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A Robust REIT for a Robust Seniors’
Health and Housing Market
LTC Properties Inc. (NYSE: LTC), a real estate investment trust focused on acquiring seniors housing and health care properties in major metropolitan markets, has crafted a diversified portfolio of well-structured leases and mortgages from coast to coast. The company’s experienced management team continues to build on its portfolio, employing a disciplined approach toward investment and a sound underwriting strategy.
- Operates more than 200 properties in 29 states with 30 operating partners
- The only publicly traded health care REIT that pays a monthly dividend
- Since 2007, LTC has grown its annual dividend from $1.50 to $2.28 per share
- Over the five‐year period ended March 5, 2018, stock return was 23.4%
- Year‐over‐year revenue growth of 4% for the twelve months ended December 2017
Advisor Access spoke with Wendy Simpson, LTC Properties’ CEO, and president.
Advisor Access: Please describe LTC’s business and property portfolio.
Wendy Simpson: LTC Properties is a health-care REIT that actively invests in seniors housing and health care real estate. We are focused on developing mutually beneficial relationships with strong regional operators and providing flexible and creative financing structures to meet their evolving needs while continuing to drive long-term value through a culture of trust, transparency, and shared success.
Our strategy is to continually seek new operator relationships while growing with our existing operators. With 202 investments as of December 31, 2017, comprising assisted living, memory care, post-acute skilled nursing, and range-of-care communities across twenty-nine states, we have successfully expanded our footprint in major metropolitan markets and their surrounding suburbs.
AA: LTC Properties focuses on seniors housing. What opportunities do you see in this market?
“The underlying market for seniors housing remains robust.”
WS: The underlying market for seniors housing remains robust. The US population continues to get older, creating ongoing demand for communities geared toward caring for people seeking senior housing.
By 2030, it is anticipated that one out of five US residents, or 70 million people, will be 65 or older, and by 2050 that number will grow to 88 million. As the size of this cohort increases, the number of Americans with Alzheimer’s disease or other dementias is also projected to grow. By 2025, the number of people 65 and older with Alzheimer’s disease is expected to reach more than seven million, up 35% from 2017, and by 2050 the number will increase to nearly 14 million.
Stand-alone memory care properties currently account for 10% of our portfolio investments, which will serve us well as the need for the kinds of care provided in the types of properties we own continues to expand.
AA: In the fourth quarter of 2017 and early in the first quarter of 2018, you completed several new transactions. Can you describe them and talk about their appeal to LTC?
WS: Our investment activity was moderately robust in the fourth quarter of 2017, including $49 million in new investments. We acquired an assisted living and memory care community in Missouri, and entered into two new real estate joint venture agreements, one for the development of an assisted living, memory care, and independent living community in Wisconsin and the other for the acquisition of an assisted living and memory care community in South Carolina. Not only do both of these transactions bring new regional operator relationships to our portfolio, they clearly demonstrate our ability and willingness to provide unique financing solutions to our operating partners.
In 2017, underwritten transactions totaled $103 million, continuing our strategy of adding newer, modernized properties to our portfolio while expanding relationships with solid regional operators. Our capital deployment strategies remain conservative to ensure profitable growth.
We have also been actively recycling capital where we believe we can put that capital to better use. During and subsequent to the end of the quarter, we identified several opportunities to recycle capital on assets that were no longer core or strategic to our portfolio. We sold a small assisted-living community in Oregon, and donated a small skilled-nursing center in Texas to a nonprofit health care provider. Additionally, we entered into a contract to sell a small portfolio of six senior living communities in Ohio and Pennsylvania. Over the last five years, we have recycled $80 million of capital, an average of $16 million annually, and worked to deploy that capital into new opportunities.
AA: What are the main highlights of your financial health, including dividend payments and your balance sheet?
WS: Our balance sheet is conservative and strong, with significant flexibility. We have maintained a long‐term debt to maturity profile that is well matched to our projected free cash flow, helping moderate future refinancing risk. There are no major long‐term debt maturities over the next five years, and we maintain significant liquidity to meet our obligations and fund future expected growth.
“Our balance sheet is conservative and strong, with significant flexibility.”
AA: Is there anything else you’d like investors to know about LTC Properties?
We have $733 million available for use under a variety of credit instruments, including a line of credit, an effective shelf registration statement and an “at-the-market” equity distribution program that allows us to raise capital through the public markets. Our balance sheet strength allows LTC to act quickly and decisively as growth opportunities arise, and, we believe, helps set us apart from other seniors housing investors who may be capital-constrained.
Since 2005, our annual dividend has grown from $1.29 per share to $2.28 per share. LTC currently pays a monthly dividend of $0.19 per share. We are the only publicly traded health care REIT that pays a monthly dividend, an attractive feature to our shareholders.
We plan to continue allocating capital strategically and conservatively to ensure profitable long‐term growth and to provide increasing value to our key stakeholders.
WS: We have several guiding principles that encompass everything we do. LTC maintains a rigorous underwriting strategy that looks for strong anticipated cash flow with a targeted yield of 7% to 9%, experienced operators, a defendable market position, quality building structures, and a favorable regulatory and tax environment.
LTC has developed a sound investment strategy, one that helps ensure our portfolio maintains the best mix of properties, strong regional operators, and financing types. We generally invest in transactions in the $10 to $100 million range, but have the financial strength to fund larger transactions.
We are committed to long-term profitable growth, and believe LTC is in a good position to capture that growth while maintaining strong, personal, and collaborative relationships with our operating partners.
“We are a savvy, disciplined, innovative, and well‐funded capital provider.”
LTC has successfully managed through several real estate cycles, and we are well positioned to profitably grow our business into the future. We are a savvy, disciplined, innovative, and well‐funded capital provider, and I am confident we can successfully meet the evolving needs of our operating partners through financing flexibility and creativity. I remain as optimistic as ever about our future.
AA: Thank you, Wendy.
Wendy Simpson has been CEO and president of LTC Properties Inc. since March 2007; and appointed chairman of the board in August 2013. She was elected to the board in 1995 and joined the company as vice chairman in 2000. She has also held the title of CFO of LTC Properties Inc. Prior to her employment with LTC, Wendy held executive positions in public companies owning and operating acute care hospitals, LTACH hospitals, psychiatric hospitals, and home health. She began her career in public accounting and has a record of over twenty-five years in health care-related businesses.
“LTC management has proven adept in the current environment, in our view, by keeping the balance sheet leverage low while finding innovative ways to grow, including development, joint ventures, and high-yielding mezzanine investments.”
— Daniel Bernstein, Capital One Securities
March 4, 2018
“We see the strength of the company’s balance sheet as an opportunity in the current environment as it offers LTC management to be proactive on the investment front, and likely be the major player with the small development-like opportunities.”
— John Roberts, Hilliard Lyons
March 2, 2019
“We think the company’s conservative approach to business and its balance sheet are behind its ability to avoid major landmines—trading a less aggressive investment and rent-setting approach in exchange for fewer issues down the road.”
— Richard Anderson, Mizuho Securities
March 4, 2018
Investors and others should note that LTC Properties posts important financial information using the investor relations section of the LTC Properties website, http://www.ltcreit.com/, and Securities and Exchange Commission filings.
The information contained in this facsimile message is intended only for the use of the individuals to whom it is addressed and may contain information that is privileged and confidential. If the reader of this message is not the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone at (707) 933-8500.
The material, information and facts discussed in this report are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. This is not an offer or solicitation of the securities discussed. Advisor-Access LLC and/or its employees, contractors and owners, may purchase or sell the securities mentioned in this report from time to time. Any opinions or estimates in this report are subject to change without notice. This report contains forward-looking statements. This information may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. The securities discussed may involve a high degree of risk and may not be suitable for all investors. LTC Properties has paid Advisor Access a fee to distribute this email. Wendy Simpson had final approval of the content and is wholly responsible for the validity of the statements and opinions.
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