Omega Healthcare Investors Q1 2025 Earnings Report

Omega Healthcare Investors EPS Results

• Actual EPS: $0.75
• Consensus EPS: $0.75
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.68

Omega Healthcare Investors Revenue Results

• Actual Revenue: $228.38 million
• Expected Revenue: $236.61 million
• Beat/Miss: Missed by -$8.24 million
• YoY Revenue Growth: +13.80%

Omega Healthcare Investors Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 2, 2025
• Conference Call Time: 10:00AM ET

Omega Healthcare Investors (NYSE:OHI) engages in the provision of financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities, assisted living facilities, independent living facilities, rehabilitation and acute care facilities, and medical office buildings. The company was founded on March 31, 1992 and is headquartered in Hunt Valley, MD.

Omega Healthcare Investors Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Thank you, everyone. My name is Karen, and I'll be your conference operator today. At this time, I'd like everyone to welcome everyone to the Omega Healthcare Investors First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a Q and A session.

[Operator]

There a Q Thank you. I would like to now turn the call over to Michelle Reber. Please go ahead.

[Michele Reber, Manager of Operations at Omega Healthcare Investors]

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett President, Matthew Gorman CFO, Bob Stevenson CIO, Vikas Gupta and Megan Kroll, Senior Vice President of Operations. Comments made during this conference call that are not historical facts may be forward looking statements, such as statements regarding our financial projections, potential transactions, operator prospects and outlook generally. Factors that could cause actual results to differ materially from those in the forward looking statements are detailed in the company's filings with the SEC. During the call today, we will refer to some non GAAP financial measures such as NAREIT FFO, adjusted FFO, FAD and EBITDA.

[Michele Reber, Manager of Operations at Omega Healthcare Investors]

Reconciliations of these non GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega. I will now turn the call over to Taylor.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Thanks, Michelle. Good morning and thank you for joining our first quarter twenty twenty five earnings conference call. Today, I will discuss our first quarter financial results and certain key operating trends. First quarter adjusted funds from operations of $0.75 per share and FAD, funds available for distribution of $0.71 per share, reflects continued revenue and EBITDA growth funded primarily with equity, which has allowed us to reduce leverage to 3.7x debt to EBITDA. We raised and narrowed our 2025 AFFO guidance from a range of $2.9 to $2.98 up to $2.95 to $3.01 which reflects our strong first quarter twenty twenty five earnings tempered by the dilutive impact of our significant year to date share issuances.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

In March, Genesis did not pay its contractual rent of $4,200,000 and we partially pulled a letter of credit to cover the full shortfall. Genesis paid full contractual rent in April and has remained current on all interest obligations due on our secured term loan. The balance of our letter of credit is $3,500,000 Genesis management has indicated that their current liquidity issues stem from a tightening of their borrowing base by their asset based lender and legacy general and professional liability obligations. Omega's credit position with Genesis is strong. Our trailing twelve month cash flow to rent coverage exceeds 1.6 times.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

We believe that our 118,000,000 term loan is fully secured by our priority lien in all of the Genesis ancillary businesses, which includes the Align Med physician practice, their accountable care organization, PowerBack Rehab and the equity ownership in Shift Med as a result of the prior career staff sale. Turning to revenue mix within the portfolio. Over the last decade, we have driven a meaningful shift in our sources of revenue through both U. S. And U.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

K. Senior housing capital allocation. The percentage of private pay and other revenue has increased from eight percent ten years ago to 39% today. Based on our current pipeline and current tenant mix, we expect that the private and other revenue percentage will continue to grow. I will now turn the call over to Bob.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Thanks, Taylor, and good morning. Turning to our financials for the first quarter of twenty twenty five. Revenue for the first quarter was $277,000,000 compared to $243,000,000 for the first quarter of twenty twenty four. The year over year increase is primarily a result of the timing and impact of revenue from new investments completed throughout twenty twenty four and twenty twenty five, operator restructurings and transitions and annual escalators, partially offset by asset sales completed during that same time period. Our net income for the first quarter was $112,000,000 or $0.33 per common share compared to $69,000,000 or $0.27 per common share for the first quarter of twenty twenty four.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Our NAREIT FFO for Q1 was $184,000,000 or $0.62 per share as compared to $153,000,000 or $0.60 per share for the first quarter of twenty twenty four. Our adjusted FFO was $221,000,000 or $0.75 per share for the quarter and our FAD was $211,000,000 or $0.71 per share and both exclude several items outlined in our NAREIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our first quarter financial supplemental posted to our website. Our Q1 twenty twenty five FAD was $0.13 greater than our Q4 twenty twenty four FAD with the increase resulting from incremental revenue related to the timing and completion of $340,000,000 in fourth quarter twenty twenty four new investments and $78,000,000 in Q1 twenty twenty five new investments. In addition, Maplewood paid $15,600,000 in rent in the first quarter of twenty twenty five, an increase of $3,300,000 inclusive of $2,100,000 of rent related to the opening of the Washington DC facility in February of twenty twenty five. And we had reduced interest expense as we repaid 400,000,000 of 4.5% senior unsecured notes that matured 01/15/2025 using balance sheet cash.

[Robert Stephenson, CFO at Omega Healthcare Investors]

These were partially offset by the first quarter issuance of 7,000,000 shares of equity for gross proceeds totaling $264,000,000 as we continue to pre fund our investment pipeline. Our balance sheet remains strong as we ended the first quarter with $368,000,000 in cash and the full borrowing capacity of our $1,450,000,000 credit facility. Our balance sheet cash was used to fund the $344,000,000 U. K. And Jersey acquisition on April 25 that Dickis will be discussing.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Additionally, in April, we repaid our $50,000,000 term loan and officially extended our credit facility maturity to the October. At March 31, '90 '5 percent of our 4,500,000,000 in debt was at fixed rates And our fixed charge coverage ratio was 5.2 times and our funded debt to annualized adjusted normalized EBITDA was 3.72 times, which is the lowest our leverage has been in over ten years. We still have a target leverage range between four to five times with the sweet spot being between 4.5 to 4.75 times. Given our equity currency, we have the flexibility to accretively fund investments with equity as we have for the past several quarters, thereby positioning ourselves for outsized adjusted FFO growth as we opportunistically look to the debt and banking markets if coupons and rates become more favorable. Turning to guidance.

[Robert Stephenson, CFO at Omega Healthcare Investors]

As Taylor mentioned, we raised and narrowed our full year adjusted FFO guidance to a range between $2.95 to $3.01 per share. A few of the key 2025 full year guidance assumptions are, we're assuming no change in our revenue related to operators on an accrual basis of revenue recognition. As a note, over 75% of our operators are currently on a straight line basis of accounting, which means any growth in revenue through annual escalators will not yield further growth in adjusted FFO, but would yield cash flow growth. We're assuming Maplewood's ability to pay contractual rent continues to improve. We're assuming Genesis continues to pay full contractual rent and interest.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Of the $247,000,000 in mortgages and other real estate backed investments contractually maturing in 2025, we're assuming $84,000,000 will convert from loans to fee simple real estate and $68,000,000 will be repaid throughout 2025. We are assuming the balance of the loans will be extended beyond 2025. We've included the impact of the new investments completed as of April 30. We project our quarterly G and A expense to run between $12,000,000 to $14,000,000 in 2025. We assume we will repay our $238,000,000 of secured debt in November 2025 with equity.

[Robert Stephenson, CFO at Omega Healthcare Investors]

We assume no material changes in market interest rates as they relate to either interest earned on the balance sheet cash or interest expense charge on credit facility borrowings. Finally, consistent with how we ended 2024, we assume we will position ourselves with enough cash on the balance sheet by year end of twenty twenty five to repay our January 2026 '6 hundred million dollars bond maturity. As a reminder, to the extent our equity currency remains favorable and we continue to pre fund investments or prepare for debt maturities for every 4,000,000 shares issued, assuming shares are issued at a price consistent with the first quarter, our quarterly adjusted FFO is negatively impacted by slightly less than $01 per share while our leverage improves or is reduced by approximately 0.15 turns until the cash is put back to work in new investments. Our 2025 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital transactions other than what I just mentioned or what's included in the earnings release. I will now turn the call over to Vicus.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Thank you, Bob, and

[Vikas Gupta, CIO at Omega Healthcare Investors]

good morning, everyone. Today, I will be discussing the most recent performance trends for Omega's operating portfolio and Omega's investment activity in the first quarter of twenty twenty five as well as provide an update on Omega's pipeline and market trends for the remainder of 2025. First, turning to portfolio performance. Trailing twelve month operator EBITDAR coverage for our core portfolio as of 12/31/2024 increased to 1.51x versus 1.50x for the trailing twelve month period ended 09/30/2024. The most recent quarter's performance is another quarter of modest but continued trailing twelve month coverage improvement across our portfolio.

[Vikas Gupta, CIO at Omega Healthcare Investors]

Omega's operating partners continue to showcase their expertise and resilience in a fluid regulatory and reimbursement environment. Omega and our operating partners continue to work towards the common goal of making disciplined and sustainable investment decisions while serving an increasingly complex resident population across various asset types and markets. Omega is currently not engaged in restructuring activity with any of our major operators. However, I do want to share a few positive updates for two of our larger operators, La Vie and Maplewood. Levy continues to work towards exiting bankruptcy during the second quarter of twenty twenty five, at which time the Omega Levy master lease will be assumed and assigned to a new entity known as Avartis.

[Vikas Gupta, CIO at Omega Healthcare Investors]

The timeline for closing is based on final regulatory approvals and legal documentation between Novartis, the various landlords and the working capital lender. Omega is currently receiving full contractual rent of $3,100,000 per month or $37,500,000 per annum and no changes to rent are expected at the time the lease is assigned to Novartis. Turning to Maplewood. Occupancy for the core 17 facility Maplewood portfolio inclusive of Inspire Carnegie Hill in New York City has reached a level of 94% as of April 2025. Maplewood paid $13,500,000 in rent in the first quarter for this portfolio, which is an improvement of $1,300,000 from the fourth quarter of twenty twenty four and an improvement of $2,300,000 from the first quarter of twenty twenty four.

[Vikas Gupta, CIO at Omega Healthcare Investors]

The Inspire Embassy Row facility in Washington DC opened in February 2025. This new facility comprises 174 units and is located in the historic and highly desired Embassy Row area downtown Washington DC. The facility is in the process of leasing up with an occupancy of 20% as of the April. Maplewood paid $2,100,000 of incremental rent in the first quarter for Inspire Embassy Row for a total rent payment of $15,600,000 in the first quarter. In April 2025, Maplewood paid total rent of $5,800,000 of which $1,000,000 was attributable to Embassy Row.

[Vikas Gupta, CIO at Omega Healthcare Investors]

Turning to new investments. Omega twenty twenty five transaction activity through the April was very strong with over $423,000,000 in new real estate investments and $34,000,000 of CapEx investments funded in the first quarter for total new investment activity of over $457,000,000 During the first quarter, Omega completed a total of $112,000,000 in new investments, inclusive of $34,000,000 in CapEx. The new investments include $58,000,000 in real estate acquisitions via two separate transactions, a purchase lease transaction of two senior housing communities in Texas, which were leased to a new operator and a purchase leaseback transaction of four care homes in The UK leased to an existing operator. Both transactions have an initial cash yield of 10% with annual escalators ranging from 2% to 2.5%. In addition, Omega invested $20,000,000 in new real estate loans in the first quarter, which have a weighted average interest rate of 10.8%.

[Vikas Gupta, CIO at Omega Healthcare Investors]

Subsequent to the first quarter of twenty twenty five, Omega closed on a $344,000,000 investment for a portfolio of 45 care homes across The UK and Jersey. Omega leased the 45 care homes to four existing and two new operators with an initial cash yield of 10%. The UK continued to be a large driver of our twenty twenty five new investment activity, totaling approximately three ninety two or 93% of our total new investments excluding CapEx. As I have mentioned previously, we've accumulated a strong bench from operators and other relationships in The UK to lead us to highly accretive investment opportunities. Additionally, as a result of our scale, reputation and strong operator base across The UK, we were able to quickly evaluate, structure and close on complex transactions like the 45 Care Home transaction we closed in April.

[Vikas Gupta, CIO at Omega Healthcare Investors]

It is important to highlight that while these transactions varied in size and nature and were comprised of both real estate investments and real estate loans, approximately $4.00 $2,000,000 excluding CapEx or 95% were owned real estate investments leased to third party operators under long term triple net lease structures. We continue to support the growth of our existing and new operators by focusing on strong credit backed real estate investments and real estate loans with exceptional returns that often provide Omega with the ultimate opportunity for real estate ownership. Turning to the pipeline. Omega's pipeline and transaction outlook for the remainder of 2025 continues to be favorable. We continue to see marketing opportunities both in The U.

[Vikas Gupta, CIO at Omega Healthcare Investors]

S. And The U. K. While also benefiting from off market opportunities that our operating partners and other relationships bring us. Additionally, while we continue to see inquiries for real estate loans due to the restricted lending environment, we are seeing a material increase in opportunities to acquire real estate in 2025.

[Vikas Gupta, CIO at Omega Healthcare Investors]

Specifically in The U. S. With opportunities ranging the spectrum of individual sellers to regional owner operators and institutional real estate sellers. We will continue to evaluate and engage in select loan opportunities, primarily for existing operator relationships, but our priority will always be allocating capital towards accretive owned real estate deals that grow our balance sheet. I will now turn the call over to Megan.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

Thanks, Ficus, and good morning, everyone. I'll start today with news that, while not unexpected, is very much appreciated. In early April, the federal judge in the Texas court case brought against the staffing mandate found in favor of the summary judgment filed by the industry associations amongst others. The court found that CMS lacked the authority to issue a regulation requiring registered nurses twenty four seven and three point four eight hours per resident day of nurse staffing time, which would have effectively replaced a statute already in place. As a reminder, the congressional budget office had scored the reversal of this rule as saving the federal government twenty two billion dollars over ten years.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

We are extremely grateful to finally see some conclusion on this front and applaud the efforts of all those involved. Also in April, both the senate and house passed respective budget resolutions, which amongst other things, tasked the house energy and commerce committee with reducing spending by $880,000,000,000 over ten years. While not specifically calling out cuts to the federally funded portion of Medicaid, it is largely believed that in order to meet the requirement, some level of Medicaid reform will need to occur. We continue to believe that the Medicaid expansion population, those able-bodied adults that were added with the Affordable Care Act, are likely the largest target of these spending cuts given that the federal government covers a higher percentage of that Medicaid spend, 90%, than the traditional Medicaid population, approximately 63% on average. However, while spending cuts there may cover a vast amount of the required cuts, there may still be some action that would impact the traditional Medicaid population.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

There's no way to tell at this time what will ultimately happen. All of that said, with overall coverage strong, fundamentals continuing to improve, and a president that stood by this industry during COVID essentially recognizing that it was too important to fail, we feel well positioned and are hopeful that no attempt at draconian cuts in this space will be proposed. I will now open the call up for questions.

[Operator]

Our first question comes from the line of Jonathan Hughes of Raymond James. Please go ahead.

[Jonathan Hughes, Managing Director at Raymond James Financial]

Good morning. Thanks for the prepared remarks and commentary. I was hoping you could share some more details on Genesis and then not paying rent and interest in March, but then paying in April. I know that was surprising as we haven't really heard from them in a few years, but the shortfall was driven by their ABL lender. Can you just remind us of the Genesis corporate capital structure, if they're on accrual or cash accounting and then the geographic footprint of your Genesis portfolio?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Yes, Jonathan, it's Taylor. So just a slightly bigger picture. The Genesis Genesis has a weak balance. And so to the extent that their principal capital partner is their ABL lender, If they squeeze down on availability, it affects liquidity. I think it's just a onetime thing.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

From our perspective, they should continue to pay. The coverage is great. Our mezz loan is collateralized by an enormous amount of ancillary assets. So I I would expect they'll continue to pay. And if for some reason, situation becomes more difficult, we're in a fine spot.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

I mean, we've been through these a million times. I'm not worried at all. In terms of geography, it's principally Mid Atlantic. We used to have some Northeast presence. We still have a tiny bit in that area, Mid Atlantic all the way down into West Virginia.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

And then in terms of accounting, Genesis is on a cash basis because for, I don't know, three, four years, they've had an accounting opinion.

[Robert Stephenson, CFO at Omega Healthcare Investors]

A billing concern.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Concern opinion.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

And I don't expect that changes anytime soon.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Yeah, Jonathan. So on the lease, it's on a cash basis. It's been there for 2020. The loans that Taylor mentioned, given the fact that collateral supports the loans, easily supports the loans, that's on a accrual basis.

[Jonathan Hughes, Managing Director at Raymond James Financial]

Okay. That's great color. I appreciate that. And then I've got more Genesis questions, but I'll save those, and I'll ask one about acquisitions. Can you maybe share more details on The UK portfolio acquisition?

[Jonathan Hughes, Managing Director at Raymond James Financial]

We've seen a lot more interest lately in UK health care real estate from various capital sources. So, yeah, I was pleasantly surprised to see the attractive 10% yield on that transaction. Can you just talk about how that deal evolved and share some details on composition of that portfolio? Thank you.

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yeah. Jonathan, this is Vicus. So, that deal is an example of our how strong our platform is in The UK. There was a seller looking to exit, completely, and we were able to come in with six different operators and give them a solution in a very quick timeline. They wanted to close everything on the same day, and we were able to deliver that.

[Vikas Gupta, CIO at Omega Healthcare Investors]

And to be honest, I don't think there's a ton of competition because there's not a lot of people who could do that. So, and these assets fit well. They're all over The UK, Scotland, and Jersey, and all of our operators took them, better taking them. It fits really well in their geographies, and good quality assets that have a very good useful life.

[Jonathan Hughes, Managing Director at Raymond James Financial]

Alright. I appreciate the color. I'll hop off.

[Jonathan Hughes, Managing Director at Raymond James Financial]

Thank you for the time.

[Operator]

Our next question comes from the line of Seth Berge from Citibank. Please go ahead.

[Seth Bergey, Senior Research Associate at Citi]

Hi. Thanks for taking my question. I guess, have you seen any immigration impact on labor availability and wage pressures?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

Yeah. We haven't seen that at this point. I mean, there's a potential there could be an indirect impact down the road, but we really haven't seen anything at this point.

[Seth Bergey, Senior Research Associate at Citi]

Great. And then I guess for my follow-up, just going back to Genesis, do you have any sense of if their operating fundamentals are improving? Or do you have any metrics you could provide there?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Well, the coverage metric is the big one, the big driver. And our portfolio has been consistently above 1.5 times. Directionally, it's it's it moved up through as COVID improved, and it's kind of leveled out like the rest of the portfolio at that for them north of 1.6 compared to the whole portfolio of 1.5%.

[Seth Bergey, Senior Research Associate at Citi]

Thanks.

[Operator]

Okay. Our next question comes from the line of Juan Sanabria from BMO Capital Markets. Please go ahead.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Hi, good morning. Just on Genesis, on the loan portion, how much, I guess, pick interest or other kind of noncash is there where if that has to switch for whatever reason, knowing you have a lot of credit behind that, be potentially at risk?

[Robert Stephenson, CFO at Omega Healthcare Investors]

As I said, we have Taylor mentioned, we have those loans that have adequate collateral since the accounting required to keep on a full basis. In the quarter, we booked $2,400,000 uptick.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Okay. Great. And just curious, there was one of your larger cap peers did a significant transaction first time in a while. Did you guys look at that? Or how do you do you do you see them in other deals?

[Juan Sanabria, Managing Director at BMO Capital Markets]

Or just curious on the state of competition for USP Simple acquisitions here and if there's been any impact as a result of Doge cuts to financing availability from HUD or otherwise as a result of government job cuts.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

So Juan, are you talking about large cap peer? I'm not even sure peer. Welltower?

[Juan Sanabria, Managing Director at BMO Capital Markets]

Yeah. I I think they would say the same thing. But yeah.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Yes.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

We don't see Welltower much. But when you think about it, the deal I've heard that they closed on was rather large. And it it was cobbled together privately. It wasn't a marketed deal.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

So we we're aware we were aware of some things happening, but we were never a part of the bid process.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Okay. And and just as as with the Doge cuts, has there been any change to, like, the receptiveness or availability of of HUD lending as a result of of cuts? I don't know if, like, that that particular department was downsized or what. But is that going to impact debt financing availability generally?

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yeah. At this time, we haven't heard anything changing on the HUD front, but we'll keep our eyes or

[Vikas Gupta, CIO at Omega Healthcare Investors]

we'll keep our

[Vikas Gupta, CIO at Omega Healthcare Investors]

you're close to the ground there, but nothing at this time.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Thank you, guys. Appreciate it.

[Operator]

Our next call comes from Emily Meckler from Green Street. Please go ahead.

[Emily Meckler, Analyst at Green Street Advisors, LLC]

Hi, everyone. Thanks for the time. Can you

[Emily Meckler, Analyst at Green Street Advisors, LLC]

provide a little more color on the packs portfolio and to what extent you'd be able to retenant the current facilities operated by the cover company? And how have coverage levels trended over the past couple quarters?

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yeah. This is Vikas. We have around 50 buildings with packs, and they do extremely well. And so overall, we don't have a worry that we we would not be able to retenant them at the current rent or even more. But at the current time, we've had no we've had discussions with PACs, and there's been no discussions of trying to exit our portfolio.

[Emily Meckler, Analyst at Green Street Advisors, LLC]

Okay. Great. Thank you. And then just one on, kind of turning to the transaction market. Has your underwriting criteria shifted over the past few months, specifically in The US, given the potential changes to Medicaid repayments?

[Vikas Gupta, CIO at Omega Healthcare Investors]

This is Vickie again. No. The answer is no. Nothing's changed. But we are I mean, we we're watching things closely, but at the current time based on just all of the unknowns out there, we continue to underwrite the same way.

[Emily Meckler, Analyst at Green Street Advisors, LLC]

Okay. Thank you for the time.

[Operator]

Our next question comes from Omotayo Okusanya from Deutsche Bank. Please go ahead.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Hi, yes. Good morning, everyone. So on Genesis, again, you had mentioned earlier, like it's just again, lending markets are a little bit tougher in general. Just kind of curious to get what we're seeing with Genesis of the ABL lender reducing capacity. I mean, you starting to see that more broadly in the industry just because, you know, lending is getting tighter?

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Or do you really kind of really look at this more as a Genesys specific issue?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

It's it's Paya, it's the latter. This is Genesys specific. We haven't seen anything across the landscape. I will tell you, ABL lenders are notoriously difficult at this. But in terms of a trend, we're not seeing anything.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Okay. That's helpful. And then for the term loan book, the $118,000,000 if you were to hazard a guess of the LTV on those assets relative to the collateral, what would that number be?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

That's really, really a guess. But I will tell you, I think we're substantially over collateralized. Substantially.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Gotcha. Okay. And then that's that's helpful. Maplewood, once it's all stabilized, what would be the run rate for the rent?

[Vikas Gupta, CIO at Omega Healthcare Investors]

On Maplewood, stabilized, Bob?

[Robert Stephenson, CFO at Omega Healthcare Investors]

You mean our contractual?

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Yeah. The contractual. Yeah. Like, what do you get to at the end of it all?

[Matthew Gourmand, President at Omega Healthcare Investors]

So this this is Matthew here. It's a little bit it's a little bit convoluted because we're growing in our DC assets. So the contractual rent on the portfolio outside of DC is currently $69,000,000 And then in the DC project, it's going to be a 6% rate this year going up to 7%, going up to eight and then 2.5 escalated thereafter. You can kind of do the math around that.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Got you. Thank you.

[Operator]

Our next question comes from the line of Nick Yulico from Scotiabank. Please go ahead.

[Nick Yulico, Analyst at Deutsche Bank]

Thanks. Good morning. Just turning to Lavee, you talked about the entity, it should be the master lease assigned to a new entity, no change to rent expected. Can you just remind us, does that mean then that the escalator is going to kick back in? What what is the escalator there?

[Nick Yulico, Analyst at Deutsche Bank]

And then also, you know, is there any, like, straight line rent that then that gets returned on then, once they exit bankruptcy?

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yeah. Nick, this is Nikas. So, basically, nothing is going to change. We'll continue to get rent. We'll continue to get our kickers.

[Vikas Gupta, CIO at Omega Healthcare Investors]

I believe they're 2.5% on this lease. And so there's really nothing from a business perspective that will be changing on that lease after this assignment. We'll continue to get full rent, and this portfolio has strong coverage above 1.4x.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Bob, do you want to answer the straight line question? Yes.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Yes. What's the answer? Oh, it's the big.

[Nick Yulico, Analyst at Deutsche Bank]

So

[Nick Yulico, Analyst at Deutsche Bank]

they so so there's gonna be straight line rent rent benefit that gets that starts to kick in again on the on the lease?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

So I'm sorry. Bob, it's how it will so the question is, will straight line rent kick in with the initiation of the new lease?

[Robert Stephenson, CFO at Omega Healthcare Investors]

Yes.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Sorry about that.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Yes.

[Nick Yulico, Analyst at Deutsche Bank]

Okay. Great. Thanks. Is there is there a way can you just remind us, like, quantify what that what that benefit is?

[Robert Stephenson, CFO at Omega Healthcare Investors]

Well, it's gonna be the the length of the lease at two and a half percent, and then you divide it by the length of the lease. I just don't know the ending date of that.

[Nick Yulico, Analyst at Deutsche Bank]

Oh, Okay. Got it. We can we follow-up. Thanks. And then just the second question is any any, you know, high level perspective you could share on, you know, provider tax?

[Nick Yulico, Analyst at Deutsche Bank]

I know you talked about it a little bit and potential Medicaid changes are in flux, but just at a high level, like, anything you're hearing about, you know, what that could turn out to be if it's a proposal and, you know, any sort of early thoughts on impact to the portfolio? Thanks.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

Yeah. I mean, look.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

I think we think of the largest impact out there on Medicaid being on the Medicaid expansion population. And with the last within the last couple of days, that's actually come out that they're suggesting per capita caps on the expansion population only. The greatest risk to traditional Medicaid is provider taxes, as you said. Right now, provider taxes can go anywhere up to 6% of net patient revenues. It was about half the states almost half the states in The US who are at 6%, but then it goes down from there.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

Several states don't have any any provider tax whatsoever. And we're not hearing that that would be wiped out completely. It's more so that it might come down a percentage or two. In terms of the impact, it's really difficult to tell from a portfolio perspective. Every state's different.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

Certainly, a certain number of states are gonna step up and probably bridge that gap, and it's just too soon to tell what that would actually look like. But that that is the greatest risk, which is probably a good thing when you look at the broad spectrum of the things they could do.

[Nick Yulico, Analyst at Deutsche Bank]

Okay. Great. Thank you.

[Operator]

Our next call comes from the line of question excuse me, comes from the line of John Kilachowski from Wells Fargo. Please go ahead.

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

Thank you. Good morning. Maybe on the disposition side, you did a lot in the quarter. I'm curious if that was just a cleanup of noncore assets or you're being opportunistic on a good deal. Just curious what prompted that?

[Matthew Gourmand, President at Omega Healthcare Investors]

Sure. So a little bit of both. We had some assets held for sale at the end of last quarter that we executed on. And then there was another portfolio that, quite frankly, we weren't necessarily envisioning selling, but somebody came along and made us an offer that would allow us to redeploy the capital effectively, accretively and grow FAD. We felt that those assets were not necessarily core to the portfolio.

[Matthew Gourmand, President at Omega Healthcare Investors]

They had been somewhat optimized in terms of the achievements that they realized in the coverage. And therefore, we took advantage of the price that was offered to us.

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

Got it. And then just in the opening remarks, it sounded like the commentary about the opportunities in The U. S. For your pipeline were improving because a lot of

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

the activity we've we've is in

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

The U. K. I'm curious what you think the rest of the year is going to look like in terms of acquisition opportunities between The U. S. And The U.

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

K?

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yes, John. This is Vicus. Right now, the pipeline overall is healthy. It is a little bit more US heavy at the moment, which is a change from where we have been historically the last year or so. But we'll see how things play out as the year progresses.

[John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo]

And I guess the last thing, kind of piggybacking on that, is has your underwriting changed for those deals in The U. S. Based on what we've seen and kind of the overhang of the Medicaid concerns?

[Vikas Gupta, CIO at Omega Healthcare Investors]

No. As I previously said, we are still underwriting the same, because there's just too many unknowns out there.

[Operator]

Our

[Operator]

next question comes from the line of Carol Greenith from Bank of America. Please go ahead.

[Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch]

Thank you and good morning. Going back to The U. K. Market, I'm curious about how you get comfortable with extending into new operators. And can you just specifically characterize your platform and if it's any different than what you do in The US?

[Vikas Gupta, CIO at Omega Healthcare Investors]

This is Vikas again. That's a good question. So, I mean, our platform is very similar to The US where we have we've grown a a bench of operators. Today, we have about 14 operators in The UK. And we honestly underwrite the same.

[Vikas Gupta, CIO at Omega Healthcare Investors]

We look at, real estate quality markets and the operator and see how they would they would fit into particular assets. So it is very much just taking our platform here and and and putting it out there, but it's been ten years going now, and we believe that we we finally have it at a good level.

[Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch]

Thank you. And also, your comment about the material change in, the transaction market in The US, I'm curious what when you're coming to deals, are you seeing greater competition? And is that changing any, cap rates that are coming to the table?

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yeah. I mean, there's a pickup in volume right now due to the interest rate environment. But, no, overall, we're I mean, you know, different players come in and out, private equity, other REITs into our space. But, no, overall, the the the the competition is about

[Vikas Gupta, CIO at Omega Healthcare Investors]

the same as as it has been historically.

[Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch]

Okay. Thank you very much.

[Operator]

Our next question comes from Wes Golladay of Baird. Please go ahead.

[Wes Golladay, Senior Research Analyst at Robert W. Baird & Co]

Hey, good morning everyone. Can you talk about your FX exposure now?

[Robert Stephenson, CFO at Omega Healthcare Investors]

Yes. So if you look at our U. K.

[Robert Stephenson, CFO at Omega Healthcare Investors]

From a hedging standpoint, what we look at, we try to do net investment hedges and or cross currency swaps when that all makes sense. But bigger picture is we have a big portfolio of assets over there and we collect rent in Pound Sterling. And as you know, looking at the pipeline and the acquisitions we just completed, we're paying Pound Sterling. That's a net investment hedge, right? It's a perfect hedge there.

[Wes Golladay, Senior Research Analyst at Robert W. Baird & Co]

Okay. And then you have been extending your credit facility. Are you looking to do something bigger at the end of the year?

[Robert Stephenson, CFO at Omega Healthcare Investors]

I would like to get something done prior to the end of the year, mid summer. And given our size, yes, you would expect we would hope that, that would increase in size.

[Wes Golladay, Senior Research Analyst at Robert W. Baird & Co]

Okay. Thanks a lot.

[Operator]

Our

[Operator]

next question comes from Richard Anderson of Wedbush Securities. Please go ahead.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

You. Taylor, in the beginning you said you're not worried at all about Genesis, which is worrisome. I guess the fact that you have to say and this may all work out perfectly fine. But correct me if I'm wrong, maybe this is the wrong way to look at it, but the 3,500,000 that's remaining on the letter of credit seems a little thin relative to the future. Is that a fair way to think about it?

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Or am I you know, looking at it the wrong way?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

I don't think well, $33,500,000.0 is less than a month. Right? So to the extent that you want more than a month, it doesn't give you a lot of room to maneuver. On the flip side, if we don't get paid, it's a default. If there's a default, there's a process.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

We and these assets are incredibly valuable. So, you know, look. It's unfortunate that we have a lot of noise because of the blip in the payment, but the reality from our perspective is we're not worked, and, you know, we'll work through the process

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

if need be.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Okay.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Alright. I I guess I'll move on from that. Alright. The the other thing I wanted to I wanted to ask about was the the 2800000.08% CMS recommendation for fiscal year twenty twenty six and the value based adjustment of 2%. I kind of queried about this and you all think that the right number to think about relative to the 4.2 of this year is 2.8, putting aside the incentive component of value of the VBP.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

But some see it differently and I'm wondering where you stand. Is the real number 2.8? Or is it some fraction of that or some lower number of that when you take into account staffing and you take into account wages and you take into account, again, the VBP adjustment? What's the real number for 2026 in your mind?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

I mean, the the true number is that 2.8%. We thought it was gonna come in around 3%, so it's right around where we thought it was gonna be. And quite frankly, normally, what happens when you get a proposed rule, by the time it becomes the final rule, there's probably maybe a little bit of a bump in there. But in terms of you're just talking total overall picture of what's going on in the the nursing homes, I mean, yes, staffing obviously cost cost more, but things have sort of leveled off from that perspective as well. It's not as, you know, heated as it was over the last couple years.

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

And it's sort of too soon to tell even on the tariff side what that's gonna do to expenses. But, really, when you think about it, the Medicare piece of the population is a very small percentage, of our business, and we really tend to concentrate more on the Medicaid side of things, which has been very much so keeping pace with inflation, and we hope to see that going forward.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Okay. So it's is it overly simplistic to take the two eight, subtract the two, and then assume that the the your operators will meet those thresholds, you'll end up at 2.8. Is that is that the is that the way to think about it, or am I kind of oversimplifying?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

I think you're probably oversimplifying. You're talking about the value based piece where they potentially could pick Is that

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Yep. That's what I'm asking. You know what mean? What's how does that you kinda swing that one?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

Yeah. We tend to think of our operators as being pretty strong on the quality piece of it, and so they would pick up whatever they can from that aspect.

[Richard Anderson, Managing Director - Equity Research at Wedbush Securities]

Okay. Okay. That's the answer then. Thank you very much.

[Operator]

Our next question comes from Michael Carroll of RBC Capital Markets. Please go ahead.

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

Yes, thanks. I guess, Megan, I wanted to circle back on the provider tax comments. I know the House Republicans initial menu of budget cuts included reducing the provider tax or potentially reducing the threshold to 3%. And I think you just said that they're talking about only reducing it by one to 200 basis points. I mean, has that changed, or is it still kind of that evolving scenario where we just don't know yet where they wanna set it even if they do wanna redo something with it?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

It is very much so evolving. So, you know, one day, you might hear they're gonna cut it by 1%, and that's the next day, it might be 2%. So it's a little all over the place. It'll be interesting to see what happens from an expansion perspective. Right?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

The more they can pick up from that 880,000,000,000 from the expansion, the less they're gonna have to pick up on the traditional Medicaid side.

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

Okay. No. That that makes perfect sense. And then if I can just sneak one Genesis question in. Did they pay their May rent yet, I guess?

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

Or how long do they have until they, need to pay their May rent?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

The May rent is due May 5, so still not due.

[Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets]

Okay. Great. Thank you.

[Operator]

Our next question comes from Vikram Malhotra from Mizuho. Please go ahead.

[Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.]

Good morning. Thanks for taking the question. I guess just going back to Genesis and your conversations with them, like why did the ABL lender shrink the borrowing base? Did something change in the business or the collateral? And can you just clarify, is this ABL lender done this with any other operator?

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

I have no idea whether the ABL lender has done it with other operators. I believe it related to a pool of collateral that, was aging. Beyond that, I don't have any more color.

[Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.]

Okay. Just going back to the comments in The US acquisition, I I guess, you know, last quarter and maybe even the quarter before that, you had sort of said it's you you were much more focused on The US, less opportunities that make sense for you. So I'm wondering, like, apart from rates, like, what has what else has changed for the pool to become, you know, larger, number one, and and more attractive to Omega?

[Vikas Gupta, CIO at Omega Healthcare Investors]

Yeah. It's just where we

[Vikas Gupta, CIO at Omega Healthcare Investors]

see accretive opportunities, and, it's a little bit more heavy on The US at the moment. We did close a large UK transaction, and at this point, there's more US opportunities are coming to us. Again, we are focusing on accretive opportunities with current partners and new partners. So wherever we see them, that's where we're heading towards.

[Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.]

Okay. Great. And then, Bob, if I can just lastly clarify, you'd mentioned kind of having enough capital to deal with, the 26 pay debt pay payments if if I'm if, correct me if I'm wrong, but does that essentially mean, you know, through the year, you'll be raising a fair amount of equity to kind of deal with that and acquisitions as well?

[Robert Stephenson, CFO at Omega Healthcare Investors]

That is correct. And again, it's predicated on price, not there. You.

[Operator]

Our next question comes from Mateo Akusana from Deutsche Bank. Please go ahead.

[Omotayo Okusanya, Managing Director at Deutsche Bank]

Yes. Just a very quick follow-up for Megan. Are you hearing anything about federal government maybe potentially filing an appeal against the judgment on minimum staffing?

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

I have not heard anything like that at this point. I mean but I at the end of the day, regardless of the court case, right, the likelihood is is that the the mandate is gonna end up in the budget as a $22,000,000,000 win, for it being going away. So it'll be handled one way or

[Megan Krull, Senior Vice President, Operations at Omega Healthcare Investors]

another.

[Robert Stephenson, CFO at Omega Healthcare Investors]

Awesome. Thank you.

[Operator]

Our next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead.

[Juan Sanabria, Managing Director at BMO Capital Markets]

For Genesis, Taylor, how should we think of or what's the meaning behind the pool of collateral that was aging? Does that mean there's, like, a growing AR or bad debt balance for Genesis, or is that the same collateral pool you guys have? Just hoping for a little bit more color if that if possible. With regards this is with regards to the ABL question. Sorry.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

I I what are you look I I'm trying to understand what it is you're you're looking for.

[Juan Sanabria, Managing Director at BMO Capital Markets]

I was I was basically following up on Vikram's question with regards to the ABL, the shrinking borrowing base. And you said it's the the pool of collateral that was aging. I just I'm not sure what that means. So just hoping for a little bit of clarification.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

Yes. So this is just what we've been told. I mean, I don't have I don't audit their ABL asset base. My understanding is their asset base is north of 400,000,000. The loan is less than 300,000,000, but ABL lenders can pull different toggles.

[Taylor Pickett, CEO & Director at Omega Healthcare Investors]

So I don't have any more information than that. Really not worried about it. But to the extent that they rely on the ABL lender for liquidity, it can create issues for the company.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Understood. Sorry about that. And just one quick one for me. How should we think of the cap rates for the yields for the first quarter dispositions?

[Matthew Gourmand, President at Omega Healthcare Investors]

It's tough. Some of those assets we weren't receiving rent on, so it's effectively an infinite yield. But I think if you look back at what the rent was assigned on those facilities, you'd probably find it's in the 10% to 12% range on legacy rents. And then the opportunistic one was probably more like a 7% yield, which as you can see is why we wanted to take advantage of that because we're still getting 10s in the marketplace. So the net number is probably below 10% once you look at the whole thing, but it's very difficult to parse that out given the fact we weren't receiving rent on some of those facilities.

[Juan Sanabria, Managing Director at BMO Capital Markets]

Thank you.

Participants

Executives

• Michele Reber, Manager of Operations
• Taylor Pickett, CEO & Director
• Vikas Gupta, CIO
• Megan Krull, Senior Vice President, Operations
• Matthew Gourmand, President

Analysts

• Robert Stephenson, CFO at Omega Healthcare Investors
• Jonathan Hughes, Managing Director at Raymond James Financial
• Seth Bergey, Senior Research Associate at Citi
• Juan Sanabria, Managing Director at BMO Capital Markets
• Emily Meckler, Analyst at Green Street Advisors, LLC
• Omotayo Okusanya, Managing Director at Deutsche Bank
• Nick Yulico, Analyst at Deutsche Bank
• John Kilichowski, Vice President - Equity Research Analyst at Wells Fargo
• Farrell Granath, Equity Research Associate at Bank of America Merrill Lynch
• Wes Golladay, Senior Research Analyst at Robert W. Baird & Co
• Richard Anderson, Managing Director - Equity Research at Wedbush Securities
• Michael Carroll, Managing Director & Head of US Real Estate Research at RBC Capital Markets
• Vikram Malhotra, Managing Director at Mizuho Financial Group, Inc.