Yahoo Finance

Caroline Chikhale

Thank you, Clint. All of the numbers I'll be discussing today are for the first quarter of 2025 compared with the same period in 2024, unless otherwise noted. In yesterday's earnings release, we provided a detailed description of our financial results. So this morning, I'll focus my comments on items of note. Fully diluted FFO per share excluding non-recurring items or core FFO grew to $0.65 from $0.64. Fully diluted FAD per share excluding non-recurring items or core FAD increased $0.70 from $0.67.
Core FFO and core FAD increased primarily related to a decrease in interest expense, rent increases from fair market rent resets, escalations and amendments, an increase in income from unconsolidated joint ventures, and an increase in interest income from additional loan funding. These were partially offset by lower interest income due to mortgage loan payoffs and principal paydowns, an increase in G&A, and lower rental income from property sold.
During and subsequent to the first quarter, we sold shares under our ATM for net proceeds of $9.6 million. These proceeds are being used to fund the initial investment in our RIDEA platform, comprised of our purchase of Anthem's leasehold improvement for $1.4 million, which will be capitalized; and a $6.5 million lease termination fee to New Perspective, which will be expensed; as well as one-time RIDEA platform transaction costs of approximately $1.1 million to $1.5 million.
Our total liquidity is approximately $681 million. Our debt to annualized adjusted EBITDA for real estate is 4.3 times, and our annualized adjusted fixed charge coverage ratio improved to 5.0 times from 4.7 times for the fourth quarter of last year. Today we are providing full-year 2025 guidance for core FFO per share between $2.65 and $2.69, and core FAD per share of between $2.78 and $2.82. Please refer to our supplemental for our assumptions for this guidance.
Now I'll turn things over to Gibson.

Gibson Satterwhite

Thanks, CeCe. We'll start with RIDEA, where we've made meaningful strides since our last update, and close collaboration with our partner Anthem. On May 1, we transitioned 12 memory care properties from triple net leases into our SHOP portfolio. The Anthem portfolio currently is 81% occupied. Additionally, we have agreed to cooperatively convert one independent and assisted living property operated by New Perspective into the portfolio with the target closing date of June 1.
The New Perspective property is stabilized, while Anthem offers some upside as that portfolio progresses toward increased occupancy. In 2025, for our current SHOP portfolio, we're projecting SHOP NOI in the range of $9.4 million to $10.3 million. Note that these figures are reflected in the guidance CeCe shared earlier. In addition to the $600,000 to $800,000 FAD CapEx estimate outlined in our earnings release, we committed $4 million for renovations.
Regarding Prestige, we received full contractual cash interest of $5 million through $3.8 million of cash interest paid and the application of $1.2 million from their security. Subsequent to March 31, Prestige received $2.3 million in retroactive Medicaid payments, which were funded into our security [pocket] which now equals approximately $6 million. When combined with the current cash pay, we expect to receive full contractual interest at least through May 2026.
As a reminder, our loan modification in the fall of 2023 introduced a current pay interest component and a mechanism to increase our security from prestigious retroactive Medicaid payments. It also included LTC's participation in excess cash generated by the portfolio beginning in 2025. This structure was designed to provide more than a two-year runway for Prestige to recover from occupancy challenges experienced during the pandemic. With the level of security we now hold and increased occupancy and performance, our investment is on much stronger footing and is continuing to improve.
From our portfolio of 14 properties subject to market-based rent resets, we expect to collect $5.1 million in revenue this year, up from guidance of $4.4 million last quarter on a same-property basis. Current guidance for this portfolio on the same-property basis represents an approximate 50% increase from the $3.4 million of rent received related to these properties in 2024.
Regarding the operator's decision not to renew their lease on seven skilled nursing centers for strategic reasons, we are continuing the sale process and remain committed to replacing at least $8.3 million of 2025 GAAP rent. We plan to strategically deploy sale proceeds into growth opportunities we have discussed. One property is currently under contract, and we expect the remaining six to be under contract in the second quarter, with all sales expected to close in the fourth quarter of this year.
Now I'll hand the call over to Pam.

Pamela Shelley-Kessler

Thank you, Gibson. With momentum building and growth as our key priority, we're actively pursuing and underwriting opportunities to add newer, stabilized assets with prospects for improved performance that enhance portfolio quality and amplify LTC's upside potential. We expect SHOP to represent a growing share of our portfolio as we scale our platform.
By complementing our idea strategy with investments in traditional and structured finance transactions that offer compelling initial yields, we're building a resilient, performance-driven portfolio structured for long-term value creation. We see RIDEA as a game changer for LTC. Backed by a seasoned team, ample access to capital, and a growing investment pipeline, we're prepared to execute with discipline and precision to capture new opportunities ahead.
Before we open the call to questions, I'll turn things over to Wendy for closing remarks.

Wendy Simpson

Thank you, Pam. The entire Board and I are energized by the progress LTC has made and even more enthusiastic about the opportunities ahead. Before transitioning to Q&A, I'd like to recognize Doug Corey, who recently retired to focus on his health and family after a remarkable 40-year career in the industry.
LTC was fortunate to have him as part of our team for the last decade. Doug was instrumental in broadening our strategy beyond traditional triple net investments, was a champion for innovative and flexible structured finance solutions that expanded our capabilities and deepened our industry connections. We will miss Doug's sharp insight, dry humor, and steady hand, and we wish him and his family all the best in this next chapter.
Operator, we're ready for questions from the audience.

Question and Answer Session

Operator

(Operator Instructions) Juan Sanabria, BMO Capital Markets.

Juan Sanabria

Hi, good morning. I hope you guys are doing well. I'm just curious on ALG. What's assumed in guidance with regards to their option to buy those assets and how's that process going in their ability to secure financing to move that process forward?

Pamela Shelley-Kessler

Thanks Juan, this is Pam. Yes, they are still working on their financing in this uncertain rate environment with the wild swings in treasuries, you can imagine, and an off and on sort of prospect at this point. But we are hopeful that they will be able to refinance this year. However, our guidance assumes that they don't and that they continue to pay full rent.

Juan Sanabria

Great. And then just on the New Perspective, if you could just give a little bit more color on the lease term payment that you're paying there at $6.5 million and how that was kind of arrived at and the payback period you guys are thinking about giving. I think you said that asset is a bit more stabilized, so just hoping for a little bit more color there.

Clint Malin

Juan, it is a stabilized asset. And with New Perspective, it's a company we've known for many years, looking at doing investments with them. We only have the one asset with them. And they do have SHOP experience with other REITs, so we see them as a growth opportunity for LTC going forward. And really, they've been very successful with this asset we have with them.
And really paying this amount for lease termination was really to reward them for the value creation that they've created and gives us really a runway with them to be able to look at new opportunities and grow our SHOP portfolio. So that was our rationale in doing that with New Perspective. And really for us to launch this platform with these assets we were familiar with, with both Anthem and New Perspective, it was a great starting point for us.

Juan Sanabria

Thanks, and then just one more for me. Just on the SHOP platform, should we expect other triple-net-to-SHOP conversions? And on the pipeline, what percentage would you say is kind of fee-simple SHOP of the $300 million?

Clint Malin

So of the $300 million, I mentioned in my remarks, Juan, that it's 50% represents RIDEA for the pipeline. There's going to be some opportunity for potential other triple-net conversions, not of scale. We're really looking at SHOP as an external growth story.

Juan Sanabria

Thank you. Good luck.

Clint Malin

Thank you.

Operator

Austin Wurschmidt, KeyBanc Capital Markets.

Austin Wurschmidt

Thanks. Good morning, everybody. Can you just talk about how you arrived at the NOI range for the SHOP assets over the remaining eight months of the year and kind of what that range implies for either sequential or year-over-year growth?

Gibson Satterwhite

Sure, Austin. Hi, this is Gibson. Let me get to it. One second. So we looked at the SHOP portfolio, and because these are conversions, we looked at 2024 on a pro forma basis. So we're saying we have similar accounting treatments. So if you look at 2024, the portfolio is 85% occupied. So we're only assuming 85% occupancy for 2025, and I can get into some detail why later.
Right now, on a full-year basis, 2025 over 2024, we've got $15.2 million versus $14 million. So that's $15.2 million in 2025 over $14 million for 2024. A big driver of the growth going forward from where we are now is continued lease up in the Anthem portfolio. They had a little bit of -- they had higher-than-normal discharges in Q4, and we expect them to get back to occupancy that they had in Q3 last year.

Austin Wurschmidt

And then beyond occupancy, are there other opportunities on the expense front? Just curious how you're thinking about the growth profile of this portfolio as we think about the next several years.

Gibson Satterwhite

Well, with respect to the portfolio that we talked about converting, I think that we do have some upside beyond the end of 2025. But we end up in 2025 assuming about 87% occupancy on a unit basis for the portfolio versus 86% Q3 of '24. There are some -- we try to make realistic budgets. Anthem's made some progress on cost reductions and efficiencies in their staffing model in Q4 of '24. And so we feel like we have some room and try to give ourselves multiple paths to be able to hit the guidance that we provided.

Austin Wurschmidt

That's helpful, and then just last one here. I guess for that 50% of the investment pipeline, that includes SHOP assets. I mean, how are we thinking about going in cap rates on those deals? And just as you're building out your senior housing portfolio, how are you balancing, I guess, operator and geographic diversification versus trying to kind of build some scale with the assets you already have? Thanks.

Clint Malin

Sure, we'll definitely focus on operator concentration. That's a key element for us as we look at having ALG exercise the purchase options to reduce that concentration, so something that's very much on the forefront. And primarily in our investment pipeline, we're looking at deals that are one or two assets.
There's a couple small portfolios, but our focus really is on one or two assets, being cognizant of that diversification with operators. And we've actually been actively pre-marketing RIDEA over the course of the last five to six months, getting traction. And a number of deals in our pipeline are off market, which we're very encouraged by.
I would say on the SHOP front, we're looking at probably 7% going in yields, plus or minus, within the forward-looking yield going up to 7.5% to 8% as you look at cost reductions, rate growth, and occupancy improvement in SHOP. And we're looking at balancing that, as Pam mentioned in her prepared remarks, with leases, loans, and structured finance products that have higher initial yields to offset those initial SHOP yields as we're growing the portfolio.

Austin Wurschmidt

That's helpful. Thank you.

Operator

Rich Anderson, Wedbush.

Rich Anderson

Hey, thanks, and good morning. So this $176 million is roughly using your enterprise value, about 7% of the company. I think I have that math right. I'm just curious if you can sort of share a pipeline of your conversion activities. So we talked about the $300 million pipeline external growth, but what's the pipeline of internal conversions that you see going forward? And what's the pace to get to something like 25% or 30% of the company in the next a couple of years?

Pamela Shelley-Kessler

Hi, Rich. We currently -- we don't have plans to convert anything that's in our triple net portfolio at this point, though we always hold that option open. And then it's really going to be the organic growth that Clint talked about, acquiring, doing investments through the RIDEA platform, and also blending that with more traditional triple net and loans.
As occupancy improves in our portfolio, those operators that have triple net leases probably become less inclined to want to transition to the SHOP platform. But if they're if they have created value in their portfolios and they would like to be rewarded for that, we would entertain doing something similar to what we did with New Perspective.

Rich Anderson

Okay, great. Thanks for that color, Pam. The other thing is you're converting to SHOP a memory care portfolio with Anthem, higher acuity assets and so on. Is that -- do you think you'll kind of be looking downstream a little bit in terms of lower acuity for future SHOP transactions in your external growth strategy, or do you like the memory care thesis in a SHOP wrapper?

Pamela Shelley-Kessler

Well, we like -- I mean, we like memory care. Obviously, we were one of the first entrants into the standalone memory care, and we developed these properties with Anthem. But we're -- as being very aware of concentration and the fluctuations that memory care experiences and the shorter average length of stay, we're not looking at that property type to grow in. I'm not excluding that, but it's not a focus of ours. We're really looking at larger properties that are more of a continuum of care, IL, AL with some memory care but not the standalone.

Rich Anderson

Okay. Last question for me is Omega had a little minor issue with Genesis this quarter. Perhaps not much of a deal according to them, but Genesis makes your top 10. Any issues that you're having with them at this point that you can share? Or if the answer is no, then that's fine as well.

Clint Malin

We have received the May rent, Rich, and we have no requests from Genesis for any assistance. Our portfolio has strong coverage and located in core markets that Genesis operates in.

Rich Anderson

Okay, fair enough. Thanks very much.

Clint Malin

Thank you.

Operator

Michael Carroll, RBC Capital Markets.

Michael Carroll

Yes, thanks, Clint. I know I appreciate some of the comments on your projections for the Anthem portfolio and the general SHOP portfolio. Can you maybe spend some time and talk about how those assets have performed over the past few years? I know that they've been struggling, and I'm a little surprised where the SHOP NOI is coming out at versus where the triple-net lease rate is for Anthem. So does Anthem have a pullback in their operations, or how should we think about that portfolio and maybe the longer-term outlook of it?

Clint Malin

Well, Mike, as Gibson mentioned in the Q&A portion earlier that they did have a dip in occupancy in Q4 relating to some clinical discharges. I mean, that's something that as it's an earnings season, we've seen other REITs have similar dips in occupancy, so that wasn't unexpected. But we're going into the key selling season that started in May, and we think there will be upside for improvement in occupancy. There's not a lot of new supply being delivered, so we think that's beneficial to occupancy growth. So we're looking at the key selling season to be an upside opportunity for Anthem.

Michael Carroll

So was that -- I guess, can you maybe provide some comments on how Anthem has performed the past few years? I mean, have they been recovering as you originally would have expected, and they just had this blip in the fourth quarter that kind of took them lower? I mean, I guess, how meaningful is that blip, and how have they performed the past few years?

Clint Malin

There has been a few dips on a quarter-by-quarter basis, but they have recovered previously, so we don't expect -- I mean, we expect similar here.

Michael Carroll

Okay. And then, I guess on the SHOP NOI, that included both the Anthem and the New Perspective tenants. I mean, can you break out how much of that projected NOI is New Perspective and how much of that is Anthem?

Pamela Shelley-Kessler

Yes, sure, Mike. At the midpoint, Anthem is $1.2 million of the increase, and New Perspective is $1.6 million. So it's a total of $2.8 million over -- if you were looking at the combined lease rates. So it is a substantial pickup from converting to RIDEA.

Michael Carroll

Okay. And then is the plan to grow with New Perspective? Are they going to be one of your core operators where you're going to add assets within that SHOP structure over the next, I guess, several quarters, or maybe execute this current investment pipeline with them?

Clint Malin

Absolutely. I mean, they're an ideal company for us to work with. I mean, they have the ability to develop. They have a strong culture, a long-tenured family business. They have their stocks compliant. They are familiar with RIDEA. So we see them as an excellent opportunity and a great partner to grow with. And that was part of the catalyst for us looking at this opportunity to put them into the initial round of our SHOP portfolio.

Pamela Shelley-Kessler

Yes, they demonstrated through our triple net lease with them an incredible ability to increase value.

Michael Carroll

Okay, great. Well, thank you very much.

Clint Malin

Thank you.

Operator

(Operator Instructions) Omotayo Okusanya, Deutsche Bank.

Omotayo Okusanya

Okay, perfect. So good morning, everyone. Nice to see all this progress on the SHOP front. Just curious, again, you've bought a couple of assets, you've hired [days]. Anything else from institutionalizing the platform that still needs to happen at this point? Is there still a need to hire data scientists or just curious, kind of making sure everything is really -- you've dotted your Is and crossed your Ts. What else still needs to happen?

Pamela Shelley-Kessler

Hi, Tayo, it's Pam. Yes, we will continue to build out the platform as we add investments into it. Yes, we still will need analysts, FP&A. I mean, as the platform grows, you obviously have to scale up. But we're confident with what we have right now supports the conversion platform.

Omotayo Okusanya

That's helpful. And then ALG, it didn't look like in this quarter you gave any rent deferral. Is that correct? And if that's the case, could you just kind of help us understand what's happening with the overall financial performance of ALG?

Pamela Shelley-Kessler

Yes, that is correct. We did not give a deferral this quarter, and their occupancy has increased 150 basis points from year end with increased lead generation and conversion rates. And in North Carolina, there has been a perspective change in reimbursement. A bill has passed the House and the Senate there that would allow -- or that gives higher -- it increases the eligibility threshold for Medicaid. And if you recall, this portfolio has Medicaid in it. And what happened during the pandemic and inflation was the eligibility requirements for Medicaid were not increased in North Carolina.
With increases in people's social security and other forms of income, many residents in North Carolina were essentially no longer eligible or not eligible for Medicaid, which depressed the census in this portfolio. But with the new eligibility -- I keep wanting to say reimbursement. It's not a change in reimbursement rate. It's a change in the eligibility. With the new eligibility requirements and the increase pool of potential residents, we expect their occupancy to continue to increase.

Omotayo Okusanya

Got you. That's helpful. One more, if you don't mind. So again, Anthem now goes to SHOP. You have kind of redone the Encore lease. Any other leases out there that also -- that still have quarterly market-based resets that we should be aware of at this point?

Pamela Shelley-Kessler

Just the 14 that Clint talked about -- or Gibson talked about in his prepared remarks. And the Encore lease, just to remind you, it's not been redone. It has set market-based resets on -- is it quarterly? It's quarterly. So they're quarterly. So you're going to see this on a quarterly basis. We have some that are on six-month basis and some that are on quarterly basis in that portfolio. And you should see, over the next year, we're hoping those continue to increase as occupancy and performance improves in that portfolio.
And those were that basket of properties. Those were properties that were with other operators that during COVID we transitioned to these new operators. And that is -- that's the part of our portfolio outside of RIDEA that has upside. We didn't defer rents and record receivable like some of our peers, so we don't have any receivable sitting on our balance sheet. So all the increases that come from improved performance in that portfolio will hit the financial statements. It will be shown through income versus hitting a receipt.

Clint Malin

And we're very much encouraged by the trending of increasing guidance in that portfolio.

Pamela Shelley-Kessler

So drop straight to the bottom line, Tayo.

Omotayo Okusanya

Awesome. Good luck.

Pamela Shelley-Kessler

Thanks.

Operator

Thank you. As we have reached the end of our question-and-answer session, I would like to turn the call back over to Wendy Simpson for closing remarks.

Wendy Simpson

As you can see, we're committed to growth and are successfully executing our strategy. We appreciate you all for joining us on today's call and look forward to talking to you again next quarter.

Operator

Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.