Completed $106 Million in New Investments in
Q3
Strengthened Balance Sheet with $429 Million
Term Loan in Q3
Omega Healthcare Investors, Inc. (NYSE: OHI) (the “Company” or
“Omega”) announced today its results for the quarter ended
September 30, 2023.
THIRD QUARTER 2023 AND RECENT
HIGHLIGHTS
- Net income for the quarter of $94 million, or $0.37 per common
share, compared to $105 million, or $0.43 per common share, for the
same period in 2022.
- Nareit Funds From Operations (“Nareit FFO”) for the quarter of
$161 million or $0.63 per common share, on 256 million
weighted-average common shares outstanding, compared to $159
million, or $0.65 per common share, on 243 million weighted-average
common shares outstanding, for the same period in 2022.
- Funds Available for Distribution (“FAD”) for the quarter of
$174 million, or $0.68 per common share, compared to FAD of $173
million, or $0.71 per common share, for the same period in
2022.
- $106 million in new investments comprised of $55 million in
real estate acquisitions, $26 million in real estate loans, and $24
million in capital renovation and construction projects.
- Sold 15 facilities for $99 million in cash proceeds and
consideration, and received repayment of a $105 million seller
note, generating a $44 million gain on assets sold.
- Entered into a $429 million unsecured term loan.
- Issued 4 million common shares for gross proceeds of $126
million.
- Sold 29 facilities that were leased to LaVie for $305.2 million
in consideration in Q4.
- Completed $61 million in new investments in Q4 to date.
Nareit FFO and FAD are supplemental non-GAAP financial measures
that the Company believes are useful in evaluating the performance
of real estate investment trusts (“REITs”). Reconciliations and
further information regarding these non-GAAP measures are provided
at the end of this press release.
CEO COMMENTS
Taylor Pickett, Omega’s Chief Executive Officer, stated, “Our
third quarter financial performance exceeded our expectations on
higher-than-expected interest income and unanticipated rent
payments from some operators on a cash-basis. Subsequent to the
quarter end, we sold 29 Florida assets operated by LaVie. We also
further strengthened our balance sheet in the third quarter by
issuing a $429 million term loan, fixed at 5.6%, and repaying $350
million of bonds that matured in August. With over $600 million of
cash on hand as of November 1st and over $1.4 billion available
under our line of credit at the end of the quarter, we are
well-positioned to fund both the pipeline and future debt
obligations.”
Mr. Pickett continued, “With some smaller restructurings
ongoing, many tenants still on a cash-basis, and some security
deposits being depleted, we expect FAD could be impacted by these
factors in the fourth quarter and potentially into early 2024.
However, we remain constructive on the longer-term opportunities
within this industry. The operating backdrop continues to improve,
with occupancy increasing and the tight labor market slowly
moderating, and, longer-term, we believe the skilled nursing
industry is well-positioned to benefit from multi-decade
demographic tailwinds.”
Mr. Pickett concluded, “In the quarter, CMS issued its proposed
rule on minimum staffing for the industry. While we applaud the
administration for its continued focus on resident care, we believe
there are fundamental flaws in the proposed rule, especially at a
time when labor capacity is the most challenging issue facing most
facilities. The industry is providing feedback to CMS on how it
could achieve its clinical goals in a more efficient manner. We are
hopeful that CMS will constructively work with the industry for the
benefit of the resident.”
THIRD QUARTER 2023
RESULTS
Revenues – Revenues for the quarter ended September 30,
2023 totaled $242.0 million, an increase of $2.6 million over the
same period in 2022. The increase primarily resulted from (i)
timing of operator restructurings and transitions and (ii) revenue
from new investments completed throughout 2022 and 2023. The
increase was partially offset by a decrease in revenue from (i)
asset sales completed throughout 2022 and 2023 and (ii) operators
placed on a cash basis of revenue recognition since the 3rd quarter
of 2022.
Expenses – Expenses for the quarter ended September 30,
2023 totaled $194.5 million, an increase of $16.8 million over the
same period in 2022. The increase primarily resulted from (i) a
$17.9 million increase in impairment on real estate properties,
(ii) a $1.9 million increase in stock-based compensation expense
and (iii) a $0.3 million increase in interest expense, partially
offset by (i) a $1.9 million decrease in depreciation and
amortization expense related to facilities sold and facilities
reclassified as held for sale and (ii) a $1.4 million favorable
change in provision for credit losses.
Other Income and Expense – Other income for the quarter
ended September 30, 2023 totaled $49.5 million, an increase of $9.1
million over the same period in 2022. The increase primarily
resulted from (i) a $5.6 million increase in other income (expense)
– net and (ii) a $3.1 million increase in gain on assets sold.
Net Income – Net income for the quarter ended September
30, 2023 totaled $93.9 million, a decrease of $11.2 million over
the same period in 2022. The decrease primarily resulted from the
aforementioned (i) $16.8 million increase in expenses and (ii) $5.5
million decrease in income from unconsolidated joint ventures,
partially offset by (i) a $9.1 million increase in other income and
expense and (ii) a $2.6 million increase in total revenue.
FINANCING ACTIVITIES
Dividend Reinvestment and Common Stock Purchase Plan and ATM
Program – The following is a summary of the 2023 quarterly
common shares issued under the Dividend Reinvestment and Common
Stock Purchase Plan and ATM Program through September 30:
Dividend Reinvestment and Common
Stock Purchase Plan for 2023
(in thousands, except price per
share)
Q1
Q2
Q3
Total
Number of shares
82
77
3,529
3,688
Average price per share
$
27.88
$
29.30
$
31.70
$
31.57
Gross proceeds
$
2,278
$
2,252
$
111,895
$
116,425
ATM Program for 2023
(in thousands, except price per
share)
Q1
Q2
Q3
Total
Number of shares
—
6,529
466
6,995
Average price per share
$
—
$
30.54
$
30.95
$
30.57
Gross proceeds
$
—
$
199,397
$
14,400
$
213,797
$350 Million Note Repayment – On August 1, 2023, the
Company repaid its $350 million 4.375% senior notes that matured on
August 1, 2023, from invested cash balances.
$429 Million Term Loan – On August 8, 2023, the Company
entered into a new two-year $400 million senior unsecured term loan
(“Term Loan”). The Term Loan includes an “accordion feature” that
permits the Company to expand its borrowing capacity to an
aggregate of up to $500 million. On September 27, 2023, the Company
exercised the accordion feature to increase the aggregate
commitments under the Term Loan to $428.5 million. During the third
quarter, the Company executed in aggregate $428.5 million of
variable-to-fixed interest rate swaps that fixed the Secured
Overnight Financing Rate (“SOFR”) variable component of the Term
Loan at 4.047%, resulting in a combined all-in fixed rate of
5.597%.
2023 THIRD QUARTER PORTFOLIO AND RECENT
ACTIVITY
Operator Updates:
LaVie – During the third quarter of 2023, the Company
sold seven facilities that were leased to LaVie Care Centers, LLC
(“LaVie”) for $84.4 million. Consideration consisted of $14.8
million in cash and $69.6 million for the pay-off of HUD related
mortgages on the seven facilities. In the third quarter, LaVie paid
$7.4 million of rent. In October, LaVie paid Omega approximately
$2.5 million related to rent. On November 1, 2023, an additional 29
facilities were sold for $305.2 million, consisting of $91.9
million in gross cash proceeds and $213.3 million for the pay-off
of HUD related mortgages.
Maplewood – As previously disclosed, Maplewood Senior
Living (“Maplewood”) short-paid its June contractual rent by $1.0
million. Maplewood continued to short-pay its contractual rent by
$1.0 million per month during the third quarter of 2023. During the
third quarter of 2023, the Company applied $3.0 million of
Maplewood’s $4.8 million security deposit to the rent shortfall.
The Company recorded $17.3 million in revenue during the third
quarter of 2023 related to Maplewood consisting of $14.3 million of
contractual rent payments received and $3.0 million in security
deposit applications. The Company is taking actions to preserve its
rights and is in discussions with Maplewood to address the
deficiency. In October, the Company applied an additional $1.0
million from Maplewood’s security deposit to revenue.
Guardian – Guardian Healthcare (“Guardian”) failed to
make its contractual rent payments in August and September 2023. As
a result, during the third quarter of 2023, the Company drew $2.9
million on a $7.3 million security deposit. In the third quarter,
the Company recorded $4.4 million in revenue consisting of $1.5
million in contractual rent payments received and the $2.9 million
security deposit application. In October, the Company drew an
additional $1.5 million from Guardian’s security deposit to fund
its unpaid October rent. The Company is in discussions to sell or
release to another operator the six remaining Guardian
facilities.
New Investments:
The following table presents real estate investment
activity:
Three Months Ended
Nine Months Ended
Real Estate Investment Activity
($000's)
September 30, 2023
September 30, 2023
$ Amount
%
$ Amount
%
Real property
$
55,141
52.2
%
$
210,064
50.2
%
Construction-in-progress
15,628
14.8
%
31,476
7.5
%
Capital expenditures
8,771
8.3
%
21,546
5.2
%
Real estate loans receivable
26,176
24.7
%
113,472
27.1
%
Other
—
—
%
41,746
10.0
%
Total
$
105,716
100.0
%
$
418,304
100.0
%
$40 Million Real Estate Acquisition – On September 8,
2023, the Company acquired 14 care homes in the U.K., similar to
assisted living facilities in the United States, for $39.5 million.
Concurrent with the acquisition, the Company entered into a master
lease for the facilities with a new operator at an initial annual
cash yield of 10.2%, with 2.5% annual escalators.
$16 Million Real Estate Acquisition – On August 29, 2023,
the Company acquired one skilled nursing facility (“SNF”) in
Virginia for $15.6 million. The SNF was added to the master lease
of an existing operator at an initial annual cash yield of 10%,
with 2.0% annual escalators.
$61 Million in New Q4 Investments – In the fourth quarter
of 2023, the Company closed on $60.7 million in new investments,
comprised of:
$38 Million in Real Estate Loans – In
October 2023, the Company funded $38.2 million in mortgage loans to
a new operator for the purpose of acquiring two Pennsylvania
assisted living facilities. The loans have a weighted-average
interest rate of 9.3% with a maturity starting October 1, 2026.
$23 Million Real Estate Acquisition –
In October 2023, the Company acquired one facility in Maryland for
$22.5 million and amended its lease with an existing operator to
add the facility. The initial annual cash yield is approximately
10%, 2% of which can be deferred, and includes annual escalators of
2.5%.
Asset Sales and
Impairments:
$204 Million in Proceeds from Seller Note Repayment and Asset
Sales – In the third quarter of 2023, the Company was repaid on
a $104.8 million seller note and also sold 15 facilities for $98.7
million in combined cash and HUD mortgage payoffs, recognizing a
gain of $44.1 million, comprised of:
Seller Note Repayment – In the third
quarter, the Company received $104.8 million to repay a seller
financing note provided by Omega in December 2022 related to the
sale of 11 LaVie facilities, generating a $50.2 million gain on
assets sold.
LaVie – As discussed above, the
Company sold seven facilities leased to LaVie for $84.4 million.
Consideration consisted of $14.8 million in cash and $69.6 million
for the pay-off of HUD-related mortgages on the seven
facilities.
Other Facility Sales – The Company
sold eight additional facilities leased to two operators for $14.3
million.
Impairments and Assets Held for Sale – During the third
quarter of 2023, the Company recorded a $27.9 million net
impairment charge to reduce the net book value of 19 facilities to
their estimated fair value.
As of September 30, 2023, the Company had 14 facilities
classified as assets held for sale, totaling $67.5 million in net
book value.
OPERATOR COVERAGE DATA
The following tables present operator revenue mix, census and
coverage data based on information provided by the Company’s
operators for the indicated periods. The Company has not
independently verified this information, and it is providing this
data for informational purposes only.
Operator Revenue Mix (1)
Medicare /
Private /
Medicaid
Insurance
Other
Three-months ended June 30, 2023
54.0
%
30.0
%
16.0
%
Three-months ended March 31, 2023
53.0
%
31.8
%
15.2
%
Three-months ended December 31, 2022
54.3
%
31.4
%
14.3
%
Three-months ended September 30, 2022
53.4
%
31.5
%
15.1
%
Three-months ended June 30, 2022
53.5
%
31.5
%
15.0
%
(1)
Excludes all facilities considered
non-core and does not include federal stimulus revenue. For
non-core definition, see Third Quarter 2023 Financial Supplemental
posted in the “Quarterly Supplements” section of Omega’s
website.
Coverage Data
Before
After
Occupancy (2)
Management
Management
Operator Census and Coverage
(1)
Fees (3)
Fees (4)
Twelve-months ended June 30, 2023
78.6
%
1.50x
1.15x
Twelve-months ended March 31, 2023
78.0
%
1.44x
1.10x
Twelve-months ended December 31, 2022
77.0
%
1.38x
1.04x
Twelve-months ended September 30, 2022
76.2
%
1.37x
1.04x
Twelve-months ended June 30, 2022
75.8
%
1.39x
1.06x
(1)
Excludes facilities considered
non-core.
(2)
Based on available (operating) beds.
(3)
Represents EBITDARM of our operators,
defined as earnings before interest, taxes, depreciation,
amortization, Rent costs and management fees for the applicable
period, divided by the total Rent payable to the Company by its
operators during such period. “Rent” refers to the total monthly
contractual rent and mortgage interest due under the Company’s
lease and mortgage agreements over the applicable period.
(4)
Represents EBITDAR of our operators,
defined as earnings before interest, taxes, depreciation,
amortization, and Rent (as defined in footnote 3) expense for the
applicable period, divided by the total Rent payable to the Company
by its operators during such period. Assumes a management fee of
4%.
BALANCE SHEET AND
LIQUIDITY
As of September 30, 2023, the Company had $5.3 billion of
outstanding indebtedness with a weighted-average annual interest
rate of 4.34%. The Company’s indebtedness consisted of an aggregate
principal amount of $4.6 billion of senior unsecured notes, $478.5
million of unsecured term loans, $289.4 million of secured debt and
$19.5 million of borrowings outstanding under its unsecured
revolving credit facility. As of September 30, 2023, total cash and
cash equivalents were $554.7 million, and the Company had $1.4
billion of undrawn capacity under its unsecured revolving credit
facility.
DIVIDENDS
On October 20, 2023, the Board of Directors declared a quarterly
cash dividend of $0.67 per share, to be paid November 15, 2023, to
common stockholders of record as of the close of business on
October 31, 2023.
ADDITIONAL INFORMATION
Additional information regarding the Company can be found in its
Third Quarter 2023 Financial Supplemental posted under “Financial
Info” in the Investors section of Omega’s website. The information
contained on, or that may be accessed through, Omega’s website,
including the information contained in the aforementioned
supplemental, is not incorporated by any reference into, and is not
part of, this document.
CONFERENCE CALL
The Company will be conducting a conference call on Friday,
November 3, 2023, at 10 a.m. Eastern time to review the Company’s
2023 third quarter results and current developments. Analysts and
investors within the U.S. interested in participating are invited
to call (877) 407-9124. The international toll-free dial-in number
is (201) 689-8584. Ask the operator to be connected to the “Omega
Healthcare’s Third Quarter 2023 Earnings Call.”
To listen to the conference call via webcast, log on to
www.omegahealthcare.com and click the “Omega Healthcare
Investors, Inc. 3Q Earnings Call” hyper-link on the “Investors”
page of Omega’s website. Webcast replays of the call will be
available on Omega’s website for a minimum of two weeks following
the call. Additionally, a copy of the earnings release will be
available in the “Financial Info” section and “SEC Filings” section
on the “Investors” page of Omega’s website.
Omega is a REIT 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 U.S., as well as
in the U.K.
Forward-Looking Statements and Cautionary Language
This press release includes forward-looking statements within
the meaning of the federal securities laws. 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 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’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)
the long-term impacts of the Novel coronavirus (“COVID-19”)
pandemic on our business and the business of our operators,
including without limitation, the levels of staffing shortages,
increased costs and decreased occupancy experienced by operators of
skilled nursing facilities (“SNFs”) and assisted living facilities
(“ALFs”) arising from the pandemic, proposed federal minimum
staffing requirements for SNFs that may further labor and occupancy
challenges for our operators, the ability of our operators to
comply with infection control and vaccine protocols and to manage
facility infection rates or future infectious diseases, and the
sufficiency of government support and reimbursement rates to offset
such costs and the conditions related thereto; (iii) 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, and other costs and uncertainties
associated with operator bankruptcies; (iv) additional regulatory
and other changes in the healthcare sector, including federal
minimum staffing requirements for SNFs that may further exacerbate
labor and occupancy challenges for Omega’s operators; (v) Omega’s
ability to re-lease, otherwise transition or sell underperforming
assets or assets held for sale on a timely basis and on terms that
allow Omega to realize the carrying value of these assets; (vi) the
availability and cost of capital to Omega; (vii) changes in Omega’s
credit ratings and the ratings of its debt securities; (viii)
competition in the financing of healthcare facilities; (ix)
competition in the long-term healthcare industry and shifts in the
perception of various types of long-term care facilities, including
SNFs and ALFs; (x) changes in the financial position of Omega’s
operators; (xi) the effect of economic and market conditions
generally, and particularly in the healthcare industry; (xii)
changes in interest rates or the impact of inflation; (xiii) the
timing, amount and yield of any additional investments; (xiv)
changes in tax laws and regulations affecting REITs; (xv) the
potential impact of changes in the SNF and 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; (xvi)
Omega’s ability to maintain its status as a REIT; (xvii) the effect
of other factors affecting our business or the businesses of
Omega’s operators that are beyond Omega’s or operators’ control,
including natural disasters, other health crises or pandemics and
governmental action, particularly in the healthcare industry, and
(xviii) 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.
We caution you that the foregoing list of important factors may
not contain all the material factors that are important to you.
Accordingly, readers should not place undue reliance on those
statements. All forward-looking statements are based upon
information available to us on the date of this release. We
undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.
OMEGA HEALTHCARE INVESTORS,
INC.
CONSOLIDATED BALANCE
SHEETS
(in thousands, except per share
amounts)
September 30,
December 31,
2023
2022
(Unaudited)
ASSETS
Real estate assets
Buildings and improvements
$
7,119,240
$
7,347,853
Land
901,282
923,605
Furniture and equipment
471,164
499,902
Construction in progress
120,243
88,904
Total real estate assets
8,611,929
8,860,264
Less accumulated depreciation
(2,419,324
)
(2,322,773
)
Real estate assets – net
6,192,605
6,537,491
Investments in direct financing leases –
net
8,984
8,503
Real estate loans receivable – net
1,121,460
1,042,731
Investments in unconsolidated joint
ventures
187,541
178,920
Assets held for sale
67,530
9,456
Total real estate investments
7,578,120
7,777,101
Non-real estate loans receivable – net
245,001
225,281
Total investments
7,823,121
8,002,382
Cash and cash equivalents
554,705
297,103
Restricted cash
3,212
3,541
Contractual receivables – net
9,511
8,228
Other receivables and lease
inducements
199,530
177,798
Goodwill
643,335
643,151
Other assets
191,899
272,960
Total assets
$
9,425,313
$
9,405,163
LIABILITIES AND EQUITY
Revolving credit facility
$
19,530
$
19,246
Secured borrowings
289,615
366,596
Senior notes and other unsecured
borrowings – net
4,982,127
4,900,992
Accrued expenses and other liabilities
276,711
315,047
Total liabilities
5,567,983
5,601,881
Preferred stock $1.00 par value authorized
– 20,000 shares, issued and outstanding – none
—
—
Common stock $.10 par value authorized –
350,000 shares, issued and outstanding – 244,989 shares as of
September 30, 2023 and 234,252 shares as of December 31, 2022
24,498
23,425
Additional paid-in capital
6,657,211
6,314,203
Cumulative net earnings
3,625,580
3,438,401
Cumulative dividends paid
(6,666,439
)
(6,186,986
)
Accumulated other comprehensive income
28,143
20,325
Total stockholders’ equity
3,668,993
3,609,368
Noncontrolling interest
188,337
193,914
Total equity
3,857,330
3,803,282
Total liabilities and equity
$
9,425,313
$
9,405,163
OMEGA HEALTHCARE INVESTORS,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Unaudited
(in thousands, except per share
amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Revenues
Rental income
$
205,905
$
203,202
$
606,019
$
624,086
Real estate tax and ground lease
income
4,043
4,386
12,107
11,813
Income from direct financing leases
254
256
762
768
Real estate loans interest income
24,898
27,800
72,274
85,367
Non-real estate loans interest income
5,725
3,544
16,001
8,494
Miscellaneous income
1,207
242
3,258
2,866
Total revenues
242,032
239,430
710,421
733,394
Expenses
Depreciation and amortization
80,798
82,709
244,008
248,668
General and administrative
11,031
11,066
35,299
31,786
Real estate tax and ground lease
expense
4,392
4,542
13,180
12,596
Stock-based compensation expense
8,756
6,809
26,306
20,515
Acquisition, merger and transition related
costs
121
185
1,183
5,658
Impairment on real estate properties
27,890
10,015
87,992
21,221
Provision for credit losses
2,733
4,106
11,643
4,367
Interest expense
55,290
54,985
166,108
165,058
Interest – amortization of deferred
financing costs
3,488
3,253
9,992
9,697
Total expenses
194,499
177,670
595,711
519,566
Other income (expense)
Other income (expense) – net
5,402
(176
)
9,151
(5,038
)
Loss on debt extinguishment
—
(376
)
(6
)
(389
)
Gain on assets sold – net
44,076
40,930
69,956
179,747
Total other income
49,478
40,378
79,101
174,320
Income before income tax expense and
income from unconsolidated joint ventures
97,011
102,138
193,811
388,148
Income tax expense
(1,758
)
(1,191
)
(2,092
)
(3,535
)
(Loss) income from unconsolidated joint
ventures
(1,345
)
4,117
555
7,522
Net income
93,908
105,064
192,274
392,135
Net income attributable to noncontrolling
interest
(2,527
)
(2,790
)
(5,095
)
(10,787
)
Net income available to common
stockholders
$
91,381
$
102,274
$
187,179
$
381,348
Earnings per common share available to
common stockholders:
Basic:
Net income available to common
stockholders
$
0.37
$
0.44
$
0.78
$
1.61
Diluted:
Net income available to common
stockholders
$
0.37
$
0.43
$
0.78
$
1.60
Dividends declared per common share
$
0.67
$
0.67
$
2.01
$
2.01
OMEGA HEALTHCARE INVESTORS,
INC.
Nareit FFO, Adjusted FFO and
FAD Reconciliation
Unaudited
(in thousands, except per share
amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income (1)
$
93,908
$
105,064
$
192,274
$
392,135
Deduct gain from real estate
dispositions
(44,076
)
(40,930
)
(69,956
)
(179,747
)
Deduct gain from real estate dispositions
of unconsolidated joint ventures
—
(346
)
—
(93
)
Sub-total
49,832
63,788
122,318
212,295
Elimination of non-cash items included in
net income:
Depreciation and amortization
80,798
82,709
244,008
248,668
Depreciation - unconsolidated joint
ventures
2,514
2,627
7,941
8,258
Add back provision for impairments on real
estate properties
27,890
10,015
87,992
21,221
Nareit funds from operations (“Nareit
FFO”)
$
161,034
$
159,139
$
462,259
$
490,442
Weighted-average common shares
outstanding, basic
245,033
234,788
238,740
236,721
Restricted stock and PRSUs
3,825
1,744
2,701
1,138
Omega OP Units
7,097
6,752
6,974
6,863
Weighted-average common shares
outstanding, diluted
255,955
243,284
248,415
244,722
Nareit funds from operations available
per share
$
0.63
$
0.65
$
1.86
$
2.00
Adjustments to calculate adjusted funds
from operations
Nareit FFO
$
161,034
$
159,139
$
462,259
$
490,442
Add back:
Stock-based compensation expense
8,756
6,809
26,306
20,515
Uncollectible accounts receivable (2)
7,232
13,820
20,633
28,625
Non-cash provision for credit losses
3,916
6,894
17,884
10,082
Non-recognized cash interest
1,753
—
6,171
—
Acquisition, merger and transition related
costs
121
185
1,183
5,658
Non-recurring expense
—
—
1,893
3,000
Loss on debt extinguishment
—
376
6
389
Deduct:
Non-recurring revenue
(2,466
)
—
(12,781
)
(2,562
)
Add back (deduct) unconsolidated JV
related non-recurring loss (revenue)
1,834
(2,585
)
1,656
(2,585
)
Adjusted funds from operations (“AFFO”)
(1)(3)
$
182,180
$
184,638
$
525,210
$
553,564
Adjustments to calculate funds
available for distribution
Non-cash interest expense
$
2,459
$
2,224
$
6,905
$
6,610
Capitalized interest
(1,117
)
(815
)
(3,016
)
(2,299
)
Non-cash revenue
(9,889
)
(13,492
)
(35,608
)
(51,290
)
Funds available for distribution
(“FAD”) (1)(3)
$
173,633
$
172,555
$
493,491
$
506,585
(1)
The three and nine months ended September
30, 2023 includes the application of $5.9 million and $11.4
million, respectively, of security deposits (letters of credit and
cash deposits) in revenue. The three and nine months ended
September 30, 2022 includes the application of $5.3 million and
$9.4 million, respectively, of security deposits (letters of credit
and cash deposits) in revenue.
(2)
The nine months ended September 30, 2023
includes a $12.5 million lease inducement write-off recorded as a
reduction to rental income related to the Maplewood option
termination fee. All other amounts represent straight-line accounts
receivable write-offs also recorded as a reduction to rental
income.
(3)
Adjusted funds from operations per share
and funds available for distribution per share can be calculated
using weighted-average common shares outstanding, diluted, as shown
above.
Nareit Funds From Operations (“Nareit FFO”), Adjusted FFO and
Funds Available for Distribution (“FAD”) are non-GAAP financial
measures. As used in this press release, GAAP refers to generally
accepted accounting principles in the United States of America. The
Company has provided reconciliations of the non-GAAP financial
measures to the most directly comparable GAAP financial
measures.
The Company calculates and reports Nareit FFO in accordance with
the definition and interpretive guidelines issued by the National
Association of Real Estate Investment Trusts (“Nareit”), and
consequently, Nareit 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 and
changes in the fair value of warrants. Adjustments for
unconsolidated partnerships and joint ventures will be calculated
to reflect funds from operations on the same basis. Revenue
recognized based on the application of security deposits and
letters of credit or based on the ability to offset against other
financial instruments is included within Nareit FFO. The Company
believes that Nareit FFO, Adjusted FFO and FAD 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
funds from operations was designed by the real estate industry to
address this issue. Funds from operations described herein is not
necessarily comparable to funds from operations 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 Nareit FFO excluding the impact of
non-cash stock-based compensation and certain revenue and expense
items (e.g., acquisition, merger and transition related costs,
write-off of straight-line accounts receivable, recoveries and
provisions for credit losses (excluding certain cash recoveries on
impaired loans), cash interest received but not included in
revenue, non-recognized cash interest, severance, legal reserve
expenses, etc.). FAD is calculated as Adjusted FFO less non-cash
interest expense and non-cash revenue, such as straight-line rent.
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 and FAD may not be
comparable to the Nareit definition of funds from operations 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 FAD 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, funds from
operations can facilitate comparisons of operating performance
between periods. The Company offers these measures to assist the
users of its financial statements in analyzing its operating
performance. These non-GAAP measures are not measures of financial
performance under GAAP and should not be considered as measures of
liquidity or cash flow, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102515957/en/
Matthew Gourmand, SVP, Corporate Strategy & Investor
Relations or Bob Stephenson, CFO at (410) 427-1700
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