What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-02 compared with 2024-10-31 · 172 added, 246 removed, 188 unchanged (69% of the section changed)

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(1) those items discussed under “Risk Factors” in Part I, Item 1A to our Annual Report on Form 10-K and Part II, Item 1A herein;

(2) uncertainties relating to the business operations of the operators of our assets, including those relating to reimbursement by third-party payors, regulatory matters, occupancy levels and quality of care, including management of infectious diseases;

(3) the timing of our operators’ recovery from staffing shortages, increased costs and decreased occupancy arising from the COVID-19 pandemic, and the sufficiency of previous government support and current reimbursement rates to offset such costs and the conditions related thereto;

(4) additional regulatory and other changes in the healthcare sector, including recently issued federal minimum staffing requirements for skilled nursing facility (“SNFs”) that may further exacerbate labor and occupancy challenges for our operators;

(3) the timing of our operators’ recovery from staffing shortages, increased costs and decreased occupancy resulting from inflation and the long-term impacts of the COVID-19 pandemic and the sufficiency of previous government support and current reimbursement rates to offset such costs and the conditions related thereto;

(4) additional regulatory and other changes in the healthcare sector, including potential changes to Medicaid or Medicare reimbursements, state regulatory initiatives or minimum staffing requirements for skilled nursing facilities (“SNFs”) that may further exacerbate labor and occupancy challenges for our operators;

(5) the ability of our operators in bankruptcy to reject unexpired lease obligations, modify the terms of our mortgages and impede our ability to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor’s obligations, and other costs and uncertainties associated with operator bankruptcies;

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(12) changes in the financial position of our operators;

(13) the effect of economic and market conditions generally and, particularly, in the healthcare industry;

(14) changes in interest rates and the impact of inflation;

(13) the effect of economic, regulatory and market conditions generally and, particularly, in the healthcare industry and in jurisdictions where we conduct business, including the U.K.;

(14) changes in interest rates and the impacts of inflation and changes global tariffs;

(15) the timing, amount and yield of any additional investments;

(16) our ability to maintain our status as a REIT;

(17) the effect of other factors affecting our business or the businesses of our operators that are beyond our or their control, including natural disasters, other health crises or pandemics and governmental action, particularly in the healthcare industry.

(17) the effect of other factors affecting our business or the businesses of our operators that are beyond our or their control, including natural disasters, public health crises or pandemics, cyber threats and governmental action, particularly in the healthcare industry.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is organized as follows:

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● Government Regulation and Reimbursement

● Third Quarter of 2024 and Recent Highlights

● First Quarter of 2025 and Recent Highlights

● Results of Operations

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Omega is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through, its operating partnership subsidiary, OHI Healthcare Properties Limited Partnership (collectively with its subsidiaries, “Omega OP”).

As of September 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.

As of March 31, 2025, Parent owned approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3% of the outstanding Omega OP Units.

Omega has one reportable segment consisting of investments in healthcare-related real estate properties located in the United States (“U.S.”) and the United Kingdom (“U.K.”).

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From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.

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 from time to time consider selling or transitioning assets that do not meet our portfolio criteria.

Outlook, Trends and Other Conditions

Our industry has begun to recover from the long-term impact 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 have not yet experienced returns to pre-pandemic levels and remain impacted by these factors post-pandemic.

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.

Our industry continues to recover from 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.

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 and may be adversely impacted by recently announced global tariffs, each of which may increase expenses and exacerbate labor shortages and increase labor costs, among other impacts.

In addition, our operators 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 extent and 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.

In addition, there remains uncertainty as to the impact of potential regulatory changes, including the potential reforms of Medicaid or Medicare and state regulatory initiatives, as well as the continued ability of our operators to manage infectious diseases in our facilities.

See “Government Regulation and Reimbursement” for additional information.

As discussed further in “Collectibility Issues” below, in 2023 and the first nine months of 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 a number of our operators have begun to experience labor, cost and occupancy improvements since the pandemic, to the extent the ongoing cost and occupancy impacts on certain of our other 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 these 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.

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 of the pandemic noted above may continue to have an impact on certain of our operators and their financial conditions.

In addition to the long-term impacts of the pandemic and regulatory requirements discussed above, our operators have been and are likely to continue to be adversely affected by inflation-related cost increases, which may exacerbate labor shortages and increase labor costs, among other impacts.

We continue to monitor these impacts as well as 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.

On February 21, 2024, Change Healthcare, a unit of UnitedHealth Group, was impacted by a cybersecurity incident involving its information technology systems that disrupted processing of claims, among other transaction services it provides.

Certain of our operators that directly or indirectly utilize Change Healthcare’s services experienced reimbursement delays due to the incident.

This incident and the resulting reimbursement delays affecting our operators may cause delays in the timing of our operators’ payments to us if not remedied timely.

We are continuing to monitor the impact of the incident, but at this time we do not believe the incident is reasonably likely to materially impact the Company’s financial condition or results of operations.

As discussed further in “Collectibility Issues” below, in recent periods 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.

Government Regulation and Reimbursement

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Our U.S.-based operators, which comprise the majority of our operators, are subject to extensive and complex federal, state and local healthcare laws and regulations;

our U.K.-based operators are also subject to a variety of laws and regulations in their jurisdiction.

our U.K.-based operators are also subject to a variety of laws and regulations in their jurisdictions.

These laws and regulations are subject to frequent and substantial changes resulting from the adoption of new legislation, rules and regulations, and administrative and judicial interpretations of existing law.

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Changes in laws and regulations impacting our operators, in addition to regulatory non-compliance by our operators, can have a significant effect on the operations and financial condition of our operators, which in turn may adversely impact us.

There is the potential that we may be subject directly to healthcare laws and regulations because of the broad nature of some of these regulations, such as the Anti-kickback Statute and False Claims Act in the United States, among others.

The COVID-19 public health emergency that was declared by the U.S.

Department of Health and Human Services (“HHS”) in January 2020 and expired in May 2023 allowed HHS to provide temporary regulatory waivers and new reimbursement rules, such as a temporary increase in the Medicaid Federal Medical Assistance Percentage (the “FMAP”) and other rules designed to equip providers with flexibility to respond to the pandemic by suspending various Medicare patient coverage criteria and documentation and care.

These temporary changes to regulations and reimbursement, as well as emergency legislation, including the CARES Act discussed below, had a significant impact on the operations and financial condition of our operators.

Following the expiration of the public health emergency, federal and state regulators generally have resumed enforcement of those regulations that were waived or otherwise not enforced during the public health emergency.

While our industry has begun to recover from some of the long-term impacts of the pandemic, which included prolonged labor shortages, lower occupancy and expense increases, the extent of the recovery will depend on future developments, including the availability of labor, the ultimate scope, implementation timeline and impact of recently issued federal minimum staffing rules for SNFs, the sufficiency and timeliness of reimbursement rate setting in offsetting cost increases, and the continued efficacy of infection control measures and regulations, all of which are uncertain and difficult to predict and may continue to adversely impact our business, results of operations, financial condition and cash flows.

A significant portion of our operators’ revenue is derived from government-funded reimbursement programs, consisting primarily of Medicare and Medicaid in the United States.

As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs by government payors will likely continue.

The long-term care industry continues to recover from the long-term impacts of the COVID-19 pandemic although a certain level of labor shortages, lower occupancy and certain expense increases that began during the pandemic persist, with certain operators continuing to experience these challenges in a much more profound way.

In addition, the impact of these ongoing challenges, including labor pressures and inflationary cost increases, may depend on future developments, including the potential impacts of global tariffs, the sufficiency of reimbursement rate setting, particularly in light of any potential changes to the Medicaid and Medicare reimbursement programs, state regulatory initiatives, and the ultimate status of the federal minimum staffing rules for SNFs that were issued in April 2024 and have been successfully challenged in federal court, and the continued efficacy of infection control measures and regulations, all of which are uncertain and difficult to predict and may continue to adversely impact our business, results of operations, financial condition and cash flows.

A significant portion of our operators’ revenue is derived from government-funded reimbursement programs, consisting primarily of Medicare and Medicaid in the U.S.

and local authority funding in the U.K.

As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs or other budgetary adjustments by government payors, including through potential Medicaid reforms and the push by the U.S.

Centers for Medicare and Medicaid Services (“CMS”) towards Medicare Advantage programs, will likely continue.

Significant limits on the scope of services reimbursed and/or reductions of reimbursement rates could therefore have a material adverse effect on our operators’ results of operations and financial condition.

Additionally, new and evolving payor and provider programs that are tied to quality and efficiency could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations, and there can be no assurance that payments under any of these government healthcare programs are currently, or will be in the future, sufficient to fully reimburse the property operators for their operating and capital expenses.

In addition to quality and value-based reimbursement reforms, the U.S.

Centers for Medicare and Medicaid Services (“CMS”) has implemented a number of initiatives focused on the reporting of certain facility-specific quality of care indicators that could affect our operators, including publicly released quality ratings for all of the nursing homes that participate in Medicare or Medicaid under the CMS “Five Star Quality Rating System.” Facility rankings, ranging from five stars (“much above average”) to one star (“much below average”) are updated on a monthly basis.

The change in presidential administration and U.S.

Congressional majorities at the federal level are increasing the political focus on entitlement program changes, which is creating uncertainty with respect to the level of government reimbursement available and the extent of industry regulation.

In addition to quality and value-based reimbursement reforms, CMS has implemented a number of initiatives focused on the reporting of certain facility-specific quality of care indicators that could affect our operators, including publicly released quality ratings for all of the nursing homes that participate in Medicare or Medicaid under the CMS “Five Star Quality Rating System.” Facility rankings, ranging from five stars (“much above average”) to one star (“much below average”) are updated on a monthly basis.

These rating changes have impacted referrals to SNFs, and it is possible that changes to this system or other ranking systems could lead to future reimbursement policies that reward or penalize facilities on the basis of the reported quality of care parameters.

SNFs are required to comply with new reporting requirements, effective as of January 16, 2024, relating to ownership by and affiliations with private equity firms and REITs, as well as provide information for inclusion on the CMS Nursing Home Care Compare website regarding staffing and quality measures.

Any of these reporting requirements may impact occupancy at our properties and our business, results of operations, financial condition and cash flows.

These rating systems and other facility reporting requirements may impact occupancy at our properties and our business, results of operations, financial condition and cash flows.

The following is a discussion of certain U.S.

laws and regulations generally applicable to our operators, and in certain cases, to us.

Reimbursement Changes in Response to the Pandemic:

Federal Stimulus Funds and Financial Assistance for Healthcare Providers .

In response to the pandemic, Congress enacted a series of economic stimulus and relief measures.

The CARES Act and related legislation authorized distributions of approximately $185 billion to reimburse eligible healthcare providers for healthcare related expenses or lost revenues that were attributable to coronavirus.

In addition, federal legislation made other forms of financial assistance available to healthcare providers, which impacted our operators to varying degrees.

We do not expect our operators will receive any additional funding from HHS in connection with the pandemic, although certain of our operators have, over the last year, continued to receive distributions at the state level from funding appropriated under the CARES Act and the American Rescue Plan Act of 2021.

Among these forms of financial assistance, the Families First Coronavirus Response Act (“FFCRA”) was enacted in the U.S.

on March 18, 2020, which provided a temporary 6.2% increase to each qualifying state and territory’s FMAP reimbursement until it was phased out as of December 31, 2023 following the expiration of the public health emergency in May 2023.

In exchange for receiving the enhanced federal funding, the FFCRA included a requirement that Medicaid programs keep beneficiaries enrolled through the end of the month in which the public health emergency terminated.

However, Congress decoupled the Medicaid continuous enrollment from the public health emergency and terminated this provision effective March 31, 2023.

Beginning April 1, 2023, states that complied with federal rules regarding beneficiary renewals were eligible to begin the phase-down of the enhanced federal funding according to the following schedule:

6.2 percentage points through March 2023;

5 percentage points through June 2023;

2.5 percentage points through September 2023 and 1.5 percentage points through December 2023.

Following termination of the continuous enrollment provision, total Medicaid enrollment, which had grown substantially during the pandemic, has declined.

The Budget Control Act of 2011 established a Medicare Sequestration of 2%, which is an automatic reduction of certain federal spending as a budget enforcement tool.

Originally, the sequester was intended to be in effect from FY 2013 to FY 2021.

However, most recently, the Infrastructure Investment and Jobs Act extended the sequester through FY 2031.

The full 2% Medicare sequestration went into effect as of July 1, 2022 and gradually increases to 4% from 2030 through 2031.

Quality of Care and Staffing Initiatives .

In addition to pandemic-related reimbursement changes, several regulatory initiatives announced from 2020 to 2022 focused on addressing quality of care in long-term care facilities, including those related to COVID-19 testing and infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies, as well as increased inspection of nursing homes.

Several regulatory initiatives announced from 2020 to 2022 focused on addressing quality of care in long-term care facilities, including those related to COVID-19 testing and infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies, as well as increased inspection of nursing homes.

In addition, the CMS Nursing Home Care Compare website and the Five Star Quality Rating System were updated to include revisions to the inspection process, adjustment of staffing rating thresholds, the implementation of new quality measures and the inclusion of a staff turnover percentage (over a 12-month period).

Additionally, on April 22, 2024, CMS issued a final rule regarding minimum staffing requirements and increased inspections at nursing homes, which CMS estimates exceed existing staffing standards in nearly all states.

The final rule is being implemented on a staggered phase-in basis based on geographic location and will require nursing homes participating in Medicare and Medicaid to maintain a total nurse staffing standard of 3.48 hours per resident day (“HPRD”), which must include at least 0.55 HPRD of direct registered nurse care and 2.45 HPRD of direct nurse aide care.

Additionally, on April 22, 2024, CMS issued a final rule regarding minimum staffing requirements and increased inspections at SNFs, which CMS estimates exceed existing staffing standards in nearly all states.

The final rule is being implemented on a staggered phase-in basis based on geographic location and will require SNFs participating in Medicare and Medicaid to maintain a total nurse staffing standard of 3.48 hours per resident day (“HPRD”), which must include at least 0.55 HPRD of direct registered nurse care and 2.45 HPRD of direct nurse aide care.

Facilities would be permitted to use any combination of nurse staff (registered nurse, licensed practical nurse and licensed vocational nurse or nurse aide) to account for the additional 0.48 HPRD required to comply with the total nurse staffing standard.

In addition, the final rule requires nursing homes to ensure a registered nurse is onsite 24 hours per day, seven days per week, although CMS indicated that a director of nursing role could fulfill such requirement.

In addition, the final rule requires SNFs to ensure a registered nurse is onsite 24 hours per day, seven days per week, although CMS indicated that a director of nursing role could fulfill such requirement.

The final rule also provides possible hardship exemptions for qualifying facilities for some parts of these requirements based on workforce unavailability and other factors.

The final rule was not accompanied by additional funding for our operators to offset the costs associated with meeting these increased staffing requirements in an industry that is already facing staffing shortages.

Since CMS issued the final rule, multiple lawsuits have been filed in federal court to overturn the minimum staffing requirements on the basis that CMS exceeded its authority.

The increased staffing requirements, if not overturned legislatively or by legal action, or if not accompanied by increased state reimbursement to offset the increased financial burden, may have a future adverse impact on the financial condition of many of our operators, which may be material, but which likely would not be experienced until closer to the point of delayed implementation, which ranges from within 90 days of the final rule publication and five years of the final rule publication, depending on the geographic location.

The Biden Administration additionally announced in March 2022 a focus on reviewing private equity investment specifically in the skilled nursing sector.

On November 15, 2023, CMS issued a final rule, effective January 16, 2024, that requires SNFs participating in the Medicare or Medicaid programs to disclose certain ownership and managerial information regarding their relationships with certain entities that lease real estate to SNFs, including REITs.

Multiple lawsuits have been filed in federal court to overturn the minimum staffing requirements on the basis that CMS exceeded its authority.

In April 2025, a federal court in Texas issued an order vacating the rule, which is subject to appeal.

The increased staffing requirements, if not overturned legislatively or by final legal action, or if not accompanied by increased state reimbursement to offset the increased financial burden, may have a future adverse impact on the financial condition of many of our operators, which may be material, but which likely would not be experienced until closer to the point of delayed implementation, ranging from within 90 days and five years of the final rule publication.

Further, on March 30, 2023, CMS issued a memorandum revising and enhancing enforcement efforts for infection control deficiencies found in SNFs that are targeted at higher-level infection control deficiencies that result in actual harm or immediate jeopardy to residents.

Similar to other serious survey deficiencies, penalties for the most serious infection control deficiencies include civil monetary penalties and discretionary payment denials for new resident admissions.

On November 15, 2023, CMS issued a final rule that requires SNFs participating in the Medicare or Medicaid programs to disclose certain ownership and managerial information regarding their relationships with certain entities that lease real estate to SNFs, including REITs, beginning August 1, 2025.

The CMS announcement noted concerns regarding the quality of care provided at SNFs owned by private equity firms, REITs and other investment firms.

There have also been congressional hearings examining the impact of private equity in the U.S.

healthcare system, including the impact on quality of care provided within the skilled nursing industry, the COVID-19 response of nursing homes and the use of federal funds by nursing homes during the pandemic.

Further, in 2024, several U.S.

senators proposed legislation that would, if enacted, restrict certain investors, including REITs and private equity firms, from investing in healthcare facilities or impose penalties on certain landlords of or private equity investors in healthcare facilities whose operators subsequently enter into bankruptcy proceedings.

In addition, in 2024, the Department of Justice (“DOJ”), HHS, and the Federal Trade Commission published a Request for Information seeking public comment on the effects of mergers and other transactions in the healthcare industry, with a focus on consolidation among health care providers, facilities, and ancillary products or services.

These initiatives, as well as additional calls for government review, at the state and federal level, of the role of private equity in the U.S.

healthcare industry and proposed legislation related to certain SNF financial arrangements with REITs, could result in additional requirements on our operators or restrictions on REITs.

In addition, on April 22, 2024, CMS issued the Ensuring Access to Medicaid Services final rule, which requires that, beginning six years after the effective date of the final rule, states generally ensure that at least 80% of Medicaid home and community-based services (“HCBS”) payments be put toward compensation for direct care workers.

On January 8, 2025, the State of Massachusetts enacted a law that requires notification for certain transactions involving SNFs and REITs and restricts new licenses to hospitals with certain facilities leased from REITs.

Legislation with similar restrictions has been proposed in several other states.

In addition, in January 2025, HHS and the Senate Budget Committee issued reports that found private equity investment in healthcare has had negative consequences for patients and providers.

These initiatives, as well as additional calls for federal and state governmental review of the role of private equity in the U.S.

healthcare industry and proposed legislation related to certain SNF financial arrangements with REITs, if enacted, could result in additional requirements or restrictions on our operators or us.

The likelihood of any of these legislative measures passing at the federal level remains uncertain.

On April 22, 2024, CMS issued the Ensuring Access to Medicaid Services final rule, which requires that, beginning six years after the effective date of the final rule, states generally ensure that at least 80% of Medicaid home and community-based services (“HCBS”) payments be put toward compensation for direct care workers.

The final rule also requires more transparency regarding how much states pay for HCBS and how those rates are set.

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Most of our SNF operators derive a substantial portion of their revenue from state Medicaid programs.

Whether and to what extent the level of Medicaid reimbursement covers the actual cost to care for a Medicaid eligible resident varies by state.

Whether and to what extent the level of Medicaid reimbursement covers the actual cost to care for a Medicaid eligible resident varies by state and depends on federal matching levels.

While periodic rate setting occurs and, in most cases, has an inflationary component, the state rate setting process does not always keep pace with inflation or, even if it does, there is a risk that it may still not be sufficient to cover all or a substantial portion of the cost to care for Medicaid eligible residents.

Additionally, rate setting is subject to changes based on state budgetary constraints and political factors, both of which could result in decreased or insufficient reimbursement to the industry even in an environment where costs are rising.

Since our operators’ profit margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement or an increase in the percentage of Medicaid patients has in the past, and may in the future, adversely affect our operators’ results of operations and financial condition, which in turn could adversely impact us.

As indicated above, the CARES Act and American Rescue Plan Act contained several provisions designed to increase coverage, expand benefits, and adjust federal financing for state Medicaid programs.

While the CARES Act provided for a 6.2% FMAP add-on to the Medicaid program during the public health emergency that was phased out as of December 31, 2023, only certain states passed any of this benefit directly to SNF operators either via an enhanced rate or lump sum payments.

The risk of insufficient Medicaid reimbursement rates, along with possible initiatives to push residents historically cared for in SNFs to alternative settings, labor shortages in certain areas and limited regulatory support in certain states, may impact us more acutely in states where we have a larger presence.

Additionally, rate setting is subject to changes based on state budgetary constraints and national and state level political factors, both of which could result in decreased or insufficient reimbursement to the industry even in an environment where costs are rising.

The change in presidential administrations and U.S.

Congressional majorities are increasing the political focus on entitlement programs such as Medicaid, which is creating uncertainty with respect to the level of reimbursement available and the extent of regulation of the industry.

Since our operators’ profit margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement or increases in the percentage of Medicaid patients have in the past, and may in the future, adversely affect our operators’ results of operations and financial condition, which in turn could adversely impact us.

The risk of insufficient Medicaid reimbursement rates or delays in operators receiving such reimbursements, along with possible initiatives to push residents historically cared for in SNFs to alternative settings, labor shortages in certain areas and limited regulatory support for increased levels of reimbursement in certain states, may impact us more acutely in states where we have a larger presence.

While state reimbursement rates have generally improved over the last several years, reimbursement support is not consistent across states, and it is difficult to assess whether the level of reimbursement support has or will continue to adequately keep pace with increased operator costs.

In addition, certain of our operators have experienced delays in receiving state reimbursements, which may impact such operators’ ability to pay rent to us.

We continue to monitor rate adjustment activity, particularly in states in which we have a meaningful presence.

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These reimbursement changes have had and may, together with any further reimbursement changes to the PDPM or value-based purchasing models, in the future have an adverse effect on the operations and financial condition of some of our operators and could adversely impact the ability of our operators to meet their obligations to us.

On May 27, 2020, CMS added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth Providers for the Medicare Part B programs provided by a SNF as a part of the COVID-19 1135 waiver provisions.

The COVID-19 1135 waiver provisions also allowed for the facility to bill an originating site fee to CMS for telehealth services provided to Medicare Part B beneficiary residents of the facility when the services were provided by a physician from an alternate location, effective March 6, 2020 through May 11, 2023, the expiration of the public health emergency.

The Consolidated Appropriations Act of 2023 extended the ability of occupational therapists, physical therapists and speech-language pathologists to continue to furnish these services via telehealth and bill as distant site practitioners until the end of 2024.

On March 30, 2023, CMS issued a memorandum revising and enhancing enforcement efforts for infection control deficiencies found in nursing homes that are targeted at higher-level infection control deficiencies that result in actual harm or immediate jeopardy to residents.

The Budget Control Act of 2011 established a Medicare Sequestration of 2%, which is an automatic reduction of certain federal spending as a budget enforcement tool.

Originally, the sequester was intended to be in effect from FY 2013 to FY 2021.

However, most recently, the Infrastructure Investment and Jobs Act extended the sequester through FY 2031.

The full 2% Medicare sequestration went into effect as of July 1, 2022 and gradually increases to 4% from 2030 through 2031.

As a part of the COVID-19 1135 waiver provisions, in 2020 CMS added physical therapy, occupational therapy and speech-language pathology to the list of approved telehealth providers for the Medicare Part B programs provided by a SNF, which also allowed for the facility to bill an originating site fee to CMS for telehealth services provided to Medicare Part B beneficiary residents of the facility when the services were provided by a physician from an alternate location through expiration of the public health emergency.

Other Regulation:

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More recently, the OIG has conducted increased oversight activities and issued additional guidance regarding its findings related to identified problems with the quality of care and the reporting and investigation of potential abuse or neglect at group homes, nursing homes and SNFs.

The OIG also reviewed the staffing levels reported by SNFs as part of its August 2018 and February 2019 Work Plan updates and included a review of involuntary transfers and discharges from nursing homes in the June 2019 Work Plan updates.

In August 2020, the OIG released its findings regarding its review of staffing levels in SNFs from 2018.

The OIG recommended that CMS enhance efforts to ensure nursing homes meet daily staffing requirements and explore ways to provide consumers with additional information on nursing homes’ daily staffing levels and variability.

The OIG indicated that while the review was initiated before the pandemic emerged, the pandemic reinforces the importance of sufficient staffing for nursing homes, as inadequate staffing can make it more difficult for nursing homes to respond to infectious disease outbreaks.

It is unknown what impact, if any, enhanced scrutiny of staffing levels by OIG and CMS will have on our operators.

Department of Justice and Other Enforcement Actions .

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The DOJ has historically used the False Claims Act to civilly pursue nursing homes that bill the federal government for services not rendered or care that is grossly substandard.

For example, California prosecutors announced in March 2021 an investigation into a skilled nursing provider that is affiliated with one of our operators, alleging the chain manipulated the submission of staffing level data in order to improve its Five Star rating.

For example, in November 2024, one of the Company’s skilled nursing operators disclosed that it had received civil investigative demands from the federal government regarding its reimbursement and referral practices.

In addition, California prosecutors announced in March 2021 an investigation into a skilled nursing provider that is affiliated with one of our operators, alleging the chain manipulated the submission of staffing level data in order to improve its Five Star rating.

In 2020, the DOJ launched a National Nursing Home Initiative to coordinate and enhance civil and criminal enforcement actions against nursing homes with grossly substandard deficiencies.

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An adverse resolution of any of these enforcement activities or investigations incurred by our operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on their reputation, business, results of operations and cash flows.

Third Quarter of 2024 and Recent Highlights

● During the three and nine months ended September 30, 2024, we acquired 66 facilities and 102 facilities for aggregate consideration of $445.7 million and $561.8 million, respectively.

Of these 66 facilities acquired during the three months ended September 30, 2024, 63 facilities relate to our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024 (see Note 2 – Real Estate Assets for additional information).

First Quarter of 2025 and Recent Highlights

● During the three months ended March 31, 2025, we acquired six facilities for aggregate consideration of $58.3 million.

The initial cash yield (the initial annual contractual cash rent divided by the purchase price) on these asset acquisitions was between 9.9% and 10.0%.

● We invested $25.4 million and $81.6 million under our construction in progress and capital improvement programs during the three and nine months ended September 30, 2024, respectively.

● During the three and nine months ended September 30, 2024, we financed $54.9 million and $209.0 million, respectively, of real estate loans originated during 2024 with a weighted average interest rate of 10.2%.

We also advanced $0.4 million and $3.8 million under existing real estate loans during the three and nine months ended September 30, 2024, respectively.

● We invested $35.3 million under our construction in progress and capital improvement programs during the three months ended March 31, 2025.

● We funded $20.0 million under two new real estate loans with a weighted average interest rate of 10.8% during the three months ended March 31, 2025.

Additionally, we advanced $6.5 million under existing real estate loans during the three months ended March 31, 2025.

Principal repayments of $43.5 million were received on real estate loans during the three months ended March 31, 2025.

● In April 2025, we acquired 45 facilities in the U.K.

(43 facilities) and in the Bailiwick of Jersey (2 facilities) for total consideration, including transaction expenses, of £259.8 million.

The facilities will be leased to 4 existing operators and 2 new operators with a weighted average initial cash yield of 10.0%.

Dispositions and Impairments

● During the three and nine months ended September 30, 2024, we sold six facilities (four ALFs and two SNFs) and 15 facilities (11 SNFs and four ALFs) for $23.9 million and $68.8 million in net cash proceeds, respectively, recognizing a net loss of $0.2 million and a net gain of $11.3 million, respectively.

● During the three and nine months ended September 30, 2024, we recorded impairments on five and 12 facilities of $8.6 million and $22.1 million, respectively.

Of the $22.1 million, $13.0 million related to eight held for use facilities (of which $7.2 million related to four closed facilities) for which the carrying value exceeded the fair value, and $9.1 million related to four facilities that were classified as held for sale for which the carrying values exceeded the estimated fair value less costs to sell.

● During the three months ended March 31, 2025, we sold 27 facilities (26 SNFs and one ALF) for $120.9 million in net cash proceeds, recognizing a net gain of $10.1 million.

● During the three months ended March 31, 2025, we recorded an impairment of $1.2 million on one held for use facility for which the carrying value exceeded the fair value .

Financing Activities

● 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 sales price of up to $1.25 billion (the “2024 ATM Program,” and together with the 2021 ATM Program, the “ATM Programs”) may be sold from time to time.

● During the three and nine months ended September 30, 2024, we sold 14.2 million and 22.9 million shares of common stock under our ATM Programs and Dividend Reinvestment and Common Stock Purchase Plan (“DRCSPP”), generating aggregate gross proceeds of $530.2 million and $808.3 million, respectively.

● During the three months ended March 31, 2025, we sold 7.1 million shares of common stock under our $1.25 billion At-The-Market Offering Program (“ATM Program”) and Dividend Reinvestment and Common Stock Purchase Plan (“DRCSPP”), generating aggregate gross proceeds of $264.2 million.

● We repaid $400 million of 4.50% senior notes on the January 15, 2025 maturity date using available cash.

● In April 2025, the maturity date of the $1.45 billion senior unsecured multicurrency revolving credit facility (“Revolving Credit Facility”) was extended from April 30, 2025 to October 30, 2025.

● Omega repaid the $50 million term loan (“OP Term Loan”) on April 29, 2025, prior to its original maturity date.

Other Highlights

● During the three and nine months ended September 30, 2024, we financed $23.5 million and $33.9 million, respectively, of non-real estate loans that were originated during 2024 with a weighted average interest rate of 9.9%.

We also advanced $0.4 million and $14.1 million under existing non-real estate loans during the three and nine months ended September 30, 2024, respectively.

We received principal repayments of $37.4 million and $90.2 million on non-real estate loans during the three months and nine months ended September 30, 2024, respectively.

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

In July 2024, we acquired the remaining 51% interest in the Cindat Joint Venture for (i) $98.9 million of cash consideration including direct transaction costs, (ii) the assumption of a £188.6 million mortgage loan with an estimated fair value of $264.0 million and (iii) deferred contingent consideration with an estimated fair value of $2.0 million.

The deferred contingent consideration payment, which will be between zero and $3.0 million, becomes payable to the sellers in December 2024 if certain contingencies are satisfied.

As part of the acquisition, we assumed a £188.6 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 four interest rate cap contracts that ensure the annual interest rate does not exceed 10.38%.

● We advanced $14.4 million under existing non-real estate loans during the three months ended March 31, 2025.

Principal repayments of $16.0 million were received on non-real estate loans during the three months ended March 31, 2025.

Collectibility Issues

● During the nine months ended September 30, 2024, we entered into a lease with a new operator as part of the transition of facilities from another operator.

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

We also did not have any straight-line receivable write-offs through rental income as a result of placing operators on a cash basis during the three months and nine months ended September 30, 2024.

As of September 30, 2024, 18 operators are on a cash basis.

These operators represent an aggregate 18.6% of our total revenues for the nine months ended September 30, 2024.

● During the third quarter of 2024, Maplewood Senior Living (along with affiliates, “Maplewood”) continued to short-pay the contractual rent amount due under its lease agreement, paying $12.1 million of contractual rent, a short pay of $5.2 million of the $17.3 million due under its lease agreement.

In addition, Maplewood did not pay the $0.8 million of contractual interest due under its loan agreement during the third quarter of 2024.

As Maplewood is on a cash basis of revenue recognition, we have recorded $12.1 million and $35.2 million of revenue related to Maplewood for the three and nine months ended September 30, 2024, respectively, for the contractual rent payments that we received.

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.

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

As discussed in Note 4 – 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 and demanded immediate repayment of past due contractual rent and replenishment of the security deposit, and accelerated all principal and accrued interest due under the revolving credit facility.

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”) or their designee(s), 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 secured revolving credit facility 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 revolving loan with Maplewood up to the amortized cost basis of the loan.

As of September 30, 2024, the amortized cost basis of this loan was $263.6 million, which represents 18.9% of the total amortized cost basis of all of Omega’s real estate loan receivables.

See Note 5 – Real Estate Loans Receivable.

In October 2024, Maplewood short-paid the contractual rent and interest amounts due under its lease and loan agreements by $1.9 million.

● In June 2024, LaVie Care Centers, LLC (“LaVie”) commenced voluntary cases under Chapter 11 of the U.S.

● During the three months ended March 31, 2025, we did not 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 the three months ended March 31, 2025.

We provided one cash basis operator with a lease inducement of $10.0 million in connection with an execution of a new lease, which was recorded as a reduction to the rental income recognized for the three months ended March 31, 2025.

As of March 31, 2025, 20 operators are on a cash basis.

These operators represent 18.6% of our total revenues for the three months ended March 31, 2025.

● In the first quarter of 2025, Maplewood Senior Living (along with affiliates, “Maplewood”) paid $13.6 million of contractual rent, a short pay of $6.0 million of the $19.6 million (consisting of $17.3 million of contractual rent and $2.3 million of contractual interest) due under its lease and loan agreements.

These amounts do not include contractual rent and payments related to Inspir Embassy Row in Washington D.C.

of $2.1 million, which is separately disclosed in Note 2 – Real Estate Assets.

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.

Maplewood is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $13.6 million for the three months ended March 31, 2025 for contractual rent payments that were received from Maplewood.

No interest income was recorded on the Maplewood secured revolving credit facility during the three months ended March 31, 2025 as the loan is on non-accrual status for interest recognition.

In April 2025, Maplewood short-paid the contractual rent and interest amounts due under its lease and loan agreements by $2.1 million.

● In the first quarter of 2025, LaVie Care Centers, LLC (“LaVie”) paid full contractual rent of $9.3 million.

As LaVie is on a cash basis of revenue recognition for lease purposes, rental income recorded was equal to cash received of $9.3 million during the three months ended March 31, 2025.

We did not recognize any interest income related to LaVie during the three months ended March 31, 2025 as the three loans outstanding have PIK interest and are on non-accrual status.

In April 2025, LaVie paid full contractual rent of $3.1 million due under its lease agreement.

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.

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 $7.8 million provision for credit losses in the second quarter of 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.

As LaVie is on a cash basis of revenue recognition for lease purposes, only the $9.2 million and $19.5 million of contractual rent payments that we received from LaVie were recorded as rental income during the three and nine months ended September 30, 2024, respectively.

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

● In April 2024, we transitioned the remaining six facilities previously included in Guardian Healthcare’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 $2.9 million and $5.8 million, respectively, related to the lease with the new operator during the three and nine months ended September 30, 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 the third quarter of 2024.

Agemo is on a cash basis of revenue recognition for lease purposes, and we recorded rental income of $6.0 million and $17.9 million, respectively, for the three and nine months ended September 30, 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 $1.2 million and $3.6 million, respectively, of interest payments that we received during the three and nine months ended September 30, 2024 were applied directly against the principal balance outstanding.

● On October 25, 2024, the Board of Directors declared a cash dividend of $0.67 per share.

The dividend will be paid on November 15, 2024 to stockholders of record as of the close of business on November 4, 2024.

Bankruptcy Court for the Northern District of Georgia, Atlanta Division (the “Bankruptcy Court”) in June 2024.

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 debtor(s) to operators designated by the Plan Sponsor upon the effective date of the plan.

● In March 2025, Genesis Healthcare, Inc.

(“Genesis”) failed to make the rent payment due under its lease agreement and the interest payment due under one of its three loan agreements.

As Genesis is on a cash basis of revenue recognition, we recognized rental income of $12.5 million related to Genesis during the three months ended March 31, 2025, which includes $8.3 million for contractual rent payments received and $4.2 million from the application of proceeds from the letter of credit that was held as collateral from Genesis.

In addition, we recognized $4.2 million (which includes $0.1 million from the application of proceeds from the letter of credit) related to three loans with Genesis during the three months ended March 31, 2025.

After the application of proceeds from the letter of credit, there is $3.5 million remaining under the letter of credit.

In April 2025, Genesis paid full contractual rent and interest of $4.8 million.

● On April 23, 2025, the Board of Directors declared a cash dividend of $0.67 per share.

The dividend will be paid on May 15, 2025 to stockholders of record as of the close of business on May 5, 2025.

Results of Operations

The following is our discussion of the consolidated results of operations, financial position and liquidity and capital resources, which should be read in conjunction with our unaudited consolidated financial statements and accompanying notes.

Comparison of results of operations for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Comparison of results of operations for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Three Months Ended

Nine Months Ended

September 30,

Rental income

6 unchanged sentences

Impairment on real estate properties

(Recovery) provision for credit losses

Provision for credit losses

Interest expense

Other income (expense):

Other (expense) income – net

Other income – net

Loss on debt extinguishment

(Loss) gain on assets sold – net

Gain (loss) on assets sold – net

Income tax expense

Income (loss) from unconsolidated joint ventures

Three Months Ended September 30, 2024 and 2023

The following is a description of certain of the changes in revenues for the three months ended September 30, 2024 compared to the same period in 2023:

● The increase in rental income was primarily the result of (i) an $18.3 million increase related to facility acquisitions made throughout 2023 and 2024, lease extensions and other rent escalations, (ii) a $6.1 million increase as a result of fewer straight-line rent receivable write-offs in the third quarter of 2024 compared to the same period in 2023 and (iii) a $0.7 million net increase related to impact of facility transitions, primarily from non-paying cash basis operators to straight-line basis operators.

The increase was partially offset by a $3.7 million net decrease in rental income from cash basis operators, primarily related to Maplewood, 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 $9.2 million increase related to new loans and additional fundings on existing loans made throughout 2023 and 2024.

As noted above, during the three months ended September 30, 2024, we funded $55.3 million in new or existing real estate loans and $23.9 million in new or existing non-real estate loans.

● The increase in miscellaneous income primarily relates to a $3.0 million non-refundable deposit related to the potential sale of certain facilities that was recognized as income during the third quarter of 2024 when the sale was terminated.

The following is a description of certain of the changes in our expenses for the three months ended September 30, 2024 compared to the same period in 2023:

● 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 $0.7 million increase in payroll and benefits and (ii) a $0.6 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 two facilities that were classified as held for sale for which the carrying values exceeded the fair value less costs to sell and three held for use facilities (one of which was closed) for which the carrying value exceeded the fair value.

The 2023 impairments were recognized in connection with 19 held for use facilities for which the carrying value exceeded the fair value.

Income from unconsolidated joint ventures

The following is a description of certain of the changes in revenues for the three months ended March 31, 2025 compared to the same period in 2024:

● The increase in rental income was primarily the result of (i) a $26.8 million increase related to facility acquisitions made throughout 2024 and 2025, a construction in progress project placed in service in 2025, lease extensions and other rent escalations, (ii) $7.6 million net increase in rental income from cash basis operators, primarily related to LaVie and Maplewood, as a result of receiving higher cash rent payments period over period from these operators and (iii) a $0.4 million net increase related to impact of facility transitions, primarily from non-paying cash basis operators to straight-line basis operators.

The increase was partially offset by a $10.0 million lease inducement provided to a cash basis operator that was recorded as a reduction to rental income in the first quarter of 2025.

● The increase in interest income was primarily due to a $10.8 million increase related to new loans and additional fundings on existing loans made throughout 2024 and 2025, partially offset by a $3.7 million decrease related to principal repayments on our loans during 2024 and 2025.

The following is a description of certain of the changes in our expenses for the three months ended March 31, 2025 compared to the same period in 2024:

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

● The increase in general and administrative (“G&A”) expense primarily relates to $6.6 million of incremental non-cash stock-based compensation expense and $2.2 million of incremental payroll expense related to the termination of the employment agreement of our former Chief Operating Officer in the first quarter of 2025.

Additional information is disclosed in Note 14 – Stock-Based Compensation.

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

● The 2025 impairments were recognized in connection with one held for use facility for which the carrying value exceeded the fair value.

The 2024 impairments were recognized in connection with three held for use facilities for which the carrying value exceeded the fair value.

The 2025 and 2024 impairments were primarily the result of decisions to exit certain non-strategic facilities and/or terminate our relationships with certain non-strategic operators.

● The change in provision for credit losses primarily relates to (i) a decrease in the general reserve recorded primarily resulting from decreases in loss rates utilized in the estimate of expected credit losses for loans and (ii) a net decrease in aggregate specific provisions recorded during the third quarter of 2024 compared to same period in 2023.

● The decrease in interest expense primarily relates to (i) the repayment of $400 million of 4.95% senior notes in April 2024, (ii) the repayment of $350 million of 4.375% senior notes in August 2023 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 and (ii) the assumption of the £188.6 million mortgage loan as part of our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024.

● The decrease in provision for credit losses primarily relates to a decrease 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, partially offset by a net increase in aggregate specific provisions recorded during the first quarter of 2025 compared to same period in 2024.

● The decrease in interest expense primarily relates to (i) the repayment of $400 million of 4.50% senior notes in January 2025, (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 an increase due to the assumption of the £188.6 million mortgage loan as part of our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024.

Other Income (Expense)

The decrease in total other income (expense) was primarily due to (i) a $6.4 million decrease in other (expense) income – net primarily related to realized fair value losses on financial instruments and decreased interest income on short-term investments due to lower invested cash in the third quarter of 2024 compared to the same period in 2023 and (ii) a $44.3 million decrease in gain on assets sold related to the sale of six facilities in the third quarter of 2024 compared to the sale of 25 facilities during the same period in 2023.

The increase in total other income (expense) was primarily due to (i) a $11.5 million increase in gain on assets sold related to the sale of 27 facilities in the first quarter of 2025 compared to the sale of four facilities during the same period in 2024 and (ii) a $1.3 million decrease in loss on debt extinguishment related to the early repayment of nine HUD mortgages during the first quarter of 2024, partially offset by a $2.2 million decrease in other income – net primarily related to decreased interest income on short-term investments due to lower invested cash in the first quarter of 2025 compared to the same period in 2024.

Income Tax Expense

The increase in income tax expense was primarily due to 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 increase in income (loss) from unconsolidated joint ventures was primarily related to one unconsolidated joint venture, OMG Senior Housing, LLC., which sold one facility during the third quarter of 2024 for a gain.

Nine Months Ended September 30, 2024 and 2023

The following is a description of certain of the changes in revenues for the nine months ended September 30, 2024 compared to the same period in 2023:

● The increase in rental income was primarily the result of (i) a $37.1 million increase related to facility acquisitions made throughout 2023 and 2024, lease extensions and other rent escalations, (ii) an increase related to a $12.5 million option termination fee payment to Maplewood that was recorded as a reduction to rental income in the first quarter of 2023, (iii) a $7.0 million increase as a result of fewer straight-line rent receivable write-offs in the third quarter of 2024 compared to the same period in 2023 and (iv) a $0.4 million net increase related to the impact of facility transitions, primarily from non-paying cash basis operators to straight-line basis operators.

The increase was partially offset by a $23.3 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.

● The increase in interest income was primarily due to a $27.7 million increase related to new loans and additional fundings on existing loans made throughout 2023 and 2024, partially offset by (i) a $1.6 million decrease related to principal payments on our loans during 2023 and 2024 and (ii) a $0.9 million net decrease related to loans on non-accrual status, primarily the Maplewood loan, in which we have recognized less interest income period over period as a result of receiving lower cash payments or the loans converting to payment-in-kind interest and being placed on non-accrual status.

As noted above, during the nine months ended September 30, 2024, we funded $212.8 million in new or existing real estate loans and $48.0 million in new or existing non-real estate loans.

The following is a description of certain of the changes in our expenses for the nine months ended September 30, 2024 compared to the same period in 2023:

● The increase in general and administrative (“G&A”) expense primarily relates to (i) a $2.9 million increase in payroll and benefits and (ii) a $1.2 million increase in stock-based compensation expense, partially offset by a $0.9 million decrease in professional service costs.

● The 2024 impairments were recognized in connection with four 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 (four of which were closed) 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 values less costs to sell and 23 held for use facilities (three of which were closed) 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 terminate our relationships with certain non-strategic operators.

● The change in provision for credit losses primarily relates to a decrease in the general reserve recorded primarily resulting from decreases in loss rates utilized in the estimate of expected credit losses for loans.

The overall decrease was partially offset by (i) an adjustment to the internal risk rating for the Maplewood loan (see Note 5 – Real Estate Loans Receivable) in the first quarter of 2024 and (ii) a net increase in aggregate specific provisions recorded during the third quarter of 2024 compared to same period in 2023.

● 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 £188.6 million 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 (i) a $58.7 million decrease in gain on assets sold related to the sale of 15 facilities in 2024 compared to the sale of 37 facilities during the same period in 2023, and (ii) a $1.6 million increase in loss on debt extinguishment primarily related to the early repayment of nine HUD mortgages during the first quarter of 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

as a result of acquisitions in 2024 and 2025.

Funds from Operations

11 unchanged sentences

Investors and potential investors in our securities should not rely on this measure as a substitute for any GAAP measure, including net income.

The following table presents our Nareit FFO results for the three and nine months ended September 30, 2024 and 2023:

The following table presents our Nareit FFO results for the three months ended March 31, 2025 and 2024:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Net income (1)

Add back loss (deduct gain) from real estate dispositions

Deduct gain from real estate dispositions - unconsolidated joint ventures

(Deduct gain) add back loss from real estate dispositions

Elimination of non-cash items included in net income:

1 unchanged sentence

Depreciation – unconsolidated joint ventures

Add back provision for impairments on real estate properties

(1) The three and nine months ended September 30, 2024 include the application of $1.1 million and $1.7 million, respectively, of security deposits (letter of credit and cash deposits) in revenue.

The three and nine months ended September 30, 2023 include the application of $5.9 million and $11.4 million, respectively, of security deposits (letter of credit and cash deposits) in revenue.

Add back impairments on real estate properties

(1) The three months ended March 31, 2025 and 2024 include the application of $4.3 million and $0.5 million, respectively, of security deposits (letter of credit and cash deposits) in revenue.

Liquidity and Capital Resources

Sources and Uses

Our primary sources of cash include rental income and interest receipts, existing availability under our Revolving Credit Facility, proceeds from our DRCSPP and the 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.

Our primary sources of cash include rental income and interest receipts, existing availability under our Revolving Credit Facility, proceeds from our DRCSPP 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 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

At September 30, 2024, we had total assets of $9.6 billion, total equity of $4.4 billion and total debt of $4.9 billion in our consolidated financial statements, with such debt representing 52.6% of total capitalization.

At September 30, 2024 and December 31, 2023, the weighted average annual interest rate of our debt was 4.6% and 4.4%, respectively.

Additionally, as of September 30, 2024, 94.9% of our debt with outstanding principal balances has fixed interest payments after reflecting the impact of interest rate swaps that are designated as cash flow hedges.

Our high percentage of fixed interest debt has kept our interest expense relatively flat year over year despite fluctuations in interest rates.

As of September 30, 2024, we had long-term credit ratings of Baa3 from Moody’s and BBB- from S&P Global and Fitch.

At March 31, 2025, we had total assets of $9.7 billion, total equity of $4.9 billion and total debt of $4.5 billion in our consolidated financial statements, with such debt representing 47.5% of total capitalization.

At March 31, 2025 and December 31, 2024, the weighted average annual interest rate of our debt was 4.6%.

Additionally, as of March 31, 2025, 94.7% of our debt with outstanding principal balances has fixed interest payments after reflecting the impact of interest rate swaps that are designated as cash flow hedges.

As of March 31, 2025, we had long-term credit ratings of Baa3 from Moody’s and BBB- from S&P Global and Fitch.

Credit ratings impact our ability to access capital and directly impact our cost of capital as well.

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, 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 discussed above, as part of our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024, we assumed a £188.6 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 four interest rate cap contracts that ensure the annual interest rate does not exceed 10.38%.

As of September 30, 2024, we had $342.4 million of cash and cash equivalents on our Consolidated Balance Sheets.

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 our $428.5 million term loan with a maturity date on August 8, 2025 (the “2025 Term Loan”).

Our Revolving Credit Facility and OP Term Loan had original maturity dates in April 2025.

In April 2025, the maturity date of the Revolving Credit Facility was extended from April 30, 2025 to October 30, 2025.

Omega previously provided notification in January 2025 to extend the maturity date of the OP Term Loan from April 30, 2025 to October 30, 2025.

However, subsequent to quarter end, Omega elected to repay the OP Term Loan on April 29, 2025, prior to its original maturity date.

The 2025 Term Loan matures on August 8, 2025.

However, we also have the option to extend the 2025 Term Loan for two sequential 12-month periods.

Our next senior note maturity is the $600 million of 5.250% senior notes due January 2026.

As of September 30, 2024, we had $1.2 billion of potential common share issuances remaining under the 2024 ATM Program and $1.45 billion of availability under our Revolving Credit Facility.

As of March 31, 2025, we had $368.0 million of cash and cash equivalents on our Consolidated Balance Sheets.

As of March 31, 2025, we had $656.5 million of potential common share issuances remaining under the ATM Program and $1.45 billion of availability under our Revolving Credit Facility.

This combination of liquidity sources, along with cash from operating activities, provides us with the 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 September 30, 2024 and December 31, 2023, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

As of March 31, 2025 and December 31, 2024, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

Supplemental Guarantor Information

Parent has issued $4.2 billion aggregate principal of senior notes outstanding at September 30, 2024 that were registered under the Securities Act of 1933, as amended.

Parent has issued $3.8 billion aggregate principal of senior notes outstanding at March 31, 2025 that were registered under the Securities Act of 1933, as amended.

The senior notes are guaranteed by Omega OP.

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However, the guarantees are effectively subordinated to any secured debt of Omega OP.

As of September 30, 2024, there were no significant restrictions on the ability of Omega OP to make distributions to Omega.

At September 30, 2024, we had 268.2 million shares of common stock outstanding, and our shares had a market value of $10.9 billion.

The following is a summary of activity under our equity programs during the three and nine months ended September 30, 2024:

● We issued 11.6 million and 19.9 million shares of common stock under our ATM Programs for aggregate gross proceeds of $439.7 million and $703.9 million during the three and nine months ended September 30, 2024, respectively.

We did not utilize the forward provisions under the ATM Programs.

We have $1.2 billion of potential common share issuances remaining under the 2024 ATM Program as of September 30, 2024.

● We issued 2.6 million and 3.0 million shares of common stock under the DRCSPP during the three and nine months ended September 30, 2024, respectively.

Aggregate gross proceeds from these sales were $90.5 million and $104.4 million during the three and nine months ended September 30, 2024, respectively.

● We did not repurchase any shares of our outstanding common stock under the $500 Million Stock Repurchase Program.

We have $357.8 million remaining authorized for repurchases under the $500 Million Stock Repurchase Program as of September 30, 2024.

As of March 31, 2025, there were no significant restrictions on the ability of Omega OP to make distributions to Omega.

At March 31, 2025, we had 286.2 million shares of common stock outstanding, and our shares had a market value of $10.9 billion.

The following is a summary of activity under our equity programs during the three months ended March 31, 2025:

● We issued 4.4 million shares of common stock under our ATM Program for aggregate gross proceeds of $164.4 million during the three months ended March 31, 2025.

We did not utilize the forward provisions under the ATM Program.

We have $656.5 million of potential common share issuances remaining under the ATM Program as of March 31, 2025.

● We issued 2.7 million shares of common stock under the DRCSPP during the three months ended March 31, 2025.

Aggregate gross proceeds from these sales were $99.8 million during the three months ended March 31, 2025.

● We did not repurchase any shares of our outstanding common stock under the $500 Million Stock Repurchase Program, which expired in March 2025.

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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To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100% of our “REIT taxable income” as adjusted, we will be subject to tax thereon at regular corporate rates.

For the nine months ended September 30 , 2024, we paid dividends of $504.0 million to our common stockholders.

For the three months ended March 31 , 2025, we paid dividends of $189.2 million to our common stockholders.

On February 18, 2025, we paid dividends of $0.67 per outstanding common share to the common stockholders of record as of the close of business on February 10, 2025.

On May 15, 2024, we paid dividends of $0.67 per outstanding common share to the common stockholders of record as of the close of business on April 30, 2024.

On August 15, 2024, we paid dividends of $0.67 per outstanding common share to the common stockholders of record as of the close of business on August 5, 2024.

Material Cash Requirements

Other than the debt service requirements associated with the assumption of a £188.6 million mortgage loan related to our acquisition of the remaining 51% interest in the Cindat Joint Venture in July 2024, during the nine months ended September 30 , 2024, there were no significant changes to our material cash requirements from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of September 30, 2024, we had $244.5 million of commitments to fund the construction of new facilities, capital improvements and other commitments under lease agreements.

During the three months ended March 31 , 2025, there were no significant changes to our material cash requirements from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024.

As of March 31, 2025, we had $227.8 million of commitments to fund the construction of new facilities, capital improvements and other commitments under lease agreements.

Additionally, we have commitments to fund $40.0 million of advancements under existing real estate loans and $56.3 million of advancements under existing non-real estate loans.

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Cash Flow Summary

Cash, cash equivalents and restricted cash totaled $360.3 million as of September 30 , 2024, a decrease of $84.4 million as compared to the balance at December 31, 2023.

The following is a summary of our sources and uses of cash flows for the nine months ended September 30 , 2024 as compared to the nine months ended September 30, 2023 (dollars in thousands):

Nine Months Ended September 30,

Cash, cash equivalents and restricted cash totaled $404.1 million as of March 31 , 2025, a decrease of $144.7 million as compared to the balance at December 31, 2024.

The following is a summary of our sources and uses of cash flows for the three months ended March 31 , 2025 as compared to the three months ended March 31, 2024 (dollars in thousands):

Three Months Ended March 31,

Increase/(Decrease)

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Financing activities

The following is a discussion of changes in cash, cash equivalents and restricted cash for the nine months ended September 30 , 2024 compared to the nine months ended September 30, 2023.

The following is a discussion of changes in cash, cash equivalents and restricted cash for the three months ended March 31 , 2025 compared to the months ended March 31, 2024.

Operating Activities – The increase in net cash provided by operating activities is driven primarily by an increase of $39.7 million of net income, net of $3.1 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 $9.2 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 primarily related to (i) a $192.5 million decrease in proceeds from the sales of real estate investments, (ii) a $52.7 million increase in loan placements, net of repayments due to new loans advanced in 2024 and significant paydowns on loans during the second quarter of 2023, (iii) a $29.2 million increase in capital improvements to real estate investments and construction in progress primarily as a result of the on-going construction of an ALF in Washington D.C., (iv) an $18.6 million increase in real estate acquisitions, including our acquisition of the remaining 51% interest in the Cindat Joint Venture, and (v) a $4.4 million decrease in receipts from insurance proceeds, partially offset by (i) an $11.8 million decrease in investments in unconsolidated joint ventures and (ii) an $8.4 million increase in proceeds from net investment hedges related to the termination of two foreign currency forward contracts during the first quarter of 2024.

Financing Activities – The increase in cash used in financing activities primarily related to (i) a $484.8 million increase in repayments on long-term borrowings, net of proceeds, primarily due to the 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 $24.7 million increase in dividends paid primarily related to share issuances during 2023 and 2024, (iv) a $3.6 million increase in payment of financing related costs related to costs incurred in connection with the assumption of the £188.6 million mortgage loan as part of our acquisition of the remaining 51% interest in the Cindat Joint Venture and the early repayment of nine HUD mortgages during the first quarter of 2024 and (v) a $2.2 million increase in distributions to Omega OP Unit holders, partially offset by a $473.5 million increase in net proceeds from issuance of common stock as a result of increased volume under our ATM Programs and DRCSPP.

Investing Activities – The increase in cash provided by investing activities primarily related to (i) a $110.8 million increase in proceeds from the sales of real estate investments and (ii) a $55.4 million increase in loan repayments, net of placements as a result of paydowns on mortgage loans due from Ciena Healthcare Management, Inc.

and on other loans during the first quarter of 2025.

The overall increase in cash provided by investing activities was partially offset by (i) a $45.1 million increase in real estate acquisitions, (ii) the funding of a $30.1 million acquisition deposit in the first quarter of 2025 for a 44-facility asset acquisition that closed in April 2025, (iii) a $13.8 million increase in capital improvements to real estate investments and construction in progress primarily related to an ALF in Washington D.C.

that was placed into service in February 2025, (iv) a $8.4 million decrease in proceeds from net investment hedges related to the termination of two foreign currency forward contracts during the first quarter of 2024 and (v) a $1.3 million decrease in receipts from insurance proceeds.

Financing Activities – The increase in cash used in financing activities primarily related to (i) a $358.7 million increase in repayments on long-term borrowings driven by the repayment of the $400 million of 4.50% senior notes that matured on January 15, 2025, (ii) a $24.5 million increase in dividends paid primarily related to share issuances during 2024 and 2025, and (iii) a $8.2 million increase in distributions to Omega OP Unit holders.

The overall increase in cash used in financing activities was partially offset by (i) a $228.4 million increase in net proceeds from issuance of common stock as a result of increased volume under our ATM Programs and DRCSPP and (ii) a $1.3 million decrease in payment of financing related costs related to the early repayment of nine HUD mortgages during the first quarter of 2024 .

Critical Accounting Policies and Estimates

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There have been no material changes to our critical accounting policies or estimates since December 31, 2024.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

During the quarter ended March 31, 2025, there were no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024.

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 2. Management’s Discussion and Analysis