LTC Properties, Inc. ($LTC)

Greetings, and welcome to the LTC Properties First Quarter 2026 Earnings Call. [Operator Instructions] Joining us on today's call are Pam Kessler, Co-President and Co-Chief Executive Officer; Clint Malin, Co-President and Co-Chief Executive Officer; Cece Chikhale, Executive Vice President and Chief Financial Officer and Treasurer; Gibson Satterwhite, Executive Vice President of Asset Management; Dave Boitano, Executive Vice President and Chief Investment Officer. Before management begins its presentation, please note that today's comments, including the question-and-answer session, may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in the LTC Properties filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2025. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note, this event is being recorded. I would now like to turn the conference over to LTC management. Please go ahead.

Good morning, and thank you for joining us. LTC is successfully executing our SHOP strategy. Our capabilities, reputation and culture are resonating with sellers and operators, and these relationships are driving investment opportunities and record external growth, allowing us to scale incredibly quickly. We have strong conviction that our strategy is the right one to create a higher growth profile company with better risk-adjusted returns to drive shareholder value. With the SHOP currently projected to represent 45% of our total investments and 40% of annualized NOI by year-end, the shift in our portfolio mix is dramatically enhancing LTC's long-term ability to grow FFO and FAD per share above our historical rate. We are on track with our $600 million SHOP acquisition midpoint guidance. And with the expected closing of second quarter transactions, we will be more than halfway to that target. Additionally, to further increase our SHOP mix, we would consider transactions that capitalize on attractive skilled nursing pricing by recycling capital into higher-growth SHOP assets. Our operator partnerships, our relationship-centric culture and our significant investment in the SHOP platform are driving our transformation and positioning LTC as a competitive force. I'll now turn it over to Gibson for more insight on the portfolio.

Thank you, Clint. We are focused on optimizing risk-adjusted returns for our shareholders by investing in our SHOP portfolio and opportunistically recycling capital, positioning LTC for higher intrinsic growth. As Clint noted, SHOP is expected to account for 40% of our annualized NOI by year-end, with the potential to expand even further. This target incorporates reinvestment of approximately $265 million in planned dispositions and loan repayments from skilled nursing assets this year. Of that amount, $77 million is closed and $190 million is expected to close in the third quarter. Our guidance projects a July 1 payoff of the Prestige loan in line with their notice of intent earlier this year. SHOP performance continues to reinforce conviction in our strategy. First quarter SHOP NOI was in line with our expectations. For our core SHOP portfolio, which consists of 27 communities at or near stabilization, including those acquired through the first quarter of this year, we are reiterating prior guidance of 14% pro forma growth at the midpoint. You can find more information on this portfolio in our supplemental. To frame the impact of our transformation, the pro forma growth rate for our overall portfolio increases to 5% to 7% at our 40% SHOP NOI target from the low 2% range embedded in triple net leases. That change is driven by increasing exposure to SHOP assets with growth prospects in the low to mid-teens over the foreseeable future. We can further increase our intrinsic growth rate should we choose to take advantage of opportunities to recycle more capital into SHOP given the strong pricing for skilled nursing assets. Our 2026 guidance includes platform investments, adding the people and data capabilities needed to scale and support double-digit SHOP growth. We expect the core infrastructure to be largely in place by year-end, enabling us to continue to scale rapidly and best support our operators. Now I'll turn the call over to Dave to discuss investments.

Thank you, Gibson. LTC has spent 18 months building a platform designed to execute with speed and certainty. We are well on track to achieving our $600 million midpoint investment target and believe, given the volume of opportunities we are evaluating, that a comparable level of annual investment is sustainable in 2027 and beyond. So far this year, we've closed around $120 million in investments with nearly $250 million on course to close in Q2. Additionally, we have signed LOIs for off-market third quarter acquisitions totaling $90 million. Our pipeline continues to be robust with well over $0.5 billion of opportunities under consideration and visibility for continued investment growth. Our relationship-centric approach is working. By the end of the second quarter, we'll have 11 SHOP operators, including 9 that are new to LTC in the past year, reflecting our success in retaining and growing with existing operators at the communities we've acquired. This strong pool of operating partners has been the source of several follow-on investments and provides great momentum as we continue to build our portfolio. Key to LTC's growth is our legacy of deep industry relationships, which in combination with our transactional agility gives us an edge in gaining access and insights to growth opportunities. Several investments have come through partner referrals, underscoring the synergy of our culture and our commitment to relationships. And a number also have been off market, demonstrating again the benefit of our relationship focus. Our rapid SHOP growth hasn't happened by chance. It is strategic and deliberate, reflecting an investment philosophy focused on assets 10 years of age or younger with operators who have deep local and regional knowledge. We emphasize asset quality, size, mix and market dynamics that favor our long-term competitive position. These criteria guide us toward the right balance of opportunities and durable returns. Today, we're seeing a high volume of potential transactions. And here again, our operator alignment is central to identifying the right assets and markets to support solid long-term performance. Experienced senior housing investors know that community performance depends on strong operating partners. LTC is deeply grateful for our operator colleagues and the excellence and commitment they bring every day to the seniors they serve. I'll now pass the call to Cece for a review of our financial results.

Thank you, Dave. Including year-to-date ATM sales of $95 million, our current liquidity is $585 million and with $190 million of proceeds expected from asset sale and loan payoffs, we remain confident in our ability to finance future SHOP acquisitions. Our pro forma liquidity totaled $775 million, providing a long investment runway. At the end of the first quarter, our pro forma debt to annualized adjusted EBITDA for real estate was 4.4x, and our annualized adjusted fixed charge coverage ratio was 4.6x. We remain well within our stated leverage target of 4 to 5x but believe that we can reduce that further over time as a result of our organic SHOP growth. Compared with last year's first quarter, core FFO per share improved by $0.04 to $0.69 and core FAD per share improved by $0.02 to $0.72, representing 6% and 3% growth, respectively. Increases were due to SHOP acquisitions and conversions to SHOP from triple net, increases in interest income from loan originations and additional loan funding and higher rent for market-based rent resets. The increases were partially offset by an increase in interest and G&A expenses, primarily to support our growing SHOP portfolio as well as a decrease in rent due to asset sales. We are reiterating our 2026 guidance for core FFO per share projected in the range of $2.75 to $2.79 and core FAD per share in the $2.82 to $2.86 range. As a reminder, our 2026 guidance includes $400 million to $800 million of SHOP acquisitions with SHOP NOI in the range of $65 million to $77 million and FAD CapEx of approximately $5 million. It also includes $265 million of proceeds from asset sales and loan payoffs. Other assumptions underpinning our guidance are detailed in yesterday's earnings press release and supplemental, which are posted on our website. Now I'll turn the call over to Pam for closing comments.

Thanks, Cece. LTC's transformation continues. What began last year through the combination of acquisitions and conversions of seniors housing communities ramps up this year with an additional $600 million of SHOP acquisitions projected at the midpoint of guidance, more than half of which will be completed by the end of the second quarter. We are deliberately curating a SHOP portfolio designed to compete effectively today and in the future when new supply eventually comes online, although new construction starts remain near historical lows nationally. We are accelerating LTC's organic growth profile and reducing our exposure to lower growth triple net lease investments while expanding our roster of strong operators to support our mutual growth. In 2027 and beyond, our strategy will focus on tactical growth in SHOP, adding additional high-quality assets and driving outsized NOI growth. As a premier seniors housing capital partner, LTC is well positioned to drive substantial growth through SHOP. Our smaller size creates agility, allowing us to drive accretive change faster than our larger peers and move the needle through single asset and small portfolio acquisitions. Our SHOP focus over the past 18 months has enabled a successful transformation and created a clear execution advantage. From our cooperative conversions of 175 million triple net leased communities into SHOP a year ago, we will have grown our SHOP portfolio to nearly $1 billion by the end of the second quarter and significantly increased our ability to drive future earnings growth. The consistency of our execution and performance is driving results and reinforces the conviction in our SHOP strategy. Our goals remain clear: support our operators who care for our nation's seniors and deliver superior long-term shareholder returns. With that, we're ready to take your questions.

[Operator Instructions] And our first question today will hear from Austin Wurschmidt with KeyBanc Capital Markets.

Could you provide some additional details around pro forma NOI growth for the 27 SHOP assets in the first quarter? And then maybe give us a sense just how occupancy trended sequentially and year-over-year within that NOI figure.

Austin, this is Gibson. I guess, first to give you some context around the disclosure. So, when we gave the pro forma 2025 for the '27 core SHOP portfolio, that was to help give an indication of the growth characteristics in that portfolio to the market, to our shareholders. But we've decided against giving that on a very detailed quarterly basis going forward. What we will do is roll our -- that core SHOP performance for, as you see in the supplemental on a quarterly basis, so you can track that with the metrics that we've realized during our ownership. For the color behind what's going on in Q1 in that core portfolio, it came in line with our expectations for EBITDAR. Rates were a little higher. When we set guidance, we anticipated a little seasonal softness in Q1, which we realized. But direction, occupancy turned around mid-quarter. If we look at it year-over-year, the occupancy troughed at a higher level, meaning occupancy at the trough in Q1 of this year was higher than occupancy that troughed Q1 last year. And we're seeing some green shoots in terms of occupancy increasing since it troughed out in February. So that -- and then also we look in the sales pipeline and our leads and tour volume going into the summer -- the spring and summer selling season, we feel really confident given what we know right now in reiterating our guidance.

Helpful detail and appreciate the context. With respect to investments, you had -- there were $157 million, I think you said last quarter that you had expected to close by the end of April. I'm just wondering what kind of drove the delay? And did the subset of that or all of those move within the $250 million? Or were there changes in the investment pool? Just any details that you can provide on that as well as expected pricing for those assets?

Sure, Austin, this is Clint. The delay was primarily related to a single off-market transaction -- follow-on transaction where the seller was focused on a tax-efficient transaction. And so, to accommodate that, we're working with them on structuring a down REIT and the seller needs some additional time to address some tax questions on their side. So really in working on this off-market transaction, that aspect is what led to a little bit of delay. But we're very excited about this deal, about growing with this existing operator. And also, this deal will add 2 newer and 2 larger communities to our portfolio that have a continuum of care spanning IL, AL, memory care. In the meantime, while that was slightly delayed, as Dave mentioned in his prepared remarks, we've added another $200 million we expect to close in Q2 and Q3. So, Dave can talk about rates.

Yes. So, cap rates going in yields have been right around that 7%. We've been able to maintain that well. We're very pleased with that. So, it ebbs and flows a little bit from deal to deal. But generally speaking, that's where we've been coming in at Austin.

And then Austin also, I'd like to just add maybe color about as we've increased the pipeline, and we're seeing a lot of opportunities right now, at the $460 million mark, which includes what we've closed to date and what Dave spoke about regarding investments by quarter. I mean, that will get us by 3Q at this point of 75% of our midpoint guidance at $600 million. So, we feel very confident about where investments are right now. And what we have is we have 8 transactions in total for 12 communities. And the average age of that 460, again, this goes back to what we already closed in Q1 is an average age of 10 years, which has been very consistent with what we've talked about, 65% of these deals in the pipeline are sourced off market. With the Q3 closings that Dave spoke on the LOI, that's going to add 2 more operators, 4 new operators this year and get Q3 up to 13 operators. And we have 2 follow-on transactions. 60% of the communities -- of this 460 span a continuum of IL, AL memory care. The size -- average size of the community is 100 units and 70% of these deals are in primary markets. So we feel very confident in our ability to source transactions. And as Pam mentioned in her comments, about buying assets that are going to be able to compete effectively against newer assets when eventually those do come online.

A lot of helpful detail, Clint. Just to clarify one thing before I yield the floor here. You said you added another $200 million. Is that specific to those -- the operator that's focused on the tax-efficient transaction? Because the $157 million is now $250 million closing in 2Q. And then there's $190 million of signed LOIs set to close in 3Q. So closer to $300 million. Can you just reconcile the adding $200 million versus what I'm getting to on the $300 million?

Austin, it's Pam. It was $90 million that's under LOI expected to close in the third quarter. Yes.

And our next question, we'll hear from Juan Sanabria with BMO Capital Markets.

Hope you can hear me okay. Just wanted to ask about the earnings guidance for the year. There's an implied decel from the first quarter run rate. So just curious on the drivers there. I'm not sure if there's any triple net softening in some of the rents versus the conversion to SHOP with some -- if there's any kind of noise or degradation in temporary cash flows there or if there's any one-timers flowing through the first quarter that maybe won't repeat?

Juan, it's Cece. First quarter, there was a little pickup just because of timing differences. But for the most part, no, we think we're going to be in line. There's going to be a ramp-up for SHOP NOI, as Gibson has talked about in the past, but we still think it's in line. There are some uncertainties out there in the market with the interest rates. We're not sure which direction it will go with the new Fed chair, but we'll give you an update next quarter.

Great. And then second, you mentioned potential monetization of some skilled nursing assets. Just curious on the potential scope and where you see kind of market pricing for in-place rents.

Thanks, Juan. This is Clint. I mean, we're supportive of the skilled nursing industry, and we don't see any immediate near-term headwinds. I mean what we have recycled to date going back to fall of '25, those have really been for specific reasons. It's been prestige, obviously, as Gibson mentioned on our last call, it's reducing concentration to an operator in state and reducing our loan book. Other sales were -- they were lease maturities and some purchase options. Those were at attractive 8 caps which we felt very good about. So going forward, it would really just be looking at capitalizing on these attractive pricing that we're seeing in the market. And anything we do going forward really would just be opportunistic to really look at, as Dave mentioned, moving on beyond lower growth triple net leases into higher-growth SHOP assets. And anything going forward, we really wouldn't be looking at limited, if anything, but no dilution effectively at all. So, this is really all opportunistic going forward as far as what we look at in skilled -- because also our coverage on an EBITDAR basis is almost 2x, which is historically extremely strong. So, we look at skilled nursing, we're very comfortable with our portfolio. We've been able to reduce that concentration within the portfolio. It would really just be opportunistic going forward.

Great. So said differently, just to summarize, given the high rent coverage the yields could be closer to what you -- or close to what you're buying SHOP at around the 7s, again, given the rent coverage.

And next, I'll move on to Rich Anderson with Cantor Fitzgerald.

So I'm looking at Slide 12 and the guidance you provided for SHOP. And I appreciate you're in growth mode. So, like it's hard to get a real good sense of any sort of same-store organic growth picture. But I'm curious like if you were to sort of do a hypothetical stress test of your portfolio, would it be high single-digit NOI type growth, putting aside additional acquisitions. I mean, is that the type of growth that we should be expecting when the time comes that you're able to disclose a same-store perspective?

Rich, it's Gibson. Yes, it's a good question, and I think you've asked similar questions on previous calls. So, in my prepared remarks, I gave just kind of the math of how the higher growth rate in SHOP moves the needle for our overall portfolio and cited that if you assume kind of low to mid-teens, SHOP NOI growth, but that was kind of the driver behind that math. I think what's changed from our prior calls is that now we have some experience with the portfolio. We're really confident in what we're assembling. We're really confident in what the deal team is buying. And if you just think about the math embedded in that same-store portfolio, we think you can get without the occupancy increases. So, our guidance there, 150 bps of occupancy increase, 14% growth at the midpoint. If you strip that out, just to be really conservative, you can get double-digit 10% NOI growth with 150 or 170 to 200 basis point spread between RevPOR and export. We think that obviously kind of keys off RevPOR. So that kind of 5% guidance, we feel pretty comfortable in that and see that the recent history has been able to sustain that. And then you just step back and look at the overall supply-demand dynamics in the industry, maybe boomers turning 80, the lack of new supply. We feel more confident in that kind of higher growth profile going forward.

Good response. So, you mentioned platform investments that are being made that you expect to be largely completed and scalable by the end of this year, you've heard my gripe about all this, right? It's -- people are -- you and others are growing SHOP through external sources, but then you have to operate it, right? And you're married to it. And I'm wondering how you've stress tested the history -- or excuse me, the future of your SHOP portfolio. It might be on the surface appearing like a layup to run these things with the demand and supply differential that we're seeing today, but things can get complicated in this business. And so, I'm wondering how -- when you talk about this platform investment, what types of people are you bringing in? What are you doing to stress test not an autopilot type of environment, but like things start to go wrong and how to manage through those things kind of new to the space. So, if you can comment on that, that would be great.

Rich, it's Pam. Well, I don't think anybody thinks that's a layup. We fully understand and appreciate the intensity with which you build the SHOP portfolio and operations. But as we've talked about on this call and for the past year, I mean, we really seek out the best managers that are the best in their markets, very strong and been doing it, have a strong track record. And then we supplement that with the database and the analytics that Gibson has talked about to help arrive at better decision-making. Our value add to the operators is helping them with aggregating data, right? That's an expensive task, and that's what we've undertaken. We've hired people to help with the data analytics. We've hired strong asset managers with historical track records managing SHOP portfolios. So, it's not something that we've undertaken lightly. And we've said before, if you're going to do SHOP, you have to go all in. We've completely fundamentally changed the way this company thinks, operates, the way we acquire properties. And we don't -- we are not managers. We're not viewing ourselves as managers. We are hiring the best managers, but we're helping those managers create the best outcome for our portfolio.

And one thing also, which we've done on top of that is just the portfolio we're acquiring. We've been very -- as Dave said in his prepared remarks, we're very strategic on what we're buying by newer assets. We've retained the managers on the majority of all but one actually to date that we've closed. And we've done this by design to curate the stabilized portfolio, which we think occupancy stabilized with the ability to drive continued improvement that Gibson spoke about. So, we're building this larger assets that have -- and newer that have the ability to compete. So, we think we're putting this together and the combination of the people to be successful. But as Pam mentioned, this is we understand we've been in the business a long time. It takes a lot of work.

And Rich, it's Gibson. I'll just add to that. The structure is relatively new to us to LTC in terms of our implementation. But we've been hard at work at this over the last 18, 20 months and been very deliberate about forming a plan, working through the issues with the initial conversions and executing on that plan. But zooming out, again, relatively new structure for LTC, but we've had exposure to private pay seniors housing. We've all been in the business for a long time, and we're acutely aware of the challenges that operators face. It's a tough business, but we feel like we've aligned with good operators. We've had -- we've hired experienced people on the team, and we just want to be there to support them.

Yes. I'm not meaning to trivialize the talent there. That's not my point, but I'm just stress testing you, I guess, in the process. So, I appreciate all that color from all of you. And my last question is, when you think about structurally how you're compensating your managers, what's the mindset there? Is it a percentage of revenues? Is it a skin in the game, NOI percentage? Like I'm curious how you're doing that? And is there a sort of a specific model you're following? Or is it a case-by-case basis with your separate managers?

It's a general model that we're following, Rich. We're looking at base fees to be calculated based on revenues as well as bottom line. We think that helps align interest in the current 12-month period. We're looking at incentive fees that we set budgets together and if budgets can be -- if they can exceed the budgets, we're looking to reward our operating partners for that. But we're also looking at aligning interest long term in creating synthetic promotes over time that when you have operators that make decisions today between growing occupancy or rate, it's got to be in the mindset of how it can benefit the community long-term to be able to achieve a financial reward through a synthetic promote structure a couple of years down the road. So, we think when you look at the current 12 months, the ability to beat the budget for the 12 months and a long-term horizon on overall performance, we think that's a good alignment of interest for both parties.

And next, we'll move to Michael Carroll with RBC.

Looking at your SHOP operator list that you guys have, it does look like you have a number of operators kind of within your portfolio. Are there a handful that you kind of have closer relationships with that you kind of want to continue to expand? And I guess some of these that have maybe 1 or 2 assets, I mean, is the plan for that to grow? I mean, how hard is it to have one operator in your portfolio just managing different asset? I mean, does it make sense to have fewer operators managing bigger portfolios?

I would say -- this is Clint. I mean, obviously, we've just started this investment platform midyear last year through the initial conversions. I mean we would look to grow with all of the operators that we have built relationships with, and we will be adding 3 more relationships following this. So, we think this is a testament to the effort that we put in back in the fall of '24 we first announced we were going to go this direction. We took attention and time to go out and market what we were doing and let operators know. And this is a result of that intentional effort that we took on. So yes, we would look to grow with each one of these operators.

And is it harder for you guys if there's more operators within the SHOP portfolio? I mean is there kind of like a limit? I mean, I'm assuming you're fine with what you have now since you're adding 3 more. But is it like 15 you're good with, but 20 or not, is kind of a limit that you want to make sure that you have to make sure that you're able to track each one of these relationships?

Well, we don't -- we have not set any limit, and it really comes down to the investment opportunities. As Clint mentioned in his prepared remarks and follow-up Q&A, the majority of our investment opportunities are coming from our operators off market. So, to the extent that this is a source of deal flow for us, we would not limit that. We're obviously, as I said in a prior remarks, that we're targeting the best operators in the geographical regions in which we have properties and where we're looking to grow. So no, we wouldn't limit it. Obviously, you do get to a point where you've got the log diminishing returns. So, I wouldn't ever say we have something like 50 operators. But where we are right now and adding operators in the next year or 2, I think we're fine. That's very manageable by our asset management team.

Okay. Great. And then circling back to -- go ahead.

Yes, I was just going to say, we've built in our staffing plan additional resources. So, the core platform, Rich was just asking about we feel like all the major pieces will be fully in place to allow us to scale. But we obviously have a staffing plan that's aligned with our growth strategy.

And then switching gears into the -- back to the SNF sales. Have you started this process of marketing some of these portfolios? Or are you kind of indicating on the call is something that you would consider if something came up?

We're not actually actually marketing at this point, but I mean we have received a lot of inbound phone calls about opportunities. So, it's things that we're engaging with. But again, it's got to be opportunistic pricing that works for us to recycle into higher growth SHOP assets.

And then, Clint, is there like specific sizes that we should think about of these potential sales? I mean, could it be like $100-plus million? Or is it too early to tell?

I think it could be -- we'd be situational depending on what comes up. So, we could be larger or smaller.

And our next question, we'll hear from Tayo Okusanya with Deutsche Bank.

I also wanted to focus on Slide 12, the SHOP performance. And just curious, again, when you kind of took a look at the quarterly results you kind of have disclosed on the page, the RevPOR, so in 2Q '25 when we just kind of had the shop conversion portfolio, the RevPOR was almost like $10,000 or so. And then kind of in 3Q, it was like $9,500. It's gradually dropped to about $7,850 by 1Q '26 with all the additional acquisitions that have happened. Can you just talk a little bit about, again, the post-conversion acquisitions kind of post original 13, just generally characteristics of that portfolio than maybe driving down the RevPOR from the original 13 conversion. Just want to kind of understand that a little bit and kind of is it just targeting a different market segment? Or just how do we kind of think about what's being bought relative to the initial 13?

Thanks, Tayo. It's Pam. Yes, I think if you go -- it's a very simple explanation. You go back to that original 13 properties in 2Q, 12 of those were memory care, right? So, memory care has a much higher RevPOR. And so, as you see us adding more traditional senior housing properties into our SHOP portfolio, a mix of IL, AL and memory care, you see that gradually go down. So that's the -- there's nothing to read into that other than the mix of the portfolio is changing as we diversify away from stand-alone memory care.

There are no further questions at this time. I would like to turn the floor back to Clint Malin for any closing remarks.

Thank you, and thanks to everyone on today's call for your ongoing support. We look forward to updating you on our progress next quarter as well as seeing some of you at upcoming investor conferences. Thank you.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.