What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 376 added, 216 removed, 661 unchanged (47% of the section changed)

30 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 – 246,377 shares as of March 31, 2024 and 245,282 shares as of December 31, 2023

Common stock $ 0.10 par value authorized – 350,000 shares, issued and outstanding – 254,023 shares as of June 30, 2024 and 245,282 shares as of December 31, 2023

Additional paid-in capital

12 unchanged sentences

Three Months Ended

Six Months Ended

Rental income

7 unchanged sentences

Impairment on real estate properties

Provision (recovery) for credit losses

(Recovery) provision for credit losses

Interest expense

3 unchanged sentences

Loss on debt extinguishment

(Loss) gain on assets sold – net

Gain on assets sold – net

Total other income

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

Income tax (expense) benefit

Income before income tax expense and income from unconsolidated joint ventures

Income tax expense

Income from unconsolidated joint ventures

9 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income (loss)

8 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended March 31, 2024 and 2023

Three Months Ended June 30, 2024 and 2023

(in thousands, except per share amounts)

2 unchanged sentences

Noncontrolling

Balance at December 31, 2023

Balance at March 31, 2024

( 6,995,876 )

3 unchanged sentences

Vesting/exercising of Omega OP Units

Conversion and redemption of Omega OP Units to common stock

Exchange and redemption of Omega OP Units for common stock

Omega OP Units distributions

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at June 30, 2024

( 7,161,897 )

Balance at March 31, 2023

( 6,344,413 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 0.67 per share)

Vesting/exercising of Omega OP Units

Exchange and redemption of Omega OP Units for common stock

Omega OP Units distributions

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at June 30, 2023

( 6,501,899 )

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Six Months Ended June 30, 2024 and 2023

(in thousands, except per share amounts)

Comprehensive

Stockholders’

Noncontrolling

Income (Loss)

Balance at December 31, 2023

4 unchanged sentences

Vesting/exercising of Omega OP Units

Exchange and redemption of Omega OP Units for common stock

Omega OP Units distributions

Capital contribution from noncontrolling interest holder in consolidated JV

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at March 31, 2023

Balance at June 30, 2024

( 7,161,897 )

Balance at December 31, 2022

( 6,186,986 )

Stock related compensation

Issuance of common stock

Common dividends declared ($ 1.34 per share)

Vesting/exercising of Omega OP Units

Exchange and redemption of Omega OP Units for common stock

Omega OP Units distributions

Net change in noncontrolling interest holder in consolidated JV

Other comprehensive income

Balance at June 30, 2023

( 6,501,899 )

See notes to consolidated financial statements.

2 unchanged sentences

Unaudited (in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

3 unchanged sentences

Provision for rental income

Provision (recovery) for credit losses

(Recovery) provision for credit losses

Amortization of deferred financing costs and loss on debt extinguishment

1 unchanged sentence

Stock-based compensation expense

Loss (gain) on assets sold – net

Gain on assets sold – net

Amortization of acquired in-place leases – net

18 unchanged sentences

Receipts from insurance proceeds

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from long-term borrowings

Payments of long-term borrowings

3 unchanged sentences

Net payments to noncontrolling members of consolidated joint venture

Proceeds from derivative instruments

Redemption of Omega OP Units

Distributions to Omega OP Unit Holders

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2024

June 30, 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 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.

As of June 30, 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

13 unchanged sentences

$ 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.

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 million relates to furniture and equipment.

We originally reclassified these assets 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 assets.

Due to regulatory issues encountered in the first quarter of 2024 during the due diligence process that limit our ability to sell these assets, they no longer qualify as assets held for sale.

Recent Accounting Pronouncements

ASU – 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses, as well as how the CODM uses the reported measure(s) of segment profit or loss in assessing performance.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The guidance is to be applied retrospectively to all periods presented in the financial statements.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and disclosures.

ASU – 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, which modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

The guidance also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions.

The guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The guidance should be applied on a prospective basis, but retrospective application is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and disclosures.

NOTE 2 – REAL ESTATE ASSETS

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

At June 30, 2024, our leased real estate properties included 588 SNFs, 221 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,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Fixed income from operating leases

4 unchanged sentences

Asset Acquisitions

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

The following table summarizes the asset acquisitions that occurred during the six months ended June 30, 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) Total consideration paid for this acquisition was $ 62.7 million.

We allocated $ 11.9 million of the purchase consideration to a deferred tax asset related to net operating losses acquired in the transaction.

See Note 13 - Taxes for additional information.

Construction in Progress and Capital Expenditure Investments

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.

We invested $ 34.8 million and $ 56.2 million under our construction in progress and capital improvement programs during the three and six months ended June 30, 2024, respectively.

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

As of June 30, 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

3 unchanged sentences

Amount of assets held for sale (in thousands)

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.

During the three and six months ended June 30, 2024, we sold five SNFs and nine SNFs subject to operating leases for $ 34.8 million and $ 44.9 million in net cash proceeds, respectively.

As a result of these sales, we recognized a net gain of $ 12.9 million and $ 11.5 million, respectively.

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

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

During the three and six months ended June 30, 2024, we received interest of $ 0.3 million and $ 0.6 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.

During the three and six months ended June 30, 2023, we received interest of $ 2.3 million and $ 4.4 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.

As of June 30, 2024, we have one sale that has not been recognized.

Real Estate Impairments

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.

During the three and six months ended June 30, 2024, we recorded impairments on four and seven facilities of $ 8.2 million and $ 13.5 million, respectively.

Of the $ 13.5 million, $ 8.1 million related to five held for use facilities (of which $ 4.0 million relates to three closed facilities) for which the carrying value exceeded the fair value and $ 5.4 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 .

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

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

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

13 unchanged sentences

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.

During the six months ended June 30, 2024, we placed one new operator on a cash basis of revenue recognition.

In the first quarter of 2024, we entered into a lease with the 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.

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

Our 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 .

We placed these operators 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.

We did no t have any straight-line receivable write-offs through rental income as a result of placing operators on a cash basis during either of the three and six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had 18 operators on a cash basis for revenue recognition, which represent 18.6 % and 22.3 % of our total revenues for the six months ended June 30, 2024 and 2023, respectively.

Rent Deferrals and Application of Collateral

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.

During each of the six months ended June 30, 2024 and 2023, we allowed three and nine operators to defer $ 1.8 million and $ 33.6 million, respectively, of contractual rent and interest.

The deferrals during the six months ended June 30, 2024 primarily related to Maplewood Senior Living (along with affiliates, “Maplewood”) ($ 1.5 million).

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

LaVie Care Centers, LLC (“LaVie”) ($ 19.0 million), Healthcare Homes Limited ($ 8.2 million), Agemo Holdings, LLC (“Agemo”) ($ 1.9 million) and Maplewood ($ 0.7 million).

During each of the six months ended June 30, 2024 and 2023, we received repayments of deferred rent of $ 1.0 million and $ 0.3 million, respectively.

Additionally, we allowed four and four operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the six months ended June 30, 2024 and 2023, respectively.

The total collateral applied to contractual rent and interest was $ 0.6 million and $ 5.5 million for the six months ended June 30, 2024 and 2023, respectively.

Operator Collectibility Updates

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.

In the fourth quarter of 2022, Omega began discussions with Maplewood to restructure its portfolio as a result of liquidity issues.

As of December 31, 2022, Omega had 17 operating facilities subject to a lease agreement with Maplewood, a construction in progress project in Washington D.C., and a $ 250.0 million secured revolving credit facility.

In view of Maplewood liquidity concerns, Omega and Maplewood entered into a comprehensive restructuring of Maplewood’s lease and loan agreements on January 31, 2023 that, among other things, fixed rent at $ 69.3 million per annum through December 2025, increased the capacity of the secured revolving credit facility to $ 320.0 million, converted portions of interest on the secured revolving credit facility from cash to paid-in-kind (“PIK”) for certain periods and provided Maplewood a one-time option termination fee of $ 12.5 million.

Shortly after the restructuring was completed, on March 31, 2023, Greg Smith, the principal and chief executive officer of Maplewood, passed away.

Smith had been a guarantor of Maplewood’s contractual obligations pursuant to a $ 40.0 million limited unconditional guaranty agreement.

Maplewood began to short pay contractual rent under its lease agreement during the second quarter of 2023, which continued through the end of the second quarter of 2024 as discussed further below.

Smith’s passing in 2023, Omega has been in discussions with the Greg Smith estate (the “Estate”) in order to protect our interests, including Mr.

Smith’s guaranty, and facilitate an orderly transition of Mr.

Smith’s controlling equity interest in Maplewood to key members of the existing Maplewood management team (the “Key Principals”).

Under the proposed transition, the Key Principals would become the new majority equity holders in the Maplewood entities.

In order to accelerate a negotiated transition process, in May 2024, Omega sent a demand letter to Maplewood and the Estate notifying them of multiple events of default under Maplewood’s lease, loan, and related agreements, including Mr.

Smith’s guaranty, with Omega, including failure to pay full contractual rent and interest for periods in 2023 and 2024.

Omega exercised its contractual rights in connection with these defaults and demanded immediate repayment of past due contractual rent and replenishment of the security deposit, and accelerated all principal and accrued interest due to Omega under the revolving credit facility, which had $ 291.2 million outstanding as of June 30, 2024, including PIK interest that is not recorded for accounting purposes.

After sending the demand letter, in June 2024, Omega executed a non-binding term sheet with the Key Principals outlining the terms of the proposed transition, which includes maintaining the Maplewood lease agreement and the secured revolving credit facility provided by Omega.

We are currently working with the Estate and the Key Principals to take the steps necessary to complete the transition of Mr.

Smith’s equity through a settlement agreement (the “Settlement Agreement”), which will require approval of the probate court overseeing administration of the Estate, as well as regulatory approvals in connection with licensure of the operating assets.

On July 31, 2024, we entered into the Settlement Agreement with the Estate subject to the approvals noted above, which formalizes the proposed settlement, including the right in favor of Omega to direct the assignment of Mr.

Smith’s equity to the Key Principals, and Omega’s agreement to forbear from exercising contractual rights or remedies in connection with the defaults, and submitted it to the probate court for approval.

There is no certainty that the court will approve the Settlement Agreement, or that this transition will be completed as intended, on a timely basis, or at all.

While pursuing negotiations with the Estate, we have filed suit to, among other things, foreclose on the pledged equity and assets of Maplewood in the event that the Settlement Agreement is not consummated and/or approved by the probate court or following any appeal therefrom.

We anticipate terminating the suit once a final, non-appealable order is entered approving the settlement with the Estate.

In the second quarter of 2024, Maplewood paid $ 11.8 million of contractual rent, a short pay of $ 6.2 million of the $ 18.0 million (consisting of $ 17.3 million of contractual rent and $ 0.7 million of contractual interest) due under its lease and loan agreements.

Maplewood’s $ 4.8 million security deposit was fully exhausted in the fourth quarter of 2023, so we were unable to apply collateral to unpaid rent and interest during the first six months of 2024.

Maplewood is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $ 11.8 million and $ 16.3 million for the three months ended June 30, 2024 and 2023, respectively.

We recorded rental income of $ 23.1 million and $ 33.6 million for the six months ended June 30, 2024 and 2023, respectively.

Rental income in all periods was limited to payments that were received from Maplewood or the application of available collateral held by Omega.

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 $ 33.6 million of gross rental income recognized for the six months ended June 30, 2023.

As discussed further in Note 5 – Real Estate Loans Receivable, we recorded interest income of zero and $ 1.5 million on the Maplewood secured revolving credit facility during the three and six months ended June 30, 2023, respectively.

No interest income was recorded during the three and six months ended June 30, 2024.

In July 2024, Maplewood short-paid the contractual rent and interest amounts due under its lease and loan agreements by $ 2.0 million.

We began restructuring our facilities and agreements with LaVie in the fourth quarter of 2022, as a result of on-going liquidity issues at LaVie, and these activities have continued into 2023 and 2024.

In January 2023, we amended our lease agreements with LaVie t o allow for a partial rent deferral of $ 19.0 million for the first four months of 2023.

During 2023, we transitioned two facilities, previously subject to the master lease with LaVie, to another operator and sold 37 facilities, previously subject to the master lease with LaVie, to a third party.

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.

On June 2 and 3, 2024, LaVie commenced voluntary cases under Chapter 11 of the U.S.

Bankruptcy Code in the U.S.

Bankruptcy Court for the Northern District of Georgia, Atlanta Division (the “Bankruptcy Court”).

LaVie will continue to operate, as a debtor-in-possession, the 30 facilities subject to a master lease agreement with Omega, unless and until LaVie’s leasehold interest under the master lease agreement is rejected or assumed and assigned.

We committed to provide, along with another lender, $ 10 million of a $ 20 million junior secured debtor-in-possession (“DIP”) financing to LaVie, as further discussed in Note 6 – Non-Real Estate Loans Receivable.

As a condition of the DIP financing, LaVie is required to pay Omega full contractual rent under its lease agreement.

We determined LaVie was a variable interest entity after it became a debtor-in-possession and following the issuance of the DIP financing loan.

Omega is not the primary beneficiary of LaVie because we do not have the power to control the activities that most significantly impact LaVie’s economic performance.

See Note 8 – Variable Interest Entities, for additional disclosures surrounding our VIEs.

Prior to its bankruptcy filing, LaVie paid Omega $ 1.5 million in April 2024 and $ 1.5 million in May 2024.

The April 2024 and May 2024 payments were short of full contractual rent by $ 1.7 million and $ 1.5 million, respectively.

Following the bankruptcy filing, LaVie paid contractual rent of $ 2.9 million in June 2024, which reflects full contractual rent prorated for the period after LaVie entered bankruptcy and a $ 0.1 million short pay for the several days prior to the filing.

As LaVie is on a cash basis of revenue recognition for lease purposes, rental income recorded was equal to cash received of $ 5.9 million and $ 16.9 million during the three months ended June 30, 2024 and 2023, respectively and $ 10.3 million and $ 24.3 million during the six months ended June 30, 2024 and 2023, respectively.

We did no t recognize any interest income related to LaVie during the six months ended June 30, 2024 and 2023 as the three loans outstanding have PIK interest and are on non-accrual status.

In July 2024, LaVie paid full contractual rent of $ 3.0 million due under its lease agreement.

In August 2023, Guardian Healthcare (“Guardian”) failed to make the contractual rent payment due under its lease agreement and subsequently did not make any required contractual rent payments due under its lease agreement through the end of the first quarter of 2024.

We recorded rental income of $ 2.9 million related to our lease with the new operator for the three months ended June 30, 2024.

Agemo failed to pay contractual rent and interest during the first quarter of 2023.

Rental income includes $ 6.0 million and $ 5.8 million related to our lease with Agemo for the three months ended June 30, 2024 and 2023, and $ 11.9 million and $ 5.8 million for the six months ended June 30, 2024 and 2023, respectively.

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.

We did no t recognize interest income on our loans with Agemo during the six months ended June 30, 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.

During the six months ended June 30, 2023, we re-leased 48 facilities that were previously subject to leases with four cash basis operators to other operators.

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

All of the operators to which the 48 facilities were transitioned have leases for which Omega is recognizing revenue on a straight-line basis.

The aggregate initial contractual rent for the 48 facilities under these leases is $ 48.0 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.

1 unchanged sentence

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

As of March 31, 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.

As of June 30, 2024, our real estate loans receivable consists of 15 fixed rate mortgage notes on 65 long-term care facilities and 16 other real estate loans.

The facilities subject to the mortgage notes are operated by 13 independent healthcare operating companies and are located in 11 U.S.

states and within the U.K.

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.

5 unchanged sentences

interest at 10.50 %

Mortgage notes due 2024 ;

interest at 10.00 % (1)

Mortgage note due 2025 ;

17 unchanged sentences

Total real estate loans receivable – net

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

(1) Approximates the weighted average interest rate on facilities as of June 30, 2024.

(2) All mortgage notes mature in 2030 with the exception of two mortgage notes with an aggregate outstanding principal balance of $ 52.8 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).

(3) Other mortgage notes outstanding consists of nine loans to multiple borrowers that have a weighted average interest rate of 9.72 % as of June 30, 2024, with maturity dates ranging from 2024 through 2027 (with $ 8.5 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) 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 .

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

During the second quarter of 2024, the maturity dates of these loans were again extended from June 28, 2024 , to June 30, 2025 .

(5) Other real estate loans outstanding consists of eight loans to multiple borrowers that have a weighted average interest rate of 11.21 % as of June 30, 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,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Mortgage notes – interest income

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Total real estate loans interest income

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.

We funded $ 112.9 million and $ 154.1 million under eleven new real estate loans with weighted average interest rates of 11.5 % and 10.2 % during the three and six months ended June 30, 2024, respectively.

We also advanced $ 0.6 million and $ 3.4 million under existing real estate loans during the three and six months ended June 30, 2024, respectively.

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

Mortgage Notes due 2024

In May 2024, we funded an aggregate $ 71.7 million under two new mortgage loans to an existing U.K.

Both mortgage loans bear interest at 10.0 % and mature on October 28, 2024.

Interest is payable monthly in arrears and no principal payments are due until maturity.

The loan is secured by a first mortgage lien on two parcels of land that the U.K.

operator intends to develop into two facilities.

Other mortgage notes outstanding

In January 2024, we funded $ 11.7 million under a new mortgage loan to a new operator.

In June 2024, we amended the loan and funded an additional $ 18.0 million under the mortgage loan.

The mortgage loan bears interest at 10.0 % and matures on January 31, 2027 .

Interest is payable monthly in arrears and no principal payments are due until maturity.

The loan is secured by a first mortgage lien on three SNFs and one ALF.

Other real estate loan due 2035

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 discussed within Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Omega sent a demand letter to Maplewood during the second quarter of 2024 notifying Maplewood that due to multiple existing events of default under Maplewood’s lease, loan, and related agreements, Omega had exercised its contractual rights to immediately accelerate the outstanding principal and accrued interest under the secured revolving loan agreement.

After sending the demand letter, in June 2024 Omega executed a non-binding term sheet with the Key Principals outlining the terms of a proposed transition, which includes the assignment of Mr.

Smith’s equity in Maplewood to the Key Principals and maintaining the existing Maplewood lease agreement and the secured revolving credit facility (without reflecting the acceleration of the maturity) provided by Omega.

We are currently working with the Estate and the Key Principals to take the steps necessary to complete the transition, which will, in part, require approval of the probate court overseeing distribution of the Estate’s assets and regulatory approvals related to licensures.

On July 31, 2024, we entered into an agreement with the Estate formalizing the transition plan, including the right to direct the assignment of Mr.

Smith’s equity in Maplewood to the Key Principals, and submitted it to the probate court for approval.

There is no certainty that court or regulatory approvals will be received or that this transition will be completed as intended, on a timely basis, or at all.

If the proposed transition plan is not completed, we may incur a substantial loss on the revolving loan with Maplewood up to the amortized cost basis of the loan.

We adjusted the internal risk rating on the loan, utilized as a component of our allowance for credit loss calculation, from a 3 to a 4 in the second quarter of 2023 when Maplewood began to short-pay contractual rent under its lease agreement.

In the first quarter of 2024, we again adjusted the internal risk rating from a 4 to 5 to reflect the increased risk of the loan as a result of the missed interest payments in the first quarter of 2024, discussed below, and due to the status of the on-going negotiations with the Estate.

We believe the internal risk rating of a 5 appropriately reflects the risks as of June 30, 2024.

See the allowance for credit losses attributable to real estate loans with a 5 internal risk rating within Note 7 – Allowance for Credit Losses.

As of June 30, 2024, the amortized cost basis of this loan was $ 263.6 million, which represents 18.0 % of the total amortized cost basis of all real estate loan receivables.

During the six months ended June 30, 2024, Maplewood failed to make aggregate cash interest payments of $ 1.2 million that were required under the loan agreement.

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 no t record any interest income related to the PIK interest during the three and six months ended June 30, 2024 and 2023.

Omega and Maplewood previously entered into a restructuring agreement and a loan amendment during the first quarter of 2023 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.

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

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

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

As of June 30, 2024, we had 42 loans with 23 different borrowers.

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

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interest at 9.14 % (3)

Notes due 2036 ;

Notes due 2024 and 2036 ;

interest at 2.98 % (1)

3 unchanged sentences

Total non-real estate loans receivable – net

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

(1) Approximates the weighted average interest rate as of June 30, 2024.

(2) During the second quarter of 2024, two working capital loans with maturity dates of June 30, 2024 were repaid in full.

These two loans had an aggregate outstanding principal balance of $ 39.5 million as of December 31, 2023.

(3) 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 8.0 % in January 2024, with further interest rate increases to 9.0 % and 10.0 % 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 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 ).

The interest rate above represents the weighted average interest rate as of June 30, 2024.

(4) Other notes outstanding have a weighted average interest rate of 8.58 % as of June 30, 2024, with maturity dates ranging from 2024 through 2030 (with $ 0.4 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.

For the three and six months ended June 30, 2024, non-real estate loans generated interest income of $ 7.1 million and $ 14.2 million, respectively.

For the three and six months ended June 30, 2023, non-real estate loans generated interest income of $ 5.3 million and $ 10.3 million, respectively.

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

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.

During the three and six months ended June 30, 2024, we funded $ 10.4 million under five new non-real estate loans with a weighted average interest rate of 10.0 %.

We advanced $ 9.6 million and $ 13.7 million under existing working capital loans during the three and six months ended June 30, 2024, respectively.

We received principal repayments of $ 45.9 million and $ 52.8 million on non-real estate loans during the three months and six months ended June 30, 2024, respectively.

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

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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 ;

During the three months and six months ended June 30, 2024, we received $ 1.2 million and $ 2.4 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.

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

As of June 30, 2024, the amortized cost basis of these loans was $ 75.5 million, which represents 21.0 % of the total amortized cost basis of all non-real estate loan receivables.

The total reserve as of June 30, 2024 related to the Agemo Replacement Loans was $ 73.2 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 2024 and 2036 ;

interest at 2.98 %

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.

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, on June 2 and 3, 2024, LaVie commenced voluntary cases under Chapter 11 of the U.S.

Bankruptcy Code in the Bankruptcy Court.

As described in LaVie’s filings with the Bankruptcy Court, we provided $ 10.0 million of DIP financing to LaVie in order to support sufficient liquidity to, among other things, effectively operate its facilities during bankruptcy.

Another lender, TIX 33433, LLC, also agreed to provide $ 10.0 million of DIP financing to LaVie, which is pari passau to Omega’s loan.

The DIP loan bears interest at 10.0 % and is paid-in-kind in arrears on a monthly basis.

The principal is due upon maturity.

Currently, the DIP loan matures on the earlier of (i) October 31, 2024, (ii) the effective date of a plan of reorganization or liquidation in the Chapter 11 cases or (iii) upon an event of default as defined in the DIP loan agreement.

The DIP lenders hold a second priority interest in the assets of LaVie, which include cash and accounts receivable.

Proceeds of any future asset sales, claims and causes of action and debt or equity issuances all serve as collateral for the DIP loans.

Given the risks associated with the bankruptcy process, we elected to evaluate the risk of loss on the DIP loan on an individual basis.

As the fair value of the collateral available to Omega was estimated to be less than the outstanding principal of $ 4.5 million as of June 30, 2024, we reserved $ 4.2 million through the provision for credit losses in the second quarter of 2024 to write the loan down to the estimated fair value of the collateral of $ 0.3 million.

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

We also have two existing term loans with LaVie, an $ 8.3 million unsecured term loan and a $ 25.0 million secured term loan, that bear interest at 2.0 % (which is all PIK interest) and mature on November 30, 2036 .

The $ 8.3 million term loan was previously fully reserved in our allowance for credit losses.

The $ 25.0 million secured term loan was previously reserved down to $ 3.6 million, the estimated fair value of the collateral which consisted of a second priority lien on LaVie’s accounts receivable.

As a result of the issuance of the DIP loans discussed above, Omega’s collateral position under the $ 25 million secured term loan decreased from second to third priority.

We estimate there will be insufficient collateral available for this loan following the decrease in priority and therefore recognized a $ 3.6 million provision for credit losses in the second quarter of 2024 to fully reserve the $ 25.0 million secured term loan.

We did no t record any interest income for any LaVie loans for the three and six months ended June 30, 2024 and 2023.

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

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

A rollforward of our allowance for credit losses for the six months ended June 30, 2024 is as follows:

Financial Statement Line Item

Allowance for Credit Loss as of December 31, 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

Provision (Recovery) for Credit Loss for the six months ended June 30, 2024 (1)

Write-offs charged against allowance for the six months ended June 30, 2024

Allowance for Credit Loss as of June 30, 2024

(in thousands)

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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.

Unfunded non-real estate loan commitments

(1) During the six months ended June 30, 2024, we received proceeds of $ 3.3 million from the liquidating trust related to the $ 25.0 million debtor in possession facility to Gulf Coast Health Care LLC, which resulted in a recovery for credit losses of $ 3.3 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.

2 unchanged sentences

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:

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

Financial Statement Line Item

Allowance for Credit Loss at December 31, 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

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

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

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

Allowance for Credit Loss as of June 30, 2023

(in thousands)

10 unchanged sentences

Non-real estate loans receivable

Unfunded real estate loan commitments

Unfunded non-real estate loan commitments

1 unchanged sentence

Unfunded non-real estate loan commitments

Unfunded 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.

(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.

4 unchanged sentences

Revolving Loans

Balance as of March 31, 2024

Balance as of June 30, 2024

(in thousands)

14 unchanged sentences

We have elected the practical expedient to exclude interest receivable 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.

As of June 30, 2024 and December 31, 2023, we have excluded $ 10.3 million and $ 10.2 million, respectively, of contractual interest receivables and $ 1.6 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 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.

During the three months ended June 30, 2024 and 2023, we recognized $ 1.2 million and $ 0.1 million, respectively, of interest income related to loans on non-accrual status as of June 30, 2024.

During the three months ended June 30, 2024 and 2023, we recognized $ 2.2 million and $ 1.6 million, respectively, of interest income related to loans on non-accrual status as of June 30, 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 March 31, 2024 and December 31, 2023:

Below is a summary of our assets, liabilities, collateral and maximum exposure to loss associated with these unconsolidated VIEs as of June 30, 2024 and December 31, 2023:

(in thousands)

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Maximum exposure to loss

(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.

(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 $ 5.9 million and $ 8.9 million as of June 30, 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 months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs, following the date they were determined to be VIEs, for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Rental income

3 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 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.

As of June 30, 2024 and December 31, 2023, this joint venture has $ 24.9 million and $ 27.9 million, respectively, of total assets, and $ 20.8 million and $ 20.7 million, respectively, of total liabilities.

Of the $ 20.8 million of total liabilities held by the joint venture at June 30, 2024, $ 20.5 million relates to a mortgage loan advanced by Omega during the second quarter 2024 to pay-off an existing third-party mortgage loan of the joint venture, as discussed in Note 15 – Borrowing Activities and Arrangements.

The $ 20.5 million Omega mortgage loan is eliminated in consolidation and is not reflected in our Consolidated Balance Sheets.

NOTE 9 – INVESTMENTS IN JOINT VENTURES

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CHS OHI Insight Holdings, LLC

(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.

(1) Ownership percentages and facility counts are as of June 30, 2024.

(2) As of June 30, 2024 and December 31, 2023, we had an aggregate of $ 79.4 million and $ 79.6 million, respectively, of loans outstanding with these joint ventures.

(3) In July 2024, we acquired the remaining 51 % ownership interest in the Cindat Joint Venture, as discussed in Note 21 – Subsequent Events.

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

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,

The following table reflects our income (loss) from unconsolidated joint ventures for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

6 unchanged sentences

NOTE 10 – GOODWILL AND OTHER INTANGIBLES

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

The following is a summary of our goodwill as of June 30, 2024 and December 31, 2023:

(in thousands)

1 unchanged sentence

Foreign currency translation

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:

Balance as of June 30, 2024

The following is a summary of our intangible assets and liabilities as of June 30, 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 March 31, 2024 and 2023, our net amortization related to intangibles was $ 0.5 million and $ 6.1 million, respectively.

For the three months ended June 30, 2024 and 2023, our net amortization related to intangibles was $ 0.6 million and $ 0.7 million, respectively.

For the six months ended June 30, 2024 and 2023, our net amortization related to intangibles was $ 1.1 million and $ 6.8 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 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 .

As of June 30, 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 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.

As of June 30, 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 928 healthcare facilities, located in 42 states and the U.K.

and operated by 79 third-party operators.

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 investment in these facilities, net of impairments and allowances, totaled $ 9.4 billion at June 30, 2024, with 97 % of our real estate investments related to long-term healthcare facilities.

Our portfolio is made up of (i) 588 SNFs, 221 ALFs, 19 ILFs, 19 specialty facilities and one medical office building, (ii) fixed rate mortgages on 50 SNFs, 12 ALFs, two specialty facilities and one ILF, and (iii) 15 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:

At June 30, 2024, we also held other real estate loans receivable (excluding mortgages) of $ 532.2 million, non-real estate loans receivable of $ 234.6 million and $ 185.3 million of investments in nine unconsolidated joint ventures.

As of June 30, 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 6.5 % of our total revenues for the three months ended June 30, 2024 and 2023, respectively and 4.7 % and 4.8 % of our total revenues for the six months ended June 30, 2024 and 2023, respectively.

The revenue associated with Maplewood for the six months ended June 30, 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 and six months ended June 30, 2024, we also have one operator with total revenues that exceeded 10% of our total revenues:

CommuniCare Health Services, Inc.

(“CommuniCare”).

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 %).

CommuniCare generated 12.5 % and 11.5 % of our total revenues for the three months ended June 30, 2024 and 2023, respectively and 12.7 % and 10.6 % of our total revenues for the six months ended June 30, 2024 and 2023.

As of June 30, 2024, CommuniCare represented 8.7 % of our total investments.

As of June 30, 2024, the three states in which we had our highest concentration of investments were Texas ( 10.2 %), Indiana ( 6.7 %) and California ( 6.0 %).

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

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April 30, 2024

August 5, 2024

August 15, 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 months ended March 31, 2024 and 2023 (in thousands):

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

Shares issued

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Three Months Ended

March 31, 2023

June 30, 2023

Three Months Ended

March 31, 2024

June 30, 2024

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 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 months ended March 31, 2024 and 2023 (in thousands except average price per share):

The following is a summary of the shares issued under our $ 1.0 billion At-The-Market Offering Program for the three months and six ended June 30, 2024 and 2023 (in thousands except average price per share):

Average Net Price

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Gross Proceeds

Three Months Ended

March 31, 2023

Three and Six Months Ended

June 30, 2023

Three Months Ended

March 31, 2024

June 30, 2024

Six Months Ended

June 30, 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:

Three Months Ended

The following is a summary of our accumulated other comprehensive income (loss), net of tax as of June 30, 2024 and December 31, 2023:

(in thousands)

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Total accumulated other comprehensive income for Omega

(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.

During the three months ended June 30, 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.

During the six months ended June 30, 2024 and 2023, we reclassified $ 5.2 million and $ 2.1 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

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

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.

As of June 30, 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 June 30, 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.

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

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

subsidiaries had a NOL carryforward of $ 35.4 million.

As of June 30, 2024, we have aggregate NOL carryforwards of $ 81.9 million associated with two U.K.

subsidiaries.

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

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Net deferred tax liability

(1) As discussed in Note 2 – Real Estate Assets, in connection with the acquisition of one U.K.

entity in the second quarter of 2024, we acquired foreign net operating losses of $ 47.8 million resulting in a NOL deferred tax asset of $ 11.9 million.

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

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

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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.

Total income tax expense (2)

(1) The benefit for the six months ended June 30, 2023 primarily relates to adjustments made to our deferred tax assets and liabilities as a result of the majority of our U.K.

portfolio electing to enter into the U.K.

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NOTE 14 – STOCK-BASED COMPENSATION

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

The following is a summary of our Stock-based compensation expense for the three and six months ended June 30, 2024 and 2023, respectively.

Three Months Ended

Six Months Ended

(in thousands)

Stock-based compensation expense

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

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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 24,257 time-based PIUs and 22,488 time-based RSUs to directors during the second quarter of 2024, and those units vest on Omega’s 2025 annual meeting date, subject to the director’s continued service and vesting in certain other events.

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

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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.

(2) Borrowing was 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 was secured by two ALFs, which are owned by the joint venture.

During the second quarter of 2024, Omega repaid this loan using available cash and proceeds from our $ 1.45 billion senior unsecured multicurrency revolving credit facility (“Revolving Credit Facility”).

(3) Guaranteed by Omega OP.

(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 6.64 % and 6.51 % as of March 31, 2024, respectively.

(4) As of June 30, 2024, borrowings under Omega’s Revolving Credit Facility consisted of $ 50 million U.S.

Dollars (“USD”) and £ 16.0 million British Pounds Sterling (“GBP”).

The applicable interest rate on the USD tranche and on the GBP borrowings under the alternative currency tranche of the credit facility were 6.66 % and 6.52 % as of June 30, 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.

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

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

As of June 30, 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 March 31, 2024, we have 12 interest rate swaps with $ 478.5 million in notional value.

As of June 30, 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.

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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.

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

NOTE 17 – FINANCIAL INSTRUMENTS

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 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

At June 30, 2024 and December 31, 2023, the net carrying amounts and fair values of our other financial instruments were as follows:

June 30, 2024

December 31, 2023

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Shareholder Litigation

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

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

Taylor Pickett, Robert O.

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

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

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

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

The complaints alleged, 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 (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.

After an investigation and due consideration, and in the exercise of its business judgment, the Board of Directors determined that it is not in the best interests of the Company to commence litigation against any current or former officers or directors based on the matters raised in the demands.

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

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

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

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

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

In 2023, the Company and individual defendants reached an agreement in principle with each of the derivative plaintiffs to resolve these derivative actions, as reflected by written memoranda of understanding.

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

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.

The court overseeing the Swan Matter issued an order in May 2024 granting final approval to a proposed settlement reached with the plaintiffs in the Stourbridge Matter and the Swan Matter, which order became final and non-appealable as of June 20, 2024.

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.

A hearing is scheduled for August 6, 2024 regarding 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.

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 the derivative actions which was 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 was no impact to the Consolidated Statements of Operations related to these matters.

In the second quarter of 2024, the Company’s insurers funded $ 2.8 million to an escrow account established for the purpose of paying the settlement amounts in accordance with the terms of the applicable settlement, and the Company reversed the previously recorded $ 2.8 million legal reserve within accrued expenses and other liabilities and the related $ 2.8 million receivable within other assets on the Consolidated Balance Sheets.

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

As of June 30, 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.

These indemnification agreements were provided to certain operators in connection with facility transitions and generally would be applicable in the event that the prior operators do not perform under their transition agreements.

These indemnification agreements were provided to certain operators in connection with facility transitions and generally would be applicable if the prior operators do not perform under their transition agreements.

We have committed to fund the construction of new leased and mortgaged facilities, capital improvements and other commitments.

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

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

Our remaining commitments at June 30, 2024, are outlined in the table below (in thousands):

Lessor construction and capital commitments under lease agreements

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(1) Includes finance costs .

In the second quarter of 2024, we exercised an option that committed Omega to buy the remaining 51 % interest in the Cindat Joint Venture, an unconsolidated joint venture that Omega held a 49 % equity interest in as of June 30, 2024.

The acquisition of the remaining 51 % interest in the Cindat Joint Venture closed in July 2024, as discussed further in Note 21 – Subsequent Events.

NOTE 19 – EARNINGS PER SHARE

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except per share amounts)

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NOTE 20 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

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

Three Months Ended March 31,

The following are supplemental disclosures to the Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

(in thousands)

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NOTE 21 – SUBSEQUENT EVENTS

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.

As of June 30, 2024, we held a 49 % interest in the Cindat Joint Venture, an unconsolidated joint venture accounted for using the equity method of accounting that owns 63 facilities in the U.K.

In July 2024, we acquired the remaining 51 % interest in the Cindat Joint Venture, for a cash consideration of $ 97.4 million, excluding transaction costs, and deferred contingent consideration between zero and $ 3.0 million, which becomes payable to the sellers in December 2024, if certain contingencies are satisfied.

As part of the acquisition, we assumed a $ 243.2 million mortgage loan that matures in August 2026 but can be repaid without a prepayment penalty beginning November 2025.

The mortgage loan bears interest at SONIA plus an applicable margin of 5.38 %.

As part of the transaction, we assumed interest rate cap contracts that ensure the annual interest rate does not exceed 10.38 %.

The 63 facilities are subject to leases with two operators that have contractual rent of $ 43.6 million per annum with minimum escalators between 1.0 % to 2.0 % that can escalate further based on certain inflationary measures.

Following the acquisition, we own 100 % of the entity and will consolidate its results in our consolidated financial statements going forward.

The acquired interest will be accounted for as an asset acquisition as substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets.

Under our existing accounting policy election, we follow the asset acquisition cost accumulation and allocation model.

In July 2024, we acquired one facility in the U.K.

for consideration of $ 5.1 million and leased it to an existing operator.

The facility has a weighted average initial annual cash yield of 10.0 % with annual escalators of 2.5 %.

In July 2024, we made a $ 27.3 million preferred equity investment, treated as a real estate loan receivable for accounting purposes, in a new real estate joint venture that was formed to acquire a facility in Massachusetts.

Omega’s preferred equity investment bears a 10.0 % return per annum and must be mandatorily redeemed by the joint venture at the earlier of July 2030 or the occurrence of certain significant events within the joint venture.

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