Omega Healthcare Investors released its second quarter results, beating estimates and demonstrating resilience amid the bankruptcy of Genesis Healthcare, one of the largest skilled nursing operators in the country. The REIT reported AFFO of $0.77 per common share, which was above the estimate of $0.75. Revenue also came in higher than expected, totaling $282.5 million as opposed to the projected $240.6 million.
Omega completed approximately $527 million in new investments during the quarter, including $502 million in real estate acquisitions. The company purchased 45 facilities in the U.K. and Jersey for £259.8 million (approximately $344.2 million). The facilities were leased to four existing and two new operators, with annual rent of £25.9 million (about $34.4 million) and annual escalators that start at 1.7% and rise to 2.5% after year five.
Additionally, Omega acquired eight skilled nursing facilities and four assisted living communities in several U.S. states through four separate transactions for aggregate consideration of $157.9 million. The properties were leased to two existing operators and two new operators, with a weighted average initial annual cash yield of 10% and annual escalators between 2.0% to 2.5%. The company also funded $24.8 million in mortgages and other real estate loans through two separate transactions during the quarter. The loans carry a weighted average interest rate of 10% and maturity dates ranging from June 2028 through June 2030.
On the disposition side, Omega sold seven facilities for $62.1 million in cash, recognizing a gain of $22.9 million. As of June 30, it had two facilities classified as assets held for sale, totaling $12.4 million in net book value. Operationally, performance improved, too. Occupancy for the 12 months ended March 31 rose to 82.2%, up 200 basis points year-over-year. EBITDAR coverage increased to 1.88x compared to 1.78x for the prior-year.
After Genesis filed a Chapter 11 bankruptcy in July, Omega agreed to provide an $8.0 million debtor-in-possession financing, contingent on Genesis continuing to pay its full contractual rent during the bankruptcy process. Interest on the DIP loan and existing term loans can be primarily paid-in-kind during the bankruptcy period. Although Genesis missed $4.2 million in rent in March, it made all required contractual rent and interest payments in the second quarter. Omega recorded rental income of $12.8 million and interest income of $4.1 million from Genesis during the quarter, including $1.6 million of cash interest and $2.5 million of PIK interest.
LaVie Care Centers completed its bankruptcy proceedings effective June 1, for the second time since 2021. As part of the reorganization plan, its master lease with Omega was assigned to a new entity, ENDMT (operating as Avardis). The lease terms remain unchanged, with $3.1 million in monthly contractual rent and annual escalators of 2.5% through 2037. Omega received total combined contractual rent payments of $9.4 million from LaVie and Avardis during the second quarter. Meanwhile, Maplewood Senior Living paid $17.6 million in rent in the second quarter, up from $15.6 million in the first quarter.
Investors responded positively, with Omega’s share price climbing nearly 3% following the release.
