What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-03 · 314 added, 223 removed, 827 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

September 30,

Real estate assets

25 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 – 240,991 shares as of June 30, 2023 and 234,252 shares as of December 31, 2022

Common stock $ 0.10 par value authorized – 350,000 shares, issued and outstanding – 244,989 shares as of September 30, 2023 and 234,252 shares as of December 31, 2022

Additional paid-in capital

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Rental income

8 unchanged sentences

Impairment on real estate properties

Provision (recovery) for credit losses

Provision for credit losses

Interest expense

7 unchanged sentences

Income tax expense

Income from unconsolidated joint ventures

(Loss) income from unconsolidated joint ventures

Net income attributable to noncontrolling interest

8 unchanged sentences

Three Months Ended

Six 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 (loss) income

Comprehensive income

4 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended June 30, 2023 and 2022

Three Months Ended September 30, 2023 and 2022

(in thousands, except per share amounts)

2 unchanged sentences

Noncontrolling

Balance at March 31, 2023

Balance at June 30, 2023

( 6,501,899 )

3 unchanged sentences

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at June 30, 2023

Other comprehensive loss

Balance at September 30, 2023

( 6,666,439 )

Balance at March 31, 2022

Balance at June 30, 2022

( 5,872,269 )

1 unchanged sentence

Issuance of common stock

Repurchase of common stock

Common dividends declared ($ 0.67 per share)

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

Other comprehensive loss

Balance at June 30, 2022

Capital contribution from noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at September 30, 2022

( 6,029,603 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

Six Months Ended June 30, 2023 and 2022

Nine Months Ended September 30, 2023 and 2022

(in thousands, except per share amounts)

13 unchanged sentences

Other comprehensive income

Balance at June 30, 2023

Balance at September 30, 2023

( 6,666,439 )

10 unchanged sentences

Other comprehensive income

Balance at June 30, 2022

Balance at September 30, 2022

( 6,029,603 )

3 unchanged sentences

Unaudited (in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

47 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

September 30, 2023

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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

As of June 30, 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.

As of September 30, 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

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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

Risks and Uncertainties

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.

1 unchanged sentence

Recent Accounting Pronouncements

ASU – 2023-05 - Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement

On August 23, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05 requiring certain joint ventures, upon formation, to apply a new basis of accounting and initially measure most of their assets and liabilities at fair value in their financial statements.

ASU 2023-05 does not affect the accounting by the joint venture’s investors.

The guidance is effective for all joint ventures with a formation date on or after January 1, 2025, and early adoption is permitted either prospectively or retrospectively.

The Company is still evaluating its adoption timeline, methodology and the impact on its consolidated financial statements.

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

On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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”).

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.

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NOTE 2 – REAL ESTATE ASSETS

At June 30, 2023, our leased real estate properties included 660 SNFs, 175 ALFs, 19 ILFs, 17 specialty facilities and one medical office building.

At September 30, 2023, our leased real estate properties included 622 SNFs, 189 ALFs, 19 ILFs, 18 specialty facilities and one medical office building.

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Asset Acquisitions

The following table summarizes the asset acquisitions that occurred during the six months ended June 30, 2023:

The following table summarizes the asset acquisitions that occurred during the nine months ended September 30, 2023:

Total Real Estate

7 unchanged sentences

Construction in Progress and Capital Expenditure Investments

We invested $ 17.8 million and $ 27.9 million under our construction in progress and capital improvement programs during the three and six months ended June 30, 2023, respectively.

We invested $ 16.0 million and $ 34.2 million under our construction in progress and capital improvement programs during the three and six months ended June 30, 2022, respectively.

We invested $ 24.5 million and $ 52.4 million under our construction in progress and capital improvement programs during the three and nine months ended September 30, 2023, respectively.

We invested $ 16.3 million and $ 50.5 million under our construction in progress and capital improvement programs during the three and nine months ended September 30, 2022, respectively.

During the second quarter of 2023, we purchased land located in Virginia (not reflected in the table above) for approximately $ 0.8 million that we plan to develop into a SNF.

4 unchanged sentences

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 and six months ended June 30, 2023, we sold ten facilities ( nine SNFs and one ILF) and 12 facilities ( ten SNFs, one ILF and one medical office building) subject to operating leases, for approximately $ 44.7 million and $ 62.3 million in net cash proceeds, respectively.

As a result of these sales, we recognized net gains of approximately $ 12.2 million and $ 25.9 million, respectively.

The proceeds for the three and six months ended June 30, 2023 primarily relate to the sale of five facilities in the second quarter of 2023 that were previously leased to Guardian Healthcare (“Guardian”) and were included in assets held for sale as of March 31, 2023.

During the three months ended September 30, 2023, we reclassified 13 SNFs, with an aggregate net book value of $ 66.1 million, to assets held for sale as a result of the exercise of a purchase option by an operator on a cash basis for revenue recognition.

The estimated fair value of the facilities, based on the fixed purchase option price, less costs to sell, exceeds the net book value and as a result, no impairment was recorded in connection with reclassifying these assets to held for sale during the three months ended September 30, 2023.

During the three and nine months ended September 30, 2023, we sold 25 facilities ( 25 SNFs) and 37 facilities ( 35 SNFs, one ILF and one medical office building) subject to operating leases for $ 199.0 million and $ 261.3 million in net cash proceeds, respectively.

As a result of these sales, we recognized net gains of $ 44.1 million and $ 70.0 million, respectively.

Our 2023 facility sales were primarily driven by restructuring transactions and negotiations related to our lease agreements with Guardian Healthcare (“Guardian”) and LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care).

In the second quarter of 2023, we sold five facilities that were previously leased to Guardian and were included in assets held for sale as of March 31, 2023.

The net cash proceeds from the sale were $ 23.8 million, and we did no t recognize any gain or loss on the sale because we had already impaired the facilities down to the estimated fair value less costs to sell during the first quarter of 2023.

Additionally, we sold one facility, also previously leased to Guardian, for a sales price of $ 12.0 million, which was fully financed by Omega through a $ 12.0 million first lien mortgage on the facility.

The one facility sale and related seller financing did not meet the contract criteria to be recognized under ASC 610-20.

During the three months ended June 30, 2023, we received interest of $ 0.2 million related to the seller financing, which was deferred and recorded as a contract liability within accrued expenses and other liabilities on our Consolidated Balance Sheets.

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

As a result of these sales, we recognized net gains of approximately $ 25.2 million and $ 138.8 million during the three and six months ended June 30, 2022, respectively.

Our 2022 sales were primarily driven by restructuring transactions and negotiations related to our lease agreements with Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) and Guardian.

Additionally, we sold one facility, also previously leased to Guardian, for a sales price of $ 12.0 million during the second quarter of 2023, which was fully financed by Omega through a $ 12.0 million first lien mortgage on the facility.

The one facility sale during the second quarter of 2023 and related seller financing did not meet the contract criteria to be recognized under ASC 610-20.

During the three and nine months ended September 30, 2023, we received interest of $ 0.3 million and $ 0.5 million, respectively, related to such seller financing, which was deferred and recorded as a contract liability within accrued expenses and other liabilities on our Consolidated Balance Sheets.

In the third quarter of 2023, we sold seven facilities subject to operating agreements with LaVie for $ 84.4 million in purchase consideration, which included cash proceeds of $ 14.8 million and an aggregate $ 69.6 million pay-off of the outstanding principal and accrued interest on seven HUD mortgages on the sold properties made by the buyer, on Omega’s behalf.

The sale resulted in a net loss of $ 5.5 million.

Also in the third quarter of 2023, we recognized the sale of 11 facilities, previously leased to LaVie, related to a December 2022 transaction that did not meet the contract criteria to be recognized under ASC 610-20 at the legal sale date.

In December 2022, in connection with restructuring negotiations with LaVie, we sold 11 facilities previously leased to LaVie to a third party 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.

During the third quarter of 2023, Omega received an aggregate $ 104.8 million of principal prepayments for the mortgage from the seller.

As a result of the principal prepayments, the Company determined the transaction met the contract criteria under ASC 610-20 and recognized the sale, resulting in a $ 50.2 million gain during the three months ended September 30, 2023, which includes the $ 25 million contract liability and $ 5.7 million of deferred interest income received to date.

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.

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

1 unchanged sentence

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 December 2022, in connection with restructuring negotiations with LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care), we sold 11 facilities previously leased to LaVie to a third party 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 and six months ended June 30, 2023, we received interest of $ 2.1 million and $ 4.2 million, respectively, 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.

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.

Real Estate Impairments

During the three and six months ended June 30, 2023, we recorded impairments on four and six facilities of approximately $ 21.1 million and $ 60.1 million, respectively.

Of the $ 60.1 million, $ 57.5 million related to four held-for-use facilities (of which $ 48.0 million relates to three facilities that were closed during the year) for which the carrying value exceeded the fair value and $ 2.6 million related to two facilities that were classified as held for sale for which the carrying value exceeded the estimated fair value less costs to sell.

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

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

During the three and nine months ended September 30, 2023, we recorded impairments on 19 and 25 facilities of approximately $ 27.9 million and $ 88.0 million, respectively.

Of the $ 88.0 million, $ 85.4 million related to 23 held for use facilities (of which $ 48.0 million relates to three facilities that were closed during the year) for which the carrying value exceeded the fair value and $ 2.6 million related to two facilities that were classified as held for sale for which the carrying value exceeded the estimated fair value less costs to sell.

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

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)

6 unchanged sentences

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

During the three and six months ended June 30, 2023, we placed two new operators, which Omega has not previously had relationships with prior to the second quarter of 2023, on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from them was not deemed probable.

During the nine months ended September 30, 2023, we placed two new operators, which Omega had not previously had relationships with prior to the second quarter of 2023, 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 each of these operators were executed in the second quarter of 2023 as part of transitions of facilities from other operators, and we placed them on a cash basis concurrent with the respective lease commencement dates, so there were no straight-line rent write-offs associated with moving these operators to a cash basis.

During the three and six months ended June 30, 2022, we placed two and four operators, respectively, on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from such operators was not deemed probable.

In connection with moving these operators to a cash basis, we recognized $ 10.4 million in total straight-line accounts receivable write-offs through rental income during the three and six months ended June 30, 2022.

During the six months ended June 30, 2023, we transitioned the portfolios of four cash basis operators with an aggregate of 48 facilities, including 14 facilities related to the operator referred to as the “ 1.2 % Operator” in our Annual Report on Form 10-K for the year ended December 31, 2022 and 20 facilities related to the operator referred to as the “ 2.0 % Operator” in our Annual Report on Form 10-K for the year ended December 31, 2022, to new or amended leases with five operators.

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 such operators was not 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.

During the nine months ended September 30, 2023, we transitioned the portfolios of four cash basis operators with an aggregate of 48 facilities, including 14 facilities related to the operator referred to as the “ 1.2 % Operator” in our Annual Report on Form 10-K for the year ended December 31, 2022 and 20 facilities related to the operator referred to as the “ 2.0 % Operator” in our Annual Report on Form 10-K for the year ended December 31, 2022, to new or amended leases with five operators.

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

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

During the six months ended June 30, 2023 and 2022, we also wrote-off $ 0.9 million and $ 3.2 million, respectively, of straight-line rent receivable balances through rental income as a result of transitioning facilities between existing operators.

As of June 30, 2023, we had 18 operators on a cash basis for revenue recognition, which represent 25.8 % and 32.3 % of our total revenues (excluding the impact of write-offs) for the six months ended June 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023 and 2022, we also wrote-off $ 8.1 million and $ 3.2 million, respectively, of straight-line rent receivable balances through rental income as a result of transitioning facilities between existing operators.

As of September 30, 2023, we had 18 operators on a cash basis for revenue recognition, which represent 25.1 % and 32.8 % of our total revenues (excluding the impact of write-offs) for the nine months ended September 30, 2023 and 2022, respectively.

Rent Deferrals and Application of Collateral

During the six months ended June 30, 2023 and 2022, we allowed nine operators and seven operators, respectively, to defer $ 33.6 million and $ 24.0 million, respectively, of contractual rent and interest.

The deferrals during the six months ended June 30, 2023 primarily related to the following operators:

LaVie ($ 19.0 million), Healthcare Homes Limited (“Healthcare Homes”) ($ 8.2 million), Agemo Holdings, LLC (“Agemo”) ($ 1.9 million) and Maplewood Senior Living (along with affiliates, “Maplewood”) ($ 0.7 million).

Additionally, we allowed four operators and five operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the six months ended June 30, 2023 and 2022, respectively.

The total collateral applied to contractual rent and interest was $ 5.5 million and $ 4.7 million for the six months ended June 30, 2023 and 2022, respectively.

During each of the nine months ended September 30, 2023 and 2022, we allowed nine operators to defer $ 35.0 million and $ 25.5 million, respectively, of contractual rent and interest.

The deferrals during the nine months ended September 30, 2023 primarily related to the following operators:

LaVie ($ 19.0 million), Healthcare Homes Limited (“Healthcare Homes”) ($ 8.2 million), Agemo ($ 1.9 million) and Maplewood Senior Living (along with affiliates, “Maplewood”) ($ 1.3 million).

Additionally, we allowed six operators and seven operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the nine months ended September 30, 2023 and 2022, respectively.

The total collateral applied to contractual rent and interest was $ 11.4 million and $ 9.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Operator Collectibility Updates

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

Agemo is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 5.8 million for the three and six months ended June 30, 2023 for the contractual rent payments that were received.

Additionally, no interest income was recognized during the three and six months ended June 30, 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.

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

Agemo is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 5.8 million and $ 11.6 million for the three and nine months ended September 30, 2023, respectively, for the contractual rent payments that were received.

Additionally, no interest income was recognized during the three and nine months ended September 30, 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 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.

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.

During the three and six months ended June 30, 2023, LaVie elected to defer $ 4.7 million and $ 19.0 million, respectively, of contractual rent.

Since LaVie was placed on a cash basis of revenue recognition for lease purposes in the fourth quarter of 2022, the $ 16.9 million and $ 24.3 million of contractual rent payments that we received from LaVie to satisfy the remaining contractual obligations after utilizing the deferral were recorded as rental income during the three and six months ended June 30, 2023, respectively.

During the second quarter of 2023, we transitioned two facilities, previously subject to the master lease with LaVie, to another operator.

In July 2023, LaVie paid $ 2.5 million of contractual rent, a short pay of $ 4.7 million of the $ 7.2 million due under its lease agreement.

Revenue from LaVie represents approximately 5.1 % and 11.3 % of our total revenues (excluding the impact of write-offs) for the six months ended June 30, 2023 and 2022, respectively.

During 2023, we continued the process of restructuring our portfolio with LaVie by amending the lease agreements with LaVie to allow for a partial rent deferral of $ 19.0 million for the first four months of 2023, transitioning two facilities previously subject to the master lease with LaVie to another operator during the second quarter of 2023 and selling seven facilities previously subject to the master lease with LaVie to a third party during the third quarter of 2023.

In the third quarter of 2023, LaVie paid $ 7.4 million of contractual rent, a short pay of $ 13.3 million of the $ 20.7 million due under its lease agreement.

As LaVie was placed on a cash basis of revenue recognition for lease purposes in the fourth quarter of 2022, only the $ 7.4 million and $ 31.7 million of contractual rent payments that we received from LaVie were recorded as rental income during the three and nine months ended September 30, 2023, respectively.

As discussed further in Note 21 – Subsequent Events, we sold 29 facilities previously subject to the master lease with LaVie during the fourth quarter of 2023 and amended its master lease agreement to reduce monthly rent to $ 3.4 million.

Revenue from LaVie represents approximately 4.3 % and 11.4 % of our total revenues (excluding the impact of write-offs) for the nine months ended September 30, 2023 and 2022, respectively.

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

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● 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;

● 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, and 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 short-paid the contractual rent amount due under its lease agreement in each of June 2023 and July 2023 by $ 1.0 million each.

During the third quarter of 2023, we applied $ 2.0 million of Maplewood’s security deposit toward the unpaid portion of June 2023 rent and July 2023 rent.

Following the application of the security deposit, we have a $ 2.8 million security deposit remaining.

We are taking actions to preserve our rights and are in discussions with Maplewood to address the deficiency.

Maplewood is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 16.3 million and $ 33.6 million for the three and six months ended June 30, 2023, respectively, 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 7.3 % and 9.0 % of our total revenues (excluding the impact of write-offs) for the six months ended June 30, 2023 and 2022, respectively.

Maplewood short-paid the contractual rent amount due under its lease agreement by $ 1.0 million in June 2023, and continued to short-pay the contractual rent amount due under its lease agreement by $ 1.0 million for each month during the third quarter of 2023.

During the third quarter of 2023, we applied $ 3.0 million of Maplewood’s security deposit toward the unpaid portion of rent for June 2023 through August 2023.

Following the application of the security deposit in the third quarter of 2023, we had a $ 1.8 million security deposit remaining as of September 30, 2023, which can be applied to future rent shortfalls.

In October 2023, Maplewood short-paid the contractual rent amount due under its lease agreement by $ 1.0 million.

We continue to take actions to preserve our rights and are in discussions with Maplewood to address the deficiency.

Maplewood is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 17.3 million and $ 50.9 million for the three and nine months ended September 30, 2023, respectively, for the contractual rent payments that were received from Maplewood and through the application of Maplewood’s security deposit.

The $ 12.5 million option termination fee payment made in the first quarter of 2023 in connection with the restructuring agreement was accounted for as a lease inducement.

As Maplewood is on a cash basis of revenue recognition, the inducement was immediately expensed and was recorded as a reduction to the $ 50.9 million of rental income recognized for the nine months ended September 30, 2023.

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 7.2 % and 9.1 % of our total revenues (excluding the impact of write-offs) for the nine months ended September 30, 2023 and 2022, respectively.

Healthcare Homes

In December 2022, we agreed to allow Healthcare Homes, a U.K.-based operator representing 3.1 % and 2.9 % of our total revenues (excluding the impact of write-offs) for the six months ended June 30, 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.

In December 2022, we agreed to allow Healthcare Homes, a U.K.-based operator representing 3.1 % and 2.9 % of our total revenues (excluding the impact of write-offs) for the nine months ended September 30, 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 three and six months ended June 30, 2023, Healthcare Homes elected to defer £ 1.7 million ($ 2.1 million in USD) and £ 6.7 million ($ 8.2 million in USD), respectively, 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.

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

In August and September 2023, Guardian, an operator that was already on a cash basis of revenue recognition, did not pay its contractual amounts due under its lease agreement.

During the third quarter of 2023, we applied $ 2.9 million of Guardian’s security deposit to fund the unpaid rent.

As Guardian is on a cash basis of revenue recognition, we recorded rental income of $ 4.4 million for the three months ended September 30, 2023 for the contractual rent payments that were received from Guardian and through the application of Guardian’s security deposit.

Following the application of the security deposit in the third quarter of 2023, we had a $ 4.4 million security deposit remaining as of September 30, 2023, which can be applied to future rent shortfalls.

We are in discussions to sell or release to another operator the facilities included in Guardian’s master lease.

In October 2023, Guardian did not pay the contractual rent amount due under its lease agreement of $ 1.5 million.

Revenue from Guardian represents approximately 1.7 % and 1.0 % of our total revenues (excluding the impact of write-offs) for the nine months ended September 30, 2023 and 2022, respectively.

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 June 30, 2023, our real estate loans receivable consists of eight fixed rate mortgage notes on 49 long-term care facilities and 12 other real estate loans.

As of September 30, 2023, our real estate loans receivable consists of eight fixed rate mortgage notes on 49 long-term care facilities and 14 other real estate loans.

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

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

September 30,

(in thousands)

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interest at 11.75 % (1)

Other real estate loan outstanding (4)

Other real estate loans outstanding (4)

Other real estate loans – gross

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Total real estate loans receivable – net

(1) Approximates the weighted average interest rate on facilities as of June 30, 2023.

(1) Approximates the weighted average interest rate on facilities as of September 30, 2023.

(2) During the second quarter of 2023, this mortgage note was extended from December 31, 2032 to December 31, 2037.

(3) Other mortgage notes outstanding have a weighted average interest rate of 8.6 % as of June 30, 2023, with maturity dates ranging from 2023 through 2026 .

(3) Other mortgage notes outstanding have a weighted average interest rate of 8.6 % as of September 30, 2023, with maturity dates ranging from 2023 through 2026 .

Two of the mortgage notes with an aggregate principal balance of $ 12.9 million are past due and have been written down, through our allowance for credit losses, to the estimated fair value of the underlying collateral of $ 1.5 million.

(4) As of June 30, 2023 and December 31, 2022, includes one other real estate loan that bears interest at a rate of 12 % and matures on December 2, 2027 .

(4) Other real estate loans outstanding have a weighted average interest rate of 12 % as of September 30, 2023, with maturity dates ranging from 2027 through 2031 .

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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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 and second quarters 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.

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 three quarters of 2023, in accordance with the restructuring terms.

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

During the three and six months ended June 30, 2023, we received $ 1.6 million and $ 3.9 million, respectively, 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.

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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 during the three and six months ended June 30, 2023.

As of June 30, 2023, the amortized cost basis of this loan was $ 263.5 million, which represents 22.7 % of the total amortized cost basis of all real estate loan receivables.

As of June 30, 2023, the remaining commitment under the secured revolving credit facility, including the unrecognized PIK interest, was $ 48.8 million.

We did not record any interest income related to the PIK interest during the three and nine months ended September 30, 2023.

As of September 30, 2023, the amortized cost basis of this loan was $ 263.5 million, which represents 22.2 % of the total amortized cost basis of all real estate loan receivables.

As of September 30, 2023, the remaining commitment under the secured revolving credit facility, including the unrecognized PIK interest, was $ 43.9 million.

Other real estate loans due 2023-2030

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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 June 30, 2023, we had 39 loans with 22 different borrowers.

As of September 30, 2023, we had 40 loans with 21 different borrowers.

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

September 30,

(in thousands)

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Total non-real estate loans receivable – net

(1) Approximates the weighted average interest rate as of June 30, 2023.

(1) Approximates the weighted average interest rate as of September 30, 2023.

(2) During the third quarter of 2023, the interest rate was amended to increase the interest rate on borrowings in excess of $ 45 million to 10 % through October 15, 2023, and to 12 % thereafter.

The interest rate remains at 7.5 % for borrowings that do not exceed $ 45 million.

The interest rate above represents the weighted average interest rate as of September 30, 2023.

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

(3) Other notes outstanding have a weighted average interest rate of 7.39 % as of June 30, 2023, with maturity dates ranging from 2023 through 2030 (with $ 19.6 million maturing in 2023 ).

We have one loan within other notes outstanding with principal of $ 4.1 million that matured in 2022 but remained outstanding as of June 30, 2023.

We wrote the $ 4.1 million loan down to the fair value of its collateral of $ 1.0 million during the first quarter of 2023.

For the three months ended June 30, 2023 and 2022, non-real estate loans generated interest income of $ 5.3 million and $ 2.8 million, respectively.

For the six months ended June 30, 2023 and 2022, non-real estate loans generated interest income of $ 10.3 million and $ 5.0 million, respectively.

(4) Other notes outstanding have a weighted average interest rate of 7.72 % as of September 30, 2023, with maturity dates ranging from 2023 through 2030 (with $ 18.1 million maturing in 2023 ).

Three of the other notes outstanding with an aggregate principal balance of $ 10.4 million are past due and have been written down to the estimated fair value of the underlying collateral of $ 0.5 million, through our allowance for credit losses.

For the three months ended September 30, 2023 and 2022, non-real estate loans generated interest income of $ 5.7 million and $ 3.5 million, respectively.

For the nine months ended September 30, 2023 and 2022, non-real estate loans generated interest income of $ 16.0 million and $ 8.5 million, respectively.

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

Notes due 2023 - 2029

During the second quarter of 2023, we entered into two $ 15.0 million mezzanine loans with an existing operator and its affiliates in connection with the operator’s acquisition of 13 SNFs in West Virginia (discussed in Note 5 – Real Estate Loans Receivable).

The first $ 15.0 million mezzanine loan (the “2028 Mezz Loan”) matures on April 1, 2028 and bears interest at a variable rate based on the one-month term SOFR plus 8.6 % per annum.

The 2028 Mezz Loan requires monthly principal payments commencing on May 1, 2023 and is secured by a pledge of the operator’s equity interest in its subsidiaries.

The second $ 15.0 million mezzanine loan (the “2029 Mezz Loan”) matures on April 13, 2029 and bears interest at a fixed rate of 12 % per annum.

The 2029 Mezz Loan also requires quarterly principal payments commencing on July 1, 2023 and additional payments contingent on the operator’s achievement of certain metrics.

The 2029 Mezz Loan is secured by a pledge of the operator’s equity interest in its subsidiaries.

In connection with the 2028 Mezz Loan and 2029 Mezz Loan, we also provided a $ 3.3 million working capital loan to a new joint venture, WV Pharm Holdings, LLC, which we formed in April 2023 with the acquiring operator (see Note 9 – Investments in Joint Ventures for additional information on this joint venture).

Notes due 2036 ;

interest at 5.63 %

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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.

During the three months ended June 30, 2023, we received $ 0.8 million of interest payments from Agemo that we applied against the outstanding principal of the loans and recognized a recovery for credit loss equal to the amount of payments applied against principal.

As of June 30, 2023, the amortized cost basis of these loans was $ 80.2 million, which represents 23.3 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of June 30, 2023 related to the Agemo Replacement Loans was $ 74.3 million.

Notes due 2023 - 2029

The first $ 15.0 million mezzanine loan (the “2028 Mezz Loan”) matures on April 1, 2028 and bears interest at a variable rate based on the one month term SOFR plus 8.6 % per annum.

The 2028 Mezz Loan requires monthly principal payments commencing on May 1, 2023 and is secured by a pledge of the operator’s equity interest in its subsidiaries.

The second $ 15.0 million mezzanine loan (the “2029 Mezz Loan”) matures on April 13, 2029 and bears interest at a fixed rate of 12 % per annum.

The 2029 Mezz Loan also requires quarterly principal payments of $ 0.3 million commencing on July 1, 2023 and additional payments contingent on the operator’s achievement of certain metrics.

The 2029 Mezz Loan is secured by a pledge of the operator’s equity interest in subsidiaries of the operator.

In connection with the two mezzanine loans, we also provided a $ 3.3 million working capital loan to a new joint venture, WV Pharm Holdings, LLC, that we formed in April 2023 with the acquiring operator (see Note 9 – Investments in Joint Ventures for additional information on this joint venture).

During the three and nine months ended September 30, 2023, we received $ 1.2 million and $ 2.0 million, respectively, of interest payments from Agemo that we applied against the outstanding principal of the loans and recognized a recovery for credit loss equal to the amount of payments applied against principal.

As of September 30, 2023, the amortized cost basis of these loans was $ 79.0 million, which represents 21.8 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of September 30, 2023 related to the Agemo Replacement Loans was $ 73.1 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 convert from monthly cash interest payments to PIK interest.

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 things, extend the loan maturity dates to November 30, 2036 to align with the lease term, and starting in January 2023, reduce the interest rates to 2 %, remove the requirement for LaVie to make any principal payments until the maturity dates and 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 six months ended June 30, 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 June 30, 2023, the amortized cost basis of these loans was $ 32.3 million, which represents 9.4 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of June 30, 2023 related to the LaVie loans was $ 24.8 million.

During the nine months ended September 30, 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 September 30, 2023, the amortized cost basis of these loans was $ 32.3 million, which represents 8.9 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of September 30, 2023 related to the LaVie loans was $ 28.7 million.

Note due 2024

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During 2022, this revolving credit facility was amended multiple times to increase the maximum principal to $ 48 million, extend the maturity date to December 31, 2024 and require monthly principal payments.

During the second quarter of 2023, this revolving credit facility was further amended to increase the maximum principal to $ 52 million and modify the principal payment schedule.

During 2023, this revolving credit facility was further amended to increase the maximum principal to $ 55 million, increase the interest rate on certain borrowings as discussed above and modify the principal payment schedule.

During the third quarter of 2023, the borrower failed to make aggregate contractual principal payments of $ 3.0 million due under the revolving credit facility.

We are currently in discussions with the borrower to amend the revolving credit facility agreement to extend the repayment schedule for the $ 55.0 million of principal outstanding.

Other notes outstanding

7 unchanged sentences

The working capital loan is secured by the accounts receivable of the acquired facilities.

As of June 30, 2023, the revolving working capital loan has not been drawn on.

As of September 30, 2023, the revolving working capital loan has an outstanding principal balance of $ 12.0 million.

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

A rollforward of our allowance for credit losses for the six months ended June 30, 2023 is as follows:

A rollforward of our allowance for credit losses for the nine months ended September 30, 2023 is as follows:

Financial Statement Line Item

Allowance for Credit Loss as of December 31, 2022

Provision (recovery) for Credit Loss for the six months ended June 30, 2023

Write-offs charged against allowance for the six months ended June 30, 2023

Other additions to the allowance for the six months ended June 30, 2023

Allowance for Credit Loss as of June 30, 2023

Provision (recovery) for Credit Loss for the nine months ended September 30, 2023

Write-offs charged against allowance for the nine months ended September 30, 2023

Other additions to the allowance for the nine months ended September 30, 2023

Allowance for Credit Loss as of September 30, 2023

(in thousands)

10 unchanged sentences

Non-real estate loans receivable

Off-balance sheet real estate loan commitments

Off-balance sheet non-real estate loan commitments

1 unchanged sentence

Off-balance sheet non-real estate loan commitments

Off-balance sheet real estate loan commitments

(1) This amount relates to the write-off of the allowance for the Guardian mortgage note in connection with the settlement and partial forgiveness of the note in the second quarter of 2023.

See Note 5 – Real Estate Loans Receivable for additional details.

(2) 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.

(2) This amount relates to the additional $ 25.2 million allowance recorded during the first quarter of 2023 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 six months ended June 30, 2022 is as follows:

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

Financial Statement Line Item

Allowance for Credit Loss at December 31, 2021

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

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

Allowance for Credit Loss as of June 30, 2022

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

(in thousands)

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Investment in direct financing leases

Non-real estate loans receivable

3 unchanged sentences

Non-real estate loans receivable

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

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 and second quarters of 2022.

(2) This provision includes an additional $ 2.3 million allowance recorded on a $ 20 million working capital loan during the second quarter of 2022.

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

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

(2) During the third quarter of 2022, we wrote-off the loan balance and reserve for a loan that expired during the quarter which had previously been fully reserved.

(3) This provision includes an additional $ 3.2 million allowance recorded on a $ 20 million working capital loan during the nine months ended September 30, 2022.

(4) This provision includes an additional $ 10.8 million allowance recorded on the Agemo WC Loan during the nine months ended September 30, 2022.

(5) In 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 as we were notified of the operator’s intent to draw the funds in the third quarter of 2022.

In the third quarter of 2022, the remaining commitment under the facility was drawn and the facility expired and as a result we wrote-off the loan balance and related reserves as we do not expect to collect amounts under the facility following the expiration.

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 June 30, 2023

Balance as of September 30, 2023

(in thousands)

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

As of June 30, 2023 and December 31, 2022, we have excluded $ 8.8 million and $ 8.2 million, respectively, of contractual interest receivables and $ 4.6 million and $ 5.7 million, respectively, of effective yield interest receivables from our allowance for credit losses.

As of September 30, 2023 and December 31, 2022, we have excluded $ 9.4 million and $ 8.2 million, respectively, of contractual interest receivables and $ 3.9 million and $ 5.7 million, respectively, of effective yield interest receivables from our allowance for credit losses.

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

During the three months ended June 30, 2023 and 2022, we recognized $ 0.1 million and $ 4.9 million, respectively, of interest income related to loans on non-accrual status as of June 30, 2023.

During the six months ended June 30, 2023 and 2022, we recognized $ 1.6 million and $ 9.0 million, respectively, of interest income related to loans on non-accrual status as of June 30, 2023.

During the three months ended September 30, 2022, we recognized $ 5.1 million of interest income related to loans on non-accrual status as of September 30, 2023.

During the nine months ended September 30, 2023 and 2022, we recognized $ 1.6 million and $ 14.1 million, respectively, of interest income related to loans on non-accrual status as of September 30, 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, collateral and maximum exposure to loss associated with these unconsolidated VIEs as of June 30, 2023 and December 31, 2022:

Below is a summary of our assets, liabilities, collateral and maximum exposure to loss associated with these unconsolidated VIEs as of September 30, 2023 and December 31, 2022:

September 30,

(in thousands)

Real estate assets – net

Assets held for sale

Real estate loans receivable – net

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

The fair value of the accounts receivable available to Omega was $ 8.7 million and $ 5.9 million as of June 30, 2023 and December 31, 2022, respectively.

The fair value of the accounts receivable available to Omega was $ 7.9 million and $ 5.9 million as of September 30, 2023 and December 31, 2022, respectively.

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

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Six Months Ended June 30,

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Consolidated VIEs

We own 52.4 % of the outstanding equity of a joint venture, which owns two ALFs, that is a VIE.

We have consolidated this VIE as a result of our conclusion 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.

As of June 30, 2023 and December 31, 2022, this joint venture has $ 26.7 million and $ 25.8 million, respectively, of total assets and $ 20.3 million and $ 19.8 million, respectively, of total liabilities, which are included in our Consolidated Balance Sheets.

We own a partial equity interest in a joint venture that we have determined is a VIE.

We have consolidated this VIE because 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 and obligation to absorb losses arising from the joint venture.

As of September 30, 2023 and December 31, 2022, this joint venture has $ 26.8 million and $ 25.8 million, respectively, of total assets and $ 20.4 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”).

11 unchanged sentences

Facilities at

September 30,

Investment (1)

June 30, 2023

September 30, 2023

Second Spring Healthcare Investments

8 unchanged sentences

OMG-Form Senior Holdings, LLC (3)(4)

CHS OHI Insight Holdings, LLC

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

1 unchanged sentence

The acquiring operator in the transaction is the majority owner of these joint ventures.

As of June 30, 2023, we have an aggregate of $ 8.5 million of loans outstanding with these joint ventures.

As of September 30, 2023, we have an aggregate of $ 8.5 million of loans outstanding with these joint ventures.

(3) These joint ventures are unconsolidated VIEs and therefore are included in the tables in Note 8 – Variable Interest Entities.

(4) During the second quarter of 2023, we funded $ 7.7 million under a mortgage loan with this joint venture.

The following table reflects our income (loss) from unconsolidated joint ventures for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Six Months Ended June 30,

The following table reflects our income (loss) from unconsolidated joint ventures for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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

For the three months ended June 30, 2023 and 2022, we recognized approximately $ 0.2 million of asset management fees.

For the six months ended June 30, 2023 and 2022, we recognized approximately $ 0.4 million of asset management fees.

For the three months ended September 30, 2023 and 2022, we recognized approximately $ 0.1 million of asset management fees.

For the nine months ended September 30, 2023 and 2022, we recognized approximately $ 0.5 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 June 30, 2023 and December 31, 2022:

The following is a summary of our goodwill as of September 30, 2023 and December 31, 2022:

(in thousands)

1 unchanged sentence

Foreign currency translation

Balance as of June 30, 2023

The following is a summary of our intangibles as of June 30, 2023 and December 31, 2022:

Balance as of September 30, 2023

The following is a summary of our intangibles as of September 30, 2023 and December 31, 2022:

September 30,

(in thousands)

8 unchanged sentences

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 June 30, 2023 and 2022, our net amortization related to intangibles was $ 0.7 million and $ 1.0 million, respectively.

For the six months ended June 30, 2023 and 2022, our net amortization related to intangibles was $ 6.8 million and $ 2.6 million, respectively.

For the three months ended September 30, 2023 and 2022, our net amortization related to intangibles was $ 2.1 million and $ 1.0 million, respectively.

For the nine months ended September 30, 2023 and 2022, our net amortization related to intangibles was $ 8.9 million and $ 3.6 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 – $ 1.9 million and 2027 – $ 1.6 million.

As of June 30, 2023, the weighted average remaining amortization period of above market lease assets is approximately fourteen years and below market lease liabilities is approximately eight years .

As of September 30, 2023, the weighted average remaining amortization period of above market lease assets is approximately 14 years and below market lease liabilities is approximately eight years .

NOTE 11 – CONCENTRATION OF RISK

As of June 30, 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 923 healthcare facilities, located in 42 states and the U.K.

As of September 30, 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 913 healthcare facilities, located in 42 states and the U.K.

and operated by 70 third-party operators.

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.6 billion at June 30, 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, 17 specialty facilities and one medical office building, (ii) fixed rate mortgages on 44 SNFs, three ALFs and two specialty facilities, and (iii) one facility that is held for sale.

At June 30, 2023, we also held other real estate loans receivable (excluding mortgages) of $ 466.6 million, non-real estate loans receivable of $ 227.9 million and $ 191.7 million of investments in eight unconsolidated joint ventures.

As of June 30, 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 6.5 % and 9.0 % of our total revenues (excluding the impact of write-offs) for the three months ended June 30, 2023 and 2022, respectively, and 7.3 % and 9.0 % of our total revenues for the six months ended June 30, 2023 and 2022, respectively.

During the three and six months ended June 30, 2023, we also have one operator with total revenues (excluding the impact of write-offs) that exceeded 10% of our total revenues:

Our investment in these facilities, net of impairments and allowances, totaled approximately $ 9.3 billion at September 30, 2023, with approximately 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 623 SNFs, 189 ALFs, 19 ILFs, 18 specialty facilities and one medical office building, (ii) fixed rate mortgages on 44 SNFs, three ALFs and two specialty facilities, and (iii) 14 facilities that are held for sale.

At September 30, 2023, we also held other real estate loans receivable (excluding mortgages) of $ 488.3 million, non-real estate loans receivable of $ 245.0 million and $ 187.5 million of investments in nine unconsolidated joint ventures.

As of September 30, 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 6.9 % and 9.3 % of our total revenues (excluding the impact of write-offs) for the three months ended September 30, 2023 and 2022, respectively, and 7.2 % and 9.1 % of our total revenues for the nine months ended September 30, 2023 and 2022, respectively.

During the three and nine months ended September 30, 2023, we also have one operator with total revenues (excluding the impact of write-offs) that exceeded 10% of our total revenues:

CommuniCare Health Services, Inc.

(“CommuniCare”).

CommuniCare generated approximately 11.4 % and 7.4 % of our total revenues (excluding the impact of write-offs) for the three months ended June 30, 2023 and 2022, respectively, and 10.3 % and 7.4 % of our total revenues for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, CommuniCare represented approximately 8.6 % of our total investments.

As of June 30, 2023, the three states in which we had our highest concentration of investments were Florida ( 11.4 %), Texas ( 10.2 %) and Indiana ( 6.6 %).

CommuniCare generated approximately 12.1 % and 8.2 % of our total revenues (excluding the impact of write-offs) for the three months ended September 30, 2023 and 2022, respectively, and 10.9 % and 7.7 % of our total revenues for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, CommuniCare represented approximately 9.0 % of our total investments.

As of September 30, 2023, the three states in which we had our highest concentration of investments were Texas ( 10.2 %), Florida ( 8.9 %) and Indiana ( 6.8 %).

NOTE 12 – STOCKHOLDERS’ EQUITY

$ 500 Million Stock Repurchase Program

We had no share repurchases during the three and six months ended June 30, 2023.

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

We had no share repurchases during the three and nine months ended September 30, 2023.

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

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Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2022

September 30, 2022

Nine Months Ended

September 30, 2022

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

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August 15, 2023

October 31, 2023

November 15, 2023

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 six months ended June 30, 2023 and 2022 (in millions):

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, 2023 and 2022 (in millions):

Shares issued

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Three Months Ended

June 30, 2022

September 30, 2022

Three Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2023

September 30, 2023

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2023

At-The-Market Offering Programs

The following is a summary of the shares issued under our $ 1.0 billion At-The-Market Offering Program (“ATM Program”) for the three and six months ended June 30, 2023 and 2022 (in millions except average price per share):

The following is a summary of the shares issued under our $ 1.0 billion At-The-Market Offering Program (“ATM Program”) for the three and nine months ended September 30, 2023 and 2022 (in millions except average price per share):

Average Net Price

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Gross Proceeds

Three and Six Months Ended

June 30, 2022

Three and Six Months Ended

June 30, 2023

Three and Nine Months Ended

September 30, 2022

Three Months Ended

September 30, 2023

Nine Months Ended

September 30, 2023

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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Beginning balance

Translation gain (loss)

Realized gain (loss)

Translation (loss) gain

Realized (loss) gain

Ending balance

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Beginning balance

Unrealized (loss) gain

Unrealized gain (loss)

Ending balance

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

As of June 30, 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 June 30, 2023, with a valuation allowance due to uncertainties regarding realization.

As of September 30, 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 $ 9.9 million.

Our NOL carry-forward was partially reserved as of September 30, 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.

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

As of June 30, 2023, one of our U.K.

As of September 30, 2023, one of our U.K.

subsidiaries had a NOL carryforward of approximately $ 38.4 million.

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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):

September 30,

(in thousands)

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions)

Federal, state and local income tax expense

Foreign income tax expense (benefit) (1)

Foreign income tax expense

Total income tax expense (1)

(1) The benefit for the six months ended June 30, 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.

(1) 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 six months ended June 30, 2023 and 2022, respectively:

The following is a summary of our stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022, respectively:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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

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.

We granted 26,254 time-based PIUs and 25,224 time-based RSUs to directors during the second quarter of 2023, and those units vest on Omega’s 2024 annual meeting date, subject to the director’s continued service and vesting in certain other events.

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.

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Interest Rate

September 30,

(in thousands)

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2033 notes (6)

2025 term loan (6)(9)

OP term loan (10)(11)

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Total secured and unsecured borrowings – net (12)(13)

(1) Reflects the weighted average annual contractual interest rate on the mortgages at June 30, 2023.

The mortgages are secured by real estate assets with a net carrying value of $ 470.8 million as of June 30, 2023.

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

(1) Reflects the weighted average annual contractual interest rate on the mortgages at September 30, 2023.

The mortgages are secured by real estate assets with a net carrying value of $ 368.4 million as of September 30, 2023.

As discussed in Note 3 – Assets Held for Sale, Dispositions and Impairments, in connection with the sale of seven facilities in the third quarter of 2023, seven HUD mortgages with outstanding principal balances of $ 69.4 million were paid off during the three months ended September 30, 2023.

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

(3) Excludes fees of approximately 0.65 % for mortgage insurance premiums.

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(7) During the second quarter of 2023, the Company transitioned its benchmark interest rate for its $ 1.45 billion senior unsecured multicurrency revolving credit facility from LIBOR to SOFR .

As of June 30, 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 6.42 % and 6.25 % as of June 30, 2023, respectively.

As of September 30, 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 U.S.

Dollar tranche and on the GBP borrowings under the alternative currency tranche of the credit facility were 6.63 % and 6.50 % as of September 30, 2023, respectively.

(8) On August 1, 2023, the Company repaid the $ 350 million of 4.375 % senior notes that matured on August 1, 2023 using available cash.

(9) The weighted average interest rate of the $ 428.5 million 2025 term loan has been adjusted to reflect the impact of the interest rate swaps that effectively fix the SOFR-based portion of the interest rate at 4.047 % .

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

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

As of June 30, 2023 and December 31, 2022, we were in compliance with all applicable covenants for our borrowings .

As of September 30, 2023 and December 31, 2022, we were in compliance with all applicable covenants for our borrowings .

Unsecured Borrowings

2025 Term Loan

On August 8, 2023, Omega entered into a credit agreement (the “2025 Omega Credit Agreement”) providing it with a new $ 400 million senior unsecured term loan facility (the “2025 Term Loan”).

The 2025 Omega Credit Agreement contains an accordion feature permitting us, subject to compliance with customary conditions, to increase the maximum aggregate commitments thereunder to $ 500 million by requesting an increase in the aggregate commitments under the 2025 Term Loan.

On September 27, 2023, Omega exercised the accordion feature to increase the aggregate commitment under the 2025 Term Loan by $ 28.5 million.

The 2025 Term Loan bears interest at SOFR plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit rating.

The 2025 Term Loan matures on August 8, 2025 , subject to Omega’s option to extend such maturity date for two sequential 12 -month periods.

We recorded $ 3.3 million of deferred financing costs and a $ 1.4 million discount in connection with the 2025 Omega Credit Agreement.

NOTE 16 – DERIVATIVES AND HEDGING

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

As of June 30, 2023, we have one interest rate swap with $ 50.0 million in notional value that was entered into during the second quarter of 2023 (discussed further below).

The swap is designated as a cash flow hedge.

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.

As of September 30, 2023, we have one interest rate swap with $ 50.0 million in notional value that was entered into during the second quarter of 2023 and 11 interest rate swaps with $ 428.5 million in notional value that were entered into during the third quarter of 2023 (discussed further below).

The swaps are designated as cash flow hedges.

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

In August 2023, we entered into ten interest rate swaps with $ 400.0 million in notional value.

The swaps are effective August 14, 2023 and terminate on August 6, 2027 .

The interest rate swaps are designated as hedges against our exposure to changes in interest payment cash flows as a result of the variable interest rate on the 2025 Term Loan.

The interest rate swap contracts effectively convert our $ 400.0 million 2025 Term Loan to an aggregate fixed rate of approximately 5.565 % .

In September 2023, in connection with the exercise of the accordion feature on the 2025 Term Loan, we entered into one additional interest rate swap with $ 28.5 million in notional value to hedge the additional $ 28.5 million under the 2025 Term Loan.

This swap is effective September 29, 2023 and terminates on August 6, 2027 .

These 11 interest rate swap contracts effectively convert our $ 428.5 million 2025 Term Loan to a new combined aggregate fixed rate of approximately 5.597 % through its maturity.

The effective fixed rate achieved by the combination of the 2025 Omega Credit Agreement and the interest rate swaps could fluctuate up by 40 basis points or down by 60 basis points based on future changes to our credit ratings.

In June 2023, we entered into an interest rate swap with a notional amount of $ 50.0 million.

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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 June 30, 2023 and December 31, 2022, the net carrying amounts and fair values of our other financial instruments were as follows:

June 30, 2023

At September 30, 2023 and December 31, 2022, the net carrying amounts and fair values of our other financial instruments were as follows:

September 30, 2023

December 31, 2022

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2024 term loan

2025 term loan

4.38 % notes due 2023 – net

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The fair values of notes receivable are estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings (Level 3).

● Revolving credit facility, OP term loan, 2023 term loan and 2024 term loan:

● Revolving credit facility, OP term loan, 2023 term loan, 2024 term loan and 2025 term loan:

The carrying amount of these approximate fair value because the borrowings are interest rate adjusted.

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District Court for the Southern District of New York, alleging violations of Section 14(a) of the Exchange Act and state-law claims including breach of fiduciary duty.

The complaint alleges, among other things, that the named defendants are responsible for the Company’s failure to disclose the financial condition of Orianna Health Systems, the alleged non-disclosures that were also the subject of the Securities Class Action described above.

The complaint alleges, among other things, that the named defendants are responsible for the Company’s failure to disclose the financial condition of Orianna Health Systems (“Orianna”), the alleged non-disclosures that were also the subject of the Securities Class Action described above.

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.

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.

The complaints allege, among other things, that the named defendants are responsible for the Company’s failure to disclose the financial condition of Orianna.

Those actions were consolidated.

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District Court for the District of Maryland, purportedly on behalf of the Company, asserting violations of Section 14(a) of the Exchange Act, Sections 10(b) and 21D of the Exchange Act, as well as claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

The complaint alleges, among other things, that the named defendants are responsible for the Company’s failure to disclose the financial condition of Orianna, as well as certain alleged discriminatory conduct and lack of diversity concerning the Company.

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

The Company and individual defendants have reached an agreement in principle with each of the derivative plaintiffs to resolve these derivative actions, as reflected by written memoranda of understanding.

The proposed settlements contemplate the Company’s adoption of certain non-monetary corporate governance enhancements and initiatives.

The parties are currently negotiating formal stipulations of settlement that will incorporate the substantive terms of the memoranda of understanding and detail the proposed settlements’ operational terms, which will be subject to court approval.

The settlements are without any admission of the allegations in the complaints, which the defendants deny.

Gulf Coast Subordinated Debt

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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.

On July 10, 2023, the Delaware state court case stayed the proceeding pending a hearing in September 2023.

On July 10, 2023, the Delaware state court case stayed the proceeding pending further developments in the Maryland litigation.

Omega believes that the claims are baseless and is evaluating procedural and substantive legal options in connection with this recently filed suit to the extent the stay is lifted.

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

As of June 30, 2023, our maximum funding commitment under these indemnification agreements was approximately $ 9.1 million.

As of September 30, 2023, our maximum funding commitment under these indemnification agreements was approximately $ 9.1 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 June 30, 2023, are outlined in the table below (in thousands):

Our remaining commitments at September 30, 2023, are outlined in the table below (in thousands):

Lessor construction and capital commitments under lease agreements

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share amounts)

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NOTE 20 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

(in thousands)

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Non-cash contribution from noncontrolling member of consolidated joint venture

Change in fair value of cash flow hedges

Change in fair value of hedges

Remeasurement of debt denominated in a foreign currency

NOTE 21 – SUBSEQUENT EVENTS

On August 1, 2023, the Company repaid its $ 350 million of 4.375 % senior notes that matured on August 1, 2023 using available cash.

The Company had $ 350.7 million in cash and cash equivalents recorded on our Consolidated Balance Sheets as of June 30, 2023.

In October 2023, we acquired one facility in Maryland for $ 22.5 million and amended a lease with an existing operator to add the acquired facility.

The initial annual cash yield is approximately 10 %, 2 % of which can be deferred and includes annual escalators of 2.5 %.

In October 2023, we funded a $ 29.5 million mortgage loan and a $ 8.7 mezzanine loan to a new operator for the purpose of acquiring two Pennsylvania facilities.

The mortgage loan bears interest at 10 % and matures on October 1, 2026 .

The mezzanine loan bears interest at 7 % and matures on October 1, 2028 .

Interest is payable monthly in arrears for both loans;

however, under certain conditions prior to August 31, 2025, the borrower can elect to pay a portion of interest as PIK interest for both loans.

The maximum PIK interest allowable under the mortgage loan and mezzanine loan is $ 3.0 million and $ 0.6 million, respectively.

The loans are secured by first and second mortgage liens on the two facilities.

Subsequent to quarter end, an additional 29 facilities previously leased to LaVie met the criteria to be classified as held for sale.

In November 2023, we sold these facilities for $ 305.2 million in purchase consideration, which consisted of gross cash proceeds of $ 91.9 million and an aggregate $ 213.3 million pay-off made by the buyer, on Omega’s behalf, of the outstanding principal and accrued interest on 22 HUD mortgages on the sold properties.

Concurrent with the sale, the Company amended the master lease with LaVie to reduce monthly rent to $ 3.4 million.

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