Second-quarter financial performance for Omega Healthcare Investors “exceeded our expectations,” as some restructured operators returned to paying rent and other operators paid additional unanticipated rent, CEO Taylor Pickett said Thursday on the Hunt Valley, MD-based real estate investment trust’s latest earnings call.
One of those restructured operators is Westport, CT-based Maplewood Senior Living, with which Omega had agreed to a formal restructuring in the first quarter.
In the second quarter, Maplewood was $1 million short on its June rent payment. In July, after the second quarter had ended, Maplewood again was $1 million short on its contractual rent payment.
The REIT said that it is in discussions with the company to address the situation and had applied $2 million of the provider’s security deposit toward the unpaid portion of its June and July rents.
Based on its latest cash flow projects, and with increased rental rates and improved census at Inspir Carnegie Hill in Manhattan, Chief Operating Officer Dan Booth said that Maplewood believes it has a “path forward” to meeting its contractual obligations in the first quarter of 2024.
Maplewood was one of the nine operators represented in Omega’s deferral of $33.6 million in contractual rent in the first half of the year, the REIT reported. Among others were Healthcare Home Limited in the UK, LaVie Care Centers and Agemo Holdings.
The REIT said that it collected approximately 85% of its contractual rent and mortgage payments from operators in the first quarter.
$270 million in transactions closed
Longer term, Pickett said, he anticipates that the REIT’s earnings potential will increase once all of the operator restructurings in its portfolio are complete.
“The operating backdrop continues to improve, with occupancy increasing and the tight labor market slowly moderating,” Pickett said in a statement. “At the same time, the acquisition pipeline continues to improve, with the team closing $270 million of transactions in the quarter.”
Chief Financial Officer Bob Stephenson said the majority of the $270 million in new investments made during the quarter were completed in April.
During the second quarter, Omega completed $129 million in real estate acquisitions and funded $17 million in capital renovation and construction-in-progress projects. Year-to-date, the REIT has closed on $313 million in new investments, including $29 million in capital expenditures, Booth said.
Looking forward, based on current capital markets, Stephenson said he expects the active investment pipeline to continue to provide opportunities.
Occupancy, revenues up
As of June 30, Omega’s portfolio included more than 890 senior housing and skilled nursing facilities across 42 states and the United Kingdom, operated by 66 operators.
Occupancy for Omega’s overall core portfolio continued its recovery from a low of 74.6% in January 2022 to 79.6% as of mid-July, according to Booth.
Revenues for the quarter totaled $250.2 million, an increase of $5.5 million over the same period in 2022. Omega attributed the increased revenue to the timing of operator restructurings and transitions, as well as revenue from new investments completed in 2022 and this year.
“While both corporate and industry metrics are improving, the industry is still on the road to recovery and remains quite fragile,” PIckett said. “As such, it is vital that both federal and state efforts continue to support an industry that proved so integral to protecting the aging and vulnerable during the pandemic.”
Other rent deferrals
As previously disclosed, during the fourth quarter of 2022, Omega agreed to allow Healthcare Homes Limited, a UK-based operator, to defer $8.2 million of contractual rent from January through April, with regular payments to resume in May. Omega received $4.4 million in rent in the second quarter, and Healthcare Homes paid its full contractual rent and interest of $2.2 million for July.
Booth said that Omega also continues working with other smaller operators on various restructurings.
