2022
Annual Report
OMEGA Healthcare
INVESTORS, INC.
OUR COMMITMENT TO THE ENVIRONMENT
Omega Healthcare Investors, Inc. ("Omega") believes in working to keep our environment cleaner and healthier. Each and
every day, we take steps to preserve the natural beauty of the surroundings that we are privileged to enjoy. In an effort to
further reduce our carbon footprint, we are asking our investors to enroll in voluntary electronic delivery of our shareholder
communications. In addition, we are also asking you to vote your shares on line. This not only reduces the costs
associated with printing and mailing, it also supports our corporate sustainability initiatives. Please see the instructions
below.
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ELECTRONIC DELIVERY OF FUTURE
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If you would like to reduce the costs incurred by our
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annual reports electronically via e-mail or the Internet. To
sign up for electronic delivery, please follow the instructions
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indicate that you agree to receive or access proxy materials
electronically in future years.
Omega's initiative in reducing its carbon footprint by promoting electronic delivery of shareholder materials has had a
positive effect on the environment. Based upon 2022 statistics, voluntary receipt of a-delivery resulted in the following
environmental savings:
Using approximately 184 fewer tons of wood, or 1,110 fewer trees
Using approximately 1,180 million fewer BTUs, or the equivalent amount of energy used to operate
1,400 residential refrigerators per year
Using approximately 829,000 fewer pounds of CO2 gases, or the equivalent of 75 .3 automobiles per
year
Saving approximately 987,000 gallons of water
Saving approximately 54,300 pounds of solid waste
Reducing hazardous air pollutants by approximately 73.7 pounds
Environmental impact estimates calculated using the Environmental Paper Network Paper Calculator.
For more information visit www.papercalculator.org .
2023 ANNUAL MEETING OF STOCKHOLDERS
Monday, June 5, 2023
10:00 AM EDT, Virtual
Omega Healthcare Investors
303 International Circle, Suite 200
Hunt Valley, MD 21030
MIX
Paper from
responsible sources
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OMEGA HEALTHCARE INVESTORS, INC.
We are a self-administered real estate investment
trust (“REIT”), providing financing and capital to
the long-term healthcare industry with a particular
focus on skilled nursing facilities located in the
United States and the United Kingdom (“U.K.”).
Operating in accordance with federal tax laws and
regulations governing REITs, income is distributed
to stockholders without federal tax liability to our
company.
consisted
investments
At December 31, 2022, our domestic and
international
of
926 healthcare facilities containing approximately
89,965 operating beds in 42 states and the U.K.,
operated by 67 third-party healthcare operating
companies. The table below sets forth the portion of
(excluding
our
total
joint ventures)
investments
represented by facilities operated by each operator.
real estate
in unconsolidated
investments
INVESTMENT BY OPERATOR
(in thousands)
Maplewood Real Estate Holdings, LLC
11.9% . . . . . . . . . . . . . . . . . . . . . . .
Connecticut, Massachusetts, New Jersey,
New York, Ohio, Washington D.C.
LaVie Care Centers, LLC
8.6% . . . . . . . . . . . . . . . . . . . . . . .
Florida, Louisiana, Mississippi,
North Carolina,Pennsylvania, Virginia
Ciena Healthcare
8.0% . . . . . . . . . . . . . . . . . . . . . . .
Indiana, Michigan, North Carolina, Ohio,
Virginia
Saber Health Group
6.6% . . . . . . . . . . . . . . . . . . . . . . .
Florida, North Carolina, Ohio, Pennsylvania
Virginia
CommuniCare Health Services, Inc.
6.0% . . . . . . . . . . . . . . . . . . . . . . .
Indiana, Maryland, Ohio, Pennsylvania,
Virginia, West Virginia
Brookdale Senior Living, Inc.
5.4% . . . . . . . . . . . . . . . . . . . . . . .
Arizona, California, Florida, Illinois,
New Jersey, Oregon, Pennsylvania, Tennessee,
Texas, Virginia, Washington
$ 1,188,015
862,288
Genesis HealthCare, Inc.
4.4% . . . . . . . . . . . . . . . . . . . . . . .
Alabama, Arizona, Colorado, Massachusetts,
New Hampshire, New Mexico, North Carolina,
Rhode Island, Tennessee, Vermont,
West Virginia
Nexion Health Inc.
3.2% . . . . . . . . . . . . . . . . . . . . . . .
Louisana, Mississippi, Texas
802,221
Health and Hospital Corporation
3.0% . . . . . . . . . . . . . . . . . . . . . . .
Indiana
657,306
Healthcare Homes
2.9% . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom
. . . . . . . . . . . . . . . . . . . . . .
Other Real Estate Investments
40.0%
57 operators with operations in 35 states & in
the U.K.
436,113
325,201
304,698
289,393
4,017,261
Grand Total 100.00% . . . . . . . . . . . . . .
$10,025,130
601,671
540,963
Dear Stockholders,
TO OUR STOCKHOLDERS
As expected, 2022 proved to be another challenging year for the senior healthcare industry, as the
impact of the global pandemic continued to be felt by senior care providers. While occupancy is gradually
improving, it still sits below pre-pandemic levels, and the tight labor market remains a challenge for
operators. These factors have combined to impact the financial capacity of many of our operators and,
with federal support less forthcoming in 2022, it resulted in several of our operators being unable to pay
their full contractual rent.
Although we believe these pressures will continue to impact the industry in the near-term, we are
cautiously optimistic that both the financial stability of our investment portfolio and the operating
backdrop are improving. From a portfolio standpoint, throughout this pandemic, our team has been
working with troubled operators to find sustainable operating solutions, which also protect the long-term
economics of our investments. As we enter the third year of the pandemic, we have either restructured or
are in the process of restructuring the portfolios of a significant number of the operators that have required
help. The resolution of these restructurings is generally expected to result in enhanced operator credit
profiles, with limited diminution in rent and rent equivalents.
At the same time, the operating backdrop has been significantly enhanced by the actions of a number
of states, which stepped up with strong increases to their Medicaid reimbursement rates in late 2022,
reflecting the inflationary pressures facing the industry. We are grateful for the support from these states,
and we are hopeful that the remaining states will provide similar much needed help in 2023.
Our capacity to absorb the financial impact of the past few years has been significantly enhanced by
the strength of our balance sheet. We ended 2022 with almost all of our $1.45 billion revolving credit
facility available for use and nearly $300 million of cash on the balance sheet. In addition, we have
$400 million of forward interest rate swaps with a weighted average fixed rate of approximately 0.8675%.
This combination of factors provides us with significant flexibility to address the $350 million and
$400 million of bonds that mature in 2023 and 2024, respectively.
This balance sheet strength, along with our deep relationships within the industry, allowed Omega to
continue to accretively deploy capital. In 2022, we closed on over $400 million of investments, and the
pipeline looks strong for 2023.
We continue to believe that the long-term secular demographic tailwinds in our industry remain intact.
The pandemic has reaffirmed the importance of a robust and well-funded healthcare offering to support the
elderly and frail, and we believe that skilled nursing and assisted living facilities, as low-cost,
non-discretionary service providers, will continue to play a vital role in this continuum of care.
Finally, we would like to thank our operators, our employees and you, our capital partners.
Throughout this pandemic, our operators and their brave staff have worked tirelessly to protect and care for
their residents. We are proud to be their partner. Our employees are the life blood of our business and their
earnest efforts throughout this pandemic have been remarkable. Lastly, we are thankful for the continued
support of our capital providers during this demanding period in our Company’s history. We will continue
to work diligently to be prudent stewards of your capital and to reward your faith in Omega Healthcare
Investors.
Very truly,
C. Taylor Pickett
Chief Executive Officer
April 21, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
For the transition period from
to
OMEGA HEALTHCARE INVESTORS, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland
(Omega Healthcare Investors, Inc.)
(State or other jurisdiction of incorporation or
organization)
1-11316
(Omega Healthcare Investors, Inc.)
(Commission file number)
38-3041398
(Omega Healthcare Investors, Inc.)
(IRS Employer Identification No.)
303 International Circle, Suite 200, Hunt Valley, MD 21030
(Address of principal executive offices)
(410) 427-1700
(Telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Registrant
Omega Healthcare Investors, Inc.
Title of Each Class
Common Stock, $.10 Par Value
Trading Symbol (s)
OHI
Name of Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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 twelve 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, 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. (Check one:)
Large accelerated filer ☒
Smaller reporting company ☐
Accelerated filer ☐
Emerging growth company ☐
Non-accelerated filer ☐
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 7(a)(2)(B) of the Securities Act.
Yes ☐ No ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.
Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the common stock Omega Healthcare Investors, Inc. held by non-affiliates was $6,599,342,597 as of
June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value was
computed using the $28.19 closing price per share for such stock on the New York Stock Exchange on such date.
As of February 8, 2023, there were 234,267,646 shares of Omega Healthcare Investors, Inc. common stock outstanding.
Proxy Statement for the registrant’s 2023 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission
no later than 120 days after December 31, 2022, is incorporated by reference in Part III herein.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Page
PART I
Business
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A. Risk Factors
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . .
Item 8.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers of the Registrant and Corporate Governance . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
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35
35
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36
37
37
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54
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55
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1
Forward-Looking Statements
Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us” and “our”
and other similar terms in this Annual Report on Form 10-K refer to Omega Healthcare Investors, Inc. and its
consolidated subsidiaries.
The following discussion should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in this document. This document contains “forward-looking statements” within the
meaning of the federal securities laws. These statements relate to our expectations, beliefs, intentions, plans,
objectives, goals, strategies, future events, performance and underlying assumptions and other statements
other than statements of historical facts. In some cases, you can identify forward-looking statements by the
use of forward-looking terminology including, but not limited to, terms such as “may,” “will,” “anticipates,”
“expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. These statements are
based on information available on the date of this filing and only speak as to the date hereof and no
obligation to update such forward-looking statements should be assumed.
Our actual results may differ materially from those reflected in the forward-looking statements
contained herein as a result of a variety of factors, including, among other things:
(1) those items discussed under “Risk Factors” in Part I, Item 1A to this Annual Report on
Form 10-K;
(2) uncertainties relating to the business operations of the operators of our assets, including those
relating to reimbursement by third-party payors, regulatory matters and occupancy levels;
(3) the impact of the COVID-19 pandemic on our business and the business of our operators,
including without limitation, the announced termination of the federally declared public health
emergency and related government and regulatory support scheduled for 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”) in connection with the
pandemic, the ability of our operators to comply with infection control and vaccine protocols and
to manage facility infection rates, and the sufficiency of government support and reimbursement
rates to offset such costs and the conditions related thereto;
(4) the ability of our operators in bankruptcy to reject unexpired lease obligations, modify the terms
of our mortgages and impede our ability 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;
(5) our ability to re-lease, otherwise transition, or sell underperforming assets or assets held for sale
on a timely basis and on terms that allow us to realize the carrying value of these assets;
(6) the availability and cost of capital to us;
(7) changes in our credit ratings and the ratings of our debt securities;
(8) competition in the financing of healthcare facilities;
(9) competition in the long-term healthcare industry and shifts in the perception of various types of
long-term care facilities, including SNFs and ALFs;
(10) additional regulatory and other changes in the healthcare sector;
(11) changes in the financial position of our operators;
(12) the effect of economic and market conditions generally and, particularly, in the healthcare
industry;
(13) changes in interest rates and the impact of inflation;
(14) the timing, amount and yield of any additional investments;
(15) changes in tax laws and regulations affecting real estate investment trusts (“REITs”);
2
(16) the potential impact of changes in the SNF and ALF markets or local real estate conditions on
our 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;
(17) our ability to maintain our status as a REIT; and
(18) the effect of other factors affecting our business or the businesses of our operators that are
beyond our or their control, including natural disasters, other health crises or pandemics and
governmental action; particularly in the healthcare industry.
3
Item 1 — Business
Overview
PART I
Omega Healthcare Investors, Inc. (“Parent”) is a Maryland corporation that, together with its
consolidated subsidiaries (collectively, “Omega” or “Company”) has elected to be taxed as a REIT for
federal income tax purposes. Omega 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 subsidiaries, “Omega OP”). As of December 31, 2022, Parent owned
approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP
Units”), and other investors owned approximately 3% of the outstanding Omega OP Units. Omega became
a publicly traded company listed on the New York Stock Exchange in 1992.
Omega has one reportable segment consisting of investments in healthcare-related real estate properties
located in the United States (“U.S.”) and the United Kingdom (“U.K.”). Our goal is to provide strong
returns to our investors, while serving as the preferred capital partner to our healthcare operating
companies and affiliates (collectively, our “operators”) so they can concentrate on providing a high level of
care for their resident-patients.
Property Types
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 (“MOBs”). The following is a summary of our various property types.
•
Skilled nursing facilities — SNFs provide services that include daily nursing, therapeutic
rehabilitation, social services, activities, housekeeping, nutrition, medication management and
administrative services for individuals requiring certain assistance for activities in daily living.
• Assisted living facilities — ALFs provide services that include assistance for activities in daily
living and permit residents to maintain some of their privacy and independence as they do not
require constant supervision and assistance. Services usually include daily housekeeping, laundry,
medical reminders and assistance with the activities of daily living, such as eating, dressing and
bathing.
•
•
Independent living facilities — ILFs are age-restricted multi-family properties with central dining
facilities that provide services that include security, housekeeping, activities, nutrition and limited
laundry services.
Specialty facilities — Specialty facilities consist of specialty hospitals, long-term acute care
hospitals, inpatient rehabilitation facilities, behavioral health substance facilities, behavioral health
psychiatric facility and traumatic brain injury facilities.
• Medical office buildings — MOBs are facilities designed specifically for healthcare providers such
as physicians, dentists and other clinicians.
Investment Strategy & Types
We maintain a portfolio of long-term healthcare facilities, mortgages and other real estate loans on
healthcare facilities located in the U.S. and the U.K. Our investments are generally geographically diverse
and operated by a diverse group of established, middle-market healthcare operators that we believe meet
our standards for quality and experience of management and creditworthiness. Our criteria for evaluating
potential investments includes but is not limited to:
•
the quality and experience of management and the creditworthiness of the operator of the facility;
4
•
•
•
•
•
•
the facility’s historical and forecasted cash flow and its ability to meet operational needs, capital
expenditure requirements and lease or debt service obligations;
the construction quality, condition and design of the facility and its environmental impact;
the location of the facility;
the tax, growth, regulatory and reimbursement environment of the applicable jurisdiction;
the occupancy rate for the facility and demand for similar healthcare facilities in the same or
nearby communities; and
the payor mix of private, Medicare and Medicaid patients at the facility.
As healthcare delivery continues to evolve, we continuously evaluate potential investments, as well as
our assets, operators and markets to position our portfolio for long-term success. Our strategy includes
applying data analytics to our investment underwriting and asset management, as well as selling or
transitioning assets that do not meet our portfolio criteria.
We prefer to invest in fee simple ownership of properties. Due to regulatory, tax or other
considerations, we may pursue alternative investment structures, such as mortgages and investments in joint
ventures. While the market for long-term care real estate acquisitions in the U.S. remained competitive in
2022, we continued to seek and identify selective investments that are accretive to our portfolio. In addition
to our U.S.-based investments, we expect to continue to pursue investments in alternative jurisdictions such
as the U.K. As part of our continuous evaluation of our portfolio and in connection with certain operator
workout transactions, we expect to continue to opportunistically sell assets, or portfolios of assets, from
time to time. In addition, as the long-term care industry evolves and adapts to new protocols, we have made
and may continue to make select ancillary investments in companies that enhance the technology and
infrastructure of long-term care providers and our operators.
We typically seek substantial liquidity deposits, covenants regarding minimum working capital and net
worth, liens on accounts receivable and other operating assets, and various provisions for cross-default,
cross-collateralization and corporate and/or personal guarantees for our investments when appropriate.
The following summarizes our primary investment structures. The average annualized yields described
below reflect obligations under existing contractual arrangements. However, due to the nature of the
long-term care industry, we cannot assure that the operators of our facilities will meet their payment
obligations in full or when due. Therefore, the annualized yields as of December 31, 2022, set forth below,
are not necessarily indicative of future yields, which may be lower.
Real Estate Assets & Leases
Our real estate assets are primarily comprised of land, buildings and improvements and any furniture
and equipment contained within our facilities. Substantially all of our leases are triple-net operating leases
and require the operator to pay rent and all additional charges incurred in the operation of the leased
facility. At December 31, 2022, we had one direct financing lease. Our triple-net operating leases typically
range from 5 to 15 years, plus renewal options. Our leases generally provide for minimum annual rents that
are subject to annual escalators. Leases with fixed annual rental escalators are generally recognized on a
straight-line basis over the initial lease period, subject to a collectibility assessment. At December 31, 2022,
our average annualized yield from operating leases was approximately 9.0%. At December 31, 2022,
approximately 78% of our operating leases have initial lease terms expiring after 2027. The majority of our
leased real estate properties are leased under provisions of master lease agreements that govern more than
one facility, and to a lesser extent, we lease facilities under single facility leases. Under our master leases,
our operators are required to make one monthly payment that represents rent on all the properties that are
subject to the master lease. Certain of our leases also contain operator purchase options or landlord put
options.
Some of our leases provide our operators with advances for the construction of facilities or capital
expenditures for strategic facility enhancements. Typically, these advances require the operator to pay a
fixed percentage of the advances funded as capital expenditure rent under the lease. Construction and
upgrades made under these lease clauses are capitalized within our real estate assets. We direct a significant
amount of our capital back into existing assets, which we believe sets the stage for our long-term strategic
success.
5
Real Estate Loans
Real estate loans consist of mortgage loans and other real estate loans which are primarily
collateralized by a first, second or third mortgage lien or a leasehold mortgage on, or an assignment of the
partnership interest in, the related properties. Our real estate loans typically have a fixed interest rate for the
loan term. We enter into real estate loans for existing facilities and for the construction of facilities. At
December 31, 2022, our average annualized yield on these investments was approximately 10.1%. At
December 31, 2022, approximately 76% of our real estate loans have primary terms that expire after 2027.
Investments in Unconsolidated Joint Ventures
From time to time, we also acquire equity interests in joint ventures or entities that support the
long-term healthcare industry and our operators. These are investments in entities that we do not
consolidate but for which we can exercise significant influence over operating and financial policies and are
reported under the equity method of accounting. Our investments in unconsolidated entities generally
represent interests ranging from 9% to 51%. Under the equity method of accounting, our share of the
investee’s earnings or losses is included in our consolidated results of operations. The initial carrying value
of investments in unconsolidated entities is based on the amount paid to purchase the entity interest
inclusive of transaction costs.
Non-Real Estate Loans
Non-real estate loans are loans to our operators and/or their principals that may be either unsecured or
secured by the collateral of the borrower and are typically short-term in nature. Collateral under secured
non-real estate loans typically consists of the working capital of operator entities. At December 31, 2022,
our average annualized yield on these investments was approximately 8.7%. At December 31, 2022,
approximately 12% of our non-real estate loans have primary terms that expire after 2027.
Portfolio and Investment Summary
As of December 31, 2022, our portfolio of real estate investments included 926 healthcare facilities
located in 42 states and the U.K. operated by 67 third-party operators and was made up of the following:
• Real estate assets, subject to operating leases, that include 664 SNFs, 169 ALFs, 20 ILFs, 16
specialty facilities and two MOBs;
investment in a direct financing lease on one SNF;
real estate loans, including first lien mortgages, on 48 SNFs, two ALFs and two specialty facilities;
investments in unconsolidated joint ventures that hold 63 ALFs and two specialty facilities; and
2 facilities held for sale.
•
•
•
•
Included below is a summary of our total investment assets, excluding accumulated depreciation, as of
December 31, 2022 and 2021 (dollars in thousands):
As of December 31,
2022
2021
Real estate assets:
Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,860,264 $ 9,028,745
Investments in direct financing leases – net . . . . . . . . . . . . . . . . . . . . . . .
10,873
1,180,786
Real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
194,687
Investments in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
203,025
10,618,116
Total real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124,184
Non-real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,325,155 $10,742,300
8,503
1,042,731
178,920
9,456
10,099,874
225,281
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Revenues
The following table summarizes our revenues by investment category for 2022, 2021 and 2020 (dollars
in thousands):
Real estate related income:
Year Ended December 31,
2022
2021
2020
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $750,208 $ 923,677 $753,427
1,033
Income from direct financing leases . . . . . . . . . . . . . . . . . . . . . . .
117,289
Real estate loans interest income . . . . . . . . . . . . . . . . . . . . . . . . .
871,749
Total real estate related revenues . . . . . . . . . . . . . . . . . . . . . . . .
16,997
Non-real estate loans interest income
. . . . . . . . . . . . . . . . . . . . . . .
3,635
Miscellaneous income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $878,244 $1,062,809 $892,381
1,029
123,649
1,048,355
12,733
1,721
1,023
110,322
861,553
13,597
3,094
The table set forth in Item 2 — Properties contains additional information regarding the geographic
concentration of our facilities and investments as of December 31, 2022.
Borrowing Policies
We generally attempt to match the maturity of our indebtedness with the maturity of our investment
assets and employ long-term, fixed-rate debt to the extent practicable in view of market conditions in
existence from time to time.
We may use the proceeds of new indebtedness to finance our investments in additional healthcare
facilities. In addition, we may invest in properties subject to existing loans, secured by mortgages, deeds of
trust or similar liens on properties.
Policies With Respect To Certain Activities
With respect to our capital requirements, we typically rely on equity offerings, debt financing and
retention of cash flow (subject to provisions in the Internal Revenue Code of 1986, as amended (the
“Code”) concerning taxability of undistributed REIT taxable income), or a combination of these methods.
Our financing alternatives include bank borrowings, publicly or privately placed debt instruments, purchase
money obligations to the sellers of assets or securitizations, any of which may be issued as secured or
unsecured indebtedness. We have the authority to issue our common stock or other equity or debt securities
in exchange for property and to repurchase or otherwise reacquire our securities. Subject to the percentage
of ownership limitations and gross income and asset tests necessary for REIT qualification, we may invest
in securities of other REITs, other entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. We may engage in the purchase and sale of
investments. We do not underwrite the securities of other issuers. Our officers and directors may change any
of these policies without a vote of our stockholders. In the opinion of our management, our properties are
adequately covered by insurance.
Competition
The healthcare industry is highly competitive and will likely become more competitive in the future. We
face competition in making and pricing new investments from other public and private REITs, investment
companies, private equity and hedge fund investors, healthcare operators, lenders, developers and other
institutional investors, some of whom may have greater resources and lower costs of capital than us. In
addition, a significant amount of our rental and loan interest income is generally derived from facilities in
states that require state approval for development and expansion of healthcare facilities. We believe that
such state approvals may reduce competition for our operators and enhance the value of our properties.
Our operators compete on a local and regional basis with operators of facilities that provide comparable
services and, in certain cases, home and community health solutions. The basis of competition for our
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operators includes, amongst other factors, the quality of care provided, reputation, the physical appearance
of a facility, price, the range of services offered, family preference, alternatives for healthcare delivery, the
supply of competing properties, physicians, staff, referral sources, location and the size and demographics of
the population and surrounding areas.
Increased competition makes it more challenging for us to identify and successfully capitalize on
opportunities that meet our objectives. Our ability to compete is also impacted by national and local
economic trends, availability of investment alternatives, availability and cost of capital, our financial
condition, construction and renovation costs, existing laws and regulations, new legislation and population
trends.
Taxation of Omega
Omega elected to be taxed as a REIT, under Sections 856 through 860 of the Code, beginning with our
taxable year ended December 31, 1992. To continue to qualify as a REIT, we must continue to meet certain
tests that, among other things, generally require that our assets consist primarily of real estate assets, our
income be derived primarily from real estate assets, and that we distribute at least 90% of our REIT taxable
income (other than net capital gains) to our stockholders annually. Provided we maintain our qualification
as a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net
income to the extent such net income is distributed to our stockholders annually. Even if we continue to
qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and
property. We believe that we were organized and have operated in such a manner as to qualify for taxation
as a REIT. We intend to continue to operate in a manner that will allow us to maintain our qualification as
a REIT, but no assurance can be given that we have operated or will be able to continue to operate in a
manner so as to qualify or remain qualified as a REIT.
We have utilized, and may continue to utilize, one or more taxable REIT subsidiaries (“TRS”) to
engage in activities that REITs may be prohibited from performing, including the provision of management
and other services to third parties and the conduct of certain nonqualifying real estate transactions. Our
TRSs generally are taxable as regular corporations, and therefore, subject to federal, foreign, state and local
income taxes.
To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less
than 100% of our “REIT taxable income,” as adjusted, we will be subject to tax thereon at regular
corporate rates. If we were to fail to qualify as a REIT in any taxable year, as a result of a determination
that we failed to meet the annual distribution requirement or otherwise, we would be subject to federal and
state income tax, and any applicable alternative minimum tax on our taxable income at regular corporate
rates with respect to each such taxable year for which the statute of limitations remains open. In addition,
even if we continue to qualify as a REIT, we could become subject to certain excise taxes. Moreover, unless
entitled to relief under certain statutory provisions, we also would be disqualified from treatment as a REIT
for the four taxable years following the year during which qualification is lost. This treatment would
significantly reduce our net earnings and cash flow because of our additional tax liability for the years
involved, which could significantly impact our financial condition.
All of our investments are held directly or through entities owned by Omega OP. Omega OP is a pass
through entity for U.S. federal income tax purposes, and therefore we are required to take into account our
allocable share of each item of Omega OP’s income, gain, loss, deduction, and credit for any taxable year of
Omega OP ending within or with our taxable year, without regard to whether we have received or will
receive any distribution from Omega OP. Although a partnership agreement for pass through entities
generally will determine the allocation of income and losses among partners, such allocations will be
disregarded for tax purposes if they do not comply with the provisions of the Code and Treasury
Regulations governing partnership allocations. If an allocation is not recognized for federal income tax
purposes, the item subject to the allocation will be reallocated in accordance with the partners’ interests in
the partnership, which will be determined by considering all the facts and circumstances relating to the
economic arrangement of the partners with respect to such item. While Omega OP should generally not be
a taxable entity for federal income tax purposes, any state or local revenue, excise or franchise taxes that
result from the operating activities of the Omega OP may be incurred at the entity level.
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Investors are strongly urged to consult their own tax advisors regarding the potential tax consequences of
an investment in us based on such investor’s particular circumstances.
Government Regulation and Reimbursement
The healthcare industry is heavily regulated. Our operators, which are primarily based in the U.S., are
subject to extensive and complex federal, state and local healthcare laws and regulations; we also have
several U.K.-based operators which are subject to a variety of laws and regulations in their jurisdiction.
These laws and regulations are subject to frequent and substantial changes resulting from the adoption of
new legislation, rules and regulations, and administrative and judicial interpretations of existing law. The
ultimate timing or effect of these changes, which may be applied retroactively, cannot be predicted. Changes
in laws and regulations impacting our operators, in addition to regulatory non-compliance by our
operators, can have a significant effect on the operations and financial condition of our operators, which in
turn may adversely impact us. There is the potential that we may be subject directly to healthcare laws and
regulations because of the broad nature of some of these regulations, such as the Anti-kickback Statute
and False Claims Act, among others.
The U.S. Department of Health and Human Services (“HHS”) declared a public health emergency on
January 31, 2020 following the World Health Organization’s decision to declare COVID-19 a public health
emergency of international concern. This declaration, which has been extended through its scheduled
expiration date of May 11, 2023, allows HHS to provide temporary regulatory waivers and new
reimbursement rules, such as a temporary increase in the Medicaid Federal Medical Assistance Percentage
and other rules designed to equip providers with flexibility to respond to the COVID-19 pandemic by
suspending various Medicare patient coverage criteria and documentation and care requirements,
including, for example, suspension of the three-day prior hospital stay coverage requirement and expanding
the list of approved services which may be provided via telehealth. The three-day prior hospital stay waiver
was a significant benefit to the skilled nursing industry during the height of the pandemic, as the
reimbursement associated with the ability to skill in place helped to offset some of the increased costs
connected with managing the pandemic. These regulatory actions have contributed, and may continue to
contribute, to a change in census volumes and skilled nursing mix that may not otherwise have occurred.
The public health emergency declaration is scheduled to terminate on May 11, 2023; however, it remains
uncertain whether and/or when federal and state regulators will resume enforcement of those regulations
which have waived or otherwise not been enforced during the public health emergency due to the exercise of
enforcement discretion.
These temporary changes to regulations and reimbursement, as well as emergency legislation, including
the CARES Act enacted on March 27, 2020 and discussed below, have had a significant impact on the
operations and financial condition of our operators. The extent of the COVID-19 pandemic’s continued
effect, including through prolonged labor shortages, slow occupancy recovery, and expense increases, on the
Company’s and our operators’ operational and financial performance will depend on future developments,
including the recovery in occupancy and availability of labor, the ability of our operators to manage the
impact of the termination of public health emergency and temporary relief thereunder, the sufficiency and
timeliness of additional governmental relief and reimbursement rate setting in offsetting cost increases, and
the continued efficacy of vaccination, treatment and infection control programs relating to COVID-19, all
of which developments and impacts are uncertain and difficult to predict and may continue to adversely
impact our business, results of operations, financial condition and cash flows.
A significant portion of our operators’ revenue is derived from government-funded reimbursement
programs, consisting primarily of Medicare and Medicaid. As federal and state governments continue to
focus on healthcare reform initiatives, efforts to reduce costs by government payors will likely continue.
Significant limits on the scope of services reimbursed and/or reductions of reimbursement rates could
therefore have a material adverse effect on our operators’ results of operations and financial condition.
Additionally, new and evolving payor and provider programs that are tied to quality and efficiency could
adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations, and there
can be no assurance that payments under any of these government healthcare programs are currently, or
will be in the future, sufficient to fully reimburse the property operators for their operating and capital
expenses. In addition to quality and value-based reimbursement reforms, the U.S. Centers for Medicare and
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Medicaid Services (“CMS”) has implemented a number of initiatives focused on the reporting of certain
facility specific quality of care indicators that could affect our operators, including publicly released quality
ratings for all of the nursing homes that participate in Medicare or Medicaid under the CMS “Five Star
Quality Rating System.” Facility rankings, ranging from five stars (“much above average”) to one star
(“much below average”) are updated on a monthly basis. SNFs are required to provide information for the
CMS Nursing Home Compare website regarding staffing and quality measures. These rating changes have
impacted referrals to SNFs, and it is possible that changes to this system or other ranking systems could
lead to future reimbursement policies that reward or penalize facilities on the basis of the reported quality
of care parameters.
The following is a discussion of certain U.S. laws and regulations generally applicable to our operators,
and in certain cases, to us.
Reimbursement Changes Related to COVID-19:
U.S. Federal Stimulus Funds and Financial Assistance for Healthcare Providers. In response to the
pandemic, Congress has enacted a series of economic stimulus and relief measures. On March 18, 2020, the
Families First Coronavirus Response Act (“FFCRA”) was enacted in the U.S., providing a temporary 6.2%
increase to each qualifying state and territory’s Medicaid Federal Medical Assistance Percentage (“FMAP”)
effective January 1, 2020. The temporary FMAP increase was set to extend through the last day of the
calendar quarter in which the public health emergency terminates. In exchange for receiving the enhanced
federal funding, the FFCRA included a requirement that Medicaid programs keep beneficiaries enrolled
through the end of the month in which the public health emergency terminates. However, as part of the
Consolidated Appropriations Act of 2023 signed into law on December 29, 2022, Congress decoupled the
Medicaid continuous enrollment from the public health emergency and terminates this provision effective
March 31, 2023. Additionally, starting April 1, 2023, states that comply with federal rules regarding
conducting renewals may begin the phase-down of the enhanced federal funding according to the following
schedule: 6.2 percentage points through March 2023; 5 percentage points through June 2023; 2.5 percentage
points through September 2023 and 1.5 percentage points through December 2023. States cannot restrict
eligibility standards, methodologies, and procedures and states cannot increase premiums as required in
FFCRA. Primarily due to the continuous enrollment provision, Medicaid enrollment has grown
substantially compared to before the pandemic and the uninsured rate has dropped. The extent to which
this increase in Medicaid enrollment is sustained following the discontinuation of the continuous
enrollment provision is uncertain.
In further response to the pandemic, the CARES Act authorized approximately $178 billion to be
distributed through the Provider Relief Fund to reimburse eligible healthcare providers for healthcare
related expenses or lost revenues that were attributable to coronavirus. Funds have been allocated since 2020
in targeted and general distributions, the latter over four phases. In September 2021, HHS announced the
release of $25.5 billion in phase four provider funding, including $17 billion of the $178 billion previously
authorized through the CARES Act and $8.5 billion for rural providers, including those with Medicaid and
Medicare patients, through the American Rescue Plan Act, with payments that began in December 2021.
The Provider Relief Fund is administered under the broad authority and discretion of HHS and recipients
are not required to repay distributions received to the extent they are used in compliance with applicable
requirements. HHS continues to evaluate and provide allocations of, and issue regulation and guidance
regarding, grants made under the CARES Act. We do not expect our operators will receive additional
funding from HHS.
The CARES Act and related legislation also made other forms of financial assistance available to
healthcare providers, which have the potential to impact our operators to varying degrees. This assistance
includes Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and
Advance Payment Program, which made available accelerated payments of Medicare funds in order to
increase cash flow to providers. These payments are loans that providers were scheduled to repay beginning
one year from the issuance date of each provider’s or supplier’s accelerated or advance payment, with
repayment made through automatic recoupment of 25% of Medicare payments otherwise owed to the
provider or supplier for eleven months, followed by an increase to 50% for another six months, after which
any outstanding balance would be repaid subject to an interest rate of 4%. We believe these repayments
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commenced for many of our operators in April 2021 and have adversely impacted operating cash flows of
these operators. While not limited to healthcare providers, the CARES Act additionally provided payroll
tax relief for employers, allowing them to defer payment of employer Social Security taxes that are
otherwise owed for wage payments made after March 27, 2020 through December 31, 2020 to December 31,
2021 with respect to 50% of the payroll taxes owed, with the remaining 50% deferred until December 31,
2022.
The Budget Control Act of 2011 established a Medicare Sequestration of 2%, which is an automatic
reduction of certain federal spending as a budget enforcement tool. Originally, the sequester was supposed
to be in effect from FY 2013 to FY 2021. However, most recently, the Infrastructure Investment and Jobs
Act extended the sequester through FY 2031. Additional legislation, including the CARES Act and the
Protecting Medicare and American Farmers Act, suspended the application of the sequester to Medicare
from May 1, 2020 through March 30, 2022. It also limited Medicare reductions to 1% from April 1, 2022
through June 30, 2022. The full 2% Medicare sequestration went into effect as of July 1, 2022. The
sequestration is currently extended through fiscal year 2031, and gradually increases to 4% from 2030
through 2031.
Quality of Care Initiatives and Additional Requirements Related to COVID-19. In addition to
COVID-19 reimbursement changes, several regulatory initiatives announced from 2020 to 2022 focused on
addressing quality of care in long-term care facilities, including those related to COVID-19 testing and
infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies,
as well as increased inspection of nursing homes. In August 2021, CMS announced it was developing an
emergency regulation requiring staff vaccinations within the nation’s more than 15,000 Medicare and
Medicaid-participating nursing homes, and in September 2021, CMS further announced that the scope of
the regulation would be expanded to include workers in hospitals, dialysis facilities, ambulatory surgical
settings, and home health agencies. In addition, recent updates to the Nursing Home Care website and the
Five Star Quality Rating System include revisions to the inspection process, adjustment of staffing rating
thresholds, the implementation of new quality measures and the inclusion of a staff turnover percentage
(over a 12-month period). Although the American Rescue Plan Act did not allocate specific funds directly
to SNF or ALF providers, certain funds were allocated to states who then distributed a portion of these
funds to SNF and ALF providers. In addition, the American Rescue Plan Act allocated funds to quality
improvement organizations to provide infection control and vaccination uptake support to SNFs and to the
CDC for staffing, training and deployment of state-based nursing home and long-term care “strike teams”
to assist facilities with known or suspected COVID-19 outbreaks. Additionally, the Biden Administration
announced a focus on implementing minimum staffing requirements and increased inspections as part of
the nursing home reforms announced in the 2022 State of the Union Address, and in July 2022, CMS
announced it was evaluating a proposed federal staffing mandate for SNFs. It is uncertain whether such a
mandate will be implemented and, if it is, whether it will be accompanied by additional funding to offset
any increased staffing requirements for our operators; an unfunded mandate to increase staff in SNFs may
have a material and adverse impact on the financial condition of our operators.
On June 16, 2020, the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis
announced the launch of an investigation into the COVID-19 response of nursing homes and the use of
federal funds by nursing homes during the pandemic. The Select Subcommittee continued to be active
throughout the remainder of 2020, 2021 and 2022. In March 2021, the Oversight Subcommittee of the
House Ways and Means Committee held a hearing on examining the impact of private equity in the U.S.
healthcare system, including the impact on quality of care provided within the skilled nursing industry. The
Biden Administration additionally announced in March 2022 a focus on reviewing private equity
investment specifically in the skilled nursing sector. These initiatives, as well as additional calls for
government review of the role of private equity in the U.S. healthcare industry, could result in additional
requirements on our operators.
Reimbursement Generally:
Medicaid. Most of our SNF operators derive a substantial portion of their revenue from state
Medicaid programs. Whether and to what extent the level of Medicaid reimbursement covers the actual cost
to care for a Medicaid eligible resident varies by state. While periodic rate setting occurs and, in most cases,
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has an inflationary component, the state rate setting process not always keep pace with inflation or, even if
it does, there is a risk that is may still not be sufficient to cover all or a substantial portion of the cost to
care for Medicaid eligible residents. Additionally, rate setting is also subject to changes based on state
budgetary constraints and political factors, both of which could result in decreased or insufficient
reimbursement to the industry even in an environment where costs are rising. Since our operators’ profit
margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid
reimbursement or an increase in the percentage of Medicaid patients has in the past, and may in the future,
adversely affect our operators’ results of operations and financial condition, which in turn could adversely
impact us.
The CARES Act and American Rescue Plan Act contained several provisions designed to increase
coverage, expand benefits, and adjust federal financing for state Medicaid programs. While the CARES Act
provided for a 6.2% FMAP add-on to the Medicaid program during the PHE, only certain states passed
any of that specifically on to SNF operators either via an enhanced rate or lump sum payments.
Additionally, the American Rescue Plan Act provided for a 10% FMAP add-on for state home and
community-based service expenditures from April 1, 2021 through March 30, 2022 in an effort to assist
seniors and people with disabilities to receive services safely in the community rather than in nursing homes
and other congregate care settings. Both of these programs came with conditions that states had to meet to
eligible for the FMAP add-on. There may be future initiatives proposed to allocate funding available for
reimbursement away from SNFs in favor of home health agencies and community-based care.
The risks of insufficient Medicaid reimbursement rates along with possible initiatives to push residents
historically cared for in SNFs to alternative settings may impact us more acutely in states where we have a
larger presence, including Florida and Texas, our states with the largest concentration of investments. In
Texas several of our operators have historically experienced lower operating margins on their SNFs, as
compared to other states, as a result of lower Medicaid reimbursement rates and higher labor costs. The
state did provide for a sizeable increase in rate during the PHE based on the FMAP add-on; however, there
is a risk that this increase won’t be captured in normal rate setting when the FMAP add-on expires. In
Florida, added support to our operators during the pandemic has generally been limited, with
approximately $100 million in additional FMAP funds announced in November 2021, payable over a
three-month period through increased Medicaid rates. In March 2022, a revised state budget for 2022-23,
which took effect October 1, 2022, increased Medicaid reimbursement rates by 7.8% to fund, in part,
increased wages for certain nursing home staff. In addition, on April 6, 2022, the State of Florida enacted
staffing reforms for SNFs that may provide additional flexibility to our operators in meeting minimum
staffing requirements by using supplemental staff. We continue to monitor rate adjustment activity in other
states in which we have a meaningful presence, and it is too early to assess whether rates will generally keep
pace with increased operator costs.
Medicare. On July 29, 2022, CMS issued a final rule regarding the government fiscal year 2023
Medicare payment rates and quality payment programs for SNFs, with aggregate Medicare Part A
payments projected to increase by $904 million, or 2.7%, for fiscal year 2023 compared to fiscal year 2022.
This estimated reimbursement increase is attributable to a 3.9% market basket increase factor plus a
1.5 percentage point market basket forecast error adjustment and less a 0.3 percentage point productivity
adjustment, as well as a $780 million decrease in the SNF prospective payment system rates as a result of
the recalibrated parity adjustment described below, which is being phased in over two years. The annual
update is reduced by two percentage points for SNFs that fail to submit required quality data to CMS
under the SNF Quality Reporting Program. CMS has indicated that these impact figures did not
incorporate the SNF Value-Based Program reductions that are estimated to be $186 million in fiscal year
2023. While Medicare reimbursement rate setting, which takes effect annually each October, has historically
included forecasted inflationary adjustments, the degree to which those forecasts accurately reflect current
inflation rates remains uncertain. Additionally, it remains uncertain whether these adjustments will
ultimately be offset by non-inflationary factors, including any adjustments related to the impact of various
payment models, such as those described below.
Payments to providers continue to be increasingly tied to quality and efficiency. The Patient Driven
Payment Model (“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the
whole patient, became effective October 1, 2019. CMS has stated that it intended PDPM to be
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revenue-neutral to operators, with future Medicare reimbursement reductions possible if that was not the
case. In April 2022, CMS issued a proposal for comment, which included an adjustment to obtain that
revenue neutrality as early as the 2023 rate setting period. After considering the feedback received in the
rulemaking cycle, CMS finalized recalibration of the PDPM parity adjustment factor of 4.6% with a
two-year phase-in period that would reduce SNF spending by 2.3%, or approximately $780 million, in each
of fiscal years 2023 and 2024. Prior to COVID-19, we believed that certain of our operators could realize
efficiencies and cost savings from increased concurrent and group therapy under PDPM and some had
reported early positive results. Given the ongoing impacts of COVID-19, many operators are and may
continue to be restricted from pursuing concurrent and group therapy and unable to realize these benefits.
Additionally, our operators continue to adapt to the reimbursement changes and other payment reforms
resulting from the value-based purchasing programs applicable to SNFs under the 2014 Protecting Access
to Medicare Act. These reimbursement changes have had and may, together with any further
reimbursement changes to PDPM or value-based purchasing models, in the future have an adverse effect on
the operations and financial condition of some operators and could adversely impact the ability of
operators to meet their obligations to us.
On May 27, 2020, CMS added physical therapy, occupational therapy and speech-language pathology
to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF as a part
of the COVID-19 1135 waiver provisions. The COVID-19 1135 waiver provisions also allow for the facility
to bill an originating site fee to CMS for telehealth services provided to Medicare Part B beneficiary
residents of the facility when the services are provided by a physician from an alternate location, effective
March 6, 2020 through May 11, 2023, the scheduled end of the public health emergency.
Other Regulation:
Office of the Inspector General Activities. The Office of Inspector General (“OIG”) of HHS has
provided long-standing guidance for SNFs regarding compliance with federal fraud and abuse laws. More
recently, the OIG has conducted increased oversight activities and issued additional guidance regarding its
findings related to identified problems with the quality of care and the reporting and investigation of
potential abuse or neglect at group homes, nursing homes and SNFs. The OIG has additionally reviewed the
staffing levels reported by SNFs as part of its August 2018 and February 2019 Work Plan updates, and
included a review of involuntary transfers and discharges from nursing homes in the June 2019 Work Plan
updates. In August 2020, the OIG released its findings regarding its review of staffing levels in SNFs from
2018. The OIG recommended that CMS enhance efforts to ensure nursing homes meet daily staffing
requirements and explore ways to provide consumers with additional information on nursing homes’ daily
staffing levels and variability. The OIG indicated that while the review was initiated before the COVID-19
pandemic emerged, the pandemic reinforces the importance of sufficient staffing for nursing homes, as
inadequate staffing can make it more difficult for nursing homes to respond to infectious disease outbreaks
like COVID-19. It is unknown what impact, if any, enhanced scrutiny of staffing levels by OIG and CMS
will have on our operators.
Department of Justice and Other Enforcement Actions. SNFs are under intense scrutiny for ensuring
the quality of care being rendered to residents and appropriate billing practices conducted by the facility.
The Department of Justice (“DOJ”) has historically used the False Claims Act to civilly pursue nursing
homes that bill the federal government for services not rendered or care that is grossly substandard. For
example, California prosecutors announced in March 2021 an investigation into a skilled nursing provider
that is affiliated with one of our operators, alleging the chain manipulated the submission of staffing level
data in order to improve its Five Star rating. In 2020, the DOJ launched a National Nursing Home
Initiative to coordinate and enhance civil and criminal enforcement actions against nursing homes with
grossly substandard deficiencies. Such enforcement activities are unpredictable and may develop over
lengthy periods of time. An adverse resolution of any of these enforcement activities or investigations
incurred by our operators may involve injunctive relief and/or substantial monetary penalties, either or both
of which could have a material adverse effect on their reputation, business, results of operations and cash
flows.
Medicare and Medicaid Program Audits. Governmental agencies and their agents, such as the
Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the OIG, CMS and state
Medicaid programs, conduct audits of our operators’ billing practices from time to time. CMS contracts
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with Recovery Audit Contractors on a contingency basis to conduct post-payment reviews to detect and
correct improper payments in the fee-for-service Medicare program, to managed Medicare plans and in the
Medicaid program. Regional Recovery Audit Contractor program auditors along with the OIG and DOJ
are expected to continue their efforts to evaluate SNF Medicare claims for any excessive therapy charges.
CMS also employs Medicaid Integrity Contractors to perform post-payment audits of Medicaid claims and
identify overpayments. In addition, the state Medicaid agencies and other contractors have increased their
review activities. To the extent any of our operators are found out of compliance with any of these laws,
regulations or programs, their financial position and results of operations can be adversely impacted, which
in turn could adversely impact us.
Fraud and Abuse. There are various federal and state civil and criminal laws and regulations
governing a wide array of healthcare provider referrals, relationships and arrangements, including laws and
regulations prohibiting fraud by healthcare providers. Many of these complex laws raise issues that have not
been clearly interpreted by the relevant governmental authorities and courts.
These laws include: (i) federal and state false claims acts, which, among other things, prohibit providers
from filing false claims or making false statements to receive payment from Medicare, Medicaid or other
federal or state healthcare programs; (ii) federal and state anti-kickback and fee-splitting statutes, including
the Medicare and Medicaid Anti-kickback statute, which prohibit the payment or receipt of remuneration
to induce referrals or recommendations of healthcare items or services, such as services provided in a SNF;
(iii) federal and state physician self-referral laws (commonly referred to as the Stark Law), which generally
prohibit referrals by physicians to entities for designated health services (some of which are provided in
SNFs) with which the physician or an immediate family member has a financial relationship; (iv) the federal
Civil Monetary Penalties Law, which prohibits, among other things, the knowing presentation of a false or
fraudulent claim for certain healthcare services and (v) federal and state privacy laws, including the privacy
and security rules contained in the Health Insurance Portability and Accountability Act of 1996, which
provide for the privacy and security of personal health information.
Violations of healthcare fraud and abuse laws carry civil, criminal and administrative sanctions,
including punitive sanctions, monetary penalties, imprisonment, denial of Medicare and Medicaid
reimbursement and potential exclusion from Medicare, Medicaid or other federal or state healthcare
programs. Additionally, there are criminal provisions that prohibit filing false claims or making false
statements to receive payment or certification under Medicare and Medicaid, as well as failing to refund
overpayments or improper payments. Violation of the Anti-kickback statute or Stark Law may form the
basis for a federal False Claims Act violation. These laws are enforced by a variety of federal, state and local
agencies and can also be enforced by private litigants through, among other things, federal and state false
claims acts, which allow private litigants to bring qui tam or whistleblower actions, which have become
more frequent in recent years.
Several of our operators have responded to subpoenas and other requests for information regarding
their operations in connection with inquiries by the DOJ or other regulatory agencies. In addition,
MedEquities Realty Trust, Inc., which we acquired in May 2019, received a Civil Investigative Demand
from the DOJ in connection with Lakeway Regional Medical Center, and in November 2022, the Company
and several of its affiliates entered into a settlement agreement relating to such demand.
Privacy. Our operators are subject to various federal, state and local laws and regulations designed to
protect the confidentiality and security of patient health information, including the federal Health
Insurance Portability and Accountability Act of 1996, as amended, the Health Information Technology for
Economic and Clinical Health Act (“HITECH”), and the corresponding regulations promulgated
thereunder (collectively referred to herein as “HIPAA”). The HITECH Act expanded the scope of these
provisions by mandating individual notification in instances of breaches of protected health information,
providing enhanced penalties for HIPAA violations, and granting enforcement authority to states’
Attorneys General in addition to the HHS Office for Civil Rights (“OCR”). Additionally, in a final rule
issued in January 2013, HHS modified the standard for determining whether a breach has occurred by
creating a presumption that any non-permitted acquisition, access, use or disclosure of protected health
information is a breach unless the covered entity or business associate can demonstrate through a risk
assessment that there is a low probability that the information has been compromised.
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Various states have similar laws and regulations that govern the maintenance and safeguarding of
patient records, charts and other information generated in connection with the provision of professional
medical services. These laws and regulations require our operators to expend the requisite resources to
secure protected health information, including the funding of costs associated with technology upgrades.
Operators found in violation of HIPAA or any other privacy law or regulation may face significant
monetary penalties. In addition, compliance with an operator’s notification requirements in the event of a
breach of unsecured protected health information could cause reputational harm to an operator’s business.
Licensing and Certification. Our operators and facilities are subject to various federal, state and local
licensing and certification laws and regulations, including laws and regulations under Medicare and
Medicaid requiring operators of SNFs and ALFs to comply with extensive standards governing operations.
Governmental agencies administering these laws and regulations regularly inspect our operators’ facilities
and investigate complaints. Our operators and their managers receive notices of observed violations and
deficiencies from time to time, and sanctions have been imposed from time to time on facilities operated by
them. In addition, many states require certain healthcare providers to obtain a certificate of need, which
requires prior approval for the construction, expansion or closure of certain healthcare facilities, which has
the potential to impact some of our operators’ abilities to expand or change their businesses.
Other Laws and Regulations. Additional federal, state and local laws and regulations affect how our
operators conduct their operations, including laws and regulations protecting consumers against deceptive
practices and otherwise generally affecting our operators’ management of their property and equipment
and the conduct of their operations (including laws and regulations involving fire, health and safety; the
Americans with Disabilities Act (the “ADA”), which imposes certain requirements to make facilities
accessible to persons with disabilities, the costs for which we may be directly or indirectly responsible; the
U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010 (collectively referred to as the “Healthcare Reform Law”), which amended
requirements for staff training, discharge planning, infection prevention and control programs, and
pharmacy services, among others; staffing; quality of services, including care and food service; residents’
rights, including abuse and neglect laws; and health standards, including those set by the federal
Occupational Safety and Health Administration (in the U.S.). It is anticipated that our operators will
continue to face additional federal and state regulatory requirements related to the operation of their
facilities in response to the COVID-19 pandemic. These requirements may continue to evolve and develop
over lengthy periods of time.
General and Professional Liability. Although arbitration agreements have been effective in limiting
general and professional liabilities for SNF and long-term care providers, there have been numerous lawsuits
in recent years challenging the validity of arbitration agreements in long-term care settings. On July 16,
2019, CMS issued a final rule lifting the prohibition on pre-dispute arbitration agreements offered to
residents at the time of admission provided that certain requirements are met. The rule prohibits providers
from requiring residents to sign binding arbitration agreements as a condition for receiving care and
requires that the agreements specifically grant residents the explicit right to rescind the agreement within
thirty calendar days of signing. A number of professional liability and employment related claims have been
filed or are threatened to be filed against long-term care providers related to COVID-19. While such claims
may be subject to liability protection provisions within various state executive orders or legislation and/or
federal legislation, an adverse resolution of any of legal proceeding or investigations against our operators
may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a
material adverse effect on our operators’ reputation, business, results of operations and cash flows.
U.K. Regulations. The U.K. also imposes very high levels of regulation on our U.K.-based operators.
In England, where all of our operators are based, the Care Quality Commission has regulatory oversight
authority over the health and social care sectors and is responsible for approving, registering and inspecting
our operators and the properties where they provide services. There is also a detailed legislative and
regulatory framework in the U.K. designed to protect the vulnerable (whether by virtue of age or physical
and/or mental impairment) and to prevent abuse. Each of these regulatory regimes carries significant
enforcement powers, including the ability to criminally prosecute offending operators and facilities, impose
fines or revoke registrations. Additionally, under the purview of the Competition and Markets Authority,
local authorities are tasked with providing and funding the care needs of eligible residents within the
applicable local authority area. There is ongoing debate and uncertainty within the U.K. as to how growing
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care needs will be met and funded in the future, and it is not clear at this stage what, if any, or the extent of
such, impact will be on our U.K-based operators.
Additionally, there has been significant legislation passed and guidance issued in the U.K. in respect of
the COVID-19 pandemic. Much of the legislation or guidance set out the additional precautions, measures
or restrictions which were required in the care sector, including infection control measures and vaccination
requirements for care sector workers. As the U.K. transitions to a post-COVID-19 pandemic position with
lessened regulation across the U.K as a whole, the care sector remains subject to specific COVID-19
guidance and requirements issued by the Care Quality Commission and the U.K. government’s Department
for Health and Social Care, including in relation to infection control measures, the use of personal
protective equipment and testing. As a result, our U.K. operators still face significantly increased regulatory
burdens under which they must deliver services and continue to experience significant impacts on their
operations and financial condition, which has been somewhat offset by the level of stimulus provided.
Environmental, Social and Governance (“ESG”)
We prioritize environmental, social and governance initiatives that matter most to our business and
shareholders. Our Nominating and Corporate Governance Committee of our Board of Directors has been
charged with primary oversight of our sustainability efforts. The Company has established an ESG Steering
Committee, with senior representation from all divisions of the company, that is responsible for advancing
the Company’s governance, sustainability, and social programs, including diversity and inclusion. The
Nominating and Corporate Governance Committee exercises oversight of the ESG Steering Committee.
As a triple-net landlord, our third-party operators maintain operational control and responsibility for
our real estate on a day-to-day basis. While our ability to mandate environmental changes to their
operations is limited, our tenants are contractually bound to preserve and maintain our properties in good
working order and condition. In connection with this, they are required to meet or exceed annual
expenditure thresholds on capital improvements and enhancements of our properties, which in some cases
may facilitate improvements in the environmental performance of our properties and reduces energy usage,
water usage, and direct and indirect greenhouse gas emissions. Beginning in 2021, we have also implemented
a capital expenditure sustainability initiative to encourage operators to invest in financially beneficial and
environmentally enhancing investment projects. The goal is to incentivize operators to invest in sustainable
capital projects that provide a favorable return on investment while reducing the environmental footprint of
these operations. Our due diligence on real estate acquisitions generally includes environmental assessments
as part of our analysis to understand the environmental condition of the property, and to determine
whether the property meets certain environmental standards. Similarly, during the due diligence process, we
seek to evaluate the risk of physical, natural disaster or extreme weather patterns on the properties we are
looking to acquire and to assess their compliance with building codes, which often results in remediations
that incorporate sustainable improvements into our properties.
We are committed to providing a positive and engaging work environment for our employees and
taking an active role in the betterment of the communities in which our employees live and work. See also
“Human Capital Management” immediately below.
Additional information regarding our ESG programs and initiatives is available in the ESG section of
our website at www.omegahealthcare.com. Information on our website, including our Corporate ESG
Report or sections thereof, is not incorporated by reference into this Annual Report.
Human Capital Management
Our success is based on the focused passion and dedication of our people. We believe our employees’
commitment to Omega provides better service to our tenants and stakeholders, supports an inclusive and
collegial working environment and generates long-term value for our shareholders and the communities
which we serve. As of February 1, 2023, we had 52 employees including the executive officers listed below,
none of whom is subject to a collective bargaining agreement. Due to the size and nature of our business,
our future performance depends to a significant degree upon the continued contributions of our executive
management team and other key employees. As such, the ability to attract, develop and retain qualified
personnel will continue to be important to the Company’s long-term success.
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We have a long-standing commitment to being an equal opportunity employer. Additionally, in 2021,
we reinforced our diversity and inclusion commitment by signing the CEO Action for Diversity and
Inclusion Pledge, one of the largest CEO-driven business commitments to act on and advance diversity,
equity and inclusion in the workplace. The Company has expanded its recruitment practices to reach more
diverse candidates for employment and Board positions and has developed an internship program with a
focus on increasing diversity in the pipeline of eligible employees. The Company requires employees and
Board members to certify its Code of Business Conduct & Ethics periodically, and from time to time,
conducts compliance training for all employees and Directors, including diversity and inclusion training. As
of February 1, 2023, at the executive level, one of the Company’s four executive officers is a woman and
brings ethnic diversity to the team, and on the senior management team, 25% are women and 25% bring
ethnic diversity to the team. We regularly conduct pay equity reviews as we seek for women and men, on
average, at various roles and levels of the Company, to be paid equitably for their roles and contributions to
our success.
We are committed to providing a positive and engaging work environment for our employees and
taking an active role in the betterment of the communities in which our employees live and work. Our
full-time employees are provided a competitive benefits program, including comprehensive healthcare
benefits and a 401(k) plan with a matching contribution from the Company, the opportunity to participate
in our employee stock purchase program, bonus and incentive pay opportunities, competitive paid time-off
benefits and paid parental leave, wellness programs, continuing education and development opportunities,
and periodic engagement surveys. In addition, we believe that giving back to our community is an extension
of our mission to improve the lives of our stockholders, our employees, and their families. The Company
has implemented a matching program for charitable contributions of employees, provides annual charitable
donations to our local Baltimore community and has implemented a scholarship, mentorship and
internship program with a local, historically Black university.
Information about our Executive Officers
Biographical information regarding our executive officers and their ages as of February 1, 2023 are set
forth below:
C. Taylor Pickett (61) is our Chief Executive Officer and has served in this capacity since June 2001.
Mr. Pickett has also served as Director of the Company since May 30, 2002. Mr. Pickett has also been a
member of the board of trustees of Corporate Office Properties Trust, an office REIT focusing on U.S.
government agencies and defense contractors, since November 2013. From January 1993 to June 2001,
Mr. Pickett served as a member of the senior management team of Integrated Health Services, Inc., most
recently as Executive Vice President and Chief Financial Officer. Prior to joining Integrated Health
Services, Inc. Mr. Pickett held various positions at PHH Corporation and KPMG Peat Marwick.
Daniel J. Booth (59) is our Chief Operating Officer and has served in this capacity since October 2001.
From 1993 to October 2001, Mr. Booth served as a member of the management team of Integrated Health
Services, Inc., most recently serving as Senior Vice President, Finance. Prior to joining Integrated Health
Services, Inc., Mr. Booth served as a Vice President in the Healthcare Lending Division of Maryland
National Bank (now Bank of America).
Robert O. Stephenson (59) is our Chief Financial Officer and has served in this capacity since
August 2001. From 1996 to July 2001, Mr. Stephenson served as the Senior Vice President and Treasurer of
Integrated Health Services, Inc. Prior to joining Integrated Health Services, Inc., Mr. Stephenson held
various positions at CSX Intermodal, Inc., Martin Marietta Corporation and Electronic Data Systems.
Gail D. Makode (47) is our Chief Legal Officer, General Counsel and has served in this capacity since
September 2019. Previously, she served as Senior Vice President, General Counsel and Corporate Secretary
of IES Holdings, Inc., from October 2012 to September 2019. Prior to IES, she served in various legal
capacities at MBIA Inc., including as General Counsel and Member of the Board at MBIA Insurance
Corporation and Chief Compliance Officer of MBIA Inc., from 2006 to 2012. Earlier in her career, she
served as Vice President and Counsel for Deutsche Bank AG, and as an associate at Cleary, Gottlieb,
Steen, & Hamilton, where she specialized in public and private securities offerings and mergers and
acquisitions.
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Available Information
Our website address is www.omegahealthcare.com. Our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)
are available on our website, free of charge, as soon as reasonably practicable after we electronically file such
materials with, or furnish them to, the U.S. Securities and Exchange Commission (“SEC”). Additionally,
the SEC maintains a website that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, including us, at www.sec.gov.
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Item 1A — Risk Factors
This section discusses material risk factors that may affect our business, operations and financial
condition. It does not describe all risks and uncertainties applicable to us, our industry or ownership of our
securities. If any of the following risks, or any other risks and uncertainties that are not addressed below or
that we have not yet identified, actually occur, we could be materially adversely affected and the value of our
securities could decline.
Risks Related to the Operators of Our Facilities
Our financial position could be weakened and our ability to make distributions and fulfill our
obligations with respect to our indebtedness could be limited if our operators, or a portion thereof, become
unable to meet their obligations to us or fail to renew or extend their relationship with us as their lease
terms expire or their mortgages mature, or if we become unable to lease or re-lease our facilities or make
mortgage loans on economically favorable terms. We have no operational control over our operators.
The bankruptcy or insolvency of our operators could limit or delay our ability to recover on our investments.
We are exposed to the risk that a distressed or insolvent operator may not be able to meet its lease,
loan, mortgage or other obligations to us or other third parties. This risk is heightened during a period of
economic or political instability. Although each of our lease and loan agreements typically provides us with
the right to terminate, evict an operator, foreclose on our collateral, demand immediate payment and
exercise other remedies upon the bankruptcy or insolvency of an operator, title 11 of the U.S. Code (the
“Bankruptcy Code”) would limit or, at a minimum, delay our ability to collect unpaid pre-bankruptcy rents
and mortgage payments and to pursue other remedies against a bankrupt operator. While we sometimes
have third-party guarantees of an operator’s lease or loan obligations, such guarantees can be expensive to
enforce, and have their own risks of collection as against the guarantors.
Leases. A bankruptcy filing by one of our lessee operators would typically prevent us from collecting
unpaid pre-bankruptcy rents or evicting the operator, absent approval of the bankruptcy court. The
Bankruptcy Code provides a lessee with the option to assume or reject an unexpired lease within certain
specified periods of time. Generally, a lessee is required to pay all rent that becomes payable between the
date of its bankruptcy filing and the date of the assumption or rejection of the lease (although such
payments will likely be delayed as a result of the bankruptcy filing). If one of our lessee operators chooses
to assume its lease with us, the operator must promptly cure all monetary defaults existing under the lease
(including payment of unpaid pre-bankruptcy rents) and provide adequate assurance of its ability to
perform its future lease obligations. Even where a lessee operator assumes its lease with us, it will first often
threaten to reject that lease to obtain better lease terms from us, and we sometimes have to consider
making, or we do make, such economic concessions to avoid rejection of the lease and our taking a closed
facility back. If one of our lessee operators opts to reject its lease with us, we would have a claim against
such operator for unpaid and future rents payable under the lease, but such claim would be subject to a
statutory “cap” under the Bankruptcy Code, and would likely result in a recovery substantially less than the
face value of such claim. Although the operator’s rejection of the lease would permit us to recover
possession of the leased facility, we would likely face losses, costs and delays associated with repairs and/or
maintenance of the facility and then re-leasing the facility to a new operator, or costs associated with selling
the facility. In any event, re-leasing a facility or selling it could take a material amount of time, and the pool
of interested and qualified tenants or buyers will be limited due to the unique nature of our properties,
which may depress values and our eventual recovery. Finally, whether a lease operator in bankruptcy ends
up assuming or rejecting our lease, we will incur legal and collection costs, which can be difficult or
impossible to recover.
Several other factors could impact our rights under leases with bankrupt operators. First, the operator
could seek to assign its lease with us to a third party. The Bankruptcy Code disregards anti-assignment
provisions in leases to permit the assignment of unexpired leases to third parties (provided all monetary
defaults under the lease are promptly cured and the assignee can demonstrate its ability to perform its
obligations under the lease). Second, in instances in which we have entered into a master lease agreement
with an operator that operates more than one facility, the bankruptcy court could determine that the master
lease was comprised of separate, divisible leases (each of which could be separately assumed or rejected),
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rather than a single, integrated lease (which would have to be assumed or rejected in its entirety). Finally,
the bankruptcy court could re-characterize our lease agreement as a disguised financing arrangement,
which could require us to receive bankruptcy court approval to foreclose or pursue other remedies with
respect to the facility.
Mortgages. A bankruptcy filing by an operator to which we have made a loan secured by a mortgage
would typically prevent us from collecting unpaid pre-bankruptcy mortgage payments and foreclosing on
our collateral, absent approval of the bankruptcy court. As an initial matter, we could ask the bankruptcy
court to order the operator to make periodic payments or provide other financial assurances to us during
the bankruptcy case (known as “adequate protection”), but the ultimate decision regarding “adequate
protection” (including the timing and amount of any “adequate protection” payments) rests with the
bankruptcy court. In addition, we would need bankruptcy court approval before commencing or continuing
any foreclosure action against the operator’s collateral (including a facility). The bankruptcy court could
withhold such approval, especially if the operator can demonstrate that the facility or other collateral is
necessary for an effective reorganization and that we have a sufficient “equity cushion” in the facility or that
we are otherwise protected from any diminution in value of the collateral. If the bankruptcy court does not
either grant us “adequate protection” or permit us to foreclose on our collateral, we may not receive any
loan payments until after the bankruptcy court confirms a plan of reorganization for the operator. In
addition, in any bankruptcy case of an operator to which we have made a loan, the operator may seek
bankruptcy court approval to pay us (i) over a longer period of time than the terms of our loan, (ii) at a
different interest rate, and/or (iii) for only the value of the collateral, instead of the full amount of the loan.
Finally, even if the bankruptcy court permits us to foreclose on the facility, we would still be subject to the
losses, costs and other risks associated with a foreclosure sale, including possible successor liability under
government programs, indemnification obligations and suspension or delay of third-party payments.
Should such events occur, our income and cash flow from operations would be adversely affected.
Failure by our operators to comply with government regulations may adversely impact their ability to make
debt or lease payments to us.
Our operators are subject to numerous federal, state and local laws and regulations in the U.S. and, for
certain operators, in the U.K., including those described in Item 1. Business — Government Regulation and
Reimbursement. Laws and regulations impacting our operators include, without limitation, those relating to
reimbursement (including Medicare and Medicaid reimbursement programs in the U.S.), quality of care
initiatives, licensing and certification of our operators, fraud and abuse laws and regulations, privacy and
security laws. Other federal, state and local laws and regulations also affect how our operators conduct their
operations. We cannot predict the effect that the costs of complying with these laws may have on the
revenues of our operators, and thus their ability to meet their obligations to us. In addition, requirements
applicable to our operators are subject to frequent and substantial changes (sometimes applied
retroactively) resulting from new legislation, adoption of rules and regulations, and administrative and
judicial interpretations of existing law, and any changes in the regulatory framework could have a material
adverse effect on our tenants, operators, guarantors and managers. Any of these changes may be more
pronounced following federal and state leadership changes and particularly following a change in
presidential administrations. The ultimate timing or effect of these changes cannot be predicted. These
changes may have a dramatic effect on our operators’ costs of doing business and on the amount of
reimbursement by both government and other third-party payors. The failure of any of our operators to
comply with these laws, requirements and regulations could adversely affect their ability to meet their
obligations to us. If we fail to effectively implement or appropriately adjust our operational and strategic
initiatives with respect to the implementation of new laws and regulations, or do not do so as effectively as
our competitors, our results of operations may be materially adversely affected.
Our U.S. operators depend on reimbursement from governmental and other third-party payors, and
reimbursement rates from such payors may be reduced or modified, including through reductions to the
Medicare and Medicaid programs.
Changes in the reimbursement rate or methods of payment from governmental and other third-party
payors, including the Medicare and Medicaid programs, or the implementation of other measures to reduce
reimbursements for services provided by our operators has in the past, and could in the future, result in a
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substantial reduction in our operators’ revenues and operating margins. Reimbursement from governmental
and other third-party payors could be reduced as part of spending cuts and tax reform initiatives that
impact Medicare, Medicaid or Medicare Advantage Plans, or as part of retroactive adjustments during
claims settlement processes or as a result of post-payment audits. Further, alternative payment models, as
well as other regulatory initiatives, have the potential to affect Medicare payments to SNFs, including, but
not limited to, provisions changing the payment methodology, setting reimbursement caps, implementing
value-based purchasing and payment bundling, and studying the appropriateness of restrictions on
payments for healthcare acquired conditions. In some cases, states have enacted or are considering enacting
measures designed to reduce Medicaid expenditures or freeze Medicaid rates, to allocate funding available
for reimbursement away from SNFs in favor of home health agencies and community-based care, and to
make changes to private healthcare insurance. Several commercial payors have expressed an intent to pursue
certain value-based purchasing models and initiatives. Since our operators’ profit margins on Medicaid
patients are generally relatively low, more than modest reductions in Medicaid reimbursement to our SNF
operators and an increase in the number of Medicaid patients could place some operators in financial
distress, which in turn could adversely affect us. If funding for Medicare and/or Medicaid is reduced, it
could have a material adverse effect on our operators’ results of operations and financial condition, which
could adversely affect our operators’ ability to meet their obligations to us. Significant limits on the scope of
services reimbursed and on reimbursement rates, as well as changes in reimbursement policies or other
measures altering payment methodologies for services provided by our operators, could have a material
adverse effect on our operators’ results of operations and financial condition, which could cause the
revenues of our operators to decline and negatively impact their ability to meet their obligations to us.
We may be unable to find a replacement operator for one or more of our leased properties.
From time to time, we need to find a replacement operator for one or more of our leased properties for
a variety of reasons, including upon the expiration of the lease term or the occurrence of an operator
default. While we are attempting to locate one or more replacement operators, we sometimes experience
and may in the future experience a decrease or cessation of rental payments on the applicable property or
properties. We cannot assure you that any of our current or future operators will elect to renew their
respective leases with us upon expiration of the terms thereof. Similarly, we cannot assure you that we will
be able to locate a suitable replacement operator or, if we are successful in locating a replacement operator,
that the rental payments from the new operator would not be significantly less than the existing rental
payments. Our ability to locate a suitable replacement operator may be significantly delayed or limited by
various state licensing, receivership, certificate of need or other laws, as well as by Medicare and Medicaid
change-of-ownership rules. We also may incur substantial additional expenses in connection with any such
licensing, receivership or change-of-ownership proceedings. Any such delays, limitations and expenses could
materially delay or impact our ability to collect rent, obtain possession of leased properties or otherwise
exercise remedies for default.
Our operators may be subject to significant legal actions that could result in their increased operating costs and
substantial uninsured liabilities, which may affect their ability to meet their obligations to us; and we may
become party to such legal actions.
Our operators may be subject to claims for damages relating to the services that they provide. While we
are unable to predict the scope of future federal, state and local regulations and legislation, including the
Medicare and Medicaid statutes and regulations, we believe that long-term care providers will continue to
be the focus of governmental investigations, particularly in the area of Medicare/Medicaid false claims and
in the use of COVID-19 related funds and compliance with infection control and quality standards. We can
give no assurance that the insurance coverage maintained by our operators will cover all claims made
against them or continue to be available at a reasonable cost, if at all. In some states, insurance coverage for
the risk of punitive damages arising from professional and general liability claims and/or litigation may not,
in certain cases, be available to operators due to state law prohibitions or limitations of availability. As a
result, our operators operating in these states may be liable for punitive damage awards that are either not
covered or are in excess of their insurance policy limits.
Any adverse determination in a legal proceeding or governmental investigation, whether currently
asserted or arising in the future, could have a material adverse effect on an operator’s financial condition
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and its ability to meet its obligations to us, which, in turn, could have a material adverse effect on our
business, financial condition, results of operations and ability to make distributions to our stockholders.
In addition, we may in some circumstances be named as a defendant in litigation involving the services
provided by our operators. In the past, we and several of our wholly-owned subsidiaries have been named
as defendants in professional liability and general liability claims related to our owned and operated
facilities, and we could be named as defendants in similar suits in the future. In these suits, patients of our
operators have alleged significant damages, including punitive damages, against the defendants. Although
we generally have no involvement in the services provided by our operators, and our standard lease and loan
agreements generally require our operators to indemnify us and carry insurance to cover us in certain cases,
a significant judgment against us in such litigation could exceed our and our operators’ insurance coverage,
which would require us to make payments to cover the judgment.
Increased competition as well as increased operating costs result in lower revenues for some of our operators
and may affect the ability of our operators to meet their obligations to us.
The long-term healthcare industry is highly competitive, and we expect that it may become more
competitive in the future. Our operators are competing with numerous other companies providing similar
healthcare services or alternatives such as home health agencies, life care at home, community-based service
programs, retirement communities and convalescent centers. Our operators compete on a number of
different levels including the quality of care provided, reputation, the physical appearance of a facility,
price, the range of services offered, family preference, alternatives for healthcare delivery, the supply of
competing properties, physicians, staff, referral sources, location and the size and demographics of the
population in the surrounding areas. Our operators may encounter increased competition in the future that
could limit their ability to attract residents or expand their businesses and therefore affect their ability to
pay their lease or mortgage payments and meet their obligations to us.
In addition, the market for qualified personnel is highly competitive and our operators may experience
difficulties in attracting and retaining such personnel, in particular due to labor constraints and, in some
cases, wage increases, which have been elevated since the beginning of the COVID-19 pandemic and may
continue to remain elevated. Increases in labor costs could affect our operators’ ability to meet their
obligations to us, which could be particularly acute in certain states that have established minimum staffing
requirements.
We may be unable to successfully foreclose on the collateral securing our mortgage loans, and even if we are
successful in our foreclosure efforts, we may be unable to successfully find a replacement operator, or operate
or occupy the underlying real estate, which may adversely affect our ability to recover our investments.
If an operator defaults under one of our mortgage loans, we may foreclose on the loan or otherwise
protect our interest by acquiring title to the property. In such a scenario, we may be required to make
substantial improvements or repairs to maximize the facility’s investment potential. Operators may contest
enforcement of foreclosure or other remedies, seek bankruptcy protection against our exercise of
enforcement or other remedies and/or bring claims for lender liability in response to actions to enforce
mortgage obligations. Even if we are able to successfully foreclose on the collateral securing our mortgage
loans, we may be unable to expeditiously find a replacement operator, if at all, or otherwise successfully
operate or occupy the property, which could adversely affect our ability to recover our investment.
Inflation could adversely impact our operators and our results of operations.
Inflation, both real or anticipated, as well as any resulting governmental policies, could adversely affect
the economy and the costs of labor, goods and services to our operators or borrowers. Our long-term leases
and loans typically contain provisions such as rent and interest escalators that are designed to mitigate the
adverse impact of inflation on Omega’s results of operations. However, these provisions may have limited
effectiveness at mitigating the risk of high levels of inflation due to contractual limits on escalation that
exist in substantially all of our escalation provisions. Our leases are triple-net and typically require the
operator to pay all property operating expenses, and therefore, increases in property-level expenses at our
leased properties generally do not directly affect us. However, increased operating costs resulting from
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inflation have had, and may continue to have, an adverse impact on our operators and borrowers if
increases in their operating expenses exceed increases in their reimbursements, which has affected, and may
continue to adversely affect, our operators’ or borrowers’ ability to pay rent or other obligations owed to us.
An increase in our operators’ expenses and a failure of their reimbursements to increase at least with
inflation could adversely impact our operators’ and our financial condition and our results of operations.
Uninsured losses or losses in excess of our operators’ insurance coverage could adversely affect our financial
position and our cash flow.
Under the terms of our leases, our operators are generally required to maintain comprehensive general
liability, fire, flood, earthquake, boiler and machinery, nursing home or long-term care professional liability
and extended coverage insurance with respect to our properties with policy specifications set forth in the
leases or other written agreements between us and the operator. However, our properties may be adversely
affected by casualty or other losses which exceed insurance coverages and reserves. In addition, we cannot
provide any assurances that our tenants will maintain the required coverages, that we will continue to
require the same levels of insurance under our leases, or that such insurance will be available at a reasonable
cost in the future or that the policies maintained will fully cover all losses on our properties upon the
occurrence of a catastrophic event. We also cannot make any guaranty as to the future financial viability of
the insurers that underwrite the policies maintained by our tenants, or, alternatively if our tenants utilize
captive or self-insurance programs, that such programs will be adequately funded.
Should an uninsured loss or a loss in excess of insured limits occur, we could lose both our investment
in, and anticipated profits and cash flows from, the property and disputes over insurance claims could arise.
Even if it were practicable to restore the property to its condition prior to the damage caused by a major
casualty, the operations of the affected property would likely be suspended for a considerable period of
time.
Our development and redevelopment projects may not yield anticipated returns.
We consider and, when appropriate, invest in various development and redevelopment projects. In
deciding whether to make an investment in a particular project, we make certain assumptions regarding the
expected future performance of the property. Our assumptions are subject to risks generally associated with
development and redevelopment projects, including, among others, that:
• Our operators may not be able to complete the project on schedule or within budgeted amounts;
• Our operators may encounter delays in obtaining or fail to obtain all necessary zoning, land use,
building, occupancy, environmental and other governmental permits and authorizations, or
underestimate the costs necessary to develop or redevelop the property to market standards;
• Volatility in the price of construction materials or labor may increase project costs;
•
The builders may fail to perform or satisfy the expectations of our operators;
• We may incorrectly forecast risks associated with development in new geographic regions;
• Demand for our project may decrease prior to completion, due to competition from other
developments; and
• New facilities may take longer than expected to reach stabilized operating levels, if at all.
If any of the risks described above occur, our development and redevelopment projects may not yield
anticipated returns, which could have a material adverse effect on us.
Risks Related to Us and Our Operations
The COVID-19 pandemic and measures intended to prevent its spread, as well as a future variant of
COVID-19 or unrelated pandemic, could have a material adverse effect on our business, results of operations,
cash flows and financial condition.
The COVID-19 pandemic has significantly and adversely impacted SNFs and long-term care providers
due to the higher rates of virus transmission and fatality among the elderly and frail populations that these
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facilities serve, as well as reduced revenue due to lower occupancy and increased expenses and uncertainties
regarding the continuing availability of sufficient government support and sufficiency of Medicare and
Medicaid reimbursement rates to address longer-term cost increases faced by operators. As a result, many
of our operators have been, and may continue to be, significantly impacted by the pandemic. See Part II
Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Overview.
Our facilities, on average, experienced declines, in some cases that are material, in occupancy levels as a
result of the pandemic. Occupancy in our facilities has generally improved on average since early 2021;
however, average occupancy has not returned to pre-pandemic levels. It remains unclear when and the
extent to which demand and occupancy levels will return to pre-COVID-19 levels. We believe these
challenges to occupancy recovery may be in part due to staffing shortages, which in some cases have
required operators to limit admissions, as well as COVID-19 related fatalities at the facilities, the delay of
SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the
suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs
and higher hospital readmittances from SNFs.
While certain states have provided pandemic-related relief measures and/or reimbursement increases,
there remains uncertainty as to how widespread these measures will continue to be and to what extent they
may be distributed to and benefit our operators, especially when the federally declared public health
emergency expires as scheduled on May 11, 2023, or previously released federal funds to states have been
fully utilized. Likewise, while certain states may in the course of routine rate-setting of Medicaid rates
address inflationary factors and other expense-related items, there can be no assurance that these changes
will be sufficient to offset existing increased inflation and expenses or that all states will address these items.
See the “Government Regulation and Reimbursement” section for additional information. Further, to the
extent the cost and occupancy impacts on our operators continue or accelerate and are not offset by
continued government relief that is sufficient and timely, we anticipate that the operating results of
additional operators may be materially and adversely affected, some may be unwilling or unable to pay their
contractual obligations to us in full or on a timely basis and we may be unable to restructure such
obligations on terms as favorable to us as those currently in place.
There are a number of uncertainties we face as we consider the continuing impact of COVID-19 on
our business, including how long census disruption and related cost increases will last, as well as the rate
and impact of future virus transmission in our facilities, continued efficacy of vaccination programs in
reducing the spread and severity of COVID-19 in our facilities, the impact of genetic mutations of the virus
into new variants on our facilities, and the extent to which funding support from the federal government
and the states will offset these incremental costs as well as lost revenues. Notwithstanding vaccination
programs, we expect that heightened clinical protocols for infection control within facilities will continue;
however, we do not know if future reimbursement rates or equipment provided by governmental agencies
will be sufficient to cover the increased costs of enhanced infection control and monitoring.
Continued uncertainty exists relating to our other operators’ ability to meet their payments obligations
generally or meet their payment obligations to us due to these factors. To the extent our operators are
unable to meet their payment obligations, we may record additional impairment charges with respect to
straight-line rent receivables associated with any such operator or with respect to outstanding loans and our
financial condition could be adversely impacted. See “Our assets, including our real estate and loans, are
subject to impairment charges, and our valuation and reserve estimates are based on assumptions and may
be subject to adjustment” in Item 1A contained in Part I of this Annual Report on Form 10-K.
The COVID-19 pandemic has from time to time also caused, and may continue to cause, severe
economic, market and other disruptions worldwide. We cannot assure you that conditions in the bank
lending, capital and other financial markets will not deteriorate or fluctuate as a result of the COVID-19
pandemic or due to a future variant of COVID-19 or a future unrelated pandemic, or that our access to
capital and other sources of funding will not become constrained, which could adversely affect the
availability and terms of future borrowings, renewals or refinancing. In addition, our employees may be
impacted directly or indirectly by the pandemic, and we may be required to make changes to our internal
controls as a result of changes in our business processes or personnel; any such changes may increase our
operational and financial reporting risks.
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The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial
performance will depend on future developments, including the ability to control the spread of the outbreak
generally and in our facilities, and the delivery and efficacy of and participation in vaccination programs
and other treatments for COVID-19, government funds and other support for the senior care sector and the
efficacy of other policies and measures that may mitigate the impact of the pandemic, as well as the future
demand for needs-based skilled nursing care and senior living facilities, all of which are uncertain and
difficult to predict. Due to these uncertainties, we are not able at this time to estimate the effect of these
factors on our business, but the adverse impact on our business, results of operations, financial condition
and cash flows could be material.
There are no assurances of our ability to pay dividends in the future.
Our ability to pay dividends may be adversely affected upon the occurrence of any of the risks
described herein. Our payment of dividends is subject to compliance with restrictions contained in our
credit agreements, the indentures governing our senior notes and any preferred stock that our Board may
from time to time designate and authorize for issuance. All dividends will be paid at the discretion of our
Board and will depend upon our earnings, our financial condition, maintenance of our REIT status and
such other factors as our Board may deem relevant from time to time. There are no assurances of our
ability to pay dividends in the future. In addition, our dividends in the past have included, and may in the
future include a return of capital.
We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining
such capital, we may not be able to make future investments necessary to grow our business or meet maturing
commitments.
As a REIT under the Code, we are required to, among other things, distribute at least 90% of our
REIT taxable income each year to our stockholders. Because of this distribution requirement, we may not
be able to fund, from cash retained from operations, all future capital needs, including capital needed to
make investments and to satisfy or refinance maturing commitments. As a result, we rely on external
sources of capital, including debt and equity financing. If we are unable to obtain needed capital at all or
only on unfavorable terms from these sources, we might not be able to make the investments needed to grow
our business, or to meet our obligations and commitments as they mature, which could negatively affect the
ratings of our debt and even, in extreme circumstances, affect our ability to continue operations. We may
not be in a position to take advantage of future investment opportunities in the event that we are unable to
access the capital markets on a timely basis or we are only able to obtain financing on unfavorable terms.
Our ability to raise capital through equity sales is dependent, in part, on the market price of our common
stock, and our failure to meet market expectations with respect to our business, or other factors we do not
control, could negatively impact such market price and availability of equity capital.
As with other publicly-traded companies, the availability of equity capital will depend, in part, on the
market price of our common stock which, in turn, will depend upon various market conditions and other
factors, some of which we cannot control, that may change from time to time including:
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•
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the extent of investor interest;
the general reputation of REITs and the attractiveness of their equity securities in comparison to
other equity securities, including securities issued by other real estate-based companies;
the financial performance of us and our operators;
concentrations in our investment portfolio by tenant and facility type;
concerns about our tenants’ financial condition due to uncertainty regarding reimbursement from
governmental and other third-party payor programs;
our credit ratings and analyst reports on us and the REIT industry in general, including
recommendations, and our ability to meet our guidance estimates or analysts’ estimates;
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•
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general economic, global and market conditions, including changes in interest rates on fixed
income securities, which may lead prospective purchasers of our common stock to demand a
higher annual yield from future distributions, or the impacts of a future pandemic or global
conflicts on our operators;
our failure to maintain or increase our dividend, which is dependent, to a large part, on the
increase in funds from operations, which in turn depends upon increased revenues from additional
investments and rental increases; and
other factors such as governmental regulatory action and changes in REIT tax laws, as well as
changes in litigation and regulatory proceedings.
The market value of the equity securities of a REIT is generally based upon the market’s perception of
the REIT’s growth potential and its current and potential future earnings and cash distributions. Our failure
to meet the market’s expectation with regard to future earnings and cash distributions would likely
adversely affect the market price of our common stock and, as a result, the availability of equity capital to
us.
We are subject to risks associated with debt financing, including changes in our credit ratings, which could
negatively impact our business and limit our ability to make distributions to our stockholders and to repay
maturing debt.
The financing required to make future investments and satisfy maturing commitments may be provided
by borrowings under our credit facilities, private or public offerings of debt or equity, the assumption of
secured indebtedness, mortgage financing on a portion of our owned portfolio or through joint ventures. To
the extent we must obtain debt financing from external sources to fund our capital requirements, we cannot
guarantee such financing will be available on favorable terms, if at all. In addition, if we are unable to
refinance or extend principal payments due at maturity or pay them with proceeds from other capital
transactions, our cash flow may not be sufficient to make distributions to our stockholders and repay our
maturing debt. Furthermore, if prevailing interest rates, changes in our debt credit ratings or other factors
at the time of refinancing result in higher interest rates upon refinancing, the interest expense relating to
that refinanced indebtedness would increase, which could reduce our profitability and the amount of
dividends we are able to pay. Factors that may affect our credit ratings include, among other things, our
financial performance, our success in raising sufficient equity capital, adverse changes in our debt and fixed
charge coverage ratios, our capital structure and level of indebtedness and pending or future changes in the
regulatory framework applicable to our operators and our industry. Further, additional debt financing
increases the amount of our leverage. The degree of leverage could have important consequences to
stockholders, including affecting our investment grade ratings and our ability to obtain additional financing
in the future, and making us more vulnerable to a downturn in our results of operations or the economy
generally.
The interest rate of our credit facilities, term loan facilities and derivatives contracts are priced using LIBOR
and are subject to risks associated with the transition from LIBOR to an alternative reference rate.
London Inter-bank Offered Rate (“LIBOR”) is the basic rate of interest used in lending between banks
on the London interbank market and is widely used as a reference for setting the interest rate on loans
globally. We typically use LIBOR as a reference rate in credit facilities, term loan facilities and derivative
contracts. In July 2017, the U.K.’s Financial Conduct Authority (“FCA”) that regulates LIBOR announced
that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and while
the transition period for many LIBOR tenors has been extended to June 2023, the U.S. Federal Reserve
advised banks to stop new LIBOR issuances by the end of 2021. At this time, no consensus exists as to
which reference rate or rates or benchmarks may become acceptable alternatives to LIBOR. The Alternative
Reference Rates Committee, a steering committee composed of U.S. financial market participants, has
identified the secured overnight financing rate, or SOFR, as the recommended alternative rate for all
LIBOR. At this time, it is impossible to predict whether the SOFR or another reference rate will become an
accepted alternative to LIBOR. Any changes in the methods by which LIBOR is determined or regulatory
activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to
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exist. Further, the consequences of these developments, or any alternative reference rate that is adopted,
cannot be entirely predicted but could include an increase in the cost of our variable rate borrowings, of
which we had $91.1 million of borrowings outstanding as of December 31, 2022 and $400 million notional
value derivative instruments that are indexed to LIBOR. For some instruments, the method of transitioning
to an alternative rate may be challenging, as this may require negotiation with the respective counterparty.
We may be subject to additional risks in connection with our acquisitions of long-term care facilities.
We may be subject to additional risks in connection with our acquisitions of long-term care facilities,
including but not limited to the following:
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our limited prior business experience with certain of the operators of the facilities we have recently
acquired or may acquire in the future;
the facilities may underperform due to various factors, including unfavorable terms and
conditions of the lease agreements that we assume, disruptions caused by the management of the
operators of the facilities or changes in economic conditions impacting the facilities and/or the
operators;
large acquisitions or investments could place significant additional demands on, and require us to
expand, our management, resources and personnel, as well as to adapt our administrative,
accounting and operational systems to integrate and manage the long-term care facilities we have
acquired or may acquire in a timely manner;
diversion of our management’s attention away from other business concerns;
exposure to any undisclosed or unknown potential liabilities relating to the facilities; and
potential underinsured losses on the facilities.
We cannot assure you that we will be able to manage our recently acquired facilities, or the future
growth in our business, without encountering difficulties or that any such difficulties will not have a
material adverse effect on us. Our growth could also increase our capital requirements, which may require us
to issue potentially dilutive equity securities and incur additional debt.
Our assets, including our real estate and loans, are subject to impairment charges, and our valuation and
reserve estimates are based on assumptions and may be subject to adjustment.
Our asset portfolio primarily consists of real estate and mortgage loans, which are subject to
write-downs in value. From time to time, we close facilities and actively market such facilities for sale. To the
extent we are unable to sell these properties for our book value, we may be required to take a non-cash
impairment charge or loss on the sale, either of which would reduce our net income. In addition, we
periodically, but not less than annually, evaluate our real estate investments and other assets for impairment
indicators, and we establish general and specific reserves for our issued loans at least quarterly. The
quarterly evaluation of our investments for impairment may result in significant fluctuations in our
provision for credit losses or real estate impairments from quarter to quarter, impacting our results of
operations. Judgments regarding the existence of impairment indicators or loan reserves are based on a
number of factors, including market conditions, operator performance and legal structure, and these factors
may involve estimates. If we determine that a significant impairment has occurred, we are required to make
an adjustment to the net carrying value of the asset, which could have a material adverse effect on our
results of operations. Our estimates of loan reserves, and other accounting estimates, are inherently
uncertain and may be subject to future adjustment, leading potentially to an increase in reserves.
Our indebtedness could adversely affect our financial condition.
We have a material amount of indebtedness and we may increase our indebtedness in the future. Our level
and type of indebtedness could have important consequences for our stockholders. For example, it could:
•
increase our vulnerability to adverse changes in general economic, industry and competitive
conditions;
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limit our ability to borrow additional funds, on satisfactory terms or at all, for working capital,
capital expenditures, acquisitions, debt service requirements, execution of our business plan or
other general corporate purposes;
increase our cost of borrowing;
require us to dedicate a substantial portion of our cash flow from operations to make payments
on our indebtedness, thereby reducing the availability of our cash flow to fund working capital,
capital expenditures and other general corporate purposes;
limit our ability to make material acquisitions or take advantage of business opportunities that
may arise;
limit our ability to make distributions to our stockholders, which may cause us to lose our
qualification as a REIT under the Code or to become subject to federal corporate income tax on
any REIT taxable income that we do not distribute;
expose us to fluctuations in interest rates, to the extent our borrowings bear variable rates of
interest;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in
which we operate; and
place us at a competitive disadvantage compared to our competitors that have less debt.
Further, we have the ability to incur substantial additional debt, including secured debt, which could
intensify the risks above. In addition, if we are unable to refinance any of our floating rate debt, we would
continue to be subject to interest rate risk. The short-term nature of some of our debt also subjects us to the
risk that market conditions may be unfavorable or may prevent us from refinancing our debt at or prior to
their existing maturities. In addition, our cash flow from operations may not be sufficient to repay all of our
outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise
funds on acceptable terms, if at all, to refinance our debt.
Covenants in our debt documents limit our operational flexibility, and a covenant breach could materially
adversely affect our operations.
The terms of our credit agreements and note indentures require us to comply with a number of
customary financial and other covenants that may limit our management’s discretion by restricting our ability
to, among other things, incur additional debt, redeem our capital stock, enter into certain transactions with
affiliates, pay dividends and make other distributions, make investments and other restricted payments, engage
in mergers and consolidations, create liens, sell assets or engage in new lines of business. In addition, our credit
facilities require us to maintain compliance with specified financial covenants, including those relating to
maximum total leverage, maximum secured leverage, maximum unsecured leverage, minimum fixed charge
coverage, minimum consolidated tangible net worth and minimum unsecured interest coverage. Any
additional financing we may obtain could contain similar or more restrictive covenants. Our continued ability
to incur indebtedness, conduct our operations, and take advantage of business opportunities as they arise is
subject to compliance with these financial and other covenants. Breaches of these covenants could result in
defaults under the instruments governing the applicable indebtedness, in addition to any other indebtedness
cross-defaulted against such instruments. Any such breach could materially adversely affect our business,
results of operations and financial condition.
We are subject to particular risks associated with real estate ownership, which could result in unanticipated
losses or expenses.
Our business is subject to many risks that are associated with the ownership of real estate. For example,
if our operators do not renew their leases, we may be unable to re-lease the facilities at favorable rental rates,
if at all. Other risks that are associated with real estate acquisition and ownership include, without
limitation, the following:
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general liability, property and casualty losses, some of which may be uninsured;
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the inability to purchase or sell our assets rapidly to respond to changing economic conditions,
due to the illiquid nature of real estate and the real estate market;
leases that are not renewed or are renewed at lower rental amounts at expiration;
contingent rent escalators tied to changes in the Consumer Price Index or other parameters;
the exercise of purchase options by operators resulting in a reduction of our rental revenue;
costs relating to maintenance and repair of our facilities and the need to make expenditures due to
changes in governmental regulations, including the Americans with Disabilities Act;
environmental hazards created by prior owners or occupants, existing tenants, mortgagors or
other persons for which we may be liable; and
acts of God or terrorism affecting our properties.
Our real estate investments are relatively illiquid.
Real estate investments are relatively illiquid and generally cannot be sold quickly. The real estate
market is affected by many factors which are beyond our control, including general economic conditions,
availability of financing, interest rates and supply and demand. Additional factors that are specific to our
industry also tend to limit our ability to vary our portfolio promptly in response to changes in economic or
other conditions. For example, all of our properties are “special purpose” properties that cannot be readily
converted into general residential, retail or office use. In addition, transfers of operations of nursing homes
and other healthcare-related facilities are subject to extensive regulatory approvals. We cannot predict
whether we will be able to sell any property for the price or on the terms set by us or whether any price or
other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length
of time needed to find a willing purchaser and to close the sale of a property, or that we will have funds
available to make necessary repairs and improvements to a property held for sale. To the extent we are
unable to sell any properties for our book value, we may be required to take a non-cash impairment charge
or loss on the sale, either of which would reduce our net income.
We face possible risks and costs associated with severe weather conditions, natural disasters or the physical
effects of climate change.
A large number of our properties are located in areas particularly susceptible to revenue loss, cost
increase or damage caused by severe weather conditions or natural disasters such as hurricanes,
earthquakes, tornadoes, fires and floods, as well as the effects of climate change. To the extent that climate
change impacts changes in weather patterns, our markets could experience more frequent and severe natural
disasters. Operationally, such events could cause a major power outage, leading to a disruption of our
operators’ operations or require them to incur additional cost associated with evacuation plans. Over time,
any of these conditions could result in increased operator costs, delays in construction, resulting in
increased construction costs, or in the inability of our operators to operate our facilities at all. Climate
change and severe weather may also have indirect effects on our business by increasing the cost to our
operators of, or decreasing the availability to our operators of, property insurance on terms they find
acceptable, and by increasing the cost of energy, maintenance, repair of water and/or wind damage, and
snow removal at our properties. In the event of a loss in excess of insured limits, we could lose our
incremental capital invested in the affected property.
Although Congress has not yet enacted comprehensive federal legislation to address climate change,
numerous states and municipalities have adopted laws and policies on climate change and emission
reduction targets. Changes in federal, state and local legislation and regulation based on concerns about
climate change could result in increased capital expenditures on our existing properties and our new
development properties (for example, to improve their energy efficiency and/or resistance to severe weather)
without a corresponding increase in revenue, resulting in adverse impacts to our net income. There can be
no assurance that climate change and severe weather will not have a material adverse effect on our
properties, operations, or business.
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As an owner or lender with respect to real property, we may be exposed to possible environmental liabilities.
Under various federal, state and local environmental laws, ordinances and regulations, a current or
previous owner of real property or a secured lender may be liable in certain circumstances for the costs of
investigation, removal or remediation of certain hazardous or toxic substances at such property, as well as
certain other potential related costs, including government fines and damages for injuries to persons and
adjacent property. Such laws often impose liability without regard to whether the owner knew of, or was
responsible for, the presence or disposal of such substances. As a result, liability may be imposed on the
owner in connection with the activities of an operator of the property, and the owner’s liability could exceed
the value of the property and/or the assets of the owner. In addition, the presence of such substances, or the
failure to properly dispose of or remediate such substances, may adversely affect an operators’ ability to
attract additional residents and our ability to sell or rent such property or to borrow using such property as
collateral which, in turn, could negatively impact our revenues.
Although our leases and mortgage loans generally require the lessee and the mortgagor to indemnify
us for certain environmental liabilities, they may be unable to fulfill their indemnification obligations to us,
and the scope of such obligations may be limited. For instance, most of our leases do not require the lessee
to indemnify us for environmental liabilities arising before the lessee took possession of the premises.
The industry in which we operate is highly competitive. Increasing investor interest in our sector and
consolidation at the operator level or REIT level could increase competition and reduce our profitability.
Our business is highly competitive and we expect that it may become more competitive in the future.
We compete for healthcare facility investments with other healthcare investors, including other REITs, some
of which have greater resources and lower costs of capital than we do. Increased competition makes it more
challenging for us to identify and successfully capitalize on opportunities that meet our business goals. If we
cannot capitalize on our development pipeline, identify and purchase a sufficient quantity of healthcare
facilities at favorable prices, or are unable to finance such acquisitions on commercially favorable terms, our
business, results of operations and financial condition may be materially adversely affected. In addition, if
our cost of capital should increase relative to the cost of capital of our competitors, the spread that we
realize on our investments may decline if competitive pressures limit or prevent us from charging higher
lease or mortgage rates.
Our charter and bylaws contain significant anti-takeover provisions which could delay, defer or prevent a
change in control or other transactions that could provide our stockholders with the opportunity to realize a
premium over the then-prevailing market price of our common stock.
Our charter and bylaws contain various procedural and other requirements which could make it
difficult for stockholders to effect certain corporate actions. Our Board of Directors (“Board”) has the
authority to issue additional shares of preferred stock and to fix the preferences, rights and limitations of
the preferred stock without stockholder approval. In addition, our charter contains limitations on the
ownership of our capital stock intended to ensure we continue to meet the requirements for qualification as
a REIT. For example, our charter, among other restrictions, prohibits the beneficial or constructive
ownership (as defined for federal income tax purposes) by any person of more than 9.8% in value or in
number of shares of the outstanding shares of any class or series of our capital stock, unless our Board
grants an exemption or modifies the ownership limit for such person and certain conditions are satisfied.
These provisions could discourage unsolicited acquisition proposals or make it more difficult for a third
party to gain control of us, which could adversely affect the market price of our securities and/or result in
the delay, deferral or prevention of a change in control or other transactions that could provide our
stockholders with the opportunity to realize a premium over the then-prevailing market price of our
common stock.
Ownership of property outside the U.S. may subject us to different or greater risks than those associated with
our U.S. investments, including currency fluctuations.
We have investments in the U.K. and may from time to time may seek to acquire other properties in the
U.K. or otherwise outside the U.S. International development, investment, ownership and operating
activities involve risks that are different from those we face with respect to our U.S. properties and
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operations. These risks include, but are not limited to, any international currency gain recognized with
respect to changes in exchange rates may not qualify under the income tests that we must satisfy annually in
order to qualify and maintain our status as a REIT; fluctuations in the exchange rates between USD and
the British Pound Sterling (“GBP”), or other foreign currencies in which we may transact in the future,
which we may be unable to protect against through hedging; changes in foreign political, regulatory, and
economic conditions, including increases in energy prices, such as those experienced in the U.K. resulting in
part from the conflict in Ukraine and sanctions imposed on Russia; challenges in managing international
operations and enforcing obligations in other countries; challenges of complying with a variety of foreign
laws and regulations, including those relating to real estate, healthcare operations, taxes, employment and
legal proceedings; differences in lending practices and the willingness of domestic or foreign lenders to
provide financing; regional or country-specific business cycles and economic instability; and changes in
applicable laws and regulations in the U.S. that affect foreign operations. If we are unable to successfully
manage the risks associated with international expansion and operations, our results of operations and
financial condition may be adversely affected.
On January 31, 2020, the U.K. withdrew from the European Union (“E.U.”), commonly referred to as
“Brexit.” Changes in economic conditions in the U.K. relating to Brexit may subject the operators of our
facilities in the U.K. to increased risk, including potential disruptions in supply, increases in costs or
difficulty staffing. In addition, the uncertainty related to Brexit has caused foreign exchange rate
fluctuations in the past, including the strengthening of the USD relative to the Euro and GBP immediately
following the announcement of Brexit, and may continue to do so in the future, which could materially
adversely affect our business, financial condition and results of operations. Furthermore, Brexit could lead
to legal uncertainty or the imposition of additional legal or regulatory requirements on the Company, which
could have adverse consequences on our business, financial condition and results of operations. To date,
one of the key effects of Brexit on the U.K. market is increased difficulty recruiting suitably qualified staff
members within properties, as historically the E.U. and freedom of movement provided a reliable personnel
resource for the U.K. market. The employment pool within the U.K. is further impacted by vaccination
requirements for those working in the sector, meaning that those in certain roles who refuse to be vaccinated
may not be employed (unless exempt from the requirement).
Our assets are concentrated in the long-term care industry and face geographic and operator concentration
risk.
Our assets are generally not diversified by industry and face risks associated with the long-term care
industry. In addition, at December 31, 2022, one operator represented greater than 10% of our investments,
and the three states in which we had our highest concentration of investments were Florida (11.5%), Texas
(10.3%) and Indiana (6.6%). As a result, we are subject to increased exposure to adverse conditions
affecting these operators and regions, with regional risks including unfavorable Medicaid reimbursements
rates for SNFs, downturns in the local economies, local real estate conditions, staffing challenges, increased
competition or decreased demand for our facilities, regional climate events, and unfavorable legislative or
regulatory developments, which could adversely affect our business and results of operations.
Our primary assets are the units of partnership interest in Omega OP and, as a result, we will depend on
distributions from Omega OP to pay dividends and expenses.
The Company is a holding company and has no material assets other than units of partnership interest
in Omega OP. We intend to cause the partnership to make distributions to its partners, including the
Company, in an amount sufficient to allow us to qualify as a REIT for U.S. federal income tax purposes
and to pay all of our expenses. To the extent we need funds and the partnership is restricted from making
distributions under applicable law or otherwise, or if the partnership is otherwise unable to provide such
funds, the failure to make such distributions could materially adversely affect our liquidity and financial
condition.
Members of our management and Board hold partnership interests in Omega OP, and their interests may differ
from those of our public stockholders.
Some members of our management and Board hold partnership interests in Omega OP. Those
unitholders may have conflicting interests with holders of the Company’s common stock. For example, such
31
unitholders of Omega OP Units may have different tax positions from the Company or holders of our
common stock, which could influence their decisions in their capacities as members of management
regarding whether and when to dispose of assets, whether and when to incur new or refinance existing
indebtedness and how to structure future transactions.
Our investments in joint ventures could be adversely affected by shared decision-making authority, our joint
venture partners’ financial condition, and our exposure to potential losses from the actions of our joint venture
partners.
As of December 31, 2022, we have ownership interests in two consolidated joint ventures and several
unconsolidated joint ventures. These joint ventures involve additional risks, including the following:
• We may be unable to take actions that are opposed by our joint venture partners under
arrangements that require us to share decision-making authority over major decisions affecting
the ownership or operation of the joint venture and any property owned by the joint venture, such
as the sale or financing of the property, our ability to sell or transfer our interest in a joint venture
or the making of additional capital contributions for the benefit of the property;
•
For joint ventures in which we have a noncontrolling interest, our joint venture partners may take
actions that we oppose;
• Our joint venture partners may become bankrupt or fail to fund their share of required capital
contributions, which could delay construction or development of a property or increase our
financial commitment to the joint venture;
• Our joint venture partners may have business interests or goals with respect to a property that
conflict with our business interests and goals, including with respect to the timing, terms and
strategies for investment, which could increase the likelihood of disputes regarding the ownership,
management or disposition of the property;
• Disagreements with our joint venture partners could result in litigation or arbitration that
increases our expenses, distracts our officers and directors, and disrupts the day-to-day operations
of the property, including by delaying important decisions until the dispute is resolved; and
• We may suffer losses resulting from actions taken by our joint venture partners with respect to our
joint venture investments.
Risks Related to Taxation
Qualifying as a REIT involves highly technical and complex provisions of the Code; failure to qualify as a
REIT would subject us to increased taxes and impair our ability to expand our business and make
distributions; and complying with REIT requirements may affect our profitability.
We were organized to qualify for taxation as a REIT under Sections 856 through 860 of the Code. See
Item 1 — Business — Taxation of Omega. Qualification as a REIT involves the application of technical
and intricate Code provisions for which there are only limited judicial and administrative interpretations,
and which involve the determination of various factual matters and circumstances not entirely within our
control. We cannot assure that we will at all times satisfy these rules and tests. Even a technical or
inadvertent violation could jeopardize our REIT qualification.
If we were to fail to qualify as a REIT in any taxable year, as a result of a determination that we failed
to meet the annual distribution requirement or otherwise, we would be subject to federal corporate income
tax, and any applicable alternative minimum tax with respect to each such taxable year for which the statute
of limitations remains open, as well certain excise taxes on nonqualified REIT income, or disqualification
from treatment as a REIT for the four taxable years following the year during which qualification is lost.
This treatment would significantly reduce our net earnings and cash flow because of our additional tax
liability for the years involved, which could significantly impact our financial condition. We generally must
distribute annually at least 90% of our taxable income to our stockholders to maintain our REIT status. To
the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%
32
of our “REIT taxable income,” as adjusted, we will be subject to tax thereon at regular corporate rates. As a
result of all these factors, our failure to maintain our qualification as a REIT could impair our ability to
expand our business and raise capital, and would substantially reduce our ability to make distributions to
you.
To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning,
among other things, the nature and diversification of our assets, the sources of our income and the
amounts we distribute to our stockholders. Thus, we may be required to liquidate otherwise attractive
investments from our portfolio or be unable to pursue investments that would be otherwise advantageous to
us, to satisfy the asset and income tests or to qualify under certain statutory relief provisions. We may also
be required to make distributions to stockholders at disadvantageous times or when we do not have funds
readily available for distribution (e.g., if we have assets which generate mismatches between taxable income
and available cash). Having to comply with the distribution requirement could cause us to: (i) sell assets in
adverse market conditions; (ii) borrow on unfavorable terms; or (iii) distribute amounts that would
otherwise be invested in future acquisitions, capital expenditures or repayment of debt. As a result,
satisfying the REIT requirements could have an adverse effect on our business results and profitability.
There is a risk of changes in the tax law applicable to REITs.
The Internal Revenue Service, the U.S. Treasury Department and Congress frequently review U.S.
federal income tax legislation, regulations and other guidance. We cannot predict whether, when or to what
extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted. Any legislative
action may prospectively or retroactively modify our tax treatment and, therefore, may adversely affect
taxation of us, our properties, or our shareholders.
Risks Related to Our Stock and Capital Structure
Our issuance of additional capital stock, warrants or debt securities, whether or not convertible, may reduce the
market price for our outstanding securities, including our common stock, and dilute the ownership interests of
existing stockholders, and we may issue securities with greater dividend, liquidation and other rights than our
common stock.
We cannot predict the effect, if any, that future sales of our capital stock, warrants or debt securities, or
the availability of our securities for future sale, will have on the market price of our securities, including our
common stock. Sales of substantial amounts of our common stock or preferred shares, warrants or debt
securities convertible into or exercisable or exchangeable for common stock in the public market, or the
perception that such sales might occur, could negatively impact the market price of our stock and the terms
upon which we may obtain additional equity financing in the future. Our Board has the authority to
designate and issue preferred stock that may have dividend, liquidation and other rights that are senior to
those of our common stock.
Any debt securities, preferred shares, warrants or other rights to acquire shares or convertible or
exchangeable securities that we issue in the future may have some rights, preferences and privileges more
favorable than those of our common stock and may result in dilution to owners of our common stock.
Holders of our common stock are not entitled to preemptive rights or other protections against dilution.
Our preferred shares, if issued, could have a preference on liquidating distributions or a preference on
dividend payments that could limit our ability pay dividends or other distributions to the holders of our
common stock. Because our decision to issue securities in any future offering will depend on market
conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or
nature of our future offerings. Thus, our stockholders bear the risk that our future offerings could reduce
the per share trading price of our common stock and dilute their interest in us.
33
General Risk Factors
Our success depends in part on our ability to retain key personnel and our ability to attract or retain other
qualified personnel.
Our future performance depends to a significant degree upon the continued contributions of our
executive management team and other key employees, the loss of whom could have an adverse impact on
our operations. Although we have entered into employment agreements with the members of our executive
management team, these agreements may not assure their continued service. In addition, our failure to
successfully attract, hire, retain and train the people we need may impede our ability to implement our
business strategy.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or
security failure of that technology could harm our business.
We rely on information technology networks and systems, including the Internet, to process, transmit
and store electronic information, and to manage or support a variety of business processes, including
financial transactions and records, personal identifying information, tenant and lease data. In addition, we
may from time to time offer technology services to tenants, which may involve storage of customer or
resident data. We purchase some of our information technology from vendors, on whom our systems
depend. We generally rely on third-party systems, software, tools and monitoring to provide security for
processing, transmission and storage of confidential tenant and other customer information, such as
individually identifiable information, including information relating to financial accounts. It is possible that
our safety and security measures will not be able to prevent the systems’ improper functioning or the
improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.
Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and
similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential
information. Any failure to maintain proper function, security and availability of our information systems,
and the privacy of the data we store, or failure to comply with related regulations, could interrupt our
operations, damage our reputation, subject us to liability claims or regulatory penalties and could have a
material adverse effect on our business, financial condition and results of operations. The regulatory
environment related to cyber and information security, data collection and privacy is increasingly rigorous,
with new and constantly changing requirements applicable to our business or to which we may become
subject, including E.U. data protection legislation, such as they General Data Protection Regulation, or the
GDPR, and the U.K.’s Data Protection Act, which impose significant data protection requirements and
penalties for noncompliance. Compliance with any of these requirements may result in additional costs and
could impact how we conduct in business in new jurisdictions.
Failure to maintain effective internal control over financial reporting could have a material adverse effect on
our business, results of operations, financial condition and stock price.
We are required to provide a report by management on internal control over financial reporting,
including management’s assessment of the effectiveness of such control. Changes to our business will
necessitate ongoing changes to our internal control systems and processes, and internal control over
financial reporting may not prevent or detect misstatements due to inherent limitations, including the
possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective
internal controls can provide only reasonable assurance with respect to the preparation and fair
presentation of financial statements. If we fail to maintain the adequacy of our internal controls or to
implement required new or improved controls, our business, results of operations and financial condition
could be materially adversely harmed, we could fail to meet our reporting obligations and there could be a
material adverse effect on our stock price. In addition, we may be adversely impacted by new accounting
pronouncements which change our lease recognition or other accounting practices or otherwise alter how
we report our financial results, or which require that we change our internal control and operating
procedures, which we may be unable to do in a timely manner.
Item 1B — Unresolved Staff Comments
None.
34
Item 2 — Properties
At December 31, 2022, our real estate investments include SNFs and ALFs and to a lesser extent ILFs,
specialty facilities and MOBs, in the form of (i) owned facilities that are leased to operators or their
affiliates, (ii) investments in direct financing leases to operators or their affiliates and (iii) real estate loans,
including mortgages on facilities that are operated by the mortgagors or their affiliates. Our facilities related
to these investments are located in 42 states and the U.K.
The following table presents the concentration of our gross real estate assets, assets held for sale, gross
investment in direct financing leases and gross mortgage notes receivables (included within our real estate
loans receivable) by state and the U.K. as of December 31, 2022:
Location
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remaining States . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Operating Beds
Number of
Facilities
Gross
Investment
(in thousands)
% of
Gross
Investment
12,022
10,957
6,937
4,322
4,894
4,791
3,598
4,399
3,668
4,676
29,701
89,965
98
111
70
52
43
92
38
46
28
45
303
926
$1,104,417
987,456
638,275
568,726
541,412
522,457
501,496
498,297
424,099
406,736
3,419,191
$9,612,562
11.5%
10.3%
6.6%
5.9%
5.6%
5.4%
5.2%
5.2%
4.4%
4.2%
35.7%
100.0%
Item 3 — Legal Proceedings
See Note 20 — Commitments and Contingencies to the Consolidated Financial Statements — Part IV,
Item 15, which is hereby incorporated by reference in response to this item.
Item 4 — Mine Safety Disclosures
None.
35
PART II
Item 5 — Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Information
Shares of Omega Healthcare Investors, Inc. (together with its consolidated subsidiaries, collectively,
“Omega” or the “Company”) common stock are traded on the New York Stock Exchange under the
symbol “OHI.” As of February 8, 2023, there were 2,744 registered holders and 234,267,646 shares of
Omega common stock outstanding.
Performance Graph
The graph and table below compare the cumulative total return of Omega, the FTSE NAREIT Equity
Health Care Index (Ticker: FN11-FTX), the FTSE NAREIT All REITs Index (Ticker: FNAR), the S&P
500 Index, and the Russell 2000 from January 1, 2018 to December 31, 2022. We have included the FTSE
NAREIT Equity Health Care Index and the FTSE NAREIT All REITs Index because we believe that they
are representative of the industry in which we compete and are relevant to an assessment of our
performance. Total cumulative return is based on a $100 investment in Omega common stock and in each of
the indices at the close of trading on December 31, 2017 and assumes quarterly reinvestment of dividends.
Stockholder returns over the indicated periods should not be considered indicative of future stock prices or
stockholder returns.
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
Omega Healthcare Investors, Inc. . . . .
FTSE NAREIT Health Care Index . .
FTSE NAREIT All REITs Index . . . .
S&P 500 Index . . . . . . . . . . . . . . . . .
Russell 2000 Index . . . . . . . . . . . . . .
$100.00
$100.00
$100.00
$100.00
$100.00
$139.43
$107.58
$ 95.90
$ 95.62
$ 88.99
$180.05
$130.39
$122.82
$125.72
$111.70
$167.47
$117.53
$115.62
$148.85
$134.00
$147.73
$136.71
$161.73
$191.58
$153.85
$152.44
$106.39
$121.13
$156.88
$122.41
Issuer Purchases of Equity Securities
On January 27, 2022, the Company authorized the repurchase of up to $500 million of our
outstanding common stock from time to time through March 2025. The Company is authorized to
repurchase shares of its common stock in open market and privately negotiated transactions or in any other
manner as determined by the Company’s management and in accordance with applicable law. The timing
and amount of stock repurchases will be determined, in management’s discretion, based on a variety of
factors, including but not limited to market conditions, other capital management needs and opportunities,
36
and corporate and regulatory considerations. The Company has no obligation to repurchase any amount of
its common stock, and such repurchases, if any, may be discontinued at any time. During 2022, we
repurchased 5.2 million shares of our common stock at an average price per share of $27.32 and an
aggregate repurchase cost of $142.3 million (including the cost of commissions). We did not repurchase any
shares during the fourth quarter of 2022.
Unregistered Sales of Equity Securities
From time to time, Omega issues shares of common stock in reliance on the private placement
exemption under Section 4(a)(2) of the Securities Act of 1933, as amended, in exchange for units of
partnership interest in OHI Healthcare Properties Limited Partnership (collectively with subsidiaries,
“Omega OP”). During the quarter ended December 31, 2022, Omega did not issue any shares of Omega
common stock.
Item 6 — [Reserved]
Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is based primarily on the consolidated financial statements of
Omega Healthcare Investors, Inc. presented in conformity with U.S. generally accepted accounting principles
(“GAAP”) for the periods presented and should be read together with the notes thereto contained in this
Annual Report on Form 10-K. Other important factors are identified in “Forward-Looking Statements” and
“Item 1A — Risk Factors” above.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is
organized as follows:
•
Business Overview
• Outlook, Trends and Other Conditions
•
2022 and Recent Highlights
• Results from Operations
•
•
•
Funds from Operations
Liquidity and Capital Resources
Supplemental Guarantor Information
• Critical Accounting Policies and Estimates
Business Overview
Omega Healthcare Investors, Inc. (“Parent”) is a Maryland corporation that, together with its
consolidated subsidiaries has elected to be taxed as a REIT for federal income tax purposes. Omega 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, Omega OP. As of December 31, 2022, Parent owned approximately 97%
of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other
investors owned approximately 3% of the outstanding Omega OP Units.
Omega has one reportable segment consisting of investments 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
(“MOBs”). Our core portfolio consists of our long-term leases and real estate loans with healthcare
operating companies and affiliates (collectively, our “operators”). Real estate loans consist of mortgage
loans and other real estate loans which are primarily collateralized by a first, second or third mortgage lien
or a leasehold mortgage on, or an assignment of the partnership interest in the related properties. In
37
addition to our core investments, we make loans to operators and/or their principals. These loans, which
may be either unsecured or secured by the collateral of the borrower, are classified as non-real estate loans.
From time to time, we also acquire equity interests in joint ventures or entities that support the long-term
healthcare industry and our operators.
Our portfolio of real estate investments (including properties associated with mortgages, direct
financing leases, assets held for sale and consolidated joint ventures) at December 31, 2022, included
926 healthcare facilities, located in 42 states and the U.K. that are operated by 67 third-party operators. Our
real estate investment in these facilities totaled approximately $9.5 billion at December 31, 2022, with
approximately 97% of our real estate investments related to long-term healthcare facilities. The portfolio is
made up of (i) 665 SNFs, (ii) 169 ALFs, (iii) 20 ILFs, (iv) 16 specialty facilities, (v) two MOBs, (vi) real
estate loans, including mortgages on 48 SNFs, two ALFs and two specialty facilities and (vii) two facilities
that are held for sale. At December 31, 2022, we also held other real estate loans (excluding mortgages)
receivable of $394.6 million and non-real estate loans receivable of $225.3 million, consisting primarily of
secured loans to third-party operators of our facilities, and $178.9 million of investments in six
unconsolidated joint ventures.
As healthcare delivery continues to evolve, we continuously evaluate potential investments, our assets,
operators and markets to position our portfolio for long-term success. Our strategy includes applying data
analytics to our investment underwriting and asset management, as well as selling or transitioning assets
that do not meet our portfolio criteria.
Outlook, Trends and Other Conditions
The COVID-19 pandemic has significantly and adversely impacted SNFs and long-term care providers
due to the higher rates of virus transmission and fatality among the elderly and frail populations that these
facilities serve; in addition, the pandemic contributed to occupancy declines, labor shortages and cost
increases which continue to significantly impact our operators. As discussed further in “Collectibility
Issues” below, during the year we have had several operators that have failed to make contractual payments
under their lease and loan agreements, and we have agreed to short-term deferrals, lease and portfolio
restructurings and/or allowed the application of security deposits or letters of credit to pay rent for several
operators.
We believe these operators were impacted by, among other things, reduced revenue as a result of lower
occupancy and increased expenses resulting from the COVID-19 pandemic and uncertainties regarding the
continuing availability of sufficient government support and adequate reimbursement levels. These increases
have been offset to some extent by increases in reimbursements due to increased skilling in place, which has
been necessitated by pandemic-related protocols and may decrease when such protocols subside or when the
federally declared public health emergency expires as scheduled on May 11, 2023. We believe these increases
primarily stem from elevated labor costs, including increased use of overtime and bonus pay and reliance on
agency staffing due to staffing shortages, as well as a significant increase in both the cost and usage of
personal protective equipment (“PPE”), testing equipment and processes and supplies, as well as
implementation of new infection control protocols and vaccination programs. In addition, operators who
do not achieve full compliance with applicable vaccination and infection control requirements may face
potential survey issues and penalties. At this time, there is significant uncertainty regarding the impact of
such developments.
We remain cautious as the COVID-19 pandemic continues to have a significant impact on our
operators and their financial conditions, particularly given the trend of reduced pandemic-related federal
support to our operators beginning in 2021, the persistence of staffing shortages that continue to impact
our operators’ occupancy levels and profitability, uncertainty as to whether Medicare and Medicaid
reimbursement rates will be sufficient to address longer-term cost increases faced by operators, factors that
may impact future virus transmission in our facilities, including vaccination rates and efficacy of the
vaccine for staff members and residents at our facilities and genetic mutations of the virus into new
variants, and the commencement in December 2021 of repayment of deferred FICA obligations.
We believe that the incidence and severity of COVID-19 among our operators’ residents and
employees, based on reporting by our operators, tend to correlate with levels of incidence and severity
experienced by the applicable community in which such operators’ are located, and it remains uncertain
whether certain of our facilities will be impacted by future community spread of the virus.
38
Our facilities, on average, experienced declines, in some cases that are material, in occupancy levels as a
result of the pandemic. Occupancy in our facilities has generally improved on average since early 2021;
however, average occupancy has not returned to pre-pandemic levels. It remains unclear when and the
extent to which demand and occupancy levels will return to pre-COVID-19 levels. We believe these
challenges to occupancy recovery may be in part due to staffing shortages, which in some cases have
required operators to limit admissions, as well as COVID-19 related fatalities at the facilities, the delay of
SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the
suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs
and higher hospital readmittances from SNFs.
While substantial government support was allocated to SNFs and to a lesser extent to ALFs in 2020,
federal relief efforts have been limited since 2021 as have been relief efforts in certain states. The additional
6.2% FMAP reimbursement in connection with the pandemic is being phased out in 2023 pursuant to the
Consolidated Appropriations Act of 2023 as further discussed under “Government Regulation —
Reimbursement Changes Related to COVID-19” under “Item 1 — Business.” The additional 6.2% FMAP
provided some of our operators with significant support, based on which states they are located in, and the
phase out of such support may adversely affect their operations to the extent that expenses are not reduced
or other support is not provided. We believe further government support will be needed to continue to
offset these impacts on operators, which could be in the form of direct support or reimbursement rate
adjustments to reflect sustained cost changes experienced by operators. It is unclear whether and to what
extent such government support will continue to be sufficient and timely to offset these impacts. In
particular, while $25.5 billion in federal funding for healthcare providers impacted by COVID-19 was
announced in September 2021 with distributions beginning in late 2021 pursuant to the Public Health and
Social Services Emergency Fund (“Provider Relief Fund”), we do not expect additional Provider Relief
Funds to be allocated to healthcare operators or our operators, and it remains uncertain whether additional
Medicaid funds under the American Rescue Plan Act of 2021 (the “American Rescue Plan Act”) or other
changes in Medicare or Medicaid reimbursement rates in the U.S., or U.K. reimbursement and relief
programs for our U.K. operators, will ultimately support reimbursement to our operators. While certain
states have provided pandemic-related relief measures and/or reimbursement increases, there remains
uncertainty as to how widespread these measures will continue to be and to what extent they may be
distributed to and benefit our operators, especially when the federally declared public health emergency
expires as scheduled on May 11, 2023 or previously released federal funds to states have been fully utilized.
Likewise, while certain states may in the course of routine rate-setting of Medicaid rates address
inflationary factors and other expense-related items, there can be no assurance that these changes will be
sufficient to offset existing increased inflation and expenses or that all states will address these items. See the
“Government Regulation and Reimbursement” section for additional information. Further, to the extent
the cost and occupancy impacts on our operators continue or accelerate and are not offset by continued
government relief or reimbursement rates that are sufficient and timely, we anticipate that the operating
results of additional operators may be materially and adversely affected, some may be unwilling or unable
to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure
such obligations on terms as favorable to us as those currently in place.
There are a number of uncertainties we face as we consider the continuing impact of COVID-19 on
our business, including how long census disruption and elevated COVID-19 costs will last, the ability of our
operators to manage the impact of the termination of public health emergency and temporary relief
thereunder, the continued efficacy of vaccination programs in reducing the spread and severity of
COVID-19 in our facilities, the impact of genetic mutations of the virus into new variants on our facilities,
and the extent to which funding support from the federal government, the states and the U.K. will continue
to offset these incremental costs as well as lost revenues. Notwithstanding vaccination programs, we expect
that heightened clinical protocols for infection control within facilities will continue for some period;
however, we do not know if future reimbursement rates or equipment provided by governmental agencies
will be sufficient to cover the increased costs of enhanced infection control and monitoring.
While we continue to believe that longer term demographics will drive increasing demand for
needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at
least for the near term until we can gain more information as to the level of costs our operators will
continue to experience and for how long, and the level of additional governmental support that will be
39
available to them, the potential support our operators may request from us and the future demand for
needs-based skilled nursing care and senior living facilities. We continue to monitor the rate of occupancy
recovery at many of our operators, and it remains uncertain whether and when demand, staffing availability
and occupancy levels will return to pre-COVID-19 levels.
In addition to the impacts of COVID-19 discussed above, our operators have been and are likely to
continue to be adversely affected by labor shortages and increased labor costs as well as other
inflation-related cost increases. In addition, our operations have also been and are likely to continue to be
impacted by increased competition for the acquisition of facilities in the U.S., which has decreased the
number of investment opportunities that would be accretive to our portfolio. As part of our continuous
evaluation of our portfolio and in connection with certain operator restructuring transactions, we expect to
continue to opportunistically sell assets, or portfolios of assets, from time to time.
We continue to monitor the impacts of other regulatory changes, as discussed below, including any
significant limits on the scope of services reimbursed and on reimbursement rates and fees, which could
have a material adverse effect on an operator’s results of operations and financial condition, which could
adversely affect the operator’s ability to meet its obligations to us.
2022 and Recent Highlights
Investments
• We acquired 41 facilities for an aggregate consideration of $225.2 million in 2022. The initial cash
yield (the initial annual contractual cash rent divided by the purchase price) on these asset
acquisitions was between 8% and 9.5%.
• We invested $64.4 million under our construction-in-progress and capital improvement programs
in 2022.
• We financed $56.2 million of new real estate loans with a weighted average interest rate of 12% in
2022. Our 2022 new real estate loans primarily relate to two new loans that we entered into during
the year. We also advanced $60.0 million under existing real estate loans in 2022.
• During 2022, Ciena Healthcare (“Ciena”) made $158.5 million of early principal payments under
its mortgage loans. In connection with the partial repayments, the maturity date of all the Ciena
mortgage notes was extended to June 30, 2030 (with exception of two loans with an aggregate
principal balance of $40.4 million with maturity dates in 2023).
Dispositions and Impairments
•
•
In 2022, we sold 66 facilities for approximately $759.0 million in net cash proceeds, recognizing a net
gain of approximately $360.0 million. Our sales during 2022 were primarily driven by restructuring
transactions associated with facilities formerly leased to the following operators: Gulf Coast Health
Care LLC (together with certain affiliates “Gulf Coast”) — 22 facilities, Guardian Healthcare
(“Guardian”) — nine facilities, and Agemo Holdings, LLC (“Agemo”) — 22 facilities.
In December 2022, in connection with restructuring negotiations with LaVie Care Centers, LLC
(“LaVie,” f/k/a Consulate Health Care), we sold 11 facilities previously leased to LaVie for a sales
price of $129.8 million. Omega provided $104.8 million in senior seller financing, collateralized by
first lien mortgages on the 11 facilities, to fund a portion of the purchase price. The senior note
has a December 29, 2027 maturity date and bears interest at 8% with required monthly interest
payments (due in arrears beginning February 1, 2023), with no principal payments are due until
the maturity date. The remaining consideration received under the purchase agreement is the
assumption of a $25.0 million liability, incurred by Omega as part of the transaction, by the buyer
from Omega. The 11-facility sale does not meet the contract criteria to be recognized as a sale for
accounting purposes and we will continue to account for these facilities on our Consolidated
Balance Sheets and depreciate the facilities until the sale recognition requirements are met. A
contract liability will be recognized on our Consolidated Balance Sheets within accrued expenses
and other liabilities for the $25.0 million liability assumed, which will be relieved when the sale is
40
recognized. The loan receivable associated with the seller financing will not be recorded on our
Consolidated Balance Sheets until the sale is recognized, and any cash interest received will be
deferred and recorded as a contract liability within accrued expenses and other liabilities on our
Consolidated Balance Sheets. No interest income or gain or loss will be recognized until the sale
recognition requirements are met.
•
In 2022, we recorded impairments on real estate properties of approximately $38.5 million on
22 facilities. Of the $38.5 million, $3.5 million related to two facilities that were classified as held
for sale and $35.0 million related to 20 held-for-use facilities of which $17.2 million relates to
12 facilities leased to and operated by LaVie that are expected to be impacted by the on-going
restructuring negotiations.
Financing Activities
•
In January 2022, our Board of Directors authorized the repurchase of up to $500 million of our
outstanding common stock from time to time through March 2025. For the year ended
December 31, 2022, we repurchased 5.2 million shares of our outstanding common stock at an
average price of $27.32 per share.
• We sold 0.3 million shares of common stock under our Dividend Reinvestment and Common
Stock Purchase Plan (“DRSPP”) during the year ended December 31, 2022. Aggregate net
proceeds from these sales generated $9.2 million during 2022.
Other Highlights
• During 2022, we made $126.1 million of new non-real estate loans with a weighted average
interest rate of 10.2%. We also advanced $124.8 million under existing non-real estate loans. Of
the $124.8 million, an aggregate $105.9 million related to two revolving working capital loans that
also had aggregate repayments of $80.0 million during 2022.
•
In 2022, Omega was included in the Bloomberg Gender-Equality Index (GEI) — one of only
418 companies worldwide, and fewer than 15 U.S. REITs, to be included in the 2022 index.
Collectibility Issues
• During the year ended December 31, 2022, we placed nine operators on a cash basis of revenue
recognition. These include LaVie, Maplewood Senior Living (along with affiliates, “Maplewood”),
and operators representing 0.4% (“0.4% Operator”), 1.2% (“1.2% Operator”) and 2.0% (“2.0%
Operator”) of total revenue (excluding the impact of write-offs), respectively, for the year ended
December 31, 2022. In connection with placing these operators on a cash basis, we recognized
$119.8 million in total straight-line accounts receivable write-offs through rental income. As of
December 31, 2022, 20 operators are on a cash basis. These operators represent an aggregate
36.5% of our total revenues (excluding the impact of write-offs) for the year ended December 31,
2022.
• During the year ended December 31, 2022, we allowed ten operators to defer $27.0 million of
contractual rent and interest. The deferrals primarily related to the following operators: Agemo,
Guardian, the 3.7% Operator (defined below) and the 1.2% Operator. Additionally, we allowed
seven operators to apply collateral, such as security deposits or letters of credit, to contractual rent
and interest during the year ended December 31, 2022. The total collateral applied to contractual
rent and interest was $11.0 million for the year ended December 31, 2022. These applications of
collateral to contractual rent and interest primarily relate to the 2.0% Operator and the 1.2%
Operator.
41
• Agemo, a cash basis operator, continued to not pay contractual rent and interest due under its
lease and loan agreements during the year ended December 31, 2022. We have not recorded any
rental income or interest income related to Agemo during the year ended December 31, 2022.
Subsequent to year end, we entered into a restructuring agreement with Agemo. See Note 5 —
Contractual Receivables and Other Receivables and Lease Inducements to the Consolidated
Financial Statements — Part I, Item 15 hereto for additional details.
• Guardian did not make rent and interest payments under its lease and loan agreements during the
first quarter of 2022, but it resumed making contractual rent and interest payments during the
second quarter of 2022, and it continued making such payments in the third and fourth quarters
of 2022, in accordance with the restructuring terms discussed further below. Guardian is on a cash
basis of revenue recognition for lease purposes, and we recorded rental income of $11.3 million for
the year ended December 31, 2022 for contractual rent payments that were received. Additionally,
Guardian’s mortgage loan is on non-accrual status and is being accounted for under the cost
recovery method and therefore the $6.0 million of interest payments that we received during the
year ended December 31, 2022 were applied directly against the principal balance outstanding. In
the second quarter of 2022, we agreed to a formal restructuring agreement, master lease
amendments and mortgage loan amendments with Guardian. As part of the restructuring
agreement and related agreements, Omega agreed to, among other things, allow for the
retrospective deferral of $18.0 million of aggregate contractual rent and interest, with repayment
required after September 30, 2024, and reduce the combined rent and mortgage interest to an
aggregate of $24.0 million per year effective as of July 1, 2022.
•
In the fourth quarter of 2022, Omega began the process of restructuring our portfolio with LaVie,
which primarily consists of two master lease agreements and two term loan agreements. On
December 30, 2022, we sold 11 facilities previously subject to one of two lease agreements with
LaVie. See further discussion on the sale and the accounting treatment in Dispositions and
Impairments above. Concurrent with the sale, we also amended the lease agreement impacted by
the sale and our loan agreements with LaVie. As part of the lease amendments, Omega agreed to,
among other terms, remove the 11 sold facilities from the lease agreement and reduce monthly
contractual rent from $8.3 million to $7.3 million. We amended the loans to, among other terms,
extend the loan maturities to November 30, 2036 to align with the lease term, and starting in
January 2023, reduce the interest rates to 2%, remove the requirement to make any principal
payments until the maturity dates and to convert from monthly cash interest payments to interest
paid-in-kind. The restructuring discussions are still ongoing and subject to change, but we
anticipate additional restructuring activity related to this operator in 2023. As a result of the
restructuring activities during 2022 and future expected restructuring activities, during the fourth
quarter of 2022, we placed LaVie on a cash basis of revenue recognition as collection of
substantially all contractual lease payments due from them was deemed no longer probable. As a
result, we wrote-off approximately $58.0 million of straight-line rent receivables and lease
inducements to rental income during the fourth quarter of 2022. In the first quarter of 2023, as
part of the restructuring, we have agreed to a partial rent deferral in the first four months of 2023.
In doing so, we agreed to allow LaVie to defer up to $10.0 million of contractual rent from
January 2023 through April 2023 under one of our lease agreements for 32 facilities. Omega is in
discussions to allow LaVie to defer up to $9.1 million of contractual rent from January 2023
through April 2023 under another lease agreement for 41 facilities. In January 2023, as a result,
LaVie deferred the full contractual payment of $2.5 million under the 32-facility lease and paid
$2.5 million of the $4.7 million of contractual rent due under the 41-facility lease.
• During the fourth quarter of 2022, we placed Maplewood on a cash basis of revenue recognition as
collection of substantially all contractual lease payments due from them was deemed no longer
probable based on the proposed restructuring of our lease and loan agreements with Maplewood.
As a result, we wrote-off approximately $29.3 million of straight-line rent receivables and lease
inducements to rental income during the fourth quarter of 2022. Subsequent to year end, we entered
into a restructuring agreement with Maplewood. See Note 5 — Contractual Receivables and Other
Receivables and Lease Inducements to the Consolidated Financial Statements — Part I, Item 15
hereto for additional details surrounding the restructuring.
42
•
•
In December 2022, we agreed to allow Healthcare Homes Limited (“Healthcare Homes”), a U.K.
based operator, the ability to defer up to £6.7 million of contractual rent from January 2023
through April 2023 with regular payments scheduled to resume in May 2023. The deferred rent
balance accrues interest monthly at a rate of 8% per annum and must be fully repaid by
December 31, 2024. Healthcare Homes has had near-term liquidity issues in connection with
increased staffing and utility costs. Healthcare Homes remains current as of December 31, 2022
and is on a straight-line basis of revenue recognition.
From January through March 2022, an operator (the “3.7% Operator”) representing 3.7% of total
revenue (excluding the impact of write-offs) for the year ended December 31, 2022, did not pay its
contractual amounts due under its lease agreement. In March 2022, the lease with the 3.7%
Operator was amended to allow for a short-term rent deferral for January through March 2022.
The 3.7% Operator paid the contractual amount due under its lease agreement from April through
December 2022. Omega holds a $1.0 million letter of credit and a $150 thousand security deposit
from the 3.7% Operator. The 3.7% Operator remains current on its $25.0 million revolving credit
facility, which is fully drawn as of December 31, 2022 and is secured by a first lien on the 3.7%
Operator’s accounts receivable. The 3.7% Operator remains on a straight-line basis of revenue
recognition.
Dividends
• Quarterly cash dividends paid during 2022 aggregated to $2.68 per share. On January 26, 2023, the
Board of Directors declared a cash dividend of $0.67 per share. The dividend will be paid on
February 15, 2023 to stockholders of record as of the close of business on February 6, 2023.
Results of Operations
The following is our discussion of the consolidated results of operations for the year ended
December 31, 2022 as compared to the year ended December 31, 2021. For a discussion of our results of
operation for the year ended December 31, 2021 as compared to the year ended December 31, 2020, see
“Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of
our Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”).
Comparison of results of operations for the years ended December 31, 2022 and 2021 (dollars in thousands):
Year Ended December 31,
2022
2021
Increase/(Decrease)
Revenues:
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $750,208 $923,677
1,029
. . . . . . . . . . . . . . . . . . .
Income from direct financing leases
136,382
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,721
Miscellaneous income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,023
123,919
3,094
$(173,469)
(6)
(12,463)
1,373
Expenses:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition, merger and transition related costs . . . . . . . . . . .
Impairment on real estate properties . . . . . . . . . . . . . . . . . . .
Recovery on direct financing leases . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
332,407
69,397
15,500
42,006
38,451
—
68,663
233,244
342,014
64,628
12,260
1,814
44,658
(717)
77,733
234,604
(9,607)
4,769
3,240
40,192
(6,207)
717
(9,070)
(1,360)
43
Other income (expense):
Year Ended December 31,
2022
2021
Increase/(Decrease)
Other expense – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,997) $
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . .
Gain on assets sold – net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from unconsolidated joint ventures . . . . . . . . . . . . . . . .
(389)
359,951
(4,561)
7,261
(581)
(30,763)
161,609
(3,840)
16,062
$ (1,416)
30,374
198,342
(721)
(8,801)
Revenues
Following is a description of certain of the changes in revenues for the year ended December 31, 2022
compared to 2021:
•
•
The decrease in rental income was primarily the result of (i) a $85.7 million decrease as a result of
a net increase in straight-line rent receivable and lease inducement write-offs in 2022 primarily due
to placing operators LaVie, Maplewood and seven other operators on a cash basis for revenue
recognition due to collectibility concerns, (ii) a $67.2 million net decrease in rental income from
13 cash basis operators, including Agemo, as a result of not recording straight-line lease revenue
and/or receiving less cash rent payments period over period from these operators, (iii) a
$36.8 million decrease due to recognizing no rental income related to Gulf Coast, a cash basis
operator, in 2022, as we received no contractual payments in the first quarter related to the lease
with this operator, and we sold or transitioned 23 of the facilities subject to the Gulf Coast lease
in March and April 2022 and (iv) a $7.1 million decrease related to facility sales, transitions and
lease terminations, partially offset by (i) a $18.3 million increase related to facility acquisitions
made in 2022 and (ii) a $3.1 million increase related to a lease extension with one operator.
The decrease in interest income was primarily due to (i) a $17.0 million decrease related to
principal payments received during 2021 and 2022, including those on the Ciena mortgage loans
discussed above, and (ii) a $12.4 million decrease related to loans placed on non-accrual status,
primarily the Guardian mortgage loan, during 2021 and 2022, partially offset by a $16.9 million
increase related to new and refinanced loans and additional funding to existing operators made
throughout 2021 and 2022. As noted above, in 2022, we funded $116.2 million for new or existing
real estate loans and $250.9 million for new or existing non-real estate loans.
Expenses
Following is a description of certain of the changes in our expenses for the year ended December 31,
2022 compared to 2021:
•
•
•
•
The decrease in depreciation and amortization expense primarily relates to facility sales and
facilities reclassified to assets held for sale, such as the 22 Gulf Coast facilities and 22 Agemo
facilities that were sold during 2022, partially offset by facility acquisitions and capital additions.
The increase in general and administrative (“G&A”) expense primarily relates to a $5.9 million
increase in stock-based compensation expense (see Note 19 — Stock-Based Compensation to the
Consolidated Financial Statements for a full summary of stock-compensation movements over the
last three years) partially offset by a $2.6 million decrease in payroll and benefits and severance
expenses.
The increase in acquisition, merger and transition related costs primarily relates to costs incurred
related to the transition of facilities with LaVie (as discussed further in “Collectibility Issues”
above) and other troubled operators.
The 2022 impairments were recognized in connection with two facilities that were classified as
held-for-sale for which the carrying values exceeded the estimated fair values less costs to sell and
20 held-for-use facilities for which the carrying value exceeded the fair value. The 2021
impairments were recognized in connection with 13 facilities that were classified as held-for-sale
44
for which the carrying values exceeded the estimated fair values less costs to sell and one
held-for-use facility because of the closure of the facility in the first quarter. The 2022 and 2021
impairments were primarily the result of decisions to exit certain non-strategic facilities and/or
operators.
•
The decrease in provision for credit losses primarily relates to a net decrease in aggregate specific
provisions recorded in 2022 compared to specific provisions recorded in 2021, partially offset by
increases in the general reserve recorded primarily resulting from increases in loss rates utilized in
the estimate of expected losses for loans (see Note 9 — Allowance for Credit Losses to the
Consolidated Financial Statements for a full summary of allowance movements over the last
three years).
Other Income (Expenses)
The increase in total other income (expense) was primarily due to (i) a $198.3 million increase in gain
on assets sold resulting from the sale of 66 facilities in 2022 compared to the sale of 48 facilities in 2021 as
we continue to exit certain facilities, operator relationships and/or states to improve the strength of our
overall portfolio and (ii) a $30.4 million decrease in loss on debt extinguishment primarily related to fees,
premiums, and expenses related to the early redemption of $350 million of principal of the 4.375% Senior
Notes due 2023 during the first quarter of 2021.
Income Tax Expense
As a REIT, we generally are not subject to federal income taxes on the REIT taxable income that we
distribute to stockholders, subject to certain exceptions. For tax year 2022, we made common dividend
payments of $632.9 million to satisfy REIT requirements relating to qualifying income. We have elected to
treat certain of our active subsidiaries as TRSs. Our domestic TRSs are subject to federal, state and local
income taxes at the applicable corporate rates. Our foreign TRSs are subject to foreign income taxes. As of
December 31, 2022, one of our TRSs that is subject to income taxes at the applicable corporate rates had a
net operating loss (“NOL”) carry-forward of approximately $10.2 million. Also, in connection with the
acquisition of one U.K. entity in the first quarter of 2022, we acquired foreign net operating losses of
$55.0 million resulting in an NOL deferred tax asset of $13.4 million (see Note 3 — Real Estate Asset
Acquisitions and Development and Note 17 — Taxes). The $10.2 million NOL carry-forward was fully
reserved as of December 31, 2022, with a valuation allowance due to uncertainties regarding realization.
Under U.S. current law, NOL carry-forwards generated up through December 31, 2017 may be carried
forward for no more than 20 years, and our NOL carry-forwards generated in our taxable years ended after
December 31, 2017 may be carried forward indefinitely.
For the year ended December 31, 2022, we recorded approximately $1.2 million of federal, state and
local income tax provision and approximately $3.4 million of tax provision for foreign income taxes. These
amounts do not include any gross receipts or franchise taxes payable to certain states and municipalities.
Income from Unconsolidated Joint Ventures
The decrease in income from unconsolidated joint ventures was primarily due to one of the joint
ventures realizing a $14.9 million gain on sale of real estate investments during 2021.
Funds From Operations
We use funds from operations (“Nareit FFO”), a non-GAAP financial measure, as one of several
criteria to measure the operating performance of our business. We calculate and report Nareit FFO in
accordance with the definition of Funds from Operations and interpretive guidelines issued by the National
Association of Real Estate Investment Trusts (“Nareit”). 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 impairment 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 are 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. We believe that Nareit
45
FFO is an important supplemental measure of our operating performance. As real estate assets (except
land) are depreciated under GAAP, 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. Nareit FFO was designed by the real estate industry to address this issue. Nareit FFO herein is
not necessarily comparable to Nareit FFO of other REITs that do not use the same definition or
implementation guidelines or interpret the standards differently from us.
We further believe that by excluding the effect of depreciation, amortization, impairment 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, Nareit FFO can facilitate comparisons of
operating performance between periods and between other REITs. We offer this measure to assist the users
of our financial statements in evaluating our financial performance under GAAP, and Nareit FFO should
not be considered a measure of liquidity, an alternative to net income or an indicator of any other
performance measure determined in accordance with GAAP. Investors and potential investors in our
securities should not rely on this measure as a substitute for any GAAP measure, including net income.
The following table presents our Nareit FFO reconciliation for the years ended December 31, 2022,
2021 and 2020:
Year Ended December 31,
2022
2021
2020
(in thousands)
Net income(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 438,841 $ 428,302 $163,545
(19,113)
Deduct gain from real estate dispositions . . . . . . . . . . . . . . . . . . .
Deduct gain from real estate dispositions – unconsolidated joint
(359,951)
(161,609)
ventures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elimination of non-cash items included in net income:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation – unconsolidated joint ventures . . . . . . . . . . . . . . . .
Add back impairments on real estate properties . . . . . . . . . . . . . . .
Add back impairments on real estate properties – unconsolidated
(93)
78,797
(14,880)
251,813
(5,894)
138,538
332,407
10,881
38,451
342,014
12,285
44,658
329,924
14,000
72,494
Add back unrealized loss on warrants
joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
—
988
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 460,536 $ 655,243 $555,944
4,430
43
—
—
Nareit FFO
(1) The years ended December 31, 2022 and 2021 include the application of $11.0 million and $11.8 million, respectively, of security
deposits (letter of credit and cash deposits) in revenue.
(2) The year ended December 31, 2021 includes $21.3 million of revenue related to Gulf Coast recognized based on our ability to
offset uncollected rent against the interest and principal of certain debt obligations of Omega.
The $194.7 million decrease in Nareit FFO for the year ended December 31, 2022 compared to 2021 is
primarily driven by the overall decrease in total revenue, which is discussed in more detail in the Results of
Operations above.
Liquidity and Capital Resources
Sources and Uses
Our primary sources of cash include rental income and interest payment receipts on our loans, existing
availability under our Revolving Credit Facility, proceeds from our DRSPP and the 2021 ATM Program,
facility sales, and proceeds from mortgage and other investment payoffs. We anticipate that these sources
will be adequate to meet our principal cash flow needs through the next twelve months, which include:
funding dividends and distributions to our stockholders and non-controlling interest members, making debt
service payments (including principal and interest), funding real estate investments (including facility
46
acquisitions, capital improvement programs and other capital expenditures), funding new and committed
loan investments and paying normal recurring G&A expenses (primarily consisting of employee payroll and
benefits and expenses relating to third parties for legal, consulting and audit services).
Capital Structure
At December 31, 2022, we had total assets of $9.4 billion, total equity of $3.8 billion and total debt of
$5.3 billion, with such debt representing approximately 58.4% of total capitalization.
Debt
At December 31, 2022, the weighted-average annual interest rate of our debt was 4.1%. Additionally, as
of December 31, 2022, 98% of our debt with outstanding principal balances has fixed interest payments.
Our high percentage of fixed interest debt has kept our interest expense relatively flat year over year despite
rising interest rates. As of December 31, 2022, Omega’s debt obligations consisted of the following:
• A $1.45 billion Revolving Credit Facility that bears interest at LIBOR (or in the case of loans
denominated in GBP, the Sterling overnight index average reference rate plus an adjustment of
0.1193% per annum) plus an applicable percentage (with a range of 95 to 185 basis points) based
on our credit ratings. The Revolving Credit Facility matures on April 30, 2025, subject to Omega’s
option to extend such maturity date for two six-month periods. As of December 31, 2022, Omega
had $19.2 million outstanding on the Revolving Credit Facility.
• A $50.0 million OP Term Loan that bears interest at LIBOR plus an applicable percentage (with a
range of 85 to 185 basis points) based on our credit ratings. The OP Term Loan matures on
April 30, 2025, subject to Omega OP’s option to extend such maturity date for two six-month
periods.
•
•
$4.9 billion of senior unsecured notes with staggered maturity dates in 2023, 2024, 2025, 2026,
2027, 2028, 2029, 2031 and 2033. These notes bear fixed interest rates between 3.25% and 5.25%
per annum.
$366.6 million of secured borrowings consisting of HUD Mortgages and two term loans. We had
$344.7 million of outstanding HUD Mortgages as of December 31, 2022, with weighted average
interest rates of 3.01% per annum that mature from 2046 to 2052.
As of December 31, 2022, we had long-term credit ratings of Baa3 from Moody’s and BBB- from S&P
Global and Fitch. Credit ratings impact our ability to access capital and directly impact our cost of capital
as well. For example, our Revolving Credit Facility accrues interest and fees at a rate per annum equal to
LIBOR plus a margin that depends upon our credit rating. A downgrade in credit ratings by Moody’s and
S&P Global may have a negative impact on the interest rates and fees for our Revolving Credit Facility.
Our credit facilities that reference LIBOR contain customary LIBOR replacement language, including,
but not limited to, the use of rates based on the secured overnight financing rate.
Certain of our other secured and unsecured borrowings are subject to customary affirmative and
negative covenants, including financial covenants. As of December 31, 2022 and 2021, we were in
compliance with all affirmative and negative covenants, including financial covenants, for our secured and
unsecured borrowings.
As of December 31, 2022 we have five forward starting swaps totaling $400 million that are indexed to
3-month LIBOR. We designated the forward starting swaps as cash flow hedges of interest rate risk
associated with interest payments on a forecasted issuance of fixed rate long-term debt. The swaps are
effective on August 1, 2023 and expire on August 1, 2033 and were issued at a weighted average fixed rate of
approximately 0.8675%. The fair value associated with these swaps was $93.0 million as of December 31,
2022.
47
Equity
At December 31, 2022, we had 234.3 million shares of common stock outstanding and our shares had
a market value of $6.5 billion. As of December 31, 2022, we had the following equity programs in place that
we can utilize to raise capital:
•
The 2021 ATM Program under which shares of common stock having an aggregate gross sales
price of up to $1.0 billion may be sold from time to time. The 2021 ATM Program has a forward
sale provision that generally allows Omega to lock in a price on the sale of shares of common
stock when sold by the forward sellers but defer receiving the net proceeds from such sales until
the shares of our common stock are issued at settlement on a later date. We did not utilize the
forward provisions under the 2021 ATM Program during 2022. We have $929.9 million of sales
remaining under the 2021 ATM Program as of December 31, 2022.
• We have a DRSPP that allows for the reinvestment of dividends and the optional purchase of our
common stock.
Dividends
As a REIT, we are required to distribute dividends (other than capital gain dividends) to our
stockholders in an amount at least equal to (A) the sum of (i) 90% of our “REIT taxable income”
(computed without regard to the dividends paid deduction and our net capital gain), and (ii) 90% of the net
income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash
income. In addition, if we dispose of any built-in gain asset during a recognition period, we will be required
to distribute at least 90% of the built-in gain (after tax), if any, recognized on the disposition of such asset.
Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if
declared before we timely file our tax return for such year and paid on or before the first regular dividend
payment after such declaration. In addition, such distributions are required to be made pro rata, with no
preference to any share of stock as compared with other shares of the same class, and with no preference to
one class of stock as compared with another class except to the extent that such class is entitled to such a
preference. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but
less than 100% of our “REIT taxable income” as adjusted, we will be subject to tax thereon at regular
corporate rates.
Material Cash Requirements
The following table shows our material cash requirements, described below, as of December 31, 2022:
Payments due by period
Total
Less than
1 year
Years 2 – 3
Years 4 – 5
(in thousands)
More than
5 years
Debt(1)
Interest payments on long-term debt . . . . . . .
Operating lease and other obligations(2) . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . $5,335,865 $359,898 $ 905,185 $1,317,191 $2,753,591
379,095
1,234,702
34,418
43,889
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,614,456 $584,808 $1,278,889 $1,583,655 $3,167,104
263,075
3,389
222,918
1,992
369,614
4,090
(1) The $5.3 billion of debt outstanding includes: (i) $50 million under the OP Term Loan due April 2025, (ii) $350 million of
4.375% Senior Notes due August 2023, (iii) $400 million of 4.95% Senior Notes due April 2024, (iv) $400 million of 4.50%
Senior Notes due January 2025, (v) $600 million of 5.25% Senior Notes due January 2026, (vi) $700 million of 4.5% Senior
Notes due April 2027, (vii) $550 million of 4.75% Senior Notes due January 2028, (viii) $500 million of 3.625% Senior Notes due
October 2029, (ix) $700 million of 3.375% Senior Notes due February 2031, (x) $700 million of 3.25% Senior Notes due
April 2033, (xi) $2.2 million of 8.0% per annum debt held at a consolidated joint venture due February 2023, (xii) $19.8 million
of 9.63% per annum debt held at a consolidated joint venture due February 2024 and (xiii) $344.7 million of HUD debt at a
3.01% weighted average interest rate due between 2046 and 2052. Other than the $50 million outstanding under the OP Term
Loan, the $344.7 million of HUD debt and the $22.0 million of debt held at consolidated joint ventures, Parent is the obligor of
all outstanding debt.
(2)
In connection with the adoption of Topic 842, we recognized lease liabilities in connection with ground and/or facility leases.
Certain operators pay these obligations directly to the landlord. We recognize rental income for ground and/or facility leases
where the operator reimburses us, or pays the obligation directly to the landlord on our behalf.
48
Capital Expenditures and Funding Commitments
In addition to the obligations in the table above, as of December 31, 2022, we also had $210.9 million
of commitments to fund the construction of new leased and mortgaged facilities, capital improvements and
other commitments. Additionally, we have commitments to fund $71.4 million of advancements under
existing non-real estate loans. These commitments are expected to be funded over the next several years and
are dependent upon the operators’ election to use the commitments.
Other Arrangements
We own interests in certain unconsolidated joint ventures as described in Note 11 to the Consolidated
Financial Statements — Investments in Joint Ventures. Our risk of loss is generally limited to our
investment in the joint venture and any outstanding loans receivable.
We also hold variable interests in certain unconsolidated entities through our loan and other
investments. See disclosures regarding our risk of loss associated with these entities with Note 10 to the
Consolidated Financial Statements — Variable Interest Entities.
We use derivative instruments to hedge interest rate and foreign currency exchange rate exposure as
discussed in Note 15 to the Consolidated Financial Statements — Derivatives and Hedging. We have seen
significant increases in fair value of our hedging instruments in 2022, primarily due to macroeconomic
factors impacting interest rates and foreign currency rates.
Cash Flow Summary
The following is a summary of our sources and uses of cash flows for the year ended December 31,
2022 as compared to the year ended December 31, 2021 (dollars in thousands):
Year Ended December 31,
2022
2021
Increase/(Decrease)
Net cash provided by (used in):
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 625,727 $ 722,136
(524,173)
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(341,117)
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
442,853
(789,447)
$ (96,409)
967,026
(448,330)
For a discussion of our consolidated cash flows for the year ended December 31, 2021 as compared to
the year ended December 31, 2020, see “Item 7 — Management’s Discussion and Analysis of Financial
Condition and Results of Operations” of our 2021 Form 10-K.
Cash, cash equivalents and restricted cash totaled $300.6 million as of December 31, 2022, an increase
of $276.2 million as compared to the balance at December 31, 2021. The following is a discussion of
changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities,
which are presented in our Consolidated Statements of Cash Flows.
Operating Activities — The decrease in net cash provided by operating activities is primarily driven by a
decrease of $144.9 million of net income, net of $155.4 million of non-cash items, primarily due to a year
over year reduction in rental income and interest income, as discussed in our material changes analysis
under Results of Operations above. The decrease was partially offset by a $48.4 million change in the net
movements of the operating assets and liabilities.
Investing Activities — The change in cash used in investing activities related primarily to (i) a
$440.5 million increase in proceeds from the sales of real estate investments driven by an attractive real
estate market in which Omega elected to sell non-strategic assets, (ii) a $391.6 million decrease in real estate
acquisitions, primarily related to the acquisition of 24 senior living facilities from Healthpeak in the first
quarter of 2021, (iii) a $75.7 million decrease in capital improvements to real estate investments and
construction in progress (including $68.0 million related to the purchase of a real estate property located in
Washington, D.C. in the third quarter of 2021 that Omega, in conjunction with Maplewood, plans to
redevelop), (iv) a $68.9 million increase in loan repayments, net of placements which is primarily driven by
higher repayments in 2022 and (v) a $10.4 million decrease in investments in unconsolidated joint ventures
49
primarily related to Second Spring II LLC, a new joint venture investment in 2021. Offsetting these changes
were: (i) a $14.5 million decrease in distributions from unconsolidated joint ventures in excess of earnings
primarily related to the Second Spring Healthcare Investments joint venture due to significant facility sales
in the first quarter of 2021 and (ii) a $4.7 million decrease in receipts from insurance proceeds.
Financing Activities — The change in cash used in financing activities was primarily related to (i) a
$265.9 million decrease in cash proceeds from the issuance of common stock in 2022 due to decreased
issuances under our DRSPP and our 2021 ATM program, as compared to the same period in 2021,
(ii) $142.3 million of repurchases of shares of common stock in 2022 as a result of implementing a
$500 million repurchase program in January 2022, (iii) a $88.7 million decrease in proceeds from other
long-term borrowings, net of repayments and (iv) a $9.6 million increase in redemptions of OP units,
partially offset by (i) a $48.6 million decrease in payment of financing related costs due to fees and
premiums paid in the first quarter of 2021 related to the early redemption of $350 million of principal of
the 4.375% senior notes due 2023, (ii) a $4.8 million decrease in dividends paid primarily resulting from
share repurchases throughout 2022 and (iii) a $4.7 million decrease in distributions to Omega OP Unit
holders.
Supplemental Guarantor Information
Parent has issued approximately $4.9 billion aggregate principal of senior notes outstanding at
December 31, 2022 that were registered under the Securities Act of 1933, as amended. The senior notes are
guaranteed by Omega OP.
The SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify
disclosure requirements related to certain registered securities, such as our senior notes. As a result of these
amendments, registrants are permitted to provide certain alternative financial and non-financial disclosures,
to the extent material, in lieu of separate financial statements for subsidiary issuers and guarantors of
registered debt securities. Accordingly, separate consolidated financial statements of Omega OP have not
been presented. Parent and Omega OP, on a combined basis, have no material assets, liabilities or
operations other than financing activities (including borrowings under the senior unsecured revolving and
term loan credit facility, Omega OP term loan and the outstanding senior notes) and their investments in
non-guarantor subsidiaries.
Omega OP is currently the sole guarantor of our senior notes. The guarantees by Omega OP of our
senior notes are full and unconditional and joint and several with respect to the payment of the principal
and premium and interest on our senior notes. The guarantees of Omega OP are senior unsecured
obligations of Omega OP that rank equal with all existing and future senior debt of Omega OP and are
senior to all subordinated debt. However, the guarantees are effectively subordinated to any secured debt of
Omega OP. As of December 31, 2022, there were no significant restrictions on the ability of Omega OP to
make distributions to Omega.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP in the U.S. requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported
amounts of revenues and expenses. Our significant accounting policies are described in Note 2 — Summary
of Significant Accounting Policies to the Consolidated Financial Statements. These policies were followed
in preparing the Consolidated Financial Statements for all periods presented. Actual results could differ
from those estimates.
50
We have identified the following accounting policies that we believe are critical accounting policies.
These critical accounting policies are those that have the most impact on the reporting of our financial
condition and those requiring significant assumptions, judgments and estimates. With respect to these
critical accounting policies, we believe the application of assumptions, judgments and estimates is
consistently applied and produces financial information that fairly presents the results of operations for all
periods presented. The following table presents information about our critical accounting policies, as well as
the material assumptions used to develop each estimate:
Nature of Critical Accounting Estimate
Assumptions/Approach Used
Revenue Recognition
income from our operating
Rental
leases
is generally recognized on a
straight-line basis over the lease term
when we have determined that the
collectibility of substantially all of the
lease payments are probable. If we
determine that it is not probable that
substantially all of the lease payments
will be collected, we account for the
revenue under the lease on a cash basis.
We assess the probability of collecting substantially all
payments under our leases based on several factors, including,
among other things, payment history of the lessee, the
financial strength of the lessee and any guarantors, historical
operations and operating trends, current and future economic
conditions and expectations of performance (which includes
known substantial doubt about an operator’s ability to
continue as a going concern). If our evaluation of these factors
indicates it is probable that we will be unable to collect
substantially all rents, we place that operator on a cash basis
and limit our rental income to the lesser of lease income on a
straight-line basis plus variable rents when they become
accruable or cash collected. As a result of placing an operator
on a cash basis, we may recognize a charge to rental income for
any contractual rent receivable, straight-line rent receivable and
lease inducements.
rent
As of December 31, 2022 and 2021, we had outstanding
$166.1 million and
straight-line
receivables of
$148.5 million, respectively, and
inducements of
lease
$6.0 million and $93.8 million, respectively. During 2022, we
wrote-off approximately $119.8 million of contractual
receivables, straight-line rent receivables and lease inducements
to rental income primarily as a result of placing nine operators
on a cash-basis. During 2021, we wrote-off approximately
$36.0 million of contractual receivables, straight-line rent
receivables and lease inducements to rental income primarily
as a result of placing six operators on a cash-basis. If we
change our conclusion regarding the probability of collecting
rent payments required by a lessee, we may recognize an
adjustment to rental income in the period we make a change to
our prior conclusion. Changes in the assessment of probability
are accounted for on a cumulative basis as if the lease had
always been accounted for based on the current determination
of the
in
increased volatility of rental income.
likelihood of collection, potentially resulting
51
in
the
estimating
Assumptions/Approach Used
Nature of Critical Accounting Estimate
Real Estate Investment Impairment
Assessing impairment of real property We evaluate our real estate investments for impairment
involves subjectivity in determining if
indicators at each reporting period, including the evaluation of
indicators of impairment are present our assets’ useful lives. The judgment regarding the existence
future of impairment indicators is based on factors such as, but not
and
limited to, market conditions, operator performance including
undiscounted cash flows. The estimated
the current payment status of contractual obligations and
future undiscounted cash flows are
generally based on the related lease
the ability to meet future contractual
expectations of
which relates to one or more properties obligations, legal structure, as well as our intent with respect to
and may include cash flows from the holding or disposing of the asset. If indicators of impairment
eventual disposition of the asset. In are present, we evaluate the carrying value of the related real
estate investments in relation to our estimate of future
some instances, there may be various
potential outcomes for a real estate undiscounted cash flows of the underlying facilities to
investment and its potential future cash determine if an impairment charge is necessary. This analysis
requires us to use judgment in determining whether indicators
flows.
undiscounted future cash flows used to of impairment exist, probabilities of potential outcomes and
to estimate the expected future undiscounted cash flows or
are
assess
impact our
estimated fair values of the facility which
probability-weighted
on
management’s best estimates as of the assessment of impairment, if any.
date of evaluation. These estimates can
the
have a significant
undiscounted cash flows.
During 2022, we recorded
impairments on real estate
properties of approximately $38.5 million on 22 facilities.
During 2021, we recorded
impairments on real estate
properties of approximately $44.7 million on 14 facilities.
recoverability
based
impact on
instances,
these
the
the
In
real
that our
Asset Acquisitions
estate The allocation of the purchase price to the related real estate
We believe
acquisitions are typically considered acquired (tangible assets and intangible assets and liabilities)
involves subjectivity as such allocations are based on a relative
asset acquisitions. The assets acquired
fair value analysis. In determining the fair values that drive
and liabilities assumed are recognized
such analysis, we estimate the fair value of each component of
by allocating the cost of the acquisition,
land,
the real estate acquired which generally
including
the
transaction costs,
individual assets acquired and liabilities buildings and site improvements, furniture and equipment, and
the above or below market component of in-place leases.
assumed on a relative fair value basis.
Tangible assets consist primarily of Significant assumptions used to determine such fair values
include comparable land sales, capitalization rates, discount
land, building and site improvements
rates, market rental rates and property operating data, all of
and
and
equipment.
and which can be impacted by expectations about future market or
Identifiable
intangible
economic conditions. Our estimates of the values of these
liabilities primarily consist of the above
components affect
or below market component of in-place
the amount of depreciation and
amortization we record over the estimated useful life of the
leases.
property or the term of the lease.
furniture
includes
assets
to
During 2022 and 2021, we acquired real estate assets of
approximately $225.2 million and $604.0 million, respectively.
These transactions were accounted for as asset acquisitions
and the purchase price of each was allocated based on the
relative fair values of the assets acquired and liabilities
assumed.
52
Nature of Critical Accounting Estimate
Allowance for Credit Losses on Real
Estate Loans, Non-real Estate Loans
and Direct Financing Leases
For purposes of determining our
allowance for credit loss, we pool financial
assets
risk
have
characteristics. We aggregate our financial
assets by financial instrument type and by
internal risk rating. Our internal ratings
range between 1 and 7. An internal rating
of 1 reflects the lowest likelihood of loss
and a 7 reflects the highest likelihood of
loss.
similar
that
We have a limited history of incurred
losses and consequently have elected to
employ external data to perform our
expected credit loss calculation. We utilize
a probability of default (“PD”) and loss
given default (“LGD”) methodology.
Periodically, the Company may identify
an individual loan for impairment. When
we identify a loan impairment, the loan is
written down to the present value of the
expected future cash flows. In cases where
expected future cash flows are not readily
determinable, the loan is written down to
the fair value of the underlying collateral.
We may base our valuation on a loan’s
observable market price, if any, or the fair
value of collateral, net of sales costs, if the
repayment of the loan is expected to be
provided solely by
the
collateral.
the sale of
Assumptions/Approach Used
We assess our internal credit ratings on a quarterly basis. Our
internal credit ratings consider several factors including the
collateral and/or security, the performance of borrowers
underlying facilities, if applicable, available credit support (e.g.,
guarantees), borrowings with third parties, and other ancillary
business ventures and real estate operations of the borrower.
Our model’s historic inputs consider PD and LGD data for
residential care facilities published by the Federal Housing
Administration (“FHA”) along with Standards & Poor’s
one-year global corporate default rates. Our historical loss
rates revert to historical averages after 36 periods. Our model’s
current conditions and supportable forecasts consider internal
credit ratings, current and projected U.S. unemployment rates
published by the U.S. Bureau of Labor Statistics and the
Federal Reserve Bank of St. Louis and the weighted average
life to maturity of the underlying financial asset. During 2022
and 2021, we recorded a provision for credit losses of
approximately $68.7 million and $77.7 million, respectively. As
of December 31, 2022 and 2021, we had a total allowance for
credit loss of $188.4 million and $144.5 million, respectively. A
10% increase or decrease in the FHA default rates as of
December 31, 2022 would result in an additional provision or
recovery for credit losses of $10.1 million or $9.3 million,
respectively. If the weighted average yield to maturity on our
portfolio increases or decreases by 10%, this will result in an
additional provision or recovery
losses of
$4.6 million or $5.4 million, respectively.
for credit
Item 7A — Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including the potential loss arising from adverse changes in
interest rates and foreign currency exchange rates. We seek to mitigate the effects of fluctuations in interest
rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent
possible. We also use financial derivative instruments to hedge our interest rate exposure as well as our
foreign currency exchange rate exposure. We do not enter into our market risk sensitive financial
instruments and related derivative positions (if any) for trading or speculative purposes. The following
disclosures discuss potential fluctuations in interest rates and foreign currency exchange rates and are
subjective in nature and are dependent on a number of important assumptions, including estimates of
future cash flows, risks, discount rates and relevant comparable market information associated with each
financial instrument. Readers are cautioned that many of the statements contained in these paragraphs are
forward-looking and should be read
in conjunction with our disclosures under the heading
“Forward-Looking Statements” set forth above. The use of different market assumptions and estimation
methodologies may have a material effect on the reported estimated fair value amounts. Accordingly, the
estimates presented below are not necessarily indicative of the amounts we would realize in a current
market exchange.
53
Interest Rate Risk
We borrow debt at a combination of variable and fixed rates. Movements in interest rates on our
variable rate borrowings would change our future earnings and cash flows but not significantly affect the
fair value of those instruments. During the year ended December 31, 2022, we incurred interest expense of
$4.1 million related to variable rate borrowings outstanding under our Revolving Credit Facility, OP Term
Loan and two other term loans. Assuming no changes in outstanding balances, a 1% increase in interest
rates would not have significantly impacted the annual interest expense on our Revolving Credit Facility,
OP Term Loan and two other term loans.
A change in interest rates will not affect the interest expense associated with our long-term fixed rate
borrowings but will affect the fair value of our long-term fixed rate borrowings. The estimated fair value of
our total long-term fixed-rate borrowings at December 31, 2022 was approximately $4.7 billion. A
one percent increase in interest rates would result in a decrease in the fair value of long-term fixed-rate
borrowings by approximately $212.0 million at December 31, 2022.
At December 31, 2022, we have $400 million of forward interest rate swaps outstanding that are
recorded at fair value in other assets on our Consolidated Balance Sheets. The forward-starting swaps hedge
the interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt.
Foreign Currency Risk
We are exposed to foreign currency risk through our investments in the U.K. Increases or decreases in
the value of the British Pound Sterling relative to the U.S. Dollar impact the amount of net income we earn
from our investments in the U.K. Based solely on our results for the year ended December 31, 2022, if the
applicable exchange rate was to increase or decrease by 10%, our net income from our consolidated
U.K.-based investments would increase or decrease, as applicable by $1.4 million.
To hedge a portion of our net investments in the U.K., at December 31, 2022, we have six foreign
currency forward contracts with notional amounts totaling £250.0 million, four of which mature on
March 8, 2024 and two of which mature on May 21, 2029.
Item 8 — Financial Statements and Supplementary Data
The consolidated financial statements listed under Item 15 — Exhibits and Financial Statement
Schedules and the report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on such
financial statements are filed as part of this report beginning on page F-1. There have been no retrospective
changes to our Consolidated Statements of Operations for any of the quarters within the two most recent
fiscal years that are individually or in the aggregate material.
Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A — Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of our Form 10-K as of and for the year ended December 31, 2022,
management evaluated the effectiveness of the design and operation of disclosure controls and procedures
of the Company as of December 31, 2022. Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer of the Company concluded that the disclosure controls and procedures of the Company
were effective at the reasonable assurance level as of December 31, 2022.
54
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. The Company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles and that receipts
and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that could have a material effect on the
financial statements.
All internal control systems, no matter how well designed, have inherent limitations and can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
In connection with the preparation of this Form 10-K, our management assessed the effectiveness of
the Company’s internal control over financial reporting as of December 31, 2022. In making that
assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (“2013 framework”).
Based on management’s assessment, management believes that, as of December 31, 2022, the Company’s
internal control over financial reporting was effective based on those criteria.
The independent registered public accounting firm’s attestation reports regarding the Company’s
internal control over financial reporting is included in the 2022 financial statements under the caption
entitled Report of Independent Registered Public Accounting Firm and is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the quarter
ended December 31, 2022 identified in connection with the evaluation of their disclosure controls and
procedures described above that have materially affected, or are reasonably likely to materially affect, its
internal control over financial reporting.
Item 9B — Other Information
None.
Item 9C — Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
55
PART III
Item 10 — Directors, Executive Officers of the Registrant and Corporate Governance
The information required by this item is incorporated herein by reference to our Company’s definitive
proxy statement for the 2023 Annual Meeting of Stockholders, to be filed with the SEC pursuant to
Regulation 14A.
For information regarding executive officers of our Company, see Item 1 — Business — Information
about our Executive Officers.
Code of Business Conduct and Ethics
We have adopted a written Code of Business Conduct and Ethics (“Code of Ethics”) that applies to all
of our directors and employees, including our chief executive officer, chief financial officer, chief
accounting officer and controller. A copy of our Code of Ethics is available on our website at
www.omegahealthcare.com. Any amendment to our Code of Ethics or any waiver of our Code of Ethics
that is required to be disclosed will be provided on our website at www.omegahealthcare.com promptly
following the date of such amendment or waiver.
Item 11 — Executive Compensation
The information required by this item is incorporated herein by reference to our Company’s definitive
proxy statement for the 2023 Annual Meeting of Stockholders, to be filed with the SEC pursuant to
Regulation 14A.
Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item is incorporated herein by reference to our Company’s definitive
proxy statement for the 2023 Annual Meeting of Stockholders, to be filed with the SEC pursuant to
Regulation 14A, except as set forth below.
The following table provides information about shares available for future issuance under our equity
compensation plans as of December 31, 2022:
Equity Compensation Plan Information
Plan category
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights(1)
(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights(2)
(c)
Number of securities
remaining available for
future issuance under
equity compensation plans
excluding securities
reflected in column (a)(3)
Equity compensation plans approved by
security holders . . . . . . . . . . . . . . . . . .
4,145,974
Equity compensation plans not approved
by security holders . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .
—
4,145,974
$ —
—
$ —
2,093,354
—
2,093,354
(1) Reflects (i) 353,185 time-based restricted stock units (“RSUs”) and profit interest units (“PIUs”), (ii) 3,145,918 shares related to
performance-based RSUs (“PRSUs”) and performance-based PIUs that could be issued if certain performance conditions are
achieved and (iii) 646,871 shares in respect of outstanding deferred stock units.
(2) No exercise price is payable with respect to the RSUs and PRSUs.
(3) Reflects (i) 1,621,463 shares of common stock under our 2018 Stock Incentive Plan and (ii) 471,891 shares of common stock
under the Omega Healthcare Investors, Inc. Employee Stock Purchase Plan.
56
Item 13 — Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to our Company’s definitive
proxy statement for the 2023 Annual Meeting of Stockholders, to be filed with the SEC pursuant to
Regulation 14A.
Item 14 — Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to our Company’s definitive
proxy statement for the 2023 Annual Meeting of Stockholders, to be filed with the SEC pursuant to
Regulation 14A.
57
PART IV
Item 15 — Exhibits and Financial Statement Schedules
(a)(1) Listing of Consolidated Financial Statements
Title of Document
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42) . . . . . . .
Consolidated Balance Sheets as of December 31, 2022 and 2021 . . . . . . . . . . . . . .
Consolidated Statements of Operations for the three years ended December 31,
Page
Number
F-1
F-4
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Comprehensive Income for the three years ended
December 31, 2022
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity for the three years ended December 31, 2022 . .
Consolidated Statements of Cash Flows for the three years ended December 31,
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements
F-6
F-7
F-8
F-9
(a)(2) Financial Statement Schedules. The following consolidated financial statement schedules are
included herein:
Schedule III — Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . .
Schedule IV — Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-72
F-74
All other schedules for which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission are not required under the related instructions or are inapplicable or
have been omitted because sufficient information has been included in the notes to the Consolidated
Financial Statements.
(a)(3) Exhibits — See “Index to Exhibits” beginning on Page I-1 of this report.
Item 16 — Form 10-K Summary
None.
58
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Omega Healthcare Investors, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Omega Healthcare Investors, Inc. (the
Company) as of December 31, 2022 and 2021, the related consolidated statements of operations,
comprehensive income, changes in equity and cash flows for each of the three years in the period ended
December 31, 2022, and the related notes and financial statement schedules listed in the Index at
Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the
Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company’s internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report
dated February 14, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the
financial statements that was communicated or required to be communicated to the audit committee and
that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of the critical audit matter
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
F-1
Description of the Matter
Collectibility of future lease payments
During 2022, the Company recognized rental income of $750.2 million
and recorded straight-line rent and lease inducement receivables of
$172.1 million at December 31, 2022. As described in Note 2 to the
consolidated financial statements, the timing and pattern of rental
income recognition for operating leases is affected by the Company’s
determination as to whether the collectibility of substantially all lease
payments is probable.
involved
judgment
Auditing the Company’s accounting for rental income is complex due to
in the Company’s determination of the
the
collectibility of future lease payments. The determination involves
consideration of the lessee’s payment history, an assessment of the
financial strength of the lessee and any guarantors, where applicable,
historical operations and operating trends, current and future economic
conditions, and expectations of performance (which includes known
substantial doubt about an operator’s ability to continue as a going
concern).
How We Addressed the Matter We obtained an understanding, evaluated the design and tested the
operating effectiveness of the Company’s controls over the recognition
in Our Audit
of rental income, including controls over management’s assessment of
the collectibility of future lease payments. For example, we tested
controls over management’s consideration of the factors used in
assessing collectibility and controls over the completeness and accuracy
of the data used in management’s analyses.
To test the rental income recognized, we performed audit procedures
that included, among others, evaluating the collectibility of future lease
payments. For example, we assessed the lessee’s payment history,
historical operating results of the properties, and factors contributing to
the financial strength of the lessee, including current and future
economic conditions, as well as management’s assessment of the
expectation of performance of a sample of operators. We also
considered whether other information obtained throughout the course
of our audit procedures corroborated or contradicted management’s
analysis. In addition, we tested the completeness and accuracy of the
data that was used in management’s analyses.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1992.
Baltimore, Maryland
February 14, 2023
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of Omega Healthcare Investors, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Omega Healthcare Investors, Inc.’s internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). In our opinion, Omega Healthcare Investors, Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of Omega Healthcare Investors, Inc. as of
December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income,
changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the
related notes and financial statement schedules listed in the Index at Item 15(a)(2) and our report dated
February 14, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit. We
are a public accounting firm registered with the PCAOB and are required to be independent with respect to
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Baltimore, Maryland
February 14, 2023
F-3
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
Real estate assets
ASSETS
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate assets – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in direct financing leases – net . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate loans receivable – net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total real estate investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual receivables – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables and lease inducements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND EQUITY
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured borrowings
Senior notes and other unsecured borrowings – net
. . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments
Equity:
Preferred stock $1.00 par value authorized – 20,000 shares, issued and
December 31,
2022
2021
$ 7,347,853 $ 7,515,658
919,180
519,845
74,062
9,028,745
(2,181,528)
6,847,217
10,873
1,180,786
194,687
203,025
8,436,588
124,184
8,560,772
20,534
3,877
11,259
251,815
651,417
138,804
$ 9,405,163 $ 9,638,478
923,605
499,902
88,904
8,860,264
(2,322,773)
6,537,491
8,503
1,042,731
178,920
9,456
7,777,101
225,281
8,002,382
297,103
3,541
8,228
177,798
643,151
272,960
$
19,246 $
366,596
4,900,992
315,047
5,601,881
—
362,081
4,891,455
276,716
5,530,252
outstanding – none . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock $0.10 par value authorized – 350,000 shares, issued and
outstanding – 234,252 shares as of December 31, 2022 and 239,061 shares as
of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity
23,425
6,314,203
3,438,401
(6,186,986)
20,325
3,609,368
193,914
3,803,282
23,906
6,427,566
3,011,474
(5,553,908)
(2,200)
3,906,838
201,388
4,108,226
$ 9,405,163 $ 9,638,478
See accompanying notes.
F-4
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31,
2022
2021
2020
Revenues
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from direct financing leases . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues
Expenses
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition, merger and transition related costs . . . . . . . . . . . . . .
Impairment on real estate properties . . . . . . . . . . . . . . . . . . . . . .
Recovery on direct financing leases . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense)
Other expense – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on assets sold – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense and income from unconsolidated joint
ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Income from unconsolidated joint ventures
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interest . . . . . . . . . . . . . .
Net income available to common stockholders . . . . . . . . . . . . . . . . . .
Earnings per common share available to common stockholders:
Basic:
$750,208 $ 923,677 $753,427
1,033
134,286
3,635
892,381
1,029
136,382
1,721
1,062,809
1,023
123,919
3,094
878,244
332,407
69,397
15,500
42,006
38,451
—
68,663
233,244
799,668
(1,997)
(389)
359,951
357,565
342,014
64,628
12,260
1,814
44,658
(717)
77,733
234,604
776,994
(581)
(30,763)
161,609
130,265
329,924
59,889
12,316
2,018
72,494
(3,079)
37,997
223,389
734,948
(879)
(13,340)
19,113
4,894
436,141
(4,561)
7,261
438,841
(11,914)
162,327
(4,925)
6,143
163,545
(4,218)
$426,927 $ 416,739 $159,327
416,080
(3,840)
16,062
428,302
(11,563)
Net income available to common stockholders . . . . . . . . . . . . . . .
$
1.81 $
1.76 $
0.70
Diluted:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.80 $
1.75 $
0.70
See accompanying notes.
F-5
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year Ended December 31,
2022
2021
2020
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $438,841 $428,302 $163,545
Other comprehensive income (loss):
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interest . . . . . .
7,762
20,087
27,849
191,394
(4,977)
Comprehensive income attributable to common stockholders . . . . . . . . . . $449,452 $427,307 $186,417
(32,770)
55,949
23,179
462,020
(12,568)
(1,842)
12,689
10,847
439,149
(11,842)
See accompanying notes.
F-6
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except per share amounts)
Common Additional Cumulative
Paid-in
Capital
Stock
Par Value
Net
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Cumulative
Dividends
Noncontrolling
Interest
Total
Equity
Balance at December 31, 2019
. . . . . . . . . . $22,663 $5,992,733 $2,463,436 $(4,303,546)
$(39,858)
$4,135,428
$201,166
$4,336,594
Cumulative effect of accounting change (see
Note 2) . . . . . . . . . . . . . . . . . . . .
—
—
(28,028)
—
—
(28,028)
(757)
(28,785)
Balance at January 1, 2020
. . . . . . . . . . . .
22,663
5,992,733
2,435,408
(4,303,546)
(39,858)
4,107,400
200,409
4,307,809
Stock related compensation . . . . . . . . . .
Issuance of common stock . . . . . . . . . . .
—
452
19,064
151,409
Common dividends declared ($2.68 per
share) . . . . . . . . . . . . . . . . . . . . .
Vesting/exercising of OP units . . . . . . . . .
Conversion and redemption of Omega OP
Units to common stock . . . . . . . . . . .
Omega OP Units distributions . . . . . . . . .
Other comprehensive income
. . . . . . . . .
Net income
. . . . . . . . . . . . . . . . . . .
—
—
4
—
—
—
—
(11,551)
1,232
—
—
—
—
—
—
—
—
—
—
159,327
—
—
(612,551)
—
—
—
—
—
—
—
—
—
—
—
27,090
—
19,064
151,861
(612,551)
(11,551)
1,236
—
27,090
159,327
—
—
—
11,551
(1,236)
(20,970)
759
4,218
19,064
151,861
(612,551)
—
—
(20,970)
27,849
163,545
Balance at December 31, 2020
. . . . . . . . . .
23,119
6,152,887
2,594,735
(4,916,097)
(12,768)
3,841,876
194,731
4,036,607
Stock related compensation . . . . . . . . . .
Issuance of common stock . . . . . . . . . . .
—
783
21,578
273,228
Common dividends declared ($2.68 per
share) . . . . . . . . . . . . . . . . . . . . .
Vesting/exercising of OP units . . . . . . . . .
Conversion and redemption of Omega OP
Units to common stock . . . . . . . . . . .
Omega OP Units distributions . . . . . . . . .
Other comprehensive income
. . . . . . . . .
Net income
. . . . . . . . . . . . . . . . . . .
—
—
4
—
—
—
—
(21,623)
1,496
—
—
—
—
—
—
—
—
—
—
416,739
—
—
(637,811)
—
—
—
—
—
—
—
—
—
—
—
10,568
—
21,578
274,011
(637,811)
(21,623)
1,500
—
10,568
416,739
—
—
—
21,623
(1,579)
(25,229)
279
11,563
21,578
274,011
(637,811)
—
(79)
(25,229)
10,847
428,302
Balance at December 31, 2021
. . . . . . . . . .
23,906
6,427,566
3,011,474
(5,553,908)
(2,200)
3,906,838
201,388
4,108,226
Stock related compensation . . . . . . . . . .
Issuance of common stock . . . . . . . . . . .
—
40
27,487
8,072
Repurchase of common stock . . . . . . . . .
(521)
(141,746)
Common dividends declared ($2.68 per
share) . . . . . . . . . . . . . . . . . . . . .
Vesting/exercising of OP units . . . . . . . . .
Conversion and redemption of Omega OP
Units to common stock . . . . . . . . . . .
Omega OP Units distributions . . . . . . . . .
Capital contributions from noncontrolling
holder in consolidated JV . . . . . . . . . .
Other comprehensive income
. . . . . . . . .
Net income
. . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
—
—
(7,176)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
426,927
—
—
—
(633,078)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
27,487
8,112
(142,267)
(633,078)
(7,176)
—
—
—
22,525
—
22,525
426,927
—
—
—
—
27,487
8,112
(142,267)
(633,078)
7,176
—
(9,704)
(20,498)
(9,704)
(20,498)
2,984
654
11,914
2,984
23,179
438,841
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
See accompanying notes.
F-7
OMEGA HEALTHCARE INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2021
2020
2022
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to reconcile net income to net cash provided by operating activities:
$ 438,841
$ 428,302
$ 163,545
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment on real estate properties
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recovery on direct financing leases
Provision for rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing costs and loss on debt extinguishment
. . . . . .
Accretion of direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on assets sold – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired in-place leases – net . . . . . . . . . . . . . . . . . . . . . .
Effective yield payable (receivable) on mortgage notes . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid-in-kind
Income from unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . . .
Change in operating assets and liabilities – net:
Contractual receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Straight-line rent receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease inducements
Other operating assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of a business, net of cash acquired . . . . . . . . . . . . . . . . . . . . . .
Acquisition of real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition deposit – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from sale of real estate investments . . . . . . . . . . . . . . . . . . . . .
Investments in construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of direct financing lease and related trust . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Placement of loan principal
Collection of loan principal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated joint ventures . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
Distributions from unconsolidated joint ventures in excess of earnings
Capital improvements to real estate investments
. . . . . . . . . . . . . . . . . . . . .
Receipts from insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings
Payments of long-term borrowings
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of financing related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . .
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling members’ contributions to consolidated joint venture . . . . . . . . .
Redemption of Omega OP Units
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to Omega OP Unit Holders . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation on cash, cash equivalents and restricted cash . . . . .
Increase (decrease) in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at end of period
332,407
38,451
—
124,758
68,663
13,337
83
27,302
(359,951)
(5,662)
2,050
(9,423)
455
3,031
(61,044)
5,957
6,472
625,727
—
(229,987)
—
759,047
(17,130)
—
(371,987)
345,665
(113)
3,328
(47,221)
1,251
442,853
342,014
44,658
(717)
38,806
77,733
43,051
55
21,415
(161,609)
(9,516)
1,526
(7,496)
(2,060)
(23,169)
(52,206)
(13,733)
(4,918)
722,136
—
(615,873)
(5,730)
318,529
(95,064)
717
(251,457)
156,276
(10,484)
17,868
(44,948)
5,993
(524,173)
329,924
75,972
(3,079)
146,608
37,997
11,608
30
18,822
(19,113)
(14,187)
(719)
(7,718)
(1,315)
5,709
(28,968)
(22,443)
15,583
708,256
(5,058)
(105,663)
(2,500)
180,851
(75,111)
15,414
(230,368)
159,733
(2,471)
6,291
(31,072)
897
(89,057)
597,403
(589,292)
(389)
8,112
(142,267)
(632,893)
81
(9,704)
(20,498)
(789,447)
(2,900)
276,233
24,411
$ 300,644
2,275,128
(2,178,311)
(48,989)
274,011
—
(637,648)
—
(79)
(25,229)
(341,117)
7
(143,147)
167,558
24,411
$
1,852,209
(1,838,155)
(18,183)
151,861
—
(612,310)
—
—
(20,970)
(485,548)
527
134,178
33,380
$ 167,558
See accompanying notes.
F-8
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION
Omega Healthcare Investors, Inc. (“Parent”), is a Maryland corporation that, together with its
in
consolidated subsidiaries (collectively, “Omega”, the “Company”, “we”, “our”, “us”)
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 (“MOBs”). Our core portfolio consists of our 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.
invests
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 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 December 31, 2022, Parent owned
approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP
Units”), and other investors owned approximately 3% of the outstanding Omega OP Units.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles (“GAAP”) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Consolidation
Omega’s consolidated financial statements include the accounts of (i) Parent, (ii) all direct and indirect
wholly-owned subsidiaries of Omega, including Omega OP, (iii) other entities in which Omega or Omega
OP has a majority voting interest and control and (iv) variable interest entities (“VIEs”) of which Omega is
the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation,
and Omega’s net earnings are reduced by the portion of net earnings attributable to noncontrolling
interests.
GAAP requires us to identify entities for which control is achieved through means other than voting
rights and to determine which business enterprise, if any, is the primary beneficiary of VIEs. A VIE is
broadly defined as an entity with one or more of the following characteristics: (a) the total equity
investment at risk is insufficient to finance the entity’s activities without additional subordinated financial
support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions
about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses
of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors
have voting rights that are not proportional to their economic interests, and substantially all of the entity’s
activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting
rights. We may change our original assessment of a VIE upon subsequent events such as the modification
of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at
risk and the disposition of all or a portion of an interest held by the primary beneficiary.
F-9
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our variable interests in VIEs may be in the form of equity ownership, leases, guarantees and/or loans
with our operators. We analyze our agreements and investments to determine whether our operators or
unconsolidated joint ventures are VIEs and, if so, whether we are the primary beneficiary.
We consolidate a VIE when we determine that we are its primary beneficiary. We identify the primary
beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that
most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the
right to receive benefits of the VIE that could be significant to the entity. Factors considered in determining
whether we are the primary beneficiary of an entity include: (i) our voting rights, if any; (ii) our
involvement in day-to-day capital and operating decisions; (iii) our risk and reward sharing; (iv) the
financial condition of the operator or joint venture and (iv) our representation on the VIE’s board of
directors. We perform this analysis on an ongoing basis. As of December 31, 2022, we have one joint
venture that is a consolidated VIE as we have concluded that we are the primary beneficiary through our
equity investment in the entity. We also have consolidated VIEs related to the Exchange Accommodation
Titleholders (“EATs”) discussed in Note 3 — Real Estate Asset Acquisitions and Development. As of
December 31, 2021, we did not have any VIEs that we consolidated.
Revenue Recognition
Rental Income
Rental income from operating leases is recognized on a straight-line basis, inclusive of fixed annual
escalators and lease inducements, over the lease term when we have determined that the collectibility of
substantially all of the lease payments is probable. Certain of our operating leases contain provisions for an
increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer
Price Index). We do not include in our measurement of our lease receivables these variable increases until
the specific events that trigger the variable payments have occurred. Our leased real estate properties are
leased under provisions of single or master leases with initial terms typically ranging from 5 to 15 years.
Some of our leases have options to extend, terminate or purchase the facilities, which are considered when
determining the lease term.
We assess the probability of collecting substantially all payments due under our leases on several
factors, including, among other things, payment history, the financial strength of the lessee and any
guarantors, as applicable, historical operations and operating trends, current and future economic
conditions, and expectations of performance (which includes known substantial doubt about an operator’s
ability to continue as a going concern). If our evaluation of these factors indicates it is probable that we will
be unable to collect substantially all rents, we recognize a charge to rental income to write off straight-line
rent receivables and limit our rental income to the lesser of lease income on a straight-line basis plus
variable rents when they become accruable or cash collected. Provisions for uncollectible lease payments are
recognized as a direct reduction to rental income. If we change our conclusion regarding the probability of
collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the
period we make a change to our prior conclusion, potentially resulting in increased volatility of rental
income.
Under the terms of our leases, the lessee is responsible for all maintenance, repairs, taxes and insurance
on the leased properties. Certain of our operating leases require the operators to reimburse us for property
taxes and other expenditures that are not considered components of the lease and therefore no
consideration is allocated to them as they do not result in the transfer of a good or service to the operators.
We have determined that all of our leases qualify for the practical expedient, under Accounting Standards
Codification (“ASC”) 842, Leases (“Topic 842”), to not separate the lease and non-lease components
because (i) the lease components are operating leases and (ii) the timing and pattern of recognition of the
non-lease components are the same as the lease components.
Certain operators are obligated to pay directly their obligations under their leases for real estate taxes,
insurance and certain other expenses. These obligations, which have been assumed by the tenants under the
terms of their respective leases, are not reflected in our consolidated financial statements. To the extent any
F-10
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
tenant responsible for these obligations under their respective lease defaults on its lease or if it is deemed
probable that the tenant will fail to pay for such costs, we would record a liability for such obligation.
We have elected to exclude sales and other similar taxes from the measurement of lease revenue and
expense.
Loan Interest Income
Interest income is recognized as earned over the term of the related real estate and non-real estate loans
receivable. Interest income is recorded on an accrual basis to the extent that such amounts are expected to
be collected using the effective interest method. In applying the effective interest method, the effective yield
on a loan is determined based on its contractual payment terms, adjusted for prepayment terms.
Direct Financing Lease Income
As of December 31, 2022, we have one lease for a facility that is classified as a direct financing lease.
For leases accounted for as direct financing leases, we record the present value of the future minimum lease
payments (utilizing a constant interest rate over the term of the lease agreement) as a receivable and record
interest income based on the contractual terms of the lease agreement. Costs related to originating direct
financing leases are deferred and amortized on a straight-line basis as a reduction to income from direct
financing leases over the term of the direct financing leases.
Real Estate Sales
We recognize gains on the disposition of real estate when the recognition criteria have been met,
generally at the time the risks and rewards and title have transferred, and we no longer have substantial
continuing involvement with the real estate sold. Gains on the sale of real estate are recognized pursuant to
provisions under Accounting Standards Codification (“ASC”) 610-20, Gains and Losses from the
Derecognition of Nonfinancial Assets. Under ASC 610-20, we determine whether the transaction is a sale
to a customer or non-customer. As a REIT, we do not sell real estate within the ordinary course of our
business and therefore, expect that our sale transactions will not be contracts with customers. ASC 610-20
refers to the revenue recognition principles under ASC 606, Revenue from Contracts with Customers.
Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds
the asset and the arrangement meets the criteria to be accounted for as a contract, we will dispose of the
asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers
to the buyer. If we determine a sale has not occurred under ASC 610-20, we continue to record the asset on
the Consolidated Balance Sheets and related depreciation expense on the Consolidated Statements of
Operations.
Fair Value Measurement
The Company measures and discloses the fair value of nonfinancial and financial assets and liabilities
utilizing a hierarchy of valuation techniques based on whether the inputs to a fair value measurement are
considered to be observable or unobservable in a marketplace. Observable inputs reflect market data
obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.
This hierarchy requires the use of observable market data when available. These inputs have created the
following fair value hierarchy:
•
•
•
Level 1 — quoted prices for identical instruments in active markets;
Level 2 — quoted prices for similar instruments in active markets; quoted prices for identical or
similar instruments in markets that are not active; and model-derived valuations in which
significant inputs and significant value drivers are observable in active markets; and
Level 3 — fair value measurements derived from valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
F-11
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company measures fair value using a set of standardized procedures that are outlined herein for
all assets and liabilities which are required to be measured at fair value. When available, the Company
utilizes quoted market prices from an independent third-party source to determine fair value and classifies
such items in Level 1. In some instances where a market price is available, but the instrument is in an
inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing
estimate and classifies such items in Level 2.
If quoted market prices or inputs are not available, fair value measurements are based upon valuation
models that utilize current market or independently sourced market inputs, such as interest rates, option
volatilities, credit spreads and/or market capitalization rates. Items valued using such internally-generated
valuation techniques are classified according to the lowest level input that is significant to the fair value
measurement. As a result, these items could be classified in either Level 2 or Level 3 even though there may
be some significant inputs that are readily observable. Internal fair value models and techniques used by the
Company include discounted cash flow and Monte Carlo valuation models.
Risks and Uncertainties including COVID-19
The Company is subject to certain risks and uncertainties affecting the healthcare industry, including
those stemming from the novel coronavirus (“COVID-19”) global pandemic, which has disproportionately
impacted the senior care sector, as well as those stemming from healthcare legislation and changing
regulation by federal, state and local governments. Additionally, we are subject to risks and uncertainties as
a result of changes affecting operators of nursing home facilities due to the actions of governmental
agencies and insurers to limit the rising cost of healthcare services.
Real Estate Acquisitions
Upon acquisition of real estate properties, we evaluate the acquisition to determine if it is a business
combination or an asset acquisition. Our real estate acquisitions are generally accounted for as asset
acquisitions as substantially all of the fair value of the gross assets acquired is concentrated in a single
identifiable asset or group of similar identifiable assets.
If the acquisition is determined to be an asset acquisition, the Company records the purchase price and
other related costs incurred to the acquired tangible assets and identified intangible assets and liabilities on
a relative fair value basis. In addition, costs incurred for asset acquisitions including transaction costs, are
capitalized.
If the acquisition is determined to be a business combination, we record the purchase of properties to
net tangible and identified intangible assets acquired and liabilities assumed at fair value. Goodwill is
measured as the excess of the fair value of the consideration transferred over the fair value of the
identifiable net assets. Transaction costs are expensed as incurred as part of a business combination.
In making estimates of fair value for purposes of recording asset acquisitions and business
combinations, we utilize a number of sources, including independent appraisals that may be obtained in
connection with the acquisition or financing of the respective property and other market data. The
Company determines the fair value of acquired assets and liabilities as follows:
•
•
•
Land is determined based on third-party appraisals which typically include market comparables.
Buildings and site improvements acquired are valued using a combination of discounted cash flow
projections that assume certain future revenues and costs and consider capitalization and discount
rates using current market conditions as well as the residual approach.
Furniture and fixtures are determined based on third-party appraisals which typically utilize a
replacement cost approach.
• Mortgages and other investments are valued using a discounted cash flow analysis, using interest
rates being offered for similar loans to borrowers with similar credit ratings.
F-12
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•
•
Investments in joint ventures are valued based on the fair value of the joint ventures’ assets and
liabilities. Differences, if any, between the Company’s basis and the joint venture’s basis are
generally amortized over the lives of the related assets and liabilities, and such amortization is
included in the Company’s share of earnings (losses) of the joint venture.
Intangible assets and liabilities acquired are valued using a combination of discounted cash flow
projections as well as other valuation techniques based on current market conditions for the
intangible asset or liability being acquired. When evaluating below market leases we consider
extension options controlled by the lessee in our evaluation.
• Other assets acquired and liabilities assumed are typically valued at stated amounts, which
approximate fair value on the date of the acquisition.
• Assumed debt balances are valued by discounting the remaining contractual cash flows using a
current market rate of interest.
• Noncontrolling interests are valued using a stock price on the acquisition date.
Real Estate Properties
Real estate properties are carried at initial recorded value less accumulated depreciation. The costs of
significant improvements, renovations and replacements, including interest are capitalized. Our interest
expense reflected in the Consolidated Statements of Operations has been reduced by the amounts
capitalized. For the years ended December 31, 2022, 2021 and 2020, we capitalized $3.2 million, $1.5 million
and $10.0 million, respectively, of interest to our projects under development. In addition, we capitalize
leasehold improvements when certain criteria are met, including when we supervise construction and will
own the improvement. Expenditures for maintenance and repairs are expensed as they are incurred.
Depreciation is computed on a straight-line basis over the estimated useful lives ranging from 20 to
40 years for buildings, eight to 15 years for site improvements, and three to ten years for furniture and
equipment. Leasehold interests are amortized over the shorter of the estimated useful life or term of the
lease.
Management evaluates our real estate properties for impairment indicators at each reporting period,
including the evaluation of our assets’ useful lives. The judgment regarding the existence of impairment
indicators is based on factors such as, but not limited to, market conditions, operator performance
including the current payment status of contractual obligations and expectations of the ability to meet
future contractual obligations, legal structure, as well as our intent with respect to holding or disposing of
the asset. If indicators of impairment are present, management evaluates the carrying value of the related
real estate investments in relation to management’s estimate of future undiscounted cash flows of the
underlying facilities. The estimated future undiscounted cash flows are generally based on the related lease
which relates to one or more properties and may include cash flows from the eventual disposition of the
asset. In some instances, there may be various potential outcomes for a real estate investment and its
potential future cash flows. In these instances, the undiscounted future cash flows used to assess the
recoverability of the assets are probability-weighted based on management’s best estimates as of the date of
evaluation. Impairment losses related to long-lived assets are recognized when expected future undiscounted
cash flows based on our intended use of the property are determined to be less than the carrying values of
the assets. An adjustment is made to the net carrying value of the real estate investments for the excess of
carrying value over fair value. The fair value of the real estate investment is determined based on current
market conditions and considers matters such as rental rates and occupancies for comparable properties,
recent sales data for comparable properties, and, where applicable, contracts or the results of negotiations
with purchasers or prospective purchasers. Additionally, our evaluation of fair value may consider valuing
the property as a nursing home or other healthcare facility as well as alternative uses. All impairments are
taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value
assigned to the asset. Management’s impairment evaluation process, and when applicable, impairment
F-13
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
calculations involve estimation of the future cash flows from management’s intended use of the property as
well as the fair value of the property. Changes in the facts and circumstances that drive management’s
assumptions may result in an impairment to our assets in a future period that could be material to our
results of operations.
Assets Held for Sale
We consider properties to be assets held for sale when (1) management commits to a plan to sell the
property; (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the
property is available for immediate sale in its present condition; (4) actions required to complete the sale of
the property have been initiated; (5) sale of the property is probable and we expect the completed sale will
occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable
given our estimate of current market value. Upon designation of a property as an asset held for sale, we
record the property’s value at the lower of its carrying value or its estimated fair value, less estimated costs
to sell, and we cease depreciation.
Lessee Accounting
Omega leases real estate (corporate headquarters and certain other facilities), office equipment and is
party to certain ground leases on our owned facilities. We determine if an arrangement is or contains a lease
at inception. Leases are classified as either finance or operating at inception of the lease. Short-term leases,
defined as leases with an initial term of 12 months or less that do not contain a purchase option, are not
recorded on the balance sheet. Lease expense for short-term leases is recognized on a straight-line basis over
the lease term. As of December 31, 2022 and 2021, all of the leases where we are the lessee were classified as
operating leases.
We have leases that contain both lease and non-lease components and have elected, as an accounting
policy, to not separate lease components and non-lease components. Operating and finance lease
right-of-use (“ROU”) assets and liabilities are recognized at the commencement date based on the present
value of lease payments over the lease term. Our ROU assets and lease liabilities are included in other assets
and accrued expenses and other liabilities, respectively, on our Consolidated Balance Sheets. The lease
liability is calculated as the present value of the remaining minimum rental payments for existing leases
using either the rate implicit in the lease or, if none exists, the Company’s incremental borrowing rate, as the
discount rate. Certain leases have options to extend, terminate or purchase the asset and have been
considered in our analysis of the lease term and the measurement of the ROU assets and lease liabilities.
On a quarterly basis, we record our lease liabilities at the present value of the future lease payments
using the discount rate determined at lease commencement. Rental expense from operating leases is
generally recognized on a straight-line basis over the lease term. Lease expense derived from our operating
leases is recorded in general and administrative in our Consolidated Statements of Operations. We do not
include in our measurement of our lease liability certain variable payments, including changes in an index
until the specific events that trigger the variable payments have occurred.
We record on a straight-line basis rental income and ground lease expense for those assets we lease and
are reimbursed by our operators and/or are paid for directly by our operators.
In-Place Leases
In-place lease assets and liabilities result when we assume a lease as part of an asset acquisition or
business combination. The fair value of in-place leases consists of the following components, as applicable
(1) the estimated cost to replace the leases and (2) the above or below market cash flow of the leases,
determined by comparing the projected cash flows of the leases in place at the time of acquisition to
projected cash flows of comparable market-rate leases.
Above market leases, net of accumulated amortization, are included in other assets on our
Consolidated Balance Sheets. Below market leases, net of accumulated amortization, are included in
accrued expenses and other liabilities on our Consolidated Balance Sheets. The net amortization related to
F-14
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the above and below market leases is included in our Consolidated Statements of Operations as an
adjustment to rental income over the estimated remaining term of the underlying leases. Should a tenant
terminate the lease, the unamortized portion of the lease intangible is recognized immediately as an
adjustment to rental income.
Allowance for Credit Losses
The allowance for credit losses reflects our current estimate of the potential credit losses on our real
estate loans, non-real estate loans, and our investment in direct financing leases and is recorded as a
valuation account as a direct offset against these financial instruments on our Consolidated Balance Sheets.
Expected credit losses inherent in non-cancelable unfunded loan commitments are accounted for as
separate liabilities included in accrued expenses and other liabilities on the Consolidated Balance Sheets.
The Company has elected to not measure an allowance for credit losses on accrued interest receivables
related to all of its real estate loans and non-real estate loans because we write off uncollectible accrued
interest receivable in a timely manner pursuant to our non-accrual policy, described below. Changes to the
allowance for credit losses on loans resulting from quarterly evaluations are recorded through provision for
credit losses on the Consolidated Statements of Operations.
We assess the creditworthiness of our borrowers on a quarterly basis. For purposes of determining our
allowance for credit loss, we pool financial assets that have similar risk characteristics. We aggregate our
financial assets by financial instrument type (i.e. real estate loan, non-real estate loan, etc.) and by our
internal risk rating. Our internal credit ratings consider several factors including the collateral and/or
security, the performance of borrowers underlying facilities, if applicable, available credit support (e.g.,
guarantees), borrowings with third parties, and other ancillary business ventures and real estate operations
of the borrower. Our internal ratings range between 1 and 7. An internal rating of 1 reflects the lowest
likelihood of loss and a 7 reflects the highest likelihood of loss. The characteristics associated with each risk
rating is as follows:
• Risk Rating 1 through 3 — Instruments with minimal to marginally acceptable risk.
• Risk Rating 4 — Instruments with potential weaknesses identified (Special mention).
• Risk Rating 5 — Instruments with well-defined weaknesses that may result in possible losses
(Substandard).
• Risk Rating 6 — Instruments that are unlikely to be repaid in full and will probably result in
losses (Doubtful).
• Risk Rating 7 — Instrument that will not be repaid in full and losses will occur (Loss).
We have a limited history of incurred losses and consequently have elected to employ external data to
perform our expected credit loss calculation. We utilize a probability of default (“PD”) and loss given
default (“LGD”) methodology. Our model’s historic inputs consider PD and LGD data for residential care
facilities published by the Federal Housing Administration along with Standards & Poor’s one-year global
corporate default rates. Our historical loss rates revert to historical averages after 36 months. Our model’s
current conditions and supportable forecasts consider internal credit ratings, current and projected U.S.
unemployment rates published by the U.S. Bureau of Labor Statistics and the Federal Reserve Bank of St.
Louis and the weighted average life to maturity of the underlying financial asset.
Periodically, the Company may identify an individual loan for impairment. A loan is considered
impaired when, based on current information and events, it is probable that we will be unable to collect all
amounts due as scheduled according to the contractual terms of the loan agreements. Our assessment of
collectibility considers several factors, including, among other things, payment history, the financial
strength of the borrower and any guarantors, historical operations and operating trends, current and future
economic conditions, expectations of performance (which includes known substantial doubt about an
operator’s ability to continue as a going concern) and the fair value of the underlying collateral of the
agreement, a Level 3 measurement, if any. Consistent with this definition, all loans on non-accrual status
F-15
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
may be deemed impaired. To the extent circumstances improve and the risk of collectibility is diminished,
we will return these loans to full accrual status. When we identify a loan impairment, the loan is written
down to the present value of the expected future cash flows or to the fair value of the underlying collateral.
Financial instruments are charged off against the allowance for credit losses when collectibility is
determined to be permanently impaired.
We account for impaired loans using (a) the cost-recovery method, and/or (b) the cash basis method.
We generally utilize the cost-recovery method for impaired loans for which impairment reserves were
recorded. Under the cost-recovery method, we apply cash received against the outstanding loan balance
prior to recording interest income. Under the cash basis method, we apply cash received to principal or
interest income based on the terms of the agreement.
Investments in Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures using the equity method of
accounting as we exercise significant influence, but do not control the entities.
Under the equity method of accounting, the net equity investments of the Company are reflected in
the accompanying Consolidated Balance Sheets and the Company’s share of net income and comprehensive
income from the joint ventures are included in the accompanying Consolidated Statements of Operations
and Consolidated Statements of Comprehensive Income, respectively.
On a periodic basis, management assesses whether there are any indicators that the value of the
Company’s investments in the unconsolidated joint ventures may be other-than-temporarily-impaired. An
investment is impaired only if management’s estimate of the value of the investment is less than the carrying
value of the investment, and such a decline in value is deemed to be other than-temporary. To the extent
impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over
the estimated fair value of the investment. The estimated fair value of the investment is determined using a
discounted cash flow model which is a Level 3 valuation. We consider a number of assumptions that are
subject to economic and market uncertainties including, among others, rental rates, operating costs,
capitalization rates, holding periods and discount rates.
No impairment losses on our investments in unconsolidated joint ventures were recognized for the last
three fiscal years.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and highly liquid investments with a maturity date
of three months or less when purchased. These investments are stated at cost, which approximates fair
value. The majority of our cash, cash equivalents and restricted cash are held at major commercial banks.
Certain cash account balances exceed FDIC insurance limits of $250,000 per account and, as a result, there
is a concentration of credit risk related to amounts in excess of the insurance limits. We regularly monitor
the financial stability of these financial institutions and believe that we are not exposed to any significant
credit risk in cash, cash equivalents or restricted cash.
Restricted Cash
Restricted cash consists primarily of liquidity deposits escrowed for tenant obligations required by us
pursuant to certain contractual terms and other deposits required by the U.S. Department of Housing and
Urban Development (“HUD”) in connection with our mortgage borrowings guaranteed by HUD.
Deposits
We obtain liquidity deposits and other deposits, security deposits and letters of credit from certain
operators pursuant to our lease and mortgage agreements. These generally represent the rental and/or
mortgage interest for periods ranging from three to six months with respect to certain of our investments or
the required deposits in connection with our HUD borrowings. At December 31, 2022 and 2021, we held
F-16
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$3.5 million and $3.9 million, respectively, in liquidity and other deposits and $40.3 million and
$46.1 million, respectively, in security deposits. We also had the ability to draw on $36.5 million and
$38.1 million of letters of credit at December 31, 2022 and 2021, respectively.
The liquidity deposits and other deposits, security deposits and the letters of credit may be used in the
event of lease and/or loan defaults, subject to applicable limitations under bankruptcy law with respect to
operators filing under Chapter 11 of the U.S. Bankruptcy Code. Liquidity deposits and other deposits are
recorded as restricted cash on our Consolidated Balance Sheets with the offset recorded as a liability in
accrued expenses and other liabilities on our Consolidated Balance Sheets. Security deposits related to cash
received from the operators are primarily recorded in cash and cash equivalents on our Consolidated
Balance Sheets with a corresponding offset in accrued expenses and other liabilities on our Consolidated
Balance Sheets. Additional security for rental and loan interest revenue from operators is provided by
covenants regarding minimum working capital and net worth, liens on accounts receivable and other
operating assets of the operators, provisions for cross-default, provisions for cross-collateralization and by
corporate or personal guarantees.
Goodwill Impairment
We test goodwill for potential impairment at least annually in the fourth quarter, or more frequently if
an event or other circumstance indicates that we may not be able to recover the carrying amount of the net
assets of the reporting unit. In evaluating goodwill for impairment, we may assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. If we bypass the qualitative assessment, or if we conclude that it is more likely than not that the
fair value of a reporting unit is less than its carrying value, then we perform a quantitative impairment test
by comparing the fair value of a reporting unit with its carrying amount.
In evaluating goodwill for impairment, we assess qualitative factors such as a significant decline in real
estate valuations, current macroeconomic conditions, state of the equity and capital markets and our overall
financial and operating performance or a significant decline in the value of our market capitalization, to
determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying
amount. Goodwill is not deductible for tax purposes. We have had no goodwill impairment charges for the
last three fiscal years.
Income Taxes
Omega and its wholly-owned subsidiaries were organized to qualify for taxation as a REIT under
Section 856 through 860 of the Internal Revenue Code (“Code”). As long as we qualify as a REIT, we will
not be subject to federal income taxes on the REIT taxable income that we distributed to stockholders,
subject to certain exceptions. However, with respect to certain of our subsidiaries that have elected to be
treated as taxable REIT subsidiaries (“TRSs”), we record income tax expense or benefit, as those entities
are subject to federal income tax similar to regular corporations. Omega OP is a pass-through entity for
U.S. federal income tax purposes.
We account for deferred income taxes using the asset and liability method and recognize deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in our
financial statements or tax returns. Under this method, we determine deferred tax assets and liabilities
based on the differences between the financial reporting and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. Any increase or decrease in
the deferred tax liability that results from a change in circumstances, and that causes us to change our
judgment about expected future tax consequences of events, is included in the tax provision when such
changes occur. Deferred income taxes also reflect the impact of operating loss and tax credit
carry-forwards. A valuation allowance is provided if we believe it is more likely than not that all or some
portion of the deferred tax asset will not be realized. Any increase or decrease in the valuation allowance
that results from a change in circumstances, and that causes us to change our judgment about the
realizability of the related deferred tax asset, is included in the tax provision when such changes occur.
F-17
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We are subject to certain state and local income tax, franchise taxes and foreign taxes. The expense
associated with these taxes are included in income tax expense on the Consolidated Statements of
Operations.
Stock-Based Compensation
We recognize stock-based compensation expense adjusted for estimated forfeitures to employees and
directors, in general and administrative in our Consolidated Statements of Operations on a straight-line
basis over the requisite service period of the awards.
Deferred Financing Costs and Original Issuance Premium and/or Discounts for Debt Issuance
External costs incurred from the placement of our debt are capitalized and amortized on a straight-line
basis over the terms of the related borrowings which approximates the effective interest method. Deferred
financing costs related to our revolving line of credit are included in other assets on our Consolidated
Balance Sheets and deferred financing costs related to our other borrowings are included as a direct
deduction from the carrying amount of the related liability on our Consolidated Balance Sheets. Original
issuance premium or discounts reflect the difference between the face amount of the debt issued and the
cash proceeds received and are amortized on a straight-line basis over the term of the related borrowings.
All premiums and discounts are recorded as an addition to or reduction from debt on our Consolidated
Balance Sheets. Amortization of deferred financing costs and original issuance premiums or discounts
totaled $12.9 million, $12.3 million and $10.1 million for the years ended December 31, 2022, 2021 and
2020, respectively, and are recorded in interest expense on our Consolidated Statements of Operations.
When financings are terminated, unamortized deferred financing costs and unamortized premiums or
discounts, as well as charges incurred for the termination, are recognized as expense or income at the time
the termination is made. Gains and losses from the extinguishment of debt are presented in loss on debt
extinguishment on our Consolidated Statements of Operations.
Earnings Per Share
The computation of basic earnings per share/unit (“EPS”) is computed by dividing net income
available to common stockholders by the weighted-average number of shares of common stock outstanding
during the relevant period. Diluted EPS is computed using the treasury stock method, which is net income
divided by the total weighted-average number of common outstanding shares plus the effect of dilutive
common equivalent shares during the respective period. Dilutive common shares reflect the assumed
issuance of additional common shares pursuant to certain of our share-based compensation plans,
including restricted stock and profit interest units, performance restricted stock and profit interest units, the
assumed issuance of additional shares related to Omega OP Units held by outside investors.
Noncontrolling Interests and Redeemable Limited Partnership Unitholder Interests
Noncontrolling interests is the portion of equity not attributable to the respective reporting entity. We
present the portion of any equity that we do not own in consolidated entities as noncontrolling interests
and classify those interests as a component of total equity, separate from total stockholders’ equity on our
Consolidated Balance Sheets. We include net income attributable to the noncontrolling interests in net
income in our Consolidated Statements of Operations.
As our ownership of a controlled subsidiary increases or decreases, any difference between the
aggregate consideration paid to acquire the noncontrolling interests and our noncontrolling interest balance
is recorded as a component of equity in additional paid-in capital, so long as we maintain a controlling
ownership interest.
The noncontrolling interest for Omega represents the outstanding Omega OP Units held by outside
investors and interests in a consolidated real estate joint venture not fully owned by Omega. Each of the
Omega OP Units (other than the Omega OP Units owned by Omega) is redeemable at the election of the
Omega OP Unit holder for cash equal to the then-fair market value of one share of Omega common stock,
F-18
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
par value $0.10 per share (“Omega Common Stock”), subject to Omega’s election to exchange the Omega
OP Units tendered for redemption for unregistered shares of Omega Common Stock on a one-for-one
basis, subject to adjustment as set forth in Omega OP’s partnership agreement. As of December 31, 2022,
Omega owns approximately 97% of the issued and outstanding Omega OP Units, and investors own
approximately 3% of the outstanding Omega OP Units.
Foreign Operations
The U.S. dollar (“USD”) is the functional currency for our consolidated subsidiaries operating in the
U.S. The functional currency for our consolidated subsidiaries operating in the U.K. is the British Pound
(“GBP”). Total revenues from our consolidated U.K. operating subsidiaries were $47.7 million,
$38.1 million and $34.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. Our
consolidated U.K. operating subsidiaries held long-lived assets of $453.4 million and $387.2 million as of
December 31, 2022 and 2021, respectively.
For our consolidated subsidiaries whose functional currency is not the USD, we translate their
financial statements into the USD. We translate the balance sheet accounts at the exchange rate in effect as
of the financial statement date. The income statement accounts are translated using an average exchange
rate for the period. Gains and losses resulting from translation are included in accumulated other
comprehensive income (loss) (“AOCI”), as a separate component of equity and a proportionate amount of
gain or loss is allocated to noncontrolling interests, if applicable.
We and certain of our consolidated subsidiaries may have intercompany and third-party debt that is
not denominated in the entity’s functional currency. When the debt is remeasured against the functional
currency of the entity, a gain or loss can result. The resulting adjustment is reflected in results of operations
within other expense — net, unless it is intercompany debt that is deemed to be long-term in nature in
which case the adjustments are included in AOCI and a proportionate amount of gain or loss is allocated to
noncontrolling interests, if applicable.
Derivative Instruments
We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a
result of our investments in the U.K. and interest rate risk related to our capital structure. As a matter of
policy, we do not use derivatives for trading or speculative purposes. Our risk management program is
designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency
forward contracts, interest rate swaps and debt issued in foreign currencies to offset a portion of these risks.
To qualify for hedge accounting, derivative instruments used for risk management purposes must
effectively reduce the risk exposure that they are designed to hedge. We formally document all relationships
between hedging instruments and hedged items, as well as our risk-management objectives and strategy for
undertaking various hedge transactions. This process includes designating all derivatives that are part of a
hedging relationship to specific forecasted transactions as well as recognized liabilities or assets on the
Consolidated Balance Sheets. In addition, at the inception of a qualifying cash flow hedging relationship,
the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in
accordance with the Company’s related assertions. The Company recognizes all derivative instruments,
including embedded derivatives required to be bifurcated, as assets or liabilities on the Consolidated
Balance Sheets at fair value which is determined using a market approach and Level 2 inputs. Changes in
the fair value of derivative instruments that are not designated in hedging relationships or that do not meet
the criteria of hedge accounting are recognized in the Consolidated Statements of Operations. For
derivatives designated in qualifying cash flow hedging relationships, the gain or loss on the derivative is
recognized in AOCI as a separate component of equity and a proportionate amount of gain or loss is
allocated to noncontrolling interest, if applicable.
If it is determined that a derivative instrument ceases to be highly effective as a hedge, or that it is
probable the underlying forecasted transaction will not occur, the Company discontinues its cash flow
hedge accounting prospectively and records the appropriate adjustment to earnings based on the current
F-19
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
fair value of the derivative instrument. For net investment hedge accounting, upon sale or liquidation of
our U.K. investment, the cumulative balance of the remeasurement value is reclassified to the Consolidated
Statements of Operations.
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.
Reclassifications
Certain line items on our Consolidated Balance Sheets, Consolidated Statements of Operations and
Consolidated Statements of Cash Flows have been reclassified to conform to the current period
presentation.
Effective for the fourth quarter of 2022, Mortgage notes receivable — net has been renamed Real
estate loans receivable — net, Other investments — net has been renamed Non-real estate loans
receivable — net, and certain loans have been reclassified out of Other Investments — net into Real estate
loans receivable — net. Specifically, other real estate loans collateralized by second or third mortgage liens,
a leasehold mortgage on, or an assignment of partnership interest in the related properties that were
previously presented in Other Investments — net are now presented in Real estate loans receivable — net.
See the table below for the prior presentation compared to the current presentation.
Mortgage notes receivable, gross . . .
Allowance for credit losses on
mortgage notes receivable . . . . . .
Mortgage notes receivable – net . .
Other investments, gross . . . . . . . . .
Prior
Presentation
December 31,
2021
(in thousands)
$ 908,687 Mortgage notes receivable, gross . .
Current
Presentation
December 31,
2021
(in thousands)
$ 908,687
Allowance for credit losses on
mortgage notes receivable . . . . .
(73,601)
$ 835,086
Mortgage notes receivable, net . .
$ 539,278 Leasehold mortgages and other real
estate loans, gross . . . . . . . . . . .
Allowance for credit losses on other
Allowance for credit losses on
investments . . . . . . . . . . . . . . . .
(69,394)
Other investments – net . . . . . . . . .
$ 469,884
leasehold mortgages and other
real estate loans . . . . . . . . . . . .
Leasehold mortgages and other
real estate loans – net . . . . . . .
Real estate loans receivable –
Total . . . . . . . . . . . . . . . . . . . . . .
$1,304,970
net . . . . . . . . . . . . . . . . . .
$1,180,786
Non-real estate loans receivable,
gross . . . . . . . . . . . . . . . . . . . .
$ 184,605
Allowance for credit losses on
non-real estate loans receivable . .
Non-real estate loans
(60,421)
receivable – net . . . . . . . . . . .
$ 124,184
Total . . . . . . . . . . . . . . . . . . . . . .
$1,304,970
F-20
(73,601)
835,086
354,673
(8,973)
345,700
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We previously reported assets held for sale of $261.2 million on the Consolidated Balance Sheet as of
December 31, 2021. $58.1 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, 2021. See further discussion on the held for sale reclassification in
Note 4 — Assets Held for Sale.
Recently Adopted Accounting Pronouncements
ASU — 2021-05, Leases (Topic 842): Lessors — Certain Leases with Variable Lease Payments
On July 19, 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2021-05. This guidance requires lessors to classify leases with variable lease payments, that
do not depend on an index or rate, as an operating lease on the commencement date of the lease if specified
criteria are met. The guidance is effective for fiscal years beginning after December 15, 2021, including
interim periods within those fiscal years. Early adoption is permitted. We early adopted this guidance
prospectively effective July 1, 2021. The adoption of the guidance did not have an impact on our
consolidated financial statements.
ASU — 2022-02, Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructurings and
Vintage Disclosures
On March 31, 2022, the FASB issued ASU 2022-02, which eliminates the recognition and measurement
guidance for troubled debt restructurings (“TDRs”) and requires additional disclosures for certain loan
modifications. ASU 2022-02 also requires entities to disclose gross write-offs of financing receivables and
net investments in leases by year of origination. Omega elected to early adopt ASU 2022-02 on a
prospective basis effective January 1, 2022. During 2022, we had three loan modifications with two
borrowers experiencing financial difficulty pursuant to ASU 2022-02, Guardian Healthcare (“Guardian”)
and LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care), that require additional disclosures.
The required disclosures for these loans are included in Note 5 — Contractual Receivables and Other
Receivables and Lease Inducements, Note 7 — Real Estate Loans Receivable and Note 8 — Non-real Estate
Loans Receivable. We have disclosed our gross write-offs of financing receivables and direct financing leases
by year of origination in Note 9 — Allowance for Credit Losses.
ASU — 2020-04, Financial Instruments — Reference Rate Reform (Topic 848)
On March 12, 2020, the FASB issued ASU 2020-04, which contains optional practical expedients for a
limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference
rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference
the London Interbank Offered Rate (“LIBOR”). The guidance may be elected over time until December 31,
2022, as reference rate reform activities occur. In December 2022, the FASB issued ASU 2022-06, Reference
Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extended the practical expedients
under ASU 2020-04 to December 31, 2024. The Company has several derivative instruments (See
Note 15 — Derivatives and Hedging), a $1.45 billion senior unsecured multicurrency revolving credit
facility, and a $50 million senior unsecured term loan facility (See Note 14 — Borrowing Arrangements)
that reference LIBOR. Beginning in the first quarter of 2020, we elected to apply the hedge accounting
expedients related to probability and the assessments of effectiveness for future LIBOR indexed cash flows
to assume that the index upon which future hedged transactions will be based matches the index on the
corresponding derivatives. Application of these expedients preserves the presentation of derivatives
consistent with past presentation. Our credit facilities that reference LIBOR contain customary LIBOR
replacement language, including, but not limited to, the use of rates based on the secured overnight
financing rate. The Company is evaluating: (i) how the transition away from LIBOR will impact the
Company, (ii) whether any additional optional expedients provided by the standards will be adopted, and
(iii) the impact that adopting ASU 2020-04 will have on our consolidated financial statements.
F-21
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ASU — 2016-13, Financial Instruments — Credit Losses (Topic 326)
In June 2016, the FASB issued ASU 2016-13, which changed the impairment model for most financial
assets. The new model uses a forward-looking expected loss method, which will generally result in earlier
recognition of allowances for credit losses. The new approach requires the calculation of expected lifetime
credit losses and is applied to financial assets measured at amortized cost, including loans, as well as certain
off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit loss on the
loans is a valuation amount that is deducted from the amortized cost basis of the loans not held at fair
value to present the net amount expected to be collected over the contractual term of the loans.
ASU 2016-13 specifically excludes from its scope receivables arising from operating leases accounted
for under Topic 842. We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective
approach and we recorded an initial $28.8 million allowance for expected credit losses with a corresponding
adjustment to equity.
NOTE 3 — REAL ESTATE ASSET ACQUISITIONS AND DEVELOPMENT
2022 Acquisitions
The following table summarizes the significant asset acquisitions that occurred in 2022:
Number of
Facilities
Total Real Estate
Assets Acquired
Period
SNF ALF Country/State
1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Q1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
1
Q1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 27
Q1
1 —
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q1
4
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Q3
6
Q4
1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7 34
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.K.
U.K.
U.K.
MD
U.K.
PA, NC
(in millions)
$ 8.7(2)
5.0
86.6(2)
8.2(3)
28.2
88.5(4)
$225.2
Initial
Annual
Cash Yield(1)
8.0%
8.0%
8.0%
9.5%
8.0%
9.0%
(1)
Initial annual cash yield reflects the initial annual contractual cash rent divided by the purchase price.
(2) The total consideration paid for the one-facility U.K. acquisition and the 27-facility U.K. acquisition was $8.2 million and
$100.0 million, respectively. In connection with these acquisitions, we allocated $0.5 million of the purchase consideration to a
deferred tax liability related to the one-facility U.K. acquisition, and $13.4 million to a deferred tax asset related to the 27-facility
U.K. acquisition. See Note 17 — Taxes for additional information.
(3) Total consideration for the one-facility Maryland acquisition was paid on December 30, 2021, but the closing of the acquisition
did not occur until January 1, 2022.
(4) During the fourth quarter of 2022, we acquired seven facilities using a reverse like-kind exchange structure pursuant to
Section 1031 of the Code (a “reverse 1031 exchange”). As of December 31, 2022, we had completed the reverse 1031 exchange
for three of the acquired facilities and the remaining four acquired facilities remained in the possession of the EATs. The EATs
were classified as VIEs as they do not have sufficient equity investment at risk to permit the entity to finance its activities. The
Company consolidated the EATs because it had the ability to control the activities that most significantly impacted the economic
performance of the EATs and was, therefore, the primary beneficiary of the EATs. The properties held by the EATs were
reflected as real estate with a carrying value of $55.2 million as of December 31, 2022. The EATs also held cash of $23.9 million
as of December 31, 2022.
F-22
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2021 Acquisitions and Other
The following table summarizes the significant asset acquisitions that occurred in 2021:
Number of
Facilities
Period
SNF ALF Specialty
Country/
State
7 AZ, CA, FL, IL, NJ, OR, PA, TN, TX, VA, WA
Q1 . . . . . — 17
Q1 . . . . .
Q3 . . . . . —
Total
6 — —
2 —
7
6 19
. . .
FL
U.K.
Total Real Estate
Assets Acquired(1)
(in millions)
Initial
Annual
Cash Yield(2)
$511.3
83.1
9.6
$604.0
8.43%
9.25%
7.89%
(1) Excludes $10.6 million of land acquisitions, $58.6 million of non-cash acquisitions of facilities previously subject to mortgage
loans with Omega in which principal amounts under the loan agreements were reduced or settled in exchange for title to the
facilities (See Note 7 — Real Estate Loans Receivable), and $1.2 million of transaction costs incurred related to the non-cash
acquisitions.
Initial annual cash yield reflects the initial annual contractual cash rent divided by the purchase price.
(2)
On January 20, 2021, we acquired 24 senior living facilities from Healthpeak Properties, Inc. for
$511.3 million. The acquisition involved the assumption of an in-place master lease with Brookdale Senior
Living Inc. We recognized approximately $45.0 million of rental income for the year ended December 31,
2021 under this master lease, which includes 24 facilities representing 2,552 operating units.
2020 Acquisitions
The following table summarizes the significant transactions that occurred in 2020:
Period
Number of
Facilities
SNF ALF
Country/
State
Total Real Estate
Assets Acquired
(in millions)
Initial
Annual
Cash Yield(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Q1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q2
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Q4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
1 —
1 —
1
6
3
8
U.K
IN
OH
VA
$ 12.1
7.0
6.9
78.4
$104.4
8.00%
9.50%
9.50%
9.50%
(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 $64.4 million, $140.0 million and $106.2 million, respectively under our construction in
progress and capital improvement programs during the years ended December 31, 2022, 2021 and 2020.
In the second quarter of 2021, we placed a $41.1 million construction project for a new build ALF in
New Jersey into service and began recognizing revenue associated with this project in the third quarter of
2021. The lease for this facility provides for an annual cash yield of 7% of the amount funded in the first
year following the completion of construction increasing to 8% in year two with 2.5% annual escalators
thereafter.
During the third quarter of 2021, we purchased a real estate property located in Washington, D.C. (not
reflected in the table above) for approximately $68.0 million and plan to redevelop the property into a 174
bed ALF. Concurrent with the acquisition, we entered into a single facility lease for this property with
Maplewood Senior Living (along with affiliates, “Maplewood”) through August 31, 2045. For accounting
purposes, the lease will commence upon the substantial completion of construction of the ALF, which is
currently expected to be in 2025. The lease provides for the accrual of financing costs at a rate of 5% per
F-23
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
annum during the construction phase. The lease provides for an annual cash yield of 6% in the first year
following the completion of construction, increasing to 7% in year two and 8% in year three with 2.5%
annual escalators thereafter. We are committed to a maximum funding of $177.7 million for the
redevelopment of the real estate property, subject to ordinary development related cost changes (see
Note 20 — Commitments and Contingencies).
NOTE 4 — ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS
We periodically sell facilities to reduce our concentration in certain operators, geographies and
non-strategic assets or due to the exercise of a tenant purchase option.
The following is a summary of our assets held for sale:
Number of facilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Amount of assets held for sale (in thousands)
December 31, December 31,
2022
2
$9,456
2021
28
$203,025
In the fourth quarter of 2022, we reclassified 13 facilities with aggregate net book values of
$58.1 million, from assets held for sale to assets held for use within the applicable line items in real estate
assets — net. Of the $58.1 million reclassified net of $20.8 million of accumulated depreciation,
$67.5 million relates to buildings, $2.8 million relates to land and $8.6 relates to furniture and equipment.
We originally reclassified these facilities as held for sale in the fourth quarter of 2021, but we no longer
believe these facilities qualify as assets held for sale. We recorded a $3.2 million cumulative catch-up
adjustment to depreciation and amortization expense related to these facilities concurrent with the
reclassification in the fourth quarter of 2022.
One of the two facilities that were classified as held for sale as of December 31, 2022 was subsequently
sold during the first quarter of 2023 for gross cash proceeds of $19.5 million.
Asset Sales
2022 Activity
During the year ended December 31, 2022, we sold 66 facilities subject to operating leases for
approximately $759.0 million in net cash proceeds, recognizing a net gain of approximately $360.0 million.
Our 2022 sales were primarily driven by restructuring transactions and negotiations related to our lease
agreements with the following operators: Gulf Coast Health Care LLC (together with certain affiliates
“Gulf Coast”), Guardian Healthcare (“Guardian”) and Agemo Holdings, LLC (“Agemo”). In addition,
during the fourth quarter of 2022, we sold 11 facilities previously leased to and operated by LaVie which
did not meet the contract criteria to be recognized under ASC 610-20, further discussed below, and as such
are not included in the amounts above.
In the first quarter of 2022, we sold 22 facilities that were previously leased and operated by Gulf
Coast. The net cash proceeds from the sale, including related costs accrued for as of the end of the fourth
quarter, were $304.9 million, and we recognized a net gain of $114.5 million. The agreement includes an
earnout clause pursuant to which the buyer is obligated to pay an additional $18.7 million to Omega if
certain financial metrics are achieved at the facilities in the three years following the sale. As we have
determined it is not probable that we will receive any additional funds, we have not recorded any income
related to the earnout clause.
During the first and second quarter of 2022, we sold nine total facilities that were leased to Guardian
for $39.5 million in net proceeds, which resulted in a net gain of $13.7 million.
In the third and fourth quarter of 2022, we sold 22 facilities that were previously leased to Agemo for
$358.7 million in net proceeds, which resulted in a net gain of $218.9 million.
F-24
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In December 2022, in connection with restructuring negotiations with LaVie, we sold 11 facilities to a
third party previously leased to LaVie for a sales price of $129.8 million. Omega provided $104.8 million in
senior seller financing, collateralized by first lien mortgages on the 11 facilities, to fund a portion of the
purchase price. The senior note has a December 29, 2027 maturity date and bears interest at 8% with
required monthly interest payments (due in arrears beginning February 1, 2023), with no principal
payments due until the maturity date. The remaining consideration received under the purchase agreement
is the assumption of a $25.0 million liability by the buyer from Omega. The 11-facility sale does not meet
the contract criteria to be recognized under ASC 610-20 and we will continue to account for these facilities
on our Consolidated Balance Sheets and depreciate the facilities until the recognition requirements under
ASC 610-20 are met. A contract liability was recorded and related expense of $25.0 million was recognized
on our Consolidated Balance Sheets within accrued expenses and other liabilities and Consolidated
Statements of Operations within acquisition, merger and transition costs, respectively. The liability will be
relieved once the sale is recognized. The loan receivable associated with the seller financing will not be
recorded on our Consolidated Balance Sheets until the sale is recognized, and any cash interest received will
be deferred and recorded as a contract liability within accrued expenses and other liabilities on our
Consolidated Balance Sheets.
2021 Activity
During the year ended December 31, 2021, we sold 48 facilities for approximately $318.5 million in net
cash proceeds, recognizing a net gain of approximately $161.6 million.
2020 Activity
During the year ended December 31, 2020, we sold 43 facilities for approximately $180.9 million in net
cash proceeds, recognizing a net gain of approximately $19.1 million.
Real Estate Impairments
2022 Activity
During the year ended December 31, 2022, we recorded impairments of approximately $38.5 million
on 22 facilities. Of the $38.5 million, $3.5 million related to two facilities that were classified as held for sale
(and subsequently sold) for which the carrying values exceeded the estimated fair values less costs to sell,
and $35.0 million related to 20 held-for-use facilities for which the carrying value exceeded the fair value, of
which $17.2 million relates to 12 facilities leased to and operated by LaVie that are expected to be impacted
by the on-going restructuring negotiations. $10.0 million of the 2022 impairments recorded on four
held-for-use facilities relate to the 2.0% Operator discussed in Note 5 — Contractual Receivables and Other
Receivables and Lease Inducements.
2021 Activity
During the year ended December 31, 2021, we recorded impairments of approximately $44.7 million
on 14 facilities which were sold or classified as held for sale for which the carrying values exceeded the
estimated fair values less costs to sell.
2020 Activity
During the year ended December 31, 2020, we recorded impairments of approximately $76.0 million
on 25 facilities. Our impairments were offset by approximately $3.5 million of insurance proceeds received
related to a facility that was previously destroyed and impaired. Of the $76.0 million, $41.5 million related
to 14 facilities which were sold or classified as held for sale for which the carrying values exceeded the
estimated fair values less costs to sell, and $34.5 million related to 11 held-for-use facilities for which it was
determined that the carrying value exceeded the fair value. The $34.5 million relates to facilities subject to a
F-25
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
lease with Daybreak Ventures, LLC (“Daybreak”) (see Note 5 — Contractual Receivables and Other
Receivables and Lease Inducements), which were planned for resale or transitioned to another existing
operator and it was determined that the new cash flows were not sufficient to support the carrying value of
the facility.
To estimate the fair value of the facilities, for the impairments noted above, we utilized a market
approach which considered binding sale agreements (a Level 1 input) or non-binding offers from unrelated
third parties and/or broker quotes (a Level 3 input).
NOTE 5 — CONTRACTUAL RECEIVABLES AND OTHER RECEIVABLES AND LEASE
INDUCEMENTS
Contractual receivables relate to the amounts currently owed to us under the terms of our lease and
loan agreements. Effective yield interest receivables relate to the difference between the interest income
recognized on an effective yield basis over the term of the loan agreement and the interest currently due to
us according to the contractual agreement. Straight-line rent receivables relate to the difference between the
rental revenue recognized on a straight-line basis and the amounts currently due to us according to the
contractual agreement. Lease inducements result from value provided by us to the lessee, at the inception,
modification or renewal of the lease, and are amortized as a reduction of rental income over the
non-cancellable lease term.
A summary of our net receivables by type is as follows:
December 31, December 31,
2022
2021
(in thousands)
Contractual receivables – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,228
$ 11,259
Effective yield interest receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Straight-line rent receivables
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease inducements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables and lease inducements . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,696
166,061
6,041
$177,798
$ 9,590
148,455
93,770
$251,815
Cash basis operators and straight-line receivable write-offs
We review our collectibility assumptions related to our operator leases on an ongoing basis. During
the years ended December 31, 2022, 2021 and 2020, we placed nine, six and four additional operators on a
cash basis of revenue recognition, respectively, as collection of substantially all contractual lease payments
due from them was no longer deemed probable. In connection with placing these operators on a cash basis,
we recognized $119.8 million, $36.0 million and $129.5 million in total straight-line accounts receivable and
lease inducement write-offs through rental income during the years ended December 31, 2022, 2021 and
2020, respectively. As of December 31, 2022, we had 20 operators on a cash basis for revenue recognition,
which represent 36.5%, 39.2% and 41.5% of our total revenues (excluding the impact of write-offs) for
the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2021, we had 14
operators on a cash basis for revenue recognition, which represent 18.6% and 22.7% of our total revenues
(excluding the impact of write-offs) for the years ended December 31, 2021 and 2020, respectively.
During the years ended December 31, 2022, 2021 and 2020, we also wrote-off $3.2 million, $1.3 million
and $3.6 million of straight-line rent receivable balances through rental income as a result of transitioning
facilities between existing operators.
Operator updates
Agemo
Agemo was formed in May 2018 by Signature Healthcare, LLC, as part of an out-of-court
restructuring agreement, to be the holding company of their leases and loans with Omega. As part of that
F-26
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
restructuring agreement, we agreed to, among other things, allow for the deferral of $6.3 million of rent per
annum for a 3-year period (the “Agemo Rent Deferral”).
We placed Agemo on a cash basis of revenue recognition during the third quarter of 2020 as we
received information regarding substantial doubt of their ability to continue as a going concern. As a result,
we wrote-off approximately $13.4 million of contractual rent receivables and $61.9 million of straight-line
rent receivables and lease inducements.
Agemo continued to make their rental and interest payments to us until July 2021. After July 2021,
Agemo made one month of contractual rent and interest payments for the remainder of fiscal year 2021.
During the third and fourth quarters of 2021, we recorded $8.7 million of revenue by collecting rental and
interest payments and we recorded $8.5 million of revenue by drawing on a letter of credit and through
application of collateral held by Omega. On September 30, 2021, the Company entered into a forbearance
agreement related to Agemo’s defaults under its lease and loan agreements (the “Agemo Forbearance
Agreement”), which was amended to extend the forbearance period through January 2022 and the lease
agreement was amended to extend the Agemo Rent Deferral through January 2022.
Agemo continued to not pay contractual rent and interest due under its lease and loan agreements
during the year ended December 31, 2022. No rental income was recorded related to Agemo during the year
ended December 31, 2022. Additionally, no interest income was recognized during the year ended
December 31, 2022 on the two loans with Agemo because these loans are on non-accrual status and we are
utilizing the cost recovery method, under which any payments, if received, are applied against the principal
amount. See Note 8 — Non-real Estate Loans Receivable for additional details on our loans with Agemo.
For the years ended December 31, 2021 and 2020, Agemo generated approximately 3.9% and 5.6%,
respectively, of our total revenues (excluding the impact of write-offs).
The Agemo Forbearance Agreement has been amended multiple times throughout 2022 and the most
recent 2022 amendment on December 30, 2022 extended the forbearance period through January 31, 2023.
In 2022, the Agemo Rent Deferral period was also extended multiple times, and the most recent amendment
extended the deferral through April 2022, after which time the deferral period terminated, with the
Company remaining subject to the Agemo Forbearance Agreement through January 31, 2023. As of
December 31, 2022, the aggregate rent deferred under the Agemo lease agreement was $25.2 million. As
discussed in Note 4 — Assets Held for Sale, Dispositions and Impairments, we sold 22 facilities, subject to
the Agemo lease agreement, during 2022.
In the first quarter of 2023, Omega and Agemo entered into a restructuring agreement, an amended
and restated master lease and a replacement loan agreement for two replacement loans. As part of the
restructuring agreement and related agreements, Omega agreed to, among other things:
•
•
•
•
Forgive and release Agemo from previously written off past due rent and interest obligations
related to certain periods prior to the 2018 Restructuring and from August 2021 through
January 2023, with contractual rent under the lease agreement and contractual interest under the
loan agreements scheduled to resume on April 1, 2023;
reduce monthly contractual base rent from $4.8 million to $1.9 million following the sales of the
22 facilities, previously leased and operated by Agemo, that occurred in the third and fourth
quarters of 2022 (See Note 4 — Assets Held For Sale, Dispositions and Impairments);
extend the initial Agemo lease term from December 31, 2030, to December 31, 2036 with three
consecutive tenant 10-year extension options; and
refinance and restructure the $25.0 million secured working capital loan (the “Agemo WC Loan”),
the $32.0 million term loan (the “Agemo Term Loan”) and the aggregate deferred rent balance of
$25.2 million into two replacement loans to Agemo that mature on December 31, 2036, with
aggregate principal of $82.2 million and an annual interest rate of 5.71%.
F-27
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Guardian
Guardian did not make rent and interest payments under its lease and mortgage loan agreements
during the fourth quarter of 2021. As a result of Guardian’s non-payment of contractual rent and the
anticipated restructuring of its agreements, in the fourth quarter of 2021, we placed Guardian on a cash
basis of revenue recognition and wrote-off approximately $14.0 million of straight-line rent receivables and
lease inducements through rental income. In the fourth quarter of 2021, we began negotiations to
restructure Guardian’s lease and loan agreements. In connection with the restructuring negotiations, on
December 30, 2021, we acquired 2 facilities, previously subject to the Guardian mortgage loan, in
consideration for a reduction of $8.7 million in the mortgage principal and added the facilities to the master
lease agreement.
Guardian continued to not pay contractual rent and interest due under its lease and mortgage loan
agreements during the first quarter of 2022. During the first and second quarters of 2022, we completed
significant restructuring activities related to the Guardian lease and loan portfolio. In the first quarter of
2022, we transitioned eight facilities previously leased to Guardian to two other operators as part of the
planned restructuring. Additionally, during the six months ended June 30, 2022, we sold nine facilities to a
third party that were previously leased to Guardian and three facilities previously subject to the Guardian
mortgage loan. In the second quarter of 2022, we agreed to a formal restructuring agreement, master lease
amendments and mortgage loan amendments with Guardian. As part of the restructuring agreement and
related agreements, Omega agreed to, among other things:
•
•
•
Extend the lease and loan maturity dates from January 31, 2027 to December 31, 2031 and allow
Guardian the option to extend the maturity date for both the lease and loan through
September 30, 2034, subject to certain conditions;
reduce the combined rent and mortgage interest to an aggregate $24.0 million per year as of
July 1, 2022 ($15.0 million in rent and $9.0 million in interest) with annual escalators of 2.25%
beginning in January 2023; and
allow Guardian to retrospectively defer $18.0 million of aggregate contractual rent and interest
that it failed to pay from October 2021 through March 2022 (consisting of $12.2 million of
deferred rent and $5.8 million of deferred interest), with repayment required beginning after
September 30, 2024, based on certain financial metrics, and in full by December 31, 2031, or the
earlier termination of the lease for any reason.
Following the execution of the restructuring agreement, Guardian resumed paying contractual rent
and interest during the second quarter of 2022 and continued such payments in the third and fourth
quarters of 2022, in accordance with the restructuring terms. For the year ended December 31, 2022, we
recorded rental income of $11.3 million for the contractual rent payments that were received. Additionally,
as discussed further in Note 7 — Real Estate Loans Receivable, no mortgage interest income has been
recognized on the Guardian mortgage loan during the year ended December 31, 2022, as we are accounting
for this loan under the cost recovery method. Revenue from Guardian represents approximately 1.1%, 2.5%
and 3.5% of our total revenues (excluding the impact of straight-line write-offs) for the years ended
December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2022, we have $7.4 million of letters of credit from Guardian as collateral.
LaVie
In the fourth quarter of 2022, Omega began the process of restructuring our portfolio with LaVie,
which primarily consists of two master lease agreements and two term loan agreements. On December 30,
2022, we sold 11 facilities previously subject to one of the two leases agreements with LaVie. See further
discussion on the sale and the accounting treatment in Note 4 -Assets Held For Sale, Dispositions and
Impairments. Concurrent with the sale, we also amended the lease agreement impacted by the sale and our
loan agreements with LaVie. The amendments to the loan agreements are discussed in Note 8 — Non-Real
F-28
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Estate Loans. With the lease amendment and other related documents, Omega and LaVie agreed to, among
other terms:
• Remove the 11 sold facilities from the lease agreement and reduce monthly contractual rent due
under all agreements from $8.3 million to $7.3 million;
•
•
provide Omega the ability to enact a one-time rent reset on one of the lease agreements, if LaVie’s
coverage exceeds a threshold, after February 1, 2027; and
require Omega to pay LaVie a $35.0 million termination fee in connection with transitioning the
11 facilities sold in the fourth quarter and the additional facilities sold in the restructure
($25.0 million was assumed by the third-party buyer of the 11 facilities).
The restructuring discussions are still ongoing and subject to change, but we anticipate additional
restructuring activity related to this operator in 2023. As a result of the restructuring activities during 2022
and future expected restructuring activities, during the fourth quarter of 2022, we placed LaVie on a cash
basis of revenue recognition and wrote-off approximately $58.0 million of straight-line rent receivables and
lease inducements. Revenue from LaVie represents approximately 11.1%, 9.5% and 9.4% of our total
revenues (excluding the impact of straight-line write-offs) for the years ended December 31, 2022, 2021 and
2020, respectively.
In the first quarter of 2023, as part of the restructuring, we have agreed to a partial rent deferral in the
first four months of 2023. In doing so, we agreed to allow LaVie to defer up to $10.0 million of contractual
rent from January 2023 through April 2023 under one of our lease agreements for 32 facilities. Omega is in
discussions to allow LaVie to defer up to $9.1 million of contractual rent from January 2023 through
April 2023 under another lease agreement for 41 facilities. In January 2023, as a result, LaVie deferred the
full contractual payment of $2.5 million under the 32-facility lease and paid $2.5 million of the $4.7 million
of contractual rent due under the 41-facility lease.
Maplewood
During the year ended December 31, 2020, we received a one-time rent payment of approximately
$55.4 million from Maplewood, in conjunction with the restructuring of its master lease and loans with
Omega (see Note 8 — Non-real Estate Loans Receivable). This payment was accounted for as an
adjustment to straight-line rent receivables and was being amortized over the remaining term of the master
lease prior to Maplewood being placed on a cash basis of revenue recognition in the fourth quarter of 2022.
During the fourth quarter of 2022, Omega began discussions with Maplewood to restructure their
portfolio, which includes a lease agreement and $250.5 million revolving credit facility. During the fourth
quarter of 2022, we placed Maplewood on a cash basis of revenue recognition and wrote-off approximately
$29.3 million of straight-line rent receivables and lease inducements. Revenue from Maplewood represents
approximately 8.9%, 7.9% and 5.3% of our total revenues (excluding the impact of straight-line write-offs)
for the years ended December 31, 2022, 2021 and 2020, respectively.
In the first quarter of 2023, we agreed to a formal restructuring agreement, master lease amendments
and loan amendments with Maplewood. As part of the restructuring agreement and related agreements,
Omega agreed to, among other things:
•
•
Extend the maturity date of the master lease from December 2033 to December 2037 with two
consecutive 5-year tenant extension options;
fix contractual rent at $69.3 million per annum (December 2022 rent annualized) and defer the
2.5% annual escalators under our lease agreement through December 31, 2025, with mandatory
repayments to be made subject to certain metrics and due in full by the maturity date;
•
fund $22.5 million of capital expenditures through December 31, 2025;
F-29
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•
•
•
•
extend the maturity date of the secured revolving credit facility from June 2030 to June 2035 with
one borrower 2-year extension option;
increase the capacity of the secured revolving credit facility from $250.5 million to $320.0 million,
inclusive of payment-in-kind (“PIK”) interest applied to principal;
convert the 7% per annum cash interest due on the secured revolving credit facility to all PIK
interest in 2023, 1% cash interest and 6% PIK interest in 2024, 4% cash interest and 3% PIK
interest in 2025 and through the maturity date; and
reduce Maplewood’s share of any future potential sales proceeds (in excess of our gross
investment) by the unpaid deferred rent balance and the $22.5 million of capital expenditures.
Gulf Coast
During the second quarter of 2021, Gulf Coast stopped paying contractual rent under its master lease
agreement because of on-going liquidity issues. Gulf Coast operated 24 facilities subject to a master lease
with Omega and represented approximately 3.3% and 2.8% of Omega’s total revenues (excluding the impact
of write-offs) for the years ended December 31, 2021 and 2020, respectively.
As a result of Gulf Coast’s default under its master lease agreement, in August 2021, we exercised our
right to accelerate the full amount of rent due under Gulf Coast’s master lease agreement. On October 14,
2021, Gulf Coast commenced voluntary cases under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). As described in Gulf Coast’s
filings with the Bankruptcy Court, we entered into a Restructuring Support Agreement (the “Support
Agreement”) that forms the basis for Gulf Coast’s restructuring and liquidation. The Support Agreement
established a timeline for the implementation of Gulf Coast’s restructuring and liquidation, including the
transition of management of the operations of the facilities to a third-party operator. As part of the
Support Agreement, we committed to provide up to $25 million of senior secured debtor-in-possession
(“DIP”) financing to Gulf Coast, which is discussed in further detail in Note 8 — Non-real Estate Loans
Receivable. In November 2021, Gulf Coast entered into management and operations transfer agreements
(“MOTAs”) with a new manager (“New Manager”), pursuant to which the management of 23 of the 24
facilities subject to the master lease with Omega were performed by New Manager during an interim period
until the license for the facilities subject to the MOTAs could be obtained by a new operator (“New
Operator”). During the interim period, no rent was being paid by Gulf Coast, and we have provided a
$20 million working capital loan to New Manager, discussed in further detail in Note 8 — Non-real Estate
Loans Receivable. The Bankruptcy Court approved the MOTAs on November 24, 2021 and the operations
were transitioned effective December 1, 2021. On June 27, 2022, the Bankruptcy Court entered its order
confirming Gulf Coast’s bankruptcy plan which provided for, among other things, an allowed claim of
$49.0 million in relation to the accelerated rent due under Gulf Coast’s master lease agreement. Payment of
the allowed claim has been redirected, with Omega’s approval, under the Plan to Gulf Coast’s unsecured
creditors.
As a result of Gulf Coast’s non-payment of contractual rent, in the second quarter of 2021, we placed
Gulf Coast on a cash basis of revenue recognition and wrote-off straight-line rent receivable balances of
$17.4 million through rental income. Subsequent to placing Gulf Coast on a cash basis of revenue
recognition in June 2021, we recognized $24.6 million of rental income over the remaining period of 2021,
based on our ability to offset any uncollected rent receivables against Gulf Coast’s security deposit and
against certain debt obligations of Omega, as discussed further below. We held a security deposit of
$3.3 million from Gulf Coast, which we applied against Gulf Coast’s obligations in the second and third
quarters of 2021. In relation to Gulf Coast, a subsidiary of Omega (“Omega Obligor”) is the obligor on
five notes due to third parties with aggregate outstanding principal of $20.0 million (collectively, the
“Subordinated Debt”) that bear interest at 9% per annum with a maturity date of December 21, 2021 (see
Note 14 — Borrowing Activities and Arrangements). Under the terms of the Subordinated Debt, to the
extent Gulf Coast fails to pay rent when due to us under its master lease, Gulf Coast’s unpaid rent can be
F-30
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
used to offset Omega Obligor’s obligations under the Subordinated Debt (on a quarterly basis with respect
to interest and, under some circumstances, on an annual basis with respect to principal). As of
December 31, 2021, we have offset $1.3 million of accrued interest and $20.0 million of principal under the
Subordinated Debt against the uncollected rent under the master lease with Gulf Coast. Following the
application of these offsets, Omega has no further obligations under the Subordinated Debt. See
Note 20 — Commitments and Contingencies for additional discussion regarding an ongoing lawsuit related
to the Subordinated Debt.
As discussed in Note 4 — Assets Held For Sale, Dispositions and Impairments, we sold 22 facilities
that were previously leased and operated by Gulf Coast in the first quarter of 2022. We transitioned one
facility that was previously leased and operated by Gulf Coast to another operator in the second quarter of
2022.
Daybreak
Daybreak previously leased and operated 58 facilities from Omega. During the third quarter of 2017,
we placed Daybreak on a cash basis for revenue recognition as a result of nonpayment of funds owed to us.
We elected to terminate our relationship with Daybreak and we transitioned 31 Daybreak facilities to
existing operators during 2020. The total annual contractual rent from the 31 transitioned facilities was
approximately $12.4 million. In 2021, we transitioned 14 additional facilities to existing operators with
annual contractual rent of approximately $4.0 million and sold the remaining four Daybreak facilities. The
transition and sale of these facilities completed our exit from our relationship with Daybreak.
Genesis Healthcare, Inc.
During the year ended December 31, 2020, we wrote-off approximately $64.9 million of contractual
receivables, straight-line rent receivables, and lease inducements through rental income in 2020 as a result of
placing Genesis Healthcare, Inc. (“Genesis”) on a cash basis based on information the Company received
from Genesis during the third quarter of 2020 regarding substantial doubt as to their ability to continue as
a going concern. Genesis represents approximately 6.6%, 5.9% and 7.6%, respectively, of our total revenues
(excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020. Genesis
continued to make their rental and interest payments to us during the years ended December 31, 2022, 2021
and 2020.
3.7% Operator
From January through March 2022, an operator (the “3.7% Operator”) representing 3.7%, 3.4% and
3.1% of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and
2020, respectively, did not pay its contractual amounts due under its lease agreement. In March 2022, the
lease with the 3.7% Operator was amended to allow for a short-term rent deferral for January through
March 2022. The deferred rent balance accrues interest monthly at a rate of 5% per annum. The 3.7%
Operator paid the contractual amount due under its lease agreement from April 2022 through
December 2022. Omega holds a $1.0 million letter of credit and a $150 thousand security deposit from the
3.7% Operator as collateral under its lease agreement. The 3.7% Operator remains on a straight-line basis of
revenue recognition.
We have a revolving credit facility with the 3.7% Operator, that was amended in the fourth quarter of
2022 to increase the capacity to $25.0 million, that is fully drawn as of December 31, 2022. The credit
facility is secured by a first lien on the accounts receivable of the 3.7% Operator. The 3.7% Operator paid
contractual interest under the facility from January through December 2022. See Note 8 — Non-Real
Estate Loans Receivable for additional details.
1.2% Operator
In March 2022, an operator (the “1.2% Operator”), representing 1.2%, 2.1% and 2.5% of total revenue
(excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, did
F-31
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
not pay its contractual amounts due under its lease agreement. In April 2022, the lease with the 1.2%
Operator was amended to allow the operator to apply its $2.0 million security deposit toward payment of
March 2022 rent and to allow for a short-term rent deferral for April 2022 with regular rent payments
required to resume in May 2022. The 1.2% Operator paid contractual rent in May 2022, but it failed to pay
the full contractual rent for June 2022 on a timely basis. We placed the 1.2% Operator on a cash basis of
revenue recognition during the second quarter of 2022 and wrote-off approximately $8.3 million of
straight-line rent receivables. During the third and fourth quarters of 2022, the 1.2% Operator made partial
contractual rent payments totaling $4.0 million. We are in discussions to sell or release to another operator
a portion of the facilities included in the 1.2% Operator’s master lease.
2.0% Operator
In June 2022, an operator (the “2.0% Operator”), representing 2.0%, 2.1% and 2.2% of total revenue
(excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively,
short-paid the contractual rent amount due under its lease agreement by $0.6 million. In July 2022, we drew
the full $5.4 million letter of credit that was held as collateral from the 2.0% Operator and applied
$0.6 million of the proceeds to pay the unpaid portion of June 2022 rent. In the third quarter of 2022, the
2.0% Operator continued to short-pay the contractual amount due under its lease agreement. As such, we
applied $3.3 million of the remaining proceeds of the letter of credit to pay the unpaid portion of July,
August and September 2022 rent. We placed the 2.0% Operator on a cash basis of revenue recognition
during the third quarter of 2022 and wrote-off approximately $10.5 million of straight-line rent receivables
and lease inducements. In the fourth quarter of 2022, the 2.0% Operator paid $2.2 million in contractual
rent and we applied the remaining $1.5 million of collateral against the remaining unpaid rent. As of
February 1, 2023, we have transitioned 19 of the 23 facilities previously included in the 2.0% Operator’s
master lease to other operators and are in discussions to re-lease the remaining four facilities to another
operator.
0.4% Operator
In June 2022, we placed an operator (the “0.4% Operator”), representing 0.4%, 0.5% and 0.6% of total
revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020,
respectively, on a cash basis of revenue recognition. The change in our evaluation of the collectibility of
future rent payments due from the 0.4% Operator was a result of information received from the operator
during the second quarter of 2022 regarding substantial doubt as to its ability to continue as a going
concern. As a result of placing the 0.4% Operator on a cash basis, we wrote-off approximately $2.1 million
of straight-line rent receivables through rental income. For the year ended December 31, 2022, the 0.4%
Operator failed to pay four months of rent representing $2.0 million.
0.9% Operator
In November and December 2022, an operator that was already on a cash basis of revenue recognition
(the “0.9% Operator”), representing 0.9%, 1.0% and 1.0% of total revenue (excluding the impact of
write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, did not pay its contractual
amounts due under its lease and loan agreements.
Healthcare Homes Limited
In December 2022, we agreed to allow Healthcare Homes Limited (“Healthcare Homes”), a U.K.
based operator representing 2.9%, 2.4% and 2.3% of total revenue (excluding the impact of write-offs) for
the years ended December 31, 2022, 2021 and 2020, respectively, the ability to defer up to £6.7 million of
contractual rent from January 2023 through April 2023 with regular payments required to resume in
May 2023. The deferred rent balance accrues interest monthly at a rate of 8% per annum and must be fully
repaid by December 31, 2024. Healthcare Homes remains current as of December 31, 2022 and is on a
straight-line basis of revenue recognition.
F-32
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Operators
During the year ended December 31, 2022, in addition to the operators specifically discussed above, we
allowed four other operators, representing an aggregate 2.7%, 3.2% and 3.6% of total revenue (excluding the
impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, to apply an
aggregate of $3.4 million of their security deposits to pay rent to accommodate short term liquidity issues,
with regular rent payments required to resume shortly thereafter. These operators also are required to begin
replenishing their security deposits in 2023. Additionally, we granted three of these operators short-term
deferrals for a portion of their respective rent due during the year ended December 31, 2022. As of
December 31, 2022, three of the four operators that were allowed to apply security deposits to rent are
current on their respective lease obligations after taking into account rent deferrals and/or the application of
security deposits. The one operator that is not current on contractual obligations is on a cash basis of
revenue recognition as of December 31, 2022.
Lease Inducements
For the years ended December 31, 2021 and 2020, we provided fundings of $22.3 million, and
$34.1 million, respectively, to our operators subject to operating leases, which were accounted for as lease
inducements and will be amortized as a reduction to rental income over the remaining term of the leases. Of
the $22.3 million funded in 2021, $20 million was paid to LaVie and $2.3 million was paid to four other
existing operators. Of the $34.1 million funded in 2020, $23.9 million was paid to Maplewood for
development and start-up related costs and the remaining $10.2 million was paid to three other operators.
NOTE 6 — LEASES
Lease Income
The following table summarizes the Company’s rental income from operating leases:
Year Ended December 31,
2022
2021
2020
(in thousands)
Rental income – operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . $735,247 $911,701 $741,681
Variable lease income – operating leases . . . . . . . . . . . . . . . . . . . . . . .
11,746
Total rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $750,208 $923,677 $753,427
14,961
11,976
Our variable lease income primarily represents the reimbursement of real estate taxes and ground lease
expenses by operators that Omega pays directly.
The following amounts reflect the future minimum lease payments due to us for the remainder of the
initial terms of our operating leases as of December 31, 2022:
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 729,902
761,895
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
759,887
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
769,715
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
732,901
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter
3,345,742
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,100,042
(in thousands)
Lease Costs
As of December 31, 2022, the Company is a lessee under ground leases and/or facility leases related to
10 SNFs, one ALF and two offices. For the years ended December 31, 2022, 2021 and 2020, the expenses
F-33
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
associated with these operating leases were $2.2 million, respectively and are included within general and
administrative expense on the Statements of Operations.
The following table summarizes the balance sheet information related to leases where the Company is a
lessee:
December 31, December 31,
2022
2021
(in thousands)
Other assets – right of use assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,849
Accrued expenses and other liabilities – lease liabilities . . . . . . . . . . . . . . . . . .
$19,130
$16,117
$17,180
Direct Financing Leases
The components of investments in direct financing leases consist of the following:
December 31, December 31,
2022
2021
(in thousands)
Minimum lease payments receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . .
Investment in direct financing leases – net . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for credit losses on direct financing leases
$23,756
(12,437)
11,319
(2,816)
$ 8,503
$ 24,863
(13,460)
11,403
(530)
$ 10,873
Properties subject to direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of direct financing leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
1
1
During the year ended December 31, 2021, we received $0.7 million from a bankruptcy court created
Distribution Trust related to a direct financing lease with a former operator which is recorded in recovery
on direct financing leases on our Consolidated Statement of Operations.
NOTE 7 — REAL ESTATE LOANS RECEIVABLE
Real estate loans consist of mortgage loans and other real estate loans which are primarily
collateralized by a first, second or third mortgage lien or a leasehold mortgage on, or an assignment of the
partnership interest in the related properties. As of December 31, 2022, our real estate loans receivable
consists of seven fixed rate mortgages on 52 long-term care facilities and 12 other real estate loans. The
mortgage notes relate to facilities located in six states that are operated by six independent healthcare
operating companies. The other real estate loans are with four of our operators as of December 31, 2022.
We monitor compliance with the loans and when necessary have initiated collection, foreclosure and other
proceedings with respect to certain outstanding real estate loans.
F-34
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The principal amounts outstanding of real estate loans receivable, net of allowances, were as follows:
December 31, December 31,
2022
2021
(in thousands)
Mortgage notes due 2030; interest at 10.96%(1) . . . . . . . . . . . . . . . . . . . . . . . . $ 506,321 $ 653,564
103,762
Mortgage note due 2031; interest at 11.02% . . . . . . . . . . . . . . . . . . . . . . . . . .
Other mortgage notes outstanding(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
151,361
908,687
Mortgage notes receivable – gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(73,601)
Allowance for credit losses on mortgage notes receivable . . . . . . . . . . . . . . . . .
835,086
Mortgage notes receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201,613
Other real estate loan due 2030; interest at 7.00% . . . . . . . . . . . . . . . . . . . . . .
Other real estate loans due 2024; interest at 13.17%(1) . . . . . . . . . . . . . . . . . . .
90,752
Other real estate loans due 2022-2025; interest at 12.03%(1) . . . . . . . . . . . . . . .
9,992
40,232
Other real estate loan due 2024; interest at 12.00% . . . . . . . . . . . . . . . . . . . . .
Other real estate loans outstanding(3)
12,084
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
354,673
Leasehold mortgages and other real estate loans – gross . . . . . . . . . . . . . . . .
(8,973)
Allowance for credit losses on leasehold mortgages and other real estate loans . .
345,700
Leasehold mortgages and other real estate loans – net . . . . . . . . . . . . . . . . .
Total real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,042,731 $1,180,786
76,049
149,153
731,523
(83,393)
648,130
250,500
98,440
43,628
—
20,000
412,568
(17,967)
394,601
(1) Approximates the weighted average interest rate on facilities as of December 31, 2022.
(2) Other mortgage notes outstanding have a weighted average interest rate of 8.85% per annum as of December 31, 2022 and
maturity dates ranging from 2023 through 2032 (with $6.5 million maturing in 2023).
(3) As of December 31, 2022, includes one real estate loan with an interest rate of 12.00% and a maturity date of December 2, 2027.
Interest income on real estate loans is included within interest income on the Consolidated Statements
of Operations and is summarized as follows:
Year Ended December 31,
2022
2021
2020
(in thousands)
Mortgage notes – interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,233 $ 91,661 $ 89,422
Leasehold mortgages and other real estate loans – interest income
27,867
. . . . . . . . . . . . . . . . . . . . . . . . $110,322 $123,649 $117,289
Total real estate loans interest income
36,089
31,988
. . . .
Mortgage Notes due 2030
On June 30, 2022, Ciena Healthcare (“Ciena”) repaid $57.1 million under the $415.0 million
amortizing mortgage (the “Ciena Master Mortgage”), $15.1 million under the $44.7 million mortgage and
$41.5 million under four additional mortgages. Concurrent with these repayments, we released the mortgage
liens on six facilities in exchange for the partial repayment and extended the maturity date of all of the
Ciena mortgage notes to June 30, 2030 (with exception of two loans with an aggregate principal balance of
$40.4 million with maturity dates in 2023).
On September 9, 2022, Ciena repaid $35.3 million under the Ciena Master Mortgage and $9.5 million
under three additional mortgages. Concurrently with these partial repayments, we released the mortgage
liens on two facilities in exchange for such partial repayments.
F-35
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2022, the $506.3 million of Mortgage Notes with Ciena consisted of the following:
•
$415 million Ciena Master Mortgage that matures in 2030. The Ciena Master Mortgage note bore
an initial interest rate of 9.0% per annum which increases by 0.225% per annum. In May 2020, we
amended the Ciena Master Mortgage to increase the interest rate by 54 basis points from 10.13%
per annum to 10.67% per annum and we sold eight SNFs and one ALF located in Michigan to
Ciena for $83.5 million (as discussed below). As of December 31, 2022, the outstanding principal
balance of the Ciena Master Mortgage note is $279.0 million and it is secured by 20 facilities. The
interest rate on the Ciena Master Mortgage was 11.35% at December 31, 2022.
• Additional borrowings in the form of incremental facility mortgages, construction and/or
improvement mortgages with maturities through 2030 (with exception to one construction
mortgage with principal of $19.1 million that matures in 2023) with initial annual interest rates
ranging between 8.5% and 10% and fixed annual escalators of 2% or 2.5% over the prior year’s
interest rate, or a fixed increase of 0.225% per annum. As of December 31, 2022, the outstanding
principal balance of these mortgage notes which are secured by three facilities is $94.3 million.
During the second quarter of 2021, one construction mortgage, included in the mortgage notes
described above, with an original maturity date of 2021 was extended to 2029 and converted into a
facility mortgage. During the third quarter of 2021, we acquired a facility which was previously
subject to a $13.9 million construction mortgage, also included in the notes described above, and
subsequently leased the property back to Ciena.
•
•
•
$44.7 million mortgage note related to five SNFs located in Michigan. The mortgage note matures
on June 30, 2030 and bore an initial annual interest rate of 9.5% which increases each year by
0.225%. The interest rate on the mortgage note was 10.4% at December 31, 2022. During the
second quarter of 2022, we released the mortgage lien on one facility under this mortgage loan in
exchange for a $15.1 million repayment (as discussed above). As of December 31, 2022, the
outstanding principal balance of this mortgage note is $28.6 million and it is secured by four
SNFs. Additionally, the Company committed to fund an additional $9.6 million to Ciena if
certain performance metrics are achieved by the portfolio.
$83.5 million mortgage note related to eight SNFs and one ALF located in Michigan. These nine
facilities were formerly leased to Ciena and were sold to Ciena by issuance of a first mortgage on
May 1, 2020. The mortgage note matures on June 30, 2030 and bore an initial annual interest rate
of 10.31% which increases each year by 2%. The interest rate on the mortgage note was 10.73% at
December 31, 2022. As of December 31, 2022, the outstanding principal balance of this mortgage
note is $83.1 million.
$21.3 million mortgage note related to one SNF located in Ohio. The mortgage note had an
original maturity date of March 31, 2022 and bore an initial annual interest rate of 9.5%. During
the year ended December 31, 2022, we amended the mortgage note to extend the maturity date to
December 31, 2023 and to increase the interest rate to 9.74% beginning April 1, 2022 and to 9.98%
beginning April 1, 2023. As of December 31, 2022, the outstanding principal balance of this
mortgage note is $21.3 million.
The mortgage notes with Ciena are cross-defaulted and cross-collateralized with our existing master
lease and other non-real estate loans with Ciena.
Mortgage Note due 2031
On January 17, 2014, we entered into a $112.5 million first mortgage loan with Guardian. The loan
was originally secured by seven SNFs and two ALFs located in Pennsylvania and Ohio. The mortgage is
cross-defaulted and cross-collateralized with our existing master lease with the operator. In March 2018, we
extended the maturity date to January 31, 2027 and provided an option to extend the maturity for a five
year period through January 31, 2032 and a second option to extend the maturity through September 30,
2034.
F-36
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In the third quarter of 2021, we reduced the risk rating on the mortgage loan from a 4 to a 5, primarily
due to the increased likelihood of a restructuring that would result in the modification of the mortgage loan
terms. As discussed in Note 5 — Contractual Receivables and Other Receivables and Lease Inducements,
Guardian failed to pay contractual rent and interest to us during the fourth quarter of 2021. The mortgage
loan was placed on non-accrual status for interest recognition in October 2021 and is being accounted for
under the cost recovery method. On December 30, 2021, we acquired two facilities, previously subject to the
Guardian mortgage loan, in consideration for a reduction of $8.7 million in the mortgage principal and
added the facilities to the master lease agreement. Following Guardian’s non-payment of rent and interest
during the fourth quarter of 2021 and further negotiations with Guardian in the fourth quarter, we elected
to further reduce the risk rating on the loan from a 5 to a 6 in the fourth quarter of 2021 and to evaluate the
risk of loss on the loan on an individual basis. As the fair value of the 7 properties that collateralized the
mortgage loan were estimated to be less than the remaining principal as of December 31, 2021 of
$103.8 million, we reserved an additional $38.2 million through provision for credit losses in the fourth
quarter of 2021. The total reserve as of December 31, 2021, related to the mortgage loan was $47.1 million
and reduced the loan carrying value to the estimated fair value of the collateral of $56.7 million as of
December 31, 2021. We also fully reserved approximately $1.0 million of contractual interest receivable
related to the mortgage loan with Guardian in the fourth quarter of 2021.
Guardian continued to not pay contractual rent and interest due under its lease and mortgage loan
agreements during the first quarter of 2022. On February 15, 2022, Guardian completed the sale of three
facilities subject to the Guardian mortgage loan with Omega. Concurrent with the sale, Omega agreed to
release the mortgage liens on these facilities in exchange for a partial paydown of $21.7 million. In
connection with the partial paydown, we recorded a $5.1 million recovery for credit losses in the first
quarter of 2022 related to the Guardian mortgage loan. In the second quarter of 2022, we agreed to a
formal restructuring agreement and amendments to the master lease and mortgage loan with Guardian,
which among other adjustments, extended the loan maturity and allowed for the deferral of certain
contractual interest as discussed in Note 5 — Contractual Receivables and Other Receivables and Lease
Inducements. These amendments were treated as a loan modification. Following the execution of the
restructuring agreement, Guardian resumed paying contractual rent and interest during the second quarter
of 2022 and continued such payments in the third and fourth quarters of 2022, in accordance with the
restructuring terms. In the third and fourth quarters of 2022, we reserved an additional $0.3 million, in
aggregate, through provision for credit losses due to a decrease in the estimated fair value of the four
facilities that are collateral under the mortgage.
As of December 31, 2022, the amortized cost basis of the Guardian mortgage loan is $76.0 million,
which represents 6.6% of the total amortized cost basis of all real estate loan receivables. The total reserve
as of December 31, 2022 related to the mortgage loan was $40.8 million and reduced the loan carrying
value to the estimated fair value of the collateral of $35.2 million as of December 31, 2022. As of
December 31, 2022, the mortgage loan is secured by three SNFs and one ALF located in Pennsylvania.
During the year ended December 31, 2022, we received $6.0 million of interest payments that were applied
directly against the principal balance outstanding using the cost recovery method.
Other mortgage notes outstanding
As of December 31, 2022, our other mortgage notes outstanding represents 4 mortgage loans to 4
operators with liens on 11 facilities. Included below are new mortgage loans within this bucket that were
entered into during the years ended December 31, 2022, and 2021.
Mortgage Note due 2032; interest at 10.50%
On July 1, 2021, we financed six SNFs in Ohio and amended an existing $6.4 million mortgage,
inclusive of two Ohio SNFs, to include the six facilities in a consolidated $72.4 million mortgage for eight
Ohio facilities bearing interest at an initial rate of 10.5% per annum. In conjunction with this transaction,
we also acquired three Maryland facilities that were previously subject to a mortgage issued by Omega
F-37
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
bearing interest at 13.75% per annum with a principal balance of $36.0 million that was included in other
mortgage notes outstanding. The purchase price for these three facilities was equal to the remaining
mortgage principal amount, and the three acquired Maryland facilities were subsequently leased back to
the seller for a term expiring on December 31, 2032, assuming Omega exercises the options under the
agreement. The base rent in the initial year is approximately $5.0 million and includes annual escalators of
2.5%. As of December 31, 2022, the outstanding principal balance of this mortgage note is $72.4 million.
Mortgage Note due 2025; interest at 7.85%
In connection with the MedEquities Merger on May 17, 2019, the Company acquired a first mortgage
lien issued to Lakeway Realty, L.L.C, an unconsolidated joint venture discussed in Note 11 — Investments
in Joint Ventures, in the original principal amount of approximately $73.0 million bearing interest at 8% per
annum based on a 25-year amortization schedule and maturing on March 20, 2025. We determined the
acquisition date fair value of the acquired mortgage was $69.1 million. As of December 31, 2022 and 2021,
this mortgage has a carrying value of $63.8 million and $65.5 million, respectively.
Other real estate loan due 2030
On July 31, 2020, we entered into a $220.5 million secured revolving credit facility with Maplewood as
a part of an overall restructuring with this operator. $132.1 million of the facility was drawn at closing
which was used to repay our prior secured revolving credit facilities with aggregate capacity of $65.0 million
with Maplewood, as well as other lease obligations owed to us, of which approximately $55.4 million was
scheduled to be repaid at termination of the master lease. Loan proceeds under the new credit facility may
also be used to fund Maplewood’s working capital needs. Advances made under this facility bear interest at
a fixed rate of 7% per annum and the facility matures on June 30, 2030. On June 22, 2022, we amended the
secured revolving credit facility with Maplewood to increase the maximum commitment under the facility
from $220.5 million to $250.5 million. Maplewood was determined to be a VIE when this loan was
originated in 2020. Our balances and risk of loss associated with Maplewood are included within our
disclosures in Note 10 — Variable Interest Entities. As discussed in Note 5 — Contractual Receivables and
Other Receivables and Lease Inducements, we began negotiations to restructure and amend Maplewood’s
lease and loan agreements during the fourth quarter of 2022. As a result of the anticipated restructuring,
we placed the Maplewood revolving credit facility on non-accrual status for interest recognition during the
fourth quarter of 2022 due to the anticipated restructuring of its lease and loan agreement. As of
December 31, 2022, $250.5 million remains outstanding on this credit facility to Maplewood.
As discussed in Note 5 — Contractual Receivables and Other Receivables and Lease Inducements, in
the first quarter of 2023, Omega entered into a restructuring agreement and a loan amendment that
modified the senior revolving credit facility. As part of the restructuring agreement and loan amendment,
Omega agreed to extend the maturity date to June 2035, increase the capacity of the senior revolving credit
facility from $250.5 million to $320.0 million, including PIK interest applied to the principal, and to convert
the 7% cash interest due on the senior revolving credit facility to all PIK interest in 2023, 1% cash interest
and 6% PIK interest in 2024, 4% cash interest and 3% PIK interest in 2025 and through the maturity date.
Other real estate loans due 2024
Our other investment notes due in 2024 consists of two secured term loans with Genesis with initial
borrowings of $48.0 million and $16.0 million at issuance. The $48.0 million term loan was issued in
July 2016 (the “2016 Term Loan”), with subsequent amendments in 2018, 2019 and 2021, and currently
bears interest at a fixed rate of 14% per annum, of which 9% per annum is paid-in-kind. The 2016 Term
Loan was initially scheduled to mature on July 29, 2020, but through the amendments noted above, the
maturity date of this loan was extended to January 1, 2024. The $16.0 million secured term loan was issued
on March 6, 2018 (the “2018 Term Loan”), and amended in 2021, and bears interest at a fixed rate of 10%
per annum, of which 5% per annum is paid-in-kind. The 2018 Term Loan was initially scheduled to mature
on July 29, 2020, but through the amendments noted above was extended to January 1, 2024. Both the 2016
F-38
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and 2018 Term Loans are on an accrual status as of December 31, 2022. Both the 2016 and 2018 Term
Loans are secured by a first priority lien on and security interest in certain collateral of Genesis. As of
December 31, 2022, there was approximately $78.1 million and $20.3 million outstanding on the 2016 and
2018 Term Loans, respectively.
Other real estate loans due 2022-2025
On June 28, 2022, we entered into a $35.6 million mezzanine loan with an existing operator related to
new operations undertaken by the operator. The loan bears interest at a fixed rate of 12% per annum and
matures on June 30, 2025. The loan also requires quarterly principal payments of $1.0 million commencing
on January 1, 2023 and additional payments contingent on the operator’s achievement of certain metrics.
The loan is secured by a leasehold mortgage and a pledge of the operator’s equity interest in a joint venture.
Other real estate loan due 2024
Our other investment note due in 2024 consisted of a $60.0 million mezzanine loan, with an operator,
that was acquired and financed in 2016 and subsequently amended and refinanced in May 2018. The loan
was amended again in 2022. As amended, the mezzanine loan bore interest at a fixed interest rate of 12%
per annum and contractually matured on May 31, 2024. During the third quarter of 2022, this loan was
fully repaid.
Other real estate loans outstanding
Preferred Equity Investment in Joint Venture — $20 million
On June 2, 2022, we made a $20.0 million preferred equity investment, which is treated as a loan for
accounting purposes, in a new real estate joint venture that was formed to acquire an acute care hospital in
New York. Omega’s preferred equity investment bears a 12% return per annum and must be mandatorily
redeemed by the joint venture at the earlier of December 2027 or the occurrence of certain significant
events within the joint venture. We have determined that the joint venture is a VIE, but we are not the
primary beneficiary as we do not have the power to direct the activities that most significantly impact the
joint venture’s economic performance. As such, this $20.0 million preferred equity investment is included in
the unconsolidated VIE table presented in Note 10 — Variable Interest Entities.
F-39
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 8 — NON-REAL ESTATE LOANS RECEIVABLE
Our non-real estate loans consist of fixed and variable rate loans to operators and/or principals. These
loans may be either unsecured or secured by the collateral of the borrower, which may include the working
capital of the borrower. As of December 31, 2022, we had 29 loans with 15 different borrowers. A summary
of our non-real estate loans is as follows:
December 31, December 31,
2022
2021
(in thousands)
Notes due 2024-2025; interest at 8.12%(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes due 2022-2028; interest at 10.44%(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . .
Notes due 2036; interest at 8.13%(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note due 2027; interest at 12.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note due 2024; interest at 7.50% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other notes outstanding(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-real estate loans receivable – gross . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for credit losses on other investments . . . . . . . . . . . . . . . . . . . . . . .
Total non-real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . .
$ 55,791
55,981
32,539
39,653
47,999
77,186
309,149
(83,868)
$225,281
$ 55,791
22,142
2,690
—
15,000
88,982
184,605
(60,421)
$124,184
(1) Approximate weighted average interest rate as of December 31, 2022.
(2)
Includes one loan with a principal balance of $1.5 million that was to mature in 2022 but remains outstanding as of
December 31, 2022. We are in negotiations to extend the loan.
(3) Other notes outstanding have a weighted average interest rate of 7.18% as of December 31, 2022 with maturity dates ranging
from 2022 through 2028 (with $10.8 million maturing in 2023). We have two loans within other notes outstanding with aggregate
principal of $9.8 million that were to mature in 2022, but remain outstanding as of December 31, 2022. We are in negotiations to
extend a $4.4 million loan to 2024 and we have fully reserved the other $5.4 million loan.
For the years ended December 31, 2022, 2021 and 2020, non-real estate loans generated interest income
of $13.6 million, $12.7 million and $17.0 million, respectively. Interest income on non-real estate loans is
included within interest income on the Consolidated Statements of Operations.
Notes due 2024-2025
Notes due in 2024-2025 consist of a $32 million secured term loan (the “Agemo Term Loan”) and a
$25.0 million secured working capital loan (the “Agemo WC Loan”) with Agemo. The Agemo Term Loan
was acquired in 2016 and bears interest at 9% per annum. The Agemo Term Loan matures on
December 31, 2024 and is secured by a security interest in certain collateral of Agemo. The Agemo WC
Loan was issued on May 7, 2018 and bears interest at 7% per annum. The Agemo WC Loan matures on
April 30, 2025 and is primarily secured by a collateral package that includes a second lien on the accounts
receivable of Agemo. The proceeds of the Agemo WC Loan were used to pay operating expenses,
settlement payments, fees, taxes and other costs approved by the Company.
During the third quarter of 2020, we evaluated both loans for impairment upon receiving information
from Agemo regarding substantial doubt of its ability to continue as a going concern. Based on our
evaluation, we recorded a provision for credit loss of $22.7 million in the third quarter of 2020 to reduce the
carrying value of the loans to the fair value of the underlying collateral. We also fully reserved
approximately $3.8 million of contractual interest receivable related to the Agemo Term Loan in the third
quarter of 2020 (see Note 9 — Allowance for Credit Losses).
As discussed in Note 5 — Contractual Receivables and Other Receivables and Lease Inducements,
Agemo failed to pay contractual rent and interest to us from August 2021 through October 2021 and in
December 2021. In the third quarter of 2021, we recorded an additional provision for credit loss of
$16.7 million related to these loans as a result of a reduction in the fair value of the underlying collateral
F-40
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
assets. The reduction in fair value of the collateral assets was primarily driven by the application of
Agemo’s $9.3 million letter of credit that supported the value of the Agemo Term Loan to Omega’s
uncollected receivables and a reduction in Agemo’s working capital accessible to Omega as collateral, after
considering other liens on the assets. Additionally, the loan has been placed on non-accrual status and we
will use the cost recovery method and will apply any interest and fees received directly against the principal
of the loan. During the year ended December 31, 2021, we received $1.2 million of interest payments which
was applied against the principal.
Agemo continued to not pay contractual rent and interest due under its lease and loan agreements
throughout 2022. During the year ended December 31, 2022, we recorded additional provisions for credit
losses of $10.8 million related to the Agemo WC Loan because of reductions in the fair value of the
underlying collateral assets supporting the current carrying values. At December 31, 2022, the total carrying
value of our loans outstanding with Agemo, net of allowances for credit losses, is approximately
$5.9 million.
As discussed in Note 5 — Contractual Receivables and Other Receivables and Lease Inducements, in
the first quarter of 2023, Omega entered into a restructuring agreement and a replacement loan agreement
that modified the existing Agemo loans. Under the restructuring agreement, previously written off
contractual unpaid interest related to the Agemo WC Loan and the Agemo Term Loan was forgiven. The
outstanding principal of the Agemo Term Loan was rolled into a $32.0 million loan (“Agemo Replacement
Loan A”). The outstanding principal of the Agemo WC Loan and the aggregate rent deferred and
outstanding under the Agemo lease agreement will be combined into a $50.2 million loan (“Agemo
Replacement Loan B” and with Agemo Replacement Loan A, the “Agemo Replacement Loans”). The
Agemo Replacement Loans bear interest at 5.71% per annum and mature on December 31, 2036. No
interest payments will accrue or are required to be paid until March 1, 2023, contingent upon Agemo’s
compliance with certain conditions of the restructuring agreement. After three years, Agemo is required to
make principal payments on the Agemo Replacement Loans dependent on certain cash flow metrics.
Notes due 2022-2028
Notes due 2022-2028 consists of eight loans with the same operator that are primarily short-term
revolving lines of credit that are collateralized by the accounts receivable of certain operations of the
operator. The most significant of the outstanding loans is a short-term $90.0 million revolving line of credit
that we entered into on June 28, 2022 in connection with the $35.6 million mezzanine loan discussed in
Note 7 — Real Estate Loans Receivable above. The loan proceeds were used by this operator to finance
working capital requirements of new operations in a new state to the operator. The line of credit consists of
two $45.0 million tranches that bear interest at fixed rates of 10% per annum and 12% per annum and
mature on June 30, 2023 and June 1, 2023 (or earlier based on certain state reimbursement conditions),
respectively. The revolving line of credit is secured by a first priority interest on the operator’s accounts
receivable related to the new operations. As of December 31, 2022, the outstanding principal under this
revolving line of credit was $33.0 million.
Notes due 2036
On September 1, 2021, we entered into an $8.3 million term loan with LaVie to be funded through
monthly advances in the amount of $0.7 million from September 2021 through August 2022. This term
loan bears interest at a fixed rate of 7% per annum (which may be paid-in-kind for the first year of the
loan), matures on March 31, 2031 and requires monthly principal payments of $0.1 million commencing
September 1, 2022. The loan is secured by a guarantee from LaVie’s parent entities.
On March 25, 2022, we entered into a $25.0 million term loan with LaVie that bears interest at a fixed
rate of 8.5% per annum and matures on March 31, 2032. This term loan requires quarterly principal
payments of $1.3 million commencing January 1, 2028 and is secured by a second priority lien on the
operator’s accounts receivable.
F-41
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the fourth quarter of 2022, we amended these loans with LaVie to, among other terms, extend
the loan maturities to November 30, 2036 to align with the lease term, and starting in January 2023, reduce
the interest rates to 2%, remove the requirement to make any principal payments until the maturity dates
and to convert from monthly cash interest payments to interest paid-in-kind. These amendments were
treated as loan modifications. In the fourth quarter of 2022, we reduced the risk rating on these loans from
a 5 to a 6, primarily due to the modifications of the loan terms. Given the modifications, we evaluated the
risk of loss on these loans on an individual basis based on the fair value of the collateral. Based on our
evaluation of the collateral, during the fourth quarter of 2022, we recognized provisions for credit losses of
$7.5 million related to the $8.3 million term loan (to fully reserve the loan balance) and $15.8 million related
to the $25.0 million term loan. Following the sale of 11 facilities in the fourth quarter of 2022, discussed in
Note 4 — Assets Held for Sale, Dispositions and Impairments, the remaining accounts receivable
outstanding that collateralize the $25.0 million term loan was insufficient to support the current
outstanding balance, and as a result, we recorded the additional reserves to reduce the carrying value of the
$25.0 million loan to the fair value of the collateral. Additionally, the loans were placed on non-accrual
status and we will use the cost recovery method and will apply any interest and fees received directly against
the principal of the loans. During the year ended December 31, 2022, we applied $0.4 million of interest
payments received to the $25.0 million term loan principal balance outstanding and $0.1 million of interest
payments received to the $8.3 million term loan principal balance outstanding. As of December 31, 2022,
the amortized cost basis of these loans was $32.5 million, which represents 10.5% of the total amortized
cost basis of all non-real estate loan receivables. The total reserve as of December 31, 2022 related to the
LaVie loans was $25.0 million.
Note due 2027
On September 1, 2022, we entered into a $40.0 million mezzanine loan with a new operator. The loan
bears interest at a fixed rate of 12% per annum and matures on September 14, 2027. The loan also requires
semi-annual principal payments of $1.7 million in January and July, commencing on January 1, 2023, and
additional payments contingent on the occurrence of certain conditions. The loan is secured by an equity
interest in subsidiaries of the operator. In February 2023, this loan was repaid.
Note due 2024
On July 8, 2019, the Company entered into a $15 million unsecured revolving credit facility agreement
with a principal of an operator that bears interest at a fixed rate of 7.5% per annum and originally matured
on July 8, 2022. During 2022, this revolving credit facility was amended multiple times to increase the
maximum principal to $48 million, extend the maturity date to December 31, 2024 and require monthly
principal payments of $0.5 million beginning in July 2022, which increase to $1.0 million in January 2023,
to $1.5 million in August 2023 and to $2.5 million in December 2023. No principal payment amounts were
required for the months of November and December 2022.
Other notes outstanding
As of December 31, 2022, our other notes outstanding represents 15 loans to operators that primarily
consists of term loans and working capital loans or revolving credit facilities. Many of these loans are not
individually significant and the use of proceeds of these loans can vary. Included below are the significant
new loans entered into during the years ended December 31, 2022, 2021 and 2020 and significant updates to
any existing loans.
Working Capital Loan — $20 million
In November 2021, we entered into a $20.0 million working capital loan (the “$20.0 million WC loan”)
with an operator that managed, on an interim basis for a 4-month period, the operations of 23 facilities
formerly leased to Gulf Coast. The $20.0 million WC loan bears interest at 3% per annum. The maturity
date of the $20.0 million WC loan was the earlier of (i) December 31, 2022, (ii) the date of the termination
F-42
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of one or more of the MOTAs, or (iii) the date that New Manager requests that the loan be terminated.
Advances under the working capital loan are not required to be repaid until maturity. The $20.0 million WC
loan is secured by the accounts receivables of these facilities during the interim period of operation.
During the year ended December 31, 2022, we recognized provisions for credit losses of $5.2 million
related to the $20.0 million WC loan, which resulted in the loan being fully reserved. Following the sale of
22 facilities, discussed in Note 4 — Assets Held for Sale, Dispositions and Impairments, the remaining
accounts receivable outstanding that collateralize the loan was insufficient to support the current
outstanding balance, and as a result, we recorded the additional reserves to reduce the carrying value of the
loan to the fair value of the collateral. The $20.0 million WC Loan was placed on non-accrual status during
the third quarter of 2022 and is being accounted for under the cost recovery method. As of December 31,
2022, the outstanding principal under this loan was $5.4 million.
Gulf Coast — DIP Facility
As discussed in Note 5 — Contractual Receivables and Other Receivables and Lease Inducements, in
October 2021, we provided an up to $25.0 million senior secured DIP facility (the “DIP Facility”) with Gulf
Coast, in order to provide liquidity for the operations of the Gulf Coast facilities during its Chapter 11
cases. A portion of the funding under the DIP Facility was tied to certain milestones and other conditions,
including the transition of the management of the operations of the facilities. At December 31, 2021, these
milestones and conditions had been met and the full capacity of the DIP Facility was available to be
borrowed upon by Gulf Coast. The DIP Facility bears interest at LIBOR (subject to a 1% floor) plus 12%
per annum and has an unused commitment fee equal to .50% of the average daily balance of the undrawn
commitments. Interest and fees are payable monthly and the principal is due at maturity, unless the amount
outstanding thereunder is accelerated prior to maturity. The DIP financing is guaranteed by all debtors in
Gulf Coast’s Chapter 11 cases and is secured by liens on substantially all of their assets, including
post-petition accounts receivable, subject in certain cases to other priorities or exceptions. As of
December 31, 2021, $20.5 million was outstanding under the DIP Facility, which was fully reserved for as
discussed further below.
Given the uncertainty and complexity surrounding the bankruptcy process and the deteriorated credit
of Gulf Coast, we evaluated the DIP facility on an individual basis and elected to measure the risk of loss
on the DIP Facility based on the fair value of the collateral. Based on the cash forecasts provided by Gulf
Coast as part of the Support Agreement and on-going monthly reporting, we estimated that the collateral
will have insufficient value to support the loan at maturity and that we will be unable to collect on
substantially all principal amounts advanced to Gulf Coast under the DIP Facility. Upon funding, we fully
reserved all principal amounts advanced under the DIP Facility. In the fourth quarter of 2021, we recorded
reserves of $20.0 million (the principal outstanding after considering interest payments applied to principal
discussed below) related to the DIP facility through the provision for credit losses on December 31, 2021.
See further discussion within Note 9 — Allowance for Credit Losses. Additionally, we have placed the loan
on non-accrual status and used the cost recovery method to apply any interest and fees received directly
against the principal of the loan. During the year ended December 31, 2021, we received $0.5 million of
interest and fee payments that we applied against the outstanding principal and recognized a recovery for
credit loss equal to the amount of payments applied against the principal.
During the year ended December 31, 2022, we recorded an additional net provision for credit losses of
$0.2 million related to the DIP Facility, which reflects the full reserve of additional advances of $2.2 million
made under the facility during 2022 and a $2.0 million recovery for interest and fee payments received
during 2022 that were applied against the outstanding principal. The DIP facility matured on August 15,
2022, which resulted in a write-off of the loan and reserve balances.
Revolving Credit Facility — $25 million
On October 1, 2021, the Company amended the terms of a $15 million revolving credit facility with an
operator (the 3.7% Operator discussed in Note 5 — Contractual Receivables and Other Receivables and
Lease Inducements) that was previously issued in December 2020 and had a maturity date of December 1,
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OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2022. The amendment increased the maximum principal of $20 million, reduced the interest rate to 5% for
the first year and 6% thereafter and extended the maturity date to September 30, 2024. The credit facility is
secured by a first lien on the accounts receivable of the 3.7% Operator. Following the amendment in the
fourth quarter, the 3.7% Operator drew $7.8 million under the credit facility during the fourth quarter of
2021. This revolving credit facility was further amended in the fourth quarter of 2022 to increase the
maximum principal to $25 million, with any borrowed amount in excess of $20 million to be repaid no later
than June 30, 2023. During 2022, the 3.7% Operator drew $9.0 million under the facility and the line of
credit of $25.0 million was fully drawn as of December 31, 2022.
As discussed in Note 5 — Contractual Receivables and Other Receivables and Lease Inducements,
from January through March 2022, the 3.7% Operator paid contractual interest under the credit facility but
failed to pay contractual rent due under its lease agreement. In March 2022, the lease with the 3.7%
Operator was amended to allow for a short-term rent deferral for January through March 2022. The 3.7%
Operator paid the contractual amount due under its lease and loan agreements from April 2022 through
December 2022.
Promissory Notes — $20 million
In the fourth quarter of 2022, the Company entered into three unsecured loans with a principal of an
operator with principal amounts of $17.0 million, $2.5 million and $0.5 million. The loans bear interest at
9% and mature on September 30, 2027. All three loans require quarterly principal payments commencing
on January 3, 2023.
Second Spring Healthcare Investments
On April 17, 2020, we provided a $17.6 million unsecured loan to a subsidiary of Second Spring
Healthcare Investments (an entity in which we have an approximate 15% ownership interest, see
Note 11 — Investments in Joint Ventures) bearing interest at the greater of the prime interest rate or
3-month LIBOR plus 2.75% per annum which was due on demand. This loan was repaid in 2021.
F-44
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 9 — ALLOWANCE FOR CREDIT LOSSES
In the fourth quarter of 2022, we revised the presentation of certain loans subject to our allowance for
credit losses as discussed in Note 2 — Summary of Significant Accounting Policies. The disclosures below
have been reclassified to conform to the revised presentation. A rollforward of our allowance for credit
losses, summarized by financial instrument type and internal credit risk rating, for the years ended
December 31, 2022, 2021 and 2020 is as follows:
Provision (recovery) Write-offs charged
Allowance for
Credit Loss as of
December 31,
2021
for Credit Loss
for the year ended
December 31,
2022
against allowance Allowance for Credit
for the year ended
December 30,
2022
Loss as of
December 31,
2022
(in thousands)
$ —
$
Rating
Financial Statement
Line Item
1 . . . Real estate loans receivable
2 . . . Real estate loans receivable
3 . . . Real estate loans receivable
4 . . . Real estate loans receivable
5 . . . Real estate loans receivable
6 . . . Real estate loans receivable
Sub-total
3 . . . Investment in direct financing leases
5 . . . Investment in direct financing leases
Sub-total
2 . . . Non-real estate loans receivable
3 . . . Non-real estate loans receivable
4 . . . Non-real estate loans receivable
5 . . . Non-real estate loans receivable
6 . . . Non-real estate loans receivable
Sub-total
2 . . . Off-balance sheet non-real estate loan commitments
3 . . . Off-balance sheet non-real estate loan commitments
3 . . . Off-balance sheet real estate loan commitments
4 . . . Off-balance sheet non-real estate loan commitments
4 . . . Off-balance sheet real estate loan commitments
6 . . . Off-balance sheet non-real estate loan commitments
Sub-total
Total
$
—
14
5,367
20,577
136
56,480
82,574
530
—
530
29
1,206
56
7,861
51,269
60,421
7
207
251
216
117
143
941
$
162
143
9,743
13,089
(136)
248
23,249
(530)
2,816
2,286
830
873
578
10,758(2)
—
—
—
—
(4,463)(1)
(4,463)
—
—
—
—
—
—
—
28,460(3)(4)
(18,052)(5)
41,499
(18,052)
200
(178)
(251)
(216)
(33)
2,107(5)
1,629
—
—
—
—
—
(2,250)(5)
(2,250)
162
157
15,110
33,666
—
52,265
101,360
—
2,816
2,816
859
2,079
634
18,619
61,677
83,868
207
29
—
—
84
—
320
$144,466
$68,663
$(24,765)
$188,364
(1) During the third quarter of 2022, we wrote-off the loan balance and reserve for one real estate loan with a rating of 6 that
expired during the third quarter which had previously been fully reserved.
(2) Reflects additional provisions of $10.8 million recorded on the Agemo WC Loan during the year ended December 31, 2022. See
Note 8 — Non-real Estate Loans Receivable for additional information on the Agemo WC Loan.
(3) Reflects aggregate provisions of $23.3 million recorded on the LaVie $25.0 million term loan and on the $8.3 million term loan
during the fourth quarter of 2022. See Note 8 — Non-real Estate Loans Receivable for additional information on the LaVie term
loans.
(4) Reflects an additional provision of $5.2 million recorded on the $20 million WC loan during the year ended December 31, 2022
as discussed in Note 8 — Non-real Estate Loans Receivable.
(5)
In the second quarter of 2022, we recorded an additional reserve of $2.2 million related to the remaining commitment under the
DIP facility as we were notified of the operator’s intent to draw the funds in the third quarter of 2022. In the third quarter of
2022, the remaining commitment under the facility was drawn and the facility expired and as a result we wrote-off the loan
balance and related reserves as we do not expect to collect amounts under the facility following the expiration.
F-45
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Rating
Financial Statement
Line Item
Allowance for
Credit Loss at
December 31,
2020
for Credit Loss
for the year ended
December 31,
2021
Provision (recovery) Write-offs charged
against allowance
for the year ended Credit Loss as of
Allowance for
December 30,
2021
December 31,
2021
2 . . . Real estate loans receivable
$
86
$
(72)
$ —
$
14
(in thousands)
3 . . . Real estate loans receivable
4 . . . Real estate loans receivable
5 . . . Real estate loans receivable
6 . . . Real estate loans receivable
Sub-total
3 . . . Investment in direct financing leases
Sub-total
2 . . . Non-real estate loans receivable
3 . . . Non-real estate loans receivable
4 . . . Non-real estate loans receivable
5 . . . Non-real estate loans receivable
6 . . . Non-real estate loans receivable
Sub-total
2 . . . Off-balance sheet non-real estate loan commitments
3 . . . Off-balance sheet non-real estate loan commitments
3 . . . Off-balance sheet real estate loan commitments
4 . . . Off-balance sheet non-real estate loan commitments
4 . . . Off-balance sheet real estate loan commitments
6 . . . Off-balance sheet non-real estate loan commitments
4,652
28,206
434
4,905
38,283
694
694
94
1,415
23,056
1,854
—
26,419
116
209
2,096
—
24
—
715
(7,629)(1)
(298)
51,575(1)
44,291
(164)
(164)
(65)
(209)
(23,000)(2)
6,102(3)
51,269(2)(4)
34,097
(109)
(2)
(1,845)
216
93
143
Sub-total
Total
2,445
$67,841
(1,504)
$ 76,720
—
—
—
—
—
—
—
—
—
—
(95)
—
(95)
—
—
—
—
—
—
—
5,367
20,577
136
56,480
82,574
530
530
29
1,206
56
7,861
51,269
60,421
7
207
251
216
117
143
941
$(95)
$144,466
(1) Amount reflects the movement of reserves associated with our mortgage loan with Guardian due to a reduction of our internal
risk rating on the loan from a 4 to a 6 during 2021. As discussed in Note 7 — Real Estate Loans Receivable, we elected to
evaluate the risk of loss on the loan on an individual basis, which resulted in recording an additional $38.2 million reserve on the
mortgage loan. This amount also reflects $4.5 million of additional allowance recorded in the second quarter of 2021 to fully
impair one real estate loan receivable with a rating of 4 that was subsequently reduced to a rating of 6 in the third quarter of
2021.
(2) Amount reflects the movement of $22.7 million of reserves from non-real estate loans receivable with a rating of 4 to non-real
estate loans receivable with a rating of 6 as a result of a reduction of our internal credit rating from a 4 to a 6 on the Agemo
Term Loan during the third quarter of 2021. Concurrent with reducing the risk rating on the Agemo Term Loan to a 6, we
recorded an additional provision of $8.8 million to fully reserve the remaining carrying value of the Agemo Term Loan. See
Note 8 — Non-real Estate Loans Receivable for additional information on the conditions that drove the additional Agemo Term
Loan provision and rating reduction.
(3) The provision includes an additional $7.9 million allowance recorded on the Agemo WC Loan during the third quarter of 2021.
We also reduced the internal rating on the Agemo WC Loan from a 4 to a 5 during the third quarter of 2021. See
Note 8 — Non-real Estate Loans Receivable for additional information on the conditions that drove the additional Agemo WC
Loan provision and rating reduction.
(4) Amount reflects $20.0 million of additional allowance recorded in the fourth quarter of 2021 to fully reserve the remaining
carrying value of the DIP Facility. See Note 8 — Non-real Estate Loans Receivable for additional information on the DIP
Facility.
F-46
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Allowance
for Credit
Loss at
Allowance
for Credit
Loss at
Provision
(recovery)
for Credit
Loss for the
year ended
Write-offs
charged
against
allowance
for the
year ended
Allowance
for Credit
Loss as of
Rating
Financial Statement
Line Item
December 31, January 1, December 31, December 30, December 31,
2019
2020
2020
2020
2020
(in thousands)
2 . . . Real estate loans receivable
$ —
$ —
$
86
$ —
$
86
3 . . . Real estate loans receivable
4 . . . Real estate loans receivable
5 . . . Real estate loans receivable
6 . . . Real estate loans receivable
Sub-total
3 . . .
Investment in direct financing leases
Sub-total
2 . . . Non-real estate loans receivable
3 . . . Non-real estate loans receivable
4 . . . Non-real estate loans receivable
5 . . . Non-real estate loans receivable
Sub-total
2 . . . Off-balance sheet non-real estate loan commitments
3 . . . Off-balance sheet non-real estate loan commitments
3 . . . Off-balance sheet real estate loan commitments
4 . . . Off-balance sheet real estate loan commitments
Sub-total
Total
—
—
—
4,905
4,905
217
217
—
—
—
—
—
—
—
—
—
—
1,721
21,419
1,150
364
2,931
6,787
(716)
(364)
24,654
8,724
611
611
195
614
1,031
1,580
3,420
—
—
—
100
100
83
83
(101)
801
22,025
274
22,999
116
209
2,096
(76)
2,345
—
—
—
—
—
(217)
(217)
—
—
—
—
—
—
—
—
—
—
4,652
28,206
434
4,905
38,283
694
694
94
1,415
23,056
1,854
26,419
116
209
2,096
24
2,445
$5,122
$28,785
$34,151
$(217)
$67,841
F-47
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Included below is a summary of the amortized cost basis of our financial instruments by year of
origination and internal risk rating and a summary of our gross write-offs by year of origination:
Rating
Financial Statement
Line Item
2022
2021
2020
2019
2018
2017
(in thousands)
Balance as of
2016 & Revolving December 31,
older
Loans
2022
1 . . . Real estate loans receivable
$ 20,000 $
— $
— $ — $
— $ — $ 63,811 $
2 . . . Real estate loans receivable
—
—
21,325
—
3 . . . Real estate loans receivable
35,600
72,420
—
6,655
—
—
—
—
—
1,373
250,500
366,548
4 . . . Real estate loans receivable
186
27,736
89,559
5,099 127,571 11,280 322,005
5 . . . Real estate loans receivable
6 . . . Real estate loans receivable
—
—
—
—
—
—
—
—
—
—
—
—
—
88,971
—
—
—
583,436
—
88,971
Sub-total
55,786 100,156 110,884 11,754 127,571 11,280 476,160
250,500
1,144,091
—
—
$
83,811
21,325
5 . . . Investment in direct financing leases
Sub-total
2 . . . Non-real estate loans receivable
3 . . . Non-real estate loans receivable
4 . . . Non-real estate loans receivable
5 . . . Non-real estate loans receivable
—
—
33,000
63,704
2,299
—
—
—
—
—
—
—
6 . . . Non-real estate loans receivable
24,640
7,899
123,643
7,899
Sub-total
Total
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,131
10,800
4,260
—
—
—
24,548
4,425
9,391
39,773
—
—
—
—
—
—
—
—
11,319
11,319
—
—
—
—
56,299
9,550
1,000
25,000
—
—
31,243
5,351
11,319
11,319
89,299
89,185
32,559
24,548
73,558
32,243
96,200
309,149
$179,429 $108,055 $110,884 $21,145 $167,344 $11,280 $519,722 $346,700
$1,464,559
Year to date gross write-offs
$
— $ (20,302) $
— $ — $ (4,463) $ — $
— $
—
$
(24,765)
Interest Receivable on Real Estate Loans and Non-real Estate Loans
We have elected the practical expedient to exclude interest receivable from our allowance for credit
losses. As of December 31, 2022 and 2021, we have excluded $8.2 million and $11.1 million, respectively, of
contractual interest receivables and $5.7 million and $9.6 million, respectively, of effective yield interest
receivables from our allowance for credit losses. We write-off interest receivable to provision for credit losses
in the period we determine the interest is no longer considered collectible. For the years ended
December 31, 2021 and 2020, we wrote-off interest receivables of $1.0 million (related to the Guardian
mortgage loan, see Note 7 — Real Estate Loans Receivable) and $3.8 million (related to the Agemo Term
Loan, see Note 8 — Non-real Estate Loans Receivable) through the provision for credit losses. This
write-off is not reflected in the roll forward of the allowance for credit losses above.
During the years ended December 31, 2022, 2021 and 2020, we recognized $17.2 million, $25.9 million
and $22.7 million, respectively, of interest income related to loans on non-accrual status as of December 31,
2022.
NOTE 10 — VARIABLE INTEREST ENTITIES
We hold variable interests in several VIEs through our investing and financing activities, which are not
consolidated, as we have concluded that we are not the primary beneficiary of these entities as we do not
have the power to direct activities that most significantly impact the VIE’s economic performance and/or
the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive
benefits from the VIE which could potentially be significant.
F-48
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Below is a summary of our assets, liabilities, collateral, and maximum exposure to loss associated with
these unconsolidated VIEs as of December 31, 2022 and 2021:
December 31,
2022
December 31,
2021
(in thousands)
Assets
Real estate assets – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 982,721 $ 1,144,851
191,016
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201,613
Real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,155
Non-real estate loans receivable – net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,227
Contractual receivables – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,795
Other receivables and lease inducements
. . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,590,657
Liabilities
—
270,500
5,929
114
—
1,499
1,260,763
Net in-place lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral
(280)
(4,828)
(43,915)
(1,499)
(50,522)
(305)
(4,715)
(43,915)
—
(48,935)
—
Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(48,000)
Personal guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other collateral(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,335,867)
Total collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,383,867)
Maximum exposure to loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 179,520 $ 157,855
—
(48,000)
(982,721)
(1,030,721)
(1) Amount excludes accounts receivable amounts that Omega has a security interest in as collateral under the two working capital
loans with operators that are unconsolidated VIEs. The fair value of the accounts receivable available to Omega was $5.9 million
and $29.2 million as of December 31, 2022 and December 31, 2021, respectively.
In determining our maximum exposure to loss from these VIEs, we considered the underlying carrying
value of the real estate subject to leases with these operators and other collateral, if any, supporting our
other investments, which may include accounts receivable, security deposits, letters of credit or personal
guarantees, if any, as well as other liabilities recognized with respect to these operators.
The table below reflects our total revenues from the operators that are considered VIEs for the years
ended December 31, 2022, 2021 and 2020:
Year Ended December 31,
2022
2021
2020
(in thousands)
Revenue
Rental income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,158 $120,381 $30,055
11,864
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,614 $135,717 $41,919
15,336
16,456
(1) The rental income for the year ended December 31, 2022, reflects the write-off of approximately $29.3 million of straight-line
rent receivables and lease inducements related to Maplewood (see Note 5 — Contractual Receivables and Other Receivables and
Lease Inducements). The rental income for the year ended December 31, 2020, reflects the write-off of approximately
$75.3 million of contractual rent receivables, straight-line rent receivables and lease inducements related to Agemo (see
Note 5 — Contractual Receivables and Other Receivables and Lease Inducements).
F-49
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Consolidated VIEs
During the first quarter of 2022, we entered into a joint venture, which owns two ALFs, for a
$3.2 million cash contribution, representing 52.4% of the outstanding equity of the joint venture. We also
sold an ALF to the joint venture for $7.7 million in net proceeds during the first quarter of 2022. The joint
venture is a VIE, and we have concluded that we are the primary beneficiary of this VIE based on a
combination of our ability to direct the activities that most significantly impact the joint venture’s economic
performance and our rights to receive residual returns or the obligation to absorb losses arising from the
joint venture. Accordingly, this joint venture has been consolidated. Omega is not required to make any
additional capital contributions to the joint venture. As of December 31, 2022, this joint venture has
$25.8 million of total assets and $19.8 million of total liabilities, which are included in our Consolidated
Balance Sheets. As a result of consolidating the joint venture, in the first quarter of 2022, we recorded a
$2.9 million noncontrolling interest to reflect the contributions of the minority interest holder of the joint
venture. No gain or loss was recognized on the initial consolidation of the VIE or upon the sale of the ALF
to the joint venture.
In addition, as discussed in Note 3 — Real Estate Asset Acquisitions and Development, we
consolidated the EATs that are classified as VIEs. See further discussion of EATs that are consolidated in
Note 3 — Real Estate Asset Acquisitions and Development.
F-50
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 11 — INVESTMENTS IN JOINT VENTURES
Unconsolidated Joint Ventures
Omega owns an interest in a number of joint ventures which generally invest in the long-term
healthcare industry. The following is a summary of our investments in unconsolidated joint ventures
(dollars in thousands):
Entity
%
Date
Investment(1)
Ownership Initial Investment
Carrying Amount
Facility
Type
Facilities at
12/31/2022
December 31, December 31,
2022
2021
Second Spring Healthcare
Investments(2) . . . . . . . .
. .
Second Spring II LLC(3)
15%
15%
11/1/2016
3/10/2021
Lakeway Realty, L.L.C.(4) . .
Cindat Joint Venture(5)
. . .
OMG Senior Housing,
LLC . . . . . . . . . . . . . . .
OH CHS SNP, Inc. . . . . . .
51%
49%
5/17/2019
12/18/2019
50%
9%
12/6/2019
12/20/2019
$ 50,032
10,330
SNF
SNF
Specialty
facility
73,834
105,688 ALF
—
—
1
63
Specialty
facility
—
1,013 N/A
1
N/A
$240,897
$ 10,975
—
$ 11,355
8
70,151
97,382
71,286
111,792
—
412
$178,920
—
246
$194,687
(1) Our investment includes our transaction costs, if any.
(2) The Company made a loan of $17.6 million in April 2020 to the venture which is included in other investments. See
Note 8 — Non-real Estate Loans Receivable. During the first quarter of 2021, this joint venture sold 16 SNFs to an unrelated
third party for approximately $328 million in net proceeds and recognized a gain on sale of approximately $102.2 million
($14.9 million of which represents the Company’s share of the gain). During the first quarter of 2021, this joint venture also sold
five SNFs to Second Spring II LLC for approximately $70.8 million in net proceeds. During 2020, this joint venture sold 16
SNFs subject to an operating lease for approximately $259.1 million in net cash proceeds and recognized a gain on sale of
approximately $40.4 million ($5.9 million of which represents the Company’s share of the gain).
(3) We acquired a 15% interest in Second Spring II LLC for approximately $10.3 million. During the first quarter of 2021, this joint
venture acquired five SNFs from Second Spring Healthcare Investments for approximately $70.8 million. During the second and
third quarters of 2021, this joint venture sold five SNFs to an unrelated third party for approximately $65 million in net proceeds
and recognized a loss on sale of approximately $0.4 million ($0.1 million of which represents the Company’s share of the loss).
(4) We acquired an interest in a joint venture that owns the Lakeway Regional Medical Center (the “Lakeway Hospital”) in Lakeway,
Texas. Our initial basis difference of approximately $69.9 million is being amortized on a straight-line basis over 40 years to
income (loss) from unconsolidated joint ventures in the Consolidated Statements of Operations. The lessee of the Lakeway
Hospital has an option to purchase the facility from the joint venture. The lessee also has a right of first refusal and a right of
first offer in the event the joint venture intends to sell or otherwise transfer Lakeway Hospital.
(5) We acquired a 49% interest in Cindat Ice Portfolio JV, GP Limited, Cindat Ice Portfolio Holdings, LP and Cindat Ice Portfolio
Lender, LP. Cindat Ice Portfolio Holdings, LP owns 63 care homes leased to two operators in the U.K. pursuant to operating
leases. Cindat Ice Portfolio Lender, LP holds loans to a third-party operator. Our investment in Cindat Joint Venture consists
primarily of real estate. Our initial basis difference of approximately $35 million is being amortized on a straight-line basis over
approximately 40 years to income (loss) from unconsolidated joint ventures in the Consolidated Statements of Operations.
F-51
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table reflects our income (loss) from unconsolidated joint ventures for the years
ended December 31, 2022, 2021 and 2020:
Entity
Year Ended December 31,
2022
2021
2020
(in thousands)
Second Spring Healthcare Investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . $1,170 $12,323 $2,807
—
Second Spring II LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,483
Lakeway Realty, L.L.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,812
Cindat Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(497)
OMG Senior Housing, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OH CHS SNP, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(462)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,261 $16,062 $6,143
(2)
2,637
3,910
(508)
54
(757)
2,562
2,478
(417)
(127)
(1) The income from this unconsolidated joint venture for the year ended December 31, 2021 includes a $14.9 million gain on sale of
real estate investments.
Asset Management Fees
We receive asset management fees from certain joint ventures for services provided. For the years ended
December 31, 2022, 2021 and 2020, we recognized approximately $0.7 million, $0.8 million and
$1.2 million, respectively, of asset management fees. These fees are included in miscellaneous income in the
accompanying Consolidated Statements of Operations.
Other Equity Investments
In the third quarter of 2021, we made an investment of $20.0 million in SafelyYou, Inc. (“SafelyYou”),
a technology company that has developed artificial intelligence-enabled video that detects and helps prevent
resident falls in ALFs and SNFs. Through our investment, we obtained preferred shares representing 5% of
the outstanding equity of SafelyYou and warrants to purchase SafelyYou common stock representing an
additional 5% of outstanding equity as of the date of our investment. SafelyYou has committed, for a
specified period, to using the proceeds of our investment to install its technology in our facilities or other
facilities of our operators. The vesting of the warrants is contingent upon SafelyYou’s attainment of certain
installation targets in our facilities. To the extent these installation targets are not attained, the investment
funds associated with the unvested warrants would be returned to Omega. The investment in the preferred
shares and warrants are recorded within other assets on the Consolidated Balance Sheets. As of
December 31, 2022, 10% of the SafelyYou warrants have vested as a result of certain installation targets
being met.
NOTE 12 — GOODWILL AND OTHER INTANGIBLES
The following is a summary of our goodwill:
Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of subsidiary(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(in thousands)
$651,417
(1,571)
(6,695)
$643,151
(1)
In the fourth quarter of 2022, we sold a senior living focused technology company acquired by Omega in 2020, for a 6% equity
investment in the acquiring entity that offers a suite of technology services to senior living facilities. In connection with the sale,
we recognized a $1.2 million gain in other expense (income) — net. We included $6.7 million of goodwill in the net assets
disposed in connection with the transaction. Our investment in the acquiring entity is included within other assets in the
consolidated balance sheet as December 31, 2022.
F-52
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following is a summary of our lease intangibles as of December 31, 2022 and 2021:
December 31, December 31,
2022
2021
(in thousands)
Assets:
Above market leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net above market leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,929
(4,484)
$ 1,445
$ 5,929
(4,313)
$ 1,616
Liabilities:
Below market leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net below market leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 66,433
(44,595)
$ 21,838
$ 66,324
(38,091)
$ 28,233
Above market leases, net of accumulated amortization, are included in other assets on our
Consolidated Balance Sheets. Below market leases, net of accumulated amortization, are included in
accrued expenses and other liabilities on our Consolidated Balance Sheets. The net amortization related to
the above and below market leases is included in our Consolidated Statements of Operations as an
adjustment to rental income.
For the years ended December 31, 2022, 2021 and 2020, our net amortization related to intangibles was
$5.7 million, $9.5 million and $14.2 million, respectively. The estimated net amortization related to these
intangibles for the subsequent five years is as follows: 2023 — $3.4 million; 2024 — $3.2 million;
2025 — $3.2 million; 2026 — $2.7 million; 2027 — $2.4 million and $5.5 million thereafter. As of
December 31, 2022, the weighted average remaining amortization period of above market lease assets is
approximately ten years and of below market lease liabilities is approximately seven years.
NOTE 13 — CONCENTRATION OF RISK
As of December 31, 2022, our portfolio of real estate investments (including properties associated with
mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 926
healthcare facilities, located in 42 states and the U.K. and operated by 67 third-party operators. Our
investment in these facilities, net of impairments and allowances, totaled approximately $9.5 billion at
December 31, 2022, with approximately 97% of our real estate investments related to long-term healthcare
facilities. Our portfolio is made up of (i) 665 SNFs, 169 ALFs, 20 ILFs, 16 specialty facilities and two
MOBs, (ii) fixed rate mortgages on 48 SNFs, two ALFs and two specialty facilities, and (iii) two facilities
that are held for sale. At December 31, 2022, we also held other real estate loans (excluding mortgages)
receivable of $394.6 million and non-real estate loans receivable of $225.3 million, consisting primarily of
secured loans to third-party operators of our facilities, and $178.9 million of investments in six
unconsolidated joint ventures.
At December 31, 2022, we had investments with one operator/or manager that approximated or
exceeded 10% of our total investments: Maplewood. At December 31, 2021, we had investments with two
operators/or managers that approximated or exceeded 10% of our total investments: Maplewood and
LaVie. Maplewood generated approximately 8.9%, 7.9% and 5.3% of our total revenues (excluding the
impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively. LaVie generated
approximately 11.1%, 9.5% and 9.4% of our total revenues (excluding the impact of write-offs) for the years
ended December 31, 2022, 2021 and 2020, respectively.
At December 31, 2022, the three states in which we had our highest concentration of investments were
Florida (11.5%), Texas (10.3%) and Indiana (6.6%).
F-53
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 14 — BORROWING ARRANGEMENTS
The following is a summary of our long-term borrowings:
Annual
Interest Rate
as of
Maturity
December 31, December 31, December 31,
2022
2022
2021
Secured borrowings:
HUD mortgages(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2046-2052
2023 term loan(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2024 term loan(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024
Total secured borrowings . . . . . . . . . . . . . . . . . . . . . . . .
3.01%(3)
8.00%
9.63%
$ 344,708
2,161
19,727
366,596
$ 359,806
2,275
—
362,081
(in thousands)
Unsecured borrowings:
Revolving credit facility(6)(7) . . . . . . . . . . . . . . . . . . . . . . . .
2025
5.58%
Senior notes and other unsecured borrowings:
2023 notes(6)(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2029 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2031 notes(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2033 notes(6)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OP term loan(10)(11) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs – net . . . . . . . . . . . . . . . . . . . . .
Discount – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . .
Total unsecured borrowings – net . . . . . . . . . . . . . . . . . . .
Total secured and unsecured borrowings – net(12)(13) . . . . . . . . . . . .
Total senior notes and other unsecured borrowings – net
2023
2024
2025
2026
2027
2028
2029
2031
2033
2025
4.375%
4.950%
4.500%
5.250%
4.500%
4.750%
3.625%
3.375%
3.250%
5.83%
19,246
19,246
—
—
350,000
400,000
400,000
600,000
700,000
550,000
500,000
700,000
700,000
50,000
(22,276)
(26,732)
4,900,992
4,920,238
$5,286,834
350,000
400,000
400,000
600,000
700,000
550,000
500,000
700,000
700,000
50,000
(26,980)
(31,565)
4,891,455
4,891,455
$5,253,536
(1) Reflects the weighted average annual contractual interest rate on the mortgages at December 31, 2022. Secured by real estate
assets with a net carrying value of $482.2 million as of December 31, 2022.
(2) Wholly owned subsidiaries of Omega OP are the obligor on these borrowings.
(3) Excludes fees of approximately 0.65% for mortgage insurance premiums.
(4) Borrowing is the debt of a consolidated joint venture.
(5) Borrowing is the debt of the consolidated joint venture discussed in Note 10 — Variable Interest Entities which was formed in
the first quarter of 2022. The borrowing is secured by two ALFs, which are owned by the joint venture.
(8)
(6) Guaranteed by Omega OP.
(7) As of December 31, 2022, borrowings under Omega’s $1.45 billion senior unsecured multicurrency revolving credit facility
consisted of £16.0 million British Pounds Sterling (“GBP”). The applicable interest rate on the US Dollar tranche and on the
GBP borrowings under the alternative currency tranche of the credit facility were 5.58% and 4.75% as of December 31, 2022,
respectively.
In March 2021, we used a portion of the proceeds from the 2033 Senior Notes offering to fund the tender offer to redeem
$350 million of the 4.375% Senior Notes due 2023. In connection with this transaction, we recorded approximately $30.6 million
in related fees, premiums, and expenses for the year ended December 31, 2021, which were recorded as Loss on debt
extinguishment in our Consolidated Statement of Operations.
In March 2021, we used the proceeds from this offering to pay down outstanding borrowings on the 2017 Revolving Credit
Facility, repay the Sterling term loan, and fund the tender offer to purchase $350 million of the 4.375% Senior Notes due 2023
and the payment of accrued interest and related fees, premiums and expenses.
(9)
(10) Omega OP is the obligor on this borrowing.
(11) The interest rate swaps, that were cash flow hedges of Omega OP’s $50.0 million senior unsecured term loan facility’s (the “OP
term loan”) interest payments and that effectively fixed the interest rate at 3.29%, matured on February 10, 2022.
(12) All borrowings are direct borrowings of Parent unless otherwise noted.
(13) Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including
financial covenants. As of December 31, 2022 and December 31, 2021, we were in compliance with all applicable covenants for
our borrowings.
F-54
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Secured Borrowings
HUD Mortgage Debt
On October 31, 2019, we assumed approximately $389 million in mortgage loans guaranteed by HUD.
The HUD loans have maturity dates between 2046 and 2052 with fixed interest rates ranging from 2.82%
per annum to 3.24% per annum. The HUD loans may be prepaid subject to an initial penalty of 10% of the
remaining principal balances in the first year and the prepayment penalty decreases each subsequent year by
1% until no penalty is required.
On August 26, 2020, we paid approximately $13.7 million to retire two mortgage loans guaranteed by
HUD that were assumed in 2019 and had an average interest rate of 3.08% per annum with maturities in
2051 and 2052. The payoff included a $0.9 million prepayment fee which is included in loss on debt
extinguishment on our Consolidated Statements of Operations.
On August 31, 2022, we paid approximately $7.9 million to retire one mortgage loan guaranteed by
HUD that was assumed in 2019 and had a fixed interest rate of 2.92% per annum with a maturity date in
2051. The payoff included a $0.4 million prepayment fee which is included in loss on debt extinguishment
on our Consolidated Statements of Operations.
All HUD loans are subject to the regulatory agreements that require escrow reserve funds to be
deposited with the loan servicer for mortgage insurance premiums, property taxes, debt service and capital
replacement expenditures. As of December 31, 2022, the Company has total escrow reserves of
$27.7 million with the loan servicer that is reported within other assets on the Consolidated Balance Sheets.
Unsecured Borrowings
Revolving Credit Facility
On April 30, 2021, Omega entered into a credit agreement (the “2021 Omega Credit Agreement”)
providing us with a new $1.45 billion senior unsecured multicurrency revolving credit facility (the
“Revolving Credit Facility”), replacing our previous $1.25 billion senior unsecured 2017 multicurrency
revolving credit facility (the “2017 Revolving Credit Facility”). The 2021 Omega Credit Agreement contains
an accordion feature permitting us, subject to compliance with customary conditions, to increase the
maximum aggregate commitments thereunder to $2.5 billion, by requesting an increase in the aggregate
commitments under the Revolving Credit Facility or by adding term loan tranches.
The Revolving Credit Facility bears interest at LIBOR (or in the case of loans denominated in GBP,
the Sterling overnight index average reference rate plus an adjustment of 0.1193% per annum, and in the
loans denominated in Euros, the Euro interbank offered rate, or EURIBOR) plus an
case of
applicable percentage (with a range of 95 to 185 basis points) based on our credit ratings. The Revolving
Credit Facility matures on April 30, 2025, subject to Omega’s option to extend such maturity date for two
six-month periods. The Revolving Credit Facility may be drawn in Euros, GBP, Canadian Dollars
(collectively, “Alternative Currencies”) or USD, with a $1.15 billion tranche available in USD and a
$300 million tranche available in Alternative Currencies. For purposes of the Revolving Credit Facility,
references to LIBOR include the Canadian dealer offered rates for amounts offered in Canadian Dollars
and any other Alternative Currency rate approved in accordance with the terms of the 2021 Omega Credit
Agreement for amounts offered in any other non-LIBOR quoted currency, as applicable. The Revolving
Credit Facility includes customary LIBOR replacement language, including, but not limited to, the use of
rates for U.S. dollar-denominated borrowings based on the secured overnight financing rate (“SOFR”)
recommended by the Alternative Reference Rates Committee, a steering committee comprised of U.S.
financial market participants, as a replacement rate for LIBOR. SOFR is a broad measure of the cost of
borrowing cash in the overnight U.S. Treasury repo market, and is administered by the Federal Reserve
Bank of New York.
We incurred $12.9 million of deferred costs in connection with the 2021 Omega Credit Agreement.
F-55
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
OP Term Loan
On April 30, 2021, Omega OP entered into a credit agreement (the “2021 Omega OP Credit
Agreement”) providing it with a new $50 million senior unsecured term loan facility (the “OP Term Loan”).
The OP Term Loan replaces the $50 million senior unsecured term loan obtained in 2017 (the “2017 OP
Term Loan”) and the related credit agreement. The OP Term Loan bears interest at LIBOR plus an
applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings. The OP Term
Loan includes customary LIBOR replacement language, including, but not limited to, the use of rates
based on SOFR. The OP Term Loan matures on April 30, 2025, subject to Omega OP’s option to extend
such maturity date for two, six-month periods.
We incurred $0.4 million of deferred costs in connection with the 2021 Omega OP Credit Agreement.
2017 Omega Credit Facilities
On May 25, 2017, Omega entered into a credit agreement (the “2017 Omega Credit Agreement”) for a
new $1.8 billion senior unsecured revolving and term loan credit facility, consisting of a $1.25 billion senior
unsecured multicurrency revolving credit facility (the “2017 Revolving Credit Facility”), a $425 million
senior unsecured U.S. Dollar term loan facility (the “U.S. Term Loan”), and a £100 million senior
unsecured British Pound Sterling term loan facility (the “Sterling Term Loan” and, together with the 2017
Revolving Credit Facility and the U.S. Term Loan Facility, collectively, the “2017 Omega Credit Facilities”).
The 2017 Revolving Credit Facility bore interest at LIBOR plus an applicable percentage (with a range of
100 to 195 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. The
U.S. Term Loan Facility and the Sterling Term Loan Facility bore interest at LIBOR plus an
applicable percentage (with a range of 90 to 190 basis points) based on our ratings from Standard & Poor’s,
Moody’s and/or Fitch Ratings.
In 2020, we repaid the outstanding balance on our U.S. Term Loan and wrote-off $0.8 million of
unamortized deferred costs to loss on debt extinguishment on our Consolidated Statements of Operations.
In 2021, we repaid the outstanding balance on our 2017 Revolving Credit Facility and Sterling Term Loan
using a portion of the proceeds from the 2033 Senior Notes offering and wrote-off $0.2 million of
unamortized deferred costs relating to the Sterling Term Loan to loss on debt extinguishment on our
Consolidated Statements of Operations. In April 2021, the 2017 Revolving Credit Facility was replaced by
the Revolving Credit Facility.
2017 OP Term Loan
On May 25, 2017, Omega OP entered into a credit agreement (the “2017 Omega OP Credit
Agreement”) providing it with a new $100 million senior unsecured term loan facility (the “2017 OP Term
Loan”). The 2017 OP Term Loan bore interest at LIBOR plus an applicable percentage (with a range of 90
to 190 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings. In
April 2021, the 2017 OP Term loan was replaced by the OP Term Loan.
Amended 2015 Term Loan Facility
On May 25, 2017, Omega entered into an amended and restated credit agreement (the “Amended 2015
Credit Agreement”), which amended and restated our previous $250 million senior unsecured term loan
facility (the “Amended 2015 Term Loan Facility”). The Amended 2015 Term Loan Facility bore interest at
LIBOR plus an applicable percentage (with a range of 140 to 235 basis points) based on our ratings from
Standard & Poor’s, Moody’s and/or Fitch Ratings. We repaid the Amended 2015 Term Loan Facility in
October 2020 with proceeds from the senior notes issuance and wrote-off $0.7 million of unamortized
deferred costs to loss on debt extinguishment on our Consolidated Statements of Operations.
Subordinated Debt
In connection with a 2010 acquisition, we assumed five separate $4.0 million subordinated notes
bearing interest at 9% per annum that mature on December 21, 2021. Interest on these notes is due
F-56
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
quarterly with the principal balance due at maturity. As discussed in Note 5 — Contractual Receivables and
Other Receivables and Lease Inducements, to the extent that the operator of the facilities (Gulf Coast)
failed to pay rent when due to us under our existing master lease, we had the right to offset the amounts
owed to us against the amounts we owe to the lender under the notes. As of December 31, 2021, we offset
$1.3 million of accrued interest and $20.0 million of principal under the Subordinated Debt against the
uncollected receivables of Gulf Coast. Following the application of these offsets, Omega believes it has no
further obligations under the Subordinated Debt. See Note 20 — Commitments and Contingencies for
additional discussion regarding an ongoing lawsuit related to the Subordinated Debt.
General
Parent and Omega OP, on a combined basis, have no material assets, liabilities or operations other than
financing activities (including borrowings under the senior unsecured revolving and term loan credit
facility, OP term loan and the outstanding senior notes) and their investments in non-guarantor
subsidiaries. Substantially all of our assets are held by non-guarantor subsidiaries.
The required principal payments, excluding the premium or discount and deferred financing costs on
our secured and unsecured borrowings, for each of the five years following December 31, 2022 and the
aggregate due thereafter are set forth below:
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 359,898
427,723
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
477,462
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
608,466
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
708,725
Thereafter
2,753,591
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,335,865
(in thousands)
NOTE 15 — DERIVATIVES AND HEDGING
Cash Flow Hedges of Interest Rate Risk
We enter into interest rate swaps in order to maintain a capital structure containing targeted amounts
of fixed and floating-rate debt and manage interest rate risk. Interest rate swaps designated as cash flow
hedges involve the receipt of variable amounts from a counterparty in exchange for our fixed-rate payments.
These interest rate swap agreements are used to hedge the variable cash flows associated with variable-rate
debt.
As a result of exposure to interest rate movements associated with the Amended 2015 Term Loan
Facility, on December 16, 2015, we entered into various forward-starting interest rate swap arrangements,
which effectively converted $250 million of our variable-rate debt based on one-month LIBOR to an
aggregate fixed rate of approximately 3.80% effective December 30, 2016. The effective fixed rate achieved
by the combination of the Amended 2015 Term Loan Facility and the interest rate swaps could fluctuate up
by 55 basis points or down by 40 basis points based on future changes to our credit ratings. Each of these
swaps had a scheduled maturity date of December 15, 2022. In October 2020, we terminated these
$250.0 million of notional value interest rate swaps in connection with the repayment of the Amended 2015
Term Loan Facility and paid our swap counterparties $10.3 million which is recorded in loss on debt
extinguishment on our Consolidated Statements of Operations.
On March 27, 2020, we entered into five forward starting swaps totaling $400 million that are indexed
to 3-month LIBOR. We designated the forward starting swaps as cash flow hedges of interest rate risk
associated with interest payments on a forecasted issuance of fixed rate long-term debt, initially expected to
F-57
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
occur within the next five years. The swaps are effective on August 1, 2023 and expire on August 1, 2033
and were issued at a weighted average fixed rate of approximately 0.8675%. In March 2021, in conjunction
with the issuance of $700 million aggregate principal amount of our 3.25% Senior Notes due 2033, we
discontinued hedge accounting for these five forward starting swaps. Simultaneously, we re-designated these
swaps in new cash flow hedging relationships of interest rate risk associated with interest payments on
another forecasted issuance of long-term debt. We are hedging our exposure to the variability in future cash
flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions
related to the payment of variable interest on existing financial instruments).
In addition to the forward swaps discussed above, we also assumed various interest rate swap contracts
in connection with the MedEquities Merger on May 17, 2019. We designated the interest rate swap
contracts as cash flow hedges of interest rate risk associated with the 2017 Omega OP Credit Agreement.
The assumed interest rate swap contracts effectively converted $75 million of our 2017 Omega OP Credit
Agreement to an aggregate fixed rate of approximately 3.29% through February 10, 2022. The effective
fixed rate achieved by the combination of the 2017 Omega OP Credit Agreement and the interest rate swaps
could fluctuate up by 55 basis points or down by 45 basis points based on future changes to our credit
ratings. In October 2020, we terminated $25.0 million of notional value interest rate swaps in connection
with the partial repayment and paid our swap counterparty $0.6 million which is recorded in loss on debt
extinguishment on our Consolidated Statements of Operations. On February 10, 2022, the two remaining
interest rate swaps with aggregate notional amounts of $50.0 million matured. These interest rate swap
contracts were designated as hedges against our exposure to changes in interest payment cash flow
fluctuations in the variable interest rates on the OP Term Loan. The OP Term Loan is unhedged for the
period after February 10, 2022 through its maturity on April 30, 2025.
Foreign Currency Forward Contracts and Debt Designated as Net Investment Hedges
We use debt denominated in GBP and foreign currency forward contracts to hedge a portion of our
net investments, including certain intercompany loans, in the U.K. against fluctuations in foreign exchange
rates.
GBP denominated borrowings under the Sterling term loan and the 2017 Revolving Credit Facility
were previously used to hedge a portion of our investments in the U.K. against fluctuations in GBP against
the USD. The GBP denominated borrowings under both debt instruments were deemed an effective hedge
from issuance in May 2017 until the settlement of the Sterling term loan and the repayment of the GBP
denominated borrowings under the 2017 Revolving Credit Facility in March 2021.
Concurrent with the settlement of the GBP denominated debt, we entered into four foreign currency
forwards with notional amounts totaling £174.0 million, that mature on March 8, 2024, to hedge a portion
of our net investments in the U.K., including an intercompany loan and an investment in our U.K. joint
venture, effectively replacing the terminated net investment hedge.
On May 17, 2022, we entered into two new foreign currency forward contracts with notional amounts
totaling £76.0 million and a GBP-USD forward rate of 1.3071, each of which mature on May 21, 2029.
These currency forward contracts hedge a portion of our net investments in U.K. subsidiaries, including an
intercompany loan.
F-58
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The location and the fair value of derivative instruments designated as hedges, at the respective balance
sheet dates, were as follows:
December 31, December 31,
2022
2021
(in thousands)
Cash flow hedges:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$92,990
$ —
$32,849
96
$
Net investment hedges:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$34,977
$ 6,754
The fair value of the interest rate swaps and foreign currency forwards is derived from observable
market data such as yield curves and foreign exchange rates and represents a Level 2 measurement on the
fair value hierarchy.
NOTE 16 — FINANCIAL INSTRUMENTS
The net carrying amount of cash and cash equivalents, restricted cash, contractual receivables, other
assets and accrued expenses and other liabilities reported in the Consolidated Balance Sheets approximates
fair value because of the short maturity of these instruments (Level 1).
At December 31, 2022 and 2021, the net carrying amounts and fair values of other financial
instruments were as follows:
December 31, 2022
Fair
Value
Carrying
Amount
December 31, 2021
Fair
Value
Carrying
Amount
(in thousands)
Assets:
Investments in direct financing leases – net . . . . . . $
Real estate loans receivable – net . . . . . . . . . . . . .
Non-real estate loans receivable – net . . . . . . . . . .
10,873
1,220,888
125,491
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,276,515 $1,317,891 $1,315,843 $1,357,252
1,042,731
225,281
1,180,786
124,184
1,080,890
228,498
10,873 $
8,503 $
8,503 $
Liabilities:
— $
Revolving credit facility . . . . . . . . . . . . . . . . . . . $
2023 term loan . . . . . . . . . . . . . . . . . . . . . . . . .
2024 term loan . . . . . . . . . . . . . . . . . . . . . . . . .
OP term loan . . . . . . . . . . . . . . . . . . . . . . . . . .
4.375% notes due 2023 – net . . . . . . . . . . . . . . . .
4.95% notes due 2024 – net . . . . . . . . . . . . . . . . .
4.50% notes due 2025 – net . . . . . . . . . . . . . . . . .
5.25% notes due 2026 – net . . . . . . . . . . . . . . . . .
4.50% notes due 2027 – net . . . . . . . . . . . . . . . . .
4.75% notes due 2028 – net . . . . . . . . . . . . . . . . .
3.625% notes due 2029 – net . . . . . . . . . . . . . . . .
3.375% notes due 2031 – net . . . . . . . . . . . . . . . .
3.25% notes due 2033 – net . . . . . . . . . . . . . . . . .
HUD mortgages – net . . . . . . . . . . . . . . . . . . . .
—
2,275
—
50,000
365,243
427,184
427,440
667,524
766,003
607,249
519,430
705,810
683,151
394,284
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,286,834 $4,702,055 $5,253,536 $5,615,593
19,246 $
2,275
19,750
50,000
347,998
394,256
388,920
589,104
657,468
507,425
411,090
540,386
507,976
266,161
19,246 $
2,161
19,727
49,762
349,669
398,736
398,446
597,848
693,837
544,916
491,890
685,382
690,506
344,708
2,275
—
49,661
349,100
397,725
397,685
597,142
692,374
543,908
490,681
683,592
689,587
359,806
Fair value estimates are subjective in nature and are dependent on a number of important assumptions,
including estimates of future cash flows, risks, discount rates and relevant comparable market information
F-59
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
associated with each financial instrument (see Note 2 — Summary of Significant Accounting Policies). The
use of different market assumptions and estimation methodologies may have a material effect on the
reported estimated fair value amounts.
The following methods and assumptions were used in estimating fair value disclosures for financial
instruments.
• Real estate loans receivable: The fair value of the real estate loans receivable are estimated using a
discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with
similar credit ratings (Level 3).
• Non-real estate loans receivable: Non-real estate loans receivable are primarily comprised of notes
receivable. The fair values of notes receivable are estimated using a discounted cash flow analysis,
using interest rates being offered for similar loans to borrowers with similar credit ratings
(Level 3).
• Revolving credit facility, OP term loan, 2023 term loan and 2024 term loan: The carrying amount
of these approximate fair value because the borrowings are interest rate adjusted. Differences
between carrying value and the fair value in the table above are due to the inclusion of deferred
financing costs in the carrying value.
•
Senior notes: The fair value of the senior unsecured notes payable was estimated based on
(Level 1) publicly available trading prices.
• HUD mortgages: The fair value of our borrowings under HUD debt agreements are estimated
using an expected present value technique based on quotes obtained by HUD debt brokers
(Level 2).
NOTE 17 — TAXES
Omega and Omega OP, including their wholly-owned subsidiaries were organized, have operated, and
intend to continue to operate in a manner that enables Omega to qualify for taxation as a REIT under
Sections 856 through 860 of the Code. On a quarterly and annual basis we perform several analyses to test
our compliance within the REIT taxation rules. If we fail to meet the requirements for qualification as a
REIT in any tax year, we will be subject to federal income tax on our taxable income at regular corporate
rates and may not be able to qualify as a REIT for the four subsequent years, unless we qualify for certain
relief provisions that are available in the event we fail to satisfy any of the requirements.
We are also subject to federal taxation of 100% of the net income derived from the sale or other
disposition of property, other than foreclosure property, that we held primarily for sale to customers in the
ordinary course of a trade or business. We believe that we do not hold assets for sale to customers in the
ordinary course of business and that none of the assets currently held for sale or that have been sold would
be considered a prohibited transaction within the REIT taxation rules.
As a REIT under the Code, we generally will not be subject to federal income taxes on the REIT
taxable income that we distribute to stockholders, subject to certain exceptions. In 2022, 2021 and 2020, we
distributed dividends in excess of our taxable income.
We currently own stock in certain subsidiary REITs. These subsidiary entities are required to
individually satisfy all of the rules for qualification as a REIT. If we fail to meet the requirements for
qualification as a REIT for any of the subsidiary REITs, it may cause the Parent REIT to fail the
requirements for qualification as a REIT also.
We have elected to treat certain of our active subsidiaries as TRSs. Our domestic TRSs are subject to
federal, state and local income taxes at the applicable corporate rates. Our foreign TRSs are subject to
foreign income taxes and may be subject to current-year income inclusion relating to ownership of a
controlled foreign corporation for U.S. income tax purposes. As of December 31, 2022, one of our TRSs
that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”)
F-60
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
carry-forward of approximately $10.2 million. Our NOL carry-forward was fully reserved as of
December 31, 2022, with a valuation allowance due to uncertainties regarding realization. Under current
law, NOL carry-forwards generated up through December 31, 2017 may be carried forward for no more
than 20 years, and NOL carry-forwards generated in taxable years ended after December 31, 2017, may be
carried forward indefinitely. We do not anticipate that such changes will materially impact the computation
of Omega’s taxable income, or the taxable income of any Omega entity, including our TRSs.
As discussed in Note 3 — Real Estate Asset Acquisitions and Development, in connection with the
acquisition of one U.K. entity in the first quarter of 2022, we acquired foreign net operating losses of
$55.0 million resulting in a NOL deferred tax asset of $13.4 million. The NOLs have no expiration date and
may be available to offset future taxable income. We believe these foreign NOLs are realizable under a
“more likely than not” measurement and have not recorded a valuation allowance against the deferred tax
asset.
The following is a summary of our provision for income taxes:
Provision for federal, state and local income taxes(1) . . . . . . . . . . . . . . . . . . . . . . .
Provision for foreign income taxes(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total provision for income taxes(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2022
2021
2020
(in millions)
$1.4
2.4
$3.8
$1.2
3.4
$4.6
$1.3
3.6
$4.9
(1) For the years ended December 31, 2022, 2021 and 2020, income before income tax expense and income from unconsolidated
joint ventures from domestic operations was $418.5 million, $403.9 million and $151.5 million, respectively.
(2) For the years ended December 31, 2022, 2021 and 2020, income before income tax expense and income from unconsolidated
joint ventures from foreign operations was $17.6 million, $12.2 million and $10.8 million, respectively.
(3) The above amounts do not include gross income receipts or franchise taxes payable to certain states and municipalities.
The following is a summary of deferred tax assets and liabilities:
December 31, December 31,
2022
2021
(in thousands)
U.S. Federal net operating loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance on deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign net operating loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign deferred tax liability(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset (liability) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,138
(2,138)
11,268
(5,373)
$ 5,895
$ 2,221
(2,221)
—
(8,200)
$(8,200)
(1) The deferred tax liability primarily resulted from inherited basis differences resulting from our acquisition of entities in the U.K.
Subsequent adjustments to these accounts result from GAAP to tax differences related to depreciation, indexation and revenue
recognition.
NOTE 18 — STOCKHOLDERS’ EQUITY
Stock Repurchase Program
On March 20, 2020, Omega’s Board of Directors authorized the repurchase of up to $200 million of
its outstanding common stock from time to time over the twelve months ending March 20, 2021. Omega
did not repurchase any of its outstanding common stock under this announced program during 2020 or
2021.
F-61
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
On January 27, 2022, the Company authorized the repurchase of up to $500 million of our
outstanding common stock from time to time through March 2025. The Company is authorized to
repurchase shares of its common stock in open market and privately negotiated transactions or in any other
manner as determined by the Company’s management and in accordance with applicable law. The timing
and amount of stock repurchases will be determined, in management’s discretion, based on a variety of
factors, including but not limited to market conditions, other capital management needs and opportunities,
and corporate and regulatory considerations. The Company has no obligation to repurchase any amount of
its common stock, and such repurchases, if any, may be discontinued at any time. Under Maryland law,
shares repurchased become authorized but unissued shares. The Company reduced the common stock at
par value and to the extent the cost acquired exceeds par value, it is recorded through additional paid-in
capital on our Consolidated Balance Sheets and Consolidated Statements of Equity. During the year ended
December 31, 2022, the Company repurchased 5.2 million shares of our outstanding common stock at an
average price of $27.32 per share, for a total repurchase cost of $142.3 million. The average price per share
and repurchase cost includes the cost of commissions.
At-The-Market Offering Program
On September 3, 2015, we entered into separate Equity Distribution Agreements with several financial
institutions to sell $500 million of shares of our common stock from time to time through an
“at-the-market” (“ATM”) offering program (the “2015 ATM Program”). Sales of the shares, if any, were
made by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, or as
otherwise agreed with the applicable Manager. We paid each Manager compensation for sales of the shares
up to 2% of the gross sales price per share for shares sold through such Manager under the applicable
Equity Shelf Agreements.
During the second quarter of 2021, we terminated the 2015 ATM Program and entered into a new
ATM Equity Offering Sales Agreement pursuant to which shares of common stock having an aggregate
gross sales price of up to $1.0 billion (the “2021 ATM Program”) may be sold from time to time (i) by
Omega through several financial institutions acting as a sales agent or directly to the financial institutions as
principals, or (ii) by several financial institutions acting as forward sellers on behalf of any forward
purchasers pursuant to a forward sale agreement. Under the 2021 ATM Program, compensation for sales of
the shares will not exceed 2% of the gross sales price per share for shares sold through each financial
institution. The use of forward sales under the 2021 ATM Program generally allows Omega to lock in a
price on the sale of shares of common stock when sold by the forward sellers but defer receiving the net
proceeds from such sales until the shares of our common stock are issued at settlement on a later date. We
did not utilize the forward provisions under the 2021 ATM Program during 2021 or 2022. The following is a
summary of the shares issued under the 2021 and 2015 ATM Programs for each of the years ended
December 31, 2020, 2021, and 2022 (in millions except average price per share):
Period Ended
Shares issued
Average Net Price
Per Share(1)
Gross Proceeds Commissions Net Proceeds
December 31, 2020 . . . . . . . . . . . .
December 31, 2021 . . . . . . . . . . . .
December 31, 2022 . . . . . . . . . . . .
4.2
4.2
—
$36.16
36.53
—
$155.1
155.1
—
$2.5
3.4
—
$152.6
151.7
—
(1) Represents the average price per share after commissions.
F-62
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Dividend Reinvestment and Common Stock Purchase Plan
We have a Dividend Reinvestment and Common Stock Purchase Plan (the “DRSPP”) that allows for
the reinvestment of dividends and the optional purchase of our common stock. On March 23, 2020, we
temporarily suspended the DRSPP and on December 17, 2020, we reinstated the DRSPP. The table below
presents information regarding the shares issued under the DRSPP for each of the years ended
December 31, 2020, 2021, and 2022 (in millions):
Period Ended
Shares issued Gross Proceeds
December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.1
3.4
0.3
$ 3.7
126.7
9.2
Dividends
The Board of Directors has declared common stock dividends as set forth below:
Record Date
Payment Date
Dividend per
Common Share
February 7, 2022 . . . . . . . . . . . . . . . . . February 15, 2022 . . . . . . . . . . . . . . . . . . .
May 2, 2022 . . . . . . . . . . . . . . . . . . . . May 13, 2022. . . . . . . . . . . . . . . . . . . . . . .
August 1, 2022 . . . . . . . . . . . . . . . . . . August 15, 2022 . . . . . . . . . . . . . . . . . . . . .
November 1, 2022 . . . . . . . . . . . . . . . . November 15, 2022 . . . . . . . . . . . . . . . . . .
February 6, 2023 . . . . . . . . . . . . . . . . . February 15, 2023 . . . . . . . . . . . . . . . . . . .
$0.67
0.67
0.67
0.67
0.67
Per Share Distributions
Per share distributions by our Company were characterized in the following manner for income tax
purposes (unaudited):
Common
Year Ended December 31,
2022
2021
2020
Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.264 $1.987 $1.961
0.654
Return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.065
Capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.680 $2.680 $2.680
0.095
1.321
0.117
0.576
Pursuant to Treasury Regulation Section 1.1061-6(c), Omega Healthcare Investors Inc. is disclosing the
following information to its shareholders. “One Year Amounts Disclosure” is zero percent of the capital
gain distributions allocated to each shareholder and “Three Year Amounts Disclosure” is zero percent of
the capital gain distributions allocated to each shareholder. All capital gain distributions reported are
related to Section 1231 gain.
For additional information regarding dividends, see Note 17 — Taxes.
F-63
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Accumulated Other Comprehensive Income (Loss)
The following is a summary of our accumulated other comprehensive income (loss), net of tax where
applicable:
As of and for the
Year Ended December 31,
2022
2021
2020
(in thousands)
Foreign Currency Translation:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(24,012) $(18,427) $(35,100)
16,595
Translation (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78
Realized (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18,427)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(59,622)
(1,370)
(85,004)
(6,302)
717
(24,012)
Derivative Instruments:
Cash flow hedges: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized gain (loss)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment hedges: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accumulated other comprehensive income (loss) before noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: portion included in noncontrolling interest . . . . . . . . . . . . . . . .
30,407
51,761
4,188
86,356
17,718
9,788
2,901
30,407
(2,369)
34,712
(14,625)
17,718
(9,588)
28,222
18,634
(13,331)
3,743
(9,588)
(4,420)
(8,911)
(13,331)
(14,040)
1,272
Total accumulated other comprehensive income (loss) for Omega . . . . . . . $ 20,325 $ (2,200) $(12,768)
(3,193)
993
19,986
339
(1) Expenses related to our effective cash flow hedges are recorded within interest expense. As noted in Note 15 — Derivatives and
Hedging, we terminated $250.0 million of notional value interest rate swaps in October 2020 and reclassified the remaining
balance in AOCI to loss on debt extinguishment on the Consolidated Statements of Operations.
NOTE 19 — STOCK-BASED COMPENSATION
At December 31, 2022, we maintained several stock-based compensation plans as described below. For
the years ended December 31, 2022, 2021 and 2020, we recognized stock-based compensation of
$27.3 million, $21.4 million and $18.8 million, respectively, related to these plans.
Time-Based Restricted Equity Awards
Restricted stock, restricted stock units (“RSUs”) and profits interest units (“PIUs”) are subject to
forfeiture if the holder’s service to us terminates prior to vesting, subject to certain exceptions for certain
qualifying terminations of service or a change in control of the Company. Prior to vesting, ownership of
the shares/units cannot be transferred. The restricted stock has the same dividend and voting rights as our
common stock. RSUs accrue dividend equivalents but have no voting rights. PIUs accrue distributions,
which are equivalent to dividend equivalents, but have no voting rights. Once vested, each RSU is settled by
the issuance of one share of Omega common stock and each PIU is settled by the issuance of one Omega
OP Unit, subject to certain conditions. Restricted stock and RSUs are valued at the price of our common
stock on the date of grant. The PIUs are valued using a Monte Carlo model to estimate fair value. We
expense the cost of these awards ratably over their vesting period.
F-64
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Performance-Based Restricted Equity Awards
Performance-based restricted equity awards include performance restricted stock units (“PRSUs”) and
PIUs. PRSUs and PIUs are subject to forfeiture if the performance requirements are not achieved or if the
holder’s service to us terminates prior to vesting, subject to certain exceptions for certain qualifying
terminations of employment or a change in control of the Company. PRSUs and PIUs have varying
degrees of performance requirements to achieve vesting, and each PRSU and PIU award represents the
right to a variable number of shares of common stock or partnership units. Each PIU once earned is
convertible into one Omega OP Unit in Omega OP, subject to certain conditions. The vesting requirements
are based on either the (i) total shareholder return (“TSR”) of Omega or (ii) Omega’s TSR relative to other
REITs in the FTSE NAREIT Equity Health Care Index (“Relative TSR”). We expense the cost of these
awards ratably over their service period.
Prior to vesting and the distribution of shares or Omega OP Units, ownership of the PRSUs or PIUs
cannot be transferred. Dividend equivalents on the PRSUs are accrued and paid to the extent the applicable
performance requirements are met. While each PIU is unearned, the employee receives a partnership
distribution equal to 10% of the quarterly approved regular periodic distributions per Omega OP Unit.
Partnership distributions (which in the case of normal periodic distributions is equal to the total approved
quarterly dividend on Omega’s common stock), less the 10% already paid, on the PIUs accumulate, and if
the PIUs are earned, the accumulated distributions are paid. We used a Monte Carlo model to estimate the
fair value for the PRSUs and PIUs granted to the employees. The following are the significant assumptions
used in estimating the value of the awards for grants made on the following dates:
Closing price on date of grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk free interest rate at time of grant . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1,
2022
January 1,
2021
January 1,
2020
$29.59
$36.32
$42.35
9.06%
0.98%
38.74%
7.38%
0.18%
42.55%
6.33%
1.65%
21.77%
F-65
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the activity in restricted stock, RSUs, PRSUs, and PIUs for the years
ended December 31, 2020, 2021 and 2022:
Time-Based
Performance-Based
Number of
Weighted -
Average Grant-
Number of
Weighted -
Total
Average Grant- Compensation
Shares/Omega Date Fair Value Shares/Omega Date Fair Value
OP Units
per Share
OP Units
per Share
Cost(1)
(in millions)
Non-vested at December 31, 2019 . . . . .
. . . . . . . . . . . .
Granted during 2020
Cancelled during 2020
. . . . . . . . . . .
Vested during 2020 . . . . . . . . . . . . . .
Non-vested at December 31, 2020 . . . . .
. . . . . . . . . . . .
Granted during 2021
. . . . . . . . . . .
Cancelled during 2021
Forfeited during 2021 . . . . . . . . . . . .
Vested during 2021 . . . . . . . . . . . . . .
Non-vested at December 31, 2021 . . . . .
. . . . . . . . . . . .
Granted during 2022
Cancelled during 2022
. . . . . . . . . . .
Forfeited during 2022 . . . . . . . . . . . .
Vested during 2022(2) . . . . . . . . . . . .
Non-vested at December 31, 2022 . . . . .
298,592
158,572
(2,006)
(184,480)
270,678
210,429
(14,157)
—
(148,538)
318,412
256,818
(2,000)
—
(165,206)
408,024
31.44
39.88
42.05
29.28
37.78
36.52
36.58
—
34.30
38.62
29.40
29.59
—
40.91
$31.93
2,401,087
1,208,537
(54,076)
(658,052)
2,897,496
1,232,178
(188,128)
(746,357)
(973,142)
2,222,047
1,620,330
(5,232)
(621,199)
—
3,215,946
13.01
17.11
16.52
14.85
14.24
18.76
18.01
14.83
10.33
17.94
14.73
11.90
13.68
—
$17.16
$27.00
$30.80
$31.40
(1) Total compensation cost to be recognized on the awards based on grant date fair value.
(2) PRSUs are shown as vesting in the year that the Compensation Committee determines the level of achievement of the applicable
performance measures.
As of December 31, 2022, unrecognized compensation costs related to unvested awards to employees is
as follows:
•
•
•
•
$5.4 million on RSUs and PIUs expected to be recognized over a weighted average period of
approximately 34 months.
$0.7 million on RSUs and PIUs expected to be recognized over a weighted average period of
approximately 12 months.
$14.0 million on TSR PRSUs and PIUs expected to be recognized over a weighted average period
of approximately 45 months.
$17.1 million on Relative TSR PRSUs and PIUs expected to be recognized over a weighted
average period of approximately 45 months.
In addition, we have a deferred stock compensation plan that allows employees and directors the
ability to defer the receipt of stock awards (units). The deferred stock awards (units) participate in future
dividend equivalents as well as the change in the value of the Company’s common stock. As of
December 31, 2022 and 2021, the Company had 646,871 and 630,623 deferred stock units outstanding.
Tax Withholding for Stock Compensation Plans
Stock withheld to pay tax withholdings for equity instruments granted under stock-based payment
arrangements for the years ended December 31, 2022, 2021 and 2020, was $1.1 million, $4.6 million and
$4.7 million, respectively.
F-66
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Shares Available for Issuance for Compensation Purposes
On June 8, 2018, at the Annual Meeting of Stockholders, our stockholders approved the 2018 Stock
Incentive Plan (the “2018 Plan”), which amended and restated the Company’s 2013 Stock Incentive Plan
(the “2013 Plan”). The 2018 Plan is a comprehensive incentive compensation plan that allows for various
types of equity-based compensation, including RSUs (including PRSUs), stock awards (including restricted
stock), deferred RSUs, incentive stock options, non-qualified stock options, stock appreciation rights,
(including
dividend equivalent
performance-based cash awards), PIUs and other stock-based awards. The 2018 Plan increased the number
of shares of common stock available for issuance under the 2013 Plan by 4.5 million.
rights, performance unit awards, certain cash-based awards
As of December 31, 2022, approximately 1.6 million shares of common stock were reserved for
issuance to our employees, directors and consultants under our stock incentive plans.
NOTE 20 — COMMITMENTS AND CONTINGENCIES
Litigation
Shareholder Litigation
The Company and certain of its officers, C. Taylor Pickett, Robert O. Stephenson, and Daniel J. Booth,
are defendants in a purported securities class action lawsuit pending in the U.S. District Court for the
Southern District of New York (the “Securities Class Action”). Brought by lead plaintiff Royce Setzer and
additional plaintiff Earl Holtzman, the Securities Class Action purports to assert claims for violations of
Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5
promulgated thereunder, as well as Section 20(a) of the Exchange Act, and seeks monetary damages,
interest, fees and expenses of attorneys and experts, and other relief. The Securities Class Action alleges that
the defendants violated the Exchange Act by making materially false and/or misleading statements, and by
failing to disclose material adverse facts about the Company’s business, operations, and prospects, including
the financial and operating results of one of the Company’s operators, the ability of such operator to make
timely rent payments, and the impairment of certain of the Company’s leases and the uncollectibility of
certain receivables. The initial complaint was dismissed with prejudice by the U.S. District Court, but the
dismissal was overturned by the U.S. Court of Appeals for the Second Circuit in 2020. Thereafter, the
plaintiffs filed a Second Consolidated Amended Complaint in August 2020. In November 2020, the
Company and the officers named in the Securities Class Action filed a Motion to Dismiss the Second
Consolidated Amended Complaint. On September 28, 2021, the Court issued an order denying the motion
to dismiss insofar as it requested dismissal of the entire action on grounds of loss causation, and granting it
insofar as it sought dismissal of any claims arising out of defendants’ statements in February 2017.
Following a mediation, the plaintiffs and defendants reached an agreement in principle on a settlement
of the Securities Class Action and thereafter executed a stipulation of settlement dated December 9, 2022
(“Settlement”), subject to the approval of the District Court. On December 27, 2022, the District Court
granted preliminary approval of the settlement, and scheduled a hearing for April 25, 2023 on final
approval of the Settlement. Pursuant to the preliminary approval order, and subject to final approval by the
District Court, the Settlement payment of $30.75 million has been transmitted to an escrow account by the
Company’s directors and officers insurers. The Settlement does not include any admission of wrongdoing
or liability on the part of the Company or the individual defendants, and upon final approval by the Court,
provides for a dismissal of, and a release of all claims against the defendants by a class of persons and/or
entities who purchased or otherwise acquired Company securities from February 8, 2017 through
October 31, 2017. The Company recorded a $31 million legal reserve related to the Securities Class Action
in the third quarter of 2022, which is included within accrued expenses and other liabilities on the
Consolidated Balance Sheets. As the Settlement proceeds are to be paid by insurance, the Company
concurrently recorded a receivable for $31 million within other assets on the Consolidated Balance Sheet,
and consequently there is no impact to the Consolidated Statements of Operations related to this matter.
F-67
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Certain derivative actions have also been brought against the officers named in the Securities
Class Action, and certain current and former directors of the Company, alleging claims relating to the
matters at issue in the Securities Class Action. These derivative actions are currently stayed pending certain
developments in the Securities Class Action.
In 2018, Stourbridge Investments LLC, a purported stockholder of the Company, filed a derivative
action purportedly on behalf of the Company in the U.S. District Court for the Southern District of New
York, alleging violations of Section 14(a) of the Exchange Act and state-law claims including breach of
fiduciary duty. The complaint alleges, among other things, that the named defendants are responsible for
the Company’s failure to disclose the financial condition of Orianna Health Systems, the alleged
non-disclosures that are also the subject of the Securities Class Action described above. The plaintiff did
not make a demand on the Company to bring the action prior to filing it, but rather alleges that demand
would have been futile. The case has been stayed pending the entry of judgment or a voluntary dismissal
with prejudice in the Securities Class Action.
In 2019, purported stockholder Phillip Swan by his counsel, and stockholders Tom Bradley and Sarah
Smith by their counsel, filed derivative actions in the Baltimore City Circuit Court of Maryland,
purportedly on behalf of the Company, asserting claims for breach of fiduciary duty, waste of corporate
assets and unjust enrichment against the named defendants. Those actions have been consolidated and
stayed in the Maryland court pending completion of fact discovery in the Securities Class Action. Prior to
filing suit, each of these stockholders had made demands on the Board of Directors in 2018 that the
Company bring such lawsuits. After an investigation and due consideration, and in the exercise of its
business judgment, the Board of Directors determined that it is not in the best interests of the Company to
commence litigation against any current or former officers or directors based on the matters raised in the
demands.
In addition, in late 2020, Robert Wojcik, a purported shareholder of the Company, filed a derivative
action in the U.S. District Court for the District of Maryland, purportedly on behalf of the Company,
asserting violations of Section 14(a) of the Exchange Act, Sections 10(b) and 21D of the Exchange Act, as
well as claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and
waste of corporate assets. Wojcik also did not make a demand on the Company prior to filing suit. The case
has been stayed pending the entry of judgment or a voluntary dismissal with prejudice in the Securities
Class Action.
Other
Gulf Coast Subordinated Debt
In August 2021, we filed suit in the Circuit Court for Baltimore County (the “Court”) against the
holders of certain Subordinated Debt (the “Debt Holders”) associated with our Gulf Coast master lease
agreement, following an assertion by the holders that our prior exercise of offset rights in connection with
Gulf Coast’s non-payment of rent had resulted in defaults under the terms of the Subordinated Debt. The
suit seeks a declaratory judgment to, among other items, declare that the aggregate amount of unpaid rent
due from Gulf Coast under the master lease agreement exceeds all amounts which otherwise would be due
and owing by an indirect subsidiary of Omega (“Omega Obligor”) under the Subordinated Debt, and that
all principal and interest due and owing under the Subordinated Debt may be (and was) offset in full as of
December 31, 2021. In October 2021, the defendants in the case filed a motion to dismiss for lack of
personal jurisdiction. On November 3, 2022, the Court granted the noteholders’ motion to dismiss for lack
of personal jurisdiction, and Omega filed a timely appeal of the ruling. While Omega believes Omega
Obligor is entitled to the enforcement of the offset rights sought in the action, Omega cannot predict the
outcome of the declaratory judgment action, irrespective of whether (a) it is ultimately litigated in the
Court if Omega Obligor prevails in its appeal or (b) if the order granting the motion to dismiss for lack of
personal jurisdiction is affirmed.
On or about January 19, 2023, the Debt Holders served a lawsuit against the Omega Obligor in the
Superior Court of the State of Delaware, asserting claims for (i) breach of the instruments evidencing the
F-68
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Subordinated Debt, (ii) declaratory judgment, and (iii) unjust enrichment, all claims that are factually based
on the claims that are the subject of Omega Obligor’s suit in the Court and that are now on appeal. On
February 8, 2023, Omega Obligor filed a motion to dismiss or, in the alternative, to stay this action pending
the outcome of the above referenced lawsuit in Maryland. The motion is presently pending before the
Delaware state court. Omega believes that the claims are baseless and is evaluating procedural and
substantive legal options in connection with this recently filed suit.
Lakeway Realty, L.L.C.
In September 2016, MedEquities received a Civil Investigative Demand (“CID”) from the U.S.
Department of Justice (“DOJ”), which indicates that it is conducting an investigation regarding alleged
violations of the False Claims Act, Stark Law and Anti-Kickback Statute in connection with claims that
may have been submitted to Medicare and other federal payors for services rendered to patients at Lakeway
Hospital or by providers with financial relationships with Lakeway Hospital (the “Potential Claims”). As a
result of the acquisition of MedEquities, the Company owns a 51% interest in an unconsolidated limited
liability company that owns Lakeway Hospital, Lakeway Realty, L.L.C. The CID requested certain
documents and information related to the acquisition and ownership of Lakeway Hospital through
Lakeway Realty, L.L.C. The Company has learned that the DOJ is investigating, among other items,
MedEquities’ conduct in connection with its investigation of financial relationships related to Lakeway
Hospital, including allegations by the DOJ that these relationships violate and continue to violate the
Anti-Kickback Statute and, as a result, related claims submitted to federal payors violated and continue to
violate the False Claims Act.
On September 29, 2020, the DOJ announced it had reached a settlement of a False Claims Act case
with Lakeway Regional Medical Center wherein Lakeway Regional Medical Center agreed to pay
$1.1 million for inducing certain physicians to refer patients by offering a low risk and high return
investment in the form of a joint venture to purchase and then lease back the hospital to Lakeway Regional
Medical Center. A MedEquities subsidiary was a party to this transaction but was not included in
settlement discussions, and we understand that the settlement did not fully resolve the investigation
referenced in the CID.
As of November 7, 2022, Lakeway Realty, L.L.C., one of its members, MRT of Lakeway TX-ACH,
LLC, and Omega (together, “Defendants”), the U.S., the State of Texas and certain named relators entered
into a settlement agreement pursuant to which Defendants were released from the Potential Claims from
March 2, 2015 through August 31, 2016, in exchange for Omega’s agreement to pay approximately
$3.1 million. Defendants admitted no liability associated with the Potential Claims. In the second quarter of
2022, the Company recorded a $3.0 million legal reserve related to this matter, which is included in other
(expense) income — net on the Consolidated Statements of Operations. The settlement was paid in the
fourth quarter of 2022 and Omega has no remaining legal reserves related to this matter as of December 31,
2022.
In addition to the matters above, we are subject to various other legal proceedings, claims and other
actions arising out of the normal course of business. While any legal proceeding or claim has an element of
uncertainty, management believes that the outcome of each lawsuit, claim or legal proceeding that is
pending or threatened, or all of them combined, will not have a material adverse effect on our consolidated
financial position or results of operations.
Indemnification Agreements
In connection with certain facility transitions, we have agreed to indemnify certain operators in certain
events. As of December 31, 2022, our maximum funding commitment under these indemnification
agreements was approximately $5.1 million. Claims under these indemnification agreements generally may
be made within 18 months to 72 months of the transition date. These indemnification agreements were
provided to certain operators in connection with facility transitions and generally would be applicable in the
event that the prior operators do not perform under their transition agreements.
F-69
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Commitments
We have committed to fund the construction of new leased and mortgaged facilities, capital
improvements and other commitments. We expect the funding of these commitments to be completed over
the next several years. Our remaining commitments at December 31, 2022, are outlined in the table below
(in thousands):
. . . . . . . . . . . . . . . . . . . . $ 7,269
Construction and capital expenditure mortgage loan commitments
Lessor construction and capital commitments under lease agreements(1) . . . . . . . . . . . . . . . . .
203,655
Non-real estate loan commitments(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71,353
Total remaining commitments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $282,277
(1)
Includes $93.3 million related to our $177.7 million commitment relating to the redevelopment of the real estate property located
in Washington, D.C. discussed in Note 3 — Real Estate Asset Acquisitions and Development.
(2) This amount includes $57.0 million related to the $90.0 million short-term revolving line of credit discussed in
Note 8 — Non-real Estate Loans Receivable.
Includes finance costs.
(3)
NOTE 21 — SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH
FLOWS
The following are supplemental disclosures to the consolidated statements of cash flows for the years
ended December 31, 2022, 2021 and 2020:
Year Ended December 31,
2022
2021
2020
(in thousands)
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $297,103 $ 20,534 $ 163,535
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,023
Cash, cash equivalents and restricted cash at end of year . . . . . . . . . $300,644 $ 24,411 $ 167,558
3,541
3,877
Supplemental information:
Interest paid during the year, net of amounts capitalized . . . . . . . . . $220,748 $214,406 $ 216,206
Taxes paid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,793 $ 6,288 $
6,974
Non cash investing activities
— $
Non-cash acquisition of business . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-cash acquisition of real estate . . . . . . . . . . . . . . . . . . . . . . . . $ (9,818) $ (58,595) $
Non-cash proceeds from sale of real estate investments . . . . . . . . . . $
— $
Non-cash proceeds from sale of business . . . . . . . . . . . . . . . . . . . . $ 7,532 $
Non-cash placement of loan principal . . . . . . . . . . . . . . . . . . . . . . $
Non-cash collection of loan principal . . . . . . . . . . . . . . . . . . . . . . $
Non-cash investment in other investments . . . . . . . . . . . . . . . . . . . $ (7,532) $
(1,826)
—
— $ 83,910
—
— $
— $ (7,000) $(208,075)
— $ 65,595 $ 68,025
—
— $
— $
Non cash financing activities
Non-cash (repayment) borrowing of other long-term borrowings . . . $
Non-cash contribution from noncontrolling member in consolidated
— $ (20,000) $
6,459
joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,903 $
—
Change in fair value of cash flow hedges . . . . . . . . . . . . . . . . . . . . $ 88,460 $ 23,457 $ 19,788
8,911
Remeasurement of debt denominated in a foreign currency . . . . . . . $ (4,077) $ 3,010 $
— $
F-70
OMEGA HEALTHCARE INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 22 — EARNINGS PER SHARE
The following tables set forth the computation of basic and diluted earnings per share:
Year Ended December 31,
2022
2021
2020
(in thousands, except per share amounts)
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deduct: net income attributable to noncontrolling interests . . . . . . . .
. . . . . . . . . . . . . . . .
Net income available to common stockholders
$438,841 $428,302 $163,545
(4,218)
(11,563)
$426,927 $416,739 $159,327
(11,914)
Denominator:
Denominator for basic earnings per share . . . . . . . . . . . . . . . . . . . .
Effect of dilutive securities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest – Omega OP Units . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per share
236,256
236,933
227,741
1,198
6,836
244,290
785
6,620
244,338
1,239
6,124
235,104
Earnings per share – basic:
Net income available to common stockholders
. . . . . . . . . . . . . . . .
$
1.81 $
1.76 $
0.70
Earnings per share – diluted:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1.80 $
1.75 $
0.70
F-71
OMEGA HEALTHCARE INVESTORS, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
December 31, 2022
Cost Capitalized
Subsequent to
Acquisition
Gross Amount at
Which Carried at
Close of Period(3)(5)
Initial Cost to
Company
Description(1)
Encumbrances
Land
Buildings and
Improvements Improvements Cost
Carrying
Other(6)
Land(8)
Buildings and
Improvements
Total
Accumulated
Date of
Depreciation(4) Construction Acquired(7)
Date
Life on Which
Depreciation
in Latest
Income Statements
is Computed
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.
Alabama (SNF) .
.
. . .
Arizona (ALF, ILF, SNF)
Arkansas (ALF, SNF) .
.
.
.
.
California (ALF, SH, SNF) . . .
.
Colorado (ILF, SNF)
.
Connecticut (ALF)
.
.
.
Florida (ALF, ILF, SNF) .
.
Georgia (ALF, SNF) .
.
.
Idaho (SNF) .
.
Illinois (ALF)
.
.
Indiana (ALF, ILF, IRF, MOB,
.
SH, SNF) .
.
.
Iowa (ALF, SNF) .
.
Kansas (SNF)
.
.
.
Kentucky (ALF, SNF) .
.
Louisiana (ALF, SNF) .
.
.
.
Maryland (SNF)
Massachusetts (ALF, SNF) . . .
.
.
Michigan (SNF)
.
. .
Minnesota (ALF, ILF, SNF)
.
Mississippi (SNF) .
.
.
.
.
Missouri (SNF) .
.
Montana (SNF) .
.
Nebraska (SNF)
.
.
.
Nevada (BHS, SH, SNF) .
.
. .
New Hampshire (ALF, SNF)
.
.
.
New Jersey (ALF) .
.
.
.
New Mexico (SNF)
.
.
New York (ALF)
.
.
North Carolina (ALF, SNF)
. .
Ohio (ALF, BHP, BHS, SH,
.
.
.
Oklahoma (SNF) .
.
Oregon (ALF, ILF, SNF) .
Pennsylvania (ALF, ILF,
.
.
.
Rhode Island (SNF) .
.
South Carolina (SNF) .
.
Tennessee (ALF, BHP, SNF)
Texas (ALF, BHS, ILF, IRF,
.
MOB, SH, SNF) .
United Kingdom (ALF)
.
Vermont (SNF) .
.
.
Virginia (ALF, SNF) .
.
.
Washington (ALF, SNF) .
.
Washington DC (ALF) .
.
.
West Virginia (SNF) .
.
.
.
Wisconsin (SNF)
.
.
.
.
. .
.
.
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.
SNF)
SNF)
.
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(2)
(2)
(2)
(2)
$
$
1,817 $
11,502
2,893
81,970
11,279
25,063
122,046
3,740
5,735
1,830
48,429
33,356
121,240
59,094
464,633
88,830
252,417
1,017,770
47,689
47,530
13,967
585,487
$ 12,916
3,653
8,517
7,925
7,790
7,116
20,143
768
1,514
1,536
11,739
$ —
—
—
—
—
1,320
—
—
—
—
—
— $ 1,817 $
—
(36)
(479)
—
—
11,502
2,893
81,970
11,279
25,063
(55,540) 121,106
3,740
5,193
1,830
48,408
—
(542)
—
(7,380)
46,272 $
124,893
67,575
472,079
96,620
260,853
983,313
48,457
49,044
15,503
589,867
48,089
136,395
70,468
554,049
107,899
285,916
1,104,419
52,197
54,237
17,333
638,275
2,343
4,092
15,556
6,577
15,144
23,621
380
10,502
8,803
4,584
1,319
750
8,811
1,782
12,953
6,008
118,606
30,935
32,147
2,296
7,331
30,072
3,299
8,480
12,976
80,905
122,941
318
35,435
16,582
68,017
1,973
399
59,310
38,693
130,819
93,709
111,651
143,172
16,120
52,585
191,448
86,316
11,698
14,892
92,797
19,837
58,199
45,285
176,921
367,008
419,651
19,934
125,133
393,156
23,487
76,912
268,846
839,069
465,187
6,005
376,943
194,121
—
66,946
4,581
—
14,219
7,517
4,877
4,985
20,052
—
5,972
827
13,910
432
—
8,350
1,463
1,576
1,318
1,841
9,171
18,460
—
9,913
18,026
3,805
2,860
7,227
37,918
11,923
602
12,659
5,837
12,901
7,062
2,153
—
—
—
448
—
—
—
—
—
—
—
—
—
—
1,559
—
40,543
336
345
—
—
—
—
—
—
197
—
—
—
—
3,877
—
—
—
2,343
—
4,092
—
15,556
(4,690)
6,577
—
15,144
(693)
23,621
—
380
—
10,502
—
8,803
(23,425)
4,424
—
1,319
—
750
—
8,811
—
1,782
—
12,953
6,008
—
— 118,606
30,935
32,147
(714)
(22,937)
—
—
(19,006)
2,296
7,331
30,067
—
—
—
(40,543)
3,299
8,480
12,976
79,902
(77,593) 109,243
318
35,261
16,582
68,017
1,973
399
—
(939)
(2)
—
—
—
59,310
52,912
138,336
94,344
116,636
162,531
16,120
58,557
192,275
76,961
12,130
14,892
101,147
21,300
61,334
46,603
219,305
375,801
415,519
19,934
135,046
392,181
27,292
79,772
276,073
837,644
413,215
6,607
388,837
199,956
16,778
74,008
6,734
61,653
57,004
153,892
100,921
131,780
186,152
16,500
69,059
201,078
81,385
13,449
15,642
109,958
23,082
74,287
52,611
337,911
406,736
447,666
22,230
142,377
422,248
30,591
88,252
289,049
917,546
522,458
6,925
424,098
216,538
84,795
75,981
7,133
$(40,830) 1960 – 1982 1992 – 1997 31 years – 33 years
(31,171) 1949 – 1999 2005 – 2021 25 years – 40 years
(43,108) 1967 – 1988 1992 – 2014 25 years – 31 years
(141,641) 1938 – 2013 1997 – 2021 5 years – 35 years
(50,881) 1925 – 1975 1998 – 2016 20 years – 39 years
(65,116) 1968 – 2019 2010 – 2017 30 years – 33 years
(265,779) 1942 – 2018 1993 – 2021 2 years – 39 years
(16,072) 1967 – 1997 1998 – 2016 30 years – 40 years
(21,697) 1920 – 2008 1997 – 2014 25 years – 39 years
(1,429)
25 years
2021
1999
(198,490) 1942 – 2015 1992 – 2020 20 years – 40 years
25 years
2011
2014
25 years
33 years
(20,796) 1961 – 1998 2010 – 2014 23 years – 33 years
(24,740) 1957 – 1977 2005 – 2011
(53,921) 1964 – 2002 1999 – 2016 20 years – 33 years
(31,207) 1957 – 2020 1997 – 2019 22 years – 39 years
(36,628) 1921 – 1985 2008 – 2022 25 years – 30 years
(63,139) 1964 – 2017 1997 – 2014 20 years – 33 years
(7,835) 1964 – 1973
(20,777) 1966 – 1983
(43,425) 1965 – 2008 2009 – 2019 20 years – 30 years
(22,560) 1955 – 1994 1999 – 2019 25 years – 33 years
(3,594) 1963 – 1971
2005
(5,534) 1966 – 1969 2012 – 2015 20 years – 33 years
(33,334) 1972 – 2012 2009 – 2017 25 years – 33 years
(11,907) 1963 – 1999 1998 – 2006 33 years – 39 years
(4,346) 1999 – 2021 2019 – 2021
(13,530) 1960 – 1985
(22,665)
(104,222) 1964 – 2019 1994 – 2022 25 years – 36 years
(109,899) 1929 – 2021 1994 – 2020 25 years – 39 years
25 years
33 years
25 years
2005
2015
33 years
2020
(10,790) 1965 – 1993 2010 – 2013 20 years – 33 years
(23,639) 1959 – 2007 2005 – 2021 25 years – 33 years
(121,187) 1873 – 2012 2004 – 2022 20 years – 39 years
2006
(15,843) 1965 – 1981
(26,687) 1959 – 2007 2014 – 2016 20 years – 33 years
(108,446) 1968 – 2018 1992 – 2021 20 years – 31 years
(238,519) 1949 – 2019 1997 – 2021 20 years – 40 years
39 years
(81,496) 1650 – 2012 2015 – 2022 25 years – 30 years
(3,432)
(89,062) 1964 – 2017 2010 – 2021 25 years – 40 years
(42,743) 1951 – 2004 1999 – 2022 25 years – 33 years
39 years
2004
1971
—
N/A
2021
N/A
(47,534) 1961 – 1996 1994 – 2011 25 years – 39 years
(3,122)
33 years
2005
1974
Total .
.
.
.
.
.
.
.
.
.
.
.
.
.
$1,012,241 $7,722,444
$331,473
$48,625
$(254,519) $995,698 $7,864,566 $8,860,264 $(2,322,773)
(1) The real estate included in this schedule is being used in either the operation of skilled nursing facilities (“SNF”), assisted living facilities (“ALF”),
independent living facilities (“ILF”), specialty facilities (consisting of behavioral health substance facilities (“BHS”), behavioral health psychology
facilities (“BHP”), independent rehabilitation facilities (“IRF”) and specialty hospitals (“SH”)) or medical office buildings (“MOB”), located in the states
or country indicated.
(2) Certain of the real estate indicated are security for the HUD loan borrowings totaling $344.7 million at December 31, 2022.
F-72
OMEGA HEALTHCARE INVESTORS, INC.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)
(in thousands)
December 31, 2022
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,985,994
$8,702,154
$9,028,745
Acquisitions(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,060
(69,913)
88,130
Disposals/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(427,117)
742,486
(44,673)
60,953
(432,175)
225,336
(38,451)
60,931
(416,297)
Balance at close of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,702,154
$9,028,745
$8,860,264
Year Ended December 31,
2020
2021
2022
(a)
Includes approximately $19.1 million, $58.6 million and $8.2 million of non-cash consideration exchanged and/or valuation adjustments during
the years ended December 31, 2020, 2021 and 2022, respectively.
(3)
(4)
Year Ended December 31,
2020
2021
2022
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,787,425
$1,996,914
$2,181,528
Provisions for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
329,508
Dispositions/other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(120,019)
341,497
(156,883)
331,963
(190,718)
Balance at close of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,996,914
$2,181,528
$2,322,773
(5) The reported amount of our real estate at December 31, 2022 is greater than the tax basis of the real estate by approximately $73 million (unaudited).
(6) Reflects bed sales, impairments (including the write-off of accumulated depreciation), land easements and impacts from foreign currency exchange rates.
(7) To the extent that we acquired an entity previously owning the underlying facility, the acquisition date reflects the date that the entity acquired the facility.
Includes $72.1 million of construction in progress related to land, all other amounts related to construction in progress are reflected in buildings and
(8)
improvements.
F-73
1
2
3
4
5
6
7
8
9
OMEGA HEALTHCARE INVESTORS, INC.
SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE
(in thousands)
December 31, 2022
Interest
Rate
Fixed/
Variable
Final
Maturity
Date
Periodic Payment
Terms
Prior Liens
Face Amount
of Mortgages
Carrying
Amount of
Loans Subject
to Delinquent
Principal
or Interest
Carrying
Amount of
Mortgages(3)(4)(6)
Grouping
Description(1)
First Mortgages
Michigan (20 SNFs)
.
.
.
.
.
.
.
.
11.35%
F(2)
2030
Michigan (4 SNFs) .
.
.
.
.
.
.
.
.
10.40%
F(2)
2030
Michigan (2 SNFs) .
.
.
.
.
.
.
.
.
10.63%
F(2)
2030
Interest plus approximately $56.3 of
principal payable monthly with
$271,997 due at maturity
Interest plus approximately $5.8 of
principal payable monthly with $27,909
due at maturity
Interest plus approximately $3.6 of
principal payable monthly with $10,381
due at maturity
None
$415,000
$279,029
$ —
None
44,200
28,631
None
11,000
10,826
10.50%
11.02%
F(2)
F(2)
2032
2031
Interest payable monthly until maturity
Interest payable monthly until maturity
None
None
72,420
82,017
72,420
35,234
Ohio (8 SNFs)
.
.
.
.
.
.
Pennsylvania (3 SNFs and 1
.
.
.
ALF) .
.
.
.
.
.
.
.
Texas (1 specialty facility) .
Massachusetts (1 specialty
.
facility) .
.
.
.
.
.
.
.
Tennessee (1 SNF)
Michigan (1 SNF)
10
Ohio (1 SNF) .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7.85%
F
2025
9.00%
F
2023
8.35%
F
9.57%
9.74%
11 Michigan (8 SNFs and 1 ALF)
. . .
10.73%
Capital Expenditure Mortgages
12 Michigan .
13 Michigan .
14 Michigan .
15 Michigan .
16 Michigan .
17 Michigan .
18 Michigan .
19 Michigan .
20 Michigan .
21 Michigan .
22 Michigan .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Construction Mortgages
10.75%
12.49%
12.18%
9.50%
11.89%
11.02%
10.40%
10.23%
9.55%
9.98%
9.74%
Interest plus approximately $150.1 of
principal payable monthly with $59,546
due at maturity
Interest plus approximately $60.0 of
principal payable monthly with $6,197
due at maturity
Past due
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest plus approximately $16.4 of
principal payable monthly with $80,918
due at maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
Interest payable monthly until maturity
None
72,960
63,811
None
9,000
—
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
6,377
14,045
21,325
83,454
3,490
4,220
4,120
248
5,445
1,472
14,045
21,325
83,030
3,480
4,220
4,112
186
5,318
15,203
15,094
500
5,450
2,900
9,771
325
500
5,188
2,542
9,518
195
2015
2030
2023
2030
2030
2030
2030
2030
2030
2030
2030
2030
2030
2030
2030
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
F(2)
23 Michigan (1 SNF)
.
.
.
.
.
.
.
.
.
9.73%
F(2)
2023
Interest paid-in-kind monthly until
maturity
None
25,683
19,082
Allowance for credit loss on
mortgage loans(7) .
.
.
.
.
.
.
.
.
.
—
(31,128)
(1) Loans included in this schedule represent first mortgages, capital expenditure mortgages and construction mortgages on facilities used in the delivery of
long-term healthcare of which such facilities are located in the states indicated.
Interest on the loans escalates annually at a fixed rate.
(2)
(3) The aggregate cost for federal income tax purposes is approximately $731.5 million (unaudited).
$909,153
$648,130
$1,472
F-74
—
—
—
(5)—
—
(5)—
1,472(5)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
OMEGA HEALTHCARE INVESTORS, INC.
SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE (continued)
(in thousands)
December 31, 2022
(4)
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions during period – new mortgage loans or additional fundings(a) . . . . . . . . . . . . .
Deductions during period – collection of principal/other(b)
. . . . . . . . . . . . . . . . . . . .
Allowance for credit loss on mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2020
$773,563
149,957
(9,867)
(28,340)
2021
2022
$ 885,313
$ 835,086
93,891
(103,761)
(40,357)
12,977
(190,141)
(9,792)
Balance at close of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$885,313
$ 835,086
$ 648,130
(a) The 2020 amount includes $0.6 million of non-cash interest paid-in-kind and $86.9 million of non-cash placement of mortgage capital. The
2021 amount includes $0.2 million of non-cash interest paid-in-kind and $7.0 million of non-cash placement of mortgage principal. The
2022 amount includes $1.2 million of non-cash interest paid-in-kind.
(b) The 2021 amount includes $58.6 million of non-cash principal reductions. The 2022 amount includes $6.0 million of interest payments that were
directly applied against the principal balance outstanding using the cost recovery method.
(5) Mortgage written down to the fair value of the underlying collateral.
(6) Mortgages included in the schedule which were extended during 2022 aggregated approximately $541.6 million.
(7) The allowance for credit loss on mortgage loans represents the allowance calculated utilizing a PD and LGD methodology. For mortgages that the risk of
loss was evaluated on an individual basis, the allowance is included as a reduction to the carrying amount of the mortgage.
F-75
EXHIBIT
NUMBER
DESCRIPTION
INDEX TO EXHIBITS TO 2022 FORM 10-K
3.1
3.2
3.3
3.4
3.5
4.0
4.1
4.1A
4.1B
4.1C
4.1D
4.1E
4.1F
Articles of Amendment and Restatement of Omega Healthcare Investors, Inc., as amended.
(Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on
Form S-3ASR, filed September 3, 2015).
Articles Supplementary of Omega Healthcare Investors, Inc. filed with the State Department
of Assessments and Taxation of Maryland on November 5, 2019 (Incorporated by reference to
Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed November 8, 2019).
Amended and Restated Bylaws of Omega Healthcare Investors, Inc. as of October 21, 2022
(Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed
October 21, 2022).
Certificate of Limited Partnership of OHI Healthcare Properties Limited Partnership
(Incorporated by reference to Exhibit 3.121 to the Company’s Form S-4, filed April 16, 2015).
Second Amended and Restated Agreement of Limited Partnership by and among Omega
Healthcare Investors, Inc., OHI Healthcare Properties Holdco, Inc., and Aviv Healthcare
Properties Limited Partnership (Incorporated by reference to Exhibit 10.11 to the Company’s
Current Report on Form 8-K, filed April 3, 2015).
See Exhibits 3.1 to 3.5.
Indenture, dated as of March 11, 2014, by and among the Company, the guarantors named
therein, and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K, filed March 11, 2014).
First Supplemental Indenture, dated as of June 27, 2014, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed August 6,
2014).
Second Supplemental Indenture, dated as of November 25, 2014, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association, and that certain
Third Supplemental Indenture, dated as of January 23, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4B to the Company’s Annual Report on Form 10-K, filed February 27,
2015).
Fourth Supplemental Indenture, dated effective as of March 2, 2015, among the Company,
each of the subsidiary guarantors listed therein and U.S. Bank National Association
(Incorporated by reference to Exhibit 4.3B to the Company’s Quarterly Report on Form 10-Q,
filed May 8, 2015).
Fifth Supplemental Indenture, dated as of April 1, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3C to the Company’s Quarterly Report on Form 10-Q, filed May 8,
2015).
Sixth Supplemental Indenture, dated as of August 4, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q, filed November 6,
2015).
Seventh Supplemental Indenture, dated as of November 9, 2015, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2F to the Company’s Annual Report on Form 10-K, filed February 29,
2016).
I-1
4.1G
4.1H
4.1I
4.1J
4.1K
4.1L
4.1M
4.2
4.2A
4.2B
4.2C
4.2D
Eighth Supplemental Indenture, dated as of March 29, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, filed May 6, 2016).
Ninth Supplemental Indenture, dated as of May 13, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, filed August 5,
2016).
Tenth Supplemental Indenture, dated as of August 9, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, filed November 8,
2016).
Eleventh Supplemental Indenture, dated as of November 10, 2016, among the Company, each
of the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated
by reference to Exhibit 4.2J to the Company’s Annual Report on Form 10-K, filed
February 24, 2017).
Twelfth Supplemental Indenture, dated as of March 17, 2017, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, filed May 5, 2017).
Thirteenth Supplemental Indenture, dated as of May 11, 2017, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Fourteenth Supplemental Indenture, dated as of May 25, 2017, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.1A to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Indenture, dated as of September 11, 2014, by and among the Company, the subsidiary
guarantors named therein, and U.S. Bank National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed September 11, 2014).
First Supplemental Indenture, dated as of November 25, 2014, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association, and that certain
Second Supplemental Indenture, dated as of January 23, 2015, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5A to the Company’s Annual Report on Form 10-K, filed February 27,
2015).
Third Supplemental Indenture, dated effective as of March 2, 2015, among the Company, each
of the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated
by reference to Exhibit 4.2B to the Company’s Registration Statement on Form S-4, filed
April 16, 2015).
Fourth Supplemental Indenture, dated as of April 1, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2B to the Company’s Registration Statement on Form S-4, filed
April 16, 2015).
Fifth Supplemental Indenture, dated as of August 4, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed November 6,
2015).
I-2
4.2E
4.2F
4.2G
4.2H
4.2I
4.2J
4.2K
4.2L
4.3
4.3A
4.3B
4.3C
4.3D
Sixth Supplemental Indenture, dated as of November 9, 2015, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3E to the Company’s Annual Report on Form 10-K, filed February 29,
2016).
Seventh Supplemental Indenture, dated as of March 29, 2016, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q, filed May 6, 2016).
Eighth Supplemental Indenture, dated as of May 13, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q, filed August 5,
2016).
Ninth Supplemental Indenture, dated as of August 9, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q, filed November 8,
2016).
Tenth Supplemental Indenture, dated as of November 10, 2016, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3I to the Company’s Annual Report on Form 10-K, filed February 24,
2017).
Eleventh Supplemental Indenture, dated as of March 17, 2017, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q, filed May 5, 2017).
Twelfth Supplemental Indenture, dated as of May 11, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Thirteenth Supplemental Indenture, dated as of May 25, 2017, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2A to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Indenture, dated as of March 18, 2015, by and among the Company, the subsidiary guarantors
named therein and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1
to the Company’s Current Report on Form 8-K, filed March 24, 2015).
First Supplemental Indenture, dated as of April 1, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5A to the Company’s Quarterly Report on Form 10-Q, filed May 8,
2015).
Second Supplemental Indenture, dated as of August 4, 2015, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2A to the Company’s Registration Statement on Form S-4, filed
October 6, 2015).
Third Supplemental Indenture, dated as of November 9, 2015, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.2B to the Amendment to the Company’s Registration Statement on
Form S-4/A, filed November 12, 2015).
Fourth Supplemental Indenture, dated as of March 29, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed May 6, 2016).
I-3
4.3E
4.3F
4.3G
4.3H
4.3I
4.3J
4.4
4.4A
4.4B
4.4C
4.4D
4.4E
4.4F
Fifth Supplemental Indenture, dated as of May 13, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed August 5,
2016).
Sixth Supplemental Indenture, dated as of August 9, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed November 8,
2016).
Seventh Supplemental Indenture, dated as of November 10, 2016, among the Company, each
of the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated
by reference to Exhibit 4.4G to the Company’s Annual Report on Form 10-K, filed
February 24, 2017).
Eighth Supplemental Indenture, dated as of March 17, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed May 5, 2017).
Ninth Supplemental Indenture, dated as of May 11, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Tenth Supplemental Indenture, dated as of May 25, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.3A to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Indenture, dated as of September 23, 2015, by and among the Company, each of the
subsidiary guarantors listed therein, and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed September 29,
2015).
First Supplemental Indenture, dated as of November 9, 2015, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.1A to the Company’s Registration Statement on Form S-4, filed
November 12, 2015).
Second Supplemental Indenture, dated as of March 29, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q, filed May 6, 2016).
Third Supplemental Indenture, dated as of May 13, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q, filed August 5,
2016).
Fourth Supplemental Indenture, dated as of August 9, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q, filed November 8,
2016).
Fifth Supplemental Indenture, dated as of November 10, 2016, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5E to the Company’s Annual Report on Form 10-K, filed February 24,
2017).
Sixth Supplemental Indenture, dated as of March 17, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q, filed May 5, 2017).
I-4
4.4G
4.4H
4.5
4.5A
4.5B
4.5C
4.5D
4.5E
4.6
4.6A
4.6B
4.7
4.8
Seventh Supplemental Indenture, dated as of May 11, 2017 among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Eighth Supplemental Indenture, dated as of May 25, 2017 among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.4A to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Indenture, dated as of July 12, 2016, by and among the Company, each of the subsidiary
guarantors listed therein, and U.S. Bank National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed July 12, 2016).
First Supplemental Indenture, dated as of August 9, 2016, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.6A to the Company’s Quarterly Report on Form 10-Q, filed
November 8, 2016).
Second Supplemental Indenture, dated as of November 10, 2016, among the Company, each of
the subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.6B to the Company’s Annual Report on Form 10-K, filed February 24,
2017).
Third Supplemental Indenture, dated as of March 17, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.6 to the Company’s Quarterly Report on Form 10-Q, filed May 5, 2017).
Fourth Supplemental Indenture, dated as of May 11, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5 to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Fifth Supplemental Indenture, dated as of May 25, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.5A to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Indenture, dated as of April 4, 2017, by and among the Company, each of the subsidiary
guarantors listed therein and U.S. Bank National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed April 4, 2017).
First Supplemental Indenture, dated as of May 11, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.6A to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Second Supplemental Indenture, dated as of May 25, 2017, among the Company, each of the
subsidiary guarantors listed therein and U.S. Bank National Association (Incorporated by
reference to Exhibit 4.6B to the Company’s Quarterly Report on Form 10-Q, filed August 9,
2017).
Indenture, dated as of September 20, 2019, among the Company, OHI Healthcare Properties
Limited Partnership and U.S. Bank National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed September 20, 2019).
Indenture, dated as of October 9, 2020, among the Company, OHI Healthcare Properties
Limited Partnership and U.S. Bank National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed October 9, 2020).
I-5
4.8A
4.9
4.10
10.1
10.2
10.3
10.4
10.5
10.6
10.6A
10.6B
10.6C
10.6D
10.6E
10.6F
10.6G
First Supplemental Indenture, dated as of October 30, 2020, among the Company, OHI
Healthcare Properties Limited Partnership and U.S. Bank National Association (Incorporated
by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q, filed
November 3, 2020).
Indenture, dated as of March 10, 2021, among the Company, OHI Healthcare Properties
Limited Partnership and U.S. Bank National Association (Incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed March 10, 2021).
Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.*
Form of Directors and Officers Indemnification Agreement (Incorporated by reference to
Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed February 23, 2018).
Amended and Restated Deferred Stock Plan, dated October 16, 2012, and forms of related
agreements (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q, filed November 7, 2012).
Credit Agreement, dated as of April 30, 2021, among the Company, certain subsidiaries of the
Company identified therein as guarantors, the lenders named therein and Bank of America,
N.A., as administrative agent for such lenders (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed May 4, 2021).
Credit Agreement, dated as of April 30, 2021, among OHI Healthcare Properties Limited
Partnership, the lenders named therein and Bank of America, N.A., as administrative agent for
such lenders (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K, filed May 4, 2021).
At-the Market Equity Offering Sales Agreement, dated May 20, 2021, among the Company,
the Sales Agents, the Forward Sellers and the Forward Purchasers (Incorporated by reference
to Exhibit 1.1 to the Company’s Current Report on Form 8-K, filed May 20, 2021).
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed June 11, 2018).+
2019 Form of Time-Based Restricted Stock Units Agreement pursuant to the Omega
Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8A of the Company’s Annual Report on Form 10-K filed February 26, 2019).+
2019 Form of Time-Based Profits Interest Units Agreement pursuant to the Omega Healthcare
Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8B of the
Company’s Annual Report on Form 10-K filed February 26, 2019).+
2019 Form of TSR-Based Performance Restricted Stock Units Agreement pursuant to the
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8C of the Company’s Annual Report on Form 10-K filed February 26, 2019).+
2019 Form of TSR-Based Performance Profits Interest Units Agreement pursuant to the
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8D of the Company’s Annual Report on Form 10-K filed February 26, 2019).+
2019 Form of Relative TSR-Based Performance Restricted Stock Units Agreement pursuant
to the Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference
to Exhibit 10.8E of the Company’s Annual Report on Form 10-K filed February 26, 2019).+
2019 Form of Relative TSR-Based Performance Profits Interest Units Agreement pursuant to
the Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8F of the Company’s Annual Report on Form 10-K filed February 26, 2019).+
2020 Form of Time-Based Restricted Stock Units Agreement pursuant to the Omega
Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8G of the Company’s Annual Report on Form 10-K filed February 28, 2020).+
I-6
10.6H
10.6I
10.6J
10.6K
10.6L
10.6M
10.6N
10.6O
10.6P
10.6Q
10.6R
10.7
10.8
10.9
2020 Form of Time-Based Profits Interest Units Agreement pursuant to the Omega Healthcare
Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8H of the
Company’s Annual Report on Form 10-K filed February 28, 2020).+
2020 Form of TSR-Based Performance Restricted Stock Units Agreement pursuant to the
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8I of the Company’s Annual Report on Form 10-K filed February 28, 2020).+
2020 Form of TSR-Based Performance Profits Interest Units Agreement pursuant to the
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8J of the Company’s Annual Report on Form 10-K filed February 28, 2020).+
2020 Form of Relative TSR-Based Performance Restricted Stock Units Agreement pursuant
to the Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference
to Exhibit 10.8K of the Company’s Annual Report on Form 10-K filed February 28, 2020). +
2020 Form of Relative TSR-Based Performance Profits Interest Units Agreement pursuant to
the Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.8L of the Company’s Annual Report on Form 10-K filed February 28, 2020). +
Form of Time-Based Restricted Stock Units Agreement pursuant to the Omega Healthcare
Investors, Inc. 2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to
Exhibit 10.6M to the Company’s Annual Report on Form 10-K, filed February 17, 2022).+
Form of Time-Based Profits Interest Units Agreement pursuant to the Omega Healthcare
Investors, Inc. 2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to
Exhibit 10.6N to the Company’s Annual Report on Form 10-K, filed February 17, 2022).+
Form of TSR-Based Performance Restricted Stock Units Agreement pursuant to the Omega
Healthcare Investors, Inc. 2018 Stock Incentive Plan (commencing 2022) (Incorporated by
reference to Exhibit 10.6O to the Company’s Annual Report on Form 10-K, filed February 17,
2022).+
Form of TSR-Based Performance Profits Interest Units Agreement pursuant to the Omega
Healthcare Investors, Inc. 2018 Stock Incentive Plan (commencing 2022) (Incorporated by
reference to Exhibit 10.6P to the Company’s Annual Report on Form 10-K, filed February 17,
2022).+
Form of Relative TSR-Based Performance Restricted Stock Units Agreement pursuant to the
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (commencing 2022) (Incorporated
by reference to Exhibit 10.6Q to the Company’s Annual Report on Form 10-K, filed
February 17, 2022).+
Form of Relative TSR-Based Performance Profits Interest Units Agreement pursuant to the
Omega Healthcare Investors, Inc. 2018 Stock Incentive Plan (commencing 2022) (Incorporated
by reference to Exhibit 10.6R to the Company’s Annual Report on Form 10-K, filed
February 17, 2022).+
Form of Officer Deferred Performance Restricted Stock Unit Agreement (Incorporated by
reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, filed August 5,
2013).+
Form of Employment Agreement for Company’s executive officers, other than Ms. Makode,
effective as of January 1, 2020 for the Company’s executive officers (Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December 20, 2019).+
Employment Agreement, effective as of January 1, 2020, between the Company and Gail
Makode (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on
Form 8-K, filed December 20, 2019).+
10.10
Form of Annual Amendment to Employment Agreement for the Company’s executive officers.+*
I-7
10.11
21.1
22.1
23.1
31.1
31.2
32.1
32.2
101
Omega Healthcare Investors, Inc. Deferred Cash Compensation Plan with form of Deferral
Agreement pursuant to the Omega Healthcare Investors, Inc. Deferred Cash Compensation
Plan (June 30, 2018) (Incorporated by reference to Exhibit 10.2 to Omega Healthcare Investor
Inc.’s Form 10-Q filed August 8, 2018).+
Subsidiaries of the Registrant.*
Subsidiary guarantors of guaranteed securities.*
Consent of Independent Registered Public Accounting Firm for Omega Healthcare Investors,
Inc.*
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Omega Healthcare
Investors, Inc.*
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Omega Healthcare
Investors, Inc.*
Section 1350 Certification of the Chief Executive Officer of Omega Healthcare Investors, Inc.*
Section 1350 Certification of the Chief Financial Officer of Omega Healthcare Investors, Inc.*
The following financial statements from the Company’s Annual Report on Form 10-K for the
year ended December 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive
Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows,
and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including
detailed tags.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained
in Exhibit 101).
Exhibits that are filed or furnished herewith.
*
+ Management contract or compensatory plan, contract or arrangement.
I-8
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
Date: February 14, 2023
OMEGA HEALTHCARE INVESTORS, INC.
Registrant
By: /s/ C. Taylor Pickett
C. Taylor Pickett
Chief Executive Officer
I-9
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by
the following persons on behalf of the Omega Healthcare Investors, Inc., for itself and in the capacities on
the date indicated.
Signatures
Title
Date
/s/ C. Taylor Pickett
C. Taylor Pickett
/s/ Robert O. Stephenson
Robert O. Stephenson
/s/ Neal A. Ballew
Neal A. Ballew
/s/ Craig R. Callen
Craig R. Callen
/s/ Kapila K. Anand
Kapila K. Anand
/s/ Dr. Lisa C. Egbuonu-Davis
Dr. Lisa C. Egbuonu-Davis
/s/ Barbara B. Hill
Barbara B. Hill
/s/ Kevin J. Jacobs
Kevin J. Jacobs
/s/ C. Taylor Pickett
C. Taylor Pickett
/s/ Stephen D. Plavin
Stephen D. Plavin
/s/ Burke W. Whitman
Burke W. Whitman
Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
February 14, 2023
February 14, 2023
February 14, 2023
Chair of the Board
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
Director
Director
Director
Director
Director
Director
Director
I-10
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Form S-8 Registration Statements (File Nos. 333-225595, 333-189144 and 333-117656) related to
the 2018 Stock Incentive Plan (formerly known as the 2013 Stock Incentive Plan and 2004 Stock
Incentive Plan) of Omega Healthcare Investors, Inc.;
(2) Form S-3 Registration Statement (File No. 333-256084) related to the registration of preferred
stock, common stock, warrants, and units of Omega Healthcare Investors, Inc.;
(3) Form S-3 Registration Statement (File No. 333-261519) pertaining to the debt securities, common
stock, preferred stock, and guarantees of debt securities of Omega Healthcare Investors, Inc.; and
(4) Form S-8 Registration Statement (File No. 333-234599) pertaining to the Omega Healthcare
Investors, Inc. Employee Stock Purchase Plan.
of our reports dated February 14, 2023, with respect to the consolidated financial statements and schedules
of Omega Healthcare Investors, Inc. and the effectiveness of internal control over financial reporting of
Omega Healthcare Investors, Inc., included in this Annual Report (Form 10-K) of Omega Healthcare
Investors, Inc. for the year ended December 31, 2022.
/s/ Ernst & Young LLP
Baltimore, Maryland
February 14, 2023
Exhibit 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, C. Taylor Pickett, certify that:
Certification
1.
I have reviewed this Annual Report on Form 10-K of Omega Healthcare Investors, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 14, 2023
/S/ C. TAYLOR PICKETT
C. Taylor Pickett
Chief Executive Officer
RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER
Exhibit 31.2
I, Robert O. Stephenson, certify that:
Certifications
1.
I have reviewed this Annual Report on Form 10-K of Omega Healthcare Investors, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 14, 2023
/S/ ROBERT O. STEPHENSON
Robert O. Stephenson
Chief Financial Officer
Exhibit 32.1
SECTION 1350 CERTIFICATION
OF THE CHIEF EXECUTIVE OFFICER
I, C. Taylor Pickett, Chief Executive Officer of Omega Healthcare Investors, Inc. (the “Company”),
hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to
the best of my knowledge:
(1) the Annual Report on Form 10-K of the Company for the year ended December 31, 2022 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: February 14, 2023
/S/ C. TAYLOR PICKETT
C. Taylor Pickett
Chief Executive Officer
Exhibit 32.2
SECTION 1350 CERTIFICATION
OF THE CHIEF FINANCIAL OFFICER
I, Robert O. Stephenson, Chief Financial Officer of Omega Healthcare Investors, Inc. (the
“Company”), hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350, that, to the best of my knowledge:
(1) the Annual Report on Form 10-K of the Company for the year ended December 31, 2022 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: February 14, 2023
/S/ ROBERT O. STEPHENSON
Robert O. Stephenson
Chief Financial Officer
STOCKHOLDER INFORMATION
Executive Officers and Directors as of April 21,
2023
C. Taylor Pickett (1)
Chief Executive Officer
Director
Daniel J. Booth
Chief Operating Officer
Gail D. Makode
Chief Legal Officer
Robert O. Stephenson
Chief Financial Officer
Kapila K. Anand (1), (3)
Director
Craig R. Callen (1), (3), (4)
Chair of the Board
Dr. Lisa C. Egbuonu-Davis (4)
Director
Barbara B. Hill (2), (4)
Director
Kevin Jacobs (1), (3)
Director
Stephen D. Plavin (2), (4)
Director
Burke W. Whitman (2), (3)
Director
(1) Member of Investment Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
(4) Member of Nominating and Corporate
Governance Committee
Dividend Reinvestment and Stock Purchase Plan
The Dividend Reinvestment and Stock
Purchase Plan provides investors and shareholders
with a convenient method for reinvesting dividends
and purchasing shares of Common Stock directly
from the Company without paying any service
charges or brokerage commissions.
Please see www.omegahealthcare.com and
click on “DRSP (Dividend Reinvestment and
Stock Purchase Plan)” in the “Stock Data” menu
on the “Investor Relations” page for plan features.
Please call 800-368-5948 for information about the
Plan, and to request a prospectus and enrollment
forms. Alternatively, Plan materials can be downloaded
directly at www.computershare.com/investor.
Auditors
Ernst & Young LLP
Baltimore, Maryland
Transfer Agent and Registrar
Postal correspondence should be mailed to:
Computershare
P.O. Box 43006
Providence, RI 02940-3006
Overnight correspondence should be sent to:
Computershare
150 Royall Street, Suite 101
Canton, MA 02021
Exchange Listing
New York Stock Exchange (Symbol: OHI)
Corporate Office
303 International Circle
Suite 200
Hunt Valley, MD 21030
(410) 427-1700 Phone
Annual Meeting
The Annual Meeting of the Stockholders will
be held virtually at 10:00 A.M. EDT June 5, 2023.
All stockholders are
to participate.
Instructions for logging into our virtual Annual
Meeting will be included in your proxy materials.
invited
Publications Available
To view a copy of press releases or the most
recent financial results, please visit the Company’s
web site at www.omegahealthcare.com.
Member
National Association
of Real Estate
Investment Trusts, Inc.
NYSE Certification
The Chief Executive Officer’s
annual
certification pursuant to §303.12(a) of the New
York Stock Exchange Listed Company Manual
was submitted to the New York Stock Exchange
on July 11, 2022. There are no qualifications to
that certification.
303 International Circle, Suite 200
Hunt Valley, MD 21030
Phone (410) 427-1700