LTC Properties, Inc. Aktie

Greetings, and welcome to the LTC Properties First Quarter 2026 Earnings Call. [Operator Instructions] Joining us on today's call are Pam Kessler, Co-President and Co-Chief Executive Officer; Clint Malin, Co-President and Co-Chief Executive Officer; Cece Chikhale, Executive Vice President and Chief Financial Officer and Treasurer; Gibson Satterwhite, Executive Vice President of Asset Management; Dave Boitano, Executive Vice President and Chief Investment Officer.

Before management begins its presentation, please note that today's comments, including the question-and-answer session, may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in the LTC Properties filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2025. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note, this event is being recorded.

I would now like to turn the conference over to LTC management. Please go ahead.

Good morning, and thank you for joining us. LTC is successfully executing our SHOP strategy. Our capabilities, reputation and culture are resonating with sellers and operators, and these relationships are driving investment opportunities and record external growth, allowing us to scale incredibly quickly. We have strong conviction that our strategy is the right one to create a higher growth profile company with better risk-adjusted returns to drive shareholder value. With the SHOP currently projected to represent 45% of our total investments and 40% of annualized NOI by year-end, the shift in our portfolio mix is dramatically enhancing LTC's long-term ability to grow FFO and FAD per share above our historical rate.

We are on track with our $600 million SHOP acquisition midpoint guidance. And with the expected closing of second quarter transactions, we will be more than halfway to that target. Additionally, to further increase our SHOP mix, we would consider transactions that capitalize on attractive skilled nursing pricing by recycling capital into higher-growth SHOP assets. Our operator partnerships, our relationship-centric culture and our significant investment in the SHOP platform are driving our transformation and positioning LTC as a competitive force.

I'll now turn it over to Gibson for more insight on the portfolio.

Thank you, Clint. We are focused on optimizing risk-adjusted returns for our shareholders by investing in our SHOP portfolio and opportunistically recycling capital, positioning LTC for higher intrinsic growth. As Clint noted, SHOP is expected to account for 40% of our annualized NOI by year-end, with the potential to expand even further. This target incorporates reinvestment of approximately $265 million in planned dispositions and loan repayments from skilled nursing assets this year. Of that amount, $77 million is closed and $190 million is expected to close in the third quarter. Our guidance projects a July 1 payoff of the Prestige loan in line with their notice of intent earlier this year.

SHOP performance continues to reinforce conviction in our strategy. First quarter SHOP NOI was in line with our expectations. For our core SHOP portfolio, which consists of 27 communities at or near stabilization, including those acquired through the first quarter of this year, we are reiterating prior guidance of 14% pro forma growth at the midpoint. You can find more information on this portfolio in our supplemental. To frame the impact of our transformation, the pro forma growth rate for our overall portfolio increases to 5% to 7% at our 40% SHOP NOI target from the low 2% range embedded in triple net leases. That change is driven by increasing exposure to SHOP assets with growth prospects in the low to mid-teens over the foreseeable future.

We can further increase our intrinsic growth rate should we choose to take advantage of opportunities to recycle more capital into SHOP given the strong pricing for skilled nursing assets. Our 2026 guidance includes platform investments, adding the people and data capabilities needed to scale and support double-digit SHOP growth. We expect the core infrastructure to be largely in place by year-end, enabling us to continue to scale rapidly and best support our operators.

Now I'll turn the call over to Dave to discuss investments.

Thank you, Gibson. LTC has spent 18 months building a platform designed to execute with speed and certainty. We are well on track to achieving our $600 million midpoint investment target and believe, given the volume of opportunities we are evaluating, that a comparable level of annual investment is sustainable in 2027 and beyond. So far this year, we've closed around $120 million in investments with nearly $250 million on course to close in Q2. Additionally, we have signed LOIs for off-market third quarter acquisitions totaling $90 million. Our pipeline continues to be robust with well over $0.5 billion of opportunities under consideration and visibility for continued investment growth. Our relationship-centric approach is working.

By the end of the second quarter, we'll have 11 SHOP operators, including 9 that are new to LTC in the past year, reflecting our success in retaining and growing with existing operators at the communities we've acquired. This strong pool of operating partners has been the source of several follow-on investments and provides great momentum as we continue to build our portfolio. Key to LTC's growth is our legacy of deep industry relationships, which in combination with our transactional agility gives us an edge in gaining access and insights to growth opportunities. Several investments have come through partner referrals, underscoring the synergy of our culture and our commitment to relationships. And a number also have been off market, demonstrating again the benefit of our relationship focus.

Our rapid SHOP growth hasn't happened by chance. It is strategic and deliberate, reflecting an investment philosophy focused on assets 10 years of age or younger with operators who have deep local and regional knowledge. We emphasize asset quality, size, mix and market dynamics that favor our long-term competitive position. These criteria guide us toward the right balance of opportunities and durable returns. Today, we're seeing a high volume of potential transactions. And here again, our operator alignment is central to identifying the right assets and markets to support solid long-term performance. Experienced senior housing investors know that community performance depends on strong operating partners. LTC is deeply grateful for our operator colleagues and the excellence and commitment they bring every day to the seniors they serve.

I'll now pass the call to Cece for a review of our financial results.

Thank you, Dave. Including year-to-date ATM sales of $95 million, our current liquidity is $585 million and with $190 million of proceeds expected from asset sale and loan payoffs, we remain confident in our ability to finance future SHOP acquisitions. Our pro forma liquidity totaled $775 million, providing a long investment runway. At the end of the first quarter, our pro forma debt to annualized adjusted EBITDA for real estate was 4.4x, and our annualized adjusted fixed charge coverage ratio was 4.6x. We remain well within our stated leverage target of 4 to 5x but believe that we can reduce that further over time as a result of our organic SHOP growth.

Compared with last year's first quarter, core FFO per share improved by $0.04 to $0.69 and core FAD per share improved by $0.02 to $0.72, representing 6% and 3% growth, respectively. Increases were due to SHOP acquisitions and conversions to SHOP from triple net, increases in interest income from loan originations and additional loan funding and higher rent for market-based rent resets. The increases were partially offset by an increase in interest and G&A expenses, primarily to support our growing SHOP portfolio as well as a decrease in rent due to asset sales. We are reiterating our 2026 guidance for core FFO per share projected in the range of $2.75 to $2.79 and core FAD per share in the $2.82 to $2.86 range.

As a reminder, our 2026 guidance includes $400 million to $800 million of SHOP acquisitions with SHOP NOI in the range of $65 million to $77 million and FAD CapEx of approximately $5 million. It also includes $265 million of proceeds from asset sales and loan payoffs. Other assumptions underpinning our guidance are detailed in yesterday's earnings press release and supplemental, which are posted on our website.

Now I'll turn the call over to Pam for closing comments.

Thanks, Cece. LTC's transformation continues. What began last year through the combination of acquisitions and conversions of seniors housing communities ramps up this year with an additional $600 million of SHOP acquisitions projected at the midpoint of guidance, more than half of which will be completed by the end of the second quarter. We are deliberately curating a SHOP portfolio designed to compete effectively today and in the future when new supply eventually comes online, although new construction starts remain near historical lows nationally. We are accelerating LTC's organic growth profile and reducing our exposure to lower growth triple net lease investments while expanding our roster of strong operators to support our mutual growth. In 2027 and beyond, our strategy will focus on tactical growth in SHOP, adding additional high-quality assets and driving outsized NOI growth.

As a premier seniors housing capital partner, LTC is well positioned to drive substantial growth through SHOP. Our smaller size creates agility, allowing us to drive accretive change faster than our larger peers and move the needle through single asset and small portfolio acquisitions. Our SHOP focus over the past 18 months has enabled a successful transformation and created a clear execution advantage. From our cooperative conversions of 175 million triple net leased communities into SHOP a year ago, we will have grown our SHOP portfolio to nearly $1 billion by the end of the second quarter and significantly increased our ability to drive future earnings growth.

The consistency of our execution and performance is driving results and reinforces the conviction in our SHOP strategy. Our goals remain clear: support our operators who care for our nation's seniors and deliver superior long-term shareholder returns. With that, we're ready to take your questions.

[Operator Instructions] And our first question today will hear from Austin Wurschmidt with KeyBanc Capital Markets.

Could you provide some additional details around pro forma NOI growth for the 27 SHOP assets in the first quarter? And then maybe give us a sense just how occupancy trended sequentially and year-over-year within that NOI figure.

Austin, this is Gibson. I guess, first to give you some context around the disclosure. So, when we gave the pro forma 2025 for the '27 core SHOP portfolio, that was to help give an indication of the growth characteristics in that portfolio to the market, to our shareholders. But we've decided against giving that on a very detailed quarterly basis going forward. What we will do is roll our -- that core SHOP performance for, as you see in the supplemental on a quarterly basis, so you can track that with the metrics that we've realized during our ownership. For the color behind what's going on in Q1 in that core portfolio, it came in line with our expectations for EBITDAR. Rates were a little higher.

When we set guidance, we anticipated a little seasonal softness in Q1, which we realized. But direction, occupancy turned around mid-quarter. If we look at it year-over-year, the occupancy troughed at a higher level, meaning occupancy at the trough in Q1 of this year was higher than occupancy that troughed Q1 last year. And we're seeing some green shoots in terms of occupancy increasing since it troughed out in February. So that -- and then also we look in the sales pipeline and our leads and tour volume going into the summer -- the spring and summer selling season, we feel really confident given what we know right now in reiterating our guidance.

Helpful detail and appreciate the context. With respect to investments, you had -- there were $157 million, I think you said last quarter that you had expected to close by the end of April. I'm just wondering what kind of drove the delay? And did the subset of that or all of those move within the $250 million? Or were there changes in the investment pool? Just any details that you can provide on that as well as expected pricing for those assets?

Sure, Austin, this is Clint. The delay was primarily related to a single off-market transaction -- follow-on transaction where the seller was focused on a tax-efficient transaction. And so, to accommodate that, we're working with them on structuring a down REIT and the seller needs some additional time to address some tax questions on their side. So really in working on this off-market transaction, that aspect is what led to a little bit of delay. But we're very excited about this deal, about growing with this existing operator. And also, this deal will add 2 newer and 2 larger communities to our portfolio that have a continuum of care spanning IL, AL, memory care. In the meantime, while that was slightly delayed, as Dave mentioned in his prepared remarks, we've added another $200 million we expect to close in Q2 and Q3. So, Dave can talk about rates.

Yes. So, cap rates going in yields have been right around that 7%. We've been able to maintain that well. We're very pleased with that. So, it ebbs and flows a little bit from deal to deal. But generally speaking, that's where we've been coming in at Austin.

And then Austin also, I'd like to just add maybe color about as we've increased the pipeline, and we're seeing a lot of opportunities right now, at the $460 million mark, which includes what we've closed to date and what Dave spoke about regarding investments by quarter. I mean, that will get us by 3Q at this point of 75% of our midpoint guidance at $600 million. So, we feel very confident about where investments are right now. And what we have is we have 8 transactions in total for 12 communities. And the average age of that 460, again, this goes back to what we already closed in Q1 is an average age of 10 years, which has been very consistent with what we've talked about, 65% of these deals in the pipeline are sourced off market.

With the Q3 closings that Dave spoke on the LOI, that's going to add 2 more operators, 4 new operators this year and get Q3 up to 13 operators. And we have 2 follow-on transactions. 60% of the communities -- of this 460 span a continuum of IL, AL memory care. The size -- average size of the community is 100 units and 70% of these deals are in primary markets. So we feel very confident in our ability to source transactions. And as Pam mentioned in her comments, about buying assets that are going to be able to compete effectively against newer assets when eventually those do come online.

A lot of helpful detail, Clint. Just to clarify one thing before I yield the floor here. You said you added another $200 million. Is that specific to those -- the operator that's focused on the tax-efficient transaction? Because the $157 million is now $250 million closing in 2Q. And then there's $190 million of signed LOIs set to close in 3Q. So closer to $300 million. Can you just reconcile the adding $200 million versus what I'm getting to on the $300 million?

Austin, it's Pam. It was $90 million that's under LOI expected to close in the third quarter. Yes.

And our next question, we'll hear from Juan Sanabria with BMO Capital Markets.

Hope you can hear me okay. Just wanted to ask about the earnings guidance for the year. There's an implied decel from the first quarter run rate. So just curious on the drivers there. I'm not sure if there's any triple net softening in some of the rents versus the conversion to SHOP with some -- if there's any kind of noise or degradation in temporary cash flows there or if there's any one-timers flowing through the first quarter that maybe won't repeat?

Juan, it's Cece. First quarter, there was a little pickup just because of timing differences. But for the most part, no, we think we're going to be in line. There's going to be a ramp-up for SHOP NOI, as Gibson has talked about in the past, but we still think it's in line. There are some uncertainties out there in the market with the interest rates. We're not sure which direction it will go with the new Fed chair, but we'll give you an update next quarter.

Great. And then second, you mentioned potential monetization of some skilled nursing assets. Just curious on the potential scope and where you see kind of market pricing for in-place rents.

Thanks, Juan. This is Clint. I mean, we're supportive of the skilled nursing industry, and we don't see any immediate near-term headwinds. I mean what we have recycled to date going back to fall of '25, those have really been for specific reasons. It's been prestige, obviously, as Gibson mentioned on our last call, it's reducing concentration to an operator in state and reducing our loan book. Other sales were -- they were lease maturities and some purchase options. Those were at attractive 8 caps which we felt very good about. So going forward, it would really just be looking at capitalizing on these attractive pricing that we're seeing in the market. And anything we do going forward really would just be opportunistic to really look at, as Dave mentioned, moving on beyond lower growth triple net leases into higher-growth SHOP assets.

And anything going forward, we really wouldn't be looking at limited, if anything, but no dilution effectively at all. So, this is really all opportunistic going forward as far as what we look at in skilled -- because also our coverage on an EBITDAR basis is almost 2x, which is historically extremely strong. So, we look at skilled nursing, we're very comfortable with our portfolio. We've been able to reduce that concentration within the portfolio. It would really just be opportunistic going forward.

Great. So said differently, just to summarize, given the high rent coverage the yields could be closer to what you -- or close to what you're buying SHOP at around the 7s, again, given the rent coverage.

And next, I'll move on to Rich Anderson with Cantor Fitzgerald.

So I'm looking at Slide 12 and the guidance you provided for SHOP. And I appreciate you're in growth mode. So, like it's hard to get a real good sense of any sort of same-store organic growth picture. But I'm curious like if you were to sort of do a hypothetical stress test of your portfolio, would it be high single-digit NOI type growth, putting aside additional acquisitions. I mean, is that the type of growth that we should be expecting when the time comes that you're able to disclose a same-store perspective?

Rich, it's Gibson. Yes, it's a good question, and I think you've asked similar questions on previous calls. So, in my prepared remarks, I gave just kind of the math of how the higher growth rate in SHOP moves the needle for our overall portfolio and cited that if you assume kind of low to mid-teens, SHOP NOI growth, but that was kind of the driver behind that math. I think what's changed from our prior calls is that now we have some experience with the portfolio. We're really confident in what we're assembling. We're really confident in what the deal team is buying.

And if you just think about the math embedded in that same-store portfolio, we think you can get without the occupancy increases. So, our guidance there, 150 bps of occupancy increase, 14% growth at the midpoint. If you strip that out, just to be really conservative, you can get double-digit 10% NOI growth with 150 or 170 to 200 basis point spread between RevPOR and export. We think that obviously kind of keys off RevPOR. So that kind of 5% guidance, we feel pretty comfortable in that and see that the recent history has been able to sustain that. And then you just step back and look at the overall supply-demand dynamics in the industry, maybe boomers turning 80, the lack of new supply. We feel more confident in that kind of higher growth profile going forward.

Good response. So, you mentioned platform investments that are being made that you expect to be largely completed and scalable by the end of this year, you've heard my gripe about all this, right? It's -- people are -- you and others are growing SHOP through external sources, but then you have to operate it, right? And you're married to it. And I'm wondering how you've stress tested the history -- or excuse me, the future of your SHOP portfolio. It might be on the surface appearing like a layup to run these things with the demand and supply differential that we're seeing today, but things can get complicated in this business. And so, I'm wondering how -- when you talk about this platform investment, what types of people are you bringing in? What are you doing to stress test not an autopilot type of environment, but like things start to go wrong and how to manage through those things kind of new to the space. So, if you can comment on that, that would be great.

Rich, it's Pam. Well, I don't think anybody thinks that's a layup. We fully understand and appreciate the intensity with which you build the SHOP portfolio and operations. But as we've talked about on this call and for the past year, I mean, we really seek out the best managers that are the best in their markets, very strong and been doing it, have a strong track record. And then we supplement that with the database and the analytics that Gibson has talked about to help arrive at better decision-making. Our value add to the operators is helping them with aggregating data, right? That's an expensive task, and that's what we've undertaken. We've hired people to help with the data analytics. We've hired strong asset managers with historical track records managing SHOP portfolios.

So, it's not something that we've undertaken lightly. And we've said before, if you're going to do SHOP, you have to go all in. We've completely fundamentally changed the way this company thinks, operates, the way we acquire properties. And we don't -- we are not managers. We're not viewing ourselves as managers. We are hiring the best managers, but we're helping those managers create the best outcome for our portfolio.

And one thing also, which we've done on top of that is just the portfolio we're acquiring. We've been very -- as Dave said in his prepared remarks, we're very strategic on what we're buying by newer assets. We've retained the managers on the majority of all but one actually to date that we've closed. And we've done this by design to curate the stabilized portfolio, which we think occupancy stabilized with the ability to drive continued improvement that Gibson spoke about. So, we're building this larger assets that have -- and newer that have the ability to compete. So, we think we're putting this together and the combination of the people to be successful. But as Pam mentioned, this is we understand we've been in the business a long time. It takes a lot of work.

And Rich, it's Gibson. I'll just add to that. The structure is relatively new to us to LTC in terms of our implementation. But we've been hard at work at this over the last 18, 20 months and been very deliberate about forming a plan, working through the issues with the initial conversions and executing on that plan. But zooming out, again, relatively new structure for LTC, but we've had exposure to private pay seniors housing. We've all been in the business for a long time, and we're acutely aware of the challenges that operators face. It's a tough business, but we feel like we've aligned with good operators. We've had -- we've hired experienced people on the team, and we just want to be there to support them.

Yes. I'm not meaning to trivialize the talent there. That's not my point, but I'm just stress testing you, I guess, in the process. So, I appreciate all that color from all of you. And my last question is, when you think about structurally how you're compensating your managers, what's the mindset there? Is it a percentage of revenues? Is it a skin in the game, NOI percentage? Like I'm curious how you're doing that? And is there a sort of a specific model you're following? Or is it a case-by-case basis with your separate managers?

It's a general model that we're following, Rich. We're looking at base fees to be calculated based on revenues as well as bottom line. We think that helps align interest in the current 12-month period. We're looking at incentive fees that we set budgets together and if budgets can be -- if they can exceed the budgets, we're looking to reward our operating partners for that. But we're also looking at aligning interest long term in creating synthetic promotes over time that when you have operators that make decisions today between growing occupancy or rate, it's got to be in the mindset of how it can benefit the community long-term to be able to achieve a financial reward through a synthetic promote structure a couple of years down the road. So, we think when you look at the current 12 months, the ability to beat the budget for the 12 months and a long-term horizon on overall performance, we think that's a good alignment of interest for both parties.

And next, we'll move to Michael Carroll with RBC.

Looking at your SHOP operator list that you guys have, it does look like you have a number of operators kind of within your portfolio. Are there a handful that you kind of have closer relationships with that you kind of want to continue to expand? And I guess some of these that have maybe 1 or 2 assets, I mean, is the plan for that to grow? I mean, how hard is it to have one operator in your portfolio just managing different asset? I mean, does it make sense to have fewer operators managing bigger portfolios?

I would say -- this is Clint. I mean, obviously, we've just started this investment platform midyear last year through the initial conversions. I mean we would look to grow with all of the operators that we have built relationships with, and we will be adding 3 more relationships following this. So, we think this is a testament to the effort that we put in back in the fall of '24 we first announced we were going to go this direction. We took attention and time to go out and market what we were doing and let operators know. And this is a result of that intentional effort that we took on. So yes, we would look to grow with each one of these operators.

And is it harder for you guys if there's more operators within the SHOP portfolio? I mean is there kind of like a limit? I mean, I'm assuming you're fine with what you have now since you're adding 3 more. But is it like 15 you're good with, but 20 or not, is kind of a limit that you want to make sure that you have to make sure that you're able to track each one of these relationships?

Well, we don't -- we have not set any limit, and it really comes down to the investment opportunities. As Clint mentioned in his prepared remarks and follow-up Q&A, the majority of our investment opportunities are coming from our operators off market. So, to the extent that this is a source of deal flow for us, we would not limit that. We're obviously, as I said in a prior remarks, that we're targeting the best operators in the geographical regions in which we have properties and where we're looking to grow. So no, we wouldn't limit it. Obviously, you do get to a point where you've got the log diminishing returns. So, I wouldn't ever say we have something like 50 operators. But where we are right now and adding operators in the next year or 2, I think we're fine. That's very manageable by our asset management team.

Okay. Great. And then circling back to -- go ahead.

Yes, I was just going to say, we've built in our staffing plan additional resources. So, the core platform, Rich was just asking about we feel like all the major pieces will be fully in place to allow us to scale. But we obviously have a staffing plan that's aligned with our growth strategy.

And then switching gears into the -- back to the SNF sales. Have you started this process of marketing some of these portfolios? Or are you kind of indicating on the call is something that you would consider if something came up?

We're not actually actually marketing at this point, but I mean we have received a lot of inbound phone calls about opportunities. So, it's things that we're engaging with. But again, it's got to be opportunistic pricing that works for us to recycle into higher growth SHOP assets.

And then, Clint, is there like specific sizes that we should think about of these potential sales? I mean, could it be like $100-plus million? Or is it too early to tell?

I think it could be -- we'd be situational depending on what comes up. So, we could be larger or smaller.

And our next question, we'll hear from Tayo Okusanya with Deutsche Bank.

I also wanted to focus on Slide 12, the SHOP performance. And just curious, again, when you kind of took a look at the quarterly results you kind of have disclosed on the page, the RevPOR, so in 2Q '25 when we just kind of had the shop conversion portfolio, the RevPOR was almost like $10,000 or so. And then kind of in 3Q, it was like $9,500. It's gradually dropped to about $7,850 by 1Q '26 with all the additional acquisitions that have happened. Can you just talk a little bit about, again, the post-conversion acquisitions kind of post original 13, just generally characteristics of that portfolio than maybe driving down the RevPOR from the original 13 conversion. Just want to kind of understand that a little bit and kind of is it just targeting a different market segment? Or just how do we kind of think about what's being bought relative to the initial 13?

Thanks, Tayo. It's Pam. Yes, I think if you go -- it's a very simple explanation. You go back to that original 13 properties in 2Q, 12 of those were memory care, right? So, memory care has a much higher RevPOR. And so, as you see us adding more traditional senior housing properties into our SHOP portfolio, a mix of IL, AL and memory care, you see that gradually go down. So that's the -- there's nothing to read into that other than the mix of the portfolio is changing as we diversify away from stand-alone memory care.

There are no further questions at this time. I would like to turn the floor back to Clint Malin for any closing remarks.

Thank you, and thanks to everyone on today's call for your ongoing support. We look forward to updating you on our progress next quarter as well as seeing some of you at upcoming investor conferences. Thank you.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

Greetings, and welcome to the LTC Properties, Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]. As a reminder, this conference is being recorded. [Operator Instructions]. It's now my pleasure to introduce Pam Kessler, Co-President and Co-CEO. Pam, please go ahead.

Good morning, and thank you for joining us. Eight months after launching our SHOP initiative, we are almost halfway through our transformation from a lower growth triple-net REIT into a faster-growing SHOP-focused REIT a transformation that will lead to higher multiyear, internal and external SHOP and earnings growth and to superior shareholder returns. This transformation has included substantial investment in people, systems and technology, which will continue to be a focus to support our aggressive growth plans.

We have made great progress growing our seniors housing portfolio through SHOP reflecting successful execution across every aspect of the business. Today, we are guiding to $600 million in acquisitions at the midpoint for 2026, all of which we anticipate will be in SHOP. This acquisition guidance is nearly 70% higher than SHOP acquisitions in 2025.

2026 started off strong with $108 million in SHOP acquisitions already completed and another $160 million on schedule to close in the second quarter, which takes us nearly halfway to our $600 million midpoint investment guidance for the year. Throughout our transformation, we have continued to maintain a strong balance sheet with well-laddered debt maturities and a FAD payout ratio below 80%.

Since launching SHOP last May, we grew it to 25% of our investment portfolio by year-end. Based on our 2026 acquisition guidance, we expect to end this year with SHOP growing to 45% of our investment portfolio and 40% of our NOI capitalizing on LTC's ability to accelerate our growth through acquisitions. By launching SHOP at a small-cap REIT, we are leveraging the denominator effect to our advantage. LTC's smaller initial footprint provides the power to capture outsized growth, where even modest investments have a meaningful and visible impact.

Additionally, after the prepayment of the $180 million Prestige loan expected later this year, loans should be reduced to less than 10% of our portfolio, and skilled nursing investments will represent less than 30% by the end of 2026. This strategic portfolio transformation reflects our SHOP launch and rapid growth within a targeted 18-month period. With our transformation complete at the end of 2026, we see the opportunity for continued accelerated internal and external growth powered by SHOP in 2027.

Now I'll turn the call over to Gibson to discuss our portfolio and strong SHOP performance.

Thank you, Pam. We've undertaken the transformation to increase the organic growth and new investment growth profile of our portfolio and maximize risk-adjusted returns for our shareholders. To that end, we have focused over the last 1.5 years to develop and enhance our platform to position LTC and our operators for success, and we'll continue to make further investments going forward to position LTC for profitable growth.

In addition to adding accounting, FP&A and data analytics resources, we recently welcomed 2 Vice Presidents to our asset management team, both with extensive experience in systems development and seniors housing asset management. Our SHOP portfolio results support our 2025 strategy by outperforming our expectations. The 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 of rent in 2024.

The remainder of the SHOP portfolio outperformed expectations in the fourth quarter by contributing $5.9 million of NOI, about $700,000 above the midpoint of guidance. Our 2026 SHOP NOI guidance includes 13 properties we originally converted and 14 properties acquired to date. Our guidance for these 27 properties assumes 14% NOI growth at the midpoint for full year 2026 over pro forma 2025. This subset of properties realized occupancy of 89.7% in 2025, which we are projecting will grow by about 150 basis points in 2026.

We further project that RevPOR will grow by approximately 5% and EXPOR will grow by 2.5%. We do want to note that the 2025 results for the 14 properties we have acquired include occupancy and performance as reported by the prior owners adjusted for the current management fee structure.

We will continue changing the mix of our portfolio in 2026. Prestige Healthcare has delivered notice of their intent to prepay on or about July 1, the $180 million loan, which is currently yielding approximately 11%.

Additionally, we expect to sell 5 skilled nursing properties and have certain loan payoffs totaling $90 million in the next 60 days. These transactions, together with our external growth through SHOP will meaningfully reduce our skilled nursing and loan exposure.

With that, I'll turn things over to Dave for an update on our growth strategy.

Thank you, Gibson. In 2025, we put $360 million to work through SHOP acquisitions. By the end of the second quarter of this year, we will have added an additional $270 million moving us rapidly towards our $600 million midpoint acquisition guidance and making 2026 our most active investment year yet as we accelerate our growth towards an increasingly SHOP weighted portfolio.

LTC's relationship-focused culture is the foundation of our success. In 2025, we closed 2 follow-on transactions with existing operating partners and our momentum is continuing in 2026 with another follow-on deal completed and 2 more and the $160 million we expect to close shortly. At the same time, we are in active conversations with operating partners new to LTC and are evaluating acquisitions to kick off those relationships.

In a competitive senior housing acquisitions environment, our smaller asset base and personal relationship-driven strategy are competitive advantages. We find opportunities in both single and multi-property investments and do not need to chase overpriced large on-market transaction. We are keenly focused on every deal and every LTC operator relationship, each of which directly contributes to our growth and furthers our transformation into a SHOP growth engine.

Existing and prospective operators desiring to grow their portfolios or retain assets when an investor wishes to exit, seek LTC because we listen, we collaborate and we engage. The evidence of this success can be seen in our accelerating year-to-date external growth that in addition to the $160 million previously mentioned, includes an acquisition pipeline of over $500 million in deals under review and consists entirely of SHOP. Our acquisition strategy is to partner with experienced, regionally focused operating teams and add newer communities with lower CapEx requirements. These are stabilized assets, but that does not equate to low growth. We are buying assets with strong pricing power, high incremental margins and durable contributions to earnings growth.

Our expanding SHOP platform is positioned to perform over time, and we expect to achieve unlevered IRRs in the low to mid-teens.

I'll now pass the call to Cece for a review of our financial results.

Thank you, Dave. For the end of the year, we bolstered our growth capacity by expanding our credit facility to $800 million, including $200 million of term loans. We anticipate receiving nearly $270 million in asset sales and loan payoffs in 2026, which will be used to fund future investments using multiple levers, including proceeds from our ATM program, borrowings under our revolving line of credit and asset sales where attractive pricing provides a better cost of capital, we feel very confident in our financial strength, which will support our ability to fuel our SHOP growth.

With the $270 million of expected proceeds, our liquidity stands at $810 million on a pro forma basis. We have minimal near-term debt maturities, giving us virtually no refinancing risk.

At year-end, our debt to annualized adjusted EBITDA for real estate was 4.5x, and our annualized adjusted fixed charge coverage ratio was 4.4x. While we are well within our stated leverage target of 4 to 5x, we believe we can reduce that further over time.

Compared with the same quarter last year, core FFO per share improved $0.05 to $0.70 and core FAD per share improved $0.07 to $0.73. These results represent core FFO per share and core FAD per share growth of 8% and 11%, respectively. The increases were primarily due to new SHOP acquisitions and triple-net conversions to SHOP, partially offset by an increase in interest expense and decreased rents related to asset sales.

Our 2026 guidance for core FFO per share is projected to be in the range of $2.75 to $2.79 and core FAD per share in the range of $2.82 to $2.86. For the first quarter, we expect core FFO per share in the range of $0.66 to $0.68 and core FAD in the range of $0.68 to $0.70.

Our 2026 guidance includes $400 million to $800 million of SHOP acquisitions with SHOP NOI in the range of $65 million to $77 million and FAD CapEx of approximately $5 million. Additionally, our guidance includes the $270 million of proceeds from asset sales and loan payoffs. Other assumptions underpinning this guidance are detailed in yesterday's earnings press release and supplemental, which are posted on our website.

Now I'll turn the call over to Clint for some closing comments.

Thanks, Cece. 2026 will complete LTC's transformation from a triple-net skilled nursing and seniors housing REIT, fueling our growth through idea to become a larger SHOP focused REIT. Increased NOI growth will come organically through our existing portfolio and through new SHOP acquisitions.

With our investment guidance of $600 million at the midpoint in 2026, SHOP will exceed $1 billion of assets and represent 45% of our portfolio by year-end. Including the SHOP acquisitions under contract, the average age of our SHOP portfolio will be 9 years, reflecting our strategy of investing in newer SHOP communities that are best positioned to compete against future new development. We will drive strong organic SHOP NOI and per share growth through aligned operator relationships and the quality of the assets.

In fact, we believe that organic NOI growth will double by the end of this year compared with our pre-transformation to SHOP. We have made rapid progress in executing on our SHOP strategy. So most importantly, on behalf of the entire LTC team, I want to extend a sincere thank you to the operators who have placed their trust in us, helping us establish and grow our SHOP platform.

We have 8 SHOP operator relationships in our portfolio, 6 new to LTC since our launch. And in Q2, we will be adding 2 more. Each one of these operator relationships represents a huge opportunity to continue driving LTC SHOP growth through management agreements that align interest to deepen our relationships. We have a simplified and compelling investment thesis, which we are executing upon with speed, determination and conviction to power future growth by optimizing risk-adjusted returns to our shareholders while increasing our organic and investment growth profile.

This success is made possible by a talented group of tenured employees and new professionals recently joining our team, all coalescing around a transforming LTC that is standing out in the industry and is well positioned for tremendous growth.

With that, we are ready to take your questions.

[Operator Instructions]

Our first question today is coming from John Kilichowski from Wells Fargo.

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?

From a SNF perspective, John, I would say that there's a tremendous amount of private capital, I think, that's driving prices in skilled nursing. So that's one element that could have a change.

And then just as we've generally seen over the years, I mean, skilled nursing at cap rates that it has, it has a stroke of the pen risk and things tend to happen when you least expect it. And we do see much more organic growth from investing in newer assets with a better growth profile. So that's really our thesis and why we're aggressively growing into SHOP.

Okay. Well, the 14% same-store growth is a great starting point. I'm curious, is this sort of like a 3- to 4-year run rate as the business remains immune, likely immune to supply shocks and demand is relatively known? Or do you forecast that moderating slightly as occupancy fully stabilized at these assets?

It's a fair question. John, this is Gibson. It's a fair question. We are -- it is a relatively new portfolio for us. And so we're comfortable with the guidance. I think the way to think about this is that, that pro forma occupancy that I gave in my prepared remarks, 89.7% that's pretty close to stabilized levels. And so we're encouraged to see that this year, our expectations are in that mid-teens growth rate. So we really just don't want to get into the out years right now.

Our next question is coming from Austin Wurschmidt from KeyBanc Capital Markets.

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?

Let me see if I can answer this in another way and see if that scratches your heard, Austin. 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.

Got it. That's helpful. And then maybe 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?

Austin, this is Pam. For stabilized occupancy, given the lack of supply that we see over the next few years, we feel occupancy can climb into the 90s. We did not project that in our 2026 guidance. But it is possible. And it's always a fine balance between occupancy and rate growth, and we feel that this portfolio has the opportunity for both.

And this also -- this is a key of what we're focused on, what we're investing in. It's newer assets, and we've emphasized that in our comments about the average age. We feel those are going to be best positioned to compete against new development. That will happen. And we think in the interim, they'll have pricing power to be able to drive growth. And we've done that by design, on intention, looking long term to have assets that can effectively compete in the future.

And then what was the in-place rent increases now for this year?

Well, the RevPOR guidance we gave is around the 5%. And so that ranges across the portfolio from 4.5% up to 7%. But a lot of the hay is in the barn with respect to year-end increases or increases that went into effect in January. But then we have some more that increase on anniversary. And then we have to see what happens with the Street rate. So I think we're comfortable with our all-in like RevPOR assumption of that 5% range.

Next question is coming from Juan Sanabria from BMO Capital Markets.

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.

Juan, this is Dave. I'll take the first half, and I think Gibson will take the second half. So from an acquisition pipeline perspective, you saw in our remarks that we have 160,000 -- $160 million under LOI and in process. We are looking at generally what we looked at last year in terms of sort of going in year 1 yields about 7% or so with good growth headroom beyond that.

Also one thing to think about on what we're looking at for deals, as Pam mentioned in her prepared remarks, mean the size of LTC really we're using to our advantage to be able to grow because we can look at smaller transactions, which have better price points to be able to drive those initial yields. So we think that's a huge opportunity for us as we're growing this portfolio and are projecting on gross book to be a 45% SHOP by the end of the year since we launched this midyear in '25.

And then Juan, this is Gibson on the dispositions. I think the Prestige loan is a unique case where that, we had a heavy concentration with one operator in one state that caused some disruption a couple of years back because of that state's specific reimbursement program. And so that was a strategic decision to derisk the portfolio and reduce operator concentration. We still have investments to for Prestige, and it's not a Prestige thing. It's just an overall operator concentration thing.

On the rest, if you blend it together, we're selling at about an 8.2% cap. And so there, if you think about that in terms of swapping out of older skilled nursing assets as we've been doing on an opportunistic basis over the last 1.5 years or so, and 8.2% with 2.5% anywhere from 2% to 2.5% escalators, and we can recycle that into newer seniors housing assets that are really built and will be competitive over the long term. We feel like that's a good risk/reward trade for our shareholders.

And then I just wanted to ask ALG, there was previously some discussion about some change in that portfolio going forward and some options they had. So just curious how we should be thinking about piece of your exposure longer term?

I think for ALG, Juan, I think that they do have purchase options. We talked previously about -- it's really more interest rate sensitive for them to look at probably bond financing to take this out. So we look at this probably will be in 2027. We have 3 different or 4 different investments with them. There can be a small -- one of the small portfolios could trade maybe towards the end of this year possibly. But I would really think of it more as a '27 event.

Got it. And then if I could just be greedy, one more question. For the incremental financing, like if you hit the top end of your acquisition guidance, how should we think about that? It sounds like you said leverage could go down. I'm not sure if that's a product of EBITDA growing or if we should assume that maybe the goal would be to over-equitize positions over and above kind of the dispositions you've laid out or loan repayments. So just curious on the funding for the pipeline at kind of the different -- either the midpoint or the high end in particular.

Yes. Thanks, Juan. It's Pam. Yes, I think you're thinking about it right. I mean the beauty of a higher growing portfolio is that your deleveraging happens naturally a lot faster through EBITDA growth. But we would also look to overequitize acquisitions if the pricing is right.

[Operator Instructions] Our next question is coming from Michael Carroll from RBC Capital Markets.

Clint or Dave, 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?

So this is Dave. On our -- I mean Clint hit on this nicely in terms of the importance of a deal to LTC and how our scale works for us. So we do a good job of finding transactions that are probably in that onesie-twosie time frame and our size, and our customers, our sellers know that they're important to us. So one great benefit here, it's been sort of in fashion to have buyer interviews. So I can bring a C-suite, bring my CEOs onto those calls to sort of underscore how important the deal is.

And as you know, with any seller, certainty of execution matters an awful lot. So we can give a transaction a lot of attention and hyper focus. We've continued to see a pretty good stream of opportunities. And generally in that first year, underwriting of around 7% or so, it doesn't mean that there's not pressure, but our whole world is looking at a lot of transactions to find a few that are worthy of underwriting and progression through the process. So we're seeing a good flow of potential opportunities, and we feel good that we'll find the right ones for LTC out of that stream.

And so with that backdrop, we've guided to $600 million at the endpoint for investments for '26 and with deals closed under contract, we're almost halfway through that. So although it's a competitive landscape, we feel that we've been able to be at the table on transactions. And a lot of the deals that we have, as Dave mentioned previously, are operators bringing us into transactions, which with having -- soon to have 10 operative relationships in our portfolio. We think that's going to help drive continued access to deals. And when we're looking at them on onesie-twosie transactions, it can be helpful.

And another thing that we're seeing also on one of the transactions we're working on is the seller is looking at a tax-efficient transaction. And so we're looking at a down REIT structure. So when you look at financing transactions and utilizing equity, pricing through a down REIT structure, it can be an attractive option for us.

So then, in this type of environment, if you look at the 7 yields, I mean, do you see -- foresee like if you kind of get back to the end of this year, you might have to go below that? Or is there enough transactions at that level that you think at least through this year, you can still achieve that 7% target?

So as Clint mentioned, right, we have $270 million in the door, right? So those are set. So we've got another $300 million plus to go. Nothing is easy if you're going to do it well. So we'll be working hard to find the right deals all year long. But we are steadfast in working to maintain that kind of year 1 yield of 7%. But definitely, there will be pressure in the industry. A lot of people are discovering senior housing or people showing up at the table. We still feel like we've got a good opportunity kind of given our relationship focus and our style of execution to find the deals that make sense for LTC.

And Mike, I have one more thing to add to that. Last year, when we talked about our projected underwriting and being at 7%, very conservative. Our 2026 guidance is already a year 1 over 7.5%, it's like 7.7%. So we're already beating that. So we've created value there just in a few short months and expect to create more.

Okay. Great. No, that's helpful. And then just last for me. Related to Prestige on the remaining loans that LTC is holding after, if they potentially pay them off in July or half of them. I mean, is there a desire to have them pay off those loans too? Or should we think about that as a longer-term hold that LTC plans to continue to maintain?

We should think of it as a long-term hold. Right now, we -- after the payoff of $180 million, we'll have $90 million remaining with them. So they will be reducing concentration as Gibson spoke about, and they would probably fall outside of our top 5 operator relationships.

And they don't have an option to prepay those.

Next question is coming Rich Anderson from Cantor Fitzgerald.

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?

We're going to see how this year plays out. We're excited about what we're seeing as we go into this year and as we get into later in the year, Rich, we'll update that. I mean I think going in a few calls ago, we said that we were targeting -- we're going in at 7% and targeted low teens IRRs. And so that's basically telling you we expect mid-single-digit growth over the long term. But I think as we work through the process. We just acquired a lot of this, getting to really understand the portfolio. We're excited. And as Pam mentioned, in our projections, we're assuming higher yields on the initial purchase price than we did an acquisition.

So I think we're excited about the opportunity in 2026, and we hope that continues on. But we'll update you as we get to the end of the year -- throughout the year.

But the 22% NOI in the 13, that's really apples-to-oranges from a previous net lease structure, correct? Just so I understand that correctly.

Yes. That's fair, yes.

And that was intended just to give visibility in regard to what we had under our rent structure and what we had to for comparable metrics what it looked like under SHOP. So that was why we broke that out separately.

That's right. And that was in -- sorry, go ahead.

No, you go ahead.

I was just going to say, yes, but I mean, that was -- we were in the structure able to capture the upside in those properties. And that's something strategically as we thought about entering RIDEA, really started talking about seriously 18 months ago, how to go about doing that. And we're just really excited that we're able to do that and be able to capture the upside and do so in a way that aligns our interest with our operators to incentivize them to drive performance.

But yes, your comment that we're comparing that increase in NOI or the triple-net structure is fair. But I will say that as we did that, we were able to capture the upside because there was -- the coverage on that Anthem portfolio was pretty close to where the rents we were collecting.

Right. Understood. Got that. Okay. 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?

Yes, that's a fair question. I guess I'll answer it this way. So we've assumed basically about $1,500 a unit. So for the portfolio that we currently have, the 30 properties, we did go through those recurring CapEx budgets, and we feel pretty comfortable with those given the age of the assets. So I don't -- we didn't feel like we were really stretching or deferring anything and felt like that was what was requisite to keep the buildings competitive. So we'll have to see how that evolves. I'll say the overall number includes assumption kind of a weighted average of that $1,500 a unit for acquisitions going forward.

Yes. And I don't think you can compare our CapEx budget to our peers just because the makeup of our SHOP portfolio is so different. I mean with an average age of 9 years, that's really young, really new buildings that don't have a lot of CapEx requirements.

That was strategic on our part because as we were introducing this portfolio, to simplify the integration of this and have assets that can compete against potential new development. I mean, we do see that over time, that will increase. But for the interim and short-term period, that's why you're seeing a lower spend.

Yes. Okay. Yes, I was going to say young does become old unfortunately, over time.

And we'll see...

We all age, Rich. We all age.

But -- Rich, I will say as we work through the budgets, we're not deferring things that we're not targeting a number. We're committed to invest in the portfolio to keep it competitive. And so if that number drifts up to drive NOI growth, that's what we'll do. But we did try to look at this from a holistic perspective. And when we certainly weren't looking to trim number out of those maintenance CapEx budgets going forward.

Okay. Last for me. You call yourself done at the end of 2026 with this transformation, 45% essentially SHOP. Is that your version of the efficient frontier? Or will you expect the SHOP exposure to sort of trickle up from that point forward? Or is it like a 50% exposure to SHOP sort of your kind of your sweet spot?

No, we don't have a target on it, Rich. It really -- transformation versus evolution, I mean, transformation. This is something that we've done quickly. And to Clint's prepared remarks point, 18 months. That's really, really fast to change the complexion of a company. After this year, it's an evolution. We will continue to invest where we see the best return for our shareholders, which in our crystal ball looks like it will continue to be SHOP. But if it's not, we'll pivot to the investment that drive shareholder value the best. But for right now, it will be an evolution more towards SHOP than a transformation at the -- after this year.

Next question is coming from Okusanya Omotayo from Deutsche Bank.

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 you guys there?

I think the key levers are laid out there in the supplemental on our guidance page. So I think that if you zoom out and with occupancy growth, our EXPOR expectations are just slightly below what people would expect for inflation. I don't think that that's a particularly aggressive assumption.

But I think some may point to the top line occupancy growth of 150 bps is maybe a little conservative. So we're really trying to -- it's a 29 property -- sorry, it's a 30-property portfolio. The 27 that we guided to, which the 27 being, 13 we converted and then everything that we've acquired since. So everything is kind of at or near stabilization.

But it's really hard to -- what the portfolio of that size really zoom in more than the detail that we've given you on the operational levers. I mean, we feel like that's appropriate. And just with 29 -- or sorry, with 27 properties you're going to have more variance than you would in a 500 property portfolio. But I think Again, we feel good about the RevPOR assumptions going forward. We think it's achievable. We don't think it's a layup. EXPOR, same thing. So we try to put the goldilocks level of guidance out there that stretches our operators, but it's achievable.

Right. That makes sense. I guess the second question I have is, 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?

I would say not really supply. Now we haven't seen -- what you do see though more is that operators that have a track record in development are talking more about gearing up for development. So I think that's where you're hearing more talk. It's not so much shovels in the ground. It's more of -- they see that there's going to be a need for supply in the future. And they have experience in doing it, and they're trying to prepare to be -- to participate in that when the time does come.

And I think what specifically within our SHOP portfolio construction activity is very light. There may be 1 under construction, 1 under consideration and some expansions here and there around the edges, but it's very light.

We reached end of our question-and-answer session. Before I turn the call back to management, please note that today's comments, including the question-and-answer session may have included forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in the LTC Properties filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2025.

LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. I'd now like to turn the floor back over to management for any further or closing comments.

Thank you, operator. And thanks to everyone for your thoughtful questions. We appreciate your continued interest, and we look forward to updating you on our progress next quarter.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the LTC Properties, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Before management begins its presentation, please note that today's comments, including the question-and-answer session, may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC's Properties' filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2024. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. And please note that this event is being recorded. I would now like to turn the conference over to LTC management. Thank you. You may begin.

Hello, and welcome to LTC's 2025 Third Quarter Earnings Call. After some brief introductory remarks from me, you'll hear from Cece Chikhale, our Chief Financial Officer; followed by Gibson Satterwhite, LTC's Executive Vice President of Asset Management; then Dave Boitano, our Chief Investment Officer. Pam Kessler, LTC's Co-CEO, will close out our formal remarks. It's been a busy and productive 10 months for LTC. We've been executing on every front, initial cooperative conversions from triple net lease to SHOP, external growth through investments, capital recycling and transformation through SHOP. Following the announcement of our SHOP initiative in late 2024, we moved quickly to build our investment pipeline, outperforming our own expectations and growing the pipeline fourfold since the beginning of this year. As Gibson will detail later, today, we are raising our 2025 SHOP NOI guidance. We have closed about 85% of our projected $460 million investment pipeline, more than $290 million of which was in our SHOP segment. We expanded operator relationships and reduced the average age of our portfolio.

Today, we have 6 SHOP operator relationships, 4 new to LTC. By the end of the year, we expect SHOP to approach 25% of our investment portfolio with an average age of less than 9 years. Our primary thesis for launching SHOP was the realization that LTC was effectively excluding itself from a vast opportunity set of new investments. With the robust volume of new investments we've made in 2025 and the backdrop of favorable demand fundamentals and supply constraints, our external growth trajectory remains strong. The transformation we've accomplished since the second quarter of this year is delivering meaningful results and positioning LTC to continue creating long-term value for our shareholders. Pam, Wendy and I want to extend a sincere thank you and express our gratitude to the LTC team. They have stretched themselves by tackling new tasks and responsibilities and are working together tirelessly and professionally to successfully execute on LTC's strategy. Now I'll turn the call over to Cece.

Thank you, Clint. The numbers I'll be discussing today are for the third quarter of 2025 compared with the same quarter in 2024, unless otherwise noted. You can find a more detailed description of our financial results in yesterday's earnings release, our supplemental and our Form 10-Q. Core FFO improved to $0.69 from $0.68, principally due to an increase in SHOP NOI from Anthem and New Perspective compared with rents we received before those leases were converted from triple net, new SHOP acquisitions and a decrease in interest expense. These were partially offset by an increase in reoccurring G&A.

Core FAD improved by $0.04 to $0.72 versus $0.68 last year. The increase primarily related to the same factors impacting core FFO as well as the turnaround impact of rent assistance provided to ALG in the third quarter of 2024, cash rent increases from escalations and CapEx funding in our triple net portfolio. These were partially offset by an increase in reoccurring G&A. During the quarter, we took a noncash write-off of Prestige's straight-line effective interest receivable balance of $41.5 million, resulting from the loan amendment that we discussed on last quarter's call.

The amendment gives Prestige a penalty-free prepayment option on their $180 million loan within a 12-month window beginning in July 2026. Additionally, during the third quarter, we wrote off $1.3 million of straight-line rent receivable related to the Genesis Chapter 11 bankruptcy filing. During the third quarter and subsequent, we sold a total of 1.5 million shares under our ATM for net proceeds of approximately $56 million. Our pro forma debt to annualized adjusted EBITDA for real estate was 4.7x, and our annualized adjusted fixed charge ratio was 4.6x. Our pro forma liquidity stands at nearly $500 million. We have increased the low end of our full year 2025 core FFO guidance by $0.01, which now stands at $2.69 to $2.71. For the fourth quarter, we expect core FFO in the range of $0.67 to $0.69. Guidance excludes asset sales and includes only those transactions closed to date or expected to close over the next 60 days. Additional assumptions underpinning this guidance can be found in our earnings release, which is posted on our website. Now I'll turn the call over to Gibson.

Thank you, Cece. We're repositioning our portfolio with purpose, recycling capital from noncore assets, adding new operators and expanding SHOP to drive long-term value. At the close of the third quarter, SHOP included 21 properties with 5 operators, 3 of them new to LTC, including LifeSpark, Charter Senior Living and Discovery Senior Living. The portfolio's gross book value is $447 million or approximately 20% of our overall portfolio with average occupancy of 87%. We expect to convert 2 seniors housing communities in Oregon from our triple net portfolio into our SHOP segment on or before December 1. Upon conversion, we will terminate the triple net master lease with the operator and enter into a management agreement with Compass Senior Living, a partner new to LTC. The contractual rent under the lease agreement is approximately $2.5 million and the SHOP NOI run rate is approximately $1.2 million, which is expected to grow to exceed the contractual rent over the next couple of years.

For the 13 properties originally converted to SHOP, we are increasing guidance to $10.9 million to $11.3 million, up from $9.4 million to $10.3 million. At the midpoint of guidance, pro forma NOI growth for these properties for the full year 2025 over '24 would approach 18%. For the remainder of the SHOP portfolio acquired through today's call and expected to convert, we expect fourth quarter NOI of $4.8 million to $5.2 million. While we are not providing formal guidance for 2026 today, we do expect continued strong SHOP NOI growth given the competitive position of our SHOP assets. Our expectation for rent from the 14-property portfolio, subject to market-based rent resets, remains steady at $5.7 million, which represents a 64% year-over-year increase. We will continue working to optimize value in this portfolio over the next 12 to 15 months. We have completed the sale of a previously discussed portfolio of 7 skilled nursing assets, generating net proceeds of approximately $120 million and a resulting gain of $78 million. Now I'll hand the call over to Dave for a discussion of our investment activity.

Thanks, Gibson. The fall NIC conference echoed a powerful theme, confidence in the future of senior housing. LTC is poised to capitalize on this robust industry updraft and build upon our solid cornerstone of 2025 investment success, a foundation of strong senior housing operator relationships and accelerating deal flow. We're gaining strong traction, not only in the volume of potential investments, but in the quality and depth of opportunities we're seeing. Our conversations with potential and existing SHOP operating partners continue to generate a strong pipeline, including off-market deals sourced from LTC's deep industry relationships.

Our current opportunity set stands at roughly $1 billion, and we already have nearly $110 million under LOI with a target close in January 2026. The majority of our 2025 pipeline is closed with more than $290 million in SHOP transactions completed since May. We expect to ramp up that pace in 2026 as we focus on executing on the substantial opportunities we are seeing with both existing and potential new SHOP relationships. I want to take a moment to thank Gibson for the over $100 million in sales proceeds that we're quickly redeploying into quality senior housing communities.

Through the end of the third quarter, we closed 3 SHOP investments totaling nearly $270 million. After quarter end and as just recently announced, we acquired a stabilized senior housing community in Georgia for $23 million that is being managed by a new LTC operator, Arbor Company. These stabilized assets were underwritten to generate threshold year 1 yields of about 7% and unlevered IRRs in the low teens, tangible proof of our ability to source, structure and execute high-performing investments.

And as with all our SHOP relationships, LTC's management agreements provide incentives for our operating partners to surpass base underwriting assumptions. During the third quarter, we also originated a $58 million 5-year mortgage at 8.25%, providing strong current returns and portfolio diversification. SHOP has proven to be a true external growth engine for LTC, built on disciplined underwriting, strong partnerships and consistent execution. As the market continues to evolve, we're focused on maintaining balance between opportunity pursuit and execution discipline, ensuring LTC's growth remains both sustainable and strategic. I'll now pass the call to Pam.

Thanks, Dave. LTC's strategy today is clear and forward focused. We're building a company defined by growth, quality and consistent performance. Over the past year, we've established a strong foundation, and now we're focusing on scaling it by expanding our SHOP platform, deepening operator partnerships and driving long-term accretive returns. We're intentionally building a SHOP portfolio of newer assets with staying power, one that will compete well as the industry continues to evolve. The bifurcation between high-quality modern assets and older, less competitive properties is becoming more pronounced across all real estate asset classes, and seniors housing is no exception.

By concentrating on newer, well-located communities operated by experienced partners, LTC is positioning itself to outperform over time. Underpinning all of this is a strong balance sheet. We maintain solid liquidity, a conservative approach to leverage and a disciplined payout ratio that gives us the flexibility to pursue growth while preserving financial stability. That foundation allows us to move decisively when opportunities arise. Our momentum is strong, our strategy is working and our opportunities ahead are significant. We're executing with discipline and confidence, and I couldn't be more optimistic about what's next for LTC. Operator, we're ready for questions from the audience.

[Operator Instructions] The first question comes from the line of John Kilichowski with Wells Fargo.

This is [ Jesus ] on for John. Just looking at the guidance here to get started, looking at the moving parts, just talk about the underlying assumptions here for the low end and the high end of the range.

Yes, [ Jesus ] it's Cece. The low range, we included all investments that have closed to date and then the high is all that we expect to close within the next 60 days.

Perfect. And let's talk about the pipeline as well and the makeup here. Are you purely focusing on SHOP deals at the moment? Or are you looking at other triple net and loans as well?

So this is Dave. Predominantly SHOP. Certainly, we will consider other opportunities across our desk, but our primary focus is SHOP.

And the next question comes from the line of Juan Sanabria with BMO Capital Markets.

Maybe just to start to piggyback on the prior question. Could you provide any color on expected yields and growth for $110 million in the pipeline to close in January and $70 million over the next 60 days?

So Juan, this is Clint. We've guided to 7% yields on our SHOP acquisitions, and you should think of the same for the $110 million deal we disclosed on our earnings release.

Initial yield.

Initial yields.

Okay. And then just you guys -- or how should we think about funding the incremental capital that you've outlined? And then how do you think about your marginal cost of capital, both debt and equity?

Yes. Thanks, Juan. This is Pam. So we have proceeds coming to us in the first quarter in the form of loan payoffs and purchase option exercises that we disclosed in the supplemental. And so that's about $90 million of proceeds and then funding the remainder on the -- with equity on the ATM. We've been very disciplined this year in issuing equity to match-fund our investments. And so you can anticipate that going forward as well.

Great. And just last one, if you don't mind. Any other options of prepayments that we should expect in 2026 or '27 that you think realistically would be executed?

The only thing you should think about is Prestige, which we talked about previously. And we gave them a prepayment window starting in July of '26, and they have improved performance, and we have been in communication with them, and they are going to be making loan applications in early '26. So at this point, we would think that they should be on track for hopefully 7%, Juan. It may take a little bit longer, but that's $180 million.

And also -- so Juan, you should also think of this in the context of, this is all part of our -- the loan payoffs and the purchase option part of our strategy to recycle out of older skilled nursing properties and into higher-performing SHOP assets. And we also point out we have an accordion feature on our line of credit that we could also execute on in 2026 to increase our availability.

And the next question comes from the line of Rich Anderson with Cantor Fitzgerald.

So this is all very exciting. The pipeline growing $1 billion is not a number we've heard associated with LTC in the past. So congrats on that. But the thing that I think I find more valuable is the growth profile of the company in year 2 and onward after the investment. So can you can you talk about what happens to the overall growth of the organic growth of LTC? Let's say, you get to 30%, 40% SHOP in the next year or so, let's say, legacy LTC was growing 2% or 2.5% on escalators on triple net. Like what's the incremental growth picture for the company after the investment, not from the investment?

You're talking about the growth through SHOP because if you're not looking at...

The whole company, like if the company was growing at 2.5% prior to your RIDEA sort of movement, what do you see the growth profile, the organic growth profile of the company because that's what you're buying, right? You're buying a better growth story longer term. So that's the basic genesis of the question.

Yes. That's right, Rich. This is Gibson Satterwhite. Yes, going in at 7% cash yields, I think we communicated before that we expect a very minimum of 3%. That's just basically to keep up with inflation. So if you think about our cost of capital as that's adjusting as we're repositioning away from skilled nursing assets, considering the overall blended cost of capital, that's the minimum growth rate that we use to price these deals for newer assets to build out our SHOP portfolio. But certainly, we expect greater growth than that. We've targeted low digit -- low double-digit IRRs. And we do expect more than 3% growth with the supply-demand imbalance that's been much discussed in the industry. Preliminary conversations we're having with operators where they expect going into 2026 that RevPOR will outpace expense growth. We're working through budgets right now, so we can't quantify that exactly for you. But we expect that to play out and to have a greater growth profile to hit those low double-digit IRRs.

And Rich, in addition to that, the average vintage right now of the deals we're acquiring in SHOP in '25 is 2019. So we are buying and bringing newer assets that we think we're going to have pricing power continuing on into future years. And we've purchased assets that are stabilized from an occupancy standpoint but have further room to grow from their positioning in the markets for revenue growth and dropping to the bottom line for NOI growth.

Okay. Yes. So I did note the 87% occupancy. Some of your peers are doing mid teens and more same-store NOI growth, a lot of that is occupancy lift. But on a RevPOR basis, do you think you could be sort of mid-single digits? Is that sort of the -- I know you said 3%, but what's the upside from there, again, with a mind towards growing -- creating a growth year story for shareholders. Is it -- is that...

Well, people are certainly targeting -- I'm sorry, Rich.

Yes, please go ahead.

Yes, people are certainly targeting more than 3% RevPOR growth. And that would at least keep up with expense growth. We expect expense growth to be below that. So in the kind of 5-ish percent. People are talking about base rates of going up anywhere 6% to 8%, doing different things with levels of care. So that could all blend down to RevPAR growth of, call it, 5-ish percent. And so we don't -- we're not getting a lot of feedback from operators going into next year that they are seeing really acute wage pressure, which is the majority of your cost structure. So if you're starting at, I don't know, 4%, 5%, whatever that is, we'll know that when we get through budget season with our portfolio. We do expect that to outpace expense growth. So yes, I think mid-single digits is a fair assumption.

Awesome. And then quickly for me, last one. You mentioned the conversion of -- to Compass previously, $2.5 million rent, $1.2 million SHOP with an expectation to pass that $2.5 million. Is that the typical model when you do a conversion where you're sort of giving up short-term rent? Or do you kind of sometimes start at a higher number on a SHOP execution versus the previous net lease structure? Just curious how typical that math is for other conversions.

This one is a little bit of an anomaly, Rich, and it's a fair question. So as you know, as I disclosed in my prepared comments that the current NOI run rate was lower than the contractual rent. So this was a specific operator issue that we dealt with that we had to address. We're really excited to start the relationship with Compass. These 2 particular properties have covered that contractual rent before, and we've just seen performance deteriorate. So we looked at this as a good opportunity, and we're really glad to have SHOP, the RIDEA platform and the toolkit to address a situation like this. So we really are confident that Compass is going to be able to drive NOI to more than exceed that contractual rent such that the value creation is going to more than offset the temporary reduction in our income. So if you think about the other conversions, Anthem that was cooperative, New Prospective cooperative, strategic. Those were really strategic important pieces for us to start our platform. And as you're seeing as we increase guidance on those, that it's really paying off for our shareholders.

And the next question comes from the line of Michael Carroll with RBC.

Yes. Maybe aligns with those last questions. I guess, Gibson, how many of the assets that you have in the portfolio were recently transitioned or how many of the acquisitions that you guys have are recent acquisitions where you're transitioning out the old operator and bringing in a new operator? And with regard to those, should we expect some type of disruption, so higher expenses or lower revenues as there's always some type of disruptions with those?

This is Dave. So, so far, on our existing external acquisitions, the operator has remained in place, and it's actually been, as far as I'm concerned, sort of a twofer because we get to buy a great piece of real estate and we get to establish a great relationship with an operator. There will be some situations where we do have transitions. And obviously, we're very careful to plan well in advance with the operator to avoid disruptions. But predominantly, so far, we've been able to keep the operator in place on deals that we've executed.

And right now, Mike, on our pipeline, we only have one deal in our pipeline where there would be an operator transition, but that was a smaller operator that was a real estate owner that's exiting that. So it's cooperative transition.

Okay. So there's nothing really in the existing shop right now where you just did a transition and we should expect some type of disruption. So like you've kind of already realized that in the numbers in the third quarter?

Yes, correct.

Okay. Great. And then I guess, related to Prestige, I know you provided and I appreciate the color, Clint, earlier in the call. What do they need to get done to exercise that purchase option? I mean, is it just obtaining the loans? Or do they need to drive better results so they can get, I guess, better underwriting with any potential, I guess, HUD-type debt? I mean, do they need to drive performance in order to exercise that? Or is it just getting the loans done?

Driving a little bit more performance. And that's why we gave them a year to go ahead and to prepay. But they have been improving substantially, and we think they're on track to be able to -- we've been analyzing their financial performance. They've improved substantially. And for right now, it looks positive for us. They'll be able to exist and it brings down our -- oh yes, the interest rates going down, too, could be a benefit for them. So we feel good about that. We feel good about our decision to allow this prepayment to be able to redeploy that capital into higher quality assets. So we are keeping close tabs on it, and it looks positive right now for middle of the year next year.

Okay. And how many trailing or how long of a trailing P&L do they need to get HUD debt and should we think about them utilizing HUD to take this out? Or could they find a bridge loan and get HUD at a later date when their financial results are more stabilized?

So this is Dave again. So generally speaking, HUD's looking at a trailing 12, which you're right, there are bridge lenders out there that would probably happy step into the situation. So there'll be optionality for them as they approach that point.

Okay. All right, great.

Mike, they're just seasoning through the remainder of the year. So the current -- as Clint mentioned, their current performance, we -- that looks like it's at a level to allow them to take it into HUD. So they're just seasoning through the remainder of the year to submit the application in Q1.

Okay. So once you kind of get...

And then also...

Sorry, go ahead, Clint.

Sorry, just one other good thing about because the trailing 12, so they had more challenging months that are in that trailing 12. So just as you continue in time, it's going to improve the underwriting. So -- and the other thing that Prestige was waiting for was their rate letters, which they got just to confirm their Medicaid rates, which were as expected. So that helps the consistency. But then within the portfolio that we have with them that will remain, they are the largest vent provider in the state of Michigan, and vents are expecting substantial Medicaid rate increases. So when you look at our portfolio that will remain with Prestige, we feel good about reimbursement that would be coming for the remainder of the portfolio because there are vent units within some of the remaining buildings we would have with them.

And the next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Yes. So much talk on SHOP. Let's talk a little bit about skilled nursing. Curious, again, when you take a look at your skilled nursing portfolio at this point, if there are opportunities to also try to improve your earnings growth from your current portfolio? Again, one of your peers did something really interesting with one of their operators. Again, not wondering again, are you guys looking at structures like that, that could also kind of help you generate better earnings growth from the skilled nursing portfolio?

We have not looked at that, Tayo, as an option. We've mentioned previously on our calls, we've been selective looking at skilled nursing, and we have focused on more transitional newer transitional care, newer assets. And we continue to be in discussions with companies about that. So that would be what I'd see us selectively growing on skilled nursing.

Got you. That's helpful. And then anything from a regulatory perspective as well on the skilled nursing side, you guys are watching at this point?

Nothing new at this point. I mean I think everything that's been discussed as far as the staffing mandate, that's in the rearview mirror now. So no major issues that we're aware of on skilled nursing other than there has been a few states that have touched on potential Medicaid rate reductions. So that's -- I guess -- and that's a narrative that's out there in select states. We don't know if that will continue to grow or not, but that has cropped up in a few cases.

Do you have exposure to those states like North Carolina and some of the other guys you've talked about it?

Correct.

Okay. Got you.

Thank you.

And the next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Pam, I appreciate some of your earlier comments around kind of the available liquidity. But going back to that earlier question on funding plans, you've talked about in the past over-equitizing the investments or at least kind of on a leverage-neutral basis. So just wondering how patient you're willing to be on the capital markets, just given this -- what seems to be a pretty substantive set of investment opportunities in front of you.

Yes. Thank you, Austin. Yes, I mean, we will look to match fund. So you're asking about how much we'll issue on the ATM. I mean we will look to match fund. We do have the proceeds coming back in the first quarter, as I talked about, and then possibly Prestige in third quarter if they meet their open window period. So with that backdrop, there's not a ton of pressure on us. But we have been disciplined this year in executing on the ATM when the backdrop was favorable for us to sell shares. And so we would continue that discipline into 2026 as well.

Appreciate that. And then just how are you guys balancing the regional densification or sort of a clustering strategy and the benefits of scale within SHOP versus geographic diversification and just kind of thinking about those future SHOP investments.

Yes. I think that we're going to continue to evolve into that, Austin, but we've been out meeting with operators for upwards of a year now premarketing this. And I think where you see where the pipeline and our investments to date, this has been a result of that very intentional effort of going out and meeting with operating companies. So as we continue to work with these companies, I mean, we will look at density being a factor of concentrating in certain markets with certain operators.

And we've done that. The operators that we're partnering with in our acquisitions, they are the market leaders in their area. And so that is a strategy of ours.

Helpful. Has the competition changed at all to a point where you felt you've had to increase your growth underwriting in sort of the 3 years out? I think you were in sort of the low to mid-single-digit growth you referenced last quarter with the expectation they would exceed that, of course.

Yes, I -- it's very competitive in the market as far as deals, and we've been focused on -- smaller transactions, we've been fortunate to be able to secure a couple of portfolios, but it is definitely competitive. But we feel we feel very good about our momentum and our positioning in the marketplace to be able to succeed on investments. And I think our investments to date plus our new investment we announced for '26 is evidence of that we're able to compete in the marketplace.

And last one for me. The transitions this quarter, I mean, it didn't sound like there was any other immediate kind of transitions that were available, but I think you'd referenced maybe evaluating some assets in the market-based rent reset, those 14 properties. Anything in the near term there that you're evaluating on maybe transitioning some additional assets from triple net or to the SHOP structure?

Sure, Austin, this is Gibson. Yes, we're certainly considering that as we look into 2026. We have a few options as it relates to those properties. We continue to work with current operators and set permanent rents. As a reminder, these are -- there were 14 properties that were all set up in short-term leases, basically 2 years in duration on average with regular market rent resets. And so there may be certain situations where we keep those with the operators once we're satisfied that we're at an occupancy level and margin that makes sense if that fits that relationship. But we'll certainly look at some of those assets to transition to SHOP. You'll probably see a little bit of movement on that early next year. And then we may make some decisions on a few as to whether or not we dispose of them. But those are our options to -- just to maximize value in that group of assets, and we certainly see upside in that portfolio from here.

There are no further questions at this time. And I would like to turn the floor back over to Clint for any closing remarks.

Thank you, everyone, for joining us today. 2025 has been a pivotal year for LTC so far, and our focus on driving growth is working and will continue. We look forward to sharing our progress with you next quarter. Thank you.

And thank you, ladies and gentlemen. That does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the LTC Properties Second Quarter 2025 Earnings Call. [Operator Instructions]

Before management begins its presentation, please note that today's comments, including the question-and-answer session, may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC Properties' filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2024. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note that this event is being recorded.

I would now like to turn the conference over to LTC management.

Hello, and welcome, everyone, to our second quarter 2025 earnings call. With me today, in order of speaker are Cece Chikhale, Chief Financial Officer; Gibson Satterwhite, Executive Vice President of Asset Management; Dave Boitano, Chief Investment Officer; and Clint Malin, Co-CEO.

LTC has been focused on transferring and execution. We executed on strengthening our teams through promotions, the addition of a new Chief Investment Officer and a new board member with extensive REIT experience. We executed on initiating a RIDEA platform which will transform LTC from a small cap triple net REIT to a larger, more diversified senior housing focused REIT. We executed on enhancing liquidity. We are executing on growth and driving additional accretive growth remains our top priority. Our momentum is evident. Last quarter, we increased our pipeline to $300 million.

Today, we are increasing guidance again to $400 million of investments in 2025, which will more than double the size of our existing SHOP portfolio. It will also expand our shop operators to 5, 3 of whom are new relationships for LTC. We have established a strong platform for meaningful growth and with ample access to capital, we're moving through the year with energy and optimism as we continue to successfully deliver on our plan.

Now I'll turn things over to Cece for a review of our financials, a liquidity update and increased guidance.

Thank you, Pam. The numbers I'll be discussing today are for the second quarter of compared to the same period in 2024, unless otherwise noted. I will focus my comments on key items as a detailed description of our financial results was provided in yesterday's earnings release and supplemental. Core FFO improved to $0.68 from $0.67. Core FAD improved by $0.05 to $0.71 versus $0.66. The increase in core FFO primarily was related to a decrease in interest expense an increase in fair market rent resets and an increase in SHOP NOI. These were partially offset by lower interest income due to mortgage loan payoffs and principal paydowns and higher G&A.

Core FAD increased principally related to these same factors, escalations and increases from the turnaround impact of deferred rent provided in the second quarter of last year. To further strengthen our capital position, subsequent to the end of the second quarter, we entered into a new 4-year unsecured credit agreement with a solid group of banks. The new unsecured credit agreement matures in July 2029 and provides a 1-year extension option. Aggregate commitments on the revolver increased from $425 million to $600 million, and we have the ability to further increase the loan commitments up to $1.2 billion.

Additionally, we rolled 250 million term loans that were maturing over the next 16 months into the revolver, keeping the swap agreements intact through November 2025 and at 2.3% in November 2026 at 2.4% based on current margins. At June 30, our debt to annualized adjusted EBITDA for real estate was 4.2x and our annualized adjusted fixed charge coverage ratio was 5.1x. Our current total liquidity stands at $674 million, and increased our full year 2025 core FFO guidance range by $0.02 to $2.67 and $2.71. The low end of this guidance includes only those investments made to date, while the high end includes $320 million in investments that are expected to close in the next 60 days. Dave will provide more color on these investments shortly. Additional assumptions underpinning this guidance can be found in the supplemental posted on our website.

Now I'll turn things over to Gibson for a portfolio review and update on SHOP.

Thanks, Cece. To execute on our goals in managing operator concentration and lowering exposure to older skilled nursing assets, we have agreed to allow prestige an option to prepay their $180 million loan, secured by 14 skilled nursing centers in Michigan without penalty. The 12-month window to prepay the loan opens in July 2026. With improving operating performance in this portfolio, and in consideration for granting the prepayment window, Prestige has agreed to eliminate the current pay rate and revert monthly interest payments to the full contractual interest rate of 11.14% and effective July 1, 2025, and escalates annually. Additionally, we are now under contract to sell all of the 7 skilled nursing centers tied to the lease with the operator who chose not to renew for strategic reasons.

We expect these transactions to close in the first part of the fourth quarter, generating net proceeds of about $120 million against our gross book value of $72 million. We anticipate recording a gain on sale of approximately $80 million in connection with the sales. With the generated proceeds and the potential of prestigious loan prepayment, we are working towards strategically recycling capital out of older skilled nursing assets and into newer seniors housing communities. We have increased our assumptions for the expected rent due to LTC on the portfolio of 14 properties subject to market-based it resets and now expect to collect revenue of $5.7 million this year up 10% from the $5.1 million we discussed last quarter and up 64% from the rent collected from these properties last year.

We have received full contractual rent from Genesis through August. Our properties are in core markets for them. And in early June, they exercised their first 5-year extension option, making the new duration date April 30, 2031. We continue to believe that our SHOP portfolio is highly transformative. Average occupancy in the portfolio for the second quarter was 81% and SHOP NOI totaled $2.5 million. As of the end of the quarter, our SHOP portfolio consisted of triple net leases converted to RIDEA. For comparative purposes, we generated about $780,000 more income in the second quarter than we did under triple net leases for the same period last year. Our prior guidance for the 13 properties recently converted into our SHOP portfolio remains unchanged at $9.4 million to $10.3 million of SHOP NOI.

Now I'll hand the call over to Dave for a discussion of our investment activity.

Thank you, Gibson. I'm excited to be speaking with you today on my first earnings call since joining the company as Chief Investment Officer and I will begin with what drew me to LTC. Beyond the strength and collaboration of a deeply experienced team, what really stood out is how well positioned LTC is for the future. With the addition of SHOP, LTC is exceptionally equipped to seize the growing opportunity to partner with seniors housing operators, particularly strong, regionally focused operators who bring deep health care expertise and experience and a profound understanding of their local markets.

Late last month, we added to our SHOP portfolio with the acquisition of a 67-unit stabilized assisted living and memory care community in California built in 2019. We invested $35 million at an estimated initial yield of 7%. The community will continue to be operated by an affiliate of Discovery Senior Living, a new shop operating partner for LTC. Our SHOP investment sites are on accretion and we're focused on accelerating growth through the acquisition of newer, stabilized properties with strong operating partners. However, we will continue to make shorter term accretive investments for financial and strategic purposes. As such, during the second quarter, we originated a $42 million mortgage loan secured by a 250-unit senior housing community in Florida built in 2021.

This 5-year loan carries a fixed interest rate of 8.5%. These 2 transactions bring 2025 year-to-date investments to nearly $80 million with approximately $320 million more expected to close over the next 60 days. Of this, approximately $60 million represents an 8.25% 5-year mortgage loan. The remaining $260 million represents stabilized shop investments with an average age of 6 years and at an estimated average year 1 yield of 7%. Our targeted unlevered IRR unnabilized SHOP communities is north of 10%. At completion, these investments will drive our SHOP portfolios gross book value to approximately $475 million, up from our initial $175 million.

Upon closing, SHOP will represent nearly 20% of our total portfolio, cementing our transformation through RIDEA. Even with the significant amount of investment activity we've discussed today, we are working to backfill our pipeline, which includes several shop transactions for which we've already issued LOIs. On our last earnings call, we highlighted our expanded investment pipeline, and we have expanded it further. The LTC team is delivering on external growth.

I'll pass the call to Clint now.

Thanks, Dave. We're glad to have you on board. The pace of external growth through SHOP is just beginning for LTC. Not only did our confidence in Anthem and new perspective drive the cooperative conversions with them, but the conversions were a cost-effective G&A approach to launching our SHOP platform with assets already familiar to us. Now with the acceleration of new investments, we are focused on scaling our accounting and asset management teams to manage our growth. So with growth front and center for LTC, I share the enthusiasm of my colleagues when I say that I have never been more excited about our future opportunities. Operator, everybody for questions from the audience. .

[Operator Instructions] And our first question comes from [ John Kalachowski ] with Wells Fargo.

Congrats on the quarter. First question for me is just on how do you think about funding all of these new investments here, especially given where your cost of equity is and kind of the going in 7-cap yields?

So as we've talked about on previous calls, we anticipate in the long term to fund these on a leverage-neutral basis or perhaps even over-equitize them. We've been blending in higher-yielding loans. So with the total blend we feel our cost of capital is adequate to fund them with debt and equity. And we also have some loan -- I'm sorry, sales proceeds coming at the end of the year, about $120 million as we've discussed previously that we'll use to fund these.

Okay. That's helpful. And then maybe on the underwriting here for these, what are you thinking about NOI growth on the SHOP acquisitions? In years 2 and 3, let's say?

I think we were looking -- I mean, I mean we're projecting out fairly sort of growth over the years, right? We think there's considerable upside on top of that. But for former purposes, we're buying stable buildings and projecting out normalized growth.

Okay. That's helpful. And the...

They're not deep value add. We've discussed the characteristics of the assets that we're looking to acquire, which are stabilized with good cash flows. So we don't have any outsized NOI projections, although we do believe that margins can be improved, but by and large, occupancy has stabilized.

Okay. That's very helpful. And then last one for me is just on you transitioned 13 properties in the quarter. Maybe could you talk about what what's the potential for the rest of the year in terms of what you've identified from your net lease portfolio that could be transitioned still?

This is Clint. You've talked about this on previous calls. We launched the SHOP portfolio with the cooperative conversions of both Anthem and new perspective, there could be a handful of other buildings that could be added, such as the transition portfolio that Gibson spoke about in the prepared remarks. But we've said all along, this really is an external growth story, which really goes to our pipeline and what we've guided to in bringing in new offers into the portfolio. So we see that the majority of the growth of the SHOP platform is going to be through external growth.

Your next question comes from Austin Wurschmidt with KeyBanc Capital Markets.

So I don't want to get too far ahead of ourselves, but I am curious just how large the pipeline of additional SHOP LOIs that Gibson reference beyond what you have here ready to close in the months ahead. And just whether there are additional deals like mortgage loans you referenced beyond those SHOP deals. Also kind of in that pipeline beyond the $320 million that you disclosed this quarter.

Thanks, Austin. We're being selective in deal flow, and we're very encouraged to see the amount of investments we've been able to put into guidance so far. So as Dave mentioned in prepared remarks, I mean there are other opportunities that we have put out LOIs. But what we're focused on, we're focused on single-asset transactions, small portfolios of stabilized assets, newer vintage properties. And that's really where our target is. So we're seeing more opportunities, but we're able to get through those and really focus in to what we're trying to grow the platform. So we are focused on execution of the remaining investments in our pipeline, but there are still other opportunities that we are going to pursue.

Do you think the subset of opportunities in front of you are enough to sustain this sort of investment pace that you've outlined kind of pretty much through really the back half of 2025? Or was there something unique about sort of this initial foray in the shop where it kind of brought to you a larger number of opportunities at the outset?

Well, we're definitely seeing more deals in the market. And a big part of where we're at today is the intentional focus that we made when Cece and Gibson's teams are focused on the cooperative conversion of Anthem and new perspective, we've been out in the market premarketing this SHOP platform with the broker community with owners that we know in the industry with operators speaking about this. So I think where you see today, is really a culmination of intentional efforts to get the word out and premarket, what we're trying to do through external growth.

So we do see that there's going to be other opportunities but it is also competitive out there. There's -- anybody who has a shop platform is looking at investments. So it definitely is a competitive landscape. But we think given the size of LTC, we have a competitive advantage that we can actually focus on smaller deals which have better price points to drive accretive growth for our shareholders.

That's helpful. And then just last one. With respect to the 2025 NFO guidance, the shop NOI contribution was up fairly meaningfully versus what you provided last quarter. I guess just can you share what's all included in that updated figure? And I think you said that the Anthem and new prospective NOI contribution from last quarter is unchanged. So can you kind of sort through the moving pieces? And then what drove the lift in annual guidance this quarter?

This is Gibson. So I'll talk just a little bit about what was in the 13 properties and then I'll turn it over to talk about our growth assumptions layered on top of that. We came in about $400,000 higher than our internal expectations on SHOP NOI in Q2. And there were a few factors at play. So new perspective, we got converted a little bit later. Anthem's occupancy was like a little bit lower and -- but that was more than offset by expense savings. But after 2 months, we're not willing to change our full year guidance. We'll just wait and see if those expenses are subject to mean reversion as we get through the year.

They have caught up on the occupancy front. So we feel pretty good that we have a good chance to meet our expectations going forward on occupancy. And so we'll monitor expenses. When we get through Q3, we'll circle back and tighten them guidance.

And then the other increase is due to the projected new deals that are coming on board.

And your next question comes from Michael Carroll with RBC Capital Markets.

I wanted to touch on the prestige change that you guys made allowing them to potentially prepay some of their loans. I mean it sounds like this doesn't open up until the back half of 2026? I mean, how are those discussions going? Does Prestige need to get new financing to be able to pay those down? I mean I'm assuming that they want to do this, and that's why you gave them this change in the lease or the mortgage agreements?

Correct. They have -- this is Clint. They would have to find that financing. I mean, most likely, had would be an option for them, it would probably be the best fit for this portfolio.

And then can you talk about the size of this? I know you gave us related to the communities, but what is the -- is it kind of equal weighted by the communities can you just do a weighted average of how much these loans represent? Or can you give us a number of how much they could potentially prepay?

Well, it's all or none. It's the whole portfolio. It's the $175 million loan.

Okay. And then can you give us an update on ALG? I know they have a couple of purchase options and is that something that they plan on exercising. I know in the prior calls, you were saying that they could potentially do it by the end of the year. Is that something that could still occur?

Well, last call we talked about, given where interest rates were at that it will probably fall into something in 2026. So I think at this point, we really have to wait and see where our interest rates shake out. But at this point, we're not expecting this year? And if more likely probably 2027, it would be our guests when they would be able to be in a position to execute on that. But it's going to come down to continued performance improvement, which we've been seeing and then just where interest rates shake out.

Okay. And then just lastly for me, Pam, can you give us an update on LTC's longer-term leverage targets? I know that the pipeline, it does imply that your leverage is going to tick up. Obviously, you're going to need to fund those. So maybe there is some new equity coming to fund part of that. But do you want to be below in the low 5s -- or sorry, low 4 net debt-to-EBITDA range. Is that kind of what you want to target? Or how are you thinking about that?

Yes. I mean seen being at 4.2 right now gives us the flexibility to be able to fund our near-term investments with debt and then take it out long term. with equity or long-term debt as the interest rates come down. So yes, this really hasn't changed. Our target hasn't really changed over the past decade. We've always targeted below 5 and sitting in the low 4s gives us the optionality during COVID, we did flex up a little higher in order to do some acquisitions. But long term, we're still target the low 4s.

Our next question comes from Omotayo Okusanya with Deutsche Bank.

First of all, on Prestige with the loan now that they're back to contractual rate, could you just talk a little bit about why there's a lot of confidence that they can maintain that in the New York term without potentially having to access the security deposit?

Sure, Tayo. This is Clint. As we've talked about in previous quarters, they have been making performance improvements through occupancy gains. When we modified the loan during the pandemic because of reimbursement challenges they had. I mean we sort of foresaw that this would be -- they would be able to come back in over a period of time. And when we did this, we gave them like a 2.5-year runway to be able to make performance improvements both on the bottom line as well as occupancy gains, which they've been doing. And so we sort of designed this and expected it would eventually get back to contractual at some point in time. .

So we're kind of where we expected this to be. I think they see an opportunity to get long-term financing, maybe at better rates. And so that's where they're looking at exploring this in '26 to be able to take out to long-term, maybe cheaper financing.

Got you. That's helpful. And then with the portfolio. Could you just talk a little bit about, again, the process you're going through to make sure you have the right operator for these assets. Could you talk a little bit about, again, the structure of the management contracts and how the operators are set up to be aligned with your goals to kind of grow bottom line NOI?

Sure. Well, I guess, first of all, Tayo, regarding the operators, I mean, we're fortunate in the deals that we're looking at that are newer vintage stabilized, every asset has a continuing operator. So it's not we're coming in a changing operators. So that's been an important element as we turn to external growth of SHOP. So that's been a key element on this. So we think given the performance and the operators have all been in for a number of years, that should continue. So we're encouraged by that as we execute on external growth.

Yes. In regard to the contracts, I mean, we've looked -- we engaged third-party resources to help us structure these management agreements and really look at an alignment of interest through financial incentives for both parties. So we're looking at compositions of management fees on top line and on bottom line. We're looking at short-term and long-term performance goals. This has been well received by operators. And I think that a choice of capital for operators is refreshing as well. And our conversations have been very productive with operators.

Got you. Last one for me, if you don't mind. Is there any point where you can see yourself doing more of the value-add type idea transactions, again, low occupancy you guys focused on seeing it up and kind of driving really large same-store NOI growth like some of the other health care REITs do?

Yes, it depends on where our stock price goes and our cost of capital. For right now, we'll continue on -- so right now, we'll continue on our focus, which is single assets, smaller portfolios, newer assets is what our focus is going to be and there's always going to be an opportunity maybe here or there for a value-add opportunity, but that's not our primary focus at this point.

Yes. I think especially as we launch the SHOP portfolio, Tayo, I mean, looking at the value add, I think that's something that you can do when you have more scale because that takes time. And it's a little messy. Turnarounds are not easy. And for right now, I think, building a very strong base in our shop with newer stabilized assets with good cash flow, that's the most prudent way to build this platform.

I think have better risk-adjusted return in our mind to be able to drive shareholder value.

Thank you. And ladies and gentlemen, there are no further questions at this time. I'll hand it back to Pam Kessler for closing remarks.

We are very excited about the opportunities ahead as we are committed as ever to driving growth and shareholder value for years to come. Thank you all for joining us today, and we look forward to speaking with you again next quarter.

This concludes today's conference. All parties may disconnect. Have a good day.