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Executives

Wendy Simpson - President & CEO

Pam Kessler - EVP & CFO

Clint Malin - EVP & CIO

Analysts

Karin Ford - KeyBanc

Daniel Bernstein - Stifel Nicolaus

James Milam - Sandler O’Neill

Todd Stender - Wells Fargo

Mike Carroll - RBC Capital Markets

John Roberts - Hilliard Lyons

LTC Properties, Inc., (LTC) Q1 2013 Earnings Call May 1, 2013 10:00 AM ET

Operator

Good morning and welcome to the LTC Properties First Quarter 2013 Analyst and Investor Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions).

I’d like to remind everyone that today’s comments including the question-and-answer session will include forward-looking statements. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC Properties Inc. filings with the Securities and Exchange Commission including the company’s 10-K dated December 31, 2011. Please note this event is being recorded.

I would now like to turn the conference over to Wendy Simpson. Please go ahead.

Wendy Simpson

Thank you, Chad, and good morning everyone and thank you for joining us today. When we talked in February about the year end we had a good pipeline of deals, and though we've not completed a transaction in the first quarter we're very bullish on our opportunities for 2013. Clint will comment further on our pipeline, but I wanted to step out in front and tell you how positive I see this year in terms of growth from investment as well from development.

Our first presentation today will be from Pam Kessler, our Executive Vice President and Chief Financial Officer, who will comment on our financial results and operator coverage statistics. Pam?

Pam Kessler

Thank you, Wendy. I’m going to review this quarter compared to last quarter. I will refer you to our year-over-year analysis in our 10-Q that was filed yesterday.

Revenues increased this quarter approximately $1.2 million primarily due to acquisitions that were completed in the fourth quarter of last year. Interest expense increased approximately $200,000 due to higher balances on our line of credit resulting from the acquisitions in the fourth quarter.

G&A expense increased approximately $300,000. First quarter G&A includes a one-time charge of approximately $700,000 related to the retirement of our Senior Vice President Marketing and Strategic Planning. On a normalized basis G&A was approximately $400,000 lower in the first quarter primarily due to bonuses that were paid in the fourth quarter of last year.

Last quarter, I gave guidance of an average quarterly run rate for G&A of $2.6 million. At this time, I would like to take that guidance to an average G&A run rate of $2.7 million to reflect additional costs associated with potential increased transaction and development volume.

Net income available to common share holders increased $200,000 in the first quarter as a result of rental income from acquisitions partially offset by higher depreciation and amortization expense associated with those acquisitions.

Normalized fully diluted FFO per share was $0.61 this quarter compared to $0.56 last quarter. Normalized fully diluted FAD per share was $0.60 this quarter compared to $0.56 last quarter.

Turning to the balance sheet, during the first quarter we invested $6.3million in development, redevelopment and capital improvements at a weighted average yield of approximately 9.1%. Capitalized interest for the quarter was approximately $200,000.

During the quarter, we funded approximately $900,000 under mortgage loans receivable and received approximately $460,000 in schedule principal payments. At March 31, we had $117.5 million drawn and $122.5 million available under our line of credit. Additionally, we have $100 million available under our shop agreement with Prudential.

During the quarter, we granted $20,000 shares of restricted stock at a grant price of $30.26 per share. Also, during the quarter, 22,000 stock options were exercised in share accordingly. Additionally, during the quarter, we received $4.9 million proceeds from the sale of approximately 127,000 shares and common stock under our ATM program. During the first quarter, we paid $15 million in preferred and common stock dividends.

In discussing operator statistics, I'll give the general caveat that these numbers come from our operators. They're unaudited and have not been independently verified by us. Additionally, the occupancy and lease coverage information is for the trailing 12 months fourth quarter 2012, compared to the trailing 12 months third quarter 2012.

Occupancy in our same store out portfolio was flat at 78%, excluding properties leased with Assisted Living Concepts and Extendicare, occupancy in our out-portfolio was 87%.

EBIDTAR lease coverage after a 5% management fee was 1.4 times. Before management fee our EBIDTARM coverage was 1.6 times. Occupancy in our same property SNF portfolio was 78%. EBIDTAR lease coverage after 5% fee was 1.8 times, before management fee or EBIDTARM coverage for our SNF portfolio was 2.5 times.

Occupancy in our same property range of care portfolio, which consists of properties that provide any combination of skilled nursing, assisted living and independent living and or memory care services was 87%. EBITDAR lease coverage after a 5% fee was 1.4 times. Before management fee or EBITDARM coverage was 1.8 times.

The underlying payor mix for the 12 months ended December 31st, 2012 for our stabilized property portfolio, which includes skilled nursing, assisted living, memory care, independent living and properties with a combination thereof was 61% private pay, 14% Medicare, and 25% Medicaid. Within our stabilized property SNF portfolio, the underlying payor mix was 28% private pay, 26% Medicare and 46% Medicaid.

Turn it back to you, Wendy.

Wendy Simpson

Thank you, Pam. Clint Malin, our Executive Vice President and Chief Investment Officer, will discuss our current acquisitions and development, underwriting activity. Clint?

Clint Malin

Thank you, Wendy. And good morning, everyone. First of all, we could not be more please with how our development program is progressing. As of March 31st, we have construction and renovation expansion commitments outstanding on 12 projects still going approximately $80 million. $27 million of this commitment amount has been funded through the end of first quarter.

Our free-standing private-pay memory care development project in the Denver Metro area was expected to open in July. And based on information provided to us from our lessee, they have 22 deposits that have been received as of yesterday. It's a very positive sign for the strength of the market given that these deposits represent over one third of the total units being constructed at this property.

Our Amarillo SNF replacement project is ready to open in July as well, at which time our lessee will begin to process a relocating residence from the older existing facility.

I'm please to confirm you that both of these projects are on time and on budget. We anticipate that two additional development projects will open around the end of 2013 or early 2014. I will provide status updates on the continued progress of our developed projects on subsequent earnings calls.

Our investment pipeline is robust and stands in excess of $250 million. Included in our pipeline is approximately $30 million for new expansion and renovation projects which we are evaluating with certain lessees on various assets within our portfolio. In addition to these opportunities within our portfolio, we are negotiating five LOIs with five separate operating companies for a total of approximately 20 existing properties, consisting of free-standing private-pay memory care communities and skilled nursing facilities in addition to four new memory care development projects that we are working on.

Two of these potential transactions are with operating companies new to our portfolio, which is a result of our ongoing marketing efforts. These acquisition opportunities and development projects are located in six states and we will add two new states to our portfolio. The deal size of the transactions in our pipeline range from $10 million to just over $100 million.

Some of these transactions we are working on have unique structuring aspects, which take more time to negotiate. Therefore, as I indicated on the last earnings call our 2013 investments we back loaded into the second half of the year.

Also, we are in the process of assuming the HUD debt related to the purchase agreement signed with Juniper at the end of 2013 for the $12 million acquisition of an assisted-living facility in Pennsylvania that will be added to our master lease in Juniper. All these investment activity, I look forward providing you with updates on our following earnings call.

With Andy Stokes retirement affected at the end of March as our former Senior Vice President of Marking and Strategic Planning, Wendy, Pam and I have been taking a fresh look at the company in evaluating our internal talent and the resources needed to best position the company for future growth. Mark Hemmingway has been working under Andy's leadership over the past couple of years and is ready to take double responsibility for our marketing platform as a company's Vice President of Marketing.

Given our tremendous growth in 2012 via acquisitions and development commitments combined with our robust investment pipeline, we have decided to increase our capabilities on the transaction and portfolio management side. This new position the Vice President Investment and Portfolio Management will be based on corporate office. It will increase our bandwidth to manage multiple transactions simultaneously, expand our ability to access and execute on development opportunities and increase our asset management capabilities given our portfolio growth. Both of these positions will report directly to me.

This investment portfolio management position will allow me to focus more my time providing leadership to Mark in expanding and refining our marketing platform, building new relationships with experienced operating companies, proactively managing existing operative relationships, sourcing new development opportunities and structuring acquisitions.

We are firm believers that this is a relationship based business and providing operators with direct access to LTC senior management will strengthen our relationship building and ultimately increase growth for both our company and our operators. We are in the process of identifying candidates for the investment and portfolio management position. I hope the company will be able to announce the strategic new hire in the near term.

Now, I'll turn the call back to Wendy for her comments.

Wendy Simpson

Thanks Clint. I am not sure I could find the right stream of adjectives to express how please I am with how much work Clint and Pam are doing to continue making 2013 a record year of LTC.

As Clint summarized or pipeline is probably as strong as it ever has been. And we are looking to increase our management team in order to address the opportunities and be able to convert more of these opportunities into deals, as well as working with our current operators, which is a great asset to us in terms of the ability to add investment with current operators.

Pam's keeping our financing options open. We can draw on our Prudential Shelf. We could do another private note placement. We can do Fannie Mae financing. We can increase our line to the full $350 million be adding additional banks and/or asking our existing banks to increase commitments. She is in frequent and constant contact with all of these sources testing appetite and pricing and all indications at this time are that significant and well priced capital is available to us.

Our construction and development initiatives are very exciting to us. It gives us the opportunity to provide new service to communities in which we build and it also adds new and modern properties to our portfolio. It certainly takes longer and is somewhat more risky than our traditional sale leaseback transaction. But I look forward to our two openings this summer and later this year, and being able to report that our commitment to this strategy is proving to the success that we have anticipated.

Right now, I have no new information on the development at assisted living concepts. Their meeting to approve the sale of the company on May 16th and as of now I have no information on who the management team may be.

We have 15 properties with Assisted Living Concepts in Idaho, Washington and Oregon. They were the states most hit in our property relative to the occupancy decreases. This year I've seen 14 of these properties and additionally I've seen one property on Ohio. The only property I haven't seen in those three states is in Klamath Falls, Oregon which I will get to hopefully within this second quarter, and additionally I expect to see all 37 properties this year.

As I've said in the past, ALC is maintaining these properties in good condition. We continue our physical inspections and ALC continues to appropriately respond to our requests for repairs and maintenance on the properties.

In anticipation of possibly transitioning these properties to other operators we continue to get unsolicited interest from both large and small operators. We're maintaining a list of possible replacement operators and have commissioned and received a very high level market analysis of each property, particularly giving interest whether or not memory care possibilities are available in the market. We believe we are well prepared and are further preparing for the opportunities these 37 properties will bring us.

When I spoke with you in February, I gave guidance of normalized FFO in the range of 246 to 248, and at this moment I am not changing that. We have great opportunities to add to our FFO with converting some of these deals in our pipeline, but the larger deals are a little more intricate and take a little bit longer. So, we are looking at a very busy third and fourth quarter of closings and a busy second quarter of structuring and negotiating.

Again, as in the past the guidance is on an as is basis and does not contemplate any capital raising activity.

Thank you for taking time to listen today and I'll now turn the call over to Chad who will open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes today from Karin Ford with KeyBanc.

Karin Ford - KeyBanc

Wendy, thanks for the update on ALC. Can you just tell us any color if you have any on why you think the coverage declined 10 bps this quarter and what's your outlook is on that knowing that's there's potentially new management team coming in here shortly and there is a little bit of uncertainty?

Wendy Simpson

Well, they started having cost by properly staffing the property over the summer. So those costs are also there and probably this quarter or the last quarter was the full quarter of the increase in the costs. So they had to add staff which they have done. We've seen a little bit increase in the occupancy and as I've gone out and seen properties I have seen the properties had 14 now have 23 and so they have, they have seen increases in occupancy. But they had to increase costs in advance in increase of occupancy. So, we were expecting that and I think it's for new operator coming in, I think that's an advantage and that way we have trained staff already in place.

Karin Ford - KeyBanc

Thanks, that's helpful. Sounds like the developments continue to go well. Can you remind us how long what the range is of the stabilization period for the assets you have under construction?

Clint Malin

Sure, sure. We're looking at right around 18 months give or take depending on the project and the location. But sometimes a little bit less and just a little bit more.

Wendy Simpson

But in the Littleton project our proforma that shows stabilization in year two?

Clint Malin

Two, correct.

Wendy Simpson

I mean, if everything held we're third full when we hold.

Clint Malin

Correct.

Karin Ford - KeyBanc

Do you have any asset sales or any tenant purchase options that you expect to be exercised in the balance of the year?

Wendy Simpson

We talked before. We give an operator an option to buy some properties in Ohio. They are continuing to look for financing; they had an opportunity with some financing and it's just taken them a little longer. They are -- it's positive for us the longer they take, because they are paying a nice rent (inaudible). So, but they are assets that we would like to transition to them as the operator. We also have a couple of very small insignificant assets that we given the operator an option to buy, but other than that we don’t have any other assets that are on the market right now.

Karin Ford - KeyBanc

Is that still baked into the guidance?

Wendy Simpson

Yes.

Karin Ford - KeyBanc

It is. Okay. And then last question from me, is the new hire and the promotion is that baked into the higher G&A run rate that Pam gave us?

Pam Kessler

Yes.

Operator

Our next question comes from Daniel Bernstein with Stifel.

Daniel Bernstein - Stifel Nicolaus

I just want to make sure I understand the lease coverage. Can you give that out separately for pool 1 and pool 2 just so I understand how each of those are performing?

Wendy Simpson

ALC?

Daniel Bernstein - Stifel Nicolaus

Yes, please.

Wendy Simpson

I think one pool is 1.27 after a 5% management fee and do you have EBITDAR around here? No. So, it is after 5% management fee, 1.45 before management fee, 1.27 after management fee. The pool that has Washington, Oregon and that has 0.91 before management fee and 0.77 after management fee.

Daniel Bernstein - Stifel Nicolaus

Okay. I just want to make I understood the difference between the two and I won't ask any more questions on ALC, but not yet, time to move on, right?

Pam Kessler

Yeah. (inaudible) gets the gold star.

Wendy Simpson

They get to bite the candy.

Daniel Bernstein - Stifel Nicolaus

On the development side, I just wanted to understand your thoughts on the amount of construction that’s out there. When you look at the NIC MAP data that came out this quarter, it seems like there is a lot of memory care construction at least as a percent of supply, but it is also -- in the Metro area it could be on the other side of where they are building it from you. And so, I just want to just try to understand how you are thinking about construction overall for the industry and it maybe specific, is there is anything being build in your properties that something again, you look at the MSA data you can get worried about it but, you could get on to the specific within five miles of any of your facilities and might that be any problem at all. So I just to understand how you are thinking about the constructions out there?

Clint Malin

Dan, it all depends on, its market specific. Dan, as an example, our Littleton, Colorado project in the Denver Metro area, we did that because we engaged third party companies to do market studies. Those are offers to have our study done and so that we had to confirm and validate the need within that community. And given the deposits on the Littleton project, I mean that's an example of us going through our thorough due diligence to make sure that we are investing in the community that has a need. And there are projects that we turn down, because after we have engaged the market study, we've determined that there is some concern regarding the potential over capacity. So, we are being selective in how we do development, we are not going out and just doing every project that comes across our desk. So, it takes a lot of underwriting to make sure that the project we think is going to be viable, sustainable for long run.

Wendy Simpson

We are not a development company, so we can start when it looks like there is we don’t have to keep doing it in order to get FFO. So, it is a strategic option for us, it's not our base business option. So, we keep sharing about developers out there adding a lot of inventories, but if you -- the classic location, location, location, if you get the right location at the right time, I still think this a great growth opportunity for the company. I cannot see that we will have 30 or 40 of them going at the same time.

Clint Malin

This is being opportunistic over the next couple of years to evaluate, there is still somewhat of a constraint on construction financing. I mean, some more experienced larger organizations have access to that, but not everyone does so, and we are trying to outline interest with select number of operators to be able to replicate the program and get the product into the market first.

Daniel Bernstein - Stifel Nicolaus

It is all really helpful and great explanation. The other question is you referred on some other calls of our continued cap rate compression in seniors housing, cap rates coming back. You talked about a very robust pipeline, so I want to just let maybe a two part question. One is the pipeline tilted a little bit more towards skilled nursing and, two, does the cap rate compression in seniors housing kind of make you more inclined to not make acquisitions on seniors housing this summer? Are you pulling back in? I know you already tilted towards skilled nursing so, but are you going to pull back from seniors housing acquisitions further given cap rate compression?

Clint Malin

We are open to looking at the seniors housing side and we want to grow there, but you are correct I mean, there is compression on the cap rate side. So, really I think on the seniors housing side, our best opportunity is sale leaseback transactions, which is the case with Juniper that we executed that at the end of the year. So that's why I really see us being able to grow is helping companies provide a liquidity there in the form of sale leaseback. If there is some assisted living properties on the market, where they're selling both real estate and operations, yeah, the cap rate compression is it makes it challenging for us to invest in those. That's why we're looking at the development side to try to keep a balance between private pay and government reimbursement. But our pipeline is tilted a little more towards skilled nursing at this point.

Operator

Our next question comes from James Milam with Sandler O’Neill.

James Milam - Sandler O’Neill

Can we talk about the balance sheet first I guess. Obviously, Wendy, from your comment you can raise capital any way you want. You made the decision to issue a little bit of equity through the ATM. Maybe could you just give us your thoughts on how you're thinking about equity versus debt, and then whether you feel any urgency to term out the balance on the line of credit today or tomorrow or at the end of the year? Just what your thoughts are on both of those.

Wendy Simpson

Well, we continue to look at all of our options. As I said, Pam's continuing to look at the cost of debt bills, validity of debt. We match our financings with our opportunities in the acquisition area. I don't feel a sense of urgency in terms of terming out things because of anything right now. But we are looking at -- we're looking at all opportunities. We did see ATM -- we hadn't used the ATM for quite a while and for three years, and we had built up a lot of due diligence costs and things. So, at the end March?

Pam Kessler

Yes.

Wendy Simpson

At the end of March we started looking at the ATM using that a little bit. So that's what we did. But everything is open. Every opportunity is open for. We're evaluating all our opportunities.

James Milam - Sandler O’Neill

I'm sorry, due diligence costs related to the ATM or?

Wendy Simpson

No, to the ATM. Every quarter you've got to do a draw down and there are legal fees and accounting fees for the comfort letter and that sort of thing. So every quarter you have to pay debt to maintain your ATM program.

James Milam - Sandler O’Neill

Okay, so it just made sense to $5 million of equity and sort of amortize those costs and maybe that's something we should expect going forward, but still not the primary source of financing for you guys at this point?

Wendy Simpson

Right, it's based on our average daily trades. You know it takes a while.

James Milam - Sandler O’Neill

Thank you. And then, on the SNF coverage it looks like it came down just a few basis points versus last quarter. Can you just give us a little color as to what the driver of that was? I would have thought it, may be would have gone the other way with the new -- at lease for a couple quarters Medicare rates.

Wendy Simpson

Actually, James, I have SNF coverage increasing third quarter last year 1.79 and fourth quarter 1.84, but I think you are referring to the assisted-living coverage dropped down a little bit. And now, it is primarily, due to Brookdale gets their rent increase, their annual stay, their rent increase in the fourth quarter. So always in first quarter you get a temporary little dip there in the coverage.

James Milam - Sandler O'Neill

Yeah. Actually, while you rather get the EBITDAR coverage for the same store skilled nursing was up the EBITDARM was down about 2 basis points, so pretty flat I guess. Nothing going on there? Just --

Wendy Simpson

No.

James Milam - Sandler O’Neill

Nothing to worry about?

Wendy Simpson

No.

James Milam - Sandler O'Neill

Okay. And then, my last one. You guys are close to the earn out provision being exercised. I am just curious if you can give us an update on that, and does that at all have an impact?

Clint Malin

So, the earn out becomes available to our lessee in July. They have contacted us regarding to see if we would consider looking at that little bit early. So, we are going through the evaluation process right now. The lease require that they provide us audited financial statement. And they have asked us questions in regard to that process and so we have entered into dialogue with them. And we are willing to consider that a few months early if we can get through the evaluation if they have to engage an accounting to give us a report on the financial (inaudible) book.

James Milam - Sandler O'Neill

Okay. And then, you guys would earn incremental 9% or 10% on $7 million or so, is that the way to think about it?

Clint Malin

Roughly 9%, yes.

Operator

Our next question comes from Todd Stender with Wells Fargo.

Todd Stender - Wells Fargo

When did the Ohio facility you highlighted that could be sold this year, are those the properties that you highlighted on the Q4 call?

Wendy Simpson

Yes, the same one.

Todd Stender - Wells Fargo

Okay. Did that $11 million in proceeds?

Wendy Simpson

Correct.

Todd Stender - Wells Fargo

Okay. What are those yielding? And what do you think you could put that back to work out right now?

Wendy Simpson

We can probably put it back to work at 9%, but they are yielding more, and Pam is desperately looking for calculator that -- yeah, I think it is about $1.4 million of revenue a year.

Pam Kessler

So that is a current yield 12%.

Wendy Simpson

12%

Todd Stender - Wells Fargo

Okay. Thanks.

Wendy Simpson

Which is around 1.4 or 1.5 yeah.

Pam Kessler

1.4 or 5.

Todd Stender - Wells Fargo

Just broadly speaking what gives you confidence to expand your development pipeline. Just despite the uncertainty with Medicare reimbursements, sequestration, and what types of things your hearing from the operators who are expanding your businesses in this environment as they continue to mitigate their costs.

Wendy Simpson

Well, it's market by market. There are some markets that are just underserved and every time you get statistics, it’s the average of the universe and not market specifics. So there are still markets that are underserved. There are still markets that if somebody is going out of business because there are the last, they are the worst in the market or their less fortunate in the market. Then that has to be taken care of by other people. So our operators, all operators have opportunities. It's not a universal opportunity. It's not a wide open opportunity in the industry but there are, as in most industries, opportunities. And even with the sequestration which everybody was expecting and as we were underwriting and as our operators were talking about their projections for this year, they were planning on this 2% and our operators are still doing fine. We have, which is a think one of the reasons that we, I know its one of the reasons that we focused on the regional local operator rather than on a larger national operator. They're a little bit more flexible and able to adjust their operations accordingly and on time. So you know we're not seeing a massive disruption in this industry, and our operators.

Todd Stender - Wells Fargo

Okay, that sounds helpful, Wendy, thank you. And Clint, can you give some examples of the leases that you're signing right now on those new facilities, how long they are and how does that compare with your existing leases just in duration, both for SNFs and AL memory care?

Clint Malin

It's really no different than we've done in the past couple of years and we're looking at probably average in terms around 12 years, and then a couple five years and newer options beyond that. So typically, the operators have a unilateral right to the facilities for 25 years or so.

Operator

Our next question is from Mike Carroll with RBC Capital Markets.

Mike Carroll - RBC Capital Markets

Just real quick, have you guys had any discussions with TPG yet?

Wendy Simpson

No, we have not.

Mike Carroll - RBC Capital Markets

Okay, and then on your chores of the assets after I guess the announcement have you noticed any changes of the properties?

Wendy Simpson

No, in fact most of them weren't aware that there were any changes. There, yes, no, I haven’t noticed any. They are all very happy with what Dr. Roadman has been doing and possibly some of them are harboring the hope that he'll stay on. But they have not mentioned any concerns. And even we mostly -- I have gone around with a gentleman who is a regional and he is not ignoring things, waiting for the new things. So I think they are doing the right thing. I think Dr. Roadman is steering out them in the right direction.

Mike Carroll - RBC Capital Markets

Okay. And then, have they seen more fraction with their occupancy rates over the past couple quarters?

Wendy Simpson

The rates, no. Not that I am aware of. But in terms of just a feeling, I have a feeling and I -- seeing from -- when I go out I take our last physical report and it will say, 13 people in the facility and now there is 24 or something like that. So I have seen more increases than decreases. Several of them have stayed steady, but I have seen more increases than decreases. So I'm not talking about, it is not full. But the trend of decreases seems to have stabilized or turned around. So, I'm very hopeful that it will continue to turnaround during the time that they have these properties.

And when you look at assisted-living occupancy in general, they are very high and when you look at the history of these properties they used to be very high. And all of those peoples did not move away and there was not a lot of additional property development in these particular cities. So, I think with the right marketing and the right public image these properties have a great opportunity.

Mike Carroll - RBC Capital Markets

Okay. And then, on the investment side, how big is your pipeline right now, how many fields are you tracking?

Clint Malin

It is over $250 million.

Mike Carroll - RBC Capital Markets

Okay. So it has been still the increasing over the past couple of years.

Clint Malin

Of total deals tracking, we're probably tracking 10, 12 different deals.

Mike Carroll - RBC Capital Markets

Okay. And then, did I see -- or correct me if, it sounds like in the second quarter investment activity will remain kind of low but pick up in the back after the year?

Clint Malin

Correct.

Operator

Our next question is from John Roberts with Hilliard Lyons.

John Roberts - Hilliard Lyons

Dividend.

Wendy Simpson

Yeah.

John Roberts - Hilliard Lyons

Increased twice last year. And any thoughts going-forward?

Wendy Simpson

Well, we like to keep at about 80% of FAD, so on a basis of where we are, I would expect that the board will be looking at a dividend increase at the end of the year or third or fourth quarter. But right now, we are not announcing any dividend increase.

John Roberts - Hilliard Lyons

And as far as -- so that when you are regularly going to raise this because you changed things around last year, is there going to be any specific time or you are just going to raise it as you think appropriate?

Wendy Simpson

We will raise it when we think -- I know it is awkward, but we raise it when we think it is appropriate. We got a deal done and we know that FFO is going to be there and we can project it forward, we like the pass it along to our shareholders. So we just want to make sure that it is there.

Operator

(Operator Instructions).

Wendy Simpson

All right, Chad.

Operator

There appears to be no further questions.

Wendy Simpson

Thank you so much. Thank you all for attending. And we look forward to talking to you after the second quarter. Have a great day.

Operator

Thank you very much. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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