Earnings call: LTC Properties reports growth and strategic investments

LTC Properties Inc . (NYSE:), a real estate investment trust specializing in seniors housing and care, has announced its first quarter earnings for 2024, reflecting the company’s strategic focus on long-term growth and its strong performance in the seniors housing and care industry. The trust reported substantial investments made in 2023 and a positive outlook for the upcoming quarters, with anticipated increases in funds from operations (FFO) and a robust pipeline of investment opportunities.

Key Takeaways

• LTC Properties completed over $260 million in investments during 2023.
• The company expects FFO and FFO excluding non-recurring items to be $0.65 to $0.66 per share in Q2 and $2.63 to $2.65 for the full year.
• LTC’s seniors housing and care industry is recovering, with rising occupancy rates and favorable demographic trends.
• The company has a strong liquidity position, with nearly $197 million in total liquidity.
• LTC Properties’ business development team is actively offering diverse financing structures to support growth.

Company Outlook

• LTC is focused on strategic long-term growth and confident in its ability to effectively allocate capital.
• The company’s stock price multiple is expected to expand as they demonstrate the conversion of their investment pipeline to accretive investments.
• LTC anticipates reimbursement increases in several states, which will contribute to its financial performance.
• The trust’s leadership emphasizes a commitment to well-covered monthly dividends and a diversified portfolio.

Bearish Highlights

• There were no immediate bearish highlights reported during the earnings call.

Bullish Highlights

• LTC Properties has made significant progress in managing lease maturities and improving occupancy rates.
• The company has completed a $12.7 million senior loan to Ignite Medical Resorts and other property sales and investments.
• Positive rent growth is expected for 2024 and beyond, with a forecast of $3.3 million in market-based rent resets.

Misses

• The call did not highlight any specific misses or underperformances for the quarter.

Q&A Highlights

• LTC utilizes equity through the ATM for financing smaller investments and may consider overnight marketed deals for larger transactions.
• There are no immediate plans for dispositions, following a period of significant property sales in the past 24 months.
• The rent forecast does not include rent from the ALG April transitions, but rent is expected after the free rent period ends.

During the earnings call, LTC Properties provided an optimistic outlook for the seniors housing and care industry, which is experiencing a recovery with increasing occupancy rates and positive demographic trends. The company’s strategic investments and asset management initiatives during the pandemic have positioned it for growth in the coming year. LTC’s strong liquidity position and confident capital allocation strategy signal a commitment to driving shareholder value and expanding its investment portfolio. The trust’s leadership remains focused on maintaining a diversified portfolio and ensuring consistent returns for investors. With no immediate plans for dispositions and a clear strategy for funding future investments, LTC Properties is poised for a successful 2024.

InvestingPro Insights

LTC Properties Inc. (LTC) has shown resilience and strategic acumen in the seniors housing and care industry, as evidenced by the latest data from InvestingPro. The company’s impressive gross profit margin of 92.44% for the last twelve months as of Q1 2024 underscores its efficient operations and strong market positioning. This high margin is a testament to LTC’s ability to manage costs effectively while generating significant revenue, a crucial factor in the company’s financial health and a key consideration for investors.

InvestingPro Data metrics reveal a robust financial picture for LTC. The company’s market capitalization stands at $1.44 billion, reflecting investor confidence and the scale of LTC’s operations. With a Price/Earnings (P/E) ratio of 17.25 and an adjusted P/E ratio of 20.32 for the last twelve months as of Q1 2024, LTC is valued favorably in the market relative to its earnings. Moreover, the dividend yield of 6.89% as of the latest data point in 2024 is particularly noteworthy, as it highlights LTC’s commitment to returning value to shareholders. This substantial dividend, coupled with the fact that LTC has maintained dividend payments for 23 consecutive years, offers investors a reliable income stream.

InvestingPro Tips for LTC further bolster the bullish sentiment. The company is not only expected to be profitable this year, but it has also been profitable over the last twelve months. Additionally, LTC’s liquid assets surpassing short-term obligations suggest a strong liquidity position, aligning with the company’s reported total liquidity in the article. Such financial stability is crucial for investors looking for companies with the capacity to weather economic fluctuations and continue to invest in growth opportunities.

For investors seeking more in-depth analysis and additional insights, there are 6 more InvestingPro Tips available for LTC Properties at Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a wealth of data and expert analysis to inform your investment decisions.

Full transcript – LTC Properties Inc (LTC) Q1 2024:

Operator: Good day. And welcome to the LTC Properties Incorporated First Quarter 2024 Earnings Conference Call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. 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 updated, sorry, are detailed in LTC’s Property filings with the Securities and Exchange Commission from time-to-time including the company’s most recent 10-K dated December 31 2023. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. Please note this event is being recorded. I would now like to turn the call over to Wendy Simpson. Ma’am, the floor is yours.

Wendy Simpson: Thank you, Operator. And welcome everyone to LTC’s 2024 first quarter conference call. I am joined today by Pam Kessler, Co-President and Chief Financial Officer; and Clint Malin (OTC:), Co-President and Chief Investment Officer. In 2023 we completed more than $260 million in investments, all while our team devoted significant amount of time to optimizing our portfolio. Now after successfully selling $77 million of assets last year and retenanting others we are concentrating our efforts on producing strategic long-term and sustainable growth which is our key focus for 2024. With that in mind we are evaluating multiple investment opportunities and are confident we have both the bandwidth and resources necessary to strategically allocate capital to enhance our portfolio and achieve the best risk adjustment returns for our shareholders. The seniors housing and care industry is on a promising upturn after setbacks related to COVID. Thanks to favorable demographic trends, improving margins and rising occupancy rates all signs point to a more robust market. We also are encouraged by the reimbursement landscape particularly with the anticipated 4.1% increase under the SNF payment rule for fiscal 2025. Reimbursement in several states also is expected to rise. In Florida where we own seven centers our operators will benefit from an unprecedented 8% Medicaid rate increase, which will result in increased coverage for LTC. Last week as expected CMS issued its final SNF minimum staffing rule. Our industry pushed back on the proposed rule during the comment period with more than 46,000 letters mainly related to the concerns that the mandate is unfunded and that the level of staff required simply does not exist. According to the American Healthcare Association 81% of skilled nursing centers do not currently meet the rule staffing requirements. We will continue to monitor the situation and support industry organizations and initiatives to oppose this rule. Looking ahead to the second quarter, we expect FFO and FFO excluding non-recurring items to range between $0.65 per share and $0.66 per share. We also are introducing full year 2024 guidance which assumes no additional investment activity, asset sales, financing or equity issuances, but does assume our loan receivables payoff at maturity and includes the rent increase associated with an HMG lease amendment. FFO excluding non-recurring items is expected to be between $2.63 per share and $2.65 per share for the full year. Non-recurring items include the payment of rent related to a property sale in January and $900,000 of credit reserves that get reversed as loans payoff. In summary, as we redirect our efforts towards strategic growth the entire LTC team is geared up for a highly productive 2024. Now I’d like to turn the call over to Pam.

Pam Kessler: Thank you, Wendy. All numbers I’ll discuss today are for the first quarter of 2024 compared with the first quarter of 2023 unless otherwise stated. Total rental revenue increased by $1.8 million related to property sales and operator transitions. Interest income from sale-leaseback financing was comparable year-over-year, but interest income from mortgage loans increased by $1.2 million principally related to mortgage loan originations in 2023 and the funding of a construction loan in 2024. Interest and other income decreased by $1.2 million primarily due to the payoff of two mezzanine loans and the related exit IRR and prepayment fee received in 2023, partially offset by income from a mezzanine loan origination in the third quarter of 2023. Interest expense increased by $436,000 mainly due to higher interest rates and a higher outstanding balance on our revolving line of credit partially offset by scheduled principal pay downs on our senior unsecured notes. Our provision for credit losses decreased by $1.7 million, mostly due to a higher dollar volume of loan originations in the prior year first quarter. Upon origination we record a loan loss reserve estimate equal to 1% which amortizes as the loan principal is repaid. Net income available to common shareholders decreased by $8.9 million, primarily due to lower gains on sale of real estate compared with last year’s first quarter, as well as the receipt of exit IRR and prepayment fees in connection with mezzanine loan payoffs in last year’s period. This was partially offset by an increase in rental income, higher interest income from loan originations and the lower provision for credit loss. Fully diluted FFO per share was $0.69, compared with $0.66. Excluding non-recurring items FFO per share was $0.64, compared with $0.67. The decrease in FFO excluding non-recurring items was principally due to dilution from sales under our ATM program the proceeds of which were used to fund investments and reduce our leverage. During the quarter we sold a total of six properties in Florida and Texas with 268 combined units and sold our interest in a joint venture in Wisconsin. The combined sales price was $26.3 million. We received proceeds of $25.4 million net of transaction costs and recorded gains of approximately $3.3 million. You can find more details about these sales in the press release we issued yesterday afternoon. Subsequent to the end of the first quarter of 2024, we sold two assisted living communities in Texas with a combined 70 units that were built in 1995 and previously had been closed. The combined sales price was $500,000 and we received approximately $400,000 of proceeds net of transaction costs. During the first quarter we funded $2.9 million of a previously disclosed $19.5 million mortgage loan commitment for the construction of an assisted living and memory care community in Michigan. LTC’s investment represents 62% of the estimated project cost. During the first quarter we sold approximately 139,000 shares of LTC’s common stock for net proceeds of $4.5 million under our ATM program. Subsequent to the end of the quarter we sold approximately 205,000 additional shares of common stock for $6.5 million in net proceeds. Proceeds from the ATM sales were used for investments and to reduce our leverage. Additionally, we repaid $25.2 million under our unsecured revolving line of credit and repaid $6 million in scheduled principal pay downs on our senior unsecured notes. We also paid $24.6 million in common dividends marking our 216th consecutive monthly dividend payment, which continued throughout the pandemic when other health care REITs decreased theirs. Our debt to annualized adjusted EBITDA for real estate stands at 5.5 times and our annualized adjusted fixed charge coverage ratio was 3.5 times. Although our debt to annualized adjusted EBITDA for real estate metric remains higher than our long-term target we anticipate we will achieve this metric by year end as a result of recent investments, anticipated pay downs on our line of credit using proceeds from loan payoffs and scheduled principal pay downs on our senior unsecured notes. You can find more detail about our loan receivable maturities on Page 12 of our supplemental. Currently we have total liquidity of nearly $197 million including $9 million of cash on hand, $123 million available on our line of credit with $277 million outstanding and roughly $65 million available under our ATM. Now I’ll turn the call over to Clint.

Clint Malin: Thank you, Pam. I’ll start my remarks today with recent transactions, as well as a few brief updates on some of our operating partners. We have resolved the remaining 10 non-revenue generating properties discussed on last quarter’s call. Three of these properties we released and the remainder were sold. You can find specific details in yesterday’s press release. Subsequent to the end of the quarter we announced the origination of a $12.7 million senior loan to Ignite Medical Resorts, a current LTC operator. The loan which was primarily funded using our ATM is secured by a skilled nursing and assisted living campus which was built in 2017 and is located in a Houston suburb. The five-year loan is interest only at a rate of 9.15%. In accordance with GAAP, we are accounting for the loan as an unconsolidated joint venture and we expect to generate approximately $884,000 of revenue in 2024. To-date, we have managed approximately 80% of our lease maturities through 2025. First, we executed a term sheet with HMG whereby we have reached an agreement in principle to amend the master lease covering 11 skilled nursing centers in Texas to extend its term through December 2028. Annual rent in 2024 is $9 million, a $1 million increase over 2023. Rent will increase to $9.5 million for 2025 and $10 million for 2026, escalating 3.3% annually thereafter. The amended master lease will provide HMG with two five-year renewal options with rent in the initial year of the first renewal term adjusting to fair market rent subject to a collar between 2.5% and 12.5%. As a condition of the amendment, HMG will repay $11.9 million on its $13.5 million working capital note in the 2024 second quarter. Upon repayment, the remaining balance of the note will be interest-free and will be paid in installments through 2028. Proceeds from this 4% working capital note will be used to pay down higher interest debt or to fund accretive investments. In addition, an operator of five properties not in our top 10 has exercised its renewal option of the master lease for another five years at its contractual rate from March 2025 through February of 2030. Quickly, occupancy for the Prestige Healthcare loan secured by 15 properties in Michigan was 77% in March of 2024, an increase from 73% in the year ago period and up from 75% in January this year. Regarding our assisted living portfolios with quarterly market-based rent resets, we received $525,000 during the first quarter of 2024 and continue to expect to receive $3.3 million in total for 2024. Now, I will provide insight into our portfolio numbers, which exclude properties transitioned on or after October 1, 2022. Q4 trailing 12-month EBITDARM and EBITDAR coverage for our assisted living portfolio as reported using a 5% management fee was 1.31 times and 1.07 times respectively. Excluding stimulus funds received by our operators, coverage is 1.28 times and 1.03 times respectively. For our skilled nursing portfolio, as reported EBITDARM and EBITDAR coverage was 1.84 times and 1.34 times, respectively. Excluding stimulus funds received by our operators, coverage was 1.71 times and 1.21 times, respectively. As a result of occupancy increases and margin improvement, same-store Q4 trailing 12-month EBITDAR coverage has improved from the prior quarter same-store coverage by 11 basis points for our assisted living portfolio and 3 basis points for our skilled nursing portfolio. Recent general occupancy trends include private pay occupancy of 88% at March 31 up from 87% at both January 31 and September 30, 2023. For our skilled nursing portfolio, average monthly occupancy grew to 75% in March from 74% in January and 72% in September. The data include approximately 66% of our total same-store private pay units and approximately 87% of our same-store skilled nursing beds. Our business development team is continuously refining our offerings to meet dynamic customer demands from traditional triple net leases to structured finance products including mezzanine loans, preferred equity investments, creative joint ventures, and construction and unit launch loans. We pride ourselves on crafting these customized solutions that cater uniquely to operators’ needs while ensuring any transactions we complete are aimed at further driving shareholder value. Looking forward, inflation remains somewhat of a wild card and banks continue to consider their options prior to any decision making about maturing loans on their books. Regardless, we are building our pipeline with interesting opportunities that are varied by financing vehicle, property type, operator and size. Now I’ll turn things back to Wendy for her closing remarks.

Wendy Simpson: Thank you, Pam and Clint. I’ll conclude today with this. LTC is a compelling investment. One, we have consistency of leadership with a successful track record. Two, our monthly dividend is well covered. Three, we have laddered debt maturities matched to cash flow, which reduces refinancing risk. Four, we have built a diversified portfolio balanced between skilled nursing and private pay seniors housing, employing various financing structures to provide LTC with a steady stream of income and liquidity and to match our operators’ needs. Last but not least, our smaller asset base makes it easier to drive growth, because smaller investments can contribute meaningful accretion. We can achieve significant growth without making a large-scale transformative investment. We recognize that our current stock price multiple is below our historical average. We believe this reflects our focus on asset management initiatives during the pandemic. The majority of our internal resources are dedicated to growth, so our multiple should begin to expand as we demonstrate the conversion of our pipeline to accretive investments. Thank you, everyone. We appreciate your ongoing support and look forward to talking to you again next quarter. Operator, we’re ready to take questions.

Operator: Thank you. [Operator Instructions] Thank you. Our first question is coming from Austin Wurschmidt with KeyBanc. Your line is live.

Austin Wurschmidt: Thanks. Good morning, everybody. Wendy or Clint, you highlighted multiple investment opportunities being evaluated today. Can you share some additional detail around the style and scope of the pipeline? And then I appreciate your comment on smaller kind of one-off deals moving the needle, but can you just speak to the competition in the transaction market today?

Clint Malin: Sure. So we — when we quote our — when we give a pipeline quote, historically we’ve given that when deals have near-term visibility. As we’re building that pipeline, hopefully next quarter we’ll be able to give more visibility on that. But at this point, we’re seeing more opportunities to invest on private pay assets and some select opportunities on the skilled nursing side, such as our recent investment with Ignite for newer skilled nursing assets. Currently, the inbounds skew towards senior loans, construction loans, mezz and preferred equity investments. But as we see these loan maturities that are coming, we think that’ll be an opportunity for us to actually look at equity investments in doing sale-leasebacks, as well as joint ventures.

Austin Wurschmidt: I guess, what’s the appetite to do some of those loan type investments and what do you think the average duration of those deals are versus…

Clint Malin: We definitely have appetite to do. We definitely have appetite and it’s going to be, I would say, probably somewhere in the three-year to five-year range.

Austin Wurschmidt: Got it. And then just from a funding perspective, I mean, how are you thinking of funding the pickup and investment? Could we expect that you’ll over-equitize those and further drive down leverage or kind of hang in around your target range?

Wendy Simpson: We will equitize. Austin, we will use equity.

Austin Wurschmidt: Understood. Thank you.

Operator: Thank you. Our next question is coming from Juan Sanabria with BMO Capital Markets.

Juan Sanabria: Hi. Hi. Hopefully, it goes away. Just trying to get a better sense [Technical Difficulty] cap rates are. [Technical Difficulty] Sounds like it’s still skewed for loans, but if you can get more color on cap rates, that would be great?

Clint Malin: Sure, Juan. Your line is cutting out a little bit, but I think regarding cap rates, I mean, right now we’re looking at a new investment in the 9% range, plus or minus, depending on whether it’s loans or owned assets. For mezz and preferred equity, there’s usually around a 9% target rate that would go with an IRR exit around 12%.

Juan Sanabria: Thanks. And then I’m hoping you can give a little color on the [Technical Difficulty] normal FFO guidance. [Technical Difficulty] second quarter numbers [Technical Difficulty] provided at the outset and if you can give any color on [Technical Difficulty] repayments that were far outlined [Technical Difficulty]?

Wendy Simpson: Sure. Sure. Juan, it’s really hard to hear you because it’s cutting out, but I think you asked about our guidance, the quarterly and annual guidance. It includes everything that we’ve announced, but we have not included any assumption for additional investments, but it does include the increases in rental rates from HMG and then also our transition portfolio that we gave guidance on last quarter. We’re reiterating that. So there’s nothing else in there. We kind of give a base rate for guidance and then allow analysts and investors to layer on their own investment assumptions beyond that. And what was the second part of your question?

Juan Sanabria: The timing on the…

Wendy Simpson: Oh! The timing. Yeah. The loan repayments. Yes. Yes. I’m sorry. The timing on the loan repayments, that is outlined in the supplemental on Page 12, but it is the fourth quarter. We have two loans that are maturing in the fourth quarter, totaling about $80 million.

Juan Sanabria: Thank you.

Wendy Simpson: And we’re in discussions with the operators on that, the borrowers. And as we’ve talked about before, in giving loans, it is not our strategy to do all loans. We have loans that we make available to operators to meet their needs, but we always do look to possibly convert those to long-term equity ownership. So if there’s an opportunity to do that, we will, or if there’s an opportunity to stay in those investments in some capacity, we would look to do that as well. We like these two investments. So we’re in discussions with the operators on that.

Operator: Thank you. Our next question is coming from Rich Anderson with Wedbush. Your line is live.

Rich Anderson: Yeah. I’m getting some mental vertigo here with the echo. I hope you can hear me. But I only have one question. A lot of structured deals you talked about, Clint. I’m wondering, what’s your comfort level in terms of loans, or I should say, anything else besides fee simple ownership as a percentage of the total? How far are you willing to go up on that before risking being viewed as a mortgage read or something like that? You’re anywhere near that. But I’m just curious if you have a threshold in mind about how high you want to go on that level of investment?

Pam Kessler: We don’t — hi, Richard, Pam. We don’t have a set threshold, but we are very mindful of that.

Rich Anderson: Okay.

Pam Kessler: And we really look at our structured product as a marketing tool and a way to get exposure with operators that might not normally look to refinancing and that want to retain some ownership in their properties. I mean, that’s been a big hurdle in marketing sale-leasebacks to operators. There are operators out there that are like, I’ll never do a sale-leaseback with a REIT. Well, that’s a big portion of the marketplace that we feel if we can get an inroad with them and they can get exposure to LTC and our way of doing business, that they might actually convert to ownership equity. We saw that happen with Pruitt. They had never done a sale-leaseback with a REIT before and they did one with us. We worked a long time on that relationship and that’s what our business development team is out there doing, looking for operators that are new to REIT financing and getting an inroad with them.

Clint Malin: Yeah. Richard, it’s not just yield focused. As Pam said, this is really an opportunity to partner with operating companies with an investment structure they’re familiar with that leads us to dialogue and other opportunities they might have. It’s really more marketing, as Pam mentioned. From a mortgage REIT standpoint, we’re staying in equity REIT.

Rich Anderson: Okay. I’m sure of that. I do have one more question. The question was asked, how are you financing this stuff? The quick answer from Wendy was we’re going to use equity. But through your ATM, you raised about $10 million or $11 million this year. So, that doesn’t really fill the gap so much, that amount at least, in terms of what I’m thinking about for your activity going forward. So, when you — can you expand upon the funding strategy beyond just saying we’re using equities that are certainly more in the way of issuance? But also, are there other priorities downstream from equity that you might use more dispositions? I mean, just — if we can get more color on the financing side of things, that’d be great? Thanks.

Pam Kessler: Sure. Sure. It’s Pam. So, equity on the ATM is our primary way of financing your one-off investments, like the KD loan that we did this year. We’ve almost equitized that 100%. And going forward, for the smaller one-offs or two-property portfolios, the ATM is great. If we were looking at a large portfolio transaction, I know it sounds very old-fashioned, but there’s still an overnight marketed deal that could be done and that’s a good way to place stock in the hands of new potential investors. But we don’t have anything like that on the horizon right now. And as I discussed, we have the $80 million in loan proceeds that currently we’re anticipating are going to payoff and so those would also be used to fund new investments.

Rich Anderson: Okay. What about disposition?

Pam Kessler: We’ve done a lot of dispositions over the past 24 months and we don’t have anything immediately on the horizon. So, we’re not looking right now at financing growth with any more dispositions.

Rich Anderson: Okay. That’s it for me. Thank you.

Pam Kessler: Thanks.

Operator: Thank you. [Operator Instructions] Our next question is coming from Michael Carroll with RBC Capital Markets. Your line is live.

Michael Carroll: Yeah. Thanks. Sorry, I was missing some of these questions during getting some bad feedback. It seems like everything’s fine now. But can you provide some background on the HMG lease negotiations? I know last quarter, you temporarily extended that lease to August, and today, you announced the amendment through the end of 2028. I guess, what changed there? I guess, what facilitated this lease amendment that increased your rent and extended the lease term?

Clint Malin: Hi, Mike. It’s Clint. So, we’ve been actively working on this. The — as the buildings have increased occupancy, as margins have improved, it’s really trying to figure out how do we structure that from a rent basis. You had the pending staffing rule that was out there. It was just finalized recently. So, there were these elements that were out there that we needed to collectively focus on with HMG to be able to look at a longer term horizon, which it took some time to do that. But as you saw from the rent growth that we’re getting off of this, not only in 2024, but going forward, that was a positive as well.

Michael Carroll: Okay. And then, correct me if I’m wrong, Clint, but are there two different master leases?

Clint Malin: There are not. We have — we talked initially about…

Wendy Simpson: Talking about the other master lease.

Clint Malin: Oh! The other one. No. Yeah. There is two other — we have two separate master leases. Yeah.

Michael Carroll: Great.

Clint Malin: And then, also, Austin is on the — we had the line of credit outstanding with HMG as well that we needed. That was a temporary financing, not temporary, but it was a short-term financing when we recently took the properties back from senior care centers. So, we wanted to be able to get that paid off to redeploy at higher yields, because that was a 4% yield on that line of credit.

Wendy Simpson: Yeah.

Pam Kessler: So, they needed to get…

Wendy Simpson: Yeah.

Pam Kessler: … a working capital line of credit.

Wendy Simpson: Yeah. Yeah. And they need a longer-term lease to do that. And just to clarify for everybody, with HMG, we have two separate master leases. We’ve had one which covers two properties that was pre-existing, this new 11-property master lease. I think there was some confusion around that. So, there are two separate master leases. We are just talking about the 11-property master lease.

Michael Carroll: Okay.

Clint Malin: So, also on that, too, is we want to look at how do we get — how we ramp up rent on this? What was important to us in this negotiation was getting a fair market rent reset at some point and we were able to negotiate that into the overall terms of the amendment.

Michael Carroll: Okay. And then what’s the rent on the two-asset master lease and do you plan on selling those?

Clint Malin: No. We don’t have any plans on selling those. Obviously, it was structured before and it’s typical where you’ve got a 10-year initial term.

Michael Carroll: Okay. Great. And then…

Clint Malin: [Inaudible]

Michael Carroll: Okay. Great. Sorry. The feedback or the echo’s back. So, it’s hard to ask a question. But just real quick, on the market-based lease rent forecasts that you provided, that you kept at the $3.3 million for 2024, does that rent include anything related to the ALG April transitions? I know they’re not paying rent through October, but are they expected to pay rent in November and December, and is that included in that $3.3 million number?

Clint Malin: Oh! There’s no rent included in that number for those buildings.

Wendy Simpson: He’s asking about the non-revenue producing.

Clint Malin: Yeah. That’s not in the $3.3 million.

Michael Carroll: Okay. Great. And you expect to get rent from those assets after the free rent period?

Clint Malin: Correct.

Michael Carroll: Okay. Perfect. Thanks.

Clint Malin: Thank you.

Operator: Thank you. As we have reached the end of our question-and-answer session, I will now turn the call back over to Wendy Simpson for closing remarks.

Wendy Simpson: Thank you all for joining us for the first quarter and we’re really excited about this year, and we hope to bring you additional good news after our second quarter ends. Have a great day.

Operator: Thank you, ladies and gentlemen. This does conclude today’s conference call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.

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