LTC Reports 2017 Second Quarter Results
Net income available to common stockholders was
Funds from Operations (“FFO”) increased 7.6% to
LTC completed the following transactions during the second quarter of 2017:
- Sold four assisted living communities in
Indiana andIowa , totaling 175 units for an aggregate sales price of$14.3 million , and recognized a net gain on sale of$5.1 million . Rental revenue is expected to decrease by$951,000 on an annual basis as a result of the sale; - Acquired a 107-unit assisted living community and a senior housing community with 25 independent living and 48 memory care units, both in
California , for an aggregate purchase price of$38.8 million . Simultaneously upon closing, LTC entered into a 15-year master lease agreement with a new operator at an initial cash yield of 7.0% and added the properties to the master lease agreement; - Issued a default notice on a master lease covering 11 memory care communities, two of which are under development. LTC is currently negotiating the transition of two of the operational properties to another operator in its portfolio. Accordingly, as of
June 30, 2017 , LTC wrote off approximately$1.9 million of straight-line rent and other receivables related to these two properties. LTC is currently in negotiations with the operator regarding the remaining properties and is exploring options which may include transitioning some or all of the properties to another operator and/or a possible sale of some or all of the properties. Subsequent toJune 30, 2017 , the rent paid by this operator will be recorded on a cash basis. Annual GAAP rent under the master lease is approximately$11.7 million , and atJune 30, 2017 the net book value of the properties was$111.6 million . LTC had$8.6 million in straight-line rent receivable and$6.6 million in other assets on its balance sheet atJune 30, 2017 ; and - Entered into agreements to transition two memory care communities to a different operator in its portfolio, contingent upon licensure by the new operator, which is anticipated to occur in the third quarter of 2017. Additionally, LTC purchased a newly constructed 60-unit memory care community in
Ohio for$15.7 million and added it to a master lease with the same operator who is taking over the management of the two memory care communities noted above. Based on the timing of the transition and funds held in escrow, LTC estimates a potential write-off of straight-line rent receivable ranging from$0 to$383,000 . Annual GAAP rent under the lease being terminated related to the two communities being transitioned was$2.4 million and annual GAAP rent under the master lease prior to the addition of all three properties was approximately$3.8 million , which will increase to$6.3 million after the additions.
Conference Call Information
LTC will conduct a conference call on
An audio replay of the conference call will be available from
About LTC
LTC is a self-administered real estate investment trust that primarily invests in seniors housing and health care properties primarily through sale-leaseback transactions, mortgage financing and structured finance solutions including mezzanine lending. At
Forward Looking Statements
This press release includes statements that are not purely historical and are “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, including statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future. All statements other than historical facts contained in this press release are forward looking statements. These forward looking statements involve a number of risks and uncertainties. Please see LTC’s most recent Annual Report on Form 10-K, its subsequent Quarterly Reports on Form 10-Q, and its other publicly available filings with the
CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share amounts) |
||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
|
|
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (audited) | |||||||||||||||
Revenues: | ||||||||||||||||
Rental income | $ | 35,265 | $ | 33,072 | $ | 70,300 | $ | 64,952 | ||||||||
Interest income from mortgage loans | 6,625 | 6,811 | 13,373 | 13,389 | ||||||||||||
Interest and other income | 578 | 113 | 1,417 | 259 | ||||||||||||
Total revenues | 42,468 | 39,996 | 85,090 | 78,600 | ||||||||||||
Expenses: | ||||||||||||||||
Interest expense | 7,151 | 6,750 | 14,622 | 12,750 | ||||||||||||
Depreciation and amortization | 9,308 | 8,907 | 18,667 | 17,468 | ||||||||||||
Impairment charges |
1,880 | — | 1,880 | — | ||||||||||||
(Recovery) provision for doubtful accounts | (5 | ) | 118 | (43 | ) | 202 | ||||||||||
Transaction costs | — | 4 | 22 | 94 | ||||||||||||
General and administrative expenses | 4,386 | 4,117 | 9,126 | 8,400 | ||||||||||||
Total expenses | 22,720 | 19,896 | 44,274 | 38,914 | ||||||||||||
Operating income | 19,748 | 20,100 | 40,816 | 39,686 | ||||||||||||
Income from unconsolidated joint ventures | 575 | 278 | 1,020 | 550 | ||||||||||||
Gain on sale of real estate, net | 5,054 | 1,802 | 5,054 | 1,802 | ||||||||||||
Net income | 25,377 | 22,180 | 46,890 | 42,038 | ||||||||||||
Income allocated to participating securities | (104 | ) | (105 | ) | (201 | ) | (206 | ) | ||||||||
Net income available to common stockholders | $ | 25,273 | $ | 22,075 | $ | 46,689 | $ | 41,832 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.64 | $ | 0.58 | $ | 1.19 | $ | 1.11 | ||||||||
Diluted | $ | 0.64 | $ | 0.58 | $ | 1.18 | $ | 1.11 | ||||||||
Weighted average shares used to calculate earnings per common share: |
||||||||||||||||
Basic | 39,414 | 37,969 | 39,390 | 37,707 | ||||||||||||
Diluted | 39,794 | 38,164 | 39,769 | 37,720 | ||||||||||||
Dividends declared and paid per common share | $ | 0.57 | $ | 0.54 | $ | 1.14 | $ | 1.08 |
Supplemental Reporting Measures
FFO, adjusted FFO (“AFFO”), and Funds Available for Distribution (“FAD”) are supplemental measures of a real estate investment trust’s (“REIT”) financial performance that are not defined by
FFO, as defined by the
We define AFFO as FFO excluding the effects of straight-line rent, amortization of lease inducement, effective interest income and deferred income from unconsolidated joint ventures. GAAP requires rental revenues related to non-contingent leases that contain specified rental increases over the life of the lease to be recognized evenly over the life of the lease. This method results in rental income in the early years of a lease that is higher than actual cash received, creating a straight-line rent receivable asset included in our consolidated balance sheet. At some point during the lease, depending on its terms, cash rent payments exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. Similar to the accounting methodology of straight-line rent, the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan thus creating an effective interest receivable asset included in the interest receivable line item in our consolidated balance sheet and reduces down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. By excluding the non-cash portion of rental income, interest income from mortgage loans and income from unconsolidated joint ventures, investors, analysts and our management can compare AFFO between periods. Normalized AFFO represents AFFO adjusted for certain items detailed in the reconciliations.
We define FAD as AFFO excluding the effects of non-cash compensation charges, capitalized interest and non-cash interest charges. FAD is useful in analyzing the portion of cash flow that is available for distribution to stockholders. Investors, analysts and the Company utilize FAD as an indicator of common dividend potential. The FAD payout ratio, which represents annual distributions to common shareholders expressed as a percentage of FAD, facilitates the comparison of dividend coverage between REITs. Normalized FAD represents FAD adjusted for certain items detailed in the reconciliations.
While the Company uses FFO, Normalized FFO, AFFO, Normalized AFFO, FAD and Normalized FAD as supplemental performance measures of our cash flow generated by operations and cash available for distribution to stockholders, such measures are not representative of cash generated from operating activities in accordance with GAAP, and are not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.
Reconciliation of FFO, AFFO and FAD
The following table reconciles GAAP net income available to common stockholders to each of NAREIT FFO attributable to common stockholders and normalized FFO attributable to common stockholders, as well as normalized AFFO and normalized FAD (unaudited, amounts in thousands, except per share amounts):
Three Months Ended | Six Months Ended | ||||||||||||||||
|
|
||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
GAAP net income available to common stockholders | $ | 25,273 | $ | 22,075 | $ | 46,689 | $ | 41,832 | |||||||||
Add: Depreciation and amortization | 9,308 | 8,907 | 18,667 | 17,468 | |||||||||||||
Add: Impairment charges |
1,880 | — | 1,880 | — | |||||||||||||
Less: Gain on sale of real estate, net | (5,054 | ) | (1,802 | ) | (5,054 | ) | (1,802 | ) | |||||||||
NAREIT FFO attributable to common stockholders | 31,407 | 29,180 | 62,182 | 57,498 | |||||||||||||
Less: Non-cash rental income | (1,856 | ) | (2,160 | ) | (4,196 | ) | (4,477 | ) | |||||||||
Less: Effective interest income from mortgage loans | (1,401 | ) | (1,293 | ) | (2,708 | ) | (2,555 | ) | |||||||||
Less: Deferred income from unconsolidated joint ventures | (47 | ) | — | (94 | ) | — | |||||||||||
Adjusted FFO (AFFO) | 28,103 | 25,727 | 55,184 | 50,466 | |||||||||||||
Add: Non-cash compensation charges | 1,425 | 1,029 | 2,684 | 2,019 | |||||||||||||
Add: Non-cash interest related to earn-out liabilities | 125 | 166 | 351 | 315 | |||||||||||||
Less: Capitalized interest | (201 | ) | (256 | ) | (371 | ) | (942 | ) | |||||||||
Funds available for distribution (FAD) | $ | 29,452 | $ | 26,666 | $ | 57,848 | $ | 51,858 | |||||||||
NAREIT Basic FFO attributable to common stockholders per share | $ | 0.80 | $ | 0.77 | $ | 1.58 | $ | 1.52 | |||||||||
NAREIT Diluted FFO attributable to common stockholders per share | $ | 0.79 | $ | 0.77 | $ | 1.57 | $ | 1.52 | |||||||||
NAREIT Diluted FFO attributable to common stockholders | $ | 31,511 | $ | 29,285 | $ | 62,383 | $ | 57,704 | |||||||||
Weighted average shares used to calculate NAREIT diluted FFO per share attributable to common stockholders |
39,794 | 38,164 | 39,769 | 37,902 | |||||||||||||
Diluted AFFO | $ | 28,207 | $ | 25,832 | $ | 55,385 | $ | 50,672 | |||||||||
Weighted average shares used to calculate diluted AFFO per share | 39,794 | 38,164 | 39,769 | 37,902 | |||||||||||||
Diluted FAD | $ | 29,556 | $ | 26,771 | $ | 58,049 | $ | 52,064 | |||||||||
Weighted average shares used to calculate diluted FAD per share | 39,794 | 38,164 | 39,769 | 37,902 | |||||||||||||
CONSOLIDATED BALANCE SHEETS (amounts in thousands, except per share) |
||||||||
|
|
|||||||
ASSETS | ||||||||
Investments: | ||||||||
Land | $ | 122,851 | $ | 116,096 | ||||
Buildings and improvements | 1,229,290 | 1,185,467 | ||||||
Accumulated depreciation and amortization | (288,442 | ) | (275,861 | ) | ||||
Operating real estate property, net | 1,063,699 | 1,025,702 | ||||||
Properties held-for-sale, net of accumulated depreciation: 2017—$1,058; 2016—$0 | 1,170 | — | ||||||
Real property investments, net | 1,064,869 | 1,025,702 | ||||||
Mortgage loans receivable, net of loan loss reserve: 2017—$2,219; 2016—$2,315 | 220,385 | 229,801 | ||||||
Real estate investments, net | 1,285,254 | 1,255,503 | ||||||
Notes receivable, net of loan loss reserve: 2017—$166; 2016—$166 | 16,402 | 16,427 | ||||||
Investments in unconsolidated joint ventures | 29,702 | 25,221 | ||||||
Investments, net | 1,331,358 | 1,297,151 | ||||||
Other assets: | ||||||||
Cash and cash equivalents | 9,299 | 7,991 | ||||||
Debt issue costs related to bank borrowings | 1,349 | 1,847 | ||||||
Interest receivable | 12,255 | 9,683 | ||||||
Straight-line rent receivable, net of allowance for doubtful accounts: 2017—$1,013; 2016—$960 | 59,287 | 55,276 | ||||||
Prepaid expenses and other assets | 27,010 | 22,948 | ||||||
Total assets | $ | 1,440,558 | $ | 1,394,896 | ||||
LIABILITIES | ||||||||
Bank borrowings | $ | 45,000 | $ | 107,100 | ||||
Senior unsecured notes, net of debt issue costs: 2017—$1,235; 2016—$1,009 | 597,898 | 502,291 | ||||||
Accrued interest | 4,543 | 4,675 | ||||||
Accrued incentives and earn-outs | 12,140 | 12,229 | ||||||
Accrued expenses and other liabilities | 23,810 | 28,553 | ||||||
Total liabilities | 683,391 | 654,848 | ||||||
EQUITY | ||||||||
Stockholders’ equity: | ||||||||
Common stock: |
396 | 392 | ||||||
Capital in excess of par value | 854,340 | 839,005 | ||||||
Cumulative net income | 1,060,333 | 1,013,443 | ||||||
Cumulative distributions | (1,157,902 | ) | (1,112,792 | ) | ||||
Total equity | 757,167 | 740,048 | ||||||
Total liabilities and equity | $ | 1,440,558 | $ | 1,394,896 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170809006000/en/
Source:
Athene Holding Ltd. Reports Second Quarter 2017 Results
Quorum Health Corporation Announces Second Quarter 2017 Operating Results
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News