Good day, everyone, and welcome to the LTC Properties Second Quarter Analyst and Investor Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Before management begins its presentation, Please note that today's comments, including the question and answer session, may include forward looking statements subject to risks and uncertainties that could cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC's properties filings with the Securities and Exchange Commission from time to time, including the company's most recent 10 ks dated December 31, 2020.
LTC undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances after the date of this presentation. Please note that this event is being recorded. I would now like to turn the conference over to Wendy Simpson. Please go ahead.
Thank you, operator, and welcome everybody joining us today for LTC's 2021 Q2 conference call. With me on the call are Pam Kessler, Co President and Chief Financial Officer and Clint Malin, Co President and Chief Investment Officer. Not being able to quantify an impact of the delta variant on current and near future operations, What we have recently heard from our operators gives us some optimism. We are seeing occupancy gains for the first time in a long while. Vaccination rates among patients and residents throughout the industry are high, generally in the 80% range, With gradual increases expected, our buildings are beginning to stabilize with in person tours and family visits allowed once again, Notwithstanding the recent introduction of the Delta variant, the transition of our senior lifestyle portfolio is virtually complete And we are seeing a nice pickup in deal flow and activity.
We are seeing a few encouraging signs throughout the industry. According to NIC data, communities and nursing centers are doing much better clinically than they have in some time given the high rate of vaccinations among residents and patients. On average, especially with respect to SNFs, occupancy is Trending slowly upward. Over the last 25 weeks, SNFs have seen occupancy rise in each week except one when census remained flat. Various government stimulus programs have helped significantly in keeping Skilled nursing operators afloat over the course of the pandemic.
Additionally, there is about $25,000,000,000 remaining for distribution To all healthcare providers in the Provider Relief Fund, while private pay has not been a beneficiary of adequate government relief to date, We are seeing some signs that more aid may become available soon. This is not to say, unfortunately, That all of the challenges facing our industry are slowly trending downward. Labor continues to be a major challenge for operators And interest rates and inflation are something we're watching carefully. Even so, I believe our industry is on more solid footing today than it has been over the last 18 months, and I'm hopeful that some of the remaining pressures will begin to ease in the coming months. That said, however, a serious surge of the COVID delta variant across the country, especially in states with lower vaccination rates among staff, Could result in the need to stop admissions again temporarily delaying a full recovery.
But hopefully any such surge will be addressed locally rather than by a national edict. 2nd quarter rent and mortgage interest income collections were 93.6%, excluding Senior Lifestyle and Senior Care and 86.1% excluding Just Senior Lifestyle, whose transition Clint will discuss in detail. We are no longer seeing new Substantial requests for rent deferrals and abatements and if new ones arise, we will review each on a case by case basis, Keeping in mind an operator's ongoing operations, rent coverage, corporate financial health and liquidity, We expect to continue providing some amount of relief in the form of deferrals and abatements until occupancy gains become more permanent. I'm so very pleased to be able to report that the Senior Lifestyle portfolio transition is nearly complete. 19 of the buildings have been shortly will be under new leases.
The other four properties in the portfolio have been sold. Clint will provide more details in his comments. With respect to Senior Care Centers, bankruptcy proceedings are continuing with the next scheduled court date on August 11. Building on the uptick we saw toward the end of the last quarter, deal flow continues to accelerate with several potential transactions in the pipeline that meet our criteria. These opportunities are mostly shorter term and cash flow strategic with what we believe are reduced risk profiles and We have no problem temporarily remaining on the sidelines for our more traditional long term investments until we can find the right deal at the right price.
The opportunities we are currently working through include mostly structured finance transactions and span the full spectrum of care. It bears repeating that LTC has ample access to liquidity to act on these opportunities when the timing is right. But as a good financial steward, We will not enter into a deal that does not produce accretive returns for LTC and our shareholders. With respect to our dividend, I'd like to repeat what I said last quarter. It has been LTC's practice to support a dividend payout ratio of approximately 80% of FAD.
As a result of the financial support we have provided some of our operators and the significant senior lifestyle and senior Our 2nd quarter 2021 dividend payout ratio was 98%. However, we believe our 2022 FAD will improve as we fully transition the Senior Lifestyle portfolio to more stable operators and the issues related to the Senior Care bankruptcy are resolved. At this time, we will provide guidance for the Q3. We expect similar NAREIT FFO results as we reported for the just completed second quarter. This guidance does not include recovery of any deferred rent or any rent payment from Senior Care.
With that, I'll turn things over to Pam.
Thank you, Wendy. Total revenue increased $9,600,000 compared with last Q2 resulting primarily from a $9,500,000 increase in rental revenue, which was due to a 17.7 write off in last year's Q2 related to senior lifestyle straight line rent and lease incentive balances. Completed development projects and higher rent payments from Anthem also contributed to the increase. The increase in revenue was partially offset by reduced rent from Senior Lifestyle, Net of rent received from releasing 11 properties in the portfolio, defaulted senior care lease obligations, abated and deferred rent And a decrease in property tax revenue. Interest income increased $113,000 from the prior year due to the funding of expansion and renovation projects offset by scheduled principal pay downs.
Interest expense decreased by 686,000 Due to scheduled principal pay downs on our senior unsecured notes, lower interest rates and a lower outstanding balance under our line of credit, partially offset by lower capitalized interest in 2021. Property tax expense decreased $311,000 compared with last year's Q2 as a result of the timing of certain operators' property tax escrow receipts and the payment of related taxes, partially offset by completed development projects. G and A was $757,000 greater than last year due to the timing of accrual for incentive compensation, Income from unconsolidated joint ventures increased $376,000 due to mezzanine loan fundings. During last year's Q2, we recognized a loss on liquidation of unconsolidated joint ventures of 620,000 Related to the sale of the 4 properties comprising our unconsolidated real estate joint venture with an affiliate of Senior Lifestyle. During the Q2 of 2021, we recognized a net gain on sale of real estate of $5,500,000 related to the sale of 3 properties in Wisconsin and a closed property in Nebraska, all previously leased to Senior Lifestyle.
We also transitioned a memory care property in Colorado, previously operated by Senior Lifestyle to Operator new to LTC. The lease has a 5 year term and provides a purchase option for $5,500,000 which is exercisable after the 1st year of the lease. Cash rent starting in the 2nd year of the lease is $150,000 increasing to $300,000 in the 3rd year and escalating 2% annually thereafter. Net income available to common shareholders for the Q2 of 2021 increased by $16,400,000 primarily NAREIT FFO for fully diluted share increased to $0.57 from $0.31 last year. In the quarter, We paid $41,000,000 under our unsecured revolving line of credit.
Additionally, we maintained our $0.19 per share monthly dividend by paying our shareholders $22,400,000 in common dividends during the quarter. Subsequent to the end of the second quarter, we entered into lease agreements covering the remaining in the senior lifestyle portfolio, which Clint will discuss shortly, and sold a skilled nursing center in Washington for 7,700,000 We received proceeds totaling $7,200,000 and expect to recognize a gain on sale of $2,600,000 Additionally, we paid $25,200,000 in regular scheduled principal payments under our senior unsecured notes and borrowed $19,000,000 under our $15,100,000 available on our line of credit, under which $84,900,000 is outstanding and $200,000,000 under our ATM program, Providing LTC with liquidity of nearly $721,000,000 It is important to note that we have no significant long term debt We expect to see this 5.3 ratio come down as we receive more rent from assets formerly operated by Senior Lifestyle and eventually we expect to be able to Collect rent from assets involved in the most recent Senior Care bankruptcy. Next, I'll discuss rent deferrals and abatements. As Wendy mentioned, Excluding Senior Care and Senior Lifestyle, we collected 93.6 percent of 2nd quarter rent and mortgage interest income. We provided $1,100,000 in rent deferrals and $1,100,000 in rent abatements.
As a reminder, Senior Lifestyle did not pay us rent in 2021. With the portfolio virtually fully transitioned, we are receiving contractual rent from the operators who now lease these properties. Additionally, during the Q2, Senior Care did not pay rent. We applied the remaining $889,000 of the $2,100,000 letter of credit to certain obligations owed under the master lease in the Q2. As of June 30, Senior Care's unaccrued outstanding rent balance was $3,100,000 In July, we provided rent deferrals totaling 366,000 And rent abatements of $323,000 We have agreed to provide rent deferrals of up to $493,000 and abatements of up to $319,000 for each of August September 2021.
Now, I'd like to turn the call over to Clint.
Thank you, Pam. As Wendy discussed, our senior lifestyle portfolio is now nearly fully transitioned, and I'm excited to provide our final updates On the transition, I'll speak in some detail about the newest transactions, but I will start with a brief recap of the transactions completed earlier this In total, the senior lifestyle portfolio included 23 properties, 12 of which were transitioned through April of this year. 6 of those communities were transferred to Randall Residence, a current LTC operator 5 to OnCore Senior Living, an operator new to us And one to Graceful Senior Living also new to us. Of the remaining 11 properties, 4 were sold in the 2nd quarter. 3 Assisted Living Communities Located in Wisconsin were sold for $35,000,000 which roughly approximates their combined gross book value.
We used the net proceeds of approximately $33,900,000 to pay down our unsecured revolving line of credit. In total, These properties included 263 units. The 4th was a previously closed property sold for $900,000 for an alternative use. The gross book value when we acquired it in 1997 was $2,500,000 and the net book value was 1,100,000 Of the remaining 7 buildings in the portfolio, 3 have been transferred and 4 are awaiting licensure. 2 properties are being operated by Juniper in Pennsylvania.
One property in New Jersey also to be operated by Juniper should be receiving licensure any day. Combined, these communities include 168 units. Juniper has been a close partner of LTCs since 2012. The new lease has a 2 year term 0 cash rent for the 1st 3 months. After that time, cash rent will be reset based on mutually agreed upon fair market rent.
Cash rent will be reset every 3 months for the 1st year and twice a year for the 2nd year as cash flow in the buildings improves until we set permanent rates for the longer term. Three properties in Nebraska with a combined 119 units We'll be operated by Oxford Senior Living and existing LTC partners since 2012 as soon as licensure is received, which we also expect in short order. The new lease follows the same pattern as I described for Juniper. One property in Wisconsin is now being operated by a regional partner new to LTC. This community includes 101 units and will be operated Under a 10 year lease with 3 5 year renewal terms, cash rent under the new lease is $920,000 In the 1st year, dollars 1,200,000 in the 2nd year, dollars 1,300,000 in the 3rd year, then escalating 2% annually thereafter.
I'll complete my remarks about the Senior Lifestyle portfolio by saying that among the properties that were transitioned in the January February timeframe, especially in markets Next, I'll provide some detail on our most recent development projects that are now operational. Wetherly Court, operated by Field Senior Living in Orion, Begin accepting residents last September. At June 30, occupancy was 36%, up from 24% on March 31. Ignite Medical Resort in Blue Springs, located in Missouri, began welcoming patients last October. At June 30, occupancy rose nicely to 83%, up from 64% on March 31.
Moving next to our portfolio numbers, please remember that with the pandemic and the challenging environment it created, we don't believe coverage is a good indicator of Q1 trailing 12 month EBITDARM and EBITDAR coverage as reported using a 5% management fee was 0.99x and 0.8x respectively for our assisted living portfolio. Excluding stimulus funds received by our operators, Coverage was 0.85x and 0.67x respectively. Excluding Senior Lifestyle from our Assisted Living portfolio, As reported, EBITDARM and EBITDAR coverages would increase to 1.03x and 0.84x respectively. Excluding both Senior Lifestyle and Stimulus Funds, EBITDARM and EBITDAR coverages would be 0.9 times and 0.71 times respectively. For our skilled nursing portfolio, as reported EBITDARM and EBITDAR coverage It was 1.94x and 1.49x respectively.
Excluding stimulus funds, Coverage was 1.44x and 1.02x respectively. Excluding senior care from our skilled portfolio, As reported, EBITDARM and EBITDAR coverages would increase to 1.98x and 1.5x, respectively. Excluding both Senior Care and Stimulus Funds, EBITDARM and EBITDAR coverages would be 1.52 times and 1.06x respectively. Now for some occupancy trends, which are as of July 15. As a reminder, For our private pay portfolio, occupancy is as of that date specifically.
And for our skilled portfolio, occupancy is the average for the month. Because our partners have given this data to us on a voluntary and expedited basis, the information we are providing Includes approximately 70% of our total private pay units and approximately 73% for skilled nursing beds. Private pay occupancy was 74% at July 15 June 30, and 72% at March 31. For our skilled portfolio, Which excludes Senior Care, average monthly occupancy through July 15 was 69% versus 68% in both June March. As Wendy mentioned, our pipeline continues to expand and is more active than it has been in some time with a diverse set of opportunities, including a mix of existing operating partners and those new to LTC, as well as a mix of private bay and SNFs.
In total, our near term pipeline is valued at about $130,000,000 with additional medium to long term opportunities totaling about another $90,000,000 Our bid activity remains healthy and we are excited to see this important part Our current investment strategy gaining steam. Our sales cycles remain elongated and pricing for some properties does not strategic investments that will position LTC for future growth. We have nurtured our balance sheet to provide us with adequate liquidity and flexibility and believe we can use this to our advantage as we seek to provide strong regional operators with creative financing solutions. We are open to any transaction that meets our underwriting criteria, but also believe that in the current environment, finance deals, including mezzanine loans and preferred equity financing, still represent the best risk reward profile at this time. Now, I'll turn things back to Wendy for her closing remarks.
Thank you, Pam and Clint. We have come a long way since the start of the pandemic. It has not been an easy road, but I believe we are now coming up on an easier road. Let's face it, this business has never been a newly paved Move superhighway with an express lane. But with great pride, I can say our industry has learned many lessons Through many cycles of significant challenge and we continue to provide what I believe is the world's most caring service to the nation's most vulnerable people.
Each day, I become more and more confident in our ability to continue to proactively participate in this vital industry. We are positioned to play offense and are seeking out opportunities to strengthen LTC now and for the future. We will accomplish this by identifying accretive ways to enhance our portfolio, diversify our investments, Serve as a growth capital partner of choice and return to a well covered dividend for our shareholders. Now we'll open up the call for your questions.
We will now begin the question and answer session. Chadler with KeyBanc Capital Markets, please go ahead.
Thank you and good morning. Wanted to just circle back, Wendy. I think in your prepared remarks, you discussed An occupancy statistic of 25 consecutive weeks of occupancy gains ex 1 week in the skilled nursing business. And can you talk about that in the context of what You're seeing or what your operators are seeing in your portfolio? I think that was a reference to the industry.
I'm just not 100% certain. And Clint just gave the occupancy statistics. I don't feel like you guys are necessarily seeing the same thing.
We had a conference call with several of our skilled operators and they are Seeing a small uptick in occupancy, the market that's lagging a little is the Michigan market And we have a lot of properties in Michigan, but Clint had drinks with the operator in Michigan the other Evening and he's not startled about the situation at all. So we are seeing that our operators Are pretty much tracking Nick except for Michigan.
Okay. And then I just I followed you guys on the SLC update, very thorough. But I was wondering, because it's pretty granular, And I guess you can do the work here, but could you guys summarize sort of the original rent versus maybe the pro form a rent? The 23 properties last year were scheduled to pay $18,400,000 I think you sold 4 for $36,000,000 and you've transitioned or about to transition the rest. What's the pro form a total rent from the remaining 19 properties or 18 properties For, let's say, the second half of 'twenty one or for 2022, how much do you expect to get now?
One of the challenges on that, is the buildings that we're transitioning to Juniper And as well as to Oxford, which as I articulated, we're ramping up rent as occupancy increases. The two properties that we have with Juniper and Pittsburgh, those two buildings were really substantial Contributor under the CN Lifestyle portfolio previously. So to be able to get back to where we're at and those buildings will play a big part increasing the rents. And then once we redeploy the capital on the asset sales, I think as we get into next quarter or starting into 1st of 'twenty two, we'll be able to give that better comparison of where we're at, but it's still in flux right now.
Okay. But the if you exclude Juniper, I mean, is there a number if you exclude Juniper and Oxford, sort of $8,000,000 of
Well, previously, Jordan, we didn't allocate buildings by property. So to be able to take that allocation, it's hard to make that comparison.
No, I think I get that. I'm just kind of curious where you stand. I know there was actually a yield associated with $35,000,000 I can follow-up with you guys after, but I'm just trying to understand where you guys are ending up on Sort of this
overall quarter,
we may have. For 1 quarter, not for anything beyond 1 quarter.
Yes. No, I follow. But I'm trying to understand I'm trying to model more than just a 1 quarter and I'm not looking for specific guidance. I'm just trying to see where this And then in terms of the Acquisition market, investment opportunity, is there anything sort of how would you characterize it, I mean, are you guys getting closer on some of these smaller deals? What is sort of the flow starting to look Mike, at this point?
There's a lot of activity. We were seeing a lot of deal flow. Buying Assets right now, as I mentioned in the comments, the valuation on what's the ask compared What the performance is, it's a little challenging to buy into investments today for the long haul. But we're seeing a diverse set of opportunities on Structured finance anywhere from assisted living to independent living, skilled nursing. So we've been happy with the volume We're seeing in a number of transactions.
So I mentioned $130,000,000 in my comments, although Not guaranteed, but those are under letter of intent and we're actively involved in due diligence working on those. So we're encouraged by what we see.
Okay. I'll hop back in the queue. Thanks.
Thank you.
And our next question will come from Connor Seversky with Berenberg. Please go ahead.
Good morning, everybody. Thanks for having me on the call. Really just one question for me as I'm looking at the deferred abated delinquent rent. For the deferrals in particular, I think there's the term for repayments Between 6 36 months, correct me if I have that wrong, but I'm wondering if there's any sense of what the weighting Of repayments is within that term as we kind of roll those receipts back into the cash metrics?
Hi, Connor. It's Pam. I would wait it toward the back end. I think the recovery is going to be a little elongated. And so obviously, they need to get back to cash flowing stabilization to All of that.
So I would wait it toward the back end if you're asking for modeling.
And we would hope any new provider relief funds that come out will Clear some of that up. Yes. If they're stable now, that should come to us. Yes. Maybe we can get to the government to have it sent directly to us.
Okay. That helps. And then just a more general question on occupancy. I mean, within your existing markets, are you seeing any Discrepancies between certain markets where occupancy is coming back faster than others and whether that's whether or not that's related to, Say the spike of the delta infection rate or anything like that?
Our buildings, It's it differs by market. We have seen some buildings that have as I mentioned in my comments, on some of the senior lifestyle transitions where there's been noticeable uptick In occupancy, so it depends by market. Some markets are still a little bit flatter. We're not seeing any big deceleration in occupancy, which we're really that's the encouraging part. We're seeing either slowly tick up, staying flat or in some markets a Substantial increase.
The fact that they're not seeing declines is positive.
And lead generation has been strong, yes, Especially recently.
Okay. That's all for me. Thanks very much.
Our next question will come from Michael Carroll with RBC Capital Markets. Please go ahead.
Yes, thanks. Could you guys walk us through the range of outcomes with the Senior Care Centers lease? I mean, will You guys get a decision from the bankruptcy court in the next hearing. I'm just trying to figure out how long Do we have to wait for this resolution to occur and if you can get some guidance on that would be great?
Well, considering the fact that we're in this legal situation, it's hard for us to Predict or say anything. We do have the August 11 hearing and we'll Do a press release if we get anything material regarding going forward With this lease and these properties. So I'm sorry, Michael, it's just so complicated and we just can't say anything.
Okay. No, I understand. I mean just one more and then I understand if you can't talk about it yet. Can you talk a little bit about the how those properties are performing right now? I mean, has there been disruption since Senior Care Centers filed for bankruptcy?
Is there any guidance or commentary you can provide on that?
Let me have we gotten recent financials from them? Yes, recent financials It would indicate that they're cash flow positive, but we haven't done any independent due diligence on those financials. I mean, They're giving us financials and I don't through March?
No, we have through May.
Through May. And they would indicate that those properties are cash
Okay. And then can you talk about how the Two leases for, I think, was it Juniper and Oxford with Senior Lifestyles? How does that new rank get set? Is it going to be based on a Formula, so it's a percent of EBITDARs that you're going to receive in the second quarter or how does those kind of flow back into earnings?
It's a great question, Mike. So we structured it by design. We've had long standing relationships both with Juniper as well as Oxford, both dating back to 2012. So performance had declined substantially in those buildings. So it's going to be an effort that we cooperatively work together Towards those, so we're fortunate we have a strong relationship with both operating companies.
And they obviously need to be making Some profit if we want to get participation as performance increases. So it's something that we'll work through cooperatively, We're doing it on a quarterly basis during the 1st year and then semi annually in the 2nd year.
But isn't our concept like
Yes, it is. It's Teo. Yes, let me Thank you, Teo. It would be for us to materially meaningfully participate As those performance improves, and that was the purpose of why we designed it as such. Right.
Okay. Do they have renewal options at the end of the lease, The 2 year lease?
Right now, we don't have renewal options. So, but what we are working on is trying to get to a rent to put For Juniper to put them into the lease existing lease long term, these buildings are in their markets. For the Oxford buildings, These are 3 buildings that we don't have any other big presence in Nebraska. So that would be properties that we probably look At selling after the buildings can be stabilized and Oxford would participate in that with us would be the optionality we have For the Nebraska buildings.
Okay. And then
can you break out how many operators LTC is Deferred or a beta rent to and I know there's been a couple of months here, but maybe we could just focus on July August September. It looks like the only rent that was to the unidentified operator, is that correct? And then how many operators are you abating rent for right now?
It's the same small group that we've been abating for the past couple of quarters. So there's not anything new in there. 1 in the deferred group that you noted and Primarily 1 in the beta group. There's 2 in the beta group, but one is the majority.
They both had They were the transition portfolio. Yes.
These were transition portfolios that got caught in the pandemic not stabilized.
Okay, great. Thank you.
You're welcome.
And this will conclude our question and answer session. I'd like to turn the conference back over to Wendy Simpson for any closing remarks.
Thank you. Thank you all for taking time to listen to our conference call And we look forward to reporting to you again at the end of the Q3. Have a great weekend. Bye bye.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.