Executive Summary / Key Takeaways

• Transformative RIDEA Strategy: LTC Properties is undergoing a significant strategic shift, pivoting from a traditional triple-net lease model to a RIDEA (Seniors Housing Operating Portfolio, or SHOP) structure, which is expected to be a primary driver of long-term organic growth and enhanced shareholder value.
• Accelerated External Growth & Portfolio Modernization: The company has rapidly expanded its SHOP portfolio through strategic acquisitions and conversions, with a pipeline of approximately $1 billion and a focus on newer, stabilized assets, while simultaneously recycling capital from older skilled nursing properties.
• Strong Financial Performance & Liquidity: Despite significant non-cash write-offs related to loan modifications and operator bankruptcies, LTC demonstrated improved Core FFO and FAD in Q3 2025, supported by a robust liquidity position of nearly $500 million and a conservative leverage profile.
• Positive Outlook with Growth Assumptions: Management has raised its full-year 2025 Core FFO guidance and anticipates continued strong SHOP NOI growth in 2026, driven by expected RevPOR outpacing expense growth and disciplined underwriting of new investments.
• Competitive Differentiation & Risk Management: LTC leverages its structured finance expertise and diversified portfolio to compete effectively, while actively managing risks associated with operator dependence and regulatory changes through proactive monitoring and strategic investment structuring.

The Strategic Pivot: Unlocking Growth Through RIDEA

LTC Properties, Inc., a healthcare real estate investment trust (REIT) established in 1992, has historically focused on seniors housing and healthcare properties through a mix of sale-leasebacks, mortgage financing, joint ventures, and structured finance solutions. For decades, LTC's core business model revolved around these traditional real estate investment vehicles, aiming to create stockholder value and provide current income through a diversified portfolio across various geographies, operators, and property types. This foundational approach provided stable, predictable income streams, often with fixed annual escalations.

However, a pivotal strategic evolution commenced in the second quarter of 2025, as LTC embraced the REIT Investment Diversification and Empowerment Act of 2007 (RIDEA) structure, establishing its Seniors Housing Operating Portfolio (SHOP) segment. This shift represents a fundamental reimagining of LTC's business model, moving beyond the limitations of triple-net leases, which, as management noted, constrained participation in upside recovery, particularly after lessons learned during the pandemic. The adoption of RIDEA is LTC's "technological differentiator," enabling a new business model that allows the company to lease qualified healthcare properties to a taxable REIT subsidiary (TRS) operated by an eligible independent operator. This structure allows LTC to participate directly in the operational performance of its properties, aligning interests more closely with operators and unlocking additional opportunities for performance-driven upside.

This strategic pivot positions LTC to compete more dynamically within the healthcare real estate sector. While larger peers like Welltower Inc. and Ventas, Inc. leverage their scale and broad diversification, LTC's RIDEA platform offers a more tailored and flexible approach, particularly for smaller, high-quality assets and regional operators. The company's expertise in structured finance solutions, combined with the operational upside of SHOP, provides a unique value proposition that differentiates it from competitors primarily focused on direct leasing or large-scale acquisitions. LTC's ability to offer a broader suite of financing tools, including preferred equity and mezzanine lending, further enhances its competitive standing by catering to a wider range of operator needs.

Operational Momentum and Financial Resilience

LTC's history of prudent portfolio management has laid the groundwork for its current transformation. The company has consistently sought to diversify its investments by geographic location, operator, property classification, and investment form. This long-standing commitment to diversification is now being amplified by the strategic pivot to SHOP.

The initial implementation of the SHOP strategy involved the cooperative conversion of 13 properties—12 memory care communities from Anthem Memory Care, LLC and one independent and assisted living community from New Perspective Senior Living, LLC—from triple-net master leases into the new SHOP segment during the second quarter of 2025. These conversions were a strategic and cost-effective way to launch the platform with assets already familiar to LTC. By the close of the third quarter of 2025, the SHOP segment had grown to 21 seniors housing communities managed by five independent operators, with its gross book value reaching $447 million, representing approximately 20% of LTC's overall portfolio. The average occupancy for the SHOP portfolio stood at 87%.

LTC has also been actively engaged in capital recycling, divesting older, non-core assets to fund its SHOP expansion. Subsequent to September 30, 2025, the company sold seven skilled nursing centers across Florida, Virginia, and California for aggregate net proceeds of approximately $120 million, realizing a total gain of $78 million. These proceeds are earmarked for redeployment into higher-quality SHOP assets, aiming to reduce the average age of its portfolio to less than nine years and strategically reduce its exposure to skilled nursing properties.

The company's financial performance in the third quarter of 2025 reflects the early impacts of this strategic shift and ongoing portfolio management. Core FFO improved to $0.69 per share in Q3 2025, up from $0.68 in Q3 2024, driven by increased SHOP NOI from the Anthem and New Perspective conversions, new SHOP acquisitions, and a decrease in interest expense. Similarly, Core FAD improved by $0.04 to $0.72 per share in Q3 2025, compared to $0.68 in Q3 2024, benefiting from the same factors, alongside the turnaround impact of rent assistance provided to ALG in Q3 2024 and cash rent increases from escalations and capital expenditure funding in the triple-net portfolio.

However, the quarter also saw significant non-cash adjustments. A $41.5 million non-cash write-off of Prestige Healthcare's straight-line effective interest receivable balance was recorded due to a loan amendment granting a penalty-free prepayment option. Additionally, a $1.3 million straight-line rent receivable related to Genesis Healthcare, Inc.'s Chapter 11 bankruptcy filing was written off. Despite these write-offs, the underlying operational improvements and strategic investments underscore LTC's financial resilience. For the nine months ended September 30, 2025, total revenues reached $178.56 million, with the Real Estate Investments segment contributing $144.00 million and the nascent SHOP segment generating $34.15 million in resident fees and services. Net income for the nine months ended September 30, 2025, was $20.23 million.

A Clear Path Forward: Outlook and Capital Strategy

LTC's outlook is firmly anchored in the continued expansion and performance of its SHOP segment and a disciplined capital allocation strategy. Management has increased the low end of its full-year 2025 Core FFO guidance by $0.01, now projecting a range of $2.69 to $2.71 per share. For the fourth quarter of 2025, Core FFO is expected to be between $0.67 and $0.69 per share. This guidance incorporates transactions closed to date and those expected to close within the next 60 days, excluding future asset sales.

The SHOP segment is a key driver of this positive outlook. For the 13 properties initially converted to SHOP, guidance for full-year 2025 NOI has been raised to $10.9 million to $11.3 million, up from previous projections. At the midpoint, this represents an impressive pro forma NOI growth of approximately 18% for these properties over 2024. For the remainder of the SHOP portfolio acquired and expected to convert, Q4 2025 NOI is projected to be $4.8 million to $5.2 million. While formal 2026 guidance is not yet available, management anticipates "continued strong SHOP NOI growth", with expectations that revenue per occupied room (RevPOR) will outpace expense growth, potentially reaching mid-single digits (around 5%). This is supported by the average vintage of 2019 for 2025 SHOP acquisitions, indicating a focus on newer assets with inherent pricing power and room for NOI growth from stabilized occupancy.

The investment pipeline for LTC is robust, currently standing at approximately $1 billion, with nearly $110 million already under Letter of Intent (LOI) for a target close in January 2026. SHOP acquisitions are underwritten to generate initial year-one yields of about 7% and unlevered Internal Rates of Return (IRRs) in the low teens, demonstrating the company's ability to execute on high-performing investments.

LTC maintains a strong liquidity position and a conservative approach to capital management. As of September 30, 2025, total liquidity was $400 million, which subsequently increased to $452.26 million. This includes cash, available revolving line of credit, and capacity under its Equity Distribution Agreement.

The company's pro forma debt to annualized adjusted EBITDA for real estate was 4.7x, and its annualized adjusted fixed charge ratio was 4.6x in Q3 2025. LTC entered into a new four-year unsecured credit agreement in Q3 2025, increasing its revolving line of credit to $600 million with an accordion feature up to $1.20 billion. The company aims to fund investments on a leverage-neutral basis, utilizing proceeds from asset sales and potential loan payoffs, such as the $180 million Prestige loan in 2026, and a disciplined approach to equity issuance via its ATM program.

Navigating the Landscape: Risks and Competitive Dynamics

While LTC's strategic pivot presents significant opportunities, it also introduces new risks and intensifies existing competitive dynamics. A primary risk remains the "dependence on operators", as the financial health and performance of its lessees and borrowers directly impact LTC's distributions and financial position. The Genesis Healthcare bankruptcy filing and the Prestige loan modification underscore the ongoing need for vigilant operator monitoring and proactive portfolio management.

The expansion into the SHOP segment brings "operational and legal risks and liabilities" that were less pronounced under the triple-net model. Although LTC maintains oversight, its independent third-party operators control day-to-day operations, exposing LTC to fluctuations in occupancy, resident fees, operating costs (e.g., food, labor, energy), and potential professional and general liability claims. Changes in government regulation of the healthcare industry, including reimbursement policies and staffing mandates, also pose a significant risk, although the 10-year moratorium on the federal minimum staffing standards rule provides some near-term relief. Inflationary pressures could adversely affect operators' businesses, indirectly impacting LTC's financial position. Furthermore, as LTC may fund investments with variable interest rate debt, it faces "risk of net interest margin deterioration if medium and long-term rates were to increase".

In the competitive landscape, LTC differentiates itself through its flexible financing solutions and the newly enhanced SHOP platform. While larger REITs like Welltower (WELL) and Ventas (VTR) benefit from sheer scale and broader diversification, LTC's focus on smaller, high-quality SHOP acquisitions and its ability to structure bespoke financing solutions provide a competitive edge in specific market niches. The company's strategy of concentrating on "newer, well-located communities operated by experienced partners" is designed to outperform in an industry increasingly characterized by a "bifurcation between high-quality modern assets and older, less competitive properties". LTC's RIDEA platform is seen as a "game changer", offering a better long-term organic growth outlook compared to the fixed escalations of traditional triple-net leases, and has significantly opened up conversations with new operators who previously did not engage in triple-net transactions.

Conclusion

LTC Properties is at an inflection point, strategically transforming its business model to capture enhanced growth and value in the dynamic seniors housing and healthcare real estate sector. The pivot to a RIDEA-driven SHOP platform, supported by disciplined capital recycling and a robust investment pipeline, represents a clear commitment to modernizing its portfolio and aligning interests with high-quality operators. While challenges such as operator performance and regulatory shifts persist, LTC's proactive management, strong liquidity, and focused investment strategy position it to capitalize on favorable demographic trends and industry tailwinds. The company's ability to execute on its SHOP expansion, deliver on its growth guidance, and continue to differentiate itself through flexible financing and operational partnerships will be paramount in solidifying its long-term investment thesis and driving sustainable shareholder returns.