Q1 2026 Omega Healthcare Investors Inc Earnings Call

April 29, 2026

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Omega Healthcare Investors Inc. First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I will now turn the conference over to Michele Reber. You may begin.

Speaker #3: After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

Speaker #3: If you would like to withdraw your question, press star one again. Thank you. I will now turn the conference over to Michele Reber, you may begin.

Speaker #2: Thank you and good morning. With me today is Omega CEO Taylor Pickett, President Matthew Gourmand, CFO Bob Stevenson, CIO Vikas Gupta, and Megan Krull, Senior Vice President Data Intelligence and Government Relations.

Michele Reber: Thank you and good morning. With me today is Omega CEO, C. Taylor Pickett, President Matthew Gourmand, CFO Bob Stephenson, CIO Vikas Gupta, and Megan Krull, Senior Vice President, Data Intelligence and Government Relations. Comments made during this conference call that are not historical facts may be forward-looking statements such as statements regarding our financial projections, potential transactions, operator prospects, and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. During the call today, we will refer to some non-GAAP financial measures such as Nareit FFO, Adjusted FFO, FAD, and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement.

Speaker #2: Comments made during this conference call that are not historical facts may be forward-looking statements, such as statements regarding our financial projections, potential transactions, operator prospects, and outlook generally.

Speaker #2: Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. During the call today, we will refer to some non-GAAP financial measures, such as NAMRED FFO, adjusted FFO, FAD, and EBITDA.

Speaker #2: Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega.

Michele Reber: In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega. I will now turn the call over to Taylor.

Speaker #2: I will now turn the call over to Taylor.

Speaker #3: Thanks, Michele. Good morning and thank you for joining our first quarter 2026 earnings conference call. Today, I will discuss our first quarter financial results, and certain key operating trends.

C. Taylor Pickett: Thanks, Michele Reber. Good morning and thank you for joining our Q1 2026 earnings conference call. Today, I will discuss our Q1 financial results and certain key operating trends. Q1 Adjusted FFO, AFFO, of $0.82 per share and FAD, funds available for distribution, of $0.78 per share reflects strong revenue and EBITDA growth, principally fueled by acquisitions and active portfolio management. Our dividend payout ratio has dropped to 82% for AFFO and 86% for FAD. Our exceptional Q1 results reflect our high quality capital allocation throughout 2025 and the Q1 of 2026. We continue to find and close RIDEA transactions while still allocating meaningful capital to SNF facilities and UK care homes. We expect our capital allocation and active portfolio management will drive significant future AFFO and FAD growth.

Speaker #3: First quarter adjusted funds from operations, AFFO, of $82 per share, and FAD, funds available for distribution, of $78 per share, reflects strong revenue and EBITDA growth, principally fueled by acquisitions and active portfolio management.

Speaker #3: Our dividend payout ratio has dropped to 82% for AFFO, and 86% for FAD. Our exceptional first quarter results reflect our high-quality capital allocation throughout 2025 and the first quarter of 2026.

Speaker #3: We continue to find enclosed Rydia transactions while still allocating meaningful capital to sniff facilities and UK care homes. We expect our capital allocation and active portfolio management will drive significant future AFFO and FAD growth.

Speaker #3: Our active portfolio management is highlighted by our planned and partially completed second quarter sales generating $480 million in proceeds. We expect the redeployment of this capital will result in approximately $0.03 of annual AFFO and FAD accretion.

C. Taylor Pickett: Our active portfolio management is highlighted by our planned and partially completed Q2 sales, generating $480 million in proceeds. We expect the redeployment of this capital will result in approximately $0.03 of annual AFFO and FAD accretion. I will now turn the call over to Matthew.

Speaker #3: I will now turn the call over to Matthew.

Speaker #4: Thanks, Taylor, and good morning, everyone. We have spoken in previous calls about the team's focus on creating shareholder value by growing FAD per share on a sustainable basis.

Matthew Gourmand: Thanks, Taylor. Good morning, everyone. We have spoken in previous calls about the team's focus on creating shareholder value by growing FAD per share on a sustainable basis, and we saw this focus continue to bear fruit in Q1 as our FAD per share increased 9.5% over the same quarter last year. This, along with a robust pipeline of investment opportunities, gave us comfort to be able to increase the low end of our AFFO guidance, moving the midpoint up by $0.02 to $3.22. At the same time, our Q1 investments reflect the breadth of our capital allocation focus. We invested in both triple net and RIDEA structures in skilled nursing, senior housing, and long-term care real estate across the US, the UK, and Canada. We closed on our equity investment in Saber operating company.

Speaker #4: And we saw this focus continue to bear fruit in the first quarter, as our FAD per share increased 9.5% over the same quarter last year.

Speaker #4: This along with a robust pipeline of investment opportunities gave us comfort to be able to increase the low end of our AFFO guidance, moving the midpoint up by $0.02 to $3.22.

Speaker #4: At the same time, our first quarter investments reflect the breadth of our capital allocation focus. We invested in both TripleNet and Rydia structures, in skilled nursing, seniors housing, and long-term care real estate across the United States, the UK, and Canada.

Speaker #4: And we closed on our equity investment in Savers Operating Company. In addition, we are in the process of selling a portfolio of 18 Communicare assets for $480 million.

Matthew Gourmand: In addition, we are in the process of selling a portfolio of 18 Communicare assets for $480 million. Vikas will provide additional details around the sale. However, from an overarching perspective, it was about putting assets into the hands of strong stewards at a price that made sense for each party while also enhancing our credit with Communicare. While we would not expect to see this be a core element of our capital allocation strategy, we will continue to evaluate our portfolio and work with our operating partners to find innovative ways to both protect and enhance shareholder value over time. Finally, I would like to thank the team who continue to work tirelessly to execute on our vision, as well as our operating partners and their staff who work every day to look after some of the sickest and most frail members of our community.

Speaker #4: Vikas will provide additional details around this sale. However, from an overarching perspective, it was about putting assets into the hands of strong stewards at a price that made sense for each party, while also enhancing our credit with Communicare.

Speaker #4: While we would not expect to see this be a core element of our capital allocation strategy, we will continue to evaluate our portfolio and work with our operating partners to find innovative ways to both protect and enhance shareholder value over time.

Speaker #4: Finally, I would like to thank the team, who continue to work tirelessly to execute on our vision as well as our operating partners and their staff who work every day to look after some of the sickest and most frail members of our community, without them none of this would be possible.

Matthew Gourmand: Without them, none of this would be possible. I will now turn the call over to Vikas Gupta.

Speaker #4: I will now turn the call over to Vikas.

Speaker #2: Thank you, Matthew, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio including an update on Genesis, additional detail on our strategic sales, Omega's investment activity year to date, and an update on our pipeline.

Vikas Gupta: Thank you, Matthew, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio, including an update on Genesis, additional detail on our strategic sales, Omega's investment activity year to date, and an update on our pipeline. Turning to portfolio performance. Core portfolio coverage continues to trend in a favorable direction. Above industry average coverage levels, with our trailing twelve-month operator EBITDA coverage for our triple net and mortgage core portfolio as of 31 December 2025 at 1.58 times compared to our Q3 2025 reported coverage of 1.57 times. This represents the highest coverage in our portfolio in over a decade and reflects the combination of a relatively favorable operating backdrop combined with our active portfolio management, where we have focused on strengthening the lease credit across our portfolio.

Speaker #2: Turning to portfolio performance, core portfolio coverage continues to trend in a favorable direction, above industry average coverage levels, with our trailing 12-month operator EBITDA coverage for our TripleNet and mortgage core portfolio as of December 31, 2025, at 1.58 times, compared to our third quarter 2025 reported coverage of 1.57 times.

Speaker #2: This represents the highest coverage in our portfolio in over a decade. And reflects the combination of a relatively favorable operating backdrop combined with our active portfolio management, where we have focused on strengthening the least credit across our portfolio.

Speaker #2: The Genesis bankruptcy process continues to move forward, with a few notable events having taken place in recent weeks. In March, we committed to fund up to $26.7 million or one-third of a new aggregate $80 million DIB loan.

Vikas Gupta: The Genesis bankruptcy process continues to move forward, with a few notable events having taken place in recent weeks. In March, we committed to fund up to $26.7 million, or one-third of a new aggregate $80 million DIP loan. As of the end of Q1, we have funded our $25 million portion of the initial $75 million advance. Proceeds from this new super priority DIP financing were used to fully repay the original DIP loan and to fund working capital needs. Additionally, the debtors have advised that 101 West State Street has submitted a qualified financing commitment as required by the asset purchase agreement. The closing date, which can contractually be extended to the end of Q3, is conditioned on several factors, including receipt of regulatory change of ownership approvals.

Speaker #2: As of the end of the first quarter, we have funded our $25 million portion of the initial $75 million advance. Proceeds from this new super-priority DIB financing were used to fully repay the original DIB loan and to fund working capital needs.

Speaker #2: Additionally, the debtors have advised that 101 West State Street has submitted a qualified financing commitment as required by the asset purchase agreement. The closing date, which can contractually be extended to the end of the third quarter, is conditioned on several factors, including receipt of regulatory change of ownership approvals.

Speaker #2: We anticipate that 101 West State Street will assume our Genesis mass release, and our DIB loan and term loan will be paid off from the consideration received by the debtors at closing.

Vikas Gupta: We anticipate that 101 West State Street will assume our Genesis master lease, and our DIP loan and term loan will be paid off from the consideration received by the debtors at closing. We remain confident that our term loan is fully collateralized based on the underlying collateral and the ascribed value of the Genesis estate. These assumptions, along with all elements of the bankruptcy process, are subject to further developments in events in the bankruptcy proceeding. As C. Taylor Pickett and Matthew Gourmand mentioned, we're in the process of a strategic sale of 18 Communicare assets located in Maryland and West Virginia for a contractual purchase price of $480 million and a rent discount at a blended 7.7%. Subsequent to quarter end, 12 Maryland facilities were sold, and we expect the remaining 6 West Virginia facilities to be sold in Q2.

Speaker #2: We remain confident that our term loan is fully collateralized based on the underlying collateral and the ascribed value of the Genesis estate. These assumptions, along with all elements of the bankruptcy process, are subject to further developments and events in the bankruptcy proceeding.

Speaker #2: As Taylor and Matthew mentioned, we're in the process of a strategic sale of 18 CommuniCare assets, located in Maryland and West Virginia, for a contractual purchase price of $480 million, and our rent discount at a blended 7.7%.

Speaker #2: Subsequent to quarter end, 12 Maryland facilities were sold, and we expect the remaining six West Virginia facilities to be sold in the second quarter.

Speaker #2: While asset sales are not typically a core component of our capital allocation strategy, the strong pricing offered for these facilities combined with the improvement of our credit with Communicare presented an opportunity to realize significant value for our shareholders.

Vikas Gupta: While asset sales are not typically a core component of our capital allocation strategy, the strong pricing offered for these facilities, combined with the improvement of our credit with Communicare, presented an opportunity to realize significant value for our shareholders. Turning to new investments. Our transaction activity for 2026 started strong, with $326 million in new investments year to date. Similar to previous quarters, these transactions varied in size and asset type, but demonstrate our ability to continue to develop, underwrite, and close accretive transactions in our core asset classes. We continue to support the growth of existing and new operators in the US skilled nursing space and UK care home space, as well as expand our new senior housing Radia portfolio. As Matthew said earlier, our primary goal is to allocate capital with a focus on growing FAD per share on a sustainable basis.

Speaker #2: Turning to new investments, our transaction activity for 2026 started strong. With $326 million in new investments year to date, similar to previous quarters, these transactions varied in size and asset type, but demonstrate our ability to continue to develop, underwrite, and close accretive transactions in our core asset classes.

Speaker #2: We continue to support the growth of existing and new operators in the US skilled nursing space and UK care home space, as well as expand our new senior housing Rydia portfolio.

Speaker #2: As Matthew said earlier, our primary goal is to allocate capital with a focus on growing FAD per share on a sustainable basis. During the first quarter of 2026, Omega completed a total of $251.

Vikas Gupta: During Q1 2026, Omega completed a total of $251 million in new investments, not including $13 million in CapEx. These new investments included the previously announced purchase of 9.9% of the equity interest in Sabers operating company, the $109 million acquisition of 13 Georgia skilled nursing facilities, and a $10 million investment in an Alabama senior housing RIDEA transaction. Our other Q1 investments included the purchase of a UK care home for $7 million and $27 million in real estate loans. The weighted average yield on these leases and loans was 10.9%. Subsequent to quarter end, we closed $75 million of additional investments. We purchased 2 Indiana skilled nursing facilities for $33 million and 3 senior housing facilities in Rhode Island for $42 million.

Speaker #2: Million in new investments not including $13 million in CapEx. These new investments included the previously announced purchase of $9.9% of the equity interest in Savers Operating Company, the $109 million acquisition of 13 Georgia skilled nursing facilities, and a $10 million investment in an Alabama senior housing Rydia transaction.

Speaker #2: Our other first quarter investments included the purchase of a UK care home for $7 million and $27 million in real estate loans. The weighted average yield on these leases and loans was 10.9%.

Speaker #2: Subsequent to quarter end, we closed $75 million of additional investments. We purchased two Indiana skilled nursing facilities for $33 million and three senior housing facilities in Rhode Island for $42 million.

Vikas Gupta: The skilled nursing facilities will be leased to a current Omega operator at a lease yield of 10%. The senior housing facilities will be operated by Omega and managed by a third-party manager via our RIDEA structure. Turning to the pipeline. Our pipeline includes both marketed and off-market opportunities in the US and the UK. A large component of these opportunities are US senior housing assets that will be structured and operated using our new RIDEA platform. As mentioned previously, we've built out our infrastructure at Omega with an experienced team of investment professionals that are finding deals that meet our investment criteria and then coupling them with proven third-party managers who we believe will deliver on those underwritten expectations. We continue to pursue deals that will achieve IRRs in the mid-teens range.

Speaker #2: The skilled nursing facilities will be leased to a current Omega operator at a lease yield of 10%, and the senior housing facilities will be operated by Omega and managed by a third-party manager via a Rydia structure.

Speaker #2: Turning to the pipeline, our pipeline includes both marketed and off-market opportunities in the US and the UK. A large component of these opportunities are US senior housing assets that will be structured and operated using our new Rydia platform.

Speaker #2: As mentioned previously, we've built out our infrastructure at Omega with an experienced team of investment professionals that are finding deals that meet our investment criteria and then coupling them with proven third-party managers who we believe will deliver on those underwritten expectations.

Speaker #2: We continue to pursue deals that will achieve IRRs in the mid-teens range. In addition to senior housing Rydia deals, we are aggressively pursuing both US skilled nursing and UK care home deals.

Vikas Gupta: In addition to senior housing RIDEA deals, we are aggressively pursuing both US skilled nursing and UK care home deals. In the UK, we've built out our team to help find off-market transactions and quickly evaluate opportunities with existing and new operators in order to continue deploying meaningful capital through both triple net and RIDEA structures. I will now turn the call over to Bob.

Speaker #2: In the UK, we've built out our team to help find off-market transactions and quickly evaluate opportunities with existing and new operators, in order to continue deploying meaningful capital through both TripleNet and Rydia structures.

Speaker #2: I will now turn the call over to Bob.

Bob Stephenson: Thanks, Vikas, good morning. Turning to our financials for Q1 2026. Revenue for Q1 was $323 million compared to $277 million for Q1 2025. The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2025 and 2026, annual escalators, and active portfolio management. Our net income for Q1 2026 was $159 million, or $0.47 per common share, compared to $112 million, or $0.33 per common share for Q1 2025.

Speaker #1: Thanks, Vikas and good morning. Turning to our financials for the first quarter of 2026, revenue for the first quarter was $323 million, compared to $277 million for the first quarter of 2025.

Speaker #1: The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2025 and '26, annual escalators, and active portfolio management.

Speaker #1: Our net income for the first quarter of 2026 was $159 million, or $0.47 per common share, compared to $112 million, or $0.33 per common share, for the first quarter of 2025.

Bob Stephenson: Our Adjusted FFO was $260 million, or $0.82 per share for the quarter. Our FAD was $247 million or $0.78 per share. Both are adjusted for several items outlined in our Nareit FFO, Adjusted FFO, and FAD reconciliations to net income found in our earnings release, as well as our Q1 financial supplemental posted to our website. Our Q1 2026 Adjusted FFO and FAD were both $0.02 greater than our Q4 AFFO and FAD, with the increase primarily resulting from incremental net income from $585 million in new investments completed during the Q4 and Q1 and revenue from annual escalators of $2 million.

Speaker #1: Our adjusted FFO was $260 million, or 82 cents per share for the quarter, and our FAD was $247 million, or 78 cents per share and both are adjusted for several items outlined in our NARETE FFO adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our first quarter financial supplemental posted to our website.

Speaker #1: Our first quarter 2026 adjusted FFO and FAD were both 2 pennies greater than our fourth quarter AFFO and FAD with the increase primarily resulting from incremental net income from $585 million in new investments completed during the fourth and first quarters.

Speaker #1: And revenue from annual escalators of $2 million. These were partially offset by income related to $53 million in asset sales and $88 million in loan repayments over the past two quarters, resulting in a 1.4 million reduction to our first quarter adjusted FFO and FAD as well as the impact from the issuance of a combined $7.7 million common shares of stock and OP units over the past two quarters to fund the new investments.

Bob Stephenson: These were partially offset by income related to $53 million in asset sales and $88 million in loan repayments over the past two quarters, resulting in a $1.4 million reduction to our Q1 Adjusted FFO and FAD, as well as the impact from the issuance of a combined 7.7 million common shares of stock and OP units over the past two quarters to fund the new investments. Our balance sheet remains incredibly strong. Our debt is well laddered and we have significant liquidity. At 31 March, we have $425 million in borrowings on our credit facility. However, we also have $26 million in available cash and assets held for sale, which we expect to sell for approximately $480 million.

Speaker #1: Our balance sheet remains incredibly strong. Our debt is well laddered, and we have significant liquidity. At March 31st, we have $425 million in borrowings on our credit facility.

Speaker #1: However, we also have $26 million in available cash and assets held for sale which we expect to sell for approximately $480 million. Additionally, we have over $1.5 billion in available capacity on our $2 billion revolver with our next scheduled debt maturity not until April 2027.

Bob Stephenson: Additionally, we have over $1.5 billion in available capacity on our $2 billion revolver, with our next scheduled debt maturity not until April 2027. At quarter end, our fixed charge coverage ratio was 6.3x. Our leverage remained flat at 3.5x. We are excited as our balance sheet and cost of capital continue to position us to accretively fund our active pipeline. Turning to guidance. As we press released yesterday, we narrowed our full year Adjusted FFO guidance to a range between $3.19 to $3.25 per share. This is a $0.02 increase over the midpoint of our February guidance. I'd like to take a moment to highlight a few of the guidance assumptions we outlined in our earnings release.

Speaker #1: At quarter end, our fixed charge coverage ratio was 6.3 times and our leverage remained flat at 3.5 times. We are excited as our balance sheet and cost of capital continue to position us to a creatively fund our active pipeline.

Speaker #1: Turning to guidance, as we press released yesterday, we narrowed our full year adjusted AFFO guidance to a range between $3.19 to $3.25 per share.

Speaker #1: This is a 2 penny increase over the midpoint of our February guidance. I like to take a moment to highlight a few of the guidance assumptions we outlined in our earnings release.

Bob Stephenson: Our guidance includes the impact of new investments completed as of 27 April and does not include any additional investments not outlined in our press release. It includes the impact of scheduled loan repayments and expected asset sales.

Speaker #1: Our guidance includes the impact of new investments completed as of April 27th and does not include any additional investments not outlined in our press release.

Speaker #1: It includes the impact of scheduled loan repayments and expected asset sales. Of the $159 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $65 million will convert to fee simple real estate and that the balance will be repaid.

Matthew Gourmand: Of the $159 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $65 million will convert to fee simple real estate and that the balance will be repaid. Additionally, $224 million in non-real estate-backed loans at 31 March 2026 are expected to be repaid throughout 2026, which includes approximately $159.5 million in Genesis loans. The 18 Communicare facilities and assets held for sale are expected to be sold for $480 million. Our Q1 rent related to these facilities totaled $9.2 million.

Bob Stephenson: Of the $159 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $65 million will convert to fee simple real estate and that the balance will be repaid. Additionally, $224 million in non-real estate-backed loans at 31 March 2026 are expected to be repaid throughout 2026, which includes approximately $159.5 million in Genesis loans. The 18 Communicare facilities and assets held for sale are expected to be sold for $480 million. Our Q1 rent related to these facilities totaled $9.2 million.

Speaker #1: Additionally, $224 million in non-real estate backed loans at March 31st, 2026 are expected to be repaid throughout 2026, which includes approximately $159.5 million in Genesis loans.

Speaker #1: The 18 Communicare facilities and assets held for sale are expected to be sold for $480 million. Our Q1 rent related to these facilities totaled $9.2 million.

Matthew Gourmand: The high end of the range in our guidance includes, but is not limited to, timing or potential extension of loan repayments and asset sales, additional cash from Maplewood, as well as other cash-based operators. G&A at the lower end of the guidance range, just to name a few. Our 2026 Adjusted FFO guidance does not include any additional investments, asset sales, or capital market transactions other than what I just mentioned or that was included in the earnings release. I will now turn the call over to Megan.

Bob Stephenson: The high end of the range in our guidance includes, but is not limited to, timing or potential extension of loan repayments and asset sales, additional cash from Maplewood, as well as other cash-based operators. G&A at the lower end of the guidance range, just to name a few. Our 2026 Adjusted FFO guidance does not include any additional investments, asset sales, or capital market transactions other than what I just mentioned or that was included in the earnings release. I will now turn the call over to Megan.

Speaker #1: The high end of the range in our guidance includes, but is not limited to, timing or potential extension of loan repayments and asset sales.

Speaker #1: Additional cash from Maplewood as well as other cash-based operators. G&A at the lower end of the guidance range just to name a few. Our 2026 adjusted FFO guidance does not include any additional investments asset sales or capital market transactions other than what I just mentioned or that was included in the earnings release.

Speaker #1: I will now turn the call over to Megan.

Megan Krull: Thanks, Bob, and good morning, everyone. With the budgetary season well underway in most states, we continue to watch for any signals of state reactions to the OBRA as it relates to long-term care. As expected, things have been relatively quiet, with most meaningful discussions not expected until sometime next year. On a separate note, over the last year or so, Medicare Advantage has come under scrutiny due to allegations of upcoding, high denial rates, delayed payments, and cost savings not keeping pace with expectations. Last week, bipartisan legislation was introduced in Congress, applauded by industry associations, which addresses just these types of concerns. While I noted last time that Medicare Advantage represents a relatively low portion of our operator's business, the momentum behind fixing these issues is important to our industry as similar issues arise in Managed Medicaid.

Speaker #2: Thanks, Bob, and good morning, everyone. With the budgetary season well underway in most states, we continue to watch for any signals of state reactions to the OVBBA as it relates to long-term care.

Speaker #2: As expected, things have been relatively quiet with most meaningful discussions not expected until sometime next year. On a separate note, over the last year or so, Medicare Advantage has come under scrutiny due to allegations of upcoding, high denial rates, delayed payments, and cost savings not keeping pace with expectations.

Speaker #2: Last week, bipartisan legislation was introduced in Congress, applauded by industry associations, which addresses just these types of concerns. While I noted last time that Medicare Advantage represents a relatively low portion of our operators' business, the momentum behind fixing these issues is important to our industry as similar issues arise in managed Medicaid.

Megan Krull: Indiana, for instance, who implemented Managed Medicaid back in 2024, has decided to unwind that program specifically for the long-term care population in nursing homes for very similar reasons that we see in Medicare Advantage. We applaud these efforts to deal with these fundamental structural problems head-on to ensure that our payment systems align with the needs of this frail and vulnerable population. I will now open the call up for questions.

Speaker #2: Indiana, for instance, who implemented managed Medicaid back in 2024, has decided to unwind that program specifically for the long-term care population in nursing homes for very similar reasons that we see in Medicare Advantage.

Speaker #2: We applaud these efforts to deal with these fundamental structural problems head-on to ensure that our payment systems align with the needs of this frail and vulnerable population.

Speaker #2: I will now open the call up for questions.

Operator: Thank you. As a reminder, to ask a question, you will need to press star, then the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. We do request for today's session that you please limit to one question and one follow-up. Your first question comes from the line of Nick Joseph with Citi. Your line is open.

Speaker #3: Thank you. As a reminder, to ask a question, you will need to press star, then the number one, on your telephone keypad. If you would like to withdraw your question, press star one again.

Speaker #3: We do request for today's session that you please limit to one question and one follow-up. Your first question comes from the line of Nick Joseph with Siri.

Speaker #3: Your line is open.

Marlon: Hi, this is Marlon for Nick. Could you please elaborate on the rationale behind the Communicare asset sales and whether or not they're indicative of broader conditions in the Maryland and West Virginia markets? Thanks.

[Analyst] (Citi): Hi, this is Marlon for Nick. Could you please elaborate on the rationale behind the Communicare asset sales and whether or not they're indicative of broader conditions in the Maryland and West Virginia markets? Thanks.

Speaker #4: Hi, this is Marnon for Nick. Could you please elaborate on the rationale behind the Communicare asset sales and whether or not they're indicative of broader conditions in the Maryland and West Virginia markets?

Speaker #4: Thanks.

Matthew Gourmand: Hi. Yes, it's Matthew here. The primary reason for the disposition was opportunistic. We had an opportunity to sell assets and enhance our credit with Communicare. We were able to get a bid that we thought was fair to both parties. I think a little bit of it's a reflection of these are both relatively hot markets right now. Both Maryland and Virginia are markets that people are looking to acquire in. We took advantage of that to a certain extent. I don't think you can expect us to be doing this as part of the core business. Occasionally, we will look to divest of assets. In this situation, we were also able to enhance our credit. To the extent that we can continue to do that, we will.

Speaker #5: Hi, yes, it's Matthew here. So the primary reason for the disposition was opportunistic. We had an opportunity to sell assets and enhance our credit with Communicare.

Speaker #5: We were able to get a bid that we thought was fair to both parties. I think a little bit of it's a reflection of these are both relatively hot markets right now, both Maryland and Virginia are markets that people are looking to acquire in.

Speaker #5: So we took advantage of that to a certain extent. But I don't think you can expect us to be doing this as part of the core business.

Speaker #5: Occasionally, we will look to divest of assets in this situation. We were also able to enhance our credit. So to the extent that we can continue to do that, we will.

Matthew Gourmand: As we look out through to 2026, I don't think you're going to see any large dispositions like this, happening in the next few quarters.

Speaker #5: But as we look out through to 2026, I don't think you're going to see any large dispositions like this happening in the next few quarters.

Marlon: Got it. Thank you.

[Analyst] (Citi): Got it. Thank you.

Speaker #4: Got it. Thank you.

Operator: Your next question comes from the line of Richard Anderson with Cantor Fitzgerald. Your line is open.

Speaker #3: Your next question comes from the line of Richard Anderson with Canter Fitzgerald. Your line is

Richard Anderson: Hey, thanks. Good morning, everyone. When you think about your, you know, your external growth strategy, you know, through all the different layers you mentioned, shops, skilled, and care homes, can you talk about your comfort level on the initial yield? You know, I know we talked about this, Matt, in some length, you know, how low on the, you know, initial yield spectrum are you willing to go if you know, have line of sight into a, you know, a reasonable IRR over the long term? Just curious what your thought process is there. Thanks.

Speaker #6: Hey, thanks. Good morning, everyone. So when you think about your external growth strategy, through all the different layers you mentioned, shop, skilled, and care homes, can you talk about your comfort level on the initial yield?

Speaker #6: I know we talked about this, Matt, at some length, but how low on the initial yield spectrum are you willing to go if you have line of sight into a reasonable IRR over the long term?

Speaker #6: Just curious what your thought process is there. Thanks.

Matthew Gourmand: Yeah. I don't think we have a number. I would encourage the team internally not to see this as a competition to see how low we can go. I think it's more really about trying to find the long-term opportunity. If there truly is a situation today that there's a lot of low-hanging fruit that we can fix immediately, I don't think that there's a number necessarily we would ascribe to the lowest we would go. I think we really have to look at, A, what the long-term opportunity is, and B, the visibility around that. You know, obviously, we'd be less reluctant to take a swing at things where there's cost-saving opportunities that we know a better manager can operate.

Speaker #5: Yeah, I don't think we have a number. I would encourage the terming team internally not to see this as a competition, to see how low we can go.

Speaker #5: I think it's more really about trying to find the long-term opportunity. If there truly is a situation today that there's a lot of low-hanging fruit that we can fix immediately, I don't think that there's another necessarily would ascribe to the lowest we would go.

Speaker #5: I think we really have to look at, A, what the long-term opportunity is, and B, the visibility around that. Obviously, we'd be less reluctant to take a swing at things where there's a cost-saving opportunity that we know a better manager can operate.

Matthew Gourmand: I think situations where you're looking at a facility that maybe has very low occupancy and historically had low occupancy, relying on a paradigm shift in that occupancy is probably a level of naivety that we wouldn't necessarily look to underwrite to. It's kind of contingent on the opportunities that present themselves and the risk-adjusted return that we assign to that.

Speaker #5: I think situations where you're looking at a facility that maybe has very low occupancy and historically had low occupancy, relying on a paradigm shift in that occupancy is probably a level of naivety that we wouldn't necessarily look to underwrite to.

Speaker #5: But it's kind of contingent on the opportunities that present themselves and the risk-adjusted return that we assign to that.

Richard Anderson: Right. Like, when you value add like a low initial cap rate, you know, kind of concept. You know, do you think it would be like a 50/50 split, you know, in terms of your what you're looking at today, you know, relative to a more stabilized, entry level, return?

Speaker #6: Right. So when you think about value-add, like a low initial cap rate, kind of concept, do you think it'd be like a 50-50 split in terms of what you're looking at today?

Speaker #6: Relative to a more stabilized entry level?

Matthew Gourmand: It kinda depends what the market presents us, Rich. You know, what you're finding right now is the stabilized assets that have the most stabilized margins, high occupancy, relatively newer vintage, they tend to be coming in at lower yields but without that upside. From that standpoint, we have been fortunate enough to find stuff that is, you know, stabilized 7, 8, 9 that we think, you know, with a relatively easy lift we can take into the double digits. I don't think that we're gonna be looking at the true stabilized assets with a 7, where you're relying on predominantly rate increase to exceed costs, to be able to drive that growth because occupancy and rate, to a certain extent are already, you know, fully baked in.

Speaker #5: It kind of depends what the market presents us, Rich, what you're finding right now is the stabilized assets that have the most stabilized margins, high occupancy, relatively newer vintage, they tend to be coming in at lower yields but without that upside.

Speaker #5: So from that standpoint, we have been fortunate enough to find stuff that is stabilized 7, 8, 9 that we think with a relatively easy lift, we can take into the double digits.

Speaker #5: But I don't think that we're going to be looking at the true stabilized assets with a 7 where you're relying on predominantly rate increase to exceed costs.

Speaker #5: To be able to drive that growth, because occupancy and rate, to a certain extent, are already fully baked in. So, from that standpoint, I think that most of the stuff we're going to be looking at is what we would say is value-add.

Matthew Gourmand: From that standpoint, I think that most of the stuff we're gonna be looking at is what we would say is value add.

Richard Anderson: Okay. Then my second question is on RIDEA. Will you take that show on the road a little bit in terms of, you know, looking at opportunities in the UK with a RIDEA mindset?

Speaker #6: Okay. And then my second question is on Rydia. Will you take that show on the road a little bit, in terms of looking at opportunities in the UK?

Speaker #6: With the Rydia mindset?

Vikas Gupta: This is Vikas. Yes, we actually are looking at a few opportunities right now, so it will become part of our strategy in the UK going forward.

Speaker #5: Yeah, this is Vickus. Yes, we actually are looking at a few opportunities right now. So it will become part of our strategy in the UK going forward.

Richard Anderson: Okay. Thanks very much.

Speaker #6: Okay. Thanks very much.

Matthew Gourmand: Thanks.

Speaker #5: Thanks.

Operator: Your next question comes from the line of Michael Goldsmith with UBS. Your line is open.

Speaker #3: Your next question comes from the line of Michael Goldsmith with UBS. Your line is open.

Michael Goldsmith: Good morning. Here with Dustin Husby. Thanks a lot for taking my question. Maybe sticking with the Communicare. We estimate the cap rate was roughly 7.7% based on the contractual rent, but maybe it was a little bit lower given the EBITDA coverage and assuming the rent is renegotiated. Is that right? Also, you know, why do you think the private market for US SNFs is so competitive right now? Is the best path forward for Omega to focus more on other segments until the competition cools for the SNFs? Thanks.

Speaker #7: Good morning. I'm here with Dustin Heswig. Thanks a lot for taking my question. Maybe sticking with the Communicare we estimate the cap rate was roughly 7.7% based on the contractual rent, but maybe it was a little bit lower given the EBITDA coverage and assuming the rent is renegotiated.

Speaker #7: So is that right? And then also, why do you think the private market for US SNFs is so competitive right now? And is the best path forward for a mega to focus more on other segments until the competition cools for the SNFs?

Speaker #7: Thanks.

Matthew Gourmand: Your math is correct, so you get an A for that. Yeah, I think right now the competition has been strong for a number of years. I think a lot of people are looking at this as a long-term secular play. That's part of the reason we really like the space. You know, ultimately, there's been no net new supply for over a decade in this space. Most states have some sort of restriction on new supply.

Speaker #5: Your math is correct. So you get an A for that. And yeah, I think right now the competition has been strong for a number of years.

Speaker #5: I think a lot of people are looking at this as a long-term secular play. It's part of the reason we really like the space.

Speaker #5: Ultimately, there's been no net new supply for over a decade. In this space, most states have some sort of restriction on new supply. So to the extent that an operator is getting in today, even with, let's say, it was a mid-sixes yield, if they believe that occupancy is going to continue to improve and that they can run these facilities well, the operating leverage that exists within the business alone can move this into the high single and low double digit yields over time for them.

Matthew Gourmand: To the extent that an operator is getting in today, even with, let's say, it was a, you know, mid-6s yield, if they believe that occupancy is going to continue to improve and that they can run these facilities well, the operating leverage that exists within the business alone can move this into the high single and low double digits yields over time for them. They have the opportunity, once these buildings are stabilized, to finance them to HUD, which is obviously a relatively low cost debt. While there's a strong bid in the market, we don't think it's an irrational bid. We just think that it's reflective of the long-term secular plays that exist, and one of the reasons we aren't looking to sell prodigious amounts of our skilled nursing.

Speaker #5: And then they have the opportunity, once these buildings are stabilized, to finance them through HUD, which is obviously a relatively low-cost debt. So while there's a strong bid in the market, we don't think it's an irrational bid.

Speaker #5: We just think that it's reflective of the long-term secular plays that exist, and one of the reasons we aren't looking to sell prodigious amounts of our skilled nursing.

Matthew Gourmand: In terms of opportunities, yeah, we're seeing less of them, but we're still seeing select opportunities. I think we're just gonna you know, we're not gonna rule out or stop looking at skilled nursing. We're just gonna continue to remain very disciplined and look for opportunities that align with what we're trying to achieve from a FAD per share growth standpoint.

Speaker #5: In terms of opportunities, yeah, we're seeing less of them, but we're still seeing select opportunities. So I think we're just going to we're not going to rule out or stop looking at skilled nursing.

Speaker #5: We're just going to continue to remain very disciplined and look for opportunities that align with what we're trying to achieve from a Fed-push and growth standpoint.

Michael Goldsmith: Got it. Thanks for that. As a follow-up, I noticed another quarter of healthy investment volume for your new SHOP segment. Maybe you can provide some color on the economics of that Rhode Island portfolio. Does Omega take more of a hands-off approach to its SHOP operations given it's still a small segment? Are you in the process of building out a data platform and other standard operating procedures related to SHOP?

Speaker #7: Yeah, and thanks for that. And as a follow-up, I noticed another quarter of healthy investment volume for your new shop segment. So maybe you can provide some color on the economics of that Rhode Island portfolio and does Omega take more of a hands-off approach to its shop operations given it's still a small segment?

Speaker #7: Or are you in the process of building out a data platform and other standard operating procedures related to shop?

Vikas Gupta: This Rhode Island deal falls right in the category of everything we've been talking about in our SHOP world. We are underwriting to stabilize mid-teen IRRs. It just follows all the protocols we've been saying. You know, we use our data, our underwriting, our entire team to get around that. It's just a typical RIDEA deal value-add in our book.

Speaker #5: Yeah, so this Rhode Island deal falls right in the category of everything we've been talking about in our shop world. We are underwriting to stabilize mid-teen IRRs.

Speaker #5: And it just follows all the protocols we've been saying. We use our data, our underwriting, our entire team to get around it. So it's just a typical Rydia deal value-add in our book.

Matthew Gourmand: The only thing I'd add is, you're right. Obviously, we don't have the level of experience and sophistication of some of our peers who've, you know, devoted years and significant amounts of money to rolling out, you know, various different technologies and have experience in that side of things. I think our attitude right now is we spend an awful lot of time both hiring people internally who have great experience in this space, but also developing relationships as a team to understand really strong operators. Our attitude as of now is we're hiring them because of their expertise. For us, given our relative lack of expertise in the space to start second-guessing them straight out of the gate, would probably be naive at best.

Speaker #4: And then the other thing I'd add is, you're right. Obviously, we don't have the level of experience and sophistication of some of our peers who've devoted years and significant amounts of money to rolling out various different technologies and have experience in that side of things.

Speaker #4: I think our attitude right now is we spend an awful lot of time both hiring people internally who have great experience in the space, but also developing relationships as a team to understand really strong operators.

Speaker #4: And our attitude, as of now, is we're hiring them because of their expertise. And for us, given our relative lack of expertise in the space, to start second-guessing them straight out of the gate would probably be naive at best.

Matthew Gourmand: From that standpoint, while we obviously are, by our very nature, extremely focused on what they're doing and seeking to learn from them and understand from them, I don't think we're in a position to necessarily tell them how to run their businesses at this point in time. That's effectively what we're hiring them to do on our behalf.

Speaker #4: So from that standpoint, while we obviously are by our very nature extremely focused on what they're doing and seeking to learn from them and understand from them, I don't think we're in a position to necessarily tell them how to run their businesses at this point in time.

Speaker #4: That's effectively what we're hiring them to do on our behalf.

Michael Goldsmith: Thank you very much. Good luck in Q2, though.

Speaker #7: Thank you very much. Good luck in the second quarter.

Matthew Gourmand: Thanks.

Speaker #4: Thanks.

Operator: Your next question comes from the line of Julien Blouin with Goldman Sachs. Your line is open.

Speaker #3: Your next question comes from the line of Julianne Bluwin with Goldman Sachs. Your line is open.

Julien Blouin: Thank you for taking my question. I guess I just wanted to touch on the level of competition you're seeing in the transaction market, specifically in US senior housing RIDEA structures. I mean, we're seeing a lot of capital flowing into this space, I'm just wondering if you're finding it maybe increasingly more difficult to achieve sort of those mid-teens IRRs you're targeting.

Speaker #8: Yeah, thank you for taking my question. I guess I just wanted to touch on the level of competition you're seeing in the transaction market.

Speaker #8: Specifically in US senior housing, Rydia structures I mean, we're seeing a lot of capital flowing into this space. And so I'm just wondering if you're finding it maybe increasingly more difficult to achieve sort of those mid-teens IRRs you're targeting.

Vikas Gupta: Yeah. It is competitive. As you know, there's a lot of players in this space now. As Matthew mentioned, we are looking at a lot of value add product, and we're finding it. The team's going out there. We're reviewing all transactions, and if it fits, it fits. You know, at the same time, everyone has its own underwriting criteria and, you know, for what we're looking for, we continue to find assets.

Speaker #5: Yeah, so it is competitive. As you know, there's a lot of players in this space now. But as Matthew mentioned, we are looking at a lot of value-add product.

Speaker #5: And we're finding it. The team's going out there. We're reviewing all transactions. And if it fits, it fits. So at the same time, everyone has its own underwriting criteria.

Speaker #5: And for what we're looking for, we continue to find assets.

Julien Blouin: Okay, great. Back to the Communicare sale. I mean, yeah, clearly a strong cap rate just on current rents. Even if, you know, we were to assume a resetting of rents to more like, you know, your average EBITDA coverage of 1.5, that would mean an even sort of lower cap rate. I guess, like, what kind of buyer is this? Is this a buyer that really sees the potential to, I don't know, change management of the assets and improve operations? Is that a key part of their play?

Speaker #8: Okay, great. And then back to the Communicare sale. I mean, yeah, clearly a strong cap rate just on current rents. But even if we were to assume a resetting of rents to more like your average EBITDA coverage of 1.5, that would mean an even sort of lower cap rate.

Speaker #8: I guess is it what kind of buyer is this? Is this a buyer that really sees the potential to, I don't know, change management of the assets and improve operations?

Speaker #8: Is that a key part of their play?

Matthew Gourmand: I can't speak to what their rationale was behind that. I. What I can tell you is, you know, they're long-term players in the space, highly established, look to own the operations and the properties. I think that their belief is kind of, as we spoke to earlier, that there is a 20-year secular play here and that the price that they paid for these assets today, in 10, 15 years' time, may actually look an extremely good buy, given the fact that there's no new supply coming online in most states. They are an established player, reputable. Other than that, I can't speak to what their plans are for the business.

Speaker #5: I can't speak to what their rationale was behind that. What I can tell you is their long-term players in the space, highly established, live to own the operations and the properties.

Speaker #5: And I think that their belief is kind of, as we spoke to earlier, that there is a 20-year secular play here. And the price that they paid for these assets today in 10, 15 years' time may actually look an extremely good buy.

Speaker #5: Given the fact that there's no new supply coming online in most states. So they are an established player, reputable. Other than that, I can't speak to what their plans are for the business.

Julien Blouin: Okay. Thank you.

Speaker #8: Okay, thank you.

Operator: Next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open.

Speaker #3: Next question comes from the line of Omatayo Oksanya with Dolce Bank. Your line is open.

Omotayo Okusanya: Yes. Good, good morning, guys. I just wanted to talk a little bit about Medicare Advantage, a little bit. I think we've kind of seen a bunch of healthcare providers report over the past last week, you know, UnitedHealth, you know, Humana. They're all kind of talking about, you know, CMS Medicare Advantage and the rollout of all these value-based care systems. You know, some of them seem to be adapting really well. Some of the people are kind of struggling with it.

Speaker #9: Yes, good morning, guys. I just wanted to talk a little bit about Medicare Advantage. A little bit. I think you've kind of seen a bunch of healthcare providers report over the past last week.

Speaker #9: UnitedHealth, Humana, they're all kind of talking about CMS, Medicare Advantage, and the rollout of all these value-based care systems. Some of them seem to be adopting really well.

Speaker #9: Some of the people are kind of struggling with it. I'm just kind of curious again, when you're thinking about what the potential impact of this kind of more aggressive rollout of these value-based programs are, in 2026, 2027, I mean, how do you kind of see that impacting kind of skilled nursing referrals from the hospitals and does that kind of change anything from that perspective?

Omotayo Okusanya: I'm just kind of curious, again, when you're thinking about, you know, what the potential impact of this kind of more aggressive rollout of these value-based programs are in 2026, 2027, I mean, how do you kind of see that impacting kind of skilled nursing referrals from the hospitals and, you know, does that kind of change anything, from that perspective? How do you expect skilled nursing operators to kind of react to all this kind of potential kind of value-based programs that are now infiltrating the system, so to speak?

Speaker #9: And how do you expect skilled nursing operators to kind of react to all this kind of potential kind of value-based programs that are now infiltrating the systems, so to speak?

Megan Krull: you know, like I said last time, the Medicare Advantage isn't a huge piece of our business. It's definitely has less of a penetration in the skilled nursing space than it does in the general Medicare population. At this point, there's not much in the way that it impacts our operators other than there are certain areas that have higher Medicare Advantage penetration. Sometimes those rates are materially lower than Medicare, and sometimes that means taking a Medicaid resident might make more sense than taking a Medicare Advantage resident at times. As an industry, I think there's a sort of a big pushback about trying to get those rates up to more reasonable numbers.

Speaker #3: Like I said last time, the Medicare Advantage is in a huge piece of our business. It's definitely has less of a penetration in the skilled nursing space than it does in the general Medicare population.

Speaker #3: And so at this point, there's not much in the way that it impacts our operators other than there are certain areas that have higher Medicare Advantage penetration.

Speaker #3: Sometimes those rates are materially lower than Medicare. And sometimes that means taking a Medicaid resident might make more sense than taking a Medicare Advantage resident.

Speaker #3: At times. And so as an industry, I think there's a sort of a big pushback about trying to get those rates up to more reasonable numbers.

Megan Krull: Like I said, in my talking points, you know, there was legislation last week to deal with some of these other issues that are going on, like the high denial rates, where typically you might have a high denial, but then if you push back, it will get approved, right? You shouldn't have that type of thing going on. I think the value-based care is a big thing, and it's something to watch, you know, for all of us. I think ultimately we try to partner with the most sophisticated operators who really that plays into their game plan really well.

Speaker #3: And like I said, in my talking points, there's legislation last week to deal with some of these other issues that are going on, like the high denial rates were typically you might have a high denial, but then if you push back, it'll get approved, right?

Speaker #3: And so you shouldn't have that type of thing going on. But I think the value-based care is a big thing. And it's something to watch for all of us.

Speaker #3: And I think ultimately, we try to partner with the most sophisticated operators, who really—that plays into their game plan really well.

Omotayo Okusanya: That's, that's helpful. Just the occupancy trends in the past few quarters have kind of stagnated. Just kind of curious, you know, what may be happening there. Is this stuff kind of changing with shift mix or like how do we kind of think about that, just kind of given, the overall backdrop of kind of, you know, aging US demographics and limited new supply?

Speaker #9: That's helpful. And then just occupancy trends in the past few quarters. Have kind of stagnated. Just kind of curious what may be happening there.

Speaker #9: Is this still kind of changing with shift mix? Or how do we kind of think about that? Just kind of given the overall backdrop of kind of improved aging US demographics and limited new supply.

Megan Krull: I don't think there's any read-through over a few quarters as to what the occupancy is doing. The demographics are here and coming, ultimately you will see that needle move. Ultimately, when you look at our performance, the coverages, you know, provide ample coverage for our rent, we're good with where things are, and we expect to see that occupancy increase in this next year or two.

Speaker #3: I don't think there's any read-through over a few quarters as to what the occupancy is doing. The demographics are here and coming. And so ultimately, you will see that needle move.

Speaker #3: And ultimately, when you look at our performance, the coverage is provide ample coverage for our rent. And so we're good with where things are.

Speaker #3: And we expect to see the occupancy increase. In this next year or two.

Omotayo Okusanya: Thank you.

Speaker #9: Thank you.

Operator: Next question comes from the line of Nick Yulico with Scotiabank. Your line is open. Next question comes from the line of John Kilichowski with Wells Fargo. Your line is open.

Speaker #3: Next question comes from the line of Nick Huliko with Scotiabank. Your line is open. Next question comes from the line of John Kilichoski with Wells Fargo.

Speaker #3: Your line is open.

John Kilichowski: Good morning. Thank you. My first question is just on the transaction market. Earlier, we talked about the competitiveness of SHOP, but I actually would be interested in talking about the competitiveness of the SNF landscape today. You know, there's been a vacuum at least of recapital, but I'm assuming of some other capital as well moving from skilled nursing and into SHOP. Are you finding it incrementally any easier to transact in the SNF space given the money that's moving over, or is it still heavily competitive?

Speaker #10: Good morning. Thank you. My first question is just on the transaction market. Earlier, we talked about the competitiveness of SHOP. But I actually would be interested in talking about the competitiveness of the SNF landscape today.

Speaker #10: There's been a vacuum, at least, of recapital. But I'm assuming of some other capital as well moving from skilled nursing into SHOP. Are you finding it incrementally any easier to transact in the SNF space, given the money that's moving over?

Speaker #10: Or is it still heavily competitive?

Vikas Gupta: This is Vikas. The short answer, it's heavily competitive. We were able to find an off-market larger deal that we did in Q1, but it is competitive, and a lot of that is coming from the family office space still. Otherwise, we're just not seeing a lot of trading at this time that we like and that fit our investment criteria.

Speaker #5: This is Vickus. The short answer, it's heavily competitive. We were able to find an off-market larger deal that we did in the first quarter.

Speaker #5: But it is competitive. And a lot of that is coming from the family office space still. Otherwise, we're just not seeing a lot of trading at this time.

Speaker #5: That we like and that fit our investment criteria.

John Kilichowski: Okay. Got it. Very helpful. My second one for you is, we've got Tim Walz legalizing alcohol in SNFs in Minnesota. You know, what are we thinking for new build-outs? Are speakeasies or local pub vibes. Is this Medicaid reimbursed? Are non-tenants gonna be allowed in?

Speaker #10: Okay. Got it. Very helpful. And then my second one for you is we've got Tim Waltz legalizing alcohol in SNF in Minnesota. What are we thinking for new build-outs?

Speaker #10: Speakeasies or local pub vibes? Is this Medicaid reimbursed? Are non-tenants going to be allowed in?

Matthew Gourmand: I don't think that's necessarily something that we're looking at right now. Obviously we have a history of partnering with operators who evolve no matter what the operating backdrop is, even if that includes the use of things previously prohibited in the facilities. I suspect that our operators will thrive no matter what the circumstances are.

Speaker #2: I don't think that's necessarily something that we're looking at right now. Obviously, we have a history of partnering with operators who evolve. No matter what the operating backdrop is, even if that includes the use of facilities.

Speaker #2: So I suspect that our operators will thrive no matter what the circumstances are.

John Kilichowski: Got it. Thank you.

Speaker #10: Got it. Thank you.

Operator: Next question comes from the line of Nick Yulico with Deutsche Bank. Your line is open.

Speaker #3: Next question comes from the line of Nick Huliko with Dolce Bank. Your line is open.

Elmer Chang: Hi, good morning. This is Elmer Chang on the Nick. Sorry about that earlier. My phone dropped. And sorry if I missed this, but my first question is on recent senior housing for day communities that you've been acquiring, and as you further build out that platform. I know it's dependent on the opportunities that may be closer to stabilized assets. How should we think about underwriting NOI upside to earnings for those recent acquisitions?

Speaker #11: Hi, good morning. This is Elmer Chang. I'm with Nick. Sorry about that earlier. My phone dropped. And sorry if I missed this. But my first question is on recent senior housing Rodeo communities that you've been acquiring.

Speaker #11: And as you further build out that platform, I know it's dependent on the opportunities that may be closer to stabilized assets. But how should we think about underwriting NOI upside to earnings for those recent acquisitions?

Matthew Gourmand: Yeah, it's tough. I mean, thankfully, we're a $14 billion company. We've put $200 million out, right? From that standpoint, I don't think it's gonna move the needle that much. I mean, I think if you're looking generally, Elmer, at the idea that it may be a. I don't wanna put a number on it, but, you know, blended between 7 and 9, coming out of the gate on these things, I don't think you're gonna be too far off. Obviously, hopefully that will meaningfully improve over time. Again, given the relative size of it right now, I think if you're in that ballpark, missing or exceeding expectations is probably gonna be limited given the relative size.

Speaker #2: Yeah. It's tough. I mean, thankfully, we're a $14 billion company. We've put a couple hundred million dollars out, right? So from that standpoint, I don't think it's going to move the needle that much.

Speaker #2: I mean, I think if you're looking generally, Elmer, at the idea that it may be a I don't want to put a number on it, but blended between 7 and 9 coming out of the gate on these things, I don't think you're going to be too far off.

Speaker #2: And then obviously, hopefully, that will meaningfully improve over time. But again, given the relative size of it right now, I think if you're in that ballpark, missing or exceeding expectations is probably going to be limited given the relative size.

Elmer Chang: Okay. Got it. Thank you. I guess second question is, maybe just going back to the planned Communicare sale. What assumptions in terms of initial yield and future growth are driving your estimates for the $0.03 of accretion to FAD that you expect? How much of the $480 million that's to be reinvested are maybe already deals under LOIs or under contract?

Speaker #10: Okay. Got it. Thank you. And I guess second question is maybe just going back to the planned community care sale. What assumptions in terms of initial yield and future growth are driving your estimates for the 3 cents of accretion to FAD that you expect?

Speaker #10: And how much of the $480 million that's going to be reinvested are maybe already deals under LOIs or under contract?

Matthew Gourmand: Yeah, we went back and forth on what the number was. I wanted to say $0.04 because technically, putting it back to work at a 10 gives you $0.035, and that rounds up. We decided to be conservative. The numbers probably are in the low 9s in terms of what we're saying. I still think we're gonna expect to deploy capital in the 10s, but that's kind of the math around it. Yeah, I mean, we're not gonna talk too much about what's in LOIs today, but, you know, this is a really.

Speaker #2: So yeah, we went back and forth on what the number was. I won't say 4 pennies because, technically, putting it back to work at a 10 gives you 3 and a half pennies, and that rounds up.

Speaker #2: But we decided to be conservative. So the number is probably in the low 9s in terms of what we're saying. I still think we're going to expect to deploy capital in the 10s.

Speaker #2: But that's kind of the math around it. And then, yeah, I mean, we're not going to talk too much about what's in LOIs today.

Speaker #2: But this is a really it's an interesting market that we're in right now because to a certain extent, in seniors' housing, and skilled nursing, and care homes, you're seeing probably more appetite and more players than we've seen in well over a decade.

Matthew Gourmand: It's an interesting market that we're in right now because to a certain extent, in seniors housing and skilled nursing and care homes, you're seeing probably more appetite and more players than we've seen in well over a decade. This is clearly a space that is exciting people and creating interest. There are more competitors out there. We still, as we look out in the portfolio, see significant opportunities across all three platforms. From that standpoint, I don't want people being confused that just because it's a competitive market, that we don't think that the pipeline isn't gonna be pretty robust for us over the next 24 months.

Speaker #2: This is clearly a space that is exciting people and creating interest. And as a result, there are more competitors out there. But we still, as we look out in the portfolio, see significant opportunities across all three platforms.

Speaker #2: And so from that standpoint, I don't want people being confused that just because it's a competitive market that we don't think that the pipeline isn't going to be pretty robust for us over the next 24 months.

Matthew Gourmand: We're just gonna have to be more selective, more creative sometimes in our structuring and just be on the road, quite frankly, and find more off-market deals through relationships. From that standpoint, I think we're in a pretty good place going forward. Nonetheless, it is pretty competitive.

Speaker #2: We're just going to have to be more selective more creative sometimes in our structuring and just be on the road, quite frankly, and find more off-market deals through relationships.

Speaker #2: So from that standpoint, I think we're in a pretty good place going forward. But nonetheless, it is pretty competitive.

Elmer Chang: Okay. Thank you.

Speaker #11: Okay. Thank you.

Operator: Next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open.

Speaker #3: Next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open.

Michael Carroll: Yeah, thanks. I wanted to circle up on the Saber equity deal. I know that there's a minimum yield to that transaction, and it looks like that the initial yield is coming in a little bit higher than that. Is this something that we should assume grows at a high single digit, low double digit rate each year, just given the organic growth outlook that you're starting to see in skilled nursing facilities, and maybe as you layer on new acquisitions and Saber can continue to grow externally? I mean, is that a good ballpark to think about the growth outlook that that equity investment could potentially generate?

Speaker #12: Yep. Thanks. I wanted to circle up on the SABR equity deal. I know that there's a minimum yield to that transaction. And it looks like that the initial yield is coming in a little bit higher than that.

Speaker #12: Is this something that we should assume grows at a high single-digit, low double-digit rate each year, just given the organic growth outlook that you're starting to see in skilled nursing facilities and maybe as you layer on new acquisitions in SABR can continue to grow externally?

Speaker #12: I mean, is that a good ballpark to think about the growth outlook that that equity investment could potentially generate? Yeah. This is Vicky. So let me answer that a little differently.

Vikas Gupta: Yeah, this is Vikas Gupta. Let me answer that a little differently. As we've said before, you're speaking of our Saber investment. Saber is a private company, so we can't release financial information for them, but we are very happy with our investment to date. It is beating expectations and we're getting a return slightly above what we thought we would get. Saber plans to keep growing and they think like us. Good, smart transactions that are accretive. We just plan that there will be further growth here above our underwriting expectations.

Speaker #12: As we've said before, you're speaking of our SABR investment. SABR is a private company. So we can't release financial information for them. But we are very happy with our investment to date.

Speaker #12: It is beating expectations. And we are getting a return slightly above what we thought we would get. SABR plans to keep growing. And they think like us.

Speaker #12: Good, smart transactions that are accretive. So we just plan that there will be further growth here above our underwritten expectations. Okay. No, that's helpful.

Michael Carroll: Okay. No, that's helpful. Just kind of circling back up with Maplewood, has there ever been any discussion to kind of transition that Maplewood investment into like a pure RIDEA contract? I mean, I know that Omega still gets a lot of that upside, just given how it's structured in the net lease side. Does it help to just simplify that agreement so everybody knows what needs to happen on that front? I mean, is that in the discussions at all?

Speaker #12: And then just kind of circling back up with Maplewood, has there ever been any discussion to kind of transition that Maplewood investment into a pure Rodeo contract?

Speaker #12: I mean, I know that Omega still gets a lot of that upside just given how it's structured in the net lease side. But does it help to just simplify that agreement so everybody knows what needs to happen on that front?

Speaker #12: I mean, is that in the discussions at all? To be honest, that's what we're doing right now. We see it as our idea asset now.

Vikas Gupta: To be honest, that's what we're doing right now. We see it as a RIDEA asset now, so we don't see the need to do that. We've thought about it from time to time, but right now we are truly treating this like a RIDEA asset. All of the cash flow comes to Omega, and the team receives promotes for hitting certain cash flow hurdles. At this point, we don't see a need for it.

Speaker #12: So, we don't see the need to do that. We've thought about it from time to time, but right now, we are truly treating this like our idea asset.

Speaker #12: All of the cash flow comes to Omega. And the team is receives promotes for hitting certain cash flow hurdles. So at this point, we don't see a need for it.

Michael Carroll: Okay, great. Thanks, appreciate it.

Speaker #12: Okay. Great. Thanks. Appreciate it.

Operator: Next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open.

Speaker #3: Next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open.

Juan Sanabria: Hi, good morning. Just curious on the building out of the team in SHOP RIDEA, how we should think about that. Is that more on trying to source opportunities, or is that more or maybe inclusive of building out the asset management capabilities?

Speaker #13: Hi. Good morning. Just curious on the building out of the team. In shop or Rodeo, how we should think about that. Is that more on trying to source opportunities?

Speaker #13: Or is that more or maybe inclusive of building out the asset management capabilities?

Vikas Gupta: Again, this is Vikas. The answer is all of the above. We've hired a lot of smart people here to help us step up our investment criteria, underwriting abilities to go out there and find more relationships. Give you an example, we have boots on the ground in the UK now to go out there and find off-market transactions for us. Additionally, both on asset management and accounting, we've hired a good bit of people to help us manage our transactions after they close.

Speaker #12: Again, this is Vicky. The answer is all of the above. We've hired a lot of smart people here to help us step up our investment underwriting abilities to go out there and find more relationships.

Speaker #12: To give you an example, we have boots on the ground in the UK now to go out there and find off-market transactions for us.

Speaker #12: Additionally, both on asset management and accounting, we've hired a good bit of people to help us manage our transactions after they close.

Juan Sanabria: Just curious, you know, there's some news about litigation and some punitive damages awarded to victims, and that the REIT was held culpable at the time it was Colony Capital, now DigitalBridge. Just curious on your thoughts there and if does that change the calculus at all and/or make you less hesitant on these transactions potentially in states like California where it's more litigious?

Speaker #13: And then just curious, there's some news about litigation and some punitive damages awarded to victims in that the REIT was held culpable at the time it was calling Capital Now Digital Bridge.

Speaker #13: Just curious on your thoughts there. And does that change the calculus at all? And/or make you less hesitant on these transactions, potentially in states like California where it's more litigious?

Megan Krull: I would like to think that that was a one-off unique situation because REITs do not get involved in the operations and are not involved in the patient care. To hold a REIT accountable for care that they're not providing does not make sense. We'll continue to watch the various different areas and make sure that that's part of our investment thesis.

Speaker #12: I would like to think that that was a one-off, unique situation, because REITs do not get involved in the operations and are not involved in the patient care.

Speaker #12: And so to hold a REIT accountable for care that they're not providing does not make sense. But we'll continue to watch the various different areas and make sure that that's part of our investment thesis.

Juan Sanabria: Thank you.

Speaker #13: Thank you.

Operator: Next question comes from the line of Wes Golladay with Baird. Your line is open.

Speaker #3: Next question comes from the line of Wes Golladay with Beard. Your line is open.

Wes Golladay: Hey, good morning, everyone. I just wanna have a quick question on how the SNF pipeline is evolving for the broader market. Are you starting to see more operators stabilizing assets and going directly to HUD?

Speaker #14: Hey. Good morning, everyone. I just want to have a quick question on how the SNF pipeline is evolving for the broader market. Are you starting to see more operators stabilizing assets and going directly to HUD?

Vikas Gupta: Yeah, this is Vikas again. I mean, to be honest, we're not seeing a lot of SNF assets trading at all right now. Again, I think people are sitting on their assets and taking them to HUD. We've also, you know, like we've seen broken deals can pop up from time to time, I think we're gonna start seeing some more of those as well in the future.

Speaker #13: Yeah. This is Vickys again. I mean, to be honest, we're not seeing a lot of SNF assets trading at all right now. So again, I think people are sitting on their assets and taking them to HUD, like we've seen broken deals pop up from time to time.

Speaker #13: And so I think we're going to start seeing some more of those as well in the future.

Wes Golladay: For those, would you look to loan on those or buy them outright?

Speaker #14: And for those, would you look to loan on those or buy them outright?

Vikas Gupta: Buy them outright.

Speaker #13: Buy them outright.

Wes Golladay: Okay. Thank you.

Speaker #14: Okay. Thank you.

Operator: Next question comes from the line of Vikram Malhotra with Mizuho. Your line is open.

Speaker #3: Next question comes from the line of Vikram Malhotra with Mizuho. Your line is open.

Vikram Malhotra: Morning. Thanks for taking the questions. I guess just to one, you know, you've had a nice pickup in FAD over the last several quarters. I'm wondering sort of what are latest thoughts on, you know, the dividend, you know, pushing that higher? Then just, I think Matthew, you made a comment on like focusing on the per share FAD growth. You know, with all these different levers you've outlined, like where do you think that could trend to from today's growth?

Speaker #15: Morning. Thanks for taking the questions. I guess just one— you’ve had a nice pickup in FAD over the last several quarters. I’m wondering what our latest thoughts are on the dividend and pushing that higher.

Speaker #15: And then just I think Matthew, you made a comment on focusing on the per-share FAD growth. With all these different levers you've outlined, where do you think that could trend to from today's growth?

Vikas Gupta: Yeah, fair question. In terms of the dividend outlook, obviously it's a board decision. When you think about Q1 2025 at $0.71 of FAD, Q1 this year at $0.78 of FAD, and all the same tools in place to replicate that type of performance, I would think by year-end, the board's going to start to need to have conversations about our dividend. Really it just comes down to velocity of putting some of the capital back to work because the escalator is in place, the portfolio is stable. We have excess cash flow rolling into the balance sheet, into investments, then you have the pipeline. It's just how fast do we recycle those dollars. We will get there, whether it's Q1 2027 or Q2 2027.

Matthew Gourmand: Yeah, fair question. In terms of the dividend outlook, obviously it's a board decision. When you think about Q1 2025 at $0.71 of FAD, Q1 this year at $0.78 of FAD, and all the same tools in place to replicate that type of performance, I would think by year-end, the board's going to start to need to have conversations about our dividend. Really it just comes down to velocity of putting some of the capital back to work because the escalator is in place, the portfolio is stable. We have excess cash flow rolling into the balance sheet, into investments, then you have the pipeline. It's just how fast do we recycle those dollars. We will get there, whether it's Q1 2027 or Q2 2027.

Speaker #16: Yeah. Fair question. In terms of the dividend outlook, obviously, it's a board decision. But when you think about Q1 of '25 at 71 cents of FAD, Q1 this year at 78 cents of FAD, and all the same tools in place to replicate that type of performance, I would think buy year-end, the board's going to start that need to have conversations about our dividend.

Speaker #16: And really, it just comes down to velocity of putting some of the capital back to work because the escalators in place, the portfolio is stable, we have excess cash flow rolling.

Speaker #16: Into the balance sheet, into investments, and then you have the pipeline. And it's just how fast do we recycle those dollars? We will get there, whether it's Q1 of '27 or Q2 of '27.

Vikas Gupta: The tools are all there for us to perform at that level of growth.

Michele Reber: The tools are all there for us to perform at that level of growth.

Speaker #16: The tools are all there for us to perform at that level of growth.

Operator: Next question comes from the line of Michael Stroyeck with Green Street. Your line is open.

Speaker #3: Next question comes from the line of Michael Stroyek with Green Street. Your line is open.

Michael Stroyeck: Thanks. Good morning. Maybe going back to the earlier question on UK RIDEA, how does the competitive backdrop within the UK compare versus the US, and has there been the same level of cap rate compression that we've seen in the States?

Speaker #17: Thanks, and good morning. Maybe going back to the earlier question on UK RIDEA, how does the competitive backdrop within the UK compare versus the US?

Speaker #17: And has there been the same level of cap rate compression that we've seen in the States?

Vikas Gupta: There are some new players in the UK. Again, through our relationships, we continue to find a good bit of deal activity out there that we can do at our current cap rates, where we are still quoting 10%.

Speaker #15: Yeah. So there are some new players in the UK. But again, through our relationships, we continue to find a good bit of deal activity out there that we can do at our current cap rates.

Speaker #15: Where we are still quoting 10%.

Michael Stroyeck: That goes for the RIDEA side as well?

Speaker #17: And that goes for the Ridea side as well?

Vikas Gupta: Yeah. It goes for RIDEA as well. Again, a little bit of our RIDEA growth there will be through our current relationships. Yes, same thing goes for RIDEA as well.

Speaker #15: Yeah. And that goes for Ridea as well. Again, I'm a little bit of our Ridea growth there will be through our current relationships. So yes, same thing goes for Ridea as well.

Michael Stroyeck: Got it. Got it. Then maybe one question on Maplewood. Last quarter, you outlined, call it, high single-digit rate increases across that portfolio. Can you just provide an update on how 1Q has progressed on that front?

Speaker #17: Got it, got it. And then maybe one question on Maplewood. Last quarter, you outlined, call it, high single-digit rate increases across that portfolio. Can you just provide an update on how Q1 has progressed on that front?

Vikas Gupta: Yeah. I mean, the net increases were just that, high single-digit increases. With both DC and New York being at the very high end of it.

Speaker #15: Yeah. I mean, the net increases were just that, high single-digit increases. With both DC and New York being at the very high end of it.

Operator: Got it. Thanks for the time. Next question comes from the line of Farrell Granath with Bank of America. Your line is open.

Michael Stroyeck: Got it. Thanks for the time.

Speaker #17: Got it. Thanks for the time.

Operator: Next question comes from the line of Farrell Granath with Bank of America. Your line is open.

Speaker #3: Next question comes from the line of Pharrell Granath with Bank of America. Your line is open.

Farrell Granath: Hello, this is Farrell Granath. I first just wanted to ask about how you consider or think about the balance between triple net with potential revenue upside, baked into the contract or a pure play RIDEA and how you consider that in your acquisition pipeline.

Speaker #18: Hello. This is Pharrell Granath. I first just wanted to ask about how you consider or think about the balance between TripleNet with potential revenue upside baked into the contract or a pure-play Ridea, and how you consider that in your acquisition pipeline.

Matthew Gourmand: You said triple net with revenue upside?

Speaker #16: So you say TripleNet with revenue upside?

Farrell Granath: With like a revenue participation similar with the one at Maplewood.

Speaker #18: Yeah. With a revenue participation similar with a Maplewood?

Matthew Gourmand: Yes, the Maplewood situation is kind of contrived from the background, right? In terms of that's how the deal started. At the end of the day, there are an operating team that have an operating company that have the rights to those operating profits if and when those profits exceed our rents. I don't think we'd necessarily be looking to create that situation again. As you say, you know, we have had these situations where we've effectively provided a lease with upside upon value realization. And that's worked reasonably well. I think a lot of that was our first foray into some level of participation in the upside. Now we have kind of torn the Band-Aid off and gone full RIDEA. I think that's probably where our preference lies.

Speaker #16: So yeah. So I mean, the Maplewood situation is kind of contrived from the background, right, in terms of that's how the deal started. At the end of the day, there are an operating team that have an operating company that have the rights to those operating profits if and when those profits exceed our rents.

Speaker #16: So I don't think we necessarily will be looking to create that situation again. As you say, we have had these situations where we've effectively provided a lease with upside upon value realization.

Speaker #16: And that's worked reasonably well. I think a lot of that was our first foray into some level of participation in the upside. But now we have kind of torn the band-aid off and gone full Ridea.

Speaker #16: I think that's probably where our preference lies. But at the same time, it's very much about creating that alignment of interests with our partners, right?

Matthew Gourmand: At the same time, it's very much about creating that alignment of interests with our partners, right? If someone else wants to participate in that upside and is willing to put capital in, we're open to creative situations, be they JVs, be they leases with upside, be they some form of debt that can convert to equity over time. We're really pretty agnostic as to that. I think the thing that we believe right now is that we have a strong underwriting ability and an ability to understand where value can be created. As long as we see where that value can be created and we can share in that value, I think we can structure the deal however it works for our operating partners and us.

Speaker #16: So if someone else wants to participate in that upside and is willing to put capital in, we're open to creative situations, be they JVs, be they leases with upside, be they some form of debt that can convert to equity over time.

Speaker #16: We're really pretty agnostic as to that. I think the thing that we believe right now is that we have a strong underwriting ability and an ability to understand where value can be created.

Speaker #16: And as long as we see where that value can be created and we can share in that value, I think we can structure the deal however it works for our operating partners and us.

Farrell Granath: Thank you. I guess also in a similar vein, when selecting the operators themselves to enter onto your SHOP platform, how do you think about or underwrite these operators in your selection? Do you have more of a focus on scaled operators or those that are maybe smaller looking to expand rapidly?

Speaker #18: Thank you. And I guess, also on a similar vein, when selecting the operators themselves to enter onto your shop platform, how do you think about or underwrite these operators and your selection?

Speaker #18: Do you have more of a focus on scaled operators or those that are maybe smaller looking to expand rapidly?

Vikas Gupta: We are looking for experienced operators who have a proven track record, and they tend to be regional. They know those markets well, have performed in those markets before. To be honest, it's a process. We interview several managers, and we pick the best one that fit all of those criteria.

Speaker #15: We are looking for experienced operators who have a proven track record. And they tend to be regional. They know those markets well, have performed in those markets before.

Speaker #15: And to be honest, it's a process. We interview several managers, and we pick the best one that fit all of those criteria.

Farrell Granath: Okay. Thank you so much.

Speaker #18: Okay. Thank you so much.

Operator: There are no further questions at this time. I will turn it back to Taylor Pickett for closing remarks.

Speaker #3: Is there no further questions at this time? I will turn it back to Taylor Pickett for closing remarks.

C. Taylor Pickett: Thanks, all, for joining us this morning. Please follow up with the team with any additional questions. Have a great day.

Speaker #17: Thanks all for joining us this morning. Please follow up with the team with any additional questions. Have a great day.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Q1 2026 Omega Healthcare Investors Inc Earnings Call

Request DemoDemo

Omega Healthcare Investors

Earnings