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Omega Announces First Quarter 2016 Financial Results; Adjusted FFO of $0.83 Per Share for the First Quarter

HUNT VALLEY, Md., May 04, 2016 (BUSINESS WIRE) -- Omega Healthcare Investors, Inc. OHI, -3.04% (the “Company” or “Omega”) today announced its results of operations for the three-month period ended March 31, 2016. The Company also reported for the three-month period ended March 31, 2016 Funds From Operations (“FFO”) of $153.6 million or $0.77 per common share and Funds Available For Distribution (“FAD”) of $148.5 million or $0.75 per common share.

Taylor Pickett, Omega’s CEO stated, “Omega had another terrific quarter deploying over $500 million in new capital and earning a record quarterly adjusted FFO of $0.83 per share.” Mr. Pickett continued, “Also during the first quarter, as part of our ongoing initiative to improve our overall portfolio, we identified 24 of our facilities as held for sale, representing slightly more than 1% of our gross book value. We estimate proceeds of over $95 million from these asset dispositions, and that the redeployment of such proceeds will increase rental revenue from the $6.6 million in annual rent currently generated by these assets. Furthermore, we anticipate the $35 million of impairments recorded in the quarter should largely be offset by gains to be recognized upon the sale of 25 facilities, currently anticipated in 2016.” Mr. Pickett concluded by stating, “Our 2016 FFO and FAD guidance announced in February remains unchanged and we look forward to continuing to enhance our tenant base, geographic density and further positioning Omega as the leading consolidator in the large, highly fragmented skilled nursing facility industry.”

The $153.6 million of FFO for the first quarter of 2016 includes $5.1 million in provisions for uncollectible mortgages, notes and straight-line receivables, $3.8 million of acquisition and merger related costs, $2.8 million of non-cash stock-based compensation expense and $0.3 million of interest refinancing costs. FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts (“NAREIT”). Adjusted FFO was $0.83 per common share for the three-month period ended March 31, 2016. FFO and Adjusted FFO are non-GAAP financial measures. Adjusted FFO is calculated as FFO excluding the impact of certain non-cash items and certain items of revenue or expense, including, but not limited to: acquisition and merger related costs, interest refinancing costs, provisions for impairment, uncollectible mortgages and accounts receivable and stock-based compensation expense. For more information regarding FFO and Adjusted FFO, see the “First Quarter 2016 Results – Funds From Operations” section below.

GAAP NET INCOME

For the three-month period ended March 31, 2016, the Company reported net income of $58.2 million, or $0.29 per diluted common share, on operating revenues of $212.9 million. This compares to net income of $43.1 million, or $0.32 per diluted common share, on operating revenues of $133.4 million, for the same period in 2015.

The increase in net income for the three-month period ended March 31, 2016 compared to the prior year was primarily due to revenue associated with the acquisition by merger of Aviv REIT, Inc. (“Aviv”) on April 1, 2015 and new investments completed in 2015 and Q1 2016. This increase was partially offset by (i) $31.8 million in increased depreciation and amortization expense, (ii) $28.6 million in increased impairments on real estate assets, (iii) $5.1 million in provisions for uncollectible mortgages, notes and straight-line receivables, (iv) $4.9 million in increased interest expense and (v) $3.3 million in incremental general and administrative expenses.

2016 RECENT DEVELOPMENTS AND FIRST QUARTER HIGHLIGHTS

In Q2 2016, the Company…

  • completed $220 million in new investments.
  • increased its quarterly common stock dividend rate to $0.58 per share.

In Q1 2016, the Company…

  • completed $494 million in new investments.
  • invested $31 million in capital renovation and construction in progress projects.
  • completed a $350 million senior unsecured 5-year term loan.
  • increased its quarterly common stock dividend rate to $0.57 per share.

FIRST QUARTER 2016 RESULTS

Operating Revenues and Expenses – Operating revenues for the three-month period ended March 31, 2016 totaled $212.9 million. Operating expenses for the three-month period ended March 31, 2016 totaled $116.3 million and were comprised of $62.4 million of depreciation and amortization expense, $34.6 million in provisions for impairment on real estate assets, $7.7 million of general and administrative expense, $5.1 million in provisions for uncollectible straight line receivables, $3.8 million of acquisition and merger related costs and $2.8 million of stock-based compensation expense.

The $5.1 million in provisions for uncollectible straight line receivables primarily resulted from the Company repositioning assets from one operator to another. For further information related to the $34.6 million of real estate impairments, see the “Asset Dispositions and Impairments” section below.

Other Income and Expense – Other income and expense for the three-month period ended March 31, 2016 was a net expense of $39.7 million, which was primarily comprised of $37.2 million of interest expense, $2.1 million of amortized deferred financing costs, $0.3 million interest refinancing costs and a $22 thousand realized loss on foreign exchange.

Funds From Operations – For the three-month period ended March 31, 2016, reportable FFO was $153.6 million, or $0.77 per common share on 198 million weighted-average common shares outstanding, compared to $79.6 million, or $0.59 per common share on 135 million weighted-average common shares outstanding, for the same period in 2015.

The $153.6 million of FFO for the three-month period ended March 31, 2016 includes the impact of $5.1 million in provisions for uncollectible mortgages, notes and straight-line receivables, $3.8 million of acquisition and merger related costs, $2.8 million of non-cash stock-based compensation expense and $0.3 million of interest refinancing costs.

The $79.6 million of FFO for the three-month period ended March 31, 2015 includes the impact of $9.4 million of interest refinancing costs, $4.9 million of acquisition related costs and $1.6 million of non-cash stock-based compensation expense.

Adjusted FFO was $165.4 million, or $0.83 per common share, for the three months ended March 31, 2016, compared to $95.5 million, or $0.71 per common share, for the same period in 2015. The Company had 64 million additional weighted-average shares outstanding for the three months ended March 31, 2016 compared to the same period in 2015. For further information see the “Funds From Operations” schedule below.

FINANCING ACTIVITIES

Amendment to the Omega Credit Facilities – Adding a $350 Million Unsecured Term Loan Facility – On January 29, 2016, the Company amended the Omega Credit Facilities (defined below) to add a $350 million senior unsecured incremental term loan facility. As a result of the amendment, the Omega Credit Facilities now include a $1.25 billion senior unsecured revolving credit facility (the “Revolving Credit Facility”), a $200 million senior unsecured term loan facility (the “Tranche A-1 Term Loan Facility”), a $200 million senior unsecured incremental term loan facility (the “Tranche A-2 Term Loan Facility”) and a $350 million senior unsecured incremental term loan facility (the “Tranche A-3 Term Loan Facility” and, together with the Revolving Credit Facility, the Tranche A-1 Term Loan Facility and the Tranche A-2 Term Loan Facility, collectively, the “Omega Credit Facilities”). The Revolving Credit Facility matures on June 27, 2018, subject to a one-time option for Omega to extend such maturity date for one year. Exercise of such extension option is subject to compliance with a notice requirement and other customary conditions. The Tranche A-1 Term Loan Facility matures on June 27, 2019. The Tranche A-2 Term Loan Facility matures on June 27, 2017, subject to Omega’s option to extend the maturity date of the Tranche A-2 Term Loan Facility twice, the first extension until June 27, 2018 and the second extension until June 27, 2019. The Tranche A-3 Term Loan Facility matures on January 29, 2021. The Tranche A-1 Term Loan Facility, the Tranche A-2 Term Loan Facility and the Tranche A-3 Term Loan Facility may be referred to collectively herein as the “Omega Term Loan Facilities”.

The Tranche A-3 Term Loan Facility is priced at LIBOR plus an applicable percentage (currently at 150 basis points, with a range of 100 to 195 basis points) based on our ratings from Standard & Poor’s, Moody’s and/or Fitch. The entire amount of the Tranche A-3 Term Loan Facility was advanced on January 29, 2016. The Company used the proceeds from the Tranche A-3 Term Loan Facility to repay existing indebtedness and for general corporate purposes.

As of March 31, 2016, the Company had $530 million of outstanding borrowings under the Revolving Credit Facility and $1.1 billion of outstanding unsecured term loan borrowings, including the Omega Term Loan Facilities and its other unsecured term loans.

Equity Shelf Program and Dividend Reinvestment and Common Stock Purchase Plan – During the three-month period ended March 31, 2016, the Company sold the following shares of its common stock under its Equity Shelf Program and its Dividend Reinvestment and Common Stock Purchase Plan:

(in thousands, except price per share)

Equity Shelf
(At-the-
Market)
Program

Dividend
Reinvestment and
Common Stock
Purchase Program

Q1 2016
Number of shares - 660
Average price per share $ - $ 29.84
Gross proceeds $ - $ 19,691

2016 Q2 RECENT DEVELOPMENTS AND PORTFOLIO ACTIVITY

$220 Million of New Investments in Q2 2016 – In Q2 2016, the Company completed four separate transactions totaling $220 million of new investments. The new investments consisted of the following:

$32 Million AcquisitionIn May 2016, the Company acquired three skilled nursing facilities (“SNFs”) located in Colorado (2) and Missouri (1) from an unrelated third party for $31.8 million and leased them to an existing operator. The SNFs, consisting of 344 operating beds, were added to the existing operator’s master lease with an initial annual cash yield of 9.0% with 2.5% annual escalators.

$9 Million Mezzanine LoanIn April 2016, the Company invested $8.5 million in a mezzanine loan with a third party. The loan bears interest at 11% per annum and matures in May 2021.

$114 Million Acquisition – In April 2016, the Company acquired 10 care homes (similar to assisted living facilities (“ALFs”) in the United States) in the United Kingdom (“UK”) from an unrelated third party for approximately $113.8 million (USD) and leased them to its existing UK operator. The 10 care homes with 743 registered beds were added to the existing operator’s 12-year master lease which has an initial cash yield of 7% with 2.5% annual escalators.

$66 Million AcquisitionIn April 2016, the Company acquired three ALFs / independent living facilities located in Texas (representing 355 operating beds) for approximately $66.0 million and leased them to a new operator to the Company. The facilities were combined into a 12-year master lease agreement with an initial annual cash yield of 6.8% in year one, increasing to 7.2% in year two, 7.4% in year three with annual escalators of 2.8% thereafter.

$494 Million of New Investments in Q1 2016 – During the three months ended March 31, 2016, the Company completed 7 separate transactions totaling $494 million of new investments and invested $31 million in capital renovation projects. The new investments consisted of the following:

$6 Million AcquisitionOn March 15, 2016, the Company acquired one 33 registered bed care home located in the UK for approximately $6.1 million (USD) and leased it to its existing UK operator. The facility was added to the existing operator’s master lease with an initial annual cash yield of 7% with 2.5% annual escalators.

$20 Million AcquisitionOn March 1, 2016, the Company completed a purchase/lease-back of two ALFs with 164 operating beds located in Georgia for approximately $20.2 million from a new third party operator. The two facility master lease has an initial term of 12-years, annual escalators of 2.5% and an initial annual yield of 7.5%.

$233 Million AcquisitionOn...


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