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Date

Friday, Aug. 1, 2025, 10 a.m. ET

Call participants

  • Chief Executive Officer — Taylor Pickett
  • Chief Financial Officer — Bob Stephenson
  • Chief Corporate Development Officer — Vikas Gupta
  • Senior Vice President, Operations — Megan Krull
  • Chief Investment Officer — Matthew Gorman

For analyst commentary, contact [email protected]

Risks

  • Senior Vice President, Operations Krull said, "the expected increase in deficit caused by the act will, without legislative action, likely cause a 4% cut in the 2026 Medicare rate."
  • Management acknowledged that "a reduction in the overall federal funding of Medicaid to the states, regardless of the target, may cause states to evaluate all programs," which could impact reimbursement rates in the future.
  • Although the current dividend payout ratio on FAD (non-GAAP) is 90% for the second quarter of 2025, management stated the threshold for increasing the dividend is in the "eighties," indicating continued constraint on dividend growth at current FAD coverage levels. The Board specifically referenced an 85% payout ratio on FAD (funds available for distribution) as the level needed before considering a dividend increase, based on second quarter 2025 results.

Takeaways

  • Adjusted FFO: Adjusted FFO was $232 million, or $0.77 per share, for the second quarter of 2025, driving a narrower, higher full-year adjusted FFO (non-GAAP) guidance of $3.04 to $3.07 per share for 2025.
  • Funds available for distribution (FAD): $223 million, or $0.74 per share, in funds available for distribution (FAD) for the second quarter of 2025, representing a sequential increase of 2.1¢ per share in FAD from the first to the second quarter of 2025 due to $605 million in new investments completed in 2025.
  • Total revenue: $283 million in revenue for the second quarter of 2025, driven by new investments, operator transitions, and escalators, partially offset by asset sales.
  • Genesis bankruptcy support: The company committed up to $8 million in debtor-in-possession financing; receives $52 million annual rent from a thirty-one-facility master lease with current trailing twelve-month coverage of 1.5 times; full contractual rent payments continue during bankruptcy.
  • Senior housing portfolio: Now three hundred ninety-six facilities, accounting for 38% of total operating assets as of the second quarter of 2025, reflecting ongoing portfolio growth.
  • Acquisition pipeline and recent activity: Over $605 million invested year-to-date through June 30, 2025, including $502 million in real estate acquisitions and $25 million in real estate loans completed in the second quarter of 2025; second quarter 2025 investments totaled $527 million (excluding $30 million CapEx); United Kingdom transactions represented 65% of total new investments (excluding CapEx) for 2025 year-to-date through June 30.
  • Net funded debt and leverage: Net funded debt was $4.3 billion as of June 30, 2025, with a net funded debt to annualized adjusted normalized EBITDA ratio of 3.67 times as of the second quarter of 2025, the lowest leverage in over a decade, as the company targets a leverage range between four and five times, and a sweet spot of 4.5-4.75 times.
  • Operator coverage metrics: Trailing 12-month EBITDAR coverage for the core portfolio was 1.51 times as of March 31, 2025, and remained flat quarter over quarter at 1.51 times for the trailing twelve months ended March 31, 2025; a tenant with 0.99 times trailing 12-month EBITDAR coverage is expected to exit sub-one coverage next quarter; incremental improvements were reported for tenants at 0.85 and 0.87 times trailing 12-month EBITDAR coverage in 2025.
  • Maplewood portfolio performance: Occupancy was 95% for seventeen facilities as of July 2025; $17.6 million in rent was paid in the second quarter of 2025, with facility-level rent growth; a new Washington, D.C., facility had 30% occupancy as of July 2025; rent payments are expected to rise further in coming quarters as occupancy and rates increase.
  • Balance sheet liquidity: Cash on the balance sheet was $734 million at the second quarter of 2025 quarter-end; 95% of the $5 billion debt was at fixed rates as of June 30, 2025; the $1.45 billion undrawn credit facility was extended to October, and a $429 million term loan extended to August 2026.
  • Guidance assumptions: Full-year 2025 adjusted FFO guidance assumes $3.6 million in monthly revenue from Avartis, Maplewood continuing at $6.1 million in monthly rent as of July 2025, $50 million in asset sales assumed for 2025, $252 million in secured debt repayment with equity assumed for 2025, and no additional investments, asset sales, or capital market transactions beyond those outlined.
  • General & administrative expense outlook: Expected to run between $13.5 million and $14.5 million per quarter for the remainder of 2025.
  • Select transaction yields: All new real estate acquisitions and loans in the second quarter of 2025 carried an initial annual cash yield of 10%, with lease escalators of 1.7%-2.5% on second quarter 2025 real estate acquisitions.
  • Dividend policy: The current FAD (funds available for distribution, non-GAAP) payout ratio is 90% for the second quarter of 2025; management discusses a dividend increase threshold at the 85% payout ratio range for FAD, but full Board consideration awaits further improvement.

Summary

Omega Healthcare (OHI 1.06%) management's revised, narrowed guidance reflects continued benefits from an expanded asset base, a stronger capital structure due to timely bond issuance, and portfolio adjustments. The company highlighted increased investment activity, particularly in the United Kingdom, while maintaining liquidity and reducing leverage to multi-year lows. Operator performance and rental coverage remained stable, with trailing twelve-month operator EBITDAR coverage for the core portfolio at 1.51 times as of March 31, 2025, with Genesis' bankruptcy process introducing near-term complexity but no immediate disruption to rent payments or loan collateral. Legislative changes from the OBBBA reduce near-term regulatory risk for skilled nursing assets but introduce the possibility of future Medicare cuts as a result of federal deficit controls.

  • Approximately 80% of operators are currently on a straight-line accounting basis, meaning rent escalators contribute to cash flow but not adjusted FFO growth.
  • The company entered derivative contracts to mitigate near-term foreign currency risk on United Kingdom investment income.
  • The company completed a $344 million acquisition in April 2025 for forty-five United Kingdom care homes leased to six operators, evidencing its strategy of sourcing off-market deals with preferred partners.
  • Incoming opportunities include larger regional senior housing portfolios priced below replacement cost and sizable skilled nursing transactions sourced from owner-operators and regional sellers.
  • Chief Investment Officer Gorman remarked that triple-net leases are less appealing to operators in this environment, with the company prepared to deploy alternative structures, including RIDEA, when financially compelling.
  • Staffing pressures have moderated according to management commentary on the second quarter 2025 earnings call, with wage increases described as "normal inflationary increases" and little difference between skilled nursing and senior housing portfolios.
  • Senior Vice President, Operations Krull noted that the OBBBA establishes a ten-year moratorium on federal staffing mandates, alleviating pending regulatory pressure, while ongoing court rulings favor the company's position on staffing regulation authority.
  • The Board recently reviewed the dividend level; increased visibility into FAD (funds available for distribution, a non-GAAP metric) improvements could prompt a payout review within the next three to four quarters.

Industry glossary

  • AFFO (Adjusted funds from operations): A non-GAAP measure estimating the cash generated by a REIT, excluding nonrecurring items and certain capital expenditures.
  • FAD (Funds available for distribution): An adjusted metric of cash flow available to pay dividends to shareholders, after capital expenditures and other recurring outflows.
  • EBITDAR coverage: A ratio measuring a tenant's earnings before interest, taxes, depreciation, amortization, and rent, divided by rent expense; indicates the ability to fulfill lease obligations.
  • RIDEA structure: A REIT investment structure allowing participation in operating income of senior housing or healthcare facilities, rather than just collecting fixed lease payments.
  • OBBBA (One Big Beautiful Bill Act): Recent federal legislation referenced as impacting Medicaid and Medicare reimbursement landscapes and regulatory mandates for skilled nursing.
  • Section 363 sale: A bankruptcy process where assets are sold under Section 363 of the Bankruptcy Code, often quickly and free of liens or claims.
  • Triple-net lease: A lease structure where the tenant is responsible for property taxes, insurance, and maintenance in addition to rent.

Full Conference Call Transcript

Taylor Pickett: Good morning, and thank you for joining our second quarter 2025 earnings conference call. Today, we will discuss our second-quarter financial results and certain key operating trends. Second quarter adjusted funds from operations of $0.77 per share and FAD funds available for distribution of $0.74 per share reflect strong revenue and EBITDA growth, principally fueled by acquisitions and active portfolio management. We again raised and narrowed our 2025 AFFO guidance from a per share range of $2.95 to $3.01 up to $3.04 to $3.07, which reflects our strong second quarter 2025 earnings and the issuance of $600 million in five-year bonds versus the continued sale of equity.

Our balance sheet metrics are very strong with adjusted annualized EBITDA of nearly $1.2 billion and net funded debt of only $4.3 billion. In July, Genesis filed a Chapter 11 bankruptcy. Omega, along with other Genesis lenders, has committed to debtor-in-possession financing and, in addition, to support a bid to buy assets via Section 363 bankruptcy sale process. In the interim, we expect to receive our full monthly contractual rent. Turning to portfolio mix, our senior housing portfolio continues to grow. It is now comprised of 396 facilities, which is 38% of our total operating facility portfolio.

With our strong acquisition pipeline, a favorable operating environment, and over $2 billion in liquidity with very low leverage, we are ideally positioned to grow both our senior housing and skilled nursing portfolios. I will now turn the call over to Bob.

Bob Stephenson: Thanks, Taylor, and good morning. Turning to our financials for 2025, revenue for the second quarter was $283 million compared to $253 million for 2024. The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2024 and 2025, operator restructurings and transitions, and annual escalators, partially offset by asset sales completed during that same time period. Our net income for the second quarter was $140 million or $0.46 per share, compared to $117 million or $0.45 per common share in 2024. Our NAREIT FFO for the second quarter was $213 million or $0.70 per share as compared to $189 million or $0.72 per share for 2024.

Our adjusted FFO was $232 million or $0.77 per share for the quarter, and our FAD was $223 million or $0.74 per share, and both exclude several items outlined in our NAREIT FFO, adjusted FFO, and FAD reconciliations to net income found in our earnings release as well as our second quarter financial supplemental posted to our website. Our second quarter 2025 FAD was 2.1¢ greater than our first quarter 2025 FAD, with the increase primarily resulting from incremental revenue related to the timing and completion of $605 million in new investments completed during 2025.

In addition, Maplewood paid $17.6 million in rent in the second quarter, an increase of $2 million inclusive of an additional $1.1 million of rent related to the Washington DC facility compared to 2025, and $1.9 million in higher rental income from our UK operators due to favorable foreign currency fluctuations. These were partially offset by the second quarter issuance of 7 million common shares of equity for gross proceeds totaling $258 million as we continue to prefund our investment pipeline. Our balance sheet remains incredibly strong, and we have continued to take steps to improve our liquidity, capital stack, and maturity ladder.

In July 2030, our notes issuance was leverage neutral as proceeds will be used to repay the $600 million of 5.25% senior notes maturing in January 2026. We will repay the notes on or about October 15, 2025, which is the earliest we can repay at par. Additionally, we repaid a $50 million term loan in April. Our $1.45 billion undrawn credit facility was extended to October, and we also extended our $429 million term loan until August 2026. We anticipate completing a new credit facility in the next few months. At June 30, we ended the quarter with $734 million in cash on the balance sheet.

95% of our $5 billion in debt was at fixed rates, and our fixed charge coverage ratio was 5.4 times. Our net funded debt to annualized adjusted normalized EBITDA was 3.67 times, which is the lowest our leverage has been in over a decade. We still have a targeted leverage range between four and five times, with the sweet spot being between 4.5 and 4.75 times. Given our strong equity currency, we have the flexibility to accretively fund investments with equity, as we have over the past several quarters, thereby positioning ourselves for outsized adjusted AFFO growth as we can opportunistically look to the debt and banking markets.

As Taylor mentioned, we raised and narrowed our full-year adjusted FFO guidance to a range between $3.04 to $3.07 per share. The increase was primarily due to several factors. One, we completed $183 million of new investments post our first quarter earnings call. Two, our prior guidance assumed we would issue equity or have approximately $600 million of cash on hand to repay our $600 million of notes due January 2026. We were able to issue bonds versus equity to put the cash on the balance sheet to handle that maturity. In addition, that maturity will be repaid in October. And three, following the completion of the Levy bankruptcy on June 1, our master lease was assigned to Avartis.

Given the improved balance sheet of Avartis and the strong operating performance of the underlying facilities, effective June 1, Avartis was placed on a straight-line basis for revenue recognition. Turning to our revised full-year guidance, the key assumptions are as follows. On the revenue and expense side, we will record $3.6 million of monthly revenue related to Avartis, of which $3.1 million represents the contractual rent. We are assuming no other changes in our revenue related to operators on an accrual basis of revenue recognition.

As a note, approximately 80% of our operators are currently on a straight-line basis of accounting, which means any growth in revenue through annual escalators will not yield further growth in adjusted FFO but would yield cash flow growth. We are assuming Genesis pays rent and interest pursuant to the terms of the debt financing agreement, and Maplewood continues to pay at its July monthly run rate of $6.1 million. We entered into derivative instruments to reduce the impact of foreign currency fluctuations on income generated from our UK investments for the balance of the year. We project quarterly G&A expense to run between $13.5 million and $14.5 million for the remaining two quarters of 2025.

On the investment side, we have included the impact of new investments completed as of June 30 and did not include any additional new investments. On the balance sheet, of the $233 million in mortgages and other real estate-backed investments contractually maturing in 2025, we are assuming $65 million will convert from loans to fee simple real estate and $88 million will be repaid throughout 2025, with the balance of the loans being extended beyond 2025. We are assuming approximately $50 million of asset sales, of which $12 million qualified as assets held for sale as of the end of the quarter. We recorded $1.3 million of revenue in the second quarter related to these assets.

We assume we will repay $252 million of secured debt on or about November 25, 2025, with equity. We assume no material changes in market interest rates. Our 2025 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital market transactions other than what I just mentioned or that was included in our earnings release. I will now turn the call over to Vikas.

Vikas Gupta: Thank you, Bob, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio as well as recent activity for three of Omega's larger operators, Omega's investment activity in 2025, and an update on Omega's pipeline and market trends for the remainder of 2025. Turning to portfolio performance, trailing twelve-month operator EBITDAR coverage for our core portfolio as of March 31, 2025, remains flat quarter over quarter at 1.51 times. This strong coverage level demonstrates our operators' ability across skilled nursing and senior housing to cover their rent and retain sufficient cash for clinical care while they are in a fluid regulatory and reimbursement environment.

Our core portfolio consists of 1,032 facilities, of which 62% is comprised of skilled nursing facilities and other transitional care facilities in the US, and the other 38% is US senior housing and UK care homes. Genesis, as Taylor previously mentioned, filed for Chapter 11 bankruptcy protection on July 9, 2025, with the goal of selling substantially all of its assets through a Section 363 sale to a winning bidder of such assets, followed by a liquidating plan of reorganization. Omega believes this filing was a necessary and important step in creating an entity that is operationally solvent and sustainable, with enhanced liquidity and a strengthened balance sheet.

Omega has worked with Genesis in recent years to divest underperforming facilities from its master lease, which has resulted in a strong current trailing twelve-month coverage of 1.5 times. As such, Omega's rent of $52 million generated by our 31-facility lease is stable, and the credit of our tenant should become stronger via the bankruptcy process. During the bankruptcy, Omega is committed to supporting Genesis by providing up to $8 million in debtor-in-possession financing. Genesis has agreed to pay full contractual rent to Omega during this period.

In addition to our lease, Omega has a $121 million term loan with Genesis, which is secured by a first lien on Genesis' foreign businesses and a subordinated all-assets lien from the overall business of Genesis. We believe our loan is fully collateralized, with the credit of the borrower improving via the bankruptcy process. Genesis has paid full contractual rent each month since April 2025 and, as previously mentioned, has committed to doing so going forward. The bankruptcy process is anticipated to take a period of nine to twelve months. This timeline, along with all elements of the bankruptcy filing process, is subject to the approval of the bankruptcy court and other complexities inherent in Chapter 11 proceedings.

Levy, La Vie exited bankruptcy on June 1, 2025, at which time the Omega La Vie master lease was assumed and assigned to Avartis. As anticipated, all material lease terms, including the contractual rent of $3.1 million per month or $37.5 million per annum, remain the same as under the legacy La Vie lease. Avartis has made full contractual payments for June and July. May performance and occupancy for the 17-facility Maplewood portfolio, inclusive of Inspire Carnegie Hill in New York City, remains strong with an occupancy level of 95% as of July 2025.

Inspire Embassy Row, the new 174-unit senior housing facility in Washington DC that opened in February 2025, is in the process of leasing up with an occupancy of 30% as of July. As Bob noted, for all 18 facilities, Maplewood paid $17.6 million in rent in the second quarter. Omega expects rent payments to increase in coming quarters as Maplewood increases rates, pushes occupancy growth, and realizes further operational efficiencies. Other than Genesis, Omega is currently not engaged in restructuring activity with any of our major operators.

Turning to new investments, we are pleased with Omega's 2025 transaction activity through June, with over $605 million in total new investments year-to-date through June 30, of which over $560 million or 93% were real estate investments added to our balance sheet. During the second quarter, Omega completed a total of $527 million in new investments, not including $30 million in CapEx. The new investments include $502 million in real estate acquisitions via five separate transactions. As previously announced, in April 2025, we closed a $344 million investment for a portfolio of 45 care homes across the UK and the island of Jersey. Omega leased the 45 care homes to four existing operators and two new operators.

Additionally, in the second quarter, we invested $158 million across four separate transactions to acquire 12 facilities, eight skilled nursing facilities, and four assisted living facilities, and lease them to two existing operators and two new operators. All transactions have an initial annual cash yield of 10%, with annual escalators ranging from 1.7% to 2.5%. Lastly, Omega invested $25 million in real estate loans via two transactions, where both loans have an interest rate of 10%. As discussed last quarter, the UK continued to be a large driver of our 2025 new investment activity, totaling approximately $392 million or 65% of our total new investments, excluding CapEx.

We continue to see ample opportunities to deploy capital in the UK, many of which our UK operating partners identify and secure off-market, with Omega as their preferred capital partner. Turning to the pipeline, Omega's pipeline transaction outlook for the second half of 2025 continues to be very favorable. We are witnessing an increase in marketed opportunities both in the US and the UK, while also securing off-market opportunities that our operating partners and other relationships bring us. Looking at asset mix, many of the larger market transactions we are seeing are for regional senior housing assets at prices meaningfully below replacement cost.

Transaction activity on the skilled nursing front is also sizable, as we are seeing numerous opportunities from individual owner-operators and regional sellers, while also seeing larger off-market opportunities brought to us by our existing relationships. We are evaluating and considering all asset types, with a focus on structuring new investments to be immediately accretive, while also providing opportunities for Omega to further improve returns in future years as the underlying cash flows of our communities increase from the continued occupancy gains and operational efficiencies. I will now turn the call over to Megan.

Megan Krull: Thanks, Vikas, and good morning, everyone. The One Big Beautiful Bill Act or OBBBA was signed into law on July 4, and as an industry, there is a lot to be thankful for. Despite pressure on the provider tax program, skilled nursing was specifically carved out from any Medicaid reductions. Removing the usual target on the back of this industry is a major win for the industry associations and operators who continue to drive a broader understanding within the legislative and executive branches of the importance of the long-term care industry. It is also another indication of President Trump's support, similar to what we saw at the start of the pandemic.

As expected, the Medicaid expansion population, those able-bodied adults that were added with the Affordable Care Act, were the target of much of the reform. However, non-SNF provider taxes in expansion states will also be reduced over time starting in 2028, which will have an impact on the hospital system. Generally speaking, a reduction in the overall federal funding of Medicaid to the states, regardless of the target, may cause states to evaluate all programs. That said, given the continued improvement in fundamentals, the strong lobbying efforts on behalf of the industry, and demographic tailwinds, we feel well-positioned to weather that potential storm.

While Medicare was not specifically targeted in the OBBBA, the expected increase in deficit caused by the act will, without legislative action, likely cause a 4% cut in the 2026 Medicare rate. However, given the scheduled Medicare rate increase later this year, coupled with the nature of our portfolio, with skilled nursing more heavily relying on Medicaid, and with an increasingly heavier concentration on private pay product, the near-term expected impact should be minimal. Historically, legislative action has been taken to avoid this automatic reduction. Finally, the OBBBA puts a moratorium on the implementation of the staffing requirements of the staffing mandate for ten years.

That said, the Texas and Iowa federal courts have now both found that CMS lacked the authority to issue the regulations surrounding the required hours, and while still subject to appeal, given the overturning of the Chevron doctrine, it seems more likely than not that the higher courts will uphold that finding. We are grateful to have this latest reconciliation chapter behind us and look forward to continued support of this critical industry serving some of the most vulnerable in our population. I will now open the call up for questions.

Operator: Thank you. Please press 1 on your telephone keypad to raise your hand and join the queue. We will now begin the question and answer session. If you have dialed in and would like to ask a question, if you are called upon to ask your question and are listening by a speakerphone on your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press 1 to join the queue. We also do request for today's session that you please limit to one question and one follow-up question. Your first question comes from Jonathan Hughes from Raymond James. Please go ahead.

Jonathan Hughes: Hi there. Happy Friday. Thank you for the prepared remarks and commentary. I was hoping you could share some more details of what the investment pipeline looks like today in terms of yields and specifically on the U.S. seniors housing opportunities you mentioned in the prepared remarks. And then maybe also yields on the sales in the quarter?

Vikas Gupta: Sure. Thank you, Jonathan. As I mentioned, our pipeline is strong. It consists of US senior housing, US SNF, and care homes in the UK. It's just as strong as it has been. It continues to be strong. We continue to just look at all the product that's out there for accretive investments. Yield would continue to push 10% across the board for all of those asset classes. Oh, and then on sales, any sales at this point forward are usually just strategic sales or at times purchase options related to old workouts. But otherwise, we have no sales on the horizon.

Jonathan Hughes: Okay. And then my follow-up would be on Maplewood. They paid more rent versus the first quarter, and that was due in part to Embassy Row being in the full second quarter. But even excluding Embassy Row, the rent there did tick up. Can you just remind us of the expected rent trajectory there? What's embedded in guidance, and when you expect them to hopefully return to paying full contract rent?

Bob Stephenson: Yeah. We will tag team on this, Jonathan. So what's laid out, what they paid in the quarter is actually laid out in the press release pretty nicely. But I look at it from a modeling standpoint. They paid $6.1 million most recently. That's what we model on a go-forward basis. My upside guidance would be based on any additional rent, and we are hoping they do pay that.

Vikas Gupta: Yeah. And, Jonathan, overall, Maplewood is doing a great job. Occupancy in New York is at 93%. They are going to keep pushing that occupancy, pushing rate, and we are just hoping for further improvement.

Operator: Our next question comes from John Pawlowski from Wells Fargo. Please go ahead.

John Pawlowski: Good morning. Thank you. First one is for Bob. It seems like there's a bit of a change of strategy on the balance sheet versus what you are planning on raising and what you are going to do in the quarter. Bob, can you maybe talk about that and maybe if the stock starts to work in your favor again, on the trajectory it was in '24, is that to change things in the back half of the year?

Bob Stephenson: You were a little hard to hear. I will try to answer that. If I do not, just re-ask a piece of it. So the strategy again, we have an equity currency. So leading into the year, we said we are going to take advantage of that equity currency in the bond market. It was not available at the coupon we were looking for. We saw an opportunity and opportunistically took advantage of that. So that's why on the guidance side, instead of having issuing equity to fund the next year's bonds, we decided to do debt for debt. And as you saw, they are basically leveraged neutral. It's a great transaction from our standpoint.

I did not catch the second part, you would not mind repeating that.

John Pawlowski: No. It was just about if, you know, if things change in the second half of the year, is there the ability to or the maybe the desire to try to fund future bonds with equity instead of just refi as you did or you know, would you kind of hold course here?

Bob Stephenson: Yeah. That's a great question. So again, we are going to keep that straight same strategy what I discussed in our prepared points that we will use equity to give it an added to strong currency to fund acquisitions. There's a chance in the bank market, I am redoing our credit facility. If I could go out and potentially do a term loan, I may take out the secured debt with a term loan. If I do, that would take us to the upside of the guide as well.

Operator: Okay. That's helpful. And then my second question is just on the sub-one coverage bucket for EBITDAR. There's a tenant that's growing. You know? It looks like there's only two quarters currently included, but you grow into a full number, I think you are roughly 11%. What gives you confidence in that? And then as they are growing with you? And then maybe the second part of that is there's also a tenant at 0.99% EBITDAR coverage. Think there's the potential for them to graduate out of this bucket? And on a net basis next quarter, you'd be down quarter over quarter?

Taylor Pickett: Yeah. I will take the question in reverse order. So you are right to focus on the 0.99. That kind of has continued to improve based on preliminary numbers in April and May. They will come out of the bucket next quarter if everything holds. So that's great news, and that takes the 9.8 down to four and change. And then if you look at the other two other big operators that are close, one at 0.85 and one at 0.87, and they also, in 2025, have had performance above those coverage amounts. So remember, it's trailing 12. We are headed in the right direction with both of those.

So you really get down to a modest under one times bucket. Once you deal with those three big guys, we are really encouraged that directionally, we are in great shape. And I would add just overall, although coverage at 1.51 was flat quarter to quarter. Again, if you look at April and May and the trajectory, we expect our overall coverages will continue to grow.

Operator: Mhmm. Alright. Very helpful. Thank you. Our next question comes from Seth Perkey from Citi. Please go ahead.

Seth Perkey: Hi, thanks for taking my question. Going back to Maplewood, can you remind us how the lease is structured and quantify how much upside in rents you could potentially capture?

Vikas Gupta: Yeah. This is Vikas. The lease structure, the contractual rent is $69 million, but at this point, we are not looking at it that way. We are looking at all cash flow that comes to Omega. So, they are trending close to full contractual rent. Like I said previously, we expect further improvements in coming quarters.

Bob Stephenson: And just to add to that a little bit, basically, all the cash that's generated in the Maplewood entity will come to us for the foreseeable future. So it's very much like our idea structure.

Seth Perkey: Okay. That's helpful. And then you know, can you just talk about who else you are seeing out there as you compete for investment opportunities and how's your underwriting changed at all kind of just given that the legislation around provider cuts is behind us?

Vikas Gupta: Yeah. This is Vikas again. As for who we see out there, it hasn't really changed. We see our REIT peers. We see private equity. We see family office. And as for underwriting, we continue to underwrite the same. As I have said on previous calls, we change our underwriting standards, so we have kept them the same. And now it's especially with the good news, we will continue to keep it the same.

Operator: Great. Thank you. Our next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead.

Juan Sanabria: Hi. Thanks for the time. Since just curious on the holistic portfolio metrics. Occupancy ticked up at coverage kind of stayed flat. Just curious if why that was in confidence or visibility in future step-ups in rent coverage. I'm not sure if you can share a two, three, or early thoughts on kind of the next quarter's EBITDAR TTM coverage. Thanks.

Taylor Pickett: Yeah. You know, Juan, it's interesting. We have trailing 12. You can have a quarter that falls off and a quarter that comes in, and you are not necessarily going to get the reaction from occupancy right away because there could be just odd accruals or whatever. But the general trajectory, as I mentioned earlier, based particularly on the April and May preliminary results that we have, is up. So I would expect, based on what we know today, that our overall coverages next quarter will be higher. And to your point, reflecting just this continued occupancy driver of that coverage.

Juan Sanabria: And second question, just wanted to follow-up with the commentary made by Megan at the beginning about the potential for a cut just given statutory, I guess, considerations for Medicare, but then, you know, obviously, there's a history of not doing that. So just curious if you could or hoping you could provide a little bit more color on the mechanics. I mean, and the processes laid out.

Megan Krull: Yeah. There's just a general requirement that if there's an increase in the deficit by a certain amount, there has to be a cut as well, to try to balance things out. And so it's capped for Medicare at 4%, so that's sort of worst-case scenario. Although keep in mind, at the same time, you are going to have a 3.2% rate increase that just got finalized yesterday. That's going to offset that. And as I said, you know, the fundamentals are good. The demographics are good. But, yes, legislatively, they have typically gone and gotten rid of that piece of it.

Right now, I think Congress is in recess, so we wouldn't find out until, you know, a couple more months whether or not they'll do that.

Operator: Thank you. Our next question comes from Michael Stroya from Green Street. Please go ahead.

Michael Stroya: Thanks, and good morning. Maybe one on the labor side. What sort of wage increases are you seeing your operators pass along to employees today? And is there a meaningful difference between wage growth within your SNF and senior housing portfolios?

Megan Krull: I mean, I would say from a wage perspective, we are just seeing normal inflationary increases at this point, you know, unlike what we have seen previously during COVID and, you know, right after COVID where things were a little bit out of whack. And I do not know that we are seeing any difference between the SNF and the senior housing portfolios on the wage side.

Michael Stroya: Okay. I guess how about at the occupation level? Has there been any specific occupations that have been maybe more difficult to hire or retain?

Megan Krull: I mean, the CNAs are always a little bit more of a difficult piece of things just because of, you know, where these states have pushed the minimum wages. So it's tough to keep that an attractive business. But our operators have been dealing with that over the last several years, and it's become more of a, you know, you just have to entice people as to the culture that you build and you want to be working here, and you want to attract the people who are looking to help people. And so I think it hasn't been as much of an issue that we've seen recently.

Operator: Great. Thanks for the time. Our next question comes from Omotayo Okusanya from Deutsche Bank. Please go ahead.

Omotayo Okusanya: Yes. Good morning, everyone. Just a quick question on the guidance raise. Again, it's pretty impressive. It feels like it's a bunch of things that are coming together there. And I guess my question is, it just feels like the company is figuring out ways to kind of, you know, drive additional earnings growth and create additional shareholder value. And I'm curious from an internal perspective what may be changing quicker, faster, and also giving the company the ability to really kind of execute on these things.

Matthew Gorman: Sure. Thanks, Tara. It's Matthew here. I think we continue to just push active portfolio management as best we can. I think that we are actively looking at operators and facilities that maybe don't align, working with operators to get them out of facilities that maybe shouldn't be part of their core portfolio, and then sourcing other operators that are more suited to run those facilities and often that presents an opportunity for either risk mitigation or even rent pickup in those situations.

I would say also, as Vikas said in his talking points, that we are considering multiple different structures to try to create that incremental value to align ourselves better with our operators and to potentially benefit from the further upside that we think will happen in both the skilled nursing and senior housing facility operating metrics over the next ten plus years.

Omotayo Okusanya: That's helpful. And then one other quick one for me. Apologies. I joined the call a little late. Just curious if you addressed Paxil.

Vikas Gupta: Yeah. So bio for PAC three notes, just about everything, but we are just we only know what the public markets know. But as an operator, we find PACS to be clinically strong. We continue to have strong coverages with them. So from our perspective, it's it's an automatic at this point.

Operator: Gotcha. Thank you. Our next question comes from Nick Yulico from Scott. Please go ahead.

Nick Yulico: Good morning. First question is on the dividend. With the FAD improving this quarter and the improvement in the guidance, in the second quarter, you are at looks like a 90% dividend payout ratio on FAD. And so I'm just wondering how the Board is thinking about potential dividend increase in the future and how we should think about a payout ratio that you need to get to, to support dividend growth?

Taylor Pickett: Yeah. It's a great question, Nick. One that we actually talked about in our most recent board meeting. I think the general view is that we need to be in the eighties, you know, kind of that 85% payout ratio range before we contemplate a dividend raise. But from a tax perspective, you get into the high seventies, even low eighties, you start to push up against the threshold anyway. So we are not quite there. But I think we have some visibility into potentially having that conversation in the next three, four quarters.

Nick Yulico: Okay. Thanks, Taylor. And then second is on Genesis. I know you talked about having, you know, gotten rid of some worked with them to get rid of some underperforming assets over the years. Just maybe remind us why you have confidence that the pool of assets you know, you own with them is still assets they want to keep and that there's not, you know, risk of some sort of, you know, rejection, of lease or, you know, any sort of move to rightsize rent through a bankruptcy process? Thanks.

Taylor Pickett: Yeah. So it's a master lease, first of all. So they would have to they can't cherry-pick the assets. They'd have to reject all 31. Highly desirable assets with really good coverage. I would say the best portfolio in that Genesis entity. So the idea of doing going through a reorganization without that portfolio, I think makes any sense. We feel really good about the assumption and exit with our portfolio intact. And as Vikas mentioned, there are a handful of facilities, particularly in the Northeast, that we've exited very tough markets. What we have left with them is Mid Atlantic, principally and really strong coverages with a lot of good visibility for growth.

Nick Yulico: Alright. Thanks.

Operator: Our next question comes from Farrell Granath from Bank of America. Please go ahead.

Farrell Granath: Thank you, and good morning. My first question is about when you're looking within the marketplace, was curious if you can explain the split between either unsolicited inbound and what either efficiencies you're doing internally on your team for that external growth outlook? More focused on faster connection to negotiation to execution of deals.

Vikas Gupta: Yeah. This is Vikas. We do a lot for new deals, and that includes incomings. We have a corporate development team that goes out, tries to meet new operators, try to find real estate. And we also have a lot of data initiatives that we are using to look for new transactions.

Farrell Granath: Great. And I guess, also, can you just share a few thoughts on how you think about either using new operators versus current operators while you're expanding your footprint?

Vikas Gupta: Yeah. We continue to a big part of our pipeline continues to be from our current operators. But we are actively looking for new operators. Sometimes that happens to a workout situation where we meet a new operator. But as I mentioned, we have a corporate development team that is just specifically going out there looking for new operators today. It's become one of our strategic initiatives.

Farrell Granath: Great. Thank you.

Operator: Our next question comes from Michael Carroll from RBC Capital. Please go ahead.

Michael Carroll: Yes. Thanks. I'm gonna circle back on the prepared remarks talking about, I guess, the senior housing transaction activity. It sounded like OHI is seeing more of these types of deals coming across their desk. I mean, would these be traditional net lease type transactions? I mean, is it hard to get those types of deals done, or is this gonna be more of a unique structure where Omega can also benefit in the upside?

Matthew Gorman: Ashish, this is Matthew here. I think you're right. The traditional triple net structure is less appealing to a lot of operators these days. And so we continue to look at various different structures, Michael. Ultimately, it's about creating long-term sustainable shareholder growth, and that really means partnering with superior operators and buying properties that are sustainably fit for purpose in markets that we like at prices that make sense for us. And if we can do that, we will consider various different structures to align those interests and ultimately achieve accretive growth for our shareholders. So everything's on the table.

Michael Carroll: Okay. And then, Matthew, did I hear it correctly? It sounded like that this is something that's more on the forefront or that Omega is being more active on this front is that true? And would those structures be like a RIDEA structure, or would it be something different?

Matthew Gorman: It could be. I think we are continuing to look at it. We've always looked at it, but quite frankly, the market's changed. Previously, there was more appetite for triple nets, and now that doesn't seem to be the case. So, yes, we would be open to that idea, but at the same time, a lot of what we're seeing right now doesn't fit what we think makes financial sense. There are some stabilized portfolios with very little upside trading at prices that we can't reconcile. And so we're just going to be incredibly disciplined both with the operator and the real estate.

So from that standpoint, I don't want to, you know, shout the word RIDEA and assume that, you know, it's gonna be a significant portion of our business over the next six to twelve months. We are gonna be opportunistic. If it happens, it happens. But at the same time, if it doesn't because the opportunities aren't presenting themselves, we still feel that there's a decent pipeline available to us to continue accretively invest.

Michael Carroll: Great. Appreciate it.

Operator: Our next question comes from Vikram Malhotra from Mizuho. Please go ahead.

Vikram Malhotra: Thanks for taking the question. I guess, Matthew, I just wanted to dig into those comments a bit more. In a lot of your peers, have sort of been more aggressive on their RIDEA structure, buying more call it, 90 plus percent stabilized assets at 7% initial yields. I'm just sort of wondering, does that type is that structure is what you're talking about? Is there some other structure? And if you could just dig into the four assets you bought on AL, like, are those triple net, and what were the yields on those specifically?

Matthew Gorman: Yeah. So some of our peers are buying those because some of our peers have the cost of capital to be able to do that and not be dilutive. We don't have that luxury, and so therefore, we have to be a little bit more selective in terms of what we take over. The opportunities are likely to be smaller portfolios or small clusters of facilities as opposed to larger portfolios because those tend to be marketed and tend to, quite frankly, get into a price range that doesn't make financial sense for our shareholders and us.

But we still see a lot of opportunity out there of fit for purpose assets that if put in the hands of the right operator, and you have a rationalization of expenses and put some CapEx in to be able to rate and occupancy can be highly accretive over time. So I think those are the types of things that we're gonna be looking at.

Vikram Malhotra: For the second part of your question, Vikram, those four ALFs that we bought, are triple net deals at 10%.

Vikram Malhotra: Okay. That's helpful. I guess just, you know, I wanted to go to the UK. You know, there's more competition there recently from one of your peers. Still seems like a very attractive market, based on your comments. But I'm wondering just in the past, you've said I guess, the first half, you have said the UK was, pipeline was good, and then you had mentioned it was smaller. Do you mind just updating us, like, how are you looking at the UK, in terms of specific opportunities? And, like, how big could that, eventually become, you know, over the next few years?

Vikas Gupta: Yeah. I'll start with your last part of your question. There are 17,000 care homes. So we believe there's still a lot of consolidation to take place in the UK. We do think it will be part of our pipeline going forward. At this very moment, it is not the lion's share of our pipeline, but we do have an ongoing UK pipeline that is largely driven by our current operators out there.

Vikram Malhotra: Thank you.

Operator: Our next question comes from Alex Dajin from Baird. Please go ahead.

Alex Dajin: Hey, Aaron. Thank you for taking my question. Guess first one for me is which segments in the US senior housing space are the best opportunities to target today? And then also, how do the senior housing metrics currently in the portfolio compare to the SNF side?

Matthew Gorman: So the first one I think it just comes down to the individual asset. Now we've seen some IL portfolios that look interesting. We've seen some CCRCs that look interesting. We've seen ILAL memory cares that don't sell have a SNF component and therefore can't really call themselves CCRCs that look interesting. But at the same time, we've seen multiple assets within all of those classes that we can't make sense of the pricing on. So I think from our standpoint, we have a fairly decent understanding. Obviously, you've been in this industry. In the senior housing industry for many years.

We have a fairly decent understanding as to what each of these should be able to achieve and what value is. What the cost rebuild is. And so we're gonna approach each one individually. Especially in alignment with superior operating partners to understand what they can achieve. And ultimately, what we're looking for is a low to mid-teen IRR over time, not assuming any cap rate compression within that model off the CapEx that provides a sufficiently compelling return to be more appealing potentially than our standard triple net.

Innately, our standard triple net structure has a little bit more consistency to it, normally a little bit more visibility to it because you have that non-operating exposure and that coverage support. So in order to invest in these assets, it has to be providing a sufficiently compelling return. And that can be over any of those classes.

Alex Dajin: Thank you for that. And I guess the second part was, how do the senior housing metrics currently in the portfolio compare to the SNF?

Matthew Gorman: Sure. In terms of coverage, pretty similar. I would say that, you know, we include our UK care homes within our senior housing component. I would say they probably have a moderately higher occupancy and coverage than our overall portfolio. But other than that, our US senior housing is materially in line metric-wise from an operating perspective. Obviously, the margins are higher. But in terms of occupancy and in terms of coverage, they're materially in line.

Alex Dajin: Got it. Thank you. That's it for me.

Operator: Again, if you would like to ask a question, please press 1 on your telephone keypad. There are no further questions at this time. I would like to turn the call over back to Taylor Pickett for closing remarks.

Taylor Pickett: Thanks for joining our call this morning. We appreciate the thoughtful questions. And we're here if there's any follow-up. Have a great day.

Operator: This concludes today's conference call. You may now disconnect.