Equity

6 Months Ended

Jun. 30, 2011

Equity

Equity

6. Equity

Equity is allocated between controlling and non-controlling interests as follows (in thousands):

	LTC Properties, Inc. Stockholders’ Equity			Non-controlling Interest			Total Equity
Balance at December 31, 2010	$	455,560		$	1,962		$	457,522
Net income	24,320			96			24,416
Redemption of preferred stock	(88,413		)	—			(88,413		)
Common stock offering	103,667			—			103,667
Vested stock options and restricted stock	721			—			721
Reclassification adjustment	(30		)	—			(30		)
Non-controlling interest preferred return	—			(96		)	(96		)
Preferred stock dividends	(3,876		)	—			(3,876		)
Common stock dividends	(23,806		)	—			(23,806		)
Balance at June 30, 2011	$	468,143		$	1,962		$	470,105

Preferred Stock.  At June 30, 2011, we had 2,000,000 shares of our 8.5% Series C Cumulative Convertible Preferred Stock (or Series C preferred stock) outstanding.  Our Series C preferred stock is convertible into 2,000,000 shares of our common stock at $19.25 per share.  Total shares reserved for issuance of common stock related to the conversion of Series C preferred stock were 2,000,000 shares at June 30, 2011.

During the six months ended June 30, 2011, we redeemed 3,536,530 shares of our 8.0% Series F Cumulative Preferred Stock (or Series F preferred stock), representing all of our outstanding shares.  The Series F preferred stock had a liquidation value of $25.00 per share. The redemption price was $25.1333 per share, including accrued and unpaid dividends up to the redemption date.  Accordingly, we recognized the $3,566,000 of original issue costs related to the Series F preferred stock as a preferred stock redemption charge in the consolidated income statement line item income allocated to preferred stockholders.

Common Stock.  During the six months ended June 30, 2011, we sold 3,990,000 shares of common stock at a price of $27.25 per share, before fees and costs of $5,061,000, in an underwritten public offering.  The net proceeds of $103,667,000 were used to redeem all of our Series F preferred stock outstanding and the remaining net proceeds were used to partially repay amounts outstanding under our Unsecured Credit Agreement.

No common stock options were exercised during the six months ended June 30, 2011. During the six months ended June 30, 2010, a total of 6,666 common stock options were exercised at a total option value of $159,000 and a total market value on the date of exercise of $182,000.

We have an equity distribution agreement which allows us to issue and sell, from time to time, up to $85,686,000 in aggregate offering price of our common shares.  Sales of common shares are made by means of ordinary brokers’ transactions at market prices, in block transactions, or as otherwise agreed between us and our sales agents.  During the six months ended June 30, 2011, we did not sell shares of our common stock under our equity distribution agreement. During the six months ended June 30, 2010, we sold 365,000 shares of common stock at a weighted average price, including fees, of $26.45, resulting in net proceeds of $9,654,000 after $249,000 of fees. At June 30, 2011, we had $64,573,000 available under this equity distribution agreement.

During 2010, we filed a Form S-3 “shelf” registration statement which became effective June 16, 2010 to replace our prior shelf registration statement.  Our current shelf registration statement provides us with the capacity to offer up to $400,000,000 in common stock, preferred stock, warrants, debt, depositary shares, or units.  We may from time to time raise capital under our current shelf registration in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of the offering. At June 30, 2011 we had availability of $167,614,000 under our effective shelf registration.

Non-controlling Interests. We have one limited partnership. The limited partnership agreement allows the limited partners to convert, on a one-for-one basis, their limited partnership units into shares of common stock or the cash equivalent, at our option. We have reserved 112,588 shares of our common stock under this partnership agreement. If we issue shares of our common stock upon limited partners’ election to exercise their conversion rights, the carrying amount of the partnership would be reclassified to stockholders’ equity. Since we exercise control, we consolidate the limited partnership and we carry the non-controlling interests at cost. At June 30, 2011, the carrying value and market value of the partnership conversion rights was $1,962,000 and $3,180,000, respectively.

Distributions.  We declared and paid the following cash dividends (in thousands):

	Six months ended June 30, 2011					Six months ended June 30, 2010
	Declared			Paid		Declared		Paid
Preferred Stock
Series C	$	1,636		$	1,636	$	1,636	$	1,636
Series E (1)	—			—		40		40
Series F (2)	2,240		(3)	4,008		5,894		5,894
	3,876			5,644		7,570		7,570
Common Stock (4)	23,806			23,806		18,416		18,416
Total (5)	$	27,682		$	29,450	$	25,986	$	25,986

(1)During 2010, we redeemed all of our 8.5% Series E Cumulative Convertible preferred Stock.

(2)During 2011, we redeemed all of our 8.0% Series F Cumulative Convertible preferred Stock.

(3)Includes the accrued and unpaid dividends on the Series F preferred stock up to the redemption date.

(4)Represents $0.14 per share per month and $0.13 per share per month for the six months ended June 30, 2011 and 2010, respectively.

(5)The difference between declared and paid is the change in distributions payable on the balance at June 30 and December 31.

On July 5, 2011, we declared a monthly cash dividend of $0.14 per common share per month for the months of July, August and September, 2011, payable on July 29, August 31 and September 30, 2011, respectively, to stockholders of record on July 21, August 23 and September 22, 2011, respectively.

Other Equity.  At June 30, 2011 and December 31, 2010, other equity consisted of accumulated comprehensive income of $234,000 and $264,000, respectively.  This balance represents the net unrealized holding gains on available-for-sale REMIC Certificates recorded in 2005 when we repurchased the loans in the underlying loan pool.  This amount is being amortized to increase interest income over the remaining life of the loans that we repurchased from the REMIC Pool.

The following table represents our consolidated comprehensive income (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Comprehensive Income:
Net income	$	12,262		$	11,630		$	24,416		$	22,200
Reclassification adjustment	(15		)	(28		)	(30		)	(56		)
Comprehensive income	$	12,247		$	11,602		$	24,386		$	22,144

Stock-Based Compensation.  No stock options were issued during the six months ended June 30, 2011 and 2010. At June 30, 2011, the total number of stock options that are scheduled to vest through December 31, 2011 and 2012 is 5,000 and 5,000, respectively.  We have no stock options outstanding that are scheduled to vest beyond 2012.  Compensation expense relating to the vesting of stock options for the three and six months ended June 30, 2011 were $4,000 and $8,000, respectively.  Compensation expense relating to the vesting of stock options for the three and six months ended June 30, 2010 were $28,000 and $67,000, respectively. The remaining compensation expense to be recognized related to the future service period of unvested outstanding stock options for 2011 and 2012 is $8,000 and $10,000, respectively.

During the six months ended June 30, 2011, we granted 6,000 shares of restricted common stock at $28.70 per share.  These shares vest ratably over a three-year period from the grant date.  During the six months ended June 30, 2010, we granted 11,030 shares of restricted common stock at $26.53 per share, 4,000 shares of restricted common stock at $25.95 per share and 1,000 shares of restricted common stock at $25.04 per share.  These shares vest ratably over a three-year period from the grant date.  Also, during the six months ended June 30, 2010, we granted 99,661 shares of restricted common stock at $26.53 per share. These shares vest ratably over a five-year period with the first date of vesting beginning in December 31, 2010.  During the three and six months ended June 30, 2011, we recognized $359,000 and $713,000, respectively, of compensation expense related to the vesting of restricted common stock.  During the three and six months ended June 30, 2010, we recognized $327,000 and $654,000, respectively, of compensation expense related to the vesting of restricted common stock.