LTC Properties, Inc. Third Quarter 2026 Earnings Call - LTC PROPERTIES INC

Greetings, and welcome to the LTC Properties 3rd Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. Joining us on today's call are Pam Kessler, Co-President and Co-Chief Executive Officer, Clint Malin, Co‑President, and Co‑Chief, Executive Officer. C.C. Chikau, Executive Vice President and Chief Financial Officer and Treasurer. Gibson Satterwhite, Executive Vise President of Asset Management. Dave Botano, Executive Vice President and Chief Investment Officer. Before management begins its presentation, please know 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 uncertaincies 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, 2025. 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 conference over to LTC Management. Good morning, everyone, and thank you for joining us. Our SHOP strategy is delivering from a growth perspective and has fundamentally reshaped LTC's future. We launched SHOP in May of 2025 and are rapidly transforming from a lower-growth triple-net lease and lending platform into a SHOP-focused REIT with a higher intrinsic growth profile. Last quarter, we increased our 2026 midpoint acquisition guidance by 50% to $900 million and have since surpassed that guidance with approximately $950 million in SHOP acquisitions closed through October. We expect total acquisitions for the year of approximately $1 billion, at which point shop will have grown from zero communities into a $1.6 billion portfolio over 19 months. Additionally, we have expanded our shop-operator relationships to 14, including one new relationship added last month. 2026 has been a historic year for LTC. As we continue to focus on the tremendous opportunities ahead of us, our sights are set firmly on 2027. To date, we have $200 million of shop acquisitions that are expected to close in the first quarter of next year, which will also add a new shop-operator relationship to our portfolio. At an expected $1 billion of shop acquisitions in 2026, the portfolio will represent 50% of LTC's pro forma annualized NOI at year end. At this level, our pro forma internal growth rate triples, and as shop continues to expand as a larger share of our total portfolio, our expected growth rate increases even further, significantly enhancing our ability to organically grow core FFO and FAD per share above the historical levels. As we have previously discussed, at our current shop acquisition pace, we see a pathway to generating approximately 75% of our annualized NOI from shop by the end of 2028. This timeline can be accelerated should we identify additional opportunities to recycle capital out of older and lower growth triple net lease assets. We are proud of what we have achieved, but even more excited about what lies ahead. Transformation is no longer a future objective. It is happening now, and LTC is entering a new chapter of growth, scale, and value creation. Now Gibson will walk us through LTC's operating portfolio. Thank you, Clint. We are continuing to optimize risk-adjusted returns and increase the intrinsic growth profile of our own portfolio by recycling capital into shop. In the third quarter, we generated about $465 million of gross proceeds by selling triple net assets at an implied cap rate on our rent of approximately 5.5%. And the $180 million prestige loan is currently slated to pay off on November 24th. Going into next year, we will continue to capitalize on opportunities to recycle capital as we look to further accelerate our portfolio transformation. We're also taking action on the 10 property portfolios subject to market-based rent resets. Of these 10 properties, we recently began the sales process for three. Another two of the 10 properties have been converted into a long-term lease with initial annualized rent of $2.4 million. The lease contains a shop conversion option that could be exercised as early as the first quarter of 2027. For the remaining five properties, we plan to negotiate a long-term lease in advance of the current lease expiration next year. We expect to recognize rent of $780,000 in the fourth quarter from these five properties. With respect to our core shop portfolio, we are narrowing our 2026 guidance to $53.5 to $55.5 million, half a million dollars below our prior range at the new midpoint of $54.5 billion. The reduction is primarily due to a change in care and unit occupancy mix and a Medicaid rate decrease received in Q3 retroactive to July 1, which affects two standalone memory care communities in our portfolio. Excluding these two communities, Medicaid as a percentage of our shop revenue is approximately 3% and is primarily offered as a spend down option in states with rates on par with private pay rates. For private pay, our operators have been able to implement strong rate increases, and we expect that to continue into 2027. The current guidance range for our core shop portfolio represents approximately 11% to 15% pro forma growth for the prior year and 13% at the midpoint. The underlying fundamentals of our business are strong. As we have outlined in prior calls, we believe that our core shop portfolio can achieve high single to low double-digit NOI growth with a 200 basis point spread between bread core and export, even at zero occupancy growth. To be clear, we do expect that our operators will continue to drive occupancy grows going forward. We're excited about the new and expanded operator relationships we've cultivated, the quality of the communities in our portfolio, and their markets. We believe that our shop portfolio is well-positioned to deliver the growth necessary to transform the intrinsic growth profile of our overall portfolio as we continue to increase our shop mix. Now, Dave will discuss our recent investment activity. Thanks, Gibson. We are executing successfully in a dynamic shop acquisition market, maintaining our strong momentum and enhancing LTC's growth trajectory. LTC's differentiated approach centers on aligning quality assets with exceptional operators in markets with strong demand fundamentals, creating a portfolio built both for performance today and growth over time. We've established a strong pool of operators who are well-suited to the profile of communities we're acquiring, allowing us to move quickly as opportunities arise. SHOP has opened a much larger opportunity set for LTC, and we are seeing significantly greater deal flow in 2026 than at any time in our history. We have been selective and strategic in vetting opportunities to pursue only acquisitions that fit our buy box. Illustrating our focus, the acquisitions we have closed in 2027 represent less than 5% of screen deal volume. Heading into 2027, we expect deal flow to remain strong, especially in a higher interest rate environment, and as loans originated at lower rates mature and drive owners to consider monetization ahead of those maturities. Nick estimates that nearly $40 billion in loans will mature over the next four years. We are building our portfolio methodically. Investment decisions are guided by key fundamentals, including occupancy, asset quality, property scale, unit mix, size, and configuration, and market dynamics to assemble a portfolio positioned to perform for the long run. LTC's collaborative, execution-oriented culture resonates with operators, sellers, and intermediaries. Our reputation for responsiveness, transaction certainty, and disciplined execution reinforces our relationships, enhances our strategic advantage, and drives a robust acquisition pipeline. 2026 has been a year of unprecedented growth, positioning shop acquisitions to reach $1 billion by the end of the year. This more than doubles our prior year investment activity, making 2026 the most active year in LTC's history and setting the stage for a new LTC growth era. The opportunities we see in the market today, together with our growing operator relationships and sourcing network, give us confidence in our ability to sustain our momentum into 2027 and beyond. Now, over to CeCe for a review of our financial results. Thank you, Dave. With a recently expanded credit facility, a new ATM agreement, proceeds from asset sales, and the expected payoff of the Prestige Loan, we have ample liquidity and flexibility to capitalize on opportunities as they emerge to continue our growth trajectory into 2027, while creating additional NOI upside. Our pro forma liquidity stands at over $900 million, including the sale of 2.3 million shares of common stock for $97 million in net proceeds in the third and fourth quarters to date, and asset sales of about $465 million of gross proceeds in third quarter. Our proforma debt to annualized adjusted EBITDA for real estate was 4.4 times, and our annualized adjusted fixed charge coverage ratio was 4,9 times. We remain well within our target rate of four to five times debt to EBITDA, although leverage may move within that range based on time of acquisitions, asset sales, loan payoffs, and ATM proceeds. Core FFO per share was $0.71 for the third quarter, compared with $0,69 last year, and core FAD per share with $.73 compared to $0 .72. The increase in core FFO primarily relates to a net increase in shop NOI from acquisitions and conversions, and an increase in interest income from loan originations and construction funding. This was offset by decreases from property sales and loan and financing receivable payoffs and an decrease in interest expense. The increase in core FAD is primarily due to the same factors as the increase in Core FFO, as well as rent escalations offset by increase in recurring capital expenditures due to shop acquisitions. Our 2026 full-year guidance range remains unchanged. Although we've narrowed some of the underlying assumptions based on results through the third quarter, we remain on track to deliver within our expected range of core FFO per share of $276 to $278 and core FAD per share between $283 to $285. Our assumptions are detailed in yesterday's press release and in our supplemental package, which are available on the LTC website. I'll turn things over to Pam. Thank you, Cece. We introduced our shop strategy a year and a half ago with a clear vision for creating a differentiated growth engine, positioning the company to capitalize on opportunities across the seniors housing sector and enhancing LTC's earnings profile. Our accomplishments to date reflect the strength of that strategy and our team's execution. Recent stock price momentum indicates that investors value the potential higher future growth from our strategic shift into SHOP. As Clint mentioned, by year-end, SHOP will represent 50% of annualized NOI and has become a significant driver of LTC's growth. This shift from 19 months ago reflects not only the scale of the opportunity, but our ability to establish and cultivate industry-wide relationships. Our objective has never been simply to grow the portfolio for growth sake. We have been intentional about assembling a collection of communities positioned to succeed in today's environment and remain competitive as market conditions evolve. The communities we own and seek to acquire have established market positions, attractive demographics, and physical layouts that support long-term resident demand. Our balance sheet is a strategic advantage. As noted, with our expanded credit facility, pro forma liquidity of $900 million, and the anticipated $180 million payoff of the Prestige Loan, we have substantial financial flexibility to continue funding growth. Additionally, we are proactively and successfully used our ATM to fund acquisitions, demonstrating the growing appetite for investment in LTC. In fact, comparing September 2024, prior to announcing our shop strategy, to October 2026, the notional value of our average daily trading volume increased nearly 175% from $10 million to $27 million per day. Eric Clark, our new Senior Vice President, Corporate Finance and investor relations will be instrumental in driving that further. Welcome, Eric. We're glad to have you on board. Our transformation has been a true group effort and our success would not be possible without the trust of our operators and the dedication of our team. We are grateful operators choose to work with LTC and have confidence in our ability to support their efforts to provide care and services to seniors across the country, while our team has proven day in and day out that with discipline, execution, and commitment, we can move faster and accomplish more. LTC has evolved rapidly by delivering on the strategy we first laid out when launching SHOP. While our goals were ambitious, we have successfully built a scalable platform that is generating considerable momentum. As a result, we believe we are better positioned than ever to drive sustainable earnings growth, increase portfolio resilience, and create meaningful long-term value for our shareholders. We are now ready to take audience questions. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. The participants using speaker equipment may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Michael Carroll with RBC Capital Markets. Please proceed with your question. Yeah, thanks. I guess, Clint, I appreciate the comments that you guys made that the total shop portfolio can generate high single-digit NOI growth or low double-digital NOI growth with just a 200 basis point spread between rev pour and export. I mean, is that a good measure for the broader portfolio? And maybe is there a split we should think about between the freestanding memory care portion of the shop and the rest of the shop portfolio? I think, Mike, well, I'll give some talk about some of the detail on that. But, you know, broadly speaking, we designed this core portfolio to give transparency to what we've been acquiring. You know, that includes properties acquired through early January. But, 12 of that 27 in our core portfolio are standalone memory care assets, which have different fundamentals as far as security, rate growth, which differs from our portfolio more broadly. So right now we have 50 buildings in our shop portfolio, of which, you know, we have about, I guess, 14 that are freestanding memory care. So there's different compositions and profiles to that. But Gibson, why don't you talk about the spread between rev port export? Yeah, Mike, it's a good question. It's a fair question. I'll hedge a little bit by saying we'll keep our comments focused on core for now. And then as we work through the budgeting process, we're now up to 50 properties, you know, core portfolio is 27 of those. we can be happy to revisit. I will say that as we roll new acquisitions in, the rev pour is kind of coming in around the range that you're seeing in our total rev pour range in our supplemental slides, so call it mid-sevens. And the acquisitions team, as we're underwriting, feels like that possibility is there. So we're not underwriting a lot of occupancy growth on stabilized acquisitions. We're underwriting that spread. So, I think, you know, given those, I don't suspect there's going to be a big change, but, you now, we can put a pin in this after we work through budget season. But we do, generally speaking, yes, we feel confident in that thesis, and we're obviously putting a lot of money and time and energy behind that. Okay. And it sounds like the Medicaid issue is tied to two communities within the memory care portfolio. Can you give us the breakout of the Medicaid exposure within the memory care portfolio alone? And is it only two communities that have a lot of Medicaid exposure and the rest is included in that 3% number you provided? Yeah, that's right. That's right, Mike. So it's primarily concentrated in those. Those two are in a state that has good reimbursement on par with private pay and it's a niche program in that state where you know they can take in residents you know, they get equivalent to what you might get in the skilled nursing but they're able to get that in a residential setting. So that was you know that was the unfortunately right after we we rolled out guidance and increase our report guidance on the last call we found out about that you know that that that decision was issued after our last call but yeah the rest of portfolio the bulk of it is in is in those buildings okay and then just last question from me um on the potential asset sales i know that there was that one sniff tenant that's going to be elect to exercise its purchase option um i know in the press release you gave us the mechanics on how the purchase price is going to be decided um but can you give us an idea what the potential yield can be is it going to in like the low eight-ish percent type range is that kind of a fair estimate or is it a little bit different than that so we know we're in the process of determining this and we structure this transaction to where we can participate in value creation of those buildings so uh i think it's too early to give you a specific number but we feel uh confident in our how we structured the transaction to not just be paid off at our gross book to participate in upside um in those properties so we'll provide more color on that on probably our next earnings school okay great thank you thank you our next question is from Rob Stevenson with Huntington please proceed with your question a good morning guys just on the skilled nursing psyche talk about what the disposition market looks like there today given most people's higher cost of capital how materially is pricing for those assets being impacted today and demand etc that you're seeing I leave We've experienced in recent transactions where there's been tremendous appetite, primarily in the private buyer market, for skilled nursing. So we haven't seen a change in that. It seems to be very robust. Yeah, in interest rates, you're probably getting at the increase in interest rights and what, you know, what effect that's had. But we haven'T seen that have a material effect on the appetite or pricing within the skilled nursing industry. Okay. Are these, the dispositions you guys have done recently, have they gone to, you know, normal buyers or is this part of the sort of fervor of 1031 and bonus depreciation buyers that seem to be supporting the market to a greater extent here in the fourth quarter? Well, for us, it's generally been the operator. So maybe that's why we're not seeing any price changes because, you Know, the operator, especially under a lease is going to be your strongest buyer. But in other cases where we sold, I mean, it's not been to the existing operator in a couple of cases. It's been buyers that are known quantities in the industry that have been long-term investors. Okay. That's helpful. And then notice that export on the core shop portfolio declined quarter over quarter. Is that just short-term noise or is there some significant initiatives that you guys have underway in the portfolio to reduce cost on the expense side? I call it a little bit of noise. Hi, this is Gibson. I call a little bit of a noise. Just keep in mind that, you know, 27 properties in and of itself is a pretty small sample size when you're talking about the same sort of portfolio. And then again, 12 of those are standalone memory care. So you get, you get more variance around whatever the mean is from quarter to quarter. On balance, the reductions there were some successful property tax appeals and better GLPL experience, but nothing that's really – I mean, those are real and those kind of carry forward, but structurally, I would call that just some changes, improvements around the edges. Okay. That's helpful. Thanks, guys. Appreciate the time this morning. Sure. Our next question is from Omokeo Okasana with The True Bank. Please proceed with your question. Yes. Good morning, all. I'm just kind of curious from a regulatory perspective if, again, the midterm results create any additional or even a reduction in regulatory risk. And then also specifically, if you've heard any additional news around CMS and some of the talk about them recalibrating PDPM because of concerns about upcharging. Hi, Tayo. I mean, there's always regulatory risk, right? And I don't see that changing significantly now versus in the past. I think broadly there's been bipartisan pushback against some of the initiatives from the more progressive side. And I think at the end of the day, cooler heads prevail on that and a lot of it's headline noise. But it's certainly something that we keep an eye on. And we do feel, we feel positive about by moving our portfolio to more of a shop focus on a private pay model than on reimbursed models. Gotcha. That's helpful. And then on the shop side, again, you know, really good activity from an investment perspective. So you guys are clearly getting deals done. But then you also mentioned that it is kind of increasingly competitive out there. So can you just talk a little bit about some of the things you're doing to still kind of get your fair share of transactions that you're interested in? Sure. This is Dave. So our byword would be relationship, right? We're super focused on our operator relationships, our intermediary relationships. and being there, whether it's one building or two or three, being super responsive. I think one of the, if you say, non-balance sheet assets for us are our operator relationships because they give us an early look at situations and opportunities and a chance to sort of continue that relationship and grow with them. So just servicing as much as we can, everybody we touch, and maintaining what I call our LCC brand in terms of responsiveness and being on it and cutting to the quick. If something doesn't fit, we'll tell them. If it doesn't work, if something does work, we're going to lean in hard. Thank you. Our next question is from Juan Sanabria with BMO Capital Markets. Please proceed with your question. Good morning. Thanks for the time. I'm just curious if you could maybe talk a little bit about how investors should think about the growth profile of the company. I think you said given what you've done to shop, growing shop, that the growth profiles from our cash flow basis, NOI or rents, has gone up 3x. And when that should begin to flow through to the bottom line, how that morphs. I know a lot of the movements in 26 have been kind of capital recycling that's been neutral to earnings. But how does that change, if at all, for 27, just given you have more higher growth shop assets at present? Yeah, thanks, Juan. You know, there has been, to your point, a lot of noise in the flow through from our acquisitions due to the capital recycling. And that kind of, you know, you have a forward 12 months of that, and especially with the Prestige loan payoff here in November. But once that's all, you know, flown through the comparative periods, you have 50% or more of, you know, the shop is dropping to the bottom line as the shop NOI percentage grows. And I talked about on last call, we were looking at just the math getting to 75% in 2028. That flows through to the bottomline because there's not much incremental cost from a corporate standpoint to that. So, it increases significantly. Okay. So, not to put words in your mouth, but we should see earnings growth in 27? As we continue to acquire properties, yes. I mean, we did say and prepare. I'm sorry, what did I say? One in 28. Yeah, 28. I mean there will be in 27 we have flow through, but we have 11 months of the prestige payoff that also flows through to counterbalance that okay and then just going forward i mean beyond prestige it's the is the focus more on pruning continuing to prune skilled nursing you talked about good appetite from the buyers there i know some of your peers have been more focused on give asset management and capturing higher rent coverage levels through higher rent either with existing or new tenants and just kind of a strategy or philosophy on how you approach those opportunities is it more skewed towards dispositions and continuing to upweight shop or is it capturing higher growth than traditionally is available through your system because of red resets sure well we had examples of that early in the year when we recycled capital out of um skilled nursing leases that were expiring it really was us looking at a situational opportunity of really having a growth trajectory through shop and recycling that capital at an attractive rate for a higher growth profile of assets. So that was really a strategic decision as we really focus on growing our shop platform. We'll look at that as we go forward as far as opportunities, but if we do have ability to attractively recycle capital in existing leases to redeploy to shop, we have to be able to accelerate that growth to a higher gross profile. That's where we want to go. I mean, Their ultimate objective is driving per-share earnings growth. Beyond the loan payoff in November, anything else out there that we should expect? I know you flagged the purchase option that was going to be taken up here in the first quarter, I believe. But anything else other than loan repayments, ALG, et cetera, that could be a source of proceeds? We've always talked about ALG as a possibility. It's been a view of a shorter-duration investment, so it's possible those could lead to payoffs. We've set that aside as always a possibility. We're not exactly sure the timing of that, but we do have people, lessees in our portfolio call us about opportunities to look at purchasing assets. So we're not looking at doing transactions that are dilutive, but we'll update you on the next quarterly call in regard to any any changes on that appreciate the time thank you thank you our next question is from Jamie Feldman with Wells Fargo please proceed with your question hey good morning this is Jesus on for Jamie thanks for taking the question just looking at your shop margins over here relative to peers just how much of that gap right there reflects the higher acuity memory care mix and how much of that gap do you think you can narrow over time it's fair to say that our that our core margins are are impacted by by the memory care max and I think as we go into because you know at the beginning of the year when we rolled out the core portfolio 27 properties that was about 98 percent of our owned in a Y at the time and so by the time we get to the end of the year our core shop portfolio would call it you know fifty four and a half fifty five million that's going to be approximately half the verse like shop NOI on a pro forma basis at the end of the years so we'll give some consideration to you know how we constitute the core portfolio next year to you to capture kind of the broader trends but I think in the core or folio I think you're seeing the impact of the standalone memory care. Great. And for the acquisitions you're underwriting today, what's the permanent debt-to-equity funding mix that you're assuming here? And, like, what initial accretion hurdle must the deal clear? Well, we're continuing with the 70% equity, 30% debt. And it's pretty flat the first year as we've talked about, but there's, you know, looking at for future growth. Yeah, what we're buying is future growth if that's probably the best way to look at it. We're not spread investing at this point. I'll say the circle back to the initial question. I might suspect that some of our peers have higher component of IL in their same store as well. So that could be another factor. But for the higher margin? Yeah, but the memory care is a factor. Thanks, guys. Our next question is from Austin Werschmitt with KeyBank Capital Markets, Inc. Please proceed with your question. Hey, good morning, everybody. You guys referenced in the prepared remarks you've transacted on less than 5% of the assets that you've underwritten. And I was wondering if that's more a function of product quality or access to capital, just given a large amount of the acquisitions this year have been funded with, you know, proceeds from capital recycling. So to the extent the opportunity to access the equity markets expands, how does that potentially increase your ability to kind of grow the acquisition pace from what you've seen this year? Well, the capital markets is not constraining growth. it's the opportunity set. And I think we're getting our fair share at a billion dollars this year. We're certainly getting our share of the opportunity that I think our buy box is probably much smaller than, you know, some of our peers. And we're being very selective, as we've talked about all year long of what we're buying, and we will continue to be selective. But right now, we don't see the opportunity net narrowing. Our pipeline for next year already looks good. So we're very optimistic about 2027 and our ability to transact at the same volume level as this year. Thanks, Pam. Appreciate the thoughts. And then Gibson, within shop, how does performance this year within the core portfolio, as well as just from what you've seen as far as the acquisitions, how the performance is stacking up versus underwriting, how does that all shape your thoughts about kind of the pace of occupancy upside in a given year? Yeah, well, I guess I'll answer it this way first. I think with the deals that we've been acquiring, they've been generally stabilized occupancy, so we haven't been making a big bet on stabilized occupacy. So it's really been come down to the ability to – the thesis has been that given the supply-demand dynamics that REV4 will continue to outpace the expenses, and we're seeing that play out. The top line of the core metrics, notwithstanding the day, I can get into that a little bit. On your question on how they are performing relative to underwriting, I think on balance, things are performing kind of in line or a little better with underwriting. If you spread that across core and on the brand new deals. Now, the new deals are just coming in, but on the core side, we actually, in our guidance, incorporated higher than underwriting expectations, and so that's coming in a little bigger. I think on balance, everything is performing in line with expectations with underwriting. On the RET4 side, I think as we look at kind of the underlying fundamentals in the business, you know, I mentioned some of the drivers behind that. So, you Know, if you think about the 50 basis point decline in our outlook for the full year pro forma year over year, about half of that, just slightly more than half of that was due to the Medicaid issue and those two in those two standalone memory care buildings the rest of that we view as and that's something that we feel like they can overcome in terms of the portfolio with continued occupancy growth in the overall portfolio and room for margin improvement if you look at the you know the other piece of that which was slightly less than than half of that change that was really due to unit mix across you know a little bit more IL than ALs, buildings that have both. You're not reducing staffing levels for that. A little less acuity in memory care around the margins. Again, you're not reducing staffing level for that, a little trend, you know, poorly trend to lower red core memory care units. And that, we just didn't, we feel like that'll sort itself out over time. We're not really concerned about that. We just didn'T model that to bounce back in Q4. You know, what we're seeing on the ground, the top line result in that kind of red core, us bringing red core down, is not what we're seeing on the ground. What we're saying on the grounds is, you know, we're not going to be able to do that. On the ground, with respect, if you just look at like-for-like care, unit type, you know, market, our operators have been, throughout the year, been able to implement strong rate increases, and as we head into next year, I think we're optimistic that we can do, you know, that they can do the same, kind of talking about in-place, mid-single digits to high single digits, in-placed rate growth. And so, you know, I feel like – we feel like the fundamentals are really strong on that. And on the expenses, you now, labor is the bulk of your cost structure. And we're not hearing a lot of acute pressure as we go into budgeting season as people look into 2027. Generally speaking, most people are talking about kind of cost of living increases. So I think we feel the fundamentals underlying the business are strong. We feel like some of the top line around the shop metrics are a little bit more noise than signal. Also, to add to Gibson's comment, there's also the acquisitions that we have invested in, we've retained the existing manager for the most part, other than a few opportunities. So that leads to consistency of leadership, staffing, familiarity with the markets, the buildings to be able to drive, you know, REV4 growth, as well as managed expense. So we're excited about that. And just to summarize some of that, the mid-to-high single-digit rate increase you referenced, is that the in-place growth at the outset of the year or sort of the pace of rev poor growth? And is 50 to 100 basis points of occupancy upside similar to what you're tracking towards this year, kind of a good run rate in terms of annual upside and the pace of occupancy growth? Yeah, we'll get, let me address that first. We'll get to the occupancy assumptions as we get into the next year, as we go through budget. You know, I might get my hand smacked if I commit to that now and go back to the operators and push it through that way. So I don't think it's unreasonable, but we'll gets to that as we do budget season. When I was talking about the potential rate growth on the table, that's in-place blended rent plus care for the in-place residents for your private pay residents. Now, that's considered at the range. Our experience is depending on who's doing that, more weighting towards certain portfolios that may blend you down to the lower end of that range. And as I just mentioned, we got a little bit of Medicaid around the margins. We don't really budget for any increases there. So we're, I wouldn't say to take the midpoint from five to nine and, you know, budget us for seven. But what I am saying is that as you look at kind of the in-place rates year over year and what people are what's on the table we don't really see deceleration of that it seems to be pretty consistent and be at levels that allow us to see the double you know that kind of high single digit low double digit growth organic growth in our shop portfolio that's uh that's helpful clarification would hate to see you or hear you get smacked thank you you. Our next question is from Rich Anderson with Cantor Fitzgerald. Please proceed with your question. Hey, thanks, and good morning out there. So, I just wanted one extra dose of clarification on this modest downtick on the core NOI from shop. I get half is the Medicaid issue. that's fine. The other half is this unit mix issue. That's going to happen all the time, right, for the rest of eternity as you're a shop owner. We're always going to have that change in care, change in unit mix sort of function. That is just the way the business goes. And so, Gibson, I think you said this, but I just want to make sure. If you had a quarter to go in the year, you make this change. But if you had five quarters, the REVPOR growth probably overwhelms this, and you don't actually have a reduction. Is that the right way to think about that messaging? That's right. Okay. Yeah, that's right, we're just not, it just, you know, we view that as, again, getting back to sample size, 27 properties, a lot of variants we're talking about in the standalone, you just can't, it's frankly, it is challenging to model quarter to quarter, but over the long term, it doesn't. I think you said it very well, Rich. Okay, and then this is probably obvious to everyone but me. But in the press release, you know, your total shop NOI also declined by the same amount, $500,000 or something. And I'm curious why that would have happened as you're growing so substantially through acquisitions. Why would have we seen shop total NOI guidance come down to that sort of, I don't know, $75 million range down a little bit from last time you spoke? Yeah, that's a fair question, Rich. We're pretty fully baked right now on our guidance. You know, so call it $20 million. So $55 million, we brought that down half a million in core. And so that's really kind of the incremental change around the margin. So that implies that we don't have any changes for, you know, we got five value-add properties, and then everything new that's been acquired relative to our model. So, you You know, I think we've got a little bit left potentially in the pipeline. But, you know, we've closed, what, 950 as of last Friday. And so that's kind of baked and that's known. And, you Know, we're just getting those properties into the portfolio. We're not moving guidance around for that. Okay. And then last question is a little bigger picture. You know you're buying at 7 plus initial cap rates. I think CC said flat in the first year based on your weighted cost of capital, which is fine. But I am curious as to that seven plus, the seven handle on the return. I mean, it's odd to me that an asset class that's growing so substantially can be acquired at elevated, what I would call elevated cap rates. You know, when you think of multifamily cap rates, which is growing nowhere near, you know, shop, those are five handle if you're lucky, you And so I'm curious your thought on the future of initial cap rates on your external growth profile and if we think that this seven-handle number is going to happen in perpetuity. Thanks. Well, Rich, on that, if you look at slide five in our supplemental, I mean, we give our year one projected cap rates for our deals. And you can see that there's cap rate compression on the most recent deals we've done in sort of the six-and-a-half range. So, that's where we see opportunity going forward in that range. Could there be a little more compression? Sure. But we're looking at transactions that are one or two asset proposed, not looking at large transactions. We've been fortunate to find a few deals that have been four or five buildings. So, what we're look at, we're finding opportunity with that, as Pam indicated. We're changing our mindset where we're not spread investing. We're looking at the composition of the buildings, which Dave spoke about in his prepared remarks, as far as the unit configuration, the size of the communities, the age to compete effectively against new development when it comes online. So we're, as Pam said, it's future growth that we're investing in. Yep, fair enough. And thanks for that, Culler, and thanks for pointing out my not reading slide five. I would have gotten to it eventually. All right, thank you, guys. Appreciate it. Thanks, Rich. We've reached the end of the question and answer session. I would like to turn the floor back over to Clint Malin for closing comments. Thank you for joining us today. We really appreciate your interest in LTC and our continued story. We look forward to seeing some of you at some upcoming investor conferences over the next couple of months. Thank you. Thank you very much. This concludes today's teleconference. You may disconnect your lines at this time.