There had been some nasty rumors in the market leading up to the release of Omega Healthcare Investors’ fourth quarter and year-end earnings release. Some people fretted that the situation had deteriorated with too many of their customers, which could force them to cut their dividend rate. You can’t believe everything you read, except on these pages.
While there are still some tenant issues, the overall situation is improving. Because they are leases, the information comes with a three-month lag. For the 12 months ended September 30, 2023, occupancy was 79.1%, up from the previous quarter and up 290 basis points from the year-ago quarter. EBITDARM coverage was 1.63x in the third quarter, up from 1.37x a year earlier.
Even Maplewood Senior Living appears to be turning the corner, with 16 of its 17 properties now stabilized. What we don’t know is stabilized at what level, and what the current cash flow is. Maplewood paid $9.8 million in cash rent in the fourth quarter, and another $1.8 million in security deposits was utilized as well. In January 2024 they paid $3.8 million in rent. Its Inspir community in the Carnegie Hill area of Manhattan is now at 65% occupancy, but it may be a tough slog to get to stabilization given the new competition in the past few years. The big question for them, and Omega, is what will happen with the $200 million Washington, D.C. project that is set to open in 2025, with the sales office now open. They both have a lot riding on its success.
For the full year, Omega had $667 million in new investments, of which $262 were acquisitions, $322 million were real estate loans, and $84 million was for capital renovation and construction projects. The REIT also sold 69 facilities for $485 million, repaid $350 million of senior unsecured notes that were due on August 1, 2023, repaid $296 million on 32 HUD loans related to sales and transitions, and issued 11 million common shares for proceeds of $339 million. Omega has also sold 30 LaVie Care Centers nursing homes in Florida, and has an additional 30 LaVie facilities that are performing well in four states. They are determining their future status now. Six others are being transitioned to other operators.
Investors liked what they heard, pushing the share price up 7% in early trading.
American Healthcare REIT (NYSE: AHR) priced its IPO at $12.00 per share, the low end of its expected range of $12.00 to $15.00 per share. They sold 56 million shares for gross proceeds of $672 million. The net proceeds will be used to repay about $623.1 million of debt outstanding under its credit facility. BofA Securities and Morgan Stanley were the lead book-running managers.
The REIT owns a mix of seniors housing, skilled nursing, MOBs, hospitals and other healthcare-related facilities with a value of approximately $4.6 billion located in 36 states and the UK. Our old friends Danny Prosky and Stefan Oh are the president and CEO, and chief investment officer, respectively. Even though AHR did not raise extra cash for investments, with the debt paydown we suspect that they will be on the acquisition hunt.
