LTC Properties, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone Q4 filing; quarterly figures are noted where disclosed. LTC is a healthcare and seniors-housing REIT investing through property leases, mortgage and other loans, financing receivables, and joint ventures.
Financial and operating results
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $175.2 million | $155.3 million |
| Net income available to common stockholders | $99.4 million | $55.4 million |
| Diluted EPS | $2.48 | $1.41 |
| NAREIT FFO per diluted share | $2.56 | $2.20 |
| Cash provided by operating activities | $105.6 million | $91.2 million |
- Revenue increased 12.8%. Rental income rose to $128.2 million from $121.1 million, and mortgage-loan interest income increased to $40.6 million from $32.8 million. The company also recorded $1.8 million of financing-receivable interest income.
- Net income growth included a $37.8 million net gain on real-estate sales, versus $7.5 million in 2021. FFO, which excludes real-estate sale gains and adds back real-estate depreciation, rose to $102.5 million from $86.2 million.
- Q4 2022 revenue was $47.8 million and net income available to common stockholders was $17.8 million; Q4 2021 figures were $39.4 million and $12.7 million, respectively.
- Annual cash distributions were $2.28 per share, unchanged from 2021. The company declared monthly dividends of $0.19 per share for January through March 2023.
- Year-end total assets were $1.66 billion, total equity $850.3 million, and cash and cash equivalents $10.4 million. Net carrying value of investments was $1.56 billion.
- Debt obligations totaled $767.9 million, net of debt issuance costs. Debt to gross asset value was 37.4%; interest and fixed-charge coverage were each 4.3x for the year. The weighted-average stated debt rate at year-end was 4.24%. The company reported compliance with debt covenants.
- Year-end liquidity included $270.0 million available on the revolving credit facility and $130.6 million of remaining capacity under equity distribution agreements. After year-end, LTC drew $162.7 million on the revolver, leaving $107.3 million available.
- Portfolio gross investments were $1.96 billion across 204 properties or investments in 29 states. Skilled nursing and assisted living represented approximately 50.0% and 48.6% of gross investments, respectively.
Material changes and unusual items
- 2022 net income included a $37.8 million real-estate sale gain. LTC sold five properties for $74.3 million and recorded a $3.4 million impairment charge, compared with no impairment charge in 2021.
- Interest expense increased to $31.4 million from $27.4 million, reflecting new debt, higher revolver rates, and the 2022 issuance of $75 million in senior unsecured notes.
- LTC acquired four Texas skilled nursing centers for approximately $51.8 million. It also invested $61.7 million in a joint venture that acquired three Florida skilled nursing centers; accounting rules require this arrangement to be reported as a financing receivable.
- During 2022, LTC issued 1.79 million common shares for net proceeds of $68.2 million. The filing reports no issuer repurchases of equity securities.
- After year-end, LTC invested $117.9 million in a joint venture acquisition of 11 assisted-living and memory-care communities. The transaction is also presented as a financing receivable under GAAP.
- In the third quarter, LTC terminated an operator’s master lease, forgave $7.1 million of deferred rent, and paid a $0.5 million termination fee; replacement-operator rent was initially waived for four months. LTC also recorded a $1.3 million impairment on a Kentucky assisted-living community classified as held for sale.
Outlook, risks, and contingencies
- Management said available cash, operating cash flow, borrowing capacity, and potential capital-market access were sufficient for current operating costs, debt service, dividends, and planned 2023 investments. It also said liquidity was sufficient for the current dividend and corporate needs.
- For leases in place at year-end, management projected 2023 cash rental income of $120.8 million, compared with $130.7 million in 2022; the filing’s projection assumes no lease modifications, replacements, or new leased investments, subject to specified exceptions.
- Key exposures include operator performance and rent collection, staffing and operating-cost inflation, occupancy and pandemic effects, healthcare reimbursement and regulation, lease renewals, interest rates, refinancing and capital access, and real-estate impairment. Three operators generated approximately 33.4% of 2022 revenue from leases and investment interest. Prestige Healthcare alone accounted for 18.6% of total revenue.
- CMS finalized a 2.7% estimated increase in aggregate Medicare Part A skilled-nursing payments for fiscal 2023, but future reimbursement rules, including potential minimum staffing requirements, could affect operators’ finances and ability to pay LTC.
- At year-end, contractual commitments totaled $67.3 million remaining, including real-estate, mortgage-loan, and notes-receivable commitments. The filing describes ordinary-course litigation and operator-related claims that management does not expect to be material.
- Ernst & Young issued unqualified opinions on the financial statements and internal control. The audit identified impairment of real-property investments as a critical audit matter because assessing recoverability depends on subjective assumptions about future cash flows, operators, rents, and property values.
Important facts for investors to verify
- Whether operators’ occupancy, staffing costs, reimbursement, and cash generation support timely rent and debt-service payments—particularly among the largest operators.
- Lease renewal and re-leasing outcomes, including the Brookdale lease renewal decision and properties with near-term expirations or operator transitions.
- Whether the year’s earnings growth is repeatable: assess recurring rental and interest income separately from the $37.8 million sale gain, and compare cash flow and FFO with the dividend.
- Liquidity after the post-year-end revolver draw, upcoming debt maturities, interest-rate exposure, and compliance with financial covenants.
- Expected recovery and returns on loans, financing receivables, joint ventures, and the large post-year-end investment; review credit-loss reserves and collateral/operator conditions.
- The basis for impairment estimates and management’s 2023 rent projection, including the effect of lease changes, concessions, and variable rent.