services.”

94100

Table of Contents

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The following financial statements of LTC Properties, Inc. are included in Part II, Item 8 of this Annual Report on Form 10-K:

    

 

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 20192022 and 20182021

Consolidated Statements of Income for the years ended December 31, 2019, 20182022, 2021 and 20172020

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 20182022, 2021 and 20172020

Consolidated Statements of Equity for the years ended December 31, 2019, 20182022, 2021 and 20172020

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 20182022, 2021 and 20172020

Notes to Consolidated Financial Statements

(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:

II. Valuation and Qualifying Accounts

III. Real Estate and Accumulated Depreciation

IV. Mortgage Loans Receivable on Real Estate

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.

(a)(3) Exhibits

Exhibit
Number

  

Description

3.1

LTC Properties, Inc. Articles of Restatement (incorporated by reference to Exhibit 3.1.2 to LTC Properties Inc.’sthe registrant’s Current Report on Form 8-K (File No. 1-11314) datedfiled June 1,6, 2016)

3.2

Bylaws of LTC Properties, Inc., as restated June 2, 2015 (incorporated by reference to Exhibit 3.23.2.2 to LTC Properties Inc.’s Currentthe registrant’s Annual Report on Form 8-K (File No. 1-11314) dated June 2, 2015)10-K filed February 18, 2021)

4.1

Description of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the registrant’s Annual Report on Form 10-K filed February 18, 2021)

10.1

Note Purchase Agreement dated February 16, 2017 (incorporated by reference to Exhibit 10.7 to LTC Properties, Inc.’sthe registrant’s Annual Report on Form 10-K (File No. 1-11314) for the year ended December 31, 2016)

10.2

Note Purchase Agreement dated May 17, 2022 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed May 19, 2022)

10.3

Note Purchase and Private Shelf Agreement between LTC Properties, Inc., and AIG Asset Management (U.S.) LLC dated August 4, 2015 (incorporated by reference to Exhibit 10.4 to LTC Properties Inc.’sthe registrant’s Quarterly Report on Form 10-Q (File No. 1-11314) for the quarter ended June 30, 2015)

10.310.4

Amended and Restated Note Purchase and Private Shelf Agreement between LTC Properties, Inc., and AIG Asset Management (U.S.) LLC dated June 2, 2016 (incorporated by reference to Exhibit 10.1 to LTC Properties Inc.’sthe registrant’s Current Report on Form 8-K datedfiled June 1,6, 2016)

10.410.5

Equity Distribution Agreement, dated March 1, 2019, by and between LTC Properties, Inc. and JMP Securities LLC (incorporated by reference to Exhibit 1.1 to LTC Properties Inc.’sthe registrant’s Current Report on Form 8-K (File No. 1-11314) dated March 1, 2019)

10.5

Equity Distribution Agreement, dated March 1, 2019, by and between LTC Properties, Inc. and Credit Agricole Securities (USA) Inc. (incorporated by reference to Exhibit 1.2 to LTC Properties Inc.’s Current Report on Form 8-K (File No. 1-11314) datedfiled March 1, 2019)

10.6

Equity Distribution Agreement, dated March 1, 2019, by and between LTC Properties, Inc., and KeyBanc Capital Markets Inc. (incorporated by reference to Exhibit 1.3 to LTC Properties Inc.’sthe registrant’s Current Report on Form 8-K (File No. 1-11314) datedfiled March 1, 2019)

10.7

Equity Distribution Agreement, dated November 19, 2021, by and between LTC Properties, Inc. and Huntington Securities USA Inc. (incorporated by reference to Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed November 19, 2021)

95101

Table of Contents

Exhibit
Number

  

Description

10.7

Equity Distribution Agreement, dated March 1, 2019, by and between LTC Properties, Inc. and Mizuho Securities USA Inc. (incorporated by reference to Exhibit 1.4 to LTC Properties Inc.’s Current Report on Form 8-K (File No. 1-11314) dated March 1, 2019)

10.8

SecondThird Amended and Restated Credit Agreement dated June 27, 2018as of November 19, 2021 (incorporated by reference to Exhibit 10.1 to LTC Properties Inc.’sthe registrant’s Current Report on Form 8-K dated June 27, 2018)filed November 19, 2021)

10.9

First Amendment to the Third Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed December 19, 2022)

10.10

Employment Agreement of Wendy Simpson dated November 12, 2014 (incorporated by reference to Exhibit 10.1 to LTC Properties, Inc.’sthe registrant’s Current Report on Form 8-K (File No. 1-11314) datedfiled November 12, 2014)

10.1010.11

Employment Agreement of Pamela Kessler, effective as of November 12, 2014 (incorporated by reference to Exhibit 10.2 to LTC Properties, Inc.’sthe registrant’s Current Report on Form 8-K (File No. 1-11314) datedfiled November 12, 2014)

10.11+10.12+

Employment Agreement of Clint Malin, effective as of November 12, 2014 (incorporated by reference to Exhibit 10.3 to LTC Properties, Inc.’sthe registrant’s Current Report on Form 8-K (File No. 1-11314) datedfiled November 12, 2014)

10.12+10.13+

Annual Cash Bonus Incentive Plan, effective as of October 27, 2014 (incorporated by reference to Exhibit 10.9 to LTC Properties, Inc.’sthe registrant’s Annual Report on Form 10-K (File No. 1-11314) for the year ended December 31, 2014)

10.13+10.14+

The 2015 Equity Participation Plan of LTC Properties, Inc. (incorporated by reference to Exhibit 4.3 to LTC Properties, Inc.’sthe registrant’s Registration Statement on Form S-8 (File No. 333-205115)

10.14+10.15+

The 2021 Equity Participation Plan of LTC Properties, Inc. (incorporated by reference to Exhibit 4.3 to the registrant’s Registration Statement on Form S-8 (File No. 333-256808)

10.16+

Form of Stock Option Agreement under the 20152021 Equity Participation Plan (incorporated by reference to Exhibit 10.2010.14 to LTC Properties, Inc.’sthe registrant’s Annual Report on Form 10-K (File No. 1-11314) for the year ended December 31, 2015)2021)

10.15

Form of Restricted Stock Agreement under the 2015 Equity Participation Plan (incorporated by reference to Exhibit 10.21 to LTC Properties, Inc.’s Annual Report on Form 10-K (File No. 1-11314) for the year ended December 31, 2015)

10.1610.17+

Form of Performance Based Market Stock Unit Agreement under the 20152021 Equity Participation Plan (incorporated by reference to Exhibit 10.210.15 to LTC Properties Inc.’s Currentthe registrant’s Annual Report on Form 8-K dated June 1, 2016)10-K for the year ended December 31, 2021)

10.1710.18+

Form of Indemnification Agreement dated as of July 30, 2009 between LTC Properties, Inc. and its Directors and Officers (incorporated by reference to Exhibit 10.1 to LTC Properties, Inc.’sthe registrant’s Quarterly Report on Form 10-Q (File No. 1-11314) for the quarter ended June 30, 2009)

21

List of Subsidiaries

23.1

Consent of Independent Registered Accounting Firm

31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

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

Item 16. FORM 10-K SUMMARY

None.

102

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LTC PROPERTIES, INC.
Registrant

Dated: February 20, 202016, 2023

96

Table of Contents

By:

/s/ Pamela J. KesslerCAROLINE CHIKHALE

PAMELA J. KESSLERCAROLINE CHIKHALE
Executive Vice President, Chief Financial
Accounting Officer and Corporate Secretary
(Principal Financial Officer)Treasurer

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 Registrantregistrant and in the capacities and on the dates indicated.

/s/ Wendy L. Simpson

WENDY L. SIMPSON

Chairman and Chief Executive Officer
President and Director

(Principal Executive Officer)

February 20, 202016, 2023

/s/ Pamela J. Kessler

PAMELA J. KESSLER

Executive Vice President,Co-President, Chief Financial
Officer and Corporate Secretary

(Principal Financial Officer and Principal
Accounting
Officer)

February 20, 202016, 2023

/s/ Boyd Hendrickson

BOYD HENDRICKSON

Director

February 20, 202016, 2023

/s/ Cornelia Cheng

Director

February 16, 2023

CORNELIA CHENG

/s/ Devra G. Shapiro

DEVRA G. SHAPIRO

Director

February 20, 202016, 2023

/s/ JAMESJames J. PIECZYNSKIPieczynski

JAMES J. PIECZYNSKI

Director

February 20, 202016, 2023

/s/ Timothy J. Triche

TIMOTHY J. TRICHE

Director

February 20, 202016, 2023

97103