Omega Announces Fourth Quarter 2019 Financial Results

Completed $896 Million in New Investments in Q4

Increased Quarterly Dividend by $0.01 to $0.67 in October

Provides 2020 Net Income and AFFO Guidance

HUNT VALLEY, Md.--()--Omega Healthcare Investors, Inc. (NYSE:OHI) (the “Company” or “Omega”) today announced its results of operations for the quarter ended December 31, 2019. The Company reported net income of $61.1 million or $0.27 per common share. The Company also reported NAREIT Funds From Operations (“NAREIT FFO”) for the quarter of $175.5 million or $0.77 per common share, Adjusted Funds From Operations (“AFFO” or “Adjusted FFO”) of $178.3 million or $0.78 per common share, and Funds Available For Distribution (“FAD”) of $163.7 million.

NAREIT FFO, AFFO and FAD are supplemental non-GAAP financial measures that we believe are useful in evaluating the performance of real estate investment trusts. For more information regarding these non-GAAP measures, see the “Funds From Operations” schedule below and the Company’s website at www.omegahealthcare.com.

GAAP NET INCOME

For the quarter ended December 31, 2019, the Company reported net income of $61.1 million, or $0.27 per common share, on revenues of $246.7 million. This compares to net income of $64.9 million, or $0.31 per common share, on revenues of $219.8 million, for the same period in 2018. The $3.8 million decrease is primarily due to an increase in impairments on real estate properties and a decrease in gains on assets sold. The decrease was primarily offset by incremental revenue from new investments completed in 2019.

For the year ended December 31, 2019, the Company reported net income of $351.9 million, or $1.58 per common share, on revenues of $928.8 million. This compares to net income of $293.9 million, or $1.40 per common share, on revenues of $881.7 million, for the same period in 2018.

The year-to-date increase in net income compared to the prior year was primarily due to (i) $45.4 million in revenue from incremental new investments, (ii) a $30.9 million increase in gains on the sale of assets, (iii) a $10.6 million increase in net income from unconsolidated joint ventures related to gains on the sale of assets in Q2 2019 and (iv) a $3.8 million decrease in impairments on direct financing leases and real estate properties. The increase in net income was partially offset by (i) a $20.4 million increase in depreciation and amortization expense related to new investments, (ii) $6.7 million in increased interest expense, (iii) a $4.4 million increase in impairments for uncollectible accounts and (iv) $4.7 million of merger costs related to the May 2019 acquisition of MedEquities Realty Trust, Inc. (“MedEquities”).

CEO COMMENTS

Taylor Pickett, Omega’s Chief Executive Officer, stated, “The fourth quarter represented a strong conclusion to a very productive year. In December, we completed our acquisition of a 49% interest in a U.K. senior housing joint venture for approximately $90 million. In addition, we continue to source smaller, attractively priced acquisitions and new development projects with our existing tenants, while opportunistically divesting of certain non-core holdings.”

Mr. Pickett continued, “In 2019, we were able to accretively invest over $1.6 billion, furthering our relationship with quality existing tenants while selectively diversifying our operator base by leasing to additional proven and experienced operators.”

Mr. Pickett concluded, “We expect the momentum of 2019 to carry into 2020. We are excited for our Maplewood-run Carnegie Hill assisted living facility to begin accepting residents in the coming months. The new Medicare reimbursement model, the Patient Driven Payment Model or PDPM, has received positive feedback from operators. While it’s too early to make any definitive conclusions, when combined with the recent 2.4% increase in Medicare reimbursement and the promising demographic tailwinds, we believe our operators are well-positioned to weather the continued labor cost pressures and generate solid financial performance over time.”

2020 RECENT DEVELOPMENTS AND FOURTH QUARTER HIGHLIGHTS

In Q1 2020, the Company

  • declared a $0.67 per share quarterly common stock dividend.

In Q4 2019, the Company

  • completed the $735 million Encore portfolio acquisition.
  • acquired a 49% interest in a U.K. senior housing joint venture for $93 million from Healthpeak.
  • settled its 7.5 million common shares forward sale agreement executed in September, generating $296 million in net proceeds.
  • sold 11 facilities for $33 million in cash proceeds generating $3 million in gains.
  • invested $57 million in capital renovation and construction-in-progress projects.
  • paid a $0.67 per share quarterly common stock dividend, representing a $0.01 increase over Q3 2019.

In Q3 2019, the Company

  • issued $500 million aggregate principal amount of 3.625% Senior Notes due 2029.
  • priced a public offering to sell 7.5 million common shares on a forward basis.
  • sold 19 facilities for $177 million in cash proceeds generating $53 million in gains.
  • completed $33 million of new investments.
  • invested $38 million in capital renovation and construction-in-progress projects.
  • paid a $0.66 per share quarterly common stock dividend.

In Q2 2019, the Company

  • completed the $623 million acquisition by merger of MedEquities.
  • invested $55 million in capital renovation and construction-in-progress projects.
  • paid a $0.66 per share quarterly common stock dividend.

In Q1 2019, the Company

  • entered into a definitive merger agreement to acquire MedEquities.
  • finalized the Orianna portfolio restructuring.
  • invested $42 million in capital renovation and construction-in-progress projects.
  • paid a $0.66 per share quarterly common stock dividend.

FOURTH QUARTER 2019 RESULTS

Operating Revenues and Expenses – Revenues for the quarter ended December 31, 2019 totaled $246.7 million, which included $14.1 million of non-cash revenue, $2.4 million of real estate tax and ground rents, $1.4 million of one-time revenue and a write-off of $0.2 million in uncollectible accounts primarily related to straight-line revenue.

Expenses for the quarter ended December 31, 2019 totaled $133.7 million, consisting of $80.5 million of depreciation and amortization expense, $9.9 million of general and administrative (“G&A”) expense, $3.4 million of real estate tax and ground lease expense, $35.7 million of impairment on real estate properties, $3.8 million of stock-based compensation expense and $0.2 million of impairment on direct financing leases.

Other Income and Expense – Other income and expense for the quarter ended December 31, 2019 was a net expense of $54.8 million, primarily consisting of $52.8 million of interest expense and $2.8 million of amortized deferred financing costs.

Funds From Operations – For the quarter ended December 31, 2019, NAREIT FFO was $175.5 million, or $0.77 per common share, on 228 million weighted-average common shares outstanding, compared to $124.7 million, or $0.59 per common share on 212 million weighted-average common shares outstanding, for the same period in 2018.

The $175.5 million of NAREIT FFO for the quarter ended December 31, 2019 includes $3.8 million of non-cash stock-based compensation expense, $0.2 million write-off of non-cash revenue (primarily straight-line revenue) and $0.2 million of impairment on direct financing leases offset by $1.4 million of one-time revenue.

The $124.7 million of NAREIT FFO for the quarter ended December 31, 2018 includes $27.2 million of impairments on direct financing leases, $3.9 million of non-cash stock-based compensation expense, $0.4 million of merger related costs and $0.3 million in provisions for uncollectable accounts offset by $1.1 million in one-time non-cash revenue.

Adjusted FFO was $178.3 million, or $0.78 per common share, for the quarter ended December 31, 2019, compared to $155.3 million, or $0.73 per common share, for the same quarter in 2018. For further information see the “Funds From Operations” schedule below and the Company’s website.

2019 ANNUAL RESULTS

Revenues and Expenses – Revenues for the year ended December 31, 2019 totaled $928.8 million, which included $60.9 million of non-cash revenue, $12.9 million of real estate tax and ground rents, $2.4 million of one-time revenue and a write-off of $11.1 million in uncollectible accounts primarily related to straight-line revenue.

Expenses for the year ended December 31, 2019 totaled $432.8 million, consisting of $301.7 million of depreciation and amortization expense, $45.3 million of impairment on real estate properties, $41.8 million of G&A expense, $16.1 million of real estate tax and ground lease expense, $14.9 million of stock-based compensation expense, $7.9 million of impairment on direct financing leases and $5.1 million of merger costs related to the May 2019 acquisition of MedEquities.

Other Income and Expense – Other income and expense for the year ended December 31, 2019 was a net expense of $207.9 million, primarily consisting of $199.2 million of interest expense and $9.6 million of amortized deferred financing costs.

Funds From Operations – For the year ended December 31, 2019, NAREIT FFO was $640.0 million, or $2.88 per common share, on 222 million weighted-average common shares outstanding, compared to $587.2 million, or $2.80 per common share on 210 million weighted-average common shares outstanding, for the same period in 2018.

The $640.0 million of NAREIT FFO for the year ended December 31, 2019 includes $14.9 million of non-cash stock-based compensation expense, $11.1 million write-off of non-cash revenue (primarily straight-line revenue), $7.9 million of impairments on direct financing leases, $5.1 million of merger costs related to the May 2019 acquisition of MedEquities, $2.0 million of interest refinancing cost related to an unconsolidated joint venture, $1.7 million of restructuring costs and a $1.1 million one-time lease termination payment offset by $2.4 million of one-time revenue.

The $587.2 million of NAREIT FFO for the year ended December 31, 2018 includes $27.2 million of impairments on direct financing leases, $16.0 million of non-cash stock-based compensation expense, $6.7 million in provisions for uncollectable accounts, $2.0 million purchase option buyout and $0.4 million of merger costs related to the May 2019 acquisition of MedEquities offset by $1.1 million of one-time revenue.

Adjusted FFO was $681.4 million, or $3.07 per common share, for the year ended December 31, 2019, compared to $638.3 million, or $3.04 per common share, for 2018. For further information see the “Funds From Operations” schedule below and the Company’s website.

FINANCING ACTIVITIES

7.5 Million Share Forward Stock Offering – On September 9, 2019, in connection with a $300 million underwritten public offering, the Company entered into a forward equity sales agreement to sell 7.5 million shares of its common stock at an initial net price of $40.01 per share, after underwriting discounts and commissions. On December 27, 2019, the Company settled the forward equity sales agreement by the physical delivery of 7.5 million shares of common stock in exchange for $295.9 million of net cash proceeds.

Equity Shelf Program and Dividend Reinvestment and Common Stock Purchase Plan – During the quarter ended December 31, 2019, the Company sold 0.6 million shares of its common stock, generating $25.6 million of gross proceeds under its Equity Shelf Program and its Dividend Reinvestment and Common Stock Purchase Plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Shelf (At-the-Market) Program for 2019

 

 

(in thousands, except price per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1

 

Q2

 

Q3

 

Q4

 

 

Year To Date

Number of shares

 

 

2,221

 

 

733

 

 

124

 

 

55

 

 

 

3,133

Average price per share

 

$

35.26

 

$

36.81

 

$

36.54

 

$

42.30

 

 

$

35.80

Gross proceeds

 

$

78,325

 

$

26,993

 

$

4,498

 

$

2,347

 

 

$

112,163

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend Reinvestment and Common Stock Purchase Plan for 2019

 

 

(in thousands, except price per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q1

 

Q2

 

Q3

 

Q4

 

 

Year To Date

Number of shares

 

 

892

 

 

589

 

 

997

 

 

568

 

 

 

3,046

Average price per share

 

$

36.19

 

$

37.02

 

$

37.87

 

$

40.84

 

 

$

37.77

Gross proceeds

 

$

32,286

 

$

21,817

 

$

37,742

 

$

23,206

 

 

$

115,051

 

2019 FOURTH QUARTER PORTFOLIO ACTIVITY

Q4 Portfolio Activity:

$896 Million of New Investments in Q4 2019 – In the fourth quarter of 2019, the Company completed approximately $839 million of new investments and $57 million in capital renovations and new construction projects consisting of the following:

$735 Million Encore Portfolio Acquisition – On October 31, 2019, the Company completed its previously announced 60 facility acquisition for $735 million. Consideration consisted of approximately $346 million in cash and the assumption of approximately $389 million in mortgage loans guaranteed by the U.S. Department of Housing and Urban Development (“HUD”). The HUD loans have a blended “all-in” rate (interest rates and mortgage insurance premiums) of 3.66% per annum with maturities between September 2046 and January 2052.

The 60 facilities, consisting of 58 skilled nursing facilities (“SNFs”) and two assisted living facilities (“ALFs”) representing 6,590 operating beds are located in Florida (37), North Carolina (8), Mississippi (6), Louisiana (4), Idaho (2), Kentucky (1), Missouri (1) and Montana (1). These facilities are leased to two operators within three triple net leases providing for approximately $64 million in 2020 annual contractual cash rent.

$93 Million Joint VentureOn December 18, 2019, the Company purchased from Healthpeak Properties, Inc. its 49% interest in a U.K. portfolio consisting of 67 senior housing facilities, as well as related development and working capital loans, for an aggregate purchase price of approximately $93 million before transaction costs.

$57 Million of New InvestmentsIn the fourth quarter of 2019, the Company invested $56.9 million under its capital renovation and construction-in-progress programs.

Asset Sales and Impairments:

$33 Million in Assets Sales – In the fourth quarter of 2019, the Company sold 11 properties for $33.3 million in cash, recognizing a gain of approximately $2.9 million.

Impairments and Assets Held for Sale – During the fourth quarter of 2019, the Company recorded an impairment charge of $35.7 million to reduce the net book values on 17 properties to their estimated fair values or expected selling prices.

As of December 31, 2019, the Company had six properties classified as assets held for sale totaling approximately $4.9 million. The Company expects to sell these properties over the next few quarters.

DIVIDENDS

On January 15, 2019, the Board of Directors declared a common stock dividend of $0.67 per share, to be paid February 14, 2020 to common stockholders of record as of the close of business on January 31, 2020.

TAX TREATMENT FOR 2019 DIVIDENDS

On February 15, 2019, May 15, 2019, August 15, 2019 and November 15, 2019, the Company paid dividends to its common stockholders in the per share amounts of $0.66, $0.66, $0.66 and $0.67 for stockholders of record on January 31, 2019, April 30, 2019, July 31, 2019 and October 31, 2019, respectively. The Company has determined the tax treatment for the dividends is as follows:

 

 

 

 

 

 

 

Dividend Payment Date

 

% Taxable as Ordinary Income

 

% Taxable as Return of Capital

 

% Taxable as Capital Gain

February 15, 2019

 

66.5028%

 

22.3133%

 

11.1839%

May 15, 2019

 

66.5029%

 

22.3133%

 

11.1838%

August 15, 2019

 

66.5029%

 

22.3133%

 

11.1838%

November 15, 2019

 

66.5028%

 

22.3133%

 

11.1839%

 

2020 GUIDANCE

The Company expects its 2020 annual net income to be between $1.58 and $1.66 per diluted share and its Adjusted FFO to be between $3.12 to $3.20 per diluted share.

Bob Stephenson, Omega’s CFO, commented, “Our 2020 guidance reflects the annual impact of $863 million of net 2019 fourth quarter acquisitions and asset sales, revenue from Maplewood related to the Carnegie Hill project, continuing Daybreak on a cash basis and the full impact of our 2019 capital markets activity.” Mr. Stephenson continued, “The $296 million in net proceeds from the physical settlement of our 7.5 million common shares equity forward agreement on December 27th adds additional capacity to our credit facility for potential acquisitions.”

The following table presents a reconciliation of Omega’s guidance regarding Adjusted FFO to projected GAAP earnings.

 

 

 

 

 

 

 

 

2020 Annual

 

 

Guidance Range

 

 

(per diluted common

 

 

share)

Net Income

 

$1.58- $1.66

Depreciation

 

1.42

Depreciation – unconsolidated joint venture

 

0.05

Gain on assets sold – net

 

-

NAREIT FFO

 

$3.05 - $3.13

Adjustments:

 

 

Stock-based compensation expense

 

0.07

Adjusted FFO

 

$3.12 - $3.20

Note: All per share numbers rounded to 2 decimals.

 

The Company's Adjusted FFO guidance for 2020 includes (i) the annual impact of acquisitions completed in 2019, (ii) approximately $21 million of cash rent payments from Maplewood related to the Carnegie Hill project, (iii) over $82 million of planned capital renovation projects with 2020 estimated in-service dates or spending that we expect to generate cash in 2020, (iv) Daybreak continuing on a cash basis, (v) approximately $9.5 million to $10.5 million of quarterly G&A, and (vi) approximately $25 million to $35 million of quarterly equity issuances. It excludes additional acquisitions and asset sales, the impact of gains and losses from the sale of assets, certain revenue and expense items, interest refinancing expense, additional capital transactions, acquisition costs, and additional provisions for uncollectible accounts, if any.

The Company's guidance is based on several assumptions, which are subject to change and many of which are outside the Company’s control. If actual results vary from these assumptions, the Company's expectations may change. Without limiting the generality of the foregoing, the timing of collection of rental obligations from operators on a cash basis, the timing and completion of acquisitions, divestitures, capital and financing transactions, and variations in stock-based compensation expense may cause actual results to vary materially from our current expectations. There can be no assurance that the Company will achieve its projected results. The Company may, from time to time, update its publicly announced Adjusted FFO guidance, but it is not obligated to do so.

CONFERENCE CALL

The Company will be conducting a conference call on Thursday, February 6, 2020 at 10 a.m. Eastern to review the Company’s 2019 fourth quarter results and current developments. Analysts and investors within the United States interested in participating are invited to call (877) 511-2891. The Canadian toll-free dial-in number is (855) 669-9657. All other international participants may use the dial-in number (412) 902-4140. Ask the operator to be connected to the “Omega Healthcare’s Fourth Quarter 2019 Earnings Call.”

To listen to the conference call via webcast, log on to www.omegahealthcare.com and click the “earnings call” icon on the Company’s home page. Webcast replays of the call will be available on the Company’s website for two weeks following the call.

Omega is a real estate investment trust that invests in the long-term healthcare industry, primarily in skilled nursing and assisted living facilities. Its portfolio of assets is operated by a diverse group of healthcare companies, predominantly in a triple-net lease structure. The assets span all regions within the US, as well as in the UK.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding Omega’s or its tenants', operators', borrowers' or managers' expected future financial condition, results of operations, cash flows, funds from operations, dividends and dividend plans, financing opportunities and plans, capital markets transactions, business strategy, budgets, projected costs, operating metrics, capital expenditures, competitive positions, acquisitions, investment opportunities, dispositions, facility transitions, growth opportunities, expected lease income, continued qualification as a REIT, plans and objectives of management for future operations and statements that include words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will” and other similar expressions are forward-looking statements. These forward-looking statements are inherently uncertain, and actual results may differ from Omega's expectations.

Omega’s actual results may differ materially from those reflected in such forward-looking statements as a result of a variety of factors, including, among other things: (i) uncertainties relating to the business operations of the operators of Omega’s properties, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels; (ii) the impact of healthcare reform and regulation, including cost containment measures and changes in reimbursement policies, procedures and rates; (iii) the ability of operators and borrowers to maintain the financial strength and liquidity necessary to satisfy their respective rent and debt obligations; (iv) the ability of any of Omega’s operators in bankruptcy to reject unexpired lease obligations, modify the terms of Omega’s mortgages and impede the ability of Omega to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor’s obligations, and other costs and uncertainties associated with operator bankruptcies; (v) the availability and cost of capital; (vi) changes in Omega’s credit ratings and the ratings of its debt securities; (vii) competition in the financing of healthcare facilities; (viii) Omega’s ability to maintain its status as a REIT and the impact of changes in tax laws and regulations affecting REITs; (ix) Omega’s ability to sell assets held for sale or complete potential asset sales on a timely basis and on terms that allow Omega to realize the carrying value of these assets; (x) Omega’s ability to re-lease, otherwise transition or sell underperforming assets on a timely basis and on terms that allow Omega to realize the carrying value of these assets; (xi) the effect of economic and market conditions generally, and particularly in the healthcare industry; (xii) the potential impact of changes in the SNF and ALF market or local real estate conditions on the Company’s ability to dispose of assets held for sale for the anticipated proceeds or on a timely basis, or to redeploy the proceeds therefrom on favorable terms; (xiii) changes in interest rates; and (xiv) other factors identified in Omega’s filings with the SEC. Statements regarding future events and developments and Omega’s future performance, as well as management’s expectations, beliefs, plans, estimates or projections relating to the future, are forward looking statements.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. Accordingly, readers should not place undue reliance on those statements. All forward-looking statements are based upon information available to us on the date of this release. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

Real estate properties

 

 

 

 

Real estate investments

 

$

8,985,994

 

 

$

7,746,410

 

Less accumulated depreciation

 

 

(1,787,425

)

 

 

(1,562,619

)

Real estate investments – net

 

 

7,198,569

 

 

 

6,183,791

 

Investments in direct financing leases – net

 

 

11,488

 

 

 

132,262

 

Mortgage notes receivable – net

 

 

773,563

 

 

 

710,858

 

 

 

 

7,983,620

 

 

 

7,026,911

 

Other investments – net

 

 

419,228

 

 

 

504,626

 

Investments in unconsolidated joint ventures

 

 

199,884

 

 

 

31,045

 

Assets held for sale – net

 

 

4,922

 

 

 

989

 

Total investments

 

 

8,607,654

 

 

 

7,563,571

 

 

 

 

 

 

Cash and cash equivalents

 

 

24,117

 

 

 

10,300

 

Restricted cash

 

 

9,263

 

 

 

1,371

 

Contractual receivables – net

 

 

27,122

 

 

 

33,826

 

Other receivables and lease inducements

 

 

381,091

 

 

 

313,551

 

Goodwill

 

 

644,415

 

 

 

643,950

 

Other assets

 

 

102,462

 

 

 

24,308

 

Total assets

 

$

9,796,124

 

 

$

8,590,877

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Revolving line of credit

 

$

125,000

 

 

$

313,000

 

Term loans – net

 

 

804,738

 

 

 

898,726

 

Secured borrowings

 

 

389,680

 

 

Senior notes and other unsecured borrowings – net

 

 

3,816,722

 

 

 

3,328,896

 

Accrued expenses and other liabilities

 

 

312,040

 

 

 

272,172

 

Deferred income taxes

 

 

11,350

 

 

 

13,599

 

Total liabilities

 

 

5,459,530

 

 

 

4,826,393

 

 

 

 

 

 

Equity:

 

 

 

 

Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 226,631 shares as of December 31, 2019 and 202,346 as of December 31, 2018

 

 

22,663

 

 

 

20,235

 

Common stock – additional paid-in capital

 

 

5,992,733

 

 

 

5,074,544

 

Cumulative net earnings

 

 

2,463,436

 

 

 

2,130,511

 

Cumulative dividends paid

 

 

(4,303,546

)

 

 

(3,739,197

)

Accumulated other comprehensive loss

 

 

(39,858

)

 

 

(41,652

)

Total stockholders’ equity

 

 

4,135,428

 

 

 

3,444,441

 

Noncontrolling interest

 

 

201,166

 

 

 

320,043

 

Total equity

 

 

4,336,594

 

 

 

3,764,484

 

Total liabilities and equity

 

$

9,796,124

 

 

$

8,590,877

 

 

 

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

212,175

 

 

$

188,265

 

 

$

791,168

 

 

$

767,340

 

Real estate tax and ground lease income

 

 

2,437

 

 

 

 

 

12,908

 

 

 

Income from direct financing leases

 

 

259

 

 

 

262

 

 

 

1,036

 

 

 

1,636

 

Mortgage interest income

 

 

19,780

 

 

 

18,503

 

 

 

76,542

 

 

 

70,312

 

Other investment income

 

 

10,364

 

 

 

12,345

 

 

 

43,400

 

 

 

40,228

 

Miscellaneous income

 

 

1,653

 

 

 

375

 

 

 

3,776

 

 

 

2,166

 

Total operating revenues

 

 

246,668

 

 

 

219,750

 

 

 

928,830

 

 

 

881,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

80,498

 

 

 

70,598

 

 

 

301,683

 

 

 

281,279

 

General and administrative

 

 

9,917

 

 

 

13,676

 

 

 

41,790

 

 

 

47,521

 

Real estate tax and ground lease expense

 

 

3,442

 

 

 

 

 

16,141

 

 

 

Stock-based compensation

 

 

3,840

 

 

 

3,880

 

 

 

14,871

 

 

 

15,987

 

Acquisition and merger related costs

 

 

43

 

 

 

383

 

 

 

5,115

 

 

 

383

 

Impairment on real estate properties

 

 

35,719

 

 

 

3,154

 

 

 

45,264

 

 

 

29,839

 

Impairment on direct financing leases

 

 

217

 

 

 

27,153

 

 

 

7,917

 

 

 

27,168

 

Provision for uncollectible accounts

 

 

 

 

326

 

 

 

 

 

6,689

 

Total operating expenses

 

 

133,676

 

 

 

119,170

 

 

 

432,781

 

 

 

408,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other operating income

 

 

 

 

 

 

 

 

 

 

 

 

Gain on assets sold – net

 

 

2,893

 

 

 

15,526

 

 

 

55,696

 

 

 

24,774

 

Operating income

 

 

115,885

 

 

 

116,106

 

 

 

551,745

 

 

 

497,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income and other – net

 

 

735

 

 

 

(183

)

 

 

856

 

 

 

313

 

Interest expense

 

 

(52,793

)

 

 

(48,605

)

 

 

(199,151

)

 

 

(192,462

)

Interest – amortization of deferred financing costs

 

 

(2,811

)

 

 

(2,237

)

 

 

(9,564

)

 

 

(8,960

)

Realized gain (loss) on foreign exchange

 

 

104

 

 

 

12

 

 

 

(42

)

 

 

32

 

Total other expense

 

 

(54,765

)

 

 

(51,013

)

 

 

(207,901

)

 

 

(201,077

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

 

61,120

 

 

 

65,093

 

 

 

343,844

 

 

 

296,513

 

Income tax expense

 

 

(893

)

 

 

(825

)

 

 

(2,844

)

 

 

(3,010

)

Income from unconsolidated joint ventures

 

 

919

 

 

 

635

 

 

 

10,947

 

 

 

381

 

Net income

 

 

61,146

 

 

 

64,903

 

 

 

351,947

 

 

 

293,884

 

Net income attributable to noncontrolling interest

 

 

(1,606

)

 

 

(2,687

)

 

 

(10,824

)

 

 

(12,306

)

Net income available to common stockholders

 

$

59,540

 

 

$

62,216

 

 

$

341,123

 

 

$

281,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share available to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

0.27

 

 

$

0.31

 

 

$

1.60

 

 

$

1.41

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.27

 

 

$

0.31

 

 

$

1.58

 

 

$

1.40

 

Dividends declared per common share

 

$

0.67

 

 

$

0.66

 

 

$

2.65

 

 

$

2.64

 

Weighted-average shares outstanding, basic

 

 

219,668

 

 

 

201,799

 

 

 

213,404

 

 

 

200,279

 

Weighted-average shares outstanding, diluted

 

 

227,980

 

 

 

212,132

 

 

 

222,125

 

 

 

209,711

 

 
 

OMEGA HEALTHCARE INVESTORS, INC.

FUNDS FROM OPERATIONS

Unaudited

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

61,146

 

 

$

64,903

 

 

$

351,947

 

 

$

293,884

 

Deduct gain from real estate dispositions

 

 

(2,893

)

 

 

(15,526

)

 

 

(55,696

)

 

 

(24,774

)

(Deduct gain) add back loss from real estate dispositions of unconsolidated joint ventures

 

 

 

 

 

 

(9,345

)

 

 

670

 

Sub-total

 

 

58,253

 

 

 

49,377

 

 

 

286,906

 

 

 

269,780

 

Elimination of non-cash items included in net income:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

80,498

 

 

 

70,598

 

 

 

301,683

 

 

 

281,279

 

Depreciation - unconsolidated joint ventures

 

 

1,625

 

 

 

1,372

 

 

 

6,513

 

 

 

5,876

 

Add back non-cash provision for impairments on real estate properties

 

 

35,719

 

 

 

3,154

 

 

 

45,264

 

 

 

29,839

 

Add back non-cash provision for impairments on real estate properties of unconsolidated joint ventures

 

 

 

 

 

 

 

 

608

 

(Deduct) add back unrealized (gain) loss on warrants

 

 

(580

)

 

 

211

 

 

 

(410

)

 

 

(160

)

NAREIT funds from operations (“NAREIT FFO”)

 

$

175,515

 

 

$

124,712

 

 

$

639,956

 

 

$

587,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic

 

 

219,668

 

 

 

201,799

 

 

 

213,404

 

 

 

200,279

 

Restricted stock and PRSUs

 

 

1,977

 

 

 

1,619

 

 

 

1,753

 

 

 

691

 

Net forward share contract

 

 

397

 

 

 

 

 

179

 

 

 

Omega OP Units

 

 

5,938

 

 

 

8,714

 

 

 

6,789

 

 

 

8,741

 

Weighted-average common shares outstanding, diluted

 

 

227,980

 

 

 

212,132

 

 

 

222,125

 

 

 

209,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NAREIT funds from operations available per share

 

$

0.77

 

 

$

0.59

 

 

$

2.88

 

 

$

2.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to calculate adjusted funds from operations:

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations

 

$

175,515

 

 

$

124,712

 

 

$

639,956

 

 

$

587,222

 

Deduct one-time revenue

 

 

(1,437

)

 

 

(1,110

)

 

 

(2,409

)

 

 

(1,110

)

Add back acquisition and merger related costs

 

 

43

 

 

 

383

 

 

 

5,115

 

 

 

383

 

Add back one-time buy-out of purchase option

 

 

 

 

 

 

 

 

 

2,000

 

Add back one-time termination payment

 

 

 

 

 

 

 

1,118

 

 

 

Add back interest refinancing cost - unconsolidated joint ventures

 

 

 

 

 

 

 

2,014

 

 

 

Add back impairment for direct financing leases

 

 

217

 

 

 

27,153

 

 

 

7,917

 

 

 

27,168

 

Add back uncollectible accounts (1)

 

 

150

 

 

 

326

 

 

 

11,120

 

 

 

6,689

 

Add back restructuring costs

 

 

21

 

 

 

 

 

1,683

 

 

 

Add back non-cash stock-based compensation expense

 

 

3,840

 

 

 

3,880

 

 

 

14,871

 

 

 

15,987

 

Adjusted funds from operations (“AFFO”)

 

$

178,349

 

 

$

155,344

 

 

$

681,385

 

 

$

638,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to calculate funds available for distribution:

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash interest expense

 

$

2,788

 

 

$

2,212

 

 

$

9,467

 

 

$

8,855

 

Capitalized interest

 

 

(3,341

)

 

 

(3,291

)

 

 

(13,876

)

 

 

(11,093

)

Non-cash revenues

 

 

(14,096

)

 

 

(16,029

)

 

 

(60,861

)

 

 

(69,738

)

Funds available for distribution (“FAD”)

 

$

163,700

 

 

$

138,236

 

 

$

616,115

 

 

$

566,363

 

 

(1) In 2019, the provision or charges for uncollectible rental revenue accounts (straight-line and contractual) are recorded through rental income.

 

NAREIT Funds From Operations (“NAREIT FFO”), Adjusted FFO and Funds Available for Distribution (“FAD”) are non-GAAP financial measures. For purposes of the Securities and Exchange Commission’s Regulation G, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that exclude amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable financial measure calculated and presented in accordance with GAAP in the income statement, balance sheet or statement of cash flows (or equivalent statements) of the company, or include amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable financial measure so calculated and presented. As used in this press release, GAAP refers to generally accepted accounting principles in the United States of America. Pursuant to the requirements of Regulation G, the Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

The Company calculates and reports NAREIT FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“NAREIT”), and consequently, NAREIT FFO is defined as net income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairments on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures and changes in the fair value of warrants. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The Company believes that NAREIT FFO, Adjusted FFO and FAD are important supplemental measures of its operating performance. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time, while real estate values instead have historically risen or fallen with market conditions. The term funds from operations was designed by the real estate industry to address this issue. Funds from operations described herein is not necessarily comparable to funds from operations of other real estate investment trusts, or REITs, that do not use the same definition or implementation guidelines or interpret the standards differently from the Company.

Adjusted FFO is calculated as NAREIT FFO excluding the impact of non-cash stock-based compensation and certain revenue and expense items identified above. FAD is calculated as Adjusted FFO less non-cash interest expense and non-cash revenue, such as straight-line rent. The Company believes these measures provide an enhanced measure of the operating performance of the Company’s core portfolio as a REIT. The Company’s computation of Adjusted FFO and FAD may not be comparable to the NAREIT definition of funds from operations or to similar measures reported by other REITs, but the Company believes that they are appropriate measures for this Company.

The Company uses these non-GAAP measures among the criteria to measure the operating performance of its business. The Company also uses FAD among the performance metrics for performance-based compensation of officers. The Company further believes that by excluding the effect of depreciation, amortization, impairments on real estate assets and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, funds from operations can facilitate comparisons of operating performance between periods and between other REITs. The Company offers these measures to assist the users of its financial statements in analyzing its operating performance and not as measures of liquidity or cash flow. These non-GAAP measures are not measures of financial performance under GAAP and should not be considered as measures of liquidity, alternatives to net income or indicators of any other performance measure determined in accordance with GAAP. Investors and potential investors in the Company’s securities should not rely on these non-GAAP measures as substitutes for any GAAP measure, including net income.

The following tables present selected portfolio information, including operator and geographic concentrations, and lease and loan maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2019

 

As of December 31, 2019

 

 

 

 

Total

 

 

 

# of

 

# of

Balance Sheet Data

 

Total # of

 

Investment

 

% of

 

Operating

 

Operating

 

 

Properties

 

($000’s)

 

Investment

 

Properties (1)

 

Beds (1)

Real Estate Investments

 

926

 

$

8,985,994

 

92

%

 

913

 

91,784

Direct Financing Leases

 

2

 

 

11,488

 

%

 

2

 

135

Mortgage Notes Receivable

 

53

 

 

773,563

 

8

%

 

49

 

5,465

 

 

981

 

$

9,771,045

 

100

%

 

964

 

97,384

Assets Held For Sale

 

6

 

 

4,922

 

 

 

 

 

 

 

Total Investments

 

987

 

$

9,775,967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

# of

# of

Investment

Investment Data

 

Total # of

Investment

% of

 

Operating

Operating

per Bed

 

 

Properties

($000’s)

Investment

 

Properties (1)

Beds (1)

($000’s)

Skilled Nursing Facilities/Transitional Care

 

852

 

$

8,192,307

 

84

%

 

838

 

89,437

 

$

92

Senior Housing (2)

 

129

 

 

1,578,738

 

16

%

 

126

 

7,947

 

$

199

 

 

981

 

$

9,771,045

 

100

%

 

964

 

97,384

 

$

100

Assets Held For Sale

 

6

 

 

4,922

 

 

 

 

 

 

 

 

 

 

Total Investments

 

987

 

$

9,775,967

 

 

 

 

 

 

 

 

 

 

____________________

(1) Excludes facilities which are non-operating, closed and/or not currently providing patient services.

(2) Includes ALFs, memory care and independent living facilities.

 

Revenue Composition ($000’s)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Investment Type

 

Three Months Ended

 

Year Ended

 

 

December 31, 2019

 

December 31, 2019

Rental Property

 

$

212,175

 

86

%

 

$

791,168

 

86

%

Real Estate Tax and Ground Lease Income

 

 

2,437

 

1

%

 

 

12,908

 

1

%

Direct Financing Leases

 

 

259

 

%

 

 

1,036

 

%

Mortgage Notes

 

 

19,780

 

8

%

 

 

76,542

 

8

%

Other Investment Income and Miscellaneous Income - net

 

 

12,017

 

5

%

 

 

47,176

 

5

%

 

 

$

246,668

 

100

%

 

$

928,830

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue by Facility Type

 

Three Months Ended

 

Year Ended

 

 

December 31, 2019

 

December 31, 2019

Skilled Nursing Facilities/Transitional Care

 

$

204,668

 

83

%

 

$

758,298

 

82

%

Senior Housing

 

 

27,546

 

11

%

 

 

110,448

 

12

%

Real Estate Tax and Ground Lease Income

 

 

2,437

 

1

%

 

 

12,908

 

1

%

Other

 

 

12,017

 

5

%

 

 

47,176

 

5

%

 

 

$

246,668

 

100

%

 

$

928,830

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 Q4

 

% of Total

 

 

 

 

Annualized

 

Annualized

 

 

# of

 

Contractual

 

Contractual

Rent/Interest Concentration by Operator ($000’s)

 

Properties (1)

 

Rent/Interest (1)(2)

 

Rent/Interest

Ciena

 

69

$

94,698

 

10.1

%

Consulate

 

82

 

85,678

 

9.2

%

Genesis

 

56

 

61,895

 

6.6

%

Communicare

 

42

 

59,937

 

6.4

%

Maplewood (4)

 

15

 

56,185

 

6.0

%

Signature

 

58

 

54,378

 

5.8

%

Saber

 

48

 

48,098

 

5.1

%

HHC

 

44

 

36,658

 

3.9

%

Guardian

 

35

 

35,506

 

3.8

%

Airamid

 

33

 

28,007

 

3.0

%

Remaining Operators (3)

 

481

 

374,568

 

40.1

%

 

 

963

$

935,608

 

100.0

%

 
___________________________________

(1)

 

Excludes properties which are non-operating, closed and/or not currently providing patient services.

(2)

 

Includes mezzanine and term loan interest.

(3)

 

Excludes one multi-tenant medical office building.

(4)

 

Includes Carnegie Hill (2nd Avenue) revenue which is contractually effective 1/1/2020.

 

 

 

 

 

 

 

 

 

 

 

Total # of

 

Total

 

% of Total

Geographic Concentration by Investment ($000’s)

 

Properties (1)

 

Investment (1)

 

Investment

Florida

 

132

$

1,420,419

 

14.5

%

Texas

 

127

 

940,434

 

9.6

%

Michigan

 

50

 

675,203

 

6.9

%

Indiana

 

69

 

635,086

 

6.5

%

California

 

59

 

610,536

 

6.3

%

Ohio

 

55

 

596,330

 

6.1

%

Pennsylvania

 

55

 

589,701

 

6.0

%

North Carolina

 

41

 

349,446

 

3.6

%

Virginia

 

22

 

330,876

 

3.4

%

New York (2)

 

 

305,006

 

3.1

%

Remaining 30 states

 

316

 

2,906,002

 

29.8

%

 

 

926

 

9,359,039

 

95.8

%

United Kingdom

 

55

 

412,006

 

4.2

%

 

 

981

$

9,771,045

 

100.0

%

___________________________________

(1)

 

Excludes six properties with total investment of $4.9 million classified as assets held for sale.

(2)

 

Includes Inspīr Carnegie Hill (f/k/a 2nd Avenue) development project.

 

The following tables present operator revenue mix, census and coverage data based on information provided by our operators for the indicated periods ended:

 

 

 

 

 

 

 

 

 

 

Operating Lease Expirations & Loan Maturities ($000's) (1)

 

As of December 31, 2019

 

 

 

 

 

 

 

 

% of Total

 

 

 

 

 

 

Annualized

 

 

 

 

Lease and

 

Contractual

Year

Lease Rent

 

Interest

 

Interest Rent

 

Rent/Interest

2020

 

$

1,611

$

125

$

1,736

0.2

%

2021

 

 

4,260

 

5,703

 

9,963

1.1

%

2022

 

 

36,903

 

102

 

37,005

4.0

%

2023

 

 

7,906

 

 

7,906

0.8

%

2024

 

 

35,540

 

2,911

 

38,451

4.1

%

 
___________________________________

(1)

Based on annualized 4th quarter 2019 contractual rent and interest.

 

The following tables present operator revenue mix, census and coverage data based on information provided by our operators for the indicated periods ended. We have not independently verified this information, and we are providing this data for informational purposes only.

 

 

 

 

 

 

 

 

 

 

 

 

 

Medicare /

 

 

Operator Revenue Mix (1)

 

Medicaid

 

Insurance

 

Private / Other

Three-months ended September 30, 2019

 

53.4

%

33.4

%

13.2

%

Three-months ended June 30, 2019

 

54.2

%

33.3

%

12.5

%

Three-months ended March 31, 2019

 

53.7

%

34.0

%

12.3

%

Three-months ended December 31, 2018

 

54.8

%

33.3

%

11.9

%

Three-months ended September 30, 2018

 

53.9

%

33.7

%

12.4

%

 
___________________________________

(1)

 

Excludes all facilities considered non-core.

 

 

 

 

 

 

 

Operator Census and Coverage (1)

 

 

 

 

Coverage Data

 

 

 

 

Before

 

After

 

 

Occupancy (2)

 

Management

 

Management

 

 

 

 

Fees

 

Fees

 

 

 

 

 

 

Twelve-months ended September 30, 2019

 

83.4

%

1.66x

1.30x

Twelve-months ended June 30, 2019

 

83.3

%

1.66x

1.30x

Twelve-months ended March 31, 2019

 

82.7

%

1.67x

1.31x

Twelve-months ended December 31, 2018

 

82.8

%

1.67x

1.32x

Twelve-months ended September 30, 2018

 

82.3

%

1.67x

1.32x

 
___________________________________

(1)

 

Excludes all properties considered non-core.

(2)

 

Based on available (operating) beds.

 

The following table presents a debt maturity schedule as of December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Maturities ($000’s)

 

Unsecured Debt

 

 

 

 

 

 

 

 

Line of Credit and

 

Senior

 

 

 

 

 

Total Debt

Year

Term Loans (1)

 

Notes/Other (2)

 

Sub Notes (3)

 

Secured Debt

 

Maturities

2020

 

$

$

$

 

$

$

2021

 

 

125,000

 

 

13,541

 

 

2,275

 

140,816

2022

 

 

807,480

 

 

 

 

 

807,480

2023

 

 

 

700,000

 

 

 

 

700,000

2024

 

 

 

400,000

 

 

 

 

400,000

2025

 

 

 

400,000

 

 

 

 

400,000

Thereafter

 

 

 

2,350,000

 

 

 

387,405

 

2,737,405

 

 

$

932,480

$

3,850,000

$

13,541

 

$

389,680

$

5,185,701

 
___________________________________

(1)

 

The Line of Credit and Term Loans exclude $2.3 million net deferred financing costs and can be extended into 2022. The $807 million is comprised of a: $350 million term loan, £100 million term loan (equivalent to $132 million), $75 million term loan to Omega’s operating partnership and a $250 million term loan and excludes $2.7 million net deferred financing costs related to the term loans.

(2)

 

Excludes net discounts and deferred financing costs.

(3)

 

Excludes $0.2 million of fair market valuation adjustments.

 

The following table presents investment activity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Activity ($000's)

 

Three Months Ended

 

Year Ended

 

 

December 31, 2019

 

December 31, 2019

Funding by Investment Type

 

$ Amount

 

%

 

$ Amount

 

%

Real Property

 

$

735,181

 

82.0

%

 

$

760,065

 

44.9

%

Construction-in-Progress

 

 

38,158

 

4.3

%

 

 

125,444

 

7.4

%

Capital Expenditures

 

 

18,729

 

2.1

%

 

 

66,464

 

3.9

%

Investment in Direct Financing Leases

 

 

 

%

 

 

 

%

Mortgages

 

 

 

%

 

 

 

%

Other

 

 

103,962

 

11.6

%

 

 

740,155

 

43.8

%

Total

 

$

896,030

 

100.0

%

 

$

1,692,128

 

100.0

%

 

 

Contacts

Matthew Gourmand, SVP, Investor Relations
or
Bob Stephenson, CFO at (410) 427-1700

Contacts

Matthew Gourmand, SVP, Investor Relations
or
Bob Stephenson, CFO at (410) 427-1700