Omega Healthcare Investors reported second quarter results on August 2 and announced a host of new investments totaling $270 million. In total, the company completed $129 million in real estate acquisitions, invested $124 million in real estate loans and other loans and investments and funded $17 million in capital renovation and construction-in-progress projects.
Regarding Omega’s real estate acquisitions, the largest was Omega’s purchase of four skilled nursing facilities located in West Virginia for $114.8 million. The company leased the SNFs to an existing operator, and the facilities were added to that operator’s master lease with an initial annual cash yield of 9.5%, with 2.5% annual escalators. Furthermore, Omega loaned a separate $104.6 million with a yield of 12% to the same operator to finance its purchase of 13 SNFs in West Virginia. Next, Omega purchased another West Virginia SNF for $13.7 million, also leasing it to an existing operator in which the facility was added to the master lease with an initial annual cash yield of 10%, with 2.5% annual escalators. The company also entered a $10 million mezzanine loan with another existing operator. The loan matures on June 30, 2028, and has a fixed rate of 11% per annum.
Concerning asset sales, the company sold 10 facilities total for $44.7 million in cash, with five of the facilities previously classified as held for sale. With this, the company recognized a gain of $12.2 million. As of June 30, it had one facility classified as assets held for sale, totaling $1.4 million in net book value.
The margin crunch is hitting operators hard, and the effects are being felt by the landlords too. For Omega, as previously disclosed, in the first quarter of 2023, Omega agreed to allow LaVie to defer up to $19.1 million (or 66% of contractual rent) from January 2023 through April 2023. In Q2:23, LaVie paid, and Omega recorded, $16.9 million in rent ($2.5 million for April and $7.2 million for both May and June) in accordance with the restructuring terms. Restructuring discussions, including the sale and release of additional facilities, are still ongoing, and Omega anticipates the additional restructuring activity to be completed in the next several months. In July 2023, LaVie paid $2.5 million of rent, and Omega expects LaVie will continue to pay $2.5 million per month, until the additional restructuring activities are completed.
Omega had some good news from Healthcare Homes Limited, a United Kingdom-based operator, which it had previously agreed to allow to defer £6.7 million (or $8.2 million) of contractual rent from January 2023 through April 2023 with regular payments to resume in May 2023. However, Healthcare Homes resumed full contractual rental payments in May 2023 and Omega received $4.4 million in rent in the second quarter of 2023. Healthcare Homes paid its full contractual rent and interest of $2.2 million for July 2023.
In accordance with a Q1:23 agreement with Omega, Agemo resumed making rent and interest payments during the second quarter of 2023. During Q2:23, the company recorded $6.6 million in income related to Agemo (on a cash basis for revenue recognition) consisting of $5.8 million of contractual rent payments received (recorded as rental income) and $0.8 million for two months of interest payments received (recorded as a recovery against provision for credit losses). Additionally, Agemo paid full contractual rent and interest of $2.3 million in July 2023.
Finally, during the second quarter of 2023, Maplewood short-paid its June contractual rent by $1.0 million. Maplewood is on a cash basis for revenue recognition, so Omega recorded only the $16.3 million of cash received as rental income in the second quarter. In July, Maplewood again short-paid its contractual rent by $1.0 million, but Omega is taking actions to preserve its rights and is in discussions with Maplewood to address the deficiency. And in August, Omega drew $2.0 million on a $4.8 million Maplewood security deposit.
