27 unchanged sentences
that are operated by 74 third-party operators.
−Removed: Our real estate investment in these facilities totaled approximately $9.5 billion at December 31, 2022, with approximately 97% of our real estate investments related to long-term healthcare facilities.
−Removed: The portfolio is made up of (i) 665 SNFs, (ii) 169 ALFs, (iii) 20 ILFs, (iv) 16 specialty facilities, (v) two MOBs, (vi) real estate loans, including mortgages on 48 SNFs, two ALFs and two specialty facilities and (vii) two facilities that are held for sale.
−Removed: At December 31, 2022, we also held other real estate loans (excluding mortgages) receivable of $394.6 million and non-real estate loans receivable of $225.3 million, consisting primarily of secured loans to third-party operators of our facilities, and $178.9 million of investments in six unconsolidated joint ventures.
+Added: Our real estate investment in these facilities, net of impairments and allowances, totaled approximately $9.1 billion at December 31, 2023, with approximately 97% of our real estate investments related to long-term healthcare facilities.
+Added: The portfolio is made up of (i) 592 SNFs, (ii) 188 ALFs, (iii) 19 ILFs, (iv) 19 specialty facilities, (v) one MOB, (vi) real estate loans, including mortgages on 45 SNFs, seven ALFs, two specialty facilities and one ILF and (vii) 17 facilities that are held for sale.
+Added: At December 31, 2023, we also held other real estate loans (excluding mortgages) receivable of $513.4 million and non-real estate loans receivable of $275.6 million, consisting primarily of secured loans to third-party operators of our facilities, and $188.4 million of investments in nine unconsolidated joint ventures, which comprise 5 SNFs, 64 ALFs and two specialty facilities.
As healthcare delivery continues to evolve, we continuously evaluate potential investments, our assets, operators and markets to position our portfolio for long-term success.
−Removed: Our strategy includes applying data analytics to our investment underwriting and asset management, as well as selling or transitioning assets that do not meet our portfolio criteria.
+Added: As part of our evaluation, we may sometimes consider selling or transitioning assets that do not meet our portfolio criteria.
Outlook, Trends and Other Conditions
−Removed: The COVID-19 pandemic has significantly and adversely impacted SNFs and long-term care providers due to the higher rates of virus transmission and fatality among the elderly and frail populations that these facilities serve;
−Removed: in addition, the pandemic contributed to occupancy declines, labor shortages and cost increases which continue to significantly impact our operators.
+Added: Our industry continues to face the long-term impacts of the COVID-19 pandemic, which significantly and adversely impacted SNFs and long-term care providers during the height of the pandemic due to the higher rates of virus transmission and fatality among the elderly and frail populations that these facilities serve.
+Added: In addition, the pandemic contributed to occupancy declines, labor shortages and cost increases which continue to significantly impact our operators post-pandemic.
As discussed further in “Collectibility Issues” below, during the year we have had several operators that have failed to make contractual payments under their lease and loan agreements, and we have agreed to short-term deferrals, lease and portfolio restructurings and/or allowed the application of security deposits or letters of credit to pay rent for several operators.
−Removed: We believe these operators were impacted by, among other things, reduced revenue as a result of lower occupancy and increased expenses resulting from the COVID-19 pandemic and uncertainties regarding the continuing availability of sufficient government support and adequate reimbursement levels.
−Removed: These increases have been offset to some extent by increases in reimbursements due to increased skilling in place, which has been necessitated by pandemic-related protocols and may decrease when such protocols subside or when the federally declared public health emergency expires as scheduled on May 11, 2023.
−Removed: We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay and reliance on agency staffing due to staffing shortages, as well as a significant increase in both the cost and usage of personal protective equipment (“PPE”), testing equipment and processes and supplies, as well as implementation of new infection control protocols and vaccination programs.
−Removed: In addition, operators who do not achieve full compliance with applicable vaccination and infection control requirements may face potential survey issues and penalties.
−Removed: At this time, there is significant uncertainty regarding the impact of such developments.
−Removed: We remain cautious as the COVID-19 pandemic continues to have a significant impact on our operators and their financial conditions, particularly given the trend of reduced pandemic-related federal support to our operators beginning in 2021, the persistence of staffing shortages that continue to impact our operators’ occupancy levels and profitability, uncertainty as to whether Medicare and Medicaid reimbursement rates will be sufficient to address longer-term cost increases faced by operators, factors that may impact future virus transmission in our facilities, including vaccination rates and efficacy of the vaccine for staff members and residents at our facilities and genetic mutations of the virus into new variants, and the commencement in December 2021 of repayment of deferred FICA obligations.
−Removed: We believe that the incidence and severity of COVID-19 among our operators’ residents and employees, based on reporting by our operators, tend to correlate with levels of incidence and severity experienced by the applicable community in which such operators’ are located, and it remains uncertain whether certain of our facilities will be impacted by future community spread of the virus.
−Removed: Our facilities, on average, experienced declines, in some cases that are material, in occupancy levels as a result of the pandemic.
+Added: We believe these operators were impacted by reduced revenue as a result of lower occupancy, increased expenses, uncertainties regarding adequate reimbursement levels and changes to government and regulatory financial support, among other things.
+Added: The expense increases were offset to some extent by enhanced reimbursement due to skilling in place, which was permitted via waiver during the pandemic, but which was discontinued when the federally declared public health emergency expired on May 11, 2023.
+Added: We believe the expense increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay and reliance on agency staffing due to labor shortages, as well as implementation of new infection control protocols.
+Added: In addition, operators who do not achieve full compliance with applicable infection control requirements may face potential survey deficiencies and penalties.
+Added: At this time, there is uncertainty regarding the ultimate impact of such developments.
+Added: We remain cautious as some of these factors may continue to have a significant impact on our operators and their financial conditions, particularly given the staffing shortages that continue to impact our operators’ occupancy levels and profitability, uncertainty as to whether Medicare and Medicaid reimbursement rates will be sufficient to address longer-term cost increases faced by operators, uncertainty regarding the ultimate scope and impact of proposed U.S.
+Added: federal minimum staffing rules for our industry, factors that may impact future virus transmission in our facilities, including vaccination rates and efficacy of the vaccine for staff members and residents at our facilities and the risk of future infectious diseases or pandemics.
+Added: Our facilities, on average, experienced declines in occupancy levels as a result of the pandemic, in some cases that were material.
Occupancy in our facilities has generally improved on average since early 2021;
however, average occupancy has not returned to pre-pandemic levels.
−Removed: It remains unclear when and the extent to which demand and occupancy levels will return to pre-COVID-19 levels.
−Removed: We believe these challenges to occupancy recovery may be in part due to staffing shortages, which in some cases have required operators to limit admissions, as well as COVID-19 related fatalities at the facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.
−Removed: While substantial government support was allocated to SNFs and to a lesser extent to ALFs in 2020, federal relief efforts have been limited since 2021 as have been relief efforts in certain states.
−Removed: The additional 6.2% FMAP reimbursement in connection with the pandemic is being phased out in 2023 pursuant to the Consolidated Appropriations Act of 2023 as further discussed under “Government Regulation – Reimbursement Changes Related to COVID-19” under “Item 1 – Business.” The additional 6.2% FMAP provided some of our operators with significant support, based on which states they are located in, and the phase out of such support may adversely affect their operations to the extent that expenses are not reduced or other support is not provided.
−Removed: We believe further government support will be needed to continue to offset these impacts on operators, which could be in the form of direct support or reimbursement rate adjustments to reflect sustained cost changes experienced by operators.
−Removed: It is unclear whether and to what extent such government support will continue to be sufficient and timely to offset these impacts.
−Removed: In particular, while $25.5 billion in federal funding for healthcare providers impacted by COVID-19 was announced in September 2021 with distributions beginning in late 2021 pursuant to the Public Health and Social Services Emergency Fund (“Provider Relief Fund”), we do not expect additional Provider Relief Funds to be allocated to healthcare operators or our operators, and it remains uncertain whether additional Medicaid funds under the American Rescue Plan Act of 2021 (the “American Rescue Plan Act”) or other changes in Medicare or Medicaid reimbursement rates in the U.S., or U.K.
−Removed: reimbursement and relief programs for our U.K.
−Removed: operators, will ultimately support reimbursement to our operators.
−Removed: While certain states have provided pandemic-related relief measures and/or reimbursement increases, there remains uncertainty as to how widespread these measures will continue to be and to what extent they may be distributed to and benefit our operators, especially when the federally declared public health emergency expires as scheduled on May 11, 2023 or previously released federal funds to states have been fully utilized.
−Removed: Likewise, while certain states may in the course of routine rate-setting of Medicaid rates address inflationary factors and other expense-related items, there can be no assurance that these changes will be sufficient to offset existing increased inflation and expenses or that all states will address these items.
−Removed: See the “Government Regulation and Reimbursement” section for additional information.
−Removed: Further, to the extent the cost and occupancy impacts on our operators continue or accelerate and are not offset by continued government relief or reimbursement rates that are sufficient and timely, we anticipate that the operating results of additional operators may be materially and adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.
−Removed: There are a number of uncertainties we face as we consider the continuing impact of COVID-19 on our business, including how long census disruption and elevated COVID-19 costs will last, the ability of our operators to manage the impact of the termination of public health emergency and temporary relief thereunder, the continued efficacy of vaccination programs in reducing the spread and severity of COVID-19 in our facilities, the impact of genetic mutations of the virus into new variants on our facilities, and the extent to which funding support from the federal government, the states and the U.K.
−Removed: will continue to offset these incremental costs as well as lost revenues.
−Removed: Notwithstanding vaccination programs, we expect that heightened clinical protocols for infection control within facilities will continue for some period;
−Removed: however, we do not know if future reimbursement rates or equipment provided by governmental agencies will be sufficient to cover the increased costs of enhanced infection control and monitoring.
−Removed: While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more information as to the level of costs our operators will continue to experience and for how long, and the level of additional governmental support that will be available to them, the potential support our operators may request from us and the future demand for needs-based skilled nursing care and senior living facilities.
+Added: It remains unclear when and the extent to which demand and occupancy levels will return to pre-pandemic levels.
+Added: We believe these challenges to occupancy recovery may be in part due to staffing shortages, which in some cases have required operators to limit admissions, as well as the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs.
+Added: While substantial government support was allocated to SNFs, and to a lesser extent to ALFs, in 2020, U.S.
+Added: federal relief efforts have been limited since 2021 as have been relief efforts in certain states.
+Added: The additional 6.2% Medicaid Federal Medical Assistance Percentage (the “FMAP”) reimbursement enacted in connection with the pandemic was phased out in 2023 pursuant to the Consolidated Appropriations Act of 2023.
+Added: The additional 6.2% FMAP provided some of our operators with significant support, based on the state, and the termination of such support may adversely affect their operations to the extent that normal rate setting does not adjust for this phase-out or expenses are not reduced.
+Added: It is unclear whether and to what extent government reimbursements will continue to be sufficient and timely to offset these impacts or whether proposed U.S.
+Added: federal minimum staffing rules for SNFs, if not accompanied by additional government funding, will further increase expenses for our operators.
+Added: While certain states have provided pandemic-related relief measures, we expect such state relief measures to be limited going forward.
+Added: Likewise, while certain states have, in the course of routine rate-setting of Medicaid rates, addressed inflationary factors and other expense-related items, there can be no assurance that these changes will be sufficient to offset increased inflation and expenses or that all states will address these items.
+Added: See “Government Regulation and Reimbursement” for additional information.
+Added: Further, to the extent the cost and occupancy impacts on our operators do not recover or are not offset by continued government relief or reimbursement rates that are sufficient and timely, we anticipate that the operating results of additional operators may be materially and adversely affected, and some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.
+Added: There are a number of uncertainties we face as we consider the effects of the industry’s recovery on our business, including how long census disruption and elevated costs will last, the continued management of infectious diseases in our facilities, the extent to which reimbursement increases from the federal government, the states and the U.K.
+Added: will continue to offset these incremental costs, and lost revenues.
+Added: While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more information as to the level of costs our operators will continue to experience, the duration of such increased costs, the adequacy of government reimbursement increases to cover such costs, the potential support our operators may request from us and the future demand for needs-based skilled nursing care and senior living facilities.
We continue to monitor the rate of occupancy recovery at many of our operators, and it remains uncertain whether and when demand, staffing availability and occupancy levels will return to pre-COVID-19 levels.
−Removed: In addition to the impacts of COVID-19 discussed above, our operators have been and are likely to continue to be adversely affected by labor shortages and increased labor costs as well as other inflation-related cost increases.
−Removed: In addition, our operations have also been and are likely to continue to be impacted by increased competition for the acquisition of facilities in the U.S., which has decreased the number of investment opportunities that would be accretive to our portfolio.
−Removed: As part of our continuous evaluation of our portfolio and in connection with certain operator restructuring transactions, we expect to continue to opportunistically sell assets, or portfolios of assets, from time to time.
−Removed: We continue to monitor the impacts of other regulatory changes, as discussed below, including any significant limits on the scope of services reimbursed and on reimbursement rates and fees, which could have a material adverse effect on an operator’s results of operations and financial condition, which could adversely affect the operator’s ability to meet its obligations to us.
+Added: In addition to the long-term impacts of COVID-19 and regulatory requirements discussed above, our operators have been and are likely to continue to be adversely affected by labor shortages and increased labor costs, as well as other inflation-related cost increases.
+Added: We continue to monitor the impacts of other regulatory changes, as discussed below, including any significant limits on the scope of services eligible for reimbursement and on reimbursement rates and fees, which could have a material adverse effect on an operator’s results of operations and financial condition, which could adversely affect the operator’s ability to meet its obligations to us.
2023 and Recent Highlights
−Removed: ● We acquired 41 facilities for an aggregate consideration of $225.2 million in 2022.
+Added: ● We acquired 30 facilities for total consideration of $261.2 million in 2023.
The initial cash yield (the initial annual contractual cash rent divided by the purchase price) on these asset acquisitions was between 8.0% and 10.2%.
● We invested $82.5 million under our construction-in-progress and capital improvement programs in 2023.
−Removed: ● We financed $56.2 million of new real estate loans with a weighted average interest rate of 12% in 2022.
−Removed: Our 2022 new real estate loans primarily relate to two new loans that we entered into during the year.
+Added: ● We funded $224.1 million under 12 new real estate loans with a weighted average interest rate of 10.9% in 2023.
We also advanced $20.8 million under existing real estate loans in 2023.
−Removed: ● During 2022, Ciena Healthcare (“Ciena”) made $158.5 million of early principal payments under its mortgage loans.
−Removed: In connection with the partial repayments, the maturity date of all the Ciena mortgage notes was extended to June 30, 2030 (with exception of two loans with an aggregate principal balance of $40.4 million with maturity dates in 2023).
Dispositions and Impairments
● In 2023, we sold 69 facilities for approximately $585.0 million in net cash proceeds, recognizing a net gain of approximately $79.7 million.
−Removed: Our sales during 2022 were primarily driven by restructuring transactions associated with facilities formerly leased to the following operators:
−Removed: Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) – 22 facilities, Guardian Healthcare (“Guardian”) – nine facilities, and Agemo Holdings, LLC (“Agemo”) – 22 facilities.
−Removed: ● 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 for a sales price of $129.8 million.
−Removed: 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.
−Removed: The senior note has a December 29, 2027 maturity date and bears interest at 8% with required monthly interest payments (due in arrears beginning February 1, 2023), with no principal payments are due until the maturity date.
−Removed: The remaining consideration received under the purchase agreement is the assumption of a $25.0 million liability, incurred by Omega as part of the transaction, by the buyer from Omega.
−Removed: The 11-facility sale does not meet the contract criteria to be recognized as a sale for accounting purposes and we will continue to account for these facilities on our Consolidated Balance Sheets and depreciate the facilities until the sale recognition requirements are met.
−Removed: A contract liability will be recognized on our Consolidated Balance Sheets within accrued expenses and other liabilities for the $25.0 million liability assumed, which will be relieved when the sale is recognized.
−Removed: The loan receivable associated with the seller financing will not be recorded on our Consolidated Balance Sheets until the sale is recognized, and any cash interest received will be deferred and recorded as a contract liability within accrued expenses and other liabilities on our Consolidated Balance Sheets.
−Removed: No interest income or gain or loss will be recognized until the sale recognition requirements are met.
+Added: Our sales during 2023 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 Healthcare).
● In 2023, we recorded impairments on real estate properties of approximately $91.9 million on 25 facilities.
−Removed: Of the $38.5 million, $3.5 million related to two facilities that were classified as held for sale and $35.0 million related to 20 held-for-use facilities of which $17.2 million relates to 12 facilities leased to and operated by LaVie that are expected to be impacted by the on-going restructuring negotiations.
+Added: Of the $91.9 million, $2.6 million related to two facilities that were classified as held for sale (and subsequently sold) for which the carrying value exceeded the fair value less costs to sell and $89.3 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 values exceeded the estimated fair value.
+Added: Of the $89.3 million, $51.7 million related to 20 facilities that were subsequently sold during the year but did not meet the criteria to be classified as held for sale when the impairments were recognized.
Financing Activities
−Removed: ● In January 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding common stock from time to time through March 2025.
−Removed: For the year ended December 31, 2022, we repurchased 5.2 million shares of our outstanding common stock at an average price of $27.32 per share.
−Removed: ● We sold 0.3 million shares of common stock under our Dividend Reinvestment and Common Stock Purchase Plan (“DRSPP”) during the year ended December 31, 2022.
−Removed: Aggregate net proceeds from these sales generated $9.2 million during 2022.
+Added: ● In 2023, we sold 11.0 million shares of common stock under our $1.0 billion At-The-Market Offering Program (“ATM Program”) and Dividend Reinvestment and Common Stock Purchase Plan (“DRCSPP”), generating aggregate gross proceeds of $339.0 million.
+Added: ● During the second quarter of 2023, we terminated our five forward starting swaps with $400 million in notional value that were designated cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt, and we received a $92.6 million net cash settlement from the swap counterparties.
+Added: ● During the second quarter of 2023, we entered into an interest rate swap with a notional amount of $50.0 million.
+Added: The swap was effective June 30, 2023 and terminates on April 30, 2027.
+Added: This interest rate swap is designated as a hedge against our exposure to changes in interest payment cash flow fluctuations in the variable interest rates on the OP term loan.
+Added: The interest rate swap contract effectively converts our $50.0 million OP term loan to an aggregate fixed rate of approximately 5.521% through its maturity.
+Added: ● On August 1, 2023, the Company repaid its $350 million of 4.375% senior notes that matured on August 1, 2023 using available cash.
+Added: ● On August 8, 2023, the Company 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”).
+Added: 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.
+Added: 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.
+Added: 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.
+Added: On September 27, 2023, Omega exercised the accordion feature to increase the aggregate commitment under the 2025 Term Loan by $28.5 million.
+Added: We recorded $3.3 million of deferred financing costs and a $1.4 million discount in connection with the 2025 Omega Credit Agreement.
+Added: ● During the third quarter of 2023, we entered into 11 new interest rate swaps with a notional amount of $428.5 million that terminate on August 6, 2027.
+Added: These 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.
+Added: The interest rate swap contracts effectively convert our 2025 Term Loan to an aggregate fixed rate of approximately 5.597% through its maturity .
+Added: ● During the fourth quarter of 2023, we terminated two foreign currency forward contracts that were entered into in March 2021 with notional amounts totaling £104.0 million.
+Added: Omega received a net cash settlement of $11.4 million as a result of the termination.
+Added: Concurrent with the termination of the two foreign currency forward contracts, during the fourth quarter of 2023, we entered into six new foreign currency forward contracts with notional amounts totaling £104.0 million and a GBP-USD forward rate of 1.2916, each of which mature between March 8, 2027 and March 8, 2030.
+Added: These currency forward contracts hedge an intercompany loan between a U.S.
Other Highlights
−Removed: ● During 2022, we made $126.1 million of new non-real estate loans with a weighted average interest rate of 10.2%.
−Removed: We also advanced $124.8 million under existing non-real estate loans.
−Removed: Of the $124.8 million, an aggregate $105.9 million related to two revolving working capital loans that also had aggregate repayments of $80.0 million during 2022.
−Removed: ● In 2022, Omega was included in the Bloomberg Gender-Equality Index (GEI) – one of only 418 companies worldwide, and fewer than 15 U.S.
−Removed: REITs, to be included in the 2022 index.
+Added: ● During 2023, we advanced $147.4 million of new non-real estate loans with a weighted average interest rate of 10.5%.
+Added: We also advanced $18.7 million under existing revolving working capital loans.
+Added: These revolving working capital loans also had aggregate repayments of $23.0 million during 2023.
+Added: Please see a description of our non-real estate loans in Item 1 – Business – Investment Strategy & Types.
Collectibility Issues
−Removed: ● During the year ended December 31, 2022, we placed nine operators on a cash basis of revenue recognition.
−Removed: These include LaVie, Maplewood Senior Living (along with affiliates, “Maplewood”), and operators representing 0.4% (“0.4% Operator”), 1.2% (“1.2% Operator”) and 2.0% (“2.0% Operator”) of total revenue (excluding the impact of write-offs), respectively, for the year ended December 31, 2022.
−Removed: In connection with placing these operators on a cash basis, we recognized $119.8 million in total straight-line accounts receivable write-offs through rental income.
+Added: ● During the year ended December 31, 2023, we placed one existing operator and 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.
+Added: There was no straight-line write-off associated with placing the existing operator on a cash basis of revenue recognition because the lease agreement did not contain any rent escalators.
+Added: The lease agreements with each of the two new 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 cash basis.
+Added: During the year ended December 31, 2023, we transitioned the portfolios of four cash basis operators with an aggregate of 48 facilities to leases with operators that are on a straight-line basis of revenue recognition.
As of December 31, 2023, 19 operators are on a cash basis.
−Removed: These operators represent an aggregate 36.5% of our total revenues (excluding the impact of write-offs) for the year ended December 31, 2022.
+Added: These operators represent an aggregate 23.9% and 32.5% of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2023 and 2022, respectively.
● During the year ended December 31, 2023, we allowed ten operators to defer $35.9 million of contractual rent and interest.
The deferrals primarily related to the following operators:
−Removed: Agemo, Guardian, the 3.7% Operator (defined below) and the 1.2% Operator.
−Removed: Additionally, we allowed seven operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the year ended December 31, 2022.
+Added: LaVie ($19.0 million), Healthcare Homes Limited ($8.2 million), Agemo Holdings, LLC (“Agemo”) ($1.9 million) and Maplewood Senior Living (along with affiliates, “Maplewood”) ($1.8 million).
+Added: Additionally, we allowed six operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the year ended December 31, 2023.
The total collateral applied to contractual rent and interest was $17.6 million for the year ended December 31, 2023.
−Removed: These applications of collateral to contractual rent and interest primarily relate to the 2.0% Operator and the 1.2% Operator.
−Removed: ● Agemo, a cash basis operator, continued to not pay contractual rent and interest due under its lease and loan agreements during the year ended December 31, 2022.
−Removed: We have not recorded any rental income or interest income related to Agemo during the year ended December 31, 2022.
−Removed: Subsequent to year end, we entered into a restructuring agreement with Agemo.
−Removed: See Note 5 – Contractual Receivables and Other Receivables and Lease Inducements to the Consolidated Financial Statements - Part I, Item 15 hereto for additional details.
−Removed: ● Guardian did not make rent and interest payments under its lease and loan agreements during the first quarter of 2022, but it resumed making contractual rent and interest payments during the second quarter of 2022, and it continued making such payments in the third and fourth quarters of 2022, in accordance with the restructuring terms discussed further below.
−Removed: Guardian is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $11.3 million for the year ended December 31, 2022 for contractual rent payments that were received.
−Removed: Additionally, Guardian’s mortgage loan is on non-accrual status and is being accounted for under the cost recovery method and therefore the $6.0 million of interest payments that we received during the year ended December 31, 2022 were applied directly against the principal balance outstanding.
−Removed: In the second quarter of 2022, we agreed to a formal restructuring agreement, master lease amendments and mortgage loan amendments with Guardian.
−Removed: As part of the restructuring agreement and related agreements, Omega agreed to, among other things, allow for the retrospective deferral of $18.0 million of aggregate contractual rent and interest, with repayment required after September 30, 2024, and reduce the combined rent and mortgage interest to an aggregate of $24.0 million per year effective as of July 1, 2022.
−Removed: ● In the fourth quarter of 2022, Omega began the process of restructuring our portfolio with LaVie, which primarily consists of two master lease agreements and two term loan agreements.
−Removed: On December 30, 2022, we sold 11 facilities previously subject to one of two lease agreements with LaVie.
−Removed: See further discussion on the sale and the accounting treatment in Dispositions and Impairments above.
−Removed: Concurrent with the sale, we also amended the lease agreement impacted by the sale and our loan agreements with LaVie.
−Removed: As part of the lease amendments, Omega agreed to, among other terms, remove the 11 sold facilities from the lease agreement and reduce monthly contractual rent from $8.3 million to $7.3 million.
−Removed: We amended the loans to, among other terms, extend the loan maturities to November 30, 2036 to align with the lease term, and starting in January 2023, reduce the interest rates to 2%, remove the requirement to make any principal payments until the maturity dates and to convert from monthly cash interest payments to interest paid-in-kind.
−Removed: The restructuring discussions are still ongoing and subject to change, but we anticipate additional restructuring activity related to this operator in 2023.
−Removed: As a result of the restructuring activities during 2022 and future expected restructuring activities, during the fourth quarter of 2022, we placed LaVie on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from them was deemed no longer probable.
−Removed: As a result, we wrote-off approximately $58.0 million of straight-line rent receivables and lease inducements to rental income during the fourth quarter of 2022.
−Removed: In the first quarter of 2023, as part of the restructuring, we have agreed to a partial rent deferral in the first four months of 2023.
−Removed: In doing so, we agreed to allow LaVie to defer up to $10.0 million of contractual rent from January 2023 through April 2023 under one of our lease agreements for 32 facilities.
−Removed: Omega is in discussions to allow LaVie to defer up to $9.1 million of contractual rent from January 2023 through April 2023 under another lease agreement for 41 facilities.
−Removed: In January 2023, as a result, LaVie deferred the full contractual payment of $2.5 million under the 32-facility lease and paid $2.5 million of the $4.7 million of contractual rent due under the 41-facility lease.
−Removed: ● During the fourth quarter of 2022, we placed Maplewood on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from them was deemed no longer probable based on the proposed restructuring of our lease and loan agreements with Maplewood.
−Removed: As a result, we wrote-off approximately $29.3 million of straight-line rent receivables and lease inducements to rental income during the fourth quarter of 2022.
−Removed: Subsequent to year end, we entered into a restructuring agreement with Maplewood.
−Removed: See Note 5 - Contractual Receivables and Other Receivables and Lease Inducements to the Consolidated Financial Statements - Part I, Item 15 hereto for additional details surrounding the restructuring.
−Removed: ● In December 2022, we agreed to allow Healthcare Homes Limited (“Healthcare Homes”), a U.K.
−Removed: based operator, the ability to defer up to £6.7 million of contractual rent from January 2023 through April 2023 with regular payments scheduled to resume in May 2023.
−Removed: The deferred rent balance accrues interest monthly at a rate of 8% per annum and must be fully repaid by December 31, 2024.
−Removed: Healthcare Homes has had near-term liquidity issues in connection with increased staffing and utility costs.
−Removed: Healthcare Homes remains current as of December 31, 2022 and is on a straight-line basis of revenue recognition.
−Removed: ● From January through March 2022, an operator (the “3.7% Operator”) representing 3.7% of total revenue (excluding the impact of write-offs) for the year ended December 31, 2022, did not pay its contractual amounts due under its lease agreement.
−Removed: In March 2022, the lease with the 3.7% Operator was amended to allow for a short-term rent deferral for January through March 2022.
−Removed: The 3.7% Operator paid the contractual amount due under its lease agreement from April through December 2022.
−Removed: Omega holds a $1.0 million letter of credit and a $150 thousand security deposit from the 3.7% Operator.
−Removed: The 3.7% Operator remains current on its $25.0 million revolving credit facility, which is fully drawn as of December 31, 2022 and is secured by a first lien on the 3.7% Operator’s accounts receivable.
−Removed: The 3.7% Operator remains on a straight-line basis of revenue recognition.
+Added: ● In the first quarter of 2023, Omega entered into a restructuring agreement, an amended and restated master lease and two new replacement loans with Agemo, a cash basis operator.
+Added: As part of the restructuring agreement and related agreements, Omega agreed to, among other things, forgive and release Agemo from previously written off past due rent and interest obligations, reduce monthly contractual base rent from $4.8 million to $1.9 million, extend the initial Agemo lease term to December 31, 2036 and modify the existing Agemo loans into two replacement loans.
+Added: During the second quarter of 2023, Agemo resumed making contractual rent payments in accordance with the restructuring agreement.
+Added: We recorded rental income of $17.4 million for the year ended December 31, 2023 for the contractual rent payments that were received.
+Added: Additionally, Agemo’s loans are on non-accrual status and are being accounted for under the cost recovery method;
+Added: therefore, the $3.2 million of interest payments that we received during the year ended December 31, 2023 were applied directly against the principal balance outstanding.
+Added: ● 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.
+Added: In the fourth quarter of 2023, Omega sold an additional 30 facilities and amended the master lease with LaVie to further reduce monthly rent to $3.3 million.
+Added: LaVie began to short pay contractual rent during the third quarter of 2023, which continued into the fourth quarter of 2023.
+Added: For the year ended December 31, 2023, LaVie paid total contractual rent of $37.0 million, a total short pay of $21.1 million of the $58.1 million due under the lease agreement after reflecting the deferral discussed above.
+Added: As LaVie is on a cash basis of revenue recognition, only the $37.0 million of contractual rent payments that we received from LaVie were recorded as rental income during the year ended December 31, 2023.
+Added: In January 2024, LaVie paid $1.45 million of contractual rent, a short pay of $1.85 million of the $3.3 million due under its lease agreement.
+Added: ● In the first quarter of 2023, we entered into a restructuring agreement, master lease amendments and loan amendments with Maplewood, a cash basis operator.
+Added: As part of the restructuring agreement and related agreements, Omega agreed to, among other things, extend the maturity date of the master lease to December 2037, fix contractual rent at $69.3 million per annum and defer the 2.5% annual escalators under our lease agreement through December 31, 2035, pay a $12.5 million option termination fee to Maplewood, extend the maturity date of the secured revolving credit facility to June 2035, increase the capacity of the secured revolving credit facility to $320.0 million and convert the 7% per annum cash interest due on the secured revolving credit facility to all payment-in-kind (“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.
+Added: Additionally, we agreed to 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 granted through the restructuring agreement and the $12.5 million option termination fee payment.
+Added: Maplewood began to short pay contractual rent during the second quarter of 2023, which continued into the fourth quarter of 2023.
+Added: For the year ended December 31, 2023, Maplewood paid total contractual rent of $57.8 million, a total short pay of $11.5 million of the $69.3 million due under the lease agreement for the year.
+Added: Omega applied all $4.8 million of Maplewood’s security deposit towards the total year to date shortfall and recognized rental income of $62.6 million for the year ended December 31, 2023.
+Added: The security deposit was fully exhausted in the fourth quarter of 2023.
+Added: 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.
+Added: As Maplewood is on a cash basis of revenue recognition, the inducement was immediately expensed and was recorded as a reduction to the $62.6 million of rental income recognized for the year ended December 31, 2023.
+Added: In January 2024, Maplewood short-paid the contractual rent amount due under its lease agreement by $2.0 million.
+Added: We continue to take actions to preserve our rights and are in discussions with Maplewood to address the deficiency.
+Added: ● In August 2023, Guardian, an operator that was already on a cash basis of revenue recognition, did not pay its contractual amount due under its lease agreement and continued to fail to make the required contractual rent payments due under its lease agreement throughout the remainder of 2023.
+Added: During the third and fourth quarters of 2023, we applied $2.9 million and $4.4 million, respectively, of Guardian’s security deposit to fund the unpaid rent.
+Added: We recorded rental income of $16.8 million for the year ended December 31, 2023 for the contractual rent payments that were received from Guardian and through the application of Guardian’s security deposit.
+Added: Following the application of the security deposit in the third and fourth quarters of 2023, we had a $0.1 million security deposit remaining as of December 31, 2023, which can be applied to future rent shortfalls.
+Added: We are in discussions to sell or release the facilities included in Guardian’s master lease to another operator.
+Added: In January 2024, Guardian did not pay the contractual rent amount due under its lease agreement of $1.5 million.
● Quarterly cash dividends paid during 2023 aggregated to $2.68 per share.
16 unchanged sentences
Impairment on real estate properties
−Removed: Recovery on direct financing leases
Provision for credit losses
1 unchanged sentence
Other income (expense):
−Removed: Other expense – net
+Added: Other income (expense) – net
Loss on debt extinguishment
1 unchanged sentence
Income tax expense
−Removed: Income from unconsolidated joint ventures
+Added: (Loss) income from unconsolidated joint ventures
Following is a description of certain of the changes in revenues for the year ended December 31, 2023 compared to 2022:
−Removed: ● The decrease in rental income was primarily the result of (i) a $85.7 million decrease as a result of a net increase in straight-line rent receivable and lease inducement write-offs in 2022 primarily due to placing operators LaVie, Maplewood and seven other operators on a cash basis for revenue recognition due to collectibility concerns, (ii) a $67.2 million net decrease in rental income from 13 cash basis operators, including Agemo, as a result of not recording straight-line lease revenue and/or receiving less cash rent payments period over period from these operators, (iii) a $36.8 million decrease due to recognizing no rental income related to Gulf Coast, a cash basis operator, in 2022, as we received no contractual payments in the first quarter related to the lease with this operator, and we sold or transitioned 23 of the facilities subject to the Gulf Coast lease in March and April 2022 and (iv) a $7.1 million decrease related to facility sales, transitions and lease terminations , partially offset by (i) a $18.3 million increase related to facility acquisitions made in 2022 and (ii) a $3.1 million increase related to a lease extension with one operator.
−Removed: ● The decrease in interest income was primarily due to (i) a $17.0 million decrease related to principal payments received during 2021 and 2022, including those on the Ciena mortgage loans discussed above, and (ii) a $12.4 million decrease related to loans placed on non-accrual status, primarily the Guardian mortgage loan, during 2021 and 2022, partially offset by a $16.9 million increase related to new and refinanced loans and additional funding to existing operators made throughout 2021 and 2022.
−Removed: As noted above, in 2022, we funded $116.2 million for new or existing real estate loans and $250.9 million for new or existing non-real estate loans.
+Added: ● The increase in rental income was primarily the result of (i) a $114.8 million increase as a result of fewer straight-line rent receivable write-offs in 2023, with write-offs of $8.1 million and $122.9 million for the years ended December 31, 2023 and 2022, respectively, (ii) a $30.2 million increase related to facility acquisitions made throughout 2022 and 2023, lease extensions and other rent escalations and (iii) a $17.1 million net increase related to the impact of facility transitions, primarily from non-paying cash basis operators to straight-line basis operators, and sales, partially offset by a $88.3 million net decrease in rental income from cash basis operators, including Maplewood and LaVie, as a result of not recording straight-line lease revenue and/or receiving lower cash rent payments period over period from these operators, along with a one-time option termination payment of $12.5 million to Maplewood that was recorded as a reduction to rental income during the second quarter of 2023.
+Added: ● The decrease in interest income was primarily due to (i) a $15.6 million decrease related to loans placed on non-accrual status, primarily the LaVie loans and the Maplewood loan, in which we have recognized less interest income period over period as a result of receiving less cash payments or the loans converting to PIK interest and (ii) a $10.6 million decrease related to early principal payments on our loans during 2022 and 2023, partially offset by a $21.8 million increase related to new and refinanced loans and additional fundings to existing operators made throughout 2022 and 2023.
+Added: As noted above, during the year ended December 31, 2023, we funded $244.9 million in new or existing real estate loans and $166.1 million in new or existing non-real estate loans.
Following is a description of certain of the changes in our expenses for the year ended December 31, 2023 compared to 2022:
−Removed: ● The decrease in depreciation and amortization expense primarily relates to facility sales and facilities reclassified to assets held for sale, such as the 22 Gulf Coast facilities and 22 Agemo facilities that were sold during 2022, partially offset by facility acquisitions and capital additions.
−Removed: ● The increase in general and administrative (“G&A”) expense primarily relates to a $5.9 million increase in stock-based compensation expense (see Note 19 – Stock-Based Compensation to the Consolidated Financial Statements for a full summary of stock-compensation movements over the last three years) partially offset by a $2.6 million decrease in payroll and benefits and severance expenses.
−Removed: ● The increase in acquisition, merger and transition related costs primarily relates to costs incurred related to the transition of facilities with LaVie (as discussed further in “Collectibility Issues” above) and other troubled operators.
+Added: ● The decrease in depreciation and amortization expense primarily relates to facility sales and facilities reclassified to assets held for sale, partially offset by facility acquisitions and capital additions.
+Added: ● The increase in general and administrative (“G&A”) expense primarily relates to (i) a $7.8 million increase in stock-based compensation expense (see Note 19 – Stock-Based Compensation to the Consolidated Financial Statements for a full summary of stock-compensation movements over the last three years), (ii) a $3.3 million increase in payroll and benefits and (iii) a $1.3 million increase in professional service costs.
+Added: ● The decrease in acquisition, merger and transition related costs primarily relates to costs incurred related to the transition of facilities with troubled operators.
● The 2023 impairments were recognized in connection with two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell and 23 held for use facilities for which the carrying value exceeded the fair value.
−Removed: The 2021 impairments were recognized in connection with 13 facilities that were classified as held-for-sale for which the carrying values exceeded the estimated fair values less costs to sell and one held-for-use facility because of the closure of the facility in the first quarter.
+Added: The 2022 impairments were recognized in connection with two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell and 20 held for use facilities for which the carrying value exceeded the fair value.
The 2023 and 2022 impairments were primarily the result of decisions to exit certain non-strategic facilities and/or operators.
−Removed: ● The decrease in provision for credit losses primarily relates to a net decrease in aggregate specific provisions recorded in 2022 compared to specific provisions recorded in 2021, partially offset by increases in the general reserve recorded primarily resulting from increases in loss rates utilized in the estimate of expected losses for loans (see Note 9 – Allowance for Credit Losses to the Consolidated Financial Statements for a full summary of allowance movements over the last three years).
−Removed: Other Income (Expenses)
−Removed: The increase in total other income (expense) was primarily due to (i) a $198.3 million increase in gain on assets sold resulting from the sale of 66 facilities in 2022 compared to the sale of 48 facilities in 2021 as we continue to exit certain facilities, operator relationships and/or states to improve the strength of our overall portfolio and (ii) a $30.4 million decrease in loss on debt extinguishment primarily related to fees, premiums, and expenses related to the early redemption of $350 million of principal of the 4.375% Senior Notes due 2023 during the first quarter of 2021.
−Removed: Income Tax Expense
−Removed: As a REIT, we generally are not subject to federal income taxes on the REIT taxable income that we distribute to stockholders, subject to certain exceptions.
−Removed: For tax year 2022, we made common dividend payments of $632.9 million to satisfy REIT requirements relating to qualifying income.
−Removed: We have elected to treat certain of our active subsidiaries as TRSs.
−Removed: Our domestic TRSs are subject to federal, state and local income taxes at the applicable corporate rates.
−Removed: Our foreign TRSs are subject to foreign income taxes.
−Removed: As of December 31, 2022, 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.
−Removed: Also, in connection with the acquisition of one U.K.
−Removed: entity in the first quarter of 2022, we acquired foreign net operating losses of $55.0 million resulting in an NOL deferred tax asset of $13.4 million (see Note 3 – Real Estate Asset Acquisitions and Development and Note 17 – Taxes).
−Removed: The $10.2 million NOL carry-forward was fully reserved as of December 31, 2022, with a valuation allowance due to uncertainties regarding realization.
−Removed: current law, NOL carry-forwards generated up through December 31, 2017 may be carried forward for no more than 20 years, and our NOL carry-forwards generated in our taxable years ended after December 31, 2017 may be carried forward indefinitely.
−Removed: For the year ended December 31, 2022, we recorded approximately $1.2 million of federal, state and local income tax provision and approximately $3.4 million of tax provision for foreign income taxes.
−Removed: These amounts do not include any gross receipts or franchise taxes payable to certain states and municipalities.
+Added: ● The change in provision for credit losses primarily relates to a net decrease in aggregate specific provisions recorded during 2023 compared to specific provisions recorded during 2022 (see Note 9 – Allowance for Credit Losses to the Consolidated Financial Statements for a full summary of allowance movements over the last three years), partially offset by increases in the general reserve recorded primarily resulting from increases in loan balances and increases in loss rates utilized in the estimate of expected credit losses for loans.
+Added: Other Income (Expense)
+Added: The decrease in total other income (expense) was primarily due to a $280.3 million decrease in gain on assets sold resulting from the sale of 69 facilities in 2023 compared to the sale of 66 facilities in 2022 as we continue to exit certain facilities, operator relationships and/or states to improve the strength of our overall portfolio, partially offset by a $22.3 million change in other income (expense) – net primarily related to increased interest income on short-term investments due to higher invested cash and favorable interest rates in 2023.
Income from Unconsolidated Joint Ventures
−Removed: The decrease in income from unconsolidated joint ventures was primarily due to one of the joint ventures realizing a $14.9 million gain on sale of real estate investments during 2021.
+Added: The change in (loss) income from unconsolidated joint ventures was primarily due to higher interest rates on outstanding debt and fair value adjustments on our derivative instruments within our Cindat Joint Venture.
Funds From Operations
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Add back unrealized loss on warrants
−Removed: (1) The years ended December 31, 2022 and 2021 include the application of $11.0 million and $11.8 million, respectively, of security deposits (letter of credit and cash deposits) in revenue.
+Added: (1) The years ended December 31, 2023, 2022 and 2021 include the application of $17.6 million, $11.0 million and $11.8 million, respectively, of security deposits (letter of credit and cash deposits) in revenue.
(2) The year ended December 31, 2021 includes $21.3 million of revenue related to Gulf Coast recognized based on our ability to offset uncollected rent against the interest and principal of certain debt obligations of Omega.
−Removed: The $194.7 million decrease in Nareit FFO for the year ended December 31, 2022 compared to 2021 is primarily driven by the overall decrease in total revenue, which is discussed in more detail in the Results of Operations above.
+Added: The $130.6 million increase in Nareit FFO for the year ended December 31, 2023 compared to 2022 is primarily driven by the overall increase in total revenue, the decrease in acquisition, merger and transition related costs and the decrease in provision for credit losses which are discussed in more detail in the Results of Operations above.
Liquidity and Capital Resources
Sources and Uses
−Removed: Our primary sources of cash include rental income and interest payment receipts on our loans, existing availability under our Revolving Credit Facility, proceeds from our DRSPP and the 2021 ATM Program, facility sales, and proceeds from mortgage and other investment payoffs.
−Removed: We anticipate that these sources will be adequate to meet our principal cash flow needs through the next twelve months, which include:
−Removed: funding dividends and distributions to our stockholders and non-controlling interest members, making debt service payments (including principal and interest), funding real estate investments (including facility acquisitions, capital improvement programs and other capital expenditures), funding new and committed loan investments and paying normal recurring G&A expenses (primarily consisting of employee payroll and benefits and expenses relating to third parties for legal, consulting and audit services).
+Added: Our primary sources of cash include rental income and interest payment receipts on our loans, existing availability under our Revolving Credit Facility, proceeds from our DRSPP and ATM Program, facility sales, the issuance of additional debt, including unsecured notes and term loans, and proceeds from real estate loan and non-real estate loan payoffs.
+Added: We anticipate that these sources will be adequate to meet our principal cash flow needs through the next twelve months, which include common stock dividends and distributions to noncontrolling interest members, debt service payments (including principal and interest), real estate investments (including facility acquisitions, capital improvement programs and other capital expenditures), real estate loan and non-real estate loan advances and normal recurring G&A expenses (primarily consisting of employee payroll and benefits and expenses relating to third parties for legal, consulting and audit services).
Capital Structure
−Removed: At December 31, 2022, we had total assets of $9.4 billion, total equity of $3.8 billion and total debt of $5.3 billion, with such debt representing approximately 58.4% of total capitalization.
−Removed: At December 31, 2022, the weighted-average annual interest rate of our debt was 4.1%.
−Removed: Additionally, as of December 31, 2022, 98% of our debt with outstanding principal balances has fixed interest payments.
−Removed: Our high percentage of fixed interest debt has kept our interest expense relatively flat year over year despite rising interest rates.
+Added: At December 31, 2023, we had total assets of $9.1 billion, total equity of $3.8 billion and total debt of $5.1 billion in our consolidated financial statements, with such debt representing approximately 57.6% of total capitalization.
+Added: At December 31, 2023 and 2022, the weighted average annual interest rate of our debt was 4.4% and 4.1%, respectively.
+Added: Additionally, as of December 31, 2023, approximately 99% of our debt obligations, with outstanding principal balances, have fixed interest payments, after reflecting the impact of interest rate swaps that are designated cash flow hedges.
As of December 31, 2023, Omega’s debt obligations consisted of the following:
−Removed: ● A $1.45 billion Revolving Credit Facility that bears interest at LIBOR ( or in the case of loans denominated in GBP, the Sterling overnight index average reference rate plus an adjustment of 0.1193% per annum) plus an applicable percentage (with a range of 95 to 185 basis points) based on our credit ratings.
+Added: ● $4.6 billion of senior unsecured notes with staggered maturity dates ranging from 2024 to 2033.
+Added: These notes bear fixed interest rates between 3.25% and 5.25% per annum.
+Added: ● A $1.45 billion Revolving Credit Facility that bears interest at SOFR plus an adjustment of 0.11448% per annum ( or in the case of loans denominated in GBP, the Sterling overnight index average reference rate plus an adjustment of 0.1193% per annum) plus an applicable percentage (with a range of 95 to 185 basis points) based on our credit ratings.
The Revolving Credit Facility matures on April 30, 2025, subject to Omega’s option to extend such maturity date for two six-month periods.
As of December 31, 2023, Omega had $20.4 million outstanding on the Revolving Credit Facility.
−Removed: ● A $50.0 million OP Term Loan that bears interest at LIBOR plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.
+Added: ● A $428.5 million 2025 Term Loan that bears interest at SOFR plus an adjustment of 0.1% per annum plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.
+Added: We have 11 interest rate swaps designated as cash flow hedges, with notional value of $428.5 million, that effectively fix the SOFR-based portion of the 2025 Term Loan interest rate at 4.047%.
+Added: 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.
+Added: ● $62.0 million of secured borrowings consisting of HUD Mortgages and one term loan.
+Added: As of December 31, 2023, we had $41.9 million of outstanding HUD Mortgages with a weighted average interest rate of 2.88% per annum that mature from 2049 to 2051.
+Added: ● A $50.0 million OP Term Loan that bears interest at SOFR plus an adjustment of 0.11448% per annum plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.
+Added: We have an interest rate swap designated as a cash flow hedge , with a notional value of $50.0 million, that effectively fixes the SOFR-based portion of the OP Term Loan at 3.957%.
The OP Term Loan matures on April 30, 2025, subject to Omega OP’s option to extend such maturity date for two six-month periods.
−Removed: ● $4.9 billion of senior unsecured notes with staggered maturity dates in 2023, 2024, 2025, 2026, 2027, 2028, 2029, 2031 and 2033.
−Removed: These notes bear fixed interest rates between 3.25% and 5.25% per annum.
−Removed: ● $366.6 million of secured borrowings consisting of HUD Mortgages and two term loans.
−Removed: We had $344.7 million of outstanding HUD Mortgages as of December 31, 2022, with weighted average interest rates of 3.01% per annum that mature from 2046 to 2052.
As of December 31, 2023, we had long-term credit ratings of Baa3 from Moody’s and BBB- from S&P Global and Fitch.
Credit ratings impact our ability to access capital and directly impact our cost of capital as well.
−Removed: For example, our Revolving Credit Facility accrues interest and fees at a rate per annum equal to LIBOR plus a margin that depends upon our credit rating.
−Removed: A downgrade in credit ratings by Moody’s and S&P Global may have a negative impact on the interest rates and fees for our Revolving Credit Facility.
−Removed: Our credit facilities that reference LIBOR contain customary LIBOR replacement language, including, but not limited to, the use of rates based on the secured overnight financing rate.
+Added: For example, our Revolving Credit Facility accrues interest and fees at a rate per annum equal to SOFR plus a margin that depends upon our credit rating.
+Added: A downgrade in credit ratings by Moody’s and S&P Global may have a negative impact on the interest rates and fees for our Revolving Credit Facility, OP Term Loan and 2025 Term Loan.
+Added: As of December 31, 2023, we have $400 million of 4.95% senior notes due April 2024.
+Added: As of December 31, 2023, we had approximately $442.8 million of cash and cash equivalents on our Consolidated Balance Sheets and $1.4 billion of availability under our revolving credit facility.
+Added: As discussed below, we also have $708.2 million of potential sales remaining under the ATM Program.
+Added: This combination of liquidity sources, along with cash from operating activities, provides us with ability to repay the senior notes due in April 2024.
Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants.
As of December 31, 2023 and 2022, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.
−Removed: As of December 31, 2022 we have five forward starting swaps totaling $400 million that are indexed to 3-month LIBOR.
−Removed: We designated the forward starting swaps as cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt.
−Removed: The swaps are effective on August 1, 2023 and expire on August 1, 2033 and were issued at a weighted average fixed rate of approximately 0.8675%.
−Removed: The fair value associated with these swaps was $93.0 million as of December 31, 2022.
At December 31, 2023, we had 245.3 million shares of common stock outstanding and our shares had a market value of $7.5 billion.
2 unchanged sentences
The ATM Program has a forward sale provision that generally allows Omega to lock in a price on the sale of shares of common stock when sold by the forward sellers but defer receiving the net proceeds from such sales until the shares of our common stock are issued at settlement on a later date.
−Removed: We did not utilize the forward provisions under the 2021 ATM Program during 2022.
+Added: We have not utilized the forward provisions under the ATM Program.
We have $708.2 million of sales remaining under the ATM Program as of December 31, 2023.
12 unchanged sentences
(1) The $5.1 billion of debt outstanding includes:
−Removed: (i) $50 million under the OP Term Loan due April 2025, (ii) $350 million of 4.375% Senior Notes due August 2023, (iii) $400 million of 4.95% Senior Notes due April 2024, (iv) $400 million of 4.50% Senior Notes due January 2025, (v) $600 million of 5.25% Senior Notes due January 2026, (vi) $700 million of 4.5% Senior Notes due April 2027, (vii) $550 million of 4.75% Senior Notes due January 2028, (viii) $500 million of 3.625% Senior Notes due October 2029, (ix) $700 million of 3.375% Senior Notes due February 2031, (x) $700 million of 3.25% Senior Notes due April 2033, (xi) $2.2 million of 8.0% per annum debt held at a consolidated joint venture due February 2023, (xii) $19.8 million of 9.63% per annum debt held at a consolidated joint venture due February 2024 and (xiii) $344.7 million of HUD debt at a 3.01% weighted average interest rate due between 2046 and 2052.
−Removed: Other than the $50 million outstanding under the OP Term Loan, the $344.7 million of HUD debt and the $22.0 million of debt held at consolidated joint ventures, Parent is the obligor of all outstanding debt.
−Removed: (2) In connection with the adoption of Topic 842, we recognized lease liabilities in connection with ground and/or facility leases.
−Removed: Certain operators pay these obligations directly to the landlord.
−Removed: We recognize rental income for ground and/or facility leases where the operator reimburses us, or pays the obligation directly to the landlord on our behalf.
+Added: (i) $50 million under the OP Term Loan due April 2025, (ii) $428.5 million under the 2025 Term Loan due August 2025, (iii) $400 million of 4.95% Senior Notes due April 2024, (iv) $400 million of 4.50% Senior Notes due January 2025, (v) $600 million of 5.25% Senior Notes due January 2026, (vi) $700 million of 4.5% Senior Notes due April 2027, (vii) $550 million of 4.75% Senior Notes due January 2028, (viii) $500 million of 3.625% Senior Notes due October 2029, (ix) $700 million of 3.375% Senior Notes due February 2031, (x) $700 million of 3.25% Senior Notes due April 2033, (xi) $19.8 million of 10.85% per annum debt held at a consolidated joint venture due February 2024, (xii) $41.9 million of HUD debt at a 2.88% weighted average interest rate due between 2049 and 2051 and (xiii) $20.4 million under the revolving credit facility.
+Added: Other than the $50 million outstanding under the OP Term Loan, the $41.9 million of HUD debt and the $19.8 million of debt held at the consolidated joint venture, Parent is the obligor of all outstanding debt.
+Added: (2) Based on foreign currency exchange rates in effect as of December 31, 2023.
+Added: (3) Based on variable interest rates in effect as of December 31, 2023 and including the impact of interest rate swaps designated as cash flow hedges.
+Added: (4) See Note 6 to our consolidated financial statements for additional information.
Capital Expenditures and Funding Commitments
In addition to the obligations in the table above, as of December 31, 2023, we also had $191.9 million of commitments to fund the construction of new leased and mortgaged facilities, capital improvements and other commitments.
−Removed: Additionally, we have commitments to fund $71.4 million of advancements under existing non-real estate loans.
+Added: Additionally, we have commitments to fund $46.3 million of advancements under existing other real estate loans and $46.2 million of advancements under existing non-real estate loans.
These commitments are expected to be funded over the next several years and are dependent upon the operators’ election to use the commitments.
5 unchanged sentences
We use derivative instruments to hedge interest rate and foreign currency exchange rate exposure as discussed in Note 15 to the Consolidated Financial Statements – Derivatives and Hedging.
−Removed: We have seen significant increases in fair value of our hedging instruments in 2022, primarily due to macroeconomic factors impacting interest rates and foreign currency rates.
Cash Flow Summary
9 unchanged sentences
The following is a discussion of changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows.
−Removed: Operating Activities –The decrease in net cash provided by operating activities is primarily driven by a decrease of $144.9 million of net income, net of $155.4 million of non-cash items, primarily due to a year over year reduction in rental income and interest income, as discussed in our material changes analysis under Results of Operations above.
−Removed: The decrease was partially offset by a $48.4 million change in the net movements of the operating assets and liabilities.
−Removed: Investing Activities –The change in cash used in investing activities related primarily to (i) a $440.5 million increase in proceeds from the sales of real estate investments driven by an attractive real estate market in which Omega elected to sell non-strategic assets, (ii) a $391.6 million decrease in real estate acquisitions, primarily related to the acquisition of 24 senior living facilities from Healthpeak in the first quarter of 2021, (iii) a $75.7 million decrease in capital improvements to real estate investments and construction in progress (including $68.0 million related to the purchase of a real estate property located in Washington, D.C.
−Removed: in the third quarter of 2021 that Omega, in conjunction with Maplewood, plans to redevelop), (iv) a $68.9 million increase in loan repayments, net of placements which is primarily driven by higher repayments in 2022 and (v) a $10.4 million decrease in investments in unconsolidated joint ventures primarily related to Second Spring II LLC, a new joint venture investment in 2021.
+Added: Operating Activities –The decrease in net cash provided by operating activities is primarily driven by a $30.6 million change in the net movements of the operating assets and liabilities.
+Added: The decrease was partially offset by an increase of $22.6 million of net income, net of $212.6 million of non-cash items, primarily due to a year over year increase in rental income and decrease in acquisition, merger and transition related costs, as discussed in our material changes analysis under Results of Operations above.
+Added: Investing Activities –The change in cash used in (provided by) investing activities related primarily to (i) a $229.1 million decrease in loan repayments, net of placements due to significant paydowns on the Ciena Healthcare mortgage loans and other loans during 2022, (ii) a $174.0 million decrease in proceeds from the sales of real estate investments driven by the sale of the Gulf Coast facilities in the first quarter of 2022, (iii) a $32.5 million increase in real estate acquisitions, (iv) an $18.2 million increase in capital improvements to real estate investments and construction in progress related to a Washington D.C.
+Added: development with Maplewood and (v) a $12.2 million increase in investments in unconsolidated joint ventures primarily related to the four new joint venture investments in the second and third quarters of 2023.
Offsetting these changes were:
−Removed: (i) a $14.5 million decrease in distributions from unconsolidated joint ventures in excess of earnings primarily related to the Second Spring Healthcare Investments joint venture due to significant facility sales in the first quarter of 2021 and (ii) a $4.7 million decrease in receipts from insurance proceeds.
−Removed: Financing Activities –The change in cash used in financing activities was primarily related to (i) a $265.9 million decrease in cash proceeds from the issuance of common stock in 2022 due to decreased issuances under our DRSPP and our 2021 ATM program, as compared to the same period in 2021, (ii) $142.3 million of repurchases of shares of common stock in 2022 as a result of implementing a $500 million repurchase program in January 2022, (iii) a $88.7 million decrease in proceeds from other long-term borrowings, net of repayments and (iv) a $9.6 million increase in redemptions of OP units, partially offset by (i) a $48.6 million decrease in payment of financing related costs due to fees and premiums paid in the first quarter of 2021 related to the early redemption of $350 million of principal of the 4.375% senior notes due 2023, (ii) a $4.8 million decrease in dividends paid primarily resulting from share repurchases throughout 2022 and (iii) a $4.7 million decrease in distributions to Omega OP Unit holders.
+Added: (i) an $11.4 million increase in proceeds from net investment hedges related to the termination of two foreign currency forwards during the fourth quarter of 2023, (ii) a $5.5 million increase in receipts from insurance proceeds from claims on damaged facilities and (iii) a $5.5 million increase in distributions from unconsolidated joint ventures in excess of earnings.
+Added: Financing Activities –The change in cash used in financing activities was primarily related to (i) a $328.3 million increase in cash proceeds from the issuance of common stock, (ii) a $142.3 million decrease in repurchases of shares of common stock, (iii) a $92.6 million increase in proceeds from derivative instruments as a result of the termination of our forward starting swaps in the second quarter of 2023 and (iv) a $9.6 million decrease in redemptions of OP units, partially offset by (i) a $236.0 million increase in repayments on other long-term borrowings, net of proceeds, primarily due to the early pay-off of 32 HUD mortgage loans during 2023, (ii) an $11.0 million increase in dividends paid primarily related to share issuances during 2023, (iii) a $5.9 million increase in distributions to Omega OP Unit holders and (iv) a $3.4 million increase in payment of financing related costs related to the Company entering into the 2025 Term Loan during the third quarter of 2023.
Supplemental Guarantor Information
4 unchanged sentences
Accordingly, separate consolidated financial statements of Omega OP have not been presented.
−Removed: Parent and Omega OP, on a combined basis, have no material assets, liabilities or operations other than financing activities (including borrowings under the senior unsecured revolving and term loan credit facility, Omega OP term loan and the outstanding senior notes) and their investments in non-guarantor subsidiaries.
+Added: Parent and Omega OP, on a combined basis, have no material assets, liabilities or operations other than financing activities (including borrowings under the outstanding senior notes, revolving credit facility and term loans) and their investments in non-guarantor subsidiaries.
Omega OP is currently the sole guarantor of our senior notes.
16 unchanged sentences
Revenue Recognition
−Removed: Rental income from our operating leases is generally recognized on a straight-line basis over the lease term when we have determined that the collectibility of substantially all of the lease payments are probable.
+Added: Rental income from our operating leases is generally recognized on a straight-line basis over the lease term when we have determined that the collectibility of substantially all of the lease payments is probable.
If we determine that it is not probable that substantially all of the lease payments will be collected, we account for the revenue under the lease on a cash basis.
We assess the probability of collecting substantially all payments under our leases based on several factors, including, among other things, payment history of the lessee, the financial strength of the lessee and any guarantors, historical operations and operating trends, current and future economic conditions and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern).
−Removed: If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we place that operator on a cash basis and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.
+Added: If our evaluation of these factors indicates it is not probable that we will be able to collect substantially all rents, we place that operator on a cash basis and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected.
As a result of placing an operator on a cash basis, we may recognize a charge to rental income for any contractual rent receivable, straight-line rent receivable and lease inducements.
As of December 31, 2023 and 2022, we had outstanding straight-line rent receivables of $202.7 million and $166.1 million, respectively, and lease inducements of $8.8 million and $6.0 million, respectively.
+Added: During 2023, we placed three operators on a cash-basis but did not write-off any contractual receivables, straight-line rent receivables and lease inducements to rental income in connection with these operators, as two related to new lease agreements and one related to an operator with a lease that had no rent escalators.
During 2022, we wrote-off approximately $119.8 million of contractual receivables, straight-line rent receivables and lease inducements to rental income primarily as a result of placing nine operators on a cash-basis.
−Removed: During 2021, we wrote-off approximately $36.0 million of contractual receivables, straight-line rent receivables and lease inducements to rental income primarily as a result of placing six operators on a cash-basis.
If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the period we make a change to our prior conclusion.
46 unchanged sentences
As of December 31, 2023 and 2022, we had a total allowance for credit loss of $222.2 million and $188.4 million, respectively.
−Removed: A 10% increase or decrease in the FHA default rates as of December 31, 2022 would result in an additional provision or recovery for credit losses of $10.1 million or $9.3 million, respectively.
+Added: A 10% increase or decrease in the FHA default rates as of December 31, 2023 would result in an additional provision or recovery for credit losses of $4.9 million.
If the weighted average yield to maturity on our portfolio increases or decreases by 10%, this will result in an additional provision or recovery for credit losses of $7.2 million or $5.8 million, respectively.
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.