OMEGA HEALTHCARE INVESTORS INC Q3 FY2024 earnings call

Financials

• Third quarter revenue increased due to operator restructurings, transitions, and new investments, partially offset by asset sales.
• NAREIT FFO, adjusted FFO, and FAD discussed with respective per share amounts.
• LaVie paid additional $3 million in rent, Maplewood's rent payments noted.

Investments

• Completed $467 million in new investments in the third quarter, including $365 million in UK care homes with a gross return of 9.9%.
• Year-to-date through October, $915 million in new investments including CapEx funded through cash from operations, debt assumption, and equity issuance.

Tenant Metrics

• Strong tenant occupancy and rent coverage; under one times EBITDAR coverage has no material risks.

Third quarter revenue was $276 million compared to $242 million in the third quarter of 2023. NAREIT FFO for the third quarter was $196 million or $0.71 per share. Adjusted FFO was $203 million or $0.74 per share for the quarter, and FAD was $192 million or $0.70 per share. The annual revenue run rate exceeds $1.1 billion with 25% of that revenue coming from the large and growing senior housing portfolio.

Guidance

• Increased 2024 adjusted FFO guidance to a range of $2.84 to $2.86 per share.
• Fourth quarter assumptions include no change in revenue related to operators, LaVie continuing to pay $3 million per month rent, Maplewood's rent improving, new investments impact, and G&A expense range.
• Balance sheet remains strong with deleveraging through equity issuance.

Risks

• Reimbursement support has a tendency to ebb and flow, not guaranteed to continue long term.
• Uncertainty around the staffing mandate with legal actions and potential regulatory changes.
• Staffing challenges in various states impacting occupancy and operations.

Q: Looking at EBITDAR coverage and triple net lease structure, asking about lease expirations and ability to reset rent.

A: Taylor Pickett stated that most leases have operator renewals, not much opportunity to reset rent typically.

Q: On leverage, asking if leverage target has changed.

A: Bob Stephenson said leverage target is still between 4 to 5x and likely to continue decreasing.

Q: On occupancy drivers and near-term occupancy levels.

A: Megan Krull said occupancy continues to increase, staffing has improved slightly but is still a struggle, with seasonal fluctuations.

Q: On transaction activity and acquisition environment.

A: Taylor Pickett said the market is active with no single reason, rates have come down, more capital available.

Q: On regulatory front, state support and staffing rules.

A: Megan Krull said no negative state support seen recently, and no concerning staffing rules like Pennsylvania in other states yet.

Q: On LaVie's bankruptcy process and rent loss.

A: Taylor Pickett said LaVie's plan of confirmation is scheduled for mid-November, expecting rent to continue at $3 million per month.

Q: On exposure to segments and investment in skilled nursing.

A: Taylor Pickett said investments driven by operating partner relationships, senior housing investment trend likely continues.

Q: On investment pipeline and asset sales.

A: Taylor Pickett said the pipeline is mixed, with half of 15 held for sale assets expected to sell in fourth quarter.

Q: On Maplewood's development timing.

A: Taylor Pickett said DC development is delayed by about 30 days for certificate of occupancy.

Q: On SNF operator with sub 1x EBITDAR coverage.

A: Megan Krull said operator is in Florida with large rate increase expected to improve coverage.

Q: On Guarding's rent and unlocking full amount.

A: Taylor Pickett said 2024 rent was hit, but 2025 rent not known yet.

Q: On staffing difficulties in specific states.

A: Megan Krull mentioned Florida and Texas as states with staffing difficulties