Reaffirms Adjusted FFO Guidance
Omega Healthcare Investors, Inc. (NYSE:OHI) (the
“Company” or “Omega”) today announced that its
tenant, 4 West Holdings, Inc. (“Orianna”) and certain of its
affiliates (the “Debtors”), commenced voluntary Chapter 11
proceedings in the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division.
The action is styled In re 4 West Holdings, Inc., Case No.
18-30777-hdh11 (Bankr. N.D. Tex.). Copies of all materials filed in
this action are available at http://www.omnimgt.com/4west.
C. Taylor Pickett, Omega’s Chief Executive Officer, stated, “We
supported Orianna’s decision to pursue a restructuring in the
context of a Chapter 11 proceeding as we believe that this will
ensure that the interests of the residents will be protected while
at the same time providing for an orderly and balanced process that
will address and definitively resolve the interests and legitimate
concerns of the various constituencies involved in Orianna’s
business. As described in Orianna’s filings with the Bankruptcy
Court, Omega has entered into a Restructuring Support Agreement
(“RSA”) that will form the basis for Orianna’s
restructuring. The RSA provides for the recommencement of partial
rent payments at $1.0 million per month (prorated for March) and
establishes a specific timeline for the implementation of Orianna’s
planned restructuring.”
While subject to Bankruptcy Court approval, the RSA provides for
the orderly transition to new operators of 23 of the 42 facilities
Orianna currently leases from Omega. The RSA contemplates that
these transfers will be approved by the Bankruptcy Court within 45
days and thereafter such transfers will be completed promptly upon
obtaining any required state-level regulatory approvals. The RSA
also provides for the sale of the remaining 19 facilities pursuant
to a plan of reorganization to be confirmed by the Bankruptcy
Court. The RSA contemplates that the plan confirmation will occur
within 110 days and that such sale will be concluded by the end of
2018.
In order to provide liquidity to the Debtors during their
Chapter 11 proceedings, Omega has provided a commitment for up to
$30 million in debtor-in-possession (“DIP”) financing.
Subject to Bankruptcy Court approval, this DIP financing would be
used to repay in full the Debtors’ current working capital lender
and to provide the Debtors’ with additional liquidity to fund
on-going business operations. Omega’s commitment to provide the DIP
financing is conditioned on obtaining first priority liens on the
Debtors’ assets and being granted superpriority claim status in the
bankruptcy cases. It is anticipated that the Bankruptcy Court will
provide an interim ruling on this request within several days and a
final ruling within 30 days.
Mr. Pickett noted, “We continue to expect that our
post-transition restructuring rent for the transition portfolio and
rent equivalent for the 19 properties to be sold will ultimately be
in our previously-estimated range of $32.0 million - $38.0 million.
Last year, we recorded impairments on our Orianna direct financing
leases reflecting assumed annual rents in that range, rental yields
between 9% and 10%, and certain assumptions regarding current and
projected operating performance of the facilities, coverage ratios
and bed values. We do not believe Orianna’s filing for bankruptcy
protection materially affects the fair value of the facilities, and
accordingly, at this time we do not expect to record further
impairments on the Orianna direct financing leases as a
result.”
Regarding guidance, Mr. Pickett added, “Our previously announced
guidance assumed the Company will not be recording revenue related
to its Orianna portfolio for the majority of 2018. Orianna’s
Chapter 11 filing does not change our estimates and, accordingly,
we reaffirm the adjusted funds from operations (“Adjusted
FFO”) guidance contained in our February 13, 2018 earnings
release in the range of $2.96 - $3.06. Of course, our actual
results will depend on the timing of the transitions and sales
contemplated by the RSA.”
* * * * * *
Omega is a real estate investment trust that invests in the
long-term healthcare industry, primarily in skilled nursing and
assisted living facilities. Its portfolio of assets is operated by
a diverse group of healthcare companies, predominantly in a
triple-net lease structure. The assets span all regions within the
US, as well as in the UK.
The following table presents a reconciliation of Omega’s
guidance regarding Adjusted FFO to projected GAAP earnings.
2018 Annual Adjusted FFOGuidance Range(per
diluted common share) Full Year Net Income $1.43 - $1.53
Depreciation 1.45 Gain on assets sold - Real estate impairment -
FFO $2.88 - $2.98 Adjustments: Acquisition/transaction costs -
Interest – refinancing costs - Stock-based compensation expense
0.08 Adjusted FFO $2.96 - $3.06
Note: All per share numbers rounded to 2 decimals.
The Company's Adjusted FFO guidance for 2018 reflects the impact
of approximately $100 million of planned capital renovation
projects, the sale of $87 million of assets held for sale,
approximately $300 million of potential divestitures and the
redeployment of capital from asset sales. The Company’s guidance
excludes the impact of gains and losses from the sale of assets,
certain revenue and expense items, interest refinancing expense,
capital transactions, acquisition costs, and additional provisions
for uncollectible accounts, if any. The Company may, from time to
time, update its publicly announced Adjusted FFO guidance, but it
is not obligated to do so.
The Company's guidance is based on a number of assumptions,
which are subject to change and many of which are outside the
Company’s control. If actual results vary from these assumptions,
the Company's expectations may change. Without limiting the
generality of the foregoing, the timing and completion of
acquisitions, divestitures, capital and financing transactions, and
variations in stock-based compensation expense may cause actual
results to vary materially from our current expectations. There can
be no assurance that the Company will achieve its projected
results.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements regarding Omega’s or its tenants’,
operators’, borrowers’ or managers’ expected future financial
condition, results of operations, cash flows, funds from
operations, dividends and dividend plans, financing opportunities
and plans, capital markets transactions, business strategy,
budgets, projected costs, operating metrics, capital expenditures,
competitive positions, acquisitions, investment opportunities,
dispositions, facility transitions, growth opportunities, expected
lease income, continued qualification as a real estate investment
trusts (“REIT”), plans and objectives of management for future
operations and statements that include words such as “anticipate,”
“if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,”
“could,” “should,” “will” and other similar expressions are
forward-looking statements. These forward-looking statements are
inherently uncertain, and actual results may differ from Omega’s
expectations. Omega does not undertake a duty to update these
forward-looking statements, which speak only as of the date on
which they are made.
Omega’s actual results may differ materially from those
reflected in such forward-looking statements as a result of a
variety of factors, including, among other things: (i)
uncertainties relating to the business operations of the operators
of Omega’s properties, including those relating to reimbursement by
third-party payors, regulatory matters and occupancy levels; (ii)
regulatory and other changes in the healthcare sector; (iii)
changes in the financial position of Omega’s operators; (iv) the
ability of any of Omega’s operators in bankruptcy to reject
unexpired lease obligations, modify the terms of Omega’s mortgages
and impede the ability of Omega to collect unpaid rent or interest
during the pendency of a bankruptcy proceeding and retain security
deposits for the debtor's obligations; (v) the availability and
cost of capital; (vi) changes in Omega’s credit ratings and the
ratings of its debt securities; (vii) competition in the financing
of healthcare facilities; (viii) Omega’s ability to maintain its
status as a REIT; (ix) Omega’s ability to sell assets held for sale
or complete potential asset sales on a timely basis and on terms
that allow Omega to realize the carrying value of these assets; (x)
Omega’s ability to re-lease, otherwise transition or sell
underperforming assets on a timely basis and on terms that allow
Omega to realize the carrying value of these assets; (xi) the
effect of economic and market conditions generally, and
particularly in the healthcare industry; (xii) the potential impact
of changes in the SNF and assisted living facility (“ALF”) market
or local real estate conditions on the Company’s ability to dispose
of assets held for sale for the anticipated proceeds or on a timely
basis, or to redeploy the proceeds therefrom on favorable terms;
(xiii) changes in interest rates; (xiv) changes in tax laws and
regulations affecting REITs, (xv) risks and uncertainties regarding
Orianna’s bankruptcy, including without limitation, the potential
that the Bankruptcy Court may not approve the RSA or not approve
the RSA on the terms contemplated by Omega, potential delays in the
anticipated transition and sale of the Orianna facilities,
potential objections from other creditors of Orianna, and
possibility of declines in the operating performance of the Orianna
facilities resulting from the bankruptcy process and (xvi) other
factors identified in Omega’s filings with the Securities and
Exchange Commission. Statements regarding future events and
developments and Omega’s future performance, as well as
management's expectations, beliefs, plans, estimates or projections
relating to the future, are forward looking statements. Omega
undertakes no obligation to update any forward-looking statements
contained in this announcement.
Funds From Operations (“FFO”) and Adjusted FFO are non-GAAP
financial measures. For purposes of the Securities and Exchange
Commission’s Regulation G, a non-GAAP financial measure is a
numerical measure of a company’s historical or future financial
performance, financial position or cash flows that exclude amounts,
or is subject to adjustments that have the effect of excluding
amounts, that are included in the most directly comparable
financial measure calculated and presented in accordance with GAAP
in the statement of operations, balance sheet or statement of cash
flows (or equivalent statements) of the company, or include
amounts, or is subject to adjustments that have the effect of
including amounts, that are excluded from the most directly
comparable financial measure so calculated and presented. As used
in this press release, GAAP refers to generally accepted accounting
principles in the United States of America. Pursuant to the
requirements of Regulation G, the Company has provided
reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures.
The Company calculates and reports FFO in accordance with the
definition and interpretive guidelines issued by the National
Association of Real Estate Investment Trusts (“NAREIT”), and
consequently, FFO is defined as net income (computed in accordance
with GAAP), adjusted for the effects of asset dispositions and
certain non-cash items, primarily depreciation and amortization and
impairments on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated
to reflect funds from operations on the same basis. The Company
believes that FFO and Adjusted FFO are important supplemental
measures of its operating performance. Because the historical cost
accounting convention used for real estate assets requires
depreciation (except on land), such accounting presentation implies
that the value of real estate assets diminishes predictably over
time, while real estate values instead have historically risen or
fallen with market conditions. The term FFO was designed by the
real estate industry to address this issue. FFO described herein is
not necessarily comparable to FFO of other real estate investment
trusts, or REITs, that do not use the same definition or
implementation guidelines or interpret the standards differently
from the Company.
Adjusted FFO is calculated as FFO excluding the impact of
non-cash stock-based compensation and certain revenue and expense
items identified above. The Company believes these measures provide
an enhanced measure of the operating performance of the Company’s
core portfolio as a REIT. The Company’s computation of Adjusted FFO
is not comparable to the NAREIT definition of FFO or to similar
measures reported by other REITs, but the Company believes that
they are appropriate measures for this Company.
The Company uses these non-GAAP measures among the criteria to
measure the operating performance of its business. The Company also
uses Adjusted FFO among the performance metrics for
performance-based compensation of officers. The Company further
believes that by excluding the effect of depreciation,
amortization, impairments on real estate assets and gains or losses
from sales of real estate, all of which are based on historical
costs and which may be of limited relevance in evaluating current
performance, FFO can facilitate comparisons of operating
performance between periods and between other REITs. The Company
offers these measures to assist the users of its financial
statements in analyzing its operating performance and not as
measures of liquidity or cash flow. These non-GAAP measures are not
measures of financial performance under GAAP and should not be
considered as measures of liquidity, alternatives to net income or
indicators of any other performance measure determined in
accordance with GAAP. Investors and potential investors in the
Company’s securities should not rely on these non-GAAP measures as
substitutes for any GAAP measure, including net income.
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version on businesswire.com: http://www.businesswire.com/news/home/20180307005624/en/
Omega Healthcare Investors, Inc.Matthew Gourmand,
410-427-1700SVP, Investor RelationsorBob Stephenson,
410-427-1700CFO
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