What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 292 added, 556 removed, 585 unchanged (59% 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 – 244,989 shares as of September 30, 2023 and 234,252 shares as of December 31, 2022

Common stock $ 0.10 par value authorized – 350,000 shares, issued and outstanding – 246,377 shares as of March 31, 2024 and 245,282 shares as of December 31, 2023

Additional paid-in capital

12 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Rental income

Income from direct financing leases

Interest income

6 unchanged sentences

Impairment on real estate properties

Provision for credit losses

Provision (recovery) for credit losses

Interest expense

1 unchanged sentence

Other income (expense)

Other income (expense) – net

Other income – net

Loss on debt extinguishment

Gain on assets sold – net

(Loss) gain on assets sold – net

Total other income

Income before income tax expense and income from unconsolidated joint ventures

Income tax expense

(Loss) income from unconsolidated joint ventures

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

Income tax (expense) benefit

Income from unconsolidated joint ventures

Net income attributable to noncontrolling interest

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income (loss)

1 unchanged sentence

Cash flow hedges

Total other comprehensive (loss) income

Total other comprehensive income

Comprehensive income

4 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended September 30, 2023 and 2022

(in thousands, except per share amounts)

Comprehensive

Stockholders’

Noncontrolling

Balance at June 30, 2023

( 6,501,899 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Omega OP Units distributions

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive loss

Balance at September 30, 2023

( 6,666,439 )

Balance at June 30, 2022

( 5,872,269 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 0.67 per share)

Omega OP Units distributions

Capital contribution from noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at September 30, 2022

( 6,029,603 )

See notes to consolidated financial statements.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Nine Months Ended September 30, 2023 and 2022

Three Months Ended March 31, 2024 and 2023

(in thousands, except per share amounts)

2 unchanged sentences

Noncontrolling

Income (Loss)

Balance at December 31, 2023

6 unchanged sentences

Omega OP Units distributions

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at September 30, 2023

Balance at March 31, 2024

( 6,995,876 )

3 unchanged sentences

Issuance of common stock

Repurchase of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Omega OP Units distributions

1 unchanged sentence

Other comprehensive income

Balance at September 30, 2022

Balance at March 31, 2023

( 6,344,413 )

3 unchanged sentences

Unaudited (in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

3 unchanged sentences

Provision for rental income

Provision for credit losses

Provision (recovery) for credit losses

Amortization of deferred financing costs and loss on debt extinguishment

1 unchanged sentence

Stock-based compensation expense

Gain on assets sold – net

Loss (gain) on assets sold – net

Amortization of acquired in-place leases – net

1 unchanged sentence

Interest paid-in-kind

Loss (income) from unconsolidated joint ventures

Loss from unconsolidated joint ventures

Change in operating assets and liabilities – net:

12 unchanged sentences

Capital improvements to real estate investments

Proceeds from net investment hedges

Receipts from insurance proceeds

1 unchanged sentence

Cash flows from financing activities

Proceeds from long-term borrowings

Payments of long-term borrowings

1 unchanged sentence

Net proceeds from issuance of common stock

Repurchase of common stock

Dividends paid

Net payments to noncontrolling members of consolidated joint venture

Proceeds from derivative instruments

Redemption of Omega OP Units

Distributions to Omega OP Unit Holders

1 unchanged sentence

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

Increase in cash, cash equivalents and restricted cash

Decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

March 31, 2024

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

8 unchanged sentences

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

As of September 30, 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 March 31, 2024, Parent owned 97 % of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned 3 % of the outstanding Omega OP Units.

Basis of Presentation and Principles of Consolidation

4 unchanged sentences

These unaudited consolidated financial statements should be read in conjunction with the financial statements and the footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

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

Omega’s consolidated financial statements include the accounts of Omega Healthcare Investors, Inc., its wholly-owned subsidiaries and the joint ventures (“JVs”) and variable interest entities (“VIEs”) that it controls, through voting rights or other means.

All intercompany transactions and balances have been eliminated in consolidation.

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

1 unchanged sentence

Reclassification

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

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

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

Recent Accounting Pronouncements

ASU – 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 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.

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

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

The Company had several derivative instruments that referenced LIBOR which were terminated during the second quarter of 2023 (see Note 16 – Derivatives and Hedging).

The Company also had a $ 1.45 billion senior unsecured multicurrency revolving credit facility and a $ 50.0 million senior unsecured term loan facility (see Note 15 – Borrowing Activities and Arrangements) that referenced LIBOR.

During the second quarter of 2023, the Company amended its $ 1.45 billion senior unsecured multicurrency revolving credit facility and $ 50.0 million senior unsecured term loan facility to adjust the interest on each loan from a LIBOR based interest rate to a Secured Overnight Financing Rate (“SOFR”) based interest rate.

For both loans we have elected to apply the optional expedient pursuant to Topic 848.

As such we will account for the amendments as if the modifications were not substantial and thus a continuation of the existing contract resulting in no change to the current loan carrying values or the related deferred financing costs.

Certain amounts in the prior year period have been reclassified to conform to the current period presentation.

Income from direct financing leases, which was previously reported separately on our Consolidated Statements of Operations, is now included in Rental Income for all periods presented.

In addition, we previously reported assets held for sale of $ 93.7 million on the Consolidated Balance Sheet as of December 31, 2023.

$ 12.2 million of these assets no longer qualify as held for sale and have been reclassified to assets held for use within the applicable line items in real estate assets – net on the Consolidated Balance Sheet as of December 31, 2023.

See further discussion on the held for sale reclassification in Note 3 – Assets Held for Sale, Dispositions and Impairments.

NOTE 2 – REAL ESTATE ASSETS

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 September 30,

Nine Months Ended September 30,

(in thousands)

At March 31, 2024, our leased real estate properties included 589 SNFs, 189 ALFs, 19 ILFs, 19 specialty facilities and one medical office building.

The following table summarizes the Company’s rental income:

Three Months Ended March 31,

(in thousands)

Rental income – operating leases

Variable lease income – operating leases

Fixed income from operating leases

Variable income from operating leases

Interest income from direct financing leases

Total rental income

Our variable lease income primarily represents the reimbursement of real estate taxes and ground lease expenses by operators that Omega pays directly.

Our variable income from operating leases primarily represents the reimbursement by operators for real estate taxes that Omega pays directly.

Asset Acquisitions

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

The following table summarizes the asset acquisitions that occurred during the three months ended March 31, 2024:

Total Real Estate

4 unchanged sentences

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

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

(3) In connection with this acquisition, the Company also provided $ 104.6 million of mezzanine financing discussed further in Note 5 – Real Estate Loans Receivable and Note 6 – Non-Real Estate Loans Receivable.

Construction in Progress and Capital Expenditure Investments

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.

Concurrent with the acquisition, we amended our lease with an existing operator to include the land in the lease.

We are committed to a maximum funding of $ 15.2 million for the development of the land.

We invested $ 21.4 million and $ 10.1 million under our construction in progress and capital improvement programs during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, construction in progress included two projects consisting of the development of a SNF in Virginia and an ALF in Washington D.C.

NOTE 3 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

1 unchanged sentence

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

September 30,

Number of facilities held for sale

Amount of assets held for sale (in thousands)

During the three months ended September 30, 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 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.

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”), Guardian and Agemo Holdings, LLC (“Agemo”).

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

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

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

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

In the first quarter of 2024, we reclassified one facility with a net book value of $ 12.2 million from assets held for sale to assets held for use within the applicable line items in real estate assets – net.

Of the $ 12.2 million reclassified net of $ 5.4 million of accumulated depreciation, $ 15.9 million relates to buildings, $ 0.6 million relates to land and $ 1.1 relates to furniture and equipment.

We originally reclassified this facility as held for sale in the fourth quarter of 2023 as a result of receiving a notification from an operator of their intent to exercise a purchase option over the facility.

Due to regulatory issues encountered in the first quarter of 2024 during the due diligence process that limit our ability to sell this facility, this facility no longer qualifies as an asset held for sale.

During the three months ended March 31, 2024, we sold four facilities ( four SNFs) subject to operating leases for $ 10.1 million in net cash proceeds.

As a result of these sales, we recognized a net loss of $ 1.4 million.

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

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

During the three months ended March 31, 2024 and 2023, we received interest of $ 0.3 million and $ 2.1 million, respectively, related to seller financing provided in connection with sales that did not meet the contract criteria to be recognized under ASC 610-20.

The interest received was deferred and recorded as a contract liability within accrued expenses and other liabilities on our Consolidated Balance Sheets.

As of March 31, 2024, we have one sale that has not been recognized.

Real Estate Impairments

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.

During the three months ended March 31, 2024, we recorded impairments of $ 5.3 million on three facilities.

The $ 5.3 million relates to three held for use facilities (of which $ 1.3 million relates to a closed facility) for which the carrying value exceeded the fair value.

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

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

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

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

5 unchanged sentences

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

September 30,

(in thousands)

5 unchanged sentences

Cash Basis Operators and Straight-Line Receivable Write-Offs

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

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 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.

The aggregate initial contractual rent related to the 48 facilities following the transition to other operators is $ 48.0 million per annum.

In connection with the transition of the 14 facilities, Omega made or agreed to make termination payments of $ 15.5 million in aggregate that were recorded as initial direct costs related to the lease with the new operator of the 14 transitioned facilities in the first quarter of 2023.

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 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.

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

During the three months ended March 31, 2024, we entered into a lease with a new operator as part of the transition of facilities from another operator.

As we had no previous relationship with this new operator and collection of substantially all contractual lease payments due from the new operator was not deemed probable, we placed the new operator on a cash basis of revenue recognition.

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

We also did not have any straight-line receivable write-offs through rental income during either of the three months ended March 31, 2024 and 2023.

As of March 31, 2024, we had 20 operators on a cash basis for revenue recognition, which represent 18.4 % and 20.5 % of our total revenues for the three months ended March 31, 2024 and 2023, respectively.

Rent Deferrals and Application of Collateral

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.

During each of the three months ended March 31, 2024 and 2023, we allowed three and eight operators to defer $ 0.9 million and $ 24.4 million, respectively, of contractual rent and interest.

The deferrals during the three months ended March 31, 2024 primarily related to Maplewood Senior Living (along with affiliates, “Maplewood”) ($ 0.7 million).

During each of the three months ended March 31, 2024 and 2023, we received repayments of deferred rent from three operators of $ 0.5 million and $ 0.2 million, respectively.

Additionally, we allowed four and three operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the three months ended March 31, 2024 and 2023, respectively.

The total collateral applied to contractual rent and interest was $ 0.5 million and $ 5.2 million for the three months ended March 31, 2024 and 2023, respectively.

Operator Collectibility Updates

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

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

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

● reduce monthly contractual base rent from $ 4.8 million to $ 1.9 million following the sales of 22 facilities, previously leased and operated by Agemo, that occurred in the third and fourth quarters of 2022;

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

● refinance and restructure the $ 25.0 million secured working capital loan (the “Agemo WC Loan”), the $ 32.0 million term loan (the “Agemo Term Loan”) and the aggregate deferred rent balance of $ 25.2 million into two replacement loans to Agemo that mature on December 31, 2036 , with aggregate principal of $ 82.2 million and an annual interest rate of 5.63 % through October 2024, which increases to 5.71 % until maturity.

Agemo 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.

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.

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

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

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

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

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

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

● convert the 7 % per annum cash interest due on the secured revolving credit facility to all PIK interest in 2023, 1 % cash interest and 6 % PIK interest in 2024, 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 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 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.

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.

In the first quarter of 2024, Maplewood paid $ 11.3 million of contractual rent, a short pay of $ 6.5 million of the $ 17.8 million (consisting of $ 17.3 million of contractual rent and $ 0.5 million of contractual interest) due under its lease and loan agreements.

Maplewood initially short-paid the contractual rent amount due under its lease agreement during the second quarter of 2023 and has not made full contractual rent and interest payments since that time.

Omega applied Maplewood’s $ 4.8 million security deposit to cover a portion of the rent that was short paid in 2023.

As the security deposit was fully exhausted in the fourth quarter of 2023, we were unable to apply collateral to unpaid rent and interest in the first quarter of 2024.

To address liquidity concerns, Omega entered into a comprehensive restructuring of Maplewood’s lease and loan agreements in the first quarter of 2023 that, among other things, fixed rent at $ 69.3 million per annum through December 2025 and provided Maplewood a one-time option termination fee of $ 12.5 million.

We continue to take actions to preserve our rights and are in discussions with Maplewood to address the payment deficiencies noted above.

Maplewood is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 11.3 million and $ 17.3 million for the three months ended March 31, 2024 and 2023, respectively, for the contractual rent payments that were received from Maplewood.

The $ 12.5 million option termination fee payment made in the first quarter of 2023 in connection with the restructuring agreement was recorded as a reduction to the $ 17.3 million rental income recognized for the three months ended March 31, 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 we received from Maplewood related to December 2022, as the loan was placed on non-accrual status for interest recognition during the fourth quarter of 2022.

No interest income was recorded during the three months ended March 31, 2024.

In April 2024, Maplewood short-paid the contractual rent and interest amounts due under its lease and loan agreements by $ 2.2 million.

In connection with the ongoing restructuring of our facilities operated by LaVie Care Centers, LLC (“LaVie”), in the first quarter of 2024, we sold two facilities and transitioned two facilities to another operator, all of which were previously subject to the master lease with LaVie.

Concurrent with the sales and transitions, we amended the master lease agreement with LaVie to reduce monthly rent to $ 3.2 million.

In the first quarter of 2024, LaVie paid $ 4.4 million of contractual rent, a short pay of $ 5.5 million of the $ 9.9 million due under its lease agreement.

As LaVie is on a cash basis of revenue recognition for lease purposes, only the $ 4.4 million and $ 7.4 million of contractual rent payments that we received from LaVie were recorded as rental income during the three months ended March 31, 2024 and 2023, respectively.

We did no t recognize any interest income related to LaVie during the three months ended March 31, 2024 and 2023 as the two loans outstanding have payment-in-kind (“PIK”) interest and are on non-accrual status.

In April 2024, LaVie paid $ 1.5 million of contractual rent, a short pay of $ 1.7 million of the $ 3.2 million due under its lease agreement.

Consistent with the third and fourth quarter of 2023, Guardian Healthcare (“Guardian”) did not pay the contractual amounts due under its lease agreement in the first quarter of 2024.

We recorded rental income of $ 0.1 million and $ 3.8 million related to our lease with Guardian for the three months ended March 31, 2024 and 2023, respectively.

As Guardian is on a cash basis of revenue recognition, rental income for these periods was limited to the contractual rent payments that were received and/or collateral held by Omega that was applied to outstanding rent.

Rental income for the three months ended March 31, 2024 included the application of $ 0.1 million of Guardian’s security deposit to fund a portion of the unpaid rent.

In April 2024, we transitioned the remaining six facilities previously included in Guardian’s master lease to a new operator for minimum initial contractual rent of $ 5.5 million per annum with the potential to increase contractual rent up to $ 12.4 million dependent on revenue received by the operator.

Agemo Holdings, LLC (“ Agemo”) failed to pay contractual rent and interest during the first quarter of 2023.

Following the execution of a restructuring agreement between Omega and Agemo in the first quarter of 2023, Agemo resumed making contractual rent and interest payments during the second quarter of 2023 and has made all required contractual rent and interest payments through the first quarter of 2024.

We recorded rental income of $ 6.0 million and zero , respectively, related to our lease with Agemo for the three months ended March 31, 2024 and 2023.

As Agemo is a cash basis operator, rental income is limited to the contractual rent payments that were received during the respective periods.

We did no t recognize interest income on our loans with Agemo during the three months ended March 31, 2024 and 2023.

See Note 6 – Non-Real Estate Loans Receivable for discussion regarding our loans and interest with Agemo.

During the three months ended March 31, 2023, we re-leased 43 facilities that were previously subject to leases with three cash basis operators to other operators.

Following the transition, we have no remaining relationships with these three cash basis operators.

All of the operators that the 43 facilities were transitioned to have leases for which Omega is recognizing revenue on a straight-line basis.

The aggregate initial contractual rent for the 43 facilities under these leases is $ 43.3 million per annum.

In connection with the transition of certain of these facilities, in the first quarter of 2023, Omega made termination payments of $ 15.5 million that were recorded as initial direct costs related to the lease with the new operator.

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

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 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.

As of March 31, 2024, our real estate loans receivable consists of 13 fixed rate mortgage notes on 62 long-term care facilities and 15 other real estate loans.

The mortgage notes relate to facilities located in 11 states that are operated by 12 independent healthcare operating companies.

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

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

September 30,

A summary of our real estate loans receivable by loan type and by borrower and/or guarantor is as follows:

(in thousands)

1 unchanged sentence

interest at 11.22 % (1)(2)

Mortgage note due 2031 ;

Mortgage notes due 2037 ;

interest at 10.50 %

18 unchanged sentences

Total real estate loans receivable – net

(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 September 30, 2023, with maturity dates ranging from 2023 through 2026 .

(1) Approximates the weighted average interest rate on facilities as of March 31, 2024.

(2) All mortgage notes mature in 2030 with the exception of two mortgage notes with an aggregate outstanding principal balance of $ 52.0 million that mature in 2024.

(3) Other mortgage notes outstanding consists of nine loans to multiple borrowers that have a weighted average interest rate of 9.67 % as of March 31, 2024, with maturity dates ranging from 2024 through 2027 (with $ 8.3 million maturing in 2024).

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) 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 September 30,

Nine Months Ended September 30,

(in thousands)

(4) During the first quarter of 2024, the maturity dates of these loans were extended from March 29, 2024 to June 28, 2024.

(5) Other real estate loans outstanding consists of seven loans to multiple borrowers that have a weighted average interest rate of 10.88 % as of March 31, 2024, with maturity dates ranging from 2027 through 2033 .

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

Three Months Ended March 31,

(in thousands)

2 unchanged sentences

Total real estate loans interest income

Mortgage note due 2031

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

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

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

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

Guardian used $ 35.2 million of proceeds from the sale of the facilities to make a principal repayment to Omega, in the same amount, against the mortgage note.

Following the repayment, Omega agreed to release the mortgage liens on these facilities and forgive the remaining $ 46.8 million of outstanding principal due under the mortgage note.

We had previously established an allowance for credit loss to reserve this loan down to $ 35.2 million in anticipation of this settlement.

During the three months ended March 31, 2024, we funded $ 41.2 million under seven new real estate loans with a weighted average interest rate of 9.6 %.

These new loans have a weighted average term of 3.1 years.

We also advanced $ 2.8 million under existing real estate loans during the three months ended March 31, 2024.

Included below is additional discussion on any significant new loans issued and significant updates to any existing loans.

Other real estate loan due 2035

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

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

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

In the first quarter of 2023, Omega entered into a restructuring agreement and a loan amendment with Maplewood that modified Maplewood’s secured revolving credit facility.

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

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

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

During the first quarter of 2024, Maplewood failed to make cash interest payments of $ 0.5 million that were required under the loan agreement.

Following the missed interest payments in the first quarter of 2024, we reviewed the characteristics associated with the loan and borrower and adjusted the internal risk rating on the loan, utilized as a component of our allowance for credit loss calculation, from a 4 to a 5 to reflect the increased risk associated with the loan.

The Maplewood risk rating adjustment was the primary reason for the increase in the allowance for credit losses presented in Note 7 – Allowance for Credit Losses.

Omega previously adjusted the internal risk rating on the Maplewood loan from a 3 to a 4 in the second quarter of 2023 when Maplewood began to short-pay contractual rent under its lease agreement.

We are in discussions with Maplewood to amend the loan agreement.

The revolving credit facility is secured by a leasehold mortgage on certain Maplewood facilities.

Additionally, the principal on the revolving credit facility is required to be repaid prior to Maplewood receiving any share of residual profit as a result of a sale of the facilities subject to the Maplewood master lease.

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 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

On April 14, 2023, we entered into two mezzanine loans, with principal balances of $ 68.0 million and $ 6.6 million, respectively, with an existing operator and its affiliates in connection with the operator’s acquisition of 13 SNFs in West Virginia.

The $ 68.0 million loan matures on April 13, 2029 and bears interest at a variable rate that results in a blended interest rate of 12 % per annum across this loan and three other loans, including the $ 6.6 million mezzanine loan and both $ 15.0 million mezzanine loans discussed under Notes due 2023-2029 in Note 6 – Non-Real Estate Loans Receivable.

The $ 68.0 million loan requires quarterly principal payments of $ 1.0 million commencing on July 1, 2023 and additional payments contingent on certain metrics.

The $ 68.0 million loan is secured by a leasehold mortgage and a pledge of the operator’s equity interest in subsidiaries of the operator.

The $ 6.6 million mezzanine loan matures on April 14, 2029 and bears interest at a rate of 8 % per annum.

The $ 6.6 million mezzanine loan was made to a new real estate joint venture, RCA NH Holdings RE Co., 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).

We did not record any interest income related to the PIK interest during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, the amortized cost basis of this loan was $ 263.6 million, which represents 19.6 % of the total amortized cost basis of all real estate loan receivables.

As of March 31, 2024, the remaining commitment under the secured revolving credit facility, including the unrecognized PIK interest, was $ 33.9 million.

NOTE 6 – NON-REAL ESTATE LOANS RECEIVABLE

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

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

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

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

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

September 30,

As of March 31, 2024, we had 45 loans with 22 different borrowers.

A summary of our non-real estate loans by borrower and/or guarantor is as follows:

(in thousands)

7 unchanged sentences

interest at 7.83 % (2)

Note due 2027 ;

Notes due 2036 ;

interest at 2.00 %

3 unchanged sentences

Total non-real estate loans receivable – net

(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.

(1) Approximates the weighted average interest rate as of March 31, 2024.

(2) During the first quarter of 2024, this loan was amended to, among other items, extend the maturity date to December 31, 2025 , modify the mandatory principal payments required under the loan, reduce the maximum principal under the loan from $ 55.0 million to $ 45.0 million and increase the interest rate on borrowings in excess of $ 15.0 million to 8 % in January 2024, with further interest rate increases to 9 % and 10 % in April 2024 and June 2024, respectively.

The interest rate remains at 7.5 % for borrowings that do not exceed $ 15.0 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.

(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.

The interest rate above represents the weighted average interest rate as of March 31, 2024.

(3) Other notes outstanding have a weighted average interest rate of 8.09 % as of March 31, 2024, with maturity dates ranging from 2024 through 2030 (with $ 7.6 million maturing in 2024 ).

Three of the other notes outstanding with an aggregate principal balance of $ 10.1 million are past due and have been written down to the estimated fair value of the underlying collateral of zero , through our allowance for credit losses.

For the three months ended March 31, 2024 and 2023, non-real estate loans generated interest income of $ 7.1 million and $ 5.0 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).

During the three months ended March 31, 2024, we did not fund any new non-real estate loans.

We advanced $ 4.1 million under existing working capital loans during the three months ended March 31, 2024.

We received principal repayments of $ 6.9 million on existing non-real estate loans during the three months ended March 31, 2024.

Included below is additional discussion on any significant new loans issued and/or significant updates to any existing loans.

Notes due 2036 ;

1 unchanged sentence

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, in the first quarter of 2023, Omega entered into a restructuring agreement and a replacement loan agreement that modified the existing Agemo loans.

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

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

2 unchanged sentences

The Agemo Replacement Loans mature on December 31, 2036 .

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

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

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

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

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

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

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

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

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

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

As such, we added an additional allowance for credit losses of $ 25.2 million related to Agemo Replacement Loan B concurrent with the increase in loan principal during the first quarter of 2023.

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

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 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.

Agemo resumed making interest payments for the Agemo Replacement Loans in May 2023 in accordance with the terms of the restructuring agreement.

The Agemo Replacement Loans are on non-accrual status, and we are utilizing the cost recovery method, under which any payments we receive are applied against the principal amount.

During the three months ended March 31, 2024, we received $ 1.2 million of interest payments from Agemo that we applied against the outstanding principal of the loans, and we recognized a recovery for credit loss equal to the amount of payments applied against principal.

As of March 31, 2024, the amortized cost basis of these loans was $ 76.7 million, which represents 19.6 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of March 31, 2024 related to the Agemo Replacement Loans was $ 71.5 million, which reserves the loan down to the fair value of the underlying collateral, consisting of a second lien on the accounts receivable of Agemo.

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 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 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

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

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

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

$ 10.0 million Mezzanine Loan and Working Capital Loan

On June 30, 2023, the Company entered into a $ 10.0 million mezzanine loan and a revolving working capital loan with an existing operator in connection with the operator’s acquisition of a portfolio of facilities in Pennsylvania.

The $ 10.0 million mezzanine loan matures on June 30, 2028 and bears interest at a fixed rate of 11 % per annum.

The $ 10.0 million mezzanine loan also requires monthly amortizing payments of principal and interest in the amount of $ 0.2 million.

The $ 10.0 million mezzanine loan is secured by an equity interest in a subsidiary of the operator.

The working capital loan matures on June 30, 2026 and bears interest at a fixed rate of 10 % per annum.

The working capital loan has a maximum principal of $ 34.0 million for the first year that decreases to $ 20.0 million thereafter.

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

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

We have two term loans with LaVie, an $ 8.3 million term loan and a $ 25.0 million term loan, that bear interest at 2 % (which is all PIK interest) and mature on November 30, 2036 .

As of March 31, 2024, the amortized cost basis of these loans was $ 32.3 million, which represents 8.3 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of March 31, 2024 related to these loans was $ 28.7 million, which reserves the loan down to the fair value of the underlying collateral consisting of a second lien on the accounts receivable of the operator.

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

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

A rollforward of our allowance for credit losses for the three months ended March 31, 2024 is as follows:

Financial Statement Line Item

Allowance for Credit Loss as of December 31, 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

Provision (Recovery) for Credit Loss for the three months ended March 31, 2024 (1)

Write-offs charged against allowance for the three months ended March 31, 2024

Allowance for Credit Loss as of March 31, 2024

(in thousands)

4 unchanged sentences

Real estate loans receivable

Investment in direct financing leases

4 unchanged sentences

Non-real estate loans receivable

Off-balance sheet real estate loan commitments

Off-balance sheet non-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 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 nine months ended September 30, 2022 is as follows:

Unfunded real estate loan commitments

Unfunded non-real estate loan commitments

(1) During the three months ended March 31, 2024, we received proceeds of $ 2.3 million from the liquidating trust related to the $ 25.0 million senior unsecured debtor in possession facility to Gulf Coast Health Care LLC, which resulted in a recovery for credit losses of $ 2.3 million that is not included in the rollforward above since we had previously written-off the loan balance and related reserves.

(2) Amount reflects the movement of reserves associated with Maplewood’s secured revolving credit facility due to an adjustment to the internal risk rating on the loan from a 4 to a 5 during the first quarter of 2024.

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

(3) This amount includes cash recoveries of $ 1.2 million related to interest payments received on loans that are written down to fair value and are being accounted for under the cost recovery method in which any payments received are applied directly against the principal balance outstanding.

This amount also includes $ 0.2 million related to principal payments received on loans that were fully reserved.

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

Financial Statement Line Item

Allowance for Credit Loss at December 31, 2022

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

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

Allowance for Credit Loss as of September 30, 2022

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

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

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

Allowance for Credit Loss as of March 31, 2023

(in thousands)

4 unchanged sentences

Real estate loans receivable

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

(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.

Unfunded real estate loan commitments

Unfunded non-real estate loan commitments

(1) 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.

(2) The amount includes cash recoveries of $ 2.5 million related to interest payments received on loans that are written down to fair value and are being accounted for under the cost recovery method in which any payments received are applied directly against the principal balance outstanding.

This amount also includes $ 0.4 million related to principal payments received on loans that were fully reserved.

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

1 unchanged sentence

Revolving Loans

Balance as of September 30, 2023

Balance as of March 31, 2024

(in thousands)

4 unchanged sentences

Real estate loans receivable

Investment in direct financing leases

7 unchanged sentences

We have elected the practical expedient to exclude interest receivable 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.

As of March 31, 2024 and December 31, 2023, we have excluded $ 10.8 million and $ 10.2 million, respectively, of contractual interest receivables and $ 2.4 million and $ 3.1 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 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.

During the three months ended March 31, 2024 and 2023, we recognized $ 1.0 million and $ 1.5 million, respectively, of interest income related to loans on non-accrual status as of March 31, 2024.

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 September 30, 2023 and December 31, 2022:

September 30,

Below is a summary of our assets, liabilities, collateral and maximum exposure to loss associated with these unconsolidated VIEs as of March 31, 2024 and December 31, 2023:

(in thousands)

10 unchanged sentences

( 1,078,671 )

( 1,105,383 )

Total collateral

2 unchanged sentences

Maximum exposure to loss

(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 $ 7.9 million and $ 5.9 million as of September 30, 2023 and December 31, 2022, respectively.

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

The fair value of the accounts receivable available to Omega was $ 8.1 million and $ 8.9 million as of March 31, 2024 and December 31, 2023, 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 nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands)

4 unchanged sentences

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”).

We completed the reverse 1031 exchange for three of the acquired facilities in the fourth quarter of 2022.

During the second quarter of 2023, the remaining four facilities were released from the possession of the Exchange Accommodation Titleholders (“EATs”), as we did not identify any qualifying exchange transactions.

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

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

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

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

As of March 31, 2024 and December 31, 2023, this joint venture has $ 28.0 million and $ 27.9 million, respectively, of total assets, and $ 21.0 million and $ 20.7 million, respectively, of total liabilities, which are included in our Consolidated Balance Sheets.

NOTE 9 – INVESTMENTS IN JOINT VENTURES

2 unchanged sentences

Carrying Amount

Initial Investment

Facilities at

September 30,

Investment (1)

September 30, 2023

Second Spring Healthcare Investments

Second Spring Healthcare Investment

Lakeway Realty, L.L.C.

8 unchanged sentences

CHS OHI Insight Holdings, LLC

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

(2) These joint ventures were entered into in connection with an existing operator’s acquisition of SNFs in West Virginia during the second quarter of 2023, as discussed in Note 5 and Note 6.

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

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

(1) Ownership percentages and facility counts are as of March 31, 2024.

(2) As of March 31, 2024 and December 31, 2023, we have an aggregate of $ 79.6 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 nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

The following table reflects our income (loss) from unconsolidated joint ventures for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands)

Second Spring Healthcare Investments

Second Spring II LLC (1)

Lakeway Realty, L.L.C.

3 unchanged sentences

OMG-Form Senior Holdings, LLC

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

Asset Management Fees

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

For the three months ended September 30, 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 September 30, 2023 and December 31, 2022:

The following is a summary of our goodwill as of March 31, 2024 and December 31, 2023:

(in thousands)

1 unchanged sentence

Foreign currency translation

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,

Balance as of March 31, 2024

The following is a summary of our intangible assets and liabilities as of March 31, 2024 and December 31, 2023:

(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 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.

For the three months ended March 31, 2024 and 2023, our net amortization related to intangibles was $ 0.5 million and $ 6.1 million, respectively.

The estimated net amortization related to these intangibles for the remainder of 2024 and the next four years is as follows:

3 unchanged sentences

2027 – $ 1.5 million and 2028 – $ 0.9 million.

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 .

As of March 31, 2024, the weighted average remaining amortization period of above market lease assets is 13 years and below market lease liabilities is seven years .

NOTE 11 – CONCENTRATION OF RISK

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.

As of March 31, 2024, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of 896 healthcare facilities, located in 42 states and the U.K.

and operated by 78 third-party operators.

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:

Our investment in these facilities, net of impairments and allowances, totaled $ 9.2 billion at March 31, 2024, with 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 590 SNFs, 189 ALFs, 19 ILFs, 19 specialty facilities and one medical office building, (ii) fixed rate mortgages on 47 SNFs, 12 ALFs, two specialty facilities and one ILF, and (iii) 16 facilities that are held for sale.

At March 31, 2024, we also held other real estate loans receivable (excluding mortgages) of $ 502.6 million, non-real estate loans receivable of $ 269.3 million and $ 185.9 million of investments in nine unconsolidated joint ventures.

As of March 31, 2024 and December 31, 2023, we had investments with one operator or manager that approximated or exceeded 10% of our total investments:

Maplewood generated 4.7 % and 2.9 % of our total revenues for the three months ended March 31, 2024 and 2023, respectively.

The revenue associated with Maplewood for the three months ended March 31, 2023 reflects a reduction of revenue of $ 12.5 million related to a termination fee payment made by Omega as discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements.

During the three months ended March 31, 2024, we also have one operator with total revenues that exceeded 10% of our total revenues:

CommuniCare Health Services, Inc.

(“CommuniCare”).

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 %).

CommuniCare generated 12.9 % and 9.6 % of our total revenues for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, CommuniCare represented 9.3 % of our total investments.

As of March 31, 2024, the three states in which we had our highest concentration of investments were Texas ( 10.4 %), Indiana ( 6.8 %) and California ( 6.1 %).

In addition, our concentration of investments in the U.K.

NOTE 12 – STOCKHOLDERS’ EQUITY

$ 500 Million Stock Repurchase Program

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

Shares Repurchased

Per Share (1)

Repurchase Cost (1)

Three Months Ended

September 30, 2022

Nine Months Ended

September 30, 2022

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

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

1 unchanged sentence

February 15, 2024

July 31, 2023

August 15, 2023

October 31, 2023

November 15, 2023

April 30, 2024

Dividend Reinvestment and Common Stock Purchase Plan

The following is a summary of the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three and nine months ended September 30, 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 months ended March 31, 2024 and 2023 (in thousands):

Shares issued

1 unchanged sentence

Three Months Ended

September 30, 2022

March 31, 2023

Three Months Ended

September 30, 2023

Nine Months Ended

September 30, 2022

Nine Months Ended

September 30, 2023

March 31, 2024

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 nine months ended September 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 months ended March 31, 2024 and 2023 (in thousands except average price per share):

Average Net Price

2 unchanged sentences

Gross Proceeds

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.

March 31, 2023

Three Months Ended

March 31, 2024

(1) Represents the average price per share after issuance costs.

Accumulated Other Comprehensive Income (Loss)

The following is a summary of our accumulated other comprehensive income (loss), net of tax where applicable:

As of and for the

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Foreign currency translation

Beginning balance

Translation (loss) gain

Realized (loss) gain

Ending balance

Derivative Instruments:

Cash flow hedges:

Beginning balance

Unrealized gain (loss)

Realized gain (1)

Ending balance

Net investment hedges:

Beginning balance

Unrealized gain (loss)

Ending balance

Derivative instruments designated as cash flow hedges (1)

Derivative instruments designated as net investment hedges

Total accumulated other comprehensive income before noncontrolling interest

1 unchanged sentence

Total accumulated other comprehensive income for Omega

(1) Recorded in interest expense on the Consolidated Statements of Operations.

(1) During the three months ended March 31, 2024 and 2023, we reclassified $ 2.6 million and $ 1.1 million, respectively, of realized gains out of accumulated other comprehensive income into interest expense on our Consolidated Statements of Operations associated with our cash flow hedges.

NOTE 13 – TAXES

7 unchanged sentences

We currently own stock in certain subsidiary REITs.

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

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

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

1 unchanged sentence

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

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.

As of March 31, 2024, one of our TRSs that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of $ 9.8 million.

Our NOL carry-forward was partially reserved as of March 31, 2024, 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.

1 unchanged sentence

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

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

subsidiaries had a NOL carryforward of approximately $ 38.4 million.

The NOLs have no expiration date and may be available to offset future taxable income.

We believe these foreign NOLs are realizable under a “more likely than not” measurement and have not recorded a valuation allowance against the deferred tax asset.

The majority of our U.K.

1 unchanged sentence

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

In connection with entering the U.K.

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

As of March 31, 2024, one of our U.K.

subsidiaries had a NOL carryforward of $ 35.4 million.

NOLs have no expiration date and may be available to offset future taxable income.

We believe these foreign NOLs are realizable under a “more likely than not” measurement and have not recorded a valuation allowance against the deferred tax asset.

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

September 30,

(in thousands)

2 unchanged sentences

Foreign net operating loss carryforward

Foreign deferred tax liability (1)

Net deferred tax asset

1 unchanged sentence

Net deferred tax liability

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

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

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

portfolio entering the U.K.

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

2 unchanged sentences

portfolio entering the U.K.

REIT regime effective April 1, 2023.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

Federal, state and local income tax expense

Foreign income tax expense

Total income tax expense (1)

Foreign income tax expense (benefit) (1)

Total income tax expense (benefit) (2)

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

portfolio electing to enter into the U.K.

REIT regime effective April 1, 2023.

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

NOTE 14 – STOCK-BASED COMPENSATION

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

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Stock-based compensation expense

Stock-based compensation expense was $ 9.2 million and $ 8.7 million for the three months ended March 31, 2024 and 2023, respectively.

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

2 unchanged sentences

We also granted 71,106 performance-based restricted stock units (“RSUs”) during the first quarter of 2024 to certain employees, which are earned based on the level of performance over the performance period (normally three years ) and vest on December 31, 2026, 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 connection with 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.

NOTE 15 – BORROWING ACTIVITIES AND ARRANGEMENTS

1 unchanged sentence

Interest Rate

September 30,

(in thousands)

2 unchanged sentences

2024 term loan (2)

2024 term loan (5)

Total secured borrowings

10 unchanged sentences

2033 notes (3)

2033 notes (6)

2025 term loan (3)(6)

5 unchanged sentences

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

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

(4) Borrowing was the debt of a consolidated joint venture.

(1) Wholly owned subsidiaries of Omega OP were the obligors on these borrowings.

During the first quarter of 2024, the remaining nine HUD mortgages with outstanding principal of $ 41.6 million were paid off.

The payoff also included a $ 1.3 million prepayment fee, which is included in loss on debt extinguishment on our Consolidated Statements of Operations.

(2) Borrowing is the debt of the consolidated joint venture discussed in Note 8 – Variable Interest Entities which was formed in the first quarter of 2022.

The borrowing is secured by two ALFs, which are owned by the joint venture.

During the first quarter of 2024, this loan was extended from February 29, 2024 to April 30, 2024 .

During the second quarter of 2024, the company repaid this loan using available cash and proceeds from our revolving credit facility.

(3) Guaranteed by Omega OP.

(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 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”).

(4) As of March 31, 2024, 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.

Dollar tranche and on the GBP borrowings under the alternative currency tranche of the credit facility were 6.64 % and 6.51 % as of March 31, 2024, respectively.

(5) The Company repaid the $ 400 million of 4.95 % senior notes on the April 1, 2024 maturity date using available cash and proceeds from our revolving credit facility.

(6) 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 % .

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

(11) During the second quarter of 2023, the Company transitioned its benchmark interest rate for its $ 50.0 million senior unsecured term loan facility from LIBOR to SOFR .

(8) The weighted average interest rate of the $ 50 million OP 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 3.957 % .

1 unchanged sentence

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

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.

As of March 31, 2024 and December 31, 2023, we were in compliance with all applicable covenants for our borrowings .

NOTE 16 – DERIVATIVES AND HEDGING

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

As of 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.

The swap is effective June 30, 2023 and terminates on April 30, 2027 .

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.

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.

The effective fixed rate achieved by the combination of the 2021 Omega OP 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 March 2020, we entered into five forward starting swaps with $ 400 million in notional value, indexed to 3-month LIBOR, that were issued at a weighted average fixed rate of 0.8675 % and were subsequently designated as cash flow hedges.

In conjunction with the October 2020 issuance of $ 700 million of 3.375 % Senior Notes due 2031 and the March 2021 issuance of $ 700 million of 3.25 % Senior Notes due 2033, we applied hedge accounting for these five forward starting swaps and began amortization.

Simultaneously with these issuances, we re-designated these swaps in new cash flow hedging relationships of interest rate risk associated with interest payments for a future forecasted issuance of long-term debt.

As a result of these transactions, the aggregate unrealized gain of $ 41.2 million ( $ 9.5 million gain related to the October 2020 issuance and $ 31.7 million gain related to the March 2021 issuance) included within accumulated other comprehensive income at the time of the bond issuances is being ratably reclassified as a reduction to interest expense, net over 10 years.

On May 30, 2023, the five forward starting swaps were terminated, and Omega received a net cash settlement of $ 92.6 million from the swap counterparties.

The incremental $ 51.4 million of gains related to the forward swaps, recorded in accumulated other comprehensive income, were frozen at the time of termination and will be recognized ratably over 10 years in earnings when the next qualifying debt issuance occurs.

Consistent with our accounting policy and historical practice, the $ 92.6 million net cash settlement from the forward swap termination is reflected within net cash used in financing activities in the Consolidated Statements of Cash Flows.

As of March 31, 2024, we have 12 interest rate swaps with $ 478.5 million in notional value.

The swaps are designated as cash flow hedges of the interest payments on two of Omega’s variable interest loans.

Additionally, we have 11 foreign currency forward contracts with £ 258.0 million in notional value issued at a weighted average GBP-USD forward rate of 1.2899 that are designated as net investment hedges.

On February 27, 2024, we terminated two foreign currency forward contracts that were entered into in March 2021 with notional amounts totaling £ 70.0 million.

Omega received a net cash settlement of $ 8.4 million as a result of termination, which is included within net cash used in investing activities in the Consolidated Statements of Cash Flows.

The $ 8.4 million related to the termination will remain in accumulated other comprehensive income until the underlying hedged items are liquidated.

Concurrent with the termination of the two foreign currency forward contracts, also on February 27, 2024, we entered into three new foreign currency forward contracts with notional amounts totaling £ 78.0 million and a GBP-USD forward rate of 1.2707 , each of which mature between March 8, 2027 and March 7, 2031 .

The new currency forward contracts hedge an intercompany loan between a U.S.

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:

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Net investment hedges:

Accrued expenses and other liabilities

The fair value of the interest rate swap and foreign currency forwards is derived from observable market data such as yield curves and foreign exchange rates and represents a Level 2 measurement on the fair value hierarchy.

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

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

September 30, 2023

At March 31, 2024 and December 31, 2023, the net carrying amounts and fair values of our other financial instruments were as follows:

March 31, 2024

December 31, 2023

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2025 term loan

4.95 % notes due 2024 – net

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3.25 % notes due 2033 – net

HUD mortgages – 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, 2024 term loan and 2025 term loan:

● Revolving credit facility, OP 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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● HUD mortgages:

The fair value of our borrowings under HUD debt agreements are estimated using an expected present value technique based on quotes obtained by HUD debt brokers (Level 2).

The fair value of our borrowings under HUD debt agreements was estimated using an expected present value technique based on quotes obtained by HUD debt brokers (Level 2).

NOTE 18 – COMMITMENTS AND CONTINGENCIES

Shareholder Litigation

The Company and certain of its officers, C.

Certain derivative actions have been brought against three of the Company’s officers, C.

Taylor Pickett, Robert O.

Stephenson, and Daniel J.

Booth , were named as defendants in a purported securities class action lawsuit in the U.S.

District Court for the Southern District of New York (the “Securities Class Action”).

Brought by lead plaintiff Royce Setzer and additional plaintiff Earl Holtzman, the Securities Class Action purported to assert claims for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, and sought monetary damages, interest, fees and expenses of attorneys and experts, and other relief.

The Securities Class Action alleged that the defendants violated the Exchange Act by making materially false and/or misleading statements, and by failing to disclose material adverse facts about the Company’s business, operations, and prospects, including the financial and operating results of one of the Company’s operators, the ability of such operator to make timely rent payments, and the impairment of certain of the Company’s leases and the uncollectibility of certain receivables.

The plaintiffs and defendants executed a stipulation of settlement dated December 9, 2022 (“Settlement”), which provided for dismissal and release of all claims against the defendants by a class of persons and/or entities who purchased or otherwise acquired Company securities from February 8, 2017 through October 31, 2017 without any admission of wrongdoing or liability on the part of the Company or the individual defendants.

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

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

In the second quarter of 2023, after the Company fulfilled all of its obligations pursuant to the Court-approved Settlement, the Company reversed the previously recorded $ 31 million legal reserve, which was included within accrued expenses and other liabilities on the Consolidated Balance Sheets, and the related $ 31 million receivable related to the insurance reimbursement, which was included within other assets on the Consolidated Balance Sheets.

Certain derivative actions have also been brought against the officers named in the Securities Class Action, and certain current and former directors of the Company, alleging claims relating to the matters at issue in the Securities Class Action.

Booth, and certain current and former directors of the Company, asserting claims for breach of duty primarily relating to matters at issue in a securities class action in the Southern District of New York that was settled in 2023, including alleged failures to disclose material adverse facts about the Company’s business, operations and prospects, including the financial and operating results of one of the Company’s operators, Orianna Health Systems (“Orianna”), the ability of Orianna to make timely rent payments and the impairment of certain of the Company’s leases and the uncollectibility of certain receivables concerning Orianna.

In 2018, Stourbridge Investments LLC, a purported stockholder of the Company, filed a derivative action purportedly on behalf of the Company in the U.S.

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 (“Orianna”), the alleged non-disclosures that were also the subject of the Securities Class Action described above.

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 “Stourbridge Matter”).

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

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.

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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.

Those actions were consolidated (together, the “Swan Matter”).

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

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In addition, in late 2020, Robert Wojcik, a purported shareholder of the Company, filed a derivative action in the U.S.

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.

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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.

In February 2024, formal stipulations of settlement, incorporating the substantive terms of the memoranda of understanding and detailing the proposed settlements’ operational terms, were submitted for court approval.

In March 2024, the court overseeing the Stourbridge Matter and the Swan Matter issued an order granting preliminary approval to a proposed settlement reached with the plaintiffs in the Stourbridge Matter and the Swan Matter.

That court scheduled a hearing on May 21, 2024, to determine whether it should issue an order for final approval of the proposed settlement in the Stourbridge Matter and the Swan Matter.

In April 2024, the court overseeing the Wojcik Matter issued an order granting preliminary approval to the proposed settlement reached with the plaintiff in the Wojcik Matter.

That court scheduled a hearing on June 24, 2024, to determine whether it should issue an order for final approval of the proposed settlement.

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

While the Company believes that it was and is in compliance with all applicable laws, in the fourth quarter of 2023, the Company recorded a $ 2.8 million legal reserve related to this matter which is included within accrued expenses and other liabilities on the Consolidated Balance Sheets.

As the settlement amounts are to be paid by insurance, the Company concurrently recorded a receivable for $ 2.8 million within other assets on the Consolidated Balance Sheet, and consequently there is no impact to the Consolidated Statements of Operations related to these matters.

Gulf Coast Subordinated Debt

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

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

As of March 31, 2024, our maximum funding commitment under these indemnification agreements was $ 6.5 million.

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

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

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

Our remaining commitments at March 31, 2024, are outlined in the table below (in thousands):

Lessor construction and capital commitments under lease agreements

Non-real estate loan commitments

Other real estate loan commitments

Construction and capital expenditure mortgage loan commitments

Real estate loan commitments

Total remaining commitments (1)

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

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(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 nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands)

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Taxes paid during the period

Non-cash investing activities:

Non-cash acquisition of real estate

Non-cash financing activities:

Non-cash contribution from noncontrolling member of consolidated joint venture

Change in fair value of hedges

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NOTE 21 – SUBSEQUENT EVENTS

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.

New Investments

In April 2024, we acquired one facility in Michigan for consideration of $ 31.0 million and leased it to an existing operator.

The facility has an initial annual cash yield of 11.5 % with annual escalators of 2.0 % beginning in the third year.

In May 2024, we acquired 32 facilities in the U.K.

for aggregate consideration of $ 62.7 million and leased them to one new operator.

The facilities have a weighted average initial annual cash yield of 10.0 % with annual escalators of 2.5 %.

In May 2024, we funded $ 71.7 million in real estate loans to a U.K.

The loans have a weighted average interest rate of 10.0 % and a weighted average term of 6 months.

Loan Repayments

The Company repaid the $ 400 million of 4.95 % senior notes on the April 1, 2024 maturity date, using available cash and proceeds from our revolving credit facility.

Subsequent to quarter end, the Company repaid the $ 19.8 million 2024 term loan, which was the debt of a consolidated joint venture and had a maturity date of April 30, 2024, using available cash and proceeds from our revolving credit facility.

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