Completed $270 Million in New Investments in
Q2
Repaid a $350 Million Debt Maturity in
Q3
Omega Healthcare Investors, Inc. (NYSE: OHI) (the “Company” or
“Omega”) announced today its results for the quarter ended June 30,
2023.
SECOND QUARTER 2023 AND RECENT
HIGHLIGHTS
- Net income for the quarter of $62 million, or $0.25 per common
share, compared to $92 million, or $0.38 per common share, for the
same period in 2022.
- Nareit Funds From Operations (“Nareit FFO”) for the quarter of
$155 million or $0.63 per common share, on 246 million
weighted-average common shares outstanding, compared to $161
million, or $0.66 per common share, on 243 million weighted-average
common shares outstanding, for the same period in 2022.
- Adjusted Funds From Operations (“Adjusted FFO” or “AFFO”) for
the quarter of $183 million, or $0.74 per common share, compared to
$185 million, or $0.76 per common share, for the same period in
2022.
- Funds Available for Distribution (“FAD”) for the quarter of
$173 million, or $0.70 per common share, compared to FAD of $172
million, or $0.71 per common share, for the same period in
2022.
- Completed $129 million in real estate acquisitions.
- Invested $124 million in real estate loans and other loans and
investments.
- Funded $17 million in capital renovation and
construction-in-progress projects.
- Sold 10 facilities for $45 million in cash proceeds, generating
a $12 million gain.
- Declared a $0.67 per share quarterly cash dividend on common
stock to be paid in August.
- Repaid $350 million of senior unsecured notes due August 1,
2023.
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 exceeded our expectations.
While we had expected a strong sequential improvement in FAD, as
some restructured operators returned to paying rent, this was
augmented by unanticipated additional rent payments from some
operators on a cash-basis. To the extent that these incremental
rents are not received in the third quarter, FAD may decline from
its second quarter level. However, longer term, we believe our
second quarter FAD highlights the earnings potential of the Company
once these restructurings are concluded.”
Mr. Pickett continued, “The operating backdrop continues to
improve, with occupancy increasing and the tight labor market
slowly moderating. As a result, EBITDAR coverage, excluding CARES
Act support, for the first quarter of 2023 ticked up to 1.15x, its
highest level in 3 years. At the same time, the acquisition
pipeline continues to improve, with the team closing $270 million
of transactions in the quarter.”
Mr. Pickett concluded, “While both corporate and industry
metrics are improving, the industry is still on the road to
recovery and remains quite fragile. As such, it is vital that both
federal and state efforts continue to support an industry that
proved so integral to protecting the aging and vulnerable during
the pandemic. In particular, we remain hopeful that any federal
minimum staffing requirement would be thoughtfully constructed,
balancing the focus on resident care with the labor challenges and
funding needs facing the industry.”
SECOND QUARTER 2023
RESULTS
Revenues – Revenues for the quarter ended June 30, 2023
totaled $250.2 million, an increase of $5.5 million over the same
period in 2022. The increase primarily resulted from (i) timing of
operator restructurings and transitions and (ii) revenue from new
investments completed throughout 2022 and 2023. The increase was
partially offset by a decrease in revenue from (i) asset sales
completed throughout 2022 and 2023 and (ii) operators placed on a
cash basis of revenue recognition in the last year.
Expenses – Expenses for the quarter ended June 30, 2023
totaled $201.4 million, an increase of $27.2 million over the same
period in 2022. The increase primarily resulted from (i) a $14.5
million unfavorable change in provision for credit losses, (ii) a
$13.4 million increase in impairment on real estate properties,
(iii) a $2.0 million increase in stock-based compensation expense
and (iv) a $1.3 million increase in general and administrative
(“G&A”) expense, partially offset by (i) a $3.5 million
decrease in acquisition, merger and transition related costs and
(ii) a $1.2 million decrease in depreciation and amortization
expense related to facilities sold and facilities reclassified as
held for sale.
Other Income and Expense – Other income for the quarter
ended June 30, 2023 totaled $13.3 million, a decrease of $7.5
million over the same period in 2022. The decrease resulted from a
decrease in gain on assets sold.
Net Income – Net income for the quarter ended June 30,
2023 totaled $61.5 million, a decrease of $30.4 million over the
same period in 2022. The decrease primarily resulted from the
aforementioned (i) $27.2 million increase in expenses and (ii) $7.5
million decrease in other income and expense, partially offset by a
$5.5 million increase in total revenue.
FINANCING ACTIVITIES
Dividend Reinvestment and Common Stock Purchase Plan and ATM
Program – The following is a summary of the 2023 quarterly
common shares issued under the Dividend Reinvestment and Common
Stock Purchase Plan and ATM Program through June 30:
Dividend Reinvestment and Common
Stock Purchase Plan for 2023
(in thousands, except price per
share)
Q1
Q2
Total
Number of shares
82
77
159
Average price per share
$
27.88
$
29.30
$
28.57
Gross proceeds
$
2,278
$
2,252
$
4,530
At-the-Market Program for
2023
(in thousands, except price per
share)
Q1
Q2
Total
Number of shares
—
6,529
6,529
Average price per share
$
—
$
30.54
$
30.54
Gross proceeds
$
—
$
199,397
$
199,397
$350 Million Note Repayment – On August 1, 2023, the
Company repaid its $350 million 4.375% senior notes that matured on
August 1, 2023, from invested cash balances. The Company had $351
million in cash at June 30, 2023.
2023 SECOND QUARTER PORTFOLIO AND
RECENT ACTIVITY
Operator Updates:
LaVie – As previously disclosed, in the first quarter of
2023, Omega agreed to allow LaVie to defer up to $19.1 million (or
66% of contractual rent) from January 2023 through April 2023.
During the second quarter of 2023, LaVie paid, and Omega recorded,
$16.9 million in rent ($2.5 million for April and $7.2 million for
both May and June) in accordance with the restructuring terms.
Restructuring discussions, including the sale and release of
additional facilities, are still ongoing, and the Company
anticipates the additional restructuring activity to be completed
in the next several months. In July 2023, LaVie paid $2.5 million
of rent, and the Company expects LaVie will continue to pay $2.5
million per month, until the additional restructuring activities
are completed.
Healthcare Homes – As previously disclosed, during the
fourth quarter of 2022, the Company agreed to allow Healthcare
Homes Limited (“Healthcare Homes”), a United Kingdom (“U.K.”) based
operator, to defer £6.7 million (or $8.2 million) of contractual
rent from January 2023 through April 2023 with regular payments to
resume in May 2023. Healthcare Homes resumed full contractual
rental payments in May 2023 and the Company received $4.4 million
in rent in the second quarter of 2023. Healthcare Homes paid its
full contractual rent and interest of $2.2 million for July
2023.
Agemo – As previously disclosed, in the first quarter of
2023, the Company entered into a restructuring agreement with
Agemo. In accordance with the agreement, Agemo resumed making rent
and interest payments during the second quarter of 2023. During the
second quarter of 2023, the Company recorded $6.6 million in income
related to Agemo (on a cash basis for revenue recognition)
consisting of $5.8 million of contractual rent payments received
(recorded as rental income) and $0.8 million for two months of
interest payments received (recorded as a recovery against
provision for credit losses). Additionally, Agemo paid full
contractual rent and interest of $2.3 million in July 2023.
Maplewood – During the second quarter of 2023, Maplewood
short-paid its June contractual rent by $1.0 million. As Maplewood
is on a cash basis for revenue recognition, the Company recorded
only the $16.3 million of cash received as rental income in the
second quarter. In July, Maplewood again short-paid its contractual
rent by $1.0 million. The Company is taking actions to preserve its
rights and is in discussions with Maplewood to address the
deficiency. In August, the Company drew $2.0 million on a $4.8
million Maplewood security deposit.
Portfolio Transitions – The portfolios of the Company’s
previously disclosed 2.4% operator, 2.2% operator, and the two
smaller operators referred to last quarter were re-leased to third
party operators in the first four months of 2023.
New Investments:
The following table presents real estate investment
activity:
Three Months Ended
Six Months Ended
Real Estate Investment Activity
($000's)
June 30, 2023
June 30, 2023
$ Amount
%
$ Amount
%
Real property
$
128,544
47.6
%
$
154,923
49.6
%
Construction-in-progress
9,880
3.7
%
15,848
5.1
%
Capital expenditures
7,350
2.7
%
12,775
4.1
%
Real estate loans receivable
82,296
30.5
%
87,296
27.9
%
Other
41,746
15.5
%
41,746
13.3
%
Total
$
269,816
100.0
%
$
312,588
100.0
%
$219 Million in Real Estate and Loan Investments – On
April 14, 2023, the Company acquired four SNFs in West Virginia for
$114.8 million and leased them to an existing operator. The four
SNFs were added to the master lease of the operator with an initial
annual cash yield of 9.5%, with 2.5% annual escalators. Concurrent
with the acquisition, the Company loaned an additional $104.6
million to the operator, primarily for the purpose of financing the
operator’s purchase of 13 additional West Virginia SNFs. The loans
have a yield of 12.0%.
$14 Million Real Estate Acquisition – On May 1, 2023, the
Company acquired one SNF in West Virginia for $13.7 million and
leased it to an existing operator. The SNF was added to the master
lease of the operator with an initial annual cash yield of 10%,
with 2.5% annual escalators.
$10 Million Mezzanine Loan – On June 30, 2023, the
Company entered into a $10.0 million mezzanine loan with an
existing operator. The mezzanine loan bears interest at a fixed
rate of 11% per annum and matures on June 30, 2028.
Asset Sales and
Impairments:
$45 Million in Asset Sales – In the second quarter of
2023, the Company sold 10 facilities (five previously classified as
held for sale) for $44.7 million in cash, recognizing a gain of
$12.2 million.
Impairments and Assets Held for Sale – During the second
quarter of 2023, the Company recorded a $21.1 million net
impairment charge to reduce the net book value of four facilities
to their estimated fair value.
As of June 30, 2023, the Company had one facility classified as
assets held for sale, totaling $1.4 million in net book value.
OPERATOR COVERAGE DATA
The following tables present operator revenue mix, census and
coverage data based on information provided by the Company’s
operators for the indicated periods. The Company has not
independently verified this information, and it is providing this
data for informational purposes only.
Operator Revenue Mix (1)
Medicare /
Private /
Medicaid
Insurance
Other
Three-months ended March 31, 2023
53.0
%
31.8
%
15.2
%
Three-months ended December 31, 2022
54.3
%
31.4
%
14.3
%
Three-months ended September 30, 2022
53.4
%
31.5
%
15.1
%
Three-months ended June 30, 2022
53.5
%
31.5
%
15.0
%
Three-months ended March 31, 2022
51.0
%
35.8
%
13.2
%
(1)
Excludes all facilities considered
non-core and does not include federal stimulus revenue. For
non-core definition, see Second Quarter 2023 Financial Supplemental
posted in the “Quarterly Supplements” section of Omega’s
website.
Coverage Data
Before
After
Occupancy (2)
Management
Management
Operator Census and Coverage
(1)
Fees (3)
Fees (4)
Twelve-months ended March 31, 2023
78.0
%
1.44x
1.10x
Twelve-months ended December 31, 2022
77.0
%
1.38x
1.04x
Twelve-months ended September 30, 2022
76.2
%
1.37x
1.04x
Twelve-months ended June 30, 2022
75.8
%
1.39x
1.06x
Twelve-months ended March 31, 2022
75.1
%
1.44x
1.10x
(1)
Excludes facilities considered
non-core.
(2)
Based on available (operating) beds.
(3)
Represents EBITDARM of our operators,
defined as earnings before interest, taxes, depreciation,
amortization, Rent costs and management fees for the applicable
period, divided by the total Rent payable to the Company by its
operators during such period. “Rent” refers to the total monthly
contractual rent and mortgage interest due under the Company’s
lease and mortgage agreements over the applicable period.
(4)
Represents EBITDAR of our operators,
defined as earnings before interest, taxes, depreciation,
amortization, and Rent (as defined in footnote 3) expense for the
applicable period, divided by the total Rent payable to the Company
by its operators during such period. Assumes a management fee of
4%.
BALANCE SHEET AND
LIQUIDITY
As of June 30, 2023, the Company had $5.3 billion of outstanding
indebtedness with a weighted-average annual interest rate of 4.23%.
The Company’s indebtedness consisted of an aggregate principal
amount of $4.9 billion of senior unsecured notes, a $50.0 million
unsecured term loan, $360.8 million of secured debt and $20.3
million of borrowings outstanding under its unsecured revolving
credit facility. As of June 30, 2023, total cash and cash
equivalents were $350.7 million, and the Company had $1.4 billion
of undrawn capacity under its unsecured revolving credit
facility.
During the second quarter of 2023, the Company terminated its
five forward starting swaps with $400 million in aggregate notional
value and received $92.6 million in a net cash settlement from the
counterparties.
DIVIDENDS
On July 20, 2023, the Board of Directors declared a quarterly
cash dividend of $0.67 per share, to be paid August 15, 2023, to
common stockholders of record as of the close of business on July
31, 2023.
ADDITIONAL INFORMATION
Additional information regarding the Company can be found in its
Second Quarter 2023 Financial Supplemental posted under “Financial
Info” in the Investors section of Omega’s website. The information
contained on, or that may be accessed through, Omega’s website,
including the information contained in the aforementioned
supplemental, is not incorporated by any reference into, and is not
part of, this document.
CONFERENCE CALL
The Company will be conducting a conference call on Thursday,
August 3, 2023, at 10 a.m. Eastern time to review the Company’s
2023 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 2023 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 without limitation, the termination of the federally
declared public health emergency and related government and
regulatory support on May 11, 2023, 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) the ability of any of Omega’s operators in
bankruptcy to reject unexpired lease obligations, modify the terms
of Omega’s mortgages and impede the ability of Omega to collect
unpaid rent or interest during the pendency of a bankruptcy
proceeding and retain security deposits for the debtor’s
obligations, and other costs and uncertainties associated with
operator bankruptcies; (iv) 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; (v) the availability and cost of
capital to Omega; (vi) changes in Omega’s credit ratings and the
ratings of its debt securities; (vii) competition in the financing
of healthcare facilities; (viii) competition in the long-term
healthcare industry and shifts in the perception of various types
of long-term care facilities, including SNFs and ALFs; (ix)
additional regulatory and other changes in the healthcare sector;
(x) changes in the financial position of Omega’s operators; (xi)
the effect of economic and market conditions generally, and
particularly in the healthcare industry; (xii) changes in interest
rates or the impact of inflation; (xiii) the timing, amount and
yield of any additional investments; (xiv) changes in tax laws and
regulations affecting REITs; (xv) the potential impact of changes
in the SNF and ALF market or local real estate conditions on the
Company’s ability to dispose of assets held for sale for the
anticipated proceeds or on a timely basis, or to redeploy the
proceeds therefrom on favorable terms; (xvi) Omega’s ability to
maintain its status as a REIT; (xvii) the effect of other factors
affecting our business or the businesses of Omega’s operators that
are beyond Omega’s or operators’ control, including natural
disasters, other health crises or pandemics and governmental
action, particularly in the healthcare industry, and (xviii) other
factors identified in Omega’s filings with the Securities and
Exchange Commission. Statements regarding future events and
developments and Omega’s future performance, as well as
management’s expectations, beliefs, plans, estimates or projections
relating to the future, are forward looking statements.
We caution you that the foregoing list of important factors may
not contain all the material factors that are important to you.
Accordingly, readers should not place undue reliance on those
statements. All forward-looking statements are based upon
information available to us on the date of this release. We
undertake no obligation to publicly update or revise any
forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.
OMEGA HEALTHCARE INVESTORS,
INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per
share amounts)
June 30,
December 31,
2023
2022
(Unaudited)
ASSETS
Real estate assets
Buildings and improvements
$
7,398,122
$
7,347,853
Land
928,318
923,605
Furniture and equipment
499,102
499,902
Construction in progress
107,983
88,904
Total real estate assets
8,933,525
8,860,264
Less accumulated depreciation
(2,444,149
)
(2,322,773
)
Real estate assets – net
6,489,376
6,537,491
Investments in direct financing leases –
net
8,995
8,503
Real estate loans receivable – net
1,096,806
1,042,731
Investments in unconsolidated joint
ventures
191,667
178,920
Assets held for sale
1,400
9,456
Total real estate investments
7,788,244
7,777,101
Non-real estate loans receivable – net
227,916
225,281
Total investments
8,016,160
8,002,382
Cash and cash equivalents
350,691
297,103
Restricted cash
5,820
3,541
Contractual receivables – net
8,837
8,228
Other receivables and lease
inducements
200,650
177,798
Goodwill
643,862
643,151
Other assets
178,013
272,960
Total assets
$
9,404,033
$
9,405,163
LIABILITIES AND EQUITY
Revolving credit facility
$
20,342
$
19,246
Secured borrowings
360,775
366,596
Senior notes and other unsecured
borrowings – net
4,905,761
4,900,992
Accrued expenses and other liabilities
304,563
315,047
Total liabilities
5,591,441
5,601,881
Equity:
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 – 240,991 shares as of June
30, 2023 and 234,252 shares as of December 31, 2022
24,099
23,425
Additional paid-in capital
6,526,367
6,314,203
Cumulative net earnings
3,534,199
3,438,401
Cumulative dividends paid
(6,501,899
)
(6,186,986
)
Accumulated other comprehensive income
41,353
20,325
Total stockholders’ equity
3,624,119
3,609,368
Noncontrolling interest
188,473
193,914
Total equity
3,812,592
3,803,282
Total liabilities and equity
$
9,404,033
$
9,405,163
OMEGA HEALTHCARE INVESTORS,
INC. CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited (in
thousands, except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues
Rental income
$
215,013
$
207,538
$
400,114
$
420,884
Real estate tax and ground lease
income
4,088
3,890
8,064
7,427
Income from direct financing leases
254
256
508
512
Real estate loans interest income
23,979
28,639
47,376
57,567
Non-real estate loans interest income
5,253
2,735
10,276
4,950
Miscellaneous income
1,600
1,591
2,051
2,624
Total revenues
250,187
244,649
468,389
493,964
Expenses
Depreciation and amortization
82,018
83,207
163,210
165,959
General and administrative
12,854
11,562
24,268
20,720
Real estate tax and ground lease
expense
4,423
4,084
8,788
8,054
Stock-based compensation expense
8,806
6,846
17,550
13,706
Acquisition, merger and transition related
costs
423
3,960
1,062
5,473
Impairment on real estate properties
21,114
7,695
60,102
11,206
Provision (recovery) for credit losses
12,967
(1,563
)
8,910
261
Interest expense
55,525
55,121
110,818
110,073
Interest – amortization of deferred
financing costs
3,251
3,251
6,504
6,444
Total expenses
201,381
174,163
401,212
341,896
Other income (expense)
Other income (expense) – net
1,029
(4,407
)
3,749
(4,862
)
Loss on debt extinguishment
—
(7
)
(6
)
(13
)
Gain on assets sold – net
12,243
25,180
25,880
138,817
Total other income
13,272
20,766
29,623
133,942
Income before income tax expense and
income from unconsolidated joint ventures
62,078
91,252
96,800
286,010
Income tax expense
(1,626
)
(1,119
)
(334
)
(2,344
)
Income from unconsolidated joint
ventures
1,069
1,782
1,900
3,405
Net income
61,521
91,915
98,366
287,071
Net income attributable to noncontrolling
interest
(1,665
)
(2,448
)
(2,568
)
(7,997
)
Net income available to common
stockholders
$
59,856
$
89,467
$
95,798
$
279,074
Earnings per common share available to
common stockholders:
Basic:
Net income available to common
stockholders
$
0.25
$
0.38
$
0.41
$
1.17
Diluted:
Net income available to common
stockholders
$
0.25
$
0.38
$
0.40
$
1.17
Dividends declared per common share
$
0.67
$
0.67
$
1.34
$
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,
June 30,
2023
2022
2023
2022
Net income (1)
$
61,521
$
91,915
$
98,366
$
287,071
Deduct gain from real estate
dispositions
(12,243
)
(25,180
)
(25,880
)
(138,817
)
Add back loss from real estate
dispositions of unconsolidated joint ventures
—
253
—
253
Sub-total
49,278
66,988
72,486
148,507
Elimination of non-cash items included in
net income:
Depreciation and amortization
82,018
83,207
163,210
165,959
Depreciation - unconsolidated joint
ventures
2,743
2,735
5,427
5,631
Add back provision for impairments on real
estate properties
21,114
7,695
60,102
11,206
Nareit funds from operations (“Nareit
FFO”)
$
155,153
$
160,625
$
301,225
$
331,303
Weighted-average common shares
outstanding, basic
236,233
235,847
235,594
237,687
Restricted stock and PRSUs
2,893
707
2,139
835
Omega OP Units
6,974
6,772
6,912
6,919
Weighted-average common shares
outstanding, diluted
246,100
243,326
244,645
245,441
Nareit funds from operations available
per share
$
0.63
$
0.66
$
1.23
$
1.35
Adjustments to calculate adjusted funds
from operations:
Nareit FFO
$
155,153
$
160,625
$
301,225
$
331,303
Add back:
Non-cash provision for credit losses
15,409
633
13,968
3,188
Stock-based compensation expense
8,806
6,846
17,550
13,706
Non-recognized cash interest
2,322
—
4,418
—
Non-recurring expense
1,893
3,000
1,893
3,000
Uncollectible accounts receivable (2)
901
11,654
13,401
14,805
Acquisition, merger and transition related
costs
423
3,960
1,062
5,473
Loss on debt extinguishment
—
7
6
13
Deduct:
Non-recurring revenue
(1,500
)
(1,341
)
(10,315
)
(2,562
)
Unconsolidated JV related non-recurring
revenue
(178
)
—
(178
)
—
Adjusted funds from operations (“AFFO”)
(1)(3)
$
183,229
$
185,384
$
343,030
$
368,926
Adjustments to calculate funds
available for distribution:
Non-cash interest expense
$
2,222
$
2,222
$
4,446
$
4,386
Capitalized interest
(991
)
(765
)
(1,899
)
(1,484
)
Non-cash revenue
(11,624
)
(14,735
)
(25,719
)
(37,798
)
Funds available for distribution
(“FAD”) (1)(3)
$
172,836
$
172,106
$
319,858
$
334,030
(1)
The three and six months ended June 30,
2023 includes the application of $0.3 million and $5.5 million,
respectively, of security deposits (letters of credit and cash
deposits) in revenue. The three and six months ended June 30, 2022
includes the application of $1.4 million and $4.7 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 shown
above.
Nareit Funds From Operations (“Nareit FFO”), Adjusted FFO and
Funds Available for Distribution (“FAD”) are non-GAAP financial
measures. As used in this press release, GAAP refers to generally
accepted accounting principles in the United States of America. The
Company has provided reconciliations of the non-GAAP financial
measures to the most directly comparable GAAP financial
measures.
The Company calculates and reports Nareit FFO in accordance with
the definition and interpretive guidelines issued by the National
Association of Real Estate Investment Trusts (“Nareit”), and
consequently, Nareit FFO is defined as net income (computed in
accordance with GAAP), adjusted for the effects of asset
dispositions and certain non-cash items, primarily depreciation and
amortization and impairments on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures and
changes in the fair value of warrants. Adjustments for
unconsolidated partnerships and joint ventures will be calculated
to reflect funds from operations on the same basis. Revenue
recognized based on the application of security deposits and
letters of credit or based on the ability to offset against other
financial instruments is included within Nareit FFO. The Company
believes that Nareit FFO, Adjusted FFO and FAD are important
supplemental measures of its operating performance. Because the
historical cost accounting convention used for real estate assets
requires depreciation (except on land), such accounting
presentation implies that the value of real estate assets
diminishes predictably over time, while real estate values instead
have historically risen or fallen with market conditions. The term
funds from operations was designed by the real estate industry to
address this issue. Funds from operations described herein is not
necessarily comparable to funds from operations of other real
estate investment trusts, or REITs, that do not use the same
definition or implementation guidelines or interpret the standards
differently from the Company.
Adjusted FFO is calculated as Nareit FFO excluding the impact of
non-cash stock-based compensation and certain revenue and expense
items (e.g., acquisition, merger and transition related costs,
write-off of straight-line accounts receivable, recoveries and
provisions for credit losses (excluding certain cash recoveries on
impaired loans), cash interest received but not included in
revenue, non-recognized cash interest, severance, legal reserve
expenses, etc.). FAD is calculated as Adjusted FFO less non-cash
interest expense and non-cash revenue, such as straight-line rent.
The Company believes these measures provide an enhanced measure of
the operating performance of the Company’s core portfolio as a
REIT. The Company’s computation of Adjusted FFO and FAD may not be
comparable to the Nareit definition of funds from operations or to
similar measures reported by other REITs, but the Company believes
that they are appropriate measures for this Company.
The Company uses these non-GAAP measures among the criteria to
measure the operating performance of its business. The Company also
uses FAD among the performance metrics for performance-based
compensation of officers. The Company further believes that by
excluding the effect of depreciation, amortization, impairments on
real estate assets and gains or losses from sales of real estate,
all of which are based on historical costs, and which may be of
limited relevance in evaluating current performance, funds from
operations can facilitate comparisons of operating performance
between periods. The Company offers these measures to assist the
users of its financial statements in analyzing its operating
performance. These non-GAAP measures are not measures of financial
performance under GAAP and should not be considered as measures of
liquidity or cash flow, alternatives to net income or indicators of
any other performance measure determined in accordance with GAAP.
Investors and potential investors in the Company’s securities
should not rely on these non-GAAP measures as substitutes for any
GAAP measure, including net income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802058328/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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