# LTC Properties Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [LTC Properties Inc](/companies/ltc.md) (CIK 887905)
- Form: 10-Q
- Filed: 2023-10-26
- Accepted by EDGAR: Oct 26, 2023, 16:21 ET
- Period: 2023-09-30
- Accession: 0001558370-23-016867
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/887905/000155837023016867/ltc-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/887905/000155837023016867/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $49.3m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $147.0m | us-gaap:Revenues |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $22.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $61.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $12.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $34.6m | us-gaap:InterestExpense |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $22.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $61.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.54 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.48 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.54 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $1.48 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 41,211,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 41,185,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $78.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $70.8m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-09-30 | $11.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $1.87bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $1.01bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $956.2m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $825.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 92,326 characters.

### Cautionary Statement Regarding Forward-Looking Statements

*This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act of 1995. Statements that are not purely historical may be forward-looking. You can identify some of the forward-looking statements by their use of forward-looking words, such as “believes,” “expects,” “may,” “will,” “could,” “would,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or the negative of those words or similar words. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements, including, but not limited to, our dependence on our operators for revenue and cash flow; the duration and extent of the effects of the COVID-19 pandemic; government regulation of the health care industry; federal and state health care cost containment measures including reductions in reimbursement from third-party payors such as Medicare and Medicaid; required regulatory approvals for operation of health care facilities; a failure to comply with federal, state, or local regulations for the operation of health care facilities; the adequacy of insurance coverage maintained by our operators; our reliance on a few major operators; our ability to renew leases or enter into favorable terms of renewals or new leases; the impact of inflation, operator financial or legal difficulties; the sufficiency of collateral securing mortgage loans; an impairment of our real estate investments; the relative illiquidity of our real estate investments; our ability to develop and complete construction projects; our ability to invest cash proceeds for health care properties; a failure to qualify as a REIT; our ability to grow if access to capital is limited; and a failure to maintain or increase our dividend. For a discussion of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements, please see the discussion under “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in our publicly available filings with the Securities and Exchange Commission. We do not undertake any responsibility to update or revise any of these factors or to announce publicly any revisions to forward-looking statements, whether as a result of new information, future events or otherwise.*

### Executive Overview

### Business and Investment Strategy

We are a real estate investment trust (“REIT”) that invests in seniors housing and health care properties through sale-leaseback, financing receivables, mortgage financing, joint ventures and structured finance solutions including preferred equity and mezzanine lending. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators.

The following graph summarizes our gross investments as of September 30, 2023:

Our primary seniors housing and health care property classifications include skilled nursing centers (“SNF”), assisted living communities (“ALF”), independent living communities (“ILF”), memory care communities (“MC”) and combinations thereof. We also invest in other (“OTH”) types of properties, such as land parcels, projects under development (“UDP”) and behavioral health care hospitals. To meet these objectives, we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property classification and form of investment.

We conduct and manage our business as one operating segment for internal reporting and internal decision-making purposes. For purposes of this quarterly report and other presentations, we generally include ALF, ILF, MC, and combinations thereof in the ALF classification. As of September 30, 2023, seniors housing and health care properties comprised approximately 99.3% of our gross investment portfolio. We have been operating since August 1992.

Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on financing receivable, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures. Income from our investments represent our primary source of liquidity to fund distributions and are dependent upon the performance of the operators on their lease and loan obligations and the rates earned thereon. To the extent that the operators experience operating difficulties and are unable to generate sufficient cash to make payments to us, there could be a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. To mitigate this risk, we monitor our investments through a variety of methods determined by property type and operator. Our monitoring process includes periodic review of financial statements for each facility, periodic review of operator credit, scheduled property inspections and review of covenant compliance.

In addition to our monitoring and research efforts, we also structure our investments to help mitigate payment risk. Some operating leases and loans are credit enhanced by guaranties and/or letters of credit. In addition, operating leases are typically structured as master leases and loans are generally cross-defaulted and cross-collateralized with other loans, operating leases or agreements between us and the operator and its affiliates.

Depending upon the availability and cost of external capital, we anticipate making additional investments in health care related properties. New investments are generally funded from cash on hand, proceeds from periodic asset sales, temporary borrowings under our unsecured revolving line of credit and internally generated cash flows. Our investments generate internal cash from rent and interest receipts and principal payments on loan receivables and income from unconsolidated joint ventures. Permanent financing for future investments, which replaces funds drawn under our unsecured revolving line of credit, is expected to be provided through a combination of public and private offerings of debt and equity securities. We could also look to secured and unsecured debt financing. The timing, source and amount of cash flows provided by financing activities and used in investing activities are sensitive to the capital markets’ environment, especially to changes in interest rates. Changes in the capital markets’ environment may impact the availability of cost-effective capital.

We believe our business model has enabled and will continue to enable us to maintain the integrity of our property investments, including in response to financial difficulties that may be experienced by operators. Traditionally, we have taken a conservative approach to managing our business, choosing to maintain liquidity and exercise patience until favorable investment opportunities arise.

### Real Estate Portfolio Overview

The following tables summarize our real estate investment portfolio by owned properties and mortgage loans and by property type, as of September 30, 2023 (*dollar amounts in thousands):*

| ​ ​ ​ ​ ​ Owned Properties | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Number of Properties (1) | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of SNF ​ ALF Beds ​ Units | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Investments ​ | ​ ​ ​ ​ ​ ​ Percentage ​ of ​ Investments ​ | ​ ​ ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 ​ ​ Rental Revenue | ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Percentage ​ of Total ​ Revenues ​ | ​ ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | --- | ---: | --- | --- | --- | --- | ---: | --- |
| Assisted Living | ​ | 92 | ​ | — ​ 5,323 | ​ | $800,963 ​ | 37.0% | ​ | $39,958 | ​ | ​ | 29.2% | ​ |
| Skilled Nursing | ​ | 50 | ​ | 6,113 ​ 236 | ​ | ​ 592,880 ​ | 27.4% | ​ | ​ 43,344 | ​ | ​ | 31.7% | ​ |
| Other (2) | ​ | 1 | ​ | 118 ​ — | ​ | ​ 12,005 ​ | 0.6% | ​ | ​ 750 | ​ | ​ | 0.5% | ​ |
| **Total Owned Properties** | ​ | 143 | ​ | 6,231 ​ 5,559 | ​ | ​ 1,405,848 ​ | 65.0% | ​ | ​ 84,052 | (4)​ | ​ | 61.4% | ​ |
| **​** | ​ | ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ |
| **​** | ​ | ​ | ​ | **Number of** | ​ | ​ ​ ​ | **Percentage** ​ | ​ | **Interest Income** | ​ | ​ | **Percentage** ​ | ​ |
| **​** | ​ | **Number of** | ​ | **SNF** ​ **ALF** | ​ | ​ **Gross** **​** | **of** ​ | ​ | **from Financing** | ​ | ​ | **of Total** ​ | ​ |
| **Financing Receivables** | ​ | **Properties (1)** | ​ | **Beds** **​** **Units** | ​ | ​ **Investments** **​** | **Investments** ​ | ​ | **Receivable** | ​ | ​ | **Revenues** ​ | ​ |
| Assisted Living | ​ | 11 | ​ | — **​** 523 | ​ | ​ 121,321 **​** | 5.6% | ​ | **​** 7,198 | ​ | ​ | 5.3% | ​ |
| Skilled Nursing | ​ | 3 | ​ | 299 ​ — | ​ | ​ 76,712 ​ | 3.5% | ​ | ​ 4,215 | ​ | ​ | 3.1% | ​ |
| **Total Financing Receivables** | ​ | 14 | ​ | 299 ​ 523 | ​ | ​ 198,033 ​ | 9.1% | ​ | ​ 11,413 | ​ | ​ | 8.4% | ​ |
| **​** | ​ | ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ |
| **​** | ​ | ​ | ​ | **Number of** | ​ | ​ ​ ​ | **Percentage** ​ | ​ | **Interest Income** | ​ | ​ | **Percentage** ​ | ​ |
| ​ | ​ | **Number of** | ​ | **SNF** ​ **ALF** | ​ | ​ **Gross** **​** | **of** ​ | ​ | **from Mortgage** | ​ | ​ | **of Total** ​ | ​ |
| **Mortgage Loans** | ​ | **Properties (1)** | ​ | **Beds** **​** **Units** | ​ | ​ **Investments** **​** | **Investments** ​ | ​ | **Loans** | ​ | ​ | **Revenues** ​ | ​ |
| Assisted Living | ​ | 20 | ​ | — ​ 1,056 | ​ | ​ 170,941 ​ | 7.9% | ​ | ​ 9,436 | ​ | ​ | 6.9% | ​ |
| Skilled Nursing | ​ | 24 | ​ | 3,041 ​ — | ​ | ​ 304,616 ​ | 14.1% | ​ | ​ 25,824 | ​ | ​ | 18.9% | ​ |
| Other (3) | ​ | — | ​ | — ​ — | ​ | ​ 2,787 ​ | 0.1% | ​ | ​ 157 | ​ | ​ | 0.1% | ​ |
| **Total Mortgage Loans** | ​ | 44 | ​ | 3,041 ​ 1,056 | ​ | ​ 478,344 ​ | 22.1% | ​ | ​ 35,417 | ​ | ​ | 25.9% | ​ |
| **​** | ​ | ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ |
| **​** | ​ | ​ | ​ | **Number of** | ​ | ​ ​ ​ | **Percentage** ​ | ​ | **Interest** | ​ | ​ | **Percentage** ​ | ​ |
| **​** | ​ | **Number of** | ​ | **SNF** ​ **ALF** | ​ | ​ **Gross** **​** | **of** ​ | ​ | **and other** | ​ | ​ | **of Total** ​ | ​ |
| **Notes Receivable** | ​ | **Properties (1)** | ​ | **Beds** **​** **Units** | ​ | ​ **Investments** **​** | **Investments** ​ | ​ | **Income** | ​ | ​ | **Revenues** ​ | ​ |
| Assisted Living | ​ | 6 | ​ | — ​ 751 | ​ | ​ 50,024 ​ | 2.3% | ​ | ​ 4,323 | ​ | ​ | 3.2% | ​ |
| Skilled Nursing | ​ | — | ​ | — ​ — | ​ | ​ 13,669 ​ | 0.6% | ​ | ​ 475 | ​ | ​ | 0.3% | ​ |
| **Total Notes Receivable** | ​ | 6 | ​ | — ​ 751 | ​ | ​ 63,693 ​ | 2.9% | ​ | ​ 4,798 | ​ | ​ | 3.5% | ​ |
| **​** | ​ | ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ |
| **​** | ​ | ​ | ​ | **Number of** | ​ | ​ ​ ​ | **Percentage** ​ | ​ | **Income from** | ​ | ​ | **Percentage** ​ | ​ |
| **​** | ​ | **Number of** | ​ | **SNF** ​ **ALF** | ​ | ​ **Gross** | **of** ​ | ​ | **Unconsolidated** | ​ | ​ | **of Total** ​ | ​ |
| **Unconsolidated Joint Ventures** | ​ | **Properties (1)** | ​ | **Beds** **​** **Units** | ​ | ​ **Investments** | **Investments** ​ | ​ | **Joint Ventures** | ​ | ​ | **Revenues** ​ | ​ |
| Assisted Living | ​ | 1 | ​ | — ​ 95 | ​ | ​ 6,340 ​ | 0.3% | ​ | ​ 337 | ​ | ​ | 0.2% | ​ |
| Under Development | ​ | — | ​ | — ​ — | ​ | ​ 13,000 ​ | 0.6% | ​ | ​ 790 | ​ | ​ | 0.6% | ​ |
| **Total Unconsolidated Joint Ventures** | ​ | 1 | ​ | — ​ 95 | ​ | ​ 19,340 ​ | 0.9% | ​ | ​ 1,127 | ​ | ​ | 0.8% | ​ |
| **​** | ​ | ​ | ​ | ​ ​ ​ | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ | ​ | ​ ​ | ​ |
| **Total Portfolio** | ​ | 208 | ​ | 9,571 ​ 7,984 | ​ | $2,165,258 ​ | 100.0% | ​ | $136,807 | ​ | ​ | 100.0% | ​ |

| ​ ​ ​ Summary of Properties by Type | ​ ​ ​ ​ | ​ Number of Properties (1) | ​ ​ ​ ​ | ​ Number of SNF Beds | ​ ​ ​ | ​ ALF Units | ​ ​ ​ ​ | ​ ​ ​ ​ Gross Investments | ​ ​ ​ ​ | ​ ​ Percentage ​ of ​ Investments ​ | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | --- | --- | ---: | --- |
| Assisted Living | ​ | 130 | ​ | — | ​ | 7,748 | ​ | $1,149,589 | ​ | 53.1% | ​ |
| Skilled Nursing | ​ | 77 | ​ | 9,453 | ​ | 236 | ​ | ​ 987,877 | ​ | 45.6% | ​ |
| Other (2) (3) | ​ | 1 | ​ | 118 | ​ | — | ​ | ​ 14,792 | ​ | 0.7% | ​ |
| Under Development | ​ | — | ​ | — | ​ | — | ​ | ​ 13,000 | ​ | 0.6% | ​ |
| **Total Portfolio** | ​ | 208 | ​ | 9,571 | ​ | 7,984 | ​ | $2,165,258 | ​ | 100.0% | ​ |

(1) We have investments in owned properties, financing receivables, mortgage loans, notes receivable and unconsolidated joint ventures in 27 states to 29 operators.

(2) Includes three parcels of land held-for-use and one behavioral health care hospital.

(3) Includes one parcel of land in Missouri securing a first mortgage held for future development of a post-acute SNF and one parcel of land in North Carolina securing a first mortgage held for future development of a seniors housing community.

(4) Excludes variable rental income from lessee reimbursement of $9,846 and sold properties of $963.

As of September 30, 2023, we had $1.7 billion in net carrying value of investments, consisting of $1.0 billion or 57.3% invested in owned and leased properties, $0.2 billion or 11.1% invested in financing receivables, $0.5 billion or 26.9% invested in mortgage loans secured by first mortgages, $63.1 million or 3.6% in notes receivable and $19.3 million or 1.1% in unconsolidated joint ventures.

Rental income, income from financing receivables and interest income from mortgage loans represented 64.5%, 7.8% and 24.1%, respectively, of *Total revenues* on the *Consolidated Statements of Income* for the nine months ended September 30, 2023. In most instances, our lease structure contains fixed annual rental escalations and/or annual rental escalations that are contingent upon changes in the Consumer Price Index. Certain leases have annual rental escalations that are contingent upon changes in the gross operating revenues of the property. This revenue is not recognized until the appropriate contingencies have been resolved.

Many of our existing leases contain renewal options that, if exercised, could result in the amount of rent payable upon renewal being greater or less than that currently being paid. During 2023, Brookdale Senior Living Communities, Inc. (“Brookdale”) elected not to exercise its renewal option under a master lease that matures on December 31, 2023. See below under *Update on Certain Operators* for further discussion.

Additionally, during 2023, a master lease covering two skilled nursing centers that was scheduled to mature in 2023 was renewed at the contractual rate for another five years extending the maturity to November 2028. The centers have a total of 216 beds and are located in Florida. Also, another master lease covering two skilled nursing centers that was scheduled to mature in 2023 was renewed for another two years extending the maturity to December 2025. The master lease was renewed at the contractual annual cash rent of $1.0 million increasing 2.5% per year. As amended, this master lease provides the lessee with a purchase option available through December 31, 2024. The centers have a total of 141 beds and are located in Tennessee.

For the nine months ended September 30, 2023, we recorded $1.6 million in straight-line rental adjustment and amortization of lease incentive cost of $0.6 million. During the nine months ended September 30, 2023, we received $97.1 million of cash rental income, which includes $9.8 million of operator reimbursements for real estate taxes. At September 30, 2023, the straight-line rent receivable balance on the consolidated balance sheet was $20.1 million.

For the nine months ended September 30, 2023, we recorded $35.4 million in *Interest income from mortgage loans* which includes $28.0 million of interest received in cash, $1.8 million of income from interest reserves and $5.6 million in mortgage loans effective interest. At September 30, 2023, the mortgage loans effective interest receivable which is included in the *Interest receivable* line item in our *Consolidated Balance Sheets* was $49.8 million.

#### Update on Certain Operators

#### Anthem Memory Care

Anthem Memory Care (“Anthem”) operates 11 memory care communities under a master lease and was placed in default in 2017 resulting from Anthem’s partial payment of its minimum rent. However, we did not enforce our rights and remedies pertaining to the event of default, under the stipulation that Anthem achieves sufficient performance and pays agreed upon rent. Anthem increased their rent payment every year between 2017 and 2021. During the second and third quarter of 2022, we agreed to a certain temporary rent reduction totaling $1.5 million. During the fourth quarter of 2022, we received payment of Anthem’s $1.5 million temporary rent reduction and a return to Anthem’s previously agreed upon rent of $0.9 million per month. Accordingly, Anthem paid us the agreed upon annual cash rent of $10.8 million in 2022 and we anticipate receiving $10.8 million in 2023 and 2024. During the first quarter of 2023, we transitioned a 60-unit memory care community located in Ohio to Anthem under a new two-year lease. Under the new two-year lease, no rent was paid through May 2023 after which cash rent is based on mutually agreed upon fair market rent. The first quarterly mutually agreed upon rent for June through August 2023 was set at $45,000 and paid in August 2023. The second quarterly mutually agreed upon rent for the period of September through November was set at $60,000 and is payable in November 2023, at which time rent will be reset for the following three months. Anthem is current on agreed upon rent payments through October 2023. We receive regular financial performance updates from Anthem and continue to monitor their performance obligations under the master lease agreement.

#### Brookdale Senior Living Communities, Inc

Brookdale Senior Living Communities, Inc’s (“Brookdale”) master lease matures on December 31, 2023 and provides Brookdale a $4.0 million capital commitment, which expired on February 28, 2023, at a yield of 7% with a reduced rate for qualified ESG projects. During 2023, we funded $0.9 million under Brookdale’s capital commitment. The master lease provides three renewal options consisting of a two-year renewal option, a five-year renewal option and a 10-year renewal option. During the first quarter of 2023, Brookdale elected not to exercise its renewal option. Brookdale is obligated to pay rent on the portfolio of 35 assisted living communities through maturity and is current on rent payments through October 2023. We are working on options for the portfolio as follows:

- We entered into agreements to sell seven assisted unit communities in the existing Brookdale portfolio. Four properties located in Florida will be sold for approximately $18.8 million, and three properties in South Carolina will be sold for approximately $8.4 million. We expect these sales to close during the fourth quarter of 2023 and expect to receive $20.0-$21.0 million of proceeds, net of transaction costs and seller financing, as a result of these sales. These properties were classified as held-for-sale as of September 30, 2023.
- We re-leased 10 properties in the existing Brookdale portfolio to Brookdale under a new master lease. This new master lease includes six properties in Colorado and four in Kansas. The six-year master lease will commence on January 1, 2024. Rent in the first year is set at $8.0 million escalating by approximately 2.0% annually. The lease includes a purchase option that can be exercised in 2029. We also agreed to fund $4.5 million for capital expenditures for the first two years of the lease at an initial rate of 8.0%, escalating by approximately 2.0% thereafter.
- Subsequent to September 30, 2023, we added seven additional properties to the new Brookdale master lease commencing on January 1, 2024. One property is located in Ohio with 42 assisted living units and six are located in Texas with 235 assisted living units. These properties are currently included in the original Brookdale master lease. As a result of this amendment, Brookdale will operate 17 properties under the new master lease with the initial annual rent of $9.3 million and the capital expenditure commitment will be $7.2 million. Additionally, the new master lease provides Brookdale with a purchase option on these seven properties.
- Subsequent to September 30, 2023, we leased six assisted living communities located in Oklahoma, with a total of 219 units, to a current LTC operator under a new master lease, expected to commence on November 1, subject to the issuance of licensure to the new operator. These properties are currently included in the original Brookdale master lease. The lease term is for three years, with one four-year extension period. Rent in the first year is set at $960,000, increasing to $984,000 in the second year and $1.2 million in the third year. Additionally, the

master lease includes a purchase option that can be exercised starting in November 2027 through October 2029 if the lessee exercises its four-year extension option.

- For the remaining five properties located in North Carolina with a total of 210 assisted living units, we are currently working on finalizing a new lease for these properties.

#### Prestige Healthcare

Prestige Healthcare (“Prestige”) operates 22 skilled nursing centers located in Michigan secured under four mortgage loans and two skilled nursing centers located in South Carolina under a master lease. Prestige is our largest operator based upon revenues and assets representing 16.6% of our total revenues and 14.2% of our total assets as of September 30, 2023. During the second quarter of 2023, we agreed to defer up to $1.5 million, or up to $0.3 million per month for May through September 2023, in interest payments due on one of Prestige’s mortgage loans secured by 15 skilled nursing centers. We deferred $0.6 million and $0.9 million in interest payments during the second and third quarter of 2023, respectively. Subsequent to September 30, 2023, we amended the loan. As part of the amendment, LTC has drawn down $2.8 million of the approximate $5.0 million letter of credit from Prestige to repay all deferred interest outstanding through October 2023. We will further draw down approximately $334,000 in each of November and December 2023 to be applied toward interest due on the loan at that point. As a result, we expect to receive all contractual interest of $19.5 million due from Prestige in 2023. Beginning on January 1, 2024, the minimum mortgage interest payment due to LTC will be set based on an annual current pay rate of 8.5% on the outstanding loan balance. The contractual interest rate of the loan remains unchanged. From retro-active Medicaid funds due to Prestige, we expect our letter of credit will be replenished in 2024 and Prestige will be able to pay all contractual interest during 2024 and 2025.

#### Other Operators

During the nine months ended September 30, 2023, we provided $1.9 million of abated rent to the same operator for which we have been providing assistance. Also, we provided the same operator $0.2 million of abated rent in October 2023 and we agreed to provide up to $0.2 million per month from November through December 2023 pursuant to a master lease covering two assisted living communities. We anticipate receiving $0.3 million in rent during 2023 from this operator.

Additionally, during 2023, we transitioned a portfolio of eight assisted living communities with a total of 500 units in Illinois, Ohio and Michigan to Encore Senior Living (“Encore”). We agreed to provide assistance in the second quarter of 2023 to the former operator of this portfolio and as part of the transition, we received repayment of $1.25 million of deferred rent which represents $0.93 million of April and May 2023 deferred rent and $0.32 million of unrecorded deferred rent provided in 2022. Cash rent under the new two-year lease with Encore is based on mutually agreed upon fair market rent beginning in month four of the lease.

### 2023 Activities Overview

The following tables summarize our transactions during the nine months ended September 30, 2023 *(dollar amounts in thousands):*

#### Acquisitions

During 2023, we entered into a $54.1 million Joint Venture (“JV”) and contributed $45.0 million into the JV that purchased an independent living, assisted living and memory care campus in Ohio. Under the JV agreement, the seller, our JV partner, has the option to purchase the campus between the third and fourth lease years for LTC’s allocation of the JV investment plus an IRR of 9.75%. The campus was leased to

Encore Senior Living (“Encore”) under a 10-year term with an initial yield of 8.25% on LTC’s allocation of the JV investment. LTC committed to fund $2.1 million of lease incentives under the Encore lease of which $1.0 million was funded during 2023. Rent is expected to be approximately $3.9 million per year.

#### Investment in Improvement projects

| ​ ​ | ​ ​ | ​ ​ Amount |
| --- | --- | ---: |
| Assisted Living Communities | ​ | $2,418 |
| Skilled Nursing Centers | ​ | ​ 2,548 |
| Other | ​ | ​ 87 |
| Total | ​ | $5,053 |

#### Impairment Loss

In conjunction with the planned sale of a 70-unit assisted living community located in Florida, we recorded a $0.4 million impairment loss during the three months ended March 31, 2023 and a $1.2 million impairment loss during the fourth quarter of 2022. During the second quarter of 2023, the community was sold for $4.9 million. Additionally, during 2023, we performed a recoverability analysis on the carrying value of two assisted living communities that we are negotiating to sell and concluded that their carrying value may not be recoverable through future undiscounted cash flows. Accordingly, we recorded an aggregate impairment loss of $12.1 million. As of September 30, 2023, we do not believe these communities meet the criteria to be classified as held-for-sale.

#### Properties Held -for-Sale

| ​ ​ ​ State | ​ ​ ​ ​ | ​ Type of Property | ​ ​ ​ ​ | ​ Number of Properties | ​ ​ ​ ​ | ​ Number of Beds/units | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Gross ​ Investment | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Accumulated ​ Depreciation | ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| FL | ​ | ALF | ​ | 4 | ​ | 176 | ​ | $12,215 | ​ | $7,213 | ​ |
| SC | ​ | ALF | ​ | 3 | ​ | 128 | ​ | ​ 8,823 | ​ | ​ 4,377 | ​ |
| ​ | ​ | ​ | ​ | 7 | ​ | 304 | ​ | $21,038 | ​ | $11,590 | ​ |

#### Properties Sold

| ​ ​ ​ State | ​ ​ ​ ​ | ​ Type of Properties | ​ ​ ​ ​ | ​ Number of Properties | ​ ​ ​ ​ | ​ Number of Beds/Units | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Sales ​ Price | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Carrying ​ Value | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Net ​ Gain (1) | ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | ---: | --- | --- | --- | --- | --- | --- | --- |
| Florida | ​ | ALF | ​ | 1 | ​ | 70 | ​ | $4,850 | ​ | $4,082 | ​ | $65 | ​ |
| Kentucky | ​ | ALF | ​ | 1 | ​ | 60 | ​ | ​ 11,000 | ​ | ​ 10,720 | ​ | ​ 57 | ​ |
| New Jersey | ​ | ALF | ​ | 1 | ​ | 39 | ​ | ​ 2,000 | ​ | ​ 1,552 | ​ | ​ 266 | ​ |
| New Mexico | ​ | SNF | ​ | 2 | ​ | 235 | ​ | ​ 21,250 | ​ | ​ 5,523 | ​ | ​ 15,287 | ​ |
| Nebraska | ​ | ALF | ​ | 3 | ​ | 117 | ​ | ​ 2,984 | ​ | ​ 2,934 | ​ | ​ — | ​ |
| Pennsylvania | ​ | ALF | ​ | 2 | ​ | 130 | ​ | ​ 11,128 | ​ | ​ 6,054 | ​ | ​ 4,870 | ​ |
| ​ | ​ | ​ | ​ | 10 | ​ | 651 | ​ | $53,212 | ​ | $30,865 | ​ | $20,545 | ​ |

(1) Calculation of net gain includes cost of sales and write-off of straight-line receivable and lease incentives, when applicable.

#### Financing Receivables

During 2023, we entered into a $121.3 million JV with an affiliate of an existing operator and contributed $117.5 million into the JV that purchased 11 assisted living and memory care communities from an affiliate of our JV partner. The JV leased the communities back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options. The contractual initial cash yield of 7.25% increases to 7.5% in year three then escalates thereafter based on CPI subject to a floor of 2.0% and a ceiling of 4.0%. Additionally, the JV provided the seller-lessee with a purchase option to buy up to 50% of the properties at the beginning of the third lease year and the remaining properties at the beginning of the fourth lease year through the end of the sixth lease year, with an exit Internal Rate of Return (“IRR”)

of 9.0%. In accordance with GAAP, the communities acquired by the JV are required to be presented as *Financing receivables* on our *Consolidated Balance Sheets* and the rental revenue from these properties is recorded as *Interest income from financing receivables* on our *Consolidated Statements of Income*. Furthermore, upon expiration of the purchase option if the purchase option remains unexercised by the seller-lessee, the purchased assets will be reclassified from *Financing receivables* to *Real property investments* on our *Consolidated Balance Sheets*. Upon origination, we recorded $1.2 million *Provision for credit losses* equal to 1% of the loan balance related to this investment. During the three and nine months ended September 30, 2023, we recognized $3.8 million and $11.4 million, respectively, of *Interest income from financing receivables* from our investments in financing receivables.

#### Investment in Mortgage Loans

| ​ ​ | ​ ​ | ​ ​ Amount | ​ ​ |
| --- | --- | --- | --- |
| Originations and funding under mortgage loans receivable | ​ | $83,383 | (1)​ |
| Application of interest reserve | ​ | ​ 1,609 | ​ |
| Scheduled principal payments received | ​ | ​ (301) | ​ |
| Mortgage loan premium amortization | ​ | ​ (5) | ​ |
| Provision for loan loss reserve | ​ | ​ (847) | ​ |
| Net increase in mortgage loans receivable | ​ | $83,839 | ​ |

(1) We originated the following:

a. $10,750 mortgage loan secured by a 45-unit MC located in North Carolina. The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%;

b. $51,111 mortgage loan investment secured by a 203-unit ILF, ALF and MC located in Georgia. We acquired a participating interest owned by existing lenders for $42,251 in addition to converting our $7,461 mezzanine loan in the property into a participating interest in the mortgage loan. The initial rate is 7.5% with an IRR of 7.75%. The mortgage loan matures in October 2024. We recorded $1,380 of additional interest income in connection with the effective prepayment of the mezzanine loan in the first quarter of 2023;

c. $16,500 senior loan for the purchase of a 150-bed SNF in Illinois. The mortgage loan matures in June 2028 and our investment is at an interest rate of 8.75%;

d. $5,022 of additional funding under other mortgage loans receivable; and

e. $19,500 mortgage loan commitment for the construction of an 85-unit assisted living and memory care community in Michigan. The borrower contributed $12,100 of equity which will initially fund the construction. Once all of the borrower’s equity has been drawn, we will begin funding the commitment. The loan term is approximately three years at a rate of 8.75%, and includes two, one-year extensions, each of which is contingent on certain coverage thresholds.

#### Preferred Equity Investment in Unconsolidated Joint Ventures

| ​ ​ ​ State | ​ ​ ​ ​ | ​ Type of Properties | ​ ​ ​ ​ | ​ ​ Total ​ Preferred ​ Return ​ | ​ ​ ​ ​ | ​ ​ Contractual ​ Cash ​ Portion ​ | ​ ​ ​ ​ | ​ Number of Beds/ Units | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Carrying ​ Value | ​ ​ ​ ​ | ​ ​ ​ ​ ​ Income ​ Recognized | ​ ​ ​ ​ | ​ ​ ​ Cash ​ Interest ​ Received | ​ ​ ​ ​ | ​ ​ ​ Application ​ of Interest ​ Reserve | ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Washington (1) | ​ | ALF/MC | ​ | 12% | ​ | 7% | ​ | 95 | ​ | $6,340 | ​ | $337 | ​ | $— | ​ | $337 | ​ |
| Washington (2) | ​ | UDP | ​ | 14% | ​ | 8% | ​ | — | ​ | ​ 13,000 | ​ | ​ 790 | ​ | ​ — | ​ | ​ 790 | ​ |
| ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | 95 | ​ | $19,340 | ​ | $1,127 | ​ | $— | ​ | $1,127 | ​ |

(1) Represents a preferred equity interest in an entity that developed and owns a 95-unit ALF and MC in Washington. Our investment represents 15.5% of the total investment. The preferred equity investment earns an initial cash rate of 7% increasing to 9% in year four until the internal rate of return (“IRR”) is 8%. After achieving an 8% IRR, the cash rate drops to 8% with an IRR ranging between 12% to 14%, depending upon timing of redemption. During the fourth quarter of 2021, the entity completed the development project and received its certificate of occupancy. We have the option to require the JV partner to purchase our preferred equity interest at any time between August 17, 2031 and December 31, 2036.

(2) Represents a preferred equity interest in an entity that will develop and own a 267-unit ILF and ALF in Washington. Our investment represents 11.0 % of the estimated total investment. The preferred equity investment earns an initial cash rate of 8% with an IRR of 14%. The JV partner has the option to buy out our investment at any time after August 31, 2023 at the IRR rate. Also, we have the option to require the JV partner to purchase our preferred equity interest at any time between August 31, 2027 and, upon project completion and leasing the property, prior to the end of the first renewal term of the lease.

#### Notes Receivable

| ​ ​ | ​ ​ | ​ ​ Amount | ​ ​ | ​ ​ |
| --- | --- | ---: | --- | --- |
| Advances under notes receivable |  | $19,258 | (1)​ |  |
| Principal payments received under notes receivable | ​ | ​ (14,537) | (2)​ | ​ |
| Provision for credit losses | ​ | ​ (48) | ​ | ​ |
| Net decrease in notes receivable | ​ | $4,673 | ​ | ​ |

(1) During the third quarter of 2023, we originated a mezzanine loan to recapitalize an existing 130-unit ILF, ALF and MC in Georgia and construction of 89 additional units. The loan term is five years at an initial yield of 8.75% and an IRR of 12.0%.

(2) During 2023, we received $4,545, which includes a prepayment fee and the exit IRR totaling $190 related to the payoff of a mezzanine loan on a 136-unit ILF in Oregon. Additionally, another $7,461 mezzanine loan was effectively prepaid through converting it as part of our $51,111 investment in a participating interest in an existing mortgage loan that is secured by a 203-unit ALF, ILF and MC located in Georgia. We recorded $1,380 of interest income in connection with the effective prepayment of the mezzanine loan.

### Health Care Regulatory

The Centers for Medicare & Medicaid Services (“CMS”) annually updates Medicare skilled nursing facility (“SNF”) prospective payment system rates and other policies. On April 8, 2021, CMS issued a proposed rule to update SNF rates and policies for fiscal year 2022, which started October 1, 2021, and issued the final rule on July 29, 2021. CMS estimated that the aggregate impact of the payment policies in the final rule would result in an increase of approximately $410 million in Medicare Part A payments to SNFs in fiscal year 2022. The final rule also includes several policies that update the SNF Quality Reporting Program and the SNF Value-Based Program for fiscal year 2022. On April 11, 2022, CMS issued a proposed rule to update SNF rates and policies for fiscal year 2023. CMS estimated that the aggregate impact of the payment policies in the proposed rule would result in a decrease of approximately $320 million in Medicare Part A payments to SNFs in fiscal year 2023 compared to fiscal year 2022. CMS also sought input on the effects of direct care staffing requirements to improve long-term care requirements for participation and promote thoughtful, informed staffing plans and decisions within facilities to meet residents’ needs, including maintaining or improving resident function and quality of life. Specifically, CMS sought input on establishing minimum staffing requirements for long-term care facilities. On June 29, 2022, CMS issued updates to guidance on minimum health and safety standards that long-term care facilities must meet to participate in Medicare and Medicaid and issued new guidance in the State Operations Manual to address issues that significantly affect residents of long-term care facilities. On July 29, 2022, CMS issued a final rule to update SNF rates and policies for fiscal year 2023. CMS estimated that the aggregate impact of the payment policies in the final rule would result in an increase of 2.7%, or approximately $904 million, in Medicare Part A payments to SNFs in fiscal year 2023 compared to fiscal year 2022. CMS also finalized a permanent 5% cap on annual wage index decreases to smooth year-to-year changes in providers’ wage index payments. In addition, CMS indicated that it would continue to review the comments it received in response to its request for information on establishing minimum staffing requirements for long-term care facilities, and that it intended to issue proposed rules on a minimum staffing level measure within one year. On April 4, 2023, CMS issued a proposed rule that would update SNF rates and policies for fiscal year 2024. CMS estimated that the aggregate impact of the payment policies in the proposed rule would result in a net increase of 3.7%, or approximately $1.2 billion, in Medicare Part A payments to SNFs in fiscal year 2024. CMS also indicated that it continued to review the feedback it received from its comment solicitation regarding minimum staffing requirements and that the feedback would be used, along with evidence from its mixed-methods study launched in August 2022 collecting quantitative and qualitative evidence on staffing levels within nursing homes, to inform proposals for minimum direct care staffing requirements in nursing homes in a future rulemaking. On July 21, 2023, CMS issued a final rule to update SNF rates and policies for fiscal year 2024. CMS estimated that the aggregate impact of the payment policies in the final rule would result in a net increase of 4.0%, or approximately $1.4 billion, in Medicare Part A payments to

SNFs in fiscal year 2024. In addition, the final rule includes updates to the SNF Quality Reporting Program and the SNF Value-Based Purchasing Program for fiscal year 2024 and future years, including the adoption of a measure intended to address staff turnover, as outlined in the President’s Executive Order 14070 Increasing Access to High-Quality Care and Supporting Caregivers. Finally, the rule finalizes a constructive waiver process to ease administrative burdens for CMS related to processing civil monetary penalty appeals.

On September 1, 2023, CMS issued the Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting proposed rule, which seeks to establish comprehensive nurse staffing requirements. The proposed rule consists of three core staffing proposals: (1) minimum nurse staffing standards of 0.55 hours per resident day (“HPRD”) for Registered Nurses (“RNs”) and 2.45 HPRD for Nurse Aids (“NAs”); (2) a requirement to have an RN onsite 24 hours a day, seven days a week; and (3) enhanced facility assessment requirements. The proposed rule also includes a staggered implementation approach and possible hardship exemptions for select facilities. Comments on the proposed rule must be submitted by November 6, 2023.

There can be no assurance that these rules or future regulations modifying Medicare skilled nursing facility payment rates or other requirements for Medicare and/or Medicaid participation will not have an adverse effect on the financial condition of our borrowers and lessees which could, in turn, adversely impact the timing or level of their payments to us.

On March 26, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), sweeping legislation intended to bolster the nation’s response to the COVID-19 pandemic. In addition to offering economic relief to individuals and impacted businesses, the law expanded coverage of COVID-19 testing and preventative services, addressed health care workforce needs, eased restrictions on telehealth services during the crisis, and increased Medicare regulatory flexibility, among many other provisions. Notably, the CARES Act temporarily suspended the 2% across-the-board “sequestration” from May 1, 2020 through December 31, 2020, and extended the Medicare sequester requirement through fiscal year 2030. In addition, the law provided $100 billion in grants to eligible health care providers for health care related expenses or lost revenues that are attributable to COVID-19. On April 10, 2020, CMS announced the distribution of $30 billion in funds to Medicare providers based upon their 2019 Medicare fee for service revenues. Eligible providers were required to agree to certain terms and conditions in receiving these grants. In addition, the Department of Health and Human Services (“HHS”) authorized $20 billion of additional funding for providers that have already received funds from the initial distribution of $30 billion. Unlike the first round of funds, which came automatically, providers were required to apply for these additional funds and submit the required supporting documentation, using the online portal provided by HHS. Providers were required to attest to and agree to specific terms and conditions for the use of such funds. HHS expressed a goal of allocating the whole $50 billion proportionally across all providers based on those providers’ proportional share of 2018 net Medicare fee-for-service revenue, so that some providers would not be eligible for additional funds. On May 22, 2020, HHS announced that it had begun distributing $4.9 billion in additional relief funds to SNFs to offset revenue losses and assist nursing homes with additional costs related to responding to the COVID-19 public health emergency and the shipments of personal protective equipment provided to nursing homes by the Federal Emergency Management Agency. On June 9, 2020, HHS announced that it expected to distribute approximately $15 billion to eligible providers that participate in state Medicaid and Children’s Health Insurance Program (“CHIP”) programs and have not received a payment from the Provider Relief Fund General Allocation. On July 22, 2020, HHS announced $5 billion in Provider Relief Funds to Medicare-certified long-term care facilities and state veterans’ homes to build nursing home skills and enhance nursing homes’ response to COVID-19, including enhanced infection control. Nursing homes were required to participate in the Nursing Home COVID-19 training to qualify for this funding. On August 27, 2020, HHS announced that it had distributed almost

$2.5 billion to nursing homes to support increased testing, staffing, and personal protective equipment needs. On September 3, 2020, HHS announced a $2 billion performance-based incentive payment distribution to nursing homes and SNFs. Finally, on October 1, 2020, HHS announced $20 billion in additional funding for several types of providers, including those who previously received, rejected, or accepted a general distribution provider relief fund payment. The application deadline for these Phase 3 funds was November 6, 2020.

The Consolidated Appropriations Act, 2021 included a $900 billion COVID-19 relief package. Of the $900 billion in COVID-19 relief, $73 billion was allocated to HHS. Notably, the legislation added an additional $3 billion to the Provider Relief Fund, includes language specific to reporting requirements, and allows providers to use any reasonable method to calculate lost revenue, including the difference between such provider’s budgeted and actual revenue budget if such budget had been established and approved prior to March 27, 2020, to demonstrate entitlement for these funds. This change reverts to HHS’ previous guidance from June 2020 on how to calculate lost revenues. The Consolidated Appropriations Act, 2021 also extended the CARES Act’s sequestration suspension to March 31, 2021. On January 15, 2021, HHS announced that it would be amending the reporting timeline for Provider Relief Funds and indicated that it was working to update the Provider Relief Fund requirements to be consistent with the passage of the Consolidated Appropriations Act, 2021.

On June 11, 2021, HHS issued revised reporting requirements for recipients of Provider Relief Fund payments. The announcement included expanding the amount of time providers would have to report information, aimed to reduce burdens on smaller providers, and extended key deadlines for expending Provider Relief Fund payments for recipients who received payments after June 30, 2020. The revised reporting requirements are applicable to providers who received one or more payments exceeding, in the aggregate, $10,000 during a single Payment Received Period from the PRF General Distributions, Targeted Distributions, and/or Skilled Nursing Facility and Nursing Home Infection Control Distributions. On July 1, 2021, HHS, through the Health Resources and Services Administration (“HRSA”), notified recipients of Provider Relief Fund payments by e-mail that the Provider Relief Fund Reporting Portal was open for recipients who were required to report on the use of funds in Reporting Period 1, as described by HHS’s June 11, 2021 update to the reporting requirements. On September 10, 2021, HHS announced a final 60-day grace period of the September 30, 2021 reporting deadline for Provider Relief Funds exceeding $10,000 in aggregate payments received from April 10, 2020 to June 30, 2020. Although the September 30, 2021 reporting deadline remained in place, HHS explained that recoupment or other enforcement actions would not be initiated during the 60-day grace period, which began on October 1, 2021 and ended on November 30, 2021.

Reporting Period 2, for providers who received one or more payments exceeding $10,000, in the aggregate, from July 1, 2020 to December 31, 2020, was from January 1, 2022 to March 31, 2022. Reporting Period 3, for providers who received one or more payments exceeding $10,000, in the aggregate, from January 1, 2021 to June 30, 2021, was from July 1, 2022 to September 30, 2022. Reporting Period 4, for providers who received one or more payments exceeding $10,000, in the aggregate, from July 1, 2021 to December 31, 2021, was from January 1, 2023 to March 31, 2023. Reporting Period 5, for providers who received one or more payments exceeding $10,000, in the aggregate, from January 1, 2022 to June 30, 2022, was from July 1, 2023 to September 30, 2023. Reporting Period 6, for providers who received one or more payments exceeding $10,000, in the aggregate, from July 1, 2022 to December 31, 2022, opens January 1, 2024.

On September 10, 2021, the Biden Administration announced $25.5 billion in new funding for health care providers affected by the COVID-19 pandemic, including $8.5 billion in American Rescue Plan (“ARP”) resources for providers who serve rural Medicaid, CHIP, or Medicare patients, and an additional $17 billion for Phase 4 Provider Relief Funds for a broad range of providers who can document revenue loss and expenses associated with the pandemic, including assisted living facilities that were state-licensed/certified on or before December 31, 2020. Approximately 25% of the Phase 4 allocation was for bonus payments based on the amount and type of services provided to Medicaid, CHIP, and Medicare beneficiaries from January 1, 2019 through September 30, 2020. On December 14, 2021, HHS announced the distribution of approximately $9 billion in Provider Relief Fund Phase 4 payments to health care providers who have experienced revenue losses and expenses related to the COVID-19 pandemic. Further, on January 25, 2022, HHS announced that it would be making more than $2 billion in Provider Relief Fund Phase 4 General Distribution payments to more than 7,600 providers across the country that same week. On March 22, 2022, HHS announced an additional $413 million in Provider Relief Fund Phase 4 payments to more than 3,600 providers across the country. On April 13, 2022, HRSA announced the disbursement of more than $1.75 billion in Provider Relief Fund payments to 3,680 providers across the country. On April 10, 2023, President Biden signed into law H.J. Res. 7, which terminated the national emergency related to the COVID-19 pandemic. Separately, the declared public health emergency expired May 11, 2023.

Following prior legislation suspending sequestration, on December 10, 2021, President Biden signed the Protecting Medicare and American Farmers from Sequester Cuts Act, which extended the suspension of the Medicare 2% sequestration reduction through March 31, 2022, and then reduced the sequestration cuts to 1% from April through June 2022. As of July 1, 2022, cuts of 2% were re-imposed.

Congress periodically considers legislation revising Medicare and Medicaid policies, including legislation that could have the impact of reducing Medicare reimbursement for SNFs and other Medicare providers, limiting state Medicaid funding allotments, encouraging home and community-based long-term care services as an alternative to institutional settings, or otherwise reforming payment policy for post-acute care services. There can be no assurances that enacted or future legislation will not have an adverse impact on the financial condition of our lessees and borrowers, which subsequently could materially adversely impact our company.

Additional reforms affecting the payment for and availability of health care services have been proposed at the federal and state level and adopted by certain states. Increasingly, state Medicaid programs are providing coverage through managed care programs under contracts with private health plans, which is intended to decrease state Medicaid costs. Congress and state legislatures can be expected to continue to review and assess alternative health care delivery systems and payment methodologies. Changes in the law, new interpretations of existing laws, or changes in payment methodologies may have a dramatic effect on the definition of permissible or impermissible activities, the relative costs associated with doing business and the amount of reimbursement by the government and other third-party payors.

### Key Performance Indicators, Trends and Uncertainties

We utilize several key performance indicators to evaluate the various aspects of our business. These indicators are discussed below and relate to concentration risk and credit strength. Management uses these key performance indicators to facilitate internal and external comparisons to our historical operating results in making operating decisions and for budget planning purposes.

*Concentration Risk.* We evaluate by gross investment our concentration risk in terms of asset mix, real estate investment mix, operator mix and geographic mix. Concentration risk is valuable to understand what portion of our real estate investments could be at risk if certain sectors were to experience downturns. Asset mix measures the portion of our investments that are real property or mortgage loans. The National Association of Real Estate Investment Trusts (“NAREIT”), an organization representing U.S. REITs and publicly traded real estate companies, classifies a company with 50% or more of assets directly or indirectly in the equity ownership of real estate as an equity REIT. Investment mix measures the portion of our investments that relate to our various property classifications. Operator mix measures the portion of our investments that relate to our top five operators. Geographic mix measures the portion of our real estate investment that relate to our top five states.

The following table reflects our recent historical trends of concentration risk *(gross investment, in thousands):*

| ​ ​ ​ Asset mix: | ​ ​ ​ ​ | ​ ​ ​ ​ 9/30/23 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ 6/30/23 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ 3/31/23 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ 12/31/22 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ 9/30/22 ​ | ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Real property | ​ | $1,405,848 | ​ | $1,421,260 | ​ | $1,389,222 | ​ | $1,410,705 | ​ | $1,408,402 | ​ |
| Financing receivables | ​ | ​ 198,033 | ​ | ​ 198,056 | ​ | ​ 198,077 | ​ | ​ 76,767 | ​ | ​ 76,267 | ​ |
| Loans receivable | ​ | ​ 478,344 | ​ | ​ 476,739 | ​ | ​ 457,524 | ​ | ​ 393,658 | ​ | ​ 386,868 | ​ |
| Notes receivable | ​ | ​ 63,693 | ​ | ​ 46,412 | ​ | ​ 46,936 | ​ | ​ 58,973 | ​ | ​ 59,014 | ​ |
| Unconsolidated joint ventures | ​ | ​ 19,340 | ​ | ​ 19,340 | ​ | ​ 19,340 | ​ | ​ 19,340 | ​ | ​ 19,340 | ​ |
| Real estate investment mix: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Assisted living communities | ​ | $1,149,589 | ​ | $1,146,827 | ​ | $1,113,096 | ​ | $951,441 | ​ | $945,552 | ​ |
| Skilled nursing centers | ​ | ​ 987,877 | ​ | ​ 987,188 | ​ | ​ 970,300 | ​ | ​ 980,401 | ​ | ​ 976,753 | ​ |
| Other (1) | ​ | ​ 14,792 | ​ | ​ 14,792 | ​ | ​ 14,703 | ​ | ​ 14,601 | ​ | ​ 14,586 | ​ |
| Under development | ​ | 13,000 | ​ | ​ 13,000 | ​ | ​ 13,000 | ​ | ​ 13,000 | ​ | ​ 13,000 | ​ |
| Operator mix: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| ALG Senior | ​ | $310,789 | ​ | $307,891 | ​ | $326,288 | ​ | $192,699 | ​ | $189,533 | ​ |
| Prestige Healthcare (1) | ​ | ​ 272,767 | ​ | ​ 272,818 | ​ | ​ 271,904 | ​ | ​ 271,476 | ​ | ​ 271,851 | ​ |
| Encore Senior Living | ​ | ​ 179,430 | ​ | ​ 179,153 | ​ | ​ 57,101 | ​ | ​ 57,101 | ​ | ​ 57,101 | ​ |
| HMG Healthcare | ​ | ​ 176,644 | ​ | ​ 176,285 | ​ | ​ 176,285 | ​ | ​ 175,835 | ​ | ​ 174,107 | ​ |
| Anthem Memory Care | ​ | ​ 156,054 | ​ | ​ 155,867 | ​ | ​ 155,629 | ​ | ​ 139,176 | ​ | ​ 139,176 | ​ |
| Remaining operators | ​ | ​ 1,069,574 | ​ | ​ 1,069,793 | ​ | ​ 1,123,892 | ​ | ​ 1,123,156 | ​ | ​ 1,118,123 | ​ |
| Geographic mix: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Texas | ​ | $329,545 | ​ | $328,517 | ​ | $328,442 | ​ | $327,490 | ​ | $325,380 | ​ |
| Michigan | ​ | ​ 281,159 | ​ | ​ 281,210 | ​ | ​ 280,294 | ​ | ​ 280,389 | ​ | ​ 280,932 | ​ |
| North Carolina | ​ | ​ 234,665 | ​ | ​ 233,301 | ​ | ​ 232,841 | ​ | ​ 99,646 | ​ | ​ 95,456 | ​ |
| Florida | ​ | ​ 146,178 | ​ | ​ 146,019 | ​ | ​ 159,461 | ​ | ​ 158,892 | ​ | ​ 158,175 | ​ |
| Ohio | ​ | ​ 142,483 | ​ | ​ 142,206 | ​ | ​ 87,693 | ​ | ​ 87,569 | ​ | ​ 87,543 | ​ |
| Remaining states | ​ | ​ 1,031,228 | ​ | ​ 1,030,554 | ​ | ​ 1,022,368 | ​ | ​ 1,005,457 | ​ | ​ 1,002,405 | ​ |

(1) Includes three parcels of land located adjacent to properties securing the Prestige Healthcare mortgage loan and are managed by Prestige.

*Credit Strength.* We measure our credit strength both in terms of leverage ratios and coverage ratios. Our leverage ratios include debt to gross asset value and debt to market capitalization. The leverage ratios indicate how much of our *Consolidated Balance Sheets* capitalization is related to long-term obligations. Our coverage ratios include interest coverage ratio and fixed charge coverage ratio. The coverage ratios indicate our ability to service interest and fixed charges (interest). The coverage ratios are based on earnings before interest, taxes, depreciation and amortization for real estate (“EBITDA*re”*) as defined by NAREIT. EBITDA*re* is calculated as net income available to common stockholders (computed in accordance with GAAP) excluding (i) interest expense, (ii) income tax expense, (iii) real estate depreciation and amortization, (iv) impairment write-downs of depreciable real estate, (v) gains or losses on the sale of depreciable real estate, and (vi) adjustments for unconsolidated partnerships and joint ventures. Leverage ratios and coverage ratios are widely used by investors, analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The following table reflects the recent historical trends for our credit strength measures:

### Balance Sheet Metrics

| ​ ​ ​ | ​ ​ ​ | ​ ​ Year to Date ​ 9/30/23 ​ | ​ ​ Quarter Ended 9/30/23 ​ | ​ ​ | ​ ​ 6/30/23 ​ | ​ ​ | ​ ​ 3/31/23 ​ | ​ ​ | ​ ​ 12/31/22 ​ | ​ ​ | ​ ​ ​ 9/30/22 ​ |
| --- | --- | ---: | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Debt to gross asset value | ​ | 42.1% | 42.1% | ​ | 42.1% | (3)​ | 41.0% | (3)​ | 37.4% | (6)​ | 38.9% |
| Debt to market capitalization ratio | ​ | 41.8% | 41.8% | (1)​ | 41.1% | (1)​ | 38.3% | (4)​ | 34.4% | ​ | 34.4% |
| Interest coverage ratio (8) | ​ | 3.4 x | 3.2 x | (2)​ | 3.5 x | ​ | 3.6 x | (5)​ | 4.4 x | (7)​ | 4.2 x |
| Fixed charge coverage ratio (8) | ​ | 3.4 x | 3.2 x | (2)​ | 3.5 x | ​ | 3.6 x | (5)​ | 4.4 x | (7)​ | 4.2 x |

(1) Increased due to decrease in market capitalization and increase in outstanding debt.

(2) Decreased due to increase in interest expense partially offset by increase in interest income from mortgage loans and other notes receivable.

(3) Increased due to increase in outstanding debt partially offset by increase in gross asset value.

(4) Increased due to increase in outstanding debt.

(5) Decreased due to increase in interest expense.

(6) Decreased due to decrease in outstanding debt and increase in gross asset value.

(7) Increased due to increase in rental income and interest income from financing receivables partially offset by an increase in interest expense.

(8) In calculating our interest coverage and fixed charge coverage ratios above, we use EBITDA*re*, which is a financial measure not derived in accordance with GAAP (non-GAAP financial measure). EBITDA*re* is not an alternative to net income, operating income or cash flows from operating activities as calculated and presented in accordance with GAAP. You should not rely on EBITDA*re* as a substitute for any such GAAP financial measures or consider it in isolation, for the purpose of analyzing our financial performance, financial position or cash flows. Net income is the most directly comparable GAAP measure to EBITDA*re.*

| ​ ​ ​ | ​ ​ ​ | ​ ​ Year to Date 9/30/23 | ​ ​ ​ | ​ ​ Quarter Ended 9/30/23 | ​ ​ | ​ ​ 6/30/23 | ​ ​ | ​ ​ 3/31/23 | ​ ​ | ​ ​ 12/31/22 | ​ ​ | ​ ​ 9/30/22 | ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net income | ​ | $62,792 | ​ | $22,627 | ​ | $6,604 | ​ | $33,561 | ​ | $18,198 | ​ | $13,389 | ​ |
| Less/Add: (Gain)/loss on sale | ​ | ​ (20,545) | ​ | ​ (4,870) | ​ | ​ (302) | ​ | ​ (15,373) | ​ | ​ (21) | ​ | ​ 387 | ​ |
| Add: Impairment loss | ​ | ​ 12,510 | ​ | ​ — | ​ | ​ 12,076 | ​ | ​ 434 | ​ | ​ 2,136 | ​ | ​ 1,286 | ​ |
| Add: Interest expense | ​ | ​ 34,595 | ​ | ​ 12,674 | ​ | ​ 11,312 | ​ | ​ 10,609 | ​ | ​ 8,830 | ​ | ​ 7,941 | ​ |
| Add: Depreciation and amortization | ​ | ​ 28,085 | ​ | ​ 9,499 | ​ | ​ 9,376 | ​ | ​ 9,210 | ​ | ​ 9,294 | ​ | ​ 9,385 | ​ |
| EBITDAre | ​ | $117,437 | ​ | $39,930 | ​ | $39,066 | ​ | $38,441 | ​ | $38,437 | ​ | $32,388 | ​ |
| Add: Non-recurring one-time items | ​ | ​ 262 | (1)​ | ​ — | ​ | ​ — | ​ | ​ 262 | (1)​ | ​ — | ​ | ​ 1,260 | (2)​ |
| Adjusted EBITDAre | ​ | $117,699 | ​ | $39,930 | ​ | $39,066 | ​ | $38,703 | ​ | $38,437 | ​ | $33,648 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Interest expense | ​ | $34,595 | ​ | $12,674 | ​ | $11,312 | ​ | $10,609 | ​ | $8,830 | ​ | $7,941 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Interest coverage ratio | ​ | ​ 3.4 | x | ​ 3.2 | x | ​ 3.5 | x | ​ 3.6 | x | ​ 4.4 | x | ​ 4.2 | x |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Interest expense | ​ | $34,595 | ​ | $12,674 | ​ | $11,312 | ​ | $10,609 | ​ | $8,830 | ​ | $7,941 | ​ |
| Total fixed charges | ​ | $34,595 | ​ | $12,674 | ​ | $11,312 | ​ | $10,609 | ​ | $8,830 | ​ | $7,941 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Fixed charge coverage ratio | ​ | ​ 3.4 | x | ​ 3.2 | x | ​ 3.5 | x | ​ 3.6 | x | ​ 4.4 | x | ​ 4.2 | x |

(1) Represents $1,832 provision for credit losses related to the $121,321 acquisition accounted for as a financing receivable and $61,900 of mortgage loan originations partially offset by $1,570 exit IRR income related to the payoff of two mezzanine loans.

(2) Represents $500 lease termination fee paid to a former operator in exchange for cooperation in facilitating an orderly transition and $760 provision for credit losses related to the $75,825 acquisition accounted for as a financing receivable during the third quarter of 2022.

We evaluate our key performance indicators in conjunction with current expectations to determine if historical trends are indicative of future results. Our expected results may not be achieved, and actual results may differ materially from our expectations. This may be a result of various factors, including, but not limited to

- The status of the economy;
- The status of capital markets, including prevailing interest rates;
- Compliance with and changes to regulations and payment policies within the health care industry;
- Changes in financing terms;
- Competition within the health care and seniors housing industries; and
- Changes in federal, state and local legislation.

Additionally, as described in the Executive Overview above, COVID-19 and the pace of recovery for COVID-19 on our operators adversely affected and is expected to continue to adversely affect our business, results of operations, cash flows and financial condition. Depending on the future developments regarding COVID-19 and the pace of recovery for its effects, historical trends reflected in our balance sheet metrics may not be achieved in the future.

Management regularly monitors the economic and other factors listed above. We develop strategic and tactical plans designed to improve performance and maximize our competitive position. Our ability to achieve our financial objectives is dependent upon our ability to effectively execute these plans and to appropriately respond to emerging economic and company-specific trends.

**Operating Results** *(unaudited, in thousands)*

| ​ ​ ​ ​ Revenues: | ​ ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 ​ ​ | ​ ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Difference ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Rental income | ​ | $31,589 | ​ | $31,585 | ​ | $4 | ​ |
| Interest income from financing receivables | ​ | ​ 3,832 | ​ | ​ 357 | ​ | ​ 3,475 | (1)​ |
| Interest income from mortgage loans | ​ | ​ 12,247 | ​ | ​ 10,379 | ​ | ​ 1,868 | (2)​ |
| Interest and other income | ​ | ​ 1,635 | ​ | ​ 1,182 | ​ | ​ 453 | (3)​ |
| Total revenues | ​ | ​ 49,303 | ​ | ​ 43,503 | ​ | ​ 5,800 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Interest expense | ​ | ​ 12,674 | ​ | ​ 7,941 | ​ | ​ (4,733) | (4)​ |
| Depreciation and amortization | ​ | ​ 9,499 | ​ | ​ 9,385 | ​ | ​ (114) | ​ |
| Impairment loss | ​ | ​ — | ​ | ​ 1,286 | (5)​ | ​ 1,286 | ​ |
| Provision for credit losses | ​ | ​ 189 | ​ | ​ 795 | ​ | ​ 606 | (6)​ |
| Transaction costs | ​ | ​ 329 | ​ | ​ 629 | ​ | ​ 300 | ​ |
| Property tax expense | ​ | ​ 3,271 | ​ | ​ 4,179 | ​ | ​ 908 | (7)​ |
| General and administrative expenses | ​ | ​ 5,959 | ​ | ​ 5,888 | ​ | ​ (71) | ​ |
| Total expenses | ​ | ​ 31,921 | ​ | ​ 30,103 | ​ | ​ (1,818) | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Other operating income: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Gain (loss) on sale of real estate, net | ​ | ​ 4,870 | (8)​ | ​ (387) | (9)​ | ​ 5,257 | ​ |
| Operating income | ​ | ​ 22,252 | ​ | ​ 13,013 | ​ | ​ 9,239 | ​ |
| Income from unconsolidated joint ventures | ​ | ​ 375 | ​ | ​ 376 | ​ | ​ (1) | ​ |
| Net income | ​ | ​ 22,627 | ​ | ​ 13,389 | ​ | ​ 9,238 | ​ |
| Income allocated to non-controlling interests | ​ | ​ (430) | ​ | ​ (99) | ​ | ​ (331) | ​ |
| Net income attributable to LTC Properties, Inc. | ​ | ​ 22,197 | ​ | ​ 13,290 | ​ | ​ 8,907 | ​ |
| Income allocated to participating securities | ​ | ​ (147) | ​ | ​ (131) | ​ | ​ (16) | ​ |
| Net income available to common stockholders | ​ | $22,050 | ​ | $13,159 | ​ | $8,891 | ​ |

(1) Represents the revenue from the acquisition of 11 ALFs and MCs located in North Carolina for $121,321 during the first quarter of 2023 and the acquisition of three SNFs located in Florida for $75,825 during the third quarter of 2022. In accordance with ASC 842, these transactions are accounted as financing receivables. See *Note 2. Real Estate Investments* within our consolidated financial statements for more information.

(2) Increased primarily due to mortgage loan originations during 2023.

(3) Increased primarily due to origination of a $17,000 mezzanine loan during the third quarter of 2023 and repayment of deferred interest due from a master lease partially offset by lower income from loan payoffs.

(4) Increased primarily due to higher outstanding balance and higher interest rates on our revolving line of credit.

(5) Represents the impairment loss related to an assisted living community in Kentucky.

(6) Decreased primarily due to the financing receivable origination during the third quarter of 2022.

(7) Decreased primarily due to property tax reassessment and properties sold partially offset by acquisitions.

(8) Represents the gain on sale related to two ALFs located in Pennsylvania during the third quarter of 2023.

(9) Represents the net loss on sale of $434 related to a closed skilled nursing center in Texas offset by additional gain due to quarterly reassessment of prior years’ sale holdbacks.

| ​ ​ ​ ​ Revenues: | ​ ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 ​ ​ | ​ ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Difference ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Rental income | ​ | $94,861 | ​ | $93,537 | ​ | $1,324 | (1)​ |
| Interest income from financing receivable | ​ | ​ 11,413 | ​ | ​ 357 | ​ | ​ 11,056 | (2)​ |
| Interest income from mortgage loans | ​ | ​ 35,417 | ​ | ​ 30,112 | ​ | ​ 5,305 | (3)​ |
| Interest and other income | ​ | ​ 5,358 | ​ | ​ 3,308 | ​ | ​ 2,050 | (4)​ |
| Total revenues | ​ | ​ 147,049 | ​ | ​ 127,314 | ​ | ​ 19,735 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Interest expense | ​ | ​ 34,595 | ​ | ​ 22,607 | ​ | ​ (11,988) | (5)​ |
| Depreciation and amortization | ​ | ​ 28,085 | ​ | ​ 28,202 | ​ | ​ 117 | ​ |
| Impairment loss | ​ | ​ 12,510 | (6)​ | ​ 1,286 | (7)​ | ​ (11,224) | ​ |
| Provision for credit losses | ​ | ​ 2,107 | ​ | ​ 1,454 | ​ | ​ (653) | (8)​ |
| Transaction costs | ​ | ​ 537 | ​ | ​ 728 | ​ | ​ 191 | ​ |
| Property tax expense | ​ | ​ 9,751 | ​ | ​ 12,180 | ​ | ​ 2,429 | (9)​ |
| General and administrative expenses | ​ | ​ 18,344 | ​ | ​ 17,407 | ​ | ​ (937) | (10)​ |
| Total expenses | ​ | ​ 105,929 | ​ | ​ 83,864 | ​ | ​ (22,065) | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Other operating income: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Gain on sale of real estate, net | ​ | ​ 20,545 | (11)​ | ​ 37,809 | (12)​ | ​ (17,264) | ​ |
| Operating income | ​ | ​ 61,665 | ​ | ​ 81,259 | ​ | ​ (19,594) | ​ |
| Income from unconsolidated joint ventures | ​ | ​ 1,127 | ​ | ​ 1,127 | ​ | ​ — | ​ |
| Net income | ​ | ​ 62,792 | ​ | ​ 82,386 | ​ | ​ (19,594) | ​ |
| Income allocated to non-controlling interests | ​ | ​ (1,287) | ​ | ​ (301) | ​ | ​ (986) | ​ |
| Net income attributable to LTC Properties, Inc. | ​ | ​ 61,505 | ​ | ​ 82,085 | ​ | ​ (20,580) | ​ |
| Income allocated to participating securities | ​ | ​ (440) | ​ | ​ (481) | ​ | ​ 41 | ​ |
| Net income available to common stockholders | ​ | $61,065 | ​ | $81,604 | ​ | $(20,539) | ​ |

(1) Increased primarily due to rental income from acquisitions, rent received from transitioned portfolios, repayment of deferred rent and annual rent escalations partially offset by sold properties and decrease in property tax revenue.

(2) Represents the revenue from the acquisition of 11 ALFs and MCs located in North Carolina for $121,321 during the first quarter of 2023 and the acquisition of three SNFs located in Florida for $75,825 during the third quarter of 2022. In accordance with ASC 842, these transactions are accounted as financing receivables. See *Note 2. Real Estate Investments* within our consolidated financial statements for more information.

(3) Increased primarily due to mortgage loan originations during the second quarter of 2022 and the first and second quarter of 2023 and additional funding under mortgage loans.

(4) Increased primarily due to origination of a $17,000 mezzanine loan during the third quarter of 2023, prepayment fees received in connection with the payoff of two mezzanine loans during the first quarter of 2023 and repayment of deferred interest related to a master lease partially offset by lower income from loan payoffs.

(5) Increased primarily due to higher outstanding balance and higher interest rates on our revolving line of credit.

(6) Represents $434 impairment loss related to a 70-unit ALF located in Florida that was sold during 2023. Additionally, represents aggregate impairment loss of $12,076 related to two ALFs. See *Note 2. Real Estate Investments* within our consolidated financial statements for more information.

(7) Represents the impairment loss related to an assisted living community in Kentucky.

(8) Increased primarily due to more originations during the nine months ended September 30, 2023 compared to nine months ended September 30, 2022.

(9) Decreased primarily due to property tax reassessment and properties sold partially offset by acquisitions.

(10) Increased due to higher incentive compensation charges and increases in overall costs due to inflationary pressures and the timing of certain expenditures.

(11) Represents the net gain on sale related to five ALFs located in Florida, Kentucky, New Jersey and Pennsylvania and two SNFs in New Mexico during 2023.

(12) Represents the net gain on sale of $38,052 related to a SNF located in California and three ALFs located in Virginia and California during the second quarter of 2022 and quarterly reassessment of prior years’ sale holdbacks partially offset by the net loss on sale of $434 related to a closed skilled nursing center in Texas.

### Funds From Operations Available to Common Stockholders

Funds from Operations (“FFO”) attributable to common stockholders, basic FFO attributable to common stockholders per share and diluted FFO attributable to common stockholders per share are supplemental measures of a REIT’s financial performance that are not defined by GAAP. Real estate values historically rise and fall with market conditions, but cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. We believe that by excluding the effect of historical cost depreciation, which may be of limited relevance in evaluating current performance, FFO facilitates comparisons of operating performance between periods.

We use FFO as a supplemental performance measurement of our cash flow generated by operations. FFO does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income available to common stockholders.

We calculate and report FFO in accordance with the definition and interpretive guidelines issued by NAREIT. FFO, as defined by NAREIT, means net income available to common stockholders (computed in accordance with GAAP) excluding gains or losses on the sale of real estate and impairment write-downs of depreciable real estate plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our calculation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that have a different interpretation of the current NAREIT definition from us; therefore, caution should be exercised when comparing our FFO to that of other REITs.

The following table reconciles GAAP net income available to common stockholders to NAREIT FFO available to common stockholders *(unaudited, amounts in thousands, except per share amounts):*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2023 | ​ ​ | ​ ​ 2022 | ​ ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ ​ | ​ ​ 2022 | ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| GAAP net income available to common stockholders | ​ | $22,050 | ​ | $13,159 | ​ | $61,065 | ​ | $81,604 | ​ |
| Add: Depreciation and amortization | ​ | ​ 9,499 | ​ | ​ 9,385 | ​ | ​ 28,085 | ​ | ​ 28,202 | ​ |
| Add: Impairment loss | ​ | ​ — | ​ | ​ 1,286 | ​ | ​ 12,510 | ​ | ​ 1,286 | ​ |
| Less/add: (Gain)/loss on sale of real estate, net | ​ | ​ (4,870) | ​ | ​ 387 | ​ | ​ (20,545) | ​ | ​ (37,809) | ​ |
| NAREIT FFO attributable to common stockholders | ​ | $26,679 | ​ | $24,217 | ​ | $81,115 | ​ | $73,283 | ​ |
| NAREIT FFO attributable to common stockholders per share: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Basic | ​ | $0.65 | ​ | $0.60 | ​ | $1.97 | ​ | $1.85 | ​ |
| Diluted | ​ | $0.65 | ​ | $0.60 | ​ | $1.97 | ​ | $1.83 | ​ |
| Weighted average shares used to calculate NAREIT FFO per share: | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Basic | ​ | ​ 41,153 | ​ | ​ 40,270 | ​ | ​ 41,127 | ​ | ​ 39,658 | ​ |
| Diluted | ​ | ​ 41,469 | (1)​ | ​ 40,781 | (2)​ | ​ 41,440 | (1)​ | ​ 39,939 | (3)​ |

(1) Includes the effect of performance-based stock units and participating securities.

(2) Includes the effect of stock option equivalents, performance-based stock units and participating securities.

(3) Includes the effect of performance-based stock units.

### Liquidity and Capital Resources

#### Sources and Uses of Cash

As of September 30, 2023, we had a total of $11.3 million of cash and cash equivalents, $37.8 million available under our unsecured revolving line of credit and the potential ability to access the capital markets through the issuance of $128.8 million of common stock under our Equity Distribution Agreements. Furthermore, we have the ability to access the capital markets through the issuance of debt and/or equity securities under an automatic shelf registration statement.

We believe that our current cash balance, cash flow from operations available for distribution or reinvestment, our borrowing capacity and our potential ability to access the capital markets are sufficient to provide for payment of our current operating costs, meet debt obligations and pay common dividends at least sufficient to maintain our REIT status and repay borrowings at, or prior to, their maturity. The timing, source and amount of cash flows used in financing and investing activities are sensitive to the capital markets environment, especially to changes in interest rates. In addition, COVID-19 has adversely affected our operators’ business, results of operations, cash flows and financial condition which could, in turn, adversely affect our financial position.

We maintain our cash deposits primarily in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). We have not experienced any losses related to amounts in excess of FDIC limits.

The operating results of the facilities will be impacted by various factors over which the operators/owners may have no control. Those factors include, without limitation, the health of the economy, inflation pressures, employee availability and cost, changes in supply of or demand for competing seniors housing and health care facilities, competition from home health providers, ability to control other rising operating costs, the potential for significant reforms in the health care industry including state and federal reimbursement programs, and the ongoing recovery for the impact of COVID-19. Prestige is our largest operator based upon revenues and assets representing 16.6% of our total revenues and 14.2% of our total assets as of September 30, 2023. During the second quarter of 2023, we agreed to defer up to $1.5 million, or up to $0.3 million per month for May through September 2023, in interest payments due on one of Prestige’s mortgage loans secured by 15 skilled nursing centers. We deferred $0.6 million and $0.9 million in interest payments during the second quarter and third quarters of 2023. Subsequent to September 30, 2023, we amended the loan. As part of the amendment, LTC has drawn down $2.8 million of the approximate $5.0 million letter of credit from Prestige to repay all deferred interest outstanding through October 2023. We will further draw down approximately $334,000 in each of November and December 2023 to be applied toward interest due on the loan at that point. As a result, we expect to receive all contractual interest of $19.5 million due from Prestige in 2023. Beginning on January 1, 2024, the minimum mortgage interest payment due to LTC will be set based on an annual current pay rate of 8.5% on the outstanding loan balance. The contractual interest rate of the loan remains unchanged. From retro-active Medicaid funds due to Prestige, we expect our letter of credit will be replenished in 2024 and Prestige will be able to pay all contractual interest during 2024 and 2025.

Our financial position and ability to make distributions may be adversely affected if Prestige faces financial difficulties, including bankruptcy, inability to emerge from bankruptcy, insolvency or a general downturn in its business.

In addition, our future growth in net income and cash flow may be adversely impacted by various proposals for changes in the governmental regulations and financing of the health care industry, and the continuing impact of our operators recovery for the effects of COVID-19. We cannot presently predict what impact these proposals may have, if any. We believe that an adequate provision has been made for the possibility of loans proving uncollectible but we will continually evaluate the financial status of the operations of the seniors housing and health care properties. In addition, we will monitor our borrowers and the underlying collateral for mortgage loans and will make future revisions to the provision, if considered necessary.

Depending on our borrowing capacity, compliance with financial covenants, ability to access the capital markets, and the payment of dividends may be negatively impacted. We continuously evaluate the availability of cost-effective capital and believe we have sufficient liquidity for our current dividend, corporate expenses and additional capital investments in 2023 and 2024.

Our investments, principally our investments in owned properties and mortgage loans, are subject to the possibility of loss of their carrying values as a result of changes in market prices, interest rates and inflationary expectations. The effects on interest rates may affect our costs of financing our operations and the fair market value of our financial assets. Generally, our leases have agreed upon annual increases and our loans have predetermined increases in interest rates. Inasmuch as we may initially fund some of our investments with variable interest rate debt, we would be at risk of net interest margin deterioration if medium and long-term rates were to increase.

Our primary sources of cash include rent and interest receipts, borrowings under our unsecured credit facility, public and private issuances of debt and equity securities, proceeds from investment dispositions and principal payments on loans receivable. Our primary uses of cash include dividend distributions, debt service payments (including principal and interest), real property investments (including acquisitions, capital expenditures and construction advances), loan advances and general and administrative expenses. These sources and uses of cash are reflected in our *Consolidated Statements of Cash Flows* as summarized below (*in thousands):*

| ​ ​ Net Cash provided by (used in): | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2023 | ​ ​ | ​ ​ 2022 | ​ ​ ​ | ​ ​ ​ Change ​ $​ | ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Operating activities | ​ | $78,932 | ​ | $72,772 | ​ | $6,160 | ​ |
| Investing activities | ​ | ​ (194,254) | ​ | ​ (110,507) | ​ | ​ (83,747) | ​ |
| Financing activities | ​ | ​ 116,245 | ​ | ​ 39,052 | ​ | ​ 77,193 | ​ |
| Increase in cash and cash equivalents | ​ | ​ 923 | ​ | ​ 1,317 | ​ | ​ (394) | ​ |
| Cash and cash equivalents, beginning of period | ​ | ​ 10,379 | ​ | ​ 5,161 | ​ | ​ 5,218 | ​ |
| Cash and cash equivalents, end of period | ​ | $11,302 | ​ | $6,478 | ​ | $4,824 | ​ |

#### Debt Obligations

*Unsecured Credit Facility.* We have an unsecured credit agreement (the “Credit Agreement”) that provides for an aggregate commitment of the lenders of up to $500.0 million comprising of a $400.0 million revolving credit facility (the “Revolving Line of Credit”) and two $50.0 million term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans commitments up to a total of $1.0 billion. The Revolving Line of Credit matures November 19, 2025 and provides for a one-year extension option at our discretion, subject to customary conditions. The Term Loans mature on November 19, 2025 and November 19, 2026. During 2022, we entered into the First Amendment to the Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) to replace London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”), plus a credit spread adjustment of 10 basis points, (“Adjusted SOFR”) as the reference rate for purpose of calculating interest under the Amended Credit Agreement. Other material terms of the Credit Agreement remain unchanged. Based on our leverage at September 30, 2023, the facility provides for interest annually at Adjusted SOFR plus 120 basis points and a facility fee of 20 basis points and the Term Loans provide for interest annually at Adjusted SOFR plus 140 basis points.

*Interest Rate Swap Agreements.* In connection with entering into the Term Loans as described above, we entered into two receive variable/pay fixed interest rate swap agreements (the “Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loans’ borrowings over their four and five year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on our *Consolidated Balance Sheets* at fair value, with changes in the fair value of these instruments recognized in *Accumulated other comprehensive income (loss)* on our *Consolidated Balance Sheets*. In connection with entering into the Amended Credit Agreement discussed above, we entered into amendments to our Interest Rate Swaps to account for SOFR as the updated reference rate in the Amended Credit Agreement. During the nine months ended September 30, 2023, we recorded a $123,000 decrease in fair value of Interest Rate Swaps.

As of September 30, 2023, the terms of the Interest Rate Swaps are as follows (*dollar amounts in thousands):*

| ​ ​ Date Entered | ​ ​ ​ | ​ ​ Maturity Date | ​ ​ ​ | ​ ​ ​ ​ Swap Rate | ​ ​ ​ | ​ ​ Rate Index | ​ ​ ​ | ​ ​ ​ Notional ​ Amount | ​ ​ ​ | ​ ​ Fair Value at ​ September 30, 2023 | ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | --- | ---: | --- | ---: | --- |
| November 2021 | ​ | November 19, 2025 | ​ | 2.62% | ​ | 1-month SOFR | ​ | $50,000 | ​ | $3,776 | ​ |
| November 2021 | ​ | November 19, 2026 | ​ | 2.76% | ​ | 1-month SOFR | ​ | ​ 50,000 | ​ | ​ 4,820 | ​ |
| ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ | $100,000 | ​ | $8,596 | ​ |

*Senior Unsecured Notes.* We have senior unsecured notes held by institutional investors with interest rates ranging from 3.66% to 5.03%. The senior unsecured notes mature between 2024 and 2033.

The senior unsecured notes and the Credit Agreement, including the Revolving Line of Credit and the Term Loans, contain financial covenants, which are measured quarterly, that require us to maintain, among other things:

- a ratio of total indebtedness to total asset value not greater than 0.6 to 1.0;
- a ratio of secured debt to total asset value not greater than 0.35 to 1.0;
- a ratio of unsecured debt to the value of the unencumbered asset value not greater than 0.6 to 1.0; and
- a ratio of EBITDA, as calculated in the debt obligation, to fixed charges not less than 1.50 to 1.0.

At September 30, 2023, we were in compliance with all applicable financial covenants. These debt obligations also contain additional customary covenants and events of default that are subject to a number of important and significant limitations, qualifications and exceptions.

The debt obligations by component as of September 30, 2023 are as follows *(dollar amounts in thousands):*

| ​ ​ ​ Debt Obligations | ​ ​ ​ ​ | ​ Applicable Interest Rate (1) | ​ ​ ​ ​ | ​ ​ ​ ​ Outstanding Balance | ​ ​ ​ ​ | ​ ​ Available for Borrowing |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Revolving line of credit | ​ | 6.63% | ​ | $362,250 | ​ | $37,750 |
| Term loans, net of debt issue costs | ​ | 2.74% | ​ | ​ 99,620 | ​ | ​ — |
| Senior unsecured notes, net of debt issue costs | ​ | 4.20% | ​ | ​ 494,353 | ​ | ​ — |
| Total | ​ | 4.97% | ​ | $956,223 | ​ | $37,750 |

(1) Represents weighted average of interest rate as of September 30, 2023.

During the nine months ended September 30, 2023, our debt borrowings and repayments were as follows *(in thousands):*

| ​ Debt Obligations | ​ ​ | ​ ​ ​ Borrowings | ​ ​ | ​ ​ ​ Repayments | ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Revolving line of credit | ​ | $274,450 | ​ | $(42,200) | ​ |
| Senior unsecured notes | ​ | ​ — | ​ | ​ (44,160) | ​ |
| Total | ​ | $274,450 | ​ | $(86,360) | ​ |

#### Equity

At September 30, 2023, we had 41,411,693 shares of common stock outstanding, equity on our balance sheet totaled $860.4 million and our equity securities had a market value of $1.3 billion. During the nine months ended September 30, 2023, we declared and paid $70.8 million of cash dividends.

During the nine months ended September 30, 2023, we acquired 43,933 shares of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Subsequent to September 30, 2023, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of October, November and December 2023, payable on October 31, November 30, and December 29, 2023, respectively, to stockholders of record on October 23, November 22, and December 21, 2023, respectively.

*At-The-Market Program.* We have separate equity distribution agreements (collectively, “Equity Distribution Agreements”) to offer and sell, from time to time, up to $200.0 million in aggregate offering price of shares of our common stock. During the nine months ended September 30, 2023, we sold 48,500 shares of common stock for $1.8 million in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $80,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. Accordingly, we have $128.8 million available under the Equity Distribution Agreements.

*Available Shelf Registrations.* We have an automatic shelf registration statement on file with the SEC and currently have the ability to file additional automatic shelf registration statements to provide us with capacity to publicly offer an indeterminate amount of common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time raise capital under our automatic registration statement in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. Our shelf registration statement expires on February 17, 2025.

*Stock-Based Compensation.* During the second quarter of 2021, we adopted and our shareholders approved the 2021 Equity Participation Plan (“the 2021 Plan”) which replaces the 2015 Equity Participation Plan (“the 2015 Plan”). Under the 2021 Plan, 1,900,000 shares of common stock have been authorized and reserved for awards, less one share for every one share that was subject to an award granted under the 2015 Plan after December 31, 2020 and prior to adoption. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited or cancelled after December 31, 2020 will be added to and again be available for awards under the 2021 Plan. Under the 2021 Plan, the shares were authorized and reserved for awards to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2021 Plan and the 2015 Plan are set by our compensation committee at its discretion.

During the nine months ended September 30, 2023, we awarded restricted stock and performance-based stock units as follows:

| ​ No. of Shares | ​ ​ ​ | ​ ​ Price per Share | ​ ​ ​ | ​ ​ Award Type | ​ ​ ​ | ​ ​ Vesting Period | ​ ​ ​ |
| ---: | --- | ---: | --- | --- | --- | --- | --- |
| 127,960 | ​ | $37.16 | ​ | Restricted stock | ​ | ratably over 3 years | ​ |
| 86,867 | ​ | $37.16 | ​ | Performance-based stock units | ​ | TSR targets (1) | ​ |
| 15,060 | ​ | $31.54 | ​ | Restricted stock | ​ | May 24,2024 | ​ |
| 3,000 | ​ | $35.45 | ​ | Restricted stock | ​ | July 25, 2024 | ​ |
| 232,887 | ​ | ​ ​ | ​ | ​ | ​ | ​ | ​ |

(1) Vesting is based on achieving certain total shareholder return (“TSR”) targets in 4 years with an acceleration opportunity in 3 years.

### Critical Accounting Policies

Our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q are prepared in conformity with U.S. generally accepted accounting principles for interim financial information set forth in the Accounting Standards Codification as published by the Financial Accounting Standards Board, which require us to make estimates and assumptions regarding future events that affect the amounts reported in our financial statements and accompanying footnotes. We base these estimates on our experience and assumptions regarding future events we believe to be reasonable under the circumstances. Actual results could differ from those estimates and such differences may be material to the consolidated financial statements. We have described our most critical accounting policies in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our critical accounting policies or estimates since December 31, 2022.

## Market risk

As filed, 228 characters.

There were no material changes in our market risk during the nine months ended September 30, 2023. For additional information, refer to Item 7A as presented in our Annual Report on Form 10-K for the year ended December 31, 2022.

## Controls and procedures

As filed, 795 characters.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). As of the end of the period covered by this report based on such evaluation our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective.

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### PART II

### OTHER INFORMATION

## Risk factors

As filed, 160 characters.

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Filed Oct 26, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-016867. Last ingested by Listed: Nov 3, 2026, 21:35 ET. No prices; not investment advice.