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Item 7. Management’s Discussion and Analysis

2025-02-13 compared with 2024-02-12 · 139 added, 150 removed, 231 unchanged (56% of the section changed)

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

Real estate loans consist of mortgage loans 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.

Real estate loans consist of mortgage loans and other real estate loans that 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.

In addition to our core investments, we make loans to operators and/or their principals.

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Our real estate investment in these facilities, net of impairments and allowances, totaled approximately $10.1 billion at December 31, 2024, with approximately 98% of our real estate investments related to long-term healthcare facilities.

The portfolio is made up of (i) 592 SNFs, (ii) 188 ALFs, (iii) 19 ILFs, (iv) 19 specialty facilities, (v) one MOB, (vi) real estate loans, including mortgages on 45 SNFs, seven ALFs, two specialty facilities and one ILF and (vii) 17 facilities that are held for sale.

At December 31, 2023, we also held other real estate loans (excluding mortgages) receivable of $513.4 million and non-real estate loans receivable of $275.6 million, consisting primarily of secured loans to third-party operators of our facilities, and $188.4 million of investments in nine unconsolidated joint ventures, which comprise 5 SNFs, 64 ALFs and two specialty facilities.

The portfolio is made up of (i) 589 SNFs, (ii) 290 ALFs, (iii) 19 ILFs, (iv) 18 specialty facilities, (v) one MOB, (vi) real estate loans, including mortgages on 52 SNFs, 43 ALFs, one specialty facility and one ILF and (vii) 12 facilities that are held for sale.

At December 31, 2024, we also held other real estate loans (excluding mortgages) receivable of $485.5 million and non-real estate loans receivable of $332.3 million, consisting primarily of secured loans to third-party operators of our facilities, and $88.7 million of investments in 11 unconsolidated joint ventures, which comprise 5 SNFs, one ALF and one specialty facility.

As healthcare delivery continues to evolve, we continuously evaluate potential investments, our assets, operators and markets to position our portfolio for long-term success.

As part of our evaluation, we may sometimes consider selling or transitioning assets that do not meet our portfolio criteria.

As part of our evaluation, we may from time to time consider selling or transitioning assets that do not meet our portfolio criteria.

Outlook, Trends and Other Conditions

Our industry continues to face the long-term impacts of the COVID-19 pandemic, which significantly and adversely impacted SNFs and long-term care providers during the height of the pandemic due to the higher rates of virus transmission and fatality among the elderly and frail populations that these facilities serve.

In addition, the pandemic contributed to occupancy declines, labor shortages and cost increases which continue to significantly impact our operators post-pandemic.

As discussed further in “Collectibility Issues” below, during the year we have had several operators that have failed to make contractual payments under their lease and loan agreements, and we have agreed to short-term deferrals, lease and portfolio restructurings and/or allowed the application of security deposits or letters of credit to pay rent for several operators.

We believe these operators were impacted by reduced revenue as a result of lower occupancy, increased expenses, uncertainties regarding adequate reimbursement levels and changes to government and regulatory financial support, among other things.

The expense increases were offset to some extent by enhanced reimbursement due to skilling in place, which was permitted via waiver during the pandemic, but which was discontinued when the federally declared public health emergency expired on May 11, 2023.

We believe the expense increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay and reliance on agency staffing due to labor shortages, as well as implementation of new infection control protocols.

In addition, operators who do not achieve full compliance with applicable infection control requirements may face potential survey deficiencies and penalties.

At this time, there is uncertainty regarding the ultimate impact of such developments.

We remain cautious as some of these factors may continue to have a significant impact on our operators and their financial conditions, particularly given the staffing shortages that continue to impact our operators’ occupancy levels and profitability, uncertainty as to whether Medicare and Medicaid reimbursement rates will be sufficient to address longer-term cost increases faced by operators, uncertainty regarding the ultimate scope and impact of proposed U.S.

federal minimum staffing rules for our industry, factors that may impact future virus transmission in our facilities, including vaccination rates and efficacy of the vaccine for staff members and residents at our facilities and the risk of future infectious diseases or pandemics.

Our facilities, on average, experienced declines in occupancy levels as a result of the pandemic, in some cases that were material.

Occupancy in our facilities has generally improved on average since early 2021;

however, average occupancy has not returned to pre-pandemic levels.

It remains unclear when and the extent to which demand and occupancy levels will return to pre-pandemic levels.

We believe these challenges to occupancy recovery may be in part due to staffing shortages, which in some cases have required operators to limit admissions, as well as the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs.

While substantial government support was allocated to SNFs, and to a lesser extent to ALFs, in 2020, U.S.

federal relief efforts have been limited since 2021 as have been relief efforts in certain states.

The additional 6.2% Medicaid Federal Medical Assistance Percentage (the “FMAP”) reimbursement enacted in connection with the pandemic was phased out in 2023 pursuant to the Consolidated Appropriations Act of 2023.

The additional 6.2% FMAP provided some of our operators with significant support, based on the state, and the termination of such support may adversely affect their operations to the extent that normal rate setting does not adjust for this phase-out or expenses are not reduced.

It is unclear whether and to what extent government reimbursements will continue to be sufficient and timely to offset these impacts or whether proposed U.S.

federal minimum staffing rules for SNFs, if not accompanied by additional government funding, will further increase expenses for our operators.

While certain states have provided pandemic-related relief measures, we expect such state relief measures to be limited going forward.

Likewise, while certain states have, in the course of routine rate-setting of Medicaid rates, addressed inflationary factors and other expense-related items, there can be no assurance that these changes will be sufficient to offset increased inflation and expenses or that all states will address these items.

See “Government Regulation and Reimbursement” for additional information.

Further, to the extent the cost and occupancy impacts on our operators do not recover or are not offset by continued government relief or reimbursement rates that are sufficient and timely, we anticipate that the operating results of additional operators may be materially and adversely affected, and some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place.

There are a number of uncertainties we face as we consider the effects of the industry’s recovery on our business, including how long census disruption and elevated costs will last, the continued management of infectious diseases in our facilities, the extent to which reimbursement increases from the federal government, the states and the U.K.

will continue to offset these incremental costs, and lost revenues.

While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more information as to the level of costs our operators will continue to experience, the duration of such increased costs, the adequacy of government reimbursement increases to cover such costs, the potential support our operators may request from us and the future demand for needs-based skilled nursing care and senior living facilities.

We continue to monitor the rate of occupancy recovery at many of our operators, and it remains uncertain whether and when demand, staffing availability and occupancy levels will return to pre-COVID-19 levels.

In addition to the long-term impacts of COVID-19 and regulatory requirements discussed above, our operators have been and are likely to continue to be adversely affected by labor shortages and increased labor costs, as well as other inflation-related cost increases.

We continue to monitor the impacts of other regulatory changes, as discussed below, including any significant limits on the scope of services eligible for reimbursement and on reimbursement rates and fees, which could have a material adverse effect on an operator’s results of operations and financial condition, which could adversely affect the operator’s ability to meet its obligations to us.

Our industry continues to recover from the impacts of the COVID-19 pandemic, which significantly and adversely impacted SNFs and long-term care providers during the height of the pandemic due to the higher rates of virus transmission and fatality among the elderly and frail populations that these facilities serve.

While certain of our operators have experienced a level of recovery from pandemic-driven challenges such as occupancy declines, labor shortages, staffing expense increases, and other cost increases, certain of our other operators remain negatively impacted by these factors in a much more profound way.

In addition, our operators have been and continue to be adversely affected by inflation-related cost increases, which may exacerbate labor shortages and increase labor costs, among other impacts, and may be adversely impacted by immigration restrictions and changes to immigration enforcement policy to the extent they contribute to labor shortages.

There continues to be uncertainty regarding the duration of these impacts for those operators, particularly given uncertainty as to whether reimbursement increases from the federal government, the states and the U.K.

will be effective in offsetting these incremental costs and lost revenues.

In addition, there remains uncertainty as to the impact of potential regulatory changes, including the ultimate scope and impact of recently issued U.S.

federal minimum staffing rules for our industry, and the continued ability of our operators to manage infectious diseases in our facilities.

See Item 1 – Business – Government Regulation and Reimbursement for additional information.

We continue to monitor these impacts as well as the impacts of other regulatory changes, as discussed in Item 1 – Business – Government Regulation and Reimbursement, including any significant limits on the scope of services eligible for reimbursement and on reimbursement rates and fees, which could have a material adverse effect on an operator’s results of operations and financial condition, which could adversely affect the operator’s ability to meet its obligations to us.

As discussed further in “Collectibility Issues” below, in 2024, we have had several operators that have failed to make contractual payments under their lease and loan agreements, and we have agreed to short-term payment deferrals, lease and portfolio restructurings and/or allowed several operators to apply security deposits or letters of credit to pay rent.

While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we remain cautious as some of the long-term impacts noted above may continue to have an impact on certain of our operators and their financial conditions.

2024 and Recent Highlights

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The initial cash yield (the initial annual contractual cash rent divided by the purchase price) on these asset acquisitions was between 9.5% and 11.5%.

Of the 114 facilities acquired during 2024, 63 facilities relate to our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024 for total consideration of $364.9 million.

See Note 3 – Real Estate Asset Acquisitions and Development for additional information.

● We invested $106.7 million under our construction in progress and capital improvement programs in 2024.

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We also advanced $7.9 million under existing real estate loans in 2024.

We received principal repayments of $77.9 million on real estate loans during 2024.

Dispositions and Impairments

● In 2023, we sold 69 facilities for approximately $585.0 million in net cash proceeds, recognizing a net gain of approximately $79.7 million.

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

● In 2024, we sold 21 facilities (14 SNFs, six ALFs and one specialty facility) for approximately $95.0 million in net cash proceeds, recognizing a net gain of approximately $13.2 million.

● In 2024, we recorded impairments on real estate properties of approximately $23.8 million on 14 facilities.

Of the $91.9 million, $2.6 million related to two facilities that were classified as held for sale (and subsequently sold) for which the carrying value exceeded the fair value less costs to sell and $89.3 million related to 23 held for use facilities (of which $48.0 million relates to three facilities that were closed during the year) for which the carrying values exceeded the estimated fair value.

Of the $89.3 million, $51.7 million related to 20 facilities that were subsequently sold during the year but did not meet the criteria to be classified as held for sale when the impairments were recognized.

Of the $23.8 million, $10.9 million related to six facilities that were classified as held for sale for which the carrying value exceeded the fair value less costs to sell, and $12.9 million related to eight held for use facilities (of which $7.2 million relates to four closed facilities) for which the carrying values exceeded the estimated fair value.

Of the $12.9 million, $5.3 million related to three facilities that were subsequently sold during the year but did not meet the criteria to be classified as held for sale when the impairments were recognized.

Financing Activities

● In 2023, we sold 11.0 million shares of common stock under our $1.0 billion At-The-Market Offering Program (“ATM Program”) and Dividend Reinvestment and Common Stock Purchase Plan (“DRCSPP”), generating aggregate gross proceeds of $339.0 million.

● During the second quarter of 2023, we terminated our five forward starting swaps with $400 million in notional value that were designated cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt, and we received a $92.6 million net cash settlement from the swap counterparties.

● During the second quarter of 2023, we entered into an interest rate swap with a notional amount of $50.0 million.

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

This interest rate swap is designated as a hedge against our exposure to changes in interest payment cash flow fluctuations in the variable interest rates on the OP term loan.

The interest rate swap contract effectively converts our $50.0 million OP term loan to an aggregate fixed rate of approximately 5.521% through its maturity.

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

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

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

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

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

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

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

● During the third quarter of 2023, we entered into 11 new interest rate swaps with a notional amount of $428.5 million that terminate on August 6, 2027.

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

The interest rate swap contracts effectively convert our 2025 Term Loan to an aggregate fixed rate of approximately 5.597% through its maturity .

● During the fourth quarter of 2023, we terminated two foreign currency forward contracts that were entered into in March 2021 with notional amounts totaling £104.0 million.

Omega received a net cash settlement of $11.4 million as a result of the termination.

Concurrent with the termination of the two foreign currency forward contracts, during the fourth quarter of 2023, we entered into six new foreign currency forward contracts with notional amounts totaling £104.0 million and a GBP-USD forward rate of 1.2916, each of which mature between March 8, 2027 and March 8, 2030.

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

● In 2024, we sold 33.8 million shares of common stock under our ATM Program (defined below) and Dividend Reinvestment and Common Stock Purchase Plan (“DRCSPP”), generating aggregate gross proceeds of $1.2 billion.

● We repaid the $400 million of 4.95% senior notes on the April 1, 2024 maturity date using available cash and proceeds from our $1.45 billion senior unsecured multicurrency revolving credit facility (“Revolving Credit Facility”).

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

The payoff included a $1.3 million prepayment fee that was recognized as a loss on extinguishment of debt.

● During the first quarter of 2024, we terminated two foreign currency forward contracts that were entered into in March 2021 with notional amounts totaling £70.0 million.

Omega received a net cash settlement of $8.4 million as a result of termination.

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

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

● During the third quarter of 2024, we terminated our 2021 $1.0 billion At-The-Market Offering Program (the “2021 ATM Program”) and entered into a new ATM Equity Offering Sales Agreement pursuant to which shares of common stock having an aggregate gross sale price of up to $1.25 billion (the “2024 ATM Program,” and together with the 2021 ATM Program, the “ATM Program”) may be sold from time to time.

● As part of the Cindat JV acquisition in July 2024, we assumed a £188.6 million mortgage loan that matures in August 2026 (the “2026 Mortgage Loan”) but can be repaid without a prepayment penalty beginning November 2025.

The 2026 Mortgage Loan bears interest at the Sterling Overnight Index Average (“SONIA”) plus an applicable margin of 5.38%.

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

Other Highlights

● During 2023, we advanced $147.4 million of new non-real estate loans with a weighted average interest rate of 10.5%.

We also advanced $18.7 million under existing revolving working capital loans.

These revolving working capital loans also had aggregate repayments of $23.0 million during 2023.

● During 2024, we advanced $60.6 million under 13 new non-real estate loans with a weighted average interest rate of 8.4%.

We also advanced $14.8 million under existing non-real estate loans during 2024.

We received principal repayments of $119.7 million on non-real estate loans during 2024.

Please see a description of our non-real estate loans in Item 1 – Business – Investment Strategy & Types.

Collectibility Issues

● During the year ended December 31, 2023, we placed one existing operator and two new operators, which Omega has not previously had relationships with prior to the second quarter of 2023, on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from them was not deemed probable.

There was no straight-line write-off associated with placing the existing operator on a cash basis of revenue recognition because the lease agreement did not contain any rent escalators.

The lease agreements with each of the two new operators were executed in the second quarter of 2023 as part of transitions of facilities from other operators, and we placed them on a cash basis concurrent with the respective lease commencement dates, so there were no straight-line rent write-offs associated with moving these operators to cash basis.

During the year ended December 31, 2023, we transitioned the portfolios of four cash basis operators with an aggregate of 48 facilities to leases with operators that are on a straight-line basis of revenue recognition.

● During the year ended December 31, 2024, we placed one existing operator and three new operators, which Omega did not previously have a relationship with prior to 2024, on a cash basis of revenue recognition as collection of substantially all contractual lease payments due from them was not deemed probable.

There was a $2.8 million straight-line rent receivable write-off associated with placing the existing operator on a cash basis of revenue recognition.

The lease agreements with the three new operators were executed in 2024 as part of the transition of facilities from other operators, and we placed them on a cash basis concurrent with the lease commencement dates, so there were no straight-line rent receivable write-offs associated with placing these operators on a cash basis.

As of December 31, 2024, 21 operators are on a cash basis.

These operators represent an aggregate 23.9% and 32.5% of our total revenues (excluding the impact of write-offs) for the years ended December 31, 2023 and 2022, respectively.

● During the year ended December 31, 2023, we allowed ten operators to defer $35.9 million of contractual rent and interest.

The deferrals primarily related to the following operators:

LaVie ($19.0 million), Healthcare Homes Limited ($8.2 million), Agemo Holdings, LLC (“Agemo”) ($1.9 million) and Maplewood Senior Living (along with affiliates, “Maplewood”) ($1.8 million).

Additionally, we allowed six operators to apply collateral, such as security deposits or letters of credit, to contractual rent and interest during the year ended December 31, 2023.

The total collateral applied to contractual rent and interest was $17.6 million for the year ended December 31, 2023.

● In the first quarter of 2023, Omega entered into a restructuring agreement, an amended and restated master lease and two new replacement loans with Agemo, a cash basis operator.

As part of the restructuring agreement and related agreements, Omega agreed to, among other things, forgive and release Agemo from previously written off past due rent and interest obligations, reduce monthly contractual base rent from $4.8 million to $1.9 million, extend the initial Agemo lease term to December 31, 2036 and modify the existing Agemo loans into two replacement loans.

During the second quarter of 2023, Agemo resumed making contractual rent payments in accordance with the restructuring agreement.

We recorded rental income of $17.4 million for the year ended December 31, 2023 for the contractual rent payments that were received.

Additionally, Agemo’s loans are on non-accrual status and are being accounted for under the cost recovery method;

therefore, the $3.2 million of interest payments that we received during the year ended December 31, 2023 were applied directly against the principal balance outstanding.

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

In the fourth quarter of 2023, Omega sold an additional 30 facilities and amended the master lease with LaVie to further reduce monthly rent to $3.3 million.

LaVie began to short pay contractual rent during the third quarter of 2023, which continued into the fourth quarter of 2023.

For the year ended December 31, 2023, LaVie paid total contractual rent of $37.0 million, a total short pay of $21.1 million of the $58.1 million due under the lease agreement after reflecting the deferral discussed above.

As LaVie is on a cash basis of revenue recognition, only the $37.0 million of contractual rent payments that we received from LaVie were recorded as rental income during the year ended December 31, 2023.

In January 2024, LaVie paid $1.45 million of contractual rent, a short pay of $1.85 million of the $3.3 million due under its lease agreement.

● In the first quarter of 2023, we entered into a restructuring agreement, master lease amendments and loan amendments with Maplewood, a cash basis operator.

As part of the restructuring agreement and related agreements, Omega agreed to, among other things, extend the maturity date of the master lease to December 2037, fix contractual rent at $69.3 million per annum and defer the 2.5% annual escalators under our lease agreement through December 31, 2035, pay a $12.5 million option termination fee to Maplewood, extend the maturity date of the secured revolving credit facility to June 2035, increase the capacity of the secured revolving credit facility to $320.0 million and convert the 7% per annum cash interest due on the secured revolving credit facility to all payment-in-kind (“PIK”) interest in 2023, 1% cash interest and 6% PIK interest in 2024, and 4% cash interest and 3% PIK interest in 2025 and through the maturity date.

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

Maplewood began to short pay contractual rent during the second quarter of 2023, which continued into the fourth quarter of 2023.

For the year ended December 31, 2023, Maplewood paid total contractual rent of $57.8 million, a total short pay of $11.5 million of the $69.3 million due under the lease agreement for the year.

Omega applied all $4.8 million of Maplewood’s security deposit towards the total year to date shortfall and recognized rental income of $62.6 million for the year ended December 31, 2023.

The security deposit was fully exhausted in the fourth quarter of 2023.

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

As Maplewood is on a cash basis of revenue recognition, the inducement was immediately expensed and was recorded as a reduction to the $62.6 million of rental income recognized for the year ended December 31, 2023.

In January 2024, Maplewood short-paid the contractual rent amount due under its lease agreement by $2.0 million.

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

● In August 2023, Guardian, an operator that was already on a cash basis of revenue recognition, did not pay its contractual amount due under its lease agreement and continued to fail to make the required contractual rent payments due under its lease agreement throughout the remainder of 2023.

During the third and fourth quarters of 2023, we applied $2.9 million and $4.4 million, respectively, of Guardian’s security deposit to fund the unpaid rent.

We recorded rental income of $16.8 million for the year ended December 31, 2023 for the contractual rent payments that were received from Guardian and through the application of Guardian’s security deposit.

Following the application of the security deposit in the third and fourth quarters of 2023, we had a $0.1 million security deposit remaining as of December 31, 2023, which can be applied to future rent shortfalls.

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

In January 2024, Guardian did not pay the contractual rent amount due under its lease agreement of $1.5 million.

These operators represent an aggregate 20.5% and 22.1% of our total revenues for the years ended December 31, 2024 and 2023, respectively.

This includes the impact of straight-line rent receivable, lease inducement and effective yield interest write-offs of $4.2 million and $20.6 million for the years ended December 31, 2024 and 2023, respectively.

● Throughout 2024, Maplewood Senior Living (along with affiliates, “Maplewood”) continued to short-pay the contractual rent amount due under its lease agreement, paying $47.5 million of contractual rent, a short pay of $21.8 million of the $69.3 million due under its lease agreement.

In addition, Maplewood did not pay the $2.7 million of contractual interest due under its secured revolving credit facility (the “Maplewood Revolver”) agreement during 2024.

As Maplewood is on a cash basis of revenue recognition, we have recorded $47.5 million of revenue related to Maplewood for the year ended December 31, 2024 for the contractual rent payments that we received.

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.

As discussed in Note 5 – Contractual Receivables and Other Receivables and Lease Inducements, in May 2024, Omega sent a demand letter to Maplewood notifying it of multiple events of default under its lease, loan and related agreements with Omega, including Mr.

Smith’s guaranty, 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, demanded immediate repayment of past due contractual rent and replenishment of the security deposit and accelerated all principal and accrued interest due under the Maplewood Revolver.

On July 31, 2024, we entered into a settlement agreement (the “Settlement Agreement”) with the Greg Smith estate (the “Estate”) and submitted it to the probate court for approval.

The Settlement Agreement, among other things, grants Omega the right to direct the assignment of Mr.

Smith’s equity to the key members of the existing Maplewood management team (the “Key Principals”), their designee(s) or another designee of Omega’s choosing, with the Estate remaining liable under Mr.

Smith’s guaranty until the transition is complete or one year from the court’s approval date, if earlier, and requires Omega to refrain from exercising contractual rights or remedies in connection with the defaults.

In the proposed transition, the Key Principals would become the new majority equity holders in the Maplewood entities, which would maintain the Maplewood lease agreement and the Maplewood Revolver provided by Omega.

On August 26, 2024, the probate court approved the Settlement Agreement, and in October 2024, following the probate court’s final and non-appealable order approving the Settlement Agreement, we requested and were granted a dismissal without prejudice of our lawsuit against, among others, the Estate.

We are still awaiting regulatory approvals related to licensure of the operating assets before the transition will be completed.

There is no certainty that the 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 Maplewood Revolver up to the amortized cost basis of the loan.

As of December 31, 2024, the amortized cost basis of the Maplewood Revolver was $263.6 million, which represents 17.8% of the total amortized cost basis of all of Omega’s real estate loan receivables.

See Note 7 – Real Estate Loans Receivable.

In January 2025, Maplewood short-paid the contractual rent and interest amounts due under its lease and loan agreements by $1.5 million.

● During the first quarter of 2024, we continued the process of restructuring our portfolio with LaVie Care Centers, LLC (“LaVie”) by selling two facilities and transitioning 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.

In June 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.

On December 5, 2024, a plan of reorganization was confirmed by the Bankruptcy Court, pursuant to which the LaVie master lease agreement will be assumed and assigned by certain of the reorganized debtor(s) upon the effective date of the plan.

As described in LaVie’s filings with the Bankruptcy Court, we committed to provide, along with another lender, $10 million of a $20 million junior secured debtor-in-possession (“DIP”) financing to LaVie.

Omega recognized an aggregate $9.6 million provision for credit losses during 2024 on LaVie’s $25.0 million secured term loan and DIP financing loan as a result of insufficient collateral supporting the loans.

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.

In the third quarter of 2024, LaVie resumed making full contractual rent payments of $9.2 million due under its lease agreement, which continued through the fourth quarter of 2024 with LaVie making a full contractual rent payment of $9.1 million.

As LaVie is on a cash basis of revenue recognition for lease purposes, only the $28.6 million of contractual rent payments that we received from LaVie were recorded as rental income during the year ended December 31, 2024.

● Beginning in August 2023, Guardian Healthcare (“Guardian”) did not pay its contractual amounts due under its lease agreement.

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 dependent on revenue received by the operator.

We recorded rental income of $8.3 million related to the lease with the new operator during the year ended December 31, 2024.

● Following Omega and Agemo Holdings, LLC (“Agemo”) entering into a restructuring agreement during the first quarter of 2023, Agemo resumed making contractual rent and interest payments during the second quarter of 2023 and continued to make the required contractual rent and interest payments throughout the remainder of 2023 and 2024.

Agemo is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $23.8 million for the year ended December 31, 2024 for the contractual rent payments that were received.

Additionally, as Agemo’s loans are on non-accrual status and are being accounted for under the cost recovery method, the $4.8 million of interest payments that we received during the year ended December 31, 2024 were applied directly against the principal balance outstanding.

● Quarterly cash dividends paid during 2024 aggregated to $2.68 per share.

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Year Ended December 31,

Increase/(Decrease)

Rental income

Income from direct financing leases

Interest income

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Impairment on real estate properties

Provision for credit losses

(Recovery) provision for credit losses

Interest expense

Other income (expense):

Other income (expense) – net

Other income – net

Loss on debt extinguishment

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Income tax expense

(Loss) income from unconsolidated joint ventures

Income (loss) from unconsolidated joint ventures

Following is a description of certain of the changes in revenues for the year ended December 31, 2024 compared to 2023:

● The increase in rental income was primarily the result of (i) a $114.8 million increase as a result of fewer straight-line rent receivable write-offs in 2023, with write-offs of $8.1 million and $122.9 million for the years ended December 31, 2023 and 2022, respectively, (ii) a $30.2 million increase related to facility acquisitions made throughout 2022 and 2023, lease extensions and other rent escalations and (iii) a $17.1 million net increase related to the impact of facility transitions, primarily from non-paying cash basis operators to straight-line basis operators, and sales, partially offset by a $88.3 million net decrease in rental income from cash basis operators, including Maplewood and LaVie, as a result of not recording straight-line lease revenue and/or receiving lower cash rent payments period over period from these operators, along with a one-time option termination payment of $12.5 million to Maplewood that was recorded as a reduction to rental income during the second quarter of 2023.

● The decrease in interest income was primarily due to (i) a $15.6 million decrease related to loans placed on non-accrual status, primarily the LaVie loans and the Maplewood loan, in which we have recognized less interest income period over period as a result of receiving less cash payments or the loans converting to PIK interest and (ii) a $10.6 million decrease related to early principal payments on our loans during 2022 and 2023, partially offset by a $21.8 million increase related to new and refinanced loans and additional fundings to existing operators made throughout 2022 and 2023.

● The increase in rental income was primarily the result of (i) a $59.5 million increase related to facility acquisitions made throughout 2023 and 2024, lease extensions and other rent escalations, (ii) an increase related to a one-time option termination payment of $12.5 million to Maplewood that was recorded as a reduction to rental income during the first quarter of 2023 and (iii) a $4.0 million increase as a result of fewer straight-line rent receivable write-offs in 2024 compared to 2023, partially offset by a $15.2 million net decrease in rental income from cash basis operators, including Maplewood and LaVie, as a result of not recording straight-line lease revenue and/or receiving lower cash rent payments period over period from these operators.

● The increase in interest income was primarily due to a $39.2 million increase related to new and refinanced loans and additional fundings to existing operators made throughout 2023 and 2024, partially offset by (i) a $2.6 million decrease related to early principal payments on our loans during 2023 and 2024 and (ii) a $0.8 million net decrease related to loans placed on non-accrual status, primarily the Maplewood Revolver , in which we have recognized less interest income period over period as a result of receiving less cash payments or the loans converting to PIK interest.

As noted above, during the year ended December 31, 2024, we funded $378.1 million in new or existing real estate loans and $75.4 million in new or existing non-real estate loans.

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● The decrease in depreciation and amortization expense primarily relates to facility sales and facilities reclassified to assets held for sale, partially offset by facility acquisitions and capital additions.

● The increase in general and administrative (“G&A”) expense primarily relates to (i) a $7.8 million increase in stock-based compensation expense (see Note 19 – Stock-Based Compensation to the Consolidated Financial Statements for a full summary of stock-compensation movements over the last three years), (ii) a $3.3 million increase in payroll and benefits and (iii) a $1.3 million increase in professional service costs.

● The decrease in acquisition, merger and transition related costs primarily relates to costs incurred related to the transition of facilities with troubled operators.

● The 2023 impairments were recognized in connection with two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell and 23 held for use facilities for which the carrying value exceeded the fair value.

The 2022 impairments were recognized in connection with two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell and 20 held for use facilities for which the carrying value exceeded the fair value.

● The increase in general and administrative (“G&A”) expense primarily relates to (i) a $3.2 million increase in payroll and benefits, (ii) a $1.6 million increase in stock-based compensation expense (see Note 19 – Stock-Based Compensation to the Consolidated Financial Statements for a full summary of stock-compensation movements over the last three years) and (iii) a $0.5 million increase in professional service costs.

● The increase in acquisition, merger and transition related costs primarily relates to costs incurred related to (i) transition costs following our acquisition of the remaining 51% interest in the Cindat Joint Venture and (ii) the transition of facilities with troubled operators.

● The 2024 impairments were recognized in connection with six facilities that were classified as held for sale for which the carrying values exceeded the estimated fair values less costs to sell and eight held for use facilities for which the carrying value exceeded the fair value.

The 2023 impairments were recognized in connection with two facilities that were classified as held for sale for which the carrying values exceeded the estimated fair value less costs to sell and 23 held for use facilities for which the carrying value exceeded the fair value.

The 2024 and 2023 impairments were primarily the result of decisions to exit certain non-strategic facilities and/or operators.

● The change in provision for credit losses primarily relates to a net decrease in aggregate specific provisions recorded during 2023 compared to specific provisions recorded during 2022 (see Note 9 – Allowance for Credit Losses to the Consolidated Financial Statements for a full summary of allowance movements over the last three years), partially offset by increases in the general reserve recorded primarily resulting from increases in loan balances and increases in loss rates utilized in the estimate of expected credit losses for loans.

● The change in (recovery) provision for credit losses primarily relates to (i) decreases in the general reserve recorded primarily resulting from decreases in loss rates utilized in the estimate of expected credit losses for loans partially offset by increases in loan balances, and a net decrease in aggregate specific provisions recorded during 2024 compared to specific provisions recorded during 2023 (see Note 9 – Allowance for Credit Losses to the Consolidated Financial Statements for a full summary of allowance movements over the last three years).

● The decrease in interest expense primarily relates to (i) the repayment of $350 million of 4.375% senior notes in August 2023, (ii) the repayment of $400 million of 4.95% senior notes in April 2024 and (iii) the payoff of all remaining HUD mortgages in the first quarter of 2024.

The overall decrease was partially offset by increases due to (i) the issuance of a $428.5 million term loan in the third quarter of 2023, (ii) the assumption of the 2026 Mortgage Loan as part of our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024 and (iii) increased borrowings on our Revolving Credit Facility during 2024.

Other Income (Expense)

The decrease in total other income (expense) was primarily due to a $280.3 million decrease in gain on assets sold resulting from the sale of 69 facilities in 2023 compared to the sale of 66 facilities in 2022 as we continue to exit certain facilities, operator relationships and/or states to improve the strength of our overall portfolio, partially offset by a $22.3 million change in other income (expense) – net primarily related to increased interest income on short-term investments due to higher invested cash and favorable interest rates in 2023.

Income from Unconsolidated Joint Ventures

The change in (loss) income from unconsolidated joint ventures was primarily due to higher interest rates on outstanding debt and fair value adjustments on our derivative instruments within our Cindat Joint Venture.

The decrease in total other income (expense) was primarily due to (i) a $66.5 million decrease in gain on assets sold resulting from the sale of 21 facilities in 2024 compared to the sale of 69 facilities in 2023 as we continue to exit certain facilities, operator relationships and/or states to improve the strength of our overall portfolio and (ii) a $13.5 million change in other income (expense) – net primarily related to decreased interest income on short-term investments due to lower invested cash in 2024 and foreign currency and fair value losses on financial instruments in 2024.

Income Tax Expense

The increase in income tax expense was primarily due to (i) adjustments made to our deferred tax assets and liabilities in the first quarter of 2023 as a result of the majority of our U.K.

portfolio entering into the U.K.

REIT regime effective April 1, 2023 and (ii) an increase in taxable income in the U.K.

as a result of acquisitions in 2023 and 2024 including our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024.

Income (Loss) from Unconsolidated Joint Ventures

The change in income (loss) income from unconsolidated joint ventures was primarily due to one unconsolidated joint venture, OMG Senior Holdings, LLC, which sold one facility during the third quarter of 2024 for a $12.9 million gain ($6.5 million of which represents the Company’s share of the gain).

Funds From Operations

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Add back impairments on real estate properties

Add back impairments on real estate properties–- unconsolidated joint ventures

Add back unrealized loss on warrants

(1) The years ended December 31, 2024, 2023 and 2022 include the application of $2.2 million, $17.6 million and $11.0 million, respectively, of security deposits (letter of credit and cash deposits) in revenue.

(2) The year ended December 31, 2021 includes $21.3 million of revenue related to Gulf Coast recognized based on our ability to offset uncollected rent against the interest and principal of certain debt obligations of Omega.

The $130.6 million increase in Nareit FFO for the year ended December 31, 2023 compared to 2022 is primarily driven by the overall increase in total revenue, the decrease in acquisition, merger and transition related costs and the decrease in provision for credit losses which are discussed in more detail in the Results of Operations above.

Liquidity and Capital Resources

Sources and Uses

Our primary sources of cash include rental income and interest payment receipts on our loans, existing availability under our Revolving Credit Facility, proceeds from our DRSPP and ATM Program, facility sales, the issuance of additional debt, including unsecured notes and term loans, and proceeds from real estate loan and non-real estate loan payoffs.

We anticipate that these sources will be adequate to meet our principal cash flow needs through the next twelve months, which include common stock dividends and distributions to noncontrolling interest members, debt service payments (including principal and interest), real estate investments (including facility acquisitions, capital improvement programs and other capital expenditures), real estate loan and non-real estate loan advances and normal recurring G&A expenses (primarily consisting of employee payroll and benefits and expenses relating to third parties for legal, consulting and audit services).

Our primary sources of cash include rental income and interest receipts, existing availability under our Revolving Credit Facility, proceeds from our DRCSPP and 2024 ATM Program, facility sales, the issuance of additional debt, including unsecured notes and term loans, and proceeds from real estate loan and non-real estate loan payoffs.

We anticipate that these sources will be adequate to fund our cash flow needs through the next twelve months, which include common stock dividends and distributions to noncontrolling interest members, debt service payments (including principal and interest), real estate investments (including facility acquisitions, capital improvement programs and other capital expenditures), real estate loan and non-real estate loan advances and normal recurring G&A expenses (primarily consisting of employee payroll and benefits and expenses relating to third parties for legal, consulting and audit services).

Capital Structure

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At December 31, 2024 and 2023, the weighted average annual interest rate of our debt was 4.6% and 4.4%, respectively.

Additionally, as of December 31, 2023, approximately 99% of our debt obligations, with outstanding principal balances, have fixed interest payments, after reflecting the impact of interest rate swaps that are designated cash flow hedges.

Additionally, as of December 31, 2024, approximately 95% of our debt with outstanding principal balances has fixed interest payments after reflecting the impact of interest rate swaps that are designated cash flow hedges.

As of December 31, 2024, Omega’s debt obligations consisted of the following:

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These notes bear fixed interest rates between 3.25% and 5.25% per annum.

● A $1.45 billion Revolving Credit Facility that bears interest at SOFR plus an adjustment of 0.11448% per annum ( or in the case of loans denominated in GBP, the Sterling overnight index average reference rate plus an adjustment of 0.1193% per annum) plus an applicable percentage (with a range of 95 to 185 basis points) based on our credit ratings.

● A $1.45 billion Revolving Credit Facility that bears interest at Secured Overnight Financing Rate (“SOFR”) plus an adjustment of 0.11448% per annum ( or in the case of loans denominated in GBP, the SONIA reference rate plus an adjustment of 0.1193% per annum) plus an applicable percentage (with a range of 95 to 185 basis points) based on our credit ratings.

The Revolving Credit Facility matures on April 30, 2025, subject to Omega’s option to extend such maturity date for two six-month periods.

As of December 31, 2023, Omega had $20.4 million outstanding on the Revolving Credit Facility.

● A $428.5 million 2025 Term Loan that bears interest at SOFR plus an adjustment of 0.1% per annum plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.

As of December 31, 2024, Omega had zero outstanding on the Revolving Credit Facility.

In January 2025, Omega provided notification to extend the maturity date to October 30, 2025.

● A $428.5 million senior unsecured term loan facility (the “2025 Term Loan”) that bears interest at SOFR plus an adjustment of 0.1% per annum plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.

We have 11 interest rate swaps designated as cash flow hedges, with notional value of $428.5 million, that effectively fix the SOFR-based portion of the 2025 Term Loan interest rate at 4.047%.

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

● $62.0 million of secured borrowings consisting of HUD Mortgages and one term loan.

As of December 31, 2023, we had $41.9 million of outstanding HUD Mortgages with a weighted average interest rate of 2.88% per annum that mature from 2049 to 2051.

● A $50.0 million OP Term Loan that bears interest at SOFR plus an adjustment of 0.11448% per annum plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.

● The 2026 Mortgage Loan with £184.6 million or $231.1 million outstanding that bears interest at SONIA plus an applicable margin of 5.38%.

We have four interest rate cap contracts that ensure the annual interest rate on the 2026 Mortgage Loan does not exceed 10.38%.

The 2026 Mortgage Loan matures in August 2026.

● A $50.0 million senior unsecured term loan facility (the “OP Term Loan”) that bears interest at SOFR plus an adjustment of 0.11448% per annum plus an applicable percentage (with a range of 85 to 185 basis points) based on our credit ratings.

We have an interest rate swap designated as a cash flow hedge , with a notional value of $50.0 million, that effectively fixes the SOFR-based portion of the OP Term Loan at 3.957%.

The OP Term Loan matures on April 30, 2025, subject to Omega OP’s option to extend such maturity date for two six-month periods.

In January 2025, Omega provided notification to extend the maturity date to October 30, 2025.

As of December 31, 2024, we had long-term credit ratings of Baa3 from Moody’s and BBB- from S&P Global and Fitch.

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For example, our Revolving Credit Facility accrues interest and fees at a rate per annum equal to SOFR plus a margin that depends upon our credit rating.

A downgrade in credit ratings by Moody’s and S&P Global may have a negative impact on the interest rates and fees for our Revolving Credit Facility, OP Term Loan and 2025 Term Loan.

As of December 31, 2023, we have $400 million of 4.95% senior notes due April 2024.

A downgrade in credit ratings by Moody’s, S&P Global and/or Fitch may have a negative impact on the interest rates and fees for our Revolving Credit Facility, OP Term Loan and 2025 Term Loan.

As of December 31, 2024, we had $400 million of 4.50% senior notes due January 2025 (which were repaid on January 15, 2025 using available cash).

Our Revolving Credit Facility, OP Term Loan and 2025 Term Loan also mature in 2025.

As noted above, we have remaining options under each of these loans to extend the maturity dates beyond 2025.

We will evaluate market conditions during the course of 2025 and determine if it is advantageous to further extend the terms of, refinance and/or pay off these loans.

As of December 31, 2024, we had approximately $518.3 million of cash and cash equivalents on our Consolidated Balance Sheets and $1.45 billion of availability under our Revolving Credit Facility.

Our next senior note maturity is the $600 million of 5.25% senior notes due January 2026.

As discussed below, we also have $821.0 million of potential sales remaining under the ATM Program.

This combination of liquidity sources, along with cash from operating activities, provides us with ability to repay the senior notes due in April 2024.

This combination of liquidity sources, along with cash from operating activities, provides us with ability to repay the senior notes due in January 2026.

We also could elect to refinance these notes based on our evaluation of market conditions at maturity.

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

As of December 31, 2024 and 2023, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

At December 31, 2023, we had 245.3 million shares of common stock outstanding and our shares had a market value of $7.5 billion.

At December 31, 2024, we had 279,129 thousand shares of common stock outstanding, and our shares had a market value of $10.6 billion.

As of December 31, 2024, we had the following equity programs in place that we can utilize to raise capital:

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We have $821.0 million of sales remaining under the 2024 ATM Program as of December 31, 2024.

● We have a DRSPP that allows for the reinvestment of dividends and the optional purchase of our common stock.

● We have a DRCSPP that allows for the reinvestment of dividends and the optional purchase of our common stock.

As a REIT, we are required to distribute dividends (other than capital gain dividends) to our stockholders in an amount at least equal to (A) the sum of (i) 90% of our “REIT taxable income” (computed without regard to the dividends paid deduction and our net capital gain), and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income.

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(in thousands)

Debt (1)(2)(3)

Interest payments on long-term debt (2)(3)(4)

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(1) The $4.9 billion of debt outstanding includes:

(i) $50 million under the OP Term Loan due April 2025, (ii) $428.5 million under the 2025 Term Loan due August 2025, (iii) $400 million of 4.95% Senior Notes due April 2024, (iv) $400 million of 4.50% Senior Notes due January 2025, (v) $600 million of 5.25% Senior Notes due January 2026, (vi) $700 million of 4.5% Senior Notes due April 2027, (vii) $550 million of 4.75% Senior Notes due January 2028, (viii) $500 million of 3.625% Senior Notes due October 2029, (ix) $700 million of 3.375% Senior Notes due February 2031, (x) $700 million of 3.25% Senior Notes due April 2033, (xi) $19.8 million of 10.85% per annum debt held at a consolidated joint venture due February 2024, (xii) $41.9 million of HUD debt at a 2.88% weighted average interest rate due between 2049 and 2051 and (xiii) $20.4 million under the revolving credit facility.

Other than the $50 million outstanding under the OP Term Loan, the $41.9 million of HUD debt and the $19.8 million of debt held at the consolidated joint venture, Parent is the obligor of all outstanding debt.

(i) $50 million under the OP Term Loan due April 2025, (ii) $428.5 million under the 2025 Term Loan due August 2025, (iii) $400 million of 4.50% Senior Notes due January 2025 (which were repaid on January 15, 2025 using available cash), (iv) $600 million of 5.25% Senior Notes due January 2026, (v) $700 million of 4.5% Senior Notes due April 2027, (vi) $550 million of 4.75% Senior Notes due January 2028, (vii) $500 million of 3.625% Senior Notes due October 2029, (viii) $700 million of 3.375% Senior Notes due February 2031, (ix) $700 million of 3.25% Senior Notes due April 2033 and (x) $231.1 million under the 2026 Mortgage Loan.

Other than the $50 million outstanding under the OP Term Loan and the $231.1 million outstanding under the 2026 Mortgage Loan, Parent is the obligor of all outstanding debt.

(2) Based on foreign currency exchange rates in effect as of December 31, 2024.

(3) Does not include the impact of Omega providing notification to extend the maturity date of the OP Term Loan to October 30, 2025 in January 2025.

(4) Based on variable interest rates in effect as of December 31, 2024 and including the impact of interest rate swaps designated as cash flow hedges.

(4) See Note 6 to our consolidated financial statements for additional information.

(5) See Note 6 – Leases to our consolidated financial statements for additional information.

Capital Expenditures and Funding Commitments

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We also hold variable interests in certain unconsolidated entities through our loan and other investments.

See disclosures regarding our risk of loss associated with these entities with Note 10 to the Consolidated Financial Statements – Variable Interest Entities.

See disclosures regarding our risk of loss associated with these entities within Note 10 to the Consolidated Financial Statements – Variable Interest Entities.

We use derivative instruments to hedge interest rate and foreign currency exchange rate exposure as discussed in Note 15 to the Consolidated Financial Statements – Derivatives and Hedging.

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The following is a discussion of changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows.

Operating Activities –The decrease in net cash provided by operating activities is primarily driven by a $30.6 million change in the net movements of the operating assets and liabilities.

The decrease was partially offset by an increase of $22.6 million of net income, net of $212.6 million of non-cash items, primarily due to a year over year increase in rental income and decrease in acquisition, merger and transition related costs, as discussed in our material changes analysis under Results of Operations above.

Investing Activities –The change in cash used in (provided by) investing activities related primarily to (i) a $229.1 million decrease in loan repayments, net of placements due to significant paydowns on the Ciena Healthcare mortgage loans and other loans during 2022, (ii) a $174.0 million decrease in proceeds from the sales of real estate investments driven by the sale of the Gulf Coast facilities in the first quarter of 2022, (iii) a $32.5 million increase in real estate acquisitions, (iv) an $18.2 million increase in capital improvements to real estate investments and construction in progress related to a Washington D.C.

development with Maplewood and (v) a $12.2 million increase in investments in unconsolidated joint ventures primarily related to the four new joint venture investments in the second and third quarters of 2023.

Offsetting these changes were:

(i) an $11.4 million increase in proceeds from net investment hedges related to the termination of two foreign currency forwards during the fourth quarter of 2023, (ii) a $5.5 million increase in receipts from insurance proceeds from claims on damaged facilities and (iii) a $5.5 million increase in distributions from unconsolidated joint ventures in excess of earnings.

Financing Activities –The change in cash used in financing activities was primarily related to (i) a $328.3 million increase in cash proceeds from the issuance of common stock, (ii) a $142.3 million decrease in repurchases of shares of common stock, (iii) a $92.6 million increase in proceeds from derivative instruments as a result of the termination of our forward starting swaps in the second quarter of 2023 and (iv) a $9.6 million decrease in redemptions of OP units, partially offset by (i) a $236.0 million increase in repayments on other long-term borrowings, net of proceeds, primarily due to the early pay-off of 32 HUD mortgage loans during 2023, (ii) an $11.0 million increase in dividends paid primarily related to share issuances during 2023, (iii) a $5.9 million increase in distributions to Omega OP Unit holders and (iv) a $3.4 million increase in payment of financing related costs related to the Company entering into the 2025 Term Loan during the third quarter of 2023.

Operating Activities –The increase in net cash provided by operating activities is primarily driven by an increase of $83.7 million of net income, net of $85.3 million of non-cash items, primarily due to a year over year increase in rental income and interest income, as discussed in our material changes analysis under Results of Operations above.

The $48.0 million change in the net movements of the operating assets and liabilities also contributed to the overall increase in cash provided by operating activities.

Investing Activities –The increase in cash used in investing activities related primarily to (i) a $490.0 million decrease in proceeds from the sales of real estate investments due to significant restructuring activities related to Guardian and LaVie in 2023, (ii) a $146.2 million increase in real estate acquisitions driven by several large portfolio acquisitions in the U.K.

in 2024, (iii) a $24.2 million increase in capital improvements to real estate investments and construction in progress primarily as a result of on-going construction of an ALF in Washington D.C., (iv) a $7.8 million decrease in distributions from unconsolidated joint ventures in excess of earnings, (v) a $7.0 million increase in loan placements, net of repayments due to new loans advanced in 2024 partially offset by significant paydowns on loans during 2024, (vi) a $3.7 million decrease in receipts from insurance proceeds and (vii) a $2.9 million decrease in proceeds from net investment hedges, partially offset by an $11.4 million decrease in investments in unconsolidated joint ventures.

Financing Activities –The change in cash provided by (used in) financing activities was primarily related to a $899.2 million increase in cash proceeds from the issuance of common stock as a result of increased volume under our ATM Program and DRSCPP, partially offset by (i) a $259.6 million increase in repayments on other long-term borrowings, net of proceeds, primarily due to repayment of $400 million of 4.95% senior notes in April 2024, (ii) a $92.6 million decrease in proceeds from derivative instruments as a result of the termination of our forward starting swaps in the second quarter of 2023, (iii) a $41.6 million increase in dividends paid primarily related to share issuances during 2024, (iv) a $3.2 million increase in payment of financing related costs related to costs incurred in connection with the assumption of the 2026 Mortgage Loan as part of our acquisition of the remaining 51% interest in the Cindat Joint Venture and (v) a $2.9 million increase in distributions to Omega OP Unit holders.

Supplemental Guarantor Information

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As of December 31, 2024 and 2023, we had outstanding straight-line rent receivables of $238.7 million and $202.7 million, respectively, and lease inducements of $8.8 million and $8.8 million, respectively.

During 2024, we wrote-off approximately $2.8 million of contractual receivables, straight-line rent receivables and lease inducements to rental income primarily as a result of placing one existing operator on a cash-basis.

Also, during 2024, we placed three new operators on a cash-basis concurrent with the lease commencement dates, so there were no straight-line rent receivable write-offs in connection with these operators.

During 2023, we placed three operators on a cash-basis but did not write-off any contractual receivables, straight-line rent receivables and lease inducements to rental income in connection with these operators, as two related to new lease agreements and one related to an operator with a lease that had no rent escalators.

During 2022, we wrote-off approximately $119.8 million of contractual receivables, straight-line rent receivables and lease inducements to rental income primarily as a result of placing nine operators on a cash-basis.

If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the period we make a change to our prior conclusion.

Changes in the assessment of probability are accounted for on a cumulative basis as if the lease had always been accounted for based on the current determination of the likelihood of collection, potentially resulting in increased volatility of rental income.

Nature of Critical Accounting Estimate

Assumptions/Approach Used

Real Estate Investment Impairment

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During 2023, we recorded impairments on real estate properties of approximately $91.9 million on 25 facilities.

Nature of Critical Accounting Estimate

Assumptions/Approach Used

Asset Acquisitions

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Louis and the weighted average life to maturity of the underlying financial asset.

During 2023 and 2022, we recorded a provision for credit losses of approximately $44.6 million and $68.7 million, respectively.

During 2024 and 2023, we recorded a (recovery) provision for credit losses of approximately ($15.5) million and $44.6 million, respectively.

As of December 31, 2024 and 2023, we had a total allowance for credit loss of $198.6 million and $222.2 million, respectively.

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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-K

Item 7. Management’s Discussion and Analysis