What changed in LTC PROPERTIES INC's 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of LTC PROPERTIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+111 added−326 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)
Top changes in LTC PROPERTIES INC's 2023 10-K
111 paragraphs added · 326 removed · 88 edited across 3 sections
- Item 7. Management's Discussion & Analysis+22 / −218 · 21 edited
- Item 2. Properties+76 / −95 · 56 edited
- Item 1. Business+13 / −13 · 11 edited
Item 1. Business
Business — how the company describes what it does
11 edited+2 added−2 removed13 unchanged
Item 1. Business
Business — how the company describes what it does
11 edited+2 added−2 removed13 unchanged
2022 filing
2023 filing
Biggest changeIf the contractual or actual increases in rental income we receive from our operators do not keep pace with a rise in inflation, our financial condition and our results of operations could be adversely impacted. We may be unable to renew leases, or the terms of renewals or new leases could be less favorable than current leases.
Biggest changeOur long-term leases and loans typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation. If the contractual or actual increases in rental income we receive from our operators do not keep pace with a rise in inflation, our financial condition and our results of operations could be adversely impacted.
Inflation, both real or anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services to our tenants. Because tenants are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not directly affect us.
Inflation, both real or anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services to our tenants. Because tenants are typically required to pay all property operating expenses, increases in property-level expenses at our leased and mortgaged properties generally do not directly affect us.
An increase in our tenants’ expenses and a failure of their revenues to increase at least with inflation could adversely impact our tenants’ and our financial condition and our results of operations. Inflation could rise at rates that outpace contractual or actual increases in rental income.
An increase in our tenants’ and borrowers’ expenses and a failure of their revenues to increase at least with inflation could adversely impact our tenants’, borrowers’ and our financial condition and our results of operations. Inflation could rise at rates that outpace contractual or actual increases in rental income.
Additionally, to retain current or attract new operators, we could be asked to provide rent concessions or undertake capital expenditures to improve properties. 20 Table of Contents Operator financial or legal difficulties could delay or prevent collection of rent.
Additionally, to retain current or attract new operators, we could be asked to provide rent concessions or undertake capital expenditures to improve properties. 19 Table of Contents Operator financial or legal difficulties could delay or prevent collection of rent.
Over the past three years, five of our operators have had or continue to have financial or legal difficulties resulting in non-payment of rent or bankruptcy. See
Over the past three years, some of our operators have had or continue to have financial or legal difficulties resulting in non-payment of rent or bankruptcy. See
If an uninsured loss occurs or a loss exceeds policy limits, we could lose both invested capital and anticipated revenue from a property. We rely on a few major operators. During the year ended December 31, 2022, approximately 33.4% of our revenues from leases and interest income from real estate investments were generated from three operators.
If an uninsured loss occurs or a loss exceeds policy limits, we could lose both invested capital and anticipated revenue from a property. We rely on a few major operators. During the year ended December 31, 2023, approximately 28.9% of our revenues from leases and interest income from real estate investments were generated from three operators.
Increased operating costs could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us.
Increased operating costs could have an adverse impact on our tenants and borrowers, if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ and borrowers’ ability to pay rent and interest owed to us.
The failure of our operators to comply with federal, state, or local regulations could result in penalties which could include loss or restriction of license, loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from federal and state health care programs, or closure of the facility. These regulations have increased in response to COVID-19.
The failure of our operators to comply with federal, state, or local regulations could result in penalties which could include loss or restriction of license, loss of accreditation, denial of reimbursement, imposition of fines, suspension or decertification from federal and state health care programs, or closure of the facility.
The loss or imposition of restrictions on any required license, registration, certificate of need, provider agreement or certification would prevent a facility from operating in the manner intended by the operator. Additionally, failure by any of our operators to comply with applicable laws and regulations could result in adverse publicity and reputational harm, and therefore could harm our business.
The loss or imposition of restrictions on any required license, registration, certificate of need, provider agreement or certification would prevent a facility from operating in the manner intended by the operator.
Approximately 73.2% of our revenue for the year ended December 31, 2022, was derived from operating lease rentals. There can be no assurance that a lessee will operate its lease through expiration or that a lessee will exercise an option to renew its lease upon expiration.
There can be no assurance that a lessee will operate its lease through expiration or that a lessee will exercise an option to renew its lease upon expiration.
Insurance coverage maintained by our operators could be inadequate to protect against contingencies. Operators of health care facilities may become subject to claims that their services have resulted in injury or other adverse effects.
Operators of health care facilities may become subject to claims that their services have resulted in injury or other adverse effects. As a non-possessory landlord, we contend we are not generally responsible for what takes place at properties we do not possess.
Removed
For example, due to the enhanced danger to senior citizens, COVID-19 infections at our properties 19 Table of Contents could lead to increased legal claims against our operators. As a non-possessory landlord, we contend we are not generally responsible for what takes place at properties we do not possess.
Added
Additionally, failure by any of our operators to comply with applicable laws and regulations could result in adverse publicity and reputational harm, and therefore could harm our business. 18 Table of Contents Insurance coverage maintained by our operators could be inadequate to protect against contingencies.
Removed
Our long-term leases and loans typically contain provisions, such as rent escalators, designed to mitigate the adverse impact of inflation. However, in 2021 we provided deferred and abated rent to certain operators and reduced 2021 rent and interest escalations by 50% to support eligible operators during the continuing COVID-19 crisis.
Added
We may be unable to renew leases, or the terms of renewals or new leases could be less favorable than current leases. Approximately 64.6% of our revenue for the year ended December 31, 2023, was derived from operating lease rentals.
Item 2. Properties
Properties — owned and leased real estate
56 edited+20 added−39 removed73 unchanged
Item 2. Properties
Properties — owned and leased real estate
56 edited+20 added−39 removed73 unchanged
2022 filing
2023 filing
Biggest changeThe following table summarizes our investments in mortgage loans secured by first mortgages at December 31, 2022 (dollar amounts in thousands) : Type Percentage Number of Investment Gross of of SNF ALF per Interest Rate Maturity (1) State Investment Property Investment Loans (2) Properties (3) Beds Units Bed/Unit 7.5% 2023 MO $ 1,886 OTH 0.5 % 1 — (4) — — $ n/a 7.5% 2024 LA 29,347 SNF 7.5 % 1 1 189 — $ 155.28 7.8% 2025 FL 14,308 ALF 3.6 % 1 1 — 68 $ 210.41 7.3% (5) 2025 NC/SC 56,317 ALF 14.3 % 1 13 — 523 $ 107.68 7.3% 2026 NC 33,001 ALF 8.4 % 1 4 — 217 $ 152.08 7.3% 2026 NC 797 OTH 0.2 % 1 — (6) — — $ — 10.4% (7) 2043 MI 184,351 SNF 46.8 % 1 15 1,875 — $ 98.32 9.5% (7) 2045 MI 39,026 SNF 9.9 % 1 4 480 — $ 81.30 9.9% (7) 2045 MI 19,750 SNF 5.0 % 1 2 201 — $ 98.26 10% (7) 2045 MI 14,875 SNF 3.8 % 1 1 146 — $ 101.88 Total $ 393,658 100.0 % 10 41 2,891 808 $ 106.42 (1) Subsequent to December 31, 2022, we originated a $10,750 mortgage loan secured by a MC located in North Carolina.
Biggest changeThe following table summarizes our investments in mortgage loans secured by first mortgages at December 31, 2023 (dollar amounts in thousands) : Type Percentage Number of Investment Gross of of SNF ALF per Interest Rate Maturity State Investment Property Investment Loans (1) Properties (2) Beds Units Bed/Unit 7.5% 2024 MO $ 1,999 OTH 0.4 % 1 — (3) — — $ n/a 7.5% 2024 LA 29,346 SNF 6.1 % 1 1 189 — $ 155.27 7.5% 2024 GA 51,111 ALF 10.6 % 1 1 — 203 $ 251.78 8.8% 2025 FL 4,000 ALF 0.8 % 1 2 — 92 $ 43.48 7.8% 2025 FL 16,706 ALF 3.4 % 1 1 — 112 $ 149.16 7.3% 2025 NC 10,750 ALF 2.2 % 1 1 — 45 $ 238.89 7.3% (4) 2025 NC/SC 58,331 ALF 12.1 % 1 13 — 523 $ 111.53 7.3% (4) 2026 NC 34,043 ALF 7.1 % 1 4 — 217 $ 156.88 7.3% (4) 2026 NC 826 OTH 0.2 % 1 — (5) — — $ — 8.8% 2028 IL 16,500 SNF 3.4 % 1 1 150 — $ 110.00 10.8% (6) 2043 MI 183,968 SNF 38.2 % 1 15 1,875 — $ 98.12 9.8% (6) 2045 MI 39,950 SNF 8.3 % 1 4 480 — $ 83.23 10.1% (6) 2045 MI 19,700 SNF 4.1 % 1 2 201 — $ 98.01 10.3% (6) 2045 MI 14,850 SNF 3.1 % 1 1 146 — $ 101.71 Total $ 482,080 100.0 % 14 46 3,041 1,192 $ 113.89 (1) Some loans contain certain guarantees and/or provide for certain facility fees. (2) Our mortgage loans are secured by properties located in eight states with eight borrowers. (3) Represents a mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF. (4) Represents the initial rate.
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%.
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%.
You may contact our Investor Relations Department at: LTC Properties, Inc. 2829 Townsgate Road, Suite 350 Westlake Village, California 91361 Attn: Investor Relations (805) 981-8655 17 Table of Contents Item 1A. RISK FACTOR S This section discusses risk factors that could affect our business, operations, and financial condition.
You may contact our Investor Relations Department at: LTC Properties, Inc. 2829 Townsgate Road, Suite 350 Westlake Village, California 91361 Attn: Investor Relations (805) 981-8655 16 Table of Contents Item 1A. RISK FACTOR S This section discusses risk factors that could affect our business, operations, and financial condition.
In addition, the law provides $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.
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.
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 intends to issue proposed rules on a minimum staffing level measure within one year.
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.
Fraud and Abuse Enforcement Various federal and state laws govern financial and other arrangements between health care providers that participate in, receive payments from, or make or receive referrals for work in connection with government funded health care programs, including Medicare and Medicaid.
Fraud and Abuse Enforcement Various federal and state laws govern financial and other arrangements between health care providers that participate in, receive payments from, or make or receive referrals in connection with government funded health care programs, including Medicare and Medicaid.
Notably, the CARES Act temporarily suspended the 2% across-the-board “sequestration” reduction of all Medicare Fee-For-Service (“FFS”) payments under the Medicare program that had previously been in effect since April 1, 2013, for the period May 1, 2020 through December 31, 2020, and extended the current Medicare sequester requirement through fiscal year 2030.
Notably, the CARES Act temporarily suspended the 2% across-the-board “sequestration” reduction of all Medicare Fee-For-Service (“FFS”) payments under the Medicare program that had previously been in effect since April 1, 2013, from May 1, 2020 through December 31, 2020, and extended the Medicare sequester requirement through fiscal year 2030.
Further, if COVID-19 results in an extended adverse trend away from seniors housing and health care facilities to at-home and alternative care services, the occupancy rates of our operators and the value of our real estate investments could be negatively impacted. The health care industry is heavily regulated by the government .
Further, if COVID-19 results in an extended adverse trend away from seniors housing and health care facilities to at-home and alternative care services, the occupancy rates of our operators and the value of our real estate investments could be negatively impacted. 17 Table of Contents The health care industry is heavily regulated by the government .
These 18 Table of Contents changes 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 both government and other third-party payors. These changes may be applied retroactively. The ultimate timing or effect of these changes cannot be predicted.
These changes 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 both government and other third-party payors. These changes may be applied retroactively. The ultimate timing or effect of these changes cannot be predicted.
In addition, the Affordable Care Act impacts both us and 11 Table of Contents our lessees and borrowers as employers, including requirements related to the health insurance we offer to our respective employees. Many aspects of the Affordable Care Act have been implemented through regulations and sub-regulatory guidance.
In addition, the Affordable Care Act impacts both us and our lessees and borrowers as employers, including requirements related to the health insurance we offer to our respective employees. Many aspects of the Affordable Care Act have been implemented through regulations and sub-regulatory guidance.
The operations and occupancy levels at the seniors housing and health care facilities of our lessees and borrowers have been adversely affected by COVID-19 and could be further adversely affected by COVID-19 or another pandemic especially if there are infections on a large scale at our properties.
The operations and occupancy levels at the seniors housing and health care facilities of our lessees and borrowers were adversely affected by COVID-19 and could be further adversely affected by COVID-19 or another pandemic especially if there are infections on a large scale at our properties.
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.
Unlike the first round of funds, which came automatically, providers were required to apply for these additional funds and submit the required 13 Table of Contents 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.
Our ability to compete successfully for real property investments will be determined by numerous 10 Table of Contents factors, including our ability to identify suitable acquisition targets, our ability to negotiate acceptable terms for any such acquisition and the availability and our cost of capital.
Our ability to compete successfully for real property investments will be determined by numerous factors, including our ability to identify suitable acquisition targets, our ability to negotiate acceptable terms for any such acquisition and the availability and our cost of capital.
In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, would reduce our revenues.
In addition, the presence of such substances, or the failure to properly dispose of or 15 Table of Contents remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral which, in turn, would reduce our revenues.
Governmental and public concern regarding health care costs may result in significant reductions in payment to health care facilities, and 15 Table of Contents there can be no assurance that future payment rates for either governmental or private payors will be sufficient to cover cost increases in providing services to patients.
Governmental and public concern regarding health care costs may result in significant reductions in payment to health care facilities, and there can be no assurance that future payment rates for either governmental or private payors will be sufficient to cover cost increases in providing services to patients.
On July 22, 2020, President Trump announced that HHS would devote $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 must participate in the Nursing Home COVID-19 training to be qualified to receive this funding.
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 must participate in the Nursing Home COVID-19 training to be qualified to receive this funding.
In addition, our leases are typically structured as master leases and multiple master leases with one operator, and are generally cross defaulted. 6 Table of Contents The following table summarizes the concentration of our top ten operators of owned properties for 2022 and percentage of rental revenue, excluding rental income from properties sold, variable rental income due to lessee reimbursement of our real estate taxes, and adjustment for collectability of rental income for those operators for 2022 and 2021: Percent of Rental Revenue Lessee Property Type 2022 2021 Brookdale Senior Living Communities, Inc. ALF/MC 13.5 % 13.4 % Carespring Healthcare Management, LLC SNF 10.2 % 10.4 % Anthem Memory Care MC 9.8 % 10.1 % Genesis Healthcare ALF/SNF 7.9 % 7.8 % Fundamental Long Term Care Company SNF/OTH 7.7 % 7.8 % Ark Post Acute Network ILF/ALF/SNF 7.5 % 7.7 % HMG Partners SNF 7.2 % 1.8 % Juniper Communities, LLC ALF/MC 5.9 % 6.1 % Ignite SNF 4.9 % 3.0 % Randall Residence ILF/ALF/MC 4.6 % 4.0 % Financing Receivable.
In addition, our leases are typically structured as master leases and multiple master leases with one operator, and are generally cross defaulted. 6 Table of Contents The following table summarizes the concentration of our top ten operators of owned properties for 2023 and percentage of rental revenue, excluding rental income from properties sold, variable rental income due to lessee reimbursement of our real estate taxes, and adjustment for collectability of rental income for those operators for 2023 and 2022: Percent of Rental Revenue Lessee Property Type 2023 2022 Brookdale Senior Living Communities, Inc. ALF/MC 11.9 % 13.5 % Carespring Healthcare Management, LLC SNF 10.1 % 10.2 % Anthem Memory Care, LLC MC 9.8 % 9.8 % HMG Healthcare, LLC SNF 9.1 % 7.2 % Genesis Healthcare, Inc. ALF/SNF 8.1 % 7.9 % Ark Post Acute Network ILF/ALF/SNF 7.5 % 7.5 % Ignite Medical Resorts SNF 7.0 % 4.9 % Fundamental Long Term Care Company SNF/OTH 6.3 % 7.7 % Juniper Communities, LLC ALF/MC 6.1 % 5.9 % Encore Senior Living ALF 5.0 % 3.0 % Financing Receivables.
Sanctions for violating the Stark Law include civil monetary penalties of up to $25,820 per prohibited service provided, assessments equal to three times the dollar value of each such service provided and exclusion from the Medicare and Medicaid programs.
Sanctions for violating the Stark Law include civil monetary penalties of up to $29,899 per prohibited service provided, assessments equal to three times the dollar value of each such service provided and exclusion from the Medicare and Medicaid programs.
Health Care Reform and Other Legislative Developments Federal health care reform, including the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”), has expanded access to health insurance, reduced health care costs, and instituted various health policy reforms.
Health Care Reform and Other Legislative Developments Federal health care reform, including the Patient Protection and Affordable Care Act, as amended (the 11 Table of Contents “Affordable Care Act”), has expanded access to health insurance, reduced health care costs, and instituted various health policy reforms.
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 July 1, 2021, HHS, through the Health Resources and Services Administration (“HRSA”), notified recipients of Provider Relief Fund payments that the Provider Relief Fund Reporting Portal was open for reporting 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.
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. Several reporting periods have concluded to date.
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.
The revised reporting requirements are applicable to providers who received payments exceeding, in the aggregate, $10,000 during a single Payment Received Period from the Provider Relief Fund General Distributions, Targeted Distributions, and/or Skilled Nursing Facility and Nursing Home Infection Control Distributions.
Notably, the bill adds 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.
Notably, the legislation added an additional $3 billion to the Provider Relief Fund included language specific to reporting requirements, and allowed 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.
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 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.
Human Capital LTC recognizes the value of our employees and strives to cultivate a cohesive company culture. We are committed to being a workplace that encourages respect, collaboration, communication, transparency, and integrity.
Human Capital LTC recognizes the value of our employees and strives to cultivate a cohesive company culture. We are committed to being a workplace that encourages respect, collaboration, communication, transparency, and integrity. We seek to hire employees with diverse backgrounds and perspectives.
Our financial condition and ability to pay dividends could be adversely affected by financial difficulties experienced by any of our lessees or borrowers, or in the event any such operator does not renew and/or extend its relationship with us at similar or better financial terms. The duration and extent of the effects of the COVID-19 pandemic remains uncertain.
Our financial condition and ability to pay dividends could be adversely affected by financial difficulties experienced by any of our lessees or borrowers, or in the event any such operator does not renew and/or extend its relationship with us at similar or better financial terms.
In addition to offering economic relief to individuals and impacted businesses, the law expands coverage of COVID-19 testing and preventative services, addresses health care workforce needs, eases restrictions on telehealth services during the crisis, and increases Medicare regulatory flexibility, among many other provisions.
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.
For instance, the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”) may be subject to revision, replacement, repeal or expansion. In addition, CMS has adopted regulations that impose new standards for long-term care facilities participating in the Medicare and Medicaid programs. See
For instance, the Patient Protection and Affordable Care Act, as amended (the “Affordable Care Act”) may be subject to revision, replacement, repeal or expansion. In addition, CMS periodically adopts new regulations, and has proposed minimum staffing standards that would apply to long-term care facilities participating in the Medicare and Medicaid programs. See
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 updated and developed new guidance in the State Operations Manual to address issues that significantly affect residents of long-term care facilities.
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 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 14 Table of Contents passage of the Consolidated Appropriations Act, 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.
Finally, on October 1, 2020, HHS announced $20 billion in new 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. On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (H.R. 133).
Finally, on October 1, 2020, HHS announced $20 billion in new 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.
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 6, for providers who received one or more payments exceeding $10,000, in the aggregate, from July 1, 2022 to December 31, 2022, opened January 1, 2024.
Following prior legislation in 2021 suspending sequestration, on December 10, 2021, President Biden signed the Protecting Medicare and American Farmers from Sequester Cuts Act, which suspended 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.
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 14 Table of Contents June 2022.
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.
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. From December 2021 through April 2022, HRSA continued to distribute Provider Relief Fund payments to eligible providers.
The following table summarizes our investment in unconsolidated joint ventures at December 31, 2022 (dollar amounts in thousands): Total Contractual Type Number Preferred Cash of of Carrying Type of Return Portion State Investment Beds/Units Value Property 12% 7% WA Preferred Equity 95 $ 6,340 ALF/MC 12% 8% WA Preferred Equity — 13,000 (1) UDP 95 $ 19,340 (1) Subsequent to December 31, 2022, we received a notice of intent to redeem our $13,000 preferred equity investment in a joint venture to develop a 267-unit ILF and ALF in Washington.
The following table summarizes our investment in unconsolidated joint ventures at December 31, 2023 (dollar amounts in thousands): Total Contractual Type Number Preferred Cash of of Carrying Type of Return Portion State Investment Beds/Units Value Property 12% 7% WA Preferred Equity 95 $ 6,340 (1) ALF/MC 14% 8% WA Preferred Equity 267 13,000 (2) ILF/ALF 362 $ 19,340 (1) Represents a preferred equity interest in an entity that developed and owns a 95-unit ALF and MC in Washington.
We anticipate receiving $1,675 of additional income in 2023 associated with the redemption representing the 14% exit IRR. Investment Policies and Strategies Our investment policy is to invest primarily in seniors housing and health care properties. Over the past three years, we have underwritten investments in seniors housing communities and health care centers for a total of approximately $320.7 million.
Investment Policies and Strategies Our investment policy is to invest primarily in seniors housing and health care properties. Over the past three years, we have underwritten investments in seniors housing communities and health care centers for a total of approximately $547.7 million.
If the ADC arrangement characteristics are more similar to a jointly-owned investment or partnership, we account for the ADC arrangement as an investment in an unconsolidated joint venture under the equity method of accounting.
Unconsolidated Joint Ventures. From time to time, we provide funding to third-party operators for the acquisition, development and construction (“ADC”) of a property. If the ADC arrangement characteristics are more similar to a jointly-owned investment or partnership, we account for the ADC arrangement as an investment in an unconsolidated joint venture under the equity method of accounting.
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.
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.
For employees with at least one year of service, we grant up to three days leave to take professional licensing examinations. We also pay their annual renewal fees for professional licenses. As of December 31, 2022, we employed 24 people. Our employees are not members of any labor union, and we consider our relations with our employees to be excellent.
We also pay their annual renewal fees for professional licenses. As of December 31, 2023, we employed 23 people. Our employees are not members of any labor union, and we consider our relations with our employees to be excellent.
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%.
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%.
In general, the mortgage loans may not be prepaid except in the event of the sale of the collateral property to a third-party that is not affiliated with the borrower, although partial prepayments (including any prepayment premium) are often permitted where a mortgage loan is secured by more than one property upon a sale of one or more, but not all, of the collateral properties to a third-party which is not an affiliate of the borrower.
This loan has an IRR of 8%. (5) Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community. (6) Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period. In general, the mortgage loans may not be prepaid except in the event of the sale of the collateral property to a third-party that is not affiliated with the borrower, although partial prepayments (including any prepayment premium) are often permitted where a mortgage loan is secured by more than one property upon a sale of one or more, but not all, of the collateral properties to a third-party which is not an affiliate of the borrower.
As states and the federal government continue to respond to budget pressures, future reduction in Medicaid payments for skilled nursing facility services could 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. 12 Table of Contents With regard to the Medicare program, over the years there have been efforts to contain Medicare fee-for-service spending, promote Medicare managed care, and, more recently, tie reimbursement to quality and value of care.
As states and the federal government continue to respond to budget pressures, future reduction in Medicaid payments for skilled nursing facility services could 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.
CMS also has implemented a variety of Medicare bundled payment programs that seek to promote greater care coordination and more efficient use of resources. Certain of these models, such as the Medicare Comprehensive Care for Joint Replacement and Bundled Payments for Care Improvement Advanced models, have impacted post-acute care, including skilled nursing facility services.
Certain of these models, such as the Medicare Comprehensive Care for Joint Replacement and Bundled Payments for Care Improvement Advanced models, have impacted post-acute care, including skilled nursing facility services.
Historically our investments have consisted of: ● fee ownership of seniors housing and skilled nursing properties that are leased to operators; ● mortgage loans secured by seniors housing and skilled nursing properties; or ● participation in such investments indirectly through investments in mezzanine loans and real estate partnerships or other entities that themselves make direct investments in such loans or properties. 9 Table of Contents In evaluating potential investments, we consider factors such as: ● type of property; ● location; ● competition within the local market and evaluation of the impact resulting from any potential new development projects in construction or anticipated to be approved by local authorities; ● construction quality, condition and design of the property; ● current and anticipated cash flow of the property and its adequacy to meet operational needs and lease obligations or debt service obligations; ● experience, reputation and solvency of the operating companies providing services; ● payor mix of private, managed care, Medicare and Medicaid patients; ● growth, tax and regulatory environments of the communities in which the properties are located; ● occupancy and demand for similar properties in the area surrounding the property; and ● Medicaid reimbursement policies and plans of the state in which the property is located.
In evaluating potential investments, we consider factors such as: ● type of property; ● location; ● competition within the local market and evaluation of the impact resulting from any potential new development projects in construction or anticipated to be approved by local authorities; ● construction quality, condition and design of the property; ● current and anticipated cash flow of the property and its adequacy to meet operational needs and lease obligations or debt service obligations; ● experience, reputation and solvency of the operating companies providing services; ● payor mix of private, managed care, Medicare and Medicaid patients; ● growth, tax and regulatory environments of the communities in which the properties are located; ● occupancy and demand for similar properties in the area surrounding the property; ● Medicaid reimbursement policies and plans of the state in which the property is located; ● third-party environmental reports, land surveys and market studies (if applicable); ● energy, water and waste efficiency management practices; and ● health, safety and wellness practices (air filtration systems, hazardous waste disposal, UV sanitation, etc).
The JV leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year.
Upon origination we recorded $1.2 million Provision for credit losses equal to 1% of the financing receivable balance related to this investment. (2) The JV leased the centers back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options and provided the seller-lessee with a purchase option, exercisable at the beginning of the fourth year through the end of the fifth year. 7 Table of Contents Mortgage Loans.
We seek to hire employees with diverse backgrounds and perspectives. 16 Table of Contents Our success starts and ends with having the best talent, and as a result, we are focused on attracting, developing and retaining our employees. The average tenure of our employees is more than 10 years with LTC.
Our success starts and ends with having the best talent, and as a result, we are focused on attracting, developing and retaining our employees. The average tenure of our employees is more than 10 years with LTC. We offer employees a competitive and comprehensive benefits package that we believe meets or exceeds market standards.
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.
On April 11, 2022, CMS issued a proposed rule to update SNF rates and policies for fiscal year 2023.
The following table summarizes our investments in notes receivable at December 31, 2022 ( dollar amounts in thousands ): Interest Type of Gross Type of Rate IRR Maturity Loan Investment # of loans Property 5.0% — 2023 Working capital $ 380 1 ALF 7.0% — 2023 Working capital 500 1 ALF 8.0% 12.0% 2023 Mezzanine 7,460 1 ALF 5.0% — 2024 Working capital 184 1 ALF 8.0% 10.5% 2024 Mezzanine 4,355 (1) 1 ILF 4.0% — 2024 Working capital 13,531 1 SNF 5.0% — 2025 Working capital 932 1 ALF 7.5% — 2027 Working capital 550 1 ALF 8.0% 11.0% 2027 Mezzanine 25,000 1 ALF 6.5% — 2030 Working capital 138 1 SNF 7.1% — 2030 Working capital 1,607 2 ALF 7.0% — 2031 Working capital 2,693 1 ALF 8.0% — 2032 Working capital 1,642 1 SNF $ 58,972 14 (1) Subsequent to December 31, 2022, we received $4,545 which includes a prepayment fee and the exit IRR totaling $190, from a mezzanine loan early payoff.
The following table summarizes our investments in notes receivable at December 31, 2023 ( dollar amounts in thousands ): Interest Type of Gross Type of Rate IRR Maturity Loan Investment # of loans Property 4.0% — 2024 Working capital $ 13,531 1 SNF 5.0% — 2025 Working capital 732 1 ALF 7.5% — 2027 Working capital 550 1 ALF 8.0% 11.0 % 2027 Mezzanine 25,000 1 ALF 8.8% 12.0 % 2028 Mezzanine 17,000 1 ALF 6.5% — 2030 Working capital 138 1 SNF 7.3% — 2030 Working capital 500 1 ALF 7.3% — 2030 Working capital 957 1 ALF 7.0% — 2031 Working capital 2,693 1 ALF $ 61,101 (1) 9 (1) Excludes the impact of credit loss reserve.
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.
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. 12 Table of Contents 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.
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 July 31, 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.
We offer employees a competitive and comprehensive benefits package that we believe meets or exceeds market standards. LTC fully pays heath care premiums for employees and all eligible dependents. For qualified employees, we offer a 401(k) retirement plan with an employer contribution matching program. We support employees attending industry conferences.
LTC fully pays heath care premiums for employees and all eligible dependents. For qualified employees, we offer a 401(k) retirement plan with an employer contribution matching program. We support employees attending industry conferences. For employees with at least one year of service, we grant up to three days leave to take professional licensing examinations.
The $1.4 trillion omnibus appropriations legislation funds the government through September 30, 2021 and was attached to a $900 billion COVID-19 relief package. Of the $900 billion in COVID-19 relief, $73 billion was allocated to HHS.
The Consolidated Appropriations Act, 2021 included a $900 billion COVID-19 relief package, of which $73 billion was allocated to HHS.
Nonetheless, claims including those pertaining to general and professional liability may be asserted against us which may result in costs and exposure for which insurance is not available.
Nonetheless, claims including those pertaining to general and professional liability may be asserted against us which may result in costs and exposure for which insurance is not available. 10 Table of Contents Competition In the health care industry, we compete for real property investments with health care providers, other health care related REITs, real estate partnerships, banks, private equity funds, venture capital funds and other investors.
Competition In the health care industry, we compete for real property investments with health care providers, other health care related REITs, real estate partnerships, banks, private equity funds, venture capital funds and other investors. Many of our competitors are significantly larger and have greater financial resources and lower cost of capital than we have available to us.
Many of our competitors are significantly larger and have greater financial resources and lower cost of capital than we have available to us.
Additionally, during the past three years, we have disposed of properties for a total sales price of $194.7 million.
Additionally, during the past three years, we have disposed of properties for a total sales price of $202.8 million. Prior to finalizing an investment, we conduct a comprehensive financial due diligence review and property site review to assess the property’s general physical condition.
Since competition from investors as well as other capital providers for large transactions consisting of fully-marketed, multi-property portfolios generally result in valuations above our targeted investment criteria, our marketing and business development efforts focus on sourcing relationships with regionally based operating companies to execute on single property transactions (for acquisition, mortgage or structured financing or development), or smaller multi-property portfolios that are not broadly marketed by third-party intermediaries which complement our historic investment execution and are priced at yields that are accretive to our stockholders.
We believe these efforts, coupled with relationships will continue to provide investment opportunities in 2024 and beyond. Our marketing and business development efforts focus on sourcing relationships with regionally based operators and intermediaries to execute on single property or small portfolio transactions that are not broadly marketed by third-party intermediaries.
Removed
During 2022, we entered into a joint venture and contributed $61.7 million into the JV that purchased three skilled nursing centers located in Florida for $75.8 million. Our JV partner contributed the remaining $14.3 million of equity.
Added
During 2023 and 2022, we entered into two joint ventures (“JV”) and contributed into the JVs for the purchase of properties through sale and leaseback transactions. Concurrently, each of these JVs leased the purchased properties back to an affiliate of the seller and provided the seller-lessee with purchase options.
Removed
Accordingly, the transaction has been accounted for as a Financing receivable on our Consolidated Balance Sheets. During 2022, we recognized $1.8 million of Interest income from financing receivable on our Consolidated Statements of Income . Additionally, in conjunction with the origination of this investment, we recorded $0.8 million provision for expected loan losses.
Added
We determined that each of these sale and leaseback transactions meet the accounting criteria to be presented as Financing receivables on our Consolidated Balance Sheets and recorded the rental revenue from these properties as Interest income from financing receivables on our Consolidated Statements of Income . See Note 2.
Removed
Subsequent to December 31, 2022, we entered into a $121.3 million JV with an affiliate of an existing operator and contributed $117.9 million into the JV that purchased 11 assisted living and memory care communities from an affiliate of our JV partner.
Added
Summary of Significant Accounting Policies within our consolidated financial statements for more information.
Removed
In accordance with GAAP, the communities acquired by the JV are required to be presented as a Financing receivable on our Consolidated Balance Sheets. 7 Table of Contents Mortgage Loans.
Added
The following tables provide information regarding our investments in financing receivables during the years ended December 31, 2023 and 2022 ( dollar amounts in thousands ): Type Number Number Investment of of of Gross LTC Year State Properties Properties Beds/Units Investments Contributions 2023 NC ALF/MC 11 523 $ 121,321 $ 117,490 2022 FL SNF 3 299 76,691 61,661 14 822 $ 198,012 $ 179,151 Type Initial Interest Income from Financing Receivables Lease of Contractual During Maturity Properties Cash Yield 2023 2022 2033 (1) ALF/MC 7.25 % $ 9,625 $ — 2032 (2) SNF 7.25 % 5,618 1,762 $ 15,243 $ 1,762 (1) The JV leased these communities back to an affiliate of the seller under a 10-year master lease, with two five-year renewal options.
Removed
The loan carries a two-year term with an interest-only rate of 7.25% and an IRR of 9.0%. (2) Some loans contain certain guarantees and/or provide for certain facility fees. (3) Our mortgage loans are secured by properties located in six states with five borrowers. (4) Represents a mortgage loan secured by a parcel of land for the future development of a 91-bed post-acute SNF. (5) Represents the initial rate.
Added
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.
Removed
This loan has an IRR of 8%. (6) Represents a mortgage loan secured by a parcel of land in North Carolina held for future development of a seniors housing community. (7) Mortgage loans provide for 2.25% annual increases in the interest rate after a certain time period.
Added
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 developed and owns a 267-unit ILF and ALF in Washington. Our investment represents 11.0% of the estimated total investment.
Removed
The mezzanine loan was on a 136-unit in Oregon. Unconsolidated Joint Ventures. From time to time, we provide funding to third-party operators for the acquisition, development and construction (“ADC”) of a property.
Added
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.
Removed
Prior to an investment, we conduct a property site review to assess the general physical condition of the property and the potential of additional services. In addition, we review third-party environmental reports, land surveys, and market studies (if applicable) as well as conduct a financial due diligence review of the property before the investment is made.
Added
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.
Removed
We seek to diversify our portfolio by operator, by property type, and geographically.
Added
Historically our investments have consisted of: ● fee ownership of seniors housing and skilled nursing properties that are leased to operators; ● mortgage loans secured by seniors housing and skilled nursing properties; or 9 Table of Contents ● participation in such investments indirectly through investments in mezzanine loans and real estate partnerships or other entities that themselves make direct investments in such loans or properties.
Removed
Our primary marketing and business development strategy is to increase awareness of our presence and build long-term relationships in the seniors housing and health care industry by supporting targeted industry trade organizations, attending industry specific conferences and events attended by seniors housing and care providers, and seeking out speaking engagements at industry related events as well as interviews in industry publications.
Added
We seek to diversify our portfolio by operator, by property type, and by geography. Our business development team boasts a seasoned roster with decades of collective experience and deep industry relationships. We strive to remain visible and relevant by supporting trade associations, attending and hosting industry conferences and events, speaking on panels and participating in media interviews.
Removed
We believe this targeted marketing and business development effort has provided deal flow opportunities and will continue to provide opportunities for new investments in 2023.
Added
We take this approach because competition for larger, fully marketed portfolios generally results in increased pricing that produces yields below our investment hurdles. This strategy allows us to invest in properties priced at yields that are accretive to our stockholders.
Removed
The Protecting Access to Medicare Act of 2014 required the Secretary of the Department of Health and Human Services to develop a skilled nursing facility “value-based purchasing program” tying Medicare payments to skilled nursing facilities to their performance on certain new readmissions measures, applicable to services furnished beginning October 1, 2018.
Added
With regard to the Medicare program, over the years there have been efforts to contain Medicare fee-for-service spending, promote Medicare managed care, and, more recently, tie reimbursement to quality and value of care. The Centers for Medicare & Medicaid Services (“CMS”) annually updates Medicare skilled nursing facility prospective payment system rates and other policies.
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
21 edited+1 added−197 removed69 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
21 edited+1 added−197 removed69 unchanged
2022 filing
2023 filing
Biggest changeDespite safeguards by us and our operators, a data privacy security failure or breach could occur 26 Table of Contents as a result of unintentional or deliberate acts to obtain unauthorized access to information, or to destroy, manipulate, or sabotage data. Information technology failures or data breaches also could result in the loss or release of personally identifiable information.
Biggest changeWe and our operators are subject to various federal and state laws governing privacy and security of personally identifiable information. Despite safeguards by us and our operators, a data privacy security failure or breach could occur as a result of unintentional or deliberate acts to obtain unauthorized access to information, or to destroy, manipulate, or sabotage data.
Construction and development projects involve risks such as the following: ● development of a project could be abandoned after expending significant resources resulting in the loss of deposits or failure to recover expenses already incurred; 21 Table of Contents ● development and construction costs of a project could exceed original estimates due to increased interest rates and higher materials, transportation, labor, leasing, or other costs, which could make completion less profitable; ● financing for a project could be unavailable on favorable terms or at all; ● project delays could result in increases in construction costs and debt service expenses as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, and regulatory hurdles; and ● occupancy rates and rents at a newly completed property could fail to meet expected levels and could be insufficient to make the property profitable.
Construction and development projects involve risks such as the following: ● development of a project could be abandoned after expending significant resources resulting in the loss of deposits or failure to recover expenses already incurred; 20 Table of Contents ● development and construction costs of a project could exceed original estimates due to increased interest rates and higher materials, transportation, labor, leasing, or other costs, which could make completion less profitable; ● financing for a project could be unavailable on favorable terms or at all; ● project delays could result in increases in construction costs and debt service expenses as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, and regulatory hurdles; and ● occupancy rates and rents at a newly completed property could fail to meet expected levels and could be insufficient to make the property profitable.
The inability to maintain proper function, security, and availability of our and our operators’ information systems and the data maintained in those systems could interrupt our operations, damage our reputation, harm our business relationships, or increase our security and insurance costs.
The inability to maintain proper function, security, and availability of our and our operators’ information systems and the data maintained in those systems could interrupt our operations, damage our reputation, harm our business relationships, or increase our information systems, cybersecurity and insurance costs.
Any change in our dividend policy could have an adverse effect on the market price of our common stock. Your ownership percentage in our common stock could be diluted. From time to time, we could issue additional shares of our common stock in connection with sales under our equity distribution agreement or other capital market transactions.
Any change in our dividend policy could have an adverse effect on the market price of our common stock. Your ownership percentage in our common stock could be diluted. From time to time, we could issue additional shares of our common stock in connection with sales under our equity distribution agreements or other capital market transactions.
If market interest rates increase, so could our interest costs. This could make the financing of any acquisition 23 Table of Contents more costly. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing.
If market interest rates increase, so could our interest costs. This could make the financing of any acquisition 22 Table of Contents more costly. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing.
If we lose our REIT status, our net earnings available for investment or 22 Table of Contents distribution to stockholders would be significantly reduced for each of the years involved. In addition, we would no longer be required to make distributions to stockholders.
If we lose our REIT status, our net earnings available for investment or 21 Table of Contents distribution to stockholders would be significantly reduced for each of the years involved. In addition, we would no longer be required to make distributions to stockholders.
The presence of hazardous substances or a failure to properly remediate any resulting contamination could adversely affect our ability to lease, mortgage, or sell an affected property. Information technology failures or data breaches could harm our business.
The presence of hazardous substances or a failure to properly remediate any resulting contamination could adversely affect our ability to lease, mortgage, or sell an affected property. Information systems failures or data breaches could harm our business.
A downturn in the health care property sector also could adversely impact the ability of our operators to 25 Table of Contents meet their obligations to us and maintain residents and occupancy rates.
A downturn in the health care property sector also could adversely impact the ability of our operators to 24 Table of Contents meet their obligations to us and maintain residents and occupancy rates.
The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. 24 Table of Contents Provisions in our charter limit ownership of shares of our stock.
The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. 23 Table of Contents Provisions in our charter limit ownership of shares of our stock.
However, information technology systems are vulnerable to failure, breaches, or attacks due to improper functioning and unauthorized access from physical or electronic break-ins, computer viruses, and similar disruptions, including by hackers, foreign governments, and cyber terrorists . This risk has increased since the outbreak of the COVID-19 pandemic as we and our operators have increased reliance on information technology.
However, information systems are vulnerable to threats, failures, breaches, or incidents due to improper functioning and unauthorized access from physical or electronic break-ins, computer viruses, and similar disruptions, including by hackers, foreign governments, and cyber terrorists . This risk has increased since the outbreak of the COVID-19 pandemic as we and our operators have increased reliance on information technology.
We also have the ability to access the capital markets through the issuance of $130.6 million of common stock under our equity distribution agreements and an indeterminate amount through the issuance of debt and/or equity securities under an automatic shelf registration statement.
We also have the ability to access the capital markets through the issuance of $76.0 million of common stock under our equity distribution agreements and an indeterminate amount through the issuance of debt and/or equity securities under an automatic shelf registration statement.
We and our operators rely on information technology systems to process, transmit, and store financial transactions and records, operator and lease data, and other confidential information. We are not aware of any material losses to our business or results of operations due to information technology failures, data breaches, or cyber-attacks.
We and our operators rely on information systems to process, transmit, and store financial transactions and records, operator and lease data, and other confidential information. We are not aware of any material losses to our business or results of operations due to information system failures, data breaches, or cybersecurity incidents.
We and our operators also rely on numerous third-party providers for information technology services, and we and our operators face similar risks relating to these providers. We cannot be certain that their information security protocols are sufficient to withstand a data breach or cyber-attack.
We and our operators also rely on numerous third-party providers for information technology services, and we and our operators face similar risks relating to these providers. We cannot be certain that their information system and cybersecurity protocols are sufficient to withstand a data breach or cybersecurity incident.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview—Portfolio Overview—Update on Certain Operators for further discussion. Additionally, the COVID-19 pandemic has caused, and depending on its scope and duration could continue to cause, financial and legal difficulties for certain of our lessees.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Overview—Portfolio Overview—Update on Certain Operators for further discussion. Additionally, the COVID-19 pandemic could continue to cause, financial and legal difficulties for certain of our lessees.
As information security risks continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and to investigate and remediate any information security vulnerabilities. Data privacy security failures or breaches could expose us to regulatory and other liability.
As information system and cybersecurity risks continue to evolve, we may be required to expend additional resources to continue to enhance our information system and cybersecurity measures and to investigate and remediate any information system and cybersecurity vulnerabilities. 25 Table of Contents Data privacy security failures or breaches could expose us to regulatory and other liability.
Further, the adoption of new privacy and security laws at the federal and state level could require us and our operators to incur significant compliance costs. Item 1B. UNRESOLVED STAFF COMMENT S None. 27 Table of Contents Item 2.
Further, the adoption of new privacy and cybersecurity laws at the federal and state level could require us and our operators to incur significant compliance costs. Item 1B. UNRESOLVED STAFF COMMENT S None.
We operate with a policy of incurring debt when it is advisable in the opinion of our Board of Directors. As of December 31, 2022, our indebtedness represented approximately 37.4% of our gross assets.
We operate with a policy of incurring debt when it is advisable in the opinion of our Board of Directors. As of December 31, 2023, our indebtedness represented approximately 39.5% of our gross assets.
As a REIT, we are required to distribute at least 90% of our taxable income. Our growth therefore is generally through the investment of new capital in real estate assets. As of December 31, 2022, we had $10.4 million of cash on hand and $270.0 million available under our unsecured revolving line of credit.
As a REIT, we are required to distribute at least 90% of our taxable income. Our growth therefore is generally through the investment of new capital in real estate assets. As of December 31, 2023, we had $20.3 million of cash on hand and $97.8 million available under our unsecured revolving line of credit.
A privacy or security failure or breach could cause a loss of business, regulatory enforcement, substantial legal liability, and reputational harm. Where the failure or breach affects an operator, this could jeopardize the operator’s ability to fulfill its obligations to us.
Information system threats, failures breaches, or incidents also could result in the loss or release of personally identifiable information. A privacy or cybersecurity failure or breach could cause a loss of business, regulatory enforcement, substantial legal liability, and reputational harm. Where the failure or breach affects an operator, this could jeopardize the operator’s ability to fulfill its obligations to us.
As of December 31, 2022, we had six active joint ventures with a total LTC equity investment of $141.0 million.
As of December 31, 2023, we had eight active joint ventures with a total LTC equity investment of $305.6 million.
Further, an information technology failure, data breach, or cyber-attack on an operator could impact their operations and ability to perform under the terms of their lease with us. While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of information security risks, such insurance coverage may be insufficient to cover all losses.
While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of information system and cybersecurity risks, such insurance coverage may be insufficient to cover all losses.
Removed
We and our operators are subject to various federal and state laws governing privacy and security of personally identifiable information.
Added
Further, an information system or cybersecurity threat, failure, data breach, or incident on an operator could impact their operations and ability to perform under the terms of their lease with us.
Removed
PROPERTIE S Here and throughout this Annual Report on Form 10-K wherever we provide details of our properties’ bed/unit count, the number of beds/units applies to skilled nursing, assisted living, independent living, memory care and behavioral health care properties only.
Removed
This number is based upon unit/bed counts shown on operating licenses provided to us by lessees/borrowers or units/beds as stipulated by lease/mortgage documents. These numbers often differ, usually not materially by property, from units/beds in operation at any point in time.
Removed
The differences are caused by such things as operators converting a patient/resident room for alternative uses, such as offices or storage, or converting a multi-patient room/unit into a single patient room/unit. We monitor our properties on a routine basis through site visits and reviews of current licenses.
Removed
In an instance where such change would cause a de-licensing of beds or in our opinion impact the value of the property, we may take action against the lessee/borrower to preserve the value of the property/collateral. Owned Properties.
Removed
The following table sets forth certain information regarding our owned properties as of December 31, 2022 ( dollars amounts in thousands ): Remaining No. of No. of No. of No. of Lease Gross Location ALFs SNFs Others Beds/Units Encumbrances Term (1) Investments Alabama — 1 — 174 $ — 40 $ 9,734 Arizona — 3 — 613 — 20 28,496 California 3 1 — 402 — 70 69,685 Colorado 13 — — 705 — 58 104,795 Florida 6 4 — 762 — 36 67,816 Georgia 1 — — 70 — 18 14,493 Illinois 5 — — 418 — 101 88,347 Kansas 8 — — 431 — 72 57,928 Kentucky 1 2 — 346 — 105 61,731 Michigan 2 — — (2) 156 — 92 22,387 Mississippi 1 — — 67 — 18 9,452 Missouri 1 2 — 253 — 90 52,952 Nebraska 3 — — 117 — 7 7,633 Nevada — — 1 118 — 26 10,975 New Jersey 4 — — 205 — 57 62,832 New Mexico — 7 — 843 — 37 50,912 N.
Removed
Carolina 5 — — 210 — 12 14,318 Ohio 7 2 — 580 — 99 87,569 Oklahoma 6 — — 219 — 12 13,080 Oregon 2 1 — 266 — 77 38,279 Pennsylvania 2 — — 130 — 7 9,744 S.
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Carolina 5 2 — 515 — 32 49,735 Tennessee — 2 — 141 — 12 5,275 Texas 17 20 — 3,268 — 36 327,490 Virginia — 4 — 500 — 37 30,209 Wisconsin 7 1 — 690 — 86 114,838 TOTAL 99 52 1 12,199 $ — 59 $ 1,410,705 (1) Weighted average remaining months in lease term as of December 31, 2022. (2) Includes three parcels of land held-for-use. 28 Table of Contents The following chart represents the 10 states with the highest percentage of gross investment for our owned properties as of December 31, 2022: The following table sets forth certain information regarding our lease expirations for our owned properties as of December 31, 2022 (dollars amounts in thousands): Annualized % of Annualized No. of No. of No. of No. of No. of Rental Rental Income Year SNFs ALFs Others Beds/Units Operators Income (1) Expiring 2023 (2) 4 43 — 2,234 6 $ 19,143 16.4 % 2024 14 14 — 2,775 4 8,359 7.2 % 2025 6 1 1 981 2 9,120 7.8 % 2026 15 — — 1,889 3 18,072 15.5 % 2027 — 9 — 611 3 11,341 9.8 % 2028 1 1 — 188 2 1,965 1.7 % 2029 2 4 — 656 4 7,311 6.3 % 2030 1 9 — 668 3 8,715 7.5 % 2031 — 17 — 1,146 3 15,316 13.2 % 2032 5 — — 429 2 5,843 5.0 % Thereafter 4 — — 574 1 11,195 9.6 % TOTAL 52 98 (3) 1 12,151 (3) $ 116,380 100.0 % (1) Represents annualized contractual GAAP rent for leased properties, excluding variable rental income from lessee reimbursement of our real estate taxes for investments as of December 31, 2022. (2) Subsequent to December 31, 2022, a master lease covering two SNFs that was scheduled to mature in 2023 was renewed at the contractual rate for another five years extending the maturity to November 2028.
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The centers have a total 216 beds and are located in Florida. (3) Excludes a 48-unit closed ALF located in Colorado. 29 Table of Contents Mortgage Loans.
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The following table sets forth certain information regarding our mortgage loans as of December 31, 2022 ( dollars amounts in thousands ): Average Original Current No. of No. of No. of No. of Interest Months to Face Amount Gross Annual Debt Location SNFs (1) ALFs (1) OTHs (1) Beds/ Units Rate Maturity of Mortgage Loans Investments Service (2) Florida — 1 — 68 7.75% 32 $ 13,123 $ 14,308 $ 1,101 Louisiana 1 — — 189 7.5% 21 27,347 29,347 2,232 Michigan 22 — — 2,702 9.6%-10.6% 256 264,370 258,003 26,657 Missouri — — — — 7.5% 6 1,886 1,886 143 North Carolina (3) — 16 — 695 7.25% 37 81,437 85,328 6,394 South Carolina (3) — 1 — 45 7.25% 35 4,529 4,786 360 TOTAL 23 18 — 3,699 179 $ 392,692 $ 393,658 $ 36,887 (1) Consists of ten mortgage loans in six states with five borrowers. (2) Includes principal and interest payments. (3) Represents a single mortgage loan secured by 13 ALFs.
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The mortgage loan was allocated by state for reporting purposes only. Item 3.
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LEGAL PROCEEDING S We are and may become from time to time a party to various claims and lawsuits arising in the ordinary course of our business, which in our opinion are not singularly or in the aggregate anticipated to be material to our results of operations or financial condition.
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Claims and lawsuits may include matters involving general or professional liability asserted against the lessees or borrowers of our properties, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder.
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We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims and lawsuits. Item 4. MINE SAFETY DISCLOSURE S Not applicable PART II Item 5.
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MARKE T FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the symbol “LTC”.
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Holders As of February 9, 2023, we had approximately 402 holders of our common stock, as determined by counting our record holders and the number of participants reflected in a security position listing provided to us by the Depository Trust Company.
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Because such “DTC participants” are brokers and other institutions holding shares of our common stock on behalf of their customers, we do not know the actual number of unique stockholders represented by these record holders. 30 Table of Contents Dividend We declared and paid total cash distributions on common stock as set forth below: Declared Paid 2022 2021 2022 2021 First quarter $ 0.57 $ 0.57 $ 0.57 $ 0.57 Second quarter $ 0.57 $ 0.57 $ 0.57 $ 0.57 Third quarter $ 0.57 $ 0.57 $ 0.57 $ 0.57 Fourth quarter $ 0.57 $ 0.57 $ 0.57 $ 0.57 $ 2.28 $ 2.28 $ 2.28 $ 2.28 We intend to distribute to our stockholders an amount at least sufficient to satisfy the distribution requirements of a REIT.
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Cash flows from operating activities available for distribution to stockholders will be derived primarily from interest and rental payments from our real estate investments. All distributions will be made subject to approval of our Board of Directors and will depend on our earnings, our financial condition and such other factors as our Board of Directors deem relevant.
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In order to qualify for the beneficial tax treatment accorded to REITs by Sections 856 through 860 of the Internal Revenue Code, we are required to make distributions to holders of our shares equal to at least 90% of our REIT taxable income.
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Issuer Purchases of Equity Securities None. 31 Table of Contents Stock Performance Graph 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.
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Our equity ownership of real estate assets was approximately 70% during 2022. This graph compares the cumulative total stockholder return on our common stock from December 31, 2017 to December 31, 2022 with the cumulative stockholder total return of (1) the Standard & Poor’s 500 Stock Index and (2) the NAREIT Equity REIT Index.
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The comparison assumes $100 was invested on December 31, 2017 in our common stock and in each of the foregoing indices and assumes the reinvestment of dividends. Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 LTC Properties, Inc. $ 100.00 $ 101.12 $ 114.06 $ 105.44 $ 98.30 $ 108.65 NAREIT Equity $ 100.00 $ 95.38 $ 120.17 $ 110.56 $ 158.36 $ 119.77 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 The stock performance depicted in the above graph is not necessarily indicative of future performance.
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The stock performance graph shall not be deemed incorporated by reference into any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent that we specifically incorporate such information by reference, and shall not otherwise be deemed filed under such Acts. Item 6.
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Reserved 32 Table of Contents Item 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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-leasebacks, financing leases, mortgage financing, joint ventures and structured finance solutions including preferred equity and mezzanine lending.
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We seek 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.
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Our primary seniors housing and health care property classifications include skilled nursing facilities (“SNF”), assisted living facilities (“ALF”), independent living facilities (“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.
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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.
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For purposes of this Annual Report on Form 10-K and other presentations, we generally include ALF, ILF, and MC in the ALF property classification. We have been operating since August 1992.
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The following graph summarizes our gross investments as of December 31, 2022: Substantially all of our revenues and sources of cash flows from operations are derived from operating lease rentals, interest earned on outstanding loans receivable and income from investments in unconsolidated joint ventures.
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Our investments in owned properties, financing leases, mortgage loans, mezzanine loans and preferred equity 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.
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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.
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Our monitoring process 33 Table of Contents 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.
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Some operating leases, financing 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.
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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, 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 mortgage loans receivable.
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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 and secured and unsecured debt financing.
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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.
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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.
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COVID-19 On March 11, 2020, the World Health Organization declared the outbreak of coronavirus (“COVID-19”) as a pandemic, and on March 13, 2020, the United States declared a national emergency with regard to COVID-19. The COVID-19 pandemic has had repercussions across regional and global economies and financial markets.
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The outbreak of COVID-19 in many countries, including the United States, has significantly and adversely impacted public health and economic activity, and has contributed to significant volatility, dislocations and liquidity disruptions in financial markets.
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The operations and occupancy levels at our properties have been adversely affected by COVID-19 and could be further adversely affected by COVID-19 or another pandemic especially if there are infections on a large scale at our properties.
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The impact of COVID-19 has included, and another pandemic could include, early resident move-outs, our operators delaying accepting new residents due to quarantines or admission suspensions, potential occupants postponing moves to our operators’ facilities, and/or hospitals cancelling or significantly reducing elective surgeries thereby there were fewer people in need of skilled nursing care.
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Additionally, as our operators have responded to the pandemic, operating costs have begun to rise. A decrease in occupancy, ability to collect rents from residents and/or increase in operating costs could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us, including the payment of rent or interest.
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In recognition of the pandemic impact affecting our operators, we provided assistance in form of rent abatements and rent deferrals and may continue to provide assistance as needed. 34 Table of Contents Portfolio Overview The following tables summarize our real estate investment portfolio as of December 31, 2022 ( dollar amounts in thousands ): Twelve Months Ended December 31, 2022 Number of Percentage Percentage Number of SNF ALF Gross of Rental of Total Owned Properties Properties (1) Beds (2) Units (2) Investments Investments Revenue Revenues Assisted Living 99 — 5,497 $ 797,813 40.7 % $ 53,923 34.1 % Skilled Nursing 52 6,348 236 600,974 30.7 % 55,126 34.8 % Other (3) 1 118 — 11,918 0.6 % 991 0.6 % Total Owned Properties 152 6,466 5,733 1,410,705 72.0 % 110,040 (5) 69.5 % Number of Percentage Interest Income Percentage Number of SNF ALF Gross of from Financing of Total Financing Receivable Properties (1) Beds Units Investments Investments Receivable Revenues Skilled Nursing 3 299 — 76,767 3.9 % 1,762 1.1 % Total Financing Receivable 3 299 — 76,767 3.9 % 1,762 1.1 % 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 18 — 808 103,626 5.4 % 6,730 4.3 % Skilled Nursing 23 2,891 — 287,349 14.6 % 33,692 21.3 % Other (4) — — — 2,683 0.1 % 178 0.1 % Total Mortgage Loans 41 2,891 808 393,658 20.1 % 40,600 25.7 % 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 7 — 961 43,662 2.2 % 3,590 2.3 % Skilled Nursing — — — 15,311 0.8 % 720 0.4 % Total Notes Receivable 7 — 961 58,973 3.0 % 4,310 2.7 % 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 % 450 0.3 % Under Development — — — 13,000 0.7 % 1,054 0.7 % Total Unconsolidated Joint Ventures 1 — 95 19,340 1.0 % 1,504 1.0 % Total Portfolio 204 9,656 7,597 $ 1,959,443 100.0 % $ 158,216 100.0 % Number Number of Percentage of SNF ALF Gross of Summary of Properties by Type Properties (1) Beds (2) Units (2) Investments Investments Skilled Nursing 78 9,538 236 $ 980,401 50.0 % Assisted Living 125 — 7,361 951,441 48.6 % Under Development — — — 13,000 0.7 % Other (3) (4) 1 118 — 14,601 0.7 % Total Portfolio 204 9,656 7,597 $ 1,959,443 100.0 % (1) We have investments in owned properties, financing receivable, mortgage loans, notes receivable and unconsolidated joint ventures in 29 states to 32 different operators. (2) See Item 2.
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Properties for discussion of bed/unit count. (3) Includes three parcels of land held-for-use and one behavioral health care hospital. (4) 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. (5) Excludes $15,459 variable rental income from lessee reimbursement of our real estate taxes and $2,745 rental income from sold properties. As of December 31, 2022, we had $1.6 billion in carrying value of net investments, consisting of $1.0 billion or 65.2% invested in owned and leased properties, $76.0 million or 4.9% invested in financing receivable, $0.4 billion or 35 Table of Contents 24.9% invested in mortgage loans secured by first mortgages, $58.4 million or 3.7% in notes receivable and $19.3 million or 1.3% in unconsolidated joint ventures.
Removed
Rental income, income from financing receivable and interest income from mortgage loans represented 73.2%, 1% and 23.2%, respectively, of Total revenues on the Consolidated Statements of Income for the year ended December 31, 2022. In most instances, our lease structure contains annual rental escalations.
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Our leases that contain fixed annual rental escalations and/or have annual rental escalations that are contingent upon changes in the Consumer Price Index or the Medicare Market Basket Rate, are generally recognized on a straight-line basis over the minimum lease period. Certain leases have annual rental escalations that are contingent upon changes in the gross operating revenues of the property.
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This revenue is not recognized until the appropriate contingencies have been resolved. For the year ended December 31, 2022, we recognized a $1.4 million straight-line rental adjustment reflecting higher cash rent received than recorded as rental income and $1.1 million in amortization and write-off of lease incentives.
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For the remaining leases in place at December 31, 2022, assuming no modification or replacement of existing leases and no new leased investments are added to our portfolio, except for the potential subsequent lease extensions and the leases reported below under Update on Certain Operators , we currently expect that the non-cash straight-line rent portion of rental income will decrease from negative $1.4 million in 2022 to negative $1.9 million for projected annual 2023 which represents higher cash rent received than recorded as rental income.
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Our cash rental income is projected to increase from $130.7 million in 2022 to $120.8 million for projected annual 2023. At December 31, 2022, the straight-line rent receivable balance on the consolidated balance sheet was $21.8 million.
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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.
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During the year ended December 31, 2022, we renewed one lease covering a 99-bed skilled nursing center in Oregon and a master lease covering 11 skilled nursing centers in Texas with a total of 1,444 beds. See Update on Certain Operators and Former Operators below for discussion regarding renewal of a master lease subsequent to December 31, 2022.
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Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. See Item 8. FINANCIAL STATEMENTS— Note 5. Real Estate Investments. Owned Properties for a table that includes information about purchase options included in our lease agreements.
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Update on Certain Operators and Former 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.
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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.
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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. Anthem is current on agreed upon rent payments through January and February 2023.
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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 The Brookdale master lease matures on December 31, 2023 and provides three renewal options consisting of a two-year renewal option, a five-year renewal option and a 10-year renewal option.
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The first renewal option expires on February 28, 2023. The master lease provides Brookdale a $4.0 million capital commitment, which matures on February 28, 2023, at a yield of 7% with a reduced rate for qualified ESG projects. During the fourth quarter of 2022, we funded $1.5 million under Brookdale’s capital commitment.
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