OMEGA HEALTHCARE INVESTORS INC 10-Q

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements and Factors Affecting Future Results Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us” and “our” and other similar terms in this Quarterly Report on Form 10-Q refer to Omega Healthcare Investors, Inc. and its consolidated subsidiaries . The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this document. This document contains “forward-looking statements” within the meaning of the federal securities laws. These statements relate to our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements other than statements of historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology including, but not limited to, terms such as “may,” “will,” “anticipates,” “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. These statements are based on information available on the date of this filing and only speak as to the date hereof and no obligation to update such forward-looking statements should be assumed. Our actual results may differ materially from those reflected in the forward-looking statements contained herein as a result of a variety of factors, including, among other things: (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 the management of infectious diseases; (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; (6) changes in tax laws and regulations affecting real estate investment trusts (“REITs”), including as the result of any policy changes driven by the current focus on capital providers to the healthcare industry; (7) our ability to re-lease, otherwise transition or sell underperforming assets or assets held for sale on a timely basis and on terms that allow us to realize the carrying value of these assets or to redeploy the proceeds therefrom on favorable terms, including due to the potential impact of changes in the SNF and assisted living facility (“ALF”) markets or local real estate conditions; (8) the availability and cost of capital to us; (9) changes in our credit ratings and the ratings of our debt securities; (10) competition in the financing of healthcare facilities; (11) competition in the long-term healthcare industry and shifts in the perception of various types of long-term care facilities, including SNFs and ALFs; (12) changes in the financial position of our operators; (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; and (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. 30 Table of Contents Summary Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is organized as follows: ● Business Overview ● Outlook, Trends and Other Conditions ● Government Regulation and Reimbursement ● First Quarter of 2025 and Recent Highlights ● Results of Operations ● Funds from Operations ● Liquidity and Capital Resources ● Critical Accounting Policies and Estimates Business Overview Omega Healthcare Investors, Inc. (“Parent”) is a Maryland corporation that, together with its consolidated subsidiaries (collectively, “Omega” or “Company”) has elected to be taxed as a REIT for federal income tax purposes. 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 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.”). Our core business is to provide financing and capital to the long-term healthcare industry with a particular focus on SNFs, ALFs, and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings. Our core portfolio consists of our long-term leases and real estate loans with healthcare operating companies and affiliates (collectively, our “operators”). Real estate loans consist of mortgage loans and other real estate loans that are primarily collateralized by a first, second or third mortgage lien or a leasehold mortgage on, or an assignment of the partnership interest in the related properties. In addition to our core investments, we make loans to operators and/or their principals. These loans, which may be either unsecured or secured by the collateral of the borrower, are classified as non-real estate loans. 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. 31 Table of Contents Outlook, Trends and Other Conditions 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 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. 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. 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 The following information supplements and updates, and should be read in conjunction with, the information contained under the caption Item 1. Business – Government Regulation and Reimbursement in our Annual Report on Form 10-K for the year ended December 31, 2024. The healthcare industry is heavily regulated. 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 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. The ultimate timing or effect of these changes, which may be applied retroactively, cannot be predicted. 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 U.S., among others. 32 Table of Contents 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. 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. 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. Quality of Care and Staffing Initiatives . 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). 33 Table of Contents 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 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. 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. 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. 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. It is uncertain what the ultimate impact of the final rule, as well as similar initiatives at the state level, will be on providers of Medicaid HCBS services, given uncertainty related to how HCBS providers are currently spending Medicaid dollars, how many providers fall below the required 80% threshold and how well regulators can measure and track spending by HCBS providers. In addition, it remains unclear whether similar requirements, including those establishing minimum allocations of Medicaid or other reimbursements to direct care workers, will be proposed for SNFs, ALFs and other senior care providers; any such requirements, if enacted, could have a material adverse impact on the financial condition of our operators. 34 Table of Contents Reimbursement Generally Medicaid . 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 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 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. Medicare . On July 31, 2024, CMS issued a final rule regarding the government fiscal year 2025 Medicare payment rates and quality payment programs for SNFs, with aggregate Medicare Part A payments projected to increase by $1.4 billion, or 4.2%, for fiscal year 2025 compared to fiscal year 2024. This estimated reimbursement increase is attributable to a 4.2% net market basket update to the payment rates, which is based on a 3.0% SNF market basket increase plus a 1.7% market basket forecast error adjustment and less a 0.5% productivity adjustment. In addition to the payment rate update, CMS stated that it has rebased and revised the SNF market basket to reflect a 2022 base year. The annual update is reduced by 2% for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program. CMS has indicated that these impact figures did not incorporate the SNF Value-Based Program reductions that are estimated to be $196.5 million in fiscal year 2025. While Medicare reimbursement rate setting, which takes effect annually each October, has historically included forecasted inflationary adjustments, the degree to which those forecasts accurately reflect current expense levels remains uncertain. Additionally, it remains uncertain whether these adjustments will ultimately be offset by other factors, including any adjustments related to the impact of various payment models, such as those described below. Payments to providers continue to be increasingly tied to quality and efficiency. The Patient Driven Payment Model (“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the whole patient, became effective October 1, 2019. CMS has stated that it intended PDPM to be revenue-neutral to operators, with future Medicare reimbursement reductions possible if that was not the case. In August 2022, CMS issued a final rule providing that, to obtain revenue neutrality, it would utilize a PDPM parity adjustment factor of 4.6% for Medicare payment rates with a two-year phase-in period that would reduce SNF spending by 2.3%, or approximately $780 million, in each of fiscal years 2023 and 2024. Our operators continue to adapt to the reimbursement changes and other payment reforms resulting from the value-based purchasing programs applicable to SNFs under the 2014 Protecting Access to Medicare Act. 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. 35 Table of Contents 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. 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 through September 30, 2025. Other Regulation: Office of the Inspector General Activities . The Office of Inspector General (“OIG”) of HHS has provided long-standing guidance for SNFs regarding compliance with federal fraud and abuse laws. 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. Department of Justice and Other Enforcement Actions . SNFs are under intense scrutiny for ensuring the quality of care being rendered to residents and appropriate billing practices conducted by the facility. 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, 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. Such enforcement activities are unpredictable and may develop over lengthy periods of time. 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. First Quarter of 2025 and Recent Highlights Investments ● 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 $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. 36 Table of Contents ● 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 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 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 ● 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 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. 37 Table of Contents ● 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”) 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. Dividends ● 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 months ended March 31, 2025 and 2024 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ 2025 2024 ​ Variance Revenues: ​ ​ ​ ​ ​ ​ ​ ​ Rental income $ 232,178 ​ $ 206,921 ​ $ 25,257 Interest income 43,116 ​ 35,836 ​ ​ 7,280 Miscellaneous income 1,491 ​ 542 ​ ​ 949 Expenses: ​ ​ ​ ​ Depreciation and amortization 79,875 ​ 74,557 ​ ​ 5,318 General and administrative 32,057 ​ 21,532 ​ ​ 10,525 Real estate taxes ​ 3,311 ​ ​ 3,798 ​ ​ (487) Acquisition, merger and transition related costs 1,464 ​ 2,603 ​ ​ (1,139) Impairment on real estate properties 1,235 ​ 5,292 ​ ​ (4,057) Provision for credit losses 5,092 ​ 8,470 ​ ​ (3,378) Interest expense 52,280 ​ 57,820 ​ ​ (5,540) Other income (expense): ​ ​ ​ ​ Other income – net 3,047 ​ 5,276 ​ ​ (2,229) Loss on debt extinguishment — ​ (1,283) ​ ​ 1,283 Gain (loss) on assets sold – net ​ 10,075 ​ ​ (1,391) ​ ​ 11,466 Income tax expense (3,611) ​ (2,581) ​ ​ (1,030) Income from unconsolidated joint ventures 1,078 ​ 98 ​ ​ 980 38 Table of Contents Revenues 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. Expenses 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 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. 39 Table of Contents Other Income (Expense) 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 2024 and 2025. Funds from Operations We use funds from operations (“Nareit FFO”), a non-GAAP financial measure, as one of several criteria to measure the operating performance of our business. We calculate and report Nareit FFO in accordance with the definition of Funds from Operations and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit FFO is defined as net income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairment on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures and changes in the fair value of warrants. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. Revenue recognized based on the application of security deposits and letters of credit or based on the ability to offset against other financial instruments is included within Nareit FFO. We believe that Nareit FFO is an important supplemental measure of our operating performance. As real estate assets (except land) are depreciated under GAAP, such accounting presentation implies that the value of real estate assets diminishes predictably over time, while real estate values instead have historically risen or fallen with market conditions. Nareit FFO was designed by the real estate industry to address this issue. Nareit FFO herein is not necessarily comparable to Nareit FFO of other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us. We further believe that by excluding the effect of depreciation, amortization, impairment on real estate assets and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, Nareit FFO can facilitate comparisons of operating performance between periods. We offer this measure to assist the users of our financial statements in evaluating our financial performance under GAAP, and Nareit FFO should not be considered a measure of liquidity or cash flow, an alternative to net income or an indicator of any other performance measure determined in accordance with GAAP. 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 months ended March 31, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ 2025 2024 ​ ​ (in thousands) Net income (1) ​ $ 112,060 ​ $ 69,346 (Deduct gain) add back loss from real estate dispositions ​ ​ (10,075) ​ ​ 1,391 ​ ​ 101,985 ​ 70,737 Elimination of non-cash items included in net income: ​ ​ ​ Depreciation and amortization ​ 79,875 ​ 74,557 Depreciation – unconsolidated joint ventures ​ 683 ​ 2,536 Add back impairments on real estate properties ​ ​ 1,235 ​ ​ 5,292 Nareit FFO ​ $ 183,778 ​ $ 153,122 (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. 40 Table of Contents 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 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 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. Debt 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 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 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 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 $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. 41 Table of Contents Rule 3-10 and Rule 13-01 of Regulation S-X permits registrants to provide certain alternative financial and non-financial disclosures, to the extent material, in lieu of separate financial statements for subsidiary issuers and guarantors of registered debt securities. Accordingly, separate consolidated financial statements of Omega OP have not been presented. Parent and Omega OP, on a combined basis, have no material assets, liabilities or operations other than financing activities (including borrowings under our outstanding senior notes, Revolving Credit Facility and term loans) and their investments in non-guarantor subsidiaries. Omega OP is currently the sole guarantor of our senior notes. The guarantees by Omega OP of our senior notes are full and unconditional and joint and several with respect to the payment of the principal and premium and interest on our senior notes. The guarantees of Omega OP are senior unsecured obligations of Omega OP that rank equal with all existing and future senior debt of Omega OP and are senior to all subordinated debt. However, the guarantees are effectively subordinated to any secured debt of Omega OP. As of March 31, 2025, there were no significant restrictions on the ability of Omega OP to make distributions to Omega. Equity 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. Dividends 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. In addition, if we dispose of any built-in gain asset during a recognition period, we will be required to distribute at least 90% of the built-in gain (after tax), if any, recognized on the disposition of such asset. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year and paid on or before the first regular dividend payment after such declaration. In addition, such distributions are required to be made pro rata, with no preference to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another class except to the extent that such class is entitled to such a preference. 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 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. 42 Table of Contents Material Cash Requirements 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. These commitments are expected to be funded over the next several years and are dependent upon the operators’ election to use the commitments. Other Arrangements We own interests in certain unconsolidated joint ventures as described in Note 9 to the Consolidated Financial Statements – Investments in Joint Ventures. Our risk of loss is generally limited to our investment in the joint venture and any outstanding loans receivable. We use derivative instruments to hedge interest rate and foreign currency exchange rate exposure as discussed in Note 16 – Derivatives and Hedging. Cash Flow Summary 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, ​ ​ ​ ​ 2025 2024 ​ Increase/(Decrease) Net cash provided by (used in): ​ ​ ​ ​ ​ ​ ​ ​ Operating activities $ 181,952 ​ $ 151,474 ​ $ 30,478 Investing activities 19,261 ​ (47,454) ​ ​ 66,715 Financing activities (347,698) ​ (186,021) ​ ​ (161,677) 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 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. 43 Table of Contents 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 Our financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. Our preparation of the financial statements requires us to make estimates and assumptions about future events that affect the amounts reported in our financial statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the consolidated financial statements. We have described our accounting policies in Note 2 – Summary of Significant Accounting Policies to our Annual Report on Form 10-K for the year ended December 31, 2024. 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.