Wendy Simpson - Chairman, President and Chief Executive Officer Pamela Kessler - Executive Vice President and Chief Financial Officer Clint Malin - Executive Vice President and Chief Investment Officer.

Jordan Sadler - KeyBanc Capital Markets Chad Vanacore - Stifel Rich Anderson - Mizuho Securities Michael Carroll - RBC Capital Daniel Bernstein - Capital One Karin Ford - MUFG Securities Americas Inc.

Good day and welcome to the LTC Properties' 3Q, 2017 Analyst and Investor Call. All participants will be in a listen-only-mode. [Operator Instructions]. After today's presentation there will be an opportunity to ask questions. [Operator Instructions].

Before management begins its presentation, please note that today's comments including the question-and-answer session may include forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially.

These risks and uncertainties are detailed in LTC Properties filings with the Securities and Exchange Commission from time-to-time including the company’s most recent 10-K dated December 31, 2016. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation.

Please also note this event is being recorded. I would now like to turn the conference over to Wendy Simpson. Please go ahead..

Thank you, operator and hello everybody. Welcome to LTC's 2017 third quarter investor call. Joining me today are Pam Kessler, our CFO; and Clint Malin, our Chief Investment Officer. I will begin with the few remarks including an update on Anthem and guidance. And then Pam will discuss our financial results.

Following Pam, Clint will provide more in depth, commentary on our investment activity. Pipeline and operator partner performance. I will come back with the quick summary before the question-and-answer portion of the call begins. For our industry, the third quarter narrative seems to be dominated by challenged operator performance.

While we also face some challenges, we remain highly focused on driving long-term value for partners and shareholders through a culture of trust, transparency and shared success. We are more confident now than ever in our strategy of partnering with regional operators. They are more nimble and thus able to successfully manage local portfolios.

While we will continue to evaluate myriad opportunities. Our commitment to working with strong regional operators both current and future to meet their needs by offering creative solutions and financing structures to help them grow remains stead fast. I would like to recognize our operating partners' outstanding efforts during the recent hurricanes.

Successful and intensive preplanning and preparedness allowed them to keep all residents safe and secure.

Operating senior housing communities during a widespread emergency takes considerable amount of complex coordination, and we couldn't be prouder of the way our partners handle themselves continuing to provide residents with the round the clock care. By or none these operators went above and beyond working during a significant time is needed.

In fact, we were told by several partners that selfless employees left their own homes, some of which were in jeopardy to care for resident. I'm happy to report only minimal damage to our portfolio and that all but one property has since been reoccupied.

Given our presence in the communities hit hardest by the storms, primarily in Texas and in recognition of all of our partners who provided extraordinary care during hurricanes Harvey and Irma, we made charitable contributions to foundations set up by our operating partners to assist their employees adversely affected by the storms.

Thank you to everyone who is playing a part in the recovery effort. Moving to our pipeline, we are a bit more optimistic than we have been over the last several quarters. Activity has picked up nicely. We are currently sourcing some attractive off market deals that are a good strategic fit for LTC and that meet our stringent underwriting standards.

Clint will provide more details later. But I will say that the pipeline is very diverse with respect to deal structure, operator and geography and we are in a good position to act on some, if not all of these potential deals before year-end.

As expected there are no significant investments in the third quarter, although we did complete an acquisition subsequent to the end of September. You will hear more about this later. I would now like to provide an update on our Anthem portfolio. First and foremost, the properties are making good progress.

The community level staffing challenges, we told you about have abated. Corporate overhead is being reduced and occupancy at the three communities we detailed on our last call Tinley Park, Burr Ridge and Westminster continues to improve. At October 31, occupancy at Tinley Park was 42%.

Burr Ridge was 64% and Westminster was 97% up from 29%, 47% and 88% respectively during the month of July. Regarding the two Kansas communities we have previously discussed, we are negotiating the transition of both from Anthem to another existing operating partner where we will be adding to an existed master lease.

We hope to complete our negotiations by the end of November and with the process of securing licensor we expect to complete the transition in January or February of 2018. Of the properties currently under development with Anthem, we expect the Glenview, Illinois Memory Care community to open by early December.

Construction of the 66th unit property is substantially complete and Anthem is moving toward licensor inspection and pre-leasing. The other construction projects located in Oak Lawn, Illinois is expected to open early in the second quarter of 2018.

We recently signed a forbearance agreement with Anthem under which we have agreed not to pursue enforcement related to their defaults through the end of this year, with the stipulation that Anthem among other conditions, pay minimum rent of $4,000 per month through December 31, 2017.

This was slightly higher than the $1 million per quarter we estimated earlier. Given the progress Anthem has made and after reviewing a variety of options for the portfolio, we have decided to continue with Anthem as our operating partner for now.

As we continue to monitor and assess their operational improvements, corporate overhead reduction and ability to bring the two new development projects online in a timely and successful manner. We still need a few more months of operating history for Anthem before we can provide a cogent forecast for 2018 rent from them.

But as I mentioned, in the few months since their default Anthem has made good progress. Finishing off with guidance, we are slightly increasing our 2017 forecast, assuming no additional investment activity, financing or equity issuances for the remainder of the year. We are forecasting FFO between $3.07 and $3.09 per share for 2017.

We plan to provide 2018 guidance during our fourth quarter conference call. Now, I will turn things over to Pam, I will return after she and Clint complete their remarks. Pam..

Thank you Wendy. NAREIT FFO at $0.76 per diluted share was the same in last year's third quarter. There were three primary factors that impacted our results. First, rental revenue was reduced related to Anthem and properties we sold during past 12 months. Additionally, mortgage interest income decline related to loans that were paid off.

These are partially offset by increases in revenue from acquisitions, development and capital improvement. Second interest and other income increased $1.2 million $425,000 of this increase resulted from investments in Mezzanine loans.

The remaining $842,000 resulted from a write-off of an earn out liability and related lease incentive that we no longer anticipate paying. The write-off was due to a strategic change in operations at the property where by the operator converted Memory Care units to Assisted Living units to better meet market demand.

After a review of the revised pro forma, we determined that it was unlikely that the operating metrics required to trigger the earn out payment will be met within the timeframe required by the agreement. Third, interest expense increase related to the sale of senior unsecured notes in the latter half of 2016 and the beginning of 2017.

Investments in the third quarter included $6.4 million for development and capital improvement projects. We borrowed $10 million under our line of credit, repaid $15 million of senior unsecured notes and funded our $0.19 per share monthly common dividend.

Subsequent to September 30, we borrowed $15 million under our line of credit for the acquisition of a newly constructed Assisted Living and Memory Care community for $16.6 million. Clint will provide the details shortly.

In keeping with our philosophy of maintaining a strong and flexible balance sheet, our long-term debt maturity remains sensibly spaced and matched to our projected free cash flow, which helps to moderate future refinancing risk.

There are no major debt maturities over the next five years and we maintain significant liquidity not only to meet our obligations, but to fund future growth.

Currently $530 million of availability remains under our line of credit, $52 million under our shelf agreement with Prudential and $185 million under our ATM program giving us total availability of $767 million.

We will continue to allocating capital strategically and conservatively to provide maximum value for our portfolio partners and shareholders and to help ensure profitable long-term growth.

At the end of the third quarter, our credit metrics continue to compare well to the healthcare REIT industry average with debt to annualized normalize EBITDA of 4.2 times and normalized annualized fixed charge coverage ratio of 4.8 times and a debt to enterprise value of 25.6%.

I will now turn the call over to Clint, who will discuss our investment activity, pipeline and portfolio metrics. Clint..

Thank you, Pam. The acquisition we completed subsequent to the end of the third quarter was for 73 units newly built Assisted Living Memory Care community in Kansas City, Missouri. Enhancing our growing relationships with Oxford Senior Living, which now operates the three communities owned by LTC.

In total Oxford operates 14 communities in Kansas, Missouri, Oklahoma and Texas. As Wendy mentioned, our focus remains on strong regional operators and Oxford's regional presence is a great example. The deal has an initial cash yield of 7% and the community was added to an existing master lease.

With the completion of this investment, we have invested $71 million year-to-date in acquisitions. All new or private pay assets. These investments to continue our stated strategy of investing in newer modernized properties to reduce the average age of our portfolio.

On last quarter's call, we discussed our Jacksonville and Louisville communities and their transition to Thrive Senior Living. Since that time, both communities have received licensor and have been added to Thrive's master lease.

At October 31st, occupancy at Louisville was 77% compared with 75% at June 30th, while occupancy at Jacksonville slipped slightly at October 31st 58% down four percentage points from June 30th.

Lease-up at the Westchester community which opened on June 23rd is operated by Thrive and was acquired by us last quarter, it is going well with occupancy at 48% as of October 31st.

We have engaged investment bankers to actively market our Sunrise portfolio a group of six Seniors Housing communities for sale or releasing to a new operator or a combination of both. Sunrise has informed us they do not intend to renew master lease-upon expiration at the end of April 2018.

The properties comprise 320 Assisted Living and Memory Care units mainly in premier submarkets in Ohio with one property in Pennsylvania. The properties are well occupied, but are not currently operating at maximum efficiency creating an opportunity for a significant NOI improvement.

We are seeing in diverse group of interested parties across the number of potential deals structures. Of note, should we sell the portfolio out write, we would recognize a meaningful gain on the sale.

We are working with our advisors to evaluate the deals that is in the best interest of our shareholders and expect to finalize a transaction on or before the lease expiration date. I look forward to providing an update on our next quarterly call as to the status of this process.

Additionally, we continue to evaluate our portfolio to identify additional opportunities to recycle capital on assets that are no longer core or strategic.

As Wendy mentioned, our current pipeline has expanded, as owners and operators of seniors housing are working through recent challenges and making decisions about their portfolios more attractive deals are coming to market.

Our low cost of capital and strong balance sheet make LTC very competitive in the marketplace for new investments, and permits us to move quickly on new opportunities. The approximate size of our pipeline is $100 million, it includes five transactions.

A span of variety of deal size including acquisitions, development projects, real-estate joint ventures and loans as well as four new regional operating partners in four states.

The majority of the pipeline consists private pay opportunities but also includes two Skilled Nursing transactions one of which would provide financing for the construction of a replacement property.

Of the private pay transactions in the pipeline one is the joint venture partnership with a developer and a regional operating company for the development of an Assisted Living Memory Care and Independent Living community outside of Milwaukee that I had mentioned on our last call.

The joint venture will own the real estate improvements and triple net lease the property to affiliates of our joint venture real estate partners to operate the community upon opening. We expect this transaction to close in the fourth quarter.

Another development of an Assisted Living Memory Care community in the Pacific Northwest, this off market transaction will be structured as a construction loan and will grant LTC a purchase option to acquire a 90% interest in the entity owning the real estate and improvements 12 months after completion of construction resulting in a joint venture partnership with the operator.

An affiliate of the operator will concurrently enter into a triple net lease with the real estate joint venture to operate the property. We are actively engaged in due diligence for this off market transaction.

The third is an off market transaction to acquire a 90% interest and the real estate and improvements comprising an existing Assisted Living and Memory Care community in a joint venture partnership with the existing operator who will then lease the property back to be a triple net lease. We are actively engaged in due diligence.

The remaining two deals in the pipeline are also off market transactions. Although we are not generally known for pursuing larger transactions, we have seen one unique larger opportunity that appears to have a more realistic price point, but is not included in the pipeline I just described.

We are in the early stages of evaluating this deal, it is interesting because the deal includes newer properties and with a well laid out geographic presence and a premier regional operator. I will finish up with our portfolio statistics, which are reported one quarter in arrears.

Q2 trailing 12 months EBITDARM and EBITDAR coverage on a same-store basis was 1.93 times and 1.41 time respectively for our Skilled Nursing portfolio and 1.43 times and 1.22 times respectively for our Assisted Living portfolio.

While our Assisted Living portfolio coverage is relatively stabled on a same-store basis to recent quarters, our Skilled Nursing portfolio coverage declined six basis points. The decline in coverage is primarily attributable to two operators.

The first, accounting for two thirds of the decrease stems primarily from occupancy declines and increased expense spending which the operator expects to recruit in future periods through higher Medicaid rates. The decline in occupancy related to a reduction in volume of post acute services for rehab patients covered by Managed Care insurers.

In response to this pressure, our operating partner has been proactively focused on implementing specialty programs to provide services to higher acuity patients such as respiratory units for treks and events.

The second portfolio experienced the opposite, while occupancy and revenue increased slightly, cost containment has been a key challenge and one building in the portfolio is experiencing pressure from new buildings opening in this marketplace.

We are working closely with both operating partners and staying appraised of the changes being implemented to improve performance. As a quick reminder, our EBITDAR rent coverage is calculated using a management fee equal to 5% of revenues.

We continue to believe that EBITDARM is a better metric of comparison to our peer group as different management fee percentages maybe used to calculate EBITDAR by different companies. Now, I will turn the call back to Wendy..

Thank you, Pam and Clint. The recent NIC Conference in Chicago highlighted what many of us in the seniors housing industry are living day-to-day. Some have a positive outlook given strong long term demographics while others remain on the sidelines. We at LTC completely agree that underlying trends remain very favorable.

But as our pipeline and Clint's comments reflect, we are now seeing more opportunity to make solid investments that will drive additional long-term profitable growth.

LTC was fortunate to host former Kansas Governor and current AHCA President and CEO Mark Parkinson at a recent board meeting for a frank state of the union discussion regarding the politics surrounding healthcare and seniors’ housing.

Mark told us that AHCA is currently focused on lobbying efforts, seeking increased funding for Sniff Medicaid rates to providers in Texas which has one of the most fractured state healthcare associations in the country. LTC is supporting these important efforts.

Our remaining committed capital to date in 2017 totals approximately $52 million which includes development, renovation and expansions. As I have always said, regardless of investment activity for the remainder of the year, our current portfolio will generate FFO this year and next and I remain optimistic about our future opportunities.

As a firm that is well capitalized, we are able to quickly take action when opportunities for additional value creation arises and that is exactly what we are doing. Thank you for joining us today. We would now be happy to take your questions..

Thank you. We will now beginning Question-and-Answer Session. [Operator Instructions]. The first question will come from Jordon Sadler with Keybanc Capital Markets. Please go ahead..

Thank you and good morning. wanted to see if we could get maybe a little bit more color surrounding Anthem outside of the two Kansas properties. So you did mentioned that they have made some progress.

Maybe you could outline incrementally some of that progress and some of the things that are giving you confidence?.

Well they have taken the steps to reduce their overhead as we counsel them to do. They have made the changes in their executive teams as the facilities that were having more difficulty leasing up. And we are seeing that they are getting back on track to their underwritten performance.

They are probably few months behind, but they are leasing up and they are I think that they are back on track. I won't be confident of the turnaround until we see the two new properties opening up and not having a stumble relative to their lease-up.

they are not currently not doing any other properties, they are not and due diligence on anything else, they are not looking to build anything else. Their total focus is on operating the properties that they have in their portfolio and stabilizing everything so that they will have a really good base to go forward.

We did talk to other operators about the assets, we have the confidence that we would be able to replace Anthem should we need to do that. But at this point I think it's best for everybody concerned and most assuredly our shareholders that we maintain our relationship with Anthem and give them the support that they need..

Okay. So when you speak to these other operators and may be also relative to the two properties that are currently being negotiated, to be transferred, the expectation in terms of where the rent is versus market is that - are you comfortable that that’s an achievable level still..

Yes..

Okay, that’s helpful thank. And then may be one for Clint, on the pipeline, obviously there is been a big pick up, I'm curious, what is driven sort of the NIC conference or otherwise, but it seems like there is been a spike in activity relative to what we talked about a few months ago and I'm curious, what all is driving it and where pricing is..

A lot of this is as mentioned off market transaction and when it comes to off market transaction sometimes it takes a while to get those cultivated and put together, some of these are developed projects, so that further takes time to go and put together.

So it’s things that we been spending our time and working on and it’s just taking time to come to fruition..

And the pricing..

On the pricing I guess should be 7.5 plus or minus..

On the 100..

Correct..

Okay and the larger opportunity that you are looking at even though it’s in the early stages, could you mention a property type..

We haven't at this point this is something that we wanted to make you aware that, we do see a lot of marketed transactions and typically given pricing we will pass on them or they are large deals that may have a lot of older properties, we will typically pass on that, but this happen to be one, that was interesting and unique, so we don’t know exactly where to go but it’s something that peaked our interest..

And you said there newer properties, probably pretty safe to assume there not to Skilled Nursing facilities..

They are newer properties..

Okay and then lastly just curious if there is any update in terms of your Genesis loan and exposure, I know that they reported this morning and they have got some news on the tape and in terms of looking for some concessions in terms of their overall fixed charges.

Anything to report there?.

Nothing to report on our side, I mean there has been a little bit drop in coverage, but from the investments we made, on the Mezz basis, its well covered, there is a lot of equity in front of us. So we continue to monitor that. But at this point, given how we were restructured in the security behind that, we don’t have any concerns in that right now..

Okay. Thank you..

Thank you..

Our next question will be from Chad Vanacore with Stifel. Please go ahead..

Hi there. So just thinking about the Anthem portfolio stabilization, these lease-up properties that actually improved quarter-over-quarter.

So what was the least up progress post quarter?.

Post quarter meaning in October?.

Yes. We are about half way through the quarter now getting close it. Have they maintained those gains and organic from these levels..

Absolutely, yes..

I think we keep track of them on a daily basis so at the end of October….

At the end of October less than it was at 98%, Burr Ridge 64% and Tinley Park at 42% and Murrieta was at 56%..

Do we have portfolio in total?.

I don’t have the portfolio in total because of the Kansan buildings included, but they definitely made progress..

And they are stabilized, properties are still stabilized..

Absolutely..

And then you also mentioned some changes on the expense side there, have you seen pretty good progress on maintaining the costs side of the business?.

Yes..

Yes. Also Chad its obviously about the occupancy. If you look at the just as an example the four Colorado buildings and the lowest occupancy right now is October 31 on the four Colorado properties is at 98%. So very strong in the Colorado market which goes back to at this point the rents..

And those Colorado facilities are really carrying a cash flow for the rest..

Correct. And then in Chicago there is two buildings that are in lease Burr Ridge and Tinley Park and then the two that are under construction. So it make sense for Colorado. I mean it's a more mature portfolio. they have been operating longer and the performance there is pretty strong..

And Chad another thing that we are monitoring and we are sensitive to this at a company that's struggling, we have set our rents so that they don't have a cash crunch. We make sure that they are paying their payables, they are paying their payroll and their payroll taxes and that sort of thing.

So we are making sure that they are not in any default relative to anything that they have to pay to operate their company and they have been very cooperative in giving us all the information we need..

Okay. And just thinking about the two facilities you transitioned in Kansas City.

What is the current rent and what is expected rent on the new leases?.

One building is located in Overland Park and the other is in Wichita so not in Kansas City, not both of them. Right now the rent is not allocated on the master lease and we are right now working on the negotiation with the other operator to transition the appropriate rent that will be applied to those two.

And we haven't quite completed that yet, as we have indicated in our comments by the end of November we expect to have that complete..

Alright. And what about the couple of properties you've transitioned at Thrive, how they are performing. Any changes in occupancy or employee turnover that may depressed them near-term..

As mentioned, we have made a lot of progress on the occupancy with the exception of the building in Jacksonville, which I mentioned in my comments that had pulled back by four basis points. Property has a little bit more challenge with the transition to Thrive plus the hurricane.

Jacksonville was impacted more fortunately our property was not impacted as a result of the hurricane, but just the challenges in the marketplace with the flooding in Jacksonville, but we think that was attributable to the downtick in occupancy. But we have been in communication with Thrive.

Wendy talked to their principle probably a couple of weeks ago, and they feel more bullish about Jacksonville had a chance to be in there. So it seems like they have more optimism about that property..

Alright. Thanks for the questions..

Thank you..

Thank you..

Our next question comes from Rich Anderson Mizuho Securities. Please go ahead..

Thanks and good morning. So Clint you mentioned on the Sunrise kind a moving parts there, and you thought that there is an upside to NOI ultimately.

But would that be like one step back two step forward type of event or do you think it will be most immediately to you to see something happened there?.

It depends which way we go between obviously a sale or a lease. I think that given where are the margins are currently in the performance, again it's not an occupancy or a revenue concerns it's more on the expense side.

So if we do end up leasing the properties, which probably can be a ramp-up period associated with that would be my guess depending on where the different offers shake out on this, but we do think there is upside on the expenses for this to drive a more normalized margin than what is currently being experienced on those properties..

Okay, and on Genesis I assume LTC was the other large landlord that was referenced on Genesis's call today.

Is that correct?.

I don’t think so..

What did they referenced, if they were looking for rent reductions?.

No, they said that they other large landlord is not an issue for them, they are doing kind of fine coverage wise and all that sort of stuff..

Well then yes for them..

But has there been a dialogue with Genesis and the conclusion was that nothing needs to be done.

Is that a fair statement or so have they not even approached?.

We have not been approached..

We have been in general conversations ordinary course with them, but again our relationship is not [indiscernible] total of eight properties with Genesis..

Okay, define large I guess. But speaking of the world large, if this larger transaction can you describe what that means is it larger than the pipeline, is it that or is it even larger than that I mean I'm trying to get a sense of magnitude is this..

It would be a little larger than what some of the larger transactions we have done, maybe the largest deal we closed on last years as around the 140 million so probably it could potentially be a little bit north of that..

Okay, and in terms of the potential sellers or the owner occupier type of situation is the REIT or what is it?.

At this point it's preliminary and we only identified it to just provide visibility into what we are seeing in the market and we have passed on lot of larger transactions previously. So the comment was nothing more than just to make you love what we are seeing and as far as pricing and what opportunities maybe out there.

So it’s hard to me to go and - it wouldn’t be right for me to go into any details at this point in time on that deal, but want to share visibility into what we are seeing..

Okay fair enough I just asked, and then last question could you provide any kind of incremental in terms of coverage on Senior Care Centers in Brookdale.

Can you go down to that level for us in terms of how those are performing lately?.

We have given guidance on our portfolio as a whole and really haven't delve into providing coverage at an operator specific level. So it's hard to call out specific operators on certain coverages, so at this point I just want to say if we can coverage at a property level basis being Assisted Living and Skilled..

Okay, but I mean is it fair to say that nothing has dramatically changed given that the average is kind of relatively the same..

Correct..

Yes, we don’t have any concerns of either portfolio..

Alright. Perfect. Thanks very much..

Thanks Rich..

Thank you..

The next question comes from Michael Carroll with RBC Capital Markets. Please go ahead..

Yes, thanks.

Wendy or Clint can you give us some additional color on Anthem and have they done anything differently over the past few quarters that drove this stronger lease-up success they had within those recent completed development projects?.

I think the big thing Mike is their focus on the existing properties, before they were looking at additional development opportunities, they had more projects in development. So I think a lot of that comes from just a heightened awareness of the situation they are in, plus they are focused on driving lease-up and occupancy at those communities..

Okay, then have you decided if you are going to stick with that operator past I guess end of this year, I think the agreement was just till December 31st and what factors go into your decision if you are going to stay with them or try to change them now?.

Well the agreement through December 31st was just to give them confidence that we will accept the 400,000 of rents for this period of time, and also to give them the opportunity to say to their group, we are not in immediate danger of losing our company.

So we did enter into that forbearance agreement and with the improvements that they are making and with the opportunities they have in the future, if we can't determine that they will be able to pay a rent, that will provide LTC and its shareholders with a proper return, then we will stay with them.

And I hope that we get there and they certainly hope that they will and are working very hard to get there.

So that will be the determinant, when we see at the end of the year and first couple of months of course nothing happens magically at December 31st, and we can project a rent stream that will be a return to LTC and its shareholders then we will make that determination..

It also includes the lease-up on the Glenview property, obviously it's in I think well located market in the Chicago Metro area and execution on that lease-up obviously is very important and we want the opportunity to evaluate their performance on that lease-up, which we think is in a very strong market..

Okay and then Clint with regard to the decline in the Smith coverage ratio, sequentially that you highlighted, was it just driven by those two tenants that you kind of gave a little color on?.

Yes..

And then where are those coverage ratios for those tenants in general, are they tight enough to be a concern and what is your thoughts longer term for those portfolios?.

We haven't given coverage by specific operator, but we have seen some decline and we think that they are recovering, acceptably now, they cover and manage fee, they are still positive coverage, but as they have been somewhat of a downtick, it is something that we continue to monitor and we are not highly concerned at the moment, but it's something that we are aware of.

We have been in communication with them and we think there are initiatives and efforts that are in place to be able to go ahead and increase coverage going forward, example being the spend on one of the portfolio that they think they would be able to recruit some of those costs through higher Medicaid rates.

It's not going to happen obviously the next quarter, but over a period of time we think that will make progress and then also going into - there couldn’t be some impact on expenses next quarter from hurricane related costs as well, so there could be potentially a little bit of downtick next quarter related to some aspects of the hurricane expenses..

And how many properties are in this portfolio?.

Giving out information like that would call attention specifically to certain operators, so I just want to highlight to make sure you are aware of these situations in the portfolio that we are monitoring, we have been very proactive and we have been in communication with the operators and we think they are taking a proactive steps to be able to address the decline in coverage..

Okay. Great, thank you..

Thank you..

Our next question will be from Daniel Bernstein of Capital One. Please go ahead..

Hi good morning..

Good morning Dan..

Just to summarize quickly, I know you don't want to give out specific lease coverage, but can you generally say whether that's above or below your mean just to get a sense of what might happen if you have to reset leases or sale your assets..

Yes Sunrise has always been less than the one. They have always been sold and always had high class so they have always been less than one and always in the last several years, they have been less than one. So because it's in the same sort that pulls down our average coverage.

But we have never had a concern about them paying rent and they have paid rent and they have done the proper repairs and maintenance that are required. So if we do re-lease them, we would re-lease them at the appropriate coverage ratio, but that would be with the understanding that they would improve operations..

Actually maybe you would have higher lease bumps or rent reset or something [indiscernible] down the road or something like that?.

Correct. And then Dan on the Sunrise portfolio obviously giving coverage specific to Sunrise with that lease as maturing. Sunrise indicated they don't want to renew and we think it’s obviously appropriate to talk about coverage specific to that with the leases that’s maturing..

Okay.

And have you remind me those are not Sunrise Mansions, so I forgot the name of the prior operator, but those are smaller properties right?.

They are originally Carrington properties which we acquired in....

So they are a little bit smaller, smaller market?.

I wouldn't say smaller market. I mean from a square layout they are probably a little smaller on a square footage basis and one we think of the Sunrise Mansion lesser number of units as well..

Okay now that’s helpful. And then on Genesis and maybe this is more of a general question on how you underwrite loans to sniff operators and maybe Seniors’ Housing operators, but you have a small loan to them. Can you talk about the LTV and the assets that backed it up and how you think about underwriting debt investments to operators..

So listen you are talking about the Mezz loan that we did with this?.

Yes..

You know Dan, we did that few quarters ago, I don't have that information specific with me n the call today but we can....

Or if you just have a look at generality, how you think about underwriting those types of loans and still do you have some of those maybe something like that in your pipeline where you might do some investments like that. How do you think about it on underwriting Mezzanine ones..

Sure that will be unique Mezzanine loans. And really the driving factor in looking at that from a Mezz standpoint was the yield as well as the equity that was invested on top of it.

And that's really what in that case made it attractive, which was a unique opportunity for that specific Mezz investment given the amount of equity that was on top of the - on us. So we felt there is a lot of protection on that investments. So I think that is a one off unique opportunity as much larger than we typically look at.

But it was an off market transaction that was presented to us. And we evaluate the merits and we thought it was a solid investment for us..

Okay. And then one question on the pipeline. I don't expect you to give the exact rates that you think you are going to buy assets at or invest in, but just on a real broad basis.

Have cap rates backed up 25 bps, 50 bps and maybe you can talk about that kind of pricing that you are seeing on the Seniors’ Housing versus skilled nurse?.

Sure. I would say I mean for lease rates on, what we are seeing, probably like we did with Oxford on the existing property, we are probably in the 7% range for existing properties and probably 7.5% on development, right now with few of the projects we have, so that’s kind of the band we are looking at on private pay opportunities.

On the skilled opportunities probably depending on lease rate 8.5% to 9% depending on what the opportunity is, but we have been very selective on Skilled Nursing investments, and you know in the last almost twenty four months, we have only acquired and invested in one Skilled Nursing property.

So although we still like Skilled Nursing, we make sure we need to underwrite it appropriately to invest in it, but we have been very conservative and only made one investment into Skilled Nursing building in nearly last twenty four months..

Alright.

Directionally, the investment yield is getting better or is it just hasn’t moved yet on skilled Nursing?.

About the same. I think, it depends on what type of property you are investing on the Skilled side, as far as location, I think in age and what type of revenues are being driven at that property side or at the property..

Okay. Okay. I appreciate the color. I will pass it on to somebody. Thank you..

Thank you very much..

[Operator Instructions] The next question comes from Karin Ford of MUFG Securities. Please go ahead..

Hi, good morning, just wondering, if I could get a little more clarity on your comments for the Anthem rent going forward. You said you wanted to continue with them only if you got an appropriate return for LTC shareholders.

So should we read from that that you are considering a permanent rent cut there, and as far as determining where the appropriate return level would be, should we look at where you are making incremental investments for guidance on that or is it something less than where you are investing incremental capital today?.

Well, I think on the Anthem properties, Karin, we would look at potentially maybe staggering rents, we want to participate and get back to where we are negotiating for the rents, and as I mentioned on the occupancy in the Colorado community as an example, there has been very strong performance on the Colorado properties.

So obviously to re-lease this portfolio and have another operator go through the lease-up, I mean we probably would have to take some type of haircut initially to bring the rents up.

So given, the progress that Anthem has made on these properties, they have made strides and progress towards improvement and we want to give them the benefit of that and we are evaluating it.

But we want to participate and get back ultimately where we originally underwrote these investments, again we invest in these at cost, we didn’t buy them at an elevated purchase price, they are all invested a cost. So our basis, comparatively speaking to an acquisition is, I think a very risk adjusted investment on a per property basis..

And is Anthem as you are working through it ultimately tells you that they don't think they can get back to the originally negotiated rent level, would you then consider transitioning or is it kind of non-deal sort of..

I think at that point in time, the assessment for us, is it the market that’s driving that circumstance or is it the operator specific is driving that circumstance and if we feel that its operator specific and we can be in a better position with higher rents with another operator, I think we will make that ultimate decision at that time.

So it really come down to our assessment of the market versus the operator performance at the time..

Got it thanks for that.

My last question is just on the reversal for your outlook on the incentive rent payments that that caused the non cash income this quarter, you mentioned the operator changed from units over from Memory Care to Assisted Living, is that portfolio deteriorating, are you concerned on that at all and is there anything else on your watch list..

This building is a part of mass release, and the operator saw some additional buildings come online with Memory Care, so they felt there is an opportunity to switch performance and divided that between Memory Care and Assisted Living.

So from where we originally underwrote this, again we invested in the asset, based on what we thought was the appropriate investment and then we allowed the operator to have access to earn out, if performance came to fruition.

Given that the change and some of the building performance to Assisted Living, the rates are coming down obviously from a revenue standpoint, it may be ultimately that they are able to achieve this earn out performance, but there is time frame we set on the performance measures to achieve the earn out.

And we just don’t know at this point in time, if they will be able to achieve that performance within the times provided in the lease agreement, what were contractually obligated to fund an earn out if they were to achieve that performance..

Got it. Just one more question on dispositions, should we expect any sales before year-end..

Before year-end its possibly small, nothing large it will be possibly, one or two small investments..

Got it. Thank you..

Thank you..

The next question will be a follow up from Rich Anderson with Mizuho Securities. Please go ahead..

Thanks, I just love earnings season so much, I just want to keep it going there.

So as far as the pipeline goes, would you be able to say if you have interest in some of the moving parts that are out there from existing Genesis landlords like [indiscernible] or Omega, could you see yourself doing that and transitioning the operator and something you are comfortable with or is that not in the pipeline math just yet..

Not in the math right now, but if there were an opportunity in the market where another operator of ours that made sense geographically, sure we will look at that..

It would probably come from operator rather than our interest. So if an operators is looking at small portfolio of those assets and brings it to us we would certainly look at it..

Okay. Fair enough. That’s all I have. Thanks..

Thank you..

Thanks..

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Wendy Simpson for any closing remarks..

Thank you and thanks to all for listening and we will talk to you at the end of the year. Have a great holiday season. Bye..

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect..