What changed in this filing

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Item 1. Financial Statements

2023-05-03 compared with 2022-11-03 · 408 added, 571 removed, 495 unchanged (66% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30,

Real estate assets

8 unchanged sentences

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

10 unchanged sentences

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

Common stock $ 0.10 par value authorized – 350,000 shares, issued and outstanding – 234,176 shares as of September 30, 2022 and 239,061 shares as of December 31, 2021

Common stock $ 0.10 par value authorized – 350,000 shares, issued and outstanding – 234,346 shares as of March 31, 2023 and 234,252 shares as of December 31, 2022

Additional paid-in capital

3 unchanged sentences

( 6,186,986 )

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total stockholders’ equity

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Rental income

Income from direct financing leases

Mortgage interest income

Other investment income

Interest income

Miscellaneous income

5 unchanged sentences

Impairment on real estate properties

Recovery on direct financing leases

Provision for credit losses

(Recovery) provision for credit losses

Interest expense

1 unchanged sentence

Other income (expense)

Other (expense) income – net

Other income (expense) – net

Loss on debt extinguishment

1 unchanged sentence

Total other income

Income before income tax expense and income from unconsolidated joint ventures

Income tax expense

Income before income tax benefit (expense) and income from unconsolidated joint ventures

Income tax benefit (expense)

Income from unconsolidated joint ventures

3 unchanged sentences

Net income available to common stockholders

See notes to consolidated financial statements .

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income (loss):

1 unchanged sentence

Cash flow hedges

Total other comprehensive income (loss)

Total other comprehensive income

Comprehensive income

4 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended September 30, 2022 and 2021

(in thousands, except per share amounts)

Comprehensive

Stockholders’

Noncontrolling

Income (Loss)

Balance at June 30, 2022

( 5,872,269 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 0.67 per share)

Omega OP Units distributions

Capital contribution from noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at September 30, 2022

( 6,029,603 )

Balance at June 30, 2021

( 5,232,692 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Other comprehensive loss

Balance at September 30, 2021

( 5,393,284 )

See notes to consolidated financial statements.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended September 30, 2022 and 2021

Three Months Ended March 31, 2023 and 2022

(in thousands, except per share amounts)

7 unchanged sentences

Issuance of common stock

Repurchase of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

1 unchanged sentence

Other comprehensive income

Balance at September 30, 2022

Balance at March 31, 2023

( 6,344,413 )

3 unchanged sentences

Issuance of common stock

Repurchase of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Capital contribution from noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at September 30, 2021

Balance at March 31, 2022

( 5,714,595 )

3 unchanged sentences

Unaudited (in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

2 unchanged sentences

Impairment on real estate properties

Recovery on direct financing leases

Provision for rental income

Provision for credit losses

(Recovery) provision for credit losses

Amortization of deferred financing costs and loss on debt extinguishment

3 unchanged sentences

Amortization of acquired in-place leases – net

Effective yield payable on mortgage notes

Straight-line rent and effective interest receivables

Interest paid-in-kind

Income from unconsolidated joint ventures

Loss (income) from unconsolidated joint ventures

Change in operating assets and liabilities – net:

Contractual receivables

Straight-line rent receivables

Lease inducements

3 unchanged sentences

Acquisition of real estate

Acquisition deposit – net

Net proceeds from sale of real estate investments

Investments in construction in progress

Proceeds from sale of direct financing lease and related trust

Placement of mortgage loans

Collection of mortgage principal

Investments in unconsolidated joint ventures

Placement of loan principal

Collection of loan principal

Distributions from unconsolidated joint ventures in excess of earnings

1 unchanged sentence

Receipts from insurance proceeds

Investments in other investments

Proceeds from other investments

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Cash flows from financing activities

1 unchanged sentence

Payments of long-term borrowings

( 2,121,429 )

Payments of financing related costs

3 unchanged sentences

Noncontrolling members’ contributions to consolidated joint venture

Redemption of OP Units

Distributions to Omega OP Unit Holders

Net cash used in financing activities

Net cash (used in) provided by financing activities

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

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

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

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

March 31, 2023

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

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.

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

Our core portfolio consists of 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.

2 unchanged sentences

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

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

As of March 31, 2023, Parent owned approximately 97 % of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3 % of the outstanding Omega OP Units.

Basis of Presentation and Principles of Consolidation

9 unchanged sentences

Reclassification

Certain line items on our Consolidated Balance Sheets have been reclassified to conform to the current period presentation.

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

Risks and Uncertainties including COVID-19

The Company is subject to certain risks and uncertainties affecting the healthcare industry, including those stemming from the novel coronavirus (“COVID-19”) global pandemic described below, which has disproportionately impacted the senior care sector, as well as those stemming from healthcare legislation and changing regulation by federal, state and local governments.

The Company is subject to certain risks and uncertainties affecting the healthcare industry, including those that arose from the novel coronavirus (“COVID-19”) global pandemic, which disproportionately impacted the senior care sector, as well as those stemming from healthcare legislation and changing regulation by federal, state and local governments.

Additionally, we are subject to risks and uncertainties as a result of changes affecting operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the rising cost of healthcare services.

Recent Accounting Pronouncements

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.

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

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

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

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

On March 12, 2020, the FASB issued ASU 2020-04, which contains optional practical expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”).

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

The Company has several derivative instruments (See Note 16 – Derivatives and Hedging), a $ 1.45 billion senior unsecured multicurrency revolving credit facility, and a $ 50.0 million senior unsecured term loan facility (See Note 15 – Borrowing Activities and Arrangements) that reference LIBOR.

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.

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

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

The Company continues to evaluate:

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

NOTE 2 – REAL ESTATE ASSETS

At September 30, 2022, our leased real estate properties included 649 SNFs, 167 ALFs, 20 ILFs, 16 specialty facilities and two medical office buildings.

At March 31, 2023, our leased real estate properties included 660 SNFs, 175 ALFs, 19 ILFs, 16 specialty facilities and one medical office building.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Three Months Ended March 31,

(in thousands)

4 unchanged sentences

Asset Acquisitions

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

The following table summarizes the asset acquisitions that occurred during the three months ended March 31, 2023:

Total Real Estate

4 unchanged sentences

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

(2) The total consideration paid for 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 13 – 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.

(2) In connection with this acquisition, the Company recorded $ 9.9 million of right-of-use (“ROU”) assets and lease liabilities associated with ground leases assumed in the acquisition.

Construction in Progress and Capital Expenditure Investments

We invested $ 10.1 million and $ 18.2 million under our construction in progress and capital improvement programs during the three months ended March 31, 2023 and 2022, respectively.

NOTE 3 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

1 unchanged sentence

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

September 30,

Number of facilities held for sale

Amount of assets held for sale (in thousands)

During the three months ended September 30, 2022, we reclassified 20 facilities that were leased and operated by Agemo Holdings, LLC (“Agemo”) to assets held for sale in connection with our restructuring negotiations surrounding Agemo’s lease agreement.

Nineteen of these facilities were subsequently sold during the fourth quarter of 2022 for aggregate gross cash proceeds of $ 315.8 million.

During the three and nine months ended September 30, 2022, we sold four and 44 facilities, subject to operating leases, for $ 51.4 million and $ 438.3 million in net cash proceeds, respectively.

As a result of these sales, we recognized net gains of $ 40.9 million and $ 179.7 million during the three and nine months ended September 30, 2022, respectively.

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.

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 third quarter, were $ 303.9 million, and we recognized a net gain of $ 113.5 million.

During the first quarter of 2023, we entered into an agreement to sell five facilities leased to Guardian Healthcare (“Guardian”) for estimated gross proceeds of $ 23.8 million.

We reclassified those five facilities to held for sale during the first quarter of 2023.

As discussed in Note 21 – Subsequent Events, these five facilities previously leased to Guardian were sold during the second quarter of 2023.

During the three months ended March 31, 2023, we sold two facilities, one SNF and one medical office building, subject to operating leases, for approximately $ 17.6 million in net cash proceeds.

As a result of these sales, we recognized a net gain of approximately $ 13.6 million.

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

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

The net cash proceeds from the sale, including related costs accrued for as of the end of the first quarter of 2022, were $ 304.0 million, and we recognized a net gain of approximately $ 113.5 million.

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

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

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

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 quarter of 2022, we sold two facilities that were previously leased to Agemo for $ 42.6 million in net proceeds, which resulted in a net gain of $ 35.6 million.

In December 2022, in connection with restructuring negotiations with LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care) 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 11-facility sale does not meet the contract criteria to be recognized under ASC 610-20.

During the three months ended March 31, 2023, we received interest of $ 2.1 million related to the $ 104.8 million in senior seller financing, which was deferred and recorded as a contract liability within accrued expenses and other liabilities on our Consolidated Balance Sheets.

Real Estate Impairments

During the three and nine months ended September 30, 2022, we recorded impairments on four and ten facilities of $ 10.0 million and $ 21.2 million, respectively.

Of the $ 21.2 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 $ 17.7 million related to eight held-for-use facilities for which the carrying value exceeded the fair value.

The impairments recorded on four facilities during the three months ended September 30, 2022 relate to the 2.2 % Operator discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements.

During the three months ended March 31, 2023, we recorded impairments of approximately $ 39.0 million on four facilities.

Of the $ 39.0 million, $ 37.0 million related to two held-for-use facilities for which the carrying value exceeded the fair value and $ 2.0 million related to two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair value less costs to sell.

Of the $ 37.0 million, $ 27.5 million relates to one held-for-use facility which was closed during the quarter.

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

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

5 unchanged sentences

A summary of our net receivables and lease inducements by type is as follows:

September 30,

(in thousands)

5 unchanged sentences

Cash Basis Operators and Straight-Line Receivable Write-Offs

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

During the three and nine months ended September 30, 2022, we placed three and five additional operators, respectively, on a cash basis of revenue recognition, as collection of substantially all contractual lease payments due from them was no longer deemed probable.

In connection with moving these operators to a cash basis, we recognized $ 13.2 million and $ 23.6 million in total straight-line accounts receivable and lease inducement write-offs through rental income during the three and nine months ended September 30, 2022, respectively.

These amounts include the operators discussed in further detail below.

As of September 30, 2022, we had 17 operators on a cash basis for revenue recognition.

These operators represent 15.3 % of our total revenues (excluding the impact of write-offs) for the nine months ended September 30, 2022.

We also wrote-off $ 3.2 million of straight-line rent receivable balances through rental income during the nine months ended September 30, 2022, as a result of transitioning 6 facilities between existing operators in the first quarter of 2022.

Operator updates

Agemo continued to not pay contractual rent and interest due under its lease and loan agreements during the nine months ended September 30, 2022.

Agemo is on a cash basis of revenue recognition for lease purposes, so no rental income was recorded related to Agemo during the three and nine months ended September 30, 2022.

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

See Note 6 – Other Investments.

For the nine months ended September 30, 2021, revenue from Agemo represented approximately 4.7 % of our total revenues (excluding the impact of write-offs).

On September 30, 2021, the Company entered a forbearance agreement related to Agemo’s defaults under its lease and loan agreements.

The forbearance period under the agreement has been extended multiple times and the most recent amendment on October 31, 2022 extended the forbearance period through November 30, 2022 .

Additionally, the Company had previously entered a restructuring agreement on May 7, 2018, with Agemo (the “2018 Restructuring”), that among other things, allowed for the deferral of $ 6.3 million of rent per annum for a 3-year period.

The deferral period was extended multiple times, and the most recent amendment extending the deferral through April 2022, after which time the deferral period terminated, with the Company remaining subject to its forbearance agreement through November 30, 2022.

As of September 30, 2022, the aggregate rent deferred under the Agemo lease agreement was $ 25.2 million.

The Company is currently in ongoing negotiations to restructure and amend Agemo’s lease and loan agreements.

Guardian did not make rent and interest payments under its lease and loan agreements during the first quarter of 2022 but resumed paying contractual rent and interest during the second quarter of 2022 and continued such payments in the third quarter of 2022, in accordance with the restructuring terms discussed further below.

Guardian is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 3.7 million and $ 7.5 million for the three and nine months ended September 30, 2022, respectively, for the contractual rent payments that were received.

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

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

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

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

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

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

During the three months ended March 31, 2023, we did no t place any additional operators on a cash basis of revenue recognition.

We transitioned 43 facilities subject to leases with three cash basis operators, including 34 facilities related to the 1.2 % Operator and 2.0 % Operator discussed below, to new leases with four operators during the three months ended March 31, 2023.

We are recognizing revenue on a straight-line basis for the leases associated with these four operators.

Subsequent to quarter end, we transitioned five facilities subject to a lease with one cash basis operator to a new lease with one new operator for which we are recognizing revenue on a straight-line basis.

During the three months ended March 31, 2022, we placed two new operators on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from them was not deemed probable.

The new lease agreements with these operators were executed in the first quarter of 2022 and we placed them on a cash basis concurrent with the lease commencement, so there was no straight-line rent write-offs associated with moving these operators to cash basis.

As of March 31, 2023, we had 17 operators on a cash basis for revenue recognition, which represent 25.1 % and 32.2 % of our total revenues (excluding the impact of write-offs) for the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2022, we also wrote-off $ 3.2 million of straight-line rent receivable balances through rental income as a result of transitioning six facilities between existing operators.

Rent Deferrals and Application of Collateral

During the three months ended March 31, 2023 and 2022, we allowed eight operators and six operators, respectively, to defer $ 24.4 million and $ 19.3 million, respectively, of contractual rent and interest.

The deferrals during the first quarter of 2023 primarily related to the following operators:

LaVie ($ 14.3 million), Healthcare Homes Limited (“Healthcare Homes”)($ 6.1 million), Agemo Holdings, LLC (“Agemo”)($ 1.9 million) and Maplewood Senior Living (along with affiliates, “Maplewood”)($ 0.4 million).

Additionally, we allowed three operators and four operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the three months ended March 31, 2023 and 2022, respectively.

The total collateral applied to contractual rent and interest was $ 5.2 million and $ 3.3 million for the three months ended March 31, 2023 and 2022, respectively.

Operator Collectibility Updates

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

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 of million 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.

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

Revenue from Guardian represented approximately 1.0 % and 3.2 % of our total revenues (excluding the impact of straight-line write-offs) for the nine months ended September 30, 2022 and 2021, respectively.

3.7 % Operator

From January through March 2022, an operator (the “3.7% Operator”) representing 3.7 % and 3.3 % of total revenue (excluding the impact of write-offs) for the nine months ended September 30, 2022 and 2021, 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 September 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.

In July 2018, we entered into a $ 20.0 million revolving credit facility with the 3.7 % Operator, and the 3.7 % Operator paid contractual interest under the facility from January through September 2022.

The 3.7 % Operator drew $ 4.0 million under the facility during the second quarter of 2022, and the line of credit under the facility was fully drawn as of June 30, 2022.

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

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

1.4 % Operator

In March 2022, an operator (the “1.4% Operator”), representing 1.4 % and 2.1 % of total revenue (excluding the impact of write-offs) for the nine months ended September 30, 2022 and 2021, respectively, did not pay its contractual amounts due under its lease agreement.

In April 2022, the lease with the 1.4 % 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 1.4 % 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 1.4 % Operator on a cash basis of revenue recognition during the second quarter of 2022, as collection of substantially all contractual lease payments due from the operator was no longer deemed probable.

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

During the three months ended September 30, 2022, the 1.4 % Operator made partial contractual rent payments of $ 2.5 million in the aggregate, which were recorded in rental income.

● Forgive and release Agemo from previously written off past due rent and interest obligations related to certain periods prior to the 2018 Agemo 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 22 facilities, previously leased and operated by Agemo, that occurred in the third and fourth quarters of 2022;

● 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 5.63 % through October 2024, which increases to 5.71 % until maturity.

Agemo did not pay rent or interest during the three months ended March 31, 2023 and 2022.

Agemo is on a cash basis of revenue recognition for lease purposes, so no rental income was recorded related to Agemo during the three months ended March 31, 2023 and 2022.

Additionally, no interest income was recognized during the three months ended March 31, 2023 and 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 6 – Non-Real Estate Loans Receivable for further discussion on the impact of the restructuring on the loans.

Agemo resumed making contractual rent payments during the second quarter of 2023 in accordance with the restructuring terms discussed above.

In the first quarter of 2023, Omega continued the process of restructuring our portfolio with LaVie and entered into lease amendments that allow for a partial rent deferral for the first four months of 2023.

In doing so, we agreed to allow LaVie to defer up to $ 19.1 million of contractual rent from January 2023 through April 2023 under our lease agreements.

In the first quarter of 2023, as a result, LaVie elected to defer $ 14.3 million of the full contractual payment of $ 21.7 million and paid the remaining $ 7.4 million of contractual rent due under the leases.

Since LaVie was placed on a cash basis of revenue recognition for lease purposes in the fourth quarter of 2022, the $ 7.4 million of contractual rent payments that we received was recorded as rental income during the three months ended March 31, 2023.

Revenue from LaVie represents approximately 3.2 % and 11.3 % of our total revenues (excluding the impact of write-offs) for the three months ended March 31, 2023 and 2022, respectively.

Subsequent to quarter end, we transitioned two facilities, previously subject to the master lease with LaVie, to another operator.

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;

● pay a one-time option termination fee of $ 12.5 million to Maplewood;

● reduce Maplewood’s share of any future potential sales proceeds (in excess of our gross investment) by the unpaid deferred rent balance, the $ 22.5 million of capital expenditures and the $ 12.5 million option termination fee payment.

Maplewood is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 17.3 million for the three months ended March 31, 2023 for the contractual rent payments that were received.

The $ 12.5 million option termination fee payment made in the first quarter of 2023 was accounted for as a lease inducement and recorded as a reduction to rental income since Maplewood is on a cash basis of revenue recognition.

Additionally, as discussed further in Note 5 – Real Estate Loans Receivable, we recorded interest income of $ 1.5 million on the secured revolving credit facility during the three months ended March 31, 2023 for the contractual interest payment received related to December 2022, as the loan was placed on non-accrual status for interest recognition during the fourth quarter of 2022.

Revenue from Maplewood represents approximately 8.2 % and 9.0 % of our total revenues (excluding the impact of write-offs) for the three months ended March 31, 2023 and 2022, respectively.

Healthcare Homes

In December 2022, we agreed to allow Healthcare Homes, a U.K.

based operator representing 3.1 % and 3.0 % of our total revenues (excluding the impact of write-offs) for the three months ended March 31, 2023 and 2022, 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.

During the first quarter of 2023, Healthcare Homes elected to defer £ 5.0 million ($ 6.1 million in USD) of contractual rent in accordance with the December 2022 agreement.

Healthcare Homes is on a straight-line basis of revenue recognition.

In May 2023, Healthcare Homes resumed making full contractual rent payments.

1.2 % Operator

In June 2022, an operator (the “2.2% Operator”), representing 2.2 % and 2.0 % of total revenue (excluding the impact of write-offs) for the nine months ended September 30, 2022 and 2021, 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 2.2 % 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 2.2 % 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 are in discussions to sell or release to another operator a portion of the facilities included in the 2.2 % Operator’s master lease.

We placed the 2.2 % Operator on a cash basis of revenue recognition during the third quarter of 2022, as collection of substantially all contractual lease payments due from the operator was no longer deemed probable.

As a result of placing the 2.2 % Operator on a cash basis, we wrote-off approximately $ 10.5 million of straight-line rent receivables and lease inducements through rental income.

As of September 30, 2022, $ 1.5 million of proceeds from the letter of credit remain as collateral to the master lease.

Omega transitioned 14 facilities, previously subject to a lease with an operator that had collectability concerns during 2022 (referred to as the “1.2% Operator” in our Annual Report on Form 10-K for the year ended December 31, 2022), to another existing operator on March 1, 2023.

Following the transition, we have no further relationship with the 1.2 % Operator.

We recorded rental income of $ 0.5 million for the contractual rent payments that were received from the 1.2 % Operator during the three months ended March 31, 2023.

The initial contractual rent related to the 14 facilities following the transition to another operator is $ 23.8 million per annum.

In connection with this transition, Omega made or agreed to make termination payments of $ 15.5 million in aggregate that were recorded as initial direct costs related to the lease with the new operator of the 14 transitioned facilities.

These payments are deferred and recognized within depreciation and amortization expense on a straight-line basis over the term of the master lease.

2.0 % Operator

In June 2022, we placed an operator (the “0.5% Operator”), representing approximately 0.5 % of total revenue (excluding the impact of write-offs) for the nine months ended September 30, 2022 and 2021, respectively, on a cash basis of revenue recognition.

The change in our evaluation of the collectability of future rent payments due from the 0.5 % 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 0.5 % Operator on a cash basis, we wrote-off approximately $ 2.1 million of straight-line rent receivables through rental income.

All facilities included in the 0.5 % Operator’s master lease are included in assets held for sale as of September 30, 2022.

Other Operators

During the nine months ended September 30, 2022, we allowed four other operators, representing an aggregate 2.8 % and 3.1 % of total revenue (excluding the impact of write-offs) for the nine months ended September 30, 2022 and 2021, 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 two of these operators short-term deferrals for a portion of their respective rent due during the nine months ended September 30, 2022.

As of September 30, 2022, two of the four operators that were allowed to apply security deposits to rent are current on their respective lease obligations.

The two operators that are not current on contractual obligations are on a cash basis of revenue recognition as of September 30, 2022.

We placed one of the operators on a cash basis of revenue recognition during the third quarter of 2022.

As a result of placing that operator on a cash basis during the third quarter of 2022, we wrote-off approximately $ 2.6 million of straight-line rent receivables through rental income.

NOTE 5 – MORTGAGE NOTES RECEIVABLE

As of September 30, 2022, mortgage notes receivable relate to seven fixed rate mortgage notes on 52 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 that are operated by six independent healthcare operating companies.

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

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

September 30,

Omega transitioned 20 facilities, previously subject to a lease with an operator that that had collectability concerns during 2022 (referred to as the “2.0% Operator” in our Annual Report on Form 10-K for the year ended December 31, 2022), to three other operators during the first quarter of 2023.

Following the transition, we have no further relationship with the 2.0 % Operator.

We recorded rental income of $ 0.9 million for the contractual rent payments that were received from the 2.0 % Operator during the three months ended March 31, 2023.

The initial aggregate contractual rent related to the 20 facilities following the transition to other operators is $ 14.5 million per annum.

NOTE 5 – REAL ESTATE LOANS RECEIVABLE

Real estate loans consist of mortgage notes 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 March 31, 2023, our real estate loans receivable consist of eight fixed rate mortgage notes on 53 long-term care facilities and 10 other real estate loans.

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

We monitor compliance with our real estate 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 notes due 2030 ;

interest at 10.99 % (1)

Mortgage note due 2031 ;

interest at 11.27 %

Mortgage notes due 2030 ;

Mortgage note due 2032 ;

interest at 10.50 % (2)

Mortgage note due 2025 ;

interest at 7.85 %

Other mortgage notes outstanding (3)

1 unchanged sentence

Allowance for credit losses on mortgage notes receivable

Total mortgage notes receivable – net

(1) Approximates the weighted average interest rate on 37 facilities as of September 30, 2022.

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

Mortgage notes receivable – net

Other real estate loan due 2035 ;

interest at 7.00 %

Other real estate loans due 2024 ;

interest at 13.18 % (1)

Other real estate loans due 2023 - 2025 ;

interest at 12.03 % (1)

Other real estate loan outstanding (4)

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 March 31, 2023.

(2) Subsequent to quarter end, this mortgage note was extended to December 31, 2037.

(3) Other mortgage notes outstanding have a weighted average interest rate of 9.00 % as of March 31, 2023, with maturity dates ranging from 2023 through 2026 (with $ 12.9 million maturing in 2023 ).

One of these mortgage notes with a principal balance of $ 6.4 million is past due and has been written down to the fair value of its collateral of $ 1.5 million.

(4) As of March 31, 2023 and December 31, 2022, includes one real estate loan with an interest rate of 12.00 % and a maturity date of December 2, 2027 .

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

Three Months Ended March 31,

(in thousands)

Mortgage notes – interest income

Leasehold mortgages and other real estate loans – interest income

Total real estate loans interest income

Mortgage note due 2031

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

The mortgage loan is on non-accrual status and is being accounted for under the cost recovery method, so the $ 2.3 million and $ 3.7 million of interest payments that we received during the three and nine months ended September 30, 2022, respectively, were applied directly against the principal balance outstanding.

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

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

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

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

These amendments were treated as a loan modification.

In the third quarter of 2022, we reserved an additional $ 1.0 million through provision for credit losses due to a decrease in the estimated fair value of the four facilities that are collateral under the mortgage.

As of September 30, 2022, the amortized cost basis of the Guardian mortgage loan is $ 78.3 million, which represents 10.8 % of the total amortized cost basis of all mortgage receivables.

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

Mortgage Notes due 2030

On June 30, 2022, Ciena Healthcare (“Ciena”) repaid $ 57.1 million under the $ 415.0 million amortizing mortgage (the “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 $ 37.7 million with maturity dates in 2022 and 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.

NOTE 6 – OTHER INVESTMENTS

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

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

A number of the secured loans are collateralized by leasehold mortgages on, or assignments or pledges of the membership interest in, the related properties, corporate guarantees and/or personal guarantees.

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

As of September 30, 2022, we had 39 loans with 20 different operators.

A summary of our other investments is as follows:

September 30,

In the second quarter of 2022, we agreed to a formal restructuring agreement and amended the mortgage loan with Guardian, which among other adjustments, extended the loan’s maturity date and allowed for the deferral of certain contractual interest.

The loan amendment was treated as a loan modification provided to a borrower experiencing financial difficulty.

Following the execution of the restructuring agreement, Guardian resumed paying contractual rent and interest during the second quarter of 2022 and continued such payments throughout the remainder of 2022 and the first quarter of 2023, in accordance with the restructuring terms.

The mortgage loan is on non-accrual status and is being accounted for under the cost recovery method, under which any payments, if received, are applied against the principal amount.

During the first quarter of 2023, we received $ 2.3 million of interest payments from Guardian that we applied against the outstanding principal of the loan and recognized a recovery for credit loss equal to the amount of payments applied against principal.

As of March 31, 2023, the amortized cost basis of the Guardian mortgage loan is $ 73.8 million, which represents 6.4 % of the total amortized cost basis of all real estate loan receivables.

The amortized cost basis of the loan, net of reserves, is $ 35.2 million.

As of March 31, 2023, the mortgage loan is secured by three SNFs and one ALF located in Pennsylvania.

The mortgage loan was paid off during the second quarter of 2023, as discussed in Note 21 – Subsequent Events.

Other real estate loan due 2035

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, in the first quarter of 2023, Omega entered into a restructuring agreement and a loan amendment with Maplewood that modified Maplewood’s secured revolving credit facility.

As part of the restructuring agreement and loan amendment, Omega agreed to extend the maturity date of the facility to June 2035, increase the capacity of the secured 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 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.

The maximum PIK interest allowable under credit facility, as amended, is $ 52.2 million.

This amendment was treated as a loan modification provided to a borrower experiencing financial difficulty.

During the three months ended March 31, 2023, we recorded interest income of $ 1.5 million on the secured revolving credit facility for the contractual interest payment received related to December 2022, as the loan was placed on non-accrual status for interest recognition during the fourth quarter of 2022.

We did not record any interest income related to the PIK interest in the first quarter of 2023.

As of March 31, 2023, the amortized cost basis of this loan was $ 259.0 million, which represents 22.5 % of the total amortized cost basis of all real estate loan receivables.

As of March 31, 2023, the remaining commitment under the secured revolving credit facility, including the unrecognized PIK interest, was $ 58.1 million.

NOTE 6 – 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 March 31, 2023, we had 34 loans with 19 different borrowers.

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

(in thousands)

Other investment notes due 2024 ;

Notes due 2036 ;

interest at 5.63 %

Other investment note due 2030 ;

Notes due 2023 - 2028 ;

interest at 10.51 % (1)

Other investment note due 2024 ;

Notes due 2036 ;

interest at 2.00 %

Other investment notes due 2022 - 2025 ;

Note due 2027 ;

interest at 12.00 % (2)

Other investment notes outstanding (3)

Real estate related loans – other investments, gross

Other investment notes due 2024 - 2025 ;

Note due 2024 ;

interest at 7.50 %

Other investment notes due 2022 - 2028 ;

Other notes outstanding (3)

Non-real estate loans receivable – gross

Allowance for credit losses on non-real estate loans receivable

Total non-real estate loans receivable – net

(1) Approximates the weighted average interest rate as of March 31, 2023.

(2) During the first quarter of 2023, this loan was fully repaid.

(3) Other notes outstanding have a weighted average interest rate of 7.00 % as of March 31, 2023, with maturity dates ranging from 2023 through 2030 (with $ 17.2 million maturing in 2023 ).

We have two loans within other notes outstanding with principal of $ 5.0 million and $ 4.2 million, respectively, that were to mature in 2022 but remained outstanding as of March 31, 2023.

We have fully reserved the $ 5.0 million loan and have written down the $ 4.2 million loan down to the fair value of its collateral of $ 1.0 million.

For the three months ended March 31, 2023 and 2022, non-real estate loans generated interest income of $ 5.0 million and $ 2.2 million, respectively.

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

Notes due 2036 ;

interest at 5.63 %

Other investment notes outstanding (4)

Non-real estate related loans – other investments, gross

Total other investments, gross

Allowance for credit losses on other investments

Total other investments – net

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

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

(3) As of September 30, 2022, includes one real estate related loan with an interest rate of 12.00 % and a maturity date of December 2, 2027 .

(4) Other investment notes that are non-real estate related loans have a weighted average interest rate of 8.20 % as of September 30, 2022 with maturity dates ranging from 2022 through 2032 (with $ 10.5 million maturing in the remainder of 2022).

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Real estate related loans – interest income

Non-real estate related loans – interest income

Total other investment income

Other investment note due 2030

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

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

As of September 30, 2022, $ 236.2 million remains outstanding on this credit facility to Maplewood.

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

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

Other investment notes due 2024-2025

Agemo continued to not pay contractual rent under its lease agreement and interest on the Agemo WC Loan and the Agemo Term Loan during the nine months ended September 30, 2022.

We have continued to monitor the fair value of the collateral associated with the Agemo WC Loan on a quarterly basis.

During the three and nine months ended September 30, 2022, we recorded an additional provision for credit losses of $ 4.8 million and $ 10.8 million, respectively, related to the Agemo WC Loan because of a reduction in the fair value of the underlying collateral assets supporting the current carrying values.

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, the Company is currently in ongoing negotiations to restructure and amend Agemo’s lease and loan agreements.

Other investment notes 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 investment notes due 2022-2028

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

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 September 30, 2022, the outstanding principal under this revolving line of credit was $ 30.0 million.

Other investment notes outstanding – real estate related loans

Preferred Equity Investment in Joint Venture - $ 20 million

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

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

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

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

Other investment notes outstanding – non-real estate related loans

Working Capital Loan – $ 20 million

During the three and nine months ended September 30, 2022, we recognized provisions for credit losses of $ 0.9 million and $ 3.2 million, respectively, related to a $ 20.0 million working capital loan (the “$ 20.0 million WC loan”) that we entered into in November 2021 with an operator that managed, on an interim basis for a 4-month period, the operations of 23 facilities formerly leased to Gulf Coast.

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

The remaining accounts receivable outstanding that collateralize the loan is 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 is on non-accrual status and is being accounted for under the cost recovery method, so the $ 32.7 thousand of interest payments that we received during the three months ended September 30, 2022 were applied directly against the principal balance outstanding.

As of September 30, 2022, the outstanding principal under this loan was $ 5.8 million.

Term Loan – $ 25 million

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

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

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

Mezzanine Loan - $ 40 million

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.

Revolving Credit Facility - $ 45 million

On August 25, 2022, the Company amended the terms of a $ 15 million revolving credit facility that was previously issued in July 2019, bearing interest at a fixed rate of 7.5 % per annum and maturing on July 8, 2022 .

This revolving credit facility was subsequently amended during the nine months ended September 30, 2022 to increase the maximum principal to $ 45 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 November 2022, to $ 1.5 million in June 2023 and to $ 2.5 million in October 2023.

As discussed in Note 4 – 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 refinanced into a new $ 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 was combined and refinanced into a new $ 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 5.63 % per annum through October 2024, which increases to 5.71 % per annum until maturity.

The Agemo Replacement Loans mature on December 31, 2036 .

Interest payments are scheduled to resume on April 1, 2023, contingent upon Agemo’s compliance with certain conditions of the restructuring agreement;

however, Agemo has the option to defer the interest payment due on April 1, 2023.

Beginning in January 2025, Agemo will be required to make principal payments on the Agemo Replacement Loans dependent on certain metrics.

These amendments were treated as loan modifications provided to a borrower experiencing financial difficulty.

Both of 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.

Agemo exercised its option to defer the interest payment due on April 1, 2023 and resumed making interest payments in May 2023 in accordance with the restructuring terms discussed above.

Prior to the restructuring, the principal of the Agemo WC Loan and the Agemo Term Loan were written down to $ 5.9 million and zero , respectively, the fair value of the underlying collateral of these loans.

No changes to the collateral supporting the loans were made because of the refinancing of these loans into the Agemo Replacement Loans.

Additional principal of $ 25.2 million related to deferred rent due under the master lease was combined with the principal of the Agemo WC Loan under Agemo Replacement Loan B.

This deferred rent balance was previously written off when the Agemo master lease was taken to a cash basis of revenue recognition in 2020.

We believe it is not probable that we will collect the additional $ 25.2 million of principal balance associated with the deferred rent under Agemo Replacement Loan B.

As such, we added an additional allowance for credit losses of $ 25.2 million related to Agemo Replacement Loan B concurrent with the increase in loan principal.

There is no income statement impact as a result of this additional reserve due to the balance previously being written off.

As of March 31, 2023, the amortized cost basis of these loans was $ 81.0 million, which represents 26.6 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of March 31, 2023 related to the Agemo Replacement Loans was $ 75.1 million.

Notes due 2036 ;

interest at 2.00 %

During the fourth quarter of 2022, we amended an $ 8.3 million term loan and a $ 25.0 million term loan 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 PIK interest.

These amendments were treated as loan modifications provided to a borrower experiencing financial difficulty.

Both of these loans are on non-accrual status and we are utilizing the cost recovery method, under which any payments made by LaVie are applied against the principal amount outstanding.

During the quarter ended March 31, 2023, we applied an aggregate $ 0.2 million of interest payments received to the $ 25.0 million term loan principal balance and the $ 8.3 million term loan principal balance outstanding.

As of March 31, 2023, the amortized cost basis of these loans was $ 32.3 million, which represents 10.6 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of March 31, 2023 related to the LaVie loans was $ 24.8 million.

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

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

A rollforward of our allowance for credit losses for the three months ended March 31, 2023 is as follows:

Financial Statement Line Item

Allowance for Credit Loss as of December 31, 2022

Provision (recovery) for Credit Loss for the nine months ended September 30, 2022

Write-offs charged against allowance for the nine months ended September 30, 2022

Allowance for Credit Loss as of September 30, 2022

Provision (recovery) for Credit Loss for the three months ended March 31, 2023

Write-offs charged against allowance for the three months ended March 31, 2023

Other additions to the allowance for the three months ended March 31, 2023

Allowance for Credit Loss as of March 31, 2023

(in thousands)

Mortgage notes receivable

Investment in direct financing leases

Real estate loan receivable

Real estate loans receivable

Investment in direct financing leases

Other investments

Off-balance sheet note commitments

Off-balance sheet mortgage commitments

Off-balance sheet note commitments

(1) Amount relates to the recoveries, net of provision, recorded on the Guardian mortgage loan during the nine months ended September 30, 2022.

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

(2) Reflects additional provisions of $ 0.9 million and $ 3.2 million recorded on the $ 20 million WC loan during the three and nine months ended September 30, 2022 as discussed in Note 6 – Other Investments.

(3) Reflects additional provisions of $ 4.8 million and $ 10.8 million recorded on the Agemo WC Loan during the three and nine months ended September 30, 2022.

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

(4) During the three and nine months ended September 30, 2022, we received $ 0.5 million and $ 2.0 million, respectively, of interest and fee payments from Gulf Coast under the $ 25.0 million senior secured DIP facility, the outstanding principal of which was fully reserved against in the fourth quarter of 2021.

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

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

(5) During the third quarter of 2022, we wrote-off the loan balance and reserve for two loans (the $ 25.0 million senior secured DIP facility and one other loan) that expired during the quarter which had previously been fully reserved.

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

(7) During the third quarter of 2022, the remaining commitment under the $ 25.0 million senior secured DIP facility was funded, and the facility expired, which resulted in a write-off of the loan and reserve balances.

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

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

(1) This amount relates to the additional $ 25.2 million allowance recorded during the first quarter of 2023 in order to reserve the aggregate deferred rent amount that is included within Agemo Replacement Loan B.

See Note 6 – Non-Real Estate Loans Receivable for additional details.

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

Financial Statement Line Item

Allowance for Credit Loss at December 31, 2021

Provision (recovery) for Credit Loss for the nine months ended September 30, 2021

Write-offs charged against allowance for the nine months ended September 30, 2021

Allowance for Credit Loss as of September 30, 2021

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

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

Allowance for Credit Loss as of March 31, 2022

(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 our mortgage loan with Guardian due to a reduction of our internal risk rating from a 4 to a 5 on the loan in the third quarter of 2021.

(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.

The provision for Other Investments with a rating of 6 also reflects $ 8.8 million of additional allowance recorded in the third quarter of 2021 to fully reserve the remaining carrying value of the Agemo Term Loan.

(3) The provision includes an additional $ 7.9 million of 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.

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

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

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

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Revolving Loans

Balance as of September 30, 2022

Balance as of March 31, 2023

(in thousands)

Mortgage notes receivable

Real estate loans receivable

Investment in direct financing leases

Other Investments

Other investments

Non-real estate loans receivable

Year to date gross write-offs

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 September 30, 2022, $ 10.0 million of contractual interest receivable is recorded in contractual receivables – net, and $ 6.2 million of effective yield interest receivables is recorded in other receivables and lease inducements on our Consolidated Balance Sheets, both of which are excluded from our allowance for credit losses.

As of March 31, 2023 and December 31, 2022, we have excluded $ 8.0 million and $ 8.2 million, respectively, of contractual interest receivables and $ 5.2 million and $ 5.7 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.

During the three months ended March 31, 2023 and 2022, we recognized $ 1.5 million and $ 4.2 million, respectively, of interest income related to loans on non-accrual status as of March 31, 2023.

NOTE 8 – VARIABLE INTEREST ENTITIES

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

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

September 30,

Below is a summary of our assets, liabilities, collateral and maximum exposure to loss associated with these unconsolidated VIEs as of March 31, 2023 and December 31, 2022:

(in thousands)

Real estate assets – net

Assets held for sale

Other investments – net

Real estate loans receivable – net

Non-real estate loans receivable – net

Contractual receivables – net

Other receivables and lease inducements

Net in-place lease liability

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Total liabilities

Letters of credit

Personal guarantee

1 unchanged sentence

( 1,066,967 )

( 1,335,867 )

Total collateral

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

The fair value of the accounts receivable available to Omega was $ 8.3 million and $ 29.2 million as of September 30, 2022 and December 31, 2021, respectively.

The fair value of the accounts receivable available to Omega was $ 5.9 million as of March 31, 2023 and December 31, 2022.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

Rental income

Other investment income

Interest income

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.

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

As of September 30, 2022, this joint venture has $ 25.6 million of total assets and $ 20.2 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.

As of March 31, 2023 and December 31, 2022, this joint venture has $ 27.0 million and $ 25.8 million, respectively, of total assets and $ 20.2 million and $ 19.8 million, respectively, of total liabilities, which are included in our Consolidated Balance Sheets.

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 March 31, 2023, 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 Exchange Accommodation Titleholders (“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 $ 54.6 million and $ 55.2 million as of March 31, 2023 and December 31, 2022, respectively.

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

NOTE 9 – INVESTMENTS IN JOINT VENTURES

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Facilities at

September 30,

Investment (1)

Second Spring Healthcare Investments

Second Spring II LLC

Lakeway Realty, L.L.C.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

The following table reflects our income (loss) from unconsolidated joint ventures for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

5 unchanged sentences

OH CHS SNP, Inc.

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

(1) The assets held by this joint venture have been liquidated and we have no remaining operations related to this joint venture.

Asset Management Fees

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

For the three months ended September 30, 2022 and 2021, we recognized approximately $ 0.1 million and $ 0.2 million, respectively, of asset management fees.

For the nine months ended September 30, 2022 and 2021, we recognized approximately $ 0.5 million and $ 0.7 million, respectively, of asset management fees.

For the three months ended March 31, 2023 and 2022, we recognized approximately $ 0.2 million of asset management fees.

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

NOTE 10 – GOODWILL AND OTHER INTANGIBLES

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

The following is a summary of our goodwill as of March 31, 2023 and December 31, 2022:

(in thousands)

1 unchanged sentence

Foreign currency translation

Balance as of September 30, 2022

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

September 30,

Balance as of March 31, 2023

The following is a summary of our intangibles as of March 31, 2023 and December 31, 2022:

(in thousands)

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

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

For the nine months ended September 30, 2022 and 2021, our net amortization related to intangibles was $ 3.6 million and $ 8.5 million, respectively.

For the three months ended March 31, 2023 and 2022, our net amortization related to intangibles was $ 6.1 million and $ 1.6 million, respectively.

The estimated net amortization related to these intangibles for the remainder of 2023 and the next four years is as follows:

3 unchanged sentences

2026 – $ 2.0 million and 2027 – $ 1.7 million.

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

As of March 31, 2023, the weighted average remaining amortization period of above market lease assets is approximately twelve years and below market lease liabilities is approximately seven years .

NOTE 11 – CONCENTRATION OF RISK

As of September 30, 2022, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 941 healthcare facilities, located in 42 states and the U.K.

As of March 31, 2023, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 931 healthcare facilities, located in 42 states and the U.K.

and operated by 68 third-party operators.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.6 billion at September 30, 2022, with approximately 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 650 SNFs, 167 ALFs, 20 ILFs, 16 specialty facilities and two medical office buildings, (ii) fixed rate mortgages on 48 SNFs, two ALFs and two specialty facilities, and (iii) 34 facilities that are held for sale.

At September 30, 2022, we also held other investments of approximately $ 608.2 million, consisting primarily of secured loans to third-party operators of our facilities and $ 176.6 million of investments in six unconsolidated joint ventures.

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

Maplewood and LaVie.

Maplewood generated approximately 9.3 % and 7.9 % of our total revenues for the three months ended September 30, 2022 and 2021, respectively, and 9.1 % and 7.7 % of our total revenues for the nine months ended September 30, 2022 and 2021, respectively.

LaVie generated approximately 11.5 % and 9.3 % of our total revenues for the three months ended September 30, 2022 and 2021, respectively, and 11.4 % and 9.3 % of our total revenues for the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022, the three states in which we had our highest concentration of investments were Florida ( 13.1 %), Texas ( 10.3 %) and Indiana ( 6.6 %).

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.5 billion at March 31, 2023, with approximately 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 661 SNFs, 175 ALFs, 19 ILFs, 16 specialty facilities and one medical office building, (ii) fixed rate mortgages on 48 SNFs, three ALFs and two specialty facilities, and (iii) six facilities that are held for sale.

At March 31, 2023, we also held other real estate loans receivable (excluding mortgages) of $ 399.2 million, non-real estate loans receivable of $ 189.9 million, consisting primarily of secured loans to third-party operators of our facilities, and $ 181.3 million of investments in five unconsolidated joint ventures.

As of March 31, 2023 and December 31, 2022, we had investments with one operator or manager that approximated or exceeded 10% of our total investments:

Maplewood generated approximately 8.2 % and 9.0 % of our total revenues (excluding the impact of write-offs) for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the three states in which we had our highest concentration of investments were Florida ( 11.5 %), Texas ( 10.2 %) and Indiana ( 6.6 %).

NOTE 12 – STOCKHOLDERS’ EQUITY

$ 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 is authorized to repurchase shares of its common stock in open market and privately negotiated transactions, pursuant to Rule 10b5-1 trading plans 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.

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

Average Price

Shares Repurchased

Per Share (1)

Repurchase Cost (1)

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2022

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

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

1 unchanged sentence

February 15, 2023

August 1, 2022

August 15, 2022

November 1, 2022

November 15, 2022

Dividend Reinvestment and Common Stock Purchase Plan

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

Shares issued

Gross Proceeds

Three Months Ended

September 30, 2021

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Nine Months Ended

September 30, 2022

At-The-Market Offering Programs

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

Average Net Price

The following is a summary of the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three months ended March 31, 2023 and 2022 (in millions):

Shares issued

Per Share (1)

Gross Proceeds

Three Months Ended

September 30, 2021

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2021

Nine Months Ended

September 30, 2022

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

We did not utilize the forward provisions under the 2021 ATM Program during the nine months ended September 30, 2022.

March 31, 2022

March 31, 2023

Accumulated Other Comprehensive Income (Loss)

1 unchanged sentence

As of and for the

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands)

1 unchanged sentence

Beginning balance

Translation loss

Realized (loss) gain

Translation gain (loss)

Realized gain (loss)

Ending balance

2 unchanged sentences

Beginning balance

Unrealized gain

Unrealized (loss) gain

Realized gain (1)

2 unchanged sentences

Beginning balance

Unrealized gain

Unrealized (loss) gain

Ending balance

13 unchanged sentences

These subsidiaries are required to individually satisfy all of the rules for qualification as a REIT.

If we fail to meet the requirements for qualification as a REIT for any of these subsidiaries, it may cause Omega to fail the requirements for qualification as a REIT also.

If we fail to meet the requirements for qualification as a REIT for any of the subsidiary REITs, it may cause Omega to fail the requirements for qualification as a REIT also.

We have elected to treat certain of our active subsidiaries as taxable REIT subsidiaries (“TRSs”).

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

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

income tax purposes.

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

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

As of March 31, 2023, one of our TRSs that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately $ 10.2 million.

Our NOL carry-forward was fully reserved as of March 31, 2023, with a valuation allowance due to uncertainties regarding realization.

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

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 2 – Real Estate Assets, 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.

Our foreign subsidiaries are subject to foreign income taxes and withholding taxes.

As of March 31, 2023, one of our U.K.

subsidiaries had a NOL carryforward of approximately $ 43.1 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.

The following is a summary of deferred tax assets and liabilities (which are recorded in other assets and accrued expenses and other liabilities, respectively, in our Consolidated Balance Sheets):

September 30,

The majority of our U.K.

portfolio elected to enter the U.K.

REIT regime with an effective date of April 1, 2023.

In connection with entering the U.K.

REIT regime, we recognized several adjustments to our deferred tax balances in the first quarter of 2023 as summarized below.

The following is a summary of deferred tax assets and liabilities (which are recorded in other assets and accrued expenses and other liabilities in our Consolidated Balance Sheets):

(in thousands)

3 unchanged sentences

Foreign deferred tax liability (1)

Net deferred tax asset (liability)

Net deferred tax asset

Foreign deferred tax liability (2)

Net deferred tax liability

(1) The deferred tax liability primarily resulted from inherited basis differences resulting from our acquisition of entities in the U.K.

Subsequent adjustments to these accounts result from GAAP to tax differences related to depreciation, indexation and revenue recognition.

The foreign deferred tax liabilities were eliminated upon the majority of our U.K.

portfolio entering the U.K.

(2) The deferred tax liability resulted from book to tax differences recorded in the U.S.

relating to depreciation and revenue recognition in the U.K.

recognized upon the majority of our U.K.

portfolio entering the U.K.

The following is a summary of our provision for income taxes:

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(in millions)

Provision for federal, state and local income taxes

Provision for foreign income taxes

Total provision for income taxes (1)

(1) The above amounts do not include gross receipts or franchise taxes payable to certain states and municipalities.

Federal, state and local income tax expense

Foreign income tax (benefit) expense (1)

Total income tax (benefit) expense (2)

(1) The benefit for the three months ended March 31, 2023 primarily relates to adjustments made to our deferred tax assets and liabilities as a result of the majority of our U.K.

portfolio electing to enter into the U.K.

REIT regime effective April 1, 2023.

(2) The above amounts do not include gross income receipts or franchise taxes payable to certain states and municipalities.

NOTE 14 – STOCK-BASED COMPENSATION

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

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Stock-based compensation expense

Stock-based compensation expense was $ 8.7 million and $ 6.9 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

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

We granted 31,685 time-based restricted stock units (“RSUs”) and 170,294 time-based profits interest units (“PIUs”) during the first quarter of 2022 to certain officers and key employees, and those units vest on December 31, 2024 ( three years after the grant date), subject to continued employment and vesting in certain other events.

We also granted 1,545,070 performance-based PIUs during the first quarter of 2022 to certain officers and key employees, which are earned based on the level of performance over the performance period (normally three years ) and vest quarterly in the four th year, subject to continued employment and vesting in certain other events.

We granted 254,777 time-based profits interest units (“PIUs”) during the first quarter of 2023 to certain officers and employees, and those units vest on December 31, 2025 ( three years after the grant date), subject to continued employment and vesting in certain other events.

We granted 2,049,878 performance-based PIUs during the first quarter of 2023 to certain officers and employees, which are earned based on the level of performance over the performance period (normally three years ) and vest quarterly in the four th year, subject to continued employment and vesting in certain other events.

We also granted 59,684 performance-based restricted stock units (“RSUs”) during the first quarter of 2023 to certain employees, which are earned based on the level of performance over the performance period (normally three years ) and vest on December 31, 2025, subject to continued employment.

Time-based and performance-based grants made to named executive officers and key employees that meet certain conditions under the Company’s retirement policy (length of service, age, etc.) vest on an accelerated basis pursuant to the 2018 Stock Incentive Plan.

2 unchanged sentences

Interest Rate

September 30,

(in thousands)

22 unchanged sentences

Total secured and unsecured borrowings – net (9)(10)

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

Secured by real estate assets with a net carrying value of $ 505.9 million as of September 30, 2022.

During the third quarter of 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 Statement of Operations.

(1) Reflects the weighted average annual contractual interest rate on the mortgages at March 31, 2023.

Secured by real estate assets with a net carrying value of $ 476.5 million as of March 31, 2023.

(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.

2 unchanged sentences

(6) Guaranteed by Omega OP.

(6) As of September 30, 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 4.32 % and 3.51 % as of September 30, 2022, respectively.

(7) As of March 31, 2023, 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 6.04 % and 5.50 % as of March 31, 2023, respectively.

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

(8) 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 .

(9) All borrowings are direct borrowings of Parent unless otherwise noted.

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

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

As of March 31, 2023 and December 31, 2022, we were in compliance with all applicable covenants for our borrowings .

NOTE 16 – DERIVATIVES AND HEDGING

3 unchanged sentences

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

As of September 30, 2022, we have five forward starting swaps with $ 400.0 million in notional value, indexed to 3-month LIBOR, that were issued at a weighted average fixed rate of 0.8675 % and are designated as cash flow hedges.

Additionally, we have six foreign currency forward contracts with £ 250.0 million in notional valued issued at a weighted average GBP-USD forward rate of 1.3641 (including the two new foreign currency forwards discussed below) that are designated as net investment hedges.

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

These currency forward contracts hedge a portion of our net investments in U.K.

subsidiaries and our U.K.

joint venture.

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

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

As of March 31, 2023, we have five forward starting swaps with $ 400.0 million in notional value, indexed to 3-month LIBOR, that were issued at a weighted average fixed rate of 0.8675 % and are designated as cash flow hedges.

Additionally, we have six foreign currency forward contracts with £ 250.0 million in notional valued issued at a weighted average GBP-USD forward rate of 1.3641 that are designated as net investment hedges.

The location and fair value of derivative instruments designated as hedges, at the respective balance sheet dates, were as follows:

September 30,

Cash flow hedges:

(in thousands)

Accrued expenses and other liabilities

Net investment hedges:

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

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

September 30, 2022

At March 31, 2023 and December 31, 2022, the net carrying amounts and fair values of our other financial instruments were as follows:

March 31, 2023

December 31, 2022

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Investments in direct financing leases – net

Mortgage notes receivable – net

Other investments – net

Real estate loans receivable – net

Non-real estate loans receivable – net

Revolving credit facility

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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 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).

● 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).

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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.

Thereafter, the plaintiffs filed a Second Consolidated Amended Complaint in August 2020.

In November 2020, the Company and the officers named in the Securities Class Action filed a Motion to Dismiss the Second Consolidated Amended Complaint.

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 in October 2022 on a settlement of the Securities Class Action.

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”).

On April 25, 2023, following notice to class members and a hearing, the Court entered judgment approving the Settlement, which becomes effective upon the expiration of the period for appealing the Court’s judgment.

Upon the effective date of the Settlement, the Settlement payment of $ 30.75 million will be transmitted from an escrow account funded by the Company’s directors and officers insurers to a settlement fund to be distributed to class members by a third party administrator.

The Settlement does not include any admission of wrongdoing or liability on the part of the Company or the individual defendants.

It provides for dismissal and 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 Company anticipates that the settlement proceeds will be paid by insurance, we concurrently recorded a receivable for $ 31 million within other assets on the Consolidated Balance Sheet, and consequently there is no impact to the Consolidated Statement of Operations related to this matter.

The settlement agreement in principle is subject to negotiation of a definitive settlement agreement, and also subject to the approval of the District Court.

The District Court has suspended deadlines under the Scheduling Order in the case, pending a definitive agreement and the court approval process.

As the Settlement proceeds are being 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.

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 plaintiff did not make a demand on the Company to bring the action prior to filing it, but rather alleges that demand would have been futile.

The case has been stayed pending the entry of judgment or a voluntary dismissal with prejudice in the Securities Class Action.

The case is stayed until July 25, 2023.

In 2019, purported stockholder Phillip Swan by his counsel, and stockholders Tom Bradley and Sarah Smith by their counsel, filed derivative actions in the Baltimore City Circuit Court of Maryland, purportedly on behalf of the Company, asserting claims for breach of fiduciary duty, waste of corporate assets and unjust enrichment against the named defendants.

Those actions have been consolidated and stayed in the Maryland court pending completion of fact discovery in the Securities Class Action.

Those actions were consolidated and stayed in the Maryland court pending the close of fact discovery in the Securities Class Action.

Prior to filing suit, each of these stockholders had made demands on the Board of Directors in 2018 that the Company bring such lawsuits.

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Wojcik also did not make a demand on the Company prior to filing suit.

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.

The case was stayed until 30 days after the entry of judgment or a voluntary dismissal with prejudice in the Securities Class Action.

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 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.

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 Debt 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 2, 2022, the Court indicated its intention to grant the noteholders’ motion to dismiss for lack of personal jurisdiction.

A decision has not been made whether to appeal this order, if it is issued.

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 it is ultimately litigated in the Court or, if the order granting the motion to dismiss for lack of personal jurisdiction is issued, or if it is issued and upheld on appeal in another court.

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

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

On September 29, 2020, the Department of Justice 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.

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

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

In October 2021, the Debt Holders filed a motion to dismiss for lack of personal jurisdiction.

On November 3, 2022, the Court granted the Debt Holders’ 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.

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

As of September 30, 2022, our maximum funding commitment under these indemnification agreements was approximately $ 3.9 million.

As of March 31, 2023, our maximum funding commitment under these indemnification agreements was approximately $ 8.8 million.

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

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

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

Our remaining commitments at March 31, 2023, are outlined in the table below (in thousands):

Construction and capital expenditure mortgage loan commitments

Lessor construction and capital commitments under lease agreements

Other investment loan commitments (1)

Other real estate loan commitments

Non-real estate loan commitments

Total remaining commitments (1)

(1) This amount includes $ 60.0 million related to the $ 90 million short-term revolving line of credit discussed in Note 6 – Other Investments.

(1) Includes finance costs .

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

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March

(in thousands, except per share amounts)

net income attributable to noncontrolling interests

Net income available to common stockholders

Net income available to common stockholders – basic

net income attributable to OP Units

Net income available to common stockholders – diluted

Denominator for basic earnings per share

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Earnings per share – diluted:

Net income available to common stockholders

NOTE 20 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Nine Months Ended September 30,

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(in thousands)

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Non-cash acquisition of real estate

Non-cash placement of mortgages

Non-cash collection of mortgage principal

Non-cash proceeds from other investments

Non-cash financing activities:

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NOTE 21 – SUBSEQUENT EVENTS

In the fourth quarter of 2022, the Company entered into three unsecured loans with principal amounts of $ 17.0 million, $ 2.5 million and $ 5.0 million.

The $ 17 million loan and $ 2.5 million loan bear interest at 9 % and mature on September 30, 2027 .

The $ 5.0 million loan bears interest at 10 % and matures on October 29, 2027 .

All three loans require quarterly principal payments commencing on January 3, 2022.

As discussed in Note 3 – Assets Held For Sale, Dispositions and Impairments and Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, in the fourth quarter of 2022 we sold 19 facilities that were leased and operated by Agemo in connection with our restructuring negotiations surrounding Agemo’s lease and loan agreements.

As discussed in Note 3 – Assets Held for Sale, Dispositions and Impairments, during the second quarter of 2023, we sold five facilities previously leased to Guardian that were classified as held for sale as of March 31, 2023 and one facility previously leased to Guardian that was not classified as held for sale as of March 31, 2023 for aggregate gross proceeds of $ 35.8 million.

In connection with the sale of the one facility that was not classified as held for sale as of March 31, 2023, we provided $ 12.0 million in seller financing, collateralized by a first lien mortgage on the facility.

In addition, Guardian completed the sale of the four facilities subject to the Guardian mortgage note with Omega during the second quarter of 2023.

Concurrent with the sale, Omega agreed to release the mortgage liens on these facilities in exchange for a paydown of $ 35.2 million, which is equal to the current amortized cost, net of credit loss reserves on the Guardian mortgage note at March 31, 2023.

Following the paydown in the second quarter of 2023, Guardian has no further obligations under the mortgage loan.

In April 2023, Omega committed to invest $ 222.6 million in connection with an existing operator’s acquisition of a West Virginia based operator that owns 17 SNFs.

Omega’s investment included $ 114.8 million for the acquisition of four of the facilities and up to $ 107.8 million for five loans to the operator primarily for the purpose of financing the acquisition of the remaining 13 West Virginia SNFs.

Concurrent with the acquisition, Omega added the 4 acquired SNFs to the operator’s master lease with an initial cash yield of 9.5 %, with 2.5 % annual escalators.

The weighted average interest rate of the five loans is 12 %.

In connection with the loans, Omega also received a 20 % equity ownership in two joint ventures.

On May 1, 2023, the Company acquired one SNF in West Virginia for $ 13.8 million and leased it to an existing operator.

The SNF was added to the operator’s master lease with an initial annual cash yield of 10 %, with 2.5 % annual escalators.

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

What changed 10-Q

Item 1. Financial Statements