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LTC Properties : Transcript of LTC Properties, Inc. Q3 2020 Earnings Call

11/03/2020 | 04:40pm EDT

LTC Properties, Inc

3Q20 Analyst and Investor Call October 30, 2020 at 8:00 a.m. Pacific


Wendy Simpson - Chairman & CEO

Pam Kessler - Co-President & CFO

Clint Malin - Co-President & CIO

Mark Parkinson - President & CEO, AHCA




Good day and welcome to the LTC Properties' Third Quarter 2020 Conference Call. After today's presentation will be an opportunity to ask questions. To ask a question you may press star and then one on your touchtone phone. To withdraw the question please press star then two.

Before management begin this presentation, please know that today's comments including the question- and-answer session may include forward looking statements, subject to risk and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC Properties filings for the Securities and Exchange Commission's from the time to time, including the company's most recent 10-K, dated December 31, 2019. LTC is undertaking no obligation to revise or update these forward looking statements to reflect the events and circumstances after the date of the presentation. Please note this event is being recorded.

I would now like to turn the conference over to Wendy Simpson.

Wendy Simpson

Thank you, operator. And good morning, everyone. Welcome to LTC's 2020 third quarter conference call. Joining me today are Pam Kessler, our Co-President and Chief Financial Officer; and Clint Malin, Co- President and Chief Investment Officer. I'm excited that we also have Mark Parkinson from the American Health Care Association with us to discuss how our industry is responding to the COVID-19 crisis, specifically as it relates to the CARES Act and government support in the seniors housing and skilled nursing space.

Before I begin my business review, I want to again thank our operating partners for all of their efforts to keep their patients, residents and employees safe during the pandemic. It bears repeating that we could not be more in awe of their responses to the extraordinary challenges they have faced over the last many months. And we know they will valiantly face several months to come as some areas experience resurgence of cases as we enter the winter and flu season.

I would also like to quickly update you on the story we told you last quarter about Mary Daniels, the wife of an Alzheimer's patient at one of our communities. Mary took a part-time dishwashing job so that she could spend time with her husband amidst visitation restriction. Because the governor of Florida recently eased COVID related restrictions for senior housings and care visitation, Mary completed her professional dishwashing career and can now visit her husband at will adhering to all proper safety protocols of course. The community Rosecastle at Deerwood, which is operated for us by ALG Senior has maintained close ties with Mary. She continues to be active in the media speaking positively about Rosecastle, as well as advocating for families across the nation who are trying to find ways to see and visit their loved ones. We wish Mary and Steve nothing but the best.

Unfortunately, there has not been a consistent meaningful decrease in COVID-19 cases around the country. In fact, many states and regions are seeing spikes in new cases. Some states, however, have been able to flatten the curve, with several easing restrictions as they pertain to senior housing and care. While our industry continues to face cost challenges related to supplies, testing and staffing, I believe our operating partners now have better tools and a much better understanding of how to manage in the world of COVID.

LTC Properties, Inc October 30, 2020 at 8:00 a.m. Pacific


LTC is continuing to provide support where we are needed. For example, we're in the process of rolling out a new program called Smart Design, which was conceived by our Executive Vice President and Managing Director of Business Development, Doug Korey and our Vice President Marketing and Investor Relations, Mandi Hogan. This initiative comes from LTC's desire to assist operators in upgrading their buildings for state of the art infection control protocols.

While some of the biggest operators in the country may have the resources to take on such projects on their own, smaller regional operators often don't have the same bandwidth. With that in mind, we are partnering with Avenue Development to assist our operators with turnkey and customized retrofitting options. Some features of Smart Design include air filtration, including bipolar ionization, UV sanitation devices, custom dividers and touchless equipment among others.

Avenue will be responsible for the retrofitting. While LTC will work with our partners to finance implementation of the program into current leases or providing a line of credit with attractive rates and flexible terms. While COVID was the catalyst for the program, we believe the benefits will serve us well over the long term by helping ensure our portfolios includes safer, more updated assets.

Mark is going to spend his time talking about government initiatives and relief for our industry. So I'll comment just briefly. After a considerable lobbying effort, private pay operators are now receiving government aid. They along with skilled nursing operators also receive point of care testing equipment from the government. Most recently, the government released Phase 3 of its CARES Act, which includes an additional $20 billion in funds earmarked to help cover lost revenue to healthcare providers. Government support has been and will continue to be vital for our industry. Mark will provide more insight in greater detail.

Moving now to more LTC-specific discussion, while the quarter did not include significant new investments, our focus on structured finance opportunities resulted in us committing nearly $20 million in preferred equity, some of which has already been funded, and the remainder of which is expected to be funded in the fourth quarter. Pam and Clint will provide additional details.

Although restrictions regarding visits to care facilities are starting to loosen in some parts of the country, we are cognizant of the fact that the fall and winter could bring surges of the virus and, with that, restored or additional constraints. We look forward to ramping up our engagement with potential acquisition targets when safe and as restrictions are lifted.

The market remains challenging, but I firmly believe that LTC has built a strong reputation as a creative financing partner to-in the seniors housing and care space by thinking outside of the REIT box to create solutions that provide our operating partners with the financing they need to help grow their business. The reputation will serve as well over the long term.

Moving to rent deferrals and abatements, we collected 94% of third quarter rent excluding Senior Lifestyle which I'll discuss in a moment. Third quarter rent collected was 97%. The rent deferrals and abatements were granted to private pay operators. I believe I have mentioned my dislike of the GAAP requirement to recognize straight-line rent. Subsequent to our reporting second quarter results, Genesis reported that they had a going concern issue. Genesis is current on rents with us and they have not requested any rent deferrals. Still, LTC has had to report a reduction in this quarter's revenue for the straight-line rent write-off related to this lease.

Another operator, not in our top ten, who has been a go-to operator for challenging properties, and has historically performed well has been adversely impacted by COVID-19 and began short paying rents in the third quarter and requested deferrals. Despite receiving government financial support, this operator

LTC Properties, Inc October 30, 2020 at 8:00 a.m. Pacific


is reluctant to actually use those funds to pay rent for fear that there may be a government payback provision. As a result, we put them on the cash basis and wrote off their straight-line balance.

Additionally, in support of this operator, we agreed to close an assisted-living facility in Florida that had drawn the attention of certain plaintiffs' attorneys, and was damaged by one of the recent Florida storms. This closure required us to record a realization reserve of $941,000. We have not released the operator of the obligation to pay contractual rents going forward. And I believe we will eventually recover our deferred rents and contractual rent, but Pam tells me my belief is not GAAP.

I'll now provide a quick update on our Senior Lifestyle portfolio. As I mentioned last quarter, we placed the portfolio on a cash basis due to a shortfall in May and June rent payments. Since that time while recent rent payments are trending up Senior Lifestyle remains in arrears.

For the 2020 third quarter, we received rent payments of approximately $3.3 million against their quarterly contractual rent obligation to LTC of approximately $4.6 million. At September 30, Senior Lifestyle owed us $3.8 million for second and third quarter rent, $2.5 million of which is recorded in our financial statements and is covered by an undrawn letter of credit which we hold. In October, we received rent of approximately $1.3 million against Senior Lifestyle's contractual rent obligation for the month of approximately $1.6 million.

In cooperation with Senior Lifestyle, we are actively working to make changes to the 23 property portfolio, which may include bringing in new operators, pursuing sales of some of the buildings, or retaining Senior Lifestyle in a few of the properties. We are currently in negotiations with several parties and expect to have resolution for the majority of the portfolio in the first quarter of 2021.

As we discussed previously, transitioning this portfolio provides LTC with the opportunity to build relationships among several different regional operators, some of whom will be new to LTC and others with whom we have an existing relationship. As a result, we will further reduce portfolio concentration, one of our key strategic focuses.

With respect to guidance, we are not providing it at this time due to ongoing COVID related uncertainties.

Now I'll turn the call over to Pam.

Pam Kessler

Thank you, Wendy. Total revenue decreased $8.9 million compared with last year's third quarter, primarily resulting from the $5.5 million write-off that Wendy discussed, a result of transitioning two leases to cash basis accounting as of September 30, 2020.

Genesis disclosed in its most recent 10-Q, that there was substantial doubt about its ability to continue as a going concern. LTC continues to collect all contractual rent due from Genesis. However, the level of certainty regarding the collectability of future rent from Genesis through lease maturity does not meet the threshold required to maintain it on an accrual basis.

The other operator did not pay its full contractual rent for the third quarter of 2020 due to COVID-19 and we wrote-off their straight-line rent balance. During the quarter, we provided this operator with rent support in the form of deferrals and abatements totaling $756,000. As with Genesis, the level of certainty regarding the collectability of this operator's future rent through lease maturity does not meet the threshold required to maintain it on an accrual basis.

LTC Properties, Inc October 30, 2020 at 8:00 a.m. Pacific

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LTC Properties Inc. published this content on 30 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2020 21:39:05 UTC

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