Omega Healthcare Investors to Acquire 58 Skilled Nursing Facilities for $735 Million

On August 6, 2019, VCBeat (WeChat ID: vcbeat) learned from foreign media reports that Omega Healthcare Investors announced plans to acquire 58 skilled nursing facilities, involving 60 buildings in a transaction valued at $735 million.

According to Omega, the Hunt Valley, Md.-based real estate investment trust (REIT) agreed to the deal on July 26, but the finalization of the transaction is still subject to approval by the Department of Housing and Urban Development (HUD) and the satisfaction of other closing conditions.

The $735 million price tag includes assisted living facilities and 6,590 skilled nursing beds across eight states. Omega did not publicly disclose the names of the sellers or current operators; however, the real estate investment trust noted that these 60 properties are operated by two providers. Omega stated that these agreements will generate $64 million in contractual cash rent by 2020.

Omega paid $345 million in cash, with the remaining $390 million coming from mortgage loans backed by the U.S. Securities and Exchange Commission (SEC), maturing between September 2046 and December 2051. This news was part of the company’s second-quarter 2019 financial report. In the report, Omega announced a net profit of $75.7 million, lower than the $82 million recorded during the same period in 2018.

Omega CEO Taylor Pickett also used the announcement to criticize the Texas Legislature for failing to raise Medicaid reimbursement rates in the Lone Star State—a move that positions real estate investment trusts (REITs) as a potential lifeline for its Texas properties, which are operated by the struggling provider Daybreak Venture.

Taylor Pickett said in a statement, “This quarter, the Texas Legislature failed to pass any form of skilled nursing Medicaid reimbursement rate reduction, which means that the state’s Medicaid reimbursement rates will be the same as the federal Medicaid, among the lowest in the country.”

Pickett stated, “In the foreseeable future, we do not intend to restore Daybreak’s contractual rent. We are actively collaborating with Daybreak’s management team and third-party advisors to maximize Daybreak’s future cash flows.”

Outside of Texas, Pickett expressed optimism about the upcoming Patient-Driven Payment Model (PDPM) and the forthcoming $851 million Medicare market plan. He stated, “We believe that the combination of PDPM and the recently confirmed 2.4% increase in Medicare reimbursement, driven by decades of population growth, will expand the continuously improving census.”

It is reported that Omega closed at $36 per share on Tuesday, up 12 cents, or 0.33%. The company will hold a conference call with investors and analysts on Wednesday morning.

Omega Healthcare Investors, Inc. was incorporated in Maryland on March 31, 1992. Omega is a self-administered real estate investment trust (REIT) that invests its income in healthcare facilities and long-term care facilities. In the United States, Omega provides lease or mortgage financing for skilled nursing facilities and acute care facilities. Historically, the company has funded its investments through its revolving credit facility, private placements, or public borrowings, by issuing debt or equity securities, secured debt, or a combination of these methods.

(Compiled by Xu Wenjuan)