The Board of Directors and Stockholders of Omega Healthcare
Investors, Inc.
We have audited Omega Healthcare Investors,
Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
Omega Healthcare Investors, Inc.’s management is responsible for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Omega Healthcare Investors,
Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based
on the COSO criteria.
We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Omega Healthcare
Investors, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income,
changes in equity, and cash flows for each of the three years in the period ended December 31, 2016 and our report dated February
24, 2017 expressed an unqualified opinion thereon.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF
PRESENTATION
Organization
Omega Healthcare Investors,
Inc. (“Omega,” “we,” “our” or the “Company”) has one reportable segment consisting
of investments in healthcare-related real estate properties located in the United States (“U.S.”) and the United Kingdom
(“U.K.”). Our core business is to provide financing and capital to the long-term healthcare industry with a particular
focus on skilled nursing facilities (“SNFs”). Our core portfolio consists of long-term leases and mortgage agreements.
All of our leases are “triple-net” leases, which require the tenants to pay all property-related expenses. Our mortgage
revenue derives from fixed rate mortgage loans, which are secured by first mortgage liens on the underlying real estate and personal
property of the mortgagor.
Omega was formed as
a real estate investment trust (“REIT”) and incorporated in the State of Maryland on March 31, 1992. In April 2015,
Aviv REIT, Inc., a Maryland corporation (“Aviv”), merged (the “Aviv Merger”) with and into a wholly-owned
subsidiary of Omega, pursuant to the terms of that certain Agreement and Plan of Merger, dated as of October 30, 2014 (the “Merger
Agreement”), by and among the Company, Aviv, OHI Healthcare Properties Holdco, Inc., a Delaware corporation and a direct
wholly-owned subsidiary of Omega (“Merger Sub”), OHI Healthcare Properties Limited Partnership, a Delaware limited
partnership (“Omega OP”), and Aviv Healthcare Properties Limited Partnership, a Delaware limited partnership (the
“Aviv OP”).
Prior to April 1,
2015 and in accordance with the Merger Agreement, Omega restructured the manner in which it holds its assets by converting to
an umbrella partnership real estate investment trust structure (the “UPREIT Conversion”). As a result of the UPREIT
Conversion and following the consummation of the Aviv Merger, substantially all of the Company’s assets are held by Omega
OP.
Omega OP is governed
by the Second Amended and Restated Agreement of Limited Partnership of OHI Healthcare Properties Limited Partnership, dated as
of April 1, 2015 (the “Partnership Agreement”). Pursuant to the Partnership Agreement, the Company and Merger Sub
are the general partners of Omega OP, and have exclusive control over Omega OP’s day-to-day management. As of December 31,
2016, the Company owned approximately 96% of the issued and outstanding units of partnership interest in Omega OP (“Omega
OP Units”), and other investors owned approximately 4% of the Omega OP Units.
Consolidation
Our consolidated
financial statements include the accounts of (i) Omega, (ii) Omega OP and (iii) all direct and indirect wholly-owned subsidiaries
of Omega. All inter-company transactions and balances have been eliminated in consolidation, and our net earnings are reduced
by the portion of net earnings attributable to noncontrolling interests.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Accounting Estimates
The preparation of
financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair Value Measurement
The Company measures
and discloses the fair value of nonfinancial and financial assets and liabilities utilizing a hierarchy of valuation techniques
based on whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable
inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions.
This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
|
·
|
Level
1 - quoted prices for identical instruments in active markets;
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
|
·
|
Level
2 - quoted prices for similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; and model-derived valuations in
which significant inputs and significant value drivers are observable in active markets;
and
|
|
·
|
Level
3 - fair value measurements derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
|
The Company measures
fair value using a set of standardized procedures that are outlined herein for all assets and liabilities which are required to
be measured at fair value. When available, the Company utilizes quoted market prices from an independent third party source to
determine fair value and classifies such items in Level 1. In some instances where a market price is available, but the instrument
is in an inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing estimate and
classifies such items in Level 2.
If quoted market prices
or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently
sourced market inputs, such as interest rates, option volatilities, credit spreads and/or market capitalization rates. Items valued
using such internally-generated valuation techniques are classified according to the lowest level input that is significant to
the fair value measurement. As a result, these items could be classified in either Level 2 or Level 3 even though there
may be some significant inputs that are readily observable. Internal fair value models and techniques used by the Company include
discounted cash flow and Monte Carlo valuation models.
Risks and Uncertainties
Our Company is subject
to certain risks and uncertainties affecting the healthcare industry as a result of healthcare legislation and growing regulation
by federal, state and local governments. Additionally, we are subject to risks and uncertainties as a result of changes affecting
operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the rising cost of healthcare
services (see Note 10 – Concentration of Risk).
Business Combinations
We record the purchase
of properties to net tangible and identified intangible assets acquired and liabilities assumed at fair value. Transaction costs
are expensed as incurred as part of a business combination. In making estimates of fair value for purposes of recording the purchase,
we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing
of the respective property and other market data. We also consider information obtained about each property as a result of our
pre-acquisition due diligence, marketing and leasing activities as well as other critical valuation metrics such as current capitalization
rates and discount rates used to estimate the fair value of the tangible and intangible assets acquired (Level 3). When liabilities
are assumed as part of a transaction, we consider information obtained about the liabilities and use similar valuation metrics
(Level 3). In some instances when debt is assumed and an identifiable active market for similar debt is present, we use market
interest rates for similar debt to estimate the fair value of the debt assumed (Level 2). The Company determines fair value as
follows:
|
·
|
Land
is determined based on third party appraisals which typically include market comparables.
|
|
·
|
Buildings
and site improvements acquired are valued using a combination of discounted cash flow
projections that assume certain future revenues and costs and consider capitalization
and discount rates using current market conditions as well as replacement cost analysis.
|
|
·
|
Furniture
and fixtures are determined based on third party appraisals which typically utilize a
replacement cost approach.
|
|
·
|
Intangible
assets and liabilities acquired are valued using a combination of discounted cash flow
projections as well as other valuation techniques based on current market conditions
for the intangible asset or liability being acquired. When evaluating below market leases
we consider extension options controlled by the lessee in our evaluation. For additional
information regarding above and below market leases assumed as part of an acquisition
see “In-Place Leases" below.
|
|
·
|
Other
assets acquired and liabilities assumed are typically valued at stated amounts, which
approximate fair value on the date of the acquisition.
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
|
·
|
Assumed
debt balances are valued by discounting the remaining contractual cash flows using a
current market rate of interest.
|
|
·
|
Stock
based compensation and noncontrolling interests are valued using a stock price on the
acquisition date.
|
|
·
|
Goodwill
represents the purchase price in excess of the fair value of assets acquired and liabilities
assumed and the cost associated with expanding our investment portfolio. Goodwill is
not amortized.
|
Asset Acquisitions
For acquisitions not
accounted for as a business combination, assets and liabilities are recognized based on their cost to the Company which generally
includes transaction costs. The costs of the acquisition are allocated to the assets and liabilities acquired on a relative fair
value basis.
Real Estate Investments and Depreciation
The costs of significant
improvements, renovations and replacements, including interest are capitalized. In addition, we capitalize leasehold improvements
when certain criteria are met, including when we supervise construction and will own the improvement. Expenditures for maintenance
and repairs are charged to operations as they are incurred.
Depreciation is computed
on a straight-line basis over the estimated useful lives ranging from 20 to 40 years for buildings, eight to 15 years for site
improvements, and three to ten years for furniture, fixtures and equipment. Leasehold interests are amortized over the shorter
of the estimated useful life or term of the lease.
As of December 31,
2016 and 2015, we had identified conditional asset retirement obligations primarily related to the future removal and disposal
of asbestos that is contained within certain of our real estate investment properties. The asbestos is appropriately contained,
and we believe we are compliant with current environmental regulations. If these properties undergo major renovations or are demolished,
certain environmental regulations are in place, which specify the manner in which asbestos must be handled and disposed. We are
required to record the fair value of these conditional liabilities if they can be reasonably estimated. As of December 31, 2016
and 2015, sufficient information was not available to estimate our liability for conditional asset retirement obligations as the
obligations to remove the asbestos from these properties have indeterminable settlement dates. As such, no liability for conditional
asset retirement obligations was recorded on our accompanying Consolidated Balance Sheets as of December 31, 2016 and 2015.
Lease Accounting
At the inception of
the lease and during the amendment process, we evaluate each lease to determine if the lease should be considered an operating
lease, sales-type lease, or direct financing lease. We have determined that all but seven of our leases should be accounted for
as operating leases. The other seven leases are accounted for as direct financing leases.
For leases accounted
for as operating leases, we retain ownership of the asset and record depreciation expense, see “Business Combinations”
and “Real Estate Investments and Depreciation” above for additional information regarding our investment in real estate
leased under operating lease agreements. We also record lease revenue based on the contractual terms of the operating lease agreement
which often includes annual rent escalators, see “Revenue Recognition” below for further discussion regarding the
recordation of revenue on our operating leases.
For
leases accounted for as
direct financing leases
, we record the
present value of the future minimum lease payments (utilizing a constant interest rate over the term of the lease agreement) as
a receivable and record
interest income based on the contractual terms of the lease agreement. Certain direct financing
leases include annual rent escalators; see “Revenue Recognition” below for further discussion regarding the recording
of interest income on our direct financing leases. As of December 31, 2016 and 2015, $3.3 million and $3.3 million, respectively,
of unamortized direct costs related to originating the direct financing leases have been deferred and recorded in our Consolidated
Balance Sheets.
In-Place Leases
In-place lease assets
and liabilities result when we assume a lease as part of a facility purchase or business combination. The fair value of in-place
leases consists of the following components, as applicable (1) the estimated cost to replace the leases, and (2) the above or
below market cash flow of the leases, determined by comparing the projected cash flows of the leases in place at the time of acquisition
to projected cash flows of comparable market-rate leases (referred to as Lease Intangibles). Lease Intangible assets and liabilities
are classified as lease contracts above and below market value, respectively, in other assets and accrued expenses and other liabilities
on our Consolidated Balance Sheets, and amortized on a straight-line basis as decreases and increases, respectively, to rental
income over the estimated remaining term of the underlying leases. Should a tenant terminate the lease, the unamortized portion
of the lease intangible is recognized immediately as income or expense. For additional information, see Note 9 – Intangibles.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
Asset Impairment
Management evaluates
our real estate investments for impairment indicators at each reporting period, including the evaluation of our assets’
useful lives. The judgment regarding the existence of impairment indicators is based on factors such as, but not limited to, market
conditions, operator performance, legal structure, as well as our intent with respect to holding or disposing of the asset. If
indicators of impairment are present, management evaluates the carrying value of the related real estate investments in relation
to the future undiscounted cash flows of the underlying facilities. Provisions for impairment losses related to long-lived assets
are recognized when expected future undiscounted cash flows based on our intended use of the property are determined to be less
than the carrying values of the assets. An adjustment is made to the net carrying value of the real estate investments for the
excess of carrying value over fair value. The fair value of the real estate investment is determined by market research, which
includes valuing the property as a nursing home as well as other alternative uses. All impairments are taken as a period cost
at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset. Management’s impairment
evaluation process, and when applicable, impairment calculations involve estimation of the future cash flows from management’s
intended use of the property. Changes in the facts and circumstances that drive management’s assumptions may result in an
impairment of the Company’s assets in a future period that could be material to the Company’s results of operations.
If we decide to sell
real estate properties or land holdings, we evaluate the recoverability of the carrying amounts of the assets. If the evaluation
indicates that the carrying value is not recoverable from estimated net sales proceeds, the property is written down to estimated
fair value less costs to sell. Our estimates of cash flows and fair values of the properties are based on current market conditions
and consider matters such as rental rates and occupancies for comparable properties, recent sales data for comparable properties,
and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers.
For the years ended
December 31, 2016, 2015 and 2014, we recognized impairment losses of $58.7 million, $17.7 million and $3.7 million, respectively.
For additional information, see Note 3 – Properties and Note 8 – Assets Held For Sale.
Loan and Direct Financing Lease
Impairment
Management evaluates
our outstanding mortgage notes, direct financing leases and other notes receivable for impairment. When management identifies
potential loan or direct financing lease impairment indicators, such as non-payment under the loan documents, impairment of the
underlying collateral, financial difficulty of the operator or other circumstances that may impair full execution of the loan
documents or direct financing leases, and management believes it is probable that all amounts will not be collected under the
contractual terms of the loan or direct financing lease, the loan or direct financing lease is written down to the present value
of the expected future cash flows. In cases where expected future cash flows are not readily determinable, the loan or direct
financing lease is written down to the fair value of the collateral. The fair value of the loan or direct financing lease is determined
by market research, which includes valuing the property as a nursing home as well as other alternative uses.
We account for impaired loans and direct financing leases using (a) the cost-recovery method, and/or (b)
the cash basis method. We generally utilize the cost-recovery method for impaired loans or direct financing leases for which impairment
reserves were recorded. We utilize the cash basis method for impaired loans or direct financing leases for which no impairment
reserves were recorded because the net present value of the discounted cash flows expected under the loan or direct financing lease
and/or the underlying collateral supporting the loan or direct financing lease were equal to or exceeded the book value of the
loans or direct financing leases. Under the cost-recovery method, we apply cash received against the outstanding loan balance or
direct financing lease prior to recording interest income. Under the cash basis method, we apply cash received to principal or
interest income based on the terms of the agreement. As of December 31, 2016 and 2015, we had $8.7 million and $3.0 million, respectively,
of reserves on our mortgages and other investments and no reserves on our direct financing leases. For additional information,
see Note 4 – Direct Financing Leases, Note 5 – Mortgage Notes Receivable and Note 6 – Other Investments.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
Investment in Unconsolidated Joint
Venture
We account for our
investment in an unconsolidated joint venture using the equity method of accounting as we exercise significant influence, but
do not control the entity.
Under the equity method
of accounting, the net equity investment of the Company is reflected in the accompanying Consolidated Balance Sheets and the Company's
share of net income and comprehensive income from the joint venture is included in the accompanying Consolidated Statements of
Operations and Consolidated Statements of Comprehensive Income, respectively.
On a periodic basis,
management assesses whether there are any indicators that the value of the Company's investment in the unconsolidated joint venture
may be other-than-temporarily-impaired. An investment is impaired only if management's estimate of the value of the investment
is less than the carrying value of the investment, and such a decline in value is deemed to be other than-temporary. To the extent
impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the estimated fair value
of the investment. The estimated fair value of the investment is determined using a discounted cash flow model which is a Level
3 valuation. We consider a number of assumptions that are subject to economic and market uncertainties including, among others,
rental rates, operating costs, capitalization rates, holding periods and discount rates.
No impairment loss
on our investment in unconsolidated joint venture was recognized during the year ended December 31, 2016.
Assets Held for Sale
We consider properties
to be assets held for sale when (1) management commits to a plan to sell the property; (2) it is unlikely that the disposal plan
will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4)
actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and we expect
the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable
given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property's
value at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and we cease depreciation.
For additional information, see Note 8 – Assets Held for Sale.
Cash and Cash Equivalents
Cash and cash equivalents
consist of cash on hand and highly liquid investments with a maturity date of three months or less when purchased. These investments
are stated at cost, which approximates fair value. The majority of our cash and cash equivalents are held at major commercial
banks.
Restricted Cash
Restricted cash consists
primarily of funds escrowed for tenants’ security deposits required by us pursuant to certain contractual terms (see Note
11 – Lease and Mortgage Deposits).
Accounts Receivable
Accounts receivable
includes: contractual receivables, effective yield interest receivables, straight-line rent receivables and lease inducements,
net of an estimated provision for losses related to uncollectible and disputed accounts. Contractual receivables relate to the
amounts currently owed to us under the terms of our lease and loan agreements. Effective yield interest receivables relate to
the difference between the interest income recognized on an effective yield basis over the term of the loan agreement and the
interest currently due to us according to the contractual agreement. Straight-line rent receivables relate to the difference between
the rental revenue recognized on a straight-line basis and the amounts currently due to us according to the contractual agreement.
Lease inducements result from value provided by us to the lessee, at the inception or renewal of the lease, and are amortized
as a reduction of rental revenue over the non-cancellable lease term.
On a quarterly basis,
we review our accounts receivable to determine their collectability. The determination of collectability of these assets requires
significant judgment and is affected by several factors relating to the credit quality of our operators that we regularly monitor,
including (i) payment history, (ii) the age of the contractual receivables, (iii) the current economic conditions and reimbursement
environment, (iv) the ability of the tenant to perform under the terms of their lease and/or contractual loan agreements and (v)
the value of the underlying collateral of the agreement. If we determine collectability of any of our contractual receivables
is at risk, we estimate the potential uncollectible amounts and provide an allowance. In the case of a lease recognized on a straight-line
basis, a mortgage recognized on an effective yield basis or the existence of lease inducements, we generally provide an allowance
for straight-line, effective interest, and or lease inducement accounts receivable when certain conditions or indicators of adverse
collectability are present. If the accounts receivable balance is subsequently deemed uncollectible, the receivable and allowance
for doubtful account balance are written off.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
A summary of our net
receivables by type is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Contractual receivables
|
|
$
|
13,376
|
|
|
$
|
8,452
|
|
Effective yield interest receivables
|
|
|
9,749
|
|
|
|
9,028
|
|
Straight-line rent receivables
|
|
|
208,874
|
|
|
|
175,709
|
|
Lease inducements
|
|
|
8,393
|
|
|
|
10,982
|
|
Allowance
|
|
|
(357
|
)
|
|
|
(309
|
)
|
Accounts receivable –
net
|
|
$
|
240,035
|
|
|
$
|
203,862
|
|
In 2016,
we wrote-off approximately
$4.3 million of straight-line rent receivable. The write-off primarily related to the transition of facilities from a former operator
to a current operator.
In 2015, we wrote-off
$3.2 million of straight-line rent receivables and $1.5 million of effective yield interest receivables associated with four facilities
that were transitioned to a new operator and three mortgages that were repaid prior to their maturity. This transaction closed
in 2016.
In 2014, we wrote-off
$0.8 million of straight-line rent receivables associated with a lease amendment to an existing operator for two facilities that
were transitioned to a new operator and $2.0 million of effective yield interest receivables associated with the termination of
a mortgage note that was due November 2021.
Goodwill Impairment
We assess goodwill
for potential impairment during the fourth quarter of each fiscal year, or during the year if an event or other circumstance indicates
that we may not be able to recover the carrying amount of the net assets of the reporting unit. In evaluating goodwill for impairment
on an interim basis, we assess qualitative factors
such as a
significant
decline in real estate valuations,
current macroeconomic conditions,
state of the equity and capital markets and our overall financial and operating performance
or a significant decline in
the value of our market capitalization, to determine whether it is more likely than not (that is, a likelihood of more than 50
percent) that the fair value of the reporting unit is less than its carrying amount. On an annual basis during the fourth
quarter of each fiscal year, or on an interim basis if we conclude it is more likely than not that the fair value of the reporting
unit is less than its carrying value, we perform a two-step goodwill impairment test to identify potential impairment and measure
the amount of impairment we will recognize, if any. The goodwill is not deductible for tax purposes.
In the first step
of the two-step goodwill impairment test (“Step 1”), we compare
the
fair value of the reporting unit to its net book value, including goodwill. As the Company has only one reporting unit, the fair
value of the reporting unit is determined by reference to the market capitalization of the Company as determined through quoted
market prices and adjusted for other relevant factors. A potential impairment exists if the fair value of the reporting unit is
lower than its net book value. The second step (“Step 2”) of the process is only performed if a potential impairment
exists, and it involves determining the difference between the fair value of the reporting unit's net assets other than goodwill
and the fair value of the reporting unit. If the difference is less than the net book value of goodwill, impairment exists and
is recorded. The Company has not been required to perform Step 2 of the process because the fair value of the reporting unit has
significantly exceeded its book value at the measurement date. There was no impairment of goodwill during 2016 and 2015.
Income Taxes
We were organized
to qualify for taxation as a REIT under Section 856 through 860 of the Internal Revenue Code (“Code”). As long as
we qualify as a REIT; we will not be subject to federal income taxes on the REIT taxable income that we distributed to stockholders,
subject to certain exceptions. However, with respect to certain of our subsidiaries that have elected to be treated as taxable
REIT subsidiaries (“TRSs”), we record income tax expense or benefit, as those entities are subject to federal income
tax similar to regular corporations.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
We account for deferred
income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in our financial statements or tax returns. Under this method, we determine deferred
tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in the deferred
tax liability that results from a change in circumstances, and that causes us to change our judgment about expected future tax
consequences of events, is included in the tax provision when such changes occur. Deferred income taxes also reflect the impact
of operating loss and tax credit carryforwards. A valuation allowance is provided if we believe it is more likely than not that
all or some portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance that results
from a change in circumstances, and that causes us to change our judgment about the realizability of the related deferred tax
asset, is included in the tax provision when such changes occur. For additional information on income taxes, see Note 14 –
Taxes.
Revenue Recognition
We have various different
investments that generate revenue, including leased and mortgaged properties, as well as other investments, including working
capital loans. We recognize rental income and other investment income as earned over the terms of the related leases and notes,
respectively. Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected using
the effective interest method. In applying the effective interest method, the effective yield on a loan is determined based on
its contractual payment terms, adjusted for prepayment terms.
Substantially all
of our operating leases contain provisions for specified annual increases over the rents of the prior year and are generally computed
in one of three methods depending on specific provisions of each lease as follows: (i) a specific annual increase over the prior
year’s rent, generally between 2.0% and 3.0%; (ii) an increase based on the change in pre-determined formulas from year
to year (e.g. increases in the Consumer Price Index); or (iii) specific dollar increases over prior years. Revenue under lease
arrangements with minimum fixed and determinable increases is recognized over the non-cancellable term of the lease on a straight-line
basis. The authoritative guidance does not provide for the recognition of contingent revenue until all possible contingencies
have been eliminated. We consider the operating history of the lessee, the payment history, the general condition of the industry
and various other factors when evaluating whether all possible contingencies have been eliminated. We do not recognize contingent
rents as income until the contingencies have been resolved.
In the case of rental
revenue recognized on a straight-line basis, we generally record reserves against earned revenues from leases when collection
becomes questionable or when negotiations for restructurings of troubled operators result in significant uncertainty regarding
ultimate collection. The amount of the reserve is estimated based on what management believes will likely be collected. We continually
evaluate the collectability of our straight-line rent assets. If it appears that we will not collect future rent due under our
leases, we will record a provision for loss related to the straight-line rent asset.
We record direct financing
lease income on a constant interest rate basis over the term of the lease. The costs related to originating the direct financing
leases have been deferred and are being amortized on a straight-line basis as a reduction to income from direct financing leases
over the term of the direct financing leases.
Mortgage interest
income is recognized as earned over the terms of the related mortgage notes, using the effective yield method. Allowances are
provided against earned revenues from mortgage interest when collection of amounts due becomes questionable or when negotiations
for restructurings of troubled operators lead to lower expectations regarding ultimate collection. When collection is uncertain,
mortgage interest income on impaired mortgage loans is recognized as received after taking into account the application of security
deposits.
Gains on sales of
real estate assets are recognized in accordance with the authoritative guidance for sales of real estate. The specific timing
of the recognition of the sale and the related gain is measured against the various criteria in the guidance related to the terms
of the transactions and any continuing involvement associated with the assets sold. To the extent the sales criteria are not met,
we defer gain recognition until the sales criteria are met.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Stock-Based Compensation
We recognize stock-based
compensation expense adjusted for estimated forfeitures to employees and directors, in general and administrative in our Consolidated
Statements of Operations on a straight-line basis over the requisite service period of the awards, see Note 17 – Stock-Based
Compensation for additional details.
Deferred Financing Costs and Original
Issuance Premium and/or Discounts for Debt Issuance
In April 2015, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03,
Simplifying
the Presentation of Debt Issuance Costs
(“ASU 2015-03”), which requires that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. Also in August 2015, the FASB issued ASU 2015-15,
Presentation and Subsequent Measurement of
Debt Issuance Costs Associated with Line-of-Credit Arrangements
(“ASU 2015-15”), which clarifies the SEC staff’s
position not objecting to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing such
costs, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted ASU 2015-03 and
ASU 2015-15 as of December 31, 2016 using the full retrospective method and adjusted the balance sheet for each period presented
to reflect the new accounting guidance. See “Change in Accounting Principle” below.
External costs incurred
from the placement of our debt are capitalized and amortized on a straight-line basis over the terms of the related borrowings
which approximates the effective interest method. Deferred financing costs related to our revolving line of credit are included
in other assets on our Consolidated Balance Sheets and deferred financing costs related to our other borrowings are included as
a direct deduction from the carrying amount of the related debt liability on our Consolidated Balance Sheets. Original issuance
premium or discounts reflect the difference between the face amount of the debt issued and the cash proceeds received and are
amortized on a straight-line basis over the term of the related borrowings. All premiums and discounts are recorded as an addition
to or reduction from debt on our Consolidated Balance Sheets. Amortization of deferred financing costs and original issuance premiums
or discounts totaled $9.3 million, $7.0 million and $4.5 million in 2016, 2015 and 2014, respectively, and are classified as interest
- amortization of deferred financing costs on our Consolidated Statements of Operations. When financings are terminated, unamortized
deferred financing costs and unamortized premiums or discounts, as well as charges incurred for the termination, are recognized
as expense or income at the time the termination is made. Gains and losses from the extinguishment of debt are presented in interest-refinancing
costs on our Consolidated Statements of Operations.
Earnings Per Share
Basic earnings per
common share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number
of shares of common stock outstanding during the year. Diluted EPS is computed using the treasury stock method, which is net income
divided by the total weighted-average number of common outstanding shares plus the effect of dilutive common equivalent shares
during the respective period. Dilutive common shares reflect the assumed issuance of additional common shares pursuant to certain
of our share-based compensation plans, including stock options, restricted stock and performance restricted stock units and the
assumed issuance of additional shares related to Omega OP Units held by outside investors. All outstanding unvested share-based
payment awards that contain rights to non-forfeitable dividends or dividend equivalents that participate in undistributed earnings
with common stockholders are considered participating securities that shall be included in the two-class method of computing basic
EPS. The impact of the two class method is immaterial. For additional information, see Note 21 – Earnings Per Share.
Redeemable Limited Partnership Unitholder
Interests and Noncontrolling Interests
As of April 1, 2015
and after giving effect to the Aviv Merger, the Company owned approximately 138.8 million Omega OP Units and Aviv OP owned approximately
52.9 million Omega OP Units. Each of the Omega OP Units (other than the Omega OP Units owned by Omega) is redeemable at the election
of the Omega OP Unit holder for cash equal to the then-fair market value of one share of Omega common stock, par value $0.10 per
share (“Omega Common Stock”), subject to the Company’s election to exchange the Omega OP Units tendered for
redemption for unregistered shares of Omega Common Stock on a one-for-one basis, subject to adjustment as set forth in the Partnership
Agreement.
Effective June 30,
2015, the Company (through Merger Sub, in its capacity as the general partner of Aviv OP) caused Aviv OP to make a distribution
of Omega OP Units held by Aviv OP (or equivalent value) to Aviv OP investors (the “Aviv OP Distribution”) in connection
with the liquidation of Aviv OP. As a result of the Aviv OP Distribution, Omega directly and indirectly owned approximately 95%
of the outstanding Omega OP Units, and the other investors owned approximately 5% of the outstanding Omega OP Units. As a part
of the Aviv OP Distribution, Omega settled approximately 0.2 million units via cash settlement. As of December 31, 2016, Omega
directly and indirectly owns approximately 96% of the outstanding Omega OP Units, and the other investors own approximately 4%
of the outstanding Omega OP Units.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Noncontrolling Interests
Noncontrolling interests
is the portion of equity in the Omega OP not attributable to the Company. We present the portion of any equity that we do not
own in consolidated entities as noncontrolling interests and classify those interests as a component of total equity, separate
from total stockholders’ equity, on our Consolidated Balance Sheets. We include net income attributable to the noncontrolling
interests in net income in our Consolidated Statements of Operations.
As our ownership of
a controlled subsidiary increases or decreases, any difference between the aggregate consideration paid to acquire the noncontrolling
interests and our noncontrolling interest balance is recorded as a component of equity in additional paid-in capital, so long
as we maintain a controlling ownership interest.
Foreign Operations
The U.S. dollar is
the functional currency for our consolidated subsidiaries operating in the United States. The functional currency for our consolidated
subsidiaries operating in countries other than the United States is the principal currency in which the entity primarily generates
and expends cash. For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate their financial
statements into the U.S. dollar. We translate assets and liabilities at the exchange rate in effect as of the financial statement
date. Revenue and expense accounts are translated using an average exchange rate for the period. Gains and losses resulting from
this translation are included in accumulated other comprehensive loss (“AOCL”) as a separate component of equity and
a proportionate amount of gain or loss is allocated to noncontrolling interest.
We and certain of
our consolidated subsidiaries may have intercompany and third-party debt that is not denominated in the entity’s functional
currency. When the debt is remeasured against the functional currency of the entity, a gain or loss can result. The resulting
adjustment is reflected in results of operations, unless it is intercompany debt that is deemed to be long-term in nature and
then the adjustments are included in AOCL.
Derivative Instruments
During our normal
course of business, we may use certain types of derivative instruments for the purpose of managing interest rate and currency
risk. To qualify for hedge accounting, derivative instruments used for risk management purposes must effectively reduce the risk
exposure that they are designed to hedge. In addition, at the inception of a qualifying cash flow hedging relationship, the underlying
transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with the Company’s
related assertions. The Company recognizes all derivative instruments, including embedded derivatives required to be bifurcated,
as assets or liabilities on the Consolidated Balance Sheets at fair value which is determined using a market approach and Level
2 inputs. Changes in the fair value of derivative instruments that are not designated in hedging relationships or that do not
meet the criteria of hedge accounting are recognized in earnings. For derivatives designated as qualifying cash flow hedging relationships,
the change in fair value of the effective portion of the derivatives is recognized in AOCL as a separate component of equity and
a proportionate amount of gain or loss is allocated to noncontrolling interest, whereas the change in fair value of the ineffective
portion is recognized in earnings. We formally document all relationships between hedging instruments and hedged items, as well
as our risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all
derivatives that are part of a hedging relationship to specific forecasted transactions as well as recognized liabilities or assets
on the Consolidated Balance Sheets. We also assess and document, both at inception of the hedging relationship and on a quarterly
basis thereafter, whether the derivatives are highly effective in offsetting the designated risks associated with the respective
hedged items. If it is determined that a derivative ceases to be highly effective as a hedge, or that it is probable the underlying
forecasted transaction will not occur, we discontinue hedge accounting prospectively and record the appropriate adjustment to
earnings based on the current fair value of the derivative. As a matter of policy, we do not use derivatives for trading or speculative
purposes. At December 2016 and 2015, we had $1.5 million and $0.7 million, respectively, of qualifying cash flow hedges recorded
at fair value in accrued expenses and other liabilities on our Consolidated Balance Sheets.
Related Party Transactions
The Company has a
policy which generally requires related party transactions to be approved or ratified by the Audit Committee. On February 1, 2016,
we acquired 10 SNFs from Laurel Healthcare Holdings, Inc. (“Laurel”) for approximately $169.0 million in cash and
leased them to an unrelated existing operator. A former member of the Board of Directors of the Company, together with certain
members of his immediate family, beneficially owned approximately 34% of the equity of Laurel prior to the transaction. Immediately
following our acquisition, the unrelated existing operator acquired all of the outstanding equity interests of Laurel, including
the interests previously held by the former director of the Company and his family.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Reclassification
Certain prior year amounts have been reclassified
to conform with the current year presentation.
Change in Accounting Principle
We have retrospectively
adjusted the presentation of deferred financing costs on the Company’s Consolidated Balance Sheets for all prior periods,
as required by ASU 2015-03 and ASU 2015-15. The guidance requires debt issuance costs to be presented as a direct deduction from
the related debt liability rather than as an asset, except for costs associated with our revolving credit facility. The prior
period amounts that have been impacted by the new accounting guidance were retrospectively adjusted to their respective debt liability
line items on the Company’s Consolidated Balance Sheets.
The following table
presents the impact of the change in accounting principle to the Consolidated Balance Sheets of the Company as of December 31,
2016:
|
|
As of December 31, 2016
|
|
|
|
Term Loans,
net
|
|
|
Secured
Borrowings, net
|
|
|
Unsecured
Borrowings, net
|
|
|
|
(in thousands)
|
|
Prior to change in accounting principle
|
|
$
|
1,100,000
|
|
|
$
|
54,954
|
|
|
$
|
3,055,849
|
|
Impact of change in accounting
principle
|
|
|
(5,657
|
)
|
|
|
(589
|
)
|
|
|
(27,703
|
)
|
As reported
|
|
$
|
1,094,343
|
|
|
$
|
54,365
|
|
|
$
|
3,028,146
|
|
The following table
presents the impact of the change in accounting principle to the Consolidated Balance Sheets of the Company as of December 31,
2015:
|
|
As of December 31, 2015
|
|
|
|
Term Loans,
net
|
|
|
Secured
Borrowings, net
|
|
|
Unsecured
Borrowings, net
|
|
|
|
(in thousands)
|
|
As previously reported
|
|
$
|
750,000
|
|
|
$
|
236,204
|
|
|
$
|
2,352,882
|
|
Impact of change in accounting
principle
|
|
|
(4,307
|
)
|
|
|
(611
|
)
|
|
|
(24,155
|
)
|
As adjusted and currently reported
|
|
$
|
745,693
|
|
|
$
|
235,593
|
|
|
$
|
2,328,727
|
|
Recently Adopted Accounting Pronouncements
In February 2015,
the FASB issued ASU 2015-02,
Amendments to the Consolidation Analysis
(“ASU 2015-02”), which amends certain
requirements for determining whether a variable interest entity must be consolidated. The amendments in ASU 2015-02 are effective
for annual and interim reporting periods of public entities beginning after December 31, 2015 and were adopted by the Company
during the quarter ended March 31, 2016. The effect of this guidance was immaterial to the Company’s consolidated results
of operations, financial position and cash flows.
In January 2017, the
FASB issued ASU 2017-01,
Business Combinations-Clarifying the Definition of a Business
(“ASU 2017-01”), which
provides a screen to determine when an integrated set of assets and activities (collectively referred to as a set) is not a business.
The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated
in a single identifiable asset or a group of similar identifiable assets, the set is not a business. To be considered a business,
a set must include, at a minimum an input and a substantive process that together significantly contribute to the ability to create
outputs and removes the evaluation of whether a market participant could replace the missing elements. ASU 2017-01 provides a
framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes
two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a
business, outputs generally are a key element of a business. Lastly, ASU 2017-01 narrows the definition of the term output so
that the term is consistent with how outputs are described in ASU 2014-09. We expect this guidance to result in fewer business
combinations for the Company. We adopted ASU 2017-01 during the fourth quarter of 2016 as permitted. The impact of adopting ASU
2017-01 was not material to the Company’s consolidated results of operations, financial position and cash flows as of and
for the year ended December 31, 2016. No additional disclosures are required at transition.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Recent Accounting Pronouncements
- Pending Adoption
In 2014, the FASB
issued ASU 2014-09,
Revenue from Contracts with Customers
(“ASU 2014-09”), which outlines a comprehensive model
for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity
recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services.” While ASU 2014-09 specifically references
contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. ASU 2014-09
is effective for the Company beginning January 1, 2018. In addition, the FASB has begun to issue targeted updates to clarify specific
implementation issues of ASU 2014-09. These updates include ASU 2016-08,
Principal versus Agent Considerations (Reporting
Revenue Gross versus Net),
ASU 2016-10,
Identifying Performance Obligations and Licensing,
and ASU 2016-12,
Narrow-Scope
Improvements and Practical Expedients.
The Company is currently evaluating the provisions of ASU 2014-09 and its related updates
and will be closely monitoring developments and additional guidance to determine the potential impact of the new standard. The
Company intends to adopt ASU 2014-09 and its subsequent updates in accordance with the modified retrospective approach. We do
not expect the adoption of ASU 2014-09 and its updates to have a significant impact on our consolidated financial statements,
as a substantial portion of our revenue consists of rental income from leasing arrangements and interest income from loan arrangements,
both of which are specifically excluded from ASU 2014-09.
In February 2016,
the FASB issued ASU 2016-02,
Leases
(“ASU 2016-02”), which amends the existing accounting standards for lease
accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor
accounting. ASU 2016-02 will be effective for the Company beginning January 1, 2019. Early adoption of ASU 2016-02 as of its issuance
is permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into
after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the impact
of adopting ASU 2016-02 on our consolidated financial statements.
In March 2016, the
FASB issued ASU 2016-09,
Compensation-Stock Compensation (Topic 718)
(“ASU 2016-09”). ASU 2016-09 amends the
accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity
or liabilities and classification on the statement of cash flows. This guidance is effective for annual and interim reporting
periods of public entities beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact
of adopting ASU 2016-09 on our consolidated financial statements.
In June 2016, the
FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326
) (“ASU 2016-13”), which changes
the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally
result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after
December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. We are currently
evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements.
In August 2016, the
FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments
(“ASU
2016-15”)
.
ASU 2016-15 eliminates the diversity in practice related to the classification of certain cash receipts
and payments for debt prepayment or extinguishment costs, the maturing of a zero coupon bond, the settlement of contingent liabilities
arising from a business combination, proceeds from insurance settlements, distributions from certain equity method investees and
beneficial interests obtained in a financial asset securitization. ASU 2016-15 designates the appropriate cash flow classification,
including requirements to allocate certain components of these cash receipts and payments among operating, investing and financing
activities. The retrospective transition method, requiring adjustment to all comparative periods presented, is required unless
it is impracticable for some of the amendments, in which case those amendments would be applied prospectively as of the earliest
date practicable. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017 and early adoption
is permitted. We do not expect the adoption of ASU 2016-15 to have a material impact on our Consolidated Statements of Cash Flows.
In November 2016,
the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230) Restricted Cash
(“ASU 2016-18”)
,
which
requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts
generally described as restricted cash. Therefore, amounts generally described as restricted cash will be included with cash and
cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
ASU 2016-18 is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted using
a retrospective transition method to each period presented. We do not expect the adoption of ASU 2016-18 to have a material impact
on our Consolidated Statements of Cash Flows.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
NOTE 3 - PROPERTIES
Leased Property
Our leased real estate
properties, represented by 809 SNFs, 101 assisted living facilities (“ALFs”), 16 specialty facilities and one medical
office building at December 31, 2016, are leased under provisions of single leases and master leases with initial terms typically
ranging from 5 to 15 years, plus renewal options. Substantially all of the single leases and master leases provide for minimum
annual rentals that are typically subject to annual increases. Under the terms of the leases, the lessee is responsible for all
maintenance, repairs, taxes and insurance on the leased properties.
A summary of our investment
in leased real estate properties is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Buildings
|
|
$
|
5,954,771
|
|
|
$
|
5,320,482
|
|
Land
|
|
|
759,295
|
|
|
|
670,916
|
|
Furniture, fixtures and equipment
|
|
|
454,760
|
|
|
|
426,040
|
|
Site improvements
|
|
|
206,206
|
|
|
|
132,182
|
|
Construction in progress
|
|
|
191,326
|
|
|
|
194,338
|
|
Total real estate investments
|
|
|
7,566,358
|
|
|
|
6,743,958
|
|
Less accumulated depreciation
|
|
|
(1,240,336
|
)
|
|
|
(1,019,150
|
)
|
Real estate investments - net
|
|
$
|
6,326,022
|
|
|
$
|
5,724,808
|
|
For the years ended December 31, 2016 and 2015,
we capitalized $6.6 million and $3.7 million, respectively of interest to our projects under development.
The future minimum
estimated contractual rents due for the remainder of the initial terms of the leases are as follows at December 31, 2016:
|
|
(in thousands)
|
|
2017
|
|
$
|
718,999
|
|
2018
|
|
|
711,714
|
|
2019
|
|
|
689,641
|
|
2020
|
|
|
701,543
|
|
2021
|
|
|
705,418
|
|
Thereafter
|
|
|
3,732,920
|
|
Total
|
|
$
|
7,260,235
|
|
The following tables
summarize the significant transactions that occurred between 2016 and 2014. The 2015 table excludes the acquisition of Care Homes
in the U.K. and the Aviv Merger in the second quarter of 2015, which are discussed separately below.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
2016 Acquisitions and Other
|
|
Number of
Facilities
|
|
|
Country/
|
|
Total
|
|
|
Land
|
|
|
Building & Site
Improvements
|
|
|
Furniture
& Fixtures
|
|
|
Initial
Annual
Cash
|
|
Period
|
|
SNF
|
|
|
ALF
|
|
|
State
|
|
Investment
|
|
|
(in millions)
|
|
|
Yield (%)
|
|
Q1
|
|
|
-
|
|
|
|
1
|
|
|
UK
|
|
$
|
8.3
|
|
|
$
|
1.4
|
|
|
$
|
6.7
|
|
|
$
|
0.2
|
|
|
|
7.00
|
|
Q1
|
|
|
-
|
|
|
|
1
|
|
|
UK
|
|
|
6.1
|
|
|
|
0.6
|
|
|
|
5.3
|
|
|
|
0.2
|
|
|
|
7.00
|
|
Q1
|
|
|
10
|
|
|
|
-
|
|
|
OH, VA, MI
|
|
|
169.0
|
(3)
|
|
|
10.5
|
|
|
|
152.5
|
|
|
|
6.0
|
|
|
|
8.50
|
|
Q1
|
|
|
-
|
|
|
|
2
|
|
|
GA
|
|
|
20.2
|
|
|
|
0.8
|
|
|
|
18.3
|
|
|
|
1.1
|
|
|
|
7.50
|
|
Q1
|
|
|
3
|
|
|
|
-
|
|
|
MD
|
|
|
25.0
|
|
|
|
2.5
|
|
|
|
19.9
|
|
|
|
2.6
|
|
|
|
8.50
|
|
Q1
|
|
|
21
|
|
|
|
-
|
|
|
VA, NC
|
|
|
212.5
|
|
|
|
19.3
|
|
|
|
181.1
|
|
|
|
12.1
|
|
|
|
8.50
|
|
Q2
|
|
|
-
|
|
|
|
10
|
|
|
UK
|
|
|
111.9
|
(4)
|
|
|
24.8
|
|
|
|
83.9
|
|
|
|
3.2
|
|
|
|
7.00
|
|
Q2
|
|
|
-
|
|
|
|
3
|
|
|
TX
|
|
|
66.0
|
(5)
|
|
|
5.8
|
|
|
|
58.6
|
|
|
|
1.6
|
|
|
|
6.80
|
|
Q2
|
|
|
3
|
|
|
|
-
|
|
|
CO, MO
|
|
|
31.8
|
|
|
|
3.1
|
|
|
|
26.2
|
|
|
|
2.5
|
|
|
|
9.00
|
|
Q3
|
|
|
-
|
|
|
|
1
|
|
|
FL
|
|
|
4.3
|
|
|
|
2.3
|
|
|
|
1.8
|
|
|
|
0.2
|
|
|
|
8.00
|
|
Q3
|
|
|
-
|
|
|
|
1
|
|
|
GA
|
|
|
2.5
|
|
|
|
0.2
|
|
|
|
2.1
|
|
|
|
0.2
|
|
|
|
8.00
|
|
Q3
|
|
|
-
|
|
|
|
1
|
|
|
FL
|
|
|
16.5
|
|
|
|
1.8
|
|
|
|
14.3
|
|
|
|
0.4
|
|
|
|
8.00
|
|
Q3
|
|
|
1
|
|
|
|
-
|
|
|
SC
|
|
|
10.1
|
|
|
|
2.7
|
|
|
|
6.5
|
|
|
|
0.9
|
|
|
|
9.00
|
|
Q3
|
|
|
1
|
|
|
|
-
|
|
|
OH
|
|
|
9.0
|
(6)
|
|
|
-
|
|
|
|
8.6
|
|
|
|
0.4
|
|
|
|
9.00
|
|
Q3
|
|
|
31
|
|
|
|
-
|
|
|
FL, KY,TN
|
|
|
329.6
|
(1)(2)
|
|
|
24.6
|
|
|
|
290.8
|
|
|
|
14.2
|
|
|
|
9.00
|
|
Total
|
|
|
70
|
|
|
|
20
|
|
|
|
|
$
|
1,022.8
|
|
|
$
|
100.4
|
|
|
$
|
876.6
|
|
|
$
|
45.8
|
|
|
|
|
|
|
(1)
|
The Company estimated the fair
value of the assets acquired on the acquisition date based on certain valuation analyses
that have yet to be finalized, and accordingly, the assets acquired, as detailed, are
subject to adjustment once the analysis is completed.
|
|
(2)
|
The Company’s investment
includes a purchase option buyout obligation with a fair value of approximately $29.6
million. The future buyout obligation is recorded in accrued expenses and other liabilities
on our Consolidated Balance Sheet. The Company also acquired a term loan with a fair
value of approximately $37.0 million which is recorded in other investments on our Consolidated
Balance Sheet. Refer to Note – 6 Other Investments.
|
|
(3)
|
Acquired from a related party.
Refer to Note – 2 Summary of Significant Accounting Policies - Related Party Transactions.
|
|
(4)
|
Omega also recorded a deferred
tax asset of approximately $1.9 million in connection with the acquisition.
|
|
(5)
|
The Company paid $63.0 million
in cash at closing to acquire the facilities. We have agreed to pay an additional $1.5
million in April 2017 and the remaining $1.5 million in April 2018. The additional consideration
to be paid is contractually determined and not contingent on other factors. The $3.0
million liability is recorded in unsecured borrowings – net on our Consolidated
Balance Sheet.
|
|
(6)
|
The Company paid approximately
$3.5 million in cash to acquire the facility. The remainder of the purchase price (approximately
$5.5 million) was funded with the redemption of an other investment note.
|
During 2016, the Company
also acquired five parcels of land which are not reflected in the table above for approximately $8.3 million with the intent of
building new facilities for existing operators.
For the year
ended December 31, 2016, we recognized rental revenue of approximately $58.1 million and expensed approximately $9.6 million
of acquisition related costs in connection with the aforementioned acquisitions. No goodwill was recorded in connection with
these acquisitions.
2015 Acquisitions and Other
|
|
Number of
Facilities
|
|
|
|
|
Total
|
|
|
Land
|
|
|
Building
& Site
Improvements
|
|
|
Furniture
& Fixtures
|
|
|
Initial
Annual
Cash
|
|
Period
|
|
SNF
|
|
|
ALF
|
|
|
State
|
|
Investment
|
|
|
(in millions)
|
|
|
Yield (%)
|
|
Q1
|
|
|
1
|
|
|
|
-
|
|
|
TX
|
|
$
|
6.8
|
|
|
$
|
0.1
|
|
|
$
|
6.1
|
|
|
$
|
0.6
|
|
|
|
9.50
|
|
Q3
|
|
|
6
|
|
|
|
-
|
|
|
NE
|
|
|
15.0
|
|
|
|
1.4
|
|
|
|
12.1
|
|
|
|
1.5
|
|
|
|
9.00
|
|
Q3
|
|
|
1
|
|
|
|
2
|
|
|
WA
|
|
|
18.0
|
|
|
|
2.2
|
|
|
|
14.9
|
|
|
|
0.9
|
|
|
|
8.00
|
|
Q3
|
|
|
-
|
|
|
|
2
|
|
|
GA
|
|
|
10.8
|
|
|
|
1.2
|
|
|
|
9.0
|
|
|
|
0.6
|
|
|
|
7.00
|
|
Q3
|
|
|
1
|
|
|
|
-
|
|
|
VA
|
|
|
28.5
|
(1)
|
|
|
1.9
|
|
|
|
24.2
|
|
|
|
2.4
|
|
|
|
9.25
|
|
Q3
|
|
|
2
|
|
|
|
-
|
|
|
FL
|
|
|
32.0
|
|
|
|
1.4
|
|
|
|
29.0
|
|
|
|
1.6
|
|
|
|
9.00
|
|
Q3
|
|
|
-
|
|
|
|
-
|
|
|
NY
|
|
|
111.7
|
(2)(3)
|
|
|
111.7
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Q4
|
|
|
1
|
|
|
|
-
|
|
|
AZ
|
|
|
0.6
|
(3)
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
9.00
|
|
Q4
|
|
|
1
|
|
|
|
-
|
|
|
TX
|
|
|
5.3
|
|
|
|
1.8
|
|
|
|
3.0
|
|
|
|
0.5
|
|
|
|
9.50
|
|
Total
|
|
|
13
|
|
|
|
4
|
|
|
|
|
$
|
228.7
|
|
|
$
|
122.0
|
|
|
$
|
98.6
|
|
|
$
|
8.1
|
|
|
|
|
|
|
(1)
|
In July 2015, we leased the
facility to a new operator with an initial lease term of 10 years.
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
|
(2)
|
On July 24, 2015, we purchased
five buildings located in New York City, New York for approximately $111.7 million. We
and our operator plan to construct a 201,000 square-foot assisted living and memory care
facility. The properties were added to the operator’s existing master lease. The
lease provides for a 5% annual cash yield on the land during the construction phase.
Upon issuance of a certification of occupancy, the annual cash yield will increase to
7% in year one and 8% in year two with 2.5% annual escalators thereafter.
|
|
(3)
|
Accounted for as an asset acquisition.
|
For the year ended December 31, 2015, we recognized rental revenue of approximately $4.9 million and expensed
$2.2 million of acquisition related costs related to the aforementioned acquisitions. No goodwill was recorded in connection with
these acquisitions.
Acquisition of Care Homes in the U.K.
On May 1, 2015, we
closed on a purchase/leaseback Care Homes Transaction (the “Care Homes Transaction”) for 23 care homes located in
the U.K. and operated by Healthcare Homes Holding Limited (“Healthcare Homes”). As part of the transaction, we acquired
title to the 23 care homes with 1,018 registered beds and leased them back to Healthcare Homes pursuant to a 12-year master lease
agreement with an initial annual cash yield of 7%, and annual escalators of 2.5%. The care homes, comparable to ALFs in the U.S.,
are located throughout the East Anglia region (north of London) of the U.K. Healthcare Homes is headquartered in Colchester (Essex
County), England. We recorded approximately $193.8 million of assets consisting of land ($20.7 million), building and site improvements
($152.1 million), furniture and fixtures ($5.3 million) and goodwill ($15.7 million).
For the year ended December 31, 2015, we recognized approximately $9.5 million of rental revenue and expensed
approximately $3.2 million of acquisition related costs associated with the
Care
Homes Transaction.
Aviv Merger
On April 1, 2015,
Omega completed the Aviv Merger, which was structured as a stock-for-stock merger. Under the terms of the Merger Agreement, each
outstanding share of Aviv common stock was converted into 0.90 of a share of Omega Common Stock. In connection with the Aviv Merger,
Omega issued approximately 43.7 million shares of Omega Common Stock to former Aviv stockholders. As a result of the Aviv Merger,
Omega acquired 342 facilities, two facilities subject to direct financing leases, one medical office building, two mortgages and
other investments. Omega also assumed certain outstanding equity awards and other debt and liabilities. Based on the closing price
of Omega’s common stock on April 1, 2015, the fair value of the consideration exchanged was approximately $2.3 billion.
The following table
highlights the final allocation of the assets acquired and liabilities assumed and consideration transferred on April 1, 2015:
|
(in thousands)
|
|
Fair value of net assets acquired:
|
|
|
|
Land and buildings
|
|
$
|
3,107,530
|
|
Investment in direct financing leases
|
|
|
26,823
|
|
Mortgages notes receivable
|
|
|
19,246
|
|
Other investments
|
|
|
23,619
|
|
Total investments
|
|
|
3,177,218
|
|
Goodwill
|
|
|
630,679
|
|
Accounts receivables and other assets
|
|
|
17,144
|
|
Cash acquired
|
|
|
84,858
|
|
Accrued expenses and other liabilities
|
|
|
(223,002
|
)
|
Debt
|
|
|
(1,410,637
|
)
|
Fair value of net assets acquired
|
|
$
|
2,276,260
|
|
The completion of the final valuation in
the first quarter of 2016 did not result in material changes to our Consolidated Statements of Operations or our Consolidated
Balance Sheets from our preliminary purchase price allocation reflected in the December 31, 2015 Form 10-K.
For the year ended December 31, 2015, we recognized approximately $188.4 million of total revenue and
expensed approximately $52.1 million in acquisition and merger related costs in connection with the Aviv Merger.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Included within accrued
expenses and other liabilities is a $67.3 million contingent liability related to a leasing arrangement with an operator assumed
as a result of the Aviv Merger.
2014 Acquisitions and Other
|
|
Number of
Facilities
|
|
|
|
|
Total
|
|
|
Land
|
|
|
Building & Site
Improvements
|
|
|
Furniture
&
Fixtures
|
|
|
Initial
Annual
Cash
|
|
Period
|
|
SNF
|
|
|
ALF
|
|
|
State
|
|
Investment
|
|
|
(in millions)
|
|
|
Yield (%)
|
|
Q1
|
|
|
-
|
|
|
|
1
|
|
|
AZ
|
|
$
|
4.7
|
|
|
$
|
0.4
|
|
|
$
|
3.9
|
|
|
$
|
0.4
|
|
|
|
9.75
|
|
Q2/Q3
|
|
|
3
|
|
|
|
-
|
|
|
GA, SC
|
|
|
34.6
|
|
|
|
0.9
|
|
|
|
32.1
|
|
|
|
1.6
|
|
|
|
9.50
|
|
Q3
|
|
|
1
|
|
|
|
-
|
|
|
TX
|
|
|
8.2
|
|
|
|
0.4
|
|
|
|
7.4
|
|
|
|
0.4
|
|
|
|
9.75
|
|
Q4
|
|
|
-
|
|
|
|
4
|
|
|
PA,OR,AR
|
|
|
84.2
|
|
|
|
5.1
|
|
|
|
76.7
|
|
|
|
2.4
|
|
|
|
6.00
|
|
|
|
|
4
|
|
|
|
5
|
|
|
|
|
$
|
131.7
|
|
|
$
|
6.8
|
|
|
$
|
120.1
|
|
|
$
|
4.8
|
|
|
|
|
|
For the year ended December 31, 2014, we recognized rental revenue of approximately $3.2 million and expensed
$3.9 million of acquisition costs related to the above transactions. No goodwill was recorded in connection with these acquisitions.
Transition of Two West Virginia Facilities
to a New Operator
On July 1, 2014, we
transitioned two West Virginia SNFs that we previously leased to Diversicare Healthcare Services (“Diversicare” and
formerly known as Advocat) to a new unrelated third party operator. The two facilities represented 150 operating beds. We amended
our Diversicare master lease to reflect the transition of the two facilities to the new operator and for the year ended December
31, 2014 recorded a $0.8 million provision for uncollectible straight-line accounts receivable. Simultaneous with the Diversicare
master lease amendment, we entered into a 12-year master lease with a new third party operator.
Pro Forma Acquisition Results
The businesses acquired
in 2015 and 2014 are included in our results of operations from the dates of acquisition. The following unaudited pro forma results
reflect the impact of the acquisitions as if they occurred on January 1, 2014. In the opinion of management, all significant necessary
adjustments to reflect the effect of the acquisitions have been made. The following pro forma information is not indicative of
future operations.
|
|
Pro Forma
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands, except
per share
amounts, unaudited)
|
|
Pro forma revenues
|
|
$
|
817,642
|
|
|
$
|
789,270
|
|
Pro forma net income
|
|
$
|
258,927
|
|
|
$
|
318,271
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – diluted:
|
|
|
|
|
|
|
|
|
Net income – as reported
|
|
$
|
1.29
|
|
|
$
|
1.74
|
|
Net income – pro forma
|
|
$
|
1.33
|
|
|
$
|
1.74
|
|
Asset Sales, Impairments and Other
In 2016, we sold 38
facilities (21 previously held-for-sale) for approximately $169.6 million in net proceeds recognizing a gain of approximately
$50.2 million. We also recorded a total of $58.7 million provision for impairment related to 29 facilities to reduce their net
book value to their estimated fair value less costs to sell. To estimate the fair value of these facilities we utilized a market
approach and Level 3 inputs (which generally consist of non-binding offers from unrelated third parties).
In 2015, we sold seven
SNFs (four previously held-for-sale) for total cash proceeds of approximately $41.5 million, generating a gain of approximately
$6.4 million. We also recorded a total of $17.7 million provision for impairment related to six SNFs to reduce their net book
value to their estimated fair value less costs to sell. To estimate the fair value of these facilities we utilized a market approach
and Level 3 inputs.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
In 2014, we sold four
SNFs (three previously held-for-sale) and a parcel of land for total cash proceeds of $4.1 million, resulting in a $2.9 million
gain. We also closed two SNFs and recorded a $3.7 million provision for impairment related to these facilities. To estimate the
fair value of these facilities we utilized a market approach and Level 3 inputs.
The recorded 2016
impairments were primarily the result of a decision to exit certain non-strategic facilities and operators primarily related to
facilities acquired in the Aviv Merger. The recorded 2015 and 2014 impairments are primarily the result of closing facilities
or updating the estimated proceeds we expected to receive for the sale of closed facilities at that time. See “
Note 8
– Assets Held For Sale
” for more details.
NOTE 4 – DIRECT FINANCING LEASES
The components of
investments in direct financing leases consist of the following:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Minimum lease payments receivable
|
|
$
|
4,287,069
|
|
|
$
|
4,320,876
|
|
Less unearned income
|
|
|
(3,685,131
|
)
|
|
|
(3,733,175
|
)
|
Investment in direct financing
leases - net
|
|
$
|
601,938
|
|
|
$
|
587,701
|
|
|
|
|
|
|
|
|
|
|
Properties subject to direct
financing leases
|
|
|
58
|
|
|
|
59
|
|
As of December 31,
2016 and 2015 we had seven direct financing leases with four different operators. The following table summarizes our investments
in the direct financing leases by operator:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
New Ark
|
|
$
|
574,581
|
|
|
$
|
560,308
|
|
Reliance Health Care Management, Inc.
|
|
|
15,498
|
|
|
|
15,509
|
|
Sun Mar Healthcare
|
|
|
11,443
|
|
|
|
11,381
|
|
Markleysburg Healthcare Investors,
LP
|
|
|
416
|
|
|
|
503
|
|
Investment in direct financing
leases - net
|
|
$
|
601,938
|
|
|
$
|
587,701
|
|
New Ark Investment Inc.
On November 27, 2013,
we closed an aggregate $529 million purchase/leaseback transaction in connection with the acquisition of Ark Holding Company,
Inc. (“Ark Holding”) by 4 West Holdings Inc. At closing, we acquired 55 SNFs and 1 ALF operated by Ark Holding and
leased the facilities back to Ark Holding, now known as New Ark Investment Inc. (“New Ark”), pursuant to four 50-year
master leases with rental payments yielding 10.6% per annum over the term of the leases. The purchase/leaseback transaction is
being accounted for as a direct financing lease.
The lease agreements
allow the tenant the right to purchase the facilities for a bargain purchase price plus closing costs at the end of the lease
term. In addition, commencing in the 41st year of each lease, the tenant will have the right to prepay the remainder of its obligations
thereunder for an amount equal to the sum of the unamortized portion of the original aggregate $529 million investment plus the
net present value of the remaining payments under the lease and closing costs. In the event the tenant exercises either of these
options, we have the right to purchase the properties for fair value at the time.
The 56 facilities
represent 5,623 licensed beds located in 12 states, predominantly in the southeastern United States. The 56 facilities are separated
by region and divided amongst four cross-defaulted master leases. The four regions include the Southeast (39 facilities), the
Northwest (7 facilities), Texas (9 facilities) and Indiana (1 facility).
Additionally, we own
four facilities and lease them to New Ark under a master lease which expires in 2026. The four facility lease is being accounted
for as an operating lease.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Aviv Merger
On April 1, 2015,
we acquired two additional direct financing leases as a result of the Aviv Merger.
As of December 31,
2016, the following minimum rents are due under our direct financing leases for the next five years (in thousands):
2017
|
2018
|
2019
|
2020
|
2021
|
$50,772
|
$52,098
|
$53,377
|
$54,677
|
$55,919
|
NOTE 5 - MORTGAGE NOTES RECEIVABLE
As of December 31,
2016, mortgage notes receivable relate to 25 fixed rate mortgages on 47 long-term care facilities. The mortgage notes are secured
by first mortgage liens on the borrowers' underlying real estate and personal property. The mortgage notes receivable relate to
facilities located in ten states, operated by seven independent healthcare operating companies. We monitor compliance with mortgages
and when necessary have initiated collection, foreclosure and other proceedings with respect to certain outstanding loans.
The outstanding principal
amounts of mortgage notes receivable, net of allowances, were as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Mortgage note due 2024; interest at 9.79%
|
|
$
|
112,500
|
|
|
$
|
112,500
|
|
Mortgage note due 2028; interest at 11.00%
|
|
|
35,964
|
|
|
|
69,928
|
|
Mortgage note due 2029; interest at 9.45%
|
|
|
412,140
|
|
|
|
413,399
|
|
Other mortgage notes outstanding
(1)
|
|
|
82,673
|
|
|
|
83,968
|
|
Mortgage notes receivable, gross
|
|
|
643,277
|
|
|
|
679,795
|
|
Allowance for loss on mortgage
notes receivable
|
|
|
(3,934
|
)
|
|
|
—
|
|
Total mortgages — net
|
|
$
|
639,343
|
|
|
$
|
679,795
|
|
|
(1)
|
Other mortgage notes
outstanding have stated interest rates ranging from 8.35% to 12.0% per annum and maturity
dates through 2029.
|
$112.5 Million of Mortgage Note due
2024
On January 17, 2014,
we entered into a $112.5 million first mortgage loan with an existing operator. The loan is secured by 7 SNFs and 2 ALFs located
in Pennsylvania (7) and Ohio (2). The mortgage is cross-defaulted and cross-collateralized with our existing master lease with
the operator.
Mortgage Note due 2028
On April 29, 2016,
an existing operator exercised an option to repay certain mortgage notes. We received proceeds of approximately $47.8 million
for the mortgage notes due. In connection with the repayment of the mortgage notes we recognized a net gain of approximately $5.4
million which is recorded in mortgage interest income on our Consolidated Statement of Operations. The remaining $36.0 million
interest only mortgage is secured by three facilities located in Maryland. The interest rate will accrue at a fixed rate of 11%
per annum through April 2018. After April 2018, the interest rate will increase to 13.75% per annum. The initial maturity date
was extended to December 2028. The mortgage is cross-defaulted and cross-collateralized with our existing master lease and other
investment notes with the operator.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
$415 Million of Refinancing/Consolidating
Mortgage Loans due 2029
On June 30, 2014,
we entered into an agreement to refinance/consolidate $117 million in existing mortgages with maturity dates ranging from 2021
to 2023 on 17 facilities into one mortgage and simultaneously provide mortgage financing for an additional 14 facilities. The
original $415 million mortgage matures in 2029 and was secured by 31 facilities. The new loan bore an initial annual cash interest
rate of 9.0% that increases by 0.225% per year (e.g., beginning in year 2 the annual cash interest rate will be 9.225%, in year
3 the annual cash interest rate will be 9.45%, etc.). The mortgage is cross-defaulted and cross-collateralized with our existing
master lease and other investment notes with the operator.
One of the existing
mortgages that was refinanced/consolidated into the new $415 million mortgage included annual interest rate escalators and required
the mortgagee to pay a prepayment penalty in the event the mortgage was retired early which resulted in us recording an effective
yield interest receivable. In connection with the refinancing/consolidating transaction which was entered into at market terms,
the old mortgage was considered to be retired early since the modifications made to the terms of the mortgage were more than minor.
As of the date of the refinancing/consolidation transaction, the effective yield interest receivable was approximately $2.0 million.
We forgave the prepayment penalty associated with the retired mortgage and recorded a $2.0 million provision to write-off the
effective yield interest receivable related to the retired mortgage.
Conversion of Mortgage Notes due 2046
to Leased Properties
In January 2016, we
acquired three facilities via a deed-in-lieu of foreclosure from a mortgagor. The fair value of the facilities approximated the
$25 million carrying value of the mortgages. These facilities are located in Maryland. Simultaneously, we leased these facilities
to an existing operator.
NOTE 6 - OTHER INVESTMENTS
A summary of our other
investments is as follows:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Other investment note due 2019; interest at 10.50%
|
|
$
|
49,458
|
|
|
$
|
—
|
|
Other investment note due 2020; interest at 10.00%
|
|
|
23,000
|
|
|
|
23,000
|
|
Other investment note due 2020; interest at 14.00%
|
|
|
47,913
|
|
|
|
—
|
|
Other investment note due 2022, interest at 9.00%
|
|
|
31,987
|
|
|
|
—
|
|
Other investment note due 2030; interest at 6.66%
|
|
|
44,595
|
|
|
|
26,966
|
|
Other investment notes outstanding
(1)
|
|
|
64,691
|
|
|
|
42,293
|
|
Other investments, gross
|
|
|
261,644
|
|
|
|
92,259
|
|
Allowance for loss on other
investments
|
|
|
(4,798
|
)
|
|
|
(2,960
|
)
|
Total other investments
|
|
$
|
256,846
|
|
|
$
|
89,299
|
|
|
(1)
|
Other
investment notes have maturity dates through 2028 and interest rates ranging from 6.50%
to 13.0% per annum.
|
The following is an
overview of certain notes entered into or repaid in 2016 and 2015.
Other Investment note due 2019
On February 26, 2016,
we acquired and funded a $50.0 million mezzanine note at a discount of approximately $0.75 million to a new operator. The mezzanine
note bears interest at 10.50% per annum and matures in February 2019.
Other Investment notes due 2020
In December 2015,
we amended our five year $28.0 million loan agreement with an existing operator. The amendment permits the operator to re-borrow
$6.0 million under the original loan agreement. We funded $6.0 million to the operator in December 2015. The loan bears interest
at 10% per annum and the maturity date was extended from 2017 to 2020. As of December 31, 2016, approximately $23.0 million remains
outstanding.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
On July 29, 2016,
we provided an existing operator $48.0 million of term loan funding. The term loan bears interest at 14% per annum (LIBOR with
a floor of 1% plus 13%) and matures on July 29, 2020. The term loan requires monthly principal payments of $0.25 million through
July 2019, and $0.5 million from August 2019 through maturity. In addition, a portion of the monthly interest may be accrued to
the outstanding principal balance of the loan.
Other Investment notes due 2022
On September 30, 2016,
we acquired and amended a term loan with a fair value of approximately $37.0 million with an existing operator. A $5.0 million
tranche of the term loan bears interest at 13% and matures on September 30, 2019 and a $32.0 million tranche of the term loan
bears interest at 9% per annum and matures on March 31, 2022.
Other Investment note due 2030
On June 30, 2015,
we entered into a $50.0 million revolving credit facility with an operator. The note bears interest at approximately 6.66% per
annum and matures in 2030. As of December 31, 2016, approximately $44.6 million has been drawn and remains outstanding.
Other Investment notes paid off
On April 29, 2016,
an existing operator exercised its option to pay off a working capital note due in 2022 and ten working capital notes due in 2023,
for approximately $7.6 million.
On March 1, 2016,
we provided an operator a $15.0 million secured working capital note. The working capital note bore interest at 8.5% per annum
and initially matured in March 2017. The loan was paid off in December 2016.
On March 1, 2016,
we provided an operator a $20.0 million acquisition note. The acquisition note bore interest at 8.5% per annum (increasing annually
by 2.5% per annum) and initially matured in March 2028. The loan was paid off in October 2016.
NOTE 7 – INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
On November 1, 2016,
we invested approximately $50.0 million for an approximate 15% ownership interest in a joint venture operating as Second Spring
Healthcare Investments. The other approximate 85% interest is owned by affiliates of Lindsey Goldberg LLC. We account for the
joint venture using the equity method. On November 1, 2016, the joint venture acquired 64 SNFs from Welltower Inc. for approximately
$1.1 billion.
We receive asset
management fees from the joint venture for services provided. For the year ended December 31, 2016, we recognized $0.3
million of asset management fees. These fees are included in miscellaneous income in the accompanying Consolidated Statement
of Operations. The accounting policies for the unconsolidated joint venture are the same as those of the Company.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
NOTE 8 – ASSETS HELD FOR SALE
The following is a summary of our assets held
for sale:
|
|
Properties Held-For-Sale
|
|
|
|
Number of
Properties
|
|
|
Net Book Value
(in thousands)
|
|
|
|
|
|
December 31, 2014
|
|
|
4
|
|
|
$
|
12,792
|
|
Properties sold/other
(1)
|
|
|
(5
|
)
|
|
|
(16,877
|
)
|
Properties added
(2)
|
|
|
4
|
|
|
|
10,684
|
|
December 31, 2015
|
|
|
3
|
|
|
$
|
6,599
|
|
Properties sold/other
(3)
|
|
|
(24
|
)
|
|
|
(75,948
|
)
|
Properties added
(4)
|
|
|
41
|
|
|
|
122,217
|
|
December 31, 2016
|
|
|
20
|
|
|
$
|
52,868
|
|
|
(1)
|
In 2015, a parcel of land was reclassified to
closed facilities. In addition, we sold four facilities for approximately $25.5 million
in net proceeds recognizing gains on sales of approximately $8.8 million.
|
|
(2)
|
In 2015, we recorded a $3.0 million impairment
charge on a SNF in New Mexico to reduce its net book value to its estimated fair value
less costs to sell.
|
|
(3)
|
In 2016, we sold
21 SNFs for approximately $86.7 million in net proceeds recognizing gains on sales of
approximately $16.5 million. We also recorded approximately $4.9 million of impairments
on 16 facilities to reduce their net book values to their estimated fair value less costs
to sell. Two SNFs and one ALF classified as assets held for sale in the second quarter
were no longer considered held for sale and were reclassified in the third quarter back
to leased properties at their fair values (approximately $7.0 million).
|
|
(4)
|
In 2016, we reclassified
ten ALFs and 31 SNFs to assets held for sale (including the two SNFs and one ALF mentioned
above that were reclassified back to leased properties in the third quarter). We recorded
approximately $49.4 million of impairment charges on 20 of these facilities to reduce
their net book values to their estimated fair value less costs to sell.
|
NOTE 9 – INTANGIBLES
The following is a summary of our intangibles as of December
31, 2016 and 2015:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Assets:
|
|
|
|
|
|
|
Goodwill
|
|
$
|
643,474
|
|
|
$
|
645,683
|
|
|
|
|
|
|
|
|
|
|
Above market leases
|
|
$
|
22,476
|
|
|
$
|
21,901
|
|
In-place leases
|
|
|
167
|
|
|
|
386
|
|
Accumulated amortization
|
|
|
(15,864
|
)
|
|
|
(14,162
|
)
|
Net intangible assets
|
|
$
|
6,779
|
|
|
$
|
8,125
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Below market leases
|
|
$
|
165,028
|
|
|
$
|
165,331
|
|
Accumulated amortization
|
|
|
(70,738
|
)
|
|
|
(55,131
|
)
|
Net intangible liabilities
|
|
$
|
94,290
|
|
|
$
|
110,200
|
|
Goodwill was recorded
in connection with the Aviv Merger and Care Homes Transaction and is shown as a separate line on our Consolidated Balance Sheets.
Above market leases and in-place leases, net of accumulated amortization, are included in other assets on our Consolidated Balance
Sheets. Below market leases, net of accumulated amortization, are included in accrued expenses and other liabilities on our Consolidated
Balance Sheets. The net amortization related to the above and below market leases is included in our Consolidated Statements of
Operations as an adjustment to rental income.
For the years ended December
31, 2016, 2015 and 2014, our net amortization related to intangibles was $13.9 million, $13.9 million and $5.0 million, respectively.
The estimated net amortization related to these intangibles for the subsequent five years is as follows: 2017 – $12.0 million;
2018 – $10.6 million; 2019 – $9.5 million; 2020 – $9.3 million; 2021 - $8.7 million and $37.3 million thereafter.
As of December 31, 2016 the weighted average remaining amortization period of above market lease assets and below market lease
liabilities is 8.1 years and 9.5 years, respectively.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
The following is a summary of our goodwill
as of December 31 2016:
|
|
(in thousands)
|
|
Balance as of December 31, 2015
|
|
$
|
645,683
|
|
Add: additional valuation adjustments related to preliminary valuations
|
|
|
275
|
|
Less: foreign currency translation
|
|
|
(2,484
|
)
|
Balance as of December 31, 2016
|
|
$
|
643,474
|
|
NOTE 10 - CONCENTRATION OF RISK
As of December 31,
2016, our portfolio of real estate investments consisted of 996 healthcare facilities, located in 42 states and the U.K. and operated
by 79 third party operators. Our investments in these facilities, net of impairments and reserve for uncollectible loans, totaled
approximately $8.9 billion at December 31, 2016, with approximately 99% of our real estate investments related to long-term care
facilities. Our portfolio is made up of 809 SNFs, 101 ALFs, 16 specialty facilities, one medical office building, fixed rate mortgages
on 44 SNFs and two ALFs, and 23 facilities that are closed/held-for-sale. At December 31, 2016, we also held other investments
of approximately $256.8 million, consisting primarily of secured loans to third-party operators of our facilities.
At December 31, 2016,
the three states in which we had our highest concentration of investments were Ohio (10%), Florida (9%) and Texas (9%). No single
operator or manager generated more than 10% of our total revenues for the year ended December 31, 2016
.
NOTE 11 - LEASE AND MORTGAGE DEPOSITS
We obtain liquidity
deposits, security deposits and letters of credit from most operators pursuant to our lease and mortgage agreements with the operators.
These generally represent the rental and mortgage interest for periods ranging from three to six months with respect to certain
of our investments. At December 31, 2016, we held $5.7 million in liquidity deposits, $49.8 million in security deposits and $66.8
million in letters of credit. The liquidity deposits, security deposits and the letters of credit may be used in the event of
lease and or loan defaults, subject to applicable limitations under bankruptcy law with respect to operators filing under Chapter
11 of the United States Bankruptcy Code. Liquidity deposits are recorded as restricted cash on our Consolidated Balance Sheets
with the offset recorded as a liability in accrued expenses and other liabilities on our Consolidated Balance Sheets. Security
deposits related to cash received from the operator are recorded in accrued expenses and other liabilities on our Consolidated
Balance Sheets. Additional security for rental and mortgage interest revenue from operators is provided by covenants regarding
minimum working capital and net worth, liens on accounts receivable and other operating assets of the operators, provisions for
cross default, provisions for cross-collateralization and by corporate or personal guarantees.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
NOTE 12 - BORROWING ARRANGEMENTS
The following is a
summary of our long-term borrowings:
|
|
|
|
Interest Rate as
of December 31,
|
|
|
December 31,
|
|
|
|
Maturity
|
|
2016
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Secured borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage term loan
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
180,000
|
|
HUD mortgages assumed December 2011
(1)
|
|
2044
|
|
|
3.06
|
%
|
|
|
54,954
|
|
|
|
56,204
|
|
Deferred financing costs – net
|
|
|
|
|
|
|
|
|
(589
|
)
|
|
|
(611
|
)
|
Total secured borrowings – net
|
|
|
|
|
|
|
|
|
54,365
|
|
|
|
235,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line of credit
|
|
2018
|
|
|
2.06
|
%
|
|
|
190,000
|
|
|
|
230,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tranche A-1 term loan
|
|
2019
|
|
|
2.27
|
%
|
|
|
200,000
|
|
|
|
200,000
|
|
Tranche A-2 term loan
|
|
2017
|
|
|
2.19
|
%
|
|
|
200,000
|
|
|
|
200,000
|
|
Tranche A-3 term loan
|
|
2021
|
|
|
2.27
|
%
|
|
|
350,000
|
|
|
|
—
|
|
Omega OP term loan
|
|
2017
|
|
|
2.19
|
%
|
|
|
100,000
|
|
|
|
100,000
|
|
2015 term loan
|
|
2022
|
|
|
3.80
|
%
|
|
|
250,000
|
|
|
|
250,000
|
|
Deferred financing costs – net
|
|
|
|
|
|
|
|
|
(5,657
|
)
|
|
|
(4,307
|
)
|
Total term loans – net
|
|
|
|
|
|
|
|
|
1,094,343
|
|
|
|
745,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 notes
|
|
2023
|
|
|
4.375
|
%
|
|
|
700,000
|
|
|
|
—
|
|
2024 notes
|
|
2024
|
|
|
5.875
|
%
|
|
|
400,000
|
|
|
|
400,000
|
|
2024 notes
|
|
2024
|
|
|
4.95
|
%
|
|
|
400,000
|
|
|
|
400,000
|
|
2025 notes
|
|
2025
|
|
|
4.50
|
%
|
|
|
250,000
|
|
|
|
250,000
|
|
2026 notes
|
|
2026
|
|
|
5.25
|
%
|
|
|
600,000
|
|
|
|
600,000
|
|
2027 notes
|
|
2027
|
|
|
4.50
|
%
|
|
|
700,000
|
|
|
|
700,000
|
|
Other
|
|
2018
|
|
|
-
|
|
|
|
3,000
|
|
|
|
—
|
|
Subordinated debt
|
|
2021
|
|
|
9.00
|
%
|
|
|
20,000
|
|
|
|
20,000
|
|
Discount - net
|
|
|
|
|
|
|
|
|
(17,151
|
)
|
|
|
(17,118
|
)
|
Deferred financing costs – net
|
|
|
|
|
|
|
|
|
(27,703
|
)
|
|
|
(24,155
|
)
|
Total unsecured borrowings – net
|
|
|
|
|
|
|
|
|
3,028,146
|
|
|
|
2,328,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total secured and unsecured borrowings – net
|
|
|
|
|
|
|
|
$
|
4,366,854
|
|
|
$
|
3,540,013
|
|
|
(1)
|
Reflects the weighted average annual contractual interest rate
on the mortgages at December 31, 2016 excluding a third-party administration fee of approximately
0.5%. Secured by real estate assets with a net carrying value of $65.7 million as of
December 31, 2016.
|
Secured Borrowings
Mortgage Term Loan
As a result of the
Aviv Merger in April 2015, we acquired two subsidiaries that were borrowers under a $180.0 million mortgage term loan secured
by mortgages on 28 healthcare facilities owned by one of the borrowers. On July 25, 2016, we purchased the $180.0 million mortgage
term loan, effectively eliminating the debt on our consolidated financial statements. The term loan was secured by real estate
assets having a net carrying value of $290.5 million at June 30, 2016. The interest rate was based on LIBOR, with a floor of 50
basis points, plus a margin of 350 basis points. The interest rate at June 30, 2016 was 4.13% per annum. We paid $180.0 million
plus a 1% premium to purchase the debt.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
HUD Mortgages Loans Payoff
On December 31, 2015,
we paid approximately $25.1 million to retire two mortgage loans guaranteed by the U.S. Department of Housing and Urban Development
(“HUD”). The loans were assumed as part of an acquisition in a prior year, and had a blended interest rate of 5.5%
per annum with maturities on March 1 and April 1, 2036. The payoff resulted in a $0.9 million gain on the extinguishment of the
debt due to the write-off of the $2.1 million unamortized fair value adjustment recorded at the time of acquisition offset by
a prepayment fee of approximately $1.2 million.
On April 30, 2015,
we paid approximately $9.1 million to retire one mortgage loan guaranteed by HUD. The loan was assumed as part of an acquisition
in a prior year, and had an interest rate of 4.35% per annum with maturity on March 1, 2041. The payoff resulted in a $1.0 million
gain on the extinguishment of the debt due to the write-off of the $1.5 million unamortized fair value adjustment recorded at
the time of acquisition offset by a prepayment fee of approximately $0.5 million.
On March 31, 2015,
we paid approximately $154.3 million to retire 21 mortgage loans guaranteed by HUD, totaling approximately $146.9 million. 18
loans had an all-in blended interest rate of 5.35% per annum with maturities between January 2040 and January 2045 and three loans
had an all-in blended interest rate of 5.23% per annum with maturities between February 2040 and February 2045. The payoff resulted
in a $2.3 million gain on the extinguishment of the debt due to the write-off of the $9.7 million unamortized debt premium recorded
at the time of acquisition offset by a prepayment fee of approximately $7.4 million.
Unsecured Borrowings
Unsecured Credit Facility
On January 29, 2016,
we entered into the Third Amendment to Credit Agreement (the “Third Amendment to Omega Credit Agreement,” as defined
below) which amended and restated the existing Credit Agreement, dated June 27, 2014 (as amended and restated pursuant to the
First Amendment to Credit Agreement, dated April 1, 2015, the Second Amendment to Credit Agreement, dated August 7, 2015 and the
Third Amendment to Omega Credit Agreement, collectively the “Omega Credit Agreement”). As a result of the amendments,
the Omega Credit Facilities (as defined below) now includes a $1.25 billion senior unsecured revolving credit facility (the “Revolving
Credit Facility”), a $200 million senior unsecured term loan facility (the “Tranche A-1 Term Loan Facility”),
a $200 million senior unsecured incremental term loan facility (the “Tranche A-2 Term Loan Facility”) and a $350 million
senior unsecured incremental term loan facility which was borrowed in 2016 (the “Tranche A-3 Term Loan Facility” and,
together with the Revolving Credit Facility, the Tranche A-1 Term Loan Facility and the Tranche A-2 Term Loan Facility, collectively,
the “Omega Credit Facilities”). The Tranche A-1 Term Loan Facility, the Tranche A-2 Term Loan Facility and the Tranche
A-3 Term Loan Facility may be referred to collectively herein as the “Omega Term Loan Facilities”.
Borrowings under the
Revolving Credit Facility bear interest at LIBOR plus an applicable percentage (beginning at 130 basis points, with a range of
92.5 to 170 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings, plus a facility
fee based on the same ratings (initially 25 basis points, with a range of 12.5 to 30 basis points). The Revolving Credit Facility
is used for acquisitions and general corporate purposes. The Revolving Credit Facility matures on June 27, 2018, subject to a
one-time option by us to extend such maturity date by one year.
The Tranche A-1 Term
Loan Facility bears interest at LIBOR plus an applicable percentage (beginning at 150 basis points, with a range of 100 to 195
basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The Tranche A-1 Term
Loan Facility matures on June 27, 2019.
The Tranche A-2 Term
Loan Facility bears interest at LIBOR plus an applicable percentage (beginning at 150 basis points, with a range of 100 to 195
basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The Tranche A-2 Term
Loan Facility matures on June 27, 2017, subject to Omega’s option to extend the maturity date of the Tranche A-2 Term Loan
Facility twice, the first extension until June 27, 2018 and the second extension until June 27, 2019.
The Tranche A-3 Term
Loan Facility bears interest at LIBOR plus an applicable percentage (beginning at 150 basis points, with a range of 100 to 195
basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The Tranche A-3 Term
Loan Facility matures on January 29, 2021.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
Omega OP Term Loan Facility
On April 1, 2015,
Omega OP entered into a credit agreement (the “Omega OP Credit Agreement”) providing it with a $100 million senior
unsecured term loan facility (the “Omega OP Term Loan Facility”). The Omega OP Term Loan Facility bears interest at
LIBOR plus an applicable percentage (beginning at 150 basis points, with a range of 100 to 195 basis points) based on our ratings
from Standard & Poor’s, Moody’s and/or Fitch Ratings. The Omega OP Term Loan Facility matures on June 27, 2017,
subject to Omega OP’s option to extend such maturity date twice, the first extension until June 27, 2018 and the second
extension until June 27, 2019.
$250 Million Term Loan Facility
On December 16, 2015,
we entered into a $250 million senior unsecured term loan facility (the “2015 Term Loan Facility”). The 2015 Term
Loan Facility bears interest at LIBOR plus an applicable percentage (beginning at 180 basis points, with a range of 140 to 235
basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The 2015 Term Loan Facility
may be increased to an aggregate amount of $400 million. We used the proceeds from this loan to repay existing indebtedness and
for general corporate purposes. The 2015 Term Loan Facility matures on December 16, 2022.
As a result of exposure
to interest rate movements associated with the 2015 Term Loan Facility, on December 16, 2015, we entered into various forward-starting
interest rate swap arrangements, which effectively converted $250 million of our variable-rate debt based on one-month LIBOR to
an aggregate fixed rate of approximately 3.8005% effective December 30, 2016. The effective fixed rate achieved by the combination
of the 2015 Term Loan Facility and the interest rate swaps could fluctuate up by 55 basis points or down by 40 basis points based
on future changes to our credit ratings. Each of these swaps began on December 30, 2016 and mature on December 15, 2022. On the
date of inception, we designated the interest rate swaps as cash flow hedges in accordance with accounting guidance for derivatives
and hedges and linked the interest rate swaps to the 2015 Term Loan Facility. Because the critical terms of the interest rate
swaps and 2015 Term Loan Facility coincided, the hedges are expected to exactly offset changes in expected cash flows as a result
of fluctuations in 1-month LIBOR over the term of the hedges. The purpose of entering into the swaps was to reduce our exposure
to future changes in variable interest rates. The interest rate swaps settle on a monthly basis when interest payments are made.
These settlements will occur through the maturity date of the 2015 Term Loan Facility. The interest rate for the 2015 Term Loan
Facility was not hedged for the portion of the term prior to December 30, 2016.
$700 Million 4.375% Senior Notes due
2023
On July 12, 2016,
we issued $700 million aggregate principal amount of our 4.375% Senior Notes due 2023 (the “2023 Notes”). The 2023
Notes were sold at an issue price of 99.739% of their face value before the underwriters’ discount. Our net proceeds from
the offering, after deducting underwriting discounts and expenses, were approximately $692.0 million. The net proceeds from the
offering were used to repay outstanding borrowings under our revolving credit facility, to purchase the $180.0 million mortgage
term loan and for general corporate purposes. The 2023 Notes mature on August 1, 2023 and pay interest semi-annually.
$400 Million 5.875% Senior Notes due
2024
On March 19, 2012,
we issued $400 million aggregate principal amount of our 5.875% Senior Notes due 2024. These notes mature on March 15, 2024 and
pay interest semi-annually.
$400 Million 4.95% Senior Notes due
2024
On March 11, 2014,
we sold $400 million aggregate principal amount of our 4.95% Senior Notes due 2024 (the “2024 Notes”). These notes
were sold at an issue price of 98.58% of the principal amount of the notes, before the initial purchasers’ discount resulting
in gross proceeds of approximately $394.3 million. The 2024 Notes mature on April 1, 2024 and pay interest semi-annually.
$250 Million 4.5% Senior Notes due
2025
On September 11, 2014,
we sold $250 million aggregate principal amount of our 4.5% Senior Notes due 2025 (the “2025 Notes”). The 2025 Notes
were sold at an issue price of 99.131% of their face value before the initial purchasers’ discount resulting in gross proceeds
of approximately $247.8 million. The 2025 Notes mature on January 15, 2025 and pay interest semi-annually.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
$600 Million 5.25% Senior Notes due
2026
On September 23, 2015,
we sold $600 million aggregate principal amount of our 5.250% Senior Notes due 2026 (the “2026 Notes”). The 2026 Notes
were sold at an issue price of 99.717% of their face value before the initial purchasers’ discount. Our total net proceeds
from the offering, after deducting initial purchasers’ discounts and other offering expenses, were approximately $594.4
million. The net proceeds of the offering were used to repay our outstanding $575 million aggregate principal amount 6.75% Senior
Notes due 2022 and for general corporate purposes. The 2026 Notes mature on January 15, 2026 and pay interest semi-annually.
$700 Million 4.5% Senior Notes due
2027
On March 18, 2015,
we sold $700 million aggregate principal amount of our 4.5% Senior Notes due 2027 (the “2027 Notes”). The 2027 Notes
were sold at an issue price of 98.546% of their face value before the initial purchasers’ discount. Our total net proceeds
from the offering, after deducting initial purchasers’ discounts and other offering expenses, were approximately $683 million.
The net proceeds of the offering were used for general corporate purposes, including the repayment of Aviv indebtedness on April
1, 2015 in connection with the Aviv Merger, and repayment of future maturities on our outstanding debt. The 2027 Notes mature
on April 1, 2027 and pay interest semi-annually.
$575 Million 6.75% Senior Notes due
2022 Redemption
On October 26, 2015,
we redeemed all of our outstanding 6.75% Senior Notes due 2022 (the “2022 Notes”). As a result of the redemption,
during the fourth quarter of 2015, we recorded approximately $21.3 million in redemption related costs and write-offs, including
$19.4 million for the early redemption or call premiums and $1.9 million in net write-offs associated with unamortized deferred
financing costs and original issuance premiums/discounts.
$200 Million 7.5% Senior Notes due
2020 Redemption
On March 13, 2015,
Omega redeemed all of its outstanding $200 million 7.5% Senior Notes due 2020 (the “2020 Notes”) at a redemption price
of approximately $208.7 million, consisting of 103.750% of the principal amount, plus accrued and unpaid interest on such notes
to, but not including, the date of redemption.
In connection with
the redemption, we recorded approximately $11.7 million redemption related costs and write-offs, including $7.5 million in prepayment
fees for early redemption and $4.2 million of write-offs associated with unamortized deferred financing costs and discount. The
consideration for the redemption of the 2020 Notes was funded from the net proceeds of the 10.925 million share common stock offering.
See Note 16 – Stockholders’ Equity for additional details.
Other Debt Repayments
In connection with
the Aviv Merger on April 1, 2015, we assumed notes payable with a face amount of $650 million and a revolving credit facility
with an outstanding balance of $525 million. In connection with the Aviv Merger, we repaid this debt assumed from Aviv on April
1, 2015. Due to the contractual requirements for early repayments; we paid approximately $705.6 million to retire the $650 million
notes assumed. The amount repaid in connection with the revolving credit facility was $525 million.
General
Certain of our other
secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants. As
of December 31, 2016 and 2015, we were in compliance with all affirmative and negative covenants, including financial covenants,
for our secured and unsecured borrowings.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
The required principal
payments, excluding the premium or discount and deferred financing costs on our secured and unsecured borrowings, for each of
the five years following December 31, 2016 and the aggregate due thereafter are set forth below:
|
|
(in thousands)
|
|
2017
|
|
$
|
302,788
|
|
2018
|
|
|
192,828
|
|
2019
|
|
|
201,369
|
|
2020
|
|
|
1,412
|
|
2021
|
|
|
371,456
|
|
Thereafter
|
|
|
3,348,101
|
|
Totals
|
|
$
|
4,417,954
|
|
The following summarizes the refinancing
related costs:
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Write off of deferred financing cost
and unamortized premiums due to refinancing
(1)(2)(3)
|
|
$
|
301
|
|
|
$
|
(7,134
|
)
|
|
$
|
1,180
|
|
Prepayment and other costs associated
with refinancing
(4)
|
|
|
1,812
|
|
|
|
35,971
|
|
|
|
1,861
|
|
Total debt extinguishment costs
|
|
$
|
2,113
|
|
|
$
|
28,837
|
|
|
$
|
3,041
|
|
|
(1)
|
In 2016, we recorded $0.3 million
of write-offs of unamortized deferred financing costs associated with three facilities
that were acquired via a deed-in-lieu foreclosure.
|
|
(2)
|
In 2015, we recorded: (a) $4.2
million of write-offs of unamortized deferred financing costs and discount associated
with the early redemption of our 2020 Notes, (b) $1.9 million in net write-offs associated
with unamortized deferred financing costs and original issuance premiums/discounts associated
with the early redemption of our 2022 Notes, offset by (c) $13.2 million gain related
to the early extinguishment of debt from the write off of unamortized premium on the
HUD debt paid off in March, April and December 2015.
|
|
(3)
|
In 2014, we recorded: (a) $2.6
million write-off of deferred financing costs associated with the termination of the
$700 million 2012 credit facilities, (b) $2.0 million write-off of deferred financing
costs associated with the termination of our $200 million 2013 term loan facility offset
by (c) $3.5 million gain related to the early extinguishment of debt from the write off
of unamortized premium on the HUD debt paid off in September and December 2014.
|
|
(4)
|
In 2016, we purchased a $180 million
mortgage term loan and paid a 1% premium of approximately $1.8 million to purchase the
debt. In 2015, we made: (a) $7.5 million of prepayment penalties associated with the
early redemption of our 2020 Notes, (b) $19.4 million of prepayment penalties associated
with the early redemption of our 2022 Notes and (c) $9.1 million of prepayment penalties
associated with 24 HUD mortgage loans that we paid off in March, April and December 2015.
In 2014, we made prepayment penalties of $1.9 million associated with five HUD mortgage
loans that we paid off in September and October 2014.
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
NOTE 13 - FINANCIAL INSTRUMENTS
At December 31, 2016
and 2015, the carrying amounts and fair values of our financial instruments were as follows:
|
|
2016
|
|
|
2015
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
|
(in thousands)
|
|
Assets:
|
|
|
|
Cash and cash equivalents
|
|
$
|
93,687
|
|
|
$
|
93,687
|
|
|
$
|
5,424
|
|
|
$
|
5,424
|
|
Restricted cash
|
|
|
13,589
|
|
|
|
13,589
|
|
|
|
14,607
|
|
|
|
14,607
|
|
Investments in direct financing leases – net
|
|
|
601,938
|
|
|
|
598,665
|
|
|
|
587,701
|
|
|
|
584,358
|
|
Mortgage notes receivable – net
|
|
|
639,343
|
|
|
|
644,961
|
|
|
|
679,795
|
|
|
|
687,130
|
|
Other investments – net
|
|
|
256,846
|
|
|
|
253,385
|
|
|
|
89,299
|
|
|
|
90,745
|
|
Total
|
|
$
|
1,605,403
|
|
|
$
|
1,604,287
|
|
|
$
|
1,376,826
|
|
|
$
|
1,382,264
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line of credit
|
|
$
|
190,000
|
|
|
$
|
190,000
|
|
|
$
|
230,000
|
|
|
$
|
230,000
|
|
Tranche A-1 term loan
|
|
|
198,830
|
|
|
|
200,000
|
|
|
|
197,699
|
|
|
|
200,000
|
|
Tranche A-2 term loan
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
200,000
|
|
Tranche A-3 term loan
|
|
|
347,449
|
|
|
|
350,000
|
|
|
|
—
|
|
|
|
—
|
|
Omega OP term loan
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
2015 term loan
|
|
|
248,064
|
|
|
|
250,000
|
|
|
|
247,994
|
|
|
|
250,000
|
|
4.375% notes due 2023 – net
|
|
|
692,305
|
|
|
|
693,505
|
|
|
|
—
|
|
|
|
—
|
|
5.875% notes due 2024 – net
|
|
|
395,065
|
|
|
|
432,938
|
|
|
|
394,382
|
|
|
|
429,956
|
|
4.95% notes due 2024 – net
|
|
|
392,669
|
|
|
|
406,361
|
|
|
|
391,658
|
|
|
|
403,064
|
|
4.50% notes due 2025 – net
|
|
|
245,949
|
|
|
|
249,075
|
|
|
|
245,446
|
|
|
|
242,532
|
|
5.25% notes due 2026 – net
|
|
|
593,616
|
|
|
|
611,461
|
|
|
|
593,032
|
|
|
|
612,760
|
|
4.50% notes due 2027 – net
|
|
|
685,052
|
|
|
|
681,978
|
|
|
|
683,596
|
|
|
|
667,651
|
|
Mortgage term loan due 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
180,000
|
|
|
|
180,000
|
|
HUD debt – net
|
|
|
54,365
|
|
|
|
52,510
|
|
|
|
55,593
|
|
|
|
52,678
|
|
Subordinated debt – net
|
|
|
20,490
|
|
|
|
23,944
|
|
|
|
20,613
|
|
|
|
24,366
|
|
Other
|
|
|
3,000
|
|
|
|
3,000
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
4,366,854
|
|
|
$
|
4,444,772
|
|
|
$
|
3,540,013
|
|
|
$
|
3,593,007
|
|
Fair value estimates
are subjective in nature and are dependent on a number of important assumptions, including estimates of future cash flows, risks,
discount rates and relevant comparable market information associated with each financial instrument (see Note 2 – Summary
of Significant Accounting Policies). The use of different market assumptions and estimation methodologies may have a material
effect on the reported estimated fair value amounts.
The following methods
and assumptions were used in estimating fair value disclosures for financial instruments.
|
·
|
Cash
and cash equivalents and restricted cash: The carrying amount of cash and cash equivalents
and restricted cash reported in the Consolidated Balance Sheets approximates fair value
because of the short maturity of these instruments (i.e., less than 90 days) (Level 1).
|
|
·
|
Direct
financing leases: The fair value of the investments in direct financing leases are estimated
using a discounted cash flow analysis, using interest rates being offered for similar
leases to borrowers with similar credit ratings (Level 3).
|
|
·
|
Mortgage
notes receivable: The fair value of the mortgage notes receivables are estimated using
a discounted cash flow analysis, using interest rates being offered for similar loans
to borrowers with similar credit ratings (Level 3).
|
|
·
|
Other
investments: Other investments are primarily comprised of notes receivable. The fair
values of notes receivable are estimated using a discounted cash flow analysis, using
interest rates being offered for similar loans to borrowers with similar credit ratings
(Level 3).
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Continued
|
·
|
Revolving
line of credit and term loans: The fair value of our borrowings under variable rate agreements
are estimated using a present value technique based on expected cash flows discounted
using the current market rates (Level 3).
|
|
·
|
Senior
notes and subordinated debt: The fair value of our borrowings under fixed rate agreements
are estimated using a present value technique based on inputs from trading activity provided
by a third party (Level 2).
|
|
·
|
HUD
debt: The fair value of our borrowings under HUD debt agreements are estimated using
an expected present value technique based on quotes obtained by HUD debt brokers (Level
2).
|
NOTE 14 – TAXES
We were organized,
have operated, and intend to continue to operate in a manner that enables us to qualify for taxation as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). On a quarterly and annual basis we
perform several analyses to test our compliance within the REIT taxation rules. In order to qualify as a REIT, in addition to
other requirements, we must: (i) distribute dividends (other than capital gain dividends) to our stockholders in an amount at
least equal to (A) the sum of (a) 90% of our “REIT taxable income” (computed without regard to the dividends paid
deduction and our net capital gain), and (b) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the
sum of certain items of non-cash income on an annual basis, (ii) ensure that at least 75% and 95%, respectively of our gross income
is generated from qualifying sources that are described in the REIT tax law, (iii) ensure that at least 75% of our assets consist
of qualifying assets, such as real property, mortgages, and other qualifying assets described in the REIT tax law, (iv) ensure
that we do not own greater than 10% in voting power or value of securities of any one issuer, (v) ensure that we do not own either
debt or equity securities of another company that are in excess of 5% of our total assets and (vi) ensure that no more than 25%
of our assets are invested in one or more taxable REIT subsidiaries (and with respect to taxable years beginning after December
31, 2017, no more than 20%). In addition to the above requirements, the REIT rules require that no less than 100 stockholders
own shares or an interest in the REIT and that five or fewer individuals do not own (directly or indirectly) more than 50% of
the shares or proportionate interest in the REIT during the last half of any taxable year. If we fail to meet the above or any
other requirements for qualification as a REIT in any tax year, we will be subject to federal income tax on our taxable income
at regular corporate rates and may not be able to qualify as a REIT for the four subsequent years, unless we qualify for certain
relief provisions that are available in the event we fail to satisfy any of these requirements.
We are also subject
to federal taxation of 100% of the net income derived from the sale or other disposition of property, other than foreclosure property,
that we held primarily for sale to customers in the ordinary course of a trade or business. We believe that we do not hold assets
for sale to customers in the ordinary course of business and that none of the assets currently held for sale or that have been
sold would be considered a prohibited transaction within the REIT taxation rules.
So long as we
qualify as a REIT under the Code, we generally will not be subject to federal income taxes on the REIT taxable income that we
distribute to stockholders, subject to certain exceptions. In 2016 and 2015, we distributed dividends in excess of our taxable
income.
Since the year
2000, the definition of foreclosure property has included any “qualified health care property,” as defined in Code
Section 856(e)(6) acquired by us as the result of the termination or expiration of a lease of such property. We have from time
to time operated qualified healthcare facilities acquired in this manner for up to two years (or longer if an extension was granted).
Properties that we had taken back in a foreclosure or bankruptcy and operated for our own account were treated as foreclosure
properties for income tax purposes, pursuant to Code Section 856(e). Gross income from foreclosure properties was classified as
“good income” for purposes of the annual REIT income tests upon making the election on the tax return. Once made,
the income was classified as “good” for a period of three years, or until the properties were no longer operated for
our own account. In all cases of foreclosure property, we utilized an independent contractor to conduct day-to-day operations
to maintain REIT status. In certain cases, we operated these facilities through a taxable REIT subsidiary. For those properties
operated through the taxable REIT subsidiary, we formed a new entity (TC Healthcare) to act as the eligible independent contractor
on our behalf and conduct the day-to-day operations with respect to the health care facilities we held as foreclosure property
in order for us to maintain REIT status. We have not held foreclosure property since 2011. As a result of the foregoing, we do
not believe that our past participation in the operation of nursing homes increased the risk that we would fail to qualify as
a REIT. Through our 2016 taxable year, we had not paid any tax on our foreclosure property because those properties had been producing
losses.
As a result of
our UPREIT Conversion, our Company and its subsidiaries may be subject to income or franchise taxes in certain states and municipalities.
In connection with our UPREIT Conversion in 2015, we created five subsidiary REITs that are subject to all of the REIT qualification
rules set forth in the Code, which were then consolidated through intercompany transfers of ownership that occurred at the end
of 2015, which created a single REIT subsidiary with four wholly-owned qualified REIT subsidiaries. In 2016, we elected REIT status
for another of our subsidiaries and in December of 2016, we transferred the ownership of that entity to our REIT subsidiary so
that we now have a single REIT subsidiary that holds all the ownership interests in several qualified REIT subsidiaries. Our REIT
subsidiary remains subject to all of the REIT qualification rules set forth in the Code as outlined above.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
Subject to the limitation
under the REIT asset test rules, we are permitted to own up to 100% of the stock of one or more taxable REIT subsidiaries (“TRSs”).
We have elected for two of our active subsidiaries to be treated as TRSs. One of our active TRSs is subject to federal, state
and local income taxes at the applicable corporate rates and the other is subject to foreign income taxes. As of December 31,
2016, our TRS that is subject to federal, state and local income taxes at the applicable corporate rates had a net operating loss
carry-forward of approximately $0.8 million. The loss carry-forward is fully reserved as of December 31, 2016 with a valuation
allowance due to uncertainties regarding realization.
In connection with
our acquisition of Care Homes in May 2015, we acquired 10 legal entities consisting of 23 facilities. The tax basis in these legal
entities acquired for U.K. taxes was approximately $82 million less than the purchase price. We recorded an initial deferred tax
liability associated with the temporary tax basis difference of approximately $15 million.
During the year ended
December 31, 2016, we recorded approximately $3.3 million of federal, state and local income tax provision and approximately $1.9
million of tax benefit for foreign income taxes.
NOTE 15 - RETIREMENT ARRANGEMENTS
Our Company has a
401(k) Profit Sharing Plan covering all eligible employees. Under this plan, employees are eligible to make contributions, and
we, at our discretion, may match contributions and make a profit sharing contribution. Amounts charged to operations with respect
to these retirement arrangements totaled approximately $0.5 million, $0.4 million, $0.3 million in 2016, 2015 and 2014, respectively.
In addition, we have
a deferred stock compensation plan that allows employees and directors the ability to defer the receipt of stock awards. The deferred
stock awards (units) participate in future dividends as well as the change in the value of the Company’s common stock. As
of December 31, 2016 and 2015, the Company had 384,107 and 400,814 deferred stock units outstanding.
NOTE 16 – STOCKHOLDERS’ EQUITY
$500 Million Equity Shelf Program
On September 3, 2015,
we entered into separate Equity Distribution Agreements (collectively, the “Equity Shelf Agreements”) to sell shares
of our common stock having an aggregate gross sales price of up to $500 million (the “2015 Equity Shelf Program”)
with several financial institutions, each as a sales agent and or principal (collectively, the “Managers”). Under
the terms of the Equity Shelf Agreements, we may sell shares of our common stock, from time to time, through or to the Managers
having an aggregate gross sales price of up to $500 million. Sales of the shares, if any, will be made by means of ordinary brokers’
transactions on the New York Stock Exchange at market prices, or as otherwise agreed with the applicable Manager. We will pay
each Manager compensation for sales of the shares equal to 2% of the gross sales price per share for shares sold through such
Manager under the applicable Equity Shelf Agreements.
For the year ended
December 31, 2015, we did not issue any shares under the 2015 Equity Shelf Program. For the year ended December 31, 2016, we issued
approximately 0.7 million shares under the 2015 Equity Shelf Program, at an average price of $29.97 per share, generating gross
proceeds of approximately $20.4 million, before $0.7 million of commissions and expenses.
$250 Million Equity Shelf Program Termination
Also on September
3, 2015, we terminated our $250 million Equity Shelf Program (the “2013 Equity Shelf Program”) that we entered into
with several financial institutions on March 18, 2013. In 2015, we did not issue any shares under the 2013 Equity Shelf Program.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
For the year ended December 31, 2014, we
issued approximately 1.8 million shares under the 2013 Equity Shelf Program, at an average price of $34.33 per share, generating
gross proceeds of approximately $63.5 million, before $1.5 million of commissions and expenses.
Since inception of
the 2013 Equity Shelf Program, we sold a total of 7.4 million shares of common stock generating total gross proceeds of $233.8
million under the program, before $4.7 million of commissions. As a result of the termination of the 2013 Equity Shelf Program,
no additional shares may be issued under the 2013 Equity Shelf Program.
Increase of Authorized Omega Common
Stock
On March 27, 2015,
we amended our charter to increase the number of authorized shares of our capital stock from 220 million to 370 million and the
number of authorized shares of our common stock from 200 million to 350 million.
10.925 Million
Common Stock Offering
On February 9, 2015,
we completed an underwritten public offering of 10.925 million shares of our common stock at $42.00 per share before underwriting
and other offering expenses. The Company’s total net proceeds from the offering were approximately $440 million, after deducting
underwriting discounts and commissions and other estimated offering expenses.
Dividend Reinvestment and Common Stock
Purchase Plan
We have a Dividend
Reinvestment and Common Stock Purchase Plan (the “DRSPP”) that allows for the reinvestment of dividends and the optional
purchase of our common stock. For the year ended December 31, 2016, we issued 7.2 million shares of common stock for gross proceeds
of approximately $240.0 million. For the year ended December 31, 2015, we issued 4.2 million shares of common stock for gross
proceeds of approximately $150.8 million. For the year ended December 31, 2014, we issued 2.1 million shares of common stock for
gross proceeds of approximately $71.5 million.
Accumulated Other Comprehensive Loss
The following is a summary of our accumulated
other comprehensive loss, net of tax where applicable:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
(52,495
|
)
|
|
$
|
(8,027
|
)
|
Cash flow hedge adjustments
|
|
|
(1,332
|
)
|
|
|
(685
|
)
|
Total accumulated other comprehensive loss
|
|
$
|
(53,827
|
)
|
|
$
|
(8,712
|
)
|
NOTE 17 – STOCK-BASED COMPENSATION
Restricted Stock and Restricted Stock Units
Restricted stock and
restricted stock units (“RSUs”) are subject to forfeiture if the holder’s service to us terminates prior to
vesting, subject to certain exceptions for certain qualifying terminations of employment or a change in control of the Company.
Prior to vesting, ownership of the shares/units cannot be transferred. The restricted stock has the same dividend and voting rights
as our common stock. RSUs accrue dividend equivalents but have no voting rights. Restricted stock and RSUs are valued at the price
of our common stock on the date of grant. We expense the cost of these awards ratably over their vesting period.
The RSUs assumed from
Aviv as part of the Aviv Merger were valued at the closing price of our stock on the date of the transaction. The portion of the
vesting accruing prior to the acquisition was recorded as part of the purchase price consideration. The expense associated with
the vesting that will occur after the date of the transaction will be recorded as stock compensation expense ratably over the
remaining life of the RSUs.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
The following table
summarizes the activity in restricted stock and RSUs for the years ended December 31, 2014, 2015 and 2016:
|
|
Number of
Shares/Units
|
|
|
Weighted -
Average Grant-
Date Fair Value
per Share
|
|
|
Compensation
Cost
(1)
(in
millions)
|
|
Non-vested at December 31, 2013
|
|
|
257,198
|
|
|
$
|
29.32
|
|
|
|
|
|
Granted during 2014
|
|
|
143,637
|
|
|
|
30.70
|
|
|
$
|
4.4
|
|
Vested during 2014
|
|
|
(90,901
|
)
|
|
|
28.87
|
|
|
|
|
|
Non-vested at December 31, 2014
|
|
|
309,934
|
|
|
$
|
30.08
|
|
|
|
|
|
Granted during 2015
|
|
|
233,483
|
|
|
|
39.25
|
|
|
$
|
9.2
|
|
Assumed in Aviv Merger
(2)
|
|
|
38,268
|
|
|
|
23.50
|
|
|
$
|
0.9
|
|
Cancelled during 2015
|
|
|
(61,911
|
)
|
|
|
33.77
|
|
|
|
|
|
Vested during 2015
|
|
|
(106,146
|
)
|
|
|
28.72
|
|
|
|
|
|
Non-vested at December 31, 2015
|
|
|
413,628
|
|
|
$
|
34.45
|
|
|
|
|
|
Granted during 2016
|
|
|
158,506
|
|
|
|
34.49
|
|
|
$
|
5.5
|
|
Cancelled during 2016
|
|
|
(905
|
)
|
|
|
24.92
|
|
|
|
|
|
Vested during 2016
|
|
|
(235,176
|
)
|
|
|
30.41
|
|
|
|
|
|
Non-vested at December 31, 2016
|
|
|
336,053
|
|
|
$
|
37.32
|
|
|
|
|
|
|
(1)
|
Total compensation cost to be
recognized on the awards based on grant date fair value, which is based on the market
price of the Company’s common stock on the date of grant.
|
|
(2)
|
Omega stock price on April 1,
2015 was $40.74. The weighted average stock price indicated in the table above represents
the expense per unit that we will record related to the assumed Aviv RSUs.
|
Performance Based Incentive Stock Units
Performance restricted
stock units (“PRSUs”) and long term incentive plan units (“LTIP Units”) are subject to forfeiture if the
performance requirements are not achieved or if the holder’s service to us terminates prior to vesting, subject to certain
exceptions for certain qualifying terminations of employment or a change in control of the Company. The PRSUs awarded in January
2011, January 2013, December 2013, January 2014, March 2015, April 2015 July 2015, and March 2016 and the LTIP Units awarded in
March 2015, April 2015, July 2015 and March 2016 have varying degrees of performance requirements to achieve vesting, and each
PRSU and LTIP Units award represents the right to a variable number of shares of common stock or partnership units (each LTIP
Unit once earned is convertible into one Omega OP Unit in Omega OP, subject to certain conditions). The vesting requirements are
based on either the (i) total shareholders return (“TSR”) of Omega or (ii) Omega’s TSR relative to other real
estate investment trusts in the MSCI U.S. REIT Index for awards before 2016 and in the FTSE NAREIT Equity Health Care Index for
awards in 2016 (“Relative TSR”). We expense the cost of these awards ratably over their service period.
Prior to
vesting and the distribution of shares, ownership of the PRSUs cannot be transferred. Dividends on the PRSUs are accrued and
only paid to the extent the applicable performance requirements are met. While each LTIP Unit is unearned, the employee
receives a partnership distribution equal to 10% of the quarterly approved regular periodic distributions per Omega OP Unit.
The remaining partnership distributions (which in the case of normal periodic distributions is equal to the total approved
quarterly dividend on Omega’s common stock) on the LTIP Units accumulate, and if the LTIP Units are earned, the
accumulated distributions are paid.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
We used a Monte Carlo
model to estimate the fair value for the PRSUs and LTIP Units granted to the employees. The following are the significant assumptions
used in estimating the value of the awards for grants made on the following dates:
|
|
January
1,
2013
|
|
|
December
31, 2013 and
January 1,
2014
|
|
|
March
31, 2015
|
|
|
April
1,
2015
|
|
|
July
31,
2015
|
|
|
March
17,
2016
|
|
Closing
price on date of grant
|
|
$
|
23.85
|
|
|
$
|
29.80
|
|
|
$
|
40.57
|
|
|
$
|
40.74
|
|
|
$
|
36.26
|
|
|
$
|
34.78
|
|
Dividend
yield
|
|
|
4.24%
|
|
|
|
6.44%
|
|
|
|
5.23%
|
|
|
|
5.20%
|
|
|
|
6.07%
|
|
|
|
6.56%
|
|
Risk
free interest rate at time of grant
|
|
|
0.05%
to 0.43%
|
|
|
|
0.04%
to 0.86%
|
|
|
|
0.10%
to 0.94%
|
|
|
|
0.09%
to 0.91%
|
|
|
|
0.13%
to 1.08%
|
|
|
|
0.05%
to 1.14%
|
|
Expected
volatility
|
|
|
15.56%
to 23.83%
|
|
|
|
24.16%
to 25.86%
|
|
|
|
20.06%
to 21.09%
|
|
|
|
20.06%
to 21.08%
|
|
|
|
20.06%
to 20.21%
|
|
|
|
23.92% to 24.88%
|
|
The following table
summarizes the activity in PRSUs and LTIP Units for the years ended December 31, 2014, 2015 and 2016:
|
|
Number of
Shares
|
|
|
Weighted-
Average Grant-
Date Fair Value
per Share
|
|
|
Compensation
Cost
(1)
(in
millions)
|
|
Non-vested at December 31, 2013
|
|
|
1,038,024
|
|
|
$
|
10.72
|
|
|
|
|
|
Granted during 2014
|
|
|
309,168
|
|
|
|
11.46
|
|
|
$
|
3.5
|
|
Vested during 2014
(2)
|
|
|
(496,979
|
)
|
|
|
10.75
|
|
|
|
|
|
Non-vested at December 31, 2014
|
|
|
850,213
|
|
|
$
|
10.97
|
|
|
|
|
|
Granted during 2015
|
|
|
537,923
|
|
|
|
18.51
|
|
|
$
|
10.0
|
|
Cancelled during 2015
|
|
|
(165,570
|
)
|
|
|
14.11
|
|
|
|
|
|
Forfeited during 2015
|
|
|
(128,073
|
)
|
|
|
12.04
|
|
|
|
|
|
Vested during 2015
(2)
|
|
|
(181,406
|
)
|
|
|
10.10
|
|
|
|
|
|
Non-vested at December 31, 2015
|
|
|
913,087
|
|
|
$
|
14.87
|
|
|
|
|
|
Granted during 2016
|
|
|
679,549
|
|
|
|
14.67
|
|
|
$
|
10.0
|
|
Forfeited during 2016
|
|
|
(518,638
|
)
|
|
|
12.10
|
|
|
|
|
|
Vested during 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
Non-vested at December 31, 2016
|
|
|
1,073,998
|
|
|
$
|
16.08
|
|
|
|
|
|
|
(1)
|
Total compensation cost to be recognized
on the awards was based on the grant date fair value or the modification date fair value.
|
|
(2)
|
PRSUs are shown as vesting in the
year that the Compensation Committee determines the level of achievement of the applicable
performance measures.
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
The following table
summarizes our total unrecognized compensation cost as of December 31, 2016 associated with restricted stock, restricted stock
units, PRSU awards, and LTIP Unit awards to employees:
|
|
Grant
Year
|
|
Shares/
Units
|
|
|
Grant
Date
Average
Fair Value
Per
Unit/
Share
|
|
|
Total
Compensation
Cost (in millions)
(1)
|
|
|
Weighted
Average
Period of
Expense
Recognition
(in months)
|
|
|
Unrecognized
Compensation
Cost (in
millions)
|
|
|
Performance
Period
|
|
Vesting
Dates
|
RSUs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/31/15 RSU
|
|
2015
|
|
|
109,985
|
|
|
|
40.57
|
|
|
|
4.5
|
|
|
|
33
|
|
|
|
1.6
|
|
|
N/A
|
|
12/31/2017
|
4/1/15 RSU
|
|
2015
|
|
|
40,464
|
|
|
|
40.74
|
|
|
|
1.6
|
|
|
|
33
|
|
|
|
0.6
|
|
|
N/A
|
|
12/31/2017
|
Assumed Aviv RSU
|
|
2015
|
|
|
7,799
|
|
|
|
35.08
|
|
|
|
0.3
|
|
|
|
33
|
|
|
|
0.1
|
|
|
N/A
|
|
11/1/2017
|
3/17/16 RSU
|
|
2016
|
|
|
131,006
|
|
|
|
34.78
|
|
|
|
4.6
|
|
|
|
33
|
|
|
|
3.3
|
|
|
N/A
|
|
12/31/2018
|
Restricted
Stock Units Total
|
|
|
|
|
289,254
|
|
|
$
|
37.82
|
|
|
$
|
11.0
|
|
|
|
|
|
|
$
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSR
PRSUs and LTIP Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 TSR
|
|
2014
|
|
|
135,634
|
|
|
|
8.67
|
|
|
|
1.2
|
|
|
|
48
|
|
|
|
0.3
|
|
|
1/1/2014-12/31/2016
|
|
Quarterly in 2017
|
3/31/15 2017 LTIP Units
|
|
2015
|
|
|
137,249
|
|
|
|
14.66
|
|
|
|
2.0
|
|
|
|
45
|
|
|
|
1.1
|
|
|
1/1/2015-12/31/2017
|
|
Quarterly in 2018
|
4/1/2015 2017 LTIP Units
|
|
2015
|
|
|
54,151
|
|
|
|
14.80
|
|
|
|
0.8
|
|
|
|
45
|
|
|
|
0.4
|
|
|
1/1/2015-12/31/2017
|
|
Quarterly in 2018
|
3/17/2016 2018 LTIP Units
|
|
2016
|
|
|
372,069
|
|
|
|
13.21
|
|
|
|
4.9
|
|
|
|
45
|
|
|
|
3.9
|
|
|
1/1/2016-12/31/2018
|
|
Quarterly in 2019
|
TSR PRSUs
& LTIP Total
|
|
|
|
|
699,103
|
|
|
$
|
12.74
|
|
|
$
|
8.9
|
|
|
|
|
|
|
$
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Relative
TSR PRSUs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Relative TSR
|
|
2014
|
|
|
135,634
|
|
|
|
14.24
|
|
|
|
1.9
|
|
|
|
48
|
|
|
|
0.5
|
|
|
1/1/2014-12/31/2016
|
|
Quarterly in 2017
|
3/31/15 2017 Relative TSR
|
|
2015
|
|
|
137,249
|
|
|
|
22.50
|
|
|
|
3.1
|
|
|
|
45
|
|
|
|
1.6
|
|
|
1/1/2015-12/31/2017
|
|
Quarterly in 2018
|
4/1/2015 2017 Relative TSR
|
|
2015
|
|
|
54,151
|
|
|
|
22.91
|
|
|
|
1.2
|
|
|
|
45
|
|
|
|
0.7
|
|
|
1/1/2015-12/31/2017
|
|
Quarterly in 2018
|
3/17/2016 2018 Relative TSR
|
|
2016
|
|
|
307,480
|
|
|
|
16.45
|
|
|
|
5.1
|
|
|
|
45
|
|
|
|
4.0
|
|
|
1/1/2016-12/31/2018
|
|
Quarterly in 2019
|
Relative
TSR PRSUs Total
|
|
|
|
|
634,514
|
|
|
$
|
17.84
|
|
|
$
|
11.3
|
|
|
|
|
|
|
$
|
6.8
|
|
|
|
|
|
Grand
Total
|
|
|
|
|
1,622,871
|
|
|
$
|
19.20
|
|
|
$
|
31.2
|
|
|
|
|
|
|
$
|
18.1
|
|
|
|
|
|
|
(1)
|
Total compensation costs are
net of shares cancelled.
|
Stock Options and Tax Withholding
As part of the Aviv
Merger, we assumed approximately 5.7 million Aviv employee stock options that were fully vested prior to the merger. On April
1, 2015, the Aviv stock options were converted into Omega stock options at an exchange ratio of 0.9 resulting in issuance of approximately
5.1 million Omega stock options. The intrinsic value of the stock option assumed on April 1, 2015 was approximately $99.2 million
and was recorded as part of the consideration provided in the merger. During 2016 and 2015, approximately 2.5 million and 2.6
million options, respectively, were exercised at a weighted average price of $19.38 per share and $19.38 per share, respectively. At December 31, 2016, approximately 26 thousand options remain outstanding and exercisable. Options outstanding
have a weighted average exercise price of $18.97. The aggregate intrinsic value of these options is $0.3 million and represents
the total pre-tax intrinsic value (based upon the difference between the Company's closing stock price on the last trading day
of 2016 of $31.26 and the exercise price) for all in-the-money options as of December 31, 2016. Options outstanding have no contractual
term limitations.
Stock withheld to
pay minimum statutory tax withholdings for equity instruments granted under stock-based payment arrangements for the years ended
December 31, 2016, 2015 and 2014, was $23.4 million, $26.7 million and $3.6 million, respectively.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
Shares Available for Issuance for
Compensation Purposes
On June 6, 2013, at
our Company’s Annual Meeting, our stockholders approved the 2013 Stock Incentive Plan (the “2013 Plan”), which
amended and restated the Company’s 2004 Stock Incentive Plan. The 2013 Plan is a comprehensive incentive compensation plan
that allows for various types of equity-based compensation, including restricted stock units (including performance-based restricted
stock units and LTIP units), stock awards, deferred restricted stock units, incentive stock options, non-qualified stock options,
stock appreciation rights, dividend equivalent rights and certain cash-based awards (including performance-based cash awards).
The 2013 Plan increased the number of shares reserved for issuance for compensation purposes by 3,000,000.
As of December 31,
2016, approximately 2.0 million shares of common stock were reserved for issuance to our employees, directors and consultants
under our stock incentive plans. Awards under our stock incentive plans may be in the form of stock, stock options, restricted
stock and performance restricted stock units.
Director Restricted Stock Grants
In 2014, 2015 and
2016, we issued 21,500, 30,500 and 27,500 shares of restricted stock to members of our Board of Directors. The fair value of these
awards was approximately $0.8 million, $1.1 million and $0.9 million, respectively, for 2014, 2015 and 2016. As of December 31,
2016, we had 51,999 shares of restricted stock outstanding to directors. The directors’ restricted shares are scheduled
to vest over the next three years. As of December 31, 2016, the unrecognized compensation cost associated with outstanding director
restricted stock grants is approximately $1.4 million.
NOTE 18 - DIVIDENDS
Common Dividends
On January 12, 2017,
the Board of Directors declared a common stock dividend of $0.62 per share, increasing the quarterly common dividend by $0.01
per share over the prior quarter. The common dividends were paid February 15, 2017 to common stockholders of record as of the
close of business on January 31, 2017.
On October 13, 2016,
the Board of Directors declared a common stock dividend of $0.61 per share, increasing the quarterly common dividend rate by $0.01
per share over the previous quarter. The common dividends were paid November 15, 2016 to common stockholders of record as of the
close of business on October 31, 2016.
On July 14, 2016,
the Board of Directors declared a common stock dividend of $0.60 per share, increasing the quarterly common dividend rate by $0.02
per share over the prior quarter. The common dividends were paid on August 15, 2016 to common stockholders of record as of the
close of business on August 1, 2016.
On April 14, 2016,
the Board of Directors declared a common stock dividend of $0.58 per share, increasing the quarterly common dividend by $0.01
per share over the prior quarter. The common dividends were paid May 16, 2016 to common stockholders of record on May 2, 2016.
On January 14, 2016,
the Board of Directors declared a common stock dividend of $0.57 per share, increasing the quarterly common dividend by $0.01
per share over the previous quarter. The common dividends were paid February 16, 2016 to common stockholders of record as of February
2, 2016.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
Per Share Distributions
Per share distributions
by our Company were characterized in the following manner for income tax purposes (unaudited):
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary income
|
|
$
|
1.968
|
|
|
$
|
1.133
|
|
|
$
|
1.834
|
|
Return of capital
|
|
|
0.322
|
|
|
|
1.047
|
|
|
|
0.186
|
|
Capital gains
|
|
|
0.070
|
|
|
|
-
|
|
|
|
-
|
|
Total dividends paid
|
|
$
|
2.360
|
|
|
$
|
2.180
|
|
|
$
|
2.020
|
|
For additional information regarding dividends,
see Note 14 – Taxes.
NOTE 19 - LITIGATION
We are subject to
various legal proceedings, claims and other actions arising out of the normal course of business. While any legal proceeding or
claim has an element of uncertainty, management believes that the outcome of each lawsuit, claim or legal proceeding that is pending
or threatened, or all of them combined, will not have a material adverse effect on our consolidated financial position or results
of operations.
NOTE 20 - SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following summarizes
quarterly results of operations for the years ended December 31, 2016 and 2015:
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
|
(in thousands, except per share amounts)
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
212,879
|
|
|
$
|
228,824
|
|
|
$
|
224,638
|
|
|
$
|
234,486
|
|
Net income
|
|
|
58,196
|
|
|
|
113,154
|
|
|
|
82,134
|
|
|
|
129,883
|
|
Net income available to common stockholders
|
|
|
55,555
|
|
|
|
108,052
|
|
|
|
78,549
|
|
|
|
124,259
|
|
Net income available to common per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.57
|
|
|
$
|
0.40
|
|
|
$
|
0.63
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.29
|
|
|
$
|
0.57
|
|
|
$
|
0.40
|
|
|
$
|
0.63
|
|
Cash dividends paid on common stock
|
|
$
|
0.57
|
|
|
$
|
0.58
|
|
|
$
|
0.60
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
133,420
|
|
|
$
|
197,711
|
|
|
$
|
201,974
|
|
|
$
|
210,512
|
|
Net income
|
|
|
43,052
|
|
|
|
43,466
|
|
|
|
83,254
|
|
|
|
63,543
|
|
Net income available to common stockholders
|
|
|
43,052
|
|
|
|
41,428
|
|
|
|
79,402
|
|
|
|
60,642
|
|
Net income available to common per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.32
|
|
|
$
|
0.23
|
|
|
$
|
0.43
|
|
|
$
|
0.32
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.32
|
|
|
$
|
0.22
|
|
|
$
|
0.43
|
|
|
$
|
0.32
|
|
Cash dividends paid on common stock
|
|
$
|
0.53
|
|
|
$
|
0.54
|
|
|
$
|
0.55
|
|
|
$
|
0.56
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
NOTE 21 - EARNINGS PER SHARE
The following tables
set forth the computation of basic and diluted earnings per share:
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands, except per share amounts)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
383,367
|
|
|
$
|
233,315
|
|
|
$
|
221,349
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(16,952
|
)
|
|
|
(8,791
|
)
|
|
|
—
|
|
Net income available to common stockholders
|
|
$
|
366,415
|
|
|
$
|
224,524
|
|
|
$
|
221,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share
|
|
|
191,781
|
|
|
|
172,242
|
|
|
|
126,550
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock equivalents
|
|
|
956
|
|
|
|
1,539
|
|
|
|
744
|
|
Noncontrolling interest – OP units
|
|
|
8,898
|
|
|
|
6,727
|
|
|
|
—
|
|
Denominator for diluted earnings per share
|
|
|
201,635
|
|
|
|
180,508
|
|
|
|
127,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
1.91
|
|
|
$
|
1.30
|
|
|
$
|
1.75
|
|
Earnings per share - diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.90
|
|
|
$
|
1.29
|
|
|
$
|
1.74
|
|
NOTE 22– CONSOLIDATING FINANCIAL STATEMENTS
As of December 31,
2016, we had outstanding: (i) $700 million 4.375% Senior Notes due 2023, (ii) $400 million 5.875% Senior Notes due 2024, (iii)
$400 million 4.95% Senior Notes due 2024, (iv) $250 million 4.50% Senior Notes due 2025, (v) $600 million 5.25% Senior Notes due
2026 and (vi) $700 million 4.5% Senior Notes due 2027 (collectively, the “Senior Notes”). The Senior Notes are fully
and unconditionally guaranteed, jointly and severally, by each of our subsidiaries that guarantee other indebtedness of Omega
or any of the subsidiary guarantors. All of our subsidiaries that guarantee the Senior Notes also guarantee amounts outstanding
under the Omega Credit Facilities and 2015 Term Loan Facility listed in Note 12– Borrowing Arrangements. In addition, all
such subsidiary guarantors that are subsidiaries of Omega OP also guarantee amounts outstanding under the Omega OP Term Loan listed
in Note 12– Borrowing Arrangements.
The following summarized
condensed consolidating financial information segregates the financial information of the non-guarantor subsidiaries from the
financial information of Omega Healthcare Investors, Inc. and the subsidiary guarantors under the Senior Notes. Our non-guarantor
subsidiaries include, among others, all subsidiaries securing secured debt that is currently outstanding and our U.K. subsidiaries.
The results and financial position of acquired entities are included from the dates of their respective acquisitions.
The 2014 and 2015
financial statements presented below have been adjusted to reflect our current guarantor and non-guarantor relationships as of
December 31, 2016.
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS - Continued
OMEGA HEALTHCARE
INVESTORS, INC.
CONSOLIDATING
BALANCE SHEET
(in thousands)
|
|
December 31, 2016
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investments
|
|
$
|
6,923,469
|
|
|
$
|
642,889
|
|
|
$
|
—
|
|
|
$
|
7,566,358
|
|
Less accumulated depreciation
|
|
|
(1,191,117
|
)
|
|
|
(49,219
|
)
|
|
|
—
|
|
|
|
(1,240,336
|
)
|
Real estate investments – net
|
|
|
5,732,352
|
|
|
|
593,670
|
|
|
|
—
|
|
|
|
6,326,022
|
|
Investment in direct financing leases - net
|
|
|
601,938
|
|
|
|
—
|
|
|
|
—
|
|
|
|
601,938
|
|
Mortgage notes receivable -
net
|
|
|
639,343
|
|
|
|
—
|
|
|
|
—
|
|
|
|
639,343
|
|
|
|
|
6,973,633
|
|
|
|
593,670
|
|
|
|
—
|
|
|
|
7,567,303
|
|
Other investments
|
|
|
256,846
|
|
|
|
—
|
|
|
|
—
|
|
|
|
256,846
|
|
Investment in unconsolidated joint venture
|
|
|
48,776
|
|
|
|
—
|
|
|
|
—
|
|
|
|
48,776
|
|
Assets held for sale –
net
|
|
|
52,868
|
|
|
|
—
|
|
|
|
—
|
|
|
|
52,868
|
|
Total investments
|
|
|
7,332,123
|
|
|
|
593,670
|
|
|
|
—
|
|
|
|
7,925,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
87,098
|
|
|
|
6,589
|
|
|
|
—
|
|
|
|
93,687
|
|
Restricted cash
|
|
|
6,915
|
|
|
|
6,674
|
|
|
|
—
|
|
|
|
13,589
|
|
Accounts receivable – net
|
|
|
230,097
|
|
|
|
9,938
|
|
|
|
—
|
|
|
|
240,035
|
|
Goodwill
|
|
|
630,679
|
|
|
|
12,795
|
|
|
|
—
|
|
|
|
643,474
|
|
Investments in and advances to affiliates
|
|
|
569,194
|
|
|
|
—
|
|
|
|
(569,194
|
)
|
|
|
—
|
|
Other assets
|
|
|
21,293
|
|
|
|
11,389
|
|
|
|
—
|
|
|
|
32,682
|
|
Total assets
|
|
$
|
8,877,399
|
|
|
$
|
641,055
|
|
|
$
|
(569,194
|
)
|
|
$
|
8,949,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line of credit
|
|
$
|
190,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
190,000
|
|
Term loans - net
|
|
|
1,094,343
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,094,343
|
|
Secured borrowings - net
|
|
|
—
|
|
|
|
429,214
|
|
|
|
(374,849
|
)
|
|
|
54,365
|
|
Unsecured borrowings – net
|
|
|
3,028,146
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,028,146
|
|
Accrued expenses and other liabilities
|
|
|
352,924
|
|
|
|
7,590
|
|
|
|
—
|
|
|
|
360,514
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
9,906
|
|
|
|
—
|
|
|
|
9,906
|
|
Intercompany payable
|
|
|
—
|
|
|
|
7,890
|
|
|
|
(7,890
|
)
|
|
|
—
|
|
Total liabilities
|
|
|
4,665,413
|
|
|
|
454,600
|
|
|
|
(382,739
|
)
|
|
|
4,737,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
19,614
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,614
|
|
Equity investment from affiliates
|
|
|
—
|
|
|
|
156,446
|
|
|
|
(156,446
|
)
|
|
|
—
|
|
Common stock – additional paid-in capital
|
|
|
4,861,408
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,861,408
|
|
Cumulative net earnings
|
|
|
1,738,937
|
|
|
|
29,479
|
|
|
|
(29,479
|
)
|
|
|
1,738,937
|
|
Cumulative dividends paid
|
|
|
(2,707,387
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,707,387
|
)
|
Accumulated other comprehensive
(loss) income
|
|
|
(53,827
|
)
|
|
|
530
|
|
|
|
(530
|
)
|
|
|
(53,827
|
)
|
Total stockholders’ equity
|
|
|
3,858,745
|
|
|
|
186,455
|
|
|
|
(186,455
|
)
|
|
|
3,858,745
|
|
Noncontrolling interest
|
|
|
353,241
|
|
|
|
—
|
|
|
|
—
|
|
|
|
353,241
|
|
Total equity
|
|
|
4,211,986
|
|
|
|
186,455
|
|
|
|
(186,455
|
)
|
|
|
4,211,986
|
|
Total liabilities and equity
|
|
$
|
8,877,399
|
|
|
$
|
641,055
|
|
|
$
|
(569,194
|
)
|
|
$
|
8,949,260
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE
INVESTORS, INC.
CONSOLIDATING BALANCE SHEET
(in thousands)
|
|
December 31, 2015
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate investments
|
|
$
|
6,184,507
|
|
|
$
|
559,451
|
|
|
$
|
—
|
|
|
$
|
6,743,958
|
|
Less accumulated depreciation
|
|
|
(991,314
|
)
|
|
|
(27,836
|
)
|
|
|
—
|
|
|
|
(1,019,150
|
)
|
Real estate investments – net
|
|
|
5,193,193
|
|
|
|
531,615
|
|
|
|
—
|
|
|
|
5,724,808
|
|
Investment in direct financing leases - net
|
|
|
587,701
|
|
|
|
—
|
|
|
|
—
|
|
|
|
587,701
|
|
Mortgage notes receivable - net
|
|
|
679,795
|
|
|
|
—
|
|
|
|
—
|
|
|
|
679,795
|
|
|
|
|
6,460,689
|
|
|
|
531,615
|
|
|
|
—
|
|
|
|
6,992,304
|
|
Other investments
|
|
|
89,299
|
|
|
|
—
|
|
|
|
—
|
|
|
|
89,299
|
|
Assets held for sale –
net
|
|
|
6,599
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,599
|
|
Total investments
|
|
|
6,556,587
|
|
|
|
531,615
|
|
|
|
—
|
|
|
|
7,088,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,592
|
|
|
|
3,832
|
|
|
|
—
|
|
|
|
5,424
|
|
Restricted cash
|
|
|
8,058
|
|
|
|
6,549
|
|
|
|
—
|
|
|
|
14,607
|
|
Accounts receivable – net
|
|
|
196,107
|
|
|
|
7,755
|
|
|
|
—
|
|
|
|
203,862
|
|
Goodwill
|
|
|
630,404
|
|
|
|
15,279
|
|
|
|
—
|
|
|
|
645,683
|
|
Investments in and advances to affiliates
|
|
|
300,409
|
|
|
|
—
|
|
|
|
(300,409
|
)
|
|
|
—
|
|
Other assets
|
|
|
25,270
|
|
|
|
6,888
|
|
|
|
—
|
|
|
|
32,158
|
|
Total assets
|
|
$
|
7,718,427
|
|
|
$
|
571,918
|
|
|
$
|
(300,409
|
)
|
|
$
|
7,989,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving line of credit
|
|
$
|
230,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
230,000
|
|
Term loans - net
|
|
|
745,693
|
|
|
|
—
|
|
|
|
—
|
|
|
|
745,693
|
|
Secured borrowings - net
|
|
|
—
|
|
|
|
360,849
|
|
|
|
(125,256
|
)
|
|
|
235,593
|
|
Unsecured borrowings – net
|
|
|
2,328,727
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,328,727
|
|
Accrued expenses and other liabilities
|
|
|
326,815
|
|
|
|
6,891
|
|
|
|
—
|
|
|
|
333,706
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
15,352
|
|
|
|
—
|
|
|
|
15,352
|
|
Intercompany payable
|
|
|
(13,673
|
)
|
|
|
13,673
|
|
|
|
—
|
|
|
|
—
|
|
Total liabilities
|
|
|
3,617,562
|
|
|
|
396,765
|
|
|
|
(125,256
|
)
|
|
|
3,889,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
18,740
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,740
|
|
Equity investment from affiliates
|
|
|
—
|
|
|
|
156,830
|
|
|
|
(156,830
|
)
|
|
|
—
|
|
Common stock – additional paid-in capital
|
|
|
4,609,474
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,609,474
|
|
Cumulative net earnings
|
|
|
1,372,522
|
|
|
|
18,246
|
|
|
|
(18,246
|
)
|
|
|
1,372,522
|
|
Cumulative dividends paid
|
|
|
(2,254,038
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,254,038
|
)
|
Accumulated other comprehensive
(loss) income
|
|
|
(8,712
|
)
|
|
|
77
|
|
|
|
(77
|
)
|
|
|
(8,712
|
)
|
Total stockholders’ equity
|
|
|
3,737,986
|
|
|
|
175,153
|
|
|
|
(175,153
|
)
|
|
|
3,737,986
|
|
Noncontrolling interest
|
|
|
362,879
|
|
|
|
—
|
|
|
|
—
|
|
|
|
362,879
|
|
Total equity
|
|
|
4,100,865
|
|
|
|
175,153
|
|
|
|
(175,153
|
)
|
|
|
4,100,865
|
|
Total liabilities and equity
|
|
$
|
7,718,427
|
|
|
$
|
571,918
|
|
|
$
|
(300,409
|
)
|
|
$
|
7,989,936
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
(in thousands)
|
|
Year
Ended December 31, 2016
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
684,771
|
|
|
$
|
59,114
|
|
|
$
|
-
|
|
|
$
|
743,885
|
|
Income from direct financing leases
|
|
|
62,298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,298
|
|
Mortgage interest income
|
|
|
69,811
|
|
|
|
-
|
|
|
|
-
|
|
|
|
69,811
|
|
Other investment income – net
|
|
|
25,056
|
|
|
|
56
|
|
|
|
(3,260
|
)
|
|
|
21,852
|
|
Miscellaneous income
|
|
|
2,981
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,981
|
|
Total operating revenues
|
|
|
844,917
|
|
|
|
59,170
|
|
|
|
(3,260
|
)
|
|
|
900,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
244,290
|
|
|
|
22,772
|
|
|
|
-
|
|
|
|
267,062
|
|
General and administrative
|
|
|
45,413
|
|
|
|
454
|
|
|
|
-
|
|
|
|
45,867
|
|
Acquisition and merger related costs
|
|
|
5,777
|
|
|
|
3,805
|
|
|
|
-
|
|
|
|
9,582
|
|
Impairment loss on real estate properties
|
|
|
58,508
|
|
|
|
218
|
|
|
|
-
|
|
|
|
58,726
|
|
Provisions for uncollectible mortgages, notes and accounts
receivable
|
|
|
6,583
|
|
|
|
3,262
|
|
|
|
-
|
|
|
|
9,845
|
|
Total operating expenses
|
|
|
360,571
|
|
|
|
30,511
|
|
|
|
-
|
|
|
|
391,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before other income and expense
|
|
|
484,346
|
|
|
|
28,659
|
|
|
|
(3,260
|
)
|
|
|
509,745
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
161
|
|
|
|
12
|
|
|
|
-
|
|
|
|
173
|
|
Interest expense
|
|
|
(148,092
|
)
|
|
|
(19,271
|
)
|
|
|
3,260
|
|
|
|
(164,103
|
)
|
Interest – amortization of deferred financing costs
|
|
|
(9,302
|
)
|
|
|
(43
|
)
|
|
|
-
|
|
|
|
(9,345
|
)
|
Interest – refinancing costs
|
|
|
(2,113
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,113
|
)
|
Realized loss on foreign exchange
|
|
|
(232
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(232
|
)
|
Equity in earnings
|
|
|
11,233
|
|
|
|
-
|
|
|
|
(11,233
|
)
|
|
|
-
|
|
Total other expense
|
|
|
(148,345
|
)
|
|
|
(19,302
|
)
|
|
|
(7,973
|
)
|
|
|
(175,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before gain on assets sold
|
|
|
336,001
|
|
|
|
9,357
|
|
|
|
(11,233
|
)
|
|
|
334,125
|
|
Gain on assets sold - net
|
|
|
50,208
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,208
|
|
Income from continuing operations
|
|
|
386,209
|
|
|
|
9,357
|
|
|
|
(11,233
|
)
|
|
|
384,333
|
|
Income tax expense
|
|
|
(3,281
|
)
|
|
|
1,876
|
|
|
|
-
|
|
|
|
(1,405
|
)
|
Income from unconsolidated joint venture
|
|
|
439
|
|
|
|
-
|
|
|
|
-
|
|
|
|
439
|
|
Net income
|
|
|
383,367
|
|
|
|
11,233
|
|
|
|
(11,233
|
)
|
|
|
383,367
|
|
Net income attributable to noncontrolling interest
|
|
|
(16,952
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,952
|
)
|
Net income available to common stockholders
|
|
$
|
366,415
|
|
|
$
|
11,233
|
|
|
$
|
(11,233
|
)
|
|
$
|
366,415
|
|
CONSOLIDATING STATEMENT OF COMPREHENSIVE
INCOME
(in thousands)
|
|
Year Ended December
31, 2016
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
383,367
|
|
|
$
|
11,233
|
|
|
$
|
(11,233
|
)
|
|
$
|
383,367
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(46,535
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(46,535
|
)
|
Cash flow hedges
|
|
|
(702
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(702
|
)
|
Total other comprehensive income (loss)
|
|
|
(47,237
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(47,237
|
)
|
Comprehensive income
|
|
|
336,130
|
|
|
|
11,233
|
|
|
|
(11,233
|
)
|
|
|
336,130
|
|
Comprehensive income attributable
to noncontrolling interest
|
|
|
(14,830
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(14,830
|
)
|
Comprehensive income attributable to common stockholders
|
|
$
|
321,300
|
|
|
$
|
11,233
|
|
|
$
|
(11,233
|
)
|
|
$
|
321,300
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
(in thousands)
|
|
Year
Ended December 31, 2015
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
564,112
|
|
|
$
|
41,879
|
|
|
$
|
-
|
|
|
$
|
605,991
|
|
Income from direct financing leases
|
|
|
59,936
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,936
|
|
Mortgage interest income
|
|
|
68,910
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68,910
|
|
Other investment income – net
|
|
|
7,534
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,534
|
|
Miscellaneous income – net
|
|
|
1,246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,246
|
|
Total operating revenues
|
|
|
701,738
|
|
|
|
41,879
|
|
|
|
-
|
|
|
|
743,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
194,328
|
|
|
|
16,375
|
|
|
|
-
|
|
|
|
210,703
|
|
General and administrative
|
|
|
38,140
|
|
|
|
428
|
|
|
|
-
|
|
|
|
38,568
|
|
Acquisition and merger related costs
|
|
|
55,012
|
|
|
|
2,513
|
|
|
|
-
|
|
|
|
57,525
|
|
Impairment loss on real estate properties
|
|
|
17,681
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,681
|
|
Provisions for uncollectible mortgages, notes and accounts
receivable
|
|
|
7,871
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,871
|
|
Total operating expenses
|
|
|
313,032
|
|
|
|
19,316
|
|
|
|
-
|
|
|
|
332,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before other income and expense
|
|
|
388,706
|
|
|
|
22,563
|
|
|
|
-
|
|
|
|
411,269
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
272
|
|
|
|
13
|
|
|
|
-
|
|
|
|
285
|
|
Interest expense
|
|
|
(135,631
|
)
|
|
|
(11,750
|
)
|
|
|
-
|
|
|
|
(147,381
|
)
|
Interest – amortization of deferred financing costs
|
|
|
(6,969
|
)
|
|
|
(21
|
)
|
|
|
-
|
|
|
|
(6,990
|
)
|
Interest – refinancing costs
|
|
|
(28,837
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(28,837
|
)
|
Realized loss on foreign exchange
|
|
|
(173
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(173
|
)
|
Equity in earnings
|
|
|
10,610
|
|
|
|
-
|
|
|
|
(10,610
|
)
|
|
|
-
|
|
Total other expense
|
|
|
(160,728
|
)
|
|
|
(11,758
|
)
|
|
|
(10,610
|
)
|
|
|
(183,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before gain on assets sold
|
|
|
227,978
|
|
|
|
10,805
|
|
|
|
(10,610
|
)
|
|
|
228,173
|
|
Gain on assets sold - net
|
|
|
6,353
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,353
|
|
Income from continuing operations
|
|
|
234,331
|
|
|
|
10,805
|
|
|
|
(10,610
|
)
|
|
|
234,526
|
|
Income tax expense
|
|
|
(1,016
|
)
|
|
|
(195
|
)
|
|
|
-
|
|
|
|
(1,211
|
)
|
Net income
|
|
|
233,315
|
|
|
|
10,610
|
|
|
|
(10,610
|
)
|
|
|
233,315
|
|
Net income attributable to noncontrolling interest
|
|
|
(8,791
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,791
|
)
|
Net income available to common stockholders
|
|
$
|
224,524
|
|
|
$
|
10,610
|
|
|
$
|
(10,610
|
)
|
|
$
|
224,524
|
|
CONSOLIDATING STATEMENT OF COMPREHENSIVE
INCOME
(in thousands)
|
|
Year Ended December
31, 2015
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
233,315
|
|
|
$
|
10,610
|
|
|
$
|
(10,610
|
)
|
|
$
|
233,315
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(8,413
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,413
|
)
|
Cash flow hedges
|
|
|
(718
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(718
|
)
|
Total other comprehensive income (loss)
|
|
|
(9,131
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,131
|
)
|
Comprehensive income
|
|
|
224,184
|
|
|
|
10,610
|
|
|
|
(10,610
|
)
|
|
|
224,184
|
|
Comprehensive income attributable to noncontrolling interest
|
|
|
(8,373
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,373
|
)
|
Comprehensive income attributable to common stockholders
|
|
$
|
215,811
|
|
|
$
|
10,610
|
|
|
$
|
(10,610
|
)
|
|
$
|
215,811
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
(in thousands)
|
|
Year
Ended December 31, 2014
|
|
|
|
Issuer &
Subsidiary
Guarantors
|
|
|
Non –
Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
379,180
|
|
|
$
|
9,263
|
|
|
$
|
-
|
|
|
$
|
388,443
|
|
Income from direct financing leases
|
|
|
56,719
|
|
|
|
-
|
|
|
|
-
|
|
|
|
56,719
|
|
Mortgage interest income
|
|
|
53,007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,007
|
|
Other investment income – net
|
|
|
6,369
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,369
|
|
Miscellaneous income – net
|
|
|
249
|
|
|
|
-
|
|
|
|
-
|
|
|
|
249
|
|
Total operating revenues
|
|
|
495,524
|
|
|
|
9,263
|
|
|
|
-
|
|
|
|
504,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
119,367
|
|
|
|
3,890
|
|
|
|
-
|
|
|
|
123,257
|
|
General and administrative
|
|
|
25,778
|
|
|
|
110
|
|
|
|
-
|
|
|
|
25,888
|
|
Acquisition costs
|
|
|
3,948
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,948
|
|
Impairment loss on real estate properties
|
|
|
3,660
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,660
|
|
Provisions for uncollectible mortgages, notes and accounts
receivable
|
|
|
2,723
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,723
|
|
Total operating expenses
|
|
|
155,476
|
|
|
|
4,000
|
|
|
|
-
|
|
|
|
159,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before other income and expense
|
|
|
340,048
|
|
|
|
5,263
|
|
|
|
-
|
|
|
|
345,311
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
32
|
|
|
|
12
|
|
|
|
-
|
|
|
|
44
|
|
Interest expense
|
|
|
(117,258
|
)
|
|
|
(2,111
|
)
|
|
|
-
|
|
|
|
(119,369
|
)
|
Interest – amortization of deferred financing costs
|
|
|
(4,438
|
)
|
|
|
(21
|
)
|
|
|
-
|
|
|
|
(4,459
|
)
|
Interest – refinancing costs
|
|
|
(3,041
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,041
|
)
|
Equity in earnings
|
|
|
3,143
|
|
|
|
-
|
|
|
|
(3,143
|
)
|
|
|
-
|
|
Total other expense
|
|
|
(121,562
|
)
|
|
|
(2,120
|
)
|
|
|
(3,143
|
)
|
|
|
(126,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before gain on assets sold
|
|
|
218,486
|
|
|
|
3,143
|
|
|
|
(3,143
|
)
|
|
|
218,486
|
|
Gain on assets sold - net
|
|
|
2,863
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,863
|
|
Net income available to common stockholders
|
|
$
|
221,349
|
|
|
$
|
3,143
|
|
|
$
|
(3,143
|
)
|
|
$
|
221,349
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
(in thousands
)
|
|
Year Ended December
31, 2016
|
|
|
|
Issuer & Subsidiary
Guarantors
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
383,367
|
|
|
$
|
11,233
|
|
|
$
|
(11,233
|
)
|
|
$
|
383,367
|
|
Adjustment to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
244,290
|
|
|
|
22,772
|
|
|
|
—
|
|
|
|
267,062
|
|
Impairment loss on real estate properties
|
|
|
58,508
|
|
|
|
218
|
|
|
|
—
|
|
|
|
58,726
|
|
Provision for uncollectible mortgages, notes and accounts receivable
|
|
|
6,583
|
|
|
|
3,262
|
|
|
|
—
|
|
|
|
9,845
|
|
Refinancing costs and amortization of deferred financing costs
|
|
|
11,415
|
|
|
|
43
|
|
|
|
—
|
|
|
|
11,458
|
|
Accretion of direct financing leases
|
|
|
(12,157
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,157
|
)
|
Stock-based compensation expense
|
|
|
13,790
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,790
|
|
Gain on assets sold – net
|
|
|
(50,208
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,208
|
)
|
Amortization of acquired in-place leases - net
|
|
|
(13,991
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,991
|
)
|
Equity in earnings
|
|
|
(11,233
|
)
|
|
|
—
|
|
|
|
11,233
|
|
|
|
—
|
|
Change in operating assets and liabilities – net of amounts assumed/acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(4,876
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,876
|
)
|
Straight-line rent receivables
|
|
|
(36,263
|
)
|
|
|
(5,828
|
)
|
|
|
—
|
|
|
|
(42,091
|
)
|
Lease inducements
|
|
|
2,589
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,589
|
|
Effective yield receivable on mortgage notes
|
|
|
(721
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(721
|
)
|
Other operating assets and liabilities
|
|
|
18,661
|
|
|
|
(15,663
|
)
|
|
|
—
|
|
|
|
2,998
|
|
Net cash provided by operating
activities
|
|
|
609,754
|
|
|
|
16,037
|
|
|
|
—
|
|
|
|
625,791
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of real estate – net of liabilities assumed and escrows acquired
|
|
|
(833,390
|
)
|
|
|
(126,358
|
)
|
|
|
—
|
|
|
|
(959,748
|
)
|
Investments in construction in progress
|
|
|
(68,983
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(68,983
|
)
|
Investment in U.K. subsidiary
|
|
|
(116,099
|
)
|
|
|
—
|
|
|
|
116,099
|
|
|
|
—
|
|
Investments in direct financing leases
|
|
|
(2,080
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,080
|
)
|
Placement of mortgage loans
|
|
|
(48,722
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(48,722
|
)
|
Investments in unconsolidated joint venture
|
|
|
(50,032
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,032
|
)
|
Distributions from unconsolidated joint venture
|
|
|
1,318
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,318
|
|
Proceeds from sale of real estate investments
|
|
|
169,603
|
|
|
|
—
|
|
|
|
—
|
|
|
|
169,603
|
|
Capital improvements to real estate investments
|
|
|
(38,824
|
)
|
|
|
(1,647
|
)
|
|
|
—
|
|
|
|
(40,471
|
)
|
Proceeds from other investments
|
|
|
94,840
|
|
|
|
1,949
|
|
|
|
—
|
|
|
|
96,789
|
|
Investments in other investments
|
|
|
(269,423
|
)
|
|
|
(2,134
|
)
|
|
|
—
|
|
|
|
(271,557
|
)
|
Collection of mortgage principal
|
|
|
59,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,975
|
|
Net cash used in investing
activities
|
|
|
(1,101,817
|
)
|
|
|
(128,190
|
)
|
|
|
116,099
|
|
|
|
(1,113,908
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from credit facility borrowings
|
|
|
1,304,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,304,000
|
|
Payments on credit facility borrowings
|
|
|
(1,344,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,344,000
|
)
|
Receipts of other long-term borrowings
|
|
|
1,048,173
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,048,173
|
|
Payments of other long-term borrowings
|
|
|
(180,000
|
)
|
|
|
(1,249
|
)
|
|
|
—
|
|
|
|
(181,249
|
)
|
Payments of financing related costs
|
|
|
(11,806
|
)
|
|
|
(24
|
)
|
|
|
—
|
|
|
|
(11,830
|
)
|
Receipts from dividend reinvestment plan
|
|
|
240,041
|
|
|
|
—
|
|
|
|
—
|
|
|
|
240,041
|
|
Payments for exercised options and restricted stock
|
|
|
(23,426
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(23,426
|
)
|
Net proceeds from issuance of common stock
|
|
|
19,651
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19,651
|
|
Dividends paid
|
|
|
(453,152
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(453,152
|
)
|
Contributions from affiliates
|
|
|
—
|
|
|
|
116,099
|
|
|
|
(116,099
|
)
|
|
|
—
|
|
Redemption of OP Units
|
|
|
(733
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(733
|
)
|
Distributions to OP Unit holders
|
|
|
(21,179
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(21,179
|
)
|
Net cash provided by financing
activities
|
|
|
577,569
|
|
|
|
114,826
|
|
|
|
(116,099
|
)
|
|
|
576,296
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
—
|
|
|
|
84
|
|
|
|
—
|
|
|
|
84
|
|
Increase in cash and cash equivalents
|
|
|
85,506
|
|
|
|
2,757
|
|
|
|
—
|
|
|
|
88,263
|
|
Cash and cash equivalents at beginning
of period
|
|
|
1,592
|
|
|
|
3,832
|
|
|
|
—
|
|
|
|
5,424
|
|
Cash and cash equivalents at end
of period
|
|
$
|
87,098
|
|
|
$
|
6,589
|
|
|
$
|
—
|
|
|
$
|
93,687
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
(in thousands
)
|
|
Year Ended December
31, 2015
|
|
|
|
Issuer & Subsidiary
Guarantors
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
233,315
|
|
|
$
|
10,610
|
|
|
$
|
(10,610
|
)
|
|
$
|
233,315
|
|
Adjustment to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
194,328
|
|
|
|
16,375
|
|
|
|
—
|
|
|
|
210,703
|
|
Impairment loss on real estate properties
|
|
|
17,681
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,681
|
|
Provision for uncollectible mortgages, notes and accounts receivable
|
|
|
7,871
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,871
|
|
Refinancing costs and amortization of deferred financing costs
|
|
|
35,806
|
|
|
|
21
|
|
|
|
—
|
|
|
|
35,827
|
|
Accretion of direct financing leases
|
|
|
(11,007
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,007
|
)
|
Stock-based compensation expense
|
|
|
11,133
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,133
|
|
Gain on assets sold – net
|
|
|
(6,353
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,353
|
)
|
Amortization of acquired in-place leases - net
|
|
|
(13,846
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,846
|
)
|
Change in operating assets and liabilities – net of amounts assumed/acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
248
|
|
|
|
—
|
|
|
|
—
|
|
|
|
248
|
|
Straight-line rent receivables
|
|
|
(31,237
|
)
|
|
|
(4,820
|
)
|
|
|
—
|
|
|
|
(36,057
|
)
|
Lease inducements
|
|
|
994
|
|
|
|
—
|
|
|
|
—
|
|
|
|
994
|
|
Effective yield receivable on mortgage notes
|
|
|
(4,065
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,065
|
)
|
Other operating assets and liabilities
|
|
|
10,550
|
|
|
|
(3,719
|
)
|
|
|
10,610
|
|
|
|
17,441
|
|
Net cash provided by operating
activities
|
|
|
445,418
|
|
|
|
18,467
|
|
|
|
—
|
|
|
|
463,885
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of real estate – net of liabilities assumed and escrows acquired
|
|
|
(116,698
|
)
|
|
|
(177,484
|
)
|
|
|
—
|
|
|
|
(294,182
|
)
|
Cash acquired in merger
|
|
|
84,858
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,858
|
|
Investments in construction in progress
|
|
|
(164,226
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(164,226
|
)
|
Investment in U.K. subsidiary
|
|
|
(166,082
|
)
|
|
|
166,082
|
|
|
|
—
|
|
|
|
—
|
|
Investments in direct financing leases
|
|
|
(6,793
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,793
|
)
|
Placement of mortgage loans
|
|
|
(14,042
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,042
|
)
|
Proceeds from sale of real estate investments
|
|
|
41,543
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41,543
|
|
Capital improvements to real estate investments
|
|
|
(24,599
|
)
|
|
|
(1,798
|
)
|
|
|
—
|
|
|
|
(26,397
|
)
|
Proceeds from other investments
|
|
|
45,871
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,871
|
|
Investments in other investments
|
|
|
(65,402
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(65,402
|
)
|
Collection of mortgage principal
|
|
|
1,359
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,359
|
|
Net cash used in investing activities
|
|
|
(384,211
|
)
|
|
|
(13,200
|
)
|
|
|
—
|
|
|
|
(397,411
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from credit facility borrowings
|
|
|
1,826,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,826,000
|
|
Payments on credit facility borrowings
|
|
|
(1,681,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,681,000
|
)
|
Receipts of other long-term borrowings
|
|
|
1,838,124
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,838,124
|
|
Payments of other long-term borrowings
|
|
|
(2,186,102
|
)
|
|
|
(1,212
|
)
|
|
|
—
|
|
|
|
(2,187,314
|
)
|
Payments of financing related costs
|
|
|
(54,721
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(54,721
|
)
|
Receipts from dividend reinvestment plan
|
|
|
150,847
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,847
|
|
Payments for exercised options and restricted stock
|
|
|
(26,706
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(26,706
|
)
|
Net proceeds from issuance of common stock
|
|
|
439,322
|
|
|
|
—
|
|
|
|
—
|
|
|
|
439,322
|
|
Dividends paid
|
|
|
(358,232
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(358,232
|
)
|
Distributions to OP Unit holders
|
|
|
(11,636
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,636
|
)
|
Net cash used in financing activities
|
|
|
(64,104
|
)
|
|
|
(1,212
|
)
|
|
|
—
|
|
|
|
(65,316
|
)
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
—
|
|
|
|
(223
|
)
|
|
|
—
|
|
|
|
(223
|
)
|
(Decrease) increase in cash and cash equivalents
|
|
|
(2,897
|
)
|
|
|
3,832
|
|
|
|
—
|
|
|
|
935
|
|
Cash and cash equivalents at
beginning of period
|
|
|
4,489
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,489
|
|
Cash and cash equivalents at
end of period
|
|
$
|
1,592
|
|
|
$
|
3,832
|
|
|
$
|
—
|
|
|
$
|
5,424
|
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
(in thousands
)
|
|
Year Ended December
31, 2014
|
|
|
|
Issuer & Subsidiary
Guarantors
|
|
|
Non-Guarantor
Subsidiaries
|
|
|
Elimination
|
|
|
Consolidated
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
221,349
|
|
|
$
|
3,143
|
|
|
$
|
(3,143
|
)
|
|
$
|
221,349
|
|
Adjustment to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
119,367
|
|
|
|
3,890
|
|
|
|
—
|
|
|
|
123,257
|
|
Impairment loss on real estate properties
|
|
|
3,660
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,660
|
|
Provision for uncollectible mortgages, notes and accounts receivable
|
|
|
2,723
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,723
|
|
Refinancing costs and amortization of deferred financing costs
|
|
|
7,479
|
|
|
|
21
|
|
|
|
—
|
|
|
|
7,500
|
|
Accretion of direct financing leases
|
|
|
(9,787
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,787
|
)
|
Stock-based compensation expense
|
|
|
8,592
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,592
|
|
Gain on assets sold – net
|
|
|
(2,863
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,863
|
)
|
Amortization of acquired in-place leases - net
|
|
|
(4,986
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,986
|
)
|
Change in operating assets and liabilities – net of amounts assumed/acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(2,264
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,264
|
)
|
Straight-line rent receivables
|
|
|
(20,164
|
)
|
|
|
(792
|
)
|
|
|
—
|
|
|
|
(20,956
|
)
|
Lease inducements
|
|
|
2,656
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,656
|
|
Effective yield receivable on mortgage notes
|
|
|
(2,878
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,878
|
)
|
Other operating assets and liabilities
|
|
|
11,089
|
|
|
|
(2,695
|
)
|
|
|
3,143
|
|
|
|
11,537
|
|
Net cash provided by operating
activities
|
|
|
333,973
|
|
|
|
3,567
|
|
|
|
—
|
|
|
|
337,540
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of real estate – net of liabilities assumed and escrows acquired
|
|
|
(131,689
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(131,689
|
)
|
Placement of mortgage loans
|
|
|
(529,548
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(529,548
|
)
|
Proceeds from sale of real estate investments
|
|
|
4,077
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,077
|
|
Capital improvements to real estate investments
|
|
|
(15,525
|
)
|
|
|
(2,392
|
)
|
|
|
—
|
|
|
|
(17,917
|
)
|
Proceeds from other investments
|
|
|
13,589
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,589
|
|
Investments in other investments
|
|
|
(9,441
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,441
|
)
|
Collection of mortgage principal
|
|
|
122,984
|
|
|
|
—
|
|
|
|
—
|
|
|
|
122,984
|
|
Net cash used in investing activities
|
|
|
(545,553
|
)
|
|
|
(2,392
|
)
|
|
|
—
|
|
|
|
(547,945
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from credit facility borrowings
|
|
|
900,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
900,000
|
|
Payments on credit facility borrowings
|
|
|
(1,141,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,141,000
|
)
|
Receipts of other long-term borrowings
|
|
|
842,148
|
|
|
|
—
|
|
|
|
—
|
|
|
|
842,148
|
|
Payments of other long-term borrowings
|
|
|
(241,369
|
)
|
|
|
(1,175
|
)
|
|
|
—
|
|
|
|
(242,544
|
)
|
Payments of financing related costs
|
|
|
(17,716
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,716
|
)
|
Receipts from dividend reinvestment plan
|
|
|
71,487
|
|
|
|
—
|
|
|
|
—
|
|
|
|
71,487
|
|
Payments for exercised options and restricted stock
|
|
|
(3,577
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,577
|
)
|
Net proceeds from issuance of common stock
|
|
|
61,981
|
|
|
|
—
|
|
|
|
—
|
|
|
|
61,981
|
|
Dividends paid
|
|
|
(258,501
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(258,501
|
)
|
Net cash provided by (used in)
financing activities
|
|
|
213,453
|
|
|
|
(1,175
|
)
|
|
|
—
|
|
|
|
212,278
|
|
Increase in cash and cash equivalents
|
|
|
1,873
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,873
|
|
Cash and cash equivalents at
beginning of period
|
|
|
2,616
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,616
|
|
Cash and cash equivalents at
end of period
|
|
$
|
4,489
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,489
|
|
OMEGA HEALTHCARE
INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
SCHEDULE III REAL ESTATE AND ACCUMULATED
DEPRECIATION
OMEGA HEALTHCARE INVESTORS, INC.
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost to
|
|
|
Cost Capitalized
|
|
|
Which Carried at
|
|
|
|
|
|
|
|
|
|
Life on Which
|
|
|
|
|
Company
|
|
|
Subsequent
to
|
|
|
Close
of Period
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
in Latest
|
|
|
|
|
|
|
|
Buildings and
|
|
|
|
|
|
Carrying
|
|
|
(6)
|
|
|
|
|
|
Buildings and
|
|
|
|
|
|
Accumulated
|
|
|
Date of
|
|
Date
|
|
Income Statements
|
Description
(1)
|
|
Encumbrances
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Cost
|
|
|
Other
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Construction
|
|
Acquired
|
|
is Computed
|
Signature Holdings II:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
(SNF)
|
|
|
|
$
|
14,926,960
|
|
|
$
|
184,977,257
|
|
|
$
|
10,162,810
|
|
|
$
|
20,238
|
|
|
$
|
-
|
|
|
$
|
14,926,960
|
|
|
$
|
195,160,305
|
|
|
$
|
210,087,265
|
|
|
$
|
47,922,023
|
|
|
1940-1997
|
|
1996-2016
|
|
3 years to 39 years
|
Georgia (SNF)
|
|
|
|
|
3,832,748
|
|
|
|
10,846,566
|
|
|
|
3,950,028
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,832,748
|
|
|
|
14,796,594
|
|
|
|
18,629,342
|
|
|
|
8,654,672
|
|
|
1970-1964
|
|
2007
|
|
20 years
|
Kentucky (SNF)
|
|
|
|
|
13,335,341
|
|
|
|
87,790,543
|
|
|
|
4,174,496
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,335,341
|
|
|
|
91,965,039
|
|
|
|
105,300,380
|
|
|
|
19,646,496
|
|
|
1964-1980
|
|
1999-2016
|
|
20 years to 33 years
|
Maryland (SNF)
|
|
|
|
|
1,480,000
|
|
|
|
19,662,571
|
|
|
|
1,183,051
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,480,000
|
|
|
|
20,845,622
|
|
|
|
22,325,622
|
|
|
|
6,981,961
|
|
|
1977-1959
|
|
2010
|
|
29 years to 30 years
|
Tennessee (AL, SNF)
|
|
|
|
|
10,813,664
|
|
|
|
187,388,817
|
|
|
|
3,440,595
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,813,664
|
|
|
|
190,829,412
|
|
|
|
201,643,076
|
|
|
|
2,696,466
|
|
|
1966-2016
|
|
2014-2016
|
|
25 years to 30 years
|
Total
Signature
|
|
|
|
|
44,388,713
|
|
|
|
490,665,754
|
|
|
|
22,910,980
|
|
|
|
20,238
|
|
|
|
-
|
|
|
|
44,388,713
|
|
|
|
513,596,972
|
|
|
|
557,985,685
|
|
|
|
85,901,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maplewood Real Estate Holdings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Connecticut (AL)
|
|
|
|
|
19,531,583
|
|
|
|
216,537,730
|
|
|
|
2,241,593
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,531,583
|
|
|
|
218,779,323
|
|
|
|
238,310,906
|
|
|
|
12,740,033
|
|
|
1968-2015
|
|
2015
|
|
33 years
|
Massachusetts (AL,
SNF)
|
|
|
|
|
19,041,468
|
|
|
|
69,409,856
|
|
|
|
39,267,802
|
|
|
|
342,695
|
|
|
|
(680,345
|
)
|
|
|
19,041,468
|
|
|
|
108,340,008
|
|
|
|
127,381,476
|
|
|
|
5,826,713
|
|
|
1988-2016
|
|
2015
|
|
30 years to 33 years
|
New York (AL)
|
|
|
|
|
118,604,252
|
|
|
|
-
|
|
|
|
6,655,755
|
|
|
|
7,092,469
|
|
|
|
-
|
|
|
|
118,604,252
|
|
|
|
13,748,224
|
|
|
|
132,352,476
|
|
|
|
-
|
|
|
-
|
|
2015
|
|
-
|
Ohio (AL)
|
|
|
|
|
3,683,238
|
|
|
|
8,180,400
|
|
|
|
19,496,317
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,683,238
|
|
|
|
27,676,717
|
|
|
|
31,359,955
|
|
|
|
1,096,131
|
|
|
1999-2016
|
|
2015
|
|
30 years to 33 years
|
Total Maplewood
|
|
|
|
|
160,860,541
|
|
|
|
294,127,986
|
|
|
|
67,661,467
|
|
|
|
7,435,164
|
|
|
|
(680,345
|
)
|
|
|
160,860,541
|
|
|
|
368,544,272
|
|
|
|
529,404,813
|
|
|
|
19,662,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saber Health Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida (SNF)
|
|
|
|
|
422,935
|
|
|
|
4,422,325
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
422,935
|
|
|
|
4,422,325
|
|
|
|
4,845,260
|
|
|
|
337,550
|
|
|
2009
|
|
2015
|
|
33 years
|
North Carolina (SNF)
|
|
|
|
|
10,780,000
|
|
|
|
106,694,700
|
|
|
|
2,312,955
|
|
|
|
47,891
|
|
|
|
-
|
|
|
|
10,780,000
|
|
|
|
109,055,546
|
|
|
|
119,835,546
|
|
|
|
4,660,696
|
|
|
1965-2013
|
|
2016
|
|
20 years to 30 years
|
Ohio (SNF, AL)
|
|
|
|
|
5,269,177
|
|
|
|
109,002,482
|
|
|
|
2,438,309
|
|
|
|
-
|
|
|
|
(268,000
|
)
|
|
|
5,269,177
|
|
|
|
111,172,791
|
|
|
|
116,441,968
|
|
|
|
6,862,544
|
|
|
1968-2000
|
|
2015-2016
|
|
30 years to 33 years
|
Pennsylvania (SNF)
|
|
|
|
|
7,134,354
|
|
|
|
124,475,985
|
|
|
|
1,825,909
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,134,354
|
|
|
|
126,301,894
|
|
|
|
133,436,248
|
|
|
|
8,140,340
|
|
|
1873-2002
|
|
2015
|
|
33 years
|
Virginia (SNF)
|
|
|
|
|
8,500,000
|
|
|
|
85,982,265
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,500,000
|
|
|
|
85,982,265
|
|
|
|
94,482,265
|
|
|
|
3,320,131
|
|
|
1964-2013
|
|
2016
|
|
30 years
|
Total
Saber Health Group
|
|
|
|
|
32,106,466
|
|
|
|
430,577,757
|
|
|
|
6,577,173
|
|
|
|
47,891
|
|
|
|
(268,000
|
)
|
|
|
32,106,466
|
|
|
|
436,934,821
|
|
|
|
469,041,287
|
|
|
|
23,321,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ciena Healthcare:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indiana (SNF)
|
|
|
|
|
321,066
|
|
|
|
7,703,262
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
321,066
|
|
|
|
7,703,262
|
|
|
|
8,024,328
|
|
|
|
574,610
|
|
|
1973
|
|
2015
|
|
33 years
|
Michigan (SNF, AL)
|
|
|
|
|
4,086,842
|
|
|
|
115,546,920
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,086,842
|
|
|
|
115,546,920
|
|
|
|
119,633,762
|
|
|
|
7,812,153
|
|
|
1964-1997
|
|
2015
|
|
33 years
|
North Carolina (ILF,
SNF)
|
|
|
|
|
4,330,580
|
|
|
|
65,027,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,330,580
|
|
|
|
65,027,000
|
|
|
|
69,357,580
|
|
|
|
4,446,154
|
|
|
1927-1997
|
|
2015
|
|
33 years
|
Ohio (SNF, AL)
|
|
|
|
|
10,342,621
|
|
|
|
159,846,959
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,342,621
|
|
|
|
159,846,959
|
|
|
|
170,189,580
|
|
|
|
10,349,693
|
|
|
1960-2007
|
|
2010-2016
|
|
20 years to 33 years
|
Virginia (SNF)
|
|
|
|
|
6,300,000
|
|
|
|
87,771,876
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,300,000
|
|
|
|
87,771,876
|
|
|
|
94,071,876
|
|
|
|
3,220,463
|
|
|
1979-2007
|
|
2016
|
|
30 years
|
Total Ciena HealthCare
|
|
|
|
|
25,381,109
|
|
|
|
435,896,017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,381,109
|
|
|
|
435,896,017
|
|
|
|
461,277,126
|
|
|
|
26,403,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alabama (SNF)
|
|
|
|
|
1,817,320
|
|
|
|
33,356,170
|
|
|
|
12,915,787
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,817,320
|
|
|
|
46,271,957
|
|
|
|
48,089,277
|
|
|
|
30,926,414
|
|
|
1960-1982
|
|
1992-1997
|
|
31.5 years to 33 years
|
Arizona (TBI, SNF,
AL)
|
|
|
|
|
10,995,190
|
|
|
|
86,868,402
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,995,190
|
|
|
|
86,868,402
|
|
|
|
97,863,592
|
|
|
|
10,017,581
|
|
|
1949-1999
|
|
2012-2015
|
|
33 years to 40 years
|
Arkansas (SNF, AL)
|
|
(2)
|
|
|
9,057,536
|
|
|
|
161,016,248
|
|
|
|
13,045,870
|
|
|
|
-
|
|
|
|
(36,350
|
)
|
|
|
9,057,536
|
|
|
|
174,025,768
|
|
|
|
183,083,304
|
|
|
|
55,208,651
|
|
|
1960-2009
|
|
1992-2015
|
|
20 years to 38 years
|
California (SNF, TBI)
|
|
|
|
|
78,596,505
|
|
|
|
423,131,800
|
|
|
|
2,823,085
|
|
|
|
63,156
|
|
|
|
-
|
|
|
|
78,596,505
|
|
|
|
426,018,041
|
|
|
|
504,614,546
|
|
|
|
55,083,670
|
|
|
1927-2013
|
|
1997-2015
|
|
5 years to 35 years
|
Colorado (SNF, ILF)
|
|
|
|
|
11,279,262
|
|
|
|
88,830,136
|
|
|
|
7,790,478
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,279,262
|
|
|
|
96,620,614
|
|
|
|
107,899,876
|
|
|
|
29,232,095
|
|
|
1925-1975
|
|
1998-2016
|
|
20 years to 39 years
|
Connecticut (land
only)
|
|
|
|
|
878,937
|
|
|
|
4,445,263
|
|
|
|
980,393
|
|
|
|
-
|
|
|
|
(5,425,656
|
)
|
|
|
878,937
|
|
|
|
-
|
|
|
|
878,937
|
|
|
|
-
|
|
|
N/A
|
|
1999
|
|
N/A
|
Florida (SNF, AL)
|
|
|
|
|
61,806,778
|
|
|
|
481,225,245
|
|
|
|
36,333,087
|
|
|
|
948,913
|
|
|
|
(9,736,615
|
)
|
|
|
61,806,778
|
|
|
|
508,770,630
|
|
|
|
570,577,408
|
|
|
|
150,266,763
|
|
|
1933-2007
|
|
1992-2016
|
|
2 years to 40 years
|
Georgia (SNF, AL)
|
|
|
|
|
3,730,000
|
|
|
|
47,387,507
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,730,000
|
|
|
|
47,387,507
|
|
|
|
51,117,507
|
|
|
|
5,230,371
|
|
|
1967-1998
|
|
1998-2016
|
|
30 years to 40 years
|
Idaho (SNF, AL)
|
|
|
|
|
6,705,560
|
|
|
|
62,572,804
|
|
|
|
1,321,587
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,705,560
|
|
|
|
63,894,391
|
|
|
|
70,599,951
|
|
|
|
12,106,038
|
|
|
1911-2008
|
|
1997-2015
|
|
25 years to 39 years
|
Illinois (SNF)
|
|
|
|
|
5,809,737
|
|
|
|
111,441,468
|
|
|
|
510,576
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,809,737
|
|
|
|
111,952,044
|
|
|
|
117,761,781
|
|
|
|
15,117,035
|
|
|
1926-1990
|
|
1996-2015
|
|
30 years to 33 years
|
Indiana (SNF, ILF, AL, MOB, SH,)
|
|
|
|
|
28,245,140
|
|
|
|
366,055,214
|
|
|
|
2,332,364
|
|
|
|
-
|
|
|
|
(1,828,124
|
)
|
|
|
28,237,640
|
|
|
|
366,566,954
|
|
|
|
394,804,594
|
|
|
|
77,812,713
|
|
|
1923-2008
|
|
1992-2015
|
|
20 years to 40 years
|
Iowa (SNF, AL)
|
|
|
|
|
2,923,947
|
|
|
|
68,736,698
|
|
|
|
2,084,807
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,923,947
|
|
|
|
70,821,505
|
|
|
|
73,745,452
|
|
|
|
13,120,583
|
|
|
1961-1998
|
|
1997-2015
|
|
23 years to 33 years
|
Kansas (SNF)
|
|
|
|
|
4,799,714
|
|
|
|
47,680,306
|
|
|
|
9,250,851
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,799,714
|
|
|
|
56,931,157
|
|
|
|
61,730,871
|
|
|
|
6,164,491
|
|
|
1957-1985
|
|
2010-2015
|
|
20 years to 33 years
|
Kentucky (SNF, AL)
|
|
|
|
|
6,279,163
|
|
|
|
123,327,734
|
|
|
|
8,677,102
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,279,163
|
|
|
|
132,004,836
|
|
|
|
138,283,999
|
|
|
|
20,157,352
|
|
|
1917-2002
|
|
1994-2015
|
|
33 years
|
Louisiana (SNF)
|
|
|
|
|
2,177,542
|
|
|
|
52,869,373
|
|
|
|
1,749,991
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,177,542
|
|
|
|
54,619,364
|
|
|
|
56,796,906
|
|
|
|
17,883,426
|
|
|
1957-1983
|
|
1997-2006
|
|
33 years to 39 years
|
Maryland (SNF)
|
|
|
|
|
7,190,000
|
|
|
|
74,028,613
|
|
|
|
2,518,228
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,190,000
|
|
|
|
76,546,841
|
|
|
|
83,736,841
|
|
|
|
14,350,237
|
|
|
1921-1985
|
|
2010-2011
|
|
25 years to 30 years
|
Massachusetts (SNF)
|
|
|
|
|
5,898,952
|
|
|
|
41,120,152
|
|
|
|
2,160,034
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,898,952
|
|
|
|
43,280,186
|
|
|
|
49,179,138
|
|
|
|
20,605,218
|
|
|
1964-1993
|
|
1997-2010
|
|
20 years to 39 years
|
Michigan (SNF)
|
|
|
|
|
829,621
|
|
|
|
30,921,159
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
829,621
|
|
|
|
30,921,159
|
|
|
|
31,750,780
|
|
|
|
4,655,127
|
|
|
1964-1975
|
|
2011-2015
|
|
25 years to 33 years
|
Minnesota (SNF, AL, ILF)
|
|
|
|
|
10,571,691
|
|
|
|
52,399,655
|
|
|
|
653,399
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,571,691
|
|
|
|
53,053,054
|
|
|
|
63,624,745
|
|
|
|
3,949,866
|
|
|
1958-1983
|
|
2015
|
|
33 years
|
Mississippi (SNF)
|
|
|
|
|
2,910,000
|
|
|
|
49,506,905
|
|
|
|
826,654
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,910,000
|
|
|
|
50,333,559
|
|
|
|
53,243,559
|
|
|
|
14,274,382
|
|
|
1962-1988
|
|
2009-2010
|
|
20 years to 40 years
|
Missouri (SNF)
|
|
|
|
|
7,333,114
|
|
|
|
121,480,904
|
|
|
|
692,135
|
|
|
|
-
|
|
|
|
(152,575
|
)
|
|
|
7,333,114
|
|
|
|
122,020,464
|
|
|
|
129,353,578
|
|
|
|
14,794,489
|
|
|
1955-1994
|
|
1999-2016
|
|
30 years to 33 years
|
Montana (SNF)
|
|
|
|
|
1,319,454
|
|
|
|
11,698,411
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,319,454
|
|
|
|
11,698,411
|
|
|
|
13,017,865
|
|
|
|
811,679
|
|
|
1963-1971
|
|
2015
|
|
33 years
|
Nebraska (SNF)
|
|
|
|
|
1,599,631
|
|
|
|
23,142,177
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,599,631
|
|
|
|
23,142,177
|
|
|
|
24,741,808
|
|
|
|
2,256,512
|
|
|
1963-1969
|
|
2015
|
|
20 years to 33 years
|
Nevada (SNF, SH, TBI)
|
|
|
|
|
5,501,308
|
|
|
|
50,472,213
|
|
|
|
8,350,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,501,308
|
|
|
|
58,822,213
|
|
|
|
64,323,521
|
|
|
|
10,013,989
|
|
|
1972-2004
|
|
2009-2015
|
|
26 years to 33 years
|
New Hampshire (SNF, AL)
|
|
|
|
|
1,782,067
|
|
|
|
19,837,436
|
|
|
|
1,462,797
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,782,067
|
|
|
|
21,300,233
|
|
|
|
23,082,300
|
|
|
|
8,439,787
|
|
|
1963-1999
|
|
1998-2006
|
|
33 years to 39 years
|
New Mexico (SNF)
|
|
|
|
|
9,002,270
|
|
|
|
68,658,130
|
|
|
|
130,323
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,002,270
|
|
|
|
68,788,453
|
|
|
|
77,790,723
|
|
|
|
7,348,628
|
|
|
1960-1989
|
|
2008-2015
|
|
20 years to 33 years
|
North Carolina (SNF)
|
|
|
|
|
3,069,856
|
|
|
|
52,675,612
|
|
|
|
3,550,986
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,069,856
|
|
|
|
56,226,598
|
|
|
|
59,296,454
|
|
|
|
26,436,775
|
|
|
1964-1987
|
|
1994-2010
|
|
25 years to 36 years
|
Ohio (SNF, SH, AL)
|
|
|
|
|
35,367,198
|
|
|
|
439,998,943
|
|
|
|
30,731,141
|
|
|
|
-
|
|
|
|
(1,166,009
|
)
|
|
|
35,367,198
|
|
|
|
469,564,075
|
|
|
|
504,931,273
|
|
|
|
133,969,181
|
|
|
1920-2008
|
|
1994-2015
|
|
20 years to 39 years
|
Oklahoma (SNF, AL)
|
|
|
|
|
4,650,087
|
|
|
|
36,246,616
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,650,087
|
|
|
|
36,246,616
|
|
|
|
40,896,703
|
|
|
|
7,883,686
|
|
|
1965-2013
|
|
2010-2015
|
|
20 years to 33 years
|
Oregon (AL, SNF)
|
|
|
|
|
3,640,572
|
|
|
|
45,217,827
|
|
|
|
2,610,185
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,640,572
|
|
|
|
47,828,012
|
|
|
|
51,468,584
|
|
|
|
3,179,897
|
|
|
1959-2004
|
|
2014-2015
|
|
25 years to 33 years
|
Pennsylvania (SNF, AL, ILF)
|
|
|
|
|
11,733,450
|
|
|
|
206,264,434
|
|
|
|
11,281,116
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,733,450
|
|
|
|
217,545,550
|
|
|
|
229,279,000
|
|
|
|
66,127,725
|
|
|
1942-2012
|
|
1998-2015
|
|
16 years to 39 years
|
Rhode Island (SNF)
|
|
|
|
|
3,658,261
|
|
|
|
35,082,551
|
|
|
|
4,792,882
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,658,261
|
|
|
|
39,875,433
|
|
|
|
43,533,694
|
|
|
|
16,190,347
|
|
|
1965-1981
|
|
2006
|
|
39 years
|
South Carolina (SNF)
|
|
|
|
|
7,800,000
|
|
|
|
59,782,493
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,800,000
|
|
|
|
59,782,493
|
|
|
|
67,582,493
|
|
|
|
5,718,501
|
|
|
1959-2007
|
|
2014-2016
|
|
20 years to 30 years
|
Tennessee (SNF)
|
|
|
|
|
5,932,773
|
|
|
|
99,743,478
|
|
|
|
4,897,458
|
|
|
|
-
|
|
|
|
(527,491
|
)
|
|
|
5,827,316
|
|
|
|
104,218,902
|
|
|
|
110,046,218
|
|
|
|
46,714,574
|
|
|
1958-1985
|
|
1992-2015
|
|
20 years to 31 years
|
Texas (AL, SNF)
|
|
|
|
|
67,370,202
|
|
|
|
667,695,852
|
|
|
|
24,223,887
|
|
|
|
203,265
|
|
|
|
(1,000
|
)
|
|
|
67,370,202
|
|
|
|
692,122,004
|
|
|
|
759,492,206
|
|
|
|
97,331,606
|
|
|
1952-2015
|
|
1997-2016
|
|
2 years to 40 years
|
United Kingdom (AL)
|
|
|
|
|
47,432,242
|
|
|
|
256,409,736
|
|
|
|
1,646,761
|
|
|
|
-
|
|
|
|
(52,350,758
|
)
|
|
|
39,822,262
|
|
|
|
213,315,719
|
|
|
|
253,137,981
|
|
|
|
10,141,108
|
|
|
1750-2011
|
|
2015-2016
|
|
30 years
|
Utah (SNF)
|
|
|
|
|
633,938
|
|
|
|
2,986,062
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
633,938
|
|
|
|
2,986,062
|
|
|
|
3,620,000
|
|
|
|
247,001
|
|
|
1977
|
|
2015
|
|
24 years
|
Vermont (SNF)
|
|
|
|
|
317,500
|
|
|
|
6,005,388
|
|
|
|
602,296
|
|
|
|
-
|
|
|
|
-
|
|
|
|
317,500
|
|
|
|
6,607,684
|
|
|
|
6,925,184
|
|
|
|
2,416,363
|
|
|
1971
|
|
2004
|
|
39 years
|
Virginia (SNF)
|
|
|
|
|
2,566,363
|
|
|
|
30,009,385
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,566,363
|
|
|
|
30,009,385
|
|
|
|
32,575,748
|
|
|
|
1,582,827
|
|
|
1989-1995
|
|
2015
|
|
33 years to 40 years
|
Washington (SNF, AL)
|
|
|
|
|
11,719,119
|
|
|
|
138,054,574
|
|
|
|
2,626,926
|
|
|
|
-
|
|
|
|
(1,500
|
)
|
|
|
11,717,619
|
|
|
|
140,681,500
|
|
|
|
152,399,119
|
|
|
|
22,271,862
|
|
|
1930-2004
|
|
1995-2015
|
|
20 years to 33 years
|
West Virginia (SNF)
|
|
|
|
|
1,972,682
|
|
|
|
66,945,947
|
|
|
|
7,000,345
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,972,682
|
|
|
|
73,946,292
|
|
|
|
75,918,974
|
|
|
|
32,588,074
|
|
|
1961-1996
|
|
1994-2011
|
|
25 years to 39 years
|
Wisconsin (SNF, AL)
|
|
|
|
|
7,377,429
|
|
|
|
53,224,076
|
|
|
|
5,252,877
|
|
|
|
-
|
|
|
|
(1,500
|
)
|
|
|
7,377,429
|
|
|
|
58,475,453
|
|
|
|
65,852,882
|
|
|
|
12,420,492
|
|
|
1930-1994
|
|
2009-2015
|
|
20 years to 33 years
|
Total Other
|
|
|
|
|
504,282,111
|
|
|
|
4,898,553,097
|
|
|
|
215,826,408
|
|
|
|
1,215,334
|
|
|
|
(71,227,578
|
)
|
|
|
496,557,674
|
|
|
|
5,052,091,698
|
|
|
|
5,548,649,372
|
|
|
|
1,085,047,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
767,018,940
|
|
|
$
|
6,549,820,611
|
|
|
$
|
312,976,028
|
|
|
$
|
8,718,627
|
|
|
$
|
(72,175,923
|
)
|
|
$
|
759,294,503
|
|
|
$
|
6,807,063,780
|
|
|
$
|
7,566,358,283
|
|
|
$
|
1,240,335,945
|
|
|
|
|
|
|
|
|
(1)
|
The real estate included in this schedule is being used in either
the operation of skilled nursing facilities (SNF), assisted living facilities (AL), independent
living facilities (ILF), tramatic brain injury (TBI), medical office building (MOB) or
specialty hospitals (SH) located in the states or country indicated.
|
|
(2)
|
Certain of the real estate indicated are security for the HUD
loan borrowings totaling $54,954,695 at December 31, 2016.
|
|
|
Year Ended December 31,
|
|
(3)
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
3,099,547,182
|
|
|
$
|
3,223,785,295
|
|
|
$
|
6,743,957,698
|
|
Acquisitions through foreclosure
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000,000
|
|
Acquisitions
|
|
|
131,689,483
|
|
|
|
3,371,233,860
|
|
|
|
1,017,760,963
|
|
Impairment
|
|
|
(3,660,381
|
)
|
|
|
(12,916,233
|
)
|
|
|
(53,716,724
|
)
|
Improvements
|
|
|
17,916,855
|
|
|
|
220,272,401
|
|
|
|
95,806,618
|
|
Disposals/other
|
|
|
(21,707,844
|
)
|
|
|
(58,417,625
|
)
|
|
|
(262,450,272
|
)
|
Balance at close of period
|
|
$
|
3,223,785,295
|
|
|
$
|
6,743,957,698
|
|
|
$
|
7,566,358,283
|
|
|
|
Year Ended December 31,
|
|
(4)
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
707,409,888
|
|
|
$
|
821,711,991
|
|
|
$
|
1,019,149,678
|
|
Provisions for depreciation
|
|
|
123,141,880
|
|
|
|
210,554,569
|
|
|
|
266,904,418
|
|
Dispositions/other
|
|
|
(8,839,777
|
)
|
|
|
(13,116,882
|
)
|
|
|
(45,718,151
|
)
|
Balance at close of period
|
|
$
|
821,711,991
|
|
|
$
|
1,019,149,678
|
|
|
$
|
1,240,335,945
|
|
|
(5)
|
The reported amount of our real estate at December 31, 2016 is
greater than the tax basis of the real estate by approximately $1.1 billion.
|
|
(6)
|
Reflects bed sales, land easements and impacts from foreign currency
exchange rates.
|
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- Continued
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
OMEGA HEALTHCARE INVESTORS, INC.
December 31, 2016
Grouping
|
|
Description
(1)
|
|
Interest
Rate
|
|
|
Final
Maturity
Date
|
|
Periodic
Payment
Terms
|
|
Prior
Liens
|
|
Face
Amount of
Mortgages
|
|
|
Carrying
Amount
of Mortgages
(2)
(3)
|
|
|
Principal
Amount
of Loans Subject
to Delinquent
Principal or
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Louisiana
(1 AL facility)
|
|
|
8.75
|
%
|
|
2018
|
|
Interest accrues
monthly
|
|
None
|
|
$
|
9,870,626
|
|
|
$
|
9,870,626
|
|
|
|
|
|
2
|
|
Maryland
(3 SNF facilities)
|
|
|
11.00
|
%
|
|
2028
|
|
Interest payable monthly
|
|
None
|
|
|
74,927,751
|
|
|
|
35,963,840
|
|
|
|
|
|
3
|
|
Michigan
(31 SNF facilities)
|
|
|
9.45
|
%
|
|
2029
|
|
Interest plus $105,000 of principal
payable monthly
|
|
None
|
|
|
415,000,000
|
|
|
|
412,140,060
|
|
|
|
|
|
4
|
|
Michigan
(1 SNF facility)
|
|
|
10.77
|
%
|
|
2021
|
|
Interest payable monthly
|
|
None
|
|
|
3,917,030
|
|
|
|
3,917,030
|
|
|
|
-
|
|
5
|
|
Michigan
(1 SNF facility)
|
|
|
10.51
|
%
|
|
2021
|
|
Interest payable monthly
|
|
None
|
|
|
4,111,387
|
|
|
|
4,111,387
|
|
|
|
-
|
|
6
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
2,214,376
|
|
|
|
2,214,376
|
|
|
|
-
|
|
7
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
560,601
|
|
|
|
560,601
|
|
|
|
-
|
|
8
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
267,170
|
|
|
|
267,170
|
|
|
|
-
|
|
9
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
-
|
|
10
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
252,241
|
|
|
|
252,241
|
|
|
|
-
|
|
11
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
269,740
|
|
|
|
269,740
|
|
|
|
-
|
|
12
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
4,036,982
|
|
|
|
4,036,982
|
|
|
|
-
|
|
13
|
|
Michigan
(1 SNF facility)
|
|
|
10.25
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
4,089,039
|
|
|
|
4,089,039
|
|
|
|
-
|
|
14
|
|
Michigan
(1 SNF facility)
|
|
|
9.50
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
597,022
|
|
|
|
597,022
|
|
|
|
-
|
|
15
|
|
Michigan
(1 SNF facility)
|
|
|
9.50
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
125,930
|
|
|
|
125,930
|
|
|
|
-
|
|
16
|
|
Michigan
(1 SNF facility)
|
|
|
9.50
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
1,803,905
|
|
|
|
1,803,905
|
|
|
|
-
|
|
17
|
|
Michigan
(1 SNF facility)
|
|
|
9.50
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
432,754
|
|
|
|
432,754
|
|
|
|
-
|
|
18
|
|
Michigan
(1 SNF facility)
|
|
|
9.50
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
190,842
|
|
|
|
190,842
|
|
|
|
-
|
|
19
|
|
Michigan
(1 SNF facility)
|
|
|
8.50
|
%
|
|
2029
|
|
Interest payable monthly
|
|
None
|
|
|
14,044,762
|
|
|
|
14,044,762
|
|
|
|
-
|
|
20
|
|
Missouri
(1 SNF facility) and Tennessee ( 1 SNF facility)
|
|
|
8.35
|
%
|
|
2015
|
|
Interest plus $0 of principal
payable monthly
|
|
None
|
|
|
6,997,610
|
|
|
|
2,500,000
|
|
|
|
|
|
21
|
|
New Jersey
(1 AL facility)
|
|
|
10.00
|
%
|
|
2017
|
|
Interest payable monthly
|
|
None
|
|
|
3,195,000
|
|
|
|
3,195,000
|
|
|
|
-
|
|
22
|
|
Ohio (2
SNF facilities) and Pennsylvania (5 SNF and 2 AL facilities)
|
|
|
9.79
|
%
|
|
2024
|
|
Interest payable monthly
|
|
None
|
|
|
112,500,000
|
|
|
|
112,500,000
|
|
|
|
-
|
|
23
|
|
Ohio (1
SNF facility)
|
|
|
11.67
|
%
|
|
2018
|
|
Interest payable monthly
|
|
None
|
|
|
11,874,013
|
|
|
|
12,254,985
|
|
|
|
|
|
24
|
|
South Carolina
(1 AL facility)
|
|
|
8.75
|
%
|
|
2018
|
|
Interest accrues monthly
|
|
None
|
|
|
8,762,943
|
|
|
|
8,762,943
|
|
|
|
-
|
|
25
|
|
Virginia
(1 AL facility)
|
|
|
8.75
|
%
|
|
2018
|
|
Interest accrues monthly
|
|
None
|
|
|
5,142,008
|
|
|
|
5,142,008
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
685,283,732
|
|
|
$
|
639,343,243
|
|
|
|
|
|
|
(1)
|
Mortgage loans included in this schedule represent first mortgages
on facilities used in the delivery of long-term healthcare of which such facilities are
located in the states indicated.
|
|
(2)
|
The aggregate cost for federal income tax purposes is equal to
the carrying amount.
|
|
|
Year Ended December 31,
|
|
(3)
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
241,514,812
|
|
|
$
|
648,078,550
|
|
|
$
|
679,795,236
|
|
Additions during period - Placements
|
|
|
529,547,836
|
|
|
|
33,288,320
|
|
|
|
48,721,953
|
|
Deductions during period - collection of principal/other
|
|
|
(122,984,098
|
)
|
|
|
(1,571,634
|
)
|
|
|
(89,173,946
|
)
|
Balance at close of period
|
|
$
|
648,078,550
|
|
|
$
|
679,795,236
|
|
|
$
|
639,343,243
|
|