Omega Reports Second Quarter 2024 Results and Recent Developments

Completed $648 Million in New Investments Year-to-Date

Increased Full Year Adjusted FFO Guidance

Omega Healthcare Investors, Inc. (NYSE: OHI) (the “Company” or “Omega”) announced today its results for the quarter ended June 30, 2024.

SECOND QUARTER 2024 AND RECENT HIGHLIGHTS

Net income for the quarter of $117 million, or $0.45 per common share, compared to $62 million, or $0.25 per common share, for Q2 2023.
Nareit Funds From Operations (“Nareit FFO”) for the quarter of $189 million, or $0.72 per common share, on 262 million weighted-average common shares outstanding, compared to $155 million, or $0.63 per common share, on 246 million weighted-average common shares outstanding, for Q2 2023.
Adjusted Funds From Operations (“Adjusted FFO” or “AFFO”) for the quarter of $185 million, or $0.71 per common share, compared to $183 million, or $0.74 per common share, for Q2 2023.
Funds Available for Distribution (“FAD”) for the quarter of $177 million, or $0.68 per common share, compared to FAD of $173 million, or $0.70 per common share, for Q2 2023.
Completed $221 million in Q2 new investments consisting of $115 million in real estate acquisitions and $106 million in real estate loans.
Issued 8 million common shares for gross proceeds of $245 million.
Repaid $400 million of senior unsecured notes.
Completed $373 million in new investments in Q3 2024 to date, which includes the assumption of a $243 million mortgage loan.

Nareit FFO, AFFO and FAD are supplemental non-GAAP financial measures that the Company believes are useful in evaluating the performance of real estate investment trusts (“REITs”). Reconciliations and further information regarding these non-GAAP measures are provided at the end of this press release.

CEO COMMENTS

Taylor Pickett, Omega’s Chief Executive Officer, stated, “Our second quarter financial performance showed strong sequential improvement, driven primarily by accretive investments and the resolution of portfolio restructurings.”

Mr. Pickett continued, “We have accretively invested approximately $648 million year-to-date through July and the pipeline remains strong. Additionally, we have seen continued improvement in the operating metrics of our tenants, with a further uptick in average portfolio coverage and a meaningful decline in the percentage of operators below 1.0x EBITDAR coverage. As a result, we are increasing our 2024 AFFO guidance to be between $2.78 and $2.84 per share from our previous guidance of between $2.70 and $2.80 per share.”

Mr. Pickett concluded, “This industry has faced some of its most challenging times in the past four years. During this period, our operators and their brave staff have worked diligently to care for a particularly vulnerable segment of our society. As operations improve and financial challenges recede, we hope that both federal and state governments will continue to support this vital part of the healthcare continuum and enable operators to remain focused on providing exceptional clinical care.”

SECOND QUARTER 2024 RESULTS

Revenues – Revenues for the quarter ended June 30, 2024 totaled $252.7 million, an increase of $2.6 million over the same period in 2023. The increase primarily resulted from (i) revenue from new investments completed throughout 2023 and 2024 and (ii) the timing and impact of operator restructurings and transitions. The increase was partially offset by a decrease in revenue from asset sales completed throughout 2023 and 2024.

Expenses – Expenses for the quarter ended June 30, 2024 totaled $149.9 million, a decrease of $51.5 million over the same period in 2023. The decrease primarily resulted from (i) a decrease in provision for credit losses, (ii) a decrease in impairment on real estate properties, (iii) a decrease in depreciation and amortization expense and (iv) a decrease in interest expense, partially offset by an increase in acquisition, merger and transition related costs.

Other Income and Expense – Other income for the quarter ended June 30, 2024 totaled $16.1 million, an increase of $2.8 million over the same period in 2023. The increase primarily resulted from (i) an increase in other income – net and (ii) an increase in gain on assets sold, partially offset by an increase in loss on debt extinguishment.

Net Income – Net income for the quarter ended June 30, 2024 totaled $117.1 million, an increase of $55.6 million over the same period in 2023. The net increase primarily resulted from the aforementioned (i) $51.5 million decrease in total expenses, (ii) $2.8 million increase in other income and expense, (iii) $2.6 million increase in total revenue and (iv) a $0.9 million decrease in income from unconsolidated joint ventures.

2024 SECOND QUARTER PORTFOLIO AND RECENT ACTIVITY

Operator Updates:

LaVie – As previously disclosed, LaVie Care Centers, LLC (“LaVie”) filed for Chapter 11 bankruptcy protection in June 2024. The Company committed $10 million of debtor-in-possession financing to LaVie ($4.5 million outstanding on June 30, 2024), in order to support sufficient liquidity to effectively operate its facilities during bankruptcy. As part of our debtor-in-possession loan commitment, during the period of bankruptcy protection, LaVie is required to pay the Company full contractual rent on the properties LaVie continues to lease from Omega. Prior to its filing bankruptcy, LaVie paid $1.5 million in each of April and May 2024. Following the bankruptcy filing, LaVie paid full contractual rent of approximately $3.0 million in each of June and July 2024.

Maplewood – In July 2024, Omega reached an agreement with the estate of the deceased principal and CEO of Maplewood Senior Living (“Maplewood”) to transition control of Maplewood, including assumption of Omega’s lease and loan agreements, to key members of the existing Maplewood management team. The agreement is subject to court approval. In the second quarter of 2024, Maplewood paid $11.8 million in rent (compared to $11.3 million in the first quarter). In July 2024, Maplewood paid $4.0 million in rent.

Guardian – In April 2024, the Company transitioned its remaining six Guardian facilities to a new operator for minimum initial annual contractual rent of $5.5 million with the potential to increase contractual rent dependent on revenue received by the operator. The Company received contractual rent of $2.8 million from the new operator during the second quarter of 2024, which consisted of $1.3 million of base minimum rent and $1.5 million of incremental revenue based on the revenue received by the operator.

New Investments:

The following table presents investment activity for the three and six months ended June 30, 2024:

Three Months Ended

Six Months Ended

Investment Activity ($000’s)

June 30, 2024

$ Amount

Real property

114,727

45.2

127,996

38.9

Real estate loans receivable

105,895

41.7

147,137

44.7

Total real property and loan investments

220,622

86.9

275,133

83.6

Construction-in-progress

25,901

10.2

40,689

12.4

Capital expenditures

7,456

2.9

13,120

4.0

Total capital investments

33,357

13.1

53,809

16.4

Total

253,979

100.0

328,942

100.0

$115 Million in Real Estate Acquisitions – In three separate second quarter transactions, the Company acquired 34 facilities for aggregate consideration of $114.7 million and leased them to an existing operator and two new operators. The investments have a combined initial annual cash yield of 10.4% with annual escalators ranging from 2.0% to 2.5%.

$106 Million in Real Estate Loans – In four separate second quarter transactions, the Company funded $105.9 million in mortgage and other real estate loans. The loans have a weighted-average interest rate of 10.4%.

$373 Million in Q3 2024 Investments – As of July 31, 2024, the Company closed on $373.0 million in new investments, comprised of:

$5 Million Real Estate Acquisition – In July 2024, the Company acquired a facility in the U.K. for $5.1 million and leased the facility to an existing operator. The investment has an initial annual cash yield of 10.0% with an escalator of 2.5%.

$341 Million Real Estate Acquisition – In July 2024, the Company acquired the remaining 51% equity interest in the unconsolidated Cindat joint venture (“Cindat JV”) for total cash consideration of $97.4 million, excluding related transaction costs, and the assumption of a $243.2 million mortgage loan, which can be repaid without a prepayment penalty beginning November 2025. The mortgage loan bears interest at SONIA plus an applicable margin of 5.38% with a 10.38% interest rate ceiling. The Company’s 49% ownership interest in the unconsolidated Cindat JV was valued at $95.3 million at June 30, 2024. With the acquisition of the remaining 51% equity and assumption of the mortgage loan, the Company’s total investment in the 63 U.K. facilities is approximately $435.9 million. The 63 facilities are leased to two operators for current annual contractual rent of $43.6 million with minimum escalators, between 1.0% to 2.0%. Following the acquisition, the Company owns 100% of the entity, and accordingly in the third quarter will consolidate the Cindat JV’s results in its financial statements.

$27 Million Real Estate Loan – In July 2024, the Company funded a $27.3 million real estate loan. The loan bears interest at 10% and has a 6-year term.

Through July 31, 2024, the Company has completed $648.1 million in new investments in 2024, excluding investments in construction-in-progress and capital expenditures.

Asset Sales and Impairments:

$35 Million in Asset Sales – In the second quarter of 2024, the Company sold five facilities for $34.8 million in cash, recognizing a gain of $12.9 million.

Impairments – During the second quarter of 2024, the Company recorded an $8.2 million net impairment charge to reduce the net book value of four facilities to their estimated fair value.

Assets Held for Sale – As of June 30, 2024, the Company had 15 facilities classified as assets held for sale, totaling $76.6 million in net book value. In July, the Company sold two of the 15 facilities for $11.8 million in cash proceeds.

OPERATOR COVERAGE DATA

The following tables present operator revenue mix, census and coverage data based on information provided by the Company’s operators for the indicated periods. The Company has not independently verified this information, and it is providing this data for informational purposes only.

Operator Revenue Mix (1)

Medicare /

Private /

Medicaid

Insurance

Other

Three-months ended March 31, 2024

52.7

30.0

17.3

Three-months ended December 31, 2023

55.3

28.0

16.7

Three-months ended September 30, 2023

55.5

28.0

16.5

Three-months ended June 30, 2023

54.0

30.0

16.0

Three-months ended March 31, 2023

53.0

31.8

15.2

(1)

Excludes all facilities considered non-core and does not include federal stimulus revenue. For non-core definition, see Second Quarter 2024 Financial Supplemental posted in the “Quarterly Supplements” section of Omega’s website.

Coverage Data

Before

After

Occupancy (2)

Management

Operator Census and Coverage (1)

Fees (3)

Fees (4)

Twelve-months ended March 31, 2024

80.2

1.78x

1.42x

Twelve-months ended December 31, 2023

79.6

1.69x

1.33x

Twelve-months ended September 30, 2023

79.1

1.63x

1.28x

Twelve-months ended June 30, 2023

78.6

1.50x

1.15x

Twelve-months ended March 31, 2023

78.0

1.44x

1.10x

(1)

Excludes facilities considered non-core. For information regarding non-core facilities, see the most recent Quarterly Supplement posted on the Company’s website.

(2)

Based on available (operating) beds.

(3)

Represents EBITDARM of our operators, defined as earnings before interest, taxes, depreciation, amortization, Rent costs and management fees for the applicable period, divided by the total Rent payable to the Company by its operators during such period. “Rent” refers to the total monthly contractual rent and mortgage interest due under the Company’s lease and mortgage agreements over the applicable period.

(4)

Represents EBITDAR of our operators, defined as earnings before interest, taxes, depreciation, amortization, and Rent (as defined in footnote 3) expense for the applicable period, divided by the total Rent payable to the Company by its operators during such period. Assumes a management fee of 4%.

FINANCING ACTIVITIES

Dividend Reinvestment and Common Stock Purchase Plan and ATM Program – The following is a summary of the 2024 quarterly Common Stock Purchase Plan and ATM Program through June 30:

Dividend Reinvestment and Common Stock Purchase Plan for 2024

(in thousands, except price per share)

Total

Number of shares

413

442

Average price per share

30.44

31.52

31.45

Gross proceeds

882

13,015

13,897

ATM Program for 2024

(in thousands, except price per share)

Total

Number of shares

1,041

7,212

8,253

Average price per share

31.02

32.16

32.01

Gross proceeds

32,295

231,920

264,215

BALANCE SHEET AND LIQUIDITY

As of June 30, 2024, the Company had $4.7 billion of outstanding indebtedness with a weighted-average annual interest rate of 4.3%. The Company’s indebtedness consisted of an aggregate principal amount of $4.2 billion of senior unsecured notes, $478.5 million of unsecured term loans and $70.2 million of borrowings outstanding under its unsecured revolving credit facility. As of June 30, 2024, total cash and cash equivalents were $35.2 million, and the Company had $1.4 billion of undrawn capacity under its unsecured revolving credit facility.

$400 Million Note Repayment – On April 1, 2024, the Company repaid its $400.0 million 4.950% senior notes that matured on April 1, 2024, from invested cash balances and borrowings under its unsecured revolving credit facility.

DIVIDENDS

On July 24, 2024, the Board of Directors declared a quarterly cash dividend of $0.67 per share, to be paid August 15, 2024, to common stockholders of record as of the close of business on August 5, 2024.

2024 AFFO GUIDANCE INCREASED

The Company increased the guidance range of its 2024 Adjusted FFO to a range of $2.78 to $2.84 per diluted share from the previous range of $2.70 and $2.80 per diluted share.

The Company’s revised Adjusted FFO guidance for 2024 includes the annual impact of $648 million in new investments completed through July 2024, assumes quarterly G&A expense of approximately $11.5 million to $13.5 million in Q3 and Q4, $77 million in asset sales, timely completion of anticipated operator restructurings and transitions, no material changes in market interest rates, and that no additional operators are placed on a cash-basis for revenue recognition. It excludes additional acquisitions and asset sales, certain revenue and expense items, interest refinancing expense, additional capital transactions, acquisition costs, and additional provisions for credit losses, if any.

The Company's guidance is based on several assumptions including those noted above, which are subject to change and many of which are outside the Company’s control. If actual results vary from these assumptions, the Company's expectations may change. Without limiting the generality of the foregoing, the timing of collection of rental obligations from operators on a cash basis, the timing and completion of acquisitions, divestitures, restructurings and capital and financing transactions may cause actual results to vary materially from our current expectations. There can be no assurance that the Company will achieve its projected results. The Company may, from time to time, update its publicly announced Adjusted FFO guidance, but it is not obligated to do so.

The Company does not provide a reconciliation for its Adjusted FFO guidance to GAAP net income because it is unable to determine meaningful or accurate estimates of reconciling items without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and/or amounts of various items that would impact future net income. This includes, but is not limited to, changes in the provision for credit losses, real estate impairments, acquisition, merger and transition related costs, straight-line write-offs, gain/loss on assets sold, etc. In particular, the Company is unable to predict with reasonable certainty the amount of the change in the provision for credit losses in future periods, which is often a significant reconciling adjustment.

ADDITIONAL INFORMATION

Additional information regarding the Company can be found in its Second Quarter 2024 Financial Supplemental posted under “Financial Info” in the Investors section of Omega’s website. The information contained on, or that may be accessed through, Omega’s website, including the information contained in the aforementioned supplemental, is not incorporated by any reference into, and is not part of, this document.

CONFERENCE CALL

The Company will be conducting a conference call on Friday, August 2, 2024, at 10 a.m. Eastern time to review the Company’s 2024 second quarter results and current developments. Analysts and investors within the U.S. interested in participating are invited to call (877) 407-9124. The international toll-free dial-in number is (201) 689-8584. Ask the operator to be connected to the “Omega Healthcare’s Second Quarter 2024 Earnings Call.”

To listen to the conference call via webcast, log on to www.omegahealthcare.com and click the “Omega Healthcare Investors, Inc. 2Q Earnings Call” hyper-link on the “Investors” page of Omega’s website. Webcast replays of the call will be available on Omega’s website for a minimum of two weeks following the call. Additionally, a copy of the earnings release will be available in the “Financial Info” section and “SEC Filings” section on the “Investors” page of Omega’s website.

* * * * * *

Omega is a REIT that invests in the long-term healthcare industry, primarily in skilled nursing and assisted living facilities. Its portfolio of assets is operated by a diverse group of healthcare companies, predominantly in a triple-net lease structure. The assets span all regions within the U.S., as well as in the U.K.

Forward-Looking Statements and Cautionary Language

This press release includes forward-looking statements within the meaning of the federal securities laws. All statements regarding Omega’s or its tenants’, operators’, borrowers’ or managers’ expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, facility transitions, growth opportunities, expected lease income, continued qualification as a REIT, plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and actual results may differ from Omega's expectations.

Omega’s actual results may differ materially from those reflected in such forward-looking statements as a result of a variety of factors, including, among other things: (i) uncertainties relating to the business operations of the operators of Omega’s properties, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels; (ii) the long-term impacts of the Novel coronavirus (“COVID-19”) pandemic on our business and the business of our operators, including the levels of staffing shortages, increased costs and decreased occupancy experienced by operators of skilled nursing facilities (“SNFs”) and assisted living facilities (“ALFs”) arising from the pandemic, the ability of our operators to comply with infection control and vaccine protocols and to manage facility infection rates or future infectious diseases, and the sufficiency of government support and reimbursement rates to offset such costs and the conditions related thereto; (iii) additional regulatory and other changes in the healthcare sector, including federal minimum staffing requirements for SNFs that may further exacerbate labor and occupancy challenges for Omega’s operators; (iv) the ability of any of Omega’s operators in bankruptcy to reject unexpired lease obligations, modify the terms of Omega’s mortgages and impede the ability of Omega to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor’s obligations, and other costs and uncertainties associated with operator bankruptcies; (v) changes in tax laws and regulations affecting real estate investment trusts (“REITs”), including as the result of any policy changes driven by the current focus on capital providers to the healthcare industry; (vi) Omega’s ability to re-lease, otherwise transition or sell underperforming assets or assets held for sale on a timely basis and on terms that allow Omega to realize the carrying value of these assets or to redeploy the proceeds therefrom on favorable terms, including due to the potential impact of changes in the SNF and ALF markets or local real estate conditions; (vii) the availability and cost of capital to Omega; (viii) changes in Omega’s credit ratings and the ratings of its debt securities; (ix) competition in the financing of healthcare facilities; (x) competition in the long-term healthcare industry and shifts in the perception of various types of long-term care facilities, including SNFs and ALFs; (xi) changes in the financial position of Omega’s operators; (xii) the effect of economic and market conditions generally, and particularly in the healthcare industry; (xiii) changes in interest rates and the impact of inflation; (xiv) the timing, amount and yield of any additional investments; (xv) Omega’s ability to maintain its status as a REIT; (xvi) the effect of other factors affecting our business or the businesses of Omega’s operators that are beyond Omega’s or operators’ control, including natural disasters, other health crises or pandemics and governmental action, particularly in the healthcare industry, and (xvii) other factors identified in Omega’s filings with the Securities and Exchange Commission. Statements regarding future events and developments and Omega’s future performance, as well as management’s expectations, beliefs, plans, estimates or projections relating to the future, are forward looking statements.

We caution you that the foregoing list of important factors may not contain all the material factors that are important to you. Accordingly, readers should not place undue reliance on those statements. All forward-looking statements are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

June 30,

December 31,

2024

2023

(Unaudited)

ASSETS

Real estate assets

Buildings and improvements

6,925,123

6,879,034

Land

876,762

867,486

Furniture and equipment

473,021

467,393

Construction in progress

185,487

138,410

Total real estate assets

8,460,393

8,352,323

Less accumulated depreciation

(2,583,159

)

(2,464,227

)

Real estate assets – net

5,877,234

5,888,096

Investments in direct financing leases – net

9,437

8,716

Real estate loans receivable – net

1,378,798

1,212,162

Investments in unconsolidated joint ventures

185,270

188,409

Assets held for sale

76,627

81,546

Total real estate investments

7,527,366

7,378,929

Non-real estate loans receivable – net

234,562

275,615

Total investments

7,761,928

7,654,544

Cash and cash equivalents

35,193

442,810

Restricted cash

3,938

1,920

Contractual receivables – net

10,360

11,888

Other receivables and lease inducements

230,428

214,657

Goodwill

643,786

643,897

Other assets

162,913

147,686

Total assets

8,848,546

9,117,402

LIABILITIES AND EQUITY

Revolving credit facility

70,226

20,397

Secured borrowings

—

61,963

Senior notes and other unsecured borrowings – net

4,590,378

4,984,956

Accrued expenses and other liabilities

287,354

287,795

Total liabilities

4,947,958

5,355,111

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

—

Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 254,023 shares as of June 30, 2024 and 245,282 shares as of December 31, 2023

25,402

24,528

Additional paid-in capital

6,951,244

6,671,198

Cumulative net earnings

3,861,804

3,680,581

Cumulative dividends paid

(7,161,897

)

(6,831,061

)

Accumulated other comprehensive income

34,345

29,338

Total stockholders’ equity

3,710,898

3,574,584

Noncontrolling interest

189,690

187,707

Total equity

3,900,588

3,762,291

Total liabilities and equity

8,848,546

9,117,402

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

2024

2023

2024

2023

Revenues

Rental income

210,402

215,267

413,606

400,622

Real estate tax and ground lease income

3,913

4,088

7,630

8,064

Real estate loans interest income

30,958

23,979

59,697

47,376

Non-real estate loans interest income

7,084

5,253

14,181

10,276

Miscellaneous income

388

1,600

930

2,051

Total revenues

252,745

250,187

496,044

468,389

Expenses

Depreciation and amortization

74,234

82,018

148,791

163,210

General and administrative

12,453

12,854

24,247

24,268

Real estate tax and ground lease expense

4,257

4,423

8,566

8,788

Stock-based compensation expense

9,188

8,806

18,415

17,550

Acquisition, merger and transition related costs

1,780

423

4,383

1,062

Impairment on real estate properties

8,182

21,114

13,474

60,102

(Recovery) provision for credit losses

(14,172

)

12,967

(5,702

)

8,910

Interest expense

50,604

55,525

104,748

110,818

Interest – amortization of deferred financing costs

3,362

3,251

7,038

6,504

Total expenses

149,888

201,381

323,960

401,212

Other income (expense)

Other income – net

3,363

1,029

8,639

3,749

Loss on debt extinguishment

(213

)

—

(1,496

)

Gain on assets sold – net

12,911

12,243

11,520

25,880

Total other income

16,061

13,272

18,663

29,623

Income before income tax expense and income from unconsolidated joint ventures

118,918

62,078

190,747

96,800

Income tax expense

(1,980

)

(1,626

)

(4,561

)

(334

)

Income from unconsolidated joint ventures

141

1,069

239

1,900

Net income

117,079

61,521

186,425

98,366

Net income attributable to noncontrolling interest

(3,217

)

(1,665

)

(5,202

)

(2,568

)

Net income available to common stockholders

113,862

59,856

181,223

95,798

Earnings per common share available to common stockholders:

Basic:

Net income available to common stockholders

0.46

0.25

0.73

0.41

Diluted:

Net income available to common stockholders

0.45

0.25

0.72

0.40

Dividends declared per common share

0.67

1.34

OMEGA HEALTHCARE INVESTORS, INC.

Nareit FFO, Adjusted FFO and FAD Reconciliation

Unaudited

(in thousands, except per share amounts)

Three Months Ended

Six Months Ended

June 30,

2024

2023

2024

2023

Net income (1)

117,079

61,521

186,425

98,366

Deduct gain from real estate dispositions

(12,911

)

(12,243

)

(11,520

)

(25,880

)

Sub-total

104,168

49,278

174,905

72,486

Elimination of non-cash items included in net income:

Depreciation and amortization

74,234

82,018

148,791

163,210

Depreciation - unconsolidated joint ventures

2,531

2,743

5,067

5,427

Add back provision for impairments on real estate properties

8,182

21,114

13,474

60,102

Nareit funds from operations (“Nareit FFO”)

189,115

155,153

342,237

301,225

Weighted-average common shares outstanding, basic

249,366

236,233

247,719

235,594

Restricted stock and PRSUs

4,583

2,893

4,170

2,139

Omega OP Units

7,585

6,974

7,511

6,912

Weighted-average common shares outstanding, diluted

261,534

246,100

259,400

244,645

Nareit funds from operations available per share

0.72

0.63

1.32

1.23

Adjustments to calculate adjusted funds from operations

Nareit FFO

189,115

155,153

342,237

301,225

Add back:

Stock-based compensation expense

9,188

8,806

18,415

17,550

Acquisition, merger and transition related costs

1,780

423

4,383

1,062

Non-recognized cash interest

307

2,322

607

4,418

Loss on debt extinguishment

213

—

1,496

Non-recurring expense

—

1,893

232

1,893

Uncollectible accounts receivable (2)

—

901

—

13,401

Deduct:

Non-cash (recovery) provision for credit losses

(12,989

)

15,409

(3,349

)

13,968

Non-recurring revenue

(2,649

)

(1,500

)

(2,938

)

(10,315

)

Unconsolidated JV related non-recurring revenue

—

(178

)

—

(178

)

Adjusted funds from operations (“AFFO”) (1)(3)

184,965

183,229

361,083

343,030

Adjustments to calculate funds available for distribution

Non-cash expense

2,750

2,222

5,947

4,446

Capitalized interest

(1,758

)

(991

)

(3,276

)

(1,899

)

Non-cash revenue

(9,335

)

(11,624

)

(19,215

)

(25,719

)

Funds available for distribution (“FAD”) (1)(3)

176,622

172,836

344,539

319,858

_______________________ (1)

The three and six months ended June 30, 2024 include the application of $0.1 million and $0.6 million, respectively, of security deposits (letters of credit and cash deposits) in revenue. The three and six months ended June 30, 2023 include the application of $0.3 million and $5.5 million, respectively, of security deposits (letters of credit and cash deposits) in revenue.

(2)

The six months ended June 30, 2023 includes a $12.5 million lease inducement write-off recorded as a reduction to rental income related to the Maplewood option termination fee. All other amounts represent straight-line accounts receivable write-offs also recorded as a reduction to rental income.

(3)

Adjusted funds from operations per share and funds available for distribution per share can be calculated using weighted-average common shares outstanding, diluted, as shown above.

Nareit Funds From Operations (“Nareit FFO”), Adjusted FFO and Funds Available for Distribution (“FAD”) are non-GAAP financial measures. As used in this press release, GAAP refers to generally accepted accounting principles in the United States of America. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

The Company calculates and reports Nareit FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“Nareit”), and consequently, Nareit FFO is defined as net income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairments on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures and changes in the fair value of warrants. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. Revenue recognized based on the application of security deposits and letters of credit or based on the ability to offset against other financial instruments is included within Nareit FFO. The Company believes that Nareit FFO, Adjusted FFO and FAD are important supplemental measures of its operating performance. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time, while real estate values instead have historically risen or fallen with market conditions. The term funds from operations was designed by the real estate industry to address this issue. Funds from operations described herein is not necessarily comparable to funds from operations of other real estate investment trusts, or REITs, that do not use the same definition or implementation guidelines or interpret the standards differently from the Company.

Adjusted FFO is calculated as Nareit FFO excluding the impact of non-cash stock-based compensation and certain revenue and expense items (e.g., acquisition, merger and transition related costs, write-off of straight-line accounts receivable, recoveries and provisions for credit losses (excluding certain cash recoveries on impaired loans), cash interest received but not included in revenue, non-recognized cash interest, severance, legal reserve expenses, etc.). FAD is calculated as Adjusted FFO less non-cash expense, such as the amortization of deferred financing costs, and non-cash revenue, such as straight-line rent. The Company believes these measures provide an enhanced measure of the operating performance of the Company’s core portfolio as a REIT. The Company’s computation of Adjusted FFO and FAD may not be comparable to the Nareit definition of funds from operations or to similar measures reported by other REITs, but the Company believes that they are appropriate measures for this Company.

The Company uses these non-GAAP measures among the criteria to measure the operating performance of its business. The Company also uses FAD among the performance metrics for performance-based compensation of officers. The Company further believes that by excluding the effect of depreciation, amortization, impairments on real estate assets and gains or losses from sales of real estate, all of which are based on historical costs, and which may be of limited relevance in evaluating current performance, funds from operations can facilitate comparisons of operating performance between periods. The Company offers these measures to assist the users of its financial statements in analyzing its operating performance. These non-GAAP measures are not measures of financial performance under GAAP and should not be considered as measures of liquidity or cash flow, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP. Investors and potential investors in the Company’s securities should not rely on these non-GAAP measures as substitutes for any GAAP measure, including net income.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801452932/en/

Matthew Gourmand, SVP, Corporate Strategy & Investor Relations or Bob Stephenson, CFO at (410) 427-1700

Omega Healthcare Investors (NYSE:OHI)
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