What changed in this filing

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Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 307 added, 182 removed, 682 unchanged (42% of the section changed)

29 unchanged sentences

Preferred stock $ 1.00 par value authorized – 20,000 shares, issued and outstanding – none

Common stock $ .10 par value authorized – 350,000 shares, issued and outstanding – 238,206 shares as of March 31, 2022 and 239,061 shares as of December 31, 2021

Common stock $ 0.10 par value authorized – 350,000 shares, issued and outstanding – 234,102 shares as of June 30, 2022 and 239,061 shares as of December 31, 2021

Additional paid-in capital

12 unchanged sentences

Three Months Ended

Six Months Ended

Rental income

10 unchanged sentences

Recovery on direct financing leases

Provision (recovery) for credit losses

(Recovery) provision for credit losses

Interest expense

17 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income (loss):

1 unchanged sentence

Cash flow hedges

Total other comprehensive income

Total other comprehensive (loss) income

Comprehensive income

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended March 31, 2022 and 2021

Three Months Ended June 30, 2022 and 2021

(in thousands, except per share amounts)

3 unchanged sentences

Income (Loss)

Balance at March 31, 2022

( 5,714,595 )

Stock related compensation

Issuance of common stock

Repurchase of common stock

Common dividends declared ($ 0.67 per share)

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Other comprehensive loss

Balance at June 30, 2022

( 5,872,269 )

Balance at March 31, 2021

( 5,074,432 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Other comprehensive loss

Balance at June 30, 2021

( 5,232,692 )

See notes to consolidated financial statements.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Six Months Ended June 30, 2022 and 2021

(in thousands, except per share amounts)

Comprehensive

Stockholders’

Noncontrolling

Income (Loss)

Balance at December 31, 2021

5 unchanged sentences

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

1 unchanged sentence

Other comprehensive income

Balance at March 31, 2022

Balance at June 30, 2022

( 5,872,269 )

8 unchanged sentences

Other comprehensive income

Balance at March 31, 2021

Balance at June 30, 2021

( 5,232,692 )

3 unchanged sentences

Unaudited (in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

4 unchanged sentences

Provision for rental income

Provision (recovery) for credit losses

Provision for credit losses

Amortization of deferred financing costs and loss on debt extinguishment

5 unchanged sentences

Interest paid-in-kind

(Income) loss from unconsolidated joint ventures

Income from unconsolidated joint ventures

Change in operating assets and liabilities – net:

28 unchanged sentences

Noncontrolling members’ contributions to consolidated joint venture

Redemption of OP Units

Distributions to Omega OP Unit Holders

Net cash provided by financing activities

Net cash used in financing activities

Effect of foreign currency translation on cash, cash equivalents and restricted cash

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

June 30, 2022

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

Our core portfolio consists of long-term “triple net” leases and mortgage loans with healthcare operating companies and affiliates (collectively, our “operators”).

In addition to our core investments, we selectively make loans to operators for working capital and capital expenditures.

In addition to our core investments, we make loans to operators and/or their principals.

From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.

1 unchanged sentence

Omega has exclusive control over Omega OP’s day-to-day management pursuant to the partnership agreement governing Omega OP.

As of March 31, 2022, Parent owned approximately 97 % of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3 % of the outstanding Omega OP Units.

As of June 30, 2022, Parent owned approximately 97 % of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3 % of the outstanding Omega OP Units.

Basis of Presentation and Principles of Consolidation

4 unchanged sentences

These unaudited consolidated financial statements should be read in conjunction with the financial statements and the footnotes thereto included in our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2022.

Omega’s consolidated financial statements include the accounts of (i) Parent, (ii) Omega OP, (iii) all direct and indirect wholly owned subsidiaries of Omega and (iv) other entities in which Omega or Omega OP has a majority voting interest and control.

Omega’s consolidated financial statements include the accounts of (i) Parent, (ii) all direct and indirect wholly owned subsidiaries of Omega, including Omega OP, (iii) other entities in which Omega or Omega OP has a majority voting interest and control and (iv) variable interest entities (“VIEs”) of which Omega is the primary beneficiary.

All intercompany transactions and balances have been eliminated in consolidation, and Omega’s net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

2 unchanged sentences

Reclassification

Certain line items on our Consolidated Statements of Changes in Equity, Consolidated Balance Sheets and Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.

Certain line items on our Consolidated Balance Sheets and Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.

Risks and Uncertainties including COVID-19

6 unchanged sentences

ASU 2022-02 also requires entities to disclose gross write-offs of financing receivables and net investments in leases by year of origination.

The TDR guidance can be adopted using either a prospective or modified retrospective transition approach and the additional disclosure requirements are made prospectively.

ASU 2022-02 would be effective for Omega’s first quarter of 2023, and early adoption is permitted.

We are still evaluating the impact that adopting ASU 2022-02 will have on our consolidated financial statements.

Omega elected to early adopt ASU 2022-02 on a prospective basis effective January 1, 2022.

In the second quarter of 2022, we had one loan modification to a borrower experiencing financial difficulty pursuant to ASU 2022-02, Guardian Healthcare (“Guardian”), that requires additional disclosures.

The required disclosures for this loan are included in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements and Note 5 – Mortgage Notes Receivable.

We have disclosed our gross write-offs of financing receivables and direct financing leases by year of origination in Note 7 – Allowance for Credit Losses.

ASU – 2020-04, Financial Instruments – Reference Rate Reform (Topic 848)

6 unchanged sentences

Our credit facilities that reference LIBOR contain customary LIBOR replacement language, including, but not limited to, the use of rates based on the secured overnight financing rate.

The Company is evaluating:

The Company continues to evaluate:

(i) how the transition away from LIBOR will impact the Company, (ii) whether any additional optional expedients provided by the standards will be adopted, and (iii) the impact that adopting ASU 2020-04 will have on our consolidated financial statements.

NOTE 2 – REAL ESTATE ASSETS

At March 31, 2022, our leased real estate properties included 674 SNFs, 163 ALFs, 20 ILFs, 16 specialty facilities and two medical office buildings.

At June 30, 2022, our leased real estate properties included 672 SNFs, 163 ALFs, 20 ILFs, 16 specialty facilities and two medical office buildings.

The following table summarizes the Company’s rental income from operating leases:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Rental income – operating leases

3 unchanged sentences

Asset Acquisitions

The following table summarizes the asset acquisitions that occurred during the first three months of 2022:

The following table summarizes the asset acquisitions that occurred during the six months ended June 30, 2022:

Total Real Estate

4 unchanged sentences

(1) Initial annual cash yield reflects the initial annual contractual cash rent divided by the purchase price.

(2) The total consideration paid for this one facility U.K.

(2) The total consideration paid for the one -facility U.K.

acquisition and the 27 -facility U.K.

acquisition was $ 8.2 million and $ 100.0 million, respectively.

In connection with these acquisitions, we allocated $ 0.5 million of the purchase consideration to a deferred tax liability related to this one facility U.K.

In connection with these acquisitions, we allocated $ 0.5 million of the purchase consideration to a deferred tax liability related to the one-facility U.K.

acquisition, and $ 13.4 million to a deferred tax asset related to the 27 -facility U.K.

See Note 13 – Taxes for additional information.

(3) Total consideration for the 1 facility Maryland acquisition was paid on December 30, 2021, but the closing of the acquisition did not occur until January 1, 2022.

(3) Total consideration for the one -facility Maryland acquisition was paid on December 30, 2021, but the closing of the acquisition did not occur until January 1, 2022.

NOTE 3 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

Periodically we sell facilities to reduce our exposure to certain operators, geographies and non-strategic assets or due to the exercise of a tenant purchase option.

In March 2022, we reclassified seven facilities leased to Guardian Healthcare (“Guardian”) to held for sale in connection with the transactions outlined in the restructuring agreement that was executed in April 2022 with Guardian, as discussed further in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements.

We also entered into agreements to sell seven of these held for sale facilities in March and April 2022 for estimated gross proceeds of $ 36.5 million.

As of March 31, 2022, the remaining 19 facilities in held for sale are all under sales agreements which provide for estimated proceeds of $ 83.1 million, subject to terms and conditions of such agreements.

The following is a summary of our assets held for sale:

1 unchanged sentence

Amount of assets held for sale (in thousands)

During the three months ended March 31, 2022, we sold 27 facilities, subject to operating leases, for approximately $ 332.6 million in net cash proceeds, recognizing a net gain of approximately $ 113.6 million.

One of these facilities was sold to the joint venture that was consolidated in the first quarter of 2022, as discussed further in Note 8 – Variable Interest Entities.

The proceeds and gain primarily relate to the sale of the 22 facilities that were previously leased and operated by Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) and were included in assets held for sale as of December 31, 2021.

The net cash proceeds from the sale, including related costs accrued for as of the end of the first quarter, were $ 304.0 million, and we recognized a net gain of approximately $ 113.5 million.

We elected to exit these facilities following Gulf Coast commencing the Chapter 11 bankruptcy process in October 2021.

During the three and six months ended June 30, 2022, we sold 13 and 40 facilities, subject to operating leases, for approximately $ 54.3 million and $ 386.9 million in net cash proceeds, recognizing net gains of approximately $ 25.2 million and $ 138.8 million, respectively.

The proceeds and gain for the six months ended June 30, 2022 primarily relate to the sale of the 22 facilities in the first quarter of 2022 that were previously leased and operated by Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) and were included in assets held for sale as of December 31, 2021.

The net cash proceeds from the sale, including related costs accrued for as of the end of the second quarter, were $ 304.0 million, and we recognized a net gain of approximately $ 113.5 million.

We elected to exit these facilities following Gulf Coast commencing its Chapter 11 bankruptcy process in October 2021.

The agreement includes an earnout clause pursuant to which the buyer is obligated to pay an additional $ 18.7 million to Omega if certain financial metrics are achieved at the facilities in the three years following the sale.

As we have determined it is not probable that we will receive any additional funds, we have not recorded any income related to the earnout clause.

Two of the facilities sold during the three months ended March 31, 2022 were previously leased to Guardian and were sold for $ 3.0 million in gross proceeds, which resulted in a net gain of approximately $ 0.5 million, in connection with on-going restructuring negotiations and were included in held for sale as of December 31, 2021.

We also sold nine facilities ( two facilities in the first quarter and seven in the second quarter) during the six months ended June 30, 2022 that were previously leased to Guardian for $ 39.5 million in net proceeds, which resulted in a net gain of approximately $ 13.7 million.

The sales were in connection with the restructuring of Guardian’s portfolio.

One of the facilities sold in the first quarter of 2022 was sold to the joint venture that was consolidated in the first quarter of 2022, as discussed further in Note 8 – Variable Interest Entities.

Real Estate Impairments

During the three months ended March 31, 2022, we recorded impairments of approximately $ 3.5 million on two facilities that were classified as held for sale during the quarter for which the carrying values exceeded the estimated fair values less costs to sell.

To estimate the fair value of the facilities determined to be held for sale for the impairments noted above, we utilized a market approach that considered binding sale agreements (a Level 1 input) or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).

During the three and six months ended June 30, 2022, we recorded impairments on four and six facilities of approximately $ 7.7 million and $ 11.2 million, respectively.

Of the $ 11.2 million, $ 3.5 million related to two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell, and $ 7.7 million related to four held-for-use facilities for which the carrying value exceeded the fair value.

To estimate the fair value of the facilities for the impairments noted above, we utilized a market approach that considered binding sale agreements (a Level 1 input), or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).

NOTE 4 – CONTRACTUAL RECEIVABLES AND OTHER RECEIVABLES AND LEASE INDUCEMENTS

11 unchanged sentences

Agemo Holdings, LLC

Agemo Holdings, LLC (“Agemo”) continued to not pay contractual rent and interest due under its lease and loan agreements during the first quarter of 2022.

As we already placed Agemo on a cash basis of revenue recognition during the third quarter of 2020, no revenue was recorded during the three months ended March 31, 2022.

See Note 6 – Other Investments for additional details on our loans with Agemo.

For the three months ended March 31, 2021, Agemo generated approximately 4.6 %, respectively, of our total revenues (excluding the impact of write-offs in the first quarter of 2021).

Agemo Holdings, LLC (“Agemo”) continued to not pay contractual rent and interest due under its lease and loan agreements during the first and second quarters of 2022.

Our lease payments from Agemo are on a cash basis of revenue recognition for lease purposes, so no rental income was recorded related to Agemo during the three and six months ended June 30, 2022.

Additionally, no interest income was recognized during the three and six months ended June 30, 2022 on the two loans with Agemo because these loans are on non-accrual status and we are utilizing the cost recovery method, under which any payments received are applied against the principal amount.

See Note 6 – Other Investments.

For the three and six months ended June 30, 2021, revenue from Agemo represented approximately 4.9 % and 4.7 %, respectively, of our total revenues (excluding the impact of write-offs).

During the six months ended June 30, 2022, we extended the forbearance period related to Agemo’s defaults under its lease and loan agreements to August 31, 2022.

We are in on-going discussions with Agemo regarding restructuring the lease and loan agreements.

During the three months ended March 31, 2022, the Agemo lease was amended to allow for the extension of the rent deferral through April 2022, which represents an additional deferral of approximately $ 1.6 million of rent.

Additionally, in the first quarter of 2022, we extended the forbearance period from February 28, 2022 to April 30, 2022.

The forbearance period was subsequently extended to May 31, 2022.

Guardian Healthcare

Guardian Healthcare (“Guardian”) continued to not make contractual rent and interest payments under its lease and loan agreements during the first quarter of 2022.

As we already placed Guardian on a cash basis of revenue recognition in the fourth quarter of 2021, no revenue was recorded during the three months ended March 31, 2022.

Guardian Healthcare (“Guardian”) did not make rent and interest payments under its lease and loan agreements during the first quarter of 2022 but resumed making contractual rent and interest payments during the second quarter of 2022, in accordance with the restructuring terms discussed further below.

Our lease payments from Guardian are on a cash basis of revenue recognition for lease purposes and we recorded rental income of $ 3.8 million for the three months ended June 30, 2022 for contractual rent payments that were made.

Additionally, as discussed further in Note 5 – Mortgage Notes Receivable, no mortgage interest income has been recognized on the Guardian mortgage loan during the three and six months ended June 30, 2022 as we are accounting for this loan under the cost recovery method.

During the first and second quarters of 2022, we completed significant restructuring activities related to the Guardian lease and loan portfolio.

In the first quarter of 2022, we transitioned eight facilities previously leased to Guardian to two other operators as part of the planned restructuring.

Additionally, we also sold two facilities previously leased to Guardian and three facilities previously subject to the Guardian mortgage loan in the first quarter of 2022 as part of on-going restructuring activities.

In April 2022, we agreed to a formal restructuring agreement, master lease amendment and mortgage loan amendment with Guardian.

As part of the restructuring agreement and amendments, Omega and Guardian agreed to the following:

● Extend the lease and loan terms to December 31, 2031 and allow Guardian the option to extend the maturity date for both the lease and loan through September 30, 2034 ,

● sell 6 facilities subject to the master lease agreement to other operators in exchange for a reduction in base rent equal to 9.5 % of the agreed upon fair value of these facilities,

● require Guardian to purchase one leased facility for $ 3.5 million before June 30, 2022, with a corresponding reduction in base rent equal to 9.5 % of the proceeds,

● reduce the combined rent and mortgage interest to an aggregate $ 24.0 million following the completion of sale of the six leased facilities and Guardian repurchase of the one leased facility are completed and

● allow for the deferral of up to $ 18.0 million of aggregate rent and interest, effective retrospectively, from October 1, 2021 through April 1, 2022 based on the existence of certain financial conditions, with repayment required after September 30, 2024 based on certain financial metrics and in full by the current lease termination date of December 31, 2031, or the earlier termination of the lease for any reason.

Guardian elected to utilize the allowed deferral in the restructuring agreement for unpaid contractual rent and interest during the period from October 2021 through March 2022 and for a portion of rent and interest in April 2022.

In April 2022, Guardian made a partial payment after exhausting the maximum allowable deferral of $ 18.0 million under the restructuring agreement.

Guardian is required to make contractual rent and interest payments going forward under the restructuring agreements.

As discussed in Note 3 – Assets Held for Sale, Dispositions and Impairments, the seven leased facilities expected to be sold based on the terms within the restructuring agreement are included in assets held for sale as of March 31, 2022.

As of March 31, 2022, we have $ 7.4 million of letters of credit from Guardian as collateral which could be applied against our uncollected rent and interest receivables.

See Note 5 – Mortgage Notes Receivable for additional details on our mortgage with Guardian.

For the three months ended March 31, 2021, Guardian generated approximately 3.2 % of our total revenues (excluding the impact of straight-line write-offs in the first quarter of 2021).

Additionally, during the six months ended June 30, 2022, we sold nine facilities previously leased to Guardian and three facilities previously subject to the Guardian mortgage loan.

In the second quarter of 2022, we agreed to a formal restructuring agreement, master lease amendments and mortgage loan amendments with Guardian.

As part of the restructuring agreement and related agreements, Omega agreed to, among other terms:

● Extend the lease and loan terms from January 31, 2027 to December 31, 2031 and allow Guardian the option to extend the maturity date for both the lease and loan through September 30, 2034 , subject to certain conditions,

● reduce the combined rent and mortgage interest to an aggregate $ 24.0 million per year as of July 1, 2022 ( $ 15.0 million in rent and $ 9.0 million in interest) with annual escalators of 2.25 % beginning in January 2023 and

● allow Guardian to retrospectively defer $ 18.0 million of aggregate contractual rent and interest that they failed to pay during the period from October 2021 through March 2022 (consisting of $ 12.2 million of deferred rent and $ 5.8 of million deferred interest), with repayment required after September 30, 2024 based on certain financial metrics and in full by December 31, 2031, or the earlier termination of the lease for any reason.

As of June 30, 2022, we have $ 7.4 million of letters of credit from Guardian as collateral.

Revenue from Guardian represented approximately 1.5 % and 3.3 % of our total revenues (excluding the impact of straight-line write-offs) for the three months ended June 30, 2022 and 2021, respectively and 0.7 % and 3.3 % of our total revenues (excluding the impact of straight-line write-offs) for the six months ended June 30, 2022 and 2021, respectively.

Other operator updates

From January through March 2022, an operator representing 3.8 % and 3.3 %, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021, did not pay its contractual amounts due under its lease agreement.

From January through March 2022, an operator representing 3.8 % and 3.4 % of total revenue (excluding the impact of write-offs) for both the three months and six months ended June 30, 2022 and 2021, respectively, did not pay its contractual amounts due under its lease agreement.

In March 2022, the lease with this operator was amended to allow for a short-term rent deferral for January through March 2022.

The deferred rent balance accrues interest monthly at a rate of 5 % per annum.

This operator paid the contractual amount due under its lease agreement in April 2022.

The operator is required to repay the deferred rent balance and accrued interest by December 31, 2022.

This operator paid the contractual amount due under its lease agreement from April 2022 through June 2022.

Omega holds a $ 1.0 million letter of credit and a $ 150.0 thousand security deposit from this operator.

We also have a $ 20.0 million revolving credit facility with this operator, and the operator paid contractual interest under the facility from January through April 2022.

As of March 31, 2022, the total outstanding principal due under the credit facility was $ 16.0 million.

In April 2022, this operator borrowed an additional $ 1.8 million under the credit facility.

The credit facility is secured by a first lien on the accounts receivable of the operator.

In March 2022, another operator, representing 2.3 % and 2.1 %, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021, did not pay its contractual amounts due under its lease agreement.

We have provided a $ 20.0 million revolving credit facility to this operator, and the operator has paid contractual interest under the facility from January through June 2022.

As of June 30, 2022, the total outstanding principal due under the credit facility was $ 20.0 million.

The credit facility is secured by a first lien on the operator’s accounts receivable.

In March 2022, an operator, representing 1.0 % and 2.1 % of total revenue (excluding the impact of write-offs) for the three months ended June 30, 2022 and 2021, respectively, and 1.6 % and 2.1 % of total revenue (excluding the impact of write-offs) for the six months ended June 30, 2022 and 2021, respectively, did not pay its contractual amounts due under its lease agreement.

In April 2022, the lease with this operator was amended to allow the operator to apply its $ 2.0 million security deposit toward payment of March 2022 rent and to allow for a short-term rent deferral for April 2022 with regular rent payments required to resume in May 2022.

During the first quarter of 2022, we allowed three other operators, representing an aggregate 2.5 % and 2.7 %, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021 to apply $ 1.3 million of their security deposits to pay rent to accommodate short term liquidity issues, with regular rent payments required to resume shortly thereafter.

As of April 30, 2022, all of these operators are current on their lease obligations.

This operator paid contractual rent in May 2022, but failed to make the full contractual rent payment for June 2022.

We placed this operator on a cash basis of revenue recognition during the second quarter of 2022 as collection of substantially all contractual lease payments due from them was no longer deemed probable.

As a result, we wrote-off approximately $ 8.3 million of straight-line rent receivables through rental income.

In June 2022, an operator, representing 2.2 % and 1.0 % of total revenue (excluding the impact of write-offs) for the three months ended June 30, 2022 and 2021, respectively, and 2.2 % and 2.1 % of total revenue (excluding the impact of write-offs) for the six months ended June 30, 2022 and 2021, respectively, short-paid the contractual rent amount due under its lease agreement by $ 0.6 million.

At June 30, 2022, we held a $ 5.4 million letter of credit as collateral from this operator.

In July 2022, we drew the full amount of the letter of credit and applied $ 0.6 million of the proceeds to pay the unpaid portion of June rent.

We are in discussions with this operator to allow the application of a portion of the remaining proceeds from the letter of credit towards future contractual rent for a short-term period.

In June 2022, we placed an operator, representing approximately 0.4 % and 0.3 % of our total revenues (excluding the impact of write-offs) for the three months ended June 30, 2022 and 2021, respectively, and 0.5 % and 0.5 % of total revenue (excluding the impact of write-offs) for the six months ended June 30, 2022 and 2021, respectively, on a cash basis of revenue recognition.

The change in our evaluation of the collectability of future rent payments due from this operator was as a result of information received from the operator during the second quarter of 2022 regarding substantial doubt as to its ability to continue as a going concern.

As a result of placing this operator on a cash basis, we wrote-off approximately $ 2.1 million of straight-line rent receivables through rental income.

All facilities included in this operator’s master lease are included in assets held for sale as of June 30, 2022.

During the six months ended June 30, 2022, we allowed three other operators, representing an aggregate 2.3 % and 2.7 % of total revenue (excluding the impact of write-offs) for the three months ended June 30, 2022 and 2021, respectively, and 2.4 % and 2.7 % of total revenue (excluding the impact of write-offs) for the six months ended June 30, 2022 and 2021, respectively, to apply an aggregate of $ 2.2 million of their security deposits to pay rent to accommodate short term liquidity issues, with regular rent payments required to resume shortly thereafter.

Additionally, we granted one of these operators a short-term deferral for a portion of its rent due during the six months ended June 30, 2022.

As of June 30, 2022, all of these operators are current on their respective lease obligations due to the application of security deposits.

These operators also are required to begin replenishing their security deposits in 2023.

Other straight-line receivables and write-offs

During the first quarter of 2022, we wrote-off straight-line rent receivable balances of $ 3.2 million through rental income as a result of transitioning six facilities to another existing operator.

In the first quarter of 2022, we transitioned six facilities between existing operators.

The transition resulted in the removal of the facilities from the original operator’s lease agreement and consequently the write-off of $ 3.2 million of straight-line rent receivable balances through rental income.

The facilities were added to the new operator’s lease agreement.

NOTE 5 – MORTGAGE NOTES RECEIVABLE

As of March 31, 2022, mortgage notes receivable relate to seven fixed rate mortgage notes on 60 facilities.

As of June 30, 2022, mortgage notes receivable relate to seven fixed rate mortgage notes on 54 facilities.

The mortgage notes are secured by first mortgage liens on the borrowers’ underlying real estate and personal property.

11 unchanged sentences

Total mortgage notes receivable — net

(1) Approximates the weighted average interest rate on 45 facilities as of March 31, 2022.

(2) Other mortgage notes outstanding have a weighted average interest rate of 8.84 % per annum as of March 31, 2022 and maturity dates ranging from 2023 through 2032 .

(1) Approximates the weighted average interest rate on 39 facilities as of June 30, 2022.

(2) Other mortgage notes outstanding have a weighted average interest rate of 8.85 % per annum as of June 30, 2022 and maturity dates ranging from 2023 through 2032 .

Mortgage Note due 2031

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Guardian continued to not pay contractual rent and interest to us during the first quarter of 2022.

During the first quarter of 2022, we continued our on-going negotiations to restructure and amend Guardian’s lease and loan agreements.

As part of the restructuring negotiations, on February 15, 2022, Guardian completed the sale of three facilities, subject to the Guardian mortgage loan with Omega.

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Guardian did not make rent and interest payments under its lease and loan agreements during the first quarter of 2022 but resumed making contractual rent and interest payments during the second quarter of 2022, in accordance with the restructuring terms agreed to in the second quarter of 2022.

The mortgage loan is on non-accrual status, and is being accounted for under the cost recovery method, so the $ 1.4 million of interest payments that we received during the three months ended June 30, 2022 were applied directly against the principal balance outstanding.

On February 15, 2022, Guardian completed the sale of three facilities, subject to the Guardian mortgage loan with Omega.

Concurrent with the sale, Omega agreed to release the mortgage liens on these facilities in exchange for a partial paydown of $ 21.7 million.

In connection with the partial paydown, we recorded a $ 5.1 million recovery for credit losses in the first quarter of 2022 related to the Guardian mortgage loan.

Following the mortgage paydown and recovery, Omega has reserves of $ 42.0 million against the loan that reduces the loan carrying value to the estimated fair value of the collateral of $ 40.0 million.

As of March 31, 2022, the mortgage loan is secured by three SNFs and one ALF located in Pennsylvania.

In April 2022, we agreed to a formal restructuring agreement and amendments to the master lease and mortgage loan with Guardian.

See Note 4 – Contractual Receivables and Other Receivables and Lease Inducements.

In the second quarter of 2022, we agreed to a formal restructuring agreement and amendments to the master lease and mortgage loan with Guardian, which among other adjustments, extended the loan maturity and allowed for the deferral of certain contractual interest as discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements.

These amendments were treated as a loan modification.

Following the mortgage paydown and recoveries, the amortized cost basis of the loan is $ 80.6 million.

The amortized cost basis of the loan represents 10.4 % of the total amortized cost basis of all mortgage receivables.

As of June 30 2022, the mortgage loan is secured by three SNFs and one ALF located in Pennsylvania.

Mortgage Notes due 2030

On June 30, 2022, Ciena Healthcare (“Ciena”) repaid $ 57.1 million under the $ 415.0 million amortizing mortgage (the “Master Mortgage”), $ 15.1 million under the $ 44.7 million mortgage and $ 41.5 million under four other additional mortgages.

Concurrent with these repayments, we released the mortgage liens on six facilities in exchange for the partial repayment and extended the maturity date of all of the Ciena mortgage notes to June 30, 2030 (with exception of two loans with an aggregate principal balance of $ 34.3 million with maturity dates in 2022 and 2023 ).

NOTE 6 – OTHER INVESTMENTS

Our other investments consist of fixed and variable rate loans to our operators and/or their principals to fund working capital and capital expenditures.

Our other investments consist of fixed and variable rate loans to our operators and/or their principals.

These loans may be either unsecured or secured by the collateral of the borrower.

1 unchanged sentence

We deem these to be “real estate related loans” that are included as qualifying assets under our quarterly REIT asset tests.

As of March 31, 2022, we had 37 loans with 18 different operators.

As of June 30, 2022, we had 39 loans with 19 different operators.

A summary of our other investments is as follows:

2 unchanged sentences

interest at 13.16 % (1)

Other investment notes due 2030 ;

Other investment note due 2030 ;

interest at 7.00 %

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interest at 12.00 % (2)

Other investment notes due 2022 - 2025 ;

interest at 12.03 % (1)

Other investment notes outstanding (3)

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interest at 8.12 % (1)

Other investment notes due 2022 - 2028 ;

interest at 11.13 % (1)

Other investment notes outstanding (4)

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Total other investments – net

(1) Approximates the weighted average interest rate as of March 31, 2022.

(2) Other investment notes that are real estate related loans have a weighted average interest rate of 11.20 % as of March 31, 2022 with maturity dates ranging from 2022 through 2023 (with $ 10.4 million maturing in 2022 ).

(3) Other investment notes that are non-real estate related loans have a weighted average interest rate of 8.08 % as of March 31, 2022 with maturity dates ranging from 2022 through 2032 (with $ 70.5 million maturing in 2022 ).

(1) Approximates the weighted average interest rate as of June 30, 2022.

(2) During the second quarter of 2022, the maturity date on this loan was extended from May 31, 2023 to May 31, 2024 .

(3) Other investment notes that are real estate related loans have a weighted average interest rate of 11.43 % as of June 30, 2022 with maturity dates ranging from 2022 through 2027 (with $ 10.0 million maturing in 2022 ).

(4) Other investment notes that are non-real estate related loans have a weighted average interest rate of 7.77 % as of June 30, 2022 with maturity dates ranging from 2022 through 2032 (with $ 55.3 million maturing in 2022 ).

Interest revenue on other investment loans is included within other investment income on the Consolidated Statement of Operations.

A summary of our other investments income by real estate and non-real estate loans, as defined above, is as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Real estate related loans – interest income

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Total other investment income

Other investment note due 2030

On June 22, 2022, we amended the secured revolving credit facility with Maplewood Senior Living (together with its affiliates, “Maplewood”) to increase the maximum commitment under the facility from $ 220.5 million to $ 250.5 million.

Advances made under this facility bear interest at a fixed rate of 7 % per annum, and the facility matures on June 30, 2030 .

As of June 30, 2022, $ 225.7 million remains outstanding on this credit facility to Maplewood.

Maplewood was determined to be a VIE when this loan was originated in 2020.

Please see further discussion in Note 8 – Variable Interest Entities.

Other investment notes due 2024-2025

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Agemo continued to not pay contractual rent and interest to us during the first quarter of 2022.

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Agemo continued to not pay contractual rent and interest to us during the first and second quarters of 2022.

We have continued to monitor the fair value of the collateral associated with Agemo’s $ 25.0 million secured working capital loan (the “Agemo WC Loan”) on a quarterly basis.

In the first quarter of 2022, we recorded an additional provision for credit losses of $ 4.7 million related to the Agemo WC Loan as a result of a reduction in the fair value of the underlying collateral assets supporting the current carrying values.

The reduction in fair value of the collateral assets was driven by a reduction in Agemo’s working capital accessible to Omega as collateral, after considering other liens on the assets.

Other investment notes outstanding

In the first and second quarters of 2022, we recorded an additional provision for credit losses of $ 4.7 million and $ 1.3 million, respectively, related to the Agemo WC Loan as a result of a reduction in the fair value of the underlying collateral assets supporting the current carrying values.

The reduction in fair value of the collateral assets in the first and second quarter was driven by a reduction in Agemo’s working capital accessible to Omega as collateral, after considering other liens on the assets.

Other investment notes due 2022-2025

On June 28, 2022, we entered into a $ 35.6 million mezzanine loan with an existing operator.

The loan bears interest at a fixed rate of 12 % per annum and matures on June 30, 2025 .

The loan also requires quarterly principal payments of $ 1.0 million commencing on January 1, 2023 and additional payments contingent on achievement of certain metrics.

The loan is secured by a leasehold mortgage and a pledge of the operator’s equity interest in a joint venture.

Other investment notes due 2022-2028

In connection with the $ 35.6 million mezzanine loan discussed above, we also entered into a short-term $ 90.0 million revolving line of credit with the same operator to finance working capital requirements.

The line of credit consists of two $ 45.0 million tranches that bear interest at fixed rates of 10 % per annum and 12 % per annum and mature on June 30, 2023 and June 1, 2023 (or earlier based on certain state reimbursement conditions), respectively.

The revolving line of credit is secured by a first priority interest on the operator’s accounts receivable.

As of June 30, 2022, the revolving line of credit has not been drawn on.

Other investment notes outstanding – real estate related loans

Preferred Equity Investment in Joint Venture - $ 20 million

On June 2, 2022, we made a $ 20.0 million preferred equity investment, which is treated as a loan for accounting purposes, in a new real estate joint venture that was formed to acquire an acute care hospital in New York.

Omega’s preferred equity investment bears a 12 % return per annum and must be mandatorily redeemed by the joint venture at the earlier of December 2027 or the occurrence of certain significant events within the joint venture.

We have determined that the joint venture is a VIE, but we are not the primary beneficiary as we do not have the power to direct the activities that most significantly impact the joint venture’s economic performance.

Please see further discussion in Note 8 – Variable Interest Entities.

Other investment notes outstanding – non-real estate related loans

Working Capital Loan – $ 20 million

In the second quarter of 2022, we recognized a provision for credit losses of $ 2.3 million on a $ 20.0 million working capital loan that was entered into in November 2021 with an operator that managed, on an interim basis for a 4-month period, the operations of 23 facilities formerly leased to Gulf Coast.

The working capital loan is secured by the accounts receivables of these facilities during the interim period of operation.

The remaining accounts receivable outstanding that collateralizes the loan is insufficient to support the current outstanding balance, and as a result, we recorded the additional reserve in the second quarter of 2022 to reduce the carrying value of the loan to the fair value of the collateral.

As of June 30, 2022, the outstanding principal under this loan was $ 6.4 million.

Term Loan – $ 25 million

On March 25, 2022, we entered into a $ 25.0 million term loan with LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care) that bears interest at a fixed rate of 8.5 % per annum and matures on March 31, 2032 .

The term loan requires quarterly principal payments of $ 1.3 million commencing January 1, 2028 and is secured by a second priority lien on the accounts receivable of the operator.

As of March 31, 2022, the outstanding principal under this term loan was $ 25.0 million.

This term loan requires quarterly principal payments of $ 1.3 million commencing January 1, 2028 and is secured by a second priority lien on the operator’s accounts receivable.

As of June 30, 2022, the outstanding principal under this term loan was $ 25.0 million.

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

A rollforward of our allowance for credit losses for the three months ended March 31, 2022 is as follows:

A rollforward of our allowance for credit losses for the six months ended June 30, 2022 is as follows:

Financial Statement Line Item

Allowance for Credit Loss as of December 31, 2021

Provision (recovery) for Credit Loss for the three months ended March 31, 2022

Write-offs charged against allowance for the three months ended March 31, 2022

Allowance for Credit Loss as of March 31, 2022

Provision (recovery) for Credit Loss for the three months ended June 30, 2022

Write-offs charged against allowance for the three months ended June 30, 2022

Provision (recovery) for Credit Loss for the six months ended June 30, 2022

Write-offs charged against allowance for the six months ended June 30, 2022

Allowance for Credit Loss as of June 30, 2022

(in thousands)

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Other investments

Off-balance sheet note commitments

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Off-balance sheet note commitments

(1) This amount relates to a recovery recorded on the Guardian mortgage loan during the first quarter of 2022.

See Note 5 – Mortgage Notes Receivable for additional information on the recovery recorded.

(2) This provision includes an additional $ 4.7 million allowance recorded on the Agemo WC Loan during the first quarter of 2022.

See Note 6 – Other Investments for additional information on the Agemo WC Loan impairment.

(3) During the three months ended March 31, 2022, we received $ 0.7 million of interest and fee payments from Gulf Coast under the $ 25.0 million senior secured DIP facility, the outstanding principal of which was fully reserved against in the fourth quarter of 2021.

The DIP loan is on non-accrual status, and the payments received in the first quarter of 2022 have been applied against the outstanding principal using the cost recovery method.

In the first quarter of 2022, we recorded a recovery for credit loss equal to the amount of payments applied against the principal.

A rollforward of our allowance for credit losses for the three months ended March 31, 2021 is as follows:

(1) Amount relates to recoveries recorded on the Guardian mortgage loan during the first and second quarters of 2022 in connection with the paydown of the mortgage in the first quarter of 2022 and the application of interest payments received against the principal in the second quarter of 2022, as we are accounting for the loan using the cost recovery method.

See Note 5 – Mortgage Notes Receivable for additional information on the recoveries recorded.

(2) This provision includes an additional $ 2.3 million allowance recorded on the $ 20 million working capital loan during the second quarter of 2022 as discussed in Note 6 – Other Investments.

(3) This provision includes an additional $ 4.7 million allowance recorded on the Agemo WC Loan during the first quarter of 2022 and an additional $ 1.3 million allowance recorded on the Agemo WC Loan during the second quarter of 2022.

See Note 6 – Other Investments for additional information on the Agemo WC Loan provision.

(4) During the three and six months ended June 30, 2022, we received $ 0.8 million and $ 1.5 million, respectively, of interest and fee payments from Gulf Coast under the $ 25.0 million senior secured DIP facility, the outstanding principal of which was fully reserved against in the fourth quarter of 2021.

The DIP facility is on non-accrual status, and the payments received in the three and six months ended June 30, 2022 have been applied against the outstanding principal using the cost recovery method.

In the three and six months ended June 30, 2022, we recorded a recovery for credit loss equal to the amount of payments applied against the principal.

(5) During the second quarter of 2022, we recorded an additional reserve of $ 2.2 million related to the remaining commitment under the $ 25.0 million senior secured DIP facility.

A rollforward of our allowance for credit losses for the six months ended June 30, 2021 is as follows:

Financial Statement Line Item

Allowance for Credit Loss at December 31, 2020

Provision (recovery) for Credit Loss for the three months ended March 31, 2021

Write-offs charged against allowance for the three months ended March 31, 2021

Allowance for Credit Loss as of March 31, 2021

Provision (recovery) for Credit Loss for the three months ended June 30, 2021

Write-offs charged against allowance for the three months ended June 30, 2021

Provision (recovery) for Credit Loss for the six months ended June 30, 2021

Write-offs charged against allowance for the six months ended June 30, 2021

Allowance for Credit Loss as of June 30, 2021

(in thousands)

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Off-balance sheet mortgage commitments

(1) This provision primarily related to a $ 4.5 million reserve recorded on a term loan during the second quarter of 2021.

A summary of our amortized cost basis by year of origination and credit quality indicator is as follows:

1 unchanged sentence

Revolving Loans

Balance as of March 31, 2022

Balance as of June 30, 2022

(in thousands)

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Other investments

Current-period gross write-offs

Interest Receivable on Mortgage and Other Investment Loans

We have elected the practical expedient to exclude interest receivable from our allowance for credit losses.

As of March 31, 2022, $ 11.3 million of contractual interest receivable is recorded in contractual receivables – net, and $ 9.1 million of effective yield interest receivables is recorded in other receivables and lease inducements on our Consolidated Balance Sheets, both of which are excluded from our allowance for credit losses.

As of June 30, 2022, $ 10.1 million of contractual interest receivable is recorded in contractual receivables – net, and $ 7.4 million of effective yield interest receivables is recorded in other receivables and lease inducements on our Consolidated Balance Sheets, both of which are excluded from our allowance for credit losses.

We write-off interest receivable to provision for credit losses in the period we determine the interest is no longer considered collectible.

During the first quarter of 2022, we did no t recognize any interest income related to loans on non-accrual status as of March 31, 2022.

NOTE 8 – VARIABLE INTEREST ENTITIES

Unconsolidated Variable Interest Entities

We hold variable interests in several variable interest entities (“VIEs”) through our investing and financing activities, which are not consolidated, as we have concluded that we are not the primary beneficiary of these entities as we do not have the power to direct activities that most significantly impact the VIE’s economic performance and/or the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant.

Below is a summary of our assets, liabilities and collateral associated with these unconsolidated VIEs as of March 31, 2022 and December 31, 2021:

We hold variable interests in several VIEs through our investing and financing activities, which are not consolidated, as we have concluded that we are not the primary beneficiary of these entities as we do not have the power to direct activities that most significantly impact the VIE’s economic performance and/or the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant.

Below is a summary of our assets, liabilities and collateral associated with these unconsolidated VIEs as of June 30, 2022 and December 31, 2021:

(in thousands)

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(1) Amount excludes accounts receivable that Omega has a security interest in as collateral under the two working capital loans with operators that are unconsolidated VIEs.

The fair value of the accounts receivable available to Omega was $ 23.7 million and $ 29.2 million as of March 31, 2022 and December 31, 2021, respectively.

The fair value of the accounts receivable available to Omega was $ 14.5 million and $ 29.2 million as of June 30, 2022 and December 31, 2021, respectively.

In determining our maximum exposure to loss from the unconsolidated VIEs, we considered the underlying carrying value of the real estate subject to leases with the operator and other collateral, if any, supporting our other investments, which may include accounts receivable, security deposits, letters of credit or personal guarantees, if any, as well as other liabilities recognized with respect to these operators.

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(in thousands)

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

Rental income

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During the first quarter of 2022, we entered into a joint venture, which owns two ALFs, for a $ 3.2 million cash contribution, representing 52.4 % of the outstanding equity of the joint venture.

Concurrent with entering the joint venture, we sold one of the ALFs to the joint venture for $ 7.7 million in net proceeds.

The joint venture is a VIE and we have concluded that we are the primary beneficiary of this VIE based on a combination of the ability to direct the activities that most significantly impact the joint venture’s economic performance and the rights to receive residual returns or the obligation to absorb losses arising from the joint venture.

We also sold the joint venture an ALF for $ 7.7 million in net proceeds during the first quarter of 2022.

The joint venture is a VIE, and we have concluded that we are the primary beneficiary of this VIE based on a combination of our ability to direct the activities that most significantly impact the joint venture’s economic performance and our rights to receive residual returns or the obligation to absorb losses arising from the joint venture.

Accordingly, this joint venture has been consolidated.

Omega is not required to make any additional capital contributions to the joint venture, and it is expected to be funded from the ongoing operations of the underlying properties.

As of March 31, 2022, this joint venture has $ 25.6 million of total assets and $ 19.6 million of total liabilities, which are included in our Consolidated Balance Sheets.

As of June 30, 2022, this joint venture has $ 25.4 million of total assets and $ 19.6 million of total liabilities, which are included in our Consolidated Balance Sheets.

As a result of consolidating the joint venture, in the first quarter of 2022, we recorded a $ 2.9 million noncontrolling interest to reflect the contributions of the minority interest holder of the joint venture.

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OH CHS SNP, Inc.

(1) Our initial investment includes our transaction costs, if any.

The following table reflects our income (loss) from unconsolidated joint ventures for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(1) Our investment includes our transaction costs, if any.

The following table reflects our income (loss) from unconsolidated joint ventures for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

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OH CHS SNP, Inc.

(1) The income from this unconsolidated joint venture for the three months ended March 31, 2021 includes a $ 14.9 million gain on sale of real estate investments.

(1) The income from this unconsolidated joint venture for the six months ended June 30, 2021 includes a $ 14.9 million gain on sale of real estate investments.

Asset Management Fees

We receive asset management fees from certain joint ventures for services provided.

For each of the three months ended March 31, 2022 and 2021, we recognized approximately $ 0.2 million of asset management fees.

For the three months ended June 30, 2022 and 2021, we recognized approximately $ 0.2 million and $ 0.3 million, respectively, of asset management fees.

For the six months ended June 30, 2022 and 2021, we recognized approximately $ 0.4 million and $ 0.5 million, respectively, of asset management fees.

These fees are included in miscellaneous income in the accompanying Consolidated Statements of Operations.

NOTE 10 – GOODWILL AND OTHER INTANGIBLES

The following is a summary of our goodwill as of March 31, 2022 and December 31, 2021:

The following is a summary of our goodwill as of June 30, 2022 and December 31, 2021:

(in thousands)

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Foreign currency translation

Balance as of March 31, 2022

The following is a summary of our intangibles as of March 31, 2022 and December 31, 2021:

Balance as of June 30, 2022

The following is a summary of our intangibles as of June 30, 2022 and December 31, 2021:

(in thousands)

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The net amortization related to the above and below market leases is included in our Consolidated Statements of Operations as an adjustment to rental income.

For the three months ended March 31, 2022 and 2021, our net amortization related to intangibles was $ 1.6 million and $ 6.2 million, respectively.

The estimated net amortization related to these intangibles for the remainder of 2022 and the subsequent four years is as follows:

For the three months ended June 30, 2022 and 2021, our net amortization related to intangibles was $ 1.0 million and $ 1.1 million, respectively.

For the six months ended June 30, 2022 and 2021, our net amortization related to intangibles was $ 2.6 million and $ 7.3 million, respectively.

The estimated net amortization related to these intangibles for the remainder of 2022 and the next four years is as follows:

remainder of 2022 – $ 2.0 million;

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2025 – $ 3.5 million and 2026 – $ 2.7 million.

As of March 31, 2022, the weighted average remaining amortization period of above market lease assets is approximately ten years and below market lease liabilities is approximately seven years .

As of June 30, 2022, the weighted average remaining amortization period of above market lease assets is approximately ten years and below market lease liabilities is approximately seven years .

NOTE 11 – CONCENTRATION OF RISK

As of March 31, 2022, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 962 healthcare facilities, located in 42 states and the U.K.

As of June 30, 2022, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 943 healthcare facilities, located in 42 states and the U.K.

and operated by 65 third-party operators.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.9 billion at March 31, 2022, with approximately 97 % of our real estate investments related to long-term healthcare facilities.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.8 billion at June 30, 2022, with approximately 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 673 SNFs, 163 ALFs, 20 ILFs, 16 specialty facilities and two medical office buildings, (ii) fixed rate mortgages on 50 SNFs, two ALFs and two specialty facilities, and (iii) 15 facilities that are held for sale.

At March 31, 2022, we also held other investments of approximately $ 506.9 million, consisting primarily of secured loans to third-party operators of our facilities and $ 192.2 million of investments in six unconsolidated joint ventures.

At March 31, 2022 we had investments with two operators or managers that approximated or exceeded 10% of our total investments:

Maplewood Senior Living (along with affiliates, “Maplewood”) and LaVie.

Maplewood generated approximately 9.0 % and 7.5 % of our total revenues for the three months ended March 31, 2022 and 2021, respectively.

LaVie generated approximately 11.3 % and 9.1 % of our total revenues for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the three states in which we had our highest concentration of investments were Florida ( 13 %), Texas ( 10 %) and Michigan ( 7 %).

At June 30, 2022, we also held other investments of approximately $ 560.9 million, consisting primarily of secured loans to third-party operators of our facilities and $ 183.7 million of investments in six unconsolidated joint ventures.

At June 30, 2022, we had investments with two operators or managers that approximated or exceeded 10% of our total investments:

Maplewood and LaVie.

Maplewood generated approximately 9.0 % and 7.7 % of our total revenues for the three months ended June 30, 2022 and 2021, respectively, and 9.0 % and 7.6 % of our total revenues for the six months ended June 30, 2022 and 2021, respectively.

LaVie generated approximately 11.4 % and 9.6 % of our total revenues for the three months ended June 30, 2022 and 2021, respectively, and 11.3 % and 9.3 % of our total revenues for the six months ended June 30, 2022 and 2021, respectively.

At June 30, 2022, the three states in which we had our highest concentration of investments were Florida ( 14 %), Texas ( 10 %) and Indiana ( 7 %).

NOTE 12 – STOCKHOLDERS’ EQUITY

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The Company has no obligation to repurchase any amount of its common stock, and such repurchases, if any, may be discontinued at any time.

During the first quarter of 2022, the Company repurchased 980,530 shares of our outstanding common stock at an average price of $ 27.84 per share.

Under Maryland law, shares repurchased become authorized but unissued shares.

The Company reduced the common stock at par value and to the extent the cost acquired exceeds par value, it is recorded through additional paid-in capital on our Consolidated Balance Sheets and Consolidated Statements of Changes in Equity.

The following is a summary of the shares repurchased for the three and six months ended June 30, 2022 (in millions except average price per share):

Average Price

Shares Repurchased

Per Share (1)

Repurchase Cost (1)

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2022

(1) Average price per share and repurchase cost includes the cost of commissions.

The following is a summary of our declared cash dividends on common stock:

1 unchanged sentence

February 15, 2022

August 1, 2022

August 15, 2022

Dividend Reinvestment and Common Stock Purchase Plan

The following is a summary of the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three months ended March 31, 2022 and 2021 (in millions):

Three Months Ended

The following is a summary of the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three and six months ended June 30, 2022 and 2021 (in millions):

Shares issued

Gross Proceeds

March 31, 2021

March 31, 2022

Three Months Ended

June 30, 2021

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2022

At-The-Market Offering Programs

The following is a summary of the shares issued under our former $ 500 million 2015 At-The-Market Offering Program (“2015 ATM Program”) and our current $ 1.0 billion 2021 At-The-Market Offering Program (“2021 ATM Program”) for the three months ended March 31, 2022 and 2021 (in millions except average price per share):

The following is a summary of the shares issued under our former $ 500 million 2015 At-The-Market Offering Program (“2015 ATM Program”) and our current $ 1.0 billion 2021 At-The-Market Offering Program (“2021 ATM Program”) for the three and six months ended June 30, 2022 and 2021 (in millions except average price per share):

Average Net Price

Three Months Ended

Shares issued

1 unchanged sentence

Gross Proceeds

March 31, 2021

March 31, 2022

Three Months Ended

June 30, 2021

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2022

(1) Represents the average price per share after commissions.

We did not utilize the forward provisions under the 2021 ATM Program during the first quarter of 2022.

We did not utilize the forward provisions under the 2021 ATM Program during the first and second quarters of 2022.

Accumulated Other Comprehensive Income (Loss)

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As of and for the

Three Months Ended March

As of and for the

Three Months Ended

Six Months Ended

(in thousands)

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Beginning balance

Unrealized gain

Unrealized gain (loss)

Realized gain (1)

21 unchanged sentences

Our domestic TRSs are subject to federal, state and local income taxes at the applicable corporate rates.

Our foreign TRSs are subject to foreign income taxes and may be subject to current-year income inclusion relating to ownership of a controlled foreign corporation for U.S.

Our foreign TRSs are subject to foreign income taxes and may cause us to be subject to current-year income inclusion relating to ownership of a controlled foreign corporation for U.S.

income tax purposes.

As of March 31, 2022, one of our domestic TRSs that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately $ 10.3 million.

Our domestic NOL carry-forward was fully reserved as of March 31, 2022, with a valuation allowance due to uncertainties regarding realization.

As of June 30, 2022, one of our domestic TRSs that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately $ 10.2 million.

Our domestic NOL carry-forward was fully reserved as of June 30, 2022, with a valuation allowance due to uncertainties regarding realization.

Under current law, NOL carry-forwards generated up through December 31, 2017, may be carried forward for no more than 20 years, and NOL carry-forwards generated in taxable years ended after December 31, 2017, may be carried forward indefinitely.

6 unchanged sentences

(in thousands)

Deferred tax assets:

Federal net operating loss carryforward

Valuation allowance on deferred tax asset

Foreign net operating loss carryforward

Deferred tax liability:

Foreign deferred tax liability (1)

Valuation allowance on deferred tax asset

Net deferred tax asset (liability)

3 unchanged sentences

Three Months Ended

Six Months Ended

(in millions)

4 unchanged sentences

NOTE 14 – STOCK-BASED COMPENSATION

Stock-based compensation expense was $ 6.9 million and $ 5.4 million for the three months ended March 31, 2022 and 2021, respectively.

The following is a summary of our stock-based compensation expense for the three and six months ended June 30, 2022 and 2021, respectively:

Three Months Ended

Six Months Ended

(in thousands)

Stock-based compensation expense

Stock-based compensation expense is included within general and administrative expenses on our Consolidated Statements of Operations.

29 unchanged sentences

Total secured and unsecured borrowings – net (8)(9)

(1) Reflects the weighted average annual contractual interest rate on the mortgages at March 31, 2022.

Secured by real estate assets with a net carrying value of $ 537.8 million as of March 31, 2022.

(1) Reflects the weighted average annual contractual interest rate on the mortgages at June 30, 2022.

Secured by real estate assets with a net carrying value of $ 531.0 million as of June 30, 2022.

(2) Wholly owned subsidiaries of Omega OP are the obligor on these borrowings.

3 unchanged sentences

(5) Guaranteed by Omega OP.

(6) As of March 31, 2022, borrowings under Omega’s $ 1.45 billion senior unsecured multicurrency revolving credit facility consisted of $ 110.0 million U.S.

dollars (“USD”) and £ 186.0 million British Pounds Sterling (“GBP”).

The interest rate presented reflects the weighted average interest rate on the borrowings under the revolving credit facility denominated in USD and GBP.

(6) Omega OP is the obligor on this borrowing.

2 unchanged sentences

(9) Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants.

As of March 31, 2022 and December 31, 2021, we were in compliance with all applicable covenants for our borrowings .

As of June 30, 2022 and December 31, 2021, we were in compliance with all applicable covenants for our borrowings .

NOTE 16 – DERIVATIVES AND HEDGING

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Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, interest rate swaps and debt issued in foreign currencies to offset a portion of these risks.

As of March 31, 2022, we have five forward starting swaps with $ 400.0 million in notional value designated as cash flow hedges and four forward currency forwards with £ 174.0 million in notional value designated as net investment hedges.

Two of our interest rate swaps that were entered into in May 2019 with aggregate notional amounts of $ 50.0 million matured on February 10, 2022 .

As of June 30, 2022, we have five forward starting swaps with $ 400.0 million in notional value designated as cash flow hedges and six foreign currency forward contracts with £ 250.0 million (including the two new foreign currency forwards discussed below) in notional value designated as net investment hedges.

On May 17, 2022, we entered into two new foreign currency forward contracts with notional amounts totaling £ 76.0 million and a GBP-USD forward rate of 1.3071 , which mature on May 21, 2029 .

The currency forwards hedge a portion of our net investments in U.K.

subsidiaries and our U.K.

joint venture.

On February 10, 2022, two of our interest rate swaps that were entered into in May 2019 with aggregate notional amounts of $ 50.0 million matured.

These interest rate swap contracts were designated as hedges against our exposure to changes in interest payment cash flow fluctuations in the variable interest rates on the OP term loan.

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The net carrying amount of cash and cash equivalents, restricted cash, contractual receivables, other assets and accrued expenses and other liabilities reported in the Consolidated Balance Sheets approximates fair value because of the short maturity of these instruments (Level 1).

At March 31, 2022 and December 31, 2021, the net carrying amounts and fair values of our other financial instruments were as follows:

March 31, 2022

At June 30, 2022 and December 31, 2021, the net carrying amounts and fair values of our other financial instruments were as follows:

June 30, 2022

December 31, 2021

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Department of Justice (“DOJ”), which indicates that it is conducting an investigation regarding alleged violations of the False Claims Act, Stark Law and Anti-Kickback Statute in connection with claims that may have been submitted to Medicare and other federal payors for services rendered to patients at Lakeway Hospital or by providers with financial relationships with Lakeway Hospital.

As a result of the acquisition of MedEquities, the Company owns a 51 % interest in an unconsolidated partnership that owns Lakeway Hospital, Lakeway Realty, L.L.C.

As a result of the acquisition of MedEquities, the Company owns a 51 % interest in an unconsolidated limited liability company that owns Lakeway Hospital, Lakeway Realty, L.L.C.

The CID requested certain documents and information related to the acquisition and ownership of Lakeway Hospital through Lakeway Realty, L.L.C.

The Company has learned that the DOJ is investigating MedEquities’ conduct in connection with its investigation of financial relationships related to Lakeway Hospital, including allegations by the DOJ that these relationships violate and continue to violate the Anti-Kickback Statute and, as a result, related claims submitted to federal payors violated and continue to violate the False Claims Act.

The Company has learned that the DOJ is investigating, among other items, MedEquities’ conduct in connection with its investigation of financial relationships related to Lakeway Hospital, including allegations by the DOJ that these relationships violate and continue to violate the Anti-Kickback Statute and, as a result, related claims submitted to federal payors violated and continue to violate the False Claims Act.

The Company is cooperating fully with the DOJ in connection with the CID and has produced all of the information that has been requested to date.

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The documents relating to the settlement are not publicly available.

The Company believes that the acquisition, ownership and leasing of Lakeway Hospital through the Lakeway Partnership was and is in compliance with all applicable laws.

However, due to the uncertainties surrounding this matter and its ultimate outcome, we are unable to determine whether it is probable that any loss has been incurred.

While the Company believes that the acquisition, ownership and leasing of Lakeway Hospital through the Lakeway Partnership was and is in compliance with all applicable laws, in the second quarter of 2022, the Company recorded a $ 3.0 million legal reserve related to this matter which is included within accrued expenses and other liabilities on the Consolidated Balance Sheets with the related expense included in other (expense) income – net on the Consolidated Statements of Operations.

In addition, we are subject to various other legal proceedings, claims and other actions arising out of the normal course of business.

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In connection with certain facility transitions, we have agreed to indemnify certain operators in certain events.

As of March 31, 2022, our maximum funding commitment under these indemnification agreements was approximately $ 5.6 million.

Claims under these indemnification agreements may be made within 18 months to 72 months of the transition date.

As of June 30, 2022, our maximum funding commitment under these indemnification agreements was approximately $ 5.6 million.

Claims under these indemnification agreements generally may be made within 18 months to 72 months of the transition date.

These indemnification agreements were provided to certain operators in connection with facility transitions and generally would be applicable in the event that the prior operators do not perform under their transition agreements.

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We expect the funding of these commitments to be completed over the next several years.

Our remaining commitments at March 31, 2022, are outlined in the table below (in thousands):

Total commitments

Amounts funded to date (1)

Remaining commitments (2)

Our remaining commitments at June 30, 2022, are outlined in the table below (in thousands):

Construction and capital expenditure mortgage loan commitments

Lessor construction and capital commitments under lease agreements

Other investment loan commitments (1)

Total remaining commitments (2)

(1) This amount includes the $ 90 million short-term revolving line of credit discussed in Note 6 – Other Investments.

(2) Includes finance costs .

(2) This amount excludes our remaining commitments to fund under our other investments of approximately $ 41.2 million.

NOTE 19 – EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings per share:

Three Months Ended March

Three Months Ended

Six Months Ended

(in thousands, except per share amounts)

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NOTE 20 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(in thousands)

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Non-cash acquisition of real estate

Non-cash placement of mortgages

Non-cash proceeds from other investments

Non-cash financing activities:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements