We have audited OHI Healthcare Properties
Limited Partnership’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). OHI Healthcare Properties Limited Partnership’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, OHI Healthcare Properties
Limited Partnership 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
OHI
Healthcare Properties Limited Partnership as of December 31, 2016 and 2015, and the related consolidated statements of operations,
comprehensive income, changes in owners’ equity, and cash flows for the year ended December 31, 2016 and the period from
April 1, 2015 (Aviv Merger date) to December 31, 2015 and our report dated August 9, 2017 expressed an unqualified opinion thereon.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Explanatory Note
Subsequent to December
31, 2016, all of the subsidiary guarantors of the outstanding senior notes of Omega Healthcare Investors, Inc. (“Omega”
or the “Company”) other than OHI Healthcare Properties Holdco, Inc. (“OHI Holdco”) and OHI Healthcare Properties
Limited Partnership (“Omega OP”) were released as guarantors of Omega’s senior notes. As a result, the composition
of Omega’s guarantor and non-guarantor subsidiaries has changed from the composition reflected in Note 22 of the consolidated
financial statements included in the original filing. Accordingly, this amendment provides the consolidated financial statements
of the current guarantors in lieu of the information previously set forth in Note 22 relating to the prior guarantor structure.
OHI Holdco and Omega OP do not directly own any substantive assets other than OHI Holdco’s equity interest in Omega OP and
Omega OP’s interest in non-guarantor subsidiaries.
Organization
Omega was incorporated
in the State of Maryland on March 31, 1992. All of Omega’s assets are owned directly or indirectly, and all of Omega’s operations
are conducted directly or indirectly, through its subsidiaries, OHI Holdco, a direct wholly owned subsidiary of Omega, and Omega
OP. OHI Holdco was formed as a corporation and incorporated in the State of Delaware on October 22, 2014. Omega OP was formed as
a limited partnership and organized in the State of Delaware on October 24, 2014. No substantive assets were owned or operating
activities occurred in either of these entities until the merger with Aviv REIT, Inc. on April 1, 2015. Unless stated otherwise
or the context otherwise requires, the terms the “Company,” “we,” “our” and “us”
means Omega, OHI Holdco and Omega OP, collectively.
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”). 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 Omega, Aviv, OHI Holdco, 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, all of Omega’s assets are held by Omega OP, through its equity interests
in its subsidiaries.
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, Omega and OHI Holdco are the general
partners of Omega OP, and have exclusive control over Omega OP’s day-to-day management. As of December 31, 2016, Omega and
OHI Holdco together 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) OHI Holdco (iii) Omega OP and (iv) all direct and indirect wholly owned subsidiaries
of Omega. All intercompany transactions and balances have been eliminated in consolidation, and our net earnings are reduced by
the portion of net earnings attributable to noncontrolling interests.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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:
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·
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Level 1 - quoted prices for identical
instruments in active markets;
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·
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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
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|
·
|
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
The 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:
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
|
·
|
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.
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|
·
|
Other assets acquired and liabilities assumed are typically valued at stated amounts, which approximate
fair value on the date of the acquisition.
|
|
·
|
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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).
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
A summary of our net receivables
by type is as follows:
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December 31,
|
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|
|
2016
|
|
|
2015
|
|
|
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(in thousands)
|
|
|
|
|
|
|
|
|
Contractual receivables
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|
$
|
13,376
|
|
|
$
|
8,452
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|
Effective yield interest receivables
|
|
|
9,749
|
|
|
|
9,028
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|
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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
OHI Holdco is a wholly
owned subsidiary of Omega and is a qualified REIT subsidiary for United States federal income tax purposes, and Omega OP is a pass
through entity for United States federal income tax purposes.
Omega and its wholly owned
subsidiaries 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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
Earnings Per Share/Unit
The computation of basic
earnings per share/unit (“EPS” or “EPU”) is computed by dividing net income available to common stockholders/Omega
OP Unit holders by the weighted-average number of shares of common stock/units outstanding during the relevant period. Diluted
EPS/EPU is computed using the treasury stock method, which is net income divided by the total weighted-average number of common
outstanding shares/Omega OP Units plus the effect of dilutive common equivalent shares/Omega OP Units during the respective period.
Dilutive common shares reflect the assumed issuance of additional common shares/Omega OP Units 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. Dilutive Omega OP Units reflect the assumed issuance
of additional Omega OP Units pursuant to certain of our share-based compensation plans, including stock options, restricted
stock and performance restricted stock. No per share information was provided for OHI Holdco because the sole stockholder is Omega.
OHI Holdco is a wholly owned subsidiary of Omega and has 1,000 shares of $0.01 par value per share common stock outstanding.
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,
Omega (through OHI Holdco, 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 and OHI Holdco together directly
and indirectly own approximately 96% of the outstanding Omega OP Units, and the other investors own approximately 4% of the outstanding
Omega OP Units.
Noncontrolling Interests
Noncontrolling interests
is the portion of equity not attributable to the respective reporting entity. 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, or partners’ 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.
The
noncontrolling interest for Omega represents the outstanding Omega OP Units held by outside investors. The noncontrolling interest
for OHI Holdco represents the Omega OP Units held by the Parent and the outstanding Omega OP Units held by outside investors.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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
|
|
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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
|
|
|
|
|
|
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
|
(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.
|
|
(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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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.
$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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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
(2)
|
|
|
|
|
|
|
|
|
|
|
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
(2)
|
|
|
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.
|
|
(2)
|
These amounts represent borrowings that were incurred by Omega OP or wholly owned subsidiaries of Omega OP.
|
Secured Borrowings
Mortgage Term Loan – Omega OP
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
HUD Mortgages Loans Payoff – Omega
OP
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 – Omega
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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 –
Omega
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
– Omega
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
– Omega
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
– Omega
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
– Omega
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
$600 Million 5.25% Senior Notes due 2026 – Omega
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
– Omega
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 – Omega
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 – Omega
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 – Omega OP
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. The guarantors of our outstanding senior notes, OHI Holdco and Omega OP, do not directly own any substantive
assets other than OHI Holdco’s interest in Omega OP and Omega OP’s interest in non-guarantor subsidiaries.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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
(1)
|
|
|
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
(1)
|
|
|
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
|
|
|
(1)
|
These amounts represent borrowings that were incurred by Omega OP or wholly owned subsidiaries of Omega OP.
|
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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
OHI Holdco is a wholly
owned subsidiary of Omega and is a qualified REIT subsidiary for United States federal income tax purposes, and Omega OP is a pass
through entity for United States federal income tax purposes.
Omega and its wholly
owned subsidiaries 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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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’/OWNERS’ 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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
$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.
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:
|
|
Omega
|
|
|
OHI Holdco
|
|
|
Omega OP
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
$
|
(52,495
|
)
|
|
$
|
(8,027
|
)
|
|
$
|
(12,028
|
)
|
|
$
|
(1,879
|
)
|
|
$
|
(54,948
|
)
|
|
$
|
(8,413
|
)
|
Cash flow hedge adjustments
|
|
|
(1,332
|
)
|
|
|
(685
|
)
|
|
|
(411
|
)
|
|
|
(160
|
)
|
|
|
(1,420
|
)
|
|
|
(718
|
)
|
Total accumulated other comprehensive loss
|
|
$
|
(53,827
|
)
|
|
$
|
(8,712
|
)
|
|
$
|
(12,439
|
)
|
|
$
|
(2,039
|
)
|
|
$
|
(56,368
|
)
|
|
$
|
(9,131
|
)
|
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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/Omega OP 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.
The following table summarizes
the activity in restricted stock and RSUs for the years ended December 31, 2014, 2015 and 2016:
|
|
Number of
Shares/Omega
OP 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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
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.
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.
On the same dates listed
above, Omega OP Unit holders received the same distributions per unit as those paid to the common stockholders of Omega.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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
the Omega, OHI Holdco and Omega OP’s quarterly results of operations for the years ended December 31, 2016 and 2015:
Omega
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
OHI Holdco
. (a)
|
|
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
|
|
|
12,902
|
|
|
|
24,994
|
|
|
|
17,688
|
|
|
|
27,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(b)
|
|
$
|
-
|
|
|
$
|
197,711
|
|
|
$
|
201,974
|
|
|
$
|
210,512
|
|
Net income
(b)
|
|
|
-
|
|
|
|
43,466
|
|
|
|
83,254
|
|
|
|
63,543
|
|
Net income available to common stockholders
(b)
|
|
|
-
|
|
|
|
9,912
|
|
|
|
18,788
|
|
|
|
14,161
|
|
Omega OP
|
|
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 Omega OP Unit
holders :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.30
|
|
|
$
|
0.57
|
|
|
$
|
0.40
|
|
|
$
|
0.63
|
|
Net income per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.29
|
|
|
$
|
0.57
|
|
|
$
|
0.40
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
(b)
|
|
$
|
-
|
|
|
$
|
197,711
|
|
|
$
|
201,974
|
|
|
$
|
210,512
|
|
Net income
(b)
|
|
|
-
|
|
|
|
43,466
|
|
|
|
83,254
|
|
|
|
63,543
|
|
Net income available to Omega OP Unit
holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
(b)
|
|
$
|
-
|
|
|
$
|
0.23
|
|
|
$
|
0.43
|
|
|
$
|
0.32
|
|
Net income per unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
(b)
|
|
$
|
-
|
|
|
$
|
0.22
|
|
|
$
|
0.43
|
|
|
$
|
0.32
|
|
|
(a)
|
No per share information was provided for OHI Holdco because the sole stockholder is Omega. OHI Holdco is a wholly owned subsidiary
of Omega and has 1,000 shares outstanding.
|
|
(b)
|
Prior to April 1, 2015, no substantive assets or activity occurred in OHI Holdco or Omega OP. The 2015 information reflects
the activity from April 1, 2015 (merger date) through December 31, 2015.
|
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
NOTE 21 - EARNINGS PER SHARE/UNIT
The following tables set
forth the computation of basic and diluted earnings per share/unit:
|
|
Omega
|
|
|
Omega OP
|
|
|
|
Year Ended December 31,
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands, except per share amounts)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
383,367
|
|
|
$
|
233,315
|
|
|
$
|
221,349
|
|
|
$
|
383,367
|
|
|
$
|
190,263
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
(16,952
|
)
|
|
|
(8,791
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income available to common stockholders/Omega OP Unit holders
|
|
$
|
366,415
|
|
|
$
|
224,524
|
|
|
$
|
221,349
|
|
|
$
|
383,367
|
|
|
$
|
190,263
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share/unit
|
|
|
191,781
|
|
|
|
172,242
|
|
|
|
126,550
|
|
|
|
200,679
|
|
|
|
193,843
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock equivalents
|
|
|
956
|
|
|
|
1,539
|
|
|
|
744
|
|
|
|
956
|
|
|
|
1,899
|
|
Noncontrolling interest –
Omega OP Units
|
|
|
8,898
|
|
|
|
6,727
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Denominator for diluted earnings per share/unit
|
|
|
201,635
|
|
|
|
180,508
|
|
|
|
127,294
|
|
|
|
201,635
|
|
|
|
195,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders/Omega OP Unit holders
|
|
$
|
1.91
|
|
|
$
|
1.30
|
|
|
$
|
1.75
|
|
|
$
|
1.91
|
|
|
$
|
0.98
|
|
Earnings per share/unit - diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.90
|
|
|
$
|
1.29
|
|
|
$
|
1.74
|
|
|
$
|
1.90
|
|
|
$
|
0.97
|
|
No per share information
was provided for OHI Holdco because the sole stockholder is Omega. OHI Holdco is a wholly owned subsidiary of Omega and has 1,000
shares outstanding.
NOTE 22 – SUBSEQUENT EVENTS
2017 Omega Credit Facilities
On May 25, 2017, we entered
into a credit agreement (the “2017 Omega Credit Agreement”) providing us with a new $1.8 billion senior unsecured revolving
and term loan credit facility, consisting of a $1.25 billion senior unsecured multicurrency revolving credit facility (the “2017
Revolving Credit Facility”), a $425 million senior unsecured U.S. Dollar term loan facility (the “2017 U.S. Term Loan
Facility”), and a £100 million senior unsecured British Pound Sterling term loan facility (the “2017 Sterling
Term Loan Facility” and, together with the 2017 Revolving Credit Facility and the 2017 U.S. Term Loan Facility, collectively,
the “2017 Omega Credit Facilities”). The 2017 Omega Credit Agreement contains an accordion feature permitting us,
subject to compliance with customary conditions, to increase the maximum aggregate commitments under the 2017 Omega Credit Facilities
to $2.5 billion.
The 2017 Omega Credit Facilities
replace the previous $1.25 billion senior unsecured 2014 revolving credit facility, the previous $200 million Tranche A-1 senior
unsecured term loan facility, and the previous $350 million Tranche A-3 senior unsecured incremental term loan facility established
under our 2014 credit agreement, which has been terminated (the “2014 Omega Credit Agreement”).
The 2017 Revolving Credit
Facility bears interest at LIBOR plus an applicable percentage (with a range of 100 to 195 basis points) based on our ratings from
Standard & Poor’s, Moody’s and/or Fitch Ratings. The 2017 Revolving Credit Facility matures on May 25, 2021, subject
to an option by us to extend such maturity date for two, six month periods. The 2017 Omega Credit Agreement provides for the 2017
Revolving Credit Facility to be drawn in Euros, British Pounds Sterling, Canadian Dollars (collectively, “Alternative Currencies”)
or U.S. Dollars, with a $900 million tranche available in U.S. Dollars and a $350 million tranche available in U.S. Dollars or
Alternative Currencies. For purposes of the 2017 Omega Credit Facilities, references to LIBOR include the Canadian dealer offered
rates for amounts offered in Canadian Dollars and any other Alternative Currency rate approved in accordance with the terms of
the 2017 Omega Credit Agreement for amounts offered in any other non-London interbank offered rate quoted currency, as applicable.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
The 2017 U.S. Term Loan
Facility and the 2017 Sterling Term Loan Facility bear interest at LIBOR plus an applicable percentage (with a range of 90 to 190
basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The 2017 U.S. Term Loan
Facility and the 2017 Sterling Term Loan Facility each mature on May 25, 2022.
In April 2017, we repaid
and terminated the $200 million Tranche A-2 senior unsecured term loan facility established under the 2014 Omega Credit Agreement.
For the three month period
ending June 30, 2017, we recorded a one-time, non-cash charge of approximately $5.5 million relating to the write-off of deferred
financing costs associated with the termination of the 2014 Omega Credit Facilities.
2017 Omega OP Term Loan Facility
On May 25, 2017, Omega
OP
entered into a credit agreement (the “2017 Omega OP
Credit Agreement”) providing it with a new $100
million senior unsecured term loan facility (the “2017 Omega OP
Term Loan Facility”). The 2017 Omega OP Credit
Agreement replaces the $100 million senior unsecured term loan facility obtained in 2015 (the “2015 Omega OP
Term
Loan Facility”) and the related credit agreement (the “2015 Omega OP
Credit Agreement”). The 2017 Omega
OP
Term Loan Facility bears interest at LIBOR plus an applicable percentage (with a range of 90 to 190 basis points) based
on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The 2017 Omega OP
Term Loan Facility
matures on May 25, 2022.
Omega OP’s obligations
in connection with the 2017 Omega OP Term Loan Facility are not currently guaranteed, but will be jointly and severally guaranteed
by any domestic subsidiary of Omega OP that provides a guaranty of any unsecured indebtedness of Omega or Omega OP for borrowed
money evidenced by bonds, debentures, notes or other similar instruments in an amount of at least $50 million individually or
in the aggregate.
$550 Million 4.75% Senior Notes and $150
Million 4.5% Senior Notes
On April 4, 2017, we issued
(i) $550 million aggregate principal amount of our 4.75% Senior Notes due 2028 (the “2028 Notes”) and (ii) an additional
$150 million aggregate principal amount of our existing 4.50% Senior Notes due 2025 (the “2025 Notes”, and together
with the 2028 Notes collectively, the “Notes”).
The
2028 Notes mature on January 15, 2028 and the 2025 Notes mature on January 15, 2025.
The 2028 Notes were sold
at an issue price of 98.978% of their face value before the underwriters’ discount and the 2025 Notes were sold at an issue
price of 99.540% of their face value before the underwriters’ discount. Our net proceeds from the Notes offering, after
deducting underwriting discounts and expenses, were approximately $690.7 million. The net proceeds from the Notes offering were
used to (i) redeem all of our outstanding $400 million aggregate principal amount of 5.875% Senior Notes due 2024 (the “5.875%
Notes”) on April 28, 2017, (ii) prepay the $200 million Tranche A-2 Term Loan Facility on April 5, 2017 that otherwise would
have become due on June 27, 2017, and (iii) repay outstanding borrowings under our revolving credit facility.
$400 Million 5.875% Senior Notes Redemption
On April 28, 2017, we redeemed
all of our outstanding 5.875% Notes. As a result of the redemption, during the second quarter of 2017, we recorded approximately
$16.5 million in redemption related costs and write-offs, including $11.8 million for the call premium and $4.7 million in net
write-offs associated with unamortized deferred financing costs.
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
OMEGA HEALTHCARE INVESTORS, INC., OHI HEALTHCARE
PROPERTIES HOLDCO, INC. AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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
|
|
|
|
|
|
|
Land
|
|
|
|
Buildings and
|
|
|
|
|
|
|
|
Carrying
|
|
|
|
(6)
|
|
|
|
Land
|
|
|
|
Buildings and
|
|
|
|
Total
|
|
|
|
Accumulated
|
|
|
Date of
|
|
Date
|
|
Income Statements
|
|
Description
(1)
|
|
Encumbrances
|
|
|
|
|
|
|
Improvements
|
|
|
|
Improvements
|
|
|
|
Cost
|
|
|
|
Other
|
|
|
|
|
|
|
|
Improvements
|
|
|
|
|
|
|
|
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
|
|
|
1964-1970
|
|
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
|
|
|
1959-1977
|
|
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 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, impairments, land easements and impacts from foreign currency exchange rates.
|
OMEGA HEALTHCARE INVESTORS, INC.,
OHI HEALTHCARE PROPERTIES HOLDCO, INC., AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
– Continued
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
OMEGA HEALTHCARE INVESTORS, INC., OHI HEALTHCARE
PROPERTIES HOLDCO, INC. AND OHI HEALTHCARE PROPERTIES LIMITED PARTNERSHIP
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
|
|