Operational trends at Omega Healthcare Investors (NYSE: OHI) are moving in the right direction, according to CEO Taylor Pickett. That said, the company is still working with its operating partners on various challenges affecting their ability to pay rent.
In the second quarter of 2023, the company posted adjusted funds from operations (FFO) of $183 million, a slight decrease compared to the $185 million FFO the company reported during the same period in 2022. Total revenue for 2Q23 was $250.2 million, a $5.5 million increase over the same period in 2022.
Funds available for distribution (FAD) registered at $173 million for the quarter — a stronger than expected result, according to management.
“While we had expected a strong sequential improvement in FAD, as some restructured operators returned to paying rent, this was augmented by unanticipated additional rent payments from some operators on a cash-basis,” Pickett said in a press release.
At the same time, he noted that occupancy among the company’s operating partners was increasing, and that “the tight labor market [is] slowly moderating.”
Still, “while both corporate and industry metrics are improving, the industry is still on the road to recovery and remains quite fragile,” he said.
The Hunt Valley, Maryland-based real estate investment trust (REIT) earlier this year announced it was restructuring a 17-community portfolio operated by Maplewood Senior Living after the operator faced a “modest liquidity crunch” in January.
Omega’s senior housing portfolio consists of 197 senior housing communities throughout the U.S. and the United Kingdom, according to its most recent quarterly disclosure.
On Thursday, the company’s management noted during an earnings call with investors and analysts that although Westport, Connecticut-based Maplewood is on better footing than before, the operator still short-paid its June and July rent by $1 million.
“We currently are working with Maplewood and the estate of [the late CEO] Greg Smith to address these shortfalls,” noted CFO Robert Stephenson.
But Maplewood’s latest cash flow projections, anticipated January rate increases and improved census at the operator’s Manhattan community, Inspir Carnegie Hill, give Omega management confidence that “there is a path forward to meet its full contractual rental obligations in the first quarter of 2024,” Stephenson said.
Currently, Inspir Carnegie Hill sits at about 61% average occupancy, which is an uptick from earlier this year.
“We expect another 10% of incremental occupancy … and obviously that has a lot of power in terms of cash to the bottom line,” said Omega COO Daniel Booth during the call Thursday.
And outside of the community in Manhattan, Maplewood is “performing very well,” with average occupancy at pre-Covid levels, he added.
Outside of Maplewood, Omega management is also working with two U.S.-based other operators in its portfolio on restructuring efforts, long-term care providers LaVie and Agemo.
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