10-Q 1 ohi-20240331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                           to                           

OMEGA HEALTHCARE INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Maryland

1-11316

38-3041398

(State or other jurisdiction of incorporation or
organization)

(Commission file number)

(IRS Employer Identification No.)

303 International Circle, Suite 200, Hunt Valley, MD 21030

(Address of principal executive offices)

(410) 427-1700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.10 par value

OHI

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  

No

As of April 30, 2024, there were 247,098,960 shares of common stock outstanding.

OMEGA HEALTHCARE INVESTORS, INC.

FORM 10-Q

March 31, 2024

TABLE OF CONTENTS

Page
No.

PART I

Financial Information

Item 1.

Financial Statements of Omega Healthcare Investors, Inc. (Unaudited):

Consolidated Balance Sheets

2

Consolidated Statements of Operations

3

Consolidated Statements of Comprehensive Income

4

Consolidated Statements of Equity

5

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

48

PART II

Other Information

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 5.

Other Information

49

Item 6.

Exhibits

50

PART I – FINANCIAL INFORMATION

Item 1 - Financial Statements

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

    

March 31, 

    

December 31, 

    

2024

    

2023

(Unaudited)

ASSETS

Real estate assets

 

  

 

  

Buildings and improvements

$

6,866,358

 

$

6,879,034

Land

865,028

867,486

Furniture and equipment

467,178

467,393

Construction in progress

162,269

138,410

Total real estate assets

8,360,833

8,352,323

Less accumulated depreciation

 

(2,526,536)

 

 

(2,464,227)

Real estate assets – net

 

5,834,297

 

 

5,888,096

Investments in direct financing leases – net

 

8,873

 

 

8,716

Real estate loans receivable – net

 

1,246,528

 

 

1,212,162

Investments in unconsolidated joint ventures

 

185,937

 

 

188,409

Assets held for sale

 

81,546

 

 

81,546

Total real estate investments

7,357,181

7,378,929

Non-real estate loans receivable – net

 

269,342

 

 

275,615

Total investments

 

7,626,523

 

 

7,654,544

Cash and cash equivalents

 

361,773

 

 

442,810

Restricted cash

 

1,253

 

 

1,920

Contractual receivables – net

 

10,973

 

 

11,888

Other receivables and lease inducements

223,281

214,657

Goodwill

 

643,778

 

 

643,897

Other assets

 

144,267

 

 

147,686

Total assets

$

9,011,848

 

$

9,117,402

LIABILITIES AND EQUITY

 

  

 

 

  

Revolving credit facility

$

20,213

 

$

20,397

Secured borrowings

 

20,145

 

 

61,963

Senior notes and other unsecured borrowings – net

 

4,987,794

 

 

4,984,956

Accrued expenses and other liabilities

 

283,103

 

 

287,795

Total liabilities

 

5,311,255

 

 

5,355,111

Preferred stock $1.00 par value authorized – 20,000 shares, issued and outstanding – none

Common stock $0.10 par value authorized – 350,000 shares, issued and outstanding – 246,377 shares as of March 31, 2024 and 245,282 shares as of December 31, 2023

 

24,637

 

24,528

Additional paid-in capital

 

6,705,333

 

6,671,198

Cumulative net earnings

 

3,747,942

 

3,680,581

Cumulative dividends paid

 

(6,995,876)

 

(6,831,061)

Accumulated other comprehensive income

 

31,852

 

29,338

Total stockholders’ equity

 

3,513,888

 

3,574,584

Noncontrolling interest

 

186,705

 

187,707

Total equity

 

3,700,593

 

3,762,291

Total liabilities and equity

$

9,011,848

 

$

9,117,402

See notes to consolidated financial statements.

2

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

Three Months Ended

    

March 31, 

    

2024

    

2023

Revenues

Rental income

$

206,921

$

189,331

Interest income

 

35,836

 

28,420

Miscellaneous income

 

542

 

451

Total revenues

 

243,299

 

218,202

Expenses

 

  

 

  

Depreciation and amortization

 

74,557

 

81,192

General and administrative

 

21,532

 

20,526

Real estate taxes

3,798

3,997

Acquisition, merger and transition related costs

 

2,603

 

639

Impairment on real estate properties

 

5,292

 

38,988

Provision (recovery) for credit losses

 

8,470

 

(4,057)

Interest expense

 

57,820

 

58,546

Total expenses

 

174,072

 

199,831

Other income (expense)

 

 

  

Other income – net

 

5,276

 

2,720

Loss on debt extinguishment

 

(1,283)

 

(6)

(Loss) gain on assets sold – net

(1,391)

13,637

Total other income

 

2,602

 

16,351

Income before income tax (expense) benefit and income from unconsolidated joint ventures

 

71,829

 

34,722

Income tax (expense) benefit

 

(2,581)

 

1,292

Income from unconsolidated joint ventures

 

98

 

831

Net income

 

69,346

 

36,845

Net income attributable to noncontrolling interest

 

(1,985)

 

(903)

Net income available to common stockholders

$

67,361

$

35,942

Earnings per common share available to common stockholders:

 

  

 

  

Basic:

 

  

 

  

Net income available to common stockholders

$

0.27

$

0.15

Diluted:

 

  

 

  

Net income available to common stockholders

$

0.27

$

0.15

See notes to consolidated financial statements.

3

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(in thousands)

Three Months Ended

    

March 31, 

    

2024

    

2023

Net income

$

69,346

$

36,845

Other comprehensive income (loss)

 

 

  

Foreign currency translation

 

(4,288)

 

10,793

Cash flow hedges

 

6,877

 

(9,550)

Total other comprehensive income

 

2,589

 

1,243

Comprehensive income

 

71,935

 

38,088

Comprehensive income attributable to noncontrolling interest

 

(2,060)

 

(938)

Comprehensive income attributable to common stockholders

$

69,875

$

37,150

See notes to consolidated financial statements.

4

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended March 31, 2024 and 2023

Unaudited

(in thousands, except per share amounts)

Accumulated

Common

Additional

Cumulative

Cumulative

Other

Total

Stock

Paid-in

Net

Dividends

Comprehensive

Stockholders’

Noncontrolling

Total

    

Par Value

    

Capital

    

Earnings

    

Paid

    

Income

    

Equity

    

Interest

    

Equity

Balance at December 31, 2023

$

24,528

$

6,671,198

$

3,680,581

$

(6,831,061)

$

29,338

$

3,574,584

$

187,707

$

3,762,291

Stock related compensation

9,284

9,284

9,284

Issuance of common stock

108

32,242

32,350

32,350

Common dividends declared ($0.67 per share)

(164,815)

(164,815)

(164,815)

Vesting/exercising of Omega OP Units

(7,722)

(7,722)

7,722

Conversion and redemption of Omega OP Units to common stock

1

331

332

(332)

Omega OP Units distributions

(10,452)

(10,452)

Other comprehensive income

2,514

2,514

75

2,589

Net income

67,361

67,361

1,985

69,346

Balance at March 31, 2024

$

24,637

$

6,705,333

$

3,747,942

$

(6,995,876)

$

31,852

$

3,513,888

$

186,705

$

3,700,593

Balance at December 31, 2022

$

23,425

$

6,314,203

$

3,438,401

$

(6,186,986)

$

20,325

$

3,609,368

$

193,914

$

3,803,282

Stock related compensation

8,792

8,792

8,792

Issuance of common stock

9

1,976

1,985

1,985

Common dividends declared ($0.67 per share)

(157,427)

(157,427)

(157,427)

Vesting/exercising of Omega OP Units

(2,811)

(2,811)

2,811

Omega OP Units distributions

(9,131)

(9,131)

Capital contribution from noncontrolling interest holder in consolidated JV

22

22

Other comprehensive income

1,208

1,208

35

1,243

Net income

35,942

35,942

903

36,845

Balance at March 31, 2023

$

23,434

$

6,322,160

$

3,474,343

$

(6,344,413)

$

21,533

$

3,497,057

$

188,554

$

3,685,611

See notes to consolidated financial statements.

5

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited (in thousands)

    

Three Months Ended March 31, 

    

2024

    

2023

Cash flows from operating activities

 

  

 

  

Net income

$

69,346

$

36,845

Adjustment to reconcile net income to net cash provided by operating activities:

 

 

  

Depreciation and amortization

 

74,557

 

81,192

Impairment on real estate properties

 

5,292

 

38,988

Provision for rental income

 

 

12,500

Provision (recovery) for credit losses

 

8,470

 

(4,057)

Amortization of deferred financing costs and loss on debt extinguishment

 

4,959

 

3,259

Accretion of direct financing leases

 

34

 

26

Stock-based compensation expense

 

9,227

 

8,744

Loss (gain) on assets sold – net

 

1,391

 

(13,637)

Amortization of acquired in-place leases – net

 

(531)

 

(6,131)

Straight-line rent and effective interest receivables

 

(9,201)

 

(12,576)

Interest paid-in-kind

(3,575)

(2,555)

Loss from unconsolidated joint ventures

827

137

Change in operating assets and liabilities – net:

 

 

  

Contractual receivables

 

915

 

180

Lease inducements

 

233

 

(12,323)

Other operating assets and liabilities

 

(10,470)

 

(19,232)

Net cash provided by operating activities

 

151,474

 

111,360

Cash flows from investing activities

 

 

Acquisition of real estate

 

(13,262)

 

(26,383)

Net proceeds from sale of real estate investments

 

10,089

 

17,559

Investments in construction in progress

 

(14,506)

 

(4,780)

Placement of loan principal

 

(48,113)

 

(31,240)

Collection of loan principal

 

14,342

 

52,011

Investments in unconsolidated joint ventures

(61)

Distributions from unconsolidated joint ventures in excess of earnings

 

942

 

382

Capital improvements to real estate investments

 

(6,941)

 

(5,340)

Proceeds from net investment hedges

 

8,429

 

Receipts from insurance proceeds

 

1,627

 

448

Net cash (used in) provided by investing activities

 

(47,454)

 

2,657

Cash flows from financing activities

 

  

 

  

Payments of long-term borrowings

 

(41,878)

 

(1,913)

Payments of financing related costs

 

(1,283)

 

(6)

Net proceeds from issuance of common stock

 

32,350

 

1,985

Dividends paid

 

(164,758)

 

(157,379)

Net payments to noncontrolling members of consolidated joint venture

 

 

22

Distributions to Omega OP Unit Holders

 

(10,452)

 

(9,131)

Net cash used in financing activities

 

(186,021)

 

(166,422)

Effect of foreign currency translation on cash, cash equivalents and restricted cash

 

297

 

279

Decrease in cash, cash equivalents and restricted cash

 

(81,704)

 

(52,126)

Cash, cash equivalents and restricted cash at beginning of period

 

444,730

 

300,644

Cash, cash equivalents and restricted cash at end of period

$

363,026

$

248,518

See notes to consolidated financial statements.

6

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

March 31, 2024

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Business Overview and Organization

Omega Healthcare Investors, Inc. (“Parent”) is a Maryland corporation that, together with its consolidated subsidiaries (collectively, “Omega,” the “Company,” “we,” “our” or “us”) invests 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”), assisted living facilities (“ALFs”), and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings. Our core portfolio consists of long-term “triple net” leases and real estate loans with healthcare operating companies and affiliates (collectively, our “operators”). In addition to our core investments, we make loans to operators and/or their principals. From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.

Omega has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes and is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through, its operating partnership subsidiary, OHI Healthcare Properties Limited Partnership (collectively with its subsidiaries, “Omega OP”). Omega has exclusive control over Omega OP’s day-to-day management pursuant to the partnership agreement governing Omega OP. As of March 31, 2024, Parent owned 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned 3% of the outstanding Omega OP Units.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and notes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the interim periods reported herein are not necessarily indicative of results to be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Omega’s consolidated financial statements include the accounts of Omega Healthcare Investors, Inc., its wholly-owned subsidiaries and the joint ventures (“JVs”) and variable interest entities (“VIEs”) that it controls, through voting rights or other means. All intercompany transactions and balances have been eliminated in consolidation.

Segments

We conduct our operations and report financial results as one business segment. The presentation of financial results as one reportable segment is consistent with the way we operate our business and is consistent with the manner in which our Chief Operating Decision Maker (CODM), our Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business.

7

Reclassification

Certain amounts in the prior year period have been reclassified to conform to the current period presentation. Income from direct financing leases, which was previously reported separately on our Consolidated Statements of Operations, is now included in Rental Income for all periods presented. In addition, we previously reported assets held for sale of $93.7 million on the Consolidated Balance Sheet as of December 31, 2023. $12.2 million of these assets no longer qualify as held for sale and have been reclassified to assets held for use within the applicable line items in real estate assets – net on the Consolidated Balance Sheet as of December 31, 2023. See further discussion on the held for sale reclassification in Note 3 – Assets Held for Sale, Dispositions and Impairments.

NOTE 2 – REAL ESTATE ASSETS

At March 31, 2024, our leased real estate properties included 589 SNFs, 189 ALFs, 19 ILFs, 19 specialty facilities and one medical office building. The following table summarizes the Company’s rental income:

Three Months Ended March 31,

2024

2023

(in thousands)

Fixed income from operating leases

$

203,292

$

185,327

Variable income from operating leases

3,377

3,750

Interest income from direct financing leases

252

254

Total rental income

$

206,921

$

189,331

Our variable income from operating leases primarily represents the reimbursement by operators for real estate taxes that Omega pays directly.

Asset Acquisitions

The following table summarizes the asset acquisitions that occurred during the three months ended March 31, 2024:

Number of

Total Real Estate

Initial 

    

 Facilities

    

    

Assets Acquired

    

Annual

Period

SNF

ALF

Country/State

(in millions)

Cash Yield(1) 

Q1

1

 

WV

$

8.1

10.0

%

Q1

1

U.K.

5.2

9.5

%

Total

 

1

1

 

$

13.3

 

(1)Initial annual cash yield reflects the initial annual contractual cash rent divided by the purchase price.

Construction in Progress and Capital Expenditure Investments

We invested $21.4 million and $10.1 million under our construction in progress and capital improvement programs during the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, construction in progress included two projects consisting of the development of a SNF in Virginia and an ALF in Washington D.C.

NOTE 3 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

Periodically we sell facilities to reduce our exposure to certain operators, geographies and non-strategic assets or due to the exercise of a tenant purchase option.

8

The following is a summary of our assets held for sale:

March 31, 

December 31,

2024

  

2023

Number of facilities held for sale

16

16

Amount of assets held for sale (in thousands)

$

81,546

$

81,546

In the first quarter of 2024, we reclassified one facility with a net book value of $12.2 million from assets held for sale to assets held for use within the applicable line items in real estate assets – net. Of the $12.2 million reclassified net of $5.4 million of accumulated depreciation, $15.9 million relates to buildings, $0.6 million relates to land and $1.1 relates to furniture and equipment. We originally reclassified this facility as held for sale in the fourth quarter of 2023 as a result of receiving a notification from an operator of their intent to exercise a purchase option over the facility. Due to regulatory issues encountered in the first quarter of 2024 during the due diligence process that limit our ability to sell this facility, this facility no longer qualifies as an asset held for sale.

Asset Sales

During the three months ended March 31, 2024, we sold four facilities (four SNFs) subject to operating leases for $10.1 million in net cash proceeds. As a result of these sales, we recognized a net loss of $1.4 million.

During the three months ended March 31, 2023, we sold two facilities (one SNF and one medical office building) subject to operating leases for $17.6 million in net cash proceeds. As a result of these sales, we recognized a net gain of $13.6 million.