Omega Healthcare Investors Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jonathan Hughes - Raymond James & Associates - Analyst : Hi, good morning. Thanks for the prepared remarks and commentary and congrats to Matthew and Vikas on their new roles and Dan on a great career. Vikas, I was hoping you could share some more details of what the investment pipeline looks like today in terms of dollar size yields and then fee simple acquisitions versus loans.

Question: Jonathan Hughes - Raymond James & Associates - Analyst : Okay. And I think I heard in maybe Bob's prepared remarks, there are some loans that are converting to fee simple ownership this year. Was that always the plan for those? Or were those operators hopeful to refi, and due to the challenging lending environment, this is kind of the option that they're locked with?

Question: Michael Griffin - Citi - Analyst : Great, thanks. Appreciate the color kind of on the regulatory front and the potential implications of the new administration. Just wondering if you could give any insight into kind of the labor environment and demand there that your operators are seeing? And is there any worry that potential immigration reform could impact the labor pool and maybe further pressure wages?

Question: Michael Griffin - Citi - Analyst : That's helpful. And then maybe a question for Vikas just getting back to the acquisition pipeline and the opportunity set. There's been some news over the past couple of months just around SNF operators and maybe financial and tenant health is coming more into the focus. I'm curious if REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, OHI.N - Q4 2024 Omega Healthcare Investors Inc Earnings Call you've seen more scrutiny on underwriting prospective deals, whether it's from a rent coverage perspective, just given maybe there could be some potential issues or worries around operator health. Again, it seems like it's more idiosyncratic to certain tenants, to certain operators. But have you seen it change in kind of underwriting from that perspective?

Question: John Kilichowski - Wells Fargo - Analyst : Thank you. Maybe I'll just follow up very quickly on one more on the pipeline. Maybe could you talk more about the competitive landscape today and your expectation around going in yields?

Question: John Kilichowski - Wells Fargo - Analyst : Understood. And then maybe one for Bob here. Just on balance sheet fortification. Your leverage is at 4 times, long-term target of 4 times to 5 times. So not a pressing need to deleverage here. But according to the guide, there's going to be some material equity issuance here to delever in the back half or '26 maturity. One, could you kind of give us the guide for what that number is, obviously, ex any acquisition activity? And then maybe more your thoughts about the decision to firm up the balance sheet at the expense of maybe some incremental dilution here? And what are you looking at? Is that the relative spread of your AFFO yield to the current cost of 10-year paper versus what it's been historically?

Question: Juan Sanabria - BMO Capital Markets - Analyst : Hi, good morning. Just following up there on that same line of questioning. What share count, I guess, is assumed or how much equity is assumed to raise as part of guidance to pay maturing loans booked this year and then to prep for the '26 Jan maturity you referenced?

Question: Juan Sanabria - BMO Capital Markets - Analyst : Okay. You're assuming other remaining '25 debt maturities are also repaid with cash/equity. Is that correct, just to make sure?

Question: Nick Yulico - Scotiabank - Analyst : Couple of questions just on Maplewood and then the Guardian transition assets. If you could just give us a feel for kind of where you're at in terms of getting back to sort of a maximum rent on those operators. And I guess, specifically on Maplewood, as we think about the Second Avenue asset, maybe an update on how that occupancy is trending and how important that is to get back to the full Maplewood rent.

Question: Nick Yulico - Scotiabank - Analyst : Okay. And then just to be clear, the guidance for the year assumes that it's just both those operators pay existing rent that they're paying, they're not paying a higher level? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, OHI.N - Q4 2024 Omega Healthcare Investors Inc Earnings Call

Question: Farrell Granath - BofA Securities - Analyst : I wanted to touch on the EBITDAR coverage. I know that you made the comment that the increases may be a little bit more modest going forward. But can you go through a little bit of the moving pieces and maybe how that's looking if it wasn't a trailing four quarters, specifically one tying in? I also see the less than 1 times coverage had a larger ding on a small rent percentage.

Question: Farrell Granath - BofA Securities - Analyst : Great. And also on that mix, I also saw the -- there's a slight uptick in the private insurers kind of a larger one than I've seen in the last couple of quarters. I was curious, what was driving that? Are you seeing the payer mix shifting more towards private?

Question: Michael Carroll - RBC Capital Markets - Analyst : I wanted to circle back to Maplewood. How is Maplewood positioned today? I mean, are they better positioned to really ramp up their EBITDAR now versus the beginning of 2024? I mean, if you look at the 2024 rent, I think the quarterly rent increased by roughly $1 million between 1Q and 4Q '24. Should we expect a similar ramp in 2025? Or given that the development in New York's occupancy is improving that it could be higher than that?

Question: Michael Carroll - RBC Capital Markets - Analyst : Okay. And then circle back, I think you've probably touched on this a little bit related to the investment pipeline. But are any buyers or sellers acting differently today, specifically for the US properties, just given the volatility we've seen in interest rates and the political environment discussing potential, I guess, Medicaid restructuring? Have people slowed down their investment activity, as sellers been more aggressive trying to get out? Have you seen anything like that occurring?

Question: Alec Feygin - Robert W. Baird & Co - Analyst : So going to the UK exposure, I think it's about a little over 14%. What are you comfortable getting that up to?

Question: Alec Feygin - Robert W. Baird & Co - Analyst : All right. Thank you. And does Omega have a plan to maybe hedge the UK cash flows as it grows?

Question: Emily Meckler - Green Street - Analyst : Have the increased employment taxes and increased minimum wage in the UK had a noticeable impact on coverage level for your UK portfolio? And does this kind of change your underwriting criteria moving forward there?

Question: Emily Meckler - Green Street - Analyst : Okay. Great. And then maybe one for Megan. Could you give us a sense for what percentage of workers in skilled nursing facilities are for inborn?

Question: Jonathan Hughes - Raymond James & Associates - Analyst : Thanks for the follow-up. Bob, I was hoping you could give us some details on FAD or cash earnings expectations. Should that gap between AFFO and FAD, similar to last year, it's narrowed by about half over the past, call it, pre-COVID versus today. And I know that's because some operators should move from cash to accrual, but just any color there would be great.

Question: Vikram Malhotra - Mizuho Securities - Analyst : I guess just first, back on the UK, could you just talk about how much of the push in the UK kind of in '25, '26, maybe perhaps a little bit of a hedge against changes and potential changes in Medicaid or other changes here? And then in the UK itself, what about raising debt in the UK also versus the US? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, OHI.N - Q4 2024 Omega Healthcare Investors Inc Earnings Call

Question: Vikram Malhotra - Mizuho Securities - Analyst : Got it. And then just perhaps going back to potential regulation, I mean, do you have thoughts -- or just based on, I guess, if you've had conversations with folks in DC, kind of what route could be minimum staffing take legislatively versus legal? And then any thought on what's been proposed by Republican party in terms of whether it's SNAP changes or adjustments to like including quality measures or even block grants. Just maybe give us a bigger picture. I know there's a lot being thrown out there. We don't know what's going to happen, but just specifically on those, kind of what's your view on those changes?

Question: Juan Sanabria - BMO Capital Markets - Analyst : Thanks for the time for the follow-up. Just going back to the deals that you've done both last year and historically, I guess what should we assume is baked and likely to convert in '25? And how should we think about the delta between the rate that you're getting as a lender versus what you get as you convert it to traditional fee simple?

Question: Juan Sanabria - BMO Capital Markets - Analyst : Okay. And then just last question. Anything on the loans or rents that are maturing that we should be factoring in the model whether rent increase, stable rent or cuts or anybody that you're looking to retant as part of maturities?

Question: Nick Yulico - Scotiabank - Analyst : Just a follow-up, Bob, on the guidance and investments not being in versus the cash on the balance at the end of the year assumed. Is there just a rough feel you can give us in terms of if you do a certain level of acquisitions, say, $500 million, how we should think about the incremental debt equity that would be raised for that? Because it does feel like there's something like pre-funding of capital that's already in your guidance this year, but the investments aren't?

Question: Nick Yulico - Scotiabank - Analyst : Yes. That's helpful. I guess just one follow-up there is on -- is there a way to give us a feel for like how your average cash balance might look through the year because there is some interest income benefit, I'm guessing here, in the guidance?