\nOmega Healthcare Investors, Inc. (NYSE: OHI) (the \u201cCompany\u201d or \u201cOmega\u201d) announced today its results for the quarter ended March 31, 2023.<\/p>\n
FIRST QUARTER 2023 AND RECENT HIGHLIGHTS<\/span><\/span><\/b><\/p>\n \nNareit FFO, AFFO and FAD are supplemental non-GAAP financial measures that the Company believes are useful in evaluating the performance of real estate investment trusts (\u201cREITs\u201d). Reconciliations and further information regarding these non-GAAP measures are provided at the end of this press release.<\/p>\n CEO COMMENTS<\/span><\/span><\/b><\/p>\n \nTaylor Pickett, Omega\u2019s Chief Executive Officer, stated, \u201cOur first quarter financial performance was in line with expectations, as our earnings reflected the impact of the previously disclosed operator restructurings. As we indicated last quarter, we expect our financial performance to improve in the coming quarters, as restructurings are concluded, restructured operators begin paying rent again, and proceeds from asset sales are redeployed. Barring additional unforeseen restructurings, this should result in both our dividend payout ratio and our leverage rapidly improving as the year progresses.\u201d<\/p>\n \nMr. Pickett continued, \u201cThe operating backdrop continues to improve, with occupancy increasing, the tight labor market moderating slightly, and federal and state reimbursement increases providing much needed support to an industry still feeling the impact from the pandemic. As a result, core EBITDAR coverage, excluding CARES Act support, for the fourth quarter of 2022 was 1.09x, up from 0.83x in the third quarter. At the same time, the acquisition pipeline is also picking up, as reflected in the $276 million of transactions closed this year.\u201d<\/p>\n \nMr. Pickett concluded, \u201cWhile both corporate and industry metrics are improving, the industry is still on the road to recovery and remains quite fragile. As such, it is vital that both federal and state efforts continue to support an industry that proved so integral to protecting the aging and vulnerable during the pandemic. In particular, we are hopeful that any federal minimum staffing requirement would be thoughtfully constructed, balancing the focus on resident care with the labor challenges and funding needs facing the industry.\u201d<\/p>\n FIRST QUARTER 2023 RESULTS<\/span><\/span><\/b><\/p>\n Revenues<\/i><\/b> \u2013 Revenues for the quarter ended March 31, 2023 totaled $218.2 million, a decrease of $31.1 million over the same period in 2022. The decrease primarily resulted from (i) the timing of operator restructurings and (ii) asset sales completed throughout 2022. The decrease was partially offset by revenue from new investments completed throughout 2022.<\/p>\n Expenses<\/i><\/b> \u2013 Expenses for the quarter ended March 31, 2023 totaled $199.8 million, an increase of $32.1 million over the same period in 2022. The increase primarily resulted from (i) a $35.5 million increase in impairment on real estate properties, (ii) a $2.3 million increase in general and administrative (\u201cG&A\u201d) expense primarily related to professional services and (iii) a $1.9 million increase in the stock-based compensation expense, partially offset by (i) a $5.9 million favorable change in provision for credit losses and (ii) a $1.6 million decrease in depreciation and amortization expense related to facilities sold and facilities reclassified as held for sale.<\/p>\n Other Income and Expense<\/i><\/b> \u2013 Other income for the quarter ended March 31, 2023 totaled $16.4 million, a decrease of $96.8 million over the same period in 2022. The decrease resulted from a decrease in gain on assets sold.<\/p>\n Net Income <\/i><\/b>\u2013 Net income for the quarter ended March 31, 2023 totaled $36.8 million, a decrease of $158.3 million over the same period in 2022. The decrease primarily resulted from the aforementioned (i) $96.8 million decrease in other income and expense, (ii) $31.1 million decrease in total revenue, as well as (iii) $32.1 million increase in expenses, partially offset by a $2.5 million favorable change in income tax expense.<\/p>\n FINANCING ACTIVITIES<\/span><\/b><\/p>\n Dividend Reinvestment and Common Stock Purchase Plan and ATM Program<\/i><\/b> \u2013 During the quarter ended March 31, 2023, the Company issued 82 thousand shares of its common stock under its Dividend Reinvestment and Common Stock Purchase Plan. Aggregate gross proceeds from these issuances generated $2.3 million at an average price per share of $27.88. No shares were issued under the ATM Program during the quarter ended March 31, 2023.<\/p>\n 2023 FIRST QUARTER PORTFOLIO AND RECENT ACTIVITY<\/span><\/span><\/b><\/p>\n Operator Updates:<\/i><\/b><\/p>\n LaVie <\/i><\/b>\u2013 In the first quarter of 2023, as previously disclosed, Omega continued the process of restructuring its portfolio with LaVie and agreed to allow LaVie to defer up to $19.1 million (or 66% of contractual rent) from January 2023 through April 2023. During the first quarter of 2023, LaVie paid, and Omega recorded, $7.4 million in contractual rent. Restructuring discussions related to additional facilities are still ongoing with LaVie, and the Company anticipates the additional restructuring activity to be completed in the next several months.<\/p>\n Maplewood <\/i><\/b>\u2013 As previously disclosed, in the first quarter of 2023, the Company entered into a restructuring agreement to amend and restate its master lease and loan agreement with Maplewood. As part of the restructuring, Omega and Maplewood agreed, among other terms, to (i) fix contractual rent at $69.3 million per annum and defer annual 2.5% escalators through December 31, 2025, (ii) convert the 7% per annum cash interest due on the loan to payment-in-kind (\u201cPIK\u201d) only interest in 2023 with cash interest payments to be phased in starting in 2024 and (iii) increase the capacity of the loan from $250.5 million to $320.0 million, inclusive of PIK interest. During the first quarter of 2023, the Company recorded the $17.3 million received for rent and also recorded $1.5 million of interest income related to the December 2022 interest that was paid in arrears in January 2023. As the loan is on non-accrual status and interest under the loan has been converted to PIK only interest for the remainder of 2023, the Company will not record any additional interest income on the loan during the year. Finally, as part of the restructuring agreement, the Company paid a $12.5 million option termination fee to Maplewood, which was recorded as a reduction of revenue. The fee could be recouped upon a potential sale of the portfolio.<\/p>\n Healthcare Homes <\/i><\/b>\u2013During the fourth quarter of 2022, as previously disclosed, the Company agreed to allow Healthcare Homes Limited (\u201cHealthcare Homes\u201d), a United Kingdom (\u201cU.K.\u201d) based operator representing 2.5% of fourth quarter 2022 annualized contractual rent and mortgage interest, the ability to defer up to \u00a36.7 million of contractual rent from January 2023 through April 2023 with regular payments to resume in May 2023. Healthcare Homes utilized the full \u00a36.7 million deferral for January 2023 through April 2023 rent and resumed full contractual payments in May 2023.<\/p>\n Agemo <\/i><\/b>\u2013 In the first quarter of 2023, the Company entered into a restructuring agreement in which Omega and Agemo agreed, among other terms, to (i) reduce annual base rent and interest to $27.9 million commensurate with 22 facilities sold in 2022 and (ii) defer Agemo\u2019s requirement to pay rent and interest until April 1, 2023. Agemo resumed making rent and interest payments during the second quarter of 2023 in accordance with the agreed-upon restructuring terms.<\/p>\n Other Operators<\/i><\/b> \u2013 During the first and second quarters of 2023, the Company transitioned the portfolios of four cash basis operators, with an aggregate of 48 skilled nursing facilities (\u201cSNFs”), to three new and two existing operators.<\/p>\n \nThese transfers included a previously disclosed operator representing 2.4% of the Company\u2019s first quarter 2022 annualized contractual rent and interest revenue, which was placed on a cash basis in the second quarter of 2022 after the operator failed to make full contractual rent payments. In the first quarter of 2023, the operator continued to under-pay rent and paid only $0.5 million, which was recorded for both adjusted FFO and FAD purposes. On March 1, 2023, the Company transitioned all 14 facilities previously leased to the 2.4% Operator to an existing operator for annual rent of $23.8 million. Rent payments resumed on these transitioned facilities beginning in March 2023.<\/p>\n \nThese transfers also included a previously disclosed operator representing 2.2% of the Company\u2019s second quarter 2022 annualized contractual rent and interest revenue, which was placed on a cash basis in the third quarter of 2022 after Omega allowed the operator to apply a $5.4 million letter of credit towards unpaid contractual rent. The proceeds from the letter of credit were fully exhausted in the fourth quarter of 2022. In the first quarter of 2023, the operator paid $0.9 million in cash rent, which was recorded for both adjusted FFO and FAD purposes. During the first quarter of 2023, the Company transitioned the remaining 20 facilities previously leased to the 2.2% operator to two new and one existing operator for a combined annual rent of $14.5 million. Rent payments resumed on these transitioned facilities beginning in February and March 2023.<\/p>\n \nAdditionally, in the first and second quarters of 2023, the Company also transitioned the portfolios of two smaller tenants, representing 14 facilities, to one new and one existing operator.<\/p>\n Other Industry News<\/i><\/b> \u2013 On January 30, 2023, it was announced that the COVID-19 Public Health Emergency (\u201cPHE\u201d) will end on May 11, 2023. The PHE provided a number of benefits to the industry that will end with its conclusion. The impact on individual operators will vary, and therefore it is not possible to quantify the financial impact it will have on portfolio coverage. However, the Company expects this will be a modest but incremental headwind to the financial performance of most of the Company\u2019s skilled nursing tenants.<\/p>\n New Investments:<\/i><\/b><\/p>\n \nThe following table presents real estate investment activity:<\/p>\n\n
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