Omega Healthcare Investors Inc.

Overview Key strengths Key risks The company has demonstrated an ability to re-tenant or recycle struggling assets with limited impact to long-term cash flow. The impact of COVID-19 has stressed coverage levels throughout the portfolio resulting in numerous operator disruptions. Triple-net leases provide cash flow stability and are supported by favorable long-term demographic trends. A tight labor market is driving wage increases and limiting admissions, though pressure is easing. Relatively conservative balance sheet and well-laddered debt maturity profile with modest near-term maturities. High exposure to skilled nursing facilities (SNFs), which are more exposed to government reimbursement risk than other health care facility types, though SNFs benefited from material government support during the pandemic. While government support helped operators during the

...Operator coverage levels have increased over the past few quarters, resulting in fewer operator disruptions and higher rent collections. While government support helped operators during the early part of the pandemic, the cumulative effect of the pandemic has stressed SNF operators. However, clear signs of improvement have emerged in recent quarters. Operator earnings before interest, taxes, depreciation, amortization, and rent expense (EBITDAR) coverage for the 12 months ended March 31, 2023, was 1.10x across Omega's portfolio, a modest increase from 1.04x a quarter prior. Furthermore, on a stand-alone basis for the first quarter, EBITDAR coverage rose to 1.15x compared to 1.09x the prior quarter, illustrating the likelihood of continued improvement to trailing-12-month (TTM) coverage metrics over the coming quarters. Occupancy continues to tick up across Omega's portfolio, improving 100 basis points during the first quarter to 78%, recovering from a low of 74.6% in January of 2022. Based...

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