What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-14 compared with 2022-02-17 · 891 added, 710 removed, 1672 unchanged (49% of the section changed)

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Item 9B – Other Information

On February 2, 2022, we issued an earnings release reporting our financial and operating results for the fourth quarter and full year ended December 31, 2021.

A copy of the earnings release was furnished to the SEC as Exhibit 99.1 to our Current Report on Form 8-K on February 2, 2022.

The earnings release inadvertently included an error in the table presenting the tax treatment of 2021 dividends paid to shareholders.

Specifically, for all dividends paid in 2021 (on February 16th, May 17th, August 13th and November 15th) the correct percentage of dividends taxable as a return on capital was 4.3802% (rather than 21.4776% stated in the earnings release) and the correct percentage of dividends taxable as a capital gain was 21.4776% (rather than 4.3802% stated in the earnings release).

This inadvertent error had no impact on our financial statements or operating results reported in the earnings release.

Additionally, this information was correctly included in the 1099 forms provided to shareholders and on our website at www.omegahealthcare.com under the “Investor Relations” tab under “Dividend Taxation.” A corrected earnings release is posted on our website under the “Investors Relations” tab under “Press Releases”.

Item 9C – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

Item 10 – Directors, Executive Officers of the Registrant and Corporate Governance

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Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Financial Statements of Omega Healthcare Investors, Inc.

Consolidated Balance Sheets as of December 31, 2022 and 2021

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Consolidated Statements of Comprehensive Income for the three years ended December 31, 2022

Consolidated Statements of Changes in Equity for the three years ended December 31, 2021

Consolidated Statements of Equity for the three years ended December 31, 2022

Consolidated Statements of Cash Flows for the three years ended December 31, 2022

Notes to Consolidated Financial Statements

(a)(2) Listing of Financial Statement Schedules.

(a)(2) Financial Statement Schedules.

The following consolidated financial statement schedules are included herein:

Schedule II – Valuation and Qualifying Accounts

Schedule III – Real Estate and Accumulated Depreciation

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All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or have been omitted because sufficient information has been included in the notes to the Consolidated Financial Statements.

(a)(3) Listing of Exhibits — See “ Index to Exhibits ” beginning on Page I-1 of this report.

Exhibits — See “ Index to Exhibits ” beginning on Page I-1 of this report.

Financial Statement Schedules — The following consolidated financial statement schedules are included herein:

Schedule II —Valuation and Qualifying Accounts

Schedule III — Real Estate and Accumulated Depreciation

Schedule IV — Mortgage Loans on Real Estate

(a)(3) Exhibits — See “ Index to Exhibits ” beginning on Page I-1 of this report.

Item 16 – Form 10-K Summary

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 14, 2023 expressed an unqualified opinion thereon.

Adoption of ASU No.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for the measurement of credit losses on financial instruments in 2020 due to the adoption of ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, and the related amendments.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Collectibility of future lease payments

Description of the Matter

The Company recognized rental income of $924 million during 2021.

As described in Note 2 to the consolidated financial statements, the timing and pattern of rental income recognition for operating leases is affected by the Company’s determination as to whether the collectibility of lease payments is probable.

Auditing the Company's accounting for rental income is complex due to the judgment involved in the Company’s determination of the collectibility of future lease payments from its operators.

The determination involves consideration of the lessee’s payment history and recent payment trends, an assessment of the financial strength of the lessees and guarantors, where applicable, future contractual rents, historical and projected operating results of the lessees in such properties, and the timing of expected payments.

During 2022, the Company recognized rental income of $750.2 million and recorded straight-line rent and lease inducement receivables of $172.1 million at December 31, 2022.

Auditing the Company's accounting for rental income is complex due to the judgment involved in the Company’s determination of the collectibility of future lease payments.

The determination involves consideration of the lessee’s payment history, an assessment of the financial strength of the lessee and any guarantors, where applicable, historical operations and operating trends, current and future economic conditions, and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern).

How We Addressed the Matter in Our Audit

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For example, we tested controls over management’s consideration of the factors used in assessing collectibility and controls over the completeness and accuracy of the data used in management’s analyses.

To test the rental income recognized, we performed audit procedures that included, among others, evaluating the collectibility of lease payments.

For example, we assessed the operators’ historical operating results in the properties, the financial condition of the operators and payment trends for a sample of operators.

To test the rental income recognized, we performed audit procedures that included, among others, evaluating the collectibility of future lease payments.

For example, we assessed the lessee’s payment history, historical operating results of the properties, and factors contributing to the financial strength of the lessee, including current and future economic conditions, as well as management’s assessment of the expectation of performance of a sample of operators.

We also considered whether other information obtained throughout the course of our audit procedures corroborated or contradicted management’s analysis.

In addition, we tested the completeness and accuracy of the data that was used in management’s analyses.

Accounting for acquisitions

Description of the Matter

As described in Note 2 to the financial statements, the Company invested $662.6 million in asset acquisitions, including the acquisition of the Healthpeak Properties, Inc.

portfolio for $511.3 million.

Auditing the Company's accounting for its acquisitions was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of the acquired assets and liabilities, including the acquired properties and assumed lease.

The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to the underlying significant assumptions utilized in the measurement of the fair value of the acquired properties and lease.

The Company used discounted cash flow analyses, market comparable data, and replacement cost data, to estimate the fair value of the acquired properties and assumed lease.

The significant assumptions used to estimate the fair value of the acquired properties and assumed lease included lease coverage ratios, lease yields, market rents, land values per acre, discount rates, and replacement costs of furniture, fixtures, and equipment.

Certain of these significant assumptions include consideration of future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over the Company’s accounting for acquisitions.

For example, we tested controls over the measurement of the acquired properties and assumed leases, including management’s review of the appropriateness of the valuation methodology and assumptions used in the valuation models.

To test the estimated fair value of the acquired properties and assumed lease, we involved our valuation specialists and performed procedures including, among others, evaluating the Company’s valuation methodology and testing the significant assumptions.

For example, we compared the significant assumptions used to independent third-party data and the Company’s recent lease and acquisition transactions.

Additionally, we tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates including through comparison to the related lease agreements.

/s/ Ernst & Young LLP

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Investments in direct financing leases – net

Mortgage notes receivable – net

Other investments – net

Real estate loans receivable – net

Investments in unconsolidated joint ventures

Assets held for sale

Total real estate investments

Non-real estate loans receivable – net

Total investments

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Accrued expenses and other liabilities

Deferred income taxes

Total liabilities

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( 5,553,908 )

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total stockholders’ equity

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Income from direct financing leases

Mortgage interest income

Other investment income

Interest income

Miscellaneous income

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Impairment on real estate properties

(Recovery) impairment on direct financing leases

Recovery on direct financing leases

Provision for credit losses

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Other income (expense)

Other (expense) income – net

Other expense – net

Loss on debt extinguishment

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OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except per share amounts)

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Noncontrolling

Loss (Income)

Income (Loss)

Balance at December 31, 2019

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Cumulative effect of accounting change (see Note 2)

Balance at January 1, 2020

( 4,303,546 )

Stock related compensation

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Omega OP Units distributions

Noncontrolling interest - consolidated joint venture

Other comprehensive income (loss)

Other comprehensive income

Balance at December 31, 2020

( 4,916,097 )

Cumulative effect of accounting change (see Note 2)

Balance at January 1, 2020

( 4,303,546 )

Stock related compensation

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Issuance of common stock

Repurchase of common stock

Common dividends declared ($ 2.68 per share)

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Omega OP Units distributions

Capital contributions from noncontrolling holder in consolidated JV

Other comprehensive income

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Impairment on real estate properties

(Recovery) impairment on direct financing leases

Recovery on direct financing leases

Provision for rental income

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Interest paid-in-kind

(Income) loss from unconsolidated joint ventures

Income from unconsolidated joint ventures

Change in operating assets and liabilities – net:

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Proceeds from sale of direct financing lease and related trust

Placement of mortgage loans

Collection of mortgage principal

Placement of loan principal

Collection of loan principal

Investments in unconsolidated joint ventures

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Receipts from insurance proceeds

Investments in other investments

Proceeds from other investments

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

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( 1,838,155 )

( 2,081,322 )

Payments of financing related costs

Net proceeds from issuance of common stock

Repurchase of common stock

Dividends paid

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

(Decrease) increase in cash, cash equivalents and restricted cash

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Our core business is to provide financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities (“SNFs”), assisted living facilities (“ALFs”), and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings (“MOBs”).

Our core portfolio consists of our long-term “triple-net” leases and 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.

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

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

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

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Consolidation

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.

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise, if any, is the primary beneficiary of variable interest entities (“VIEs”).

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise, if any, is the primary beneficiary of VIEs.

A VIE is broadly defined as an entity with one or more of the following characteristics:

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We perform this analysis on an ongoing basis.

As of December 31, 2021 and 2020 we did not have any VIEs that we consolidated.

As of December 31, 2022, we have one joint venture that is a consolidated VIE as we have concluded that we are the primary beneficiary through our equity investment in the entity.

We also have consolidated VIEs related to the Exchange Accommodation Titleholders (“EATs”) discussed in Note 3 – Real Estate Asset Acquisitions and Development.

As of December 31, 2021, we did no t have any VIEs that we consolidated.

Revenue Recognition

Rental Income

Substantially all of our operating leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one of three methods depending on the specific provisions of each lease as follows:

(i) a specific annual increase over the prior year’s rent, generally between 2.0 % and 3.0 % (which is the most prevalent in our lease portfolio);

(ii) an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index);

or (iii) specific dollar increases over prior years.

Rental income from operating leases is generally recognized on a straight-line basis over the lease term when we have determined that the collectibility of substantially all of the lease payments is probable.

We assess the probability of collecting substantially all payments due under our leases on several factors, including, among other things, payment history, the financial strength of the lessee and/or borrower and any guarantors, historical operations and operating trends, current and future economic conditions, and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern).

If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.

Provisions for uncollectible lease payments are recognized as a direct reduction to rental income.

If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the period we make a change to our prior conclusion, potentially resulting in increased volatility of rental income.

Rental income from operating leases is recognized on a straight-line basis, inclusive of fixed annual escalators and lease inducements, over the lease term when we have determined that the collectibility of substantially all of the lease payments is probable.

Certain of our operating leases contain provisions for an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index).

We do not include in our measurement of our lease receivables these variable increases until the specific events that trigger the variable payments have occurred.

Our leased real estate properties are leased under provisions of single or master leases with initial terms typically ranging from 5 to 15 years .

Some of our leases have options to extend, terminate or purchase the facilities, which are considered when determining the lease term.

We do not include in our measurement of our lease receivables certain variable payments, including changes in an index until the specific events that trigger the variable payments have occurred.

Under the terms of the leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

We assess the probability of collecting substantially all payments due under our leases on several factors, including, among other things, payment history, the financial strength of the lessee and any guarantors, as applicable, historical operations and operating trends, current and future economic conditions, and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern).

If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize a charge to rental income to write off straight-line rent receivables and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.

Provisions for uncollectible lease payments are recognized as a direct reduction to rental income.

Under the terms of our leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

Certain of our operating leases require the operators to reimburse us for property taxes and other expenditures that are not considered components of the lease and therefore no consideration is allocated to them as they do not result in the transfer of a good or service to the operators.

We have determined that all of our leases qualify for the practical expedient to not separate the lease and non-lease components because (i) the lease components are operating leases and (ii) the timing and pattern of recognition of the non-lease components are the same as the lease components.

We apply Accounting Standards Codification (“ASC”) 842, Leases (“Topic 842”) to the combined component.

We have determined that all of our leases qualify for the practical expedient, under Accounting Standards Codification (“ASC”) 842, Leases (“Topic 842”), to not separate the lease and non-lease components because (i) the lease components are operating leases and (ii) the timing and pattern of recognition of the non-lease components are the same as the lease components.

Certain operators are obligated to pay directly their obligations under their leases for real estate taxes, insurance and certain other expenses.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Mortgage Interest Income and Other Investment Income

Mortgage interest income and other investment income is recognized as earned over the terms of the related mortgage notes or other investment.

Loan Interest Income

Interest income is recognized as earned over the term of the related real estate and non-real estate loans receivable.

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected using the effective interest method.

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Costs related to originating direct financing leases are deferred and amortized on a straight-line basis as a reduction to income from direct financing leases over the term of the direct financing leases.

Real Estate Sales

We recognize gains on the disposition of real estate when the recognition criteria have been met, generally at the time the risks and rewards and title have transferred, and we no longer have substantial continuing involvement with the real estate sold.

Gains on the sale of real estate are recognized pursuant to provisions under Accounting Standards Codification (“ASC”) 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets.

Under ASC 610-20, we determine whether the transaction is a sale to a customer or non-customer.

As a REIT, we do not sell real estate within the ordinary course of our business and therefore, expect that our sale transactions will not be contracts with customers.

ASC 610-20 refers to the revenue recognition principles under ASC 606, Revenue from Contracts with Customers.

Under ASC 610-20, if we determine we do not have a controlling financial interest in the entity that holds the asset and the arrangement meets the criteria to be accounted for as a contract, we will dispose of the asset and recognize a gain or loss on the sale of the real estate when control of the underlying asset transfers to the buyer.

If we determine a sale has not occurred under ASC 610-20, we continue to record the asset on the Consolidated Balance Sheets and related depreciation expense on the Consolidated Statements of Operations.

Fair Value Measurement

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In some instances where a market price is available, but the instrument is in an inactive or over-the-counter market, the Company consistently applies the dealer (market maker) pricing estimate and classifies such items in Level 2.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

If quoted market prices or inputs are not available, fair value measurements are based upon valuation models that utilize current market or independently sourced market inputs, such as interest rates, option volatilities, credit spreads and/or market capitalization rates.

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Internal fair value models and techniques used by the Company include discounted cash flow and Monte Carlo valuation models.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Risks and Uncertainties including COVID-19

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When evaluating below market leases we consider extension options controlled by the lessee in our evaluation.

● Other assets acquired and liabilities assumed are typically valued at stated amounts, which approximate fair value on the date of the acquisition.

● Assumed debt balances are valued by discounting the remaining contractual cash flows using a current market rate of interest.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

● Other assets acquired and liabilities assumed are typically valued at stated amounts, which approximate fair value on the date of the acquisition.

● Assumed debt balances are valued by discounting the remaining contractual cash flows using a current market rate of interest.

● Noncontrolling interests are valued using a stock price on the acquisition date.

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Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and we cease depreciation.

Real Estate Sales

We recognize gains related to the sale of real estate when we transfer control of the property and when it is probable that we will collect substantially all of the related consideration.

OMEGA HEALTHCARE INVESTORS, INC.

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The lease liability is calculated as the present value of the remaining minimum rental payments for existing leases using either the rate implicit in the lease or, if none exists, the Company's incremental borrowing rate, as the discount rate.

Certain leases have options to extend, terminate or purchase the asset and have been considered in our analysis of the lease term and the measurement of the right-of-use assets and lease liabilities.

On a quarterly basis, we remeasure our lease liabilities at the present value of the future lease payments using the discount rate determined at lease commencement.

Certain leases have options to extend, terminate or purchase the asset and have been considered in our analysis of the lease term and the measurement of the ROU assets and lease liabilities.

On a quarterly basis, we record our lease liabilities at the present value of the future lease payments using the discount rate determined at lease commencement.

Rental expense from operating leases is generally recognized on a straight-line basis over the lease term.

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Allowance for Credit Losses

The allowance for credit losses reflects our current estimate of the potential credit losses on our mortgage notes, other investment loans, and our investment in direct financing leases and is recorded as a valuation account as a direct offset against these financial instruments on our Consolidated Balance Sheets.

The allowance for credit losses reflects our current estimate of the potential credit losses on our real estate loans, non-real estate loans, and our investment in direct financing leases and is recorded as a valuation account as a direct offset against these financial instruments on our Consolidated Balance Sheets.

Expected credit losses inherent in non-cancelable unfunded loan commitments are accounted for as separate liabilities included in accrued expenses and other liabilities on the Consolidated Balance Sheets.

The Company has elected to not measure an allowance for credit losses on accrued interest receivables related to all of its mortgage notes and other investment loans because we write off uncollectible accrued interest receivable in a timely manner pursuant to our non-accrual policy, described below.

The Company has elected to not measure an allowance for credit losses on accrued interest receivables related to all of its real estate loans and non-real estate loans because we write off uncollectible accrued interest receivable in a timely manner pursuant to our non-accrual policy, described below.

Changes to the allowance for credit losses on loans resulting from quarterly evaluations are recorded through provision for credit losses on the Consolidated Statements of Operations.

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We aggregate our financial assets by financial instrument type (i.e.

mortgage, other investment, etc.) and by internal risk rating.

real estate loan, non-real estate loan, etc.) and by our internal risk rating.

Our internal credit ratings consider several factors including the collateral and/or security, the performance of borrowers underlying facilities, if applicable, available credit support (e.g., guarantees), borrowings with third parties, and other ancillary business ventures and real estate operations of the borrower.

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Our model’s historic inputs consider PD and LGD data for residential care facilities published by the Federal Housing Administration along with Standards & Poor’s one-year global corporate default rates.

Our historical loss rates revert to historical averages after 36 periods.

Our historical loss rates revert to historical averages after 36 months.

Our model’s current conditions and supportable forecasts consider internal credit ratings, current and projected U.S.

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A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreements.

Our assessment of collectibility considers several factors, including, among other things, payment history, the financial strength of the borrower and any guarantors, historical operations and operating trends, current and future economic conditions, expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern) and the value of the underlying collateral of the agreement, if any.

Our assessment of collectibility considers several factors, including, among other things, payment history, the financial strength of the borrower and any guarantors, historical operations and operating trends, current and future economic conditions, expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern) and the fair value of the underlying collateral of the agreement, a Level 3 measurement, if any.

Consistent with this definition, all loans on non-accrual status may be deemed impaired.

To the extent circumstances improve and the risk of collectibility is diminished, we will return these loans to full accrual status.

When we identify a loan impairment, the loan is written down to the present value of the expected future cash flows.

In cases where expected future cash flows are not readily determinable, the loan is written down to the fair value of the underlying collateral.

We may base our valuation on a loan’s observable market price, if any, or the fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the sale of the collateral.

When we identify a loan impairment, the loan is written down to the present value of the expected future cash flows or to the fair value of the underlying collateral.

Financial instruments are charged off against the allowance for credit losses when collectibility is determined to be permanently impaired.

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We account for our investments in unconsolidated joint ventures using the equity method of accounting as we exercise significant influence, but do not control the entities.

Under the equity method of accounting, the net equity investments of the Company are reflected in the accompanying Consolidated Balance Sheets and the Company’s share of net income and comprehensive income from the joint ventures are included in the accompanying Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income, respectively.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investments in the unconsolidated joint ventures may be other-than-temporarily-impaired.

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We consider a number of assumptions that are subject to economic and market uncertainties including, among others, rental rates, operating costs, capitalization rates, holding periods and discount rates.

No impairment losses on our investments in unconsolidated joint ventures were recognized during the years ended December 31, 2021, 2020 and 2019.

No impairment losses on our investments in unconsolidated joint ventures were recognized for the last three fiscal years.

Cash and Cash Equivalents

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Security deposits related to cash received from the operators are primarily recorded in cash and cash equivalents on our Consolidated Balance Sheets with a corresponding offset in accrued expenses and other liabilities on our Consolidated Balance Sheets.

Additional security for rental and mortgage interest revenue from operators is provided by covenants regarding minimum working capital and net worth, liens on accounts receivable and other operating assets of the operators, provisions for cross-default, provisions for cross-collateralization and by corporate or personal guarantees.

Additional security for rental and loan interest revenue from operators is provided by covenants regarding minimum working capital and net worth, liens on accounts receivable and other operating assets of the operators, provisions for cross-default, provisions for cross-collateralization and by corporate or personal guarantees.

OMEGA HEALTHCARE INVESTORS, INC.

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Omega and its wholly-owned subsidiaries were organized to qualify for taxation as a REIT under Section 856 through 860 of the Internal Revenue Code (“Code”).

As long as we qualify as a REIT;

we will not be subject to federal income taxes on the REIT taxable income that we distributed to stockholders, subject to certain exceptions.

As long as we qualify as a REIT, we will not be subject to federal income taxes on the REIT taxable income that we distributed to stockholders, subject to certain exceptions.

However, with respect to certain of our subsidiaries that have elected to be treated as taxable REIT subsidiaries (“TRSs”), we record income tax expense or benefit, as those entities are subject to federal income tax similar to regular corporations.

Omega OP is a pass-through entity for United States federal income tax purposes.

Omega OP is a pass-through entity for U.S.

federal income tax purposes.

We account for deferred income taxes using the asset and liability method and recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns.

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All premiums and discounts are recorded as an addition to or reduction from debt on our Consolidated Balance Sheets.

Amortization of deferred financing costs and original issuance premiums or discounts totaled $ 12.3 million, $ 10.1 million and $ 9.6 million in 2021, 2020 and 2019, respectively, and are recorded in interest expense on our Consolidated Statements of Operations.

Amortization of deferred financing costs and original issuance premiums or discounts totaled $ 12.9 million, $ 12.3 million and $ 10.1 million for the years ended December 31, 2022, 2021 and 2020, respectively, and are recorded in interest expense on our Consolidated Statements of Operations.

When financings are terminated, unamortized deferred financing costs and unamortized premiums or discounts, as well as charges incurred for the termination, are recognized as expense or income at the time the termination is made.

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For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into the USD.

We translate assets and liabilities at the exchange rate in effect as of the financial statement date.

Revenue and expense accounts are translated using an average exchange rate for the period.

We translate the balance sheet accounts at the exchange rate in effect as of the financial statement date.

The income statement accounts are translated using an average exchange rate for the period.

Gains and losses resulting from translation are included in accumulated other comprehensive income (loss) (“AOCI”), as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

1 unchanged sentence

When the debt is remeasured against the functional currency of the entity, a gain or loss can result.

The resulting adjustment is reflected in results of operations, unless it is intercompany debt that is deemed to be long-term in nature in which case the adjustments are included in AOCI and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

The resulting adjustment is reflected in results of operations within other expense - net, unless it is intercompany debt that is deemed to be long-term in nature in which case the adjustments are included in AOCI and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

Derivative Instruments

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The Company recognizes all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities on the Consolidated Balance Sheets at fair value which is determined using a market approach and Level 2 inputs.

Changes in the fair value of derivative instruments that are not designated in hedging relationships or that do not meet the criteria of hedge accounting are recognized in earnings.

Changes in the fair value of derivative instruments that are not designated in hedging relationships or that do not meet the criteria of hedge accounting are recognized in the Consolidated Statements of Operations.

For derivatives designated in qualifying cash flow hedging relationships, the gain or loss on the derivative is recognized in AOCI as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interest, if applicable.

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For net investment hedge accounting, upon sale or liquidation of our U.K.

investment, the cumulative balance of the remeasurement value is reclassified to earnings.

investment, the cumulative balance of the remeasurement value is reclassified to the Consolidated Statements of Operations.

We conduct our operations and report financial results as one business segment.

The presentation of financial results as one reportable segment is consistent with the way we operate our business and is consistent with the manner in which our Chief Operating Decision Maker (CODM), our Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business.

Reclassification

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

Reclassifications

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

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Effective for the fourth quarter of 2022, Mortgage notes receivable - net has been renamed Real estate loans receivable - net, Other investments - net has been renamed Non-real estate loans receivable - net, and certain loans have been reclassified out of Other Investments - net into Real estate loans receivable - net.

Specifically, other real estate loans collateralized by second or third mortgage liens, a leasehold mortgage on, or an assignment of partnership interest in the related properties that were previously presented in Other Investments - net are now presented in Real estate loans receivable - net.

See the table below for the prior presentation compared to the current presentation.

Prior Presentation

Current Presentation

December 31, 2021

(in thousands)

Mortgage notes receivable, gross

Allowance for credit losses on mortgage notes receivable

Mortgage notes receivable – net

Mortgage notes receivable, net

Leasehold mortgages and other real estate loans, gross

Allowance for credit losses on leasehold mortgages and other real estate loans

Other investments, gross

Leasehold mortgages and other real estate loans – net

Allowance for credit losses on other investments

Real estate loans receivable – net

Other investments – net

Non-real estate loans receivable, gross

Allowance for credit losses on non-real estate loans receivable

Non-real estate loans receivable – net

We previously reported assets held for sale of $ 261.2 million on the Consolidated Balance Sheet as of December 31, 2021.

$ 58.1 million of these assets no longer qualify as held for sale and have been reclassified to assets held for use within the applicable line items in real estate assets – net on the Consolidated Balance Sheet as of December 31, 2021.

See further discussion on the held for sale reclassification in Note 4 – Assets Held for Sale.

Recently Adopted Accounting Pronouncements

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The adoption of the guidance did not have an impact on our consolidated financial statements.

ASU – 2022-02, Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures

On March 31, 2022, the FASB issued ASU 2022-02, which eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) and requires additional disclosures for certain loan modifications.

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

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

During 2022, we had three loan modifications with two borrowers experiencing financial difficulty pursuant to ASU 2022-02, Guardian Healthcare (“Guardian”) and LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care), that require additional disclosures.

The required disclosures for these loans are included in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, Note 7 – Real Estate Loans Receivable and Note 8 – Non-real Estate Loans Receivable.

We have disclosed our gross write-offs of financing receivables and direct financing leases by year of origination in Note 9 – Allowance for Credit Losses.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

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

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The guidance may be elected over time until December 31, 2022, as reference rate reform activities occur.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which extended the practical expedients under ASU 2020-04 to December 31, 2024.

The Company has several derivative instruments (See Note 15 – Derivatives and Hedging), a $ 1.45 billion senior unsecured multicurrency revolving credit facility, and a $ 50 million senior unsecured term loan facility (See Note 14 – Borrowing Arrangements) that reference LIBOR.

We also have a $ 25.0 million senior secured DIP facility loan with an operator that references LIBOR (See Note 8 – Other Investments), but it matures in 2022 prior to LIBOR being discontinued.

During the first quarter of 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Beginning in the first quarter of 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

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The Company is evaluating:

(i) how the transition away from LIBOR will impact the Company, (ii) whether the 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.

(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.

ASU – 2016-13, Financial Instruments - Credit Losses (Topic 326)

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We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach and we recorded an initial $ 28.8 million allowance for expected credit losses with a corresponding adjustment to equity.

Included below is a summary of impact of the adoption on our Consolidated Balance Sheets.

Pre-adoption balance as of

Impact of adopting

Post-adoption balance as of

Financial Statement Line Item

December 31, 2019

January 1, 2020

(in thousands)

Mortgage notes receivable - net

Investment in direct financing leases - net

Other investments - net

Off-balance sheet commitments

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

ASU – 2016-02, Leases (Topic 842)

On January 1, 2019, we adopted ASC 842, Leases (“Topic 842”) using the modified retrospective method.

Topic 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

At the inception of a lease and over its term, we evaluate each lease to determine the proper lease classification.

Certain of these leases provide our operators or us the contractual right to use and economically benefit from all of the physical space specified in the lease, therefore we have determined that they should be evaluated as lease arrangements.

Upon adoption of Topic 842, we applied the package of practical expedients that allowed us to not reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases and (iii) initial direct costs for any expired or existing leases.

Furthermore, we applied the optional transition method, which allowed us to initially apply Topic 842 at the adoption date and recognize a cumulative effect adjustment to the opening balance of equity in the period of adoption.

During the year ended December 31, 2019, we made an adjustment of approximately $ 8.5 million to the equity balance to reflect our assessment of the collectibility of certain operator’s future contractual lease payments based on the facts and circumstances that existed as of January 1, 2019.

In addition, we recorded total initial non-cash ROU assets and lease liabilities of approximately $ 11.1 million.

NOTE 3 – REAL ESTATE ACQUISITIONS

NOTE 3 – REAL ESTATE ASSET ACQUISITIONS AND DEVELOPMENT

2022 Acquisitions

The following table summarizes the significant asset acquisitions that occurred in 2022:

Total Real Estate

Assets Acquired

Country/State

(in millions)

Cash Yield (1)

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

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

acquisition and the 27 -facility U.K.

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

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

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

See Note 17 – Taxes for additional information.

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

(4) During the fourth quarter of 2022, we acquired seven facilities using a reverse like-kind exchange structure pursuant to Section 1031 of the Code (a “reverse 1031 exchange”).

As of December 31, 2022, we had completed the reverse 1031 exchange for three of the acquired facilities and the remaining four acquired facilities remained in the possession of the EATs.

The EATs were classified as VIEs as they do not have sufficient equity investment at risk to permit the entity to finance its activities.

The Company consolidated the EATs because it had the ability to control the activities that most significantly impacted the economic performance of the EATs and was, therefore, the primary beneficiary of the EATs.

The properties held by the EATs were reflected as real estate with a carrying value of $ 55.2 million as of December 31, 2022.

The EATs also held cash of $ 23.9 million as of December 31, 2022.

2021 Acquisitions and Other

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AZ, CA, FL, IL, NJ, OR, PA, TN, TX, VA, WA

(1) Excludes $ 10.6 million of land acquisitions, $ 58.6 million of non-cash acquisitions of facilities previously subject to mortgage loans with Omega in which principal amounts under the loan agreements were reduced or settled in exchange for title to the facilities (See Note 7 – Mortgage Notes Receivable), and $ 1.2 million of transaction costs incurred related to the non-cash acquisitions.

(1) Excludes $ 10.6 million of land acquisitions, $ 58.6 million of non-cash acquisitions of facilities previously subject to mortgage loans with Omega in which principal amounts under the loan agreements were reduced or settled in exchange for title to the facilities (See Note 7 – Real Estate Loans Receivable), and $ 1.2 million of transaction costs incurred related to the non-cash acquisitions.

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

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We recognized approximately $ 45.0 million of rental income for the year ended December 31, 2021 under this master lease, which includes 24 facilities representing 2,552 operating units.

Construction in progress investments

During the third quarter of 2021, we purchased a real estate property located in Washington, D.C.

(not reflected in the table above) for approximately $ 68.0 million and plan to redevelop the property into a 174 bed ALF.

Concurrent with the acquisition, we entered into a single facility lease for this property with Maplewood Senior Living (along with affiliates, “Maplewood”) through August 31, 2045.

For accounting purposes, the lease will commence upon the substantial completion of construction of the ALF, which is currently expected to be in the first quarter of 2025.

The lease provides for the accrual of financing costs at a rate of 5 % per annum during the construction phase.

The lease provides for an annual cash yield of 6 % in the first year following the completion of construction, increasing to 7 % in year two and 8 % in year three with 2.5 % annual escalators thereafter.

We are committed to a maximum funding of $ 177.7 million for the redevelopment of the real estate property, subject to ordinary development related cost changes (see Note 20 - Commitments and Contingencies).

OMEGA HEALTHCARE INVESTORS, INC.

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2020 Acquisitions

The following table summarizes the significant asset acquisitions that occurred in 2020:

Total Real Estate

Assets Acquired

Country/State

(in millions)

Cash Yield (1)

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

2019 Acquisitions and Other

The following table summarizes the significant transactions that occurred in 2020:

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Cash Yield (1)

CA, CT, IN, NV, SC, TN, TX

FL, ID, KY, LA, MS, MO, MT, NC

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

(2) The acquisition was accounted for as a business combination.

The other 2019 acquisitions were accounted for as asset acquisitions.

(3) Acquired via a deed-in-lieu of foreclosure.

Encore Portfolio Acquisition

On October 31, 2019, we completed the $ 757 million portfolio acquisition of 60 facilities (the “Encore Portfolio”).

Consideration consisted of approximately $ 369 million of cash and the assumption of approximately $ 389 million in mortgage loans guaranteed by HUD.

See Note 14 – Borrowing Arrangements for additional information.

The following table highlights the fair value of the assets acquired and liabilities assumed on October 31, 2019:

(in thousands)

Fair value of net assets acquired:

Real estate assets

Other investments

Contractual receivables

Total investments

Secured borrowings

Accrued expenses and other liabilities

Fair value of net assets acquired

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

MedEquities Merger

On May 17, 2019, we completed our acquisition by merger of MedEquities (the “MedEquities Merger”) and its subsidiary operating partnership and the general partner of its subsidiary operating partnership.

In connection with the MedEquities Merger, we issued approximately 7.5 million shares of Omega common stock and paid approximately $ 63.7 million of cash consideration to former MedEquities stockholders.

We borrowed approximately $ 350 million under our existing senior unsecured revolving credit facility to fund the cash consideration and the repayment of MedEquities’ previously outstanding debt.

As a result of the MedEquities Merger, we acquired 33 facilities subject to operating leases, four mortgages, three other investments and an investment in an unconsolidated joint venture.

We also acquired other assets and assumed debt and other liabilities.

Based on the closing price of our common stock on May 16, 2019, the fair value of the consideration exchanged approximated $ 346 million.

Our purchase price allocation was finalized during the second quarter of 2020, with no material adjustments recorded.

The following table highlights the final fair value of the assets acquired and liabilities assumed on May 17, 2019:

(in thousands)

Fair value of net assets acquired:

Real estate assets

Mortgage notes receivable

Other investments

Investment in unconsolidated joint venture

Contractual receivables

Other assets (1)

Total investments

Accrued expenses and other liabilities (3)

Fair value of net assets acquired

(1) Includes approximately $ 2.5 million in above market lease assets.

(2) In connection with the MedEquities Merger on May 17, 2019, we assumed a $ 125.0 million term loan and outstanding borrowings of $ 160.1 million under MedEquities’ previous revolving credit facility.

We repaid the total outstanding balance on both the term loan and the revolving credit facility and terminated the related agreements on May 17, 2019.

(3) Includes approximately $ 1.1 million in below market lease liabilities.

The MedEquities facilities acquired in 2019 are included in our results of operations from the date of acquisition.

For the period from May 17, 2019 through December 31, 2019, we recognized approximately $ 35.2 million of total revenue from the assets acquired in connection with the MedEquities Merger.

For the year ended December 31, 2019, we incurred approximately $ 5.1 million of acquisition and merger related costs associated with the MedEquities Merger.

Pro Forma Acquisition Results

The following unaudited pro forma information presents consolidated financial information as if the MedEquities Merger occurred on January 1, 2019.

In the opinion of management, all significant necessary adjustments to reflect the effect of the merger have been made.

The following pro forma information is not indicative of future operations.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Year Ended December 31, 2019

(in thousands, except per share amounts, unaudited)

Pro forma revenues

Pro forma net income

Earnings per share – diluted:

Net income – as reported

Net income – pro forma

Construction in progress and capital expenditure investments

We invested $ 64.4 million, $ 140.0 million and $ 106.2 million, respectively under our construction in progress and capital improvement programs during the years ended December 31, 2022, 2021 and 2020.

In the second quarter of 2021, we placed a $ 41.1 million construction project for a new build ALF in New Jersey into service and began recognizing revenue associated with this project in the third quarter of 2021.

The lease for this facility provides for an annual cash yield of 7 % of the amount funded in the first year following the completion of construction increasing to 8 % in year two with 2.5 % annual escalators thereafter.

During the third quarter of 2021, we purchased a real estate property located in Washington, D.C.

(not reflected in the table above) for approximately $ 68.0 million and plan to redevelop the property into a 174 bed ALF.

Concurrent with the acquisition, we entered into a single facility lease for this property with Maplewood Senior Living (along with affiliates, “Maplewood”) through August 31, 2045.

For accounting purposes, the lease will commence upon the substantial completion of construction of the ALF, which is currently expected to be in 2025.

The lease provides for the accrual of financing costs at a rate of 5 % per annum during the construction phase.

NOTE 4 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

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

In December 2021, we entered into an agreement to sell 22 facilities that were previously leased and operated by Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) for estimated gross proceeds of $ 317.5 million.

We elected to exit these facilities following Gulf Coast commencing the Chapter 11 bankruptcy process in October 2021, as discussed further in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements.

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 five years following the sale.

We reclassified the 22 facilities subject to the agreement to Assets held for sale in the fourth quarter of 2021.

As of February 7, 2022, the remaining 19 facilities in held for sale are all under sales agreements which provide for estimated gross proceeds of $ 88.8 million, subject to terms and conditions of such agreements.

We periodically sell facilities to reduce our concentration in certain operators, geographies and non-strategic assets or due to the exercise of a tenant purchase option.

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

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Amount of assets held for sale (in thousands)

In the fourth quarter of 2022, we reclassified 13 facilities with aggregate net book values of $ 58.1 million, from assets held for sale to assets held for use within the applicable line items in real estate assets – net.

Of the $ 58.1 million reclassified net of $ 20.8 million of accumulated depreciation, $ 67.5 million relates to buildings, $ 2.8 million relates to land and $ 8.6 relates to furniture and equipment.

We originally reclassified these facilities as held for sale in the fourth quarter of 2021, but we no longer believe these facilities qualify as assets held for sale.

We recorded a $ 3.2 million cumulative catch-up adjustment to depreciation and amortization expense related to these facilities concurrent with the reclassification in the fourth quarter of 2022.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

One of the two facilities that were classified as held for sale as of December 31, 2022 was subsequently sold during the first quarter of 2023 for gross cash proceeds of $ 19.5 million.

2022 Activity

During the year ended December 31, 2022, we sold 66 facilities subject to operating leases for approximately $ 759.0 million in net cash proceeds, recognizing a net gain of approximately $ 360.0 million.

Our 2022 sales were primarily driven by restructuring transactions and negotiations related to our lease agreements with the following operators:

Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”), Guardian Healthcare (“Guardian”) and Agemo Holdings, LLC (“Agemo”).

In addition, during the fourth quarter of 2022, we sold 11 facilities previously leased to and operated by LaVie which did not meet the contract criteria to be recognized under ASC 610-20, further discussed below, and as such are not included in the amounts above.

In the first quarter of 2022, we sold 22 facilities that were previously leased and operated by Gulf Coast.

The net cash proceeds from the sale, including related costs accrued for as of the end of the fourth quarter, were $ 304.9 million, and we recognized a net gain of $ 114.5 million.

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

During the first and second quarter of 2022, we sold nine total facilities that were leased to Guardian for $ 39.5 million in net proceeds, which resulted in a net gain of $ 13.7 million.

In the third and fourth quarter of 2022, we sold 22 facilities that were previously leased to Agemo for $ 358.7 million in net proceeds, which resulted in a net gain of $ 218.9 million.

In December 2022, in connection with restructuring negotiations with LaVie, we sold 11 facilities to a third party previously leased to LaVie for a sales price of $ 129.8 million.

Omega provided $ 104.8 million in senior seller financing, collateralized by first lien mortgages on the 11 facilities, to fund a portion of the purchase price.

The senior note has a December 29, 2027 maturity date and bears interest at 8 % with required monthly interest payments (due in arrears beginning February 1, 2023), with no principal payments due until the maturity date.

The remaining consideration received under the purchase agreement is the assumption of a $ 25.0 million liability by the buyer from Omega.

The 11-facility sale does not meet the contract criteria to be recognized under ASC 610-20 and we will continue to account for these facilities on our Consolidated Balance Sheets and depreciate the facilities until the recognition requirements under ASC 610-20 are met.

A contract liability was recorded and related expense of $ 25.0 million was recognized on our Consolidated Balance Sheets within accrued expenses and other liabilities and Consolidated Statements of Operations within acquisition, merger and transition costs, respectively.

The liability will be relieved once the sale is recognized.

The loan receivable associated with the seller financing will not be recorded on our Consolidated Balance Sheets until the sale is recognized, and any cash interest received will be deferred and recorded as a contract liability within accrued expenses and other liabilities on our Consolidated Balance Sheets.

2021 Activity

During the year ended December 31, 2021, we sold 48 facilities for approximately $ 318.5 million in net cash proceeds, recognizing a net gain of approximately $ 161.6 million.

2020 Activity

During the year ended December 31, 2020, we sold 43 facilities for approximately $ 180.9 million in net cash proceeds, recognizing a net gain of approximately $ 19.1 million.

Real Estate Impairments

During the year ended December 31, 2021, we recorded impairments of approximately $ 44.7 million on 14 facilities which were sold or classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Real Estate Impairments

2022 Activity

During the year ended December 31, 2022, we recorded impairments of approximately $ 38.5 million on 22 facilities.

Of the $ 38.5 million, $ 3.5 million related to two facilities that were classified as held for sale (and subsequently sold) for which the carrying values exceeded the estimated fair values less costs to sell, and $ 35.0 million related to 20 held-for-use facilities for which the carrying value exceeded the fair value, of which $ 17.2 million relates to 12 facilities leased to and operated by LaVie that are expected to be impacted by the on-going restructuring negotiations.

$ 10.0 million of the 2022 impairments recorded on four held-for-use facilities relate to the 2.0 % Operator discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements.

2021 Activity

Additionally, during the year ended December 31, 2020, we recorded an impairment of approximately $ 34.5 million on 11 held for use facilities for which it was determined that the carrying value exceeded the fair value.

The $ 34.5 million relates to facilities subject to a lease with Daybreak Ventures, LLC (“Daybreak”) (see Note 5 – Contractual Receivables and Other Receivables and Lease Inducements), which were planned for resale or transitioned to another existing operator and it was determined that the new cash flows were not sufficient to support the carrying value of the facility.

2020 Activity

During the year ended December 31, 2020, we recorded impairments of approximately $ 76.0 million on 25 facilities.

Our impairments were offset by approximately $ 3.5 million of insurance proceeds received related to a facility that was previously destroyed and impaired.

During the year ended December 31, 2019, we recorded impairments of approximately $ 14.5 million on 9 facilities which were sold or classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell.

Additionally, during the year ended December 31, 2019, we recorded an impairment of approximately $ 34.5 million on 13 held for use facilities for which it was determined that the carrying value exceeded the fair value.

Of the $ 34.5 million, the $ 28.3 million relates to 11 facilities subject to a lease with Daybreak which were planned for resale or transitioned to another existing operator and it was determined that the new cash flows were not sufficient to support the carrying value of the facility.

Our impairments were offset by approximately $ 3.7 million of insurance proceeds received related to two facilities that were previously destroyed and impaired.

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

Of the $ 76.0 million, $ 41.5 million related to 14 facilities which were sold or classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell, and $ 34.5 million related to 11 held-for-use facilities for which it was determined that the carrying value exceeded the fair value.

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

NOTE 5 – CONTRACTUAL RECEIVABLES AND OTHER RECEIVABLES AND LEASE INDUCEMENTS

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Other receivables and lease inducements

Agemo Holdings, LLC

From August 2021 through October 2021 and in December 2021, Agemo Holdings, LLC (“Agemo”), failed to pay contractual rent and interest due under their lease and loan agreements, but paid rent and interest in November 2021.

Agemo was formed in May 2018 by Signature Healthcare, LLC, as part of an out-of-court restructuring agreement, to be the holding company of their leases and loans with Omega.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

We placed Agemo on a cash basis of revenue recognition during the third quarter of 2020 as collection of substantially all contractual lease payments due from them was deemed no longer probable because of information received regarding substantial doubt of their ability to continue as a going concern.

As a result, we wrote-off approximately $ 75.3 million of contractual rent receivables, straight-line rent receivables, and lease inducements to rental income during the third quarter of 2020.

Agemo continued to make their rental and interest payments to us until August 2021.

During the third and fourth quarters of 2021, we recorded $ 8.7 million of revenue by collecting rental and interest payments and we recorded $ 8.5 million of revenue by drawing on the letter of credit and through application of the security deposit balance.

See Note 8 – Other Investments for additional details on our loans with Agemo.

Cash basis operators and straight-line receivable write-offs

We review our collectibility assumptions related to our operator leases on an ongoing basis.

During the years ended December 31, 2022, 2021 and 2020, we placed nine , six and four additional operators on a cash basis of revenue recognition, respectively, as collection of substantially all contractual lease payments due from them was no longer deemed probable.

In connection with placing these operators on a cash basis, we recognized $ 119.8 million, $ 36.0 million and $ 129.5 million in total straight-line accounts receivable and lease inducement write-offs through rental income during the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, we had 20 operators on a cash basis for revenue recognition, which represent 36.5 %, 39.2 % and 41.5 % of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2021, we had 14 operators on a cash basis for revenue recognition, which represent 18.6 % and 22.7 % of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2021 and 2020, respectively.

During the years ended December 31, 2022, 2021 and 2020, we also wrote-off $ 3.2 million, $ 1.3 million and $ 3.6 million of straight-line rent receivable balances through rental income as a result of transitioning facilities between existing operators.

Operator updates

Agemo was formed in May 2018 by Signature Healthcare, LLC, as part of an out-of-court restructuring agreement, to be the holding company of their leases and loans with Omega.

As part of that restructuring agreement, we agreed to, among other things, allow for the deferral of $ 6.3 million of rent per annum for a 3-year period (the “Agemo Rent Deferral”).

We placed Agemo on a cash basis of revenue recognition during the third quarter of 2020 as we received information regarding substantial doubt of their ability to continue as a going concern.

As a result, we wrote-off approximately $ 13.4 million of contractual rent receivables and $ 61.9 million of straight-line rent receivables and lease inducements.

Agemo continued to make their rental and interest payments to us until July 2021.

After July 2021, Agemo made one month of contractual rent and interest payments for the remainder of fiscal year 2021.

During the third and fourth quarters of 2021, we recorded $ 8.7 million of revenue by collecting rental and interest payments and we recorded $ 8.5 million of revenue by drawing on a letter of credit and through application of collateral held by Omega.

On September 30, 2021, the Company entered into a forbearance agreement related to Agemo’s defaults under its lease and loan agreements (the “Agemo Forbearance Agreement”), which was amended to extend the forbearance period through January 2022 and the lease agreement was amended to extend the Agemo Rent Deferral through January 2022.

Agemo continued to not pay contractual rent and interest due under its lease and loan agreements during the year ended December 31, 2022.

No rental income was recorded related to Agemo during the year ended December 31, 2022.

Additionally, no interest income was recognized during the year ended December 31, 2022 on the two loans with Agemo because these loans are on non-accrual status and we are utilizing the cost recovery method, under which any payments, if received, are applied against the principal amount.

See Note 8 – Non-real Estate Loans Receivable for additional details on our loans with Agemo.

For the years ended December 31, 2021 and 2020, Agemo generated approximately 3.9 % and 5.6 %, respectively, of our total revenues (excluding the impact of write-offs).

As part of the 2018 restructuring agreement with Agemo discussed above, Omega agreed to, among other terms, defer rent of $ 6.3 million per annum through April 2021.

During the year ended December 31, 2021, the Agemo lease was amended to allow for the extension of the rent deferral through January 2022, which represents an additional deferral of approximately $ 4.7 million of rent.

Additionally, during the year ended December 31, 2021, we entered into a forbearance agreement with Agemo pursuant to which we agreed to forbear from exercising remedies under our lease and loan agreements until January 31, 2022.

The forbearance period and rent deferral period were subsequently extended to February 28, 2022.

Guardian Healthcare

From October 2021 through December 2021, Guardian Healthcare (“Guardian”) failed to make contractual rent and interest payments under its lease agreement for 26 operating facilities and on its $ 112.5 million mortgage loan agreement, bearing interest at 10.81 %, for nine facilities, due to ongoing liquidity issues.

The Company is currently in on-going negotiations to restructure and amend Guardian’s lease and loan agreements.

As part of the restructuring negotiations, on December 30, 2021, we acquired 2 facilities, previously subject to the Guardian mortgage loan, in consideration for a reduction of $ 8.7 million in the mortgage principal and added the facilities to the master lease agreement.

Subsequent to year end, in February 2022, we completed additional restructuring activities related to Guardian, including selling and re-leasing certain facilities as discussed further in Note 23 – Subsequent Events.

As a result of Guardian’s non-payment of contractual rent and the anticipated restructuring noted above, in the fourth quarter of 2021, we placed Guardian on a cash basis of revenue recognition and wrote-off approximately $ 14.0 million of straight-line rent receivables and lease inducements through rental income.

As of December 31, 2021, 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 7 – Mortgage Notes Receivable for additional details on our mortgage with Guardian.

Guardian represents approximately 2.5 %, 3.5 % and 3.8 % of our total revenues (excluding the impact of straight-line write-offs) for the years ended December 31, 2021, 2020 and 2019, respectively.

The Agemo Forbearance Agreement has been amended multiple times throughout 2022 and the most recent 2022 amendment on December 30, 2022 extended the forbearance period through January 31, 2023 .

In 2022, the Agemo Rent Deferral period was also extended multiple times, and the most recent amendment extended the deferral through April 2022, after which time the deferral period terminated, with the Company remaining subject to the Agemo Forbearance Agreement through January 31, 2023.

As of December 31, 2022, the aggregate rent deferred under the Agemo lease agreement was $ 25.2 million.

As discussed in Note 4 – Assets Held for Sale, Dispositions and Impairments, we sold 22 facilities, subject to the Agemo lease agreement, during 2022.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

In the first quarter of 2023, Omega and Agemo entered into a restructuring agreement, an amended and restated master lease and a replacement loan agreement for two replacement loans.

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

● Forgive and release Agemo from previously written off past due rent and interest obligations related to certain periods prior to the 2018 Restructuring and from August 2021 through January 2023, with contractual rent under the lease agreement and contractual interest under the loan agreements scheduled to resume on April 1, 2023;

● reduce monthly contractual base rent from $ 4.8 million to $ 1.9 million following the sales of the 22 facilities, previously leased and operated by Agemo, that occurred in the third and fourth quarters of 2022 (See Note 4 – Assets Held For Sale, Dispositions and Impairments);

● extend the initial Agemo lease term from December 31, 2030 , to December 31, 2036 with three consecutive tenant 10-year extension options;

● refinance and restructure the $ 25.0 million secured working capital loan (the “Agemo WC Loan”), the $ 32.0 million term loan (the “Agemo Term Loan”) and the aggregate deferred rent balance of $ 25.2 million into two replacement loans to Agemo that mature on December 31, 2036, with aggregate principal of $ 82.2 million and an annual interest rate of 5.71 % .

Guardian did not make rent and interest payments under its lease and mortgage loan agreements during the fourth quarter of 2021.

As a result of Guardian’s non-payment of contractual rent and the anticipated restructuring of its agreements, in the fourth quarter of 2021, we placed Guardian on a cash basis of revenue recognition and wrote-off approximately $ 14.0 million of straight-line rent receivables and lease inducements through rental income.

In the fourth quarter of 2021, we began negotiations to restructure Guardian’s lease and loan agreements.

In connection with the restructuring negotiations, on December 30, 2021, we acquired 2 facilities, previously subject to the Guardian mortgage loan, in consideration for a reduction of $ 8.7 million in the mortgage principal and added the facilities to the master lease agreement.

Guardian continued to not pay contractual rent and interest due under its lease and mortgage loan agreements during the first quarter of 2022.

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

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

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

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

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

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

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

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

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Following the execution of the restructuring agreement, Guardian resumed paying contractual rent and interest during the second quarter of 2022 and continued such payments in the third and fourth quarters of 2022, in accordance with the restructuring terms.

For the year ended December 31, 2022, we recorded rental income of $ 11.3 million for the contractual rent payments that were received.

Additionally, as discussed further in Note 7 – Real Estate Loans Receivable, no mortgage interest income has been recognized on the Guardian mortgage loan during the year ended December 31, 2022, as we are accounting for this loan under the cost recovery method.

Revenue from Guardian represents approximately 1.1 %, 2.5 % and 3.5 % of our total revenues (excluding the impact of straight-line write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, we have $ 7.4 million of letters of credit from Guardian as collateral.

In the fourth quarter of 2022, Omega began the process of restructuring our portfolio with LaVie, which primarily consists of two master lease agreements and two term loan agreements.

On December 30, 2022, we sold 11 facilities previously subject to one of the two leases agreements with LaVie.

See further discussion on the sale and the accounting treatment in Note 4 -Assets Held For Sale, Dispositions and Impairments.

Concurrent with the sale, we also amended the lease agreement impacted by the sale and our loan agreements with LaVie.

The amendments to the loan agreements are discussed in Note 8 – Non-Real Estate Loans.

With the lease amendment and other related documents, Omega and LaVie agreed to, among other terms:

● Remove the 11 sold facilities from the lease agreement and reduce monthly contractual rent due under all agreements from $ 8.3 million to $ 7.3 million;

● provide Omega the ability to enact a one-time rent reset on one of the lease agreements, if LaVie’s coverage exceeds a threshold, after February 1, 2027;

● require Omega to pay LaVie a $ 35.0 million termination fee in connection with transitioning the 11 facilities sold in the fourth quarter and the additional facilities sold in the restructure ( $ 25.0 million was assumed by the third-party buyer of the 11 facilities).

The restructuring discussions are still ongoing and subject to change, but we anticipate additional restructuring activity related to this operator in 2023.

As a result of the restructuring activities during 2022 and future expected restructuring activities, during the fourth quarter of 2022, we placed LaVie on a cash basis of revenue recognition and wrote-off approximately $ 58.0 million of straight-line rent receivables and lease inducements.

Revenue from LaVie represents approximately 11.1 %, 9.5 % and 9.4 % of our total revenues (excluding the impact of straight-line write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively.

In the first quarter of 2023, as part of the restructuring, we have agreed to a partial rent deferral in the first four months of 2023.

In doing so, we agreed to allow LaVie to defer up to $ 10.0 million of contractual rent from January 2023 through April 2023 under one of our lease agreements for 32 facilities.

Omega is in discussions to allow LaVie to defer up to $ 9.1 million of contractual rent from January 2023 through April 2023 under another lease agreement for 41 facilities.

In January 2023, as a result, LaVie deferred the full contractual payment of $ 2.5 million under the 32-facility lease and paid $ 2.5 million of the $ 4.7 million of contractual rent due under the 41-facility lease.

During the year ended December 31, 2020, we received a one-time rent payment of approximately $ 55.4 million from Maplewood, in conjunction with the restructuring of its master lease and loans with Omega (see Note 8 – Non-real Estate Loans Receivable).

This payment was accounted for as an adjustment to straight-line rent receivables and was being amortized over the remaining term of the master lease prior to Maplewood being placed on a cash basis of revenue recognition in the fourth quarter of 2022.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

During the fourth quarter of 2022, Omega began discussions with Maplewood to restructure their portfolio, which includes a lease agreement and $ 250.5 million revolving credit facility.

During the fourth quarter of 2022, we placed Maplewood on a cash basis of revenue recognition and wrote-off approximately $ 29.3 million of straight-line rent receivables and lease inducements.

Revenue from Maplewood represents approximately 8.9 %, 7.9 % and 5.3 % of our total revenues (excluding the impact of straight-line write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively.

In the first quarter of 2023, we agreed to a formal restructuring agreement, master lease amendments and loan amendments with Maplewood.

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

● Extend the maturity date of the master lease from December 2033 to December 2037 with two consecutive 5-year tenant extension options;

● fix contractual rent at $ 69.3 million per annum (December 2022 rent annualized) and defer the 2.5 % annual escalators under our lease agreement through December 31, 2025, with mandatory repayments to be made subject to certain metrics and due in full by the maturity date;

● fund $ 22.5 million of capital expenditures through December 31, 2025;

● extend the maturity date of the secured revolving credit facility from June 2030 to June 2035 with one borrower 2-year extension option;

● increase the capacity of the secured revolving credit facility from $ 250.5 million to $ 320.0 million, inclusive of payment-in-kind (“PIK”) interest applied to principal ;

● convert the 7 % per annum cash interest due on the secured revolving credit facility to all PIK interest in 2023, 1 % cash interest and 6 % PIK interest in 2024, 4 % cash interest and 3 % PIK interest in 2025 and through the maturity date;

● reduce Maplewood’s share of any future potential sales proceeds (in excess of our gross investment) by the unpaid deferred rent balance and the $ 22.5 million of capital expenditures.

During the second quarter of 2021, Gulf Coast stopped paying contractual rent under its master lease agreement because of on-going liquidity issues.

Gulf Coast operates 24 facilities subject to a master lease with Omega and represents approximately 3.3 %, 2.8 % and 2.7 % of Omega’s total revenues (excluding the impact of write-offs) for the years ended December 31, 2021, 2020 and 2019, respectively.

Gulf Coast operated 24 facilities subject to a master lease with Omega and represented approximately 3.3 % and 2.8 % of Omega’s total revenues (excluding the impact of write-offs) for the years ended December 31, 2021 and 2020, respectively.

OMEGA HEALTHCARE INVESTORS, INC.

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Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

The payment of our accelerated rent will be subject to the Bankruptcy Code and approval of the bankruptcy court in Gulf Coast’s Chapter 11 cases.

As described in Gulf Coast’s filings with the Bankruptcy Court, we have entered into a Restructuring Support Agreement (the “Support Agreement”) that forms the basis for Gulf Coast’s intended restructuring and liquidation.

The Support Agreement establishes a timeline for the implementation of Gulf Coast’s planned restructuring and liquidation, including the transition of management of the operations of the facilities to a third-party operator.

As part of the Support Agreement, we committed to provide up to $ 25 million of senior secured debtor-in-possession (“DIP”) financing to Gulf Coast, which is discussed in further detail in Note 8 – Other Investments.

In November 2021, Gulf Coast entered into management and operations transfer agreements (“MOTAs”) with a new manager (“New Manager”), pursuant to which the management of 23 of the 24 facilities subject to the master lease with Omega would be performed by New Manager during an interim period until the license for the facilities subject to the MOTAs could be obtained by a new operator (“New Operator”).

During the interim period, no rent is being paid by Gulf Coast, and we have provided a $ 20 million working capital loan to New Manager, discussed in further detail in Note 8 – Other Investments.

As described in Gulf Coast’s filings with the Bankruptcy Court, we entered into a Restructuring Support Agreement (the “Support Agreement”) that forms the basis for Gulf Coast’s restructuring and liquidation.

The Support Agreement established a timeline for the implementation of Gulf Coast’s restructuring and liquidation, including the transition of management of the operations of the facilities to a third-party operator.

In November 2021, Gulf Coast entered into management and operations transfer agreements (“MOTAs”) with a new manager (“New Manager”), pursuant to which the management of 23 of the 24 facilities subject to the master lease with Omega were performed by New Manager during an interim period until the license for the facilities subject to the MOTAs could be obtained by a new operator (“New Operator”).

During the interim period, no rent was being paid by Gulf Coast, and we have provided a $ 20 million working capital loan to New Manager, discussed in further detail in Note 8 – Non-real Estate Loans Receivable.

The Bankruptcy Court approved the MOTAs on November 24, 2021 and the operations were transitioned effective December 1, 2021.

On June 27, 2022, the Bankruptcy Court entered its order confirming Gulf Coast’s bankruptcy plan which provided for, among other things, an allowed claim of $ 49.0 million in relation to the accelerated rent due under Gulf Coast’s master lease agreement.

Payment of the allowed claim has been redirected, with Omega’s approval, under the Plan to Gulf Coast’s unsecured creditors.

As a result of Gulf Coast’s non-payment of contractual rent, in the second quarter of 2021, we placed Gulf Coast on a cash basis of revenue recognition and wrote-off straight-line rent receivable balances of $ 17.4 million through rental income.

Subsequent to placing Gulf Coast on a cash basis of revenue recognition in June 2021, we recognized $ 24.6 million of rental income over the remaining period of 2021, based on our ability to offset any uncollected rent receivables against Gulf Coast’s security deposit and against certain debt obligations of Omega, as discussed further below.

We held a security deposit of $ 3.3 million from Gulf Coast, which we have applied against Gulf Coast’s obligations in the second and third quarters of 2021.

We held a security deposit of $ 3.3 million from Gulf Coast, which we applied against Gulf Coast’s obligations in the second and third quarters of 2021.

In relation to Gulf Coast, a subsidiary of Omega (“Omega Obligor”) is the obligor on five notes due to third parties with aggregate outstanding principal of $ 20.0 million (collectively, the “Subordinated Debt”) that bear interest at 9 % per annum with a maturity date of December 21, 2021 (see Note 14 – Borrowing Activities and Arrangements).

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Following the application of these offsets, Omega has no further obligations under the Subordinated Debt.

In August 2021, following an assertion by the holders of the Subordinated Debt that our prior exercise of offset rights had resulted in defaults under the terms of the Subordinated Debt, we also filed suit in the Circuit Court for Baltimore County against the holders of the Subordinated Debt seeking a declaratory judgment to, among other items, declare that the aggregate amount of unpaid rent due from Gulf Coast under the master lease agreement exceeds all amounts which otherwise would be due and owing by Omega Obligor under the Subordinated Debt, and that all principal and interest due and owing under the Subordinated Debt may be (and was) offset in full as of December 31, 2021.

In October 2021, the defendants in the case filed a motion to dismiss for lack of personal jurisdiction.

While Omega believes that Omega Obligor is entitled to the enforcement of the offset rights sought in the action, the outcome of litigation is unpredictable, and Omega cannot predict the outcome of the declaratory judgment action.

See Note 20 – Commitments and Contingencies for additional discussion regarding an ongoing lawsuit related to the Subordinated Debt.

As discussed in Note 4 – Assets Held For Sale, Dispositions and Impairments, we sold 22 facilities that were previously leased and operated by Gulf Coast in the first quarter of 2022.

We transitioned one facility that was previously leased and operated by Gulf Coast to another operator in the second quarter of 2022.

Daybreak previously leased and operated 58 facilities from Omega.

During the third quarter of 2017, we placed Daybreak on a cash basis for revenue recognition as a result of nonpayment of funds owed to us.

During the fourth quarter of 2017, we executed a Settlement and Forbearance Agreement with Daybreak which permitted Daybreak to defer payments up to 23 % of their contractual rent until January 2018, subject to certain conditions.

During the fourth quarter of 2018, Daybreak was no longer in compliance with the 2017 Settlement and Forbearance Agreement.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

On January 30, 2019, we entered into a Second Amendment to the Settlement and Forbearance Agreement under which we agreed to defer approximately $ 4.2 million of rent in the fourth quarter of 2018 and approximately $ 2.5 million (or approximately one month’s rent) in each of the first two quarters of 2019.

Except for $ 1.1 million in required real estate tax escrows, Daybreak met their contractual payment obligations through the second quarter of 2019;

however, during the second half of 2019, Daybreak did not meet their full contractual payment obligations to us as we received approximately $ 1.3 million of cash rent.

During 2020, as part of our plan to transition and sell our Daybreak facilities, we transitioned 31 Daybreak facilities to existing operators.

We elected to terminate our relationship with Daybreak and we transitioned 31 Daybreak facilities to existing operators during 2020.

The total annual contractual rent from the 31 transitioned facilities was approximately $ 12.4 million.

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The transition and sale of these facilities completed our exit from our relationship with Daybreak.

Other straight-line receivables and write-offs

In addition to the Guardian and Gulf Coast straight-line receivable write-offs in 2021 discussed above, we wrote-off straight-line rent receivable balances of $ 5.9 million through rental income in 2021 primarily due to placing four other operators ( one operator in the first quarter, two operators in the third quarter and one operator in the fourth quarter) on a cash basis of revenue recognition.

We determined that collection of substantially all contractual lease payments with these operators was no longer probable for various reasons.

The placement of an operator on a cash basis of revenue recognition during the first quarter was because the operator stopped paying contractual rent under our lease agreement.

The two operators placed on a cash basis of revenue recognition during the third quarter and the one operator placed on a cash basis of revenue recognition during the fourth quarter are current with rent payments as of December 31, 2021.

The four operators collectively represent approximately 0.8 %, 1.0 % and 1.0 %, respectively, of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2021, 2020 and 2019.

In addition to the write-off of Agemo’s contractual receivables, straight-line rent receivables, and lease inducements in the third quarter of 2020 discussed above, we wrote-off approximately $ 67.7 million of contractual receivables, straight-line rent receivables, and lease inducements through rental income in 2020 as a result of placing three operators (excluding Agemo discussed above) on a cash basis resulting from a change in our evaluation of the collectibility of future rent payments due under the respective lease agreements.

In part, our conclusions were based on information the Company received from these three operators during the third and fourth quarters of 2020 regarding substantial doubt as to their ability to continue as a going concern.

Of the $ 67.7 million, $ 64.9 million related to Genesis Healthcare, Inc.

(“Genesis”) and $ 2.8 million related to two other operators which lease five facilities from the Company.

During 2020, we also wrote-off approximately $ 3.6 million of straight-line rent receivables to rental income as a result of transitioning facilities to other existing operators.

In addition, during 2020, we received a one-time rent payment of approximately $ 55.4 million from Maplewood, in conjunction with the restructuring of its master lease and loans with Omega (see Note 8 – Other Investments).

This payment was accounted for as an adjustment to straight-line rent receivables and is being amortized over the remaining term of the master lease.

During 2019, we wrote-off approximately $ 11.1 million of contractual receivables, straight-line rent receivables and lease inducements to rental income, of which $ 9.9 million resulted from placing five operators on a cash basis of revenue recognition due to changes in our evaluation of the collectibility of future rent payments due under the respective lease agreements.

The remaining $ 1.2 million write-off of straight-line rent receivables to rental income resulted from transitioning a facility to another existing operator.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Genesis Healthcare, Inc.

During the year ended December 31, 2020, we wrote-off approximately $ 64.9 million of contractual receivables, straight-line rent receivables, and lease inducements through rental income in 2020 as a result of placing Genesis Healthcare, Inc.

(“Genesis”) on a cash basis based on information the Company received from Genesis during the third quarter of 2020 regarding substantial doubt as to their ability to continue as a going concern.

Genesis represents approximately 6.6 %, 5.9 % and 7.6 %, respectively, of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020.

Genesis continued to make their rental and interest payments to us during the years ended December 31, 2022, 2021 and 2020.

3.7 % Operator

From January through March 2022, an operator (the “3.7% Operator”) representing 3.7 %, 3.4 % and 3.1 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, did not pay its contractual amounts due under its lease agreement.

In March 2022, the lease with the 3.7 % Operator was amended to allow for a short-term rent deferral for January through March 2022.

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

The 3.7 % Operator paid the contractual amount due under its lease agreement from April 2022 through December 2022.

Omega holds a $ 1.0 million letter of credit and a $ 150 thousand security deposit from the 3.7 % Operator as collateral under its lease agreement.

The 3.7 % Operator remains on a straight-line basis of revenue recognition.

We have a revolving credit facility with the 3.7 % Operator, that was amended in the fourth quarter of 2022 to increase the capacity to $ 25.0 million, that is fully drawn as of December 31, 2022.

The credit facility is secured by a first lien on the accounts receivable of the 3.7 % Operator.

The 3.7 % Operator paid contractual interest under the facility from January through December 2022.

See Note 8 – Non-Real Estate Loans Receivable for additional details.

1.2 % Operator

In March 2022, an operator (the “1.2% Operator”), representing 1.2 %, 2.1 % and 2.5 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, did not pay its contractual amounts due under its lease agreement.

In April 2022, the lease with the 1.2 % Operator was amended to allow the operator to apply its $ 2.0 million security deposit toward payment of March 2022 rent and to allow for a short-term rent deferral for April 2022 with regular rent payments required to resume in May 2022.

The 1.2 % Operator paid contractual rent in May 2022, but it failed to pay the full contractual rent for June 2022 on a timely basis.

We placed the 1.2 % Operator on a cash basis of revenue recognition during the second quarter of 2022 and wrote-off approximately $ 8.3 million of straight-line rent receivables.

During the third and fourth quarters of 2022, the 1.2 % Operator made partial contractual rent payments totaling $ 4.0 million.

We are in discussions to sell or release to another operator a portion of the facilities included in the 1.2 % Operator’s master lease.

2.0 % Operator

In June 2022, an operator (the “2.0% Operator”), representing 2.0 %, 2.1 % and 2.2 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, short-paid the contractual rent amount due under its lease agreement by $ 0.6 million.

In July 2022, we drew the full $ 5.4 million letter of credit that was held as collateral from the 2.0 % Operator and applied $ 0.6 million of the proceeds to pay the unpaid portion of June 2022 rent.

In the third quarter of 2022, the 2.0 % Operator continued to short-pay the contractual amount due under its lease agreement.

As such, we applied $ 3.3 million of the remaining proceeds of the letter of credit to pay the unpaid portion of July, August and September 2022 rent.

We placed the 2.0 % Operator on a cash basis of revenue recognition during the third quarter of 2022 and wrote-off approximately $ 10.5 million of straight-line rent receivables and lease inducements.

In the fourth quarter of 2022, the 2.0 % Operator paid $ 2.2 million in contractual rent and we applied the remaining $ 1.5 million of collateral against the remaining unpaid rent.

As of February 1, 2023, we have transitioned 19 of the 23 facilities previously included in the 2.0 % Operator’s master lease to other operators and are in discussions to re-lease the remaining four facilities to another operator.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

0.4 % Operator

In June 2022, we placed an operator (the “0.4% Operator”), representing 0.4 %, 0.5 % and 0.6 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, on a cash basis of revenue recognition.

The change in our evaluation of the collectibility of future rent payments due from the 0.4 % Operator was a result of information received from the operator during the second quarter of 2022 regarding substantial doubt as to its ability to continue as a going concern.

As a result of placing the 0.4 % Operator on a cash basis, we wrote-off approximately $ 2.1 million of straight-line rent receivables through rental income.

For the year ended December 31, 2022, the 0.4 % Operator failed to pay four months of rent representing $ 2.0 million.

0.9 % Operator

In November and December 2022, an operator that was already on a cash basis of revenue recognition (the “0.9% Operator”), representing 0.9 %, 1.0 % and 1.0 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, did not pay its contractual amounts due under its lease and loan agreements.

Healthcare Homes Limited

In December 2022, we agreed to allow Healthcare Homes Limited (“Healthcare Homes”), a U.K.

based operator representing 2.9 %, 2.4 % and 2.3 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, the ability to defer up to £ 6.7 million of contractual rent from January 2023 through April 2023 with regular payments required to resume in May 2023.

The deferred rent balance accrues interest monthly at a rate of 8 % per annum and must be fully repaid by December 31, 2024.

Healthcare Homes remains current as of December 31, 2022 and is on a straight-line basis of revenue recognition.

Other Operators

During the year ended December 31, 2022, in addition to the operators specifically discussed above, we allowed four other operators, representing an aggregate 2.7 %, 3.2 % and 3.6 % of total revenue (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively, to apply an aggregate of $ 3.4 million of their security deposits to pay rent to accommodate short term liquidity issues, with regular rent payments required to resume shortly thereafter.

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

Additionally, we granted three of these operators short-term deferrals for a portion of their respective rent due during the year ended December 31, 2022.

As of December 31, 2022, three of the four operators that were allowed to apply security deposits to rent are current on their respective lease obligations after taking into account rent deferrals and/or the application of security deposits.

The one operator that is not current on contractual obligations is on a cash basis of revenue recognition as of December 31, 2022.

Lease Inducements

For the years ended December 31, 2021, 2020 and 2019, we provided fundings of $ 22.3 million, $ 34.1 million, and $ 50.8 million, respectively, to our operators subject to operating leases, which were accounted for as lease inducements and will be amortized as a reduction to rental income over the remaining term of the leases.

Of the $ 22.3 million funded in 2021, $ 20 million was paid to Consulate Health Care (“Consulate”), $ 2.3 million was paid to four other existing operators.

For the years ended December 31, 2021 and 2020, we provided fundings of $ 22.3 million, and $ 34.1 million, respectively, to our operators subject to operating leases, which were accounted for as lease inducements and will be amortized as a reduction to rental income over the remaining term of the leases.

Of the $ 22.3 million funded in 2021, $ 20 million was paid to LaVie and $ 2.3 million was paid to four other existing operators.

Of the $ 34.1 million funded in 2020, $ 23.9 million was paid to Maplewood for development and start-up related costs and the remaining $ 10.2 million was paid to three other operators.

Of the $ 50.8 million funded in 2019, $ 15.0 million was paid to Genesis and the remaining $ 35.8 million was paid to seven other existing operators.

OMEGA HEALTHCARE INVESTORS, INC.

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(in thousands)

As of December 31, 2021, the Company is a lessee under ground leases and/or facility leases related to 11 SNFs and two offices.

For the years ended December 31, 2021, 2020 and 2019, the expenses associated with these operating leases were $ 2.2 million, respectively and are included within general and administrative expense on the Statement of Operations.

As of December 31, 2022, the Company is a lessee under ground leases and/or facility leases related to 10 SNFs, one ALF and two offices.

For the years ended December 31, 2022, 2021 and 2020, the expenses associated with these operating leases were $ 2.2 million, respectively and are included within general and administrative expense on the Statements of Operations.

The following table summarizes the balance sheet information related to leases where the Company is a lessee:

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Number of direct financing leases

Orianna Direct Financing Lease

On January 11, 2019, pursuant to a bankruptcy court order, affiliates of Orianna Health Systems (“Orianna”) purchased the remaining 15 SNFs subject to the direct financing lease with Orianna for $ 176 million of consideration, comprised of $ 146 million in cash received by Orianna and a $ 30.0 million seller note held by the Company.

On the same date, Orianna repaid $ 25.0 million of our then outstanding debtor in possession financing, including all related interest.

The $ 30.0 million note, which was repaid during the third quarter of 2021, bore interest at 6 % per annum and had a maturity date of January 11, 2026.

On January 16, 2019, the bankruptcy court confirmed Orianna’s plan of reorganization, creating a Distribution Trust (the “Trust”) to distribute the proceeds from Orianna’s sale of the remaining 15 SNFs, as well as the Trust’s collections of Orianna’s accounts receivable portfolio.

In January 2019, we reclassified our net investment in direct financing lease of $ 115.8 million from the Trust to other assets on our Consolidated Balance Sheets.

For the period from January 16, 2019 through December 31, 2019, we received approximately $ 94 million from the Trust as a partial liquidation.

In March 2019, we received updated information from the Trust indicating diminished collectibility of the accounts receivable owed to us.

As a result, we recorded an additional $ 7.7 million allowance.

As of December 31, 2019, our remaining receivable from the Trust was approximately $ 14.1 million which was recorded in other assets on our Consolidated Balance Sheets.

During 2020, we received approximately $ 17.2 million from the Trust of which approximately $ 3.1 million is recorded in (recovery) impairment on direct financing leases on our Consolidated Statements of Operations.

During 2021, we received approximately $ 0.7 million from the Trust which is recorded in (recovery) impairment on direct financing leases on our Consolidated Statement of Operations.

NOTE 7 - MORTGAGE NOTES RECEIVABLE

As of December 31, 2021, mortgage notes receivable relate to seven fixed rate mortgages on 63 long-term care facilities.

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

The mortgage notes receivable relate to facilities located in six states, operated by six independent healthcare operating companies.

We monitor compliance with mortgages and when necessary have initiated collection, foreclosure and other proceedings with respect to certain outstanding mortgage notes.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

The principal amounts outstanding of mortgage notes receivable, net of allowances, were as follows:

During the year ended December 31, 2021, we received $ 0.7 million from a bankruptcy court created Distribution Trust related to a direct financing lease with a former operator which is recorded in recovery on direct financing leases on our Consolidated Statement of Operations.

NOTE 7 – REAL ESTATE LOANS RECEIVABLE

Real estate loans consist of mortgage loans and other real estate loans which are primarily collateralized by a first, second or third mortgage lien or a leasehold mortgage on, or an assignment of the partnership interest in the related properties.

As of December 31, 2022, our real estate loans receivable consists of seven fixed rate mortgages on 52 long-term care facilities and 12 other real estate loans.

The mortgage notes relate to facilities located in six states that are operated by six independent healthcare operating companies.

The other real estate loans are with four of our operators as of December 31, 2022.

We monitor compliance with the loans and when necessary have initiated collection, foreclosure and other proceedings with respect to certain outstanding real estate loans.

The principal amounts outstanding of real estate loans receivable, net of allowances, were as follows:

(in thousands)

Mortgage note due 2027 ;

interest at 10.81 %

Mortgage notes due 2030 ;

interest at 10.96 % (1)

Mortgage note due 2031 ;

interest at 11.02 %

Other mortgage notes outstanding (2)

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Allowance for credit losses on mortgage notes receivable

Total mortgage notes receivable — net

Mortgage notes receivable – net

Other real estate loan due 2030 ;

interest at 7.00 %

Other real estate loans due 2024 ;

interest at 13.17 % (1)

Other real estate loans due 2022 - 2025 ;

interest at 12.03 % (1)

Other real estate loan due 2024 ;

interest at 12.00 %

Other real estate loans outstanding (3)

Leasehold mortgages and other real estate loans – gross

Allowance for credit losses on leasehold mortgages and other real estate loans

Leasehold mortgages and other real estate loans – net

Total real estate loans receivable – net

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

(2) Other mortgage notes outstanding have a weighted average interest rate of 8.84 % per annum as of December 31, 2021 and maturity dates ranging from 2023 through 2032 .

Mortgage Note due 2027

On January 17, 2014, we entered into a $ 112.5 million first mortgage loan with Guardian.

The loan was originally secured by seven SNFs and two ALFs located in Pennsylvania and Ohio.

The mortgage is cross-defaulted and cross-collateralized with our existing master lease with the operator.

In March 2018, we extended the maturity date to January 31, 2027 and provided an option to extend the maturity for a five year period through January 31, 2032 and a second option to extend the maturity through September 30, 2034 .

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, Guardian failed to pay contractual rent and interest to us from October 2021 through December 2021 due to on-going liquidity issues.

The Company is currently in on-going negotiations to restructure and amend Guardian’s lease and loan agreements.

As part of the restructuring negotiations, on December 30, 2021, we acquired two facilities, previously subject to the Guardian mortgage loan, in consideration for a reduction of $ 8.7 million in the mortgage principal and added the facilities to the master lease agreement.

As discussed in Note 9 – Allowance for Credit Losses, we reduced the risk rating on the mortgage loan from a 4 to a 5 during the third quarter of 2021, primarily due to the increased likelihood of a restructuring that would result in the modification of the mortgage loan terms.

The reduction in risk rating increased our reserve on the mortgage loan, determined using our PD and LGD credit loss model, to $ 8.9 million as of the end of the third quarter.

Following Guardian’s non-payment of rent and interest during the fourth quarter of 2021 and further negotiations with Guardian in the fourth quarter, we elected to further reduce the risk rating on the loan from a 5 to a 6 in the fourth quarter of 2021 and to evaluate the risk of loss on the loan on an individual basis.

As the fair value of the 7 properties that collateralize the mortgage loan were estimated to be less than the remaining principal of $ 103.8 million, we reserved an additional $ 38.2 million through provision for credit losses in the fourth quarter.

The total reserve on December 31, 2021, related to the mortgage loan is $ 47.1 million and reduces to the loan carrying value, to the estimated fair value of the collateral of $ 56.7 million.

We also fully reserved approximately $ 1.0 million of contractual interest receivable related to the mortgage loan with Guardian in the fourth quarter of 2021 (see Note 9 – Allowance for Credit Losses).

The mortgage loan was also placed on non-accrual status for interest recognition in October 2021 and we will utilize the cost recovery method for any proceeds received on the mortgage loan.

(2) Other mortgage notes outstanding have a weighted average interest rate of 8.85 % per annum as of December 31, 2022 and maturity dates ranging from 2023 through 2032 (with $ 6.5 million maturing in 2023 ).

(3) As of December 31, 2022, includes one real estate loan with an interest rate of 12.00 % and a maturity date of December 2, 2027 .

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Interest income on real estate loans is included within interest income on the Consolidated Statements of Operations and is summarized as follows:

Year Ended December 31,

(in thousands)

Mortgage notes – interest income

Leasehold mortgages and other real estate loans – interest income

Total real estate loans interest income

Mortgage Notes due 2030

At December 31, 2021, the $ 653.6 million of Mortgages Notes with Ciena Healthcare (“Ciena") consisted of the following:

● $ 415 million amortizing mortgage (the “Master Mortgage”) that matures in 2029 .

The Master Mortgage note bore an initial interest rate of 9.0 % per annum which increases by 0.225 % per annum.

In May 2020, we amended the Master Mortgage to increase the interest rate by 54 basis points from 10.13 % per annum to 10.67 % per annum and we sold eight SNFs and one ALF located in Michigan to Ciena for $ 83.5 million (as discussed below).

As of December 31, 2021, the outstanding principal balance of the Master Mortgage note is approximately $ 372.8 million and is secured by 25 facilities.

The interest rate on the Master Mortgage was 11.13 % at December 31, 2021.

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

Concurrent with these repayments, we released the mortgage liens on six facilities in exchange for the partial repayment and extended the maturity date of all of the Ciena mortgage notes to June 30, 2030 (with exception of two loans with an aggregate principal balance of $ 40.4 million with maturity dates in 2023 ).

On September 9, 2022, Ciena repaid $ 35.3 million under the Ciena Master Mortgage and $ 9.5 million under three additional mortgages.

Concurrently with these partial repayments, we released the mortgage liens on two facilities in exchange for such partial repayments.

At December 31, 2022, the $ 506.3 million of Mortgage Notes with Ciena consisted of the following:

● $ 415 million Ciena Master Mortgage that matures in 2030 .

The Ciena Master Mortgage note bore an initial interest rate of 9.0 % per annum which increases by 0.225 % per annum.

In May 2020, we amended the Ciena Master Mortgage to increase the interest rate by 54 basis points from 10.13 % per annum to 10.67 % per annum and we sold eight SNFs and one ALF located in Michigan to Ciena for $ 83.5 million (as discussed below).

As of December 31, 2022, the outstanding principal balance of the Ciena Master Mortgage note is $ 279.0 million and it is secured by 20 facilities.

The interest rate on the Ciena Master Mortgage was 11.35 % at December 31, 2022.

● Additional borrowings in the form of incremental facility mortgages, construction and/or improvement mortgages with maturities through 2030 (with exception to one construction mortgage with principal of $ 19.1 million that matures in 2023 ) with initial annual interest rates ranging between 8.5 % and 10 % and fixed annual escalators of 2 % or 2.5 % over the prior year’s interest rate, or a fixed increase of 0.225 % per annum.

As of December 31, 2021, the outstanding principal balance of these mortgage notes which are secured by five facilities is approximately $ 132.4 million.

As of December 31, 2022, the outstanding principal balance of these mortgage notes which are secured by three facilities is $ 94.3 million.

During the second quarter of 2021, one construction mortgage, included in the mortgage notes described above, with an original maturity date of 2021 was extended to 2029 and converted into a facility mortgage.

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● $ 44.7 million mortgage note related to five SNFs located in Michigan.

The mortgage note matures on June 30, 2029 and bears an initial annual interest rate of 9.5 % which increases each year by 0.225 %.

The mortgage note matures on June 30, 2030 and bore an initial annual interest rate of 9.5 % which increases each year by 0.225 % .

The interest rate on the mortgage note was 10.4 % at December 31, 2022.

As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $ 43.8 million.

During the second quarter of 2022, we released the mortgage lien on one facility under this mortgage loan in exchange for a $ 15.1 million repayment (as discussed above).

As of December 31, 2022, the outstanding principal balance of this mortgage note is $ 28.6 million and it is secured by four SNFs.

Additionally, the Company committed to fund an additional $ 9.6 million to Ciena if certain performance metrics are achieved by the portfolio.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

● $ 83.5 million mortgage note related to eight SNFs and one ALF located in Michigan.

These nine facilities were formerly leased to Ciena and were sold to Ciena by issuance of a first mortgage on May 1, 2020.

In connection with this sale, we recorded a loss of $ 3.6 million related to the write-off of the nine facilities’ straight-line rent receivable.

The mortgage note matures on June 30, 2029 and bears an initial annual interest rate of 10.31 % which increases each year by 2 % .

The mortgage note matures on June 30, 2030 and bore an initial annual interest rate of 10.31 % which increases each year by 2 % .

The interest rate on the mortgage note was 10.73 % at December 31, 2022.

As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $ 83.2 million.

As of December 31, 2022, the outstanding principal balance of this mortgage note is $ 83.1 million.

● $ 21.3 million mortgage note related to one SNF located in Ohio.

The mortgage note matures on March 31, 2022 and bears an initial annual interest rate of 9.5 % .

In January 2022, we amended the mortgage note to increase the interest rate to 9.74 % beginning April 1, 2022 and to extend the maturity date to December 31, 2022 .

As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $ 21.3 million.

The mortgage notes with Ciena are cross-defaulted and cross-collateralized with our existing master lease and other investment notes with the operator.

The mortgage note had an original maturity date of March 31, 2022 and bore an initial annual interest rate of 9.5 % .

During the year ended December 31, 2022, we amended the mortgage note to extend the maturity date to December 31, 2023 and to increase the interest rate to 9.74 % beginning April 1, 2022 and to 9.98 % beginning April 1, 2023.

As of December 31, 2022, the outstanding principal balance of this mortgage note is $ 21.3 million.

The mortgage notes with Ciena are cross-defaulted and cross-collateralized with our existing master lease and other non-real estate loans with Ciena.

Mortgage Note due 2031

On January 17, 2014, we entered into a $ 112.5 million first mortgage loan with Guardian.

The loan was originally secured by seven SNFs and two ALFs located in Pennsylvania and Ohio.

The mortgage is cross-defaulted and cross-collateralized with our existing master lease with the operator.

In the third quarter of 2021, we reduced the risk rating on the mortgage loan from a 4 to a 5, primarily due to the increased likelihood of a restructuring that would result in the modification of the mortgage loan terms.

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, Guardian failed to pay contractual rent and interest to us during the fourth quarter of 2021.

The mortgage loan was placed on non-accrual status for interest recognition in October 2021 and is being accounted for under the cost recovery method.

On December 30, 2021, we acquired two facilities, previously subject to the Guardian mortgage loan, in consideration for a reduction of $ 8.7 million in the mortgage principal and added the facilities to the master lease agreement.

As the fair value of the 7 properties that collateralized the mortgage loan were estimated to be less than the remaining principal as of December 31, 2021 of $ 103.8 million, we reserved an additional $ 38.2 million through provision for credit losses in the fourth quarter of 2021.

The total reserve as of December 31, 2021, related to the mortgage loan was $ 47.1 million and reduced the loan carrying value to the estimated fair value of the collateral of $ 56.7 million as of December 31, 2021.

We also fully reserved approximately $ 1.0 million of contractual interest receivable related to the mortgage loan with Guardian in the fourth quarter of 2021.

Guardian continued to not pay contractual rent and interest due under its lease and mortgage loan agreements during the first quarter of 2022.

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

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

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

In the second quarter of 2022, we agreed to a formal restructuring agreement and amendments to the master lease and mortgage loan with Guardian, which among other adjustments, extended the loan maturity and allowed for the deferral of certain contractual interest as discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements.

These amendments were treated as a loan modification.

In the third and fourth quarters of 2022, we reserved an additional $ 0.3 million, in aggregate, through provision for credit losses due to a decrease in the estimated fair value of the four facilities that are collateral under the mortgage.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

As of December 31, 2022, the amortized cost basis of the Guardian mortgage loan is $ 76.0 million, which represents 6.6 % of the total amortized cost basis of all real estate loan receivables.

The total reserve as of December 31, 2022 related to the mortgage loan was $ 40.8 million and reduced the loan carrying value to the estimated fair value of the collateral of $ 35.2 million as of December 31, 2022.

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

During the year ended December 31, 2022, we received $ 6.0 million of interest payments that were applied directly against the principal balance outstanding using the cost recovery method.

Other mortgage notes outstanding

As of December 31, 2022, our other mortgage notes outstanding represents 4 mortgage loans to 4 operators with liens on 11 facilities.

Included below are new mortgage loans within this bucket that were entered into during the years ended December 31, 2022, and 2021.

Mortgage Note due 2032 ;

interest at 10.50 %

On July 1, 2021, we financed six SNFs in Ohio and amended an existing $ 6.4 million mortgage, inclusive of 2 Ohio SNFs, to include the six facilities in a consolidated $ 72.4 million mortgage for eight Ohio facilities bearing interest at an initial rate of 10.5 % per annum.

On July 1, 2021, we financed six SNFs in Ohio and amended an existing $ 6.4 million mortgage, inclusive of two Ohio SNFs, to include the six facilities in a consolidated $ 72.4 million mortgage for eight Ohio facilities bearing interest at an initial rate of 10.5 % per annum.

In conjunction with this transaction, we also acquired three Maryland facilities that were previously subject to a mortgage issued by Omega bearing interest at 13.75 % per annum with a principal balance of $ 36.0 million that was included in other mortgage notes outstanding.

1 unchanged sentence

The base rent in the initial year is approximately $ 5.0 million and includes annual escalators of 2.5 %.

As of December 31, 2021, the outstanding principal balance of this mortgage note is approximately $ 72.4 million.

As of December 31, 2022, the outstanding principal balance of this mortgage note is $ 72.4 million.

Mortgage Note due 2025 ;

3 unchanged sentences

As of December 31, 2022 and 2021, this mortgage has a carrying value of $ 63.8 million and $ 65.5 million, respectively.

NOTE 8 - 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.

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

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

As of December 31, 2021, we had 34 loans with 18 different operators.

A summary of our other investments is as follows:

(in thousands)

Other investment notes due 2024 ;

interest at 13.15 % (1)

Other investment notes due 2024 - 2025 ;

interest at 8.12 % (1)

Other investment note due 2023 ;

interest at 12.00 %

Other investment notes due 2030 ;

interest at 7.00 %

Other investment notes outstanding (2)

Total other investments, gross

Allowance for credit losses on other investments

Total other investments - net

(1) Approximate weighted average interest rate as of December 31, 2021.

(2) Other investment notes have a weighted average interest rate of 8.46 % as of December 31, 2021 with maturity dates ranging from 2022 through 2031 (with $ 81.9 million maturing in 2022 ).

Other real estate loan due 2030

On July 31, 2020, we entered into a $ 220.5 million secured revolving credit facility with Maplewood as a part of an overall restructuring with this operator.

$ 132.1 million of the facility was drawn at closing which was used to repay our prior secured revolving credit facilities with aggregate capacity of $ 65.0 million with Maplewood, as well as other lease obligations owed to us, of which approximately $ 55.4 million was scheduled to be repaid at termination of the master lease.

Loan proceeds under the new credit facility may also be used to fund Maplewood’s working capital needs.

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

On June 22, 2022, we amended the secured revolving credit facility with Maplewood to increase the maximum commitment under the facility from $ 220.5 million to $ 250.5 million.

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

Our balances and risk of loss associated with Maplewood are included within our disclosures in Note 10 – Variable Interest Entities.

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, we began negotiations to restructure and amend Maplewood’s lease and loan agreements during the fourth quarter of 2022.

As a result of the anticipated restructuring, we placed the Maplewood revolving credit facility on non-accrual status for interest recognition during the fourth quarter of 2022 due to the anticipated restructuring of its lease and loan agreement.

As of December 31, 2022, $ 250.5 million remains outstanding on this credit facility to Maplewood.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Other investment notes due 2024

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, in the first quarter of 2023, Omega entered into a restructuring agreement and a loan amendment that modified the senior revolving credit facility.

As part of the restructuring agreement and loan amendment, Omega agreed to extend the maturity date to June 2035, increase the capacity of the senior revolving credit facility from $ 250.5 million to $ 320.0 million, including PIK interest applied to the principal, and to convert the 7 % cash interest due on the senior revolving credit facility to all PIK interest in 2023, 1 % cash interest and 6 % PIK interest in 2024, 4 % cash interest and 3 % PIK interest in 2025 and through the maturity date.

Other real estate loans due 2024

Our other investment notes due in 2024 consists of two secured term loans with Genesis with initial borrowings of $ 48.0 million and $ 16.0 million at issuance.

3 unchanged sentences

The 2018 Term Loan was initially scheduled to mature on July 29, 2020 , but through the amendments noted above was extended to January 1, 2024 .

Both the 2016 and 2018 Term Loans are on an accrual status as of December 31, 2022.

Both the 2016 and 2018 Term Loans are secured by a first priority lien on and security interest in certain collateral of Genesis.

As of December 31, 2022, there was approximately $ 78.1 million and $ 20.3 million outstanding on the 2016 and 2018 Term Loans, respectively.

We evaluated our 2016 and 2018 Term Loans with Genesis for impairment during 2021 and 2020, with no incremental provision for credit loss recognized given the underlying collateral value.

Other investment notes due 2024-2025

Our other investment notes due in 2024-2025 consist of a $ 32 million secured term loan (the “Agemo Term Loan”) and a $ 25.0 million secured working capital loan (the “Agemo WC Loan”) with Agemo.

Other real estate loans due 2022 - 2025

On June 28, 2022, we entered into a $ 35.6 million mezzanine loan with an existing operator related to new operations undertaken by the operator.

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

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

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

Other real estate loan due 2024

Our other investment note due in 2024 consisted of a $ 60.0 million mezzanine loan, with an operator, that was acquired and financed in 2016 and subsequently amended and refinanced in May 2018.

The loan was amended again in 2022.

As amended, the mezzanine loan bore interest at a fixed interest rate of 12 % per annum and contractually matured on May 31, 2024 .

During the third quarter of 2022, this loan was fully repaid .

Other real estate loans outstanding

Preferred Equity Investment in Joint Venture - $ 20 million

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

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

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

As such, this $ 20.0 million preferred equity investment is included in the unconsolidated VIE table presented in Note 10 – Variable Interest Entities.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

NOTE 8 – NON-REAL ESTATE LOANS RECEIVABLE

Our non-real estate loans consist of fixed and variable rate loans to operators and/or principals.

These loans may be either unsecured or secured by the collateral of the borrower, which may include the working capital of the borrower.

As of December 31, 2022, we had 29 loans with 15 different borrowers.

A summary of our non-real estate loans is as follows:

(in thousands)

Notes due 2024 - 2025 ;

interest at 8.12 % (1)

Notes due 2022 - 2028 ;

interest at 10.44 % (1)(2)

Notes due 2036 ;

interest at 8.13 % (1)

Note due 2027 ;

interest at 12.00 %

Note due 2024 ;

interest at 7.50 %

Other notes outstanding (3)

Non-real estate loans receivable – gross

Allowance for credit losses on other investments

Total non-real estate loans receivable – net

(1) Approximate weighted average interest rate as of December 31, 2022.

(2) Includes one loan with a principal balance of $ 1.5 million that was to mature in 2022 but remains outstanding as of December 31, 2022.

We are in negotiations to extend the loan.

(3) Other notes outstanding have a weighted average interest rate of 7.18 % as of December 31, 2022 with maturity dates ranging from 2022 through 2028 (with $ 10.8 million maturing in 2023 ).

We have two loans within other notes outstanding with aggregate principal of $ 9.8 million that were to mature in 2022 , but remain outstanding as of December 31, 2022.

We are in negotiations to extend a $ 4.4 million loan to 2024 and we have fully reserved the other $ 5.4 million loan.

For the years ended December 31, 2022, 2021 and 2020, non-real estate loans generated interest income of $ 13.6 million, $ 12.7 million and $ 17.0 million, respectively.

Interest income on non-real estate loans is included within interest income on the Consolidated Statements of Operations.

Notes due 2024 - 2025

Notes due in 2024 - 2025 consist of a $ 32 million secured term loan (the “Agemo Term Loan”) and a $ 25.0 million secured working capital loan (the “Agemo WC Loan”) with Agemo.

The Agemo Term Loan was acquired in 2016 and bears interest at 9 % per annum.

1 unchanged sentence

The Agemo WC Loan was issued on May 7, 2018 and bears interest at 7 % per annum.

The Agemo WC Loan matures on April 30, 2025 and is primarily secured by a collateral package that includes a second lien on the accounts receivable of the Agemo.

The Agemo WC Loan matures on April 30, 2025 and is primarily secured by a collateral package that includes a second lien on the accounts receivable of Agemo.

The proceeds of the Agemo WC Loan were used to pay operating expenses, settlement payments, fees, taxes and other costs approved by the Company.

2 unchanged sentences

We also fully reserved approximately $ 3.8 million of contractual interest receivable related to the Agemo Term Loan in the third quarter of 2020 (see Note 9 – Allowance for Credit Losses).

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, Agemo failed to pay contractual rent and interest to us from August 2021 through October 2021 and in December 2021.

We have continued to monitor the fair value of the collateral associated with these loans on a quarterly basis.

In the third quarter of 2021, we recorded an additional provision for credit loss of $ 16.7 million related to these loans as a result of a reduction in the fair value of the underlying collateral assets supporting the current carrying values.

The reduction in fair value of the collateral assets was primarily driven by the application of Agemo’s $ 9.3 million letter of credit that supported the value of the Agemo Term Loan to Omega’s uncollected receivables and a reduction in Agemo’s working capital accessible to Omega as collateral, after considering other liens on the assets.

Additionally, the loan has been placed on non-accrual status and we will use the cost recovery method and will apply any interest and fees received directly against the principal of the loan.

As of December 31, 2021, we have received $ 1.2 million of interest payments and applied against the principal.

We previously had two other loans with Agemo affiliates that were repaid during 2020:

$ 1.7 million term loan (which was added to Agemo Term Loan) that was issued on November 5, 2019 and a $ 3.5 million term loan that was issued on February 28, 2020.

The $ 1.7 million term loan and $ 3.5 million term loan bore interest at fixed rates of 9 % and 10 % per annum, respectively.

At December 31, 2021, the total carrying value of our loans outstanding with Agemo and its affiliates, net of allowances for credit losses, is approximately $ 16.7 million.

During the year ended December 31, 2021, we received $ 1.2 million of interest payments which was applied against the principal.

Agemo continued to not pay contractual rent and interest due under its lease and loan agreements throughout 2022.

During the year ended December 31, 2022, we recorded additional provisions for credit losses of $ 10.8 million related to the Agemo WC Loan because of reductions in the fair value of the underlying collateral assets supporting the current carrying values.

At December 31, 2022, the total carrying value of our loans outstanding with Agemo, net of allowances for credit losses, is approximately $ 5.9 million.

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, in the first quarter of 2023, Omega entered into a restructuring agreement and a replacement loan agreement that modified the existing Agemo loans.

Under the restructuring agreement, previously written off contractual unpaid interest related to the Agemo WC Loan and the Agemo Term Loan was forgiven.

The outstanding principal of the Agemo Term Loan was rolled into a $ 32.0 million loan (“Agemo Replacement Loan A”).

The outstanding principal of the Agemo WC Loan and the aggregate rent deferred and outstanding under the Agemo lease agreement will be combined into a $ 50.2 million loan (“Agemo Replacement Loan B” and with Agemo Replacement Loan A, the “Agemo Replacement Loans”).

The Agemo Replacement Loans bear interest at 5.71 % per annum and mature on December 31, 2036 .

No interest payments will accrue or are required to be paid until March 1, 2023, contingent upon Agemo’s compliance with certain conditions of the restructuring agreement.

After three years, Agemo is required to make principal payments on the Agemo Replacement Loans dependent on certain cash flow metrics.

Notes due 2022 - 2028

Notes due 2022 - 2028 consists of eight loans with the same operator that are primarily short-term revolving lines of credit that are collateralized by the accounts receivable of certain operations of the operator.

The most significant of the outstanding loans is a short-term $ 90.0 million revolving line of credit that we entered into on June 28, 2022 in connection with the $ 35.6 million mezzanine loan discussed in Note 7 – Real Estate Loans Receivable above.

The loan proceeds were used by this operator to finance working capital requirements of new operations in a new state to the operator.

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

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

As of December 31, 2022, the outstanding principal under this revolving line of credit was $ 33.0 million.

Notes due 2036

On September 1, 2021, we entered into an $ 8.3 million term loan with LaVie to be funded through monthly advances in the amount of $ 0.7 million from September 2021 through August 2022.

This term loan bears interest at a fixed rate of 7 % per annum (which may be paid-in-kind for the first year of the loan), matures on March 31, 2031 and requires monthly principal payments of $ 0.1 million commencing September 1, 2022.

The loan is secured by a guarantee from LaVie’s parent entities.

On March 25, 2022, we entered into a $ 25.0 million term loan with LaVie that bears interest at a fixed rate of 8.5 % per annum and matures on March 31, 2032 .

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

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Other investment note due 2023

Our other investment note due in 2023 consists of a $ 60.0 million mezzanine loan, with an operator, that was acquired and financed in 2016 and subsequently amended and refinanced in May 2018.

As amended, the mezzanine loan bears interest at a fixed interest rate of 12 % per annum and matures on May 31, 2023 .

The mezzanine loan requires semi-annual principal payments of $ 2.5 million commencing December 31, 2018 and is secured by an equity interest in subsidiaries of the borrower.

As of December 31, 2021, our total other investments outstanding with this borrower was approximately $ 40.2 million.

Other investment notes due 2030

In 2015 and 2017, we entered into two separate $ 50.0 million and $ 15.0 million secured revolving credit facilities with Maplewood and its subsidiaries.

These revolving credit facilities bore interest at approximately 6.66 % per annum and 9.5 % per annum, respectively, and were initially scheduled to mature in 2023.

As a part of an overall restructuring with this operator, we entered into a $ 220.5 million secured revolving credit facility with Maplewood on July 31, 2020, of which $ 132.1 million was drawn at closing.

The funds drawn at closing were used to repay our prior credit facilities with Maplewood, as well as other lease obligations owed to us, of which approximately $ 55.4 million was scheduled to be repaid at termination of the master lease.

Loan proceeds under the new credit facility may also be used to fund Maplewood’s working capital needs.

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

As of December 31, 2021, $ 201.6 million remains outstanding on this credit facility to Maplewood.

As a result of entering into the $ 220.5 million secured revolving credit facility in July 2020, we reassessed our relationship with Maplewood and concluded that Maplewood was a VIE.

Other investment notes outstanding

As of December 31, 2021, our other investment notes outstanding represents 28 loans to operators that primarily consists of term loans and working capital loans or revolving credit facilities.

During the fourth quarter of 2022, we amended these loans with LaVie to, among other terms, extend the loan maturities to November 30, 2036 to align with the lease term, and starting in January 2023, reduce the interest rates to 2 %, remove the requirement to make any principal payments until the maturity dates and to convert from monthly cash interest payments to interest paid-in-kind.

These amendments were treated as loan modifications.

In the fourth quarter of 2022, we reduced the risk rating on these loans from a 5 to a 6, primarily due to the modifications of the loan terms.

Given the modifications, we evaluated the risk of loss on these loans on an individual basis based on the fair value of the collateral.

Based on our evaluation of the collateral, during the fourth quarter of 2022, we recognized provisions for credit losses of $ 7.5 million related to the $ 8.3 million term loan (to fully reserve the loan balance) and $ 15.8 million related to the $ 25.0 million term loan.

Following the sale of 11 facilities in the fourth quarter of 2022, discussed in Note 4 – Assets Held for Sale, Dispositions and Impairments, the remaining accounts receivable outstanding that collateralize the $ 25.0 million term loan was insufficient to support the current outstanding balance, and as a result, we recorded the additional reserves to reduce the carrying value of the $ 25.0 million loan to the fair value of the collateral.

Additionally, the loans were placed on non-accrual status and we will use the cost recovery method and will apply any interest and fees received directly against the principal of the loans.

During the year ended December 31, 2022, we applied $ 0.4 million of interest payments received to the $ 25.0 million term loan principal balance outstanding and $ 0.1 million of interest payments received to the $ 8.3 million term loan principal balance outstanding.

As of December 31, 2022, the amortized cost basis of these loans was $ 32.5 million, which represents 10.5 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of December 31, 2022 related to the LaVie loans was $ 25.0 million.

Note due 2027

On September 1, 2022, we entered into a $ 40.0 million mezzanine loan with a new operator.

The loan bears interest at a fixed rate of 12 % per annum and matures on September 14, 2027 .

The loan also requires semi-annual principal payments of $ 1.7 million in January and July, commencing on January 1, 2023, and additional payments contingent on the occurrence of certain conditions.

The loan is secured by an equity interest in subsidiaries of the operator.

In February 2023, this loan was repaid.

Note due 2024

On July 8, 2019, the Company entered into a $ 15 million unsecured revolving credit facility agreement with a principal of an operator that bears interest at a fixed rate of 7.5 % per annum and originally matured on July 8, 2022 .

During 2022, this revolving credit facility was amended multiple times to increase the maximum principal to $ 48 million, extend the maturity date to December 31, 2024 and require monthly principal payments of $ 0.5 million beginning in July 2022, which increase to $ 1.0 million in January 2023, to $ 1.5 million in August 2023 and to $ 2.5 million in December 2023.

No principal payment amounts were required for the months of November and December 2022.

Other notes outstanding

As of December 31, 2022, our other notes outstanding represents 15 loans to operators that primarily consists of term loans and working capital loans or revolving credit facilities.

Many of these loans are not individually significant and the use of proceeds of these loans can vary.

Included below are the significant new loans entered into in 2021 and significant updates to any existing loans.

Included below are the significant new loans entered into during the years ended December 31, 2022, 2021 and 2020 and significant updates to any existing loans.

Working Capital Loan – $ 20 million

In November 2021, we entered into a $ 20.0 million working capital loan (the “$20.0 million WC loan”) with an operator that managed, on an interim basis for a 4-month period, the operations of 23 facilities formerly leased to Gulf Coast.

The $ 20.0 million WC loan bears interest at 3 % per annum.

The maturity date of the $ 20.0 million WC loan was the earlier of (i) December 31, 2022 , (ii) the date of the termination of one or more of the MOTAs, or (iii) the date that New Manager requests that the loan be terminated.

Advances under the working capital loan are not required to be repaid until maturity.

The $ 20.0 million WC loan is secured by the accounts receivables of these facilities during the interim period of operation.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

During the year ended December 31, 2022, we recognized provisions for credit losses of $ 5.2 million related to the $ 20.0 million WC loan, which resulted in the loan being fully reserved.

Following the sale of 22 facilities, discussed in Note 4 – Assets Held for Sale, Dispositions and Impairments, the remaining accounts receivable outstanding that collateralize the loan was insufficient to support the current outstanding balance, and as a result, we recorded the additional reserves to reduce the carrying value of the loan to the fair value of the collateral.

The $ 20.0 million WC Loan was placed on non-accrual status during the third quarter of 2022 and is being accounted for under the cost recovery method.

As of December 31, 2022, the outstanding principal under this loan was $ 5.4 million.

Gulf Coast – DIP Facility

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, in October 2021, we provided an up to $ 25.0 million senior secured DIP facility (the “DIP Facility”) with Gulf Coast, in order to provide liquidity for the operations of the Gulf Coast facilities during its Chapter 11 cases.

A portion of the funding under the DIP Facility is tied to certain milestones and other conditions, including the transition of the management of the operations of the facilities.

A portion of the funding under the DIP Facility was tied to certain milestones and other conditions, including the transition of the management of the operations of the facilities.

At December 31, 2021, these milestones and conditions had been met and the full capacity of the DIP Facility was available to be borrowed upon by Gulf Coast.

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Interest and fees are payable monthly and the principal is due at maturity, unless the amount outstanding thereunder is accelerated prior to maturity.

Currently, the DIP Facility matures on the earlier of (i) June 18, 2022 , (ii) the effective date of a plan of reorganization or liquidation in the Chapter 11 Cases or (iii) upon an event of default as defined in the DIP Facility agreement.

The DIP financing is guaranteed by all debtors in Gulf Coast’s Chapter 11 cases and is secured by liens on substantially all of their assets, including post-petition accounts receivable, subject in certain cases to other priorities or exceptions.

As of December 31, 2021, $ 20.5 million was outstanding under the DIP Facility, which was fully reserved for as discussed further below.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Given the uncertainty and complexity surrounding the bankruptcy process and the deteriorated credit of Gulf Coast, we evaluated the DIP facility on an individual basis and elected to measure the risk of loss on the DIP Facility based on the fair value of the collateral.

Based on the cash forecasts provided by Gulf Coast as part of the Support Agreement and on-going monthly reporting, we estimate that the collateral will have insufficient value to support the loan at maturity and that we will be unable to collect on substantially all principal amounts advanced to Gulf Coast under the DIP Facility.

Based on the cash forecasts provided by Gulf Coast as part of the Support Agreement and on-going monthly reporting, we estimated that the collateral will have insufficient value to support the loan at maturity and that we will be unable to collect on substantially all principal amounts advanced to Gulf Coast under the DIP Facility.

Upon funding, we fully reserved all principal amounts advanced under the DIP Facility.

In the fourth quarter of 2021, we recorded reserves of $ 20.0 million (the principal outstanding after considering interest payments applied to principal discussed below) related to the DIP facility through the provision for credit losses on December 31, 2021.

Please see further discussion within Note 9 – Allowance for Credit Losses.

Additionally, we have placed the loan on non-accrual status and will use the cost recovery method and will apply any interest and fees received directly against the principal of the loan.

As of December 31, 2021, we have received $ 0.5 million of interest and fee payments and applied against the principal.

Working Capital Loan - $ 20 million

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, in November 2021, we entered into a $ 20.0 million working capital loan with New Manager of 23 of the 24 Gulf Coast facilities as part of the MOTAs that became effective on December 1, 2021.

The working capital loan bears interest at 3 % per annum.

The maturity date of the loan is the earlier of (i) December 31, 2022 , (ii) the date of the termination of one or more of the MOTAs, or (iii) the date that New Manager requests that the loan be terminated.

Advances under the working capital loan are not required to be repaid until maturity.

The working capital loan is collateralized by the post-transition accounts receivable of the 24 facilities.

As of December 31, 2021, the outstanding principal under this loan was $ 12.5 million.

See further discussion within Note 9 – Allowance for Credit Losses.

Additionally, we have placed the loan on non-accrual status and used the cost recovery method to apply any interest and fees received directly against the principal of the loan.

During the year ended December 31, 2021, we received $ 0.5 million of interest and fee payments that we applied against the outstanding principal and recognized a recovery for credit loss equal to the amount of payments applied against the principal.

During the year ended December 31, 2022, we recorded an additional net provision for credit losses of $ 0.2 million related to the DIP Facility, which reflects the full reserve of additional advances of $ 2.2 million made under the facility during 2022 and a $ 2.0 million recovery for interest and fee payments received during 2022 that were applied against the outstanding principal.

The DIP facility matured on August 15, 2022 , which resulted in a write-off of the loan and reserve balances.

Revolving Credit Facility – $ 25 million

On October 1, 2021, the Company amended the terms of a $ 15 million revolving credit facility with an operator that was previously issued in December 2020 and had a maturity date of December 1, 2022 .

The revolving credit facility, as amended, has an increased maximum principal of $ 20 million, bears interest at 5 % for the first year and 6 % thereafter and has a maturity date of September 30, 2024 .

On October 1, 2021, the Company amended the terms of a $ 15 million revolving credit facility with an operator (the 3.7 % Operator discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements) that was previously issued in December 2020 and had a maturity date of December 1, 2022 .

The amendment increased the maximum principal of $ 20 million, reduced the interest rate to 5 % for the first year and 6 % thereafter and extended the maturity date to September 30, 2024 .

The credit facility is secured by a first lien on the accounts receivable of the 3.7 % Operator.

Following the amendment in the fourth quarter, this operator drew $ 7.8 million under the credit facility.

As of December 31, 2021, the outstanding principal under this loan was $ 16.0 million.

As discussed in Note 23 – Subsequent Events, in January and February 2022, this operator paid contractual interest under the credit facility but failed to pay contractual rent due under its lease agreement.

The operator has asked for a short-term rent deferral, and negotiations are on-going.

Following the amendment in the fourth quarter, the 3.7 % Operator drew $ 7.8 million under the credit facility during the fourth quarter of 2021.

This revolving credit facility was further amended in the fourth quarter of 2022 to increase the maximum principal to $ 25 million, with any borrowed amount in excess of $ 20 million to be repaid no later than June 30, 2023 .

During 2022, the 3.7 % Operator drew $ 9.0 million under the facility and the line of credit of $ 25.0 million was fully drawn as of December 31, 2022.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, from January through March 2022, the 3.7 % Operator paid contractual interest under the credit facility but failed to pay contractual rent due under its lease agreement.

In March 2022, the lease with the 3.7 % Operator was amended to allow for a short-term rent deferral for January through March 2022.

The 3.7 % Operator paid the contractual amount due under its lease and loan agreements from April 2022 through December 2022.

Promissory Notes – $ 20 million

In the fourth quarter of 2022, the Company entered into three unsecured loans with a principal of an operator with principal amounts of $ 17.0 million, $ 2.5 million and $ 0.5 million.

The loans bear interest at 9 % and mature on September 30, 2027 .

All three loans require quarterly principal payments commencing on January 3, 2023.

Second Spring Healthcare Investments

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This loan was repaid in 2021.

Sellers Note - $30 million

In connection with transitioning facilities associated with Orianna Health Systems, a former operator, in January 2019 we issued a $ 30 million sellers note that bore interest at a fixed rate of 6 % per annum.

The $ 23.5 million in principal outstanding on this loan was repaid in September 2021.

OMEGA HEALTHCARE INVESTORS, INC.

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NOTE 9 – ALLOWANCE FOR CREDIT LOSSES

In the fourth quarter of 2022, we revised the presentation of certain loans subject to our allowance for credit losses as discussed in Note 2 – Summary of Significant Accounting Policies.

The disclosures below have been reclassified to conform to the revised presentation.

A rollforward of our allowance for credit losses, summarized by financial instrument type and internal credit risk rating, for the years ended December 31, 2022, 2021 and 2020 is as follows:

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(in thousands)

Mortgage notes receivable

Real estate loans receivable

Investment in direct financing leases

Other investments

Off-balance sheet note commitments

Off-balance sheet mortgage commitments

(1) Amount reflects the movement of reserves associated with a $ 112.5 million mortgage for 9 facilities with Guardian due to a reduction of our internal risk rating on the loan from a 4 to a 5 in the third quarter of 2021, which was primarily due to the increased likelihood of a restructuring that would result in the modification of the mortgage loan terms, and from a 5 to a 6 during the fourth quarter of 2021, which was primarily due to Guardian’s non-payment of rent and interest during the fourth quarter of 2021 due to on-going liquidity issues (as discussed further in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements) and further negotiations with Guardian in the fourth quarter.

As discussed in Note 7 – Mortgage Notes Receivable, we elected to evaluate the risk of loss on the loan on an individual basis, which resulted in recording an additional $ 38.2 million reserve on the mortgage loan.

(2) Amount reflects the movement of $ 27.2 million of reserves from Other Investments with a rating of 4 to Other Investments with a rating of 6 as a result of a reduction of our internal credit rating from a 4 to a 6 on the Agemo Term Loan and one other loan during the third quarter of 2021.

Investment in direct financing leases

Non-real estate loans receivable

Off-balance sheet non-real estate loan commitments

Off-balance sheet real estate loan commitments

Off-balance sheet non-real estate loan commitments

Off-balance sheet real estate loan commitments

Off-balance sheet non-real estate loan commitments

(1) During the third quarter of 2022, we wrote-off the loan balance and reserve for one real estate loan with a rating of 6 that expired during the third quarter which had previously been fully reserved.

(2) Reflects additional provisions of $ 10.8 million recorded on the Agemo WC Loan during the year ended December 31, 2022.

See Note 8 – Non-real Estate Loans Receivable for additional information on the Agemo WC Loan.

(3) Reflects aggregate provisions of $ 23.3 million recorded on the LaVie $ 25.0 million term loan and on the $ 8.3 million term loan during the fourth quarter of 2022.

See Note 8 – Non-real Estate Loans Receivable for additional information on the LaVie term loans.

(4) Reflects an additional provision of $ 5.2 million recorded on the $ 20 million WC loan during the year ended December 31, 2022 as discussed in Note 8 – Non-real Estate Loans Receivable.

(5) In the second quarter of 2022, we recorded an additional reserve of $ 2.2 million related to the remaining commitment under the DIP facility as we were notified of the operator’s intent to draw the funds in the third quarter of 2022.

In the third quarter of 2022, the remaining commitment under the facility was drawn and the facility expired and as a result we wrote-off the loan balance and related reserves as we do not expect to collect amounts under the facility following the expiration.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Financial Statement Line Item

Allowance for Credit Loss at December 31, 2020

Provision (recovery) for Credit Loss for the year ended December 31, 2021

Write-offs charged against allowance for the year ended December 30, 2021

Allowance for Credit Loss as of December 31, 2021

(in thousands)

Real estate loans receivable

Investment in direct financing leases

Non-real estate loans receivable

Off-balance sheet non-real estate loan commitments

Off-balance sheet real estate loan commitments

Off-balance sheet non-real estate loan commitments

Off-balance sheet real estate loan commitments

Off-balance sheet non-real estate loan commitments

(1) Amount reflects the movement of reserves associated with our mortgage loan with Guardian due to a reduction of our internal risk rating on the loan from a 4 to a 6 during 2021.

As discussed in Note 7 – Real Estate Loans Receivable, we elected to evaluate the risk of loss on the loan on an individual basis, which resulted in recording an additional $ 38.2 million reserve on the mortgage loan.

This amount also reflects $ 4.5 million of additional allowance recorded in the second quarter of 2021 to fully impair one real estate loan receivable with a rating of 4 that was subsequently reduced to a rating of 6 in the third quarter of 2021.

(2) Amount reflects the movement of $ 22.7 million of reserves from non-real estate loans receivable with a rating of 4 to non-real estate loans receivable with a rating of 6 as a result of a reduction of our internal credit rating from a 4 to a 6 on the Agemo Term Loan during the third quarter of 2021.

Concurrent with reducing the risk rating on the Agemo Term Loan to a 6, we recorded an additional provision of $ 8.8 million to fully reserve the remaining carrying value of the Agemo Term Loan.

See Note 8 – Non-real Estate Loans Receivable for additional information on the conditions that drove the additional Agemo Term Loan provision and rating reduction.

(3) The provision includes an additional $ 7.9 million allowance recorded on the Agemo WC Loan during the third quarter of 2021.

We also reduced the internal rating on the Agemo WC Loan from a 4 to a 5 during the third quarter of 2021.

See Note 8 – Other Investments for additional information on the conditions that drove the Agemo WC Loan impairment and rating reduction.

(4) Amount reflects the movement of $ 27.2 million of reserves from Other Investments with a rating of 4 to Other Investments with a rating of 6 as a result of a reduction of our internal credit rating from a 4 to a 6 on the Agemo Term Loan and one other loan during the third quarter of 2021.

The amount also reflects $ 8.8 million of additional allowance recorded in the third quarter of 2021 to fully impair the remaining carrying value of the Agemo Term Loan and $ 20.0 million of additional allowance recorded in the fourth quarter of 2021 to fully impair the remaining carrying value of the Gulf Coast DIP Facility.

See Note 8 – Other Investments for additional information on the conditions that drove the Agemo Term Loan impairment and ratings reduction and the Gulf Coast DIP Facility Impairment.

See Note 8 – Non-real Estate Loans Receivable for additional information on the conditions that drove the additional Agemo WC Loan provision and rating reduction.

(4) Amount reflects $ 20.0 million of additional allowance recorded in the fourth quarter of 2021 to fully reserve the remaining carrying value of the DIP Facility.

See Note 8 – Non-real Estate Loans Receivable for additional information on the DIP Facility.

OMEGA HEALTHCARE INVESTORS, INC.

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Allowance for Credit Loss at December 31, 2019

Allowance for Credit Loss on January 1, 2020

Allowance for Credit Loss at January 1, 2020

Provision (recovery) for Credit Loss for the year ended December 31, 2020

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(in thousands)

Mortgage notes receivable

Real estate loans receivable

Investment in direct financing leases

Other investments

Off-balance sheet note commitments

Off-balance sheet mortgage commitments

Included below is a summary of the amortized cost basis of our financial instruments, subject to the allowance for credit losses, by year of origination and our internal risk rating:

Non-real estate loans receivable

Off-balance sheet non-real estate loan commitments

Off-balance sheet real estate loan commitments

Included below is a summary of the amortized cost basis of our financial instruments by year of origination and internal risk rating and a summary of our gross write-offs by year of origination:

Financial Statement Line Item

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(in thousands)

Mortgage notes receivable

Real estate loans receivable

Investment in direct financing leases

Other investments

Non-real estate loans receivable

Year to date gross write-offs

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Interest Receivable on Mortgage and Other Investment Loans

Interest Receivable on Real Estate Loans and Non-real Estate Loans

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

As of December 31, 2021 and 2020, $ 11.1 million and $ 10.0 million, respectively, of contractual interest receivable is recorded in contractual receivables – net on our Consolidated Balance Sheets.

As of December 31, 2022 and 2021, we have excluded $ 8.2 million and $ 11.1 million, respectively, of contractual interest receivables and $ 5.7 million and $ 9.6 million, respectively, of effective yield interest receivables from our allowance for credit losses.

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

For the years ended December 31, 2021 and 2020, we wrote-off interest receivables of $ 1.0 million (related to the Guardian mortgage loan, see Note 7 – Mortgage Notes Receivable) and $ 3.8 million (related to the Agemo Term Loan, see Note 8 – Other Investments) through the provision for credit losses, respectively.

These write-offs are not reflected in the rollforward of the allowance for credit losses above.

During the year ended December 31, 2021, we recognized $ 11.9 million of interest income related to loans on non-accrual status as of December 31, 2021.

For the years ended December 31, 2021 and 2020, we wrote-off interest receivables of $ 1.0 million (related to the Guardian mortgage loan, see Note 7 – Real Estate Loans Receivable) and $ 3.8 million (related to the Agemo Term Loan, see Note 8 – Non-real Estate Loans Receivable) through the provision for credit losses.

This write-off is not reflected in the roll forward of the allowance for credit losses above.

During the years ended December 31, 2022, 2021 and 2020, we recognized $ 17.2 million, $ 25.9 million and $ 22.7 million, respectively, of interest income related to loans on non-accrual status as of December 31, 2022.

NOTE 10 – VARIABLE INTEREST ENTITIES

We hold variable interests in several VIEs through our investing and financing activities.

As of December 31, 2021, we have not consolidated any VIEs, as we have concluded that we are not the primary beneficiary of these entities as we either 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.

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, collateral, and maximum exposure to loss associated with these unconsolidated VIEs as of December 31, 2022 and 2021:

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Assets held for sale

Other investments – net

Real estate loans receivable – net

Non-real estate loans receivable – net

Contractual receivables – net

Straight-line rent receivables

Lease inducement

Other receivables and lease inducements

Net in-place lease liability

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Contingent liability

Other liabilities

Total liabilities

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( 1,335,867 )

( 1,121,498 )

Total collateral

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Maximum exposure to loss

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

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

The fair value of the accounts receivable available to Omega was $ 5.9 million and $ 29.2 million as of December 31, 2022 and December 31, 2021, respectively.

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Rental income (1)

Other investment income

(1) The rental income for the year ended December 31, 2020, reflects the write-off of approximately $ 75.3 million of contractual rent receivable, straight-line rent receivable and lease inducements related to Agemo (see Note 5 – Contractual Receivables and Other Receivables and Lease Inducements).

Interest income

(1) The rental income for the year ended December 31, 2022, reflects the write-off of approximately $ 29.3 million of straight-line rent receivables and lease inducements related to Maplewood (see Note 5 – Contractual Receivables and Other Receivables and Lease Inducements).

The rental income for the year ended December 31, 2020, reflects the write-off of approximately $ 75.3 million of contractual rent receivables, straight-line rent receivables and lease inducements related to Agemo (see Note 5 – Contractual Receivables and Other Receivables and Lease Inducements).

Consolidated VIEs

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

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

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

Accordingly, this joint venture has been consolidated.

Omega is not required to make any additional capital contributions to the joint venture.

As of December 31, 2022, this joint venture has $ 25.8 million of total assets and $ 19.8 million of total liabilities, which are included in our Consolidated Balance Sheets.

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

No gain or loss was recognized on the initial consolidation of the VIE or upon the sale of the ALF to the joint venture.

In addition, as discussed in Note 3 – Real Estate Asset Acquisitions and Development, we consolidated the EATs that are classified as VIEs.

See further discussion of EATs that are consolidated in Note 3 – Real Estate Asset Acquisitions and Development.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

NOTE 11 – INVESTMENTS IN JOINT VENTURES

Unconsolidated Joint Ventures

Omega owns an interest in a number of joint ventures that are accounted for under the equity method.

These entities and their subsidiaries are not consolidated by the Company because it does not control, through voting rights or other means, the joint venture.

Omega owns an interest in a number of joint ventures which generally invest in the long-term healthcare industry.

The following is a summary of our investments in unconsolidated joint ventures (dollars in thousands):

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(2) The Company made a loan of $ 17.6 million in April 2020 to the venture which is included in other investments.

See Note 8 – Other Investments.

See Note 8 – Non-real Estate Loans Receivable.

During the first quarter of 2021, this joint venture sold 16 SNFs to an unrelated third party for approximately $ 328 million in net proceeds and recognized a gain on sale of approximately $ 102.2 million ( $ 14.9 million of which represents the Company’s share of the gain).

During the first quarter of 2021, this joint venture also sold five SNFs to Second Spring II LLC for approximately $ 70.8 million in net proceeds.

During 2020, this joint venture sold 16 SNFs subject to an operating lease for approximately $ 259.1 million in net cash proceeds and recognized a gain on sale of approximately $ 40.4 million.

During 2019, this joint venture sold 14 SNFs subject to an operating lease for approximately $ 311.8 million in net cash proceeds and recognized a gain on sale of approximately $ 64.0 million.

During 2020, this joint venture sold 16 SNFs subject to an operating lease for approximately $ 259.1 million in net cash proceeds and recognized a gain on sale of approximately $ 40.4 million ( $ 5.9 million of which represents the Company’s share of the gain).

(3) We acquired a 15 % interest in Second Spring II LLC for approximately $ 10.3 million.

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Our initial basis difference of approximately $ 35 million is being amortized on a straight-line basis over approximately 40 years to income (loss) from unconsolidated joint ventures in the Consolidated Statements of Operations.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

The following table reflects our income (loss) from unconsolidated joint ventures for the years ended December 31, 2022, 2021 and 2020:

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

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Asset Management Fees

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The investment in the preferred shares and warrants are recorded within other assets on the Consolidated Balance Sheets.

As of December 31, 2022, 10 % of the SafelyYou warrants have vested as a result of certain installation targets being met.

NOTE 12 – GOODWILL AND OTHER INTANGIBLES

3 unchanged sentences

Foreign currency translation

Sale of subsidiary (1)

Balance as of December 31, 2022

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

(1) In the fourth quarter of 2022, we sold a senior living focused technology company acquired by Omega in 2020, for a 6 % equity investment in the acquiring entity that offers a suite of technology services to senior living facilities.

In connection with the sale, we recognized a $ 1.2 million gain in other expense (income) – net.

We included $ 6.7 million of goodwill in the net assets disposed in connection with the transaction.

Our investment in the acquiring entity is included within other assets in the consolidated balance sheet as December 31, 2022.

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

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Net below market leases

Above market leases, net of accumulated amortization, are included in other assets on our Consolidated Balance Sheets.

Below market leases, net of accumulated amortization, are included in accrued expenses and other liabilities on our Consolidated Balance Sheets.

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

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

For the years ended December 31, 2022, 2021 and 2020, our net amortization related to intangibles was $ 5.7 million, $ 9.5 million and $ 14.2 million, respectively.

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2027 – $ 2.4 million and $ 5.5 million thereafter.

As of December 31, 2021, the weighted average remaining amortization period of above market lease assets is approximately ten years and of below market lease liabilities is approximately eight years .

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

NOTE 13 - CONCENTRATION OF RISK

As of December 31, 2021, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, and assets held for sale) consisted of 960 healthcare facilities, located in 42 states and the U.K.

As of December 31, 2022, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 926 healthcare facilities, located in 42 states and the U.K.

and operated by 67 third-party operators.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 10.1 billion at December 31, 2021, with approximately 98 % of our real estate investments related to healthcare facilities.

Our portfolio is made up of (i) 685 SNFs, 133 ALFs, 20 ILFs, 16 specialty facilities, two MOBs, (ii) fixed rate mortgages on 59 SNFs, two ALFs and two specialty facilities, and (iii) 41 facilities that are held for sale.

At December 31, 2021, we also held other investments of approximately $ 469.9 million, consisting primarily of secured loans to third-party operators of our facilities and $ 194.7 million of investment in six unconsolidated joint ventures.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.5 billion at December 31, 2022, with approximately 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 665 SNFs, 169 ALFs, 20 ILFs, 16 specialty facilities and two MOBs, (ii) fixed rate mortgages on 48 SNFs, two ALFs and two specialty facilities, and (iii) two facilities that are held for sale.

At December 31, 2022, we also held other real estate loans (excluding mortgages) receivable of $ 394.6 million and non-real estate loans receivable of $ 225.3 million, consisting primarily of secured loans to third-party operators of our facilities, and $ 178.9 million of investments in six unconsolidated joint ventures.

At December 31, 2022, we had investments with one operator/or manager that approximated or exceeded 10% of our total investments:

At December 31, 2021, we had investments with two operators/or managers that approximated or exceeded 10% of our total investments:

Maplewood and Consulate.

Maplewood and LaVie.

Maplewood generated approximately 8.9 %, 7.9 % and 5.3 % of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively.

Consulate generated approximately 9.5 %, 9.4 % and 3.6 % of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2021, 2020 and 2019, respectively.

At December 31, 2020, we had investments with one operator/or manager that exceeded 10% of our total investments:

Ciena generated approximately 9.3 %, 9.9 % and 10.5 % of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2021, 2020 and 2019, respectively.

At December 31, 2021, the three states in which we had our highest concentration of investments were Florida ( 15 %), Texas ( 10 %) and Michigan ( 6 %).

LaVie generated approximately 11.1 %, 9.5 % and 9.4 % of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2022, 2021 and 2020, respectively.

At December 31, 2022, the three states in which we had our highest concentration of investments were Florida ( 11.5 %), Texas ( 10.3 %) and Indiana ( 6.6 %).

OMEGA HEALTHCARE INVESTORS, INC.

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2023 term loan (4)

2024 term loan (5)

Total secured borrowings

Unsecured borrowings:

Revolving borrowings:

Revolving credit facility (6)(7)

Revolving credit facility (4)

Total revolving borrowings

Senior notes and other unsecured borrowings:

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2033 notes (6)(9)

Subordinated debt (2)

Sterling term loan (4)(7)

OP term loan (10)(11)

OP term loan (8)(9)

Deferred financing costs – net

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

(3) Excludes fees of approximately 0.65 % for mortgage insurance premiums.

(4) Borrowing is the debt of a consolidated joint venture.

(5) Borrowing is the debt of the consolidated joint venture discussed in Note 10 – Variable Interest Entities which was formed in the first quarter of 2022.

The borrowing is secured by two ALFs, which are owned by the joint venture.

(6) Guaranteed by Omega OP.

(7) As of December 31, 2022, borrowings under Omega’s $ 1.45 billion senior unsecured multicurrency revolving credit facility consisted of £ 16.0 million British Pounds Sterling (“GBP”).

The applicable interest rate on the US Dollar tranche and on the GBP borrowings under the alternative currency tranche of the credit facility were 5.58 % and 4.75 % as of December 31, 2022, respectively.

(8) In March 2021, we used a portion of the proceeds from the 2033 Senior Notes offering to fund the tender offer to redeem $ 350 million of the 4.375 % Senior Notes due 2023 .

In connection with this transaction, we recorded approximately $ 30.6 million in related fees, premiums, and expenses for the year ended December 31, 2021, which were recorded as Loss on debt extinguishment in our Consolidated Statement of Operations.

(6) We used the proceeds from this offering to pay down outstanding borrowings on the 2017 Revolving Credit Facility, repay the Sterling term loan, and fund the tender offer to purchase $ 350 million of the 4.375 % Senior Notes due 2023 and the payment of accrued interest and related fees, premiums and expenses.

(7) Actual borrowing is in GBP and remeasured to USD.

The Sterling term loan was settled in March 2021 using proceeds from the 3.250 % 2033 Senior Notes offering.

(9) In March 2021, we used the proceeds from this offering to pay down outstanding borrowings on the 2017 Revolving Credit Facility, repay the Sterling term loan, and fund the tender offer to purchase $ 350 million of the 4.375 % Senior Notes due 2023 and the payment of accrued interest and related fees, premiums and expenses.

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

(9) The weighted average interest rate of the OP Term Loan has been adjusted to reflect the impact of the interest rate swaps that effectively fix the LIBOR based portion of the interest rate at 1.84 %

(11) The interest rate swaps, that were cash flow hedges of Omega OP’s $ 50.0 million senior unsecured term loan facility’s (the “OP term loan”) interest payments and that effectively fixed the interest rate at 3.29 % , matured on February 10, 2022 .

(12) All borrowings are direct borrowings of Parent unless otherwise noted.

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

As of December 31, 2021 and 2020, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings .

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

OMEGA HEALTHCARE INVESTORS, INC.

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The payoff included a $ 0.9 million prepayment fee which is included in loss on debt extinguishment on our Consolidated Statements of Operations.

On August 31, 2022, we paid approximately $ 7.9 million to retire one mortgage loan guaranteed by HUD that was assumed in 2019 and had a fixed interest rate of 2.92 % per annum with a maturity date in 2051 .

The payoff included a $ 0.4 million prepayment fee which is included in loss on debt extinguishment on our Consolidated Statements of Operations.

All HUD loans are subject to the regulatory agreements that require escrow reserve funds to be deposited with the loan servicer for mortgage insurance premiums, property taxes, debt service and capital replacement expenditures.

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Term Loan Facility, collectively, the “2017 Omega Credit Facilities”).

The 2017 Revolving Credit Facility bore interest at LIBOR plus an applicable percentage (with a range of 100 to 195 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings.

Term Loan Facility and the Sterling Term Loan Facility bore interest at LIBOR plus an applicable percentage (with a range of 90 to 190 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings.

In 2020, we repaid the outstanding balance on our U.S.

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The 2017 OP Term Loan bore interest at LIBOR plus an applicable percentage (with a range of 90 to 190 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch Ratings.

At December 31, 2020, we had $ 50.0 million in outstanding borrowings under this facility.

In April 2021, the 2017 OP Term loan was replaced by the OP Term Loan.

3 unchanged sentences

We repaid the Amended 2015 Term Loan Facility in October 2020 with proceeds from the senior notes issuance and wrote-off $ 0.7 million of unamortized deferred costs to loss on debt extinguishment on our Consolidated Statements of Operations.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Subordinated Debt

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Interest on these notes is due quarterly with the principal balance due at maturity.

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, to the extent that the operator of the facilities (Gulf Coast) fails to pay rent when due to us under our existing master lease, we have the right to offset the amounts owed to us against the amounts we owe to the lender under the notes.

As of December 31, 2021, we have offset $ 1.3 million of accrued interest and $ 20.0 million of principal under the Subordinated Debt against the uncollected receivables of Gulf Coast.

Following the application of these offsets, Omega has no further obligations under the Subordinated Debt.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, to the extent that the operator of the facilities (Gulf Coast) failed to pay rent when due to us under our existing master lease, we had the right to offset the amounts owed to us against the amounts we owe to the lender under the notes.

As of December 31, 2021, we offset $ 1.3 million of accrued interest and $ 20.0 million of principal under the Subordinated Debt against the uncollected receivables of Gulf Coast.

Following the application of these offsets, Omega believes it has no further obligations under the Subordinated Debt.

See Note 20 – Commitments and Contingencies for additional discussion regarding an ongoing lawsuit related to the Subordinated Debt.

Parent and Omega OP, on a combined basis, have no material assets, liabilities or operations other than financing activities (including borrowings under the senior unsecured revolving and term loan credit facility, OP term loan and the outstanding senior notes) and their investments in non-guarantor subsidiaries.

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In October 2020, we terminated these $ 250.0 million of notional value interest rate swaps in connection with the repayment of the Amended 2015 Term Loan Facility and paid our swap counterparties $ 10.3 million which is recorded in loss on debt extinguishment on our Consolidated Statements of Operations.

On March 27, 2020 , we entered into five forward starting swaps totaling $ 400 million.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

On March 27, 2020 , we entered into five forward starting swaps totaling $ 400 million that are indexed to 3-month LIBOR.

We designated the forward starting swaps as cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt, initially expected to occur within the next five years .

The swaps are effective on August 1, 2023 and expire on August 1, 2033 and were issued at a fixed rate of approximately 0.8675 %.

The swaps are effective on August 1, 2023 and expire on August 1, 2033 and were issued at a weighted average fixed rate of approximately 0.8675 %.

In March 2021, in conjunction with the issuance of $ 700 million aggregate principal amount of our 3.25 % Senior Notes due 2033 , we discontinued hedge accounting for these five forward starting swaps.

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We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

In addition to the forward swaps discussed above, we also assumed various interest rate swap contracts in connection with the MedEquities Merger on May 17, 2019.

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In October 2020, we terminated $ 25.0 million of notional value interest rate swaps in connection with the partial repayment and paid our swap counterparty $ 0.6 million which is recorded in loss on debt extinguishment on our Consolidated Statements of Operations.

As of December 31, 2021, we have two interest rate swaps remaining with aggregate notional amounts of $ 50.0 million that are designated as hedges against our exposure to changes in interest payment cash flow fluctuations in the variable interest rates on the OP Term Loan.

The OP Term Loan will be unhedged for the period after February 10, 2022 through its maturity on April 30, 2025 .

On February 10, 2022, the two remaining interest rate swaps with aggregate notional amounts of $ 50.0 million matured.

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

The OP Term Loan is unhedged for the period after February 10, 2022 through its maturity on April 30, 2025 .

Foreign Currency Forward Contracts and Debt Designated as Net Investment Hedges

We use debt denominated in GBP and foreign currency forward contracts to hedge a portion of our net investment in the U.K.

We use debt denominated in GBP and foreign currency forward contracts to hedge a portion of our net investments, including certain intercompany loans, in the U.K.

against fluctuations in foreign exchange rates.

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The GBP denominated borrowings under both debt instruments were deemed an effective hedge from issuance in May 2017 until the settlement of the Sterling term loan and the repayment of the GBP denominated borrowings under the 2017 Revolving Credit Facility in March 2021.

Concurrent with the settlement of the GBP denominated debt, we entered into four foreign currency forwards with notional amounts totaling £ 174.0 million, that mature on March 8, 2024 , to hedge a portion of our net investments in the U.K., effectively replacing the terminated net investment hedge.

Concurrent with the settlement of the GBP denominated debt, we entered into four foreign currency forwards with notional amounts totaling £ 174.0 million, that mature on March 8, 2024 , to hedge a portion of our net investments in the U.K., including an intercompany loan and an investment in our U.K.

joint venture, effectively replacing the terminated net investment hedge.

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

These currency forward contracts hedge a portion of our net investments in U.K.

subsidiaries, including an intercompany loan.

The location and the fair value of derivative instruments designated as hedges, at the respective balance sheet dates, were as follows:

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Net investment hedges:

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

The fair value of the interest rate swaps and foreign currency forwards is derived from observable market data such as yield curves and foreign exchange rates and represents a Level 2 measurement on the fair value hierarchy.

1 unchanged sentence

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).

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

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

3 unchanged sentences

Investments in direct financing leases – net

Mortgage notes receivable – net

Other investments – net

2017 Revolving credit facility

Real estate loans receivable – net

Non-real estate loans receivable – net

Revolving credit facility

Sterling term loan

2017 OP term loan

2023 term loan

2024 term loan

4.375 % notes due 2023 – net

8 unchanged sentences

HUD mortgages – net

Subordinated debt – net

Fair value estimates are subjective in nature and are dependent on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument (see Note 2 – Summary of Significant Accounting Policies).

1 unchanged sentence

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

● Mortgage notes receivable:

The fair value of the mortgage notes receivables are estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings (Level 3).

● Other investments:

Other investments are primarily comprised of notes receivable.

● Real estate loans receivable:

The fair value of the real estate loans receivable are estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings (Level 3).

● Non-real estate loans receivable:

Non-real estate loans receivable are primarily comprised of notes receivable.

The fair values of notes receivable are estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings (Level 3).

● Revolving credit facility and OP term loan:

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

● Revolving credit facility, OP term loan, 2023 term loan and 2024 term loan:

The carrying amount of these approximate fair value because the borrowings are interest rate adjusted.

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The fair value of the senior unsecured notes payable was estimated based on (Level 1) publicly available trading prices.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

● Subordinated debt:

The fair value of our borrowings under fixed rate agreements are estimated using a present value technique based on inputs from trading activity provided by a third party (Level 2).

● HUD mortgages:

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We do not anticipate that such changes will materially impact the computation of Omega’s taxable income, or the taxable income of any Omega entity, including our TRSs.

As discussed in Note 3 – Real Estate Asset Acquisitions and Development, in connection with the acquisition of one U.K.

entity in the first quarter of 2022, we acquired foreign net operating losses of $ 55.0 million resulting in a NOL deferred tax asset of $ 13.4 million.

The NOLs have no expiration date and may be available to offset future taxable income.

We believe these foreign NOLs are realizable under a “more likely than not” measurement and have not recorded a valuation allowance against the deferred tax asset.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

The following is a summary of our provision for income taxes:

4 unchanged sentences

Total provision for income taxes (3)

(1) For the years ended December 31, 2022, 2021 and 2020, income before income tax expense and income from unconsolidated joint ventures from domestic operations was $ 418.5 million, $ 403.9 million and $ 151.5 million, respectively.

(2) For the years ended December 31, 2022, 2021 and 2020, income before income tax expense and income from unconsolidated joint ventures from foreign operations was $ 17.6 million, $ 12.2 million and $ 10.8 million, respectively.

(3) The above amounts do not include gross income receipts or franchise taxes payable to certain states and municipalities.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

The following is a summary of deferred tax assets and liabilities:

(in thousands)

Deferred tax assets:

Federal net operating loss carryforward

Deferred tax liability:

Foreign deferred tax liability (1)

Valuation allowance on deferred tax asset

Net deferred tax liability

Foreign net operating loss carryforward

Foreign deferred tax liability (1)

Net deferred tax asset (liability)

(1) The deferred tax liability primarily resulted from inherited basis differences resulting from our acquisition of entities in the U.K.

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NOTE 18 – STOCKHOLDERS’ EQUITY

$300 Million 2019 Forward Equity Sale

In connection with a $ 300 million underwritten public offering, we entered into a forward equity sales agreement on September 9, 2019 to sell 7.5 million shares of our common stock at an initial net price of $ 40.01 per share, after underwriting discounts and commissions.

On December 27, 2019, we settled the forward equity sale agreement by physical delivery of 7.5 million shares of common stock at $ 39.45 per share, net of dividends paid and interest received, for net proceeds of approximately $ 295.9 million.

$ 200 Million Stock Repurchase Program

Stock Repurchase Program

On March 20, 2020, Omega’s Board of Directors authorized the repurchase of up to $ 200 million of its outstanding common stock from time to time over the twelve months ending March 20, 2021.

Omega did no t repurchase any of its outstanding common stock under this announced program during 2020 or 2021.

On January 27, 2022, the Company authorized the repurchase of up to $ 500 million of our outstanding common stock from time to time through March 2025.

The Company is authorized to repurchase shares of its common stock in open market and privately negotiated transactions or in any other manner as determined by the Company’s management and in accordance with applicable law.

The timing and amount of stock repurchases will be determined, in management’s discretion, based on a variety of factors, including but not limited to market conditions, other capital management needs and opportunities, and corporate and regulatory considerations.

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

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

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

During the year ended December 31, 2022, the Company repurchased 5.2 million shares of our outstanding common stock at an average price of $ 27.32 per share, for a total repurchase cost of $ 142.3 million.

The average price per share and repurchase cost includes the cost of commissions.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

At-The-Market Offering Program

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The use of forward sales under the 2021 ATM Program generally allows Omega to lock in a price on the sale of shares of common stock when sold by the forward sellers but defer receiving the net proceeds from such sales until the shares of our common stock are issued at settlement on a later date.

We did not utilize the forward provisions under the 2021 ATM Program during 2021.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

We did not utilize the forward provisions under the 2021 ATM Program during 2021 or 2022.

The following is a summary of the shares issued under the 2021 and 2015 ATM Programs for each of the years ended December 31, 2020, 2021, and 2022 (in millions except average price per share):

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February 15, 2023

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Per Share Distributions

5 unchanged sentences

Total dividends paid

Pursuant to Treasury Regulation Section 1.1061-6(c), Omega Healthcare Investors Inc.

is disclosing the following information to its shareholders.

“One Year Amounts Disclosure” is zero percent of the capital gain distributions allocated to each shareholder and “Three Year Amounts Disclosure” is zero percent of the capital gain distributions allocated to each shareholder.

All capital gain distributions reported are related to Section 1231 gain.

For additional information regarding dividends, see Note 17 – Taxes.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Accumulated Other Comprehensive Income (Loss)

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Translation (loss) gain

Realized gain (loss)

Realized (loss) gain

Ending balance

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Beginning balance

Unrealized gain (loss)

Unrealized gain

Realized gain (loss) (1)

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Ending balance

Total accumulated other comprehensive loss before noncontrolling interest

Total accumulated other comprehensive income (loss) before noncontrolling interest

portion included in noncontrolling interest

Total accumulated other comprehensive loss for Omega

Total accumulated other comprehensive income (loss) for Omega

Expenses related to our effective cash flow hedges are recorded within interest expense.

As noted in Note 15 – Derivatives and Hedging, we terminated $ 250.0 million of notional value interest rate swaps in October 2020 and reclassified the remaining balance in AOCI to loss on debt extinguishment on the Consolidated Statements of Operations.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

NOTE 19 – STOCK-BASED COMPENSATION

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We expense the cost of these awards ratably over their vesting period.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Performance-Based Restricted Equity Awards

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Expected volatility

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

The following table summarizes the activity in restricted stock, RSUs, PRSUs, and PIUs for the years ended December 31, 2020, 2021 and 2022:

12 unchanged sentences

Cancelled during 2021

Forfeited during 2021

Vested during 2021

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PRSUs are shown as vesting in the year that the Compensation Committee determines the level of achievement of the applicable performance measures .

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

As of December 31, 2022, unrecognized compensation costs related to unvested awards to employees is as follows:

8 unchanged sentences

Stock withheld to pay tax withholdings for equity instruments granted under stock-based payment arrangements for the years ended December 31, 2022, 2021 and 2020, was $ 1.1 million, $ 4.6 million and $ 4.7 million, respectively.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Shares Available for Issuance for Compensation Purposes

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As of December 31, 2022, approximately 1.6 million shares of common stock were reserved for issuance to our employees, directors and consultants under our stock incentive plans.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

NOTE 20 – COMMITMENTS AND CONTINGENCIES

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District Court for the Southern District of New York (the “Securities Class Action”).

Brought by lead plaintiff Royce Setzer and additional plaintiff Earl Holtzman, the Securities Class Action purports to assert claims for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, and seeks an unspecified amount of monetary damages, interest, fees and expenses of attorneys and experts, and other relief.

Brought by lead plaintiff Royce Setzer and additional plaintiff Earl Holtzman, the Securities Class Action purports to assert claims for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, and seeks monetary damages, interest, fees and expenses of attorneys and experts, and other relief.

The Securities Class Action alleges that the defendants violated the Exchange Act by making materially false and/or misleading statements, and by failing to disclose material adverse facts about the Company’s business, operations, and prospects, including the financial and operating results of one of the Company’s operators, the ability of such operator to make timely rent payments, and the impairment of certain of the Company’s leases and the uncollectibility of certain receivables.

The initial complaint was dismissed with prejudice by the U.S District Court, but the dismissal was overturned by the U.S Court of Appeals for the Second Circuit in 2020.

The initial complaint was dismissed with prejudice by the U.S.

District Court, but the dismissal was overturned by the U.S.

Court of Appeals for the Second Circuit in 2020.

Thereafter, the plaintiffs filed a Second Consolidated Amended Complaint in August 2020.

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On September 28, 2021, the Court issued an order denying the motion to dismiss insofar as it requested dismissal of the entire action on grounds of loss causation, and granting it insofar as it sought dismissal of any claims arising out of defendants’ statements in February 2017.

Because the dismissed claims were the basis for defendants’ efforts to begin the alleged class period in February 2017, the decision means that the alleged class period runs from May 3, 2017 to October 31, 2017.

Following a mediation, the plaintiffs and defendants reached an agreement in principle on a settlement of the Securities Class Action and thereafter executed a stipulation of settlement dated December 9, 2022 (“Settlement”), subject to the approval of the District Court.

On December 27, 2022, the District Court granted preliminary approval of the settlement, and scheduled a hearing for April 25, 2023 on final approval of the Settlement.

Pursuant to the preliminary approval order, and subject to final approval by the District Court, the Settlement payment of $ 30.75 million has been transmitted to an escrow account by the Company’s directors and officers insurers.

The Settlement does not include any admission of wrongdoing or liability on the part of the Company or the individual defendants, and upon final approval by the Court, provides for a dismissal of, and a release of all claims against the defendants by a class of persons and/or entities who purchased or otherwise acquired Company securities from February 8, 2017 through October 31, 2017.

The Company recorded a $ 31 million legal reserve related to the Securities Class Action in the third quarter of 2022, which is included within accrued expenses and other liabilities on the Consolidated Balance Sheets.

As the Settlement proceeds are to be paid by insurance, the Company concurrently recorded a receivable for $ 31 million within other assets on the Consolidated Balance Sheet, and consequently there is no impact to the Consolidated Statements of Operations related to this matter.

Certain derivative actions have also been brought against the officers named in the Securities Class Action, and certain current and former directors of the Company, alleging claims relating to the matters at issue in the Securities Class Action.

These derivative actions are currently stayed pending certain developments in the Securities Class Action.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

In 2018, Stourbridge Investments LLC, a purported stockholder of the Company, filed a derivative action purportedly on behalf of the Company in the U.S.

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The case has been stayed pending the entry of judgment or a voluntary dismissal with prejudice in the Securities Class Action.

The Company believes that the claims asserted against it in these lawsuits are without merit and intends to vigorously defend against them.

Gulf Coast Subordinated Debt

In August 2021, we filed suit in the Circuit Court for Baltimore County (the “Court”) against the holders of certain Subordinated Debt (the “Debt Holders”) associated with our Gulf Coast master lease agreement, following an assertion by the holders that our prior exercise of offset rights in connection with Gulf Coast’s non-payment of rent had resulted in defaults under the terms of the Subordinated Debt.

The suit seeks a declaratory judgment to, among other items, declare that the aggregate amount of unpaid rent due from Gulf Coast under the master lease agreement exceeds all amounts which otherwise would be due and owing by an indirect subsidiary of Omega (“Omega Obligor”) under the Subordinated Debt, and that all principal and interest due and owing under the Subordinated Debt may be (and was) offset in full as of December 31, 2021.

In October 2021, the defendants in the case filed a motion to dismiss for lack of personal jurisdiction.

On November 3, 2022, the Court granted the noteholders’ motion to dismiss for lack of personal jurisdiction, and Omega filed a timely appeal of the ruling.

While Omega believes Omega Obligor is entitled to the enforcement of the offset rights sought in the action, Omega cannot predict the outcome of the declaratory judgment action, irrespective of whether (a) it is ultimately litigated in the Court if Omega Obligor prevails in its appeal or (b) if the order granting the motion to dismiss for lack of personal jurisdiction is affirmed.

On or about January 19, 2023, the Debt Holders served a lawsuit against the Omega Obligor in the Superior Court of the State of Delaware, asserting claims for (i) breach of the instruments evidencing the Subordinated Debt, (ii) declaratory judgment, and (iii) unjust enrichment, all claims that are factually based on the claims that are the subject of Omega Obligor’s suit in the Court and that are now on appeal.

On February 8, 2023, Omega Obligor filed a motion to dismiss or, in the alternative, to stay this action pending the outcome of the above referenced lawsuit in Maryland.

The motion is presently pending before the Delaware state court.

Omega believes that the claims are baseless and is evaluating procedural and substantive legal options in connection with this recently filed suit.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

Gulf Coast Subordinated Debt

In August 2021, we filed suit in the Circuit Court for Baltimore County against the holders of certain Subordinated Debt associated with our Gulf Coast master lease agreement, following an assertion by the holders that our prior exercise of offset rights in connection with Gulf Coast’s non-payment of rent had resulted in defaults under the terms of the Subordinated Debt.

The suit seeks a declaratory judgment to, among other items, declare that the aggregate amount of unpaid rent due from Gulf Coast under the master lease agreement exceeds all amounts which otherwise would be due and owing by Omega Obligor under the Subordinated Debt, and that all principal and interest due and owing under the Subordinated Debt may be (and was) offset in full as of December 31, 2021.

In October 2021, the defendants in the case filed a motion to dismiss for lack of personal jurisdiction, with a hearing scheduled on the motion for February 25, 2022.

While Omega believes Omega Obligor is entitled to the enforcement of the offset rights sought in the action, the outcome of litigation is unpredictable, and Omega cannot predict the outcome of the declaratory judgment action.

See Note 5 – Contractual Receivables and Other Receivables and Lease Inducements – Gulf Coast Health Care, LLC.

Lakeway Realty, L.L.C.

In September 2016, MedEquities received a Civil Investigative Demand (“CID”) from the U.S.

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

As a result of the acquisition of MedEquities, the Company owns a 51 % interest in an unconsolidated partnership that owns Lakeway Hospital (the “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 is cooperating fully with the DOJ in connection with the CID and has produced all of the information that has been requested to date.

On September 29, 2020 the DOJ announced it had reached a settlement of a False Claims Act case with respect to certain aspects of the investigation with Lakeway Regional Medical Center wherein Lakeway Regional Medical Center agreed to pay $ 1.1 million for inducing certain physicians to refer patients by offering a low risk and high return investment in the form of a joint venture to purchase and then lease back the hospital to Lakeway Regional Medical Center.

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

On September 29, 2020, the DOJ announced it had reached a settlement of a False Claims Act case with Lakeway Regional Medical Center wherein Lakeway Regional Medical Center agreed to pay $ 1.1 million for inducing certain physicians to refer patients by offering a low risk and high return investment in the form of a joint venture to purchase and then lease back the hospital to Lakeway Regional Medical Center.

A MedEquities subsidiary was a party to this transaction but was not included in settlement discussions, and we understand that the settlement did not fully resolve the investigation referenced in the CID.

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.

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

As of November 7, 2022, Lakeway Realty, L.L.C., one of its members, MRT of Lakeway TX-ACH, LLC, and Omega (together, “Defendants”), the U.S., the State of Texas and certain named relators entered into a settlement agreement pursuant to which Defendants were released from the Potential Claims from March 2, 2015 through August 31, 2016, in exchange for Omega’s agreement to pay approximately $ 3.1 million.

Defendants admitted no liability associated with the Potential Claims.

In the second quarter of 2022, the Company recorded a $ 3.0 million legal reserve related to this matter, which is included in other (expense) income – net on the Consolidated Statements of Operations.

The settlement was paid in the fourth quarter of 2022 and Omega has no remaining legal reserves related to this matter as of December 31, 2022.

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

While any legal proceeding or claim has an element of uncertainty, management believes that the outcome of each lawsuit, claim or legal proceeding that is pending or threatened, or all of them combined, will not have a material adverse effect on our consolidated financial position or results of operations.

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As of December 31, 2022, our maximum funding commitment under these indemnification agreements was approximately $ 5.1 million.

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

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

Total commitments (1)

Amounts funded to date (2)

Remaining commitments (3)

(1) Includes our $ 177.7 million commitment relating to the redevelopment of the real estate property located in Washington, D.C.

discussed in Note 3 – Real Estate Acquisitions.

Construction and capital expenditure mortgage loan commitments

Lessor construction and capital commitments under lease agreements (1)

Non-real estate loan commitments (2)

Total remaining commitments (3)

(1) Includes $ 93.3 million related to our $ 177.7 million commitment relating to the redevelopment of the real estate property located in Washington, D.C.

discussed in Note 3 – Real Estate Asset Acquisitions and Development.

(2) This amount includes $ 57.0 million related to the $ 90.0 million short-term revolving line of credit discussed in Note 8 – Non-real Estate Loans Receivable.

(3) Includes finance costs .

(3) This amount excludes our remaining commitments to fund under our other investments of approximately $ 50.1 million.

Environmental Matters

As of December 31, 2021 and 2020, we had identified conditional asset retirement obligations primarily related to the future removal and disposal of asbestos that is contained within certain of our real estate investment properties.

The asbestos is appropriately contained, and we believe we are compliant with current environmental regulations.

If these properties undergo major renovations or are demolished, certain environmental regulations are in place, which specify the manner in which asbestos must be handled and disposed.

We are required to record the fair value of these conditional liabilities if they can be reasonably estimated.

As of December 31, 2021 and 2020, no liability for conditional asset retirement obligations was recorded on our accompanying Consolidated Balance Sheets.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

NOTE 21 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

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Non-cash proceeds from sale of real estate investments

Non-cash placement of mortgage principal

Non-cash collection of mortgage principal

Non-cash surrender of mortgage

Non-cash proceeds from sale of business

Non-cash placement of loan principal

Non-cash collection of loan principal

Non-cash investment in other investments

Non-cash proceeds from other investments

Non-cash settlement of direct financing lease

Initial non-cash right of use asset - ground leases

Initial non-cash lease liability - ground leases

Non cash financing activities

Debt assumed in merger

Stock exchanged in merger

Acquisition of other long-term borrowings

Non-cash borrowing (repayment) of other long-term borrowings

Non-cash (repayment) borrowing of other long-term borrowings

Non-cash contribution from noncontrolling member in consolidated joint venture

Change in fair value of cash flow hedges

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Common stock equivalents

Net forward share contract

Noncontrolling interest – Omega OP Units

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Earnings per share – diluted:

In September 2019, we entered into a forward equity sales agreement to sell up to an aggregate of 7.5 million shares of our common stock at an initial net price of $ 40.01 per share, after underwriting discounts and commissions.

On December 27, 2019, we completed the forward equity sale and issued the 7.5 million shares of common stock at a net price of $ 39.45 per share, and received approximately $ 295.9 million of net proceeds.

See Note 18 – Stockholders’ Equity – $ 300 Million Forward Equity Sale.

The shares issuable prior to settlement of the forward equity sales agreement are reflected in the diluted earnings per share calculations using the treasury stock method.

Under this method, the number of our common shares used in calculating diluted earnings per share is deemed to be increased by the excess, if any, of the number of common shares that would be issued upon full physical settlement of the forward equity sales agreement over the number of common shares that could be purchased by us in the market (based on the average market price during the period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the reporting period).

NOTE 23 – SUBSEQUENT EVENTS

Asset Acquisitions

On January 1, 2022, we acquired a Maryland SNF for $ 8.2 million and amended an operator’s existing lease, with an initial term expiring on December 31, 2032 , to include the acquired facility.

The incremental base rent for the additional facility in the initial year is $ 0.8 million and includes annual escalators of 2.5 %.

On January 31, 2022, we acquired one care home facility in the U.K.

(similar to ALFs in the U.S.) for approximately $ 8.2 million.

The facility was added to an existing operator’s master lease with an initial cash yield of 8.0 % with 2.5 % annual escalators.

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued

$500 Million Stock Repurchase Program

On January 27, 2022, the Company authorized the repurchase of up to $ 500 million of our outstanding common stock from time to time through March 2025 .

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

Operator Collectibility

In January and February 2022, an operator representing 3.4 % of total revenue (excluding the impact of write-offs) for the year ended December 31, 2021, did not pay its contractual amounts due under its lease agreement.

The operator asked for a short-term rent deferral, and negotiations are on-going.

Omega holds a $ 1.0 million letter of credit from this operator.

As discussed in Note 8 – Other Investments under “Revolving Credit Facility - $ 20 million”, we also have a $ 20.0 million revolving credit facility with this operator, and the operator paid contractual interest under the facility in January and February 2022.

As of December 31, 2021, the total outstanding principal due under the credit facility was $ 16.0 million.

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

In connection with on-going restructuring negotiations with Guardian, in February 2022, we completed the sale of two facilities for $ 3.1 million in gross proceeds, previously leased to Guardian, and included in held for sale as of December 31, 2021.

In February 2022, we also agreed to re-lease 7 facilities, also previously leased to Guardian, to another operator.

The new 7 facility lease has an initial term expiring January 31, 2027 .

The base rent in the initial year is $ 0.9 million and increases to $ 1.2 million in the second year with annual escalators of 2.5 % thereafter.

On February 15, 2022, Guardian completed the sale of three facilities, subject to a mortgage loan with Omega (see Note – 8 Mortgage Notes Receivable).

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

Guardian failed to make rent and interest payments in January and February 2022 and discussions on restructuring the remaining Guardian lease facilities are on-going.

OMEGA HEALTHCARE INVESTORS, INC.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Deductions or

Year Ended December 31, 2019:

Allowance for doubtful accounts:

Contractual receivables (2)

Mortgage notes receivable (3)

Direct financing leases (3)

(1) Uncollectible accounts written off, net of recoveries or adjustments.

(2) The Company adopted Topic 842 on January 1, 2019.

As a result of this adoption, lease related receivables are written off through rental income, as opposed to the provision account.

As such, our lease receivables are no longer considered in the valuation and qualifying accounts.

(3) The Company adopted Topic 326 on January 1, 2020 which addressed expected credit losses on our mortgage notes receivables, other investments, and direct financing leases.

As a result of this adoption, we have disclosed a rollforward of our allowance for credit loss related to these financial instruments for 2020 and 2021 in Note 9 – Allowance for Credit Losses.

OMEGA HEALTHCARE INVESTORS, INC.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

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31 years - 33 years

Arizona (ALF, SNF, ILF)

Arizona (ALF, ILF, SNF)

25 years - 40 years

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30 years - 33 years

Florida (ALF, SNF, ILF)

Florida (ALF, ILF, SNF)

2 years - 39 years

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20 years - 40 years

Iowa (ALF, SNF)

23 years - 33 years

Kentucky (ALF, SNF)

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Montana (SNF)

Nebraska (SNF)

20 years - 33 years

Nevada (BHS, SH, SNF)

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New York (ALF)

North Carolina (SNF)

North Carolina (ALF, SNF)

25 years - 36 years

Ohio (BHP, BHS, ALF, SH, SNF)

Ohio (ALF, BHP, BHS, SH, SNF)

25 years - 39 years

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20 years - 33 years

Oregon (ALF, SNF, ILF)

Oregon (ALF, ILF, SNF)

25 years - 33 years

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Balance at beginning of period

Acquisitions through foreclosure

Acquisitions (a)

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Balance at close of period

(5) The reported amount of our real estate at December 31, 2021 is greater than the tax basis of the real estate by approximately $ 41.0 million.

(5) The reported amount of our real estate at December 31, 2022 is greater than the tax basis of the real estate by approximately $ 73 million (unaudited).

(6) Reflects bed sales, impairments (including the write-off of accumulated depreciation), land easements and impacts from foreign currency exchange rates.

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OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCHEDULE IV – MORTGAGE LOANS ON REAL ESTATE

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Interest payable monthly until maturity

Ohio (2 SNFs) and Pennsylvania (4 SNFs and 1 ALFs)

Pennsylvania (3 SNFs and 1 ALF)

Interest payable monthly until maturity

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Interest payable monthly until maturity

Michigan (1 SNF)

Interest plus approximately $ 4.0 of principal payable monthly with $ 17,613 due at maturity

Interest payable monthly until maturity

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Interest plus approximately $ 16.4 of principal payable monthly with $ 80,918 due at maturity

Michigan (1 SNF)

Interest plus approximately $ 2.9 of principal payable monthly with $ 16,617 due at maturity

Capital Expenditure Mortgages

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Michigan (1 SNF)

Interest payable monthly until maturity

Interest paid-in-kind monthly until maturity

Allowance for credit loss on mortgage loans (7)

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(2) Interest on the loans escalates annually at a fixed rate.

(3) The aggregate cost for federal income tax purposes is approximately $ 909.3 million.

(3) The aggregate cost for federal income tax purposes is approximately $ 731.5 million (unaudited).

OMEGA HEALTHCARE INVESTORS, INC.

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Balance at close of period

(a) The 2019 amount includes $ 0.3 million of non-cash interest paid-in-kind.

The 2020 amount includes $ 0.6 million of non-cash interest paid-in-kind and $ 86.9 million of non-cash placement of mortgage capital.

(a) The 2020 amount includes $ 0.6 million of non-cash interest paid-in-kind and $ 86.9 million of non-cash placement of mortgage capital.

The 2021 amount includes $ 0.2 million of non-cash interest paid-in-kind and $ 7.0 million of non-cash placement of mortgage principal.

(b) The 2019 amount includes $ 11.9 million of non-cash deed-in-lieu of foreclosure.

The 2021 amount includes $ 58.6 million of non-cash principal reductions.

The 2022 amount includes $ 1.2 million of non-cash interest paid-in-kind.

(b) The 2021 amount includes $ 58.6 million of non-cash principal reductions.

The 2022 amount includes $ 6.0 million of interest payments that were directly applied against the principal balance outstanding using the cost recovery method.

(5) Mortgage written down to the fair value of the underlying collateral.

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EXHIBIT NUMBER

Agreement and Plan of Merger, dated as of January 2, 2019, by and among Omega Healthcare Investors, Inc., OHI Healthcare Properties Limited Partnership, MedEquities Realty Trust, Inc., MedEquities OP GP, LLC and MedEquities Realty Operating Partnership, LP together with First Amendment thereto dated March 26, 2019 (Incorporated by reference to Annex A of Amendment No.

1 to Form S-4, filed March 29, 2019).

Articles of Amendment and Restatement of Omega Healthcare Investors, Inc., as amended.

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Amended and Restated Bylaws of Omega Healthcare Investors, Inc.

as of January 27, 2022 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed January 27, 2022).

as of October 21, 2022 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed October 21, 2022).

Certificate of Limited Partnership of OHI Healthcare Properties Limited Partnership (Incorporated by reference to Exhibit 3.121 to the Company’s Form S-4, filed April 16, 2015).

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Bank National Association (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed March 10, 2021).

Description of Securities registered under Section 12 of the Securities Exchange Act of 1934 (Incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.*

Form of Directors and Officers Indemnification Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed February 23, 2018).

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2020 Form of Time-Based Restricted Stock Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8G to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8G of the Company’s Annual Report on Form 10-K filed February 28, 2020).

2020 Form of Time-Based Profits Interest Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8H to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8H of the Company’s Annual Report on Form 10-K filed February 28, 2020).

2020 Form of TSR-Based Performance Restricted Stock Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8I to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8I of the Company’s Annual Report on Form 10-K filed February 28, 2020).

2020 Form of TSR-Based Performance Profits Interest Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8J to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8J of the Company’s Annual Report on Form 10-K filed February 28, 2020).

2020 Form of Relative TSR-Based Performance Restricted Stock Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8K to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8K of the Company’s Annual Report on Form 10-K filed February 28, 2020).

2020 Form of Relative TSR-Based Performance Profits Interest Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8L to the Company’s Annual Report on Form 10-K, filed February 28, 2020).

2018 Stock Incentive Plan (Incorporated by reference to Exhibit 10.8L of the Company’s Annual Report on Form 10-K filed February 28, 2020).

Form of Time-Based Restricted Stock Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan.

2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to Exhibit 10.6M to the Company’s Annual Report on Form 10-K, filed February 17, 2022).

Form of Time-Based Profits Interest Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan.

2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to Exhibit 10.6N to the Company’s Annual Report on Form 10-K, filed February 17, 2022).

Form of TSR-Based Performance Restricted Stock Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan.

2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to Exhibit 10.6O to the Company’s Annual Report on Form 10-K, filed February 17, 2022).

Form of TSR-Based Performance Profits Interest Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan.

2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to Exhibit 10.6P to the Company’s Annual Report on Form 10-K, filed February 17, 2022).

Form of Relative TSR-Based Performance Restricted Stock Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan.

2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to Exhibit 10.6Q to the Company’s Annual Report on Form 10-K, filed February 17, 2022).

Form of Relative TSR-Based Performance Profits Interest Units Agreement pursuant to the Omega Healthcare Investors, Inc.

2018 Stock Incentive Plan.+*

2018 Stock Incentive Plan (commencing 2022) (Incorporated by reference to Exhibit 10.6R to the Company’s Annual Report on Form 10-K, filed February 17, 2022).

Form of Officer Deferred Performance Restricted Stock Unit Agreement (Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q, filed August 5, 2013).

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Form of Annual Amendment to Employment Agreement for the Company’s executive officers.

Amended and Restated Phantom Partnership Unit Award Agreement, dated as of September 17, 2010, among Aviv Asset Management, L.L.C., Steven J.

Insoft and Aviv Healthcare Properties Limited Partnership (Incorporated by reference to Exhibit 10.8 to Aviv REIT, Inc.’s Registration Statement on Form S-4, filed May 2, 2011).

Omega Healthcare Investors, Inc.

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The following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in Inline XBRL:

(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

(i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

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February 14, 2023

/s/ Edward Lowenthal

February 17, 2022

Edward Lowenthal

Taylor Pickett

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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-K

Item 9A. Controls and Procedures