LTC Properties Inc. (NYSE:LTC) Q3 2016 Earnings Conference Call - Final Transcript

Nov 03, 2016 • 11:00 am ET


LTC Properties Inc. (NYSE:LTC) Q3 2016 Earnings Conference Call - Final Transcript


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Welcome to the LTC Properties Third Quarter 2016 Analyst and Investor Call and Webcast. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Ms. Wendy Simpson, CEO of LTC Properties. Please go ahead.

Wendy Simpson

People joining me on this call are Pam Kessler, our CFO and Clint Malin, our Chief Investment Officer. You'll hear from them both momentarily.

Year-to-date in 2016, LTC has underwritten $126 million of investments, including $39 million of development commitments. Our under-development projects are down year-over-year as our operators and we turn our attention to stabilizing all of these new properties. Clint will have more specific comments about our current properties under construction and what we see that may be underwritten in the near future.

However, we have been investing and underwriting for periods beyond 2017. At the end of the quarter, we had $45 million committed to spend on de novo projects at rates between 7.4% and 9%. $3.3 million of those commitments will begin generating income to LTC in 2016 and all of 2017. However, approximately $42 million will provide us with 2018 revenue increases and increases in years beyond that.

Additionally, we have committed to spend $34.5 million at average rates over 9% to reposition or renovate properties we own, including our Michigan properties. The investment is structured as a loan. The Michigan properties are one of our best performing group of assets. The operators are innovative and we have a high likelihood that they will use these capital dollars. Our income increases upon each funding and therefore revenue will increase immediately rather than when the entire project is completed. As such, we have provided for additional 2017 growth.

The transaction environment for the deals we're interested in pursuing is not robust at this time. Despite this, I believe LTC is positioned to provide its shareholders with real growth in 2017 and 2018 without additional transactions. Additional transactions which we will continually court, will be added growth.

Our balance sheet remains at a conservative leverage ratio. We have sufficient capital available to fund these commitments and do acquisitions that would be accretive to LTC. Clint will discuss our pipeline and our operator statistics. First, though, I'll turn the call over to Pam for our financial review.

Pam Kessler

Normalized FFO increased 11.6% year-over-year for the third quarter of 2016 to $29.7 million or $0.76 a share on a fully diluted per-share basis. Revenues for the quarter increased 16.9% or $5.9 million, year-over-year. The improvement primarily reflects acquisitions, completed development in capital improvement projects, lease amendments, as well as an increase in interest income from mortgage loans resulting from loan originations, CapEx spending under existing loans and the amendment to our Michigan loan. This was partially offset by a reduction in revenue from properties sold and mortgage loan payoffs.

Second quarter interest expense was $6.8 million, an increase of $2.5 million over the comparable 2015 quarter due primarily to the sale of senior unsecured notes and greater utilization