UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended ~~March 31,~~September 30, 2021

☐

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

For the Transition period from ____ to ____

Commission file number 1-11314

LTC PROPERTIES, INC.

(Exact name of Registrant as specified in its charter)


Maryland				71-0720518
(State or other jurisdiction of				(I.R.S. Employer
incorporation or organization)				Identification No.)

2829 Townsgate Road, Suite 350

Westlake Village, California 91361

(Address of principal executive offices, including zip code)

(805) 981-8655

(Registrant’s telephone number, including area code)

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



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value	LTC	New York Stock Exchange

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ 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 þ 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 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 þ	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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No þ

The number of shares of common stock outstanding on ~~April 22,~~October 21, 2021 was ~~39,364,622.~~39,374,044.

Table of Contents

LTC PROPERTIES, INC.

FORM 10-Q

~~March 31,~~September 30, 2021

INDEX


PART I -- Financial Information		Page

Item 1.	Financial Statements
	Consolidated Balance Sheets	3
	Consolidated Statements of Income and Comprehensive Income	4
	Consolidated Statements of Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2325
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4046
Item 4.	Controls and Procedures	4046
PART II -- Other Information

Item 1.	Legal Proceedings	4147
Item 1A.	Risk Factors	4147
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4147
Item 6.	Exhibits	4248

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share)



					September 30, 2021		December 31, 2020
	March 31, 2021		December 31, 2020		(unaudited)		(audited)
ASSETS
Investments:
Land	$	126,331	$	127,774	$	123,239	$	127,774
Buildings and improvements		1,314,707		1,324,227		1,283,859		1,324,227
Accumulated depreciation and amortization		(354,623)		(349,643)		(365,182)		(349,643)
Operating real estate property, net		1,086,415		1,102,358
Properties held-for-sale, net of accumulated depreciation: 2021—$3,512; 2020—$0		4,512		—
Real property investments, net		1,090,927		1,102,358		1,041,916		1,102,358

Mortgage loans receivable, net of loan loss reserve: 2021—$2,592; 2020—$2,592		257,282		257,251
Mortgage loans receivable, net of loan loss reserve: 2021—$2,608; 2020—$2,592						258,829		257,251
Real estate investments, net		1,348,209		1,359,609		1,300,745		1,359,609
Notes receivable, net of loan loss reserve: 2021—$137; 2020—$146		13,577		14,465
Notes receivable, net of loan loss reserve: 2021—$189; 2020—$146						18,675		14,465
Investments in unconsolidated joint ventures		19,340		11,340		19,340		11,340
Investments, net		1,381,126		1,385,414		1,338,760		1,385,414

Other assets:
Cash and cash equivalents		8,201		7,772		45,459		7,772
Debt issue costs related to bank borrowings		1,104		1,324		688		1,324
Interest receivable		34,491		32,746		37,476		32,746
Straight-line rent receivable		24,377		24,452		24,298		24,452
Lease incentives		2,349		2,462		2,726		2,462
Prepaid expenses and other assets		3,655		5,316		3,681		5,316
Total assets	$	1,455,303	$	1,459,486	$	1,453,088	$	1,459,486
LIABILITIES
Bank borrowings	$	106,900	$	89,900	$	134,400	$	89,900
Senior unsecured notes, net of debt issue costs: 2021—$619; 2020—$658		552,521		559,482
Senior unsecured notes, net of debt issue costs: 2021—$551; 2020—$658						527,429		559,482
Accrued interest		3,347		4,216		3,172		4,216
Accrued expenses and other liabilities		27,764		30,082		35,157		30,082
Total liabilities		690,532		683,680		700,158		683,680
EQUITY
Stockholders’ equity:
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2021—39,362; 2020—39,242		394		392
Common stock: $0.01 par value; 60,000 shares authorized; shares issued and outstanding: 2021—39,374; 2020—39,242						394		392
Capital in excess of par value		851,150		852,780		854,921		852,780
Cumulative net income		1,402,537		1,388,775		1,431,798		1,388,775
Cumulative distributions		(1,497,714)		(1,474,545)		(1,542,596)		(1,474,545)
Total LTC Properties, Inc. stockholders’ equity		756,367		767,402		744,517		767,402
Non-controlling interests		8,404		8,404		8,413		8,404
Total equity		764,771		775,806		752,930		775,806
Total liabilities and equity	$	1,455,303	$	1,459,486	$	1,453,088	$	1,459,486

See accompanying notes.

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(amounts in thousands, except per share, unaudited)

Three Months Ended

March 31,


2021

2020


Revenues:

Rental income

$
31,973

$
38,035

Interest income from mortgage loans

7,922

7,777

Interest and other income

385

598

Total revenues

40,280

46,410

Expenses:

Interest expense

6,972

7,710

Depreciation and amortization

9,877

9,669

(Recovery) provision for credit losses

(9)

1

Transaction costs

92

70

Property tax expense

3,981

4,223

General and administrative expenses

5,033

5,100

Total expenses

25,946

26,773

Other operating income:

(Loss) gain on sale of real estate, net

(773)

43,854

Operating income

13,561

63,491

Income from unconsolidated joint ventures

289

231

Net income

13,850

63,722

Income allocated to non-controlling interests

(88)

(89)

Net income attributable to LTC Properties, Inc.

13,762

63,633

Income allocated to participating securities

(120)

(263)

Net income available to common stockholders

$
13,642

$
63,370

Earnings per common share:

Basic

$
0.35

$
1.60

Diluted

$
0.35

$
1.60

Weighted average shares used to calculate earnings per common share:

Basic

39,100

39,539

Diluted

39,179

39,541

Dividends declared and paid per common share

$
0.57

$
0.57

Comprehensive Income:

Net income

$
13,850

$
63,722

Comprehensive income

$
13,850

$
63,722


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues:
Rental income	$	29,320	$	30,010	$	91,097	$	88,320
Interest income from mortgage loans		7,924		7,890		23,779		23,487
Interest and other income		228		273		1,005		1,257
Total revenues		37,472		38,173		115,881		113,064
Expenses:
Interest expense		6,610		7,361		20,442		22,617
Depreciation and amortization		9,462		9,766		28,847		29,232
Impairment charges		—		941		—		941
Provision (recovery) for credit losses		68		(2)		59		(1)
Transaction costs		4,046		63		4,271		197
Property tax expense		3,932		3,351		11,713		11,685
General and administrative expenses		5,318		4,814		15,688		14,494
Total expenses		29,436		26,294		81,020		79,165
Other operating income:
Gain on sale of real estate, net		2,702		30		7,392		44,073
Operating income		10,738		11,909		42,253		77,972
Gain from property insurance proceeds		—		373		—		373
Loss on unconsolidated joint ventures		—		—		—		(620)
Income from unconsolidated joint ventures		376		56		1,041		287
Net income		11,114		12,338		43,294		78,012
Income allocated to non-controlling interests		(92)		(121)		(271)		(292)
Net income attributable to LTC Properties, Inc.		11,022		12,217		43,023		77,720
Income allocated to participating securities		(113)		(103)		(346)		(339)
Net income available to common stockholders	$	10,909	$	12,114	$	42,677	$	77,381

Earnings per common share:
Basic	$	0.28	$	0.31	$	1.09	$	1.97
Diluted	$	0.28	$	0.31	$	1.09	$	1.97

Weighted average shares used to calculate earnings per common share:
Basic		39,177		39,061		39,149		39,218
Diluted		39,177		39,112		39,149		39,269

Dividends declared and paid per common share	$	0.57	$	0.57	$	1.71	$	1.71

Comprehensive Income:
Net income	$	11,114	$	12,338	$	43,294	$	78,012
Comprehensive income	$	11,114	$	12,338	$	43,294	$	78,012

See accompanying notes.

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

Capital in

Cumulative

Total

Non-

Common Stock

Excess of

Net

Cumulative

Stockholder's

Controlling

Total

Shares

Amount

Par Value

Income

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

Common Stock cash distributions ($0.57 per share)

—

—

—

—

(22,581)

(22,581)

—

(22,581)

Vesting of performance-based stock units

82

—

—

—

(586)

(586)

—

(586)

Issuance of restricted stock

76

1

(1)

—

—

—

—

—

Repurchase of common stock

(616)

(6)

(18,006)

—

—

(18,012)

—

(18,012)

Stock-based compensation expense

—

—

1,777

—

—

1,777

—

1,777

Net income

—

—

—

63,633

—

63,633

89

63,722

Non-controlling interest distributions

—

—

—

—

—

—

(146)

(146)

Other

(76)

(1)

(3,544)

—

—

(3,545)

—

(3,545)

Balance—March 31, 2020

39,218

$
392

$
847,572

$
1,357,115

$
(1,407,450)

$
797,629

$
8,426

$
806,055

Common Stock cash distributions ($0.57 per share)

—

—

—

—

(22,359)

(22,359)

—

(22,359)

Issuance of restricted stock

25

—

(7)

—

—

(7)

—

(7)

Stock-based compensation expense

—

—

1,761

—

—

1,761

—

1,761

Net income

—

—

—

1,870

—

1,870

82

1,952

Non-controlling interest distributions

—

—

—

—

—

—

(97)

(97)

Balance—June 30, 2020

39,243

$
392

$
849,326

$
1,358,985

$
(1,429,809)

$
778,894

$
8,411

$
787,305

Common Stock cash distributions ($0.57 per share)

—

—

—

—

(22,368)

(22,368)

—

(22,368)

Stock-based compensation expense

—

—

1,693

—

—

1,693

—

1,693

Net income

—

—

—

12,217

—

12,217

121

12,338

Non-controlling interest distributions

—

—

—

—

—

—

(128)

(128)

Other

(1)

—

(19)

—

—

(19)

—

(19)

Balance—September 30, 2020

39,242

$
392

$
851,000

$
1,371,202

$
(1,452,177)

$
770,417

$
8,404

$
778,821

Common Stock cash distributions ($0.57 per share)

—

—

—

—

(22,368)

(22,368)

—

(22,368)

Issuance of restricted stock

—

—

(1)

—

—

(1)

—

(1)

Stock-based compensation expense

—

—

1,781

—

—

1,781

—

1,781

Net income

—

—

—

17,573

—

17,573

92

17,665

Non-controlling interest distributions

—

—

—

—

—

—

(92)

(92)

Balance—December 31, 2020

39,242

$
392

$
852,780

$
1,388,775

$
(1,474,545)

$
767,402

$
8,404

$
775,806

Common Stock cash distributions ($0.57 per share)

—

—

—

—

(22,405)

(22,405)

—

(22,405)

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

109

1

(1)

—

(764)

(764)

—

(764)

Stock-based compensation expense

—

—

1,852

—

—

1,852

—

1,852

Net income

—

—

—

13,762

—

13,762

88

13,850

Non-controlling interest distributions

—

—

—

—

—

—

(88)

(88)

Cash paid for taxes in lieu of common shares

(84)

—

(3,470)

—

—

(3,470)

—

(3,470)

Other

95

1

(11)

—

—

(10)

—

(10)

Balance—March 31, 2021

39,362

$
394

$
851,150

$
1,402,537

$
(1,497,714)

$
756,367

$
8,404

$
764,771


					Capital in		Cumulative				Total		Non-
	Common Stock				Excess of		Net		Cumulative		Stockholder's		Controlling		Total
	Shares		Amount		Par Value		Income		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
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,581)		(22,581)		—		(22,581)
Vesting of performance-based stock units	82		—		—		—		(586)		(586)		—		(586)
Issuance of restricted stock	76		1		(1)		—		—		—		—		—
Repurchase of common stock	(616)		(6)		(18,006)		—		—		(18,012)		—		(18,012)
Stock-based compensation expense	—		—		1,777		—		—		1,777		—		1,777
Net income	—		—		—		63,633		—		63,633		89		63,722
Non-controlling interest distributions	—		—		—		—		—		—		(146)		(146)
Other	(76)		(1)		(3,544)		—		—		(3,545)		—		(3,545)
Balance—March 31, 2020	39,218	$	392	$	847,572	$	1,357,115	$	(1,407,450)	$	797,629	$	8,426	$	806,055
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,359)		(22,359)		—		(22,359)
Issuance of restricted stock	25		—		(7)		—		—		(7)		—		(7)
Stock-based compensation expense	—		—		1,761		—		—		1,761		—		1,761
Net income	—		—		—		1,870		—		1,870		82		1,952
Non-controlling interest distributions	—		—		—		—		—		—		(97)		(97)
Balance—June 30, 2020	39,243	$	392	$	849,326	$	1,358,985	$	(1,429,809)	$	778,894	$	8,411	$	787,305
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,368)		(22,368)		—		(22,368)
Stock-based compensation expense	—		—		1,693		—		—		1,693		—		1,693
Net income	—		—		—		12,217		—		12,217		121		12,338
Non-controlling interest distributions	—		—		—		—		—		—		(128)		(128)
Other	(1)		—		(19)		—		—		(19)		—		(19)
Balance—September 30, 2020	39,242	$	392	$	851,000	$	1,371,202	$	(1,452,177)	$	770,417	$	8,404	$	778,821
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,368)		(22,368)		—		(22,368)
Issuance of restricted stock	—		—		(1)		—		—		(1)		—		(1)
Stock-based compensation expense	—		—		1,781		—		—		1,781		—		1,781
Net income	—		—		—		17,573		—		17,573		92		17,665
Non-controlling interest distributions	—		—		—		—		—		—		(92)		(92)
Balance—December 31, 2020	39,242	$	392	$	852,780	$	1,388,775	$	(1,474,545)	$	767,402	$	8,404	$	775,806
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,405)		(22,405)		—		(22,405)
Vesting of performance-based stock units, including the payment of distributions	109		1		(1)		—		(764)		(764)		—		(764)
Stock-based compensation expense	—		—		1,852		—		—		1,852		—		1,852
Net income	—		—		—		13,762		—		13,762		88		13,850
Non-controlling interest distributions	—		—		—		—		—		—		(88)		(88)
Cash paid for taxes in lieu of common shares	(84)		—		(3,470)		—		—		(3,470)		—		(3,470)
Other	95		1		(11)		—		—		(10)		—		(10)
Balance—March 31, 2021	39,362	$	394	$	851,150	$	1,402,537	$	(1,497,714)	$	756,367	$	8,404	$	764,771
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,439)		(22,439)		—		(22,439)
Vesting of performance-based stock units, including the payment of distributions							—				-		—		-
Stock-based compensation expense	—		—		1,958		—		—		1,958		—		1,958
Net income	—		—		—		18,239		—		18,239		91		18,330
Non-controlling interest distributions	—		—		—		—		—		—		(91)		(91)
Cash paid for taxes in lieu of common shares	(3)		—		(103)		—		—		(103)		—		(103)
Other	15		—		(46)		—		—		(46)		—		(46)
Balance—June 30, 2021	39,374	$	394	$	852,959	$	1,420,776	$	(1,520,153)	$	753,976	$	8,404	$	762,380
Common Stock cash distributions ($0.57 per share)	—		—		—		—		(22,443)		(22,443)		—		(22,443)
Stock-based compensation expense	—		—		1,975		—		—		1,975		—		1,975
Net income	—		—		—		11,022		—		11,022		92		11,114
Non-controlling interest distributions	—		—		—		—		—		—		(92)		(92)
Non-controlling interest contributions	—		—		—		—		—		—		9		9
Other	—		—		(13)		—		—		(13)		—		(13)
Balance—September 30, 2021	39,374	$	394	$	854,921	$	1,431,798	$	(1,542,596)	$	744,517	$	8,413	$	752,930

Table of Contents

LTC PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~Amounts~~amounts in thousands, unaudited)

Three Months Ended March 31,


2021

2020

OPERATING ACTIVITIES:





Net income

$
13,850

$
63,722

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

Depreciation and amortization

9,877

9,669

Stock-based compensation expense

1,852

1,777

Loss (gain) on sale of real estate, net

773

(43,854)

Income from unconsolidated joint ventures

(289)

(231)

Income distributions from unconsolidated joint ventures

164

231

Straight-line rental income

(682)

(839)

Adjustment for collectibility of rental income and lease incentives

758

—

Lease incentives funded

—

(13)

Amortization of lease incentives

112

101

(Recovery) provision for credit losses

(9)

1

Other non-cash items, net

260

256

Increase in interest receivable

(1,745)

(1,511)

Decrease in accrued interest payable

(869)

(1,480)

Net change in other assets and liabilities

(2,793)

(3,975)

Net cash provided by operating activities

21,259

23,854

INVESTING ACTIVITIES:

Investment in real estate properties

—

(13,581)

Investment in real estate developments

—

(4,854)

Investment in real estate capital improvements

(1,044)

(1,119)

Capitalized interest

—

(191)

Proceeds from sale of real estate, net

1,765

71,905

Investment in real estate mortgage loans receivable

(158)

(366)

Principal payments received on mortgage loans receivable

125

65

Investments in unconsolidated joint ventures

(5,676)

(58)

Advances and originations under notes receivable

(1,656)

(141)

Principal payments received on notes receivable

2,553

—

Net cash (used in) provided by investing activities

(4,091)

51,660

FINANCING ACTIVITIES:

Bank borrowings

17,000

24,000

Repayment of bank borrowings

—

(28,000)

Principal payments on senior unsecured notes

(7,000)

—

Stock repurchase plan

—

(18,012)

Distributions paid to stockholders

(23,169)

(23,167)

Distributions paid to non-controlling interests

(88)

(146)

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

(3,470)

(3,545)

Other

(12)

—

Net cash used in financing activities

(16,739)

(48,870)

Increase in cash, cash equivalents and restricted cash

429

26,644

Cash, cash equivalents and restricted cash, beginning of period

7,772

4,244

Cash, cash equivalents and restricted cash, end of period

$
8,201

$
30,888

Supplemental disclosure of cash flow information:

Interest paid

$
7,582

$
8,935

Non-cash investing and financing transactions:

Reclassification of notes receivable to lease incentives

$
—

$
300

Preferred return reserve related to investments in unconsolidated joint venture (See Note 3)

$
2,324

$
—


	Nine Months Ended September 30,
	2021		2020
OPERATING ACTIVITIES:
Net income	$	43,294	$	78,012
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,847		29,232
Stock-based compensation expense		5,785		5,231
Impairment charges		—		941
Gain on sale of real estate, net		(7,392)		(44,073)
Loss on unconsolidated joint ventures		—		620
Income from unconsolidated joint ventures		(1,041)		(287)
Income distributions from unconsolidated joint ventures		—		249
Straight-line rental income		(619)		(1,701)
Adjustment for collectibility of rental income and lease incentives		758		23,214
Lease incentives funded		(650)		(50)
Amortization of lease incentives		386		317
Provision (recovery) for credit losses		59		(1)
Other non-cash items, net		782		772
Increase in interest receivable		(4,730)		(4,662)
Decrease in accrued interest payable		(1,044)		(1,683)
Net change in other assets and liabilities		5,146		(502)
Net cash provided by operating activities		69,581		85,629
INVESTING ACTIVITIES:
Investment in real estate properties		—		(13,581)
Investment in real estate developments		—		(13,384)
Investment in real estate capital improvements		(4,839)		(3,955)
Capitalized interest		—		(354)
Proceeds from sale of real estate, net		43,628		72,141
Investment in real estate mortgage loans receivable		(2,081)		(4,176)
Principal payments received on mortgage loans receivable		625		565
Investments in unconsolidated joint ventures		(5,676)		(6,398)
Proceeds from liquidation of investments in unconsolidated joint ventures		—		17,758
Advances and originations under notes receivable		(6,453)		(1,366)
Principal payments received on notes receivable		2,553		4,732
Net cash provided by investing activities		27,757		51,982
FINANCING ACTIVITIES:
Bank borrowings		92,500		24,000
Repayment of bank borrowings		(48,000)		(28,000)
Principal payments on senior unsecured notes		(32,160)		(25,160)
Stock repurchase plan		—		(18,012)
Distributions paid to stockholders		(68,051)		(67,894)
Contribution from non-controlling interests		9		—
Distributions paid to non-controlling interests		(271)		(371)
Financing costs paid		(35)		(35)
Cash paid for taxes in lieu of shares upon vesting of restricted stock and performance-based stock units		(3,573)		(3,564)
Other		(70)		(8)
Net cash used in financing activities		(59,651)		(119,044)
Increase in cash, cash equivalents and restricted cash		37,687		18,567
Cash, cash equivalents and restricted cash, beginning of period		7,772		4,244
Cash, cash equivalents and restricted cash, end of period	$	45,459	$	22,811
Supplemental disclosure of cash flow information:
Interest paid	$	20,708	$	23,531
Non-cash investing and financing transactions:
Reclassification of notes receivable to lease incentives	$	—	$	300
Preferred return reserve related to investments in unconsolidated joint ventures (See Note 3)	$	2,324	$	—
Mortgage loan receivable reserve withheld at origination (See Note 2)	$	142	$	—
Notes receivable reserve withheld at origination (See Note 4)	$	353	$	—

See accompanying notes.

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	General

LTC Properties, Inc., 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 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 1 operating segment, rather than multiple operating segments, for internal reporting and internal decision-making purposes. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators. Our primary seniors housing and health care property classifications include skilled nursing centers (“SNF”), assisted living communities (“ALF”), independent living communities (“ILF”), memory care communities (“MC”) and combinations thereof. 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 have prepared consolidated financial statements included herein without audit and in the opinion of management have included all adjustments necessary for a fair presentation of the consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to rules and regulations governing the presentation of interim financial statements. The accompanying consolidated financial statements include the accounts of our company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 are not necessarily indicative of the results for a full year.

NaN provision has been made for federal or state income taxes. Our company qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. As such, we generally are not taxed on income that is distributed to our stockholders.

New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance which provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance is effective upon issuance and generally may be elected over time through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through ~~March 31,~~September 30, 2021 but will continue to evaluate the possible adoption (including potential impact) of any such expedients or exceptions during the effective period as circumstances evolve.

2.	Real Estate Investments

Assisted living communities, independent living communities, memory care communities and combinations thereof are included in the assisted living property classification (collectively “ALF”).

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

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

Owned Properties. Our ~~Owned~~owned properties are leased pursuant to non-cancelable operating leases generally with an initial term of 10 to 15 years. 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. Many of the leases contain renewal options. The leases provide for fixed minimum base rent during the initial and renewal periods. The majority of our leases contain provisions for specified annual increases over the rents of the prior year that are generally computed in one of 4 ways depending on specific provisions of each lease:

(i)a specified percentage increase over the prior year’s rent, generally between 2.0% and 2.5%;

(ii)a calculation based on the Consumer Price Index;

(iii)as a percentage of facility net patient revenues in excess of base amounts; or

(iv)specific dollar increases.

Our leases that contain fixed annual rental escalations and/or have annual rental escalations ~~that~~ are contingent upon changes in the Consumer Price ~~Index, are generally recognized on a straight-line basis over the minimum lease period.~~Index. 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.

The following table summarizes our investments in owned properties at ~~March 31,~~September 30, 2021 (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	Units	Bed/Unit		Investment		Investment		Properties ⁽¹⁾	Beds	Units	Bed/Unit
Assisted Living	$	877,233	60.5	%	106	—	6,103	$	143.74	$	843,015	59.9	%	102	—	5,798	$	145.40
Skilled Nursing		560,469	38.7	%	51	6,277	212	$	86.37		552,723	39.3	%	50	6,154	212	$	86.82
Other ⁽²⁾		11,360	0.8	%	1	118	—		—		11,360	0.8	%	1	118	—		—
Total	$	1,449,062	100.0	%	158	6,395	6,315			$	1,407,098	100.0	%	153	6,272	6,010

(1)	We own properties in 2726 states that are leased to 3031 different operators.

(2)	Includes 3 parcels of land held-for-use, and 1 behavioral health care hospital.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

between the Lessee and LTC. The settlement provides for, among other things, a one-time payment of $3,250,000 from LTC to the affiliates of the Lessee which we expensed as transaction costs during the three months ended September 30, 2021 and subsequently paid in October 2021.

Future minimum base rents receivable under the remaining non-cancelable terms of operating leases excluding the effects of straight-line rent receivable, amortization of lease incentives and renewal options are as follows (in thousands):


	Cash		Cash
	Rent ⁽¹⁾		Rent ⁽¹⁾
2021	$	104,798
4Q 2021			$	27,175
2022		144,536		119,023
2023		130,486		104,210
2024		131,146		105,332
2025		116,304		87,144
Thereafter		507,382		329,267

(1)	Represents contractual cash rent, except for certain master leases which are based on estimated cash ~~payments.~~payments and the Senior Care and Abri Health master lease. See Footnote 12 for further discussion about this lease.

We monitor the collectability of our receivable balances, including deferred rent receivable balances, on an ongoing basis. We write-off uncollectible operator receivable balances, including straight line rent receivable and lease incentives balances, as a reduction to rental income in the period such balances are no longer probable of being collected. Therefore, recognition of rental income is limited to the lesser of the amount of cash collected or rental income reflected on a “straight-line” basis for those customer receivable balances deemed uncollectible. As of ~~March 31,~~September 30, 2021, we have 1620 operators that are being accounted for on a “cash-basis”. representing approximately 51% of our rental income for the three months ended September 30, 2021. We wrote-off straight-line rent receivable and lease incentives balances of $758,000 and $0$23,214,000 for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

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 our uncollectible accounts and deferred rents receivable at ~~March 31,~~September 30, 2021. We are closely monitoring the collectability of such rents and will adjust future estimations as appropriate as further information becomes known.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

The following table summarizes components of our rental income for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
Rental Income		2021			2020			2021			2020			2021			2020
Base cash rental income	$	28,623	⁽¹⁾	$	33,015		$	25,934	⁽¹⁾	$	32,006		$	80,967	⁽¹⁾	$	98,357
Variable cash rental income		3,538	⁽²⁾		4,282	⁽²⁾		3,588	⁽²⁾		3,356	⁽²⁾		10,655	⁽²⁾		11,793	⁽²⁾
Straight-line rent		682	⁽³⁾		839			(44)	⁽³⁾		228			619	⁽³⁾		1,701
Adjustment for collectability of rental income and lease incentives		(758)	⁽⁴⁾		—			—			(5,472)	⁽⁴⁾		(758)	⁽⁴⁾		(23,214)	⁽⁴⁾
Amortization of lease incentives		(112)			(101)			(158)			(108)			(386)			(317)
Total	$	31,973		$	38,035		$	29,320		$	30,010		$	91,097		$	88,320

(1)

Decreased primarily due to ~~reduction~~non-payment of ~~rent~~lease obligations from Senior Lifestyle Corporation (“Senior Lifestyle”), unpaid lease obligations from Senior Care and Abri Health, abated and deferred rent and reduced rent from a property sale. This decrease was partially offset by increased rent from ~~acquisitions and~~re-leasing 18 properties previously leased to Senior Lifestyle, completion of development projects and contractual rent increases.

(2)

The variable rental income for the three and nine months ended ~~March 31,~~September 30, 2021, includes reimbursement of real estate taxes by our lessees of ~~$3,538.~~$3,588 and $10,655, respectively. The variable rental income for the three and nine months ended ~~March 31,~~September 30, 2020 includes contingent rental income of ~~$60~~$4 and ~~$4,222 related to~~$108, respectively and reimbursement of real estate taxes by our ~~lessees.~~lessees of $3,352 and $11,685, respectively.

(3)	Decreased due to more leases accounted for on a cash ~~basis and normal amortization partially offset by increases due to a 50% reduction in 2021 rent escalations for those leases accounted for on a straight-line~~ basis.

(4)	Represents a straight-line rent receivable ~~write-off.~~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~~amounts 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	$	35,366	2024-2029		ALF/MC	2	$	38,895	$	34,895	2024-2029
California	ALF	2		31,037		17,033	2021-TBD	⁽¹⁾	ALF	2		31,682		17,166	2021-TBD	⁽¹⁾
Colorado									ALF	1		6,764		5,378	2022-2026
Florida	MC	1		14,986		13,076	2028-2029		MC	1		15,201		13,069	2028-2029
Kentucky and Ohio	MC	2		30,342		27,116	2028-2029		MC	2		30,421		26,798	2028-2029
Nebraska									ALF	3		7,633		3,248	TBD	⁽²⁾
Texas	MC	2		25,265		23,560	2025-2027		MC	2		25,265		23,250	2021-2027
South Carolina	ALF/MC	1		11,680		10,067	2028-2029		ALF/MC	1		11,680		9,777	2028-2029
Total			$	152,205	$	126,218					$	167,541	$	133,581

(1)	The option window ending date will be either 24 months or 48 months after the option window commences, based on certain contingencies.

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

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, and on March 13, 2020, the United States declared a national emergency with regard to COVID-19. At ~~March 31,~~September 30, 2021, in conjunction with the continued levels of uncertainty related to the adverse effects of COVID-19, 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 collectibility of our lease payments. The extent to which COVID-19 could impact our operators and the collectibility 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 rent abatements totaling $600,000 and rent deferrals for certain operators totaling $1,144,000 during the first quarter of 2021. The $1,743,000 in rent abatements and deferrals during the three months ended March 31, 2021,

Table of Contents

LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

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 rent abatements totaling $2,639,000 and rent deferrals, net of repayments, for certain operators totaling $3,371,000 during the nine months ended September 30, 2021. The $6,010,000 in rent abatements and deferrals, net of repayments, during the nine months ended September 30, 2021, represented approximately 4%5.0% of our ~~first quarter of 2021~~ contractual ~~rent.~~rent for the nine months ended September 30, 2021. Additionally, we reduced 2021 rent and interest escalations by 50% to support eligible operators during the continuing COVID-19 crisis. The rent and interest escalation reductions were given in the form of a rent and interest credit in recognition of operators’ increased costs due to COVID-19. We have elected to recognize the rent credits given to the eligible operators where we accrue rent on a straight-line basis over the remaining life of those respective leases. During the ~~first quarter of~~nine months ended September 30, 2021, we recognized a decrease of ~~$292,000~~$496,000 of GAAP revenue and ~~$1,200,000 in funds available for distribution.~~$1,337,000 of cash revenue.

Acquisitions and Developments: The following table summarizes our acquisitions for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (dollar amounts in thousands):


						Total		Number	Number
		Purchase		Transaction		Acquisition		of	of
Year	Type of Property	Price		Costs		Costs		Properties	Beds/Units
2021	n/a	$	—	$	—	$	—	—	—

2020	Skilled Nursing ⁽¹⁾	$	13,500	$	81	$	13,581	1	140

(1)	We acquired a SNF located in Texas.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, we invested the following in development and improvement projects (in thousands):


	Three Months Ended March 31,								Nine Months Ended September 30,
	2021				2020				2021				2020
Type of Property	Developments		Improvements		Developments		Improvements		Developments		Improvements		Developments		Improvements
Assisted Living Communities	$	—	$	1,044	$	2,386	$	1,116	$	—	$	4,560	$	4,491	$	3,941
Skilled Nursing Centers		—		—		2,468		3		—		279		8,893		14
Total	$	—	$	1,044	$	4,854	$	1,119	$	—	$	4,839	$	13,384	$	3,955

Completed Developments. We had no completed developments during the nine months ended September 30, 2021. The following table summarized our completed developments during the nine months ended September 30, 2020 (dollar amounts in thousands):

Number

Type

Number

Total

Year

Type of Project

Properties

Property

Beds/Units

State

Investment

2020

Development

ALF/MC

Oregon

18,447

Development

SNF

Missouri

13,272

Total

168

31,719

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

~~Completed Developments.~~ ~~We had no completed developments during the three months ended March 31, 2021. The following table summarized our completed developments during the three months ended March 31, 2020~~ ~~(dollar amounts in thousands):~~

Number

Type

Number

of

of

of

Total
Year

Type of Project

Properties

Property

Beds/Units

State

Investment
2020

Development

1

ALF/MC

78

Oregon

$
18,447

Properties Sold. The following table summarizes property sales during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (dollar amounts in thousands):


		Type		Number	Number									Type	Number	Number
		of		of	of		Sales		Carrying		Net			of	of	of		Sales		Carrying		Net
Year	State	Properties		Properties	Beds/Units		Price		Value		(Loss) gain	⁽¹⁾	State	Properties	Properties	Beds/Units		Price		Value		Gain (loss) ⁽¹⁾
2021	Florida	ALF		1	—	$	2,000	$	2,625	$	(861)		n/a	n/a	—	—	$	—	$	—	$	292	^{(2) (3)}
													Florida	ALF	1	—		2,000		2,626		(858)
													Nebraska	ALF	1	40		900		1,079		(198)
													Washington	SNF	1	123		7,700		4,528		2,562
	n/a	n/a		—	—		—		—		88	^{(2) (3)}	Wisconsin	ALF	3	263		35,000		28,295		5,594
Total 2021				1	—	$	2,000	$	2,625	$	(773)				6	426	$	45,600	$	36,528	$	7,392

2020	Arizona	SNF		1	194	$	12,550	$	2,229	$	10,293		n/a	n/a	—	—	$	—	$	—	$	108	^{(2) (3)}
	Colorado	SNF		3	275		15,000		4,271		10,365		Arizona	SNF	1	194		12,550		2,229		10,292
	Iowa	SNF	⁽³⁾	7	544		14,500		4,886		8,914		Colorado	SNF	3	275		15,000		4,271		10,364
	Kansas	SNF		3	250		9,750		7,438		1,994		Iowa	SNF	7	544		14,500		4,886		9,029	⁽³⁾
	Texas	SNF		7	1,148		23,000		10,260		12,288		Kansas	SNF	3	250		9,750		7,438		1,993
													Texas	SNF	7	1,148		23,000		10,260		12,287
Total 2020				21	2,411	$	74,800	$	29,084	$	43,854				21	2,411	$	74,800	$	29,084	$	44,073

(

(1)	Calculation of net gain (loss) ~~gain~~ includes cost of sales.

(2)	We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold during 2019 and 2020, under the expected value model per ASC Topic 606, Contracts with Customers (“ASC 606”).

(3)

One of the transactions includes a holdback of $838 which is held in an interest-bearing account with an escrow holder on behalf of the buyer for potential specific losses. During 2020, we received $150 of the holdback. The remaining holdback expires in March 2022. Using the expected value model per ASC 606, we estimated and recorded the holdback value of $471 at closing.

~~Properties held-for-sale.~~ ~~The following table summarizes our properties held-for-sale at March 31, 2021 and December 31, 2020~~ ~~(dollar amounts in thousands):~~

Type

Number

Number

of

of

of

Gross

Accumulated

State

Property

Properties

Beds/units

Investment

Depreciation

2021

WA

SNF

1

123

$
8,024

$
3,512

2020

n/a

n/a

—

—

$
—

$
—

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

Mortgage Loans. The following table summarizes our investments in mortgage loans secured by first mortgages at ~~March 31,~~September 30, 2021 (dollar amounts in thousands):


				Type	Percentage		Number of			Investment						Type		Percentage		Number of					Investment
		Gross		of	of				SNF	per				Gross		of		of						SNF	per
Interest Rate ⁽¹⁾	Maturity	Investment		Property	Investment		Loans ⁽²⁾	Properties ⁽³⁾	Beds	Bed/Unit		Maturity	State	Investment		Property		Investment		Loans ⁽²⁾		Properties ⁽³⁾		Beds	Bed/Unit
7.5%												2022	MO	$	1,780	OTH	⁽⁴⁾	0.7	%	1		—	⁽⁴⁾	—	$	n/a
10.1%	2043	$	186,362	SNF	71.7	%	1	15	1,941	$	96.01	2043	MI		185,859	SNF		71.1	%	1		15		1,875	$	99.12
9.3%	2045		38,862	SNF	15.0	%	1	4	501	$	77.57	2045	MI		39,148	SNF		15.0	%	1		4		501	$	78.14
9.4%	2045		19,750	SNF	7.6	%	1	2	205	$	96.34
9.6%												2045	MI		19,750	SNF		7.5	%	1		2		205	$	96.34
9.6%	2045		14,900	SNF	5.7	%	1	1	157	$	94.90	2045	MI		14,900	SNF		5.7	%	1		1		146	$	102.05
Total		$	259,874		100.0	%	4	22	2,804	$	92.68			$	261,437			100.0	%	5	⁽⁵⁾	22	⁽⁵⁾	2,727	$	95.87

(1)	The majority of the mortgage loans provide for 2.25% annual increases in the interest rate after a certain time ~~period increasing by 2.25%.~~period.

(2)	Some loans contain certain guarantees, provide for certain facility fees and the majority of the mortgage loans have a 30-year term.

(3)	The properties securing these mortgage loans are ~~located in 1 state and are~~ operated by ~~1 operator.~~the same operator except for (4) below.

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

(5)

Subsequent to September 30, 2021, we funded a $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 1 12-month extension option and a yield of 7.5%. Additionally, we funded a $12,530 mortgage loan secured by a 68-unit ALF and MC community in Florida operated by a regional operator new to us. 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.

The following table summarizes our mortgage loan activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


	Three Months Ended March 31,				Nine Months Ended September 30,
	2021		2020		2021			2020
Originations and funding under mortgage loans receivable	$	158	$	366	$	2,223	⁽¹⁾	$	4,176
Scheduled principal payments received		(125)		(65)		(625)			(565)
Mortgage loan premium amortization		(2)		(1)		(4)			(3)
Provision for loan loss reserve		—		(3)		(16)			(36)
Net increase in mortgage loans receivable	$	31	$	297	$	1,578		$	3,572

(1)	We originated a $1,780 mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF in Missouri and withheld a reserve of $142. The mortgage loan term is one year at a yield of 7.5%.

We apply ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and the “expected loss” model to estimate our loan losses on our mortgage loans and notes receivable. In determining the expected losses on these receivables, we utilize the probability of default and discounted cash flow methods. Further, we stress-test the results to reflect the impact of unknown adverse future events including recessions.

As of ~~March 31,~~September 30, 2021, the accrued interest receivable of ~~$34,491,000~~$37,476,000 was not included in the measurement of expected credit losses on the mortgage loan receivable and notes receivable (see Note 4). We elected not to measure an allowance for expected credit losses on the related accrued interest receivable using the expected credit loss standard. Rather, we have elected to write-off accrued interest receivable by reversing interest income and/or recognizing credit loss expense as incurred. We review the collectability of the accrued interest receivable quarterly as part of our review of the mortgage loan or

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

notes receivables including the performance of the underlying collateral. For the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, the Company did 0t write-off any accrued interest receivable.

3.	Investment in Unconsolidated Joint Ventures

We had a preferred equity investment in an unconsolidated joint venture (“JV”) that owned 4 communities located in Arizona, providing independent living, assisted living and memory care services. During 2020, the JV sold the 4 properties comprising the JV ~~(“Properties”)~~ and received liquidation proceeds totaling ~~$17,848,000~~$17,848,000. As a result of this transaction, we incurred $620,000 of losses during the nine months ended September 30, 2020 and ~~incurred $758,000~~an additional $138,000 during the fourth quarter of ~~losses.~~2020.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~CONTINUED~~

~~(Unaudited)~~

During 2020, we provided preferred capital contribution commitments to two joint ventures (“JVs”). We determined that each of these JVs meets the accounting criteria to be considered a variable interest entity (“VIE”). We are not the primary beneficiary of the JVs as we do not have the power to direct the activities that most significantly affect the JVs’ economic performance. However, we do have significant influence over the JVs. Therefore, we have accounted for the JVs using the equity method of accounting. The following table provides information regarding these preferred equity investments (dollar amounts in thousands):

Type

Total

Contractual

Number

Type

Total

Contractual

Number

Preferred

Cash

Investment

Carrying

Preferred

Cash

Carrying

State

Properties

Investment

Return

Portion

Beds/ Units

Commitment

Value

Properties

Investment

Return

Portion

Beds/ Units

Value

Washington

UDP

Preferred Equity

⁽¹⁾

—

⁽¹⁾

6,340

⁽¹⁾

UDP

Preferred Equity

⁽¹⁾

—

6,340

⁽¹⁾

Washington

UDP

Preferred Equity

⁽²⁾

—

⁽²⁾

13,000

⁽²⁾

UDP

Preferred Equity

⁽²⁾

—

13,000

⁽²⁾

Total

—

19,340

—

19,340

(1)

Invested $6,340 of preferred equity in an entity that will develop and own a 95-unit ALF and MC in Washington and withheld $1,425 as a reserve. Our investment represents 15.5% of the estimated 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%.

(2)

Invested $13,000 of preferred equity in an entity that will develop and own a 267-unit ILF and ALF in Washington and withheld $3,777 as a reserve. Our investment represents 11.6% of the estimated total investment. The preferred equity investment earns an initial cash rate of 8% until achieving an IRR ranging between 12% and 14%.

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(Unaudited)

The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


	Type											Type
	of			Capital			Income			Cash Interest		of			Capital			Income		Cash Interest
Year	Properties			Contribution			Recognized			Earned		Properties			Contribution			Recognized		Earned
2021	UDP	⁽¹⁾	$	—	⁽¹⁾	$	112	⁽¹⁾	$	75	⁽¹⁾	UDP	⁽¹⁾	$	—		$	337	$	300
	UDP	⁽²⁾		8,000	⁽²⁾		177	⁽²⁾		89	⁽²⁾	UDP	⁽²⁾		8,000	⁽²⁾		704		616
Total			$	8,000		$	289		$	164				$	8,000		$	1,041	$	916

2020	ALF/MC/ILF	⁽³⁾	$	58	⁽³⁾	$	231	⁽³⁾	$	231	⁽³⁾	ALF/MC/ILF	⁽³⁾	$	58	⁽³⁾	$	231	$	231
												UDP	⁽¹⁾		6,340	⁽¹⁾		56		18
Total			$	58		$	231		$	231				$	6,398		$	287	$	249

(1)	During 2020, we provided a total preferred equity investment of $6,340 to a JV for the development of a 95-unit ALF and MC.

(2)

During ~~the first quarter of~~ 2021, we funded the remaining $8,000 related to a $13,000 preferred equity investment commitment in an entity that will develop and own a 267-unit ILF and ALF in Washington. Additionally, we withheld $2,324 from the $8,000 funding for a total reserve of $3,777 related to this preferred equity investment.

(3)	Relates to our preferred equity investment in Arizona discussed above. During 2020, the properties comprising the JV were sold.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~CONTINUED~~

~~(Unaudited)~~

4.	Notes Receivable

Notes receivable consists of mezzanine loans and other loan arrangements. The following table is a summary of our notes receivable components as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


	March 31, 2021		December 31, 2020		September 30, 2021			December 31, 2020
Mezzanine loans	$	7,461	$	8,445	$	11,816	⁽¹⁾	$	8,445
Other loans		6,253		6,166		7,048	⁽²⁾		6,166
Notes receivable loan loss reserve		(137)		(146)		(189)			(146)
Total	$	13,577	$	14,465	$	18,675		$	14,465

(1)

During the three months ended September 30, 2021, we originated a $4,355 mezzanine loan and held back a $353 interest reserve. The mezzanine loan has a three-year term with 2 12-month extensions. The initial rate is 8.0% for the first 18 months increasing to 10.5% thereafter with an internal rate of return (“IRR”) of 10.5%.

(2)	Subsequent to September 30, 2021, we provided HMG Healthcare, LLC (“HMG”)a $25,000 secured working capital loan maturing in September 2022 to facilitate the transition of the 11 properties from Senior Care and Abri Health.

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(Unaudited)

The following table summarizes our notes receivable activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


	Three Months Ended March 31,						Nine Months Ended September 30,
		2021			2020			2021			2020
Advances under notes receivable	$	1,656	⁽¹⁾	$	141		$	6,453	⁽¹⁾	$	1,366
Interest reserve withheld								353			—
Principal payments received under notes receivable		(2,553)			—			(2,553)			(4,732)
Reclassified to lease incentives		—			(300)	⁽²⁾		—			(300)	⁽²⁾
Notes receivable loan loss reserve		9			1
Net decrease	$	(888)		$	(158)
Notes receivable reserve								43			36
Net increase (decrease) in notes receivable							$	4,296		$	(3,630)

(1)	Funding under working capital notes and mezzanine loans with interest ranging between 5% and 8% and maturities between 2022 and ~~2027.~~2030.

(2)	Represents interim working capital loans related to development projects which matured upon completion of the development projects and commencement of the master leases.

5.	Lease Incentives

Our lease incentive balances at ~~March 31,~~September 30, 2021 ~~and December 31, 2020 are as follows~~ (in thousands):


		March 31, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Non-contingent lease incentives	$	2,349	$	2,462	$	2,726	$	2,462

The following table summarizes our lease incentives activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):

2021

2020

Funding

Amortization

Funding

Amortization

Reclassification

Non-contingent lease incentives

$
—

$
(112)

$
13

$
(101)

$
300
⁽¹⁾


	Nine Months Ended September 30,
	2021				2020
		Funding		Amortization		Funding		Amortization		Reclassification
Non-contingent lease incentives	$	650	$	(386)	$	50	$	(317)	$	115	⁽¹⁾

(1)

We reclassified a $300 interim working capital loan as lease incentive. See Note 4. Notes Receivable for further discussion. Additionally, we wrote-off $185 of lease incentive related to a master lease for which we determined it was not probable we will collect substantially all of the contractual lease obligations through maturity. See Note 2. 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 payments that may be made to our lessees in the future, as part of our lease agreements. From time to time, we may commit to provide contingent payments to our lessees, upon our properties achieving certain rent coverage ratios. Once the contingent payment becomes probable and estimable, the contingent payment is recorded as a lease incentive. Lease incentives are amortized as a yield adjustment to rental income over the remaining life of the lease.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~CONTINUED~~

~~(Unaudited)~~

6.	Debt Obligations

Bank Borrowings. We have an unsecured credit agreement that provides for a revolving aggregate commitment of the lenders of up to $600,000,000 with the opportunity to increase the commitment size of the credit agreement up to a total of $1,000,000,000. The unsecured credit agreement matures on June 27, 2022 and provides for a one-year extension option at our discretion, subject to customary conditions. Based on our leverage at ~~March 31,~~September 30, 2021, the facility provides for interest annually at LIBOR plus ~~115 basis points and a facility fee of 20 basis points. At March 31, 2021, we were in compliance with all covenants.~~

~~Senior Unsecured Notes.~~ ~~We have senior unsecured notes held by institutional investors with interest rates ranging from 3.85% to 5.03%. The senior unsecured notes mature between 2021 and 2032.~~

~~The debt obligations by component as of March 31, 2021 and December 31, 2020 are as follows (~~~~dollar amounts in thousands):~~

At March 31, 2021

At December 31, 2020

Applicable

Available

Available

Interest

Outstanding

for

Outstanding

for

Debt Obligations

Rate ⁽¹⁾

Balance

Borrowing

Balance

Borrowing

Bank borrowings ⁽²⁾

1.30%

$
106,900

$
493,100

$
89,900

$
510,100

Senior unsecured notes, net of debt issue costs

4.37%

552,521

—

559,482

—

Total

3.87%

$
659,421

$
493,100

$
649,382

$
510,100

~~(1)~~

~~Represents weighted average of interest rate as of March 31, 2021.~~

~~(2)~~

Subsequent to March 31, 2021, we paid down $5,000 under our unsecured revolving line of credit. Accordingly, we have $101,900 outstanding and $498,100 available for borrowing under our unsecured revolving line of credit at April 29, 2021.

~~Our borrowings and repayments are as follows~~ ~~(in thousands):~~

Three Months Ended March 31,

2021

2020

Debt Obligations

Borrowings

Repayments

Borrowings

Repayments

Bank borrowings

$
17,000

$
—
⁽¹⁾
$
24,000

$
(28,000)

Senior unsecured notes

—

(7,000)

—

—

Total

$
17,000

$
(7,000)

$
24,000

$
(28,000)

~~(1)~~

~~Subsequent to March 31,2021, we paid down $5,000 under our unsecured revolving line of credit. Accordingly, we have $101,900outstanding and $498,100 available for borrowing under our unsecured revolving line of credit at April 29, 2021.~~

7.	~~Equity~~

~~Non-controlling Interests.~~ We 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. As 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 on the consolidated financial statements.

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(Unaudited)

115 basis points and a facility fee of 20 basis points. At September 30, 2021, we were in compliance with all covenants.

Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates ranging from 3.85% to 5.03%. The senior unsecured notes mature between 2021 and 2032.

The debt obligations by component as of September 30, 2021 and December 31, 2020 are as follows (dollar amounts in thousands):


		At September 30, 2021				At December 31, 2020
	Applicable			Available				Available
	Interest	Outstanding		for		Outstanding		for
Debt Obligations	Rate ⁽¹⁾	Balance		Borrowing		Balance		Borrowing
Bank borrowings	1.23%	$	134,400	$	465,600	$	89,900	$	510,100
Senior unsecured notes, net of debt issue costs	4.34%		527,429		—		559,482		—
Total	3.71%	$	661,829	$	465,600	$	649,382	$	510,100

(1)	Represents weighted average of interest rate as of September 30, 2021.

Our borrowings and repayments are as follows (in thousands):


	Nine Months Ended September 30,
	2021				2020
Debt Obligations		Borrowings		Repayments	Borrowings		Repayments
Bank borrowings	$	92,500	$	(48,000)	$	24,000	$	(28,000)
Senior unsecured notes		—		(32,160)		—		(25,160)
Total	$	92,500	$	(80,160)	$	24,000	$	(53,160)

7.	Equity

Non-controlling Interests. We 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. As 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 on the consolidated financial statements.

As of ~~March 31,~~September 30, 2021, 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

2,858

2018

Owned real estate and development

ALF/MC

OR

18,447

1,081

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

$
83,429

$
8,404


					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		2,857
2018	Owned real estate and development	ALF/MC	OR		18,447		1,091
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				$	83,429	$	8,413

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 stock. As of ~~March 31,~~September 30, 2021, 0 shares had been issued under the

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(Unaudited)

Equity Distribution Agreements. Accordingly, at ~~March 31,~~September 30, 2021, we had $200,000,000 available under the Equity Distribution Agreements.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, we acquired ~~84,616~~87,249 shares and ~~76,067~~76,574 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Stock Repurchase Plan. On March 12, 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 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.

Available Shelf Registration. 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 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. Our shelf registration statement expires on February 28, 2022.

Distributions. We declared and paid the following cash dividends (in thousands):


	Three Months Ended March 31,												Nine Months Ended September 30,
	2021						2020						2021						2020
	Declared			Paid			Declared			Paid			Declared			Paid			Declared			Paid
Common Stock ⁽¹⁾	$	23,169	⁽²⁾	$	23,169	⁽²⁾	$	23,167	⁽³⁾	$	23,167	⁽³⁾	$	68,051	⁽²⁾	$	68,051	⁽²⁾	$	67,894	⁽³⁾	$	67,894	⁽³⁾

(1)	Represents $0.19 per share per month for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020.

(2)	Includes $764 of distributions that were paid as a result of the vesting of performance-based stock units.

(3)	Includes $586 of distributions that were paid as a result of the vesting of performance-based stock units.

In ~~April~~October 2021, we declared a monthly cashdividend of $0.19 per share on our common stock for

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~~(Unaudited)~~

the months of ~~April~~October, ~~May~~November and ~~June~~December 2021, payable on ~~April~~October 29, November 30, ~~May 28,~~ and ~~June 30,~~December 31, 2021, respectively, to stockholders of record on ~~April 22, May 20,~~October 21, November 19, and ~~June 22,~~December 23, 2021, respectively.

Stock-Based Compensation. ~~Under~~During the second quarter of 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”)~~, 1,400,000~~. Under the 2021 Plan, 1,900,000 shares of common stock have been authorized and reserved for awards, ~~including nonqualified stock option grants~~less 1 share for every 1 share that was subject to an award granted under the 2015 Plan after December 31, 2020 and ~~restricted stock grants~~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 ~~2015~~2021 Plan ~~are set by our compensation committee at its discretion.~~

~~At March 31, 2021, we had 15,000 stock options~~ ~~outstanding~~and ~~exercisable.~~ ~~During~~ the ~~three months ended March 31, 2021 and 2020, 0 stock options were granted or exercised.~~

~~The following table summarizes our restricted stock activity for the three months ended March 31, 2021 and 2020:~~

Three Months Ended March 31,

2021

2020

Outstanding, January 1

180,440

163,569

Granted

95,293

76,464

Vested

(78,482)

(74,981)

Outstanding, March 31

197,251

165,052

During the three months ended March 31, 2021 and 2020, we granted 71,892 and 66,027, respectively, of performance-based stock units. Additionally, during the three months ended March 31, 2021 and 2020, the number of vested performance-based stock units were 108,720 and 81,574, respectively.

~~During the three months ended March 31, 2021 and 2020, we granted restricted stock and performance-based stock units under the 2015 Plan as follows:~~

No. of

Price per

Year

Shares/Units ⁽¹⁾

Share

Vesting Period

2021

95,293

$
42.27

ratably over 3 years

71,892

$
42.27

TSR targets ⁽²⁾

167,185

2020

76,464

$
48.95

ratably over 3 years

66,027

$
49.98

TSR targets ⁽²⁾

142,491

~~(1)~~

~~Subsequent to March 31, 2021, we granted 3,000 shares of restricted stock at $43.14 per share vesting over one year.~~

~~(2)~~

~~Vesting is based on achieving certain total shareholder return (“TSR”) targets in~~ 4~~years~~ ~~with acceleration opportunity in~~ 3~~years~~.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

2015 Plan are set by our compensation committee at its discretion.

At September 30, 2021, we had 15,000 stock options outstanding and exercisable. During the nine months ended September 30, 2021 and 2020, 0 stock options were granted or exercised.

The following table summarizes our restricted stock activity for the nine months ended September 30, 2021 and 2020:


	Nine Months Ended September 30,
	2021		2020
Outstanding, January 1		180,440		163,569
Granted		110,348		101,348
Vested		(93,366)		(84,477)
Outstanding, September 30		197,422		180,440

During the nine months ended September 30, 2021 and 2020, we granted 71,892 and 66,027, respectively, of performance-based stock units. Additionally, during the nine months ended September 30, 2021 and 2020, the number of performance-based stock units that vested were 108,720 and 81,574, respectively.

During the nine months ended September 30, 2021 and 2020, we granted restricted stock and performance-based stock units as follows:


	No. of	Price per
Year	Shares/Units	Share		Vesting Period
2021	95,293	$	42.27	ratably over 3 years
	71,892	$	42.27	TSR targets ⁽¹⁾
	12,055	$	39.40	May 26, 2022
	3,000	$	43.14	April 1, 2022
	182,240

2020	76,464	$	48.95	ratably over 3 years
	66,027	$	49.98	TSR targets ⁽¹⁾
	9,884	$	38.45	May 27, 2021
	15,000	$	38.45	ratably over 3 years
	167,375

(1)	Vesting is based on achieving certain total shareholder return (“TSR”) targets in 4years with acceleration opportunity in 3years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

Compensation expense recognized related to the vesting of restricted common stock and performance-based stock units for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 were ~~$1,852,000~~$5,785,000 and ~~$1,777,000,~~$5,231,000, respectively. At ~~March 31,~~September 30, 2021, the 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 (in thousands):


	Remaining		Remaining
	Compensation		Compensation
Vesting Date	Expense		Expense
2021	$	5,534	$	1,974
2022		5,216		5,447
2023		2,855		2,855
2023		303
2024				303
Total	$	13,908	$	10,579

8.	Commitments and Contingencies

At ~~March 31,~~September 30, 2021, we had commitments as follows (in thousands):


						Total									Total
	Investment			2021		Commitment		Remaining		Investment			2021		Commitment		Remaining
	Commitment			Funding		Funded		Commitment		Commitment			Funding		Funded		Commitment
Real estate properties(Note 2. Real Estate Investments)	$	16,085	⁽¹⁾	$	829	$	8,176	$	7,909	$	19,670	⁽¹⁾	$	3,770	$	10,228	$	9,442
Accrued incentives and earn-out liabilities (Note 5. Lease Incentives)		9,000			—		—		9,000		9,130			50		50		9,080
Mortgage loans (Note 2. Real Estate Investments)		21,000	⁽²⁾		32		3,413		17,587		21,000	⁽²⁾		318		3,699		17,301
Notes receivable (Note 4. Notes Receivable)		1,845			353		1,090		755		1,925			643		1,247		678
Total	$	47,930		$	1,214	$	12,679	$	35,251	$	51,725		$	4,781	$	15,224	$	36,501

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

Also, some of our lease agreements provide purchase options allowing the lessee to purchase the properties they currently lease from us. See Note 2. 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.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

9.	Major Operators

We have 1 operator that derives 10% or more of our combined rental revenue and interest income from mortgage loans. The following table sets forth information regarding our major operator as of ~~March 31,~~September 30, 2021:

Number of

Percentage of

Number of

Percentage of

SNF

ALF

Total

SNF

ALF

Total

Operator

SNF

ALF

Beds

Units

Revenue⁽¹⁾

Assets ⁽²⁾

SNF

ALF

Beds

Units

Revenue⁽¹⁾

Assets ⁽²⁾

Prestige Healthcare ⁽³⁾

—

2,922

20.6

18.3

—

2,845

21.4

18.3

(1)	Includes rental income from owned properties and interest income from mortgage loans as of ~~March 31, 2021 and excludes variable rental income from lessee reimbursement and sold properties.~~September 30, 2021.

(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 this operator relates to interest income from mortgage loans.

Our financial position and ability to make distributions may be adversely affected if Prestige Healthcare 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 COVID-19, or in the event any such operator does not renew and/or extend its relationship with us.

~~Table of Contents~~

~~LTC PROPERTIES, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~CONTINUED~~

~~(Unaudited)~~

~~10.~~

~~Earnings per Share~~

~~The following table sets forth the computation of basic and diluted net income per share (~~~~in thousands, except per share amounts~~):

For the three months ended March 31,

2021

2020

Net income

$
13,850

$
63,722

Less income allocated to non-controlling interests

(88)

(89)

Less income allocated to participating securities:

Non-forfeitable dividends on participating securities

(120)

(94)

Income allocated to participating securities

—

(169)

Total net income allocated to participating securities

(120)

(263)

Net income available to common stockholders

13,642

63,370

Effect of dilutive securities:

Participating securities ⁽¹⁾

—

—

Net income for diluted net income per share

$
13,642

$
63,370

Shares for basic net income per share

39,100

39,539

Effect of dilutive securities:

Stock options

1

2

Performance-based stock units

78

—
⁽²⁾

Participating securities ⁽¹⁾

—

—

Total effect of dilutive securities

79

2

Shares for diluted net income per share

39,179

39,541

Basic net income per share

$
0.35

$
1.60

Diluted net income per share

$
0.35

$
1.60

~~(1)~~

~~For the three months ended March 31, 2021, and 2020, the participating securities have been excluded from the computation of diluted net income per share as such inclusion would be anti-dilutive.~~

~~(2)~~

~~At March 31, 2020, 0 performance-based stock units would be earned based on TSR targets.~~

~~11.~~

~~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 elect the fair value option for any of our financial assets and financial liabilities.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

10.

Earnings per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021			2020		2021			2020
Net income	$	11,114		$	12,338	$	43,294		$	78,012
Less income allocated to non-controlling interests		(92)			(121)		(271)			(292)
Less income allocated to participating securities:
Non-forfeitable dividends on participating securities		(113)			(103)		(346)			(294)
Income allocated to participating securities		—			—		—			(45)
Total net income allocated to participating securities		(113)			(103)		(346)			(339)
Net income available to common stockholders		10,909			12,114		42,677			77,381
Effect of dilutive securities:
Participating securities ⁽¹⁾		—			—		—			—
Net income for diluted net income per share	$	10,909		$	12,114	$	42,677		$	77,381

Shares for basic net income per share		39,177			39,061		39,149			39,218
Effect of dilutive securities:
Stock options ⁽¹⁾		—			—		—			—
Performance-based stock units		—	⁽²⁾		51		—	⁽²⁾		51
Participating securities ⁽¹⁾		—			—		—			—
Total effect of dilutive securities		—			51		—			51
Shares for diluted net income per share		39,177			39,112		39,149			39,269

Basic net income per share	$	0.28		$	0.31	$	1.09		$	1.97
Diluted net income per share	$	0.28		$	0.31	$	1.09		$	1.97

(1)	For the three and nine months ended September 30, 2021, and 2020, the stock options and participating securities have been excluded from the computation of diluted net income per share as such inclusion would be anti-dilutive.

(2)	For the three and nine months ended September 30, 2021, 0 performance-based stock units would be earned based on TSR targets.

11.

Fair Value Measurements

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

The carrying amount of cash and cash equivalents, prepaid expenses and other assets, accrued interest, accrued expenses and other liabilities 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 ~~March 31,~~September 30, 2021 and December 31, 2020 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):


	At March 31, 2021					At December 31, 2020					At September 30, 2021					At December 31, 2020
	Carrying		Fair			Carrying		Fair			Carrying		Fair			Carrying		Fair
	Value		Value			Value		Value			Value		Value			Value		Value
Mortgage loans receivable	$	257,282	$	301,097	⁽¹⁾	$	257,251	$	299,751	⁽¹⁾
Notes receivable		13,577		13,410	⁽²⁾		14,465		13,893	⁽²⁾
Mortgage loans receivable, net of loan loss reserve											$	258,829	$	298,677	⁽¹⁾	$	257,251	$	299,751	⁽¹⁾
Notes receivable, net of loan loss reserve												18,675		18,552	⁽²⁾		14,465		13,893	⁽²⁾
Bank borrowings		106,900		106,900	⁽³⁾		89,900		89,900	⁽³⁾		134,400		134,400	⁽³⁾		89,900		89,900	⁽³⁾
Senior unsecured notes, net of debt issue costs		552,521		573,095	⁽⁴⁾		559,482		560,140	⁽⁴⁾		527,429		556,841	⁽⁴⁾		559,482		560,140	⁽⁴⁾

(1)

Our investment in mortgage loans receivable is classified as Level 3. The fair value is determined using a widely accepted valuation technique, discounted cash flow analysis on the expected cash flows. The discount rate is determined using our assumption on market conditions adjusted for market and credit risk and current returns on our investments. The discount rate used to value our future cash inflows of the mortgage loans receivable at ~~March 31,~~September 30, 2021 and December 31, 2020 was 10.1% and 10.0%., respectively.

(2)

Our investments 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 ~~March 31,~~September 30, 2021 and December 31, 2020, were ~~6.0%~~6.5% and 6.6%, respectively.

(3)	Our bank borrowings bear interest at a variable interest rate. The estimated fair value of our bank borrowings approximated their carrying values at ~~March 31,~~September 30, 2021 and December 31, 2020 based upon prevailing market interest rates for similar debt arrangements.

(4)

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 ~~March 31,~~September 30, 2021, the discount rate used to value our future cash outflow of our senior unsecured notes was ~~3.25%~~3.00% for those maturing before year ~~2026~~2030 and ~~3.50%~~3.25% for those maturing at or beyond year ~~2026.~~2030. At December 31, 2020, the discount rate used to value our future cash outflow of our senior unsecured notes was 3.25% for those maturing before year 2026 and 3.50% for those maturing at or beyond year 2026.

12.

Subsequent Events

Subsequent to ~~March 31,~~September 30, 2021 the following events occurred:

~~Debt:~~Real Estate Investments: We ~~paid down $5,000,000~~transitioned 11 properties previously leased to Senior Care and Abri Health to HMG under ~~our unsecured revolving line~~a one-year master lease with rent based on cash flows, and payment subject to a deferral of ~~credit. Accordingly, we have $101,900,000 outstanding~~up to six months. We intend to add these 11 properties to their current master lease after establishing a stabilized rent during the first lease year. We also funded the following mortgage loans:

●

A $27,047,000 mortgage loan secured by a 189-bed skilled nursing center 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%; and

●

A $12,530,000 mortgage loan secured by a 68-unit assisted living and memory care community in Florida operated by a regional operator new to us. The mortgage loan term is approximately 4 years at a 7.75% yield and includes an additional $4,177,000 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.

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LTC PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(Unaudited)

Notes Receivable:We provided HMG a $25,000,000 secured working capital loan maturing in September 2022 to facilitate the transition of the 11 properties from Senior Care and ~~$498,100,000 available for borrowing under our unsecured revolving line of credit at April 29, 2021.~~Abri Health.

Equity: We declared a monthly cash dividend of $0.19 per share on our common stock for the months of ~~April~~October, ~~May~~November and ~~June~~December 2021, payable on ~~April~~October 29, November 30, ~~May 28,~~ and ~~June 30,~~December 31, 2021, respectively to stockholders of record on ~~April 22, May 20,~~October 21, November 19, and ~~June 22,~~December 23, 2021, respectively.

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report 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, our dependence on our operators for revenue and cash flow; the duration and extent of the effects of the COVID-19 pandemic; government regulation of the health care industry; federal and state health care cost containment measures including reductions in reimbursement from third-party payors such as Medicare and 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 renew leases or enter into favorable terms of renewals or new leases; operator financial or legal difficulties; the sufficiency of collateral securing mortgage loans; an impairment of our real estate investments; the relative illiquidity of our real estate investments; our ability to develop and complete 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 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in 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.

Executive Overview

Business and Investment Strategy

We are a real estate investment trust (“REIT”) that invests in seniors housing and health care properties through sale-leaseback transactions, mortgage financing, joint ventures, construction financing and structured finance solutions including mezzanine lending. 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.

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The following graph summarizes our gross investments as of ~~March 31,~~September 30, 2021:

Diagram

Description automatically generated

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 conduct and manage our business as one operating segment, rather than multiple operating segments, for internal reporting and internal decision-making purposes. For purposes of this quarterly report and other presentations, we generally include ALF, ILF, MC, and combinations thereof in the ALF classification. As of ~~March 31,~~September 30, 2021, seniors housing and long-term health care properties comprised approximately ~~99.3%~~99.2% of our real estate investment portfolio. We have been operating since August 1992.

Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures. Income from our investments in owned properties and mortgage loans represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by property type and operator. Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance.

In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases and loans are credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-

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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, proceeds from periodic asset sales, 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, 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. In recognition of the pandemic impact affecting our operators, we have agreed to rent abatements totaling ~~$1.7~~$3.8 million and rent deferrals for certain operators totaling ~~$3.7~~$6.1 million between April 2020 and ~~March~~September 2021, of which ~~$1.5~~$1.7 million subsequently has been repaid. The ~~$3.9~~$8.2 million in rent abatements and deferrals, net ~~with~~of repayments, represented approximately 2%2.9% of our April 2020 through ~~March~~September 2021 contractual rent and interest. The remaining balance of deferred rent is due to us over the next 2436 months or upon receipt of government funds from the U.S. Coronavirus Aid, Relief, and Economic Security (the “CARES Act”).

During the ~~first quarter of~~nine months ended September 30, 2021, we proactively provided additional financial support to the majority of our operators by reducing 2021 rent and interest escalations by 50%. The rent and interest escalation reduction were given in the form of a rent and interest credit in recognition of operators’ increased costs due to COVID-19. During ~~the first quarter of~~nine months ended September 30, 2021, we recognized a GAAP revenue decrease of ~~$0.3~~$0.5 million ~~of GAAP revenue~~ and a cash revenue decrease of ~~$1.2~~$1.3 million ~~in funds available for distribution. We expect the~~related

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to the 50% escalation reduction. We expect the escalation reductions to ~~reduce~~have a de minimis effect on GAAP revenue ~~by approximately $0.2 million, $34,000 and $32,000~~ during the ~~second, third and~~ fourth ~~quarters of 2021, respectively, and to reduce funds available for distribution by approximately $0.1 million in the second~~ quarter of 2021.

Real Estate Portfolio Overview

The following tables summarize our real estate investment portfolio by owned properties and mortgage loans and by property type, as of ~~March 31,~~September 30, 2021 (dollar amounts in thousands):

Three Months Ended

Percentage

March 31, 2021

Percentage

Number

Number of

Gross

of

Rental

Interest

of

of

SNF

ALF
Owned Properties

Investments

Investments

Income ⁽¹⁾

Income

Revenues

Properties ⁽²⁾

Beds ⁽³⁾

Units ⁽³⁾
Assisted Living

$
877,233

51.3
%
$
13,267

$
—

35.7
%

106

—

6,103
Skilled Nursing

560,469

32.8
%

15,684

—

42.3
%

51

6,277

212
Other ⁽⁴⁾

11,360

0.7
%

242

—

0.7
%

1

118

—
Total Owned Properties

1,449,062

84.8
%

29,193

—

78.7
%

158

6,395

6,315

Mortgage Loans

Skilled Nursing

259,874

15.2
%

—

7,922

21.3
%

22

2,804

—
Total Mortgage Loans

259,874

15.2
%

—

7,922

21.3
%

22

2,804

—
Total Portfolio

$
1,708,936

100.0
%
$
29,193

$
7,922

100.0
%

180

9,199

6,315


					Nine Months Ended
			Percentage		September 30, 2021				Percentage		Number	Number of
	Gross		of		Rental		Interest		of		of	SNF	ALF
Owned Properties	Investments		Investments		Income ⁽¹⁾		Income		Revenues		Properties ⁽²⁾	Beds ⁽³⁾	Units ⁽³⁾
Assisted Living	$	843,015	50.5	%	$	40,236	$	—	38.5	%	102	—	5,798
Skilled Nursing		552,723	33.1	%		39,809		—	38.1	%	50	6,154	212
Other ⁽⁴⁾		11,360	0.7	%		725		—	0.7	%	1	118	—
Total Owned Properties		1,407,098	84.3	%		80,770		—	77.3	%	153	6,272	6,010

Mortgage Loans
Skilled Nursing		259,657	15.6	%		—		23,779	22.7	%	22	2,727	—
Other ⁽⁴⁾		1,780	0.1	%		—		—	—	%	—	—	—
Total Mortgage Loans		261,437	15.7	%		—		23,779	22.7	%	22	2,727	—

Total Portfolio	$	1,668,535	100.0	%	$	80,770	$	23,779	100.0	%	175	8,999	6,010


					Three Months Ended													Nine Months Ended
			Percentage		March 31, 2021				Percentage		Number	Number of				Percentage		September 30, 2021				Percentage		Number	Number of
	Gross		of		Rental		Interest		of		of	SNF	ALF	Gross		of		Rental		Interest		of		of	SNF	ALF
Summary of Properties by Type	Investments		Investments		Income ⁽¹⁾		Income		Revenues		Properties ⁽²⁾	Beds ⁽³⁾	Units ⁽³⁾	Investments		Investments		Income ⁽¹⁾		Income		Revenues		Properties ⁽²⁾	Beds ⁽³⁾	Units ⁽³⁾
Assisted Living	$	877,233	51.3	%	$	13,267	$	—	35.7	%	106	—	6,103	$	843,015	50.5	%	$	40,236	$	—	38.5	%	102	—	5,798
Skilled Nursing		820,343	48.0	%		15,684		7,922	63.6	%	73	9,081	212		812,380	48.7	%		39,809		23,779	60.8	%	72	8,881	212
Other ⁽⁴⁾		11,360	0.7	%		242		—	0.7	%	1	118	—		13,140	0.8	%		725		—	0.7	%	1	118	—
Total Portfolio	$	1,708,936	100.0	%	$	29,193	$	7,922	100.0	%	180	9,199	6,315	$	1,668,535	100.0	%	$	80,770	$	23,779	100.0	%	175	8,999	6,010

(1)	Excludes variable rental income from lessee reimbursement and rental income from sold properties.

(2)	We have investments in 27owned properties and mortgage loans in 26 states leased or mortgaged to 3031 different operators.

(3)	See Item 1. Financial Statements – Note 2. Real Estate Investments for discussion of bed/unit count.

(4)	Includes three parcels of land held-for-use, ~~and~~ one behavioral health care ~~hospital.~~hospital and one parcel of land securing a first mortgage held for future development of a post-acute skilled nursing center.

As of ~~March 31,~~September 30, 2021, we had ~~$1.4~~$1.3 billion in net carrying value of real estate investments, consisting of ~~$1.1~~$1.0 billion or ~~80.9%~~80.1% invested in owned and leased properties and $0.3 billion or ~~19.1%~~19.9% invested in mortgage loans secured by first mortgages. Our investment in mortgage loans mature ~~in 2043~~between 2022 and ~~beyond~~2045 and contain interest rates between ~~9.3%~~7.5% and 10.1%.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, rental income ~~and~~represented 78.6% of total gross revenues, interest income from mortgage loans represented ~~79.4%~~20.5% of total gross revenues and ~~19.7%, respectively,~~interest and other income represented 0.9% of total gross revenues. In most instances, our lease structure contains fixed annual rental escalations and/or annual rental escalations that are contingent upon changes in the Consumer Price ~~Index, which are generally recognized on a straight-line basis over the minimum lease period.~~Index. 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.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we recorded ~~$0.7~~$0.6 million in straight-line rental income and amortization of lease incentive cost of ~~$0.1~~$0.4 million. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we received ~~$32.2~~$91.6 million of cash rental income, which includes ~~$3.5~~$10.7 million of operator reimbursements for our real estate taxes. At ~~March 31,~~September 30, 2021, the straight-line rent receivable balance, net of write-offs for uncollectible amounts, on the balance sheet was ~~$24.4~~$24.3 million.

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Update on Certain Operators

Senior Care Centers, LLC

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”~~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, ~~as a result of~~ Senior ~~Care’s~~Care and ~~Abri’s~~Abri Health (collectively, ~~the~~ “Lessee”) ~~non-payment of~~failed to pay rent and additional obligations owed under the master ~~lease,~~lease. Accordingly, we sent a notice of default and applied ~~the Lessee’s security deposit~~proceeds from letters of credit to certain obligations owed under the master ~~lease to delinquent rent.~~lease. Furthermore, ~~on April 7, 2021,~~ we sent the Lessee a notice of termination of the master lease to be effective April 17, 2021. On April 16, 2021, the Lessee filed for Chapter 11 bankruptcy. AtIn August 2021, the ~~time~~United States Bankruptcy Court approved a settlement agreement between Lessee and LTC. The settlement provides 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 ~~April 16, 2021 bankruptcy filings by~~11 skilled nursing centers from the Lessee ~~we were in the process~~and its affiliates to affiliates of ~~transitioning the portfolio to~~ HMG Healthcare, LLC ~~with a goal to complete the transition by the end of the second quarter of~~which occurred on October 1, 2021.

Brookdale Senior Living Communities, Inc

~~During the third quarter of 2020, we consolidated our four leases with~~ Brookdale Senior Living Communities, ~~Inc~~Inc’s (“Brookdale”) ~~into one~~ master lease ~~and~~was scheduled for expiration on December 31, 2021. During the first quarter of 2021, we extended ~~the~~their term by one year tothrough an amended master lease, with a new maturity date of December 31, ~~2021. The~~2022. Also, the renewal options under the amended master lease will remain the same which provides three renewal options consisting of a ~~four-year~~three-year renewal option, a five-year renewal option and a 10-year renewal option. The economic terms of rent remain the same as the consolidated rent terms under the previous four separate lease agreements. During the first quarter of 2021, the Brookdale master lease was amended to extend the current term by one year to December 31, 2022. The notice period for ~~this~~the first renewal option is January 1, 2022 to April 30, 2022. During 2020, we extended a $4.0 million capital commitment to Brookdale, which is available through December 31, 2021 at a 7% yield. As of September 30, 2021, we have funded $3.3 million under this agreement and our remaining commitment is $0.7 million. Brookdale is current on rent payments through ~~April~~October 2021.

Senior Lifestyle Corporation

AnDuring 2020, an affiliate of Senior Lifestyle ~~Corporation~~ (“Senior Lifestyle”) operated 23 of our properties under a master lease with a combination of independent living, assisted living and memory care units. Senior Lifestyle failed to pay full rent to us during the second quarter of 2020. Accordingly, we wrote-off a total $17.7 million of straight-line rent receivable and lease incentives related to this master lease and transitioned rental revenue recognition to cash basis effective July 2020. During 2020, Senior Lifestyle paid us $13.8 million of their $18.4 million contractual rent and we applied their letter of credit and deposits totaling $3.7 million to past due rent of $3.6 million and to their outstanding notes receivable of $0.1 million. Accordingly, we wrote-off a total $17.7 million of straight-line rent receivable and lease incentives related to this master lease and transitioned rental revenue recognition to cash basis effective July 2020. During 2020, we recognized $17.4 million of rental revenue from Senior ~~Lifestyle in 2020.~~Lifestyle. To date in 2021, Senior Lifestyle has not paid rent or its other obligations under the master lease.

During ~~the first quarter of~~ 2021, we ~~transitioned 11~~transition 18 assisted living communities previously leased to Senior Lifestyle to ~~two~~five operators. These communities are located in Illinois, Ohio, Wisconsin, Colorado, Pennsylvania and Wisconsin. Total cash rent expected under these two master lease agreements is $5.3 million for the first lease year, $7.1 million for the second lease year and $7.3 million for the third lease year, escalating 2% annually thereafter. In AprilNebraska. Also, during 2021, we ~~transitioned~~sold three Wisconsin communities and a ~~memory care~~closed community in ~~Colorado~~Nebraska previously leased to Senior Lifestyle for a 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. We expect to transition the remaining New Jersey community to an existing operator ~~new to us. The new master lease has a 5-year term with $0.2 million of cash rent starting in~~during the second lease year and $0.3 million in the third lease year escalating 2% annually thereafter. For the remaining 11 assisted living communities, three communities are expected to be transferred to one of our existing operators by the end of the secondfourth quarter of ~~2021, three are expected to be sold by the end of the second quarter of 2021, subject to timely completion of due diligence, one is~~2021.

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expected to be transferred to an operator new to us by the end of July, one has been closed and will be sold for an alternative use, and options are currently being evaluated for the remaining communities.

Genesis Healthcare, Inc

~~On August 10, 2020, in the Quarterly Report on Form 10-Q,~~ Genesis ~~Healthcare, Inc. (“Genesis”)~~ reported doubt regarding its ability to continue as a going ~~concern.~~concern on its Quarterly Report on Form 10-Q filed in August 2020. As a result, we wrote-off $4.3 million of straight-line rent receivable related to this master lease during the third quarter of 2020 and transitioned rental revenue recognition to cash basis effective September 2020. ~~On March 3,~~During the first quarter of 2021, ~~Genesis announced its three-part strategic restructuring plan to strengthen its liquidity position and capital structure. As part of its plan,~~ Genesis delisted its Class A common stock from the New York Stock ~~Exchange and deregistered its Class A Common Stock under the Securities Exchange Act of 1934, during the first quarter of 2021.~~Exchange. Genesis is current on rent payments through ~~April~~October 2021.

Other Operators

During the third quarter of 2020, an operator failed to pay its full contractual rent. Accordingly, we wrote-off $1.2 million of straight-line rent receivable related to this master lease. ~~Effective September 1,~~During 2020, we consolidated our two master leases with ~~the~~this operator into one combined master ~~lease. Under the new combined master~~ lease weand agreed to abate $0.7 million of rent and allow the operator to defer rent as needed through March 31, 2021. During ~~the first quarter of~~ 2021, the ~~new~~ combined master lease was amended to extend the rent deferral period ~~another three months starting April 1,~~through December 31, 2021. ~~During~~The operator deferred rent of $1.2 million for the ~~first~~third quarter of 2021 ~~the operator~~and $0.4 million for October 2021. The deferred ~~$1.0 million of rent and, at March 31, 2021, the remaining deferred rent~~ balance due from ~~the~~this operator ~~was $1.4 million. During 2020, we recorded an impairment charge~~is $4.1 million as of ~~$1.0~~October 2021. The operator can defer rent up to $0.4 million ~~related to an assisted living community that was operated by the operator. The community was closed in October 2020~~for each of November and ~~sold during the first quarter of 2021. As a result of this transaction, we recognized a net loss on sale of $0.9 million during the first quarter of~~December 2021.

2021 Rent deferrals, net of repayments, and abatements (in thousands):

January/

February

March

April

Rent deferrals, net of repayments

$
689

$
433

$
367

Rent abatements

360

240

319

50% reduction of 2021 rent & interest escalations

1,204

-

133

$
2,253

$
673

$
819


	Three Months Ended
		March 31, 2021		June 30, 2021		September 30, 2021		October 2021
Rent deferrals, net of repayments	$	1,122	$	1,121	$	1,300	$	438
Rent abatements		600		1,069		970		240
50% reduction of 2021 rent & interest escalations		1,204		133		—		—
	$	2,926	$	2,323	$	2,270	$	678

WeSubsequent to September 30, 2021, we have agreed to provide rent deferrals up to $0.4 million and abatements up to ~~$0.8~~$0.2 million for each of ~~May~~November and ~~June~~December 2021.

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2021 Activities Overview

The following tables summarize our transactions during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 (dollar amounts in thousands):

Investment in Development and Improvement projects

Developments

Improvements
Assisted Living Communities

$
—

$
1,044


	Developments		Improvements
Assisted Living Communities	$	—	$	4,560
Skilled Nursing Centers		—		279
Total	$	—	$	4,839

Properties Sold

Type

Number

Number

of

of

of

Sales

Carrying

Net

State

Properties

Properties

Beds/Units

Price

Value

(Loss) gain ⁽¹⁾

Florida

ALF

1

—

$
2,000

$
2,625

$
(861)

n/a

n/a

—

—

—

—

88
⁽²⁾

1

—

$
2,000

$
2,625

$
(773)


	Type	Number	Number
	of	of	of		Sales		Carrying		Net
State	Properties	Properties	Beds/Units		Price		Value		Gain (loss) ⁽¹⁾
n/a	n/a	—	—	$	—	$	—	$	292	^{(2) (3)}
Florida	ALF	1	—		2,000		2,626		(858)
Nebraska	ALF	1	40		900		1,079		(198)
Washington	SNF	1	123		7,700		4,528		2,562
Wisconsin	ALF	3	263		35,000		28,295		5,594
		6	426	$	45,600	$	36,528	$	7,392

(1)	Calculation of net gain (loss) ~~gain~~ includes cost of sales.

(2)	We recognized additional gain due to the reassessment adjustment of the holdbacks related to properties sold induring 2019 and 2020, under the expected value model per ASC Topic 606, Contracts with Customers (“ASC 606”).

(3)

Investment in Mortgage Loans

Originations and funding under mortgage loans receivable

$
158

Scheduled principal payments received

(125)

Mortgage loan premium amortization

(2)

Net increase in mortgage loans receivable

$
31


Originations and funding under mortgage loans receivable	$	2,223	⁽¹⁾
Scheduled principal payments received		(625)
Mortgage loan premium amortization		(4)
Provision for loan loss reserve		(16)
Net increase in mortgage loans receivable	$	1,578

(1)

Subsequent to September 30, 2021, we funded a $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%. Additionally, we funded a $12,530 mortgage loan secured by a 68-unit ALF and MC community in Florida operated by a regional operator new to us. 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.

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Investment in Unconsolidated Joint Ventures


	Type	Type		Total		Contractual		Number						2021				Cash	Type	Type		Total		Contractual		Number				2021				Cash
	of	of		Preferred		Cash		of		Investment		Carrying		Capital		Income		Interest	of	of		Preferred		Cash		of		Carrying		Capital		Income		Interest
State	Properties	Investment		Return		Portion		Beds/ Units		Commitment		Value		Contribution		Recognized		Received	Properties	Investment		Return		Portion		Beds/ Units		Value		Contribution		Recognized		Received
Washington ⁽¹⁾	UDP	Preferred Equity	⁽¹⁾	12	%	7	%	—	$	—	$	6,340	$	—	$	112	$	75	UDP	Preferred Equity	⁽¹⁾	12	%	7	%	—	$	6,340	$	—	$	337	$	300
Washington ⁽²⁾	UDP	Preferred Equity	⁽²⁾	12	%	8	%	—		—		13,000		8,000		177		89	UDP	Preferred Equity	⁽²⁾	12	%	8	%	—		13,000		8,000		704		616
								—	$	—	$	19,340	$	8,000	$	289	$	164								—	$	19,340	$	8,000	$	1,041	$	916

(1)

Invested $6,340 of preferred equity in an entity that will develop and own a 95-unit ALF/MC in ~~Washington.~~Washington and withheld $1,425 as a reserve. Our investment represents 15.5% of the estimated 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%.

(2)

Invested $13,000 of preferred equity in an entity that will develop and own a 267-unit ILF/ALF in ~~Washington.~~Washington and withheld $3,777 as a reserve. Our investment represents 11.6% of the estimated total investment. The preferred equity investment earns an initial cash rate of 8% until achieving an IRR ranging between 12% and 14%.

Notes Receivable

Advances under notes receivable

$
1,656
⁽¹⁾

Principal payments received under notes receivable

(2,553)

Notes receivable loan loss reserve

9

Net decrease in notes receivable

$
(888)


Advances under notes receivable	$	6,453	^{(1) (2)}
Interest reserve withheld		353
Principal payments received under notes receivable		(2,553)
Notes receivable reserve		43
Net increase in notes receivable	$	4,296

(1)	Funding under working capital notes and mezzanine loans with interest ranging between 5% and 8% and maturities between ~~2023~~2022 and ~~2027.~~2030.

(2)	Subsequent to September 30, 2021, we provided HMG a $25,000 secured working capital loan maturing in September 2022 to facilitate the transition of the 11 properties from Senior Care and Abri Health.

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Health Care Regulatory Climate

The Centers for Medicare & Medicaid Services (“CMS”) annually updates Medicare skilled nursing facility (“SNF”) prospective payment system rates and other policies. On July 30, 2019, CMS

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issued its final fiscal year 2020 Medicare skilled nursing facility update. Under the final rule, CMS projected aggregate payments to SNFs would increase by $851 million, or 2.4%, for fiscal year 2020 compared with fiscal year 2019. The final rule also addressed implementation of the new 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 SNF Value-Based Purchasing and quality reporting program policies. On April 10, 2020, CMS issued a proposed rule to update SNF rates and policies for fiscal year 2021, which started October 1, 2020, and issued the final rule on July 31, 2020. CMS estimated that payments to SNFs would increase by $750 million, or 2.2%, for fiscal year 2021 compared to fiscal year 2020. CMS 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 ~~starts~~started October 1, 2021, and issued the final rule on July 29, 2021. CMS ~~estimates~~estimated that ~~under~~ the ~~proposed~~aggregate impact of the payment policies in the final rule ~~overall~~would result in an increase of approximately $410 million in Medicare Part A payments to SNFs ~~under the SNF prospective payment system~~ in ~~FY 2022 are projected to increase by approximately $444 million, or 1.3%, compared with those in FY 2021.~~fiscal year 2022. The ~~proposed~~final rule also includes ~~proposals for~~several policies that update the SNF Quality Reporting Program and the SNF Value-Based Program for FYfiscal year 2022.

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, respond to the COVID-19 pandemic. These include waiving the ~~SNFs~~SNF 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 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 has also enhanced requirements for nursing facilities to report COVID-19 infections to local, state and federal authorities. On ~~April~~October 15, 2021, HHS Secretary Becerra announced that he had renewed, effective ~~April 21,~~October 18, 2021, 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 ~~suspends~~suspended the 2% across-the-board “sequestration” reduction during the period May 1, 2020 through December 31, 2020, and

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extends the current Medicare sequester requirement through fiscal year 2030. In addition, the law provides $100 billion in grants to eligible health care providers for 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, the

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Department of Health and Human Services (“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 will 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~~were required to t participate in the Nursing Home COVID-19 training to ~~be qualified to receive~~qualify for 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, the Trump Administration announced $20 billion in ~~new~~additional 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.~~2020, to demonstrate entitlement for these funds. This change reverts to HHS’ previous guidance from June 2020 on how to calculate lost revenues. 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 passage of the Consolidated Appropriations Act, 2021.

On April 14, 2021, President Biden signed an Act to Prevent Across-the-Board Direct Spending Cuts, and for Other Purposes (H.R. 1868), which extended the sequestration suspension period to December 31, 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

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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 has explained that recoupment or other enforcement actions will not be initiated during the 60-day grace period, which began on October 1, 2021 and will end on November 30, 2021.

On September 10, 2021, the Biden Administration announced that HHS would be making available $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 can 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 will be put towards 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. The deadline for submitting applications for Phase 4 funds is October 26, 2021.

On July 18, 2019, CMS published a final rule that ~~eliminates~~eliminated the prohibition on pre-dispute binding arbitration agreements between long-term care facilities and their residents. The rule also ~~strengthens~~strengthened the transparency of arbitration agreements and makes other changes to arbitration requirements for long-term care facilities. There can be no assurance that these rules or future regulations modifying Medicare skilled nursing facility payment rates or other requirements for Medicare and/or Medicaid participation will not have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.

Congress periodically considers legislation revising Medicare and Medicaid policies, including legislation that could have the impact of reducing Medicare reimbursement for SNFs and other Medicare providers, limiting state Medicaid funding allotments, encouraging home and community-based ~~long-~~

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~~term~~long-term care services as an alternative to institutional settings, or otherwise reforming payment policy for post-acute care services. Congress continues to consider further legislative action in response to the COVID-19 pandemic. There can be no assurances that enacted or future legislation will not have an adverse impact on the financial condition of our lessees and borrowers, which subsequently could materially adversely impact our company.

Additional reforms affecting the payment for and availability of health care services have been proposed at the federal and state level and adopted by certain states. Increasingly, state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid costs. State Medicaid budgets may experience shortfalls due to increased costs in addressing the COVID-19 pandemic. Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies. Changes in the law, new interpretations of existing laws, or changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third-party payors.

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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 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 investments that are real property or mortgage loans. 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. Investment mix measures the portion of our investments that relate to our various property classifications. Operator mix measures the portion of our 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.

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The following table reflects our recent historical trends of concentration risk (gross investment, in thousands):



	3/31/21		12/31/20		9/30/20		6/30/20		3/31/20		9/30/21		6/30/21		3/31/21		12/31/20		9/30/20
Asset mix:
Real property	$	1,449,062	$	1,452,001	$	1,448,764	$	1,445,691	$	1,438,177	$	1,407,098	$	1,412,329	$	1,449,062	$	1,452,001	$	1,448,764
Loans receivable		259,874		259,843		260,267		258,649		256,959		261,437		259,641		259,874		259,843		260,267
Real estate investment mix:
Assisted living communities											$	843,015	$	840,502	$	877,233	$	880,172	$	880,307
Skilled nursing centers	$	820,343	$	820,312	$	817,364	$	812,637	$	807,457		812,380		820,108		820,343		820,312		817,364
Assisted living communities		877,233		880,172		880,307		880,343		876,319
Other ⁽¹⁾		11,360		11,360		11,360		11,360		11,360		13,140		11,360		11,360		11,360		11,360
Operator mix:
Prestige Healthcare ⁽¹⁾	$	273,007	$	272,976	$	273,399	$	271,781	$	270,091	$	272,789	$	272,773	$	273,007	$	272,976	$	273,399
Senior Care Centers		138,109		138,109		138,109		138,109		138,109
Senior Care Centers/ Abri Health Services												138,315		138,109		138,109		138,109		138,109
Anthem Memory Care		136,483		136,483		136,483		136,483		136,483		136,483		136,483		136,483		136,483		136,483
Carespring Health Care Management		102,520		102,520		102,520		102,520		102,520		102,520		102,520		102,520		102,520		102,520
Brookdale Senior Living ⁽²⁾		101,012		100,613		98,921		98,921		98,921		102,261		101,240		101,012		100,613		98,921
Remaining operators ⁽²⁾		957,805		961,143		959,599		956,526		949,012		916,167		920,845		957,805		961,143		959,599
Geographic mix:
Michigan	$	281,995	$	281,963	$	282,103	$	279,821	$	277,063	$	282,022	$	281,762	$	281,995	$	281,963	$	282,103
Texas		273,468		273,287		273,075		273,075		273,075		274,204		273,588		273,468		273,287		273,075
Wisconsin		149,403		149,403		149,403		149,403		149,405		114,288		114,250		149,403		149,403		149,403
California		105,352		105,163		104,924		104,687		103,970		105,997		105,892		105,352		105,163		104,924
Colorado		104,307		104,090		106,879		106,879		106,879		104,445		104,347		104,307		104,090		106,879
Remaining states		794,411		797,938		792,647		790,475		784,744		787,579		792,131		794,411		797,938		792,647

(1)	~~As of March 31, 2021, we have~~Includes three parcels of land located adjacent to properties securing the Prestige Healthcare mortgage loan and are managed by Prestige.

~~(2)~~

During the three months ended March 31, 2021, we transitioned 11 ALFs from Senior Lifestyle to two operators. As a result of this transition, Senior Lifestyle is no longer a top five operator under our operator mix and is replaced by Brookdale Senior Living. Accordingly, our “Brookdale Senior Living properties” were reclassified from “Remaining operators” and our “Senior Lifestyle properties” were reclassified to “Remaining operators” for all periods presented.

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 Sheets 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 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. 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:

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Balance Sheet Metrics

Quarter Ended

3/31/21

12/31/20

9/30/20

6/30/20

3/31/20

Debt to gross asset value

36.3
%
⁽¹⁾
35.8
%
⁽⁴⁾
36.5
%
⁽⁴⁾
37.4
%

37.3
%
Debt to market capitalization ratio

28.7
%
⁽²⁾
29.8
%
⁽⁵⁾
32.7
%
⁽⁷⁾
31.8
%
⁽⁸⁾
36.3
%
Interest coverage ratio ⁽⁹⁾

4.5
x
⁽³⁾
5.3
x
⁽⁶⁾
4.8
x

4.9
x

4.7
x
Fixed charge coverage ratio ⁽⁹⁾

4.5
x

5.3
x
⁽⁶⁾
4.8
x

4.9
x

4.7
x


	Year to Date		Quarter Ended
	9/30/21		9/30/21			6/30/21			3/31/21			12/31/20			9/30/20
Debt to gross asset value	36.3	%	36.3	%	⁽¹⁾	34.8	%	⁽³⁾	36.3	%	⁽¹⁾	35.8	%	⁽³⁾	36.5	%
Debt to market capitalization ratio	34.7	%	34.7	%	⁽²⁾	29.0	%	⁽⁴⁾	28.7	%	⁽⁶⁾	29.8	%	⁽⁷⁾	32.7	%
Interest coverage ratio ⁽⁹⁾	4.4	x	4.3	x		4.3	x	⁽⁵⁾	4.6	x	⁽⁵⁾	5.3	x	⁽⁸⁾	4.8	x
Fixed charge coverage ratio ⁽⁹⁾	4.4	x	4.3	x		4.3	x	⁽⁵⁾	4.6	x	⁽⁵⁾	5.3	x	⁽⁸⁾	4.8	x

(1)	Increased due to increase in outstanding debt partially offset by increase in gross asset value.

(2)	~~Decreased~~Increased due to ~~increase~~decrease in market capitalization ~~partially offset by~~and increase in outstanding debt.

(3)	Decreased due to decrease in outstanding debt partially offset by decrease in gross asset value.

(4)	Increased due to decrease in market capitalization, partially offset by decrease in outstanding debt.

(5)	Decreased due to decrease in rental income partially offset by decrease in interest expense.

~~(4)~~(6)

Decreased due to ~~decrease~~increase in ~~outstanding debt~~market capitalization partially offset by ~~decrease~~increase in ~~gross value.~~outstanding debt.

~~(5)~~(7)

Decreased due to decrease in outstanding debt and increase in market capitalization.

~~(6)~~(8)

Increased due to decrease in interest expense and increase in rental income.

~~(7)~~

~~Increased due to decrease in market capitalization, partially offset by decrease in outstanding debt.~~

~~(8)~~

~~Decreased due to increase in market capitalization.~~

(9)

In calculating our interest coverage and fixed charge coverage ratios above, we use EBITDAre, which is a financial measure not derived in accordance with GAAP (non-GAAP financial measure). EBITDAre is not an alternative 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 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 EBITDArere..

Quarter Ended

3/31/21

12/31/20

9/30/20

6/30/20

3/31/20

Net income

$
13,850

$
17,665

$
12,338

$
1,952

$
63,722

Less/Add: (Gain)/ loss on sale

773

(44)

(30)

(189)

(43,854)

Add: Loss on unconsolidated joint ventures

—

138

—

620

—

Add: Impairment loss

—

3,036

941

—

—

Add: Interest expense

6,972

7,088

7,361

7,546

7,710

Add: Depreciation and amortization

9,877

9,839

9,766

9,797

9,669

EBITDAre

$
31,472

$
37,722

$
30,376

$
19,726

$
37,247

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

—

—

5,099

17,742
⁽¹⁾

—

Adjusted EBITDAre

$
31,472

$
37,722

$
35,475

$
37,468

$
37,247

Interest expense

$
6,972

$
7,088

$
7,361

$
7,546

$
7,710

Add: Capitalized interest

—

—

77

86

191

Interest incurred

$
6,972

$
7,088

$
7,438

$
7,632

$
7,901

Interest coverage ratio

4.5
x

5.3
x

4.8
x

4.9
x

4.7
x

Interest incurred

$
6,972

$
7,088

$
7,438

$
7,632

$
7,901

Total fixed charges

$
6,972

$
7,088

$
7,438

$
7,632

$
7,901

Fixed charge coverage ratio

4.5
x

5.3
x

4.8
x

4.9
x

4.7
x


	Year to Date			Quarter Ended
	9/30/21			9/30/21			6/30/21			3/31/21			12/31/20			9/30/20
Net income	$	43,294		$	11,114		$	18,330		$	13,850		$	17,665		$	12,338
Less/Add: (Gain)/ loss on sale		(7,392)			(2,702)			(5,463)			773			(44)			(30)
Add: Loss on unconsolidated joint ventures		—			—			—			—			138			—
Add: Impairment loss		—			—			—			—			3,036			941
Add: Interest expense		20,442			6,610			6,860			6,972			7,088			7,361
Add: Depreciation and amortization		28,847			9,462			9,508			9,877			9,839			9,766
EBITDAre	$	85,191		$	24,484		$	29,235		$	31,472		$	37,722		$	30,376
Add (less): Non-recurring one-time items		4,653			3,895	⁽¹⁾		—			758	⁽²⁾		—			5,099	⁽³⁾
Adjusted EBITDAre	$	89,844		$	28,379		$	29,235		$	32,230		$	37,722		$	35,475

Interest expense	$	20,442		$	6,610		$	6,860		$	6,972		$	7,088		$	7,361
Add: Capitalized interest		—			—			—			—			—			77
Interest incurred	$	20,442		$	6,610		$	6,860		$	6,972		$	7,088		$	7,438
															��
Interest coverage ratio		4.4	x		4.3	x		4.3	x		4.6	x		5.3	x		4.8	x

Interest incurred	$	20,442		$	6,610		$	6,860		$	6,972		$	7,088		$	7,438
Total fixed charges	$	20,442		$	6,610		$	6,860		$	6,972		$	7,088		$	7,438

Fixed charge coverage ratio		4.4	x		4.3	x		4.3	x		4.6	x		5.3	x		4.8	x

(1)	Represents the Senior Care and Abri Health settlement and related fees.

(2)	Represents the write-off of ~~Senior Lifestyle straight line~~straight-line rent related to an operator.

(3)	Represents the write-off of straight-line rent receivable related to Genesis and ~~lease incentives.~~another operator offset by the gain from insurance proceeds related to a previously sold property.

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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.

Additionally, as described in the Executive Overview above, COVID-19 is adversely affecting and is expected to continue to adversely affect our business, results of operations, cash flows and financial condition. Depending on the future developments regarding COVID-19, the duration, spread and severity of the outbreak, historical trends reflected in our balance sheet metrics may not be achieved in the future.

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.

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Operating Results (unaudited, in thousands)

Three Months Ended

March 31,

2021

2020

Difference

Revenues:

Rental income

$
31,973

$
38,035

$
(6,062)
⁽¹⁾
Interest income from mortgage loans

7,922

7,777

145

Interest and other income

385

598

(213)
⁽²⁾
Total revenues

40,280

46,410

(6,130)

Expenses:

Interest expense

6,972

7,710

738
⁽³⁾
Depreciation and amortization

9,877

9,669

(208)

Impairment charges

—

—

—

Recovery (provision) for credit losses

(9)

1

10

Transaction costs

92

70

(22)

Property tax expense

3,981

4,223

242
⁽⁴⁾
General and administrative expenses

5,033

5,100

67

Total expenses

25,946

26,773

827

Other operating income:

(Loss) gain on sale of real estate, net

(773)
⁽⁵⁾

43,854
⁽⁶⁾

(44,627)

Operating income

13,561

63,491

(49,930)

Income from unconsolidated joint ventures

289

231

58

Net income

13,850

63,722

(49,872)

Income allocated to non-controlling interests

(88)

(89)

1

Net income attributable to LTC Properties, Inc.

13,762

63,633

(49,871)

Income allocated to participating securities

(120)

(263)

143

Net income available to common stockholders

$
13,642

$
63,370

$
(49,728)


	Three Months Ended
	September 30,
	2021			2020			Difference
Revenues:
Rental income	$	29,320		$	30,010		$	(690)	⁽¹⁾
Interest income from mortgage loans		7,924			7,890			34
Interest and other income		228			273			(45)
Total revenues		37,472			38,173			(701)

Expenses:
Interest expense		6,610			7,361			751	⁽²⁾
Depreciation and amortization		9,462			9,766			304
Impairment charges		—			941	⁽³⁾		941
Provision (recovery) for credit losses		68			(2)			(70)
Transaction costs		4,046			63			(3,983)	⁽⁴⁾
Property tax expense		3,932			3,351			(581)	⁽⁵⁾
General and administrative expenses		5,318			4,814			(504)	⁽⁶⁾
Total expenses		29,436			26,294			(3,142)

Other operating income:
Gain on sale of real estate, net		2,702	⁽⁷⁾		30	⁽⁸⁾		2,672
Operating income		10,738			11,909			(1,171)
Gain from property insurance proceeds		—			373	⁽⁹⁾		(373)
Loss on unconsolidated joint ventures		—			—			—
Income from unconsolidated joint ventures		376			56			320	⁽¹⁰⁾
Net income		11,114			12,338			(1,224)
Income allocated to non-controlling interests		(92)			(121)			29
Net income attributable to LTC Properties, Inc.		11,022			12,217			(1,195)
Income allocated to participating securities		(113)			(103)			(10)
Net income available to common stockholders	$	10,909		$	12,114		$	(1,205)

(1)

Decreased primarily due to unpaid rent from Senior ~~Lifestyle’s failure to pay contractual rent,~~Care and Abri Health, Senior Lifestyle non-payment of lease obligations, abated and deferred rent and reduced income from a sold SNF in Washington partially offset by a $5,472 write-off of straight-line rent receivable ~~write-off, a decrease~~balances related to two operators during the third quarter of 2020, increased rent from re-leasing 18 properties previously leased to Senior Lifestyle, completed development projects, an increase in property tax revenue ~~and reduction of 2021 rent and interest escalations by 50%, partially offset by increased rent from acquisitions and completed development projects~~ and contractual rent increases.

(2)	Decreased primarily due to ~~the payoff~~scheduled principal paydowns on our senior unsecured notes and lower rates and a lower average outstanding balance under our unsecured revolving line of ~~a mezzanine loan.~~credit.

(3)	Represents an impairment loss related to a closed ALF in Florida which was sold during the first quarter of 2021.

(4)	Increased due to the Senior Care and Abri Health settlement and related fees.

(5)	Increased primarily due to higher property tax expense related to Senior Lifestyle’s default of their contractual obligations to pay real estate taxes.

(6)	Increased primarily due to higher incentive compensation projected in 2021 than in prior year and an increase in non-cash restricted stock and performance-based stock vesting expense.

(7)	Represents the net gain on sale of $2,562 related to a SNF in Washington and (8) below.

(8)	Represents recognition of additional gain due to quarterly reassessment of prior years’ sale holdbacks.

(9)	Represents gain on insurance proceeds related to roof damage at a 114-bed SNF in Texas sold during the first quarter of 2020.

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

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	Nine Months Ended
	September 30,
	2021			2020			Difference
Revenues:
Rental income	$	91,097		$	88,320		$	2,777	⁽¹⁾
Interest income from mortgage loans		23,779			23,487			292	⁽²⁾
Interest and other income		1,005			1,257			(252)	⁽³⁾
Total revenues		115,881			113,064			2,817

Expenses:
Interest expense		20,442			22,617			2,175	⁽⁴⁾
Depreciation and amortization		28,847			29,232			385
Impairment charges		—			941	⁽⁵⁾		941
Provision (recovery) for credit losses		59			(1)			(60)
Transaction costs		4,271			197			(4,074)	⁽⁶⁾
Property tax expense		11,713			11,685			(28)
General and administrative expenses		15,688			14,494			(1,194)	⁽⁷⁾
Total expenses		81,020			79,165			(1,855)

Other operating income:
Gain on sale of real estate, net		7,392	⁽⁸⁾		44,073	⁽⁹⁾		(36,681)
Operating income		42,253			77,972			(35,719)
Gain from property insurance proceeds		—			373	⁽¹⁰⁾		(373)
Loss on unconsolidated joint ventures		—			(620)	⁽¹¹⁾		620
Income from unconsolidated joint ventures		1,041			287			754	⁽¹²⁾
Net income		43,294			78,012			(34,718)
Income allocated to non-controlling interests		(271)			(292)			21
Net income attributable to LTC Properties, Inc.		43,023			77,720			(34,697)
Income allocated to participating securities		(346)			(339)			(7)
Net income available to common stockholders	$	42,677		$	77,381		$	(34,704)

(1)

Increased primarily due to 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 partially offset due to non-payment of lease obligations from Senior Lifestyle, unpaid lease obligations from 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.

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

(3)	Decreased primarily due to ~~lower interest rates on our line~~the payoff of ~~credit and scheduled principal payments on our senior unsecured notes.~~a mezzanine loan offset by additional notes receivable funding.

(4)

Decreased primarily due to ~~timing~~scheduled principal payments on our senior unsecured notes and lower interest rates and a lower average outstanding balance under our unsecured revolving line of ~~certain operators’ property tax escrow receipts and the payment of related taxes partially offset by acquisitions and completed development projects.~~credit.

(5)	Represents ~~the net~~an impairment loss ~~on sale of $861~~ related to a closed ~~property~~ALF in Florida ~~that~~which was sold during the first quarter of ~~2021 partially offset by reassessment adjustment of the holdback related to properties sold in the prior years.~~2021.

(6)	Increased primarily due to the Senior Care and Abri Health settlement and related fees.

(7)	Increased primarily due to higher incentive compensation projected in 2021 than in prior year and an increase in non-cash restricted stock and performance-based stock vesting expense.

(8)

Represents the net gain on sale of $2,562 related to a SNF in Washington, $5,594 related to three ALFs in Wisconsin and $292 of quarterly reassessment of the prior years’ sale holdbacks partially offset by the net loss on sale of $198 related to a closed ALF in Nebraska and the net loss on sale of $858 related to a closed property in Florida.

(9)	Represents net gain on sale of 21 SNFs within the Preferred Care ~~portfolio.~~portfolio and recognition of additional gain due to quarterly reassessment of prior years’ sale holdbacks.

(10)	Represents gain on insurance proceeds related to roof damage at a 114-bed SNF in Texas sold during the first quarter of 2020.

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

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

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Funds From Operations Available to Common Stockholders

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.

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,

~~Table of Contents~~

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 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 GAAP net income available to common stockholders to NAREIT FFO available to common stockholders (unaudited, amounts in thousands, except per share amounts):

Three Months Ended

March 31,

2021

2020

GAAP net income available to common stockholders

$
13,642

$
63,370

Add: Depreciation and amortization

9,877

9,669

Add/(less): Loss (gain) on sale of real estate, net

773

(43,854)

NAREIT FFO attributable to common stockholders

$
24,292

$
29,185

NAREIT FFO attributable to common stockholders per share:

Basic

$
0.62
⁽¹⁾
$
0.74

Diluted

$
0.62
⁽¹⁾
$
0.74

Weighted average shares used to calculate NAREIT FFO per share:

Basic

39,100

39,539

Diluted

39,374
⁽²⁾

39,541
⁽²⁾


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021		2020			2021		2020
GAAP net income available to common stockholders	$	10,909	$	12,114		$	42,677	$	77,381
Add: Depreciation and amortization		9,462		9,766			28,847		29,232
Add: Impairment loss from investments		—		941			—		941
Add: Loss on unconsolidated joint ventures		—		—			—		620
Less: Gain on sale of real estate, net		(2,702)		(30)			(7,392)		(44,073)
NAREIT FFO attributable to common stockholders	$	17,669	$	22,791		$	64,132	$	64,101
NAREIT FFO attributable to common stockholders per share:
Basic	$	0.45	$	0.58		$	1.64	$	1.63
Diluted	$	0.45	$	0.58	⁽¹⁾	$	1.64	$	1.63
Weighted average shares used to calculate NAREIT FFO per share:
Basic		39,177		39,061			39,149		39,218
Diluted		39,177		39,293	⁽²⁾		39,149		39,269	⁽³⁾

(1)	Includes the effect of participating securities.

(2)	Includes the effect of performance-based stock ~~option equivalents,~~units and participating ~~securities and~~securities.

(3)	Includes the effect of performance-based stock units.

Liquidity and Capital Resources

Sources and Uses of Cash

As of ~~March 31,~~September 30, 2021, we had a total of ~~$8.2~~$45.5 million of cash and cash equivalents, ~~$493.1~~$465.6 million available under our unsecured revolving line of credit and the potential ability to access the capital

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markets through the issuance of $200.0 million of common stock under our Equity Distribution Agreements. Furthermore, we have the ability to access the capital markets through the issuance of debt and/ or equity securities under an automatic shelf registration statement.

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 in financing and investing activities are sensitive to the capital markets environment, especially to changes in interest rates. In addition, as described in “Item 1A. Risk Factors”, COVID-19 has adversely affected and is expected to continue to adversely affect our operators’ business, results of operations, cash flows and financial condition which could, in turn, adversely affect our financial position.

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The operating results of the facilities will be impacted by various factors over which the operators/owners may have no control. Those factors include, without limitation, the health of the economy, changes in supply of or demand for competing seniors housing and health care facilities, ability to control rising operating costs, the potential for significant reforms in the health care industry, and the 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, and the impact of COVID-19. We cannot presently predict what impact these proposals may have, if any. We believe that an adequate provision has been made for the possibility of loans proving uncollectible but we will continually evaluate the financial status of the operations of the seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary.

Depending on the duration, spread and severity of the outbreak, 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 corporate expenses and additional capital investments in ~~2021.~~2021 and 2022.

Our investments, principally our investments in owned properties and mortgage loans, 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. Inasmuch as we may initially fund some of our investments with variable interest rate debt, 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 unsecured credit facility, public and private issuances of debt and equity securities, proceeds from investment 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

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administrative expenses. These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below (in thousands):


	Three Months Ended March 31,					Change	Nine Months Ended September 30,					Change
Cash provided by (used in):	2021		2020			$	2021		2020			$
Operating activities	$	21,259	$	23,854	$	(2,595)	$	69,581	$	85,629	$	(16,048)
Investing activities		(4,091)		51,660		(55,751)		27,757		51,982		(24,225)
Financing activities		(16,739)		(48,870)		32,131		(59,651)		(119,044)		59,393
Increase in cash, cash equivalents and restricted cash		429		26,644		(26,215)		37,687		18,567		19,120
Cash, cash equivalents and restricted cash, beginning of period		7,772		4,224		3,548		7,772		4,244		3,528
Cash, cash equivalents and restricted cash, end of period	$	8,201	$	30,868	$	(22,667)	$	45,459	$	22,811	$	22,648

Debt Obligations

Bank Borrowings. We have an Unsecured Credit Agreement that provides for a revolving line of credit up to $600.0 million in aggregate commitment of the lenders and the opportunity to increase the commitment size of the credit agreement up to a total of $1.0 billion. The Unsecured Credit Agreement matures on June 27, 2022 and provides for a one-year extension option at our discretion, subject to customary conditions. Based on our leverage at ~~March 31,~~September 30, 2021, the facility provides for interest annually at LIBOR plus 115 basis points and a facility fee of 20 basis points. At ~~March 31,~~September 30, 2021, we were in compliance with all covenants.

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Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates ranging from 3.85% to 5.03%. The senior unsecured notes mature between 2021 and 2032.

The debt obligations by component as of ~~March 31,~~September 30, 2021 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⁾	1.30%	$	106,900	$	493,100	1.23%	$	134,400	$	465,600
Senior unsecured notes, net of debt issue costs	4.37%		552,521		—	4.34%		527,429		—
Total	3.87%	$	659,421	$	493,100	3.71%	$	661,829	$	465,600

(1)	Represents weighted average of interest rate as of ~~March 31,~~September 30, 2021.

~~(2)~~

Our debt borrowings and repayments during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 are as follows (in thousands):

Debt Obligations

Borrowings

Repayments
Bank borrowings

$
17,000

$
—
Senior unsecured notes

—

(7,000)
Total

$
17,000

$
(7,000)


Debt Obligations		Borrowings		Repayments
Bank borrowings	$	92,500	$	(48,000)
Senior unsecured notes		—		(32,160)
Total	$	92,500	$	(80,160)

Equity

At ~~March 31,~~September 30, 2021, we had ~~39,361,622~~39,374,044 shares of common stock outstanding, equity on our balance sheet totaled ~~$764.8~~$752.9 million and our equity securities had a market value of ~~$1.6~~$1.2 billion. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we declared and paid ~~$23.2~~$68.1 million of cash dividends.

Subsequent to ~~March 31,~~September 30, 2021, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of ~~April, May~~October, November and ~~June~~December 2021, payable on ~~April~~October 29,

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November 30, ~~May 28,~~ and ~~June 30,~~December 31, 2021, respectively, to stockholders of record on ~~April 22, May 20,~~October 21, November 19, and ~~June 22,~~December 23, 2021, respectively.

At-The-Market Program. We have separate equity distribution agreements (collectively, “Equity Distribution Agreements”) to offer and sell, from time to time, up to $200.0 in aggregate offering price of shares of our common stock. As of ~~March 31,~~September 30, 2021, no shares had been issued under the Equity Distribution Agreements. Accordingly, at ~~March 31,2021,~~September 30,2021, we had $200.0 available under the Equity Distribution Agreements.

Available Shelf Registrations. 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 raise capital under our automatic 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. Our shelf registration statement expires on February 28, 2022.

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Stock-Based Compensation. During the second quarter of 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 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.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we granted restricted stock and performance-based stock units ~~under the 2015 Plan~~ as follows:

No. of

Price per

Shares ⁽¹⁾

Share

Vesting Period

95,293

$
42.27

ratably over 3 years

71,892

$
42.27

TSR targets ⁽²⁾

167,185


No. of	Price per
Shares	Share		Vesting Period
95,293	$	42.27	ratably over 3 years
71,892	$	42.27	TSR targets ⁽¹⁾
12,055	$	39.40	May 26, 2022
3,000	$	43.14	April 1, 2022
182,240

(1)	~~Subsequent to March 31, 2021, we granted 3,000 shares of restricted stock at $43.14 per share vesting over one year.~~

~~(2)~~

Vesting is based on achieving certain total shareholder return (“TSR”) targets in 4 years with an acceleration opportunity in 3 years.

Critical Accounting Policies

Our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q are prepared in conformity with U.S. generally accepted accounting principles for interim financial information set forth in the Accounting Standards Codification as published by the Financial Accounting Standards Board, which require us to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and accompanying footnotes. We base these estimates on our experience and assumptions regarding future events we believe to be reasonable under the circumstances. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements. We have described our most critical accounting policies in our

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Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our critical accounting policies or estimates since December 31, 2020.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There were no material changes in our market risk during the ~~three~~nine months ended ~~March 31,~~September 30, 2021. For additional information, refer to Item 7A as presented in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has 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 have concluded that, as of the end of such period, our disclosure controls and procedures were effective.

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.

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PART II

OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of 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 related to 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 1A. RISK FACTORS

~~There have been no material changes from~~The additional risk factor below should be read in conjunction with the risk factors ~~as previously disclosed~~set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Inflation Could Adversely Impact Our Tenants And Our Results Of Operations.

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. 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. 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.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~During the three months ended March 31, 2021, we did not make any unregistered sales of equity securities.~~None.

During the three months ended March 31, 2021, we acquired shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations. The average prices paid per share for each month in the quarter ended March 31, 2021 are as follows:

Total Number

of Shares

Maximum

Purchased as

Number of

Average

Part of

Shares that May

Total Number

Price

Publicly

Yet Be

of Shares

Paid per

Announced

Purchased

Period

Purchased

Share

Plan

Under the Plan

January 1-January 31, 2021

—

$
—

—

—

February 1 - February 28, 2021

84,616

$
41.01

—

—

March 1 - March 31, 2021

—

$
—

—

—

Total

84,616

—

—

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Item 6. EXHIBITS

3.1	LTC Properties, Inc. Articles of Restatement (incorporated by reference to Exhibit 3.1.2 to the registrant’s Current Report on Form 8-K filed June 6, 2016)

3.2	Bylaws of LTC Properties, Inc. (incorporated by reference to Exhibit 3.2.2 to the registrant’s Annual Report on Form 10-K filed February 18, 2021)
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 Definitions 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)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LTC PROPERTIES, INC.
	Registrant



Dated: ~~April 29,~~October 28, 2021	By:	/s/ Caroline Chikhale
		Caroline Chikhale
		Executive Vice President, Chief Accounting Officer and Treasurer
		(Principal Accounting Officer)

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		January/
		February		March		April
Rent deferrals, net of repayments	$	689	$	433	$	367
Rent abatements		360		240		319
50% reduction of 2021 rent & interest escalations		1,204		-		133
	$	2,253	$	673	$	819


No. of	Price per
Shares ⁽¹⁾	Share		Vesting Period
95,293	$	42.27	ratably over 3 years
71,892	$	42.27	TSR targets ⁽²⁾
167,185


				Total Number
				of Shares	Maximum
				Purchased as	Number of
		Average		Part of	Shares that May
	Total Number	Price		Publicly	Yet Be
	of Shares	Paid per		Announced	Purchased
Period	Purchased	Share		Plan	Under the Plan
January 1-January 31, 2021	—	$	—	—	—
February 1 - February 28, 2021	84,616	$	41.01	—	—
March 1 - March 31, 2021	—	$	—	—	—
Total	84,616			—	—