LTC PROPERTIES INC

1. The Company

LTC Properties, Inc. (“LTC” or the “Company”), a Maryland corporation, commenced operations on August 25, 1992. LTC is a real estate investment trust (“REIT”) that invests primarily in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint ventures and structured finance solutions including preferred equity and mezzanine lending. We conduct and manage our business asone operating segment, rather than multiple operating segments, for internal reporting and internal decision-making purposes. Our primary objectives are to create, sustain and enhance stockholder equity value and provide current income for distribution to stockholders through real estate investments in seniors housing and health care properties managed by experienced operators. Our primary seniors housing and health care property classifications include skilled nursing centers (“SNF”), assisted living communities (“ALF”), independent living communities (“ILF”), memory care communities (“MC”) and combinations thereof. We also invest in other (“OTH”) types of properties, such as land parcels, projects under development (“UDP”) and behavioral health care hospitals. ILF, ALF, MC and combinations thereof are included in the ALF classification.

2. Summary of Significant Accounting Policies

Basis of Presentation. The accompanying consolidated financial statements include the accounts of LTC, our wholly-owned subsidiaries, and our consolidated companies. All intercompany investments, accounts and transactions have been eliminated.

Any reference to the number of properties or facilities, number of units, number of beds, number of operators, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

*Consolidation.*At inception, and on an ongoing basis, as circumstances indicate the need for reconsideration, we evaluate each legal entity that is not wholly-owned by us for consolidation, first under the variable interest entity (“VIE”), then under the voting model. Our evaluation considers all of our variable interests, including common or preferred equity ownership, loans, and other participating instruments. The variable interest model applies to entities that meet certain criteria.

If an entity is determined to be a VIE, we evaluate whether we are the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and benefits. We consolidate a VIE if we have both power and benefits - that is (i) we have the power to direct the activities of a VIE that most significantly impact the VIE's economic performance (power), and (ii) we have the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). If we have a variable interest in a VIE but we are not the primary beneficiary, we account for our investment using the equity method of accounting.

If a legal entity does not meet the characteristics of a VIE, we evaluate such entity under the voting interest model. Under the voting interest model, we consolidate the entity if we, directly or indirectly, have greater than 50% of the voting shares.

The Financial Accounting Standards Board (the “FASB”) requires the classification of non-controlling interests as a component of consolidated equity in the consolidated balance sheet subject to the provisions of the rules governing classification and measurement of redeemable securities. The guidance requires consolidated net income to be reported at the amounts attributable to both the controlling and non-controlling interests. The calculation of earnings per share will be based on income amounts attributable to the controlling interest.

Use of Estimates. Preparation of the consolidated financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those

estimates. Our most significant assumptions and estimates are related to the valuation of real estate, purchase price allocation of acquired assets, revenue recognition including the collectability of tenant receivables and asset impairment.

Cash Equivalents. Cash equivalents consist of highly liquid investments with a maturity of three months or less when purchased and are stated at cost which approximates market.

Owned Properties. We make estimates as part of our allocation of the purchase price of acquisitions to the various components of the acquisition based upon the fair value of each component. In determining fair value, we use current appraisals or other third-party opinions of value. The most significant components of our allocations are typically the allocation of fair value to land and buildings and, for certain of our acquisitions, in-place leases and other intangible assets. In the case of the fair value of buildings and the allocation of value to land and other intangibles, the estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. We evaluate each purchase transaction to determine whether the acquired assets meet the definition of an asset acquisition or a business combination. Transaction costs related to acquisitions that are not deemed to be business combinations are included in the cost basis of the acquired assets, while transaction costs related to acquisitions that are deemed to be business combinations are expensed as incurred.

We capitalize direct construction and development costs, including predevelopment costs, interest, property taxes, insurance and other costs directly related and essential to the acquisition, development or construction of a real estate asset. We capitalize construction and development costs while substantive activities are ongoing to prepare an asset for its intended use. We consider a construction project as substantially complete and held available for occupancy upon the issuance of the certificate of occupancy. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred. For redevelopment, renovation and expansion of existing operating properties, we capitalize the cost for the construction and improvement incurred in connection with the redevelopment, renovation and expansion. Costs previously capitalized related to abandoned acquisitions or developments are charged to earnings. Expenditures for repairs and maintenance are expensed as incurred.

Depreciation is computed principally by the straight-line method for financial reporting purposes over the estimated useful lives of the assets, which range from 3 to 5 years for computers,5 to 15 years for furniture and equipment,35 to 50 years for buildings,10 to 20 years for site improvements,10 to 50 years for building improvements and the respective lease term for acquired lease intangibles.

Financing Receivables. As part of our acquisitions, we may from time to time, invest in sale and leaseback transactions. In accordance with Accounting Standards Codification (“ASC”)Topic 842, Leases (“ACS 842”), we are required to determine whether the sale and leaseback transaction qualifies as a sale. ASC 842 clarifies that an option for the seller-lessee to repurchase a real estate asset would generally preclude accounting for the transfer of the asset as a sale. Therefore, a sale and leaseback transaction of real estate that includes a seller-lessee repurchase option is accounted for as a failed sale and leaseback transaction. As a result, the purchased assets of a failed sale and leaseback transaction would be presented as aFinancing receivable on ourConsolidated Balance Sheets and the rental revenue from these properties is recorded asInterest income from financing receivables on ourConsolidated Statements of Income. Furthermore, upon expiration of the purchase option if the purchase option remains unexercised by the seller-lessee, the purchased assets will be reclassified fromFinancing receivables toReal property investments on ourConsolidated Balance Sheets. Financing receivables are recorded on an amortized cost basis.

Mortgage Loans Receivable, Net of Loan Loss Reserve. Mortgage loans receivable we originate are recorded on an amortized cost basis.

Intangible Assets. As previously discussed, we make estimates as part of our allocation of the purchase price of an acquisition to various components of the acquisition based on the fair market value of each component. Occasionally, we may allocate a portion of the purchase price as in-place leases or other intangibles. In the case of the value of in-place leases, we make the best estimates based on the evaluation of the specific characteristics of each tenant’s lease. Factors

considered include estimates of carrying costs during the hypothetical expected lease-up periods, market conditions and costs to execute similar leases.

*Working Capital Loans.*Our investment in working capital loans consists of loan arrangements with interest ranging between 4.0% and 7.5% and maturities between 2024 and 2031.

Mezzanine Loans. Mezzanine financing sits between senior debt and common equity in the capital structure, and typically is used to finance development projects or value-add opportunities on existing operational properties. We seek market-based, risk-adjusted rates of return typically between 8-12% with the loan term typically four tofive years. Security for mezzanine loans can include all or a portion of the following credit enhancements; secured second mortgage, pledge of equity interests and personal/corporate guarantees. Mezzanine loans are recorded for GAAP purposes as either a loan, under notes receivable, or joint venture (“JV”), under investment in unconsolidated JVs, depending upon specifics of the loan terms and related credit enhancements.

Investments in unconsolidated joint ventures. From time to time, we provide funding to third-party operators for the acquisition, development and construction (“ADC”) of a property. Under an ADC arrangement, we may participate in the residual profits of the project through the sale or refinancing of the property. These ADC arrangements can have characteristics similar to a loan or similar to a JV or partnership such as participating in the risks and rewards of the project as an owner or an investment partner. If the ADC arrangement characteristics are more similar to a jointly-owned investment or partnership, we account for the ADC arrangement as an investment in an unconsolidated JV under the equity method of accounting or a direct investment (consolidated basis of accounting) instead of applying loan accounting.

We evaluate our ADC arrangements first pursuant to ASCTopic 810,Consolidation, to determine whether the ADC arrangement meets the definition of a VIE, as explained above, and whether we are the primary beneficiary. If the ADC arrangement is deemed to be a VIE but we are not the primary beneficiary, or if it is deemed to be a voting interest entity but we do not have a controlling financial interest, we account for our investment in the ADC arrangement using the equity method. Under the equity method, we initially record our investment at cost and subsequently recognize our share of net earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate. Allocations of net income or loss may be subject to preferred returns or allocation formulas defined in operating agreements and may not be according to percentage ownership interests. In certain circumstances where we have a substantive profit-sharing arrangement which provides a priority return on our investment, a portion of our equity in earnings may consist of a change in our claim on the net assets of the underlying JV. Distributions of operating profit from the JVs are reported as part of operating cash flows, while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities. Currently we do not have any ADC arrangements.

We periodically perform evaluation of our investment in unconsolidated JVs to determine whether the fair value of each investment is less than the carrying value, and, if such decrease in value is deemed to be other-than-temporary, we write the investment down to its estimated fair value as of the measurement date.

Loan Loss Reserve. ASCTopic 326,Financial Instruments- Credit Losses (“ASC 326”) requires a forward looking “expected loss” model to be used for receivables, held-to-maturity debt, loans, and other instruments. When shared risk characteristics exist, ASC 326 requires a collective basis measurement of expected credit losses of the financial assets.

We determined ourMortgage loans receivable, Financing receivablesandNotes receivableare within the scope of this ASC*.*We utilize the probability of default and discounted cash flow methods to estimate expected credit losses. Additionally, we stress-test the results to reflect the impact of unknown adverse future events including recessions.

We elected not to measure an allowance for expected credit losses on accrued interest receivable under the expected credit loss standard as we have a policy in place to reserve or write off accrued interest receivable in a timely manner through our quarterly review of the loan and property performance. Therefore, we elected the policy to write off

accrued interest receivable by recognizing credit loss expense. As of December 31, 2023, the total balance of accrued interest receivable of $53,960,000 was not included in the measurement of expected credit loss. For the years ended December 31, 2023, 2022 and 2021, the Company didnot recognize any write-off related to accrued interest receivable.

Accrued incentives.As part of our acquisitions and/or amendments, we may commit to provide contingent payments to our sellers or lessees, upon the properties achieving certain rent coverage ratios. Typically, when the contingent incentive payments are funded, cash rent will increase by the amount funded multiplied by a rate stipulated in the agreement. If it is deemed probable, the contingent payment is recorded as a liability at the estimate fair value calculated using a discounted cash flow analysis and accreted to the settlement amount of the estimated payment date. If the contingent payment is provided to the lessee, the payment is recorded as a lease incentive included in thePrepaid expenses and other assets line item on ourConsolidated Balance Sheets and is amortized as a yield adjustment over the life of the lease. The fair value of these contingent liabilities is evaluated on a quarterly basis based on changes in estimates of future operating results and changes in market discount rates. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

Impairments. Assets that are classified as held-for-use are periodically evaluated for impairment when events or changes in circumstances indicate that the asset may be impaired or the carrying amount of the asset may not be recoverable through future undiscounted cash flows. Where indicators of impairment exist, the estimation required in the undiscounted future cash flow assumption includes management’s probability-weighting of various scenarios including whether management modifies the lease with the existing operator versus identifying a replacement operator and the assumed market lease rate underlying projected future rental cash flows. In determining fair value, we use current appraisals or other third-party opinions of value and other estimates of fair value such as estimated discounted future cash flows. Based on our assessment, during the years ended December 31, 2023, 2022 and 2021, we recognized impairment losses of$15,775,000, $3,422,000 and $0, respectively, related to our real property investments.

Properties held-for-sale. Properties classified as held-for-sale on theConsolidated Balance Sheets include only those properties available for immediate sale in their present condition and for which management believes that it is probable that a sale of the property will be completed within one year. Properties held-for-sale are carried at the lower of cost or fair value less estimated selling costs. No depreciation expense is recognized on properties held-for-sale once they have been classified as such. Only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Examples include the disposal of a major geographic area, a major line of business, or a major equity method investment. We have not reclassified results of operations for properties disposed as discontinued operations as these disposals do not represent strategic shifts in our operations.

Fair Value of Financial Instruments. The FASB requires the disclosure of fair value information about financial instruments for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Accordingly, the aggregate fair market value amounts presented in the notes to these consolidated financial statements do not represent our underlying carrying value in financial instruments.

The FASB provides guidance for using fair value to measure assets and liabilities, the information used to measure fair value, and the effect of fair value measurements on earnings. The FASB emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the FASB establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset

or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices).

The fair value guidance issued by the FASB excludes accounting pronouncements that address fair value measurements for purposes of lease classification or measurement. However, this scope exception does not apply to assets acquired and liabilities assumed in a business combination that are required to be measured at fair value, regardless of whether those assets and liabilities are related to leases.

In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses on items for which the fair value option has been elected reported in earnings. We have not elected the fair value option for any of our financial assets or liabilities.

The FASB requires disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. SeeNote 15. Fair Value Measurements for the disclosure about the fair value of our financial instruments.

Derivative Instruments.As of December 31, 2023, we hadtwo interest rate swaps that were designated as cash flow hedges of interest rate risk with a total notional amount of $100,000,000. See Note 9. Debt Obligationswithin our consolidated financial statements for further detail on our interest rate swaps. We record cash flow hedges either as an asset or a liability measured at fair value. If hedge accounting is applied to a derivative instrument, the entire change in the fair value of the derivative designated and qualified as cash flow hedge is recorded inAccumulated other comprehensive income (loss) on theConsolidated Balance Sheets. We estimate the fair value of our interest rate swaps using the assistance of a third-party using inputs that are observable in the market which include forward yield curves and other relevant information. Additionally, we are exposed to credit risk of the counterparty to our interest rate swap agreements in the event of non-performance under the terms of the agreements.* We have determined that the majority of the inputs used to value our derivative instruments fall within level 2 of the fair value hierarchy. *

In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04,Reference Rate Reform (Topic 848):Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The practical expedients are optional and may be elected over time as reference rate reform activities occur. In December 2022, the FASB issued ASU No. 2022-06,Reference Rate Reform(Topic 848),Deferral of the Sunset Date of Topic 848, which defers the sunset date from December 31, 2022 to December 31, 2024.

In December 2022, we amended our unsecured credit agreement to update the benchmark provisions to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”), plus a credit spread of 10 basis points, as the reference rate for the purpose of calculating interest under the agreement. In connection with amending the unsecured credit agreement, we also amended our fixed interest rate swap agreements to update reference rate to SOFR. As a result, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients maintains the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of the ASU and may apply other elections, as applicable, as additional changes in the market occur. Our election to apply the hedge accounting expedients did not have a material impact on our consolidated financial statements. See* Note 9. Debt Obligations*within our consolidated financial statements for further detail on our unsecured credit agreement.

Revenue Recognition- Rental Income. Rental income from operating leases is generally recognized on a straight-line basis over the terms of the leases. Substantially all of our leases contain provisions for specified annual increases over the rents of the prior year and are generally computed inone offour methods depending on specific provisions of each lease as follows:

The FASB does not permit recognition of contingent revenue until the contingencies have been resolved. Historically, we have not included contingent rents as income until received and we will continue our historical policy. During the years ended December 31, 2023, 2022 and 2021, we received $56,000, $57,000 and $0, respectively, of contingent rental income. In accordance with ASC 842,Leases, we report real estate taxes that are reimbursed by our operators asRental incomewith a correspondingProperty tax expensein theConsolidated Statements of Income.

Furthermore, we assess the collectability of substantially all of our lease payments through maturity and if collectability is not probable, all or a portion of our straight-line rent receivable and other lease receivables may be written off and the rental income during the period would be limited to the lesser of the income that would have been recognized if collection were probable, and the lease payments received. Our assessment of collectability of leases includes evaluating the data and assumptions used in determining whether substantially all of the future lease payments were probable based on the lessee’s payment history, the financial strength of the lessees, future contractual rents, and the timing of expected payments.

Revenue Recognition- Interest Income. Interest income on mortgage loans receivable and notes receivable is recognized using the effective interest method. Exit fee income and commitment fee income are also amortized over the life of the related loan under the effective interest method. Effective interest method, as required by GAAP, is a technique for calculating the actual interest rate for the term of a mortgage loan based on the initial origination value. When the actual interest rate is higher than the stated interest rate in the early years of the mortgage loan, an effective interest receivable asset is created and included in theInterest receivable line item in ourConsolidated Balance Sheets and begins reducing down to zero when, at some point during the mortgage loan, the stated interest rate is higher than the actual interest rate. We consider a loan to be non-performing after 60 days of non-payment of amounts due and do not recognize unpaid interest income from that loan until the past due amounts have been received.

As previously discussed underFinancing Receivables above, rental income from properties acquired through a sale leaseback, subject to a seller-lessee repurchase option, is recorded asInterest income from financing receivables on ourConsolidated Statements of Income. Interest income on financing receivables is recognized using the effective interest method. The recognition of interest income will stop when theFinancing receivables are reclassified toReal estate investments if the purchase options remain unexercised upon expiration of the purchase options.

*Gains on sale of Real Estate, Net.*Recognition of gains or losses from sales of investments in real estate requires that we:

The gain or loss recorded is measured as the difference between the sales price, less costs to sell, and the carrying value of the real estate when we sell it.

Federal Income Taxes. LTC qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and as such, no provision for Federal income taxes has been made. A REIT is required to distribute at least 90% of its taxable income to its stockholders and a REIT may deduct dividends in computing taxable income. If a REIT distributes 100% of its taxable income and complies with other Internal Revenue Code requirements, it will generally not be subject to Federal income taxation.

For Federal tax purposes, depreciation for a majority of our assets is generally calculated using the straight-line method over a period 27.5 years. Earnings profits, which determine the taxability of distributions to stockholders, use the straight-line method over 30 years. The determination of Federal taxable income differ from net income for financial statement purposes principally due to the treatment of certain investments in joint ventures, timing of interest income,

rental income, other expense items, recognition of impairment charges, and depreciable lives and bases of assets. At December 31, 2023, the net tax bases of our depreciable assets exceeded net book basis by $160,372,000 (unaudited) due to the differences previously mentioned.

The FASB clarified the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The guidance utilizes a two-step approach for evaluating tax positions. Recognition (step one) occurs when a company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (step two) is only addressed if step one has been satisfied (i.e., the position is more likely than not to be sustained). Under step two, the tax benefit is measured as the largest amount of benefit (determined on a cumulative probability basis) that is more likely than not to be realized upon ultimate settlement. We currently do not have any uncertain tax positions that would not be sustained on its technical merits on a more-likely than not basis.

We may from time to time be assessed interest or penalties by certain tax jurisdictions. In the event we have received an assessment for interest and/or penalties, it has been classified in ourConsolidated Statements of IncomeasGeneral and administrative expenses.

Concentrations of Credit Risk. Financial instruments which potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, operating leases on owned properties, financing receivables and mortgage loans receivable. Our financial instruments, operating leases, financing receivables and mortgage loans receivable are subject to the possibility of loss of carrying value as a result of the failure of other parties to perform according to their contractual obligations or changes in market prices which may make the instrument less valuable. We obtain various collateral and other protective rights, and continually monitor these rights, in order to reduce such possibilities of loss. In addition, we provide reserves for potential losses based upon management’s periodic review of our portfolio. SeeNote 3. Major Operators for further discussion of concentrations of credit risk from our tenants.

Net Income Per Share. Basic earnings per share is calculated using the weighted-average shares of common stock outstanding during the period excluding common stock equivalents. Diluted earnings per share includes the effect of all dilutive common stock equivalents.

In accordance with the accounting guidance regarding the determination of whether instruments granted in share-based payments transactions are participating securities, we have applied the two-class method of computing basic earnings per share. This guidance clarifies that outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common stockholders and are considered participating securities.

Stock-Based Compensation. The FASB requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. We use the Black-Scholes-Merton formula to estimate the value of stock options granted to employees. Also, we use the Monte Carlo model to estimate the value of performance-based stock units awarded to employees. These models require management to make certain estimates including stock volatility, expected dividend yield and the expected term. If management incorrectly estimates these variables, the results of operations could be affected. The FASB also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow. Because we qualify as a REIT under the Internal Revenue Code of 1986, as amended, we are generally not subject to Federal income taxation. Therefore, this reporting requirement does not have an impact on theConsolidated Statements of Cash Flows.

Segment Disclosures. The FASB accounting guidance regarding disclosures about segments of an enterprise and related information establishes standards for the manner in which public business enterprises report information about operating segments. Our investment decisions in seniors housing and health care properties, including property lease transactions, financing receivables, mortgage loans, and other investments, are made and resulting investments are managed as a single operating segment for internal reporting and for internal decision-making purposes. Therefore, we have concluded that we operate as a single segment. In November 2023, the FASB issued ASUNo. 2023-07, Segment Reporting (Topic 280) (“ASU 2023-07”) which requires public entities to disclose information about their reportable

segments’ significant expenses on an interim and annual basis. ASU 2023-07 clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements under ASCTopic 280, Segment Reporting (“ASC 280”). ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures.

3. Major Operators

We haveone operator from which we derive approximately 10% or more of our total revenues. The following table sets forth information regarding our major operator as of December 31, 2023:

During 2023, we agreed to defer up to $1,500,000, or up to $300,000 per month for May through September 2023, in interest payments due on one of Prestige Healthcare's mortgage loans secured by 15 skilled nursing centers in Michigan. We deferred $600,000 and $900,000 in interest payments during the second and third quarter of 2023, respectively. During the fourth quarter of 2023, we amended the mortgage loan with Prestige which was subject to the previously agreed upon interest deferral. Effective January 1, 2024, the minimum mortgage interest payment due to us is based on an annual current pay rate of 8.5% on the outstanding loan balance. The current contractual interest rate on the loan of 10.8% remains unchanged. The amendment also provides us the right to draw on Prestige’s security to pay the difference between the contractual rate and current pay rate. We received all 2023 contractual interest of $19,539,000 due from Prestige after applying $3,435,000 of its security. Full contractual interest has been paid on the loan through February 2024 and we expect to receive full contractual cash interest through 2025. Subsequent to December 31, 2023, Prestige increased the security from its receipt of retro-active Medicaid funds. Accordingly, we currently hold security of $3,966,000. Additional retro-active Medicaid payments received by Prestige in 2024 will be remitted to us as security.

Our financial position and ability to make distributions may be adversely affected if Prestige Healthcare, or any of our lessees and borrowers face financial difficulties, including any bankruptcies, inability to emerge from bankruptcy, insolvency, or general downturn in business of any such operator, continuing impact upon services or occupancy levels due to infectious disease outbreaks, or in the event any such operator does not renew and/or extend its relationship with us.

4. Supplemental Cash Flow Information

5. Real Estate Investments

Owned Properties. As of December 31, 2023, we owned 134 health care real estate properties consisting of 83 ALFs,50 SNFs andone behavioral health care hospital located in 23 states. These properties are operated by 22 operators.

Independent living communities, assisted living communities, memory care communities and combinations thereof are included in the assisted living property classification (collectively “ALF”). Any reference to the number of properties, number of units, number of beds, and yield on investments in real estate are unaudited and outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Depreciation expense on buildings and improvements, including properties classified as held-for-sale, was $37,303,000, $37,394,000, and $38,192,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Future minimum base rents receivable under the remaining non-cancelable terms of operating leases excluding the effects of straight-line rent, amortization of lease incentives and renewal options are as follows (in thousands):

Many of our existing leases contain renewal options that, if exercised, could result in the amount of rent receivable upon renewal being greater or less than that currently being paid.

During 2023, Brookdale Senior Living Communities, Inc. (“Brookdale”) elected not to exercise its renewal option under a master lease that matured on December 31, 2023. The 35-property assisted living portfolio was apportioned as follows:

total of 92 units. The $4,000,000 seller-financed mortgage loan is two years, with a one-year extension, at an interest rate of 8.75%.

Additionally, during 2023, a master lease coveringtwo skilled nursing centers that was scheduled to mature in 2023 was renewed at the contractual rate for another five years extending the maturity to November 2028. The centers have a total of 216 beds and are located in Florida. Also, during 2023, a master lease coveringtwo skilled nursing centers that was scheduled to mature in 2023 was renewed for anothertwo years extending the maturity to December 2025. The master lease was renewed at the contractual annual cash rent of $1,005,000 increasing 2.5% per year. As amended, this master lease provides the lessee with a purchase option available through December 31, 2024. The centers have a total of 141 beds and are located in Tennessee. Further, during 2023, a master lease covering three skilled nursing centers that was scheduled to mature in 2024 was renewed at the contractual rate for another five years extending the maturity to August 2029. The centers have a total of 613 beds and are located in Arizona.

During 2023, we transitioned a portfolio ofeight assisted living communities with 500 units in Illinois, Ohio and Michigan to Encore Senior Living (“Encore”). We agreed to provide assistance in the second quarter of 2023 to the former operator of this portfolio and as part of transition, we received repayment of $1,250,000 of deferred rent which represents $934,000 of April and May 2023 deferred rent and $316,000 of unrecorded deferred rent provided in 2022. Cash rent under the newtwo-year lease with Encore is based on mutually agreed upon fair market rent beginning in September 2023.

Subsequent to December 31, 2023, a master lease covering 11 skilled nursing centers that was scheduled to mature in January 2024 was renewed forseven months extending the maturity to August 2024. The master lease was renewed at the current annualized rent of $8,000,000, or $4,667,000 for seven months in 2024. The centers have a total of 1,444 beds and are located in Texas. Also, subsequent to December 31, 2023, we transitionedtwo assisted living communities, which are located in Georgia and South Carolina with a combined 159-units, to an operator new to LTC. The newtwo-year master lease commenced on January 1, 2024, and providestwo one-year extension periods. Cash rent iszero for the first six months. Thereafter, cash rent is based on mutually agreed upon fair market rent.

We monitor the collectability of our receivable balances, including deferred rent receivable balances, on an ongoing basis. We write-off uncollectable operator receivable balances, including straight-line rent receivable and lease incentives balances, as a reduction to rental income in the period such balances are no longer probable of being collected. Therefore, recognition of rental income is limited to the lesser of the amount of cash collected or rental income reflected on a straight-line basis for those customer receivable balances deemed uncollectable. We wrote-off straight-line rent receivable and lease incentives balances of $26,000, $256,000 and $758,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

We continue to take into account the current financial condition of our operators, including consideration of the impact of COVID-19, in our estimation of uncollectable accounts and deferred rents receivable at December 31, 2023. We are closely monitoring the collectability of such rents and will adjust future estimations as appropriate as further information becomes known.

The following table summarizes components of our rental income for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. The following table summarizes information about purchase options included in our lease agreements as of December 31, 2023*(dollar amount in thousands):*

Impairment Loss. We performed recoverability analysis on the carrying value of the communities listed in the table below and concluded that their carrying value may not be recoverable through future undiscounted cash flows. The following table summarizes information regarding impairment losses recorded during the years ended December 31, 2023 and 2022*(dollar amounts in thousands):*

Properties Held-for-Sale. The following summarizes our held-for sale properties as of December 31, 2023 and 2022 (dollar amounts in thousands):

Acquisitions.The following table summarizes our acquisitions for the years ended December 31, 2023 through 2021(dollar amounts in thousands):

Intangible Assets. The following is a summary of our intangible assets as of December 31, 2023 and 2022 (in thousands):

The following table provides future amortization expenses related to the intangible assets at December 31, 2023 (in thousands):

Developments and Improvements. During the years ended December 31, 2023, 2022 and 2021, we invested the following in development and improvement* projects (in thousands)*:

*Property Sales.During the years ended December 31, 2023, 2022 and 2021 we recorded net gain on sale of real estate of $37,296,000, $37,830,000 and $7,462,000, respectively. *The following table summarizes property sales during the years ended December 31, 2023 through 2021 (dollar amounts in thousands):

2019, under the expected value model per ASC Topic 606, Contracts with Customers.

Financing Receivables.During 2023 and 2022, we entered into two joint ventures (“JV”) and contributed into the JVs for the purchase of properties through sale and leaseback transactions. Concurrently, each of these JVs leased the purchased properties back to an affiliate of the seller and provided the seller-lessee with purchase options. We determined that each of these sale and leaseback transactions meet the accounting criteria to be presented asFinancing receivables on ourConsolidated Balance Sheets and recorded the rental revenue from these properties asInterest income from financing receivables on ourConsolidated Statements of Income. SeeNote 2. Summary of Significant Accounting Policies within our consolidated financial statements for more information. The following tables provide information regarding our investments in financing receivables during the years ended December 31, 2023 and 2022 (dollar amounts in thousands):

Mortgage Loans.The following table summarizes our investments in mortgage loans secured by first mortgages at December 31, 2023(dollar amounts in thousands):

The following table summarizes our mortgage loan activity for the years ended December 31, 2023, 2022 and 2021 (in thousands):

At December 31, 2023 and 2022 the carrying values of the mortgage loans, net of loan loss reserves were $477,266,000 and $389,728,000, respectively. Scheduled principal payments on mortgage loan receivables are as follows*(in thousands)*:

6. Investments in Unconsolidated Joint Ventures

We have preferred equity investments in two joint ventures. We determined that each of these JVs meet the accounting criteria to be considered a VIE. We are not the primary beneficiary of the VIEs as we do not have both: 1) the power to direct the activities that most significantly affect the VIE’s economic performance, and 2) the right to receive benefits from the VIE or the obligation to absorb losses of the VIE that could be significant to the VIE. However, we do have significant influence over the JVs. Therefore, we account for the joint venture investments using the equity method of accounting. The following table provides information regarding these preferred equity investments*(dollar amounts in thousands):*

represents 15.5% of the total investment. The preferred equity investment earns an initial cash rate of 7% increasing to 9% in year four until the internal rate of return (“IRR”) is 8%. After achieving an 8% IRR, the cash rate drops to 8% until achieving an IRR ranging between 12% to 14%, depending upon timing of redemption. We have the option to require the JV partner to purchase our preferred equity interest at any time between August 17, 2031 and December 31, 2036.

The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures during the years ended December 31, 2023, 2022 and 2021* (in thousands):*

7. Notes Receivable

Notes receivable consists of mezzanine loans and working capital loans. The following table summarizes our investments in notes receivable at December 31, 2023 (dollar amounts in thousands):

The following table is a summary of our notes receivable components at December 31, 2023 and 2022 (in thousands):

The following table summarizes our notes receivable activity for the years ended December 31, 2023, 2022 and 2021 (in thousands):

8. Lease Incentives

Our non-contingent lease incentive balances at December 31, 2023 and 2022 were $2,607,000 and $1,789,000, respectively. The following table summarizes our non-contingent lease incentive activity for the years ended December 31, 2023, 2022 and 2021*(in thousands)*:

Non-contingent lease incentives represent payments made to our lessees for various reasons including entering into a new lease or lease amendments and extensions. Contingent lease incentives represent potential contingent earn-out payments that may be made to our lessees in the future, as part of our lease agreements. From time to time, we may commit to provide contingent payments to our lessees, upon our properties achieving certain rent coverage ratios. Once the contingent payment becomes probable and estimable, the contingent payment is recorded as a lease incentive. Lease incentives are amortized as a yield adjustment to rental income over the remaining life of the lease.

9. Debt Obligations

*Unsecured Credit Facility.We have an unsecured credit agreement (the “Credit Agreement”) that provides for an *aggregate commitment of the lenders of up to $500,000,000 comprising of a $400,000,000 revolving credit facility (the “Revolving Line of Credit”) andtwo $50,000,000 term loans (the “Term Loans”). The Credit Agreement permits us to request increases to the Revolving Line of Credit and Term Loans commitments up to a total of $1,000,000,000. The Term Loans mature on November 19, 2025 and November 19, 2026. The Revolving Line of Credit had a maturity date of November 19, 2025 and provided aone-year extension option at our discretion, subject to customary conditions. During the fourth quarter of 2022, we entered into the First Amendment to Third Amended and Restated Credit Agreement to replace LIBOR with SOFR, plus a credit spread adjustment of 10 basis points (“Adjusted SOFR”), as the reference rate for purpose of calculating interest under the agreement. Other material terms of the Credit Agreement remained unchanged. Further, subsequent to December 31, 2023, we entered into a Second Amendment to Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) to accelerate theone-year extension option notice to January 4, 2024. Concurrently, we exercised our option to extend the maturity date of the Credit Agreement, as amended to November 19, 2026.

Based on our leverage at December 31, 2023, the Revolving Line of Credit provides for interest annually at Adjusted SOFR plus 115 points and a facility fee of 20 basis point and the Term Loans provide for interest annually at Adjusted SOFR plus 135 points.

Interest Rate Swap Agreements.In connection with entering into the Term Loans as discussed above, we entered intotwo receive variable/pay fixed interest rate swap agreements (“Interest Rate Swaps”) with maturities of November 19, 2025 and November 19, 2026, respectively, that will effectively lock-in the forecasted interest payments on the Term Loans’ borrowings over thefour andfive year terms of the loans. The Interest Rate Swaps are considered cash flow hedges and are recorded on ourConsolidated Balance Sheets at fair value, with changes in the fair value of these instruments recognized inAccumulated other comprehensive income (loss) on ourConsolidated Balance Sheets. In connection with entering into the First Amendment to Third Amended and Restated Credit Agreement discussed above, we entered into amendments to our Interest Rate Swaps to account for SOFR as the updated reference rate in the First Amendment to Third Amended and Restated Credit Agreement. During the year ended December 31, 2023 and 2022, we recorded$2,609,000 decrease and $8,891,000 increase, respectively, in fair value of Interest Rate Swaps.

The following table sets forth information regarding our Interest Rate Swaps at December 31, 2023 and 2022 (dollar amounts in thousands):

Senior Unsecured Notes. We have senior unsecured notes held by institutional investors with interest rates ranging from 3.66% to 5.03%. The senior unsecured notes mature between 2024 and 2033. During year ended December 31, 2022, we sold $75,000,000 aggregate principal amount of 3.66% senior unsecured notes. The notes have an average 10-year life, scheduled principal payments and mature in May 2033.

The senior unsecured notes and Credit Agreement, including the Revolving Line of Credit and the Term Loans, contain financial covenants, which are measured quarterly, require us to maintain, among other things:

At December 31, 2023, we were in compliance with all applicable financial covenants. These debt obligations also contain additional customary covenants and events of default that are subject to a number of important and significant limitations, qualifications and exceptions.

The following table sets forth information regarding debt obligations by component as of December 31, 2023 and 2022*(dollar amounts in thousands):*

Our borrowings and repayments for the years ended December 31, 2023, 2022 and 2021 are as follows*(in thousands):*

Scheduled Principal Payments. The following table represents our long-term contractual obligations (scheduled principal payments and amounts due at maturity) as of December 31, 2023, and excludes the effects of interest and debt issue costs (in thousands):

10. Equity

*Non-controlling Interests.*We have entered into partnerships to develop and/or own real estate. Given that our limited members do not have the substantive kick-out rights, liquidation rights, or participation rights, we have concluded that the partnerships are VIEs. As we exercise power over and receive benefits from the VIEs, we are considered the primary beneficiary. Accordingly, we consolidate the VIEs and record the non-controlling interests on the consolidated financial statements. As of December 31, 2023, we have the following consolidated VIEs (in thousands):

Sale.

Common Stock. We have separate equity distribution agreements (collectively, “Equity Distribution Agreements”) to offer and sell, from time to time, up to$200,000,000 in aggregate offering price of shares of our common shares. The Equity Distribution Agreements provide for sales of common shares to be made by means of ordinary brokers’ transactions, which may include block trades, or transactions that are deemed to be “at the market” offerings.

During the year ended December 31, 2021, no shares were issued under the Equity Distribution Agreements. During the year ended December 31, 2022, we sold 1,792,400 shares of common stock for $68,156,000 in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $513,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received.

During the year ended December 31, 2023, we sold 1,658,400 shares of common stock for $53,687,000 in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $836,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. At December 31, 2023, we had $76,018,000 available under the Equity Distribution Agreements.

Subsequent to December 31, 2023, we sold 91,100 shares of common stock for $2,927,000 in net proceeds under our Equity Distribution Agreements. Accordingly, we have $73,074,000 available under our Equity Distribution Agreements.

During the years ended December 31, 2023, 2022 and 2021, we acquired 43,933 shares,39,463 shares and 87,249 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Shelf Registration Statement. We have an automatic shelf registration statement on file with the SEC, and currently have the ability to file additional automatic shelf registration statements, to provide us with capacity to publicly offer an indeterminate amount of common stock, preferred stock, warrants, debt, depositary shares, or units. We may from time to time publicly raise capital under our automatic shelf registration statement in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. Our shelf registration statement expires on February 17, 2025.

Distributions. We declared and paid the following cash dividends* (in thousands)*:

In January 2024, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of January, February and March 2024 payable on January 31, February 29, and March 29, 2024, respectively, to stockholders of record on January 23, February 21, and March 21, 2024, respectively.

Stock Based Compensation Plans. During 2021, we adopted, and our stockholders approved the 2021 Equity Participation Plan (the “2021 Plan”) which replaces the 2015 Equity Participation Plan (the “2015 Plan”)*.*Under the 2021 Plan,1,900,000 shares of common stock have been authorized and reserved for awards, lessone share for everyone share that was subject to an award granted under the 2015 plan after December 31, 2020 and prior to adoption. In addition, any shares that are not issued under outstanding awards under the 2015 Plan because the shares were forfeited

or cancelled after December 31, 2020 will be added to and again be available for awards under the 2021 Plan. Under the 2021 Plan, the shares were authorized and reserved for awards to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2021 Plan and the 2015 Plan are set by our compensation committee at its discretion. As of December 31, 2023, we have 1,580,006 shares of common stock reserved for awards under the 2021 Plan.

Restricted Stock and Performance-Based Stock Units. Restricted stock activity for the years ended December 31, 2023, 2022 and 2021was as follows:

During the years ended December 31, 2023, 2022 and 2021, we granted 86,867,86,332 and 71,892, respectively, of performance-based stock units. During the years ended December 31, 2023 and 2022 no performance-based stock units vested. During the year ended December 31, 2021,108,720 performance-based stock units were vested. Total compensation expense related to restricted stock and performance-based stock units for the years ended December 31, 2023, 2022 and 2021 were $8,481,000, $7,964,000 and $7,760,000.

During 2023, 2022 and 2021, we granted 232,887,221,542 and 182,240 shares of restricted common stock and performance-based stock units, respectively, under the 2021 Plan as follows:

At December 31, 2023, the remaining compensation expense to be recognized related to the future service period of unvested outstanding restricted common stock and performance-based stock units are as follows (dollar amount in thousands):

Stock Options. During 2023, 2022 and 2021, we did not issue any stock options. Nonqualified stock option activity for the years ended December 31, 2023, 2022 and 2021 was as follows:

We use the Black-Scholes-Merton formula to estimate the value of stock options granted to employees. This model requires management to make certain estimates including stock volatility, expected dividend yield and the expected term. No compensation expense related to the vesting of stock options was recorded for the years ended December 31, 2023, 2022 and 2021.

11. Commitments and Contingencies

At December 31, 2023, we had commitments as follows*(in thousands):*

Also, some of our lease agreements provide purchase options allowing the lessees to purchase the properties they currently lease from us. SeeNote 5. Real Estate Investments for a table summarizing information about our purchase options.

We are a party from time to time to various general and professional liability claims and lawsuits asserted against the lessees or borrowers of our properties, which in our opinion are not singularly or in the aggregate material to our results of operations or financial condition. These types of claims and lawsuits may include matters involving general or professional liability, which we believe under applicable legal principles are not our responsibility as a non-possessory landlord or mortgage holder. We believe that these matters are the responsibility of our lessees and borrowers pursuant to general legal principles and pursuant to insurance and indemnification provisions in the applicable leases or mortgages. We intend to continue to vigorously defend such claims.

12. Distributions

We must distribute at least 90% of our taxable income in order to continue to qualify as a REIT. This distribution requirement can be satisfied by current year distributions or, to a certain extent, by distributions in the following year.

For federal tax purposes, distributions to stockholders are treated as ordinary income, capital gains, return of capital or a combination thereof. Distributions for 2023, 2022 and 2021 were cash distributions. The federal income tax classification of the per share common stock distributions are as follows (unaudited):

13. Net Income Per Common Share

Basic and diluted net income per share was as follows*(in thousands except per share amounts)*:

14. Quarterly Financial Information

15. Fair Value Measurements

In accordance with the accounting guidance regarding the fair value option for financial assets and financial liabilities, entities are permitted to choose to measure certain financial assets and liabilities at fair value, with the change in unrealized gains and losses reported in earnings. We did not adopt the elective fair market value option for our financial assets and financial liabilities.

The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments. We do not invest our cash in auction rate securities. The carrying value and fair value of our financial instruments as of December 31, 2023 and 2022 assuming election of fair value for our financial assets and financial liabilities were as follows (in thousands):

16. Subsequent Events

The following events occurred subsequent to the balance sheet date:

*Real Estate Transitions and Lease Renewals.*We transitionedtwo assisted living communities located in Georgia and South Carolina with a combined 159-units to a new operator. The newtwo-year master lease commenced on January 1, 2024 and providestwo one-year extension periods. Rent iszero for the first six months. Thereafter, cash rent is based on mutually agreed upon fair market rent. Additionally, a master lease covering 11 skilled nursing centers that was scheduled to mature in January 2024 was renewed forseven months extending the maturity to August 2024. The master lease was renewed at the current annualized rent of $8,000,000, or $4,667,000 for seven months in 2024. The centers have a total of 1,444 beds and are located in Texas.

Property Sales. We sold our interest in a JV for$23,120,000, which includes repayment of $1,814,000 of

abated rent and$563,000 of deferred rent, as well as the payoff of a$550,000 note receivable. The JV owns a 110-unit community that provides independent living, assisted living and memory care services in Wisconsin. We held an approximate 90% economic interest in the JV, exercised power over and received benefits from the JV. Accordingly, we were considered the primary beneficiary of the JV and consolidated the JV on our consolidated financial statements. At December 31, 2023, this community was classified as held-for-sale. See*Note 5. Real Estate Investments** —*Properties Held-for-Sale for more information.

Debt. We entered into a Second Amendment to Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”) to accelerate theone-year extension option notice to January 4, 2024. Concurrently, we exercised our option to extend the maturity date of the Credit Agreement, as amended to November 19, 2026. Additionally, we repaid $30,500,000 under our unsecured revolving line of credit. Accordingly, we have $271,750,000 outstanding and $128,250,000 available for borrowing under our unsecured revolving line of credit.

Equity. We declared a monthly cash dividend of$0.19 per share on our common stock for the months of January, February, and March 2024, payable on January 31, February 29, and March 29, 2024, respectively, to stockholders of record on January 23, February 21, and March 21, 2024, respectively. Additionally, we sold 91,100 shares of common stock for $2,907,000 in net proceeds under our Equity Distribution Agreements. Accordingly, we have $73,074,000 available under our Equity Distribution Agreements.