LTC PROPERTIES INC Q4 FY2025 earnings call

• Transformation: Nearly halfway through transformation from lower growth triple-net REIT to SHOP-focused REIT. 2026 acquisition guidance is $600 million at midpoint, with $108 million already completed and $160 million on schedule to close in Q2. SHOP grew to 25% of investment portfolio by year-end 2025 and expected to reach 45% by end of 2026. - Portfolio and SHOP performance: Developed and enhanced platform with added resources. SHOP portfolio results outperformed expectations. - Growth strategy: Put $360 million to work through SHOP acquisitions in 2025, on track for $600 million in 2026. Focus on relationship - driven culture, competitive advantages in senior housing acquisitions. - Financial results: Bolstered growth capacity by expanding credit facility to $800 million. Core FFO per share and core FAD per share grew in 2025. 2026 guidance for core FFO per share $2.75 - $2.79 and core FAD per share $2.82 - $2.86.

SHOP portfolio: Original 13 properties converted to SHOP grew NOI over 2024 pro forma NOI by 22% and produced $16.2 million of combined rent and NOI in 2025 compared to $12.3 million in 2024. Remainder of SHOP portfolio contributed $5.9 million of NOI in Q4 2025, about $700,000 above midpoint of guidance. 2026 SHOP NOI guidance for 27 properties assumes 14% NOI growth at midpoint over pro forma 2025. Occupancy of subset of properties was 89.7% in 2025, projected to grow by ~150 basis points in 2026. RevPOR projected to grow by ~5% and EXPOR by 2.5%. Skilled nursing investments will represent less than 30% of portfolio by end of 2026, loans will be reduced to less than 10% of portfolio after prepayment of $180 million Prestige loan.

• 2026 acquisition guidance: $600 million at midpoint, with $108 million already completed and $160 million on schedule to close in Q2. - Core FFO per share guidance: $2.75 to $2.79. - Core FAD per share guidance: $2.82 to $2.86. - First - quarter core FFO per share guidance: $0.66 to $0.68. - First - quarter core FAD guidance: $0.68 to $0.70. - SHOP acquisitions guidance: $400 million to $800 million. - SHOP NOI guidance: $65 million to $77 million. - FAD CapEx: Approximately $5 million. - Proceeds from asset sales and loan payoffs: $270 million.

• SNF funding landscape: Tremendous private capital driving prices in skilled nursing, which could be a threat. Skilled nursing has stroke - of - the - pen risk. - Operator concentration: Prestige loan situation was due to operator concentration, and there could be risks related to operator concentration in general. - Competitive landscape: Seniors housing deals are competitive, with pressure on yields, and need to find deals that meet underwriting. - CapEx evolution: While current CapEx is low due to young SHOP portfolio, over time as assets age, CapEx may increase, but it's uncertain.

Q: This pivot is happening relatively quickly, and it sounds like messaging has been it's not if but when something happens to the SNF funding landscape. I'm curious in your minds, like what are the nearest 1 or 2 greatest threats to SNF today that could cause some sort of re - rating the market isn't expecting?

A: From a SNF perspective, there's a tremendous amount of private capital driving prices in skilled nursing, and skilled nursing at cap rates has stroke - of the pen risk.

Q: Just going back to SHOP for a minute. Gibson, you had highlighted that the 13 original assets grew NOI by 22% last year on a pro forma basis versus '24. Can you give us a sense how the 14% on the 27 assets compares to how that trended in 2025 or just versus the fourth quarter?

A: If you look at our projections, '25 over '24 and you pull out that original 13, our growth rate of 14% isn't going to materially change.

Q: Just going back to John's question a little bit differently here. I mean you mentioned the 89% is nearing stabilization, but this portfolio does continue to evolve as you layer on additional acquisitions. I mean, what are your latest thoughts for the portfolio today as to where stabilized occupancy levels are? And what sort of the right feeling on where you can kind of send out in - place rent increases or drive RevPOR in the coming years?

A: For stabilized occupancy, given the lack of supply that we see over the next few years, we feel occupancy can climb into the 90s. It's a fine balance between occupancy and rate growth, and this portfolio has opportunity for both.

Q: I'm just hoping you could talk a little bit about the pipeline of investments and the year 1 yields you're underwriting for SHOP. And then on the flip side, how we should be thinking about some of the disposition yields for some of the SNF that you're selling. You've already given us the loan piece.

A: From an acquisition pipeline perspective, have $160 million under LOI and in process, looking at year 1 yields about 7% or so with good growth headroom. On dispositions, selling at about an 8.2% cap, swapping out of older skilled nursing assets into newer seniors housing assets.

Q: Can you guys provide some more color on the competitive landscape for seniors housing deals right now? I mean, how difficult is it for you to find deals that you want to own that meets your underwriting? And then when you do find those transactions, I guess, where have cap rates trended? I know you've been talking about that 7% range for some time. I mean, are we starting to see that take a little bit lower? Is it hard to find yields at that 7% yield?

A: Do a good job of finding transactions that are in onesie - twosie time frame and our size. Have continued to see a pretty good stream of opportunities, generally underwriting around 7% or so, but there's pressure. We feel good about finding the right ones for LTC.

Q: So I just want to make this sort of crystal clear. Is your expectation on a go - forward basis, 2027 and beyond for your SHOP business to be producing sort of low mid - teens type of same - store NOI growth? Is that the target you're going after? Or is it something lower than that?

A: We're going to see how this year plays out. We're excited about what we're seeing, and we'll update as we get through the year. We targeted low teens IRRs, which means mid - single - digit growth over long term.

Q: In terms of the CapEx, I see your guidance is $0.10, a little less than $5 million a year on whatever you own average - weighted average wise for the year. I don't know, $5 million just feels low to me for a $1 billion portfolio. Is that a function of its age? I wonder what do you think the CapEx burden might be for LTC going forward when you're kind of fully built out $1 billion or so of assets?

A: We've assumed about $1,500 a unit. For the current portfolio, we went through recurring CapEx budgets and feel comfortable. The number includes weighted average of $1,500 a unit for acquisitions going forward.

Q: Given the RevPOR, EXPOR spread you guys saw in the quarter, how confident are you that the SHOP portfolio can deliver the growth you're guiding to? And can you walk us through kind of the key operational levers that you kind of are relying on to get你 guys there?

A: The key levers are laid out in the supplemental on our guidance page. Occupancy growth, EXPOR expectations being slightly below inflation, and top line occupancy growth are key. We feel good about the RevPOR and EXPOR assumptions, but it's achievable with stretching operators.

Q: I know you guys have talked about -- and we all know like suppliers have really been an issue, but have you anything around that changed at all?

A: Not really supply. Operators that have a track record in development are talking more about gearing up for development. Within our SHOP portfolio construction activity is very light.