LTC PROPERTIES INC

LTC Properties, Inc., a health care real estate investment trust (“REIT”), was incorporated on May 12, 1992 in the State of Maryland and commenced operations on August 25, 1992. We invest 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. To meet these objectives, we attempt to invest in properties that provide opportunity for additional value and current returns to our stockholders and diversify our investment portfolio by geographic location, operator, property classification and form of investment.

We have prepared consolidated financial statements included herein without audit and in the opinion of management have included all adjustments necessary for a fair presentation of the consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to rules and regulations governing the presentation of interim financial statements. The accompanying consolidated financial statements include the accounts of our company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results for a full year.

We apply Accounting Standards Codification Topic 326, Financial Instruments-Credit Losses (“ASC 326”), which requires a forward-looking “expected loss” model, to estimate our loan losses on our mortgage loans, financing receivables and notes receivable. In determining the “expected” credit loss reserves on these instruments, we utilize the probability of default and discounted cash flow methods. Further, we stress-test the results to reflect the impact of unknown adverse future events including recessions.

The expected credit losses related to our financial instruments that are within the scope of ASC 326 are as follows (in thousands):

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 March 31, 2024, the total balance of accrued interest receivable of $55,842,000 was not included in the measurement of expected credit loss. For the three months ended March 31, 2024 and 2023, we did not recognize any write-off related to accrued interest receivable.

No provision has been made for federal or state income taxes. Our company qualifies as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. As such, we generally are not taxed on income that is distributed to our stockholders.

Assisted living communities, independent 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 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 review of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Owned Properties. Our owned properties are leased pursuant to non-cancelable operating leases. Each lease is a triple net lease which requires the lessee to pay all taxes, insurance, maintenance and repairs, capital and non-capital expenditures and other costs necessary in the operations of the facilities. Many of the leases contain renewal options. The majority of our leases contain provisions for specified annual increases over the rents of the prior year.

The following table summarizes our investments in owned properties at March 31, 2024*(dollar amounts in thousands)*:

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

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*(dollar amounts in thousands)*:

During the three months ended March 31, 2024, 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. Subsequent to March 31, 2024, we executed a term sheet with the operator, to amend the master lease extending the term through December 2028. Annual rent will increase by $1,000,000 to $9,000,000 for 2024. Rent will increase to $9,500,000 for 2025, and $10,000,000 for 2026, escalating 3.3% annually thereafter. The amended master lease provides the operator withtwo five-year renewal options. As a condition of the amendment, the operator will repay $11,900,000 on its $13,531,000 working capital note during the second quarter of 2024. Upon the repayment, the remaining balance of the working capital note will be interest-free and repaid in installments through 2028.

Additionally, subsequent to March 31, 2024, another operator exercised its renewal option under its master lease for five years, from March 2025 through February 2030. Annual cash and GAAP rent for 2024 are $8,004,000 and $7,049,000, respectively escalating 2.5% annually. The master lease covers 666

beds across four skilled nursing centers, three in Texas andone in Wisconsin, and a behavioral health care hospital in Nevada.

We monitor the collectability of our receivable balances, including deferred rent receivable balances, on an ongoing basis. We write-off uncollectible 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 uncollectible. We wrote-off straight-line rent receivable and lease incentives balances of $191,000 and $144,000 for the three months ended March 31, 2024 and 2023, respectively, as a result of property sales and lease terminations.

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 uncollectible accounts at March 31, 2024. 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 three months ended March 31, 2024 and 2023*(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*(dollar amounts in thousands):*

Impairment Loss. In conjunction with the planned sale of a 70-unit assisted living community located in Florida, we recorded a $434,000 impairment loss during the three months ended March 31, 2023.

*Properties Held -for-Sale.*The following summarizes our held-for-sale properties as of March 31, 2024 and December 31, 2023 (dollar amounts in thousands):

*Acquisitions.*During the three months ended March 31, 2024, we acquired a parcel of land in Kansas adjacent to an existing community operated by Brookdale for a total cost of$315,000. Rent was increased by 8% of our total cost of the investment. During the three months ended March 31, 2023, we did not have any acquisitions.

Intangible Assets. We make estimates as part of our allocation of the purchase price of acquisitions to various components of 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 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. The following is a summary of the carrying amount of intangible assets as of March 31, 2024 and December 31, 2023*(in thousands)*:

Improvements. Duringthe three months ended March 31, 2024 and 2023, we invested in the following capital improvement projects*(in thousands)*:

Properties Sold. During the three months ended March 31, 2024 and 2023, we recorded a gain on sale of $3,251,000 and $15,373,000, respectively. The following table summarizes property sales during the three months ended March 31, 2024 and 2023* (dollar amounts in thousands):*

(

Financing Receivables. During 2023 and 2022, we entered into two joint ventures 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.

The following tables provide information regarding our investments in financing receivables (dollar amounts in thousands):

Mortgage Loans. The following table sets forth information regarding our investments in mortgage loans secured by first mortgages at March 31, 2024*(dollar amounts in thousands)*:

The following table summarizes our mortgage loan activity for the three months ended March 31, 2024 and 2023*(in thousands):*

We have preferred equity investments in two joint ventures. We determined that each of these JVs meets the accounting criteria to be considered a variable interest entity (“VIE”). We are not the primary beneficiary of the JVs as we do not have both: 1) the power to direct the activities that most significantly affect the JVs’ 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 have accounted for the JVs using the equity method of accounting. The following table provides information regarding these preferred equity investments*(dollar amounts in thousands):*

The following table summarizes our capital contributions, income recognized, and cash interest received related to our investments in unconsolidated joint ventures during the three months ended March 31, 2024 and 2023*(in thousands):*

Notes receivable consist of mezzanine loans and working capital loans. The following table summarizes our investments in notes receivable at March 31, 2024 (dollar amounts in thousands):

The following table is a summary of our notes receivable components as of March 31, 2024 and December 31, 2023*(in thousands):*

The following table summarizes our notes receivable activity for the three months ended March 31, 2024 and 2023*(in thousands):*

Our non-contingent lease incentive balances at March 31, 2024 and December 31, 2023 were $3,578,000 and $2,607,000, respectively. The following table summarizes our lease incentives activity for the three months ended March 31, 2024 and 2023*(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.

*Unsecured Credit Facility.*We had an unsecured credit agreement (the “Original Credit Agreement”) that provided 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 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 first quarter of 2024, we entered into an amendment to the Original Credit Agreement (the “Credit Agreement”) to accelerate ourone-year extension option notice to January 4, 2024. Concurrently, we exercised our option to extend the maturity date to November 19, 2026. Other material terms of the Original Credit Agreement remained unchanged. 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.

Based on our leverage at March 31, 2024, the facility provides for interest annually at Adjusted SOFR plus 115 basis points and a facility fee of 20 basis points and the Term Loans provide for interest annually at Adjusted SOFR plus 135 basis points.

Interest Rate Swap Agreements. In connection with entering into the Term Loans described above, we entered intotwo receive variable/pay fixed interest rate swap agreements (the “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 their four 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 inPrepaid expenses and other assets, with cumulative changes

in the fair value of these instruments recognized inAccumulated other comprehensive income (loss) on ourConsolidated Balance Sheets. During the three months ended March 31, 2024 and 2023, we recorded an increase of $378,000 and a decrease of $1,362,000 in fair value of Interest Rate Swaps, respectively.

Information regarding our interest rate swaps measured at fair value, which are classified as Level 2 of the fair value hierarchy is presented below (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.

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

At March 31, 2024, 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 March 31, 2024 and December 31, 2023 (dollar amounts in thousands):

During the three months ended March 31, 2024 and 2023, our debt borrowings and repayments were as follows (in thousands):

*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 March 31, 2024, we have the following consolidated VIEs*(in thousands):*

*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 stock. 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 three months ended March 31, 2023, we sold 48,500 shares of common stock for $1,777,000 in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $80,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received.

During the three months ended March 31, 2024, we sold 139,100 shares of common stock for $4,453,000 in net proceeds under our Equity Distribution Agreements. In conjunction with the sale of common stock, we incurred $116,000 of costs associated with this agreement which have been recorded in additional paid in capital as a reduction of proceeds received. At March 31, 2024, we had $71,509,000 available under the Equity Distribution Agreements. Subsequent to March 31, 2024, we sold 204,700 shares of common stock for $6,522,000 in net proceeds under our Equity Distribution Agreements. Accordingly, we have $64,905,000 available under our Equity Distribution Agreements after the sale of these additional shares.

During the three months ended March 31, 2024 and 2023, we acquired 49,540 shares and 41,350 shares, respectively, of common stock held by employees who tendered owned shares to satisfy tax withholding obligations.

Available Shelf Registration. 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 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 April 2024, we declared a monthly cash dividend of $0.19 per share on our common stock for the months of April, May and June 2024, payable on April 30, May 31, and June 28, 2024, respectively, to stockholders of record on April 22, May 23, and June 20, 2024, respectively.

Stock-Based Compensation. During 2021, we adopted and our shareholders 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. Beginning in the first quarter of 2024, we entered into Performance Stock Unit Award Agreements, based upon absolute and relative total shareholder return, under the 2021 Plan. Forms of such Performance Stock Unit Award Agreements are filed as exhibits to this quarter report.

During the three months ended March 31, 2024 and 2023, no stock options were granted or exercised. During each of the three months ended March 31, 2024 and 2023,5,000 stock options expired and were cancelled. At March 31, 2024, we hadno stock options outstanding andexercisable.

The following table summarizes our restricted stock activity for the three months ended March 31, 2024 and 2023*:*

No performance-based stock units vested during the three months ended March 31, 2024, and 2023.

During the three months ended March 31, 2024 and 2023, we granted restricted stock and performance-based stock units under the 2021 Plan as follows:

Compensation expense recognized related to the vesting of restricted common stock and performance-based stock units for the three months ended March 31, 2024 and 2023 were$2,202,000 and$2,088,000, respectively. At March 31, 2024, 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*(in thousands):*

At March 31, 2024, we had commitments as follows*(in thousands):*

Additionally, some of our lease agreements provide purchase options allowing the lessee to purchase the properties they currently lease from us. SeeNote 2. 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.

We haveone operator that represents 10% or more of our combined rental revenue and interest income from mortgage loans. The following table sets forth information regarding our major operator as of March 31, 2024:

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 COVID-19, or in the event any such operator does not renew and/or extend its relationship with us.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

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 elect the fair value option for any of our financial assets and financial liabilities.

The carrying amount of cash and cash equivalents approximates their 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 estimated fair value of our financial instruments as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

Subsequent to March 31, 2024, the following events occurred:

Real Estate.We soldtwo closed properties located in Texas for$500,000 and received proceeds of approximately$400,000, net of transaction costs. At March 31, 2024, these properties were classified as held-for-sale. SeeNote 2. Real Estate Investments* —** Properties Held-for-Sale* for more information.

Unconsolidated Joint Venture. We originated a$12,700,000 mortgage loan to a current operator in order to acquire a skilled nursing and assisted living campus in Texas. The loan is secured by this

property. In accordance with GAAP, this mortgage loan was determined to be an acquisition, development and construction (“ADC”) loan and will be accounted for as an unconsolidated joint venture. The campus was built in 2017 and includes 78 units (48 skilled nursing and 30 assisted living) and 104 licensed beds (70 skilled nursing and 34 assisted living). Thefive-year loan is interest-only at a current rate of 9.15%.

Equity: We declared a monthly cash dividend of $0.19 per share on our common stock for the months of April, May and June 2024, payable on April 30, May 31, and June 28, 2024, respectively to stockholders of record on April 22, May 23, and June 20, 2024, respectively. Additionally, we sold 204,700 shares of common stock for $6,522,000 in net proceeds under our Equity Distribution Agreements. Accordingly, we have $64,905,000 available under our Equity Distribution Agreements after the sale of these additional shares.