LTC Properties Inc (LTC) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the LTC Properties analyst conference call. My name is Katie and I will be your coordinator for today. At this time all participants will be in a listen-only mode. After the speakers' remarks you will be invited to participate in a question and answer session. (OPERATOR INSTRUCTIONS) Before the call begins I would like to read the forward-looking statement. This presentation may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve known and unknown risks and uncertainties which may cause the Company's actual results in the future to differ materially from expected results. These risks and uncertainties may include among others general economic conditions, the availability of capital, competition within the financial service and real estate market, the performance of tenants and borrowers within LTC Properties, portfolio and [regulatories] and other changes in healthcare sectors as described in the Company's filing with the Securities and Exchange Commission. I would like to now turn the call over to Ms. Wendy Simpson, CEO. Ma'am, you may proceed.

Thank you, Katie, good morning or early afternoon. Thanks for joining us for our fourth quarter and year end conference call. After my initial comments, Pam Kessler, our Chief Financial Officer, will comment on some operating and balance sheet specifics. Then I have asked Clint Malin, our Chief Investment Officer, and Andy Stokes, our Vice President of Marketing and Strategic Planning, to comment on the deal and market environment as we see it now and what we believe we may see in the near future. Our position has been over the last several years that prices for assets in which we invest were too high to provide us with a reasonable return and to provide operators with a reasonable profit. As a result, we have made few investments in additional land and buildings and other than the investments to improve in our own properties, which we talked about on previous calls. We continue to make those investments in our own properties and we invested approximately $5.7 million in our properties in 2007.

In the fourth quarter we invested approximately $6.2 million in two mortgage loans. Those were the only mortgage loans that we originated in 2007. Conversely, during 2007 we had approximately $33 million of mortgage loans pay off. And while that lessened our exposure to mortgage loans and qualified us as an equity REIT as defined by NAREIT, we need to reinvest those funds. We invested approximately $18.8 million during the year of 2007 to buyback our own common stock at an average price of $21. Based on an FFO of $1.90, that's a 9% no risk return to the Company. In the same vein, in the first quarter of 2008 we announced that we had purchased 500,000 shares of our 8% series F at a price of about $22 a share, which is a 9% yield. And it creates close to a $1 million onetime gain for us, which will show up in our first quarter.

These shares were available because three funds that held those shares needed near-term liquidity and we were a bulk buyer. We've made it, I think, clear to the marketplace that in instances where large holders of this type of security needing to get some liquid assets to come and talk to us. In fact, I had a discussion earlier this morning with somebody who might be interested in selling us another group of these assets, the series F preferreds, and we stand ready at the right price to redeem some of those securities. We continue to strategically invest in ourselves, while simultaneously identifying and closing deals to grow the Company and our FFO in 2008. In that area I'm going to turn the call over to Clint to talk about some of the things that we have done last year and some of the things we are currently doing and what we might see in the next quarter or so. Clint?

Thank you, Wendy. Good morning or good afternoon, as the case may be. Wendy already touched base on the loans that we entered into in the fourth quarter. Additionally, we worked on an opportunity within our portfolio to go ahead and sell a property in Tennessee. An operator that we had who was losing money on it, we worked with them proactively to go ahead and asses that property. We sold it to them, taking back a mortgage on the property without a reduction in the rent on the master lease, which was a win/win, both for LTC as well as for our operator in helping them from a cash flow perspective. Going into the first quarter activities I want to touch base on a few items that we have been working on. In January we closed on the acquisition of a nursing home in Ohio, which is a 30 bed property. It was for $1 million.

This was a unique opportunity that we entered into with an existing operator that we have. It's going to be a 10% yield and it's going to be added to an existing master lease that we already have with the operator. The interesting aspect is that our operator found this property and it is rather old and antiquated but our intent in buying it is to go ahead and construct a replacement property and add on an assisted living unit component to that property. We are in the process right now of working with our lessee to go ahead and formalize the O.N. process to start the replacement of that building. We have allotted a $2 million capital allowance, which will be at a 10% yield. Obviously this is going to take a little bit of time to go ahead and put in place, but we see during the course of the first six months here making progress and our lessee filing the O.N., a replacement application.

Some additional items we worked on in the first quarter, similar to the property I mentioned in Tennessee, we own some vacant land adjacent to a property we acquired a few years ago in Albuquerque. We retain the right to sell that property, which we did in the -- in January, for approximately $600,000 with net proceeds of about $550,000. And again the rent under the existing master lease we had with that tenant remained the same. Also have just recently extended a working capital line of credit for a tenant that we have two properties under a master lease. That line of credit was expiring in March. We have extended it for three years at a 10% yield and we've increased the line to $600,000 from the previous $400,000. We also had a loan that was maturing in the first part of January.

However, the borrower was unable to go ahead and place, refinance the property so we've extended that loan, which is approximately $1.3 million at 11.4% yield. It's been extended until June of 2008. In addition we have just recently entered into a loan commitment with the borrow on -- an existing borrow on three properties in Florida. This commitment is for a $1 million loan for a 41 bed assisted living facility in Florida that is operated as an Alzheimer's Dementia care facility. It's a property we probably would not have looked at if it was a standalone property, but it's being cross collateralized and cross defaulted through the other properties that we currently hold mortgages on. We are going to go ahead and it's going to be a short term loan and have a same maturity as we have on the other loans, which is November of 2009. And the yield on this $1 million loan will be 10.5%.

Separately we have just agreed to increase loan commitments, or existing loans to a borrower on two properties in Texas to fund an additional $500,000 to be used to renovate those properties. The rate on that will be 11%. We expect these proceeds to be disbursed over the next six months. And in doing this we have agreed to extend the maturity of the loans for two additional years on the current maturity, which now will mature in November of 2011. An additional item is we retained, or we were given a right of first refusal if the borrower ever decides to sell those properties before the maturities. With the -- with the extension of these two loans into 2011, on the existing portfolio there is really a minimal number of lease expirations or loan maturities. We have four -- we have loans on four properties in Florida and two properties in Georgia that mature through 2010.

The reason I mentioned this is because with these minimal lease and loan maturities, it really frees up our resources to focus on accretive projects within the portfolio as well as acquisition opportunities. Right now as it relates to renovation projects within the portfolio, we are working on new projects, trying to put those in place. We are currently working on an approximate $2.5 million renovation on a 150 bed nursing home in the state of Georgia. I'm hopeful over the course of the next month or so we will be able to finalize that with an expected yield on that investment of about 10%. Turning to touch base on acquisition activity. We continue to maintain our investment target level of $10 million per quarter. Right now we will look at sale lease-backs, loans or various opportunities to buyback our stock to achieve this target. Right now for the first quarter we have exceeded that target by the buyback of the series Fs, as well as the acquisition of the property in Ohio.

We are currently actively looking at opportunities for acquisitions or loans with existing customers, as well as some new customers that we've made contact with. Our focus will probably be more so on the skilled nursing side as opposed to the assisted living or independent side, just giving the pricing of those assets. Additionally on the skilled properties, what we are going to be looking for are higher quality assets or assets such as this property in Ohio that we've just recently purchased, whereby we can go ahead and either replace it or go ahead and renovate that. In looking at a lot of the current activity or current acquisition opportunities out there, we continue to see a disparity in the bid and ask price on these different portfolios and properties. We are going to continue our disciplined underwriting approach in evaluating these properties.

And what we see is that we want our operators to be successful as well as profitable and the pricing on the opportunities that we've seen, given our target investment rate of 9% to 10% as a return on the lease, doesn't provide our operators much upside on the opportunities that we've seen so far. And our focus on the skilled nursing properties will be more with smaller regional operators, probably within the $5 million to $10 million range. Although if larger acquisitions present themselves and the yield is acceptable to us, we will definitely take a look at that. The last item I want to do touch base on was some de novo development projects. We have in the past talked about opportunities that we've looked at and, over the course of the past year, we've looked at probably four different opportunities for de novo development projects from skilled nursing to assisted living to Alzheimer's projects.

What we've seen, in evaluating these opportunities, is that they take a long time to come to fruition and they are very resource intensive. So after spending considerable time looking at the opportunities, we've decided that our time is probably better spent on the acquisition side of existing properties, as we see hopefully more opportunities evolving over the course of the next 12 to 24 months. That's not to say that we won't look at specific unique opportunities, such as the project that I mentioned earlier on the Ohio project that we are going to go ahead and build a replacement property.

Thank you, Clint. Now Andy is going to talk about our marketing effort and our strategy in increasing our footprint in the industry.

Hi, I'm Andy Stokes. I started with LTC last June after quite a few years in simular positions. One of the things I know about this management team is that they are very good at asset management. They always have been. They work the portfolio. They mine their current, LTC mines its current portfolio, as Clint says, for accretive expansions and upgrades. Prior to my joining, LTC had not done much marketing for a long time. They had been absorbed years previous, immediately previous to high prices and an unwillingness to foresake their discipline. Before that they were, LTC was absorbed pretty much with taking care of problems resulting from the industry meltdown about 2000. When I got together with people, especially with Wendy, we sat, talked about what our goal was, this footprint that she described.

The goal is that any time an operator in senior living or long-term care needs financing, they think of LTC. They know who we are, they know what we do. They think favorably of us. And they have been in touch with us or we have been in touch with them recently, whatever that means. How do you go about doing that? Well, senior housing and long-term care are intensely local. They are regulated and they are local at the community and the town and the county and the MSA level. They are not local at regions. So taking, bearing that in mind the regulation and the reimbursement for this industry is organized at the state level. It's -- they are the ones that pay the bills, they are the ones that do the regulating. So the state trade associations have largely become governmental relations organizations.

And they are very effective way to get at our potential customers. Their preferred venue for CEOs and for owners, CFOs and other decision makers. So we have become active in state associations for typically the, it's typically called the quote healthcare association, or the assisted living association. We also have done a little bit of work with healthcare financial management association and just to keep our one foot in the door, we follow the -- a couple of the hospital associations. We support these organizations first of all by joining. The cost is usually modest and the information you get is usually good. We support their operations by going to their conferences. Often get a booth. We set up meetings before, during and after, as you all do with -- as all investment bankers and other professionals are accustomed to doing, we give speeches when we can and we've done some of that. We prioritize.

There are after all 50 states. We don't want to go to all of them. We couldn't go to all of them if we wanted to, so we prioritize them. And if you do a sort and rank them by 65 and over, you come up with the states in order of California, Florida, New York, Texas, Pennsylvania, Ohio, Illinois, Michigan, New Jersey, North Carolina, Massachusetts and Georgia. That list is just the top 12. It's given for example, it's not our target list. We look at that, at all the states in terms of first of all barriers to entry, C.O.N. states are favorable. So for instance, Illinois is the seventh in our list but it's, doesn't have C.O.N. so it probably moves it down a little bit. North Carolina, which is tenth in the list, is a little bit better than that because it has strong C.O.N. protection for operators. Some states have bad economics. We can all think of Michigan as a good example of that and other states have hostile regulatory environments, New York especially being one.

So those considerations and also good economics. For instance, Maryland, Virginia, I call that big in terms of over 65, but they are good markets and they have good economies and they are C.O.N. states, so those move those up in our priority. We make the ranking in a subjective way, bearing in mind what the goal is. The goal is so that when they think of, when an operator needs capital they think of LTC and we, they think of us favorably. They know who we are and they know what we do. And we support their organization and thereby support them in what they are after. You can't do it just once. You have to go back. You have to attend specialized sessions. For instance, legislative sessions are often well attended by CEOs and CFOs and other decision makers. We do all the typical networking activities that one would expect with meeting the professionals that are associated with the industry, write articles, give speeches.

We also make program of marketing calls, typically it's going to be one of, one of Wendy's direct reports who identifies what I like to call the B calls. We go out and we meet with people, get to know who they are and a little bit about them and if they are a particularly good prospect just in a general sense, we kind of create them, we promote them to an A call and that's something where we try to take the CEO out on a swing and meet with potential operators. Our current marketing program has us attending about 40 conferences per year in about 20 states. We also do some national conferences, N.I.C., for instance, and American Healthcare Association. We sponsor about 20 events and we organize the contacts, the networking, that results from this effort in a marketing database. All, again, leading to the goal that people think favorably of us, they know who we are and they know what we do.

Thank you, Andy. I passed over Pam, relative to our financial results, and so I am going to now ask Pam to talk about the quarter and year end, just a few of the highlights that we would like to point out.

Thank you, Wendy, how could we forget the most exciting part of the call. I will move quickly along because you guys have all read the press release. I'm going to compare the fourth quarter to the third quarter, since that seems to be the most relevant. Revenues decreased in the fourth quarter over third quarter this year due almost entirely to the lower interest income from our overnight investments of cash resulting from the lower rates and lower cash balances. Straight line rent for the fourth quarter, net of amortization of lease induement costs, was $1.048 million. Operating and other expenses increased primarily due to an increase in the loan loss reserves relating to the new loans that we originated in the quarter. Fully diluted FFO per share was $0.46 this quarter compared to $0.46 last quarter.

Comparing the balance sheet, fourth quarter over third quarter of this year we invested $484,000 in capital improvements at a weighted average yield of 9.8%. And $643,000 in capital improvements that were already reflected in the lease rate. We sold one 59 bed nursing home in Tennessee for $700,000 and took back a first trustee mortgage in the amount of $530,000. And this note is at 11% and matures in December of '08. We recognized a $43,000 loss on this. We originated two mortgage loans totaling $6.2 million, secured by two skilled nursing properties in Texas, with a total of 347 beds at an initial interest rate of 9.75%. We received $1.1 million in scheduled principal payments on mortgage loans receivable. We had no prepayments during the quarter. Prepaid expenses and other assets increased primarily due to the increase in the straight line rent receivable assets.

During the fourth quarter we used $1.4 million of cash to repurchase 670,123 shares of common stock on the open market at an average of $21.58 per share including commission. During the quarter holders of 3,300 shares of our preferred E stock converted to 6,600 shares of common. At December 31 there were approximately 160,000 shares of the preferred stock still outstanding. During the fourth quarter we paid $12.8 million in preferred and common dividends.

Thank you, Pam.

You're welcome.

We received a couple of questions that participants would like to have us answer and I think we've covered some of them but a couple I want to comment on. Relative to our view of Medicare and Medicaid reimbursement, Clint was just at a meeting in Sarasota and it was the --

The National Medicare and Medicaid conference.

And we had a board meeting the other day before our earnings release and, Boyd Hendrickson, who is on our board, is a CEO of an operating Company and so we always use him as a sounding board relative to what they are hearing in the reimbursement area. And Boyd wasn't particularly rosy about the future or depressed about the future. He said it's a day by day process. He's not expecting a significant cut or they are not aware of any issues in front of Medicare at this moment that would create a significant cut in Medicare. The states, of course, each of the states has their own economy issues relative to the funds that they have available for their Medicaid programs. We have not talked to any operators that are particularly concerned. We don't have a great deal of investments in Michigan. I think we only have one loan in Michigan, actually, and I'm not sure we own any properties in Michigan.

We have -- Ohio seems to be a fairly stressed state in terms of its real estate and homes foreclosure, but Ohio seems to be a relatively healthy state in terms of its Medicaid program right at this moment and we don't have a lot of nursing homes in Ohio, we have assisted living properties I think mostly in Ohio. So in terms of our view on Medicare and Medicaid, we are not aware of any significant hits and as I think I've mentioned in the past, we believe that our costs, our rents per bed are relatively low compared to the industry because we have not made a lot of high investments in the last several years where the operators have to be able to cover a very high percentage of their reimbursement in the rental costs. So that's what we've heard recently on Medicare and Medicaid.

We don't give rent coverage metrics because most of our operators are not public and the information we get from them is not vetted by anybody independently and I've said in the past, I'm uncomfortable giving nonpublic information publicly that somebody could make a decision that LTC has presented this information as audited or vetted information. But I can tell you, we do look at coverage. We get generally quarterly financial statements and on our mortgages we get at least annual statements. We don't have a significant coverage issue with many of our operators. One of our operators, who's a well known public operator who has been having some financial reporting difficulties was not covering very well. And we have negotiated with them an amendment to their mortgage, whereby, or their leases whereby they have provided us with three months of security deposit for their property, beautiful properties.

We have no issues with the maintenance or the view of the properties if you go out and look at them. They just haven't been able to perform as well as they had in the past. So we approach them with a suggestion and we have been able to negotiate a security deposit on those properties. We have no delinquencies, I believe. The only property that we have some concern about, I believe, Clint, we are under contract to sell, it's a small property in Colorado.

In Colorado where the operator has -- we granted the operator an option to purchase the property and we are working with them right now flexibility on that date.

In terms of mortgages, we agreed to extend a mortgage that was going to expire earlier this year. We don't have, as Clint said, a lot of mortgages that are coming up for renewal or for payment in this year. There are two mortgages that we know that the owners have the properties up for sale. If that happens, then we might get those mortgages paid off. But we haven't seen a lot of refinancing of mortgages. In fact the one that was supposed to become due they had tried to refinance it and were not able to get a rate that they found to be more advantageous than the rate that we currently have. So just -- I expect that we might be approached with other mortgage opportunities in the near future. Relative to our, with N.H.I. we always have this question, N.H.I. has an investment in our series C. They are the only one who own the series C. I have not approached them to buy back the series C.

They have a significant amount of cash, as they've reported in their public reports. They are getting an 8.5% return on our series C. And I think they are pretty comfortable that we have the adequate cash flow to pay that, so I would not expect that they would be interested in letting us buyback that series C. We are open for buying back our series F at the right price. And next year, in February, we can call the series F. We still have our $90 million line of credit. It expires in November of this year. Pam and I will be talking to banks during the spring and summer to look at possibly getting that renewal earlier than waiting until the fall so that I think if opportunities present themselves earlier this year that we want to be assured that that line of credit is there and is extended beyond November of this year.

I want to take the opportunity to welcome Peter Costa of FTN Midwest Securities who is a new analyst covering LTC. So if Peter is on the line, welcome, Peter. We enjoy talking to you. I'm sorry I missed seeing you when you came out to visit, but I welcome you again to a Company that I'm associated with. I'll open it up now to questions. Katie?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Tony Howard from Hilliard Lyons. Please proceed.

Good afternoon to everybody.

Hi, Tony.

Wendy, I appreciate the actual comments from Clint and Andy. Even though they were a little long, but I appreciate it.

We will try to keep it shorter next time.

A couple clarifications, Wendy. What was the rationale of releasing the data at 9:30 eastern time yesterday morning versus a conference call this afternoon?

We release the day before. I guess, Pam said that people have been asking that we release the earnings in enough time to have the earnings call later so that you can look at it and formulate sufficient questions.

We've been listening to your comments.

Well, the problem I have with 9:30, though, it doesn't give us the time to comment yesterday. I had to wait until this morning to comment before the opening market opened.

It was supposed to have happened at the market open. Oh, okay, well thanks for letting us know that. I thought it hit the market open.

It was supposed to hit, well, 6;30.

Okay, sorry. We will make sure that that happens in the future.

But if he's on the east coast that is 9:30.

Wendy, as far as the buyback of the series F, is that considered part of the authorization as far as the 5 million share common stock buyback or was that a separate authorization from the board?

It is, Tony. We had the board resolution amended to include that. So now our remaining under the current resolution is about 3.6 million shares. Either, either of common or the preferred.

Say that again now, the 3.6 million? Because it was 5 million you only did about 900,000, I think, up until now?

Right, we did 900,000 and then we did the 500,000.

Okay. So you are including that now as far as --

Right.

Got you. Okay. Can you summarize as far as your comments, what's the total amount so far as far as investments for the first quarter of 2008? I didn't get a total amount.

So far for the first quarter we did the $1 million acquisition of the property in Ohio. And then the buyback of the preferreds were 11 million, so just over the $12 million mark in the first quarter. So far.

Those are funds that are definitely going out. The 500,000 that we increased the two loans for, they may spend 300,000 by the end of this quarter, they may spend all 500,000 by the end of this quarter. So I would add that into the mix of what we have.

We also, under the existing renovation projects. The loan that we are going to look at, that should close probable in March, that will be another $1 million. And also we expect to continue to fund under the renovation projects that we have underway. So I don't know the exact number of those renovation projects, but I think right now the first quarter, definitely at least 12 million probably around 13 million or 14 million.

Okay. Payments, were any debt maturities coming due this year?

Yes. We have --

We have one due December.

Right. Right. Do you have it here? Do you have another question while we search for that?

Wendy, can you talk a little bit about what you expect as far as the line of credit of $90 million which comes due in the fall as far as do you expect to be able to renegotiate a line of credit at a lower rate or what kind of rate do you expect?

We had preliminary discussions with our banks and Pam and I actually are having lunch with a bank today, with one of our line banks today. We haven't used it, so they haven't been able to get the return that they've been expecting. So the first indication we've gotten, but this was a couple of weeks ago and as everyday more disaster hits the market in terms of financial issues, they were saying, yes, maybe it looks like the rate would be about the same, which for us right now is LIBOR plus 150 but we might want a higher uncommitted fee because you're not using it. So I'm -- and in that situation we might be looking at a smaller committed line with an accordion feature. But right now I expect that the cost will go up slightly but I can't be sure what. Our two major bank's, [EMO] and Key, are, I believe, there and will be writing credits.

The third major bank is Merrill and I'm not sure that Merrill is going to be wanting to stay in any credit lines. So we either find a new line, a new bank to go in, the other two step-up for more or we decide we don't need that much right at this time. So we are actively working with our banks. Relative to maturity, we have one loan that matures on 9/1. It's a rate of 7.27%. It's payable three months prior to maturity. So assuming we have cash available, which it looks like we will have cash available, we will pay it three months prior to 9/1 and that's the only -- it is about $14 million.

Final question or comment, Wendy, is that I understand you look upon investments of buying back the stock the same as buying or purchasing a mortgage loan. But one basically grows a Company where the other one shrinks the Company.

Yes.

You mentioned in the last conference call that because of the credit situation that you were actually starting to see an increase in activity. But based on what I'm hearing, I don't see a significant increase in activity.

We have seen an increase in activity. We haven't seen a decrease in prices. So people are still expecting to sell buildings that are 90 some percent occupied for per bed prices that we don't think that we can get a reasonable return on and an operator can make a profit out of, because there's no -- there's not much upside in a 90% occupied building. Or we are seeing properties that people are desperate to sell because they are in bad shape and they are in bad communities. And they might be at the right price but they are not a business that we would like to invest in. So the metrics don't seem to be meshing yet. But from what we hear, the prices are coming around to where we think we can make some decent investments.

Okay. Thank you, Wendy.

You're welcome, Tony. Thank you.

Your next question comes from the line of Peter Costa from FTN Midwest Securities. Sir, you may proceed.

Hi, guys, a couple questions. First on the change in looking at de novo facilities, does that have anything to do with seeing the better activity even though the prices haven't changed? Is that part of why you're not doing the de novo stuff because there's more to do on the other side of the world?

Yes, to some extent. To do de novo, you really need sort of a construction group within your Company. Or you need an operator who is construction oriented. And that's why in the Ohio situation we bought the property with the intent that it would be replaced. That operator is a very active and very relatively young operator who is out to burn down the world and he is going to get these projects done. The other projects would have required us to be the sort of the guiding force behind getting the construction done. And we looked at our scarce resources and the lead time in getting construction done and we decided that it was just not going to pay us back as quickly as turning our attention to some of these possible acquisitions. So, yes. De novo, I like de novo because I like the idea of building something new and having something at a very high quality level. But it just didn't fit into our Company at this time.

And then regarding the two properties that are up for sale but that you have mortgages on, what's the dollar value of those mortgages?

One of them is a little over $2 million and the second one is a little over $3 million. Small amounts.

And then you had talked about in the third quarter maybe as much as $40 million over the course of the year, the last year, that might prepay and then it sort of came down to $30 million or so. Do you expect that to, that $10 million to come back again here now with the interest rates having dropped a little bit, that might prepay?

No, I don't expect to have a lot of prepayments. I think most, if not all, of our loans have prepayment penalties. So they would have to be able to get a much better interest rate and span the prepayment penalty. So I'm not expecting much in terms of prepayment. Now they mostly all have and I think they all have the option of prepaying if they sell the property to a third party. But they still will have prepayment penalties.

Okay.

We can't keep them from doing that.

Got it. You talked about hiring another person besides Andy perhaps at some point in time, is that something you're still thinking about doing or are you closer on that?

Well, we are thinking about doing it. We'd like to look at somebody in the Midwest or further east to sort of cut down on, well, first to improve our footprint out there and to cut down on our drive time in order to get to opportunities. So we are looking at that and everybody we hire, because of salaries and all the benefits and that sort of thing, impact our FFO. So I think if these guys can convert a couple of things to actually earning assets and we'll continue to look at possibly adding somebody, because I am a great believe in the fact that we have to be out there. We have to be the last person the operator or the finance person has talked to on the phone when the issue hits his desk. So we are looking. One of the things Andy does, while he's out there, is look at people who are in the industry and possibly one of those people would be somebody we would approach in terms of making an offer.

And then regarding Andy coming on board, how many of the things that we've talked about on this call that are new and ongoing are things that sort of came in because of the increased marketing effort that you have had versus just stuff that was sort of in the pipeline already?

Well, for instance, there's one operator that we did not know existed whatsoever. And they are in New Jersey. Very, very high quality assisted living operator. We have, we have talked to them about various deals. They have a presence in Colorado and we had an operator who possibly wasn't interested in continuing with his operations in Colorado. They may still get together and do something with the assets in Colorado with our approval. And they have brought us some other opportunities that we are following up on. So there's one, one group out there that we didn't know before and are now, as they are looking at things, do call us to bring us into their decision-making process of doing projects. I can't think of any other specifics that Andy has met somebody out in the industry and has called us specifically but, Andy, you want to?

There have been, but if they don't pass the smell test, we don't talk, Clint and I don't really bring them to you, Wendy. There have been some others and we are meeting people and you get people to say, would you do this and we look at a transaction and if it's a nonstarter we don't go any further with it.

Marketing is something I, having been in operating companies in the past and seeing big marketing departments and things, it was as a finance person always grated on me about how much marketing costs. But now, as the head of a Company and a Company that we want to grow and improve, I embrace the marketing. Not to the extent that Andy is going first class anywhere, but it is a process that is a long process and you may be very lucky in getting a couple of really quick wins. Andy has really been added for only about six months for our Company. And it is a pay back that I think you get in the future.

You can't start it and stop it and start it and stop it, because it doesn't look like it's paying back immediately. I've, as I've used an analogy with these people all the time, I had experiences where somebody has spent a lot of money trying to market their operating facility and then the corporate office fires them for not making their budget and the next year the new guy who is operating it gets the benefit of all that marketing and he gets a huge bonus. So it's a process that takes time and I think I've got the right person working on it and we are all marketing minded around here.

Okay. Thank you. I guess the last question is, the Senior Housing just priced a deal today. Do you see them coming in as more and more of a competitor to you or are they just looking at bigger things than you at this point?

We don't see Senior Housing in the marketplace. I didn't know they -- oh, they priced a common deal, yes. No, we don't see them. I don't know what they are doing deals at a return rate of.

Okay. Thank you very much.

Thank you, Peter.

Your next question comes from the line of Jerry Doctrow from Stifel Nicolaus. Please proceed.

Dan Bernstein filling in for Jerry.

Hi, Dan.

Most of the big questions have been asked.

There you go.

So I guess I have got to have one basic question on the capital structure as to whether you prefer to use cash or leverage up a little bit more as you find more opportunities.

Well, my cash right now, I guess I'm much too possessive of it, my cash, the cash in the Company is only earning 3%. So I need to use all of that cash before I leverage up. So in that respect, if buying back Fs, even at an 8% or 8.3% yield, is a good use of that 3% cash. Once that cash is gone, I think we will definitely lever up. But right now the cash is just not earning us anything.

And what is the current spread or pricing on the line, credit line?

One and a half, LIBOR plus one and a half.

Okay. I also noticed that G&A was up a little bit in the quarter. Is that something we should expect going into '08 or '09? I know you added some personnel and may add some more personnel.

Yes, we expect that the normalized G&A should be down about $300,000 a quarter. We had, because we had the new loan this year, last quarter, we have a loan reserve. And as loans were paying off, we had loan reserves were coming down. And so in the fourth quarter we had put in that new $6.2 million loan. We had to -- instead of having a credit, we had a debit relative to the loan reserve loss. Then we've had Andres restricted stock had been vested through the end of this year and that will go away. I would say about $300,000 of overhead should be reduced for quarters going forward.

Just one follow-up question to Peter's question on competition with Senior Housing. Who are you competing with at this point? Are you seeing any of the public REITS out there or are you just competing with private lenders?

Hi, Dan, this is Clint. As far as who we are seeing, in a lot of cases, it's some small regional banks that were doing some loans. But as far as competitors, we haven't really seen other REITS and some of the smaller ones we've been looking at. Or Andy (inaudible).

I think they just don't do them because they are not getting the price. But we haven't heard that, Oh, Omega bought this, or that CSE bought this or I'm not sure H.C.P. or Ventas is looking at any of those things. We haven't heard of any transactions that have closed.

That's all for me.

All right.

At this time I'm showing you have no further questions. I would now like to turn the call back over to management for closing remarks.

Thank you. We've been told by various people that it would appear that based on the conditions of the debt markets our strategy to be very liquid should stand us well in this environment and we believe that it will. We are doing all that we can to capitalize on it. We are doing all we can to deploy our available capital in the most beneficial way to the shareholders of LTC. And on behalf of the team here, who is with me, I want to thank you for participating and we look forward to talking to you after the end of our first quarter. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a wonderful day.

Thank you, Katie.

You're welcome.