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LTC Properties (LTC)

Participants
Wendy Simpson Chief Executive Officer
Pam Kessler Chief Financial Officer
Clint Malin Chief Investment Officer
Jordan Sadler KeyBanc Capital Markets
Chad Vanacore Stifel
Michael Carroll RBC Capital Markets
Daniel Bernstein Capital One
Karin Ford MUFG Securities
Call transcript
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Operator

Good morning and welcome to the LTC Properties First Quarter 2018 Results Conference Call. [Operator Instructions] Before management begins its presentation, please know that today’s comments, including the question-and-answer session, may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC Properties’ filings with the Securities and Exchange Commission from time-to-time, including the company’s most recent 10-K dated December 31, 2017. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note this event is being recorded. to conference like Simpson, to now CEO. would turn over the Wendy I go Please ahead.

Wendy Simpson

and Welcome hello first operator you, Thank everybody. call. quarter to investor XXXX LTC’s

Joining Clint a and brief will of this and begin Pam introductory and portfolio. and commentary up discussion including the on I closing upward our pipeline Investment Pam of results answers. month, revision our our we our portfolio I provide operator Anthem comments, me successful will Sunrise and Sunrise the will of with for our our slight portfolio financial Officer. with Earlier guidance. before announced Malin, a on and questions come quick follow the performance. we Chief our CFO begin will partner sale back sale today are update with XXXX Clint me wrap Kessler, of a

the and good re-lease markets. As the in related and the on senior living generated Pennsylvania. to lease Ohio to in located are seeking flow expired been centers and XX you The master or of had X properties portfolio April cash collection know, strong sell we

detail more result portfolio that buyer, to lessee process As we newer, shortly. a more sell into for capital will to identify new additional determined Pam a of a $XX.X provide rigorous million reinvest it prudent the or and assets. modernized

a new color Clint Prestige call. not any opportunities. later this with make we significant loan did the we funded and during in Although additional new identified investments Healthcare provide will potential some quarter,

update provide will brief a I Anthem. Next, on

quarter’s communities, the XX, April last to has grown January I Ridge, campus from occupancy we January. previously of help challenges their key Anthem them community should XX% indicated the Illinois gain which Burr XX. in million. to Anthem two XX% Two XX% operated by rent care in from Chicago discussed XXXX at has as Tinley to expects in Anthem resident area XX. admit Glenview, April would of XX% On occupancy have we Park community improved. on occupied newly solidified January remain call, in from to the month. position memory communities $X.X at the The December opened up which occupancy XX% Illinois later constructed its reminder, was was year Anthem’s XX, be portfolio. a anticipate Oaklawn, As at this And last these having properties leadership XX% roles up in have first end that at them momentum. from

development portfolio, entire anthem As profitably focus care operating Anthem’s residents. to on that with a and our now completes is our reminder, while providing their

sure are goals expectations make We and higher paying achieve occupancy, to have but work is made we closely Anthem for to they progress with our with them in rent committed to some line on they continuing that encouraged are the XXXX. that they

I Before an to want I turn Pam, provide XXXX. the guidance our update to for call over on

higher than is $X.XX $X.XX forecast. additional no be full at investment our issuances equity and to our previous for between $X.XX year activity, the midpoint which the now FFO per Assuming expected share financing is

Now, I Pam. will to turn Pam? things over

Pam Kessler

from offset generally interest loans which unconsolidated for due from reduction a which Higher FFO partial was an was was sold development accounted G&A slightly reduced loans income to year’s from quarter seasonally projects income. and result and and default borrowings. the by completed to be higher the down in improvement from year, income resulting offset. million properties mezzanine interest in unconsolidated increase was rental a than represents typical joint capital partially in of per expense year related first last NAREIT acquisitions and expense due higher last we $X.X from $X.X remainder net was about The previously $X.XX decrease year’s expected certain approximately primarily ventures. higher Wendy. This Anthem’s is $XXX,XXX you, Thank first last was of ventures disclosed $X.XX in income to quarter. first as was lower Revenue last to joint the quarter, rental as quarter in income for expenditures. million the with timing of G&A to and line XXXX. mezzanine

As bed funded an of Healthcare million $X.X skilled with Michigan. loan for we nursing million $X.X Wendy mentioned, center the XXX Prestige our additional committed renovation for in and

development renovation million three $XX.X $XX.X with for owned capital totaling XX, During the and million. At two existing under commitments under quarter remaining under projects. improvement and we also we funded commitments properties March development

in We to on $XX.X received subsequent the as seven quarter, Michigan. the for loans properties Related of net $XX.X the in and located renovations under approximately for Sunrise, mortgage commitments Wendy sold discussed end remaining million million have also we of expansions $XX portfolio million. and proceeds to

to gain sale record second the We was a in of roughly quarter. paydown on of line expect our use to credit. proceeds $XX The immediate million the

$XX are capital million remaining, the ultimately the nearly fit portfolio. better However, being with proceeds for of assets new into our recycled given strategic commitments a

$XX origination projects line disclosed. already borrowed capital fund of and we million to under improvement quarter, our the credit During the loan

repaid million our monthly common $X and unsecured dividend. also per in We funded senior $X.XX notes share

with sheet to initiatives. a continued our We flexibility maintain fund strong and substantial growth to balance liquidity

profile projected future maturity risk. which helps to free debt refinancing matched moderate remains our long-term cash to well Our flow

of no over a Additionally, million our sale $XXX $XX Prudential of long-term agreement under shelf we of and line available next $XXX with maturities Sunrise the the X years. Currently million ATM million giving our our under $XXX credit, debt million under major remains availability. us have approximately total after program

EBITDA worked our apply strategic for normalized our Pro the charge value the well for annualized philosophy sale normalized of XX%. properties the normalized metrics a with fixed debt EBITDA X.Xx to X.Xx real enterprise charge is X.Xx, our and and and well and normalized annualized continue through of ratio of our X.Xx, forma several annualized quarter the fixed coverage to estate enterprise end REIT to has of Sunrise to industry was value debt annualized will business to credit cycles. was healthcare capital conservative At ratio which our us first average the allocation debt of We XX%. compared a debt to

will over Now, call pipeline. Clint? a to and of turn for portfolio Clint the discussion our I

Clint Malin

Pam. Thanks

$XX is Our million. at valued active pipeline approximately

We memory community acquisition be of are I campus. integrated living before currently comprises adjacent on off create discussed comprised portfolio. with two operators, community potential Transaction with engaged to market land properties and an an of pay transactions would the private our Oregon care an living and to independent have two in the of parcel assisted four whom development of both new

XX transaction of XXXX units private were of a two care and private memory purchase and communities for accommodations. The in Texas comprised The is suite respectively. pay the total include which XXXX second communities potential built companion both in of

is with are can partner there We looking selectively standalone for well-capitalized and solid where markets, relationship at where work a care growth. we operating potential memory in a certain

operator with expand continuing diversification we that Additionally, to portfolio. operator within are can with our cultivate partners several both and opportunities companies existing off-market

they last longer our opportunities As pipeline. mentioned I not so quarter, bit active off-market are take to in included a complete,

the opportunities. opportunities continue exercising position but are ability and into future. new we which about grow good investment well LTC’s We to attract We identify new feel us to help patience,

positive assisted lease us of the properties master living properties operator two operating at of Sunrise in but heels communities re-leasing communities do will not the are generate operated recently sale we net the the or process expiring the California. renew has began of under end that portfolio, of These November. selling a notified the the The On is lease, either they income.

condition, While consideration. is both the are selling and years prudent are believe in so of XX considering these assets re-leasing on good a capital alternatives viable properties and old, they are properties strategic we a recycling approximately the

to sale engaged and or the the with anticipate a us expiration. assist an having lessee a intermediary in process lease place have We new by completing

strategic XX% to improved XX% from opportunities. opportunity my at asset Kentucky December all the care continue XX. properties before, in any Christi assets will have with to as the occupancy or as are XX% And gains lease increased the foresee XXXX portfolios January Thrive mentioned evaluating sales we in additional our Also at Texas community XX, April with Corpus future don’t has We single for from in December I Louisville, XX% XX have I time. portfolio XX% be to additional to Since Census XX likely mentioned XX, XXXX. the small find memory in two The period over at experienced the report occupancy at community at their April will about Last compared master occupancy master portfolio near exception at of quarter-over-quarter future. XX% our community Florida. the declines portfolio. quarter, of the occupancy same was I Jacksonville, with pleased am a I large sales current discussion lease. end Thrive comments properties the

transitioned and both As to in fall Thrive’s master XXXX. were a Jacksonville lease reminder, the the communities Louisville of

monitor Thrive in master years. with the We and X our them engaged past up continue lease, portfolio communities actively are the they have times through during X the which as at progress their of lease various opened to with

statistics, exclude the Sunrise This quarter, we which sale. due the to pro reporting are forma portfolio portfolio

our XX-month of As represent and our living fourth trailing fee a using times and times and assisted X% skilled portfolio. EBITDAR approximately and cash quarter X.XX quarter rent. X.XX management trailing one respectively was reported times and XX% nursing times QX coverage for respectively X.XX reminder, these EBITDARM our a XX-month in X.XX metrics arrears are for portfolio

While cost to the skilled Census. is in with quarter. not operating both portfolio. stable, cases, three coverage our partners by in nursing Medicaid declines. A skilled in from our of driver was down reduction basis portfolio coverage able declines of the was declined operating The Census X points some tandem our skilled for were revenue these manage for previous partners and coverage degradation combination revenue the in portfolio In living assisted in primary a nursing the our decline

is to offset later an of going anticipating increases operating forward, Medicaid As in our one year. rate partners pressures the the downward

increase rate operators. Medicare X.X% X, XXXX beginning proposed a the positive Additionally, be to our should impact October

engage current partners performance with to monitor regular We their environment. this on operating a our basis are continuing to through

Wendy. like call to back would Now, I the to turn

Wendy Simpson

Thank you, Pam Clint. and

NIC, all now, year’s point there occupancy you heard decline senior an according from basis housing in XX rates last to have average has industry-wide with by a including been to As X-year likely levels. falling low a drop

sector. did In fact, news our for good provide NIC recent report the most much not

I know through all that demographic long-term housing environment. well has trends the this challenging strong. remain seniors LTC we believe However, managed

add disciplined, have are to not not being value LTC’s careful sake, could not real that that’s style. make grow innovative We investments well-funded remained but highly to growth LTC. We and for

on are bit along our of a needs the operating and knowing into that while steadfast in us well. creativity conservative this in only us and flexibility takes to served okay strategic plan through partners, that meeting it we are same it partners measured We maintaining when we and a we the has of longer focus to with If framework We LTC. everything continue do path that the benefits one not transaction complete will investing. be sound but shareholders deals of environment, enter our that financing a

is every it built FFO we and portfolio on feel call quarterly XXXX important I say to through I reiterate, generate As because to have beyond. a

have drive for our value transparency add you are and long-term we success. We while culture successfully shared and And through partners to shareholders. provide trust, capitalized ability of joining demonstrated our needs for us a continuing well to focus of will today. to on Thank our our continue and the to partners value we creative ways

now will We questions. your take

Operator

from And Jordan Capital Instructions] our of question first [Operator come Markets. will you. Sadler Thank KeyBanc

Jordan Sadler

distributions just from within be that the is be going fit any a will then XXXX and for ultimately increase on what? commentary them to initially remaining I want the you use Thank think capital paid how can or there on to some special the commitments, you Sunrise capital will overall Pam the touch gain you of perspective or year, this gain said the that based or requirements the elucidate you but morning. your be assets, just point absorbed activity you proceeds will fund and to you do in may line, good tax I your through the

Pam Kessler

Yes. Hi, Jordan.

anticipating not special We any dividend. are

sales special a necessitating no, We to have our contemplating are support so in any room of more we sales that our without year. transactions in dividend dividend, this

Jordan Sadler

obviously? XXXXs Okay. no And

Pam Kessler

No.

Jordan Sadler

your or guess if it’s I there there pressure upward but technical, on dividend a thought don’t know normalized flow? And room $X current share quarter increase because too I gain over to you year certainly this is your and well two in dividend to guys or Okay. is a operating with about, enough put cash are relative this this that is you I

Pam Kessler

for policy not – if There our year we the target alter Yes. doesn’t payout there this is room, sale XX% as is dividend know you ratio.

year. comfortably this we within So are for that

Jordan Sadler

Oregon? rates targeting the $XX separately memory you million Okay. spoke you in be in care the Texas cap the to would that facilities active pipeline, and And Clint, then on then

Clint Malin

We are the X.X X to in looking range.

Jordan Sadler

one Okay. the And the facilities November, today? is rent just the coverage the Clint expiration and you on in what last those for on is

Clint Malin

of you do these those facilities rent want you The cash GAAP two buildings? on or rents want rents

Jordan Sadler

I guess.

Clint Malin

is buildings X.X So right now rents about million. cash for on on it XX trailing these the two the

Jordan Sadler

is the assume I X.X, GAAP lower.

Clint Malin

Correct. coverage right And around the is this X on times.

Jordan Sadler

Is coverage? that cash

Clint Malin

Correct.

Jordan Sadler

Thank Okay. you, guys.

Clint Malin

you. Thank

Pam Kessler

Thank you, Jordan.

Operator

Our will Stifel. next Chad of come from question Vanacore

Chad Vanacore

Hi morning. good

Pam Kessler

Good morning.

Chad Vanacore

a So, FFO to so the $X.XX? that’s really is quickly $X.XX missed $X.XX I it up guidance,

Pam Kessler

Correct.

Chad Vanacore

post-transfer? And the gains, some give some can margin you occupancy gave on those are expense the on performing Okay. Thrive you helpful and management then Clint on all how numbers us color properties

Clint Malin

we in quarter’s higher residence that to agency that on there usage a manage of have The that had has on couple some down the mentioned as Thrive about been margin was side, call before available on far of properties. the communities margins labor last as utilization the the some there they and compression in

have Thrive to sure make down. with in that we with are they engaged working So, are them they and managing been working

transition of bit take time to and ahead accomplish. go of little a buildings So, the does

it. other circumstances we We that managing aware are through, have are have working in they been I of seen and they think and

I we progress think making on that. are

Chad Vanacore

That’s me. it great. Okay, for Thanks.

Clint Malin

Thank you.

Operator

of we Michael from next have Capital question And Markets. a Carroll RBC

Michael Carroll

the policies to performance mentioned coverage tenants Yes, weighed are right operating results, you increase? improve more now implementing of coverage waiting little Medicare types are they bit rates help other and provide their that can they at thanks. where to Clint, you for are on ratios detail the Medicaid down a and three just that or hoping

Clint Malin

question. good Sure,

decline one they We on in coverage to has back about of operator particular, given Medicare talked haven’t which in which they operator, Census is specific a and case calls did we by Skilled in have have increase managing in one but previous do the little mix, Census a months for can XX note do an probably that and quarter they operator, they in have taking ago, probably where over quarter over of away capital we a from hiring for in quarter that and resources increasing better not one indicated that complex seen skilled the push policies see it into have operator that. more made progress lot equipment. We gravitating they definitely sequentially pulmonary made event on but was in quarter a have that invested care, rehab buying of time cardiac and put procedures and up, towards programs and and we portfolio and through

care. made So pleased proposed rule the the they towards they have shift complex that with reimbursement investment model would PDPM of and now more that are very

not So the gravitate will that. think they that. I into reimbursement excited XXXX, off that’s steps take are so making to effect they rates Obviously, but future, positive are until those towards

seeing are what operators. it’s with the example one one we So, of

Michael Carroll

shown quarter? should we through the weakness again decline all am next I coverage And right as coverage the the expect how now tenants these big are of ratio,

Clint Malin

I given on the larger that. mean, the contribute to the tick the tick down – down We operators obviously, know that

seen see growth. scale but we where these large got that So, down quarters a we quarter, couple companies off in have sequentially a weaker tick strong operating organizations are have a are we back coverage, cases and of third in and in falling because XXXX maybe possibly have might

still have challenging growing fall So, in bit and quarters XX takes coverage legacy regain. while a of more coverage take to remain, it are the courses they as again if that more a you off strong just little we phase-in may have trailing part for that

Michael Carroll

Pam, many coverage do guess sort leases right our above just mean, have coverage many with could the I guess tight I X.X, Okay. are fairly ratios maybe what’s about above now you how EBITDA talk those ratios And X.X, I considered the you or how in coverage of or ratios distribution? Clint then average is ratio

Clint Malin

within outliers say the any of large band. material our would it rent have so I that would portfolio, fall is don’t we within distribution

Michael Carroll

Okay. Thank you.

Wendy Simpson

welcome. Thank are you. You

Operator

of from next comes Your Capital question One. Bernstein Daniel

Daniel Bernstein

that a security about so Hi, could question are if you there SNF I there talk and and continue corporate wanted guaranties properties struggling, bit large talked those leases? on you to those on entities little coverages about we you given the on a are

Wendy Simpson

corporate a we In other company the In have it’s one the lessees, combination we of as case case operators. parent and guarantee. do so different have the that

guarantee of We have NT a strong corporate then credit as on the corporate as on have one security deposit. another. One, strong we well have letter the got a lessee and we as

Daniel Bernstein

And current tenants the Okay. those are rent? on

Wendy Simpson

Yes.

Daniel Bernstein

to your the them more? such the Okay. lease through assets want assets, obviously, I process that re-leased and little understand the and bit in went Sunrise And – on the then saw thought to the going a so and to Sunrise, for versus peers want just value back as understand sale

Wendy Simpson

strong bankers the options had we we for both reverse growing marketplace. run attractive given for think leasing that relationship well the lay and into So look buyer. at the process, to to in us a a assist when that company with us process for existing at in to for this an pricing to is them They a had engaging I we have and worked I look operator think relationship. sales And was

Daniel Bernstein

Is the you be the of some reduce age portfolio, the improve know strategy it portfolio age forward? I years of could old, talked to the going the so all of later strategy XX I additional part year sold a to this the about assets that what’s also that are guess

Wendy Simpson

you have lease our that’s And last on of page modernized the Dan, supplemental about and we and reduce to can ours. by we see age invest want been continuing absolutely in a have consideration. I invest It’s strategy up to the average and number mean, new assets. of calls that about talked our

good selling modernized think can of us makes capital have we it on are if we sense buildings and for where comes and situation assets. think when or that assets to we looking strategy that’s that and we going in an bring new same the get to re-leasing look reinvest we so do as the consideration expires attractive a this at we average options. price at down want thing can definitely two to the a to that’s that’s pricing we we We look the option at at and And think will how us that for a to lease the what age reduce see year, look portfolio, for will age And of best lease strategy continue assets at us. the is the we end at in we look long-term

Daniel Bernstein

the of the I want your How the hit coverages think oversupply many of industry? some to significant was housing in lease seniors age industry have maybe the just seniors other portfolio improving housing understand the REITs versus deterioration the your given in versus and performance in

Wendy Simpson

As on of the average far I have average couple age. sale – Sunrise Right the we ALC executed of ago. years follow-up now, the as maybe age sold sale and asset. assets assets don’t of X did We in we the we some the a

properties to vintage. XX So, that early the probably XXXX XX in were late alone is that all

those We number of average development definitely and I portfolio. our assets has average a our then mean, the selling can then assets, private on get these the you can the pay So, age, lot age investing so we in private of to follow-up. in new on changed

Pam Kessler

Yes.

is it. because that years is, really are in we don’t portfolios that we around and that prior It’s have legacy that X newer average a that and than indicative, I old. have but recalling think years of presentations, are years our am got I less lot old of more are assets then I XX one it if age it’s XX think

So meaningful I think. there the not is mean that don’t

Wendy Simpson

Okay.

have were properties. of strong those properties early portfolio strong Brookdale very again which have a XXXX late-‘XXs, coverage vintage But and have assets very We coverage. those

Daniel Bernstein

Okay. floor. I leave all the Thank for you color. will the

Wendy Simpson

you. Thank

Operator

Our next question [Operator of Ford Karin come from Instructions] will Securities. MUFG

Karin Ford

lease on on to Hi, they ultimately could be of continue end the and set? the get the forbearance the the is shake as good the see your think to out the you latest am year of any time permanent wondering I progress Do rent should Anthem where morning. I if thoughts where to on ultimately see that make will thoughts right sort leasing.

Pam Kessler

the rent. I permanent won’t predict

less I it run-rate think we and time XXXX. for gave of don’t have be than I it front but last in quarter by me, no would that would rent assume quarter the I fourth quarter

occupancy. Glenview which and quarter will We review, some about well The are to and of so properties. on because right had now problems Oaklawn. industry periods, month, season the to quarter doing some see extremely is illnesses with they are seems within showing not a some doing, in have has month by admit got well see how flu last we They by be increases

monitor how has We will it Anthem impacted have that forward. going constantly and to see

in can, up Anthem And ALC, as are rent we they the of certainly want and we predict we over give we the cash quarter going to go Thrive the will keep this don’t so at have like anymore but possibly where into given I to had much end as and year, them for fourth when to explaining past the they to you moment. have right we as will be explain color than we by lease what

Karin Ford

within like new skilled. looking the is on fair senior skilled sounds Question guys and opposed for larger heavily senior at new pipeline, the it enough. the Are on to housing in focus or goal it’s the portfolio on as housing Okay, you development? towards to buys weighted investment Clint really

Clint Malin

existing the a We for in we nearly side. mean, the have continue operators have supporter right the good we portfolio. have side. that I it on nursing right opportunities at just look at for looking opportunities been and It to expand and to skilled us looked we a our the obviously operating always partner of with that happens are fit would skilled

just across that come yes active our skilled haven’t opportunities have in that So, side, the into it happened pipeline. fallen

Karin Ford

preferred as one me, missed you last did I update care this, to for sorry just give within but an the your stand where bankruptcy? then guys if And Thanks. property

Clint Malin

bankruptcy. preferred right XX now, assume have mindset understand still We in June to We reject did is now, extension care. the on the not but that Karin, we progressing Right update leases. they care are XX-day for or preferred give extension – has date they that, that, an in

want So, to our they we would assume indicated leases.

was I read of New in the on transcript assumption transition date they call referenced I that working fourth relates extension their buildings the Omega’s on are on their of earnings to Mexico the that transitioning they part Kentucky. the and transitioning Omega’s should buildings in what think portfolio, on of rejection that’s believe within XX the to was I quarter which operators call. occur are mentioned

So, I think that’s and have. they the gating item to exiting being able property New the to leases Kentucky conclude that Mexico bankruptcies the

Karin Ford

are they fully And correct? current still rent on

Clint Malin

correct. is That

Karin Ford

you. Thank

Clint Malin

you. Thank

Pam Kessler

Thank you, Karin.

Operator

our to And over would I conference closing like this concludes question-and-answer session. any the Simpson Wendy remarks. for turn to back

Wendy Simpson

listening Have thank Thank you. spending and a you fall. forward look to to to presentation. time you great all again Again, We our talking for your day. early

Operator

now is presentation. today’s conference The you attending concluded. for Thank

You disconnect. may now