Restructuring pays off with limited decline in long-term cash flow, says Omega CEO

Omega CEO Taylor Pickett

Omega Healthcare Investors, based in Hunt Valley, Maryland, saw sequential improvement in adjusted operating funds and funds available for distribution during the second quarter, CEO Taylor Pickett said on Tuesday during the latest earnings call. the real estate investment trust. The reason, he said, is that the REIT’s restructured operators started paying their contractual rent obligations again during the quarter.

“The ability to restructure portfolios has improved the ADF [funds available for distribution] payout rate of 7%. We plan over time to put additional portfolios back to work, further improving our payout ratio and liquidity,” Pickett said.

Because the REIT’s portfolio assets are strong, he said, the company is able to handle operator restructurings with limited decline in long-term cash flow. Executives provided stock updates with several portfolio companies.

Omega has completed all restructuring work related to Gulf Coast Health Care. Omega completed the sale of the majority of the Gulf Coast portfolio in the first quarter for $318 million. Under this restructuring plan, Omega sold 12 facilities and vacated eight facilities, as planned. Beginning in April, Guardian resumed paying contractual rents and interest.

Furthermore, after several months of work to bring its lease with Agemo back into conformity following the operator’s inability to honor its rental obligations, Omega is “on the right track to restructuring” the Agemo portfolio, which represents approximately 6 % of contractual rents, according to Picket. None of that contractual rent was accrued in the second quarter, he added.

The REIT’s overall portfolio, Pickett said in a press release issued in conjunction with the earnings call, “is seeing steady occupancy growth, with the labor market also showing signs of improvement.” Additionally, we continue to see a strong appetite for our assets, as evidenced by the robust trading market, and we believe the long-term financial impact on the business of resolving these operator issues should be relatively modest.

Occupancy continues to rise for skilled nursing assets at Omega, he said.

In the senior living portfolio, COO Dan Booth added: “Based on preliminary results, occupancy…returned to 87.9% in mid-July 2022 vs. 83% in January 2022.”

As of June 30, Omega’s overall senior housing portfolio included 181 assisted living, self-catering and memory care properties in the United States and United Kingdom.

Omega’s balance sheet remains strong, said Chief Financial Officer Bob Stephenson, “thanks to the steps we’ve taken throughout 2021 and the first half of 2022 to further improve our liquidity, capital stack maturity ladder and the overall cost of debt”.

Omega made $73 million in new investments during the second quarter. REIT net income for the quarter of $92 million, or $0.38 per common share, compared to $87 million, or $0.36 per common share, for the same period in 2021.

According to the press release, as of June 30, Omega had $5.4 billion in debt outstanding with a weighted average annual interest rate of 4.17%. The REIT’s debt consisted of $4.9 billion aggregate principal amount of senior unsecured notes, a $50 million unsecured term loan, $378 million of secured debt and $38 million of outstanding borrowings under its unsecured revolving credit facility.

As of June 30, total cash and cash equivalents were $164.9 million, and the REIT had $1.4 billion of unused capacity on its unsecured revolving credit facility. .


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