LTC Properties: New CIO to unlock strategic investment opportunities

LTC Properties started the year on a strong footing, with $176m in gross assets converted or to be converted into a new SHOP portfolio. In its latest financial results, the company highlighted comfortable liquidity to undertake attractive investments, led by the group’s new chief investment officer.

LTC Properties, Inc., which was incorporated in 1992 in Maryland, US, is a health care real estate investment trust (REIT) that primarily invests in housing for seniors and health care properties through sale-leasebacks, mortgage financing, joint ventures and structured finance solutions including preferred equity and mezzanine lending.

The company’s investment portfolio includes 187 properties in 25 states with 28 operating partners. Assisted living made up of 110 properties and skilled nursing 76 as of March 31, 2025. In addition, housing for seniors accounts for approximately 50% of gross investment portfolio, with skilled nursing properties the remaining 50%.

Finishes Q1 25 with ample liquidity position

The company reported total revenues of $49m in the quarter, reflecting a 4.5% y/y decrease, owing to one-time revenue received in 2024 for the repayment of a $2.4m of rent credit received in connection with the sale of a 110-unit assisted living community. This was partially offset by rent increases from fair-market rent resets, and higher income from sale lease-back financing receivables and additional loan funding. Expenses rose due to provision for credit losses related to the write-off of a note receivable. As a result, net income decreased by $3.5m to $20.5m in Q1 25, with the decline partially offset by an increase in income from redemption of preferred equity interest in a JV, resulting in the receipt of $16m, including a 13% exit IRR of $3m.

LTC Properties ended the quarter with substantial liquidity of $681.2m, including $23.3m cash, $276.3m available under the unsecured revolving line of credit, and ability to issue up to $381.7m of stock under equity distribution agreements.

Encouraging guidance

In 2025, LTC Properties guided for the conversion of Anthem’s triple-net portfolio of 12 properties, along with pending conversion of a property under New Perspective’s triple-net lease into the company’s new SHOP portfolio. In addition, the company anticipates SHOP NOI in between $9.4m and $10.3m for the remaining eight months of 2025, and SHOP FAD capex in between $600,000 and $800,000. Overall, the group expects GAAP net income between $3.38 and $3.42 per share, diluted core FFO of between $2.65 and $2.69 per share, and diluted core FAD of between $2.78 and $2.82 per share.

Capital infusion over the long term

LTC Properties reported a decent top line performance over FY 21-24, posting a CAGR of 9.1% to reach $202m. EBITDA rose at a CAGR of 12.4% to $160m in FY 24, with margins expanding by 6.8% to 79.6%. Net income surged at 17.7% CAGR over the same period, reaching $91m in FY 24.

The cash position of the group increased from $5.2m at end-FY 21 to $9.4m at end-FY 24, helped by infusion of equity and debt, and offset by real estate assets acquisition. The company has posted moderation in leverage with debt to equity decreasing from 97% to 65% over the same period.

In comparison, CareTrust REIT, a local peer, outperformed with a revenue CAGR of 15.5% over the past three years, reaching $296m in FY 24. EBITDA increased at a CAGR of 15% to $246m in FY 24, with margins contracting 113bp to 83.1%.

Attractive valuation relative to peer

Over the past 12 months, the company's stock returns have remained broadly flat. In comparison, CareTrust REIT’s stock outperformed with returns of about 22% over the same period. In addition, the company paid an annual dividend of $2.3 in FY 24, representing an attractive dividend yield of 6.6%. Moreover, analysts expect an average dividend yield of 6.6% over the next three years.

The company is trading at a discount compared to CareTrust REIT. LTC Properties is currently trading at a P/E of 16.1x, based on the FY 25 estimated EPS of $2.1, which is lower than CareTrust REIT’s valuation of 21.7x. However, it is trading higher than its 3-year historical average of 15.4x.

LTC Properties is currently trading at an EV/EBITDA multiple of 13.8x, based on the FY 25 estimated EBITDA of $165.2m, which is lower than its 3-year historical average of 14.4x and that of CareTrust REIT (18.1x).

LTC Properties is monitored by eight analysts, two of whom have ‘Buy’ ratings and five have ‘Hold’ ratings for an average target price of $37, implying 7.2% upside potential from the current price. Analysts anticipate EBITDA CAGR of 0.6% over FY 24-27, reaching $172.9m, with margins of 53.9% in FY 27. In addition, analysts estimate a net profit CAGR of 0.2%, reaching $90.8m, with margins of 28.3% in FY 27. On the other hand, analysts estimate EBITDA CAGR of 26% and net profit CAGR of 41.6% for CareTrust REIT.

Overall, the company plans to build on its growth outlook and welcomed an industry veteran as its new chief investment officer aboard, who would support strategic investments across the portfolio. With $300m investment pipeline and implementation of RIDEA strategy, the group is poised for sustained growth in the sector. However, LTC Properties is prone to some risks, including dependence on operators, public health crises, and prudent regulations in the healthcare industry.