Earnings call transcript: Omega Healthcare Q2 2025 beats estimates, stock up

Published 01/08/2025, 16:02
Earnings call transcript: Omega Healthcare Q2 2025 beats estimates, stock up

Omega Healthcare Investors Inc. reported better-than-expected earnings for the second quarter of 2025, with both earnings per share (EPS) and revenue surpassing market forecasts. The company’s EPS came in at $0.46, beating the forecast of $0.44, while revenue reached $283 million, exceeding the expected $240.6 million. Following the announcement, Omega Healthcare’s stock saw a modest increase, closing at $38.90, up 0.72% from the previous session. According to InvestingPro data, the company maintains a strong GREAT financial health score of 3.24, with particularly robust profitability metrics.

Key Takeaways

  • Omega Healthcare’s Q2 2025 EPS of $0.46 surpassed the forecast by 4.55%.
  • Revenue for the quarter was $283 million, a significant increase from the $240.6 million expected.
  • The company raised its 2025 Adjusted Funds From Operations (AFFO) guidance to $3.4-$3.7 per share.
  • Omega Healthcare’s stock price rose by 0.72% post-earnings announcement.
  • The company completed $183 million in new investments year-to-date.

Company Performance

Omega Healthcare reported robust performance in Q2 2025, reflecting a strong recovery and strategic investments. The company’s revenue increased to $283 million, up from $253 million in the same period last year. This growth was driven by significant investments and acquisitions, particularly in the UK market, which now accounts for 65% of new investments. The company continues to focus on expanding its senior housing and skilled nursing portfolios, aligning with positive demographic trends.

Financial Highlights

  • Revenue: $283 million, up from $253 million in Q2 2024.
  • Earnings per share: $0.46, compared to a forecast of $0.44.
  • Adjusted FFO: $0.77 per share.
  • Funds Available for Distribution: $0.74 per share.
  • Net income: $140 million or $0.46 per share.

Earnings vs. Forecast

Omega Healthcare’s Q2 2025 EPS of $0.46 exceeded the forecast of $0.44, resulting in a 4.55% earnings surprise. The company’s revenue also surpassed expectations by 17.42%, coming in at $283 million against the anticipated $240.6 million. This marks a substantial beat compared to previous quarters, indicating strong operational performance and effective cost management.

Market Reaction

Following the earnings release, Omega Healthcare’s stock increased by 0.72%, closing at $38.90. This movement reflects investor optimism about the company’s financial health and future prospects. The stock remains within its 52-week range, with a high of $44.42 and a low of $35.04, indicating room for potential growth as the company continues to execute its strategic initiatives.

Outlook & Guidance

Omega Healthcare has raised its 2025 AFFO guidance to $3.4-$3.7 per share, signaling confidence in its ongoing operations and investment strategy. The company anticipates completing a new credit facility in the coming months and continues to explore flexible investment structures to enhance shareholder value. Projections for upcoming quarters remain strong, with expectations for continued revenue growth and stable earnings.

Executive Commentary

CEO Taylor Pickett stated, "We are ideally positioned to grow both our senior housing and skilled nursing portfolios." President Matthew Gorman emphasized the company’s strategy to use equity for acquisitions, aiming for long-term sustainable shareholder growth. Senior Executive Vikas Gupta highlighted the ample opportunities to deploy capital in the UK market, reflecting the company’s focus on international expansion.

Risks and Challenges

  • Potential Medicare rate adjustments could impact revenue.
  • The Genesis bankruptcy poses operational risks, though Omega Healthcare is confident in the portfolio’s strength.
  • Market competition from REITs, private equity, and family offices remains intense.
  • Economic uncertainties and inflationary pressures could affect investment yields.

Q&A

During the earnings call, analysts inquired about the Genesis portfolio, with executives expressing confidence in its resilience. Questions also focused on alternative investment structures, potential dividend increases, and opportunities in the UK care home market. Omega Healthcare’s management reiterated its disciplined investment approach and commitment to shareholder returns.

Full transcript - Omega Healthcare Investors Inc (OHI) Q2 2025:

Jericho, Conference Operator: Ladies and gentlemen, thank you for standing by. My name is Jericho, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

I would now like to turn the conference over to Michelle Reber. You may begin.

Michelle Reber, Investor Relations, 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.

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, Omega Healthcare Investors: Thanks, Michelle. Good morning and thank you for joining our second quarter twenty twenty five earnings conference call. Today, I will discuss our second quarter financial results and certain key operating trends. Second quarter adjusted funds from operations of $0.77 per share and FAD, funds available for distribution of $0.74 per share, reflects strong revenue and EBITDA growth, principally fueled by acquisitions and active portfolio management. We again raised and narrowed our 2025 AFFO guidance from a per share range of $2.95 to $3.1 up to $3.4 to $3.7 which reflects our strong second quarter twenty twenty five earnings and the issuance of $600,000,000 in five year bonds versus the continued sale of equity.

Our balance sheet metrics are very strong with adjusted annualized EBITDA of nearly $1,200,000,000 and net funded debt of only $4,300,000,000 In July, Genesis filed a Chapter 11 bankruptcy. Omega, along with other Genesis lenders, has committed to debtor in possession financing and, in addition, to support a bid to buy assets via Section three sixty three bankruptcy sale process. In the interim, we expect to receive our full monthly contractual rent. Turning to portfolio mix. Our senior housing portfolio continues to grow and is now comprised of three ninety six facilities, which is 38% of our total operating facility portfolio.

With our strong acquisition pipeline, a favorable operating environment and over $2,000,000,000 in liquidity with very low leverage, we are ideally positioned to grow both our senior housing and skilled nursing portfolios. I will now turn the call over to Bob.

Bob Stevenson, CFO, Omega Healthcare Investors: Thanks, Taylor, and good morning. Turning to our financials for the 2025. Revenue for the second quarter was $283,000,000 compared to $253,000,000 for the 2024. The year over year increase is primarily the 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 second quarter was $140,000,000 or $0.46 per share compared to $117,000,000 or $0.45 per common share for the 2024.

Our NAREIT FFO for the second quarter was $213,000,000 or $0.70 per share as compared to $189,000,000 or $0.72 per share for the 2024. Our adjusted FFO was $232,000,000 or $0.77 per share for the quarter and our FAD was $223,000,000 or $0.74 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 second quarter financial supplemental posted to our website. Our second quarter twenty twenty five FAD was $0.21 greater than our first quarter twenty twenty five FAD with the increase primarily resulting from incremental revenue related to the timing and completion of $6.00 $5,000,000 in new investments completed during the 2025. In addition, Maplewood paid $17,600,000 in rent in the second quarter, an increase of $2,000,000 inclusive of an additional $1,100,000 of rent related to the Washington DC facility compared to the 2025 and $1,900,000 in higher rental income from our U. K.

Operators due to favorable foreign currency fluctuations. These were partially offset by the second quarter issuance of 7,000,000 common shares of equity for gross proceeds totaling $258,000,000 as we continue to pre fund our investment pipeline. Our balance sheet remains incredibly strong, and we’ve continued to take steps to improve our liquidity, capital stack and maturity ladder. In June, we opportunistically issued $600,000,000 5.2% senior notes due in July 2030. Our notes issuance was leverage neutral as proceeds will be used to repay the $600,000,000 of 5.25 percent senior notes maturing in January 2026.

We will repay the notes on or about 10/15/2025, which is the earliest we can repay at par. Additionally, we repaid a $50,000,000 term loan in April. Our 1,450,000,000 undrawn credit facility was extended to the October, and we also extended our $429,000,000 term loan until August 2026. We anticipate completing a new credit facility in the next few months. At June 30, we ended the quarter with seven thirty four million dollars in cash on the balance sheet.

95% of our $5,000,000,000 in debt was at fixed rates, and our fixed charge coverage ratio was 5.4 times. And our net funded debt to annualized adjusted normalized EBITDA was 3.67 times, which is the lowest our leverage has been in over a decade. We still have targeted leverage range between four and five times with the sweet spot being between four point five and four point seven five times. Given our strong equity currency, we have the flexibility to accretively fund investments with equity as we have over the past several quarters, thereby positioning ourselves for outsized adjusted AFFO growth as we can opportunistically look to the debt and banking markets. As Taylor mentioned, we raised and narrowed our full year adjusted FFO guidance to a range between 3.04 to $3.07 per share.

The increase was primarily due to several factors. One, we completed $183,000,000 of new investments post our first quarter earnings call. Two, our prior guidance assumed we would issue equity or have approximately $600,000,000 of cash on hand to repay our $600,000,000 of notes due January 2026. We were able to issue bonds versus equity to put the cash on the balance sheet to handle that maturity. In addition, that maturity will be repaid in October.

And three, following the completion of the Levy bankruptcy, on June 1, our master lease was assigned to Avartis. Given the improved balance sheet of Avartis and the strong operating performance of the underlying facilities, effective June 1, Novartis was placed on a straight line basis for revenue recognition. Turning to our revised full year guidance. The key assumptions are as follows: on the revenue and expense side, we will record $3,600,000 of monthly revenue related to Abartus of which $3,100,000 represents the contractual rent. We’re assuming no other changes in our revenue related to operators on an accrual basis of revenue recognition.

As a note, approximately 80% 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 Genesis pays rent and interest pursuant to terms of the DIP financing agreement. And Maplewood continues to pay at its July monthly run rate of $6,100,000 We entered into derivative instruments to reduce the impact of foreign currency fluctuations on income generated from our U. K. Investments for the balance of the year.

We project quarterly G and A expense to run between $13,500,000 to $14,500,000 for the remaining February 2025. On the investment side, we’ve included the impact of new investments completed as of June 30 and did not include any additional new investments. On the balance sheet, of the $233,000,000 in mortgages and other real estate backed investments contractually maturing in 2025, we’re assuming $65,000,000 will convert from loans to fee simple real estate and $88,000,000 will be repaid throughout 2025 and the balance of the loans being extended beyond 2025. We’re assuming approximately $50,000,000 of asset sales of which $12,000,000 qualified as assets held for sale as of the end of the quarter. We recorded $1,300,000 of revenue in the second quarter related to these assets.

We assume we will repay $252,000,000 of secured debt on or about 11/25/2025 with equity. And we assume no material changes in market interest rates. Our 2025 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital market transactions other than what I just mentioned or that was included in our earnings release. I will now turn the call over to Vicus. Thank you, Bob, and good morning, everyone.

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Today, I will discuss the most recent performance trends for Omega’s operating portfolio as well as recent activity for three of Omega’s larger operators. Omega’s investment activity in the 2025 and an update on Omega’s pipeline and market trends for the remainder of 2025. Turning to portfolio performance. Trailing twelve month operator EBITDAR coverage for our core portfolio as of 03/31/2025 remains flat quarter over quarter and 1.51 times. This strong coverage level demonstrates our operators’ ability across skilled nursing and senior housing to cover their rent and retain sufficient cash for clinical care while in a fluid regulatory and reimbursement environment.

Our core portfolio consists of ten thirty two facilities, of which 62% is comprised of skilled nursing facilities and other transitional care facilities in The U. S. And the other 38% is US senior housing and UK care homes. Genesis. As Taylor previously mentioned, Genesis filed for Chapter 11 bankruptcy protection on 07/09/2025, with the goal of selling substantially all of its assets through a Section three sixty three sale to a winning bidder of such assets, followed by a liquidating plan of reorganization.

MEGA believes this filing was a necessary and important step in creating an entity that is operationally solvent and sustainable with enhanced liquidity and a strengthened balance sheet. Omega has worked with Genesis in recent years to divest underperforming facilities from its master lease, which has resulted in a strong current trailing twelve month coverage of 1.5 times. As such, Omega’s rent of $52,000,000 generated by our 31 facility lease is stable and the credit of our tenant should become stronger via the bankruptcy process. During the bankruptcy, Omega is committed to support Genesis by providing up to $8,000,000 in debtor in possession financing. Genesis has agreed to pay full contractual rent to Omega during this period.

In addition to our lease, Omega has $121,000,000 term loan with Genesis, which is secured by a first lien on Genesis’ four and three businesses and a subordinated all assets lien from the overall business of Genesis. We believe our loan is fully collateralized with the credit of the borrower improving via the bankruptcy process. Genesis has paid full contractual rent each month since April 2025 and as previously mentioned has committed to doing so going forward. The bankruptcy process is anticipated to take a period of nine to twelve months. This timeline along with all elements of the bankruptcy filing process is subject to the approval of the bankruptcy court and other complexities inherent in Chapter 11 proceedings.

Levy. Levy exited bankruptcy on 06/01/2025, at which time the Omega Levy master lease was assumed and assigned to Avargas. As anticipated, all material lease terms including the contractual rent of $3,100,000 per month or $37,500,000 per annum remain the same as under the legacy Lavie lease. Avartis has made full contractual payments for June and July. Maplewood.

Performance and occupancy for the 17 facility Maplewood portfolio inclusive of Inspire Carnegie Hill in New York City remains strong with an occupancy level of 95% as of July 2025. Inspire Embassy Row, the new 174 unit senior housing facility in Washington DC that opened in February 2025 is in the process of leasing up with an occupancy of 30% as of the July. As Bob noted, for all 18 facilities, Maplewood paid $17,600,000 in rent in the second quarter. Omega expects rent payments to increase in coming quarters as Maplewood increases rates, pushes occupancy growth and realizes further operational efficiencies. Other than Genesis, Omega is currently not engaged in restructuring activity with any of our major operators.

Turning to new investments. We are pleased with Omega’s twenty twenty five transaction activity through the June, with over $6.00 $5,000,000 in total new investments year to date through June 30, of which over $560,000,000 or 93% were real estate investments added to our balance sheet. During the second quarter, Amega completed a total of $527,000,000 in new investments, not including $30,000,000 in CapEx. The new investments include $5.00 $2,000,000 in real estate acquisitions via five separate transactions. As previously announced, in April 2025, we closed a $344,000,000 investment for a portfolio of 45 care homes across The UK and the Island Of Jersey.

Omega leased the 45 care homes to four existing operators and two new operators. Additionally, in the second quarter, we invested $158,000,000 across four separate transactions to acquire 12 facilities, eight skilled nursing facilities and four assisted living facilities and lease them to two existing operators and two new operators. All transactions have an initial annual cash yield of 10% with annual escalators ranging from 1.7% to 2.5%. Lastly, Omega invested $25,000,000 in real estate loans via two transactions, where both loans have an interest rate of 10%. As discussed last quarter, UK continued to be a large driver of our twenty twenty five new investment activity, totaling approximately $392,000,000 or 65% of our total new investments excluding CapEx.

We continue to see ample opportunities to deploy capital in The UK, many of which our UK operating partners identify and secure off market with Omega as their preferred capital partner. Turning to the pipeline. Omega’s pipeline transaction outlook for the 2025 continues to be very favorable. We are witnessing an increase in marketed opportunities both in The U. S.

And The UK, while also securing off market opportunities that our operating partners and other relationships bring us. Looking at asset mix, many of the larger market transactions we are seeing are for regional senior housing assets at prices meaningfully below replacement cost. Transaction activity on the skilled nursing front is also sizable, and we’re seeing numerous opportunities from individual owner operators and regional sellers, while also seeing larger off market opportunities brought to us by our existing relationships. We are evaluating and considering all asset types with a focus on structuring new investments to be immediately accretive, while also providing opportunities for Omega to further improve returns in future years as the underlying cash flows of our communities increase from the continued occupancy gains and operational efficiencies. I will now turn the call over to Megan.

Michelle Reber, Investor Relations, Omega Healthcare Investors: Thanks, Ficus, and good morning, everyone. The One Big Beautiful Bill Act or OBBBA was signed into law on July 4, and as an industry, there’s a lot to be thankful for. Despite pressure on the provider tax program, skilled nursing was specifically carved out from any Medicaid reductions. Removing the usual target on the back of this industry is a major win for the industry associations and operators who continue to drive a broader understanding within the legislative and executive branches of the importance of the long term care industry. It is also another indication of President Trump’s support similar to what we saw at the start of the pandemic.

As expected, the Medicaid expansion population, those able-bodied adults that were added with the Affordable Care Act, were the target of much of the reform. However, non SNF provider taxes in expansion states will also be reduced over time starting in 2028, which will have an impact on the hospital system. Generally speaking, a reduction in the overall federal funding of Medicaid to the states, regardless of the target, may cause states to evaluate all programs. That said, given the continued improvement in fundamentals, the strong lobbying efforts on behalf of the industry, and demographic tailwinds, we feel well positioned to weather that potential storm. While Medicare was not specifically targeted in the OBBBA, the expected increase in deficit caused by the act will, without legislative action, likely cause a 4% cut in the 2026 Medicare rate.

However, given the scheduled Medicare rate increase later this year, coupled with the nature of our portfolio, with skilled nursing more heavily reliant on Medicaid and with an increasingly heavier concentration on private pay product, the near term expected impact should be minimal. Historically, legislative action has been taken to avoid this automatic reduction. Finally, the OBBBA puts a moratorium on the implementation of the staffing requirements of the staffing mandate for ten years. That said, the Texas and Iowa federal courts have now both found that CMS lacked the authority to issue the regulations surrounding the required hours, and while still subject to appeal, given the overturning of the Chevron doctrine, it seems more likely than not that the higher courts will uphold that finding. We are grateful to have this latest reconciliation chapter behind us and look forward to continued support of this critical industry serving some of the most vulnerable in our population.

I will now open the call up for questions.

Jericho, Conference Operator: Thank you. We will now begin the question and answer session. If you are called upon to ask your question and are listening by speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Your first question comes from Jonathan Hughes from Raymond James.

Please go ahead.

Jonathan Hughes, Analyst, Raymond James: Hi there. Happy Friday. Thank you for the prepared remarks and commentary. I was hoping you could share some more details of what the investment pipeline looks like today in terms of yields and specifically on the, I think, US seniors housing opportunities you mentioned in in the prepared remarks, and then maybe also yields on the sales in the quarter?

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Sure. Nikita here. As I mentioned, our pipeline is strong. It consists of US senior housing, US SNFs, and payrolls in The UK. It’s just as strong as it has been.

It continues to be strong. We continue to just look at all the product that’s out there for accretive investments. Yield. Yield to yield, we continue to push 10% across the board for all of those asset classes.

Bob Stevenson, CFO, Omega Healthcare Investors: Yield to sales.

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Oh, and then on sales, we are you know, any sales at this point forward are usually just strategic sales or, at times, purchase options related to old workouts. But otherwise, we have no sales on the horizon. Okay.

Jonathan Hughes, Analyst, Raymond James: And then, my follow-up would be on Maplewood. They paid more rent versus the first quarter, that was due in part to Embassy Row being in the full second quarter. But even excluding Embassy Row, the rent there did tick up. Can you just remind us of the expected rent trajectory there? What’s embedded in guidance?

And when you expect them to hopefully return to paying full contract rent?

Bob Stevenson, CFO, Omega Healthcare Investors: Yeah. We’ll we’ll we’ll tag team on this, Jonathan. So, you know, what’s laid out what what they paid in the quarter is actually laid out in the press release pretty nicely. But I look at it from a modeling standpoint. You know, they paid $6,100,000 most recently.

That’s what we model on a go forward basis. My upside guidance would be based on any additional rent, and we’re hoping they do pay that. So

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. And, Jonathan, overall, Maple is doing a great job. Occupancy in New York is a 93%. They’re gonna keep pushing that occupancy, pushing rate, and we we’re just hoping for further improve.

John Kolichowski, Analyst, Wells Fargo: All right. Thanks for the time.

Jericho, Conference Operator: Our next question comes from John Kolichowski from Wells Fargo. Please go ahead.

Jonathan Hughes, Analyst, Raymond James: Good morning. Thank you. First one is for Bob. It seems like there’s a bit of a change of strategy on the balance sheet versus what you’re planning on raising and what you’re to do in the quarter.

Seth Perkey, Analyst, Citi: Bob, can you maybe talk about that

Jonathan Hughes, Analyst, Raymond James: and maybe if the stock starts to work in your favor again sort of on the trajectory it was in ’24, is that could change things in the back half of the year?

Bob Stevenson, CFO, Omega Healthcare Investors: We were a little hard to hear. I’ll try to answer that. If I don’t, just re ask a piece of it. So the strategy, again we have an equity currency. So leading into the year we said we’re going to take advantage of that equity currency and the bond market was not available at the coupon we were looking for.

We saw an opportunity and opportunistically took advantage of that. So that’s why on the guidance side, instead of having issuing equity to fund the next year’s bonds, we decided to do debt for debt. And as you saw, they’re basically leverage neutral. So it was a great transaction from our standpoint. I didn’t catch the second part, if you wouldn’t mind repeating that.

Jonathan Hughes, Analyst, Raymond James: No. It was it was just about if, you know, if things change in the second half of the year, is there the ability to or the maybe the desire to try to fund future bonds with equity instead of just refi as you did? Or would you kind of hold course here?

Bob Stevenson, CFO, Omega Healthcare Investors: Yeah. That’s a great question. So again, we’re going to keep that same strategy what I discussed in our prepared points that we’ll use equity to give it an added to strong currency to fund acquisitions. There’s a chance in the bank market I am redoing our credit facility. If I could go out and potentially do a term loan, I may take out the secured debt with a term loan.

If I do, that will take us to the upside of the guidance as well.

Jonathan Hughes, Analyst, Raymond James: Okay. That’s helpful. And then my second question is just on the sub one coverage bucket for EBITDAR. There’s a tenant that’s growing, you know, and it looks like there’s only there’s only two quarters currently included, but if you grow into a full number, think you’re roughly 11%. What gives you confidence in that tenant as they’re growing with you?

And then maybe the second part of that is there’s also a tenant at 0.99 Percent EBITDAR coverage. Do you think there’s the potential for them to graduate out of this bucket? And on a net basis next quarter, you’d be down quarter over quarter.

Seth Perkey, Analyst, Citi: Yeah. I’ll I’ll take the

Taylor Pickett, CEO, Omega Healthcare Investors: this is Taylor. I’ll take the question in reverse order. So, you’re right to focus on the point nine nine. That tenant has continued to improve, based on preliminary numbers in April and May. They will come out of the bucket next quarter if everything holds.

So that’s great news, and that takes the 9.8, you know, down to four and change. And then if if you look at the other the two other big operators that are closed, one at point eight five and one at point eight 7, and they also, in 02/2025, have had performance above those coverage amounts. So remember, it’s trailing 12. We’re headed in the right direction with both of those. So you really get down to a modest under one times bucket once you deal with those three big guys.

We’re we’re really encouraged that, directionally, we’re in great shape. And I would add just overall, although coverage at one five one was flat quarter to quarter, again, if you look at April and May and the trajectory, we expect our overall coverages will continue to grow.

Jericho, Conference Operator: Our next question comes from Seth Perkey from Citi. Please go ahead.

Juan Sanabrios, Analyst, BMO Capital Markets: Hi, thanks for taking my question. Just going back to Maplewood, can you remind us how the lease is structured and quantify how much upside in rents you could potentially capture?

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. So this is Vicus. The lease structure that the the contractual rent is 69,000,000, but at this point, we’re not looking at it that way. We’re looking at all cash flow that comes to Omega. So, they’re trending close to full contractual rent.

But like I said previously, we we expect, further improvements in coming quarters.

Jericho, Conference Operator: And just to

Taylor Pickett, CEO, Omega Healthcare Investors: add to that a little bit, basically, all the cash that’s generated in the Maplewood entity will come to us for the foreseeable future. So it’s very much like our idea structure.

Juan Sanabrios, Analyst, BMO Capital Markets: Okay. That’s helpful. And then, you know, can you just talk about who else you’re seeing out there as you compete for investment opportunities? And how’s your underwriting changed at all kinda just given that the legislation around provider tax cuts is behind us?

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. This is Vikas again. As for who we see out there, it hasn’t really changed. We see, our REIT peers. We see private equity.

We see family offices. And as for underwriting, we continue to underwrite the same. As I’ve said on previous calls, we didn’t change our underwriting standards, so we’ve kept them the same. And now especially with the good news, we will continue to keep it the same.

Juan Sanabrios, Analyst, BMO Capital Markets: Great. Thank you.

Jericho, Conference Operator: Our next question comes from Juan Sanabrios from BMO Capital Markets. Please go ahead.

Michael Stroya, Analyst, Green Street: Hi. Thanks for the time. Just curious on the holistic portfolio metrics, occupancy ticked up, coverage kind of stayed flat. Just curious if why that was in confidence or visibility in future step ups in rent coverage? I’m not sure if you could share a Q3 or early thoughts on kind of the next quarter’s EBITDAR TTM coverage.

Thanks.

Taylor Pickett, CEO, Omega Healthcare Investors: Yeah. Well, it’s interesting. We have trailing 12. You you can have a quarter that falls off and a quarter that comes in, and you’re not necessarily gonna get the reaction from occupancy right away because, you know, there could be just odd accruals or whatever. But the general trajectory, as I mentioned earlier, based particularly on the April and May preliminary results that we have, is up.

So I would expect, based on what we know today, that our overall coverages next quarter will be higher, and to your point, reflecting just this continued occupancy driver of that coverage.

Michael Stroya, Analyst, Green Street: And second question, just wanted to follow-up with the commentary made by Megan at the beginning about the potential for a cut just given statutory, I guess, considerations for Medicare, but obviously, there’s a history of not doing that. So just curious if you could or hoping you could provide a little bit more color on on the mechanics and and the processes laid out.

Michelle Reber, Investor Relations, Omega Healthcare Investors: Yeah. There’s just a general requirement that if there’s an increase in the deficit by a certain amount, there has to be a cut as well, to try to balance things out. And so it’s capped for Medicare at 4%. So that’s, you know, sort of worst case scenario. Although keep in mind, at the same time, you’re gonna have a 3.2% rate increase that just got finalized yesterday.

That’s gonna offset that. And as I said, you know, fundamentals are good. The demographics are good. But, yes, legislatively, they have typically gone and and gotten rid of that piece of it. Right now, think they’re in congress is in recess, so we wouldn’t find out until, you know, a couple more months whether or not they’ll do that.

Jericho, Conference Operator: Thank you. Our next question comes from Michael Stroya from Green Street. Please go ahead.

Michelle Reber, Investor Relations, Omega Healthcare Investors0: Thanks and good morning. Maybe one on the labor side. What sort of wage increases are you seeing your operators pass along to employees today? And is there a meaningful difference between wage growth within your SNF and senior housing portfolios?

Michelle Reber, Investor Relations, Omega Healthcare Investors: I mean, I would say from a wage perspective, we’re just seeing normal inflationary increases at this point, you know, unlike what we had seen previously during COVID and, you know, right after COVID where things were a little bit out of whack. And I don’t know that we’re seeing any differences between the the SNF and the out portfolios on the wage side.

Seth Perkey, Analyst, Citi: Okay. I I guess how about

Michelle Reber, Investor Relations, Omega Healthcare Investors0: at the occupation level? Has there been any specific occupations that have been maybe more difficult to hire or retain?

Michelle Reber, Investor Relations, Omega Healthcare Investors: I mean, the CNAs are always a little bit more of a difficult piece of things just because of, you know, where these states have pushed the minimum wages. So it’s it’s tough to keep, you know, keep that an attractive, business. But but they’ve our operators have been dealing with that over the last several years, and it’s become more of a you know, you just have to entice people to the culture that you build and that you wanna be working here, and you wanna attract the people who are looking to help people. And so, I think it hasn’t been as much of an issue, that we’ve seen recently.

John Kolichowski, Analyst, Wells Fargo: Great. Thanks for the time.

Jericho, Conference Operator: Our next question comes from Omotayo Okusanya from Deutsche Bank. Please go ahead.

Seth Perkey, Analyst, Citi: Yes. Good morning, everyone. Just a quick question on the guidance raise. Again, it’s pretty impressive. It feels like it’s a bunch of things that are coming together there.

And I guess my question is, it it just feels like the company is figuring out ways to kind of, you know, drive additional earnings growth and create additional shareholder value. And I’m curious from a internally what may be changing that’s helping Omega identify these opportunities quicker, faster and giving the company the ability to really kind of execute on these things?

Michelle Reber, Investor Relations, Omega Healthcare Investors1: Sure. Thanks, Tara. It’s Matthew here. I think, you know, we continue to just push active portfolio management as best we can. I think that we are actively looking at operators and facilities that maybe don’t align, working with operators to get them out of facilities that maybe don’t shouldn’t be part of their core portfolio, And then sourcing other operators that are more suited to run those facilities.

And often that presents an opportunity for either risk mitigation or even rent pickup in those situations. I would say also, as Victor said in his talking points, we’re considering multiple different structures to try to create that incremental value, to align ourselves better, with our operators and to, potentially benefit from the further upside that we think will happen in both the skilled nursing and senior housing facility operating metrics over the next ten plus years.

Seth Perkey, Analyst, Citi: That’s helpful. Then then one other quick one for me. I apologize. I joined the call a little late. Just curious if you addressed PACS at all.

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. So, I have for packs, we know just about everything before just we only know it’s public markets now. But as an operator, we find packs to be clinically strong. We continue to have strong coverages with them. So from our perspective, it’s an odd event at this point.

Jericho, Conference Operator: Our next question comes from Nick Yulico from Scott LeBlanc. Please go ahead.

Michelle Reber, Investor Relations, Omega Healthcare Investors2: Good morning. First question is on the dividend. With the FAD improving this quarter and the improvement in the guidance, in the second quarter, you’re at looks like a 90% dividend payout ratio on FAD. And so I’m just wondering how the Board is thinking about potential dividend increase in the future and how we should think about a payout ratio that you need to get to to support dividend growth.

Taylor Pickett, CEO, Omega Healthcare Investors: Yeah. It’s a great question, Nick. One that we actually talked about in our most recent board meeting. I think the general view is

Bob Stevenson, CFO, Omega Healthcare Investors: that we need to be in the 80s, kind

Taylor Pickett, CEO, Omega Healthcare Investors: of that 85% payout ratio range before we contemplate a dividend raise. But from a tax perspective, you get into the high seventies, even low eighties, you start to push up against the threshold anyway. So we’re not quite there, but I think we have some visibility into into potentially having that conversation in the next three, four quarters.

Michelle Reber, Investor Relations, Omega Healthcare Investors2: Okay. Thanks, Taylor. And then second is on Genesys.

Jericho, Conference Operator: I know

Michelle Reber, Investor Relations, Omega Healthcare Investors2: you talked about having gotten rid of some worked with them to get rid of some underperforming assets over the years. Just maybe remind us why you have a confidence that the pool of assets you know, you own with them is still assets they wanna keep and that there’s not, you know, risk of some sort of, you know, rejection of lease or, you know, any sort of move to right size rent through a bankrupt bankruptcy process? Yes.

Vikas Gupta, Senior Executive, Omega Healthcare Investors: So

Taylor Pickett, CEO, Omega Healthcare Investors: it’s a master lease, first of all. So they would have to they can’t cherry pick the assets. They’d have to reject all 31. Highly desirable assets with really good coverage, I would say the best portfolio in that Genesis entity. So the idea of doing going through a reorganization without that portfolio, I don’t think makes any sense.

We feel really good about the assumption and exit with our portfolio intact. And as Vic has mentioned, there are a handful of facilities, particularly in the Northeast that we’ve exited very tough markets. What we have left with them is Mid Atlantic principally and really strong coverages with a lot of good visibility for growth.

Michelle Reber, Investor Relations, Omega Healthcare Investors2: All right. Thanks.

Jericho, Conference Operator: Our next question comes from Farrell Granath from Bank of America. Please go ahead.

Michelle Reber, Investor Relations, Omega Healthcare Investors3: Thank you and good morning. My first question is about when you’re looking within the marketplace, was curious if you can explain the split between either unsolicited inbounds and what either efficiencies you’re doing internally on your team for that external, growth outlook, more focused on, faster connection to negotiations, to execution of deals?

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. This is Ikis. We do a lot for new deals, and that includes incomings. We have a corporate development team that goes out, tries to meet new operators, try to find real estate. And we also have a lot of data initiatives that we’re we’re using to to look and see what’s out there, what’s available, what operators could wanna sell real estate or partner with us.

So I can’t tell you, like, how that breaks down exactly, but we do it all to look look for new transactions.

Michelle Reber, Investor Relations, Omega Healthcare Investors3: Great. And I guess, also, can you just share a few thoughts on how you think about either using new operators versus current operators while you’re expanding your footprint?

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. We continued to a a big part of our pipeline continues to be from our current operators, but we are actively looking for new operators. Sometimes that happens through a workout situation where we meet a new operator. But as I mentioned, we have a corporate development team that is just specifically going out there looking for new operators today. So it’s become one of our strategic initiatives.

Michelle Reber, Investor Relations, Omega Healthcare Investors3: Great. Thank you.

Jericho, Conference Operator: Our next question comes from Michael Carroll from RBC Capital Markets. Please go ahead.

Michelle Reber, Investor Relations, Omega Healthcare Investors: Yes, thanks. I want

Michelle Reber, Investor Relations, Omega Healthcare Investors4: to circle back on the prepared remarks talking about, I guess, the senior housing transaction activity. It sounded like OHI, is seeing more of these types of deals coming across their desk. I mean, would these be traditional net lease type transactions? I mean, it hard to get those types of deals done? Or is this going to be more of a unique structure where Omega can also benefit in the upside?

Michelle Reber, Investor Relations, Omega Healthcare Investors1: Hi, Shipt. This is Matthew here. Yes, I think you’re right. The traditional triple net structure is less appealing to a lot of operators these days. And so we continue to look at various different structures, Michael.

Ultimately, it’s about creating long term sustainable shareholder growth. And that really means partnering with superior operators and buying properties that are sustainably fit for purpose in markets that we like at prices that make sense for us. And if we can do that, we will consider various different structures to align those interests and ultimately achieve accretive growth for our shareholders. So everything’s on the table.

Michelle Reber, Investor Relations, Omega Healthcare Investors4: Okay. And then, Matthew, did I hear it correctly? It sounded like that this is something that’s more on the forefront or that Omega is being more active on this front. Is that true? And would those structures be like a RIDEA structure?

Or would it be something different?

Michelle Reber, Investor Relations, Omega Healthcare Investors1: It could be. I I I think we are continuing to look at it. We’ve always looked at it, but quite frankly, the market’s changed. Previously, there was more appetite for triple nets, and and now that doesn’t seem to be the case. So, yes, we would be open to that idea, but at the same time, a lot of what we’re seeing right now doesn’t fit, what we think makes financial sense.

There are some stabilized portfolios with very little upside trading at prices that we can’t reconcile. And so we’re just gonna have to be incredibly disciplined both with the operator and the real estate. So from that standpoint, I don’t want to, you know, shout the word right here and assume that, you know, it it’s gonna be a significant portion of our business over the next six to twelve months. We are gonna be opportunistic. If it happens, it happens.

But at the same time, if it doesn’t, because the opportunities aren’t presenting themselves, we still feel that there’s a decent pipeline available to us to continue to accretively invest.

Juan Sanabrios, Analyst, BMO Capital Markets: Great. Appreciate it.

Jericho, Conference Operator: Our next question comes from Vikram Malhotra from Mizuho. Please go ahead.

John Kolichowski, Analyst, Wells Fargo: Thanks for taking the question. I guess, Matthew, I just wanted to dig into that those comments a bit more. A lot

Jonathan Hughes, Analyst, Raymond James: of your

John Kolichowski, Analyst, Wells Fargo: peers have sort of been more aggressive on their idea structure, buying more, call it, 90 plus percent stabilized assets at 7% initial yields. I I’m just sort of wondering does that type is that structure is what you’re talking about? Is there some other structure? And if you could just dig into the four assets you bought on AL, like, those triple net, and what were the yields on those specifically?

Michelle Reber, Investor Relations, Omega Healthcare Investors1: Yeah. So some of our peers are buying those because some of our peers have the cost of capital to be able to do that and not be dilutive. We don’t have that luxury. And so therefore, we have to be a little bit more selective in terms of what we take over. The opportunities are likely to be, smaller portfolios or or or, a small cluster of facilities as opposed to larger portfolios because those tend to be marketed and tend to, quite frankly, get into a price range that doesn’t make financial sense for our shareholders and us.

But we still see a lot of opportunity out there of fit for purpose assets that if put in the hands of the right operator and you have a rationalization of expenses and put some CapEx in to be able to push rate and occupancy can be highly accretive over time. So I think those are the kind of things that we’re going to be looking at. And

Vikas Gupta, Senior Executive, Omega Healthcare Investors: for the second part of your question, Vikram, those four ALFs that we bought are triple net deals at 10%.

John Kolichowski, Analyst, Wells Fargo: Okay. That that’s helpful. I guess just, you know, I wanted to go to The UK. You know, there there’s more competition there recently from one of your peers. Still seems like a very attractive market, based on your comments.

But I’m wondering just, you know, in past, you’ve said, I guess, the first half you had said The UK was, pipeline was good, and then you had mentioned it was smaller. Do you mind just updating us, like, how are you looking at The UK, in terms of specific opportunities? And, like, how how big could that, eventually become, you know, over the next few years?

Vikas Gupta, Senior Executive, Omega Healthcare Investors: Yeah. I’ll start with your last part of your question. There there’s 17,000 caros. So we believe there’s still a lot of consolidation to take place in The UK. We do think it will be part of our pipeline going forward.

At this very moment, it is not the lion’s share of our pipeline, but we do have an ongoing UK pipeline that is largely driven by our current operators out there.

Seth Perkey, Analyst, Citi: Thank you.

Jericho, Conference Operator: Our next question comes from Alex Tajian from Baird.

Vikas Gupta, Senior Executive, Omega Healthcare Investors: I

Michelle Reber, Investor Relations, Omega Healthcare Investors5: guess first one for me is which segments in The US senior housing space are the best opportunities to target today? And and then also, do the senior housing metrics currently in the portfolio compare to the SNF side?

Michelle Reber, Investor Relations, Omega Healthcare Investors1: So the first one, I I I think it just comes down to the individual asset. Now we’ve seen some IL portfolios that look interesting. We’ve seen some CCRCs that look interesting. We’ve seen ILL memory cares that don’t sell have a sniff component and therefore can’t really call themselves c c CCRCs that look interesting. But at the same time, we’ve seen multiple assets within all of those classes that we can’t make sense of the pricing on.

So I think from our standpoint, we have a fairly decent understanding. Obviously, we’ve been in this industry, in the senior housing industry for for many years. We have a fairly decent understanding as to what each of these should be able to achieve and what the value is, what the cost to rebuild is. And so we’re gonna approach each one individually, especially in alignment with superior operating partners to understand what they can achieve. And ultimately, what we’re looking for is a low to mid teen IRR over time, not assuming any cap rate compression within that model, after CapEx that provides a sufficiently compelling return to be more appealing potentially than our standard triple net.

Innately, our trans standard triple net structure has a little bit more consistency to it, normally a little bit more visibility to it because you have that nonoperating exposure and that coverage support. So in order to invest in these assets, it has to be providing a sufficiently compelling return, and that can be over any of those classes.

Michelle Reber, Investor Relations, Omega Healthcare Investors5: Thank you for that. And I guess the second part was how do the senior housing metrics currently in the portfolio compare to the sales?

Michelle Reber, Investor Relations, Omega Healthcare Investors1: Sure. In in terms of coverage, pretty similar. I would say that, you know, we include our UK care homes within our senior housing component. I would say they probably have a moderately higher occupancy and coverage than our overall portfolio. But other than that, our US senior housing, is materially in line metric wise from an operating obviously, the margins are higher.

But in in terms of, occupancy and in terms of coverage, they’re they’re materially in line.

Michelle Reber, Investor Relations, Omega Healthcare Investors5: Got it. Thank you. That’s it for me.

Jericho, Conference Operator: There are no further questions at this time. I would like to turn the call over back to Taylor Pickett for closing remarks.

Taylor Pickett, CEO, Omega Healthcare Investors: Thanks for joining our call this morning. We appreciate the thoughtful questions, and we’re here if there’s any follow-up. Have a great day.

Jericho, Conference Operator: This concludes today’s conference call. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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