UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

OMEGA HEALTHCARE INVESTORS, INC.

(Exact name of registrant as specified in its charter)


Maryland	1-11316	38-3041398
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS Employer Identification No.)

303 International Circle, Suite 200, Hunt Valley, MD 21030

(Address of principal executive offices)

(410) 427-1700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 par value	OHI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.


Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ⌧	Accelerated filer ◻	Non-accelerated filer ◻	Smaller reporting company ☐	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

As of April ~~29, 2021,~~28, 2022, there were ~~235,359,702~~235,216,880 shares of common stock outstanding.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

FORM 10-Q

March 31, ~~2021~~2022


TABLE OF CONTENTS
		Page No.
PART I	Financial Information

Item 1.	Financial Statements of Omega Healthcare Investors, Inc.:
	Consolidated Balance Sheets	2
	March 31, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	2
	Consolidated Statements of Operations (unaudited)
	Three months ended March 31, ~~2021~~2022 and ~~2020~~2021	3
	Consolidated Statements of Comprehensive Income (unaudited)
	Three months ended March 31, ~~2021~~2022 and ~~2020~~2021	4
	Consolidated Statements of Changes in Equity (unaudited)
	Three months ended March 31, ~~2021~~2022 and ~~2020~~2021	5
	Consolidated Statements of Cash Flows (unaudited)
	Three months ended March 31, ~~2021~~2022 and ~~2020~~2021	6
	Notes to Consolidated Financial Statements
	March 31, ~~2021~~2022 (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3330

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4645

Item 4.	Controls and Procedures	4745

PART II	Other Information

Item 1.	Legal Proceedings	4746

Item 1A.	Risk Factors	4746

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4948

Item 6.	Exhibits	5049

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1 - Financial Statements

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

March 31,

December 31,


2021

2020

(Unaudited)

ASSETS

Real estate properties




Real estate investments

$
9,261,190

$
8,702,154
Less accumulated depreciation

(2,069,822)

(1,996,914)
Real estate investments – net

7,191,368

6,705,240
Investments in direct financing leases – net

10,757

10,764
Mortgage notes receivable – net

890,068

885,313

8,092,193

7,601,317
Other investments – net

444,719

467,442
Investments in unconsolidated joint ventures

204,646

200,638
Assets held for sale – net

7,922

81,452
Total investments

8,749,480

8,350,849

Cash and cash equivalents

51,376

163,535
Restricted cash

4,522

4,023
Contractual receivables – net

11,428

10,408
Other receivables and lease inducements

236,669

234,666
Goodwill

651,679

651,737
Other assets

117,648

82,231
Total assets

$
9,822,802

$
9,497,449

LIABILITIES AND EQUITY




Revolving line of credit

$
135,000

$
101,158
Term loans – net

49,914

186,349
Secured borrowings

367,685

369,524
Senior notes and other unsecured borrowings – net

4,855,286

4,512,221
Accrued expenses and other liabilities

256,338

280,824
Deferred income taxes

10,249

10,766
Total liabilities

5,674,472

5,460,842

Equity:




Preferred stock $1.00 par value authorized – 20,000 shares, issued and outstanding - none

—

—
Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 233,386 shares as of March 31, 2021 and 231,199 as of December 31, 2020

23,338

23,119
Common stock – additional paid-in capital

6,226,543

6,152,887
Cumulative net earnings

2,754,713

2,594,735
Cumulative dividends paid

(5,074,432)

(4,916,097)
Accumulated other comprehensive income (loss)

23,230

(12,768)
Total stockholders’ equity

3,953,392

3,841,876
Noncontrolling interest

194,938

194,731
Total equity

4,148,330

4,036,607
Total liabilities and equity

$
9,822,802

$
9,497,449


	March 31,		December 31,
	2022		2021
	(Unaudited)
ASSETS
Real estate assets
Buildings and improvements	$	7,477,855	$	7,448,126
Land		937,235		916,328
Furniture and equipment		516,410		511,271
Construction in progress		77,633		74,062
Total real estate assets		9,009,133		8,949,787
Less accumulated depreciation		(2,212,183)		(2,160,696)
Real estate assets – net		6,796,950		6,789,091
Investments in direct financing leases – net		10,849		10,873
Mortgage notes receivable – net		819,577		835,086
		7,627,376		7,635,050
Other investments – net		506,942		469,884
Investments in unconsolidated joint ventures		192,238		194,687
Assets held for sale		92,762		261,151
Total investments		8,419,318		8,560,772

Cash and cash equivalents		491,247		20,534
Restricted cash		3,534		3,877
Contractual receivables – net		13,172		11,259
Other receivables and lease inducements		269,992		251,815
Goodwill		651,024		651,417
Other assets		166,318		138,804
Total assets	$	10,014,605	$	9,638,478

LIABILITIES AND EQUITY
Revolving credit facility	$	354,888	$	—
Secured borrowings		379,644		362,081
Senior notes and other unsecured borrowings – net		4,893,839		4,891,455
Accrued expenses and other liabilities		256,390		276,716
Total liabilities		5,884,761		5,530,252

Equity:
Preferred stock $1.00 par value authorized – 20,000 shares, issued and outstanding – none		—		—
Common stock $.10 par value authorized – 350,000 shares, issued and outstanding – 238,206 shares as of March 31, 2022 and 239,061 shares as of December 31, 2021		23,820		23,906
Additional paid-in capital		6,401,207		6,427,566
Cumulative net earnings		3,201,081		3,011,474
Cumulative dividends paid		(5,714,595)		(5,553,908)
Accumulated other comprehensive income (loss)		6,318		(2,200)
Total stockholders’ equity		3,917,831		3,906,838
Noncontrolling interest		212,013		201,388
Total equity		4,129,844		4,108,226
Total liabilities and equity	$	10,014,605	$	9,638,478

See notes to consolidated financial statements.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2021		2020		2022		2021
Revenues
Rental income	$	237,761	$	221,500	$	216,883	$	237,761
Income from direct financing leases		258		258		256		258
Mortgage interest income		23,625		19,685		20,549		23,625
Other investment income		11,652		10,652		10,594		11,652
Miscellaneous income		472		929		1,033		472
Total revenues		273,768		253,024		249,315		273,768

Expenses
Depreciation and amortization		84,849		82,643		82,752		84,849
General and administrative		16,152		15,923		16,385		16,152
Real estate taxes		2,729		3,666		3,603		2,729
Acquisition, merger and transition related costs		1,814		(225)		1,513		1,814
Impairment on real estate properties		28,689		3,639		3,511		28,689
Recovery on direct financing leases		(553)		—		—		(553)
(Recovery) provision for credit losses		(1,024)		1,486
Provision (recovery) for credit losses						1,824		(1,024)
Interest expense		58,521		55,202		58,145		58,521
Total expenses		191,177		162,334		167,733		191,177

Other income (expense)
Other income (expense) – net		231		(804)
Other (expense) income – net						(455)		231
Loss on debt extinguishment		(29,670)		—		(6)		(29,670)
Gain on assets sold – net		100,342		1,838		113,637		100,342
Total other income		70,903		1,034		113,176		70,903

Income before income tax expense and income from unconsolidated joint ventures		153,494		91,724		194,758		153,494
Income tax expense		(958)		(1,005)		(1,225)		(958)
Income from unconsolidated joint ventures		11,830		1,560		1,623		11,830
Net income		164,366		92,279		195,156		164,366
Net income attributable to noncontrolling interest		(4,388)		(2,364)		(5,549)		(4,388)
Net income available to common stockholders	$	159,978	$	89,915	$	189,607	$	159,978

Earnings per common share available to common stockholders:
Basic:
Net income available to common stockholders	$	0.69	$	0.40	$	0.79	$	0.69
Diluted:
Net income	$	0.69	$	0.39	$	0.79	$	0.69

See notes to consolidated financial statements.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Unaudited

(in thousands)


	Three Months Ended				Three Months Ended
		March 31,				March 31,
	2021		2020		2022		2021
Net income	$	164,366	$	92,279	$	195,156	$	164,366
Other comprehensive income (loss):
Foreign currency translation		1,186		(18,771)		(10,809)		1,186
Cash flow hedges		35,801		(7,844)		19,578		35,801
Total other comprehensive income (loss)		36,987		(26,615)
Total other comprehensive income						8,769		36,987
Comprehensive income		201,353		65,664		203,925		201,353
Comprehensive income attributable to noncontrolling interest		(5,377)		(1,679)		(5,800)		(5,377)
Comprehensive income attributable to common stockholders	$	195,976	$	63,985	$	198,125	$	195,976

See notes to consolidated financial statements.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021

Unaudited

(in thousands, except per share amounts)


									Accumulated																	Accumulated
	Common		Additional		Cumulative				Other		Total							Common		Additional		Cumulative		Cumulative		Other		Total
	Stock		Paid-in		Net		Cumulative		Comprehensive		Stockholders’		Noncontrolling			Total		Stock		Paid-in		Net		Dividends		Comprehensive		Stockholders’		Noncontrolling		Total
	Par Value		Capital		Earnings		Dividends Paid		Income (Loss)		Equity		Interest		��	Equity		Par Value		Capital		Earnings		Paid		Income (Loss)		Equity		Interest		Equity
Balance at December 31, 2021																		$	23,906	$	6,427,566	$	3,011,474	$	(5,553,908)	$	(2,200)	$	3,906,838	$	201,388	$	4,108,226
Stock related compensation																			—		6,905		—		—		—		6,905		—		6,905
Issuance of common stock																			12		1,135		—		—		—		1,147		—		1,147
Repurchase of common stock																			(98)		(27,223)		—		—		—		(27,321)		—		(27,321)
Common dividends declared ($0.67 per share)																			—		—		—		(160,687)		—		(160,687)		—		(160,687)
Vesting/exercising of Omega OP Units																			—		(7,176)		—		—		—		(7,176)		7,176		—
Omega OP Units distributions																			—		—		—		—		—		—		(5,276)		(5,276)
Capital contribution from noncontrolling interest holder in consolidated JV																			—		—		—		—		—		—		2,925		2,925
Other comprehensive income																			—		—		—		—		8,518		8,518		251		8,769
Net income																			—		—		189,607		—		—		189,607		5,549		195,156
Balance at March 31, 2022																		$	23,820	$	6,401,207	$	3,201,081	$	(5,714,595)	$	6,318	$	3,917,831	$	212,013	$	4,129,844


Balance at December 31, 2020	$	23,119	$	6,152,887	$	2,594,735	$	(4,916,097)	$	(12,768)	$	3,841,876	$	194,731		$	4,036,607	$	23,119	$	6,152,887	$	2,594,735	$	(4,916,097)	$	(12,768)	$	3,841,876	$	194,731	$	4,036,607
Stock related compensation		2		5,431		—		—		—		5,433		—			5,433		—		5,433		—		—		—		5,433		—		5,433
Vesting/exercising of equity compensation plan, net of tax withholdings		13		(2,525)		—		—		—		(2,512)		—			(2,512)
Dividend reinvestment and stock purchase plan		42		15,450		—		—		—		15,492		—			15,492
Equity Shelf Program		162		59,985		—		—		—		60,147		—			60,147
Issuance of common stock																			219		72,908		—		—		—		73,127		—		73,127
Common dividends declared ($0.67 per share)																			—		—		—		(158,335)		—		(158,335)		—		(158,335)
Vesting/exercising of Omega OP Units		—		(4,767)		—		—		—		(4,767)		4,767			—		—		(4,767)		—		—		—		(4,767)		4,767		—
Common dividends declared ($0.67 per share)		—		—		—		(158,335)		—		(158,335)		—			(158,335)
Conversion and redemption of Omega OP Units to common stock		—		82		—		—		—		82		(82)			—		—		82		—		—		—		82		(82)		—
Omega OP Units distributions		—		—		—		—		—		—		(9,855)			(9,855)		—		—		—		—		—		—		(9,855)		(9,855)
Comprehensive income:
Foreign currency translation		—		—		—		—		1,153		1,153		33			1,186
Cash flow hedges		—		—		—		—		34,845		34,845		956			35,801
Other comprehensive income																			—		—		—		—		35,998		35,998		989		36,987
Net income		—		—		159,978		—		—		159,978		4,388			164,366		—		—		159,978		—		—		159,978		4,388		164,366
Total comprehensive income																	201,353
Balance at March 31, 2021	$	23,338	$	6,226,543	$	2,754,713	$	(5,074,432)	$	23,230	$	3,953,392	$	194,938		$	4,148,330	$	23,338	$	6,226,543	$	2,754,713	$	(5,074,432)	$	23,230	$	3,953,392	$	194,938	$	4,148,330


Balance at December 31, 2019	$	22,663	$	5,992,733	$	2,463,436	$	(4,303,546)	$	(39,858)	$	4,135,428	$	201,166		$	4,336,594
Cumulative effect of accounting change		—		—		(28,028)		—		—		(28,028)		(757)			(28,785)
		22,663		5,992,733		2,435,408		(4,303,546)		(39,858)		4,107,400		200,409			4,307,809
Stock related compensation		—		4,694		—		—		—		4,694		—			4,694
Vesting/exercising of equity compensation plan, net of tax withholdings		9		(3,158)		—		—		—		(3,149)		—			(3,149)
Dividend reinvestment and stock purchase plan		9		3,738		—		—		—		3,747		—			3,747
Equity Shelf Program		5		1,826		—		—		—		1,831		—			1,831
Vesting/exercising of Omega OP Units		—		(2,608)		—		—		—		(2,608)		2,608			—
Common dividends declared ($0.67 per share)		—		—		—		(154,661)		—		(154,661)		—			(154,661)
Conversion and redemption of Omega OP Units to common stock		—		336		—		—		—		336		(336)			—
Omega OP Units distributions		—		—		—		—		—		—		(7,290)			(7,290)
Comprehensive income:
Foreign currency translation		—		—		—		—		(18,288)		(18,288)		(483)			(18,771)
Cash flow hedges		—		—		—		—		(7,642)		(7,642)		(202)			(7,844)
Net income		—		—		89,915		—		—		89,915		2,364			92,279
Total comprehensive income																	65,664
Balance at March 31, 2020	$	22,686	$	5,997,561	$	2,525,323	$	(4,458,207)	$	(65,788)	$	4,021,575	$	197,070		$	4,218,645

See notes to consolidated financial statements.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited (in thousands)


	March 31,				Three Months Ended March 31,
	2021		2020		2022		2021
Cash flows from operating activities
Net income	$	164,366	$	92,279	$	195,156	$	164,366
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		84,849		82,643		82,752		84,849
Impairment on real estate properties		28,689		3,639		3,511		28,689
Recovery on direct financing leases		(553)		—		—		(553)
Provision for rental income		2,750		—		3,151		2,750
(Recovery) provision for credit losses		(1,024)		1,486
Provision (recovery) for credit losses						1,824		(1,024)
Amortization of deferred financing costs and loss on debt extinguishment		32,423		2,461		3,199		32,423
Accretion of direct financing leases		12		6		19		12
Stock-based compensation expense		5,396		4,635		6,860		5,396
Gain on assets sold – net		(100,342)		(1,838)		(113,637)		(100,342)
Amortization of acquired in-place leases – net		(6,221)		(1,291)		(1,608)		(6,221)
Effective yield payable (receivable) on mortgage notes		311		(87)
Effective yield payable on mortgage notes						463		311
Interest paid-in-kind		(1,754)		(1,982)		(2,196)		(1,754)
Loss (income) from unconsolidated joint ventures		72		(951)
(Income) loss from unconsolidated joint ventures						(677)		72
Change in operating assets and liabilities – net:
Contractual receivables		(1,020)		(307)		(1,912)		(1,020)
Straight-line rent receivables		(13,459)		(4,784)		(24,137)		(13,459)
Lease inducements		1,168		(13,786)		1,932		1,168
Other operating assets and liabilities		(19,688)		(23,055)		(22,498)		(19,688)
Net cash provided by operating activities		175,975		139,068		132,202		175,975
Cash flows from investing activities
Acquisition of real estate		(594,504)		(19,085)		(113,157)		(594,504)
Refund of acquisition deposit		2,500		—
Acquisition deposit - net						—		2,500
Net proceeds from sale of real estate investments		188,253		18,091		332,552		188,253
Investments in construction in progress		(9,806)		(27,734)		(4,667)		(9,806)
Proceeds from sale of direct financing lease and related trust		553		—		—		553
Placement of mortgage loans		(4,717)		(4,269)		(2,801)		(4,717)
Collection of mortgage principal		1,065		1,335		22,913		1,065
Investments in unconsolidated joint ventures		(10,443)		(495)		—		(10,443)
Distributions from unconsolidated joint ventures in excess of earnings		7,489		179		61		7,489
Capital improvements to real estate investments		(4,012)		(12,758)		(13,548)		(4,012)
Receipts from insurance proceeds		3,017		311		22		3,017
Investments in other investments		(27,636)		(23,813)		(100,225)		(27,636)
Proceeds from other investments		51,911		13,084		56,188		51,911
Net cash used in investing activities		(396,330)		(55,154)
Net cash provided by (used in) investing activities						177,338		(396,330)
Cash flows from financing activities
Proceeds from credit facility borrowings		1,210,000		662,466
Payments on credit facility borrowings		(1,177,490)		(266,000)
Receipts of other long-term borrowings		695,128		—
Payments of other long-term borrowings		(490,217)		(1,845)
Proceeds from long-term borrowings						420,208		1,905,128
Payments of long-term borrowings						(66,896)		(1,667,707)
Payments of financing related costs		(33,836)		—		(6)		(33,836)
Receipts from dividend reinvestment plan		15,492		3,747
Payments for exercised options and restricted stock		(2,512)		(3,149)
Net proceeds from issuance of common stock		60,147		1,831		1,147		73,127
Repurchase of common stock						(27,321)		—
Dividends paid		(158,298)		(154,603)		(160,641)		(158,298)
Noncontrolling members’ contributions to consolidated joint venture						22		—
Distributions to Omega OP Unit Holders		(9,855)		(7,290)		(5,276)		(9,855)
Net cash provided by financing activities		108,559		235,157		161,237		108,559
Effect of foreign currency translation on cash, cash equivalents and restricted cash		136		(429)		(407)		136
(Decrease) increase in cash, cash equivalents and restricted cash		(111,660)		318,642
Increase (decrease) in cash, cash equivalents and restricted cash						470,370		(111,660)
Cash, cash equivalents and restricted cash at beginning of period		167,558		33,380		24,411		167,558
Cash, cash equivalents and restricted cash at end of period	$	55,898	$	352,022	$	494,781	$	55,898

See notes to consolidated financial statements.

Table of Contents

OMEGA HEALTHCARE INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited

March 31, ~~2021~~2022

NOTE 1 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Business Overview and Organization

Omega Healthcare Investors, Inc. (“~~Omega”~~Parent”) ~~was incorporated in the State of~~is a Maryland on March 31, 1992 and has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes. Omega is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through,corporation that, together with its ~~operating partnership subsidiary, OHI Healthcare Properties Limited Partnership (“Omega OP”). Unless stated otherwise or the context otherwise requires, the terms “Omega”,~~consolidated subsidiaries (collectively, “Omega,” the “Company,” “we,” ~~“our” and~~“our,” or “us” refer to Omega Healthcare Investors, Inc. and its consolidated subsidiaries, including Omega OP, references to “Parent” refer to Omega Healthcare Investors, Inc. without regard to its consolidated subsidiaries, and references to “Omega OP” mean OHI Healthcare Properties Limited Partnership and its consolidated subsidiaries.

~~Omega has 1 reportable segment consisting of investments~~) invests in healthcare-related real estate properties located in the United States (“U.S.”) and the United Kingdom (“U.K.”). Our core business is to provide financing and capital to the long-term healthcare industry with a particular focus on skilled nursing facilities (“SNFs”), assisted living facilities (“ALFs”), and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings. Our core portfolio consists of long-term “triple net” leases and mortgage ~~agreements. All of~~loans with healthcare operating companies and affiliates (collectively, our ~~leases are “triple-net” leases, which require the operators (we use the term “operator” to refer~~“operators”). In addition to our tenants and mortgagors and their affiliates who manage and/or operate our properties) to pay all property-related expenses. Our mortgage revenue derives from fixed rate mortgage loans, which are secured by first mortgage liens on the underlying real estate and personal property of the mortgagor. Our other investment income derives from fixed and variable ratecore investments, we selectively make loans to ~~our~~ operators ~~and/or their principals to fund~~for working capital and capital expenditures. ~~These loans,~~From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.

Omega has elected to be taxed as a real estate investment trust (“REIT”) for federal income tax purposes and is structured as an umbrella partnership REIT (“UPREIT”) under which ~~may be either unsecured~~all of Omega’s assets are owned directly or ~~secured~~indirectly by, ~~the collateral~~and all of ~~the borrower,~~Omega’s operations are ~~classified as other investments.~~

conducted directly or indirectly through, its operating partnership subsidiary, OHI Healthcare Properties Limited Partnership (collectively with its subsidiaries, “Omega OP”). Omega has exclusive control over Omega OP’s day-to-day management pursuant to the partnership agreement governing Omega OP. As of March 31, ~~2021,~~2022, Parent owned approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3% of the outstanding Omega OP Units.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared ~~pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information and~~in accordance with the instructions to Form 10-Q and ~~Article 10 of Regulation S-X. Accordingly, they~~ do not include all of the information and notes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the interim periods reported herein are not necessarily indicative of results to be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the financial statements and the footnotes thereto included in our latest Annual Report on Form 10-K filed with the ~~SEC~~Securities and Exchange Commission on February ~~22, 2021.~~17, 2022.

Omega’s consolidated financial statements include the accounts of (i) Parent, (ii) Omega OP, (iii) all direct and indirect wholly owned subsidiaries of Omega and (iv) other entities in which Omega or Omega OP has a majority voting interest and control. All intercompany transactions and balances have been eliminated in consolidation, and Omega’s net earnings are reduced by the portion of net earnings attributable to noncontrolling interests.

Segments

We conduct our operations and report financial results as 1 business segment. The presentation of financial results as 1 reportable segment is consistent with the way we operate our business and is consistent with the manner in which our Chief Operating Decision Maker (CODM), our Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business.

Table of Contents

Reclassification

Certain line items on our Consolidated Statements of Changes in Equity, Consolidated Balance Sheets and Consolidated Statements of Cash Flows have been reclassified to conform to the current period presentation.

Risks and Uncertainties including COVID-19

The Company is subject to certain risks and uncertainties affecting the healthcare industry, including those stemming from the novel coronavirus (“COVID-19”) global pandemic described below, which has disproportionately impacted the senior care sector, as well as those stemming from healthcare legislation and changing regulation by federal, state and local ~~governments, including those driven by the COVID-19 pandemic.~~governments. Additionally, we are subject to risks and uncertainties as a result of changes affecting operators of nursing home facilities due to the actions of governmental agencies and insurers to limit the rising cost of healthcare services.

~~In addition~~Recent Accounting Pronouncements

ASU – 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

On March 31, 2022, the FASB issued ASU 2022-02, which eliminates the recognition and measurement guidance for troubled debt restructurings (“TDRs”) and requires additional disclosures for certain loan modifications. ASU 2022-02 also requires entities to ~~experiencing outbreaks~~disclose gross write-offs of ~~positive cases~~financing receivables and ~~deaths~~net investments in leases by year of ~~residents~~origination. The TDR guidance can be adopted using either a prospective or modified retrospective transition approach and ~~employees during~~ the ~~pandemic,~~additional disclosure requirements are made prospectively. ASU 2022-02 would be effective for Omega’s first quarter of 2023, and early adoption is permitted. We are still evaluating the impact that adopting ASU 2022-02 will have on our ~~operators have been required~~consolidated financial statements.

ASU – 2020-04, Financial Instruments – Reference Rate Reform (Topic 848)

On March 12, 2020, the FASB issued ASU 2020-04, which contains optional practical expedients for a limited period of time to ~~and continue to, adapt their operations rapidly throughout~~ease the pandemic to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, personal protective equipment (“PPE”), quality of care, visitation protocols, staffing levels, and reporting, among other regulations, throughout the pandemic. It remains uncertain when and to what extent vaccination programspotential burden in accounting for ~~COVID-19, which have been implemented in many of our facilities, will continue to mitigate~~(or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). The guidance may be elected over time until December 31, 2022, as reference rate reform activities occur. The Company has several derivative instruments (See Note 16 – Derivatives and Hedging), a $1.45 billion senior unsecured multicurrency revolving credit facility, and a $50 million senior unsecured term loan facility (See Note 15 – Borrowing Activities and Arrangements) that reference LIBOR. We also have a $25.0 million senior secured debtor-in-possession (“DIP”) facility loan with an operator that references LIBOR (See Note 6 – Other Investments), but it matures in 2022 prior to LIBOR being discontinued. During the first quarter of ~~COVID-19 in our facilities, or how effective existing vaccines~~2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR indexed cash flows to assume that the index upon which future hedged transactions will be ~~against variants of~~based matches the ~~COVID-19 virus;~~index on the ~~impact~~corresponding derivatives. Application of these ~~programs will depend in part on~~expedients preserves the ~~continued speed, distribution, efficacy and delivery~~presentation of ~~the vaccine in our~~derivatives consistent with past presentation. Our credit facilities as well as participation levels in vaccination programs among the residents and employees of our operators. In addition to the risks associated with managing the spread of the virus, delivery of the vaccines and care of their patients and residents, many of our operators reported incurring, and may continue to incur, significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases. We believe these increases primarily stem from elevated labor costs,that reference LIBOR contain customary LIBOR replacement language, including, increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of PPE, testing equipment and processes and supplies, as well as implementation of new infection control protocols and vaccination programs. In addition, many of our operators have reported experiencing declines, in some cases that are material, in occupancy levels as a result of the pandemic, which declines on average appear to be stabilizing. We believe these declines may be in part due to COVID-19 related fatalities at our facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs. We continue to monitor the impact of occupancy declines at many of our operators, and it remains uncertain whether and when demand and occupancy levels will return to pre-COVID-19 levels.

While substantial government support has been allocated to SNFs and to a lesser extent to ALFs, further government support will likely be needed to continue to offset these impacts and it is unclear whether and to what extent such government support has been and will continue to be sufficient and timely to offset these impacts. Further, to the extent the impacts of the pandemic continue or accelerate and are not offset by continued government relief that is sufficient and timely, we anticipate that the operating results of certain of our operators would be materially and adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place. Even if operators are able to avail themselves of government relief to offset some of these costs, they may face challenges in complying with the terms and conditions of government support and may face longer-term adverse impacts to their personnel and business operations from the COVID-19 pandemic, including potential patient litigation and decreased demand for their services, loss of business due to an interruption in their operations, workforce challenges, new regulatory restrictions, or other liabilities related to gathering restrictions, quarantines, reopening plans, vaccine distribution or delivery, spread of infection or other related factors.

The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ability to control the spread of the outbreak generally and in our facilities and the delivery and efficacy of and participation in vaccination programs and other treatments for COVID-19, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic, as well as the future demand for needs-based skilled nursing care and senior living facilities, all of which are uncertain and difficult to predict. Due to these uncertainties, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

~~Table of Contents~~

~~Variable Interest Entities~~

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affects the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

Our variable interests in VIEs may be in the form of equity ownership, leases, guarantees and/or loans with our operators. We analyze our agreements and investments to determine whether our operators or unconsolidated joint ventures are VIEs and, if so, whether we are the primary beneficiary.

We consolidate a VIE when we determine that we are its primary beneficiary. We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. Factors considered in determining whether we are the primary beneficiary of an entity include: (i) our voting rights, if any; (ii) our involvement in day-to-day capital and operating decisions; (iii) our risk and reward sharing; (iv) the financial condition of the operator or joint venture and (iv) our representation on the VIE’s board of directors. We perform this analysis on an ongoing basis.

As of March 31, 2021, we have not consolidated any VIEs, as we do not have the power to direct the activities of any VIEs that most significantly impact their economic performance and we do not have the obligation to absorb losses or receive benefits of the VIEs that could be significant to the entities.

~~Real Estate Investments and Depreciation~~

The costs of significant improvements, renovations and replacements, including interest are capitalized. In addition, we capitalize leasehold improvements when certain criteria are met, including when we supervise construction and will own the improvement. Expenditures for maintenance and repairs are charged to operations as they are incurred.

~~Depreciation is computed on a straight-line basis over the estimated useful lives ranging from~~ 20 ~~to 40 years for buildings,~~ ~~eight~~ ~~to 15 years for site improvements, and~~ ~~three~~ ~~to 10 years for furniture and equipment. Leasehold interests are amortized over the shorter of the estimated useful life or term of the lease.~~

~~Table of Contents~~

~~Business Combinations~~

We record the purchase of properties to net tangible and identified intangible assets acquired and liabilities assumed at fair value. Transaction costs are expensed as incurred as part of a business combination. In making estimates of fair value for purposes of recording the purchase, we utilize a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities as well as other critical valuation metrics such as current capitalization rates and discount rates used to estimate the fair value of the tangible and intangible assets acquired (Level 3). When liabilities are assumed as part of a transaction, we consider information obtained about the liabilities and use similar valuation metrics (Level 3). In some instances when debt is assumed and an identifiable active market for similar debt is present, we use market interest rates for similar debt to estimate the fair value of the debt assumed (Level 2). The Company determines fair value as follows:

●

~~Land is determined based on third party appraisals which typically include market comparables.~~

●

Buildings and site improvements acquired are valued using a combination of discounted cash flow projections that assume certain future revenues and costs and consider capitalization and discount rates using current market conditions as well as the residual approach.

●

~~Furniture and fixtures are determined based on third party appraisals which typically utilize a replacement cost approach.~~

●

~~Mortgages and other investments are valued using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings.~~

●

Investments in joint ventures are valued based on the fair value of the joint ventures’ assets and liabilities. Differences, if any, between the Company’s basis and the joint venture’s basis are generally amortized over the lives of the related assets and liabilities, and such amortization is included in the Company’s share of earnings of the joint venture.

●

Intangible assets and liabilities acquired are valued using a combination of discounted cash flow projections as well as other valuation techniques based on current market conditions for the intangible asset or liability being acquired. When evaluating below market leases we consider extension options controlled by the lessee in our evaluation.

●

~~Other assets acquired and liabilities assumed are typically valued at stated amounts, which approximate fair value on the date of the acquisition.~~

●

~~Assumed debt balances are valued by discounting the remaining contractual cash flows using a current market rate of interest.~~

●

~~Goodwill represents the purchase price in excess of the fair value of assets acquired and liabilities assumed. Goodwill is not amortized.~~

~~Asset Acquisitions~~

For asset acquisitions, assets acquired and liabilities assumed are recognized by allocating the cost of the acquisition, including transaction costs, to the individual assets acquired and liabilities assumed on a relative fair value basis. The fair value of the assets acquired and liabilities assumed in an asset acquisition are determined in a consistent manner with the immediately preceding “Business Combinations” section.

~~Table of Contents~~

~~Real Estate Investment Impairment~~

Management evaluates our real estate investments for impairment indicators at each reporting period, including the evaluation of our assets’ useful lives. The judgment regarding the existence of impairment indicators is based on factors such as, but not limited to, ~~market conditions, operator performance including~~ the ~~current payment status~~use of contractual obligations and expectations of the ability to meet future contractual obligations, legal structure, as well as our intent with respect to holding or disposing of the asset. If indicators of impairment are present, management evaluates the carrying value of the related real estate investments in relation to management’s estimate of future undiscounted cash flows of the underlying facilities. The estimated future undiscounted cash flows are generallyrates based on the ~~related lease which relates to one or more properties~~secured overnight financing rate. The Company is evaluating: (i) how the transition away from LIBOR will impact the Company, (ii) whether any additional optional expedients provided by the standards will be adopted, and ~~may include cash flows from~~(iii) the eventual disposition of the asset. In some instances, there may be various potential outcomes for a real estate investment and its potential future cash flows. In these instances, the undiscounted future cash flows used to assess the recoverability are probability-weighted based on management’s best estimates as of the date of evaluation. Provisions for impairment losses related to long-lived assets are recognized when expected future undiscounted cash flows basedimpact that adopting ASU 2020-04 will have on our intended use of the property are determined to be less than the carrying values of the assets. An adjustment is made to the net carrying value of the real estate investments for the excess of carrying value over fair value. The fair value of the real estate investment is determined based on current market conditions and consider matters such as rental rates and occupancies for comparable properties, recent sales data for comparable properties, and, where applicable, contracts or the results of negotiations with purchasers or prospective purchasers. Additionally, our evaluation of fair value may consider valuing the property as a nursing home or other healthcare facility as well as alternative uses. All impairments are taken as a period cost at that time, and depreciation is adjusted going forward to reflect the new value assigned to the asset. Management’s impairment evaluation process, and when applicable, impairment calculations involve estimation of the future cash flows from management’s intended use of the property as well as the fair value of the property. Changes in the facts and circumstances that drive management’s assumptions may result in an impairment to our assets in a future period that could be material to our results of operations.

~~Lease Accounting~~

~~Lessor Accounting~~

As a lessor, our leased real estate properties are leased under provisions of single or master leases with initial terms typically ranging from 5 to 15 years, plus renewal options. As of March 31, 2021, we have determined that all but 1 of our leases should be accounted for as operating leases. NaN lease is accounted for as a direct financing lease. Under the terms of the leases, the lessee is responsible for all maintenance, repairs, taxes and insurance on the leased properties.

For leases accounted for as operating leases, we retain ownership of the asset and record depreciation expense (see “Business Combinations”, “Asset Acquisitions” and “Real Estate Investments and Depreciation” above for additional information regarding our investment in real estate leased under operating lease agreements). Substantially all of our operating leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one of three methods depending on the specific provisions of each lease as follows: (i) a specific annual increase over the prior year’s rent, generally between 2.0% and 3.0%; (ii) an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index); or (iii) specific dollar increases over prior years. Rental income from operating leases is generally recognized on a straight-line basis over the lease term when we have determined that the collectibility of substantially all of the lease payments is probable.

~~We assess the probability of collecting substantially all payments due under our leases on several factors, including, among other things, payment history, the~~consolidated financial strength of the lessee and/or borrower and any guarantors, historical operations and operating trends, current and future economic conditions, and expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern). If our evaluation of these factors indicates it is probable that we will be unable to collect substantially all rents, we recognize a charge to rental income and limit our rental income to the lesser of lease income on a straight-line basis plus variable rents when they become accruable or cash collected. If we change our conclusion regarding the probability of collecting rent payments required by a lessee, we may recognize an adjustment to rental income in the period we make a change to our prior conclusion, potentially resulting in increased volatility of rental income.

~~Table of Contents~~

For leases accounted for as direct financing leases, we record the present value of the future minimum lease payments (utilizing a constant interest rate over the term of the lease agreement) as a receivable and record interest income based on the contractual terms of the lease agreement. Certain direct financing leases include annual rent escalators, see “Lessor Accounting for Direct Financing Lease Income” below for further discussion regarding the recording of interest income on our direct financing leases.

~~Lessee Accounting~~

As a lessee, the Company is party to ground and/or facility leases which are classified as operating leases. Substantially all of our operating leases contain provisions for specified annual increases over the rents of the prior year and are generally computed in one of three methods depending on the specific provisions of each lease as follows: (i) a specific annual increase over the prior year’s rent, generally between 1.0% and 3.0%; (ii) an increase based on the change in pre-determined formulas from year to year (e.g., increases in the Consumer Price Index); or (iii) specific dollar increases over prior years. The initial terms of our ground leases range between 10 years and 100 years. Our office leases have initial terms of approximately 10 years. Certain leases have options to ~~extend~~, ~~terminate~~ or purchase the asset and have been considered in our analysis of the lease term and the measurement of the right-of-use assets and lease liabilities. The discount rate utilized in forming the basis of our right of use assets and lease liabilities approximates our cost of debt. We have not recognized a right of use asset and/or lease liability for leases with terms of 12 months or less and without an option to purchase the underlying asset. Our right of use assets and lease liabilities are included in other assets and accrued expenses and other liabilities, respectively, on our Consolidated Balance Sheets.

On a monthly basis, we remeasure our lease liabilities at the present value of the future lease payments using the discount rate determined at lease commencement. Rental expense from operating leases is generally recognized on a straight-line basis over the lease term.

~~Mortgages, Other Investments and Direct Financing Leases (collectively, our “loans”) and Allowance for Credit Losses~~

~~Mortgage Interest Income and Other Investment Income~~

Mortgage interest income and other investment income is recognized as earned over the terms of the related mortgage notes or other investment. Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected using the effective interest method. In applying the effective interest method, the effective yield on a loan is determined based on its contractual payment terms, adjusted for prepayment terms.

~~Lessor Accounting for Direct Financing Lease Income~~

We record direct financing lease income on a constant interest rate basis over the term of the lease. Costs related to originating direct financing leases are deferred and amortized on a straight-line basis as a reduction to income from direct financing leases over the term of the direct financing leases.

~~Allowance for Credit Losses~~

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (“Topic 326”) (“ASU 2016-13”), which changed the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for credit losses. The new approach requires the calculation of expected lifetime credit losses and is applied to financial assets measured at amortized cost, including loans, as well as certain off-balance sheet credit exposures such as unfunded loan commitments. The allowance for credit loss on the loans is a valuation amount that is deducted from the amortized cost basis of the loans not held at fair value to present the net amount expected to be collected over the contractual term of the loans.statements.

~~Table of Contents~~

The allowance for credit losses on loans is measured using relevant information about past events, including historical credit loss experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the remaining cash flows over the contractual term of the loans. Changes to the allowance for credit losses on loans resulting from quarterly evaluations are recorded through provision for credit losses on the Consolidated Statements of Operations. The Company’s unfunded lending commitments are calculated using the same as the methodology for the loans over the contractual term of the commitment. The loss estimate is recorded in accrued expenses and other liabilities on the Consolidated Balance Sheets with quarterly changes to the liability recorded through provision for credit losses on the Consolidated Statements of Operations.

ASU 2016-13 specifically excludes from its scope receivables arising from operating leases accounted for under Topic 842. We adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach and we recorded an initial $28.8 million allowance for expected credit losses with a corresponding adjustment to ~~equity~~.

We elected to disaggregate our financial assets within the scope of Topic 326 based on the type of financial instrument. These segments were further disaggregated based on our internal credit ratings. We assess our internal credit ratings on a quarterly basis. Our internal credit ratings consider several factors including the collateral and/or security, the performance of borrowers underlying facilities, if applicable, available credit support (e.g., guarantees), borrowings with third parties, and other ancillary business ventures and real estate operations of the borrower. Our internal ratings range between 1 and 7. An internal rating of 1 reflects the lowest likelihood of loss and a 7 reflects the highest likelihood of loss.

We have a limited history of incurred losses and consequently have elected to employ external data to perform our expected credit loss calculation. We have elected a probability of default (“PD”) and loss given default (“LGD”) methodology. Our model’s historic inputs consider PD and LGD data for residential care facilities published by the Federal Housing Administration along with Standards & Poor’s one-year global corporate default rates. Our historical loss rates revert to historical averages after 36 periods. Our model’s current conditions and supportable forecasts consider internal credit ratings, current and projected U.S. unemployment rates published by the United States Bureau of Labor Statistics and the Federal Reserve Bank of St. Louis and the weighted average life to maturity of the underlying financial asset. As of March 31, 2021, $10.4 million of contractual interest receivable is recorded in contractual receivables – net on our Consolidated Balance Sheets. We have elected the practical expedient to exclude interest receivable from our allowance for credit losses. We write-off interest receivable to provision for credit losses in the period we determine the interest is no longer considered collectible. Our assessment of collectibility considers several factors, including, among other things, payment history, the financial strength of the borrower and any guarantors, historical operations and operating trends, current and future economic conditions, expectations of performance (which includes known substantial doubt about an operator’s ability to continue as a going concern) and the value of the underlying collateral of the agreement, if any.

Periodically, the Company may identify an individual loan for impairment. A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreements. Consistent with this definition, all loans on non-accrual status may be deemed impaired. To the extent circumstances improve and the risk of collectibility is diminished, we will return these loans to full accrual status. When we identify a loan impairment, the loan is written down to the present value of the expected future cash flows. In cases where expected future cash flows are not readily determinable, the loan is written down to the fair value of the underlying collateral. We may base our valuation on a loan’s observable market price, if any, or the fair value of collateral, net of sales costs, if the repayment of the loan is expected to be provided solely by the sale of the collateral.

138

Table of Contents

NOTE 2 – REAL ESTATE ASSETS

At March 31, 2022, our leased real estate properties included 674 SNFs, 163 ALFs, 20 ILFs, 16 specialty facilities and 2 medical office buildings. The following table summarizes the Company’s rental income from operating leases:


	Three Months Ended March 31,
	2022		2021

	(in thousands)
Rental income – operating leases	$	213,597	$	235,062
Variable lease income – operating leases		3,286		2,699
Total rental income	$	216,883	$	237,761

Our variable lease income primarily represents the reimbursement of real estate taxes and ground lease expenses by operators that Omega pays directly.

Asset Acquisitions

The following table summarizes the asset acquisitions that occurred during the first three months of 2022:


	Number of				Total Real Estate			Initial
	Facilities				Assets Acquired			Annual
Period	SNF	ALF	Specialty	Country/State	(in millions)			Cash Yield⁽¹⁾
Q1	—	1	—	U.K.	$	8.7	⁽²⁾	8.0	%
Q1	—	1	—	U.K.		5.0		8.0	%
Q1	—	27	—	U.K.		86.6	⁽²⁾	8.0	%
Q1	1	—	—	MD		8.2	⁽³⁾	9.5	%
Total	1	29	—		$	108.5

(1)	Initial annual cash yield reflects the initial annual contractual cash rent divided by the purchase price.

(2)

The total consideration paid for this 1 facility U.K. acquisition and the 27-facility U.K. acquisition was $8.2 million and $100.0 million, respectively. In connection with these acquisitions, we allocated $0.5 million of the purchase consideration to a deferred tax liability related to this 1 facility U.K. acquisition, and $13.4 million to a deferred tax asset related to the 27-facility U.K. acquisition. See Note 13 – Taxes for additional information.

(3)	Total consideration for the 1 facility Maryland acquisition was paid on December 30, 2021, but the closing of the acquisition did not occur until January 1, 2022.

NOTE 3 – ASSETS HELD FOR SALE, DISPOSITIONS AND IMPAIRMENTS

Periodically we sell facilities to reduce our exposure to certain operators, geographies and non-strategic assets or due to the exercise of a tenant purchase option.

In March 2022, we reclassified 7 facilities leased to Guardian Healthcare (“Guardian”) to held for sale in connection with the transactions outlined in the restructuring agreement that was executed in April 2022 with Guardian, as discussed further in Note 4 – Contractual Receivables and Other Receivables and Lease ~~Inducements~~Inducements. We also entered into agreements to sell 7 of these held for sale facilities in March and April 2022 for estimated gross proceeds of $36.5 million. As of March 31, 2022, the remaining 19 facilities in held for sale are all under sales agreements which provide for estimated proceeds of $83.1 million, subject to terms and conditions of such agreements.

The following is a summary of our assets held for sale:


	March 31,		December 31,
	2022		2021
Number of facilities held for sale		26		41
Amount of assets held for sale (in thousands)	$	92,762	$	261,151

Table of Contents

Asset Sales

During the three months ended March 31, 2022, we sold 27 facilities, subject to operating leases, for approximately $332.6 million in net cash proceeds, recognizing a net gain of approximately $113.6 million. NaN of these facilities was sold to the joint venture that was consolidated in the first quarter of 2022, as discussed further in Note 8 – Variable Interest Entities. The proceeds and gain primarily relate to the sale of the 22 facilities that were previously leased and operated by Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) and were included in assets held for sale as of December 31, 2021. The net cash proceeds from the sale, including related costs accrued for as of the end of the first quarter, were $304.0 million, and we recognized a net gain of approximately $113.5 million. We elected to exit these facilities following Gulf Coast commencing the Chapter 11 bankruptcy process in October 2021. The agreement includes an earnout clause pursuant to which the buyer is obligated to pay an additional $18.7 million to Omega if certain financial metrics are achieved at the facilities in the three years following the sale. As we have determined it is not probable that we will receive any additional funds, we have not recorded any income related to the earnout clause.

NaN of the facilities sold during the three months ended March 31, 2022 were previously leased to Guardian and were sold for $3.0 million in gross proceeds, which resulted in a net gain of approximately $0.5 million, in connection with on-going restructuring negotiations and were included in held for sale as of December 31, 2021.

Real Estate Impairments

During the three months ended March 31, 2022, we recorded impairments of approximately $3.5 million on 2 facilities that were classified as held for sale during the quarter for which the carrying values exceeded the estimated fair values less costs to sell. To estimate the fair value of the facilities determined to be held for sale for the impairments noted above, we utilized a market approach that considered binding sale agreements (a Level 1 input) or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).

NOTE 4 – CONTRACTUAL RECEIVABLES AND OTHER RECEIVABLES AND LEASE INDUCEMENTS

Contractual receivables relate to the amounts currently owed to us under the terms of our lease and loan agreements. Effective yield interest receivables relate to the difference between the interest income recognized on an effective yield basis over the term of the loan agreement and the interest currently due to us according to the contractual agreement. Straight-line rent receivables relate to the difference between the rental revenue recognized on a straight-line basis and the amounts currently due to us according to the contractual agreement. Lease inducements result from value provided by us to the lessee, at the inception, modification or renewal of the lease, and are amortized as a reduction of rental ~~revenue~~income over the non-cancellable lease term.

A summary of our net receivables and lease inducements by type is as follows:


	March 31,		December 31,
	2022		2021

	(in thousands)
Contractual receivables – net	$	13,172	$	11,259

Effective yield interest receivables	$	9,127	$	9,590
Straight-line rent receivables		169,028		148,455
Lease inducements		91,837		93,770
Other receivables and lease inducements	$	269,992	$	251,815

March 31,

December 31,


2021

2020


(in thousands)

Contractual receivables – net

$
11,428

$
10,408

Effective yield interest receivables

$
11,884

$
12,195

Straight-line rent receivables

143,599

139,046

Lease inducements

81,186

83,425

Other receivables and lease inducements

$
236,669

$
234,666

Table of Contents

Agemo Holdings, LLC

~~During~~Agemo Holdings, LLC (“Agemo”) continued to not pay contractual rent and interest due under its lease and loan agreements during the first quarter of ~~2021,~~2022. As we ~~wrote-off approximately $2.7 million of straight-line rent receivables to rental income as a result of transitioning one facility and placing one operator~~already placed Agemo on a cash basis ~~due~~of revenue recognition during the third quarter of 2020, 0 revenue was recorded during the three months ended March 31, 2022. See Note 6 – Other Investments for additional details on our loans with Agemo. For the three months ended March 31, 2021, Agemo generated approximately 4.6%, respectively, of our total revenues (excluding the impact of write-offs in the first quarter of 2021).

During the three months ended March 31, 2022, the Agemo lease was amended to ~~changes in our evaluation~~allow for the extension of the ~~collectibility~~rent deferral through April 2022, which represents an additional deferral of ~~future~~approximately $1.6 million of rent. Additionally, in the first quarter of 2022, we extended the forbearance period from February 28, 2022 to April 30, 2022. The forbearance period was subsequently extended to May 31, 2022.

Guardian Healthcare

Guardian Healthcare (“Guardian”) continued to not make contractual rent and interest payments ~~due~~under its lease and loan agreements during the first quarter of 2022. As we already placed Guardian on a cash basis of revenue recognition in the fourth quarter of 2021, 0 revenue was recorded during the three months ended March 31, 2022. In the first quarter of 2022, we transitioned 8 facilities previously leased to Guardian to 2 other operators as part of the planned restructuring. Additionally, we also sold 2 facilities previously leased to Guardian and 3 facilities previously subject to the Guardian mortgage loan in the first quarter of 2022 as part of on-going restructuring activities. In April 2022, we agreed to a formal restructuring agreement, master lease amendment and mortgage loan amendment with Guardian. As part of the restructuring agreement and amendments, Omega and Guardian agreed to the following:

●

Extend the lease and loan terms to December 31, 2031 and allow Guardian the option to extend the maturity date for both the lease and loan through September 30, 2034,

●

sell 6 facilities subject to the master lease agreement to other operators in exchange for a reduction in base rent equal to 9.5% of the agreed upon fair value of these facilities,

●

require Guardian to purchase 1 leased facility for $3.5 million before June 30, 2022, with a corresponding reduction in base rent equal to 9.5% of the proceeds,

●

reduce the combined rent and mortgage interest to an aggregate $24.0 million following the completion of sale of the 6 leased facilities and Guardian repurchase of the 1 leased facility are completed and

●

allow for the deferral of up to $18.0 million of aggregate rent and interest, effective retrospectively, from October 1, 2021 through April 1, 2022 based on the existence of certain financial conditions, with repayment required after September 30, 2024 based on certain financial metrics and in full by the current lease termination date of December 31, 2031, or the earlier termination of the lease for any reason.

Guardian elected to utilize the allowed deferral in the restructuring agreement for unpaid contractual rent and interest during the period from October 2021 through March 2022 and for a portion of rent and interest in April 2022. In April 2022, Guardian made a partial payment after exhausting the maximum allowable deferral of $18.0 million under the ~~lease~~restructuring agreement.

~~Earnings Per Share~~

~~The computation~~ Guardian is required to make contractual rent and interest payments going forward under the restructuring agreements. As discussed in Note 3 – Assets Held for Sale, Dispositions and Impairments, the 7 leased facilities expected to be sold based on the terms within the restructuring agreement are included in assets held for sale as of ~~basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by~~March 31, 2022. As of March 31, 2022, we have $7.4 million of letters of credit from Guardian as collateral which could be applied against our uncollected rent and interest receivables. See Note 5 – Mortgage Notes Receivable for additional details on our mortgage with Guardian. For the weighted-average number of shares of common stock outstanding during the relevant period. Diluted EPS is computed using the treasury stock method, which is net income divided by the total weighted-average number of common outstanding shares plus the effect of dilutive common equivalent shares during the respective period. Dilutive common shares reflect the assumed issuance of additional common shares pursuant to certainthree months ended March 31, 2021, Guardian generated approximately 3.2% of our ~~share-based compensation plans, including restricted stock and profit interest units, performance restricted stock and profit interest units,~~total revenues (excluding the ~~assumed issuance~~impact of ~~additional shares related to Omega OP Units held by outside investors.~~

~~Noncontrolling Interests~~

~~Noncontrolling interests is~~straight-line write-offs in the ~~portion~~first quarter of equity not attributable to the respective reporting entity. We present the portion of any equity that we do not own in consolidated entities as noncontrolling interests and classify those interests as a component of total equity, separate from total stockholders’ equity or owners’ equity on our Consolidated Balance Sheets. We include net income attributable to the noncontrolling interests in net income in our Consolidated Statements of Operations.

As our ownership of a controlled subsidiary increases or decreases, any difference between the aggregate consideration paid to acquire the noncontrolling interests and our noncontrolling interest balance is recorded as a component of equity in additional paid-in capital, so long as we maintain a controlling ownership interest.

~~The noncontrolling interest for Omega represents the outstanding Omega OP Units held by outside investors and interests in a consolidated real estate joint venture not fully owned by Omega.~~2021).

1411

Table of Contents

~~Foreign Operations~~Other operator updates

From January through March 2022, an operator representing 3.8% and 3.3%, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021, did not pay its contractual amounts due under its lease agreement. In March 2022, the lease with this operator was amended to allow for a short-term rent deferral for January through March 2022. The ~~U.S. dollar (“USD”)~~deferred rent balance accrues interest monthly at a rate of 5% per annum. This operator paid the contractual amount due under its lease agreement in April 2022. The operator is required to repay the ~~functional currency for our consolidated subsidiaries operating in~~deferred rent balance and accrued interest by December 31, 2022. Omega holds a $1.0 million letter of credit and a $150.0 thousand security deposit from this operator.

We also have a $20.0 million revolving credit facility with this operator, and the ~~U.S.~~operator paid contractual interest under the facility from January through April 2022. As of March 31, 2022, the total outstanding principal due under the credit facility was $16.0 million. In April 2022, this operator borrowed an additional $1.8 million under the credit facility. The ~~functional currency for our consolidated subsidiaries operating in~~credit facility is secured by a first lien on the U.K. is the British Pound (“GBP”). For our consolidated subsidiaries whose functional currency is not the USD, we translate their financial statements into the USD. We translate assets and liabilities at the exchange rate in effect asaccounts receivable of the ~~financial statement date. Revenue~~operator.

In March 2022, another operator, representing 2.3% and ~~expense accounts are translated using an average exchange rate~~2.1%, respectively, of total revenue (excluding the impact of write-offs) for the ~~period. Gains~~three months ended March 31, 2022 and ~~losses resulting from translation~~2021, did not pay its contractual amounts due under its lease agreement. In April 2022, the lease with this operator was amended to allow the operator to apply its $2.0 million security deposit toward payment of March 2022 rent and to allow for a short-term rent deferral for April, 2022 with regular rent payments required to resume in May 2022.

During the first quarter of 2022, we allowed three other operators, representing an aggregate 2.5% and 2.7%, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021 to apply $1.3 million of their security deposits to pay rent to accommodate short term liquidity issues, with regular rent payments required to resume shortly thereafter. As of April 30, 2022, all of these operators are ~~included~~current on their lease obligations. These operators also are required to begin replenishing their security deposits in ~~accumulated other comprehensive~~2023.

Other straight-line receivables and write-offs

During the first quarter of 2022, we wrote-off straight-line rent receivable balances of $3.2 million through rental income ~~(“AOCI”),~~ as a ~~separate component~~result of ~~equity and a proportionate amount of gain or loss is allocated~~transitioning 6 facilities to ~~noncontrolling interests, if applicable.~~

We and certain of our consolidated subsidiaries may have intercompany and third-party debt that is not denominated in the entity’s functional currency. When the debt is remeasured against the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in results of operations, unless it is intercompany debt that is deemed to be long-term in nature in which case the adjustments are included in AOCI and a proportionate amount of gain or loss is allocated to noncontrolling interests, if applicable.

~~Derivative Instruments~~

~~Cash flow hedges~~

During our normal course of business, we may use certain types of derivative instruments for the purpose of managing interest rate and currency risk. To qualify for hedge accounting, derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. In addition, at the inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with our related assertions. The Company recognizes all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities in the Consolidated Balance Sheets at their fair value which is determined using a market approach and Level 2 inputs. Changes in the fair value of derivative instruments that are not designated in hedging relationships or that do not meet the criteria of hedge accounting are recognized in earnings. For derivatives designated in qualifying cash flow hedging relationships, the gain or loss on the derivative is recognized in AOCI as a separate component of equity and a proportionate amount of gain or loss is allocated to noncontrolling interest, if applicable. We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objectives and strategy for undertaking various hedge transactions. This process includes designating all derivatives that are part of a hedging relationship to specific forecasted transactions as well as recognized liabilities or assets on the Consolidated Balance Sheets. We also assess and document, both at inception of the hedging relationship and on a quarterly basis thereafter, whether the derivatives are highly effective in offsetting the designated risks associated with the respective hedged items. If it is determined that a derivative ceases to be highly effective as a hedge, or that it is probable the underlying forecasted transaction will not occur, we discontinue hedge accounting prospectively and record the appropriate adjustment to earnings based on the current fair value of the derivative. As a matter of policy, we do not use derivatives for trading or speculative purposes. At March 31, 2021 and December 31, 2020, $0.7 million and $1.0 million, respectively, of qualifying cash flow hedges were recorded at fair value in accrued expenses and other liabilities on our Consolidated Balance Sheets. At March 31, 2021 and December 31, 2020, $52.6 and $17.0 million, respectively, of qualifying cash flow hedges were recorded at fair value in other assets on our Consolidated Balance Sheets.

~~Table of Contents~~

~~Net investment hedge~~

We are exposed to fluctuations in the GBP against its functional currency, the USD, relating to our investments in healthcare-related real estate located in the U.K. For derivatives that are designated and qualify as net investment hedges, the gain or loss on the derivative is reported in AOCI as a part of the cumulative translation adjustment in our Consolidated Balance Sheets. For nonderivative financial instruments that are designated and qualify as net investment hedges, the foreign currency transaction gain or loss on the nonderivative financial instrument is reported in AOCI as a part of the cumulative translation adjustment in our Consolidated Balance Sheets. Amounts are reclassified out of AOCI into earnings when the hedged net investment is either sold or substantially liquidated. From the issuance date of our GBP borrowings through the prepayment date in March 2021, we used a nonderivative, GBP-denominated term loan and line of credit totaling £174 million to hedge a portion of our net investments in foreign operations. During March 2021 and concurrent with the prepayment of our GBP-denominated term loan and line of credit, we entered into 4 foreign currency forwards that mature on March 8, 2024 to hedge a portion of our net investments in foreign operations, effectively replacing the terminated net investment hedge. At March 31, 2021, $0.9 million of qualifying net investment hedges were recorded at fair value in other assets on our Consolidated Balance Sheets.

~~Reclassification~~

~~Certain line items on our Consolidated Statements of Operations and Consolidated Statements of Changes in Equity have been reclassified to conform to the current period presentation.~~another existing operator.

~~NOTE 2 – PROPERTIES AND INVESTMENTS~~

~~Leased Property~~

~~A summary of our investments in real estate properties subject to operating leases is as follows:~~

March 31,

December 31,


2021

2020


(in thousands)

Buildings

$
7,425,801

$
6,961,509

Land

935,739

883,765

Furniture and equipment

534,011

518,664

Site improvements

330,833

308,087

Construction in progress

34,806

30,129

Total real estate investments

9,261,190

8,702,154

Less accumulated depreciation

(2,069,822)

(1,996,914)

Real estate investments – net

$
7,191,368

$
6,705,240

~~At March 31, 2021, our leased real estate properties included 734 SNFs, 133 ALFs, 35 specialty facilities and 2 medical office buildings.~~

Three Months Ended March 31,

2021

2020

(in thousands)
Rental income – operating leases

$
235,062

$
218,340
Variable lease income – operating leases

2,699

3,160
Total lease income

$
237,761

$
221,500

~~Table of Contents~~

~~The following table summarizes the significant asset acquisitions that occurred during the first three months of 2021:~~

Number of

Total

Initial


Facilities

Country/

Investment

Annual

Period

SNF
ALF
Specialty

State

(in millions)

Cash Yield⁽¹⁾

Q1

—
17
7

AZ, CA, FL, IL, NJ, OR, PA, TN, TX, VA, WA

$
511.3
⁽²⁾
8.43
%
Q1

6
—
—

FL

83.1

9.25
%
Total

6
17
7



$
594.4

~~(1)~~

~~The initial annual cash yield reflects the initial annual cash rent divided by the purchase price.~~

~~(2)~~

~~On January 20, 2021, we acquired 24 facilities from Healthpeak Properties, Inc. The acquisition involved the assumption of an in-place master lease with Brookdale Senior Living Inc.~~

~~Asset Sales and Impairments~~

During the first quarter of 2021, we sold 24 facilities subject to operating leases for approximately $188.3 million in net cash proceeds, recognizing a net gain of approximately $100.3 million. In addition, we recorded impairments on 4 facilities of approximately $28.7 million (3 were subsequently reclassified to assets held for sale).

Our recorded impairments were primarily the result of decisions to exit certain non-strategic facilities and/or operators. We reduced the net book value of the impaired facilities to their estimated fair values or, with respect to the facilities reclassified to held for sale, to their estimated fair values less costs to sell. To estimate the fair value of the facilities, we utilized a market approach which considered binding sale agreements (a Level 1 input) and/or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).

NOTE 35 – MORTGAGE NOTES RECEIVABLE

As of March 31, ~~2021,~~2022, mortgage notes receivable relate to 97 fixed rate mortgage notes on 6360 facilities. The mortgage notes are secured by first mortgage liens on the borrowers’ underlying real estate and personal property. The mortgage notes receivable relate to facilities located in 86 states that are operated by 76 independent healthcare operating companies. We monitor compliance with the terms of our mortgages and when necessary have initiated collection, foreclosure and other proceedings with respect to certain outstanding mortgage notes.

The principal amounts outstanding of mortgage notes receivable, net of allowances, were as follows:


	March 31,		December 31,		March 31,		December 31,
	2021		2020		2022		2021

	(in thousands)				(in thousands)
Mortgage note due 2027; interest at 10.81%	$	112,500	$	112,500
Mortgage notes due 2029; interest at 10.55%⁽¹⁾		674,205		670,015
Mortgage note due 2027; interest at 11.02%					$	82,017	$	103,762
Mortgage notes due 2029; interest at 10.81%⁽¹⁾						656,007		653,564
Other mortgage notes outstanding⁽²⁾		135,505		136,043		150,779		151,361
Mortgage notes receivable, gross		922,210		918,558		888,803		908,687
Allowance for credit losses on mortgage notes receivable		(32,142)		(33,245)		(69,226)		(73,601)
Total mortgages — net	$	890,068	$	885,313
Total mortgage notes receivable — net					$	819,577	$	835,086

(1)

Approximates the weighted average interest rate on 4745 facilities as of March 31, 2021. NaN notes totaling approximately $30.7 million are construction mortgages with maturities in 2021. NaN mortgage notes totaling $43.2 million mature in 2021 and the remaining loan balance matures in 2029.2022.

(2)

Other ~~mortgages~~mortgage notes outstanding have a weighted average interest rate of ~~9.41%~~8.84% per annum as of March 31, ~~2021~~2022 and maturity dates ranging from 2023 through ~~2028.~~2032.

1712

Table of Contents

Mortgage Note due 2027

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Guardian continued to not pay contractual rent and interest to us during the first quarter of 2022. During the first quarter of 2022, we continued our on-going negotiations to restructure and amend Guardian’s lease and loan agreements. As part of the restructuring negotiations, on February 15, 2022, Guardian completed the sale of 3 facilities, subject to the Guardian mortgage loan with Omega. Concurrent with the sale, Omega agreed to release the mortgage liens on these facilities in exchange for a partial paydown of $21.7 million. In connection with the partial paydown, we recorded a $5.1 million recovery for credit losses in the first quarter of 2022 related to the Guardian mortgage loan. Following the mortgage paydown and recovery, Omega has reserves of $42.0 million against the loan that reduces the loan carrying value to the estimated fair value of the collateral of $40.0 million. As of March 31, 2022, the mortgage loan is secured by 3 SNFs and 1 ALF located in Pennsylvania. In April 2022, we agreed to a formal restructuring agreement and amendments to the master lease and mortgage loan with Guardian. See Note 4 – Contractual Receivables and Other Receivables and Lease Inducements.

NOTE 46 – OTHER INVESTMENTS

Our other investments consist of fixed and variable rate loans to our operators and/or their principals to fund working capital and capital expenditures. These loans may be either unsecured or secured by the collateral of the borrower. A number of the secured loans are collateralized by a leasehold mortgage on, or an assignment or pledge of the membership interest in, the related properties, corporate guarantees and/or personal guarantees. We deem these to be “real estate related loans” that are included as qualifying assets under our quarterly REIT asset tests. As of March 31, 2022, we had 37 loans with 18 different operators. A summary of our other investments is as follows:


	March 31,		December 31,		March 31,		December 31,
	2021		2020		2022		2021

	(in thousands)				(in thousands)
Other investment notes due 2024; interest at 13.13% ⁽¹⁾	$	85,361	$	83,636
Other investment notes due 2024; interest at 13.15% ⁽¹⁾					$	92,613	$	90,752
Other investment notes due 2030; interest at 7.00%						212,633		201,613
Other investment note due 2023; interest at 12.00%						37,797		40,232
Other investment notes outstanding ⁽²⁾						19,599		22,076
Real estate related loans - other investments, gross						362,642		354,673
Other investment notes due 2024-2025; interest at 8.12% ⁽¹⁾		56,987		56,987		55,791		55,791
Other investment note due 2023; interest at 12.00%		42,538		49,973
Other investment notes due 2030; interest at 7.00%		162,368		147,148
Other investment notes outstanding ⁽²⁾		129,407		161,155
Other investment notes outstanding ⁽³⁾						164,491		128,814
Non-real estate related loans - other investments, gross						220,282		184,605
Total other investments, gross		476,661		498,899		582,924		539,278
Allowance for credit losses on other investments		(31,942)		(31,457)		(75,982)		(69,394)
Total other investments - net	$	444,719	$	467,442	$	506,942	$	469,884

(1)	~~Approximate~~Approximates the weighted average interest rate as of March 31, ~~2021.~~2022.

(2)	Other investment notes that are real estate related loans have a weighted average interest rate of ~~8.26%~~11.20% as of March 31, ~~2021 and~~2022 with maturity dates ranging from 2022 through ~~2028.~~2023 (with $10.4 million maturing in 2022).

(3)	Other investment notes that are non-real estate related loans have a weighted average interest rate of 8.08% as of March 31, 2022 with maturity dates ranging from 2022 through 2032 (with $70.5 million maturing in 2022).

~~Other~~Interest revenue on other investment ~~notes due 2024~~

~~On March 6, 2018, we amended certain terms~~loans is included within other investment income on the Consolidated Statement of Operations. A summary of our ~~$48.0 million secured term loan with Genesis. The $48.0 million term loan bears interest at a fixed rate of 14% per annum, of which 9% per annum~~other investments income by real estate and non-real estate loans, as defined above, is paid-in-kind and was initially scheduled to mature on July 29, 2020. The maturity date of this loan was extended during the first quarter of 2021 to January 1, 2024. This term loan (and the $16.0 million term loan discussed below) is secured by a first priority lien on and security interest in certain collateral of Genesis. As of March 31, 2021, approximately $66.7 million is outstanding on this term loan. as follows:

Also on March 6, 2018, we provided Genesis an additional $16.0 million secured term loan bearing interest at a fixed rate of 10% per annum, of which 5% per annum is paid-in-kind, and was initially scheduled to mature on July 29, 2020. The maturity date of this loan was extended during the first quarter of 2021 to January 1, 2024. As of March 31, 2021, approximately $18.6 million is outstanding on this term loan.


	Three Months Ended March 31,
	2022		2021

	(in thousands)
Real estate related loans - interest income	$	8,379	$	7,706
Non-real estate related loans - interest income		2,215		3,946
Total other investment income	$	10,594	$	11,652

1813

Table of Contents

Other investment notes due 2024-2025

As discussed in Note 4 – Contractual Receivables and Other Receivables and Lease Inducements, Agemo continued to not pay contractual rent and interest to us during the first quarter of 2022. We have continued to monitor the fair value of the collateral associated with Agemo’s $25.0 million secured working capital loan (the “Agemo WC Loan”) on a quarterly basis. In the first quarter of 2022, we recorded an additional provision for credit losses of $4.7 million related to the Agemo WC Loan as a result of a reduction in the fair value of the underlying collateral assets supporting the current carrying values. The reduction in fair value of the collateral assets was driven by a reduction in Agemo’s working capital accessible to Omega as collateral, after considering other liens on the assets.

Other investment notes outstanding

Term Loan –$25 million

On March 25, 2022, we entered into a $25.0 million term loan with LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care) that bears interest at a fixed rate of 8.5% per annum and matures on March 31, 2032. The term loan requires quarterly principal payments of $1.3 million commencing January 1, 2028 and is secured by a second priority lien on the accounts receivable of the operator. As of March 31, 2022, the outstanding principal under this term loan was $25.0 million.

NOTE 57 – ALLOWANCE FOR CREDIT LOSSES

A rollforward of our allowance for credit losses for the three months ended March 31, 2022 is as follows:

Segment

Financial Statement Line Item
Allowance for Credit Loss as of December 31, 2020
(Recovery) Provision for Credit Loss for the period ended March 31, 2021
Write-offs charged against allowance for the period ended March 31, 2021
Allowance for Credit Loss as of March 31, 2021

(in thousands)
Segment A-4

Mortgage Notes Receivable
$
26,865
$
(913)
$
-
$
25,952
Segment B-3

Mortgage Notes Receivable

954

(38)

-

916
Segment C-5

Mortgage Notes Receivable

433

(107)

-

326
Segment E-6

Mortgage Notes Receivable

4,905

-

-

4,905
Segment F-2

Mortgage Notes Receivable

88

(45)

-

43

Sub-total

33,245

(1,103)

-

32,142

Segment A-3

Investment in Direct Financing Leases

694

(6)

-

688

Sub-total

694

(6)

-

688

Segment A-4

Other Investments

24,397

413

-

24,810
Segment B-3

Other Investments

5,113

217

-

5,330
Segment C-2

Other Investments

94

(40)

-

54
Segment D-5

Other Investments

1,853

(10)

(95)

1,748

Sub-total

31,457

580

(95)

31,942

Segment A-4

Off-Balance Sheet Mortgage Commitments

24

38

-

62
Segment B-3

Off-Balance Sheet Note Commitments

2,305

(538)

-

1,767
Segment C-2

Off-Balance Sheet Note Commitments

116

5

-

121

Sub-total

2,445

(495)

-

1,950

Total
$
67,841
$
(1,024)
$
(95)
$
66,722

~~A summary of our amortized cost basis by year of origination and credit quality indicator is as follows:~~

Rating
Financial Statement Line Item
2021
2020
2019
2018
2017
2016
2015 & older
Revolving Loans

Balance as of March 31, 2021

(in thousands)
1
Mortgage Notes Receivable
$
-
$
-
$
-
$
-
$
-
$
-
$
66,621
$
-

$
66,621
2
Mortgage Notes Receivable

-

43,150

-

-

-

-

-

-

43,150
3
Mortgage Notes Receivable

-

-

-

-

-

-

35,964

-

35,964
4
Mortgage Notes Receivable

2,685

89,325

18,585

44,395

46,455

37,550

504,559

-

743,554
5
Mortgage Notes Receivable

-

-

-

19,000

-

-

7,544

-

26,544
6
Mortgage Notes Receivable

-

-

-

-

-

-

6,377

-

6,377

Sub-total

2,685

132,475

18,585

63,395

46,455

37,550

621,065

-

922,210

3
Investment in Direct Financing Leases

-

-

-

-

-

-

11,445

-

11,445

Sub-total

-

-

-

-

-

-

11,445

-

11,445

2
Other Investments

-

-

-

-

-

-

2,082

10,265

12,347
3
Other Investments

-

-

21,782

30,698

-

-

3,809

171,510

227,799
4
Other Investments

-

-

11,845

114,974

-

75,525

-

5,000

207,344
5
Other Investments

-

467

23,004

5,700

-

-

-

-

29,171

Sub-total

-

467

56,631

151,372

-

75,525

5,891

186,775

476,661

Total

$
2,685
$
132,942
$
75,216
$
214,767
$
46,455
$
113,075
$
638,401
$
186,775

$
1,410,316


Rating	Financial Statement Line Item	Allowance for Credit Loss as of December 31, 2021		Provision (recovery) for Credit Loss for the three months ended March 31, 2022			Write-offs charged against allowance for the three months ended March 31, 2022		Allowance for Credit Loss as of March 31, 2022
		(in thousands)
2	Mortgage Notes Receivable	$	15	$	47		$	—	$	62
3	Mortgage Notes Receivable		1,973		126			—		2,099
4	Mortgage Notes Receivable		19,461		610			—		20,071
5	Mortgage Notes Receivable		135		(23)			—		112
6	Mortgage Notes Receivable		52,017		(5,135)	⁽¹⁾		—		46,882
	Sub-total		73,601		(4,375)			—		69,226

3	Investment in Direct Financing Leases		530		5			—		535
	Sub-total		530		5			—		535

2	Other Investments		29		53			—		82
3	Other Investments		4,600		1,063			—		5,663
4	Other Investments		1,172		1,499			—		2,671
5	Other Investments		7,861		4,704	⁽²⁾		—		12,565
6	Other Investments		55,732		(731)	⁽³⁾		—		55,001
	Sub-total		69,394		6,588			—		75,982

2	Off-Balance Sheet Note Commitments		7		3			—		10
3	Off-Balance Sheet Note Commitments		458		(132)			—		326
4	Off-Balance Sheet Note Commitments		216		(78)			—		138
4	Off-Balance Sheet Mortgage Commitments		117		(106)			—		11
6	Off-Balance Sheet Note Commitments		143		(81)			—		62
	Sub-total		941		(394)			—		547

	Total	$	144,466	$	1,824		$	—	$	146,290

(1)	This amount relates to a recovery recorded on the Guardian mortgage loan during the first quarter of 2022. See Note 5 – Mortgage Notes Receivable for additional information on the recovery recorded.

(2)	This provision includes an additional $4.7 million allowance recorded on the Agemo WC Loan during the first quarter of 2022. See Note 6 – Other Investments for additional information on the Agemo WC Loan impairment.

(3)

During the three months ended March 31, 2022, we received $0.7 million of interest and fee payments from Gulf Coast under the $25.0 million senior secured DIP facility, the outstanding principal of which was fully reserved against in the fourth quarter of 2021. The DIP loan is on non-accrual status, and the payments received in the first quarter of 2022 have been applied against the outstanding principal using the cost recovery method. In the first quarter of 2022, we recorded a recovery for credit loss equal to the amount of payments applied against the principal.

1914

Table of Contents

A rollforward of our allowance for credit losses for the three months ended March 31, 2021 is as follows:


Rating	Financial Statement Line Item	Allowance for Credit Loss at December 31, 2020		Provision (recovery) for Credit Loss for the three months ended March 31, 2021		Write-offs charged against allowance for the three months ended March 31, 2021		Allowance for Credit Loss as of March 31, 2021
		(in thousands)
2	Mortgage Notes Receivable	$	88	$	(45)	$	—	$	43
3	Mortgage Notes Receivable		954		(38)		—		916
4	Mortgage Notes Receivable		26,865		(913)		—		25,952
5	Mortgage Notes Receivable		433		(107)		—		326
6	Mortgage Notes Receivable		4,905		—		—		4,905
	Sub-total		33,245		(1,103)		—		32,142

3	Investment in Direct Financing Leases		694		(6)		—		688
	Sub-total		694		(6)		—		688

2	Other Investments		94		(40)		—		54
3	Other Investments		5,113		217		—		5,330
4	Other Investments		24,397		413		—		24,810
5	Other Investments		1,853		(10)		(95)		1,748
	Sub-total		31,457		580		(95)		31,942

2	Off-Balance Sheet Note Commitments		116		5		—		121
3	Off-Balance Sheet Note Commitments		2,305		(538)		—		1,767
4	Off-Balance Sheet Mortgage Commitments		24		38		—		62
	Sub-total		2,445		(495)		—		1,950

	Total	$	67,841	$	(1,024)	$	(95)	$	66,722

A summary of our amortized cost basis by year of origination and credit quality indicator is as follows:


Rating	Financial Statement Line Item	2022		2021		2020		2019		2018		2017		2016 & older		Revolving Loans		Balance as of March 31, 2022
		(in thousands)
1	Mortgage notes receivable	$	—	$	—	$	—	$	—	$	—	$	—	$	65,054	$	—	$	65,054
2	Mortgage notes receivable		—		—		21,325		—		—		—		—		—		21,325
3	Mortgage notes receivable		—		72,420		—		—		—		—		—		—		72,420
4	Mortgage notes receivable		—		19,204		89,397		5,084		44,274		46,349		430,373		—		634,681
5	Mortgage notes receivable		—		—		—		—		—		—		6,929		—		6,929
6	Mortgage notes receivable		—		—		—		—		—		—		88,394		—		88,394
	Sub-total		—		91,624		110,722		5,084		44,274		46,349		590,750		—		888,803

3	Investment in direct financing leases		—		—		—		—		—		—		11,384		—		11,384
	Sub-total		—		—		—		—		—		—		11,384		—		11,384

2	Other investments		—		—		—		—		—		—		—		32,800		32,800
3	Other investments		—		—		—		17,341		26,224		—		2,482		249,893		295,940
4	Other investments		25,000		4,749		—		8,525		92,613		—		38,797		—		169,684
5	Other investments		—		—		—		—		29,498		—		—		—		29,498
6	Other investments		—		19,296		—		—		4,463		—		31,243		—		55,002
	Sub-total		25,000		24,045		—		25,866		152,798		—		72,522		282,693		582,924

Total		$	25,000	$	115,669	$	110,722	$	30,950	$	197,072	$	46,349	$	674,656	$	282,693	$	1,483,111

Interest Receivable on Mortgage and Other Investment Loans

We have elected the practical expedient to exclude interest receivable from our allowance for credit losses. As of March 31, 2022, $11.3 million of contractual interest receivable is recorded in contractual receivables – net, and $9.1 million of effective yield interest receivables is recorded in other receivables and lease inducements on our Consolidated Balance Sheets, both of which are excluded from our allowance for credit losses. We write-off interest receivable to provision for credit losses in the period we determine the interest is no longer considered collectible.

Table of Contents

During the first quarter of 2022, we did 0t recognize any interest income related to loans on non-accrual status as of March 31, 2022.

NOTE 68 – VARIABLE INTEREST ENTITIES

AsUnconsolidated Variable Interest Entities

We hold variable interests in several variable interest entities (“VIEs”) through our investing and financing activities, which are not consolidated, as we have concluded that we are not the primary beneficiary of ~~March 31, 2021 and December 31, 2020, Agemo Holdings, LLC (“Agemo”) and Maplewood Real Estate Holdings, LLC (“Maplewood”) are both VIEs.~~ these entities as we do not have the power to direct activities that most significantly impact the VIE’s economic performance and/or the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant.

Below is a summary of our assets, liabilities and collateral associated with these ~~operators~~unconsolidated VIEs as of March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:

March 31, 2021

December 31, 2020

Agemo
Maplewood

Agemo
Maplewood

(in thousands)

(in thousands)

Assets

Real estate investments – net

$
357,501

749,260

$
371,010
$
750,488

Assets held for sale

755

—

—

—

Other investments

34,253

162,368

34,253

147,148

Contractual receivables

615

979

346

887

Straight-line rent receivables

—

(52,892)

—

(56,664)

Lease inducement

—

68,326

—

69,666

Subtotal

393,124

928,041

405,609

911,525

Liabilities

Net in-place lease liability

—

(324)

—

(331)

Security deposit

(343)

(4,609)

—

—

Contingent liability

—

(43,915)

—

(43,915)

Subtotal

(343)

(48,848)

—

(44,246)

Collateral









Letters of credit

(9,253)

—

(9,253)

—

Personal guarantee

(8,000)

(40,000)

(8,000)

(40,000)

Other collateral

(358,256)

(749,260)

(371,010)

(750,488)

Subtotal

(375,509)

(789,260)

(388,263)

(790,488)

Maximum exposure to loss

$
17,272
$
89,933

$
17,346
$
76,791


	March 31,		December 31,
	2022		2021

	(in thousands)
Assets
Real estate assets – net	$	1,136,095	$	1,144,851
Assets held for sale		—		191,016
Other investments – net		236,334		230,768
Contractual receivables – net		1,310		1,227
Straight-line rent receivables		(37,888)		(41,512)
Lease inducement		62,967		64,307
Other assets		732		—
Total assets		1,399,550		1,590,657

Liabilities
Net in-place lease liability		(299)		(305)
Security deposit		(4,743)		(4,715)
Contingent liability		(43,915)		(43,915)
Other liabilities		(732)		—
Total liabilities		(49,689)		(48,935)

Collateral
Letters of credit		—		—
Personal guarantee		(48,000)		(48,000)
Other collateral⁽¹⁾		(1,136,095)		(1,335,867)
Total collateral		(1,184,095)		(1,383,867)

Maximum exposure to loss	$	165,766	$	157,855

(1)

Amount excludes accounts receivable that Omega has a security interest in as collateral under the two working capital loans with operators that are unconsolidated VIEs. The fair value of the accounts receivable available to Omega was $23.7 million and $29.2 million as of March 31, 2022 and December 31, 2021, respectively.

In determining our maximum exposure to loss from the ~~VIE,~~unconsolidated VIEs, we considered the underlying carrying value of the real estate subject to leases with the operator and other collateral, if any, supporting our other investments, which may include accounts receivable, security deposits, letters of credit or personal guarantees, if any, as well as other liabilities recognized with respect to these operators.

~~The table below reflects our total revenues from Agemo and Maplewood for the three months ended March 31, 2021 and 2020:~~

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Agemo

Maplewood

Agemo

Maplewood

(in thousands)

Revenue









Rental income

$
11,492

$
19,032

$
15,287

$
10,140

Other investment income

1,157

2,788

1,241

1,202

Total⁽¹⁾

$
12,649

$
21,820

$
16,528

$
11,342

~~(1)~~

For the three months ended March 31, 2021 and 2020, we received cash from Agemo of approximately $14.0 million and $13.7 million, respectively, pursuant to our lease and other investment agreements. For the three months ended March 31, 2021 and 2020, we received cash rental income and other investment income from Maplewood of approximately $19.3 million and $16.8 million, respectively.

2016

Table of Contents

The table below reflects our total revenues from the operators that are considered unconsolidated VIEs for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021

	(in thousands)
Revenue
Rental income	$	20,863	$	30,524
Other investment income		3,766		3,945
Total	$	24,629	$	34,469

Consolidated VIEs

During the first quarter of 2022, we entered into a joint venture, which owns 2 ALFs, for a $3.2 million cash contribution, representing 52.4% of the outstanding equity of the joint venture. Concurrent with entering the joint venture, we sold 1 of the ALFs to the joint venture for $7.7 million in net proceeds. The joint venture is a VIE and we have concluded that we are the primary beneficiary of this VIE based on a combination of the ability to direct the activities that most significantly impact the joint venture’s economic performance and the rights to receive residual returns or the obligation to absorb losses arising from the joint venture. Accordingly, this joint venture has been consolidated. Omega is not required to make any additional capital contributions to the joint venture, and it is expected to be funded from the ongoing operations of the underlying properties. As of March 31, 2022, this joint venture has $25.6 million of total assets and $19.6 million of total liabilities, which are included in our Consolidated Balance Sheets. As a result of consolidating the joint venture, in the first quarter of 2022, we recorded a $2.9 million noncontrolling interest to reflect the contributions of the minority interest holder of the joint venture. No gain or loss was recognized on the initial consolidation of the VIE or upon the sale of the ALF to the joint venture.

NOTE 79 – INVESTMENTS IN JOINT VENTURES

Unconsolidated Joint Ventures

Omega owns an interest in ~~the following entities~~a number of joint ventures that are accounted for under the equity ~~method~~method. These entities and their subsidiaries are not consolidated by the Company because it does not control, through voting rights or other means, the joint venture. The following is a summary of our investments in unconsolidated joint ventures (dollars in thousands):


							Carrying Amount										Carrying Amount
	Ownership	Initial Investment			Facility	Facilities at	March 31,		December 31,		Ownership	Initial Investment			Facility	Facilities at	March 31,		December 31,
Entity ⁽¹⁾	%	Date		Investment⁽²⁾	Type	3/31/2021	2021		2020		%	Date		Investment⁽¹⁾	Type	3/31/2022	2022		2021
Second Spring Healthcare Investments⁽³⁾	15%	11/1/2016	$	50,032	SNF	—	$	10,624	$	17,700	15%	11/1/2016	$	50,032	SNF	—	$	11,565	$	11,355
Second Spring II LLC⁽⁴⁾	15%	3/10/2021		10,330	SNF	5		9,873		—	15%	3/10/2021		10,330	SNF	—		5		8
Lakeway Realty, L.L.C.	51%	5/17/2019		73,834	Specialty facility	1		72,077		72,318	51%	5/17/2019		73,834	Specialty facility	1		71,014		71,286
Cindat Joint Venture	49%	12/18/2019		105,688	ALF	67		111,871		110,360	49%	12/18/2019		105,688	ALF	65		109,381		111,792
OMG Senior Housing, LLC	50%	12/6/2019		—	Specialty facility	1		—		—	50%	12/6/2019		—	Specialty facility	1		—		—
OH CHS SNP, Inc.	9%	12/20/2019		859	N/A	N/A		201		260	9%	12/20/2019		900	N/A	N/A		273		246
			$	240,743			$	204,646	$	200,638			$	240,784			$	192,238	$	194,687

(1)

~~These entities and their subsidiaries are not consolidated by the Company because it does not control, through voting rights or other means, the joint venture.~~

~~(2)~~

Our initial investment includes our transaction costs, if any.

~~(3)~~

During the first quarter of 2021, this joint venture sold 16 SNFs to an unrelated third party for approximately $328 million in net proceeds and recognized a gain on sale of approximately $102.2 million ($14.9 million of which represents the Company’s share of the gain). During the first quarter of 2021, this joint venture also sold 5 SNFs to Second Spring II LLC for approximately $70.8 million in net proceeds.

~~(4)~~

We acquired approximately a 15% interest in Second Spring II LLC for approximately $10.3 million. During the first quarter of 2021, this joint venture acquired 5 SNFs from Second Spring Healthcare Investments for approximately $70.8 million.

Table of Contents

The following table reflects our income (loss) from unconsolidated joint ventures for the three months ended March 31, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended March 31,				Three Months Ended March 31,
Entity	2021		2020		2022		2021

	(in thousands)				(in thousands)
Second Spring Healthcare Investments⁽¹⁾	$	11,411	$	570	$	285	$	11,411
Second Spring II LLC		(457)		—		(2)		(457)
Lakeway Realty, L.L.C.		645		610		661		645
Cindat Joint Venture		486		646		735		486
OMG Senior Housing, LLC		(101)		(161)		(83)		(101)
OH CHS SNP, Inc.		(154)		(105)		27		(154)
Total	$	11,830	$	1,560	$	1,623	$	11,830

(1)

The income from this unconsolidated joint venture for the three months ended March 31, 2021 includes a $14.9 million gain on sale of real estate investments.

Asset Management Fees

We receive asset management fees from certain joint ventures for services provided. For each of the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, we recognized approximately $0.2 million of asset management fees. These fees are included in miscellaneous income in the accompanying Consolidated Statements of Operations.

~~Table of Contents~~

~~NOTE 8 – ASSETS HELD FOR SALE~~

~~The following is a summary of our assets held for sale:~~

Properties Held For Sale

Number of

Net Book Value

Properties

(in thousands)
December 31, 2020
22

$
81,452
Properties sold ⁽¹⁾
(21)

(81,252)
Properties added ⁽²⁾
5

7,722
March 31, 2021⁽³⁾
6

$
7,922

~~(1)~~

~~In the first quarter of 2021, we sold 21 facilities for approximately $187.6 million in net cash proceeds recognizing a net gain on sale of approximately $100.3 million.~~

~~(2)~~

In the first quarter of 2021, we recorded approximately $16.9 million of impairment expense to reduce 3 facilities’ book value to their estimated fair value less costs to sell before they were reclassified to assets held for sale.

~~(3) We plan to sell the facilities classified as assets held for sale at March 31, 2021 within the next twelve months.~~

NOTE 910 – GOODWILL AND OTHER INTANGIBLES

The following is a summary of our goodwill as of March 31, 2022 and December 31, 2021:


	(in thousands)
Balance as of December 31, 2021	$	651,417
Foreign currency translation		(393)
Balance as of March 31, 2022	$	651,024

The following is a summary of our intangibles as of March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:


	March 31,		December 31,		March 31,		December 31,
	2021			2020	2022			2021

	(in thousands)				(in thousands)
Assets:
Above market leases	$	22,822	$	22,822	$	5,929	$	5,929
Accumulated amortization		(20,966)		(20,882)		(4,365)		(4,313)
Net above market leases	$	1,856	$	1,940	$	1,564	$	1,616

Liabilities:
Below market leases	$	139,100	$	139,515	$	71,072	$	66,324
Accumulated amortization		(107,301)		(100,996)		(45,060)		(38,091)
Net below market leases	$	31,799	$	38,519	$	26,012	$	28,233

Above market leases, net of accumulated amortization, are included in other assets on our Consolidated Balance Sheets. Below market leases, net of accumulated amortization, are included in accrued expenses and other liabilities on our Consolidated Balance Sheets. The net amortization related to the above and below market leases is included in our Consolidated Statements of Operations as an adjustment to rental income.

Table of Contents

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, our net amortization related to intangibles was ~~$6.2~~$1.6 million and ~~$1.3~~$6.2 million, respectively. The estimated net amortization related to these intangibles for the remainder of ~~2021~~2022 and the subsequent four years is as follows: remainder of ~~2021 – $3.3 million;~~ 2022 – ~~$4.2~~$3.0 million; 2023 – ~~$4.0~~$3.9 million; 2024 – ~~$3.9~~$3.8 million; 2025 – $3.5 million and ~~2025~~2026 – ~~$3.6~~$2.8 million. As of March 31, ~~2021,~~2022, the weighted average remaining amortization period of above market lease assets is approximately ten years and below market lease liabilities is approximately ~~eight~~seven years.

~~The following is a summary of our goodwill as of March 31, 2021:~~

(in thousands)
Balance as of December 31, 2020

$
651,737
Add: foreign currency translation

(58)
Balance as of March 31, 2021

$
651,679

~~Table of Contents~~

NOTE 1011 – CONCENTRATION OF RISK

As of March 31, ~~2021,~~2022, our portfolio of real estate investments (including properties associated with mortgages, direct financing leases, assets held for sale and consolidated joint ventures) consisted of ~~974~~962 healthcare facilities, located in 42 states and the U.K. and operated by 7065 third-party operators. Our investment in these facilities, net of impairments and allowances, totaled approximately ~~$10.2~~$9.9 billion at March 31, ~~2021,~~2022, with approximately 97% of our real estate investments related to long-term healthcare facilities. Our portfolio is made up of (i) ~~735~~675 SNFs, ~~133~~163 ALFs, 3520 ILFs, 16 specialty facilities and 2 medical office buildings, (ii) fixed rate mortgages on 5756 SNFs, 32 ALFs and 32 specialty facilities, and (iii) 626 facilities that are held for sale. At March 31, ~~2021,~~2022, we also held other investments of approximately ~~$444.7~~$506.9 million, consisting primarily of secured loans to third-party operators of our facilities and ~~$204.6~~$192.2 million of investments in 6 unconsolidated joint ventures.

At March 31, ~~2021~~2022 we had investments with ~~1 operator/~~2 operators or ~~manager~~managers that approximated or exceeded 10% of our total investments: ~~Consulate Health Care (“Consulate”~~Maplewood Senior Living (along with affiliates, “Maplewood”)~~. Consulate also~~ and LaVie. Maplewood generated approximately 9%9.0% and ~~10%~~7.5% of our total revenues for the three months ended March 31, 2022 and 2021, respectively. LaVie generated approximately 11.3% and ~~2020,~~9.1% of our total revenues for the three months ended March 31, 2022 and 2021, respectively.

At March 31, ~~2021,~~2022, the three states in which we had our highest concentration of investments were Florida ~~(15%~~(13%), Texas (10%) and Michigan ~~(6%~~(7%).

NOTE 1112 – STOCKHOLDERS’ EQUITY

$500 Million Stock Repurchase Program

On January 27, 2022, the Company authorized the repurchase of up to $500 million of our outstanding common stock from time to time through March 2025. The Company is authorized to repurchase shares of its common stock in open market and privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or in any other manner as determined by the Company’s management and in accordance with applicable law. The timing and amount of stock repurchases will be determined, in management’s discretion, based on a variety of factors, including but not limited to market conditions, other capital management needs and opportunities and corporate and regulatory considerations. The Company has no obligation to repurchase any amount of its common stock, and such repurchases, if any, may be discontinued at any time. During the first quarter of 2022, the Company repurchased 980,530 shares of our outstanding common stock at an average price of $27.84 per share. Under Maryland law, shares repurchased become authorized but unissued shares. The Company reduced the common stock at par value and to the extent the cost acquired exceeds par value, it is recorded through additional paid-in capital on our Consolidated Balance Sheets and Consolidated Statements of Changes in Equity.

Dividends

The ~~Board~~following is a summary of ~~Directors has~~our declared cash dividends on common ~~stock as set forth below:~~stock:

Record

Payment

Dividend per
Date

Date

Common Share
February 8, 2021

February 16, 2021

$
0.67
May 3, 2021

May 17, 2021

0.67

~~$500~~ ~~Million Equity Shelf Program~~

~~The table below presents information regarding the shares issued under the Equity Shelf Program for the three months ended March 31, 2020 and 2021:~~

Shares issued
Average Price
Net Proceeds
Three Months Ended
(in millions)
Per Share
(in millions)
March 31, 2020
0.1
$
37.58
$
1.8
March 31, 2021
1.6

37.16

60.1

~~Dividend Reinvestment and Common Stock Purchase Plan~~

~~The table below presents information regarding the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three months ended March 31, 2020 and 2021:~~

Shares issued
Gross Proceeds
Three Months Ended
(in millions)
(in millions)
March 31, 2020
0.1
$
3.7
March 31, 2021
0.4

15.5


Record	Payment	Dividend per
Date	Date	Common Share
February 7, 2022	February 15, 2022	$	0.67
May 2, 2022	May 13, 2022		0.67

2319

Table of Contents

Dividend Reinvestment and Common Stock Purchase Plan

The following is a summary of the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three months ended March 31, 2022 and 2021 (in millions):


Three Months Ended	Shares issued	Gross Proceeds
March 31, 2021	0.4	$	15.5
March 31, 2022	0.1		2.3

At-The-Market Offering Programs

The following is a summary of the shares issued under our former $500 million 2015 At-The-Market Offering Program (“2015 ATM Program”) and our current $1.0 billion 2021 At-The-Market Offering Program (“2021 ATM Program”) for the three months ended March 31, 2022 and 2021 (in millions except average price per share):


		Average Net Price
Three Months Ended	Shares issued	Per Share⁽¹⁾		Gross Proceeds		Commissions		Net Proceeds
March 31, 2021	1.6	$	37.16	$	61.4	$	1.3	$	60.1
March 31, 2022	—		—		—		—		—

(1)	Represents the average price per share after commissions.

We did not utilize the forward provisions under the 2021 ATM Program during the first quarter of 2022.

Accumulated Other Comprehensive Income (Loss)

The following is a summary of our accumulated other comprehensive income (loss), net of tax where applicable:


	As of and for the
	Three Months Ended				As of and for the
	March 31,				Three Months Ended March
	2021		2020		2022		2021

	(in thousands)				(in thousands)
Foreign Currency Translation:
Beginning balance	$	(18,427)	$	(35,100)	$	(24,012)	$	(18,427)
Translation gain (loss)		3,530		(31,888)
Realized gain (loss)		666		(70)
Translation (loss) gain						(14,630)		3,530
Realized (loss) gain						(26)		666
Ending balance		(14,231)		(67,058)		(38,668)		(14,231)

Derivative Instruments:
Cash flow hedges:
Beginning balance		17,718		(2,369)		30,407		17,718
Unrealized gain						18,612		35,191
Realized gain⁽¹⁾						966		610
Ending balance						49,985		53,519
Net investment hedges:
Beginning balance						(9,588)		(13,331)
Unrealized gain (loss)		35,191		(7,526)		3,847		(3,010)
Realized gain (loss)⁽¹⁾		610		(318)
Ending balance		53,519		(10,213)		(5,741)		(16,341)
Net investment hedge:
Beginning balance		(13,331)		(4,420)
Unrealized (loss) gain		(3,010)		13,187
Ending balance		(16,341)		8,767
Total accumulated other comprehensive income (loss) before noncontrolling interest		22,947		(68,504)
Total accumulated other comprehensive income before noncontrolling interest						5,576		22,947
Add: portion included in noncontrolling interest		283		2,716		742		283
Total accumulated other comprehensive income (loss) for Omega	$	23,230	$	(65,788)
Total accumulated other comprehensive income for Omega					$	6,318	$	23,230

(1)	Recorded in interest expense on the Consolidated Statements of Operations.

Table of Contents

NOTE 1213 – TAXES

Omega ~~and Omega OP, including their wholly owned subsidiaries were~~was organized, ~~have~~has operated and ~~intend~~intends to continue to operate in a manner that enables Omega to qualify for taxation as a REIT under Sections 856 through 860 of the Code. On a quarterly and annual basis, we perform several analyses to test our compliance within the REIT taxation rules. If we fail to meet the requirements for qualification as a REIT in any tax year, we will be subject to federal income tax on our taxable income at regular corporate rates and may not be able to qualify as a REIT for the four subsequent years, unless we qualify for certain relief provisions that are available in the event we fail to satisfy any of the requirements.

We are also subject to federal taxation of 100% of the net income derived from the sale or other disposition of property, other than foreclosure property, that we held primarily for sale to customers in the ordinary course of a trade or business. We believe that we do not hold assets for sale to customers in the ordinary course of business and that none of the assets currently held for sale or that have been sold would be considered a prohibited transaction within the REIT taxation rules.

As a REIT under the Code, we generally will not be subject to federal income taxes on the REIT taxable income that we distribute to stockholders, subject to certain exceptions. In ~~2020, 2019, and 2018,~~2021, we distributed dividends in excess of our taxable income.

We currently own stock in ~~an entity that has elected to be taxed as a REIT. This~~certain subsidiary ~~entity is~~REITs. These subsidiaries are required to individually satisfy all of the rules for qualification as a REIT.

~~Table~~If we fail to meet the requirements for qualification as a REIT for any of ~~Contents~~these subsidiaries, it may cause Omega to fail the requirements for qualification as a REIT also.

We have elected to treat certain of our active subsidiaries as ~~TRSs.~~taxable REIT subsidiaries (“TRSs”). Our domestic TRSs are subject to federal, state and local income taxes at the applicable corporate rates. Our foreign TRSs are subject to foreign income ~~taxes.~~ taxes and may be subject to current-year income inclusion relating to ownership of a controlled foreign corporation for U.S. income tax purposes.

As of March 31, ~~2021,~~2022, 1 of our domestic TRSs that is subject to income taxes at the applicable corporate rates had a net operating loss (“NOL”) carry-forward of approximately ~~$6.5~~$10.3 million. Our domestic NOL carry-forward was fully reserved as of March 31, ~~2021,~~2022, with a valuation allowance due to uncertainties regarding realization. Under current law, NOL carry-forwards generated up through December 31, 2017 may be carried forward for no more than 20 years, and NOL carry-forwards generated in ~~our~~ taxable years ended after December 31, ~~2018 and after~~2017, may be carried forward indefinitely. ~~The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) modified the NOL carryback rules to limit recovery of taxes paid in prior tax periods.~~ We do not anticipate that such changes will materially impact the computation of Omega’s taxable income, or the taxable income of any Omega entity, including our TRSs.

As discussed in Note 2 – Real Estate Assets, in connection with the acquisition of one U.K. entity in the first quarter of 2022, we acquired foreign net operating losses of $55.0 million resulting in a NOL deferred tax asset of $13.4 million. The NOLs have no expiration date and may be available to offset future taxable income. We ~~also do~~believe these foreign NOLs are realizable under a “more likely than not” measurement and have not ~~expect that Omega or any Omega entity, including our TRSs, will realize~~recorded a ~~material~~valuation allowance against the deferred tax ~~benefit as a result~~asset.

Table of ~~the changes to the provisions of the Code made by the CARES Act.~~Contents

For the three months ended March 31, 2021 and 2020, we recorded approximately $0.3 million and $0.4 million, respectively, of state and local income tax provisions. For the three months ended March 31, 2021 and 2020, we recorded approximately $0.7 million and $0.6 million, respectively, of tax provisions for foreign income taxes. The expenses were included in income tax expense on our Consolidated Statements of Operations.

The following is a summary of deferred tax assets and liabilities (which are recorded in other assets and accrued expenses and other liabilities, respectively, in our Consolidated Balance Sheets):


	March 31,		December 31,
	2022		2021

	(in thousands)
Deferred tax assets:
U.S. Federal net operating loss carryforward	$	2,156	$	2,221
Foreign net operating loss carryforward		13,374		—
		15,530		2,221
Deferred tax liability:
Foreign deferred tax liability ⁽¹⁾		(7,883)		(8,200)
Valuation allowance on deferred tax asset		(2,156)		(2,221)
Net deferred tax asset (liability)	$	5,491	$	(8,200)

(1)	The deferred tax liability primarily resulted from inherited basis differences resulting from our acquisition of entities in the U.K. Subsequent adjustments to these accounts result from GAAP to tax differences related to depreciation, indexation and revenue recognition.

The following is a summary of our provision for income taxes:


	Three Months Ended
	March 31,
	2022		2021

	(in millions)
Provision for federal, state and local income taxes	$	0.3	$	0.3
Provision for foreign income taxes		0.9		0.7
Total provision for income taxes⁽¹⁾	$	1.2	$	1.0

(1)	The above amounts do not include gross receipts or franchise taxes payable to certain states and municipalities.

NOTE 1314 – STOCK-BASED COMPENSATION

~~The following is a summary of our stock-based~~Stock-based compensation expense was $6.9 million and $5.4 million for the three months ended March 31, 2022 and 2021, respectively. Stock-based compensation expense is included within general and ~~2020, respectively.~~

Three Months Ended

March 31,


2021

2020

(in thousands)
Stock-based compensation expense

$
5,396

$
4,635

administrative expenses on our Consolidated Statements of Operations.

We granted ~~22,051 time based~~31,685 time-based restricted stock units (“RSUs”) and ~~142,719 time based~~170,294 time-based profits interest units (“PIUs”) during the first quarter of ~~2021~~2022 to certain officers and key employees, and those units vest on December 31, ~~2023~~2024 (three years after the grant date), subject to continued employment and vesting in certain other events.

We also granted ~~1,232,178 performance based~~1,545,070 performance-based PIUs during the first quarter of ~~2021~~2022 to certain officers and key employees, which are earned based on the level of performance over the performance period (normally three years) and vest quarterly in the ~~fourth~~fourth year, subject to continued employment and vesting in certain other events.

Time-based and performance-based grants made to named executive officers and key employees that meet certain conditions under the Company’s retirement policy (length of service, age, etc.) vest on an accelerated basis pursuant to the 2018 Stock Incentive Plan.

2522

Table of Contents

NOTE 1415 – BORROWING ACTIVITIES AND ARRANGEMENTS

The following is a summary of our borrowings:


				Annual							Annual
				Interest Rate							Interest Rate
				as of							as of
				March 31,		March 31,		December 31,			March 31,		March 31,		December 31,
	Net Proceeds		Maturity	2021		2021		2020		Maturity	2022		2022		2021

	(in millions)					(in thousands)							(in thousands)
Secured borrowings:
HUD mortgages⁽¹⁾⁽²⁾			2046-2052	3.01	%	$	365,410	$	367,249	2046-2052	3.01	%	$	357,910	$	359,806
Term loan⁽³⁾			2022	3.75	%		2,275		2,275
2022 term loan⁽³⁾										2022	4.00	%		2,275		2,275
2024 term loan⁽⁴⁾										2024	6.00	%		19,459		—
Total secured borrowings														379,644		362,081
							367,685		369,524
Unsecured borrowings:
Revolving line of credit⁽⁴⁾⁽⁵⁾			2021	1.36	%		135,000		101,158
Revolving credit facility⁽⁵⁾⁽⁶⁾										2025	1.82	%		354,888		—

Sterling term loan⁽⁵⁾⁽⁶⁾			N/A	N/A			—		136,700
Omega OP term loan⁽⁷⁾			2022	3.29	%		50,000		50,000
Senior notes and other unsecured borrowings:
2023 notes⁽⁵⁾										2023	4.375	%		350,000		350,000
2024 notes⁽⁵⁾										2024	4.950	%		400,000		400,000
2025 notes⁽⁵⁾										2025	4.500	%		400,000		400,000
2026 notes⁽⁵⁾										2026	5.250	%		600,000		600,000
2027 notes⁽⁵⁾										2027	4.500	%		700,000		700,000
2028 notes⁽⁵⁾										2028	4.750	%		550,000		550,000
2029 notes⁽⁵⁾										2029	3.625	%		500,000		500,000
2031 notes⁽⁵⁾										2031	3.375	%		700,000		700,000
2033 notes⁽⁵⁾										2033	3.250	%		700,000		700,000
OP term loan⁽⁷⁾⁽⁸⁾										2025	1.91	%		50,000		50,000
Deferred financing costs – net							(86)		(351)					(25,804)		(26,980)
Total term loans – net							49,914		186,349

Senior Notes:⁽⁵⁾
2023 notes⁽⁸⁾	$	692.0	2023	4.375	%		350,000		700,000
2024 notes		394.3	2024	4.950	%		400,000		400,000
2025 notes		397.7	2025	4.500	%		400,000		400,000
2026 notes		594.4	2026	5.250	%		600,000		600,000
2027 notes		683.0	2027	4.500	%		700,000		700,000
2028 notes		540.8	2028	4.750	%		550,000		550,000
2029 notes		487.8	2029	3.625	%		500,000		500,000
2031 notes		680.5	2031	3.375	%		700,000		700,000
2033 notes⁽⁹⁾		689.3	2033	3.250	%		700,000		—
Subordinated debt⁽²⁾			2021	9.000	%		20,000		20,000
Discount – net							(35,128)		(31,709)					(30,357)		(31,565)
Deferred financing costs – net							(29,586)		(26,070)
Total senior notes and other unsecured borrowings – net							4,855,286		4,512,221					4,893,839		4,891,455

Total unsecured borrowings – net							5,040,200		4,799,728					5,248,727		4,891,455

Total secured and unsecured borrowings – net⁽¹⁰⁾						$	5,407,885	$	5,169,252
Total secured and unsecured borrowings – net^(9)(10)													$	5,628,371	$	5,253,536

(1)	Reflects the weighted average annual contractual interest rate on the mortgages at March 31, ~~2021.~~2022. Secured by real estate assets with a net carrying value of ~~$564.5~~$537.8 million as of March 31, ~~2021.~~2022.

(2)	Wholly owned subsidiaries of Omega OP are the obligor on these borrowings.

(3)	Borrowing is the debt of a consolidated joint venture.

(4)

~~On April 30, 2021,~~Borrowing is the ~~Revolving line~~debt of ~~credit (which~~the consolidated joint venture discussed in Note 8 – Variable Interest Entities which was ~~scheduled to mature on May 25, 2021) was terminated and replaced with a new four-year $1.45 billion senior unsecured credit facility (“Credit Facility”).~~ formed in the first quarter of 2022. The borrowing is secured by 2 ALFs which are owned by the joint venture.

(5)	Guaranteed by Omega OP.

(6)

~~Actual borrowing is in~~As of March 31, 2022, borrowings under Omega’s $1.45 billion senior unsecured multicurrency revolving credit facility consisted of $110.0 million U.S. dollars (“USD”) and £186.0 million British Pounds Sterling (“GBP”). The interest rate presented reflects the weighted average interest rate on the borrowings under the revolving credit facility denominated in USD and ~~remeasured to USD. The Sterling term loan was settled in March 2021 using proceeds from the 3.250% 2033 Senior Notes offering.~~GBP.

(7)	Omega OP is the obligor on this borrowing.

(8)

~~On April 30, 2021, the~~The interest rate swaps, that were cash flow hedges of Omega ~~OP term loan facility (which was scheduled to mature on May 25, 2022) was terminated and replaced with a new four-year $50~~OP’s $50.0 million senior unsecured term loan facility ~~(“OP Term Loan Facility”~~(the “OP term loan”).

~~(8)~~

~~In March 2021, we used a portion of~~ interest payments and that effectively fixed the proceeds from the 2033 Senior Notes offering to fund the tender offer to purchase $350 million of the 4.375% Senior Notes due 2023. In connection with this transaction, we recorded approximately $29.7 million in related fees, premiums, and expenses which were recorded as Lossinterest rate at 3.29%, matured on ~~debt extinguishment in our Consolidated Statement of Operations.~~February 10, 2022.

(9)

We used the proceeds from this offering to pay down outstanding borrowings on the Revolving Line of Credit, repay the Sterling term loan, and fund the tender offer to purchase $350 million of the 4.375% Senior Notes due 2023 and the payment of accrued interest and related fees, premiums and expenses.

~~(10)~~

All borrowings are direct borrowings of Parent unless otherwise noted.

(10)	Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants. As of March 31, 2022 and December 31, 2021, we were in compliance with all applicable covenants for our borrowings.

2623

Table of Contents

~~$400~~ ~~Million Forward Starting Swaps~~NOTE 16 – DERIVATIVES AND HEDGING

OnWe are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our investments in the U.K. and interest rate risk related to our capital structure. As a matter of policy, we do not use derivatives for trading or speculative purposes. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, interest rate swaps and debt issued in foreign currencies to offset a portion of these risks. As of March ~~27, 2020,~~31, 2022, we ~~entered into~~have 5 forward starting swaps ~~totaling $400 million. We~~with $400.0 million in notional value designated ~~the forward starting swaps~~ as cash flow hedges and 4 forward currency forwards with £174.0 million in notional value designated as net investment hedges.

NaN of our interest rate ~~risk associated~~swaps that were entered into in May 2019 with ~~interest payments~~aggregate notional amounts of $50.0 million matured on a forecasted issuance of fixed rate long-term debt, initially expected to occur within the next five years. The swaps are effective on August 1, 2023 and expire on August 1, 2033 and were issued at a fixed rate of approximately 0.8675%. In March 2021, in conjunction with the issuance of $700 million aggregate principal amount of our 3.25% Senior Notes due 2033, we discontinued hedge accounting for these 5 forward starting swaps. Amounts reported in Accumulated Other Comprehensive Income related to these discontinued cash flow hedging relationships will be reclassified to interest expense over a ten year term. Simultaneously, we re-designated these swaps in new cash flow hedging relationships ofFebruary 10, 2022. These interest rate ~~risk associated with interest payments on another forecasted issuance of long-term debt. We are hedging~~swap contracts were designated as hedges against our exposure to ~~the variability~~changes in ~~future~~interest payment cash ~~flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions related to~~flow fluctuations in the ~~payment of~~ variable interest rates on ~~existing financial instruments).~~the OP term loan.

~~£174~~ ~~Million Foreign Exchange Forward Starting Swaps~~The location and the fair value of derivative instruments designated as hedges, at the respective balance sheet dates, were as follows:


	March 31,		December 31,
	2022		2021

Cash flow hedges:	(in thousands)
Other assets	$	53,394	$	32,849
Accrued expenses and other liabilities	$	—	$	96

Net investment hedges:
Other assets	$	10,601	$	6,754

~~From~~The fair value of the ~~issuance date of our GBP borrowings through the prepayment date in March 2021, we used a nonderivative, GBP-denominated term loan~~interest rate swaps and line of credit totaling £174 million to hedge a portion of our net investments in foreign operations. During March 2021 and concurrent with the settlement of our GBP-denominated term loan and repayment of our GBP denominated borrowings under our line of credit, we entered into 4 foreign currency forwards ~~that mature on March 8, 2024 to hedge~~is derived from observable market data such as yield curves and foreign exchange rates and represents a portion of our net investments in foreign operations, effectively replacing the terminated net investment hedge. For these derivatives that are designated and qualify as net investment hedges, the gain or lossLevel 2 measurement on the derivative is reported in Accumulated Other Comprehensive Income as part of the cumulative translation adjustment. Amounts are reclassified out of Accumulated Other Comprehensive Income into earnings when the hedged net investment is either sold or substantially liquidated.fair value hierarchy.

Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants. As of March 31, 2021 and December 31, 2020, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

NOTE 1517 – FINANCIAL INSTRUMENTS

The net carrying amount of cash and cash equivalents, restricted cash, contractual receivables, other assets and accrued expenses and other liabilities reported in the Consolidated Balance Sheets approximates fair value because of the short maturity of these instruments (Level 1).

2724

Table of Contents

At March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the net carrying amounts and fair values of our other financial instruments were as follows:


	March 31, 2021				December 31, 2020				March 31, 2022				December 31, 2021
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value		Amount		Value		Amount		Value

	(in thousands)								(in thousands)
Assets:
Investments in direct financing leases – net	$	10,757	$	10,757	$	10,764	$	10,764	$	10,849	$	10,849	$	10,873	$	10,873
Mortgage notes receivable – net		890,068		929,623		885,313		924,353		819,577		841,432		835,086		869,715
Other investments – net		444,719		452,848		467,442		474,552		506,942		516,639		469,884		476,664
Total	$	1,345,544	$	1,393,228	$	1,363,519	$	1,409,669	$	1,337,368	$	1,368,920	$	1,315,843	$	1,357,252
Liabilities:
Revolving line of credit	$	135,000	$	135,000	$	101,158	$	101,158
Term loan		2,275		2,275		2,275		2,275
Sterling term loan		—		—		136,453		136,700
Omega OP term loan		49,914		50,000		49,896		50,000
Revolving credit facility									$	354,888	$	354,888	$	—	$	—
2022 term loan										2,275		2,275		2,275		2,275
2024 term loan										19,459		19,750		—		—
OP term loan										49,686		50,000		49,661		50,000
4.375% notes due 2023 – net		348,674		379,864		696,981		770,635		349,242		355,534		349,100		365,243
4.95% notes due 2024 – net		396,966		445,362		396,714		441,194		397,978		408,984		397,725		427,184
4.50% notes due 2025 – net		397,114		436,262		396,924		444,652		397,875		406,980		397,685		427,440
5.25% notes due 2026 – net		596,614		685,558		596,437		697,993		597,319		622,896		597,142		667,524
4.50% notes due 2027 – net		691,275		770,272		690,909		794,294		692,739		714,903		692,374		766,003
4.75% notes due 2028 – net		543,152		607,222		542,899		633,950		544,160		559,916		543,908		607,249
3.625% notes due 2029 – net		489,774		511,116		489,472		532,248		490,983		472,485		490,681		519,430
3.375% notes due 2031 – net		682,250		693,896		681,802		731,541		684,040		641,347		683,592		705,810
3.25% notes due 2033 – net		689,405		671,583		—		—		689,817		610,575		689,587		683,151
HUD mortgages – net		365,410		384,979		367,249		409,004		357,910		344,769		359,806		394,284
Subordinated debt – net		20,062		21,207		20,083		21,599
Total	$	5,407,885	$	5,794,596	$	5,169,252	$	5,767,243	$	5,628,371	$	5,565,302	$	5,253,536	$	5,615,593

Fair value estimates are subjective in nature and are dependent on a number of important assumptions, including estimates of future cash flows, risks, discount rates and relevant comparable market information associated with each financial instrument (see Note 2 – Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the year ended December 31, ~~2020)~~2021). The use of different market assumptions and estimation methodologies may have a material effect on the reported estimated fair value amounts.

The following methods and assumptions were used in estimating fair value disclosures for financial instruments.

●

Direct financing leases: The fair value of the investments in direct financing leases are estimated using a discounted cash flow analysis, using interest rates being offered for similar leases to borrowers with similar credit ratings (Level 3).

●

Mortgage notes receivable: The fair value of the mortgage notes receivables are estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings (Level 3).

●

Other investments: Other investments are primarily comprised of notes receivable. The fair values of notes receivable are estimated using a discounted cash flow analysis, using interest rates being offered for similar loans to borrowers with similar credit ratings (Level 3).

●

Revolving ~~line~~credit facility, OP term loan, 2022 term loan and 2024 term loan: The carrying amount of ~~credit, secured borrowing~~these approximate fair value because the borrowings are interest rate adjusted. Differences between carrying value and ~~term loans:~~ the fair value in the table above are due to the inclusion of deferred financing costs in the carrying value.

●

Senior notes: The fair value of ~~our borrowings under variable rate agreements are~~the senior unsecured notes payable was estimated ~~using a present value technique~~ based on ~~expected cash flows discounted using the current market rates~~ (Level ~~3).~~1) publicly available trading prices.

2825

Table of Contents

●

~~Senior notes and subordinated~~Subordinated debt: The fair value of our borrowings under ~~fixed rate~~these agreements are estimated using a present value technique based on inputs from trading activity provided by a third-party (Level 2).

●

HUD mortgages: The fair value of our borrowings under HUD debt agreements are estimated using an expected present value technique based on quotes obtained by HUD debt brokers (Level 2).

NOTE 1618 – COMMITMENTS AND CONTINGENCIES

Litigation

Shareholder Litigation

The Company and certain of its officers, C. Taylor Pickett, Robert O. Stephenson, and Daniel J. Booth, are defendants in a purported securities class action lawsuit pending in the U.S. District Court for the Southern District of New York (the “Securities Class Action”). Brought by lead plaintiff Royce Setzer and additional plaintiff Earl Holtzman, the Securities Class Action purports to assert claims for violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, as well as Section 20(a) of the Exchange Act, and seeks an unspecified amount of monetary damages, interest, fees and expenses of attorneys and experts, and other relief. The Securities Class Action alleges that the defendants violated the Exchange Act by making materially false and/or misleading statements, and by failing to disclose material adverse facts about the Company’s business, operations, and prospects, including the financial and operating results of one of the Company’s operators, the ability of such operator to make timely rent payments, and the impairment of certain of the Company’s leases and the uncollectibility of certain receivables. The initial complaint was dismissed with prejudice by the U.S. District Court, but the dismissal was overturned by the ~~U.S~~U.S. Court of Appeals for the Second Circuit in 2020. Thereafter, the plaintiffs filed a Second Consolidated Amended Complaint in August 2020. In November 2020, the Company and the officers named in the Securities Class Action filed a Motion to Dismiss the Second Consolidated Amended ~~Complaint, which is fully briefed~~Complaint. On September 28, 2021, the Court issued an order denying the motion to dismiss insofar as it requested dismissal of the entire action on grounds of loss causation, and ~~pending before~~granting it insofar as it sought dismissal of any claims arising out of defendants’ statements in February 2017. Because the ~~District Court.~~dismissed claims were the basis for defendants’ efforts to begin the alleged class period in February 2017, the decision means that the alleged class period runs from May 3, 2017 to October 31, 2017.

Certain derivative actions have also been brought against the officers named in the Securities Class Action, and certain current and former directors of the Company, alleging claims relating to the matters at issue in the Securities Class Action. These derivative actions are currently stayed pending certain developments in the Securities Class Action.

In 2018, Stourbridge Investments LLC, a purported stockholder of the Company, filed a derivative action purportedly on behalf of the Company in the ~~United States~~U.S. District Court for the Southern District of New York, alleging violations of Section 14(a) of the Exchange Act and state-law claims including breach of fiduciary duty. The complaint alleges, among other things, that the named defendants are responsible for the Company’s failure to disclose the financial condition of Orianna Health Systems, the alleged non-disclosures that are also the subject of the Securities Class Action described above. The plaintiff did not make a demand on the Company to bring the action prior to filing it, but rather alleges that demand would have been futile. The case has been stayed pending the entry of ~~judgement~~judgment or a voluntary dismissal with prejudice in the Securities Class Action.

In 2019, purported stockholder Phillip Swan by his counsel, and stockholders Tom Bradley and Sarah Smith by their counsel, filed derivative actions in the Baltimore City Circuit Court of Maryland, purportedly on behalf of the Company, asserting claims for breach of fiduciary duty, waste of corporate assets and unjust enrichment against the named defendants. Those actions have been consolidated and stayed in the Maryland court pending completion of fact discovery in the Securities Class Action. Prior to filing suit, each of these stockholders had made demands on the Board of Directors in 2018 that the Company bring such lawsuits. After an investigation and due consideration, and in the exercise of its business judgment, the Board of Directors determined that it is not in the best interests of the Company to commence litigation against any current or former officers or directors based on the matters raised in the demands.

2926

Table of Contents

In addition, in late 2020, Robert Wojcik, a purported shareholder of the Company, filed a derivative action in the U.S. District Court for the District of Maryland, purportedly on behalf of the Company, asserting violations of Section 14(a) of the Exchange Act, Sections 10(b) and 21D of the Exchange Act, as well as claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. Wojcik also did not make a demand on the Company prior to filing suit. The case has been stayed pending the entry of ~~judgement~~judgment or a voluntary dismissal with prejudice in the Securities Class Action.

The Company believes that the claims asserted against it in these lawsuits are without merit and intends to vigorously defend against them.

Other

Gulf Coast Subordinated Debt

In August 2021, we filed suit in the Circuit Court for Baltimore County (the “Court”) against the holders of certain Subordinated Debt associated with our Gulf Coast master lease agreement, following an assertion by the holders that our prior exercise of offset rights in connection with Gulf Coast’s non-payment of rent had resulted in defaults under the terms of the Subordinated Debt. The suit seeks a declaratory judgment to, among other items, declare that the aggregate amount of unpaid rent due from Gulf Coast under the master lease agreement exceeds all amounts which otherwise would be due and owing by a subsidiary of Omega (“Omega Obligor”) under the Subordinated Debt, and that all principal and interest due and owing under the Subordinated Debt may be (and was) offset in full as of December 31, 2021. In October 2021, the defendants in the case filed a motion to dismiss for lack of personal jurisdiction. A hearing was held on such motion on February 25, 2022, but the decision was taken under advisement. While Omega believes Omega Obligor is entitled to the enforcement of the offset rights sought in the action, the outcome of litigation is unpredictable, and Omega cannot predict the outcome of the declaratory judgment action, irrespective of whether it is litigated in the Court or, if the motion to dismiss for lack of personal jurisdiction is granted, in another court.

Lakeway Realty, L.L.C.

In September 2016, MedEquities received a Civil Investigative Demand (“CID”) from the U.S. Department of Justice (“DOJ”), which indicates that it is conducting an investigation regarding alleged violations of the False Claims Act, Stark Law and Anti-Kickback Statute in connection with claims that may have been submitted to Medicare and other federal payors for services rendered to patients at Lakeway Hospital or by providers with financial relationships with Lakeway Hospital. As a result of the acquisition of MedEquities, the Company owns a 51% interest in an unconsolidated partnership that owns Lakeway Hospital, ~~(the “Lakeway~~Lakeway Realty, L.L.C.~~”).~~ The CID requested certain documents and information related to the acquisition and ownership of Lakeway Hospital through Lakeway Realty, ~~L.L.C..~~L.L.C. The Company has learned that the DOJ is investigating MedEquities’ conduct in connection with its investigation of financial relationships related to Lakeway Hospital, including allegations by the DOJ that these relationships violate and continue to violate the Anti-Kickback Statute and, as a result, related claims submitted to federal payors violated and continue to violate the False Claims Act. The Company is cooperating fully with the DOJ in connection with the CID and has produced all of the information that has been requested to date.

On September 29, 2020, the Department of Justice announced it had reached a settlement of a False Claims Act case with Lakeway Regional Medical Center wherein Lakeway Regional Medical Center agreed to pay $1.1 million for inducing certain physicians to refer patients by offering a low risk and high return investment in the form of a joint venture to purchase and then lease back the hospital to Lakeway Regional Medical Center. A MedEquities subsidiary was a party to this transaction but was not included in settlement ~~discussions.~~discussions, and we understand that the settlement did not fully resolve the investigation referenced in the CID. The documents relating to the settlement are not publicly available.

The Company believes that the acquisition, ownership and leasing of Lakeway Hospital through the Lakeway Partnership was and is in compliance with all applicable laws. However, due to the uncertainties surrounding this matter and its ultimate outcome, we are unable to determine whether it is probable that any loss has been incurred.

Table of Contents

In addition, we are subject to various other legal proceedings, claims and other actions arising out of the normal course of business. While any legal proceeding or claim has an element of uncertainty, management believes that the outcome of each lawsuit, claim or legal proceeding that is pending or threatened, or all of them combined, will not have a material adverse effect on our consolidated financial position or results of operations.

Indemnification Agreements

In connection with certain facility transitions, we have agreed to indemnify certain operators in certain events. As of March 31, ~~2021,~~2022, our maximum funding commitment under these indemnification agreements was approximately ~~$8.1~~$5.6 million. Claims under these indemnification agreements may be made within 18 months to 72 months of the transition date. These indemnification agreements were provided to certain operators in connection with facility transitions and generally would be applicable in the event that the prior operators do not perform under their transition agreements. ~~The Company does not expect to fund a material amount under these indemnification agreements.~~

~~Table of Contents~~

Commitments

We have committed to fund the construction of new leased and mortgaged facilities, capital improvements and other commitments. We expect the funding of these commitments to be completed over the next several years. Our remaining commitments at March 31, ~~2021,~~2022, are outlined in the table below (in thousands):



Total commitments	$	596,615	$	752,891
Amounts funded to date⁽¹⁾		(454,837)		(532,002)
Remaining commitments ⁽²⁾	$	141,778	$	220,889

(1)

Includes finance costs.

(2)

This amount excludes our remaining commitments to fund under our other investments of approximately ~~$81.0~~$41.2 million.

NOTE 1719 – EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings per share:


	Three Months Ended
	March 31,				Three Months Ended March
	2021		2020		2022		2021

	(in thousands, except per share amounts)				(in thousands, except per share amounts)
Numerator:
Net income	$	164,366	$	92,279	$	195,156	$	164,366
Deduct: net income attributable to noncontrolling interests		(4,388)		(2,364)		(5,549)		(4,388)

Net income available to common stockholders	$	159,978	$	89,915	$	189,607	$	159,978
Denominator:
Denominator for basic earnings per share		232,572		227,261		239,527		232,572
Effect of dilutive securities:
Common stock equivalents		944		1,261		963		944
Noncontrolling interest – Omega OP Units		6,391		5,984		7,066		6,391
Denominator for diluted earnings per share		239,907		234,506		247,556		239,907

Earnings per share - basic:
Net income available to common stockholders	$	0.69	$	0.40	$	0.79	$	0.69
Earnings per share – diluted:
Net income	$	0.69	$	0.39	$	0.79	$	0.69

3128

Table of Contents

NOTE 1820 – SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOWS

The following are supplemental disclosures to the ~~consolidated statements~~Consolidated Statements of ~~cash flows~~Cash Flows for the three months ended March 31, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended March 31,


2021

2020


(in thousands)

Reconciliation of cash and cash equivalents and restricted cash:

Cash and cash equivalents

$
51,376

$
347,965

Restricted cash

4,522

4,057

Cash, cash equivalents and restricted cash at end of period

$
55,898

$
352,022

Supplemental information:

Interest paid during the period, net of amounts capitalized

$
67,538

$
64,457

Taxes paid during the period

$
1,509

$
2,655

Non cash financing activities





Change in fair value of cash flow hedges

36,672

(7,844)

Remeasurement of debt denominated in a foreign currency

3,010

(13,187)


	Three Months Ended March 31,
	2022		2021

	(in thousands)
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents	$	491,247	$	51,376
Restricted cash		3,534		4,522
Cash, cash equivalents and restricted cash at end of period	$	494,781	$	55,898

Supplemental information:
Interest paid during the period, net of amounts capitalized	$	60,478	$	67,538
Taxes paid during the period	$	1,716	$	1,509

Non-cash investing activities:
Non-cash acquisition of real estate	$	(11,133)	$	—

Non-cash financing activities:
Non-cash contribution from noncontrolling interest holder in consolidated joint venture	$	2,903	$	—
Change in fair value of cash flow hedges	$	24,489	$	36,672
Remeasurement of debt denominated in a foreign currency	$	(320)	$	3,010

~~NOTE 19 – SUBSEQUENT EVENTS~~

~~On April 30, 2021, the Company closed a new four-year $1.45~~ ~~billion senior unsecured credit facility (“Credit Facility”). The Credit Facility replaced a~~ ~~$1.25 billion senior unsecured credit facility that was scheduled to mature on May 25, 2021.~~

~~On April 30, 2021, the Company closed a new four-year $50~~ ~~million senior unsecured term loan facility (“OP Term Loan Facility”) to its operating partnership subsidiary. The OP Term Loan Facility replaced a~~ ~~$50 million senior unsecured term loan facility that was scheduled to mature on May 25, 2022.~~

3229

Table of Contents

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements and Factors Affecting Future Results

Unless otherwise indicated or except where the context otherwise requires, the terms “we,” “us” and “our” and other similar terms in this Quarterly Report on Form 10-Q refer to Omega Healthcare Investors, Inc. and its consolidated subsidiaries.

The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this document. This document contains “forward-looking statements” within the meaning of the federal securities laws. These statements relate to our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements other than statements of historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology including, but not limited to, terms such as “may,” “will,” “anticipates,” “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. These statements are based on information available on the date of this filing and only speak as to the date hereof and no obligation to update such forward-looking statements should be assumed.

Our actual results may differ materially from those reflected in the forward-looking statements contained herein as a result of a variety of factors, including, among other things:

~~(i)~~(1)

those items discussed under “Risk Factors” in Part I, Item 1A to our ~~annual report~~Annual Report on Form 10-K;

~~(ii)~~(2)

uncertainties relating to the business operations of the operators of our assets, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels;

~~(iii)~~(3)

the impact of the ~~novel coronavirus (“COVID-19”)~~COVID-19 pandemic on our business and the business of our operators, including without limitation, the extent and duration of the COVID-19 pandemic, increased costs, staffing shortages and decreased occupancy levels experienced by operators of skilled nursing facilities (“SNFs”) and assisted living facilities (“ALFs”) in connection therewith, the ability of operators to comply with ~~new~~ infection control and vaccine protocols, the long-term impact of vaccination on facility infection rates, and the extent to which continued government support may be available to operators to offset such costs and the conditions related thereto;

~~(iv)~~(4)

the ability of ~~any of Omega’s~~our operators in bankruptcy to reject unexpired lease obligations, modify the terms of ~~Omega’s~~our mortgages and impede ~~the~~our ability ~~of Omega~~ to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor’s obligations, and other costs and uncertainties associated with operator bankruptcies;

~~(v)~~(5)

our ability to re-lease, otherwise transition, or sell underperforming assets or assets held for sale on a timely basis and on terms that allow us to realize the carrying value of these assets;

~~(vi)~~(6)

the availability and cost of capital to us;

~~(vii)~~(7)

changes in our credit ratings and the ratings of our debt securities;

~~(viii)~~(8)

competition in the financing of healthcare facilities;

~~(ix)~~(9)

competition in the long-term healthcare industry and shifts in the perception of various types of long-term care facilities, including SNFs and ALFs;

~~(x)~~(10)

additional regulatory and other changes in the healthcare sector;

~~(xi)~~(11)

changes in the financial position of our operators;

~~(xii)~~(12)

the effect of economic and market conditions generally and, particularly, in the healthcare industry;

~~(xiii)~~(13)

changes in interest ~~rates;~~rates and the impact of inflation;

~~(xiv)~~(14)

the timing, amount and yield of any additional investments;

~~(xv)~~(15)

changes in tax laws and regulations affecting real estate investment trusts (“REITs”);

~~(xvi)~~(16)

the potential impact of changes in the SNF and ALF markets or local real estate conditions on our ability to dispose of assets held for sale for the anticipated proceeds or on a timely basis, or to redeploy the proceeds therefrom on favorable terms;

~~(xvii)~~(17)

our ability to maintain our status as a REIT; and

~~(xviii)~~(18)

the effect of other factors affecting our business or the businesses of our operators that are beyond our or their control, including natural disasters, other health crises or pandemics and governmental action; particularly in the healthcare industry.

3330

Table of Contents

Overview

Omega Healthcare Investors, Inc. (“~~Omega”~~Parent”) ~~was incorporated in the State of~~is a Maryland ~~on March 31, 1992, and~~corporation that, together with its consolidated subsidiaries (collectively, “Omega,” or “Company,” “we,” “our,” or “us”) has elected to be taxed as a ~~real estate investment trust (“REIT”)~~REIT for federal income tax purposes. Omega is structured as an umbrella partnership REIT (“UPREIT”) under which all of Omega’s assets are owned directly or indirectly by, and all of Omega’s operations are conducted directly or indirectly through, its operating partnership subsidiary, OHI Healthcare Properties Limited Partnership ~~(“Omega~~(collectively with its subsidiaries, “Omega OP”). Unless stated otherwise or the context otherwise requires, the terms “Omega”, the “Company,” “we,” “our” and “us” refer to Omega Healthcare Investors, Inc. and its consolidated subsidiaries, including Omega OP, references to “Parent” refer to Omega Healthcare Properties, Inc. without regard to its consolidated subsidiaries, and references to “Omega OP” mean OHI Healthcare Properties Limited Partnership and its consolidated subsidiaries. As of March 31, ~~2021, Omega~~2022, Parent owned approximately 97% of the issued and outstanding units of partnership interest in Omega OP (“Omega OP Units”), and other investors owned approximately 3% of the outstanding Omega OP Units.

Omega has one reportable segment consisting of investments in healthcare-related real estate properties located in the United States (“U.S.”) and the United Kingdom (“U.K.”). Our core business is to provide financing and capital to the long-term healthcare industry with a particular focus on SNFs, ~~and~~ ALFs, and to a lesser extent, independent living facilities (“ILFs”), rehabilitation and acute care facilities (“specialty facilities”) and medical office buildings. Our core portfolio consists of our long-term leases and mortgage ~~agreements.~~loans with healthcare operating companies and affiliates (collectively, our “operators”). All of our leases are “triple-net” leases, which require the operators (we use the term “operator” to refer to our tenants and mortgagors and their affiliates who manage and/or operate our properties) to pay all property-related expenses. Our mortgage revenue derives from fixed rate mortgage loans, whichmortgages are secured by first ~~mortgage~~ liens on the underlying real estate and personal property of the ~~mortgagor. Our other investment income derives from fixed and variable rate~~operators. In addition to our core investments, we selectively make loans to ~~our~~ operators ~~and/or their principals to fund~~for working capital and capital expenditures. These loans, which may be either unsecured or secured by the collateral of the borrower, are classified as other investments. From time to time, we also acquire equity interests in joint ventures or entities that support the long-term healthcare industry and our operators.

COVID-19 Pandemic Update

~~For~~The COVID-19 pandemic has continued to significantly and adversely impact SNFs and long-term care providers due to the ~~year ended December 31, 2020~~higher rates of virus transmission and fatality among the elderly and frail populations that these facilities serve. As a result, many of our operators have been and may continue to be significantly impacted by the pandemic. Agemo Holdings, LLC (“Agemo”), Guardian Healthcare (“Guardian”) and Gulf Coast Health Care LLC (together with certain affiliates, “Gulf Coast”), three operators that failed to make contractual payments under their lease and loan agreements for periods of 2021, continued to not make payments during the first quarter of ~~2021,~~2022. During the first quarter of 2022, two new operators, representing an aggregate of 6.1% of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022, missed contractual rent payments during the period, and we have ~~collected substantially all~~agreed to short term deferrals with these two operators, as well as allowed one of these operators to apply its security deposit to pay rent, as discussed further in “Collectibility Issues” below. Additionally, we allowed three other operators, representing an aggregate 2.5% of total revenue (excluding the ~~contractual rents owed~~impact of write-offs) for the three months ended March 31, 2022, to usapply $1.3 million of their security deposits to pay rent to accommodate short term liquidity issues, with regular rent payments required to resume shortly thereafter.

We believe these operators were impacted by, among other things, reduced revenue as a result of lower occupancy and increased expenses resulting from ~~our operators (other than operators under a forbearance agreement prior to~~ the ~~pandemic). However,~~COVID-19 pandemic and uncertainties regarding the continuing availability of sufficient government support. We remain cautious as the COVID-19 pandemic continues to have a significant impact on our ~~operators.~~ operators and their financial conditions, particularly given continued uncertainty regarding the availability of sufficient government support and trend of reduced federal support to our operators beginning in 2021, the persistence of staffing shortages that continue to impact our operators’ occupancy levels and profitability, the impact of governmental vaccine mandates for staff on these ongoing staffing shortages, other factors that may impact virus transmission in our facilities, including genetic mutations of the virus into new variants, the commencement in April 2021 for many of our operators of the repayment of accelerated payments of Medicare funds that were previously received as Advanced Medicare payments in 2020 and the commencement in December 2021 of repayment of deferred FICA obligations.

As of April 27, ~~2021,~~2022, our operators have reported a decline in cases of COVID-19 involving employees and residents from the high caseload experienced in January 2022 driven by the Omicron variant. Our operators reported, as of April 27, 2022, cases of COVID-19 within ~~212,~~151, or ~~22%~~16.1%, of our ~~949~~939 operating facilities as of December 31, ~~2020,~~2021, which includes cases involving employees and residents. ~~This represents a meaningful decline in cases from the 614 facilities with cases, or 64%~~

Table of ~~our 959 operating facilities, that our operators reported as of December 22, 2020.~~ Contents

We caution that we have not independently validated any such facility virus incidence information, itwhich may be reported on an inconsistent basis by our operators, and we can provide no assurance regarding ~~its~~the information’s accuracy or that there have not been any changes since the time ~~the information~~it was obtained from our operators; we also undertake no duty to update this information. ~~While we believe the decline in reported cases noted above is due in large part~~It remains uncertain to what extent vaccination programs for COVID-19 ~~which have been implemented in many of our facilities, it remains uncertain when~~ and ~~to what extent these vaccination programs~~any booster doses will ~~continue to~~ mitigate the effects of COVID-19 in our facilities, ~~or how effective existing vaccines will be against~~particularly with regard to new variants of the ~~COVID-19 virus.~~virus, the impact of governmental vaccine mandates for staff on ongoing staffing shortages in our facilities and other factors that impact virus transmission in our facilities. The impact of these programs will depend in part on the continued ~~speed, distribution,~~ efficacy and delivery of the vaccine and booster doses in our facilities, ~~as well as~~compliance with staff vaccination requirements and participation levels in vaccination programs among the residents and employees of our ~~operators. Our~~ operators ~~have reported considerable variation~~and in ~~participation levels among both employees and residents,~~the communities in which ~~may change over time as additional vaccination clinics are held.~~they operate.

~~Table of Contents~~

In addition to experiencing outbreaks of positive cases and deaths of residents and employees during the pandemic, our operators have been required to, and continue to, adapt their operations ~~rapidly throughout the pandemic~~ to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, staffing levels, personal protective equipment (“PPE”), testing mandates, quality of care, visitation protocols ~~staffing levels,~~ and reporting, among other regulations, throughout the ~~pandemic.~~pandemic while facing staffing shortages that have accelerated during the pandemic and that may impede the delivery of care. Many of our operators have reported incurring significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases. These increases have been offset to some extent by increases in reimbursements due to increased skilling in place, which has been necessitated by pandemic-related protocols and may decrease when such protocols subside. We believe these increases primarily stem from elevated labor costs, including increased use of overtime and bonus pay and reliance on agency staffing due to staffing shortages, as well as a significant increase in both the cost and usage of PPE, testing equipment and processes and supplies, as well as implementation of new infection control protocols and vaccination programs. ~~In addition, many~~

The federal government announced in August and September 2021 that it would be requiring SNF and healthcare workers to be vaccinated against COVID-19 and issued an emergency implementing regulation effective November 5, 2021 requiring covered healthcare facilities to ensure eligible staff have received a first vaccine dose as of ~~our~~December 5, 2021 and a second dose of a two-dose vaccine as of January 4, 2022, with certain permitted exemptions in alignment with federal law, which were subsequently extended by the U.S. Centers for Medicare and Medicaid Services by between one to two months depending on the applicable state. Our operators have reported ~~experiencing~~increases in staff vaccination rates during the first quarter of 2022; however, we expect that such mandates may exacerbate ongoing staffing shortages in skilled nursing and senior housing facilities. In addition, operators who do not achieve full compliance with the requirements may face potential survey issues and penalties. At this time, there is significant uncertainty regarding the impact of such developments.

In addition, our facilities, on average, have experienced declines, in some cases that are material, in occupancy levels as a result of the ~~pandemic, which declines~~pandemic. Occupancy in our facilities has generally improved on average ~~appear~~since early 2021, with a slight reduction in growth in late 2021 and early 2022 due to ~~be stabilizing.~~the impact of new variants; however, average occupancy has not returned to pre-pandemic levels. It remains unclear when and the extent to which demand and occupancy levels will return to pre-COVID-19 levels. We believe these ~~declines~~challenges to occupancy recovery may be in part due to staffing shortages, which in some cases have required operators to limit admissions, as well as COVID-19 related fatalities at the facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension and/or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs.

Table of Contents

While substantial government support, primarily through the federal CARES Act in the U.S. and distribution of PPE, vaccines and testing equipment by federal and state governments, ~~has been~~was allocated to SNFs and to a lesser extent to ALFs in 2020, federal relief efforts were limited in 2021 as have been relief efforts in certain states. We believe further government support will ~~likely~~ be needed to continue to offset these ~~impacts.~~impacts, which may take the form of stimulus or reimbursement rate adjustments to reflect sustained cost changes experienced by operators. It is unclear whether and to what extent such government support will continue to be sufficient and timely to offset these impacts. In particular, while $25.5 billion in federal funding for healthcare providers impacted by COVID-19 was announced in September 2021 with distributions beginning in late 2021, it remains unclear asthe extent to ~~whether~~which these funds or remaining unallocated funds under the Public Health and Social Services Emergency Fund (“Provider Relief ~~Fund~~Fund”) will be distributed to our operators in any meaningful way, whether additional funds will be added to the Provider Relief Fund or otherwise allocated to ~~health care~~healthcare operators or our operators, or whether additional Medicaid funds under the ~~recently enacted~~ American Rescue Plan Act of 2021 (the “American Rescue Plan Act”) or other Medicare or Medicaid reimbursement rates changes in the U.S. will ultimately support reimbursement to our operators. Further, to the extent the cost and occupancy impacts on our operators continue or accelerate and are not offset by continued government relief that is sufficient and timely, we anticipate that the operating results of ~~certain of our~~additional operators ~~would~~may be materially and adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place. Citing in part the impact of the COVID-19 pandemic and uncertainties regarding the continuing availability of sufficient government support, during the third and fourth quarters of 2020, four of our operators indicated in their financial statements substantial doubt regarding their ability to continue as going concerns.

There are a number of uncertainties we face as we consider the ~~potential~~continuing impact of COVID-19 on our business, including how long census disruption and elevated COVID-19 costs will last, the impact of vaccination programs, including booster doses, and participation levels in those programs in reducing the spread of COVID-19 in our facilities, the impact of genetic mutations of the virus into new variants on our facilities, the impact of vaccine mandates on ongoing staffing shortages in our facilities, and the extent to which funding support from the federal government and the states will continue to offset these incremental costs as well as lost revenues. Notwithstanding vaccination programs, we expect that heightened clinical protocols for infection control within facilities will continue for some period; however, we do not know if future reimbursement rates or equipment provided by governmental agencies will be sufficient to cover the increased costs of enhanced infection control and monitoring.

While we continue to believe that longer term demographics will drive increasing demand for needs-based skilled nursing care, we expect the uncertainties to our business described above to persist at least for the near term until we can gain more information as to the level of costs our operators will continue to experience and for how long, and the level of additional governmental support that will be available to them, the potential support our operators may request from us and the future demand for needs-based skilled nursing care and senior living facilities. We continue to monitor the ~~impact~~rate of occupancy ~~declines~~recovery at many of our operators, and it remains uncertain whether and when demand, staffing availability and occupancy levels will return to pre-COVID-19 levels.

We continue to monitor the impacts of other regulatory changes, as discussed in ~~Item 1. Business – Government Regulation and Reimbursement~~,below, including any significant limits on the scope of services reimbursed and on reimbursement rates and fees, which could have a material adverse effect on an operator’s results of operations and financial condition, which could adversely affect the operator’s ability to meet its obligations to us.

Other Trends and Conditions

In addition to the impacts of COVID-19 discussed above, our operators have been and are likely to continue to be adversely affected by labor shortages and increased labor costs. In addition, our operations have also been and are likely to continue to be impacted by increased competition for the acquisition of facilities in the U.S., which has decreased the number of investment opportunities that would be accretive to our portfolio. As part of our continuous evaluation of our portfolio and in connection with certain operator restructuring transactions, we expect to continue to opportunistically sell assets, or portfolios of assets, from time to time.

3533

Table of Contents

Government Regulation and Reimbursement

The following information supplements and updates, and should be read in conjunction with, the information contained under the caption Item 1. Business – Government Regulation and Reimbursement in our Annual Report on Form 10-K for the year ended December 31, 2021.

The healthcare industry is heavily regulated. Our operators, which are primarily based in the U.S., are subject to extensive and complex federal, state and local healthcare laws and regulations; we also have several U.K.-based operators ~~that~~which are ~~impacted by~~subject to a variety of laws and regulations in their jurisdiction. These laws and regulations are subject to frequent and substantial changes resulting from the adoption of new legislation, rules and regulations, and administrative and judicial interpretations of existing law. The ultimate timing or effect of these changes, which may be applied retroactively, cannot be predicted. Changes in laws and regulations impacting our operators, in addition to regulatory non-compliance by our operators, can have a significant effect on the operations and financial condition of our operators, which in turn may adversely impact us. There is the potential that we may be subject directly to healthcare laws and regulations because of the broad nature of some of these regulations, such as the Anti-kickback Statute and False Claims Act, among others.

The ~~following information supplements and updates, and should be read in conjunction with, the information contained under the caption “~~~~Item 1. Business – Government Regulation and Reimbursement~~~~” in our Annual Report on~~ ~~Form 10-K~~ ~~for the year ended December 31, 2020. Except as discussed below, there have been no changes to the matters discussed therein that we believe materially impact us.~~

~~The~~ U.S. Department of Health and Human Services (“HHS”) declared a public health emergency on January 31, 2020 following the World Health Organization's decision to declare COVID-19 a public health emergency of international concern. This declaration, which has been extended through July ~~20, 2021,~~15, 2022, allows HHS to provide temporary regulatory waivers and new reimbursement rules designed to equip providers with flexibility to respond to the COVID-19 pandemic by suspending various Medicare patient coverage criteria and documentation and care requirements, including, for example, suspension of the three-day prior hospital stay coverage requirement and expanding the list of approved services which may be provided via telehealth. These regulatory actions ~~could~~have contributed, and may continue to contribute, to a change in census volumes and skilled nursing mix that may not otherwise have occurred. It remains uncertain when federal and state regulators will resume enforcement of those regulations which are waived or otherwise not being enforced during the public health emergency due to the exercise of enforcement discretion.

These temporary changes to regulations and reimbursement, as well as emergency legislation, including the CARES Act enacted on March 27, 2020 and discussed below, continue to have a significant impact on the operations and financial condition of our operators. The extent of the COVID-19 pandemic’s effect on the Company’s and our operators’ operational and financial performance will depend on future developments, including the sufficiency and timeliness of additional governmental relief, the duration, spread and intensity of the outbreak, the impact of genetic mutations of the virus into new variants, the impact of vaccine distributions and booster doses on our operators and their populations, the impact of vaccine mandates on staffing shortages at our operators, as well as the difference in how the pandemic may impact SNFs in contrast to ALFs, all of which developments and impacts are uncertain and difficult to predict. Due to these uncertainties, we are not able at this time to estimate the effect of these factors on our business; however, the adverse impact on our business, results of operations, financial condition and cash flows could be material.

A significant portion of our operators’ revenue is derived from government-funded reimbursement programs, consisting primarily of Medicare and Medicaid. As federal and state governments continue to focus on healthcare reform initiatives, efforts to reduce costs by government payors will likely continue. Significant limits on the scope of services reimbursed and/or reductions of reimbursement rates could therefore have a material adverse effect on our operators’ results of operations and financial condition. Additionally, new and evolving payor and provider programs that are tied to quality and efficiency could adversely impact our tenants’ and operators’ liquidity, financial condition or results of operations, and there can be no assurance that payments under any of these government ~~health care~~healthcare programs are currently, or will be in the future, sufficient to fully reimburse the property operators for their operating and capital expenses. In addition to quality and value based reimbursement reforms, the U.S. Centers for Medicare and Medicaid Services (“CMS”) has implemented a number of initiatives focused on the reporting of certain facility specific quality of care indicators that could affect our operators, including publicly released quality ratings for all of the nursing homes that participate in Medicare or Medicaid under the CMS “Five Star Quality Rating System.” Facility rankings, ranging from five stars (“much above average”) to one star (“much below average”) are updated on a monthly basis. SNFs are required to provide information for the CMS Nursing Home Compare website regarding staffing and quality measures. These rating changes have impacted referrals to SNFs, and it is possible that changes to this system or other ranking systems could lead to future reimbursement policies that reward or penalize facilities on the basis of the reported quality of care parameters.

Table of Contents

The following is a discussion of ~~recent developments regarding~~ certain U.S. laws and regulations generally applicable to our operators, and in certain cases, to ~~us, and their impact. This discussion supplements and should be read in conjunction with the information under the heading~~ ~~“Item 1. Business – Government Regulation and Reimbursement~~~~” in our Annual Report on~~ ~~Form 10-K~~ ~~for the year ended December 31, 2020.~~us.

~~Table of Contents~~

Reimbursement Changes Related to COVID-19:

U.S. Federal Stimulus Funds ~~through the CARES Act~~ and ~~Provider Relief Fund, Appropriating $178 Billion to Health Care Providers.~~ Financial Assistance for Healthcare Providers. In response to the pandemic, Congress has enacted a series of economic stimulus and relief ~~measures throughout 2020.~~measures. On March 18, 2020, the Families First Coronavirus Response Act was enacted in the U.S., providing a temporary 6.2% increase to each qualifying state and territory’s Medicaid Federal Medical Assistance Percentage (“FMAP”) effective January 1, 2020. The temporary FMAP increase will extend through the last day of the calendar quarter in which the public health emergency terminates. States will make individual determinations about how this additional Medicaid reimbursement will be applied to SNFs, if at all.

In a further response to the pandemic, the CARES Act authorized approximately $178 ~~Billion~~billion to be distributed through the ~~Public Health and Social Services Emergency Fund (“~~Provider Relief ~~Fund”)~~Fund to reimburse eligible healthcare providers for ~~health care~~healthcare related expenses or lost revenues that ~~are~~were attributable to coronavirus. As part of the $178 billion, in May 2020, HHS announced that approximately $9.5 billion in targeted distributions would be made available to eligible SNFs, approximately $2.5 billion of which were composed of performance-based incentive payments tied to a facility’s infection rate. Further, in September 2021, HHS announced the release of $25.5 billion in provider funding, including $17 billion of the $178 billion previously authorized through the CARES Act and $8.5 billion for rural providers, including those with Medicaid and Medicare patients, through the American Rescue Plan Act. The Provider Relief Fund is administered under the broad authority and discretion of HHS and recipients are not required to repay distributions received to the extent they are used in compliance with applicable requirements. Also in September 2021, the Centers for Disease Control and Prevention (“CDC”) announced it would allocate $500 million to staffing, training and deployment of state-based nursing home and long-term care “strike teams” to assist facilities with known or suspected COVID-19 outbreaks.

HHS began distributing Provider Relief Fund grants in April 2020 and has made grants available to various provider groups in three general phases. In May 2020, HHS announced that approximately $9.5 Billion in targeted distributions would be made available to eligible skilled nursing facilities, approximately $2.5 Billion of which were composed of performance-based incentive payments tied to a facility’s infection rate. Approximately $8.5 billion in additional funds were added to the Provider Relief Fund through the American Rescue Plan Act enacted on March 11, 2021; however, these funds are limited to rural providers and suppliers.

As of March 15, 2021, based on data published by HHS, it appears that less than $29 billion of the Provider Relief Fund remains unallocated. HHS continues to evaluate and provide allocations of, and issue regulations and guidance regarding, grants made under the CARES Act and related legislation. There are substantial uncertainties regarding the extent to which our operators will receive funds which have not been allocated, whether additional funds will be allocated to the Provider Relief Fund, health care providers or senior care providers and whether additional payments will be distributed to providers, the financial impact of receiving any of these funds on their operations or financial condition, and whether operators will be able to meet the compliance requirements associated with the funds. HHS continues to evaluate and provide allocations of, and issue regulation and guidance regarding, grants made under the CARES Act. There are substantial uncertainties regarding the extent to which our operators will receive additional funding from HHS.

The CARES Act and related legislation also made other forms of financial assistance available to healthcare providers, which have the potential to impact our operators to varying degrees. This assistance includes Medicare and Medicaid payment adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which made available accelerated payments of Medicare funds in order to increase cash flow to providers. These payments are loans that providers ~~must repay.~~ are scheduled to repay beginning one year from the issuance date of each provider’s or supplier’s accelerated or advance payment, with repayment made through automatic recoupment of 25% of Medicare payments otherwise owed to the provider or supplier for eleven months, followed by an increase to 50% for another six months, after which any outstanding balance would be repaid subject to an interest rate of 4%. We believe these repayments commenced for many of our operators in April 2021 and have adversely impacted, and will continue to adversely impact, operating cash flows of these operators.

Additionally, CMS suspended Medicare sequestration payment adjustments, which would have otherwise reduced payments to Medicare providers by 2%, from May 1, 2020 through December 31, ~~2021,~~2020, but also extended sequestration through 2030. The Bipartisan-Bicameral Omnibus COVID Relief Deal that passed in December 2020 further extended the suspension of the Medicare sequestration until March 31, 2021, and it most recently has been further extended from December 31, 2021 through March 31, 2022, resulting in a 1% cut in Medicare reimbursement for the three months starting April 1, 2022 and the full 2% sequester resuming July 1, 2022. While not limited to healthcare providers, the CARES Act additionally provided payroll tax relief for employers, allowing them to defer payment of employer Social Security taxes that are otherwise owed for wage payments made after March 27, 2020 through December 31, 2020 to December 31, 2021 with respect to 50% of the payroll taxes owed, with the remaining 50% deferred until December 31, 2022.

3735

Table of Contents

Quality of Care Initiatives and Additional Requirements Related to ~~COVID-19:~~

COVID-19.

In addition to COVID-19 reimbursement changes, several regulatory initiatives announced in 2020 and ~~the first quarter of~~ 2021 focused on addressing quality of care in long-term care facilities, including those related to COVID-19 testing and infection control protocols, vaccine protocols, staffing levels, reporting requirements, and visitation policies, as well as increased inspection of nursing homes. ~~For example,~~In August 2021, CMS announced it was developing an emergency regulation requiring staff vaccinations within the nation’s more than 15,000 Medicare and Medicaid-participating nursing homes, and in September 2021, CMS further announced that the scope of the regulation will be expanded to include workers in hospitals, dialysis facilities, ambulatory surgical settings, and home health agencies. In addition, recent updates to the Nursing Home Care website and the Five Star Quality Rating System include revisions to the inspection process, adjustment of staffing rating thresholds, ~~and~~ the implementation of new quality ~~measures.~~measures and the inclusion of a staff turnover percentage (over a 12-month period). Additionally, the Biden Administration announced a focus on implementing minimum staffing requirements and increased inspections as part of the nursing home reforms announced in the 2022 State of the Union Address. Although the American Rescue Plan Act did not allocate specific funds to SNF or ~~assisted living facility~~ALF providers, approximately $200 million was allocated to quality improvement organizations to provide infection control and vaccination uptake support to ~~SNFs.~~

SNFs and $500 million has been allocated by the CDC to staffing, training and deployment of state-based nursing home and long-term care “strike teams” to assist facilities with known or suspected COVID-19 outbreaks.

On June 16, 2020, the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis announced the launch of an investigation into the COVID-19 response of nursing homes and the use of federal funds by nursing homes during the pandemic. The Select Subcommittee continued to be active throughout the remainder of 2020 and ~~the first quarter of~~ 2021. In March 2021, the Oversight Subcommittee of the House Ways and Means Committee held a hearing on examining the impact of private equity in the U.S. ~~health care~~healthcare system, including the impact on quality of care provided within the skilled nursing industry. The Biden Administration additionally announced in March 2022 a focus on reviewing private equity investment specifically in the skilled nursing sector. These ~~hearings~~initiatives, as well as additional calls for government review of the role of private equity in the U.S. healthcare industry, could result in legislation imposing additional requirements on our operators.

Reimbursement Generally:

~~Medicaid.~~Medicaid. The American Rescue Plan Act contains several provisions designed to increase coverage, expand benefits, and adjust federal financing for state Medicaid programs. For example, the American Rescue Plan Act increases the FMAP by 10 percentage points for state home and community-based services expenditures beginning April 1, 2021 through March 30, 2022 in an effort to assist seniors and people with disabilities to receive services safely in the community rather than in nursing homes and other congregate care settings. As a condition for receiving the FMAP increase, states must enhance, expand, or strengthen their Medicaid home and community-based services program during this period. These potential enhancements to Medicaid reimbursement funding may be offset in certain states by state budgetary concerns, the ability of the state to allocate matching funds and to comply with the new requirements, the potential for increased enrollment in Medicaid due to unemployment and declines in family incomes resulting from the COVID-19 pandemic, and the potential allocation of state Medicaid funds available for reimbursement away from SNFs in favor of home and community-based programs. These challenges may particularly impact us in states where we have a larger presence, including Florida and Texas. In Texas in particular, several of our operators have historically experienced lower operating margins on their SNFs, as compared to other states, as a result of lower Medicaid reimbursement rates and higher labor costs. Our operators in Texas may also be adversely impacted by the expected expiration of an add-on by the state to the daily reimbursement rate for Medicaid patients that will terminate upon expiration of the federally declared public health emergency. In Florida, while added support to our operators during the pandemic has generally been limited, approximately $100 million in additional FMAP funds for nursing homes was approved by the State in November 2021, with the funds to be distributed through increased Medicaid payment rates over a three-month period. In addition, on April 6, 2022, the State of Florida enacted staffing reforms for SNFs that may provide additional flexibility to our operators in meeting minimum staffing requirements by using supplemental staff. Since our operators’ profit margins on Medicaid patients are generally relatively low, more than modest reductions in Medicaid reimbursement or an increase in the percentage of Medicaid patients has in the past and may in the future adversely affect our operators’ results of operations and financial condition, which in turn could adversely impact us.

Table of Contents

~~Medicare.~~Medicare. On July 29, 2021, CMS issued a final rule regarding the government fiscal year 2022 Medicare payment rates and quality payment programs for SNFs, with aggregate Medicare Part A payments projected to increase by $410 million, or 1.2%, for fiscal year 2022 compared to fiscal year 2021. This estimated reimbursement increase is attributable to a 2.7% market basket increase factor less a 0.8 percentage point forecast error adjustment and a 0.7 percentage point productivity adjustment, and a $1.2 million decrease due to the proposed reduction to the SNF prospective payment system rates to account for the recent blood-clotting factors exclusion. The annual update is reduced by two percentage points for SNFs that fail to submit required quality data to CMS under the SNF Quality Reporting Program. CMS has indicated that these impact figures did not incorporate the SNF Value-Based Program reductions that are estimated to be $184.25 million in fiscal year 2022. While Medicare reimbursement rate setting, which takes effect annually each October, has historically included forecasted inflationary adjustments, the degree to which those forecasts accurately reflect current inflation rates remains uncertain. Additionally, it remains uncertain whether these adjustments will ultimately be offset by non-inflationary factors, including any adjustments related to the impact of various payment models, such as those described below.

Payments to providers continue to be increasingly tied to quality and efficiency. The Patient Driven Payment Model (“PDPM”), which was designed by CMS to improve the incentives to treat the needs of the whole patient, became effective October 1, 2019. CMS intended PDPM to be revenue-neutral to operators, with future Medicare reimbursement reductions possible if that was not the case. In April 2022, CMS put out a proposal for comment, which included an adjustment to obtain that revenue neutrality as early as the 2023 rate setting period; however, that proposal may change significantly prior to adoption. Prior to COVID-19, we believed that certain of our operators could realize efficiencies and cost savings from increased concurrent and group therapy under PDPM and some had reported early positive results. Given the ongoing impacts of COVID-19, many operators are and may continue to be restricted from pursuing concurrent and group therapy and unable to realize these benefits. Additionally, our operators continue to adapt to the reimbursement changes and other payment reforms resulting from the ~~value based~~value-based purchasing programs applicable to SNFs under the 2014 Protecting Access to Medicare ~~Act, which became effective on October 1, 2018.~~Act. These reimbursement changes have had and may, together with any further reimbursement changes to PDPM or value-based purchasing models, in the future have an adverse effect on the operations and financial condition of some operators and could adversely impact the ability of operators to meet their obligations to us.

~~Table~~On May 27, 2020, CMS added physical therapy, occupational therapy and speech-language pathology to the list of ~~Contents~~approved telehealth Providers for the Medicare Part B programs provided by a SNF as a part of the COVID-19 1135 waiver provisions. The COVID-19 1135 waiver provisions also allow for the facility to bill an originating site fee to CMS for telehealth services provided to Medicare Part B beneficiary residents of the facility when the services are provided by a physician from an alternate location, effective March 6, 2020 through the end of the public health emergency.

Other Regulation:

Department of Justice and Other Enforcement ~~Actions:~~

Actions. SNFs are under intense scrutiny for ensuring the quality of care being rendered to residents and appropriate billing practices conducted by the facility. The Department of Justice (“DOJ”) has historically used the False Claims Act to civilly pursue nursing homes that bill the federal government for services not rendered or care that is grossly substandard. For example, California prosecutors announced in March 2021 an investigation into a skilled nursing provider that is affiliated with one of our operators, alleging the chain manipulated the submission of staffing level data in order to improve its Five Star rating. In 2020, the DOJ launched a National Nursing Home Initiative to coordinate and enhance civil and criminal enforcement actions against nursing homes with grossly substandard deficiencies. Such enforcement activities are unpredictable and may develop over lengthy periods of time. An adverse resolution of any of these enforcement activities or investigations incurred by our operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on their reputation, business, results of operations and cash flows.

~~Critical Accounting Policies~~37

Table of Contents

2022 and ~~Estimates~~Recent Highlights

~~Our financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States,~~Investments

●

We acquired $108.5 million of real estate assets which included 30 facilities during the three months ended March 31, 2022. The initial cash yield (the initial annual contractual cash rent divided by the purchase price) on these asset acquisitions was between 8% and 9.5%.

●

We invested $18.2 million under our construction-in-progress and capital improvement programs during the three months ended March 31, 2022.

●

In the first quarter of 2022, we advanced $2.8 million under existing mortgage loans.

Dispositions and ~~a summary~~Impairments

●

In the first quarter of 2022, we sold 27 facilities for approximately $332.6 million in net cash proceeds, recognizing a net gain of approximately $113.6 million. One of these facilities was sold to the joint venture that was consolidated in the first quarter of 2022. The proceeds and gain primarily relate to the sale of 22 facilities that were previously leased and operated by Gulf Coast Health Care LLC (together with certain affiliates “Gulf Coast”) and were included in assets held for sale as of December 31, 2021. The net cash proceeds from the sale, including certain costs accrued as of the end of the first quarter, were $304.0 million, and we recognized a net gain of approximately $113.5 million.

●

In the first quarter of 2022, we recorded impairments on real estate properties of approximately $3.5 million on two facilities primarily as a result of reclassifying facilities to held for sale.

●

In March 2022, we reclassified seven facilities leased to Guardian Healthcare (“Guardian”) to held for sale in connection with the planned restructuring. We also entered into agreements to sell seven of these held for facilities in March and April 2022 for estimated gross proceeds of $36.5 million. As of March 31, 2022, the remaining 19 facilities in held for sale are all under sales agreements which provide for estimated proceeds of $83.1 million, subject to terms and conditions of such agreements.

Financing Activities

●

In January 2022, our Board authorized the repurchase of up to $500 million of our outstanding common stock, from time to time, through March 2025. During the first quarter of 2022, the Company repurchased 980,530 shares of our outstanding common stock at an average price of $27.84 per share. In April 2022, the Company repurchased 3.9 million of our outstanding common stock for $106.1 million.

Other Highlights

●

During the first quarter of 2022, we made $25.8 million of new other investment loans with a weighted average interest rate of 8.5%. Of the $25.8 million, $25 million relates to a term loan entered into with LaVie Care Centers, LLC (“LaVie,” f/k/a Consulate Health Care) that bears interest at a fixed rate of 8.5% per annum and matures on March 31, 2032. During the first quarter of 2022, we also advanced $72.2 million under existing other investment loans. Of the $72.2 million, $47.4 million related to a revolving working capital loan which also had repayments of $48.1 million during the first quarter of 2022.

●

In 2022, Omega was again included in the Bloomberg Gender-Equality Index (GEI) – one of only 418 companies worldwide, and fewer than 15 U.S. REITs, to be included in the 2022 index.

Table of ~~our significant accounting policies is included in Note 2 – Summary~~Contents

Collectibility Issues

●

During the first quarter of 2022, Agemo Holdings, LLC (“Agemo”) continued to not pay contractual rent and interest due under its lease and loan agreements. As Agemo was already placed on a cash basis of revenue recognition during the third quarter of 2020, no revenue was recorded during the three months ended March 31, 2022. In the first quarter of 2022, we recorded a provision for credit losses of $4.7 million related to the $25.0 million secured working capital loan as a result of a reduction in the fair value of the underlying collateral assets supporting the current carrying values.

●

During the first quarter of 2022, Guardian Healthcare (“Guardian”) continued to not make contractual rent and interest payments under its lease and loan agreements. As Guardian was already placed on a cash basis of revenue recognition in the fourth quarter of 2021, no revenue was recorded during the three months ended March 31, 2022. We recorded a $5.1 million recovery for credit losses in the first quarter of 2022 on the Guardian mortgage loan in connection with a $21.7 million principal repayment on the loan from the proceeds of the sale of three of the mortgage facilities. We also transitioned or sold 10 facilities that were previously leased to Guardian in the first quarter of 2022 in connection with on-going restructuring activities. In April 2022, we agreed to a formal restructuring agreement, master lease amendment and mortgage loan amendment with Guardian. As part of the restructuring agreement and amendments, Omega and Guardian agreed to, among other things, allow for the deferral of up to $18.0 million of aggregate rent and interest, effective retrospectively, with repayment required after September 30, 2024 and to reduce the combined rent and mortgage interest to an aggregate $24.0 million following the completion of the sale of those seven facilities. Guardian made a partial payment in April 2022 after exhausting the maximum allowable deferral of $18.0 million under the restructuring agreement.

●

From January through March 2022, an operator, representing 3.8% and 3.3%, respectively, of total revenue (excluded the impact of write-offs) for the three months ended March 31, 2022 and 2021, did not pay its contractual amounts due under its lease agreement. In March 2022, the lease with this operator was amended to allow for a short-term rent deferral for January through March 2022. This operator paid the contractual amount due under its lease agreement in April 2022. Omega holds a $1.0 million letter of credit and a $150 thousand security deposit from this operator. The operator remains current on its loan obligations, which are secured by a first lien on the accounts receivable of the operator.

●

In March 2022, another operator representing 2.3% and 2.1%, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021, did not pay its contractual amounts due under its lease agreement. In April 2022, the lease with this operator was amended to allow the operator to apply its $2.0 million security deposit in order to pay March 2022 rent and to allow for a short-term rent deferral for April 2022, with regular rent payments required to resume in May 2022.

●

During the first quarter of 2022, we allowed three other operators, each representing 2.5% and 2.7%, respectively, of total revenue (excluding the impact of write-offs) for the three months ended March 31, 2022 and 2021 to apply $1.3 million of their security deposits to pay rent in order to accommodate short term liquidity issues, with regular rent payments required to resume shortly thereafter. As of April 30, 2022, all of these operators are current on their lease obligations. These operators are required to begin replenishing their security deposits in 2023.

●

During the first quarter of 2022, we wrote off straight-line rent receivable balances of $3.2 million through rental income as a result of transitioning six facilities to another existing operator.

Dividends

●

On April 21, 2022, the Board of Directors declared a cash dividend for the quarter ended March 31, 2022 of $0.67 per share.

Table of ~~Significant Accounting Policies to our Annual Report on~~ ~~Form 10-K~~Contents for the year ended December 31, 2020. Our preparation of the financial statements requires us to make estimates and assumptions about future events that affect the amounts reported in our financial statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the consolidated financial statements. We have described our most critical accounting policies in our 2020 Annual Report on ~~Form 10-K~~ ~~for the year ended December 31, 2020, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

There have been no material changes to our critical accounting policies or estimates since December 31, 2020. See also Note 2 – Summary of Significant Accounting Policies to our Annual Report on ~~Form 10-K~~ ~~for the year ended December 31, 2020.~~

Results of Operations

The following is our discussion of the consolidated results of operations, financial position and liquidity and capital resources, which should be read in conjunction with our unaudited consolidated financial statements and accompanying notes.

Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021

Revenues

Our revenues for the three months ended March 31, ~~2021~~2022 totaled ~~$273.8~~$249.3 million, ~~an increase~~a decrease of approximately ~~$20.7~~$24.5 million over the same period in ~~2020. The $20.7~~2021. Included below is a description of the material changes in revenues for three months ended March 31, 2022 compared to the same period in 2021:

●

Rental income was $216.9 million, a decrease of $20.9 million over the same period in 2021. The decrease was primarily the result of (i) a $17.4 million decrease relating to two cash basis operators, Agemo and Guardian, from which we received no rental payments and recorded no revenue for in the first quarter of 2022; (ii) a $7.3 million decrease as a result of recognizing no rental income associated with the 24 facilities previously leased to Gulf Coast in the first quarter of 2022, as 23 of the facilities were temporarily transitioned to another operator in December 2021 that was not required to pay contractual rent during the transition period, as a part of the chapter 11 bankruptcy process; and (iii) a $4.6 million decrease resulting from the acceleration of certain in-place lease liabilities due to facility transitions. The overall decrease in rental income was partially offset by (i) a $6.4 million increase due to additional rental income in the first quarter of 2022 from acquisitions and construction in progress facilities being placed in service and (ii) a net increase of $1.8 million due to lease extensions, facility transitions and sales.

●

Mortgage interest income was $20.5 million, a decrease of $3.1 million over the same period in 2021. The decrease was primarily the result of recognizing no interest income in the first quarter of 2022 on the Guardian mortgage loan with $82.0 million of principal outstanding as of March 31, 2022. The loan was placed on non-accrual status in the fourth quarter of 2021, with all payments received (none in the first quarter of 2022) applied directly to principal under the cost recovery method.

Expenses

Our expenses for the three months ended March 31, 2022 totaled $167.7 million, ~~increase was primarily~~a decrease of approximately $23.4 million over the ~~result~~same period in 2021. Included below is a description of ~~(i) a $26.8 million increase~~the material changes in ~~rental income resulting from facility acquisitions, facilities placed~~expenses for three months ended March 31, 2022 compared to the same period in service, and facility transitions, (ii) a $4.9 million increase in rental income resulting from the acceleration of certain in-place lease liabilities, and (iii) a $1.0 million increase in other investment income primarily related to new mortgages or notes and additional funding to existing operators. These increases were partially offset by (i) a $8.6 million decrease in rental income resulting from placing operators on cash basis of revenue recognition and (ii) a $3.6 million decrease in rental income resulting from facility sales and facility transitions.2021:

●

Our depreciation and amortization expense was $82.8 million, a $2.1 million decrease over the same period in 2021. The decrease primarily relates to facility sales and facilities reclassified to assets held for sale, such as the 22 Gulf Coast facilities that were sold in the first quarter of 2022, partially offset by facility acquisitions and capital additions.

●

Our impairment on real estate properties was $3.5 million, a decrease of $25.2 million over the same period in 2021. The 2022 impairments were recognized in connection with reclassifying two facilities to held for sale in the first quarter to reduce their net book value to the estimated fair value less costs to sell. The 2021 impairments related to four facilities, three of which were recognized in connection with reclassifying the facilities to assets held for sale.

3940

Table of Contents

~~Expenses~~

Expenses for the three months ended March 31, 2021 totaled $191.2 million, an increase of approximately $28.8 million over the same period in 2020. The $28.8 million increase was primarily due to: (i) a $25.1 million increase in impairment on real estate properties related to four facilities in the first quarter of 2021 (compared to three facilities during the same period in 2020) to reduce their book values to their estimated fair value less costs to sell or fair value, (ii) a $3.1 million increase in interest expense primarily resulting from the issuance during the fourth quarter of 2020 of the $700 million of Senior Notes due 2031 and the issuance during the first quarter of 2021 of the $700 million of Senior Notes due 2033, partially offset by the retirement of term loans in the fourth quarter of 2020, (iii) a $2.2 million increase in depreciation expense primarily resulting from facility acquisitions and capital additions, offset by facility sales and facilities reclassified to assets held for sale, and (iv) a $2.0 million increase in acquisition, merger and transition related costs primarily resulting from the Daybreak transition. These increases were partially offset by (i) a $1.0 million recovery for credit losses primarily resulting from decreases in average time to maturity, decreases in loss rates, and decreases in loan balances compared to a $1.5 million provision for credit losses during the same period in 2020 and (ii) a $0.9 million decrease in real estate taxes primarily related to facility sales and transitions.

●

Our provision for credit losses was $1.8 million, a $2.8 million increase over the same period in 2021. The increase was primarily as a result of additional reserves taken against a loan outstanding to Agemo (see Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Collectibility Issues), increases in loan balances and increases in loss rates in the first quarter of 2022 compared to the same period in 2021 partially offset by recoveries for cash collections and paydowns received on the Guardian mortgage (see Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Collectibility Issues).

Other Income (Expense)

For the three months ended March 31, ~~2021,~~2022, total other income was ~~$70.9~~$113.2 million, an increase of approximately ~~$69.9~~$42.3 million over the same period in ~~2020.~~2021. The ~~increase~~decrease was mainly due toto: (i) a ~~$98.5~~$29.7 million ~~increase in gain~~loss on ~~assets sold related to the sale of 24 facilities~~debt extinguishment in the first quarter of 2021 ~~compared to the sale of six facilities during the same period in 2020 offset by a $29.7 million increase in loss on debt extinguishment~~ primarily related to fees, premiums and expenses related to the purchase of $350 million of the 4.375% Senior Notes due 2023 during the first quarter of 2021 and (ii) $13.3 million increase in gain on assets sold related to the sale of 27 facilities in the first quarter of 2022 compared to the sale of 24 facilities during the same period in 2021.

National Association of Real Estate Investment Trusts Funds From Operations

~~Our~~We use funds from operations (“Nareit FFO”) ~~for~~, a non-GAAP financial measure, as one of several criteria to measure the ~~three months ended March 31, 2021 was $170.2 million compared to $181.0 million for the same period in 2020.~~

operating performance of our business. We calculate and report Nareit FFO in accordance with the definition of Funds from Operations and interpretive guidelines issued by the National Association of Real Estate Investment Trusts (“Nareit”)~~, and, consequently,~~. Nareit FFO is defined as net income (computed in accordance with GAAP), adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization and impairment on real estate assets, and after adjustments for unconsolidated partnerships and joint ventures and changes in the fair value of warrants. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations on the same basis. Revenue recognized based on the application of security deposits and letters of credit or based on the ability to offset against other financial instruments is included within Nareit FFO. We believe that Nareit FFO is an important supplemental measure of our operating performance. ~~Because the historical cost accounting convention used for~~As real estate assets ~~requires depreciation~~ (except on land), are depreciated under GAAP, such accounting presentation implies that the value of real estate assets diminishes predictably over time, while real estate values instead have historically risen or fallen with market conditions. Nareit FFO was designed by the real estate industry to address this issue. Nareit FFO herein is not necessarily comparable to Nareit FFO of other REITs that do not use the same definition or implementation guidelines or interpret the standards differently from us.

~~Table of Contents~~

~~Nareit FFO is a non-GAAP financial measure. We use Nareit FFO as one of several criteria to measure the operating performance of our business.~~ We further believe that by excluding the effect of depreciation, amortization, impairment on real estate assets and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, Nareit FFO can facilitate comparisons of operating performance between periods and between other REITs. We offer this measure to assist the users of our financial statements in evaluating our financial performance under GAAP, and Nareit FFO should not be considered a measure of liquidity, an alternative to net income or an indicator of any other performance measure determined in accordance with GAAP. Investors and potential investors in our securities should not rely on this measure as a substitute for any GAAP measure, including net income.

Table of Contents

The following table presents our Nareit FFO results for the three months ended March 31, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2021		2020		2022		2021

	(in thousands)				(in thousands)
Net income	$	164,366	$	92,279	$	195,156	$	164,366
Deduct gain from real estate dispositions		(100,342)		(1,838)		(113,637)		(100,342)
Deduct gain from real estate dispositions - unconsolidated joint ventures		(14,924)		(117)		—		(14,924)
		49,100		90,324		81,519		49,100
Elimination of non-cash items included in net income:
Depreciation and amortization		84,849		82,643		82,752		84,849
Depreciation – unconsolidated joint ventures		3,361		3,632		2,896		3,361
Add back impairments on real estate properties		28,689		3,639		3,511		28,689
Add back impairments on real estate properties - unconsolidated joint ventures		4,178		—		—		4,178
Add back unrealized loss on warrants		72		775		—		72
Nareit FFO	$	170,249	$	181,013	$	170,678	$	170,249

~~Portfolio and Recent Developments~~

~~The following table summarizes the significant asset acquisitions that occurred during the first three months of 2021:~~

~~(1)~~

~~The initial annual cash yield reflects the initial cash rent divided by the purchase price.~~

~~(2)~~

~~On January 20, 2021, we acquired 24 facilities from Healthpeak Properties, Inc. The acquisition involved the assumption of an in-place master lease with Brookdale Senior Living Inc.~~

~~Other Recent Developments~~

On April 30, 2021, the Company closed a new four-year $1.45 billion senior unsecured credit facility (“Credit Facility”). The Credit Facility replaced a $1.25 billion senior unsecured credit facility that was scheduled to mature on May 25, 2021.

On April 30, 2021, the Company closed a new four-year $50 million senior unsecured term loan facility (“OP Term Loan Facility”) to its operating partnership subsidiary. The OP Term Loan Facility replaced a $50 million senior unsecured term loan facility that was scheduled to mature on May 25, 2022.

~~Table of Contents~~

~~Asset Held for Sale~~

~~As of March 31, 2021, we have 6 facilities, totaling $7.9 million classified as assets held for sale. We expect to sell these facilities over the next twelve months.~~

~~Asset Sales, Impairments, Contractual Receivables and Other Receivables and Lease Inducements~~

~~Asset Sales~~

~~During the first quarter of 2021, we sold 24 facilities subject to operating leases for approximately $188.3 million in net cash proceeds, recognizing a net gain of approximately $100.3 million.~~

~~Impairments~~

During the first quarter of 2021, we recorded impairments on real estate properties of approximately $28.7 million on four facilities (three were subsequently reclassified to assets held for sale). Our recorded impairments were primarily the result of decisions to exit certain non-strategic facilities and/or operators. We reduced the net book value of the impaired facilities to their estimated fair values or, with respect to the facilities reclassified to held for sale, to their estimated fair values less costs to sell. To estimate the fair value of the facilities, we utilized a market approach which considered binding sale agreements (a Level 1 input) and/or non-binding offers from unrelated third parties and/or broker quotes (a Level 3 input).

~~Contractual Receivables, Other Receivables and Lease Inducements~~

~~A summary of our net receivables by type is as follows:~~

During the first quarter of 2021, we wrote-off approximately $2.7 million of straight-line rent receivables to rental income as a result of transitioning one facility and placing one operator on a cash basis due to changes in our evaluation of the collectibility of future rent payments due under the lease agreement.

~~Other Investments~~

~~Genesis~~

On March 6, 2018, we amended certain terms of our $48.0 million secured term loan with Genesis. The $48.0 million term loan bears interest at a fixed rate of 14% per annum, of which 9% per annum is paid-in-kind and was initially scheduled to mature on July 29, 2020. The maturity date of this loan was extended during the first quarter of 2021 to January 1, 2024. This term loan (and the $16.0 million term loan discussed below) is secured by a first priority lien on and security interest in certain collateral of Genesis. As of March 31, 2021, approximately $66.7 million is outstanding on this term loan.

~~Table of Contents~~

~~Daybreak~~

During the first quarter of 2021, we transitioned 14 Daybreak facilities to existing operators and sold two Daybreak facilities. As of March 31, 2021, we had two remaining Daybreak facilities with a net book value of approximately $0.7 million, which we expect to sell during the second quarter of 2021. The total annual rent or rent equivalents achieved through transitioning the Daybreak portfolio equal $16.6 million. On April 6, 2021, we terminated the Daybreak master lease and exited that relationship.

~~We continue to closely monitor the performance of all of our operators, as well as industry trends and developments generally.~~

Liquidity and Capital Resources

Sources and Uses

Our primary sources of cash include rental income and interest receipts, existing availability under our revolving credit facility, proceeds from our DRSPP and the $1.0 billion 2021 At-The-Market Offering Program (“2021 ATM Program”), facility sales, and proceeds from mortgage and other investment payoffs. We anticipate that these sources will be adequate to fund our cash flow needs through the next twelve months, which include common stock dividends, debt service payments (including principal and interest), real estate investments (including facility acquisitions, capital improvement programs and other capital expenditures), mortgage and other investment loan advances and normal recurring G&A expenses (primarily consisting of employee payroll and benefits and expenses relating to third parties for legal, consulting and audit services).

Capital Structure

At March 31, ~~2021,~~2022, we had total assets of ~~$9.8~~$10.0 billion, total equity of $4.1 billion and total debt of ~~$5.5~~$5.7 billion in our consolidated financial statements, with such debt representing approximately ~~56.9%~~57.9% of total capitalization.

~~Financing Activities and Borrowing Arrangements~~

~~$700 Million 3.250% Senior Notes due 2033~~Debt

InAt March ~~2021, we issued $700 million aggregate principal amount~~31, 2022, the weighted-average annual interest rate of our ~~3.250% Senior Notes due 2033 (the “2033 Senior Notes”)~~debt was 3.96%. ~~The 2033 Senior Notes mature on April 15, 2033. The 2033 Senior Notes~~Additionally, as of March 31, 2022, 92% of our debt with outstanding principal balances has fixed interest payments.

Two of our interest rate swaps that were sold at an issue price of 99.304% of their face value before the underwriters’ discount. We used the proceeds from this offering to pay down outstanding borrowings on the Revolving Line of Credit, repay the Sterling term loan, and fund the tender offer to purchase $350 million of the 4.375% Senior Notes due 2023 and the payment of accrued interest and related fees, premiums and expenses. In connection with this transaction, we recorded approximately $29.7 million in related fees, premiums, and expenses which were recorded as Loss on debt extinguishment in our Consolidated Statement of Operations.

~~$400 Million Forward Starting Swaps~~

~~On March 27, 2020, we~~ entered into ~~five forward starting swaps totaling $400 million. We designated the forward starting swaps as cash flow hedges~~in May 2019 with aggregate notional amounts of $50.0 million matured on February 10, 2022. These interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt, initially expected to occur within the next five years. The swaps are effective on August 1, 2023 and expire on August 1, 2033 andswap contracts were issued at a fixed rate of approximately 0.8675%. In March 2021, in conjunction with the issuance of $700 million aggregate principal amount of our 3.25% Senior Notes due 2033, we discontinued hedge accounting for these five forward starting swaps. Amounts reported in Accumulated Other Comprehensive Income related to these discontinued cash flow hedging relationships will be reclassified to interest expense over a ten year term. Simultaneously, we re-designated these swaps in new cash flow hedging relationships of interest rate risk associated with interest payments on another forecasted issuance of long-term debt. We are hedgingdesignated as hedges against our exposure to ~~the variability~~changes in ~~future~~interest payment cash ~~flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions related to~~flow fluctuations in the ~~payment of~~ variable interest ~~on existing financial instruments).~~

~~Table of Contents~~

~~£174 Million Foreign Exchange Forward Starting Swaps~~

From the issuance date of our GBP borrowings through the prepayment date in March 2021, we used a nonderivative, GBP-denominated term loan and line of credit totaling £174 million to hedge a portion of our net investments in foreign operations. During March 2021 and concurrent with the settlement of our GBP-denominated term loan and repayment of our GBP denominated borrowings under our line of credit, we entered into four foreign currency forwards that mature on March 8, 2024 to hedge a portion of our net investments in foreign operations, effectively replacing the terminated net investment hedge. For these derivatives that are designated and qualify as net investment hedges, the gain or lossrates on the ~~derivative is reported~~OP term loan.

As of March 31, 2022, we had long-term credit ratings of Baa3 from Moody’s and BBB- from S&P Global and Fitch. Credit ratings impact our ability to access capital and directly impact our cost of capital as well. For example, our revolving credit facility accrues interest and fees at a rate per annum equal to LIBOR plus a margin that depends upon our credit rating. A downgrade in ~~Accumulated Other Comprehensive Income as part of~~credit ratings by Moody’s and S&P Global may have a negative impact on the ~~cumulative translation adjustment. Amounts are reclassified out of Accumulated Other Comprehensive Income into earnings when the hedged net investment is either sold or substantially liquidated.~~interest rates and fees for our revolving credit facility.

Certain of our other secured and unsecured borrowings are subject to customary affirmative and negative covenants, including financial covenants. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, we were in compliance with all affirmative and negative covenants, including financial covenants, for our secured and unsecured borrowings.

Table of Contents

Supplemental Guarantor Information

Parent has issued approximately $4.9 billion aggregate principal of senior notes outstanding at March 31, ~~2021~~2022 that were registered under the Securities Act of 1933, as amended. The senior notes are guaranteed by Omega OP.

The SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities, such as our senior notes. As a result of these amendments, registrants are permitted to provide certain alternative financial and non-financial disclosures, to the extent material, in lieu of separate financial statements for subsidiary issuers and guarantors of registered debt securities. Accordingly, separate consolidated financial statements of Omega OP have not been presented. Parent and Omega OP, on a combined basis, have no material assets, liabilities or operations other than financing activities (including borrowings under the outstanding senior ~~unsecured~~notes, the revolving ~~and term loan~~ credit facility ~~Omega~~and the OP term ~~loan and the outstanding senior notes)~~loan) and their investments in non-guarantor subsidiaries.

Omega OP is currently the sole guarantor of our senior notes. The guarantees by Omega OP of our senior notes are full and unconditional and joint and several with respect to the payment of the principal and premium and interest on our senior notes. The guarantees of Omega OP are senior unsecured obligations of Omega OP that rank equal with all existing and future senior debt of Omega OP and are senior to all subordinated debt. However, the guarantees are effectively subordinated to any secured debt of Omega OP. As of March 31, ~~2021,~~2022, there were no significant restrictions on the ability of Omega OP to make distributions to Omega.

~~$500 Million~~ Equity ~~Shelf Program~~

At March 31, 2022, we had approximately 238.2 million shares of common stock outstanding, and our shares had a market value of $7.4 billion. The ~~table below presents information regarding the shares issued~~following is a summary of activity under ~~the Equity Shelf Program for~~our equity programs during the three months ended March 31, ~~2020 and 2021:~~2022:

Shares issued
Average Price
Net Proceeds
Three Months Ended
(in millions)
Per Share
(in millions)
March 31, 2020
0.1
$
37.58
$
1.8
March 31, 2021
1.6

37.16

60.1

●

~~Table of Contents~~

~~Dividend Reinvestment and Common Stock Purchase Plan~~

~~The table below presents information regarding the shares issued under the Dividend Reinvestment and Common Stock Purchase Plan for the three months ended March 31, 2020 and 2021:~~

Shares issued
Gross Proceeds
Three Months Ended
(in millions)
(in millions)
March 31, 2020
0.1
$
3.7
March 31, 2021
0.4

15.5

~~Commitments~~

We have committed to fund the construction of new leased and mortgaged facilities, capital improvements and other commitments. We expect the funding of these commitments to be completed over the next several years. Our remaining commitments at March 31, 2021, are outlined in the table below (in thousands):

Total commitments

$
596,615

Amounts funded to date⁽¹⁾

(454,837)

Remaining commitments ⁽²⁾

$
141,778

~~(1)~~

●

~~Includes finance costs.~~We did not issue any shares of common stock under our 2021 ATM Program during the three months ended March 31, 2022.We did not utilize the forward provisions under the 2021 ATM Program during the three months ended March 31, 2022. We have $929.9 million of sales remaining under the 2021 ATM Program as of March 31, 2022.

~~(2)~~

●

~~This amount excludes our remaining commitments to fund~~We issued 79.9 thousand shares of common stock under ~~our other investments~~DRSPP during the three months ended March 31, 2022. Aggregate gross proceeds from these sales were $2.3 million during the first quarter of ~~approximately $81.0 million.~~ 2022.

Dividends

As a REIT, we are required to distribute dividends (other than capital gain dividends) to our stockholders in an amount at least equal to (A) the sum of (i) 90% of our “REIT taxable income” (computed without regard to the dividends paid deduction and our net capital gain), and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. In addition, if we dispose of any built-in gain asset during a recognition period, we will be required to distribute at least 90% of the built-in gain (after tax), if any, recognized on the disposition of such asset. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year and paid on or before the first regular dividend payment after such declaration. In addition, such distributions are required to be made pro rata, with no preference to any share of stock as compared with other shares of the same class, and with no preference to one class of stock as compared with another class except to the extent that such class is entitled to such a preference. To the extent that we do not distribute all of our net capital gain or do distribute at least 90%, but less than 100% of our “REIT taxable income” as adjusted, we will be subject to tax thereon at regular ordinary and capital gain corporate tax rates.

Table of Contents

For the three months ended March 31, ~~2021,~~2022, we paid dividends of approximately ~~$158.3~~$160.6 million to our common stockholders. On February ~~16, 2021,~~15, 2022, we paid dividends of $0.67 per outstanding common share to the common stockholders of record as of the close of business on February ~~8, 2021.~~ 7, 2022.

~~Liquidity~~Material Cash Requirements

~~We believe~~During the three months ended March 31, 2022, there were no significant changes to our ~~liquidity~~material cash requirements from those disclosed in the section “Management’s Discussion and ~~various sources~~Analysis of ~~available~~Financial Condition and Results of Operations” in our 2021 Annual Report.

As of March 31, 2022, we had $220.9 million of commitments to fund the construction of new leased and mortgaged facilities, capital ~~including cash from operations, our existing availability under our credit facilities, existing equity sales programs, facility sales and expected proceeds from mortgage~~improvements and other commitments. Additionally, we have commitments to fund $41.2 million of advancements under existing other investment ~~payoffs~~loans. These commitments are ~~adequate~~expected to ~~finance operations, meet recurring debt service requirements and fund future investments through~~be funded over the next ~~twelve months.~~several years and are dependent upon the operators’ election to use the commitments.

45Other Arrangements

~~Table of Contents~~

We regularly review our liquidity needs, the adequacy of cash flow from operations, and other expected liquidity sources to meet these needs. We believe our principal short-term liquidity needs are to fund:

●

~~normal recurring expenses;~~

●

~~debt service payments;~~

●

~~capital improvement programs;~~

●

~~common stock dividends; and~~

●

~~growth through acquisitions of additional properties.~~

The primary source of liquidity is our cash flows from operations. Operating cash flows have historically been determined by: (i) the number of facilities we lease or have mortgages on; (ii) rental and mortgage rates; (iii) our debt service obligations; (iv) general and administrative expenses and (v) our operators’ ability to pay amounts owed. The timing, source and amount of cash flows provided by or usedown interests in ~~financing activities and~~certain unconsolidated joint ventures as described in ~~investing activities are sensitive~~Note 9 to the ~~capital markets environment, especially~~Consolidated Financial Statements – Investments in Joint Ventures. Our risk of loss is generally limited to ~~changes in interest rates. Changes~~our investment in the ~~capital markets environment may impact~~joint venture and any outstanding loans receivable. We use derivative instruments to hedge interest rate and foreign currency exchange rate exposure as discussed in Note 15 – Derivatives and Hedging in our Annual Report on Form 10-K for the ~~availability of cost-effective capital and affect our plans for acquisition and disposition activity.~~year ended December 31, 2021.

Cash Flow Summary

Cash, cash equivalents and restricted cash totaled ~~$55.9~~$494.8 million as of March 31, ~~2021, a decrease~~2022, an increase of ~~$111.7~~$470.4 million as compared to the balance at December 31, ~~2020.~~2021. The following is a discussion of changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows.

Operating Activities – Operating activities generated ~~$176.0~~$132.2 million of net cash flow for the three months ended March 31, ~~2021,~~2022, as compared to ~~$139.1~~$176.0 million for the same period in ~~2020, an increase~~2021, a decrease of ~~$36.9~~$43.8 million, which is primarily driven by a decrease of $30.2 million of net income, adjusted for non-cash items, primarily due to ~~facility acquisitions and transitions, investments in mortgages and other investments, and~~ a year over year reduction in ~~lease inducements~~rental income and mortgage revenue related to three operators, as discussed in our material changes analysis under Results of Operations above. A $13.6 million change in the net movements of the operating assets and liabilities, primarily driven by an increase in receivables, also contributed to the overall decrease in cash provided ~~to our operators.~~ by operating activities.

Investing Activities – Net cash flow from investing activities was an ~~outflow~~inflow of ~~$396.3~~$177.3 million for the three months ended March 31, ~~2021,~~2022, as compared to an outflow of ~~$55.2~~$396.3 million for the same period in ~~2020.~~2021. The ~~$341.1~~$573.6 million change in cash flow from investing activities related primarily to (i) a ~~$575.4~~$481.3 million ~~increase~~decrease in real estate acquisitions ~~offset~~driven by ~~(i)~~the acquisition of 24 senior living facilities from Healthpeak Properties, Inc. for $511.3 million in the first quarter of 2021, (ii) a ~~$170.2~~$144.3 million increase in proceeds from the sales of real estate investments largely driven by the sale of 22 facilities previously leased to Gulf Coast for net proceeds of $310.3 million in the first quarter of 2022, (iii) a $23.8 million increase in mortgage collections, net of placements driven by a $21.7 million partial principal paydown on the Guardian mortgage loan in the first quarter of 2022 and (iv) a $10.4 million decrease in investments in unconsolidated joint ventures driven by our $10.3 million investment in Second Spring II LLC in the first quarter of 2021, offset by (i) a $68.3 million increase in new other investments, net of other investments proceeds driven by the new $25.0 million term loan to LaVie and additional draws on existing loans, (ii) a ~~$35.0~~$7.4 million ~~change~~decrease in ~~other investments – net,~~distributions from unconsolidated joint venture in excess of earnings primarily related to the Second Spring Healthcare Investments joint venture due to significant facility sales in the first quarter of 2021, (iii) a ~~$26.7~~$4.4 million ~~decrease~~increase in investment in construction in progress and capital expenditures, (iv) a $3.0 million decrease in receipts from insurance proceeds and ~~(iv)~~(v) a $2.5 million ~~refund of an~~decrease in acquisition related ~~deposit in the first quarter~~deposits.

Table of ~~2021.~~Contents

Financing Activities – Net cash flow from financing activities was an inflow of ~~$108.6~~$161.2 million for the three months ended March 31, ~~2021,~~2022, as compared to an inflow of ~~$235.2~~$108.6 million for the same period in ~~2020.~~2021. The ~~$126.6~~$52.6 million change in cash ~~provided by~~flow from financing activities was primarily related to (i) ~~a $364.0~~$115.9 million ~~change~~increase in proceeds from other long-term borrowings, net of repayments as we had increased borrowings on our revolving credit facility ~~borrowings – net,~~in connection with funding acquisitions and loans, (ii) a $33.8 million ~~increase~~decrease in payment of financing related costs due to fees and premiums paid in the first quarter of 2021 related to the early redemption of $350 million of principal of the 4.375% senior notes due 2023 and (iii) a ~~$3.7~~$4.6 million decrease in distributions to Omega OP Unit holders. The overall increase in ~~dividends paid,~~financing inflows was partially offset by (i) a ~~$206.8~~$72.0 million ~~change in other long-term borrowings – net, (ii) a $58.3 million increase~~decrease in cash proceeds from the issuance of common stock in ~~2021,~~2022 due to decreased issuances under our DRSPP and our ATM Programs, as compared to the same period in ~~2020~~2021, (ii) $27.3 million of repurchases of shares of common stock in the first quarter of 2022 and (iii) a ~~$11.7~~$2.3 million increase in ~~net proceeds~~dividends paid.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) in the U.S. Our preparation of the financial statements requires us to make estimates and assumptions about future events that affect the amounts reported in our financial statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from ~~our dividend reinvestment plan in 2021, as compared~~those estimates, and such differences may be material to the ~~same period~~consolidated financial statements. We have described our accounting policies in ~~2020.~~Note 2 – Summary of Significant Accounting Policies to our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to our critical accounting policies or estimates since December 31, 2021.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

During the quarter ended March 31, ~~2021,~~2022, there were no material changes in our primary market risk exposures or how those exposures are managed from the information disclosed under Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

~~Table of Contents~~

Item 4 – Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of our Form 10-Q as of and for the quarter ended March 31, ~~2021,~~2022, management evaluated the effectiveness of the design and operation of the disclosure controls and procedures of the Company as of March 31, ~~2021.~~2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures of the Company were effective at a reasonable assurance level as of March 31, ~~2021.~~2022.

Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended March 31, ~~2021~~2022 identified in connection with the evaluation of our disclosure controls and procedures described above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

See Note 1618 – Commitments and Contingencies into the Consolidated Financial Statements - Part I, Item 1 hereto, which is hereby incorporated by reference in response to this ~~item.~~Item.

Item 1A – Risk Factors

In addition to the risk factors previously disclosed in Item 1A contained in Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, investors should carefully consider the following additional risk factor, which should be read in conjunction with the risk factors set forth in such Form 10-K and Form 10-Q and the other information contained in this report and our other filings with the Securities and Exchange Commission.

The COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations, cash flows and financial condition.

The COVID-19 pandemic has continued to significantly and adversely ~~impacted,~~impact, and may continue to so impact SNFs and ~~long term~~long-term care providers ~~generally, with~~due to higher rates of virus transmission and fatality among the elderly and frail populations these facilities serve. As a result, many of our operators have been, and may continue to be, significantly impacted by the pandemic. See Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview.

Continued uncertainty exists relating to our other operators’ ability to meet their payments obligations generally or meet their payment obligations to us, including due to continued uncertainty regarding the availability of sufficient government support, the persistence of staffing shortages that have impacted, and may continue to impact, our operators’ occupancy levels and profitability, the impact of governmental vaccine mandates for staff on ongoing staffing shortages, and other factors that may impact virus transmission in our facilities, including the impact of genetic mutations of the virus into new variants, as well as the commencement in April 2021 for many of our operators of the repayment of accelerated payments of Medicare funds that were previously received as Advanced Medicare payments in 2020, and the commencement in December 2021 of repayment of deferred FICA obligations. To the extent our operators are unable to meet their payment obligations, we may record additional impairment charges with respect to straight-line rent receivables associated with any such operator or with respect to outstanding loans and our financial condition could be adversely impacted. See “Our assets, including our real estate and loans, are subject to impairment charges, and our valuation and reserve estimates are based on assumptions and may be subject to adjustment” in Item 1A contained in Part I of our Annual Report on Form 10-K for the year ended December 31, 2021.

Our operators have been, and continue to be, impacted by the pandemic in numerous ways. In addition to experiencing outbreaks of positive cases and deaths of residents and employees during the pandemic, our operators have been required to, and continue to, adapt their operations rapidly throughout the pandemic to manage the spread of the COVID-19 virus as well as the implementation of new treatments and vaccines, and to implement new requirements relating to infection control, staffing levels, PPE, quality of care, visitation protocols, ~~staffing levels,~~ and reporting, among other regulations, throughout the ~~pandemic. It~~pandemic while facing staffing shortages that have accelerated during the pandemic and that may impede the delivery of care. Significant uncertainty remains regarding the impact of vaccine mandates for SNF and healthcare workers on ongoing staffing shortages in our facilities, which have caused some operators to limit admissions. In addition, it remains uncertain ~~when and~~ to what extent vaccination programs for COVID-19, which have been implemented in ~~many~~most of our facilities, will continue to mitigate the effects of COVID-19 in our facilities, or how effective existing vaccines and booster doses will be against the variants of the COVID-19 virus; the impact of these programs will depend in part on the continued speed, distribution, efficacy and delivery of the vaccine and booster doses in our facilities, compliance with staff vaccination requirements as well as participation levels in vaccination programs among the residents and employees of our operators. Our operators have ~~reported~~continued to report considerable variation in participation levels among both employees and residents, which we believe may change over time aswith additional vaccination ~~clinics are held.~~education efforts for residents and implementation of vaccine mandates for staff.

4746

Table of Contents

In addition to the risks associated with managing the spread of the virus, delivery of the vaccines and care of their patients and residents, many of our operators reported incurring, and may continue to incur, significant cost increases as a result of the COVID-19 pandemic, with dramatic increases for facilities with positive cases. We believe these increases primarily stem from elevated labor costs, in part as a result of staffing shortages, including the increased use of overtime and bonus pay and reliance on agency staffing, as well as a significant increase in both the cost and usage of PPE, testing equipment and processes and supplies, as well as implementation of new infection control protocols and delivery of the vaccine. In addition, many of our operators have ~~reported experiencing~~experienced declines in occupancy levels as a result of the pandemic. We believe these declines may be in part due to staffing shortages, which in some cases have required operators to limit admissions, as well as COVID-19-induced fatalities at the facilities, the delay of SNF placement and/or utilization of alternative care settings for those with lower level of care needs, the suspension or postponement of elective hospital procedures, fewer discharges from hospitals to SNFs and higher hospital readmittances from SNFs. We continue to monitor the impact of occupancy ~~declines~~levels at many of our operators, and it remains uncertain whether and when demand and occupancy levels will return to pre-COVID-19 levels.

~~While substantial government support, primarily through the federal CARES Act in the U.S. and distribution of PPE and testing equipment by federal and state governments, has been allocated to~~Federal relief efforts for SNFs and ~~to a lesser extent to~~ ALFs have been limited since 2021 as have been relief efforts in certain states, and further government support will likely be needed to continue to offset these ~~impacts and it~~impacts. It is unclear whether and to what extent such government support, which may take the form of stimulus or reimbursement rate adjustments to reflect sustained cost changes experienced by operators, has been and will continue to be sufficient and timely to offset these impacts. In particular, it remains unclear ~~as to~~ whether ~~unallocated funds under the Provider Relief Fund~~relief will be distributed to our operators in any meaningful way ~~whether additional funds will be added to the Provider Relief Fund or otherwise allocated to health care operators or our operators,~~ or whether additional Medicaid or Medicare funds ~~under the federal American Rescue Plan Act~~ will ultimately support reimbursement to our operators. Further, to the extent the impacts of the pandemic continue or accelerate and are not offset by continued government relief that is sufficient and timely, we anticipate that the operating results of certain of our operators would be materially and adversely affected, some may be unwilling or unable to pay their contractual obligations to us in full or on a timely basis and we may be unable to restructure such obligations on terms as favorable to us as those currently in place. Even if operators are able to avail themselves of government relief to offset some of these costs, they may face challenges in complying with the terms and conditions of government support and may face longer-term adverse impacts to their personnel and business operations from the COVID-19 pandemic, including potential patient litigation and decreased demand for their services, loss of business due to an interruption in their operations, workforce challenges, new regulatory restrictions, or other liabilities related to gathering restrictions, quarantines, reopening plans, vaccine distribution or delivery, spread of infection or other related factors.

Numerous state and local governments and the federal government have initiated efforts that may also affect landlords’ and/or mortgagees’ ability to collect payments due or enforce remedies for the failure to pay amounts due. Additionally, a ~~growing~~ number of professional liability and employment related claims have been filed or are threatened to be filed against long-term care providers related to the COVID-19 pandemic. While such claims may be subject to liability protection provisions within various state executive orders or legislation and/or federal legislation, an adverse resolution of any of legal proceeding or investigations against our operators may involve injunctive relief and/or substantial monetary penalties, either or both of which could have a material adverse effect on our reputation, business, results of operations and cash flows.

The COVID-19 pandemic has from time to time also caused, and ~~is likely to~~may continue to cause, severe economic, market and other disruptions worldwide. The pandemic has led governments and other authorities in the U.S., U.K. and around the world to impose measures intended to control its spread, including but not limited to, restrictions on freedom of movement and business operations which may remain in place or be reinstated along with continuing uncertainty around the potential duration of the pandemic. We cannot assure you that conditions in the bank lending, capital and other financial markets will not deteriorate or fluctuate as a result of the COVID-19 pandemic, or that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancing. In addition, our employees may be impacted directly or indirectly by the pandemic and we may be required to make changes to our internal controls as a result of changes in our business processes or personnel; any such changes may increase our operational and financial reporting risks.

4847

Table of Contents

The extent of the COVID-19 pandemic’s effect on our and our operators’ operational and financial performance will depend on future developments, including the ability to control the spread of the outbreak generally and in our facilities, and the delivery and efficacy of and participation in vaccination programs and other treatments for COVID-19, government funds and other support for the senior care sector and the efficacy of other policies and measures that may mitigate the impact of the pandemic, as well as the future demand for needs-based skilled nursing care and senior living facilities, all of which are uncertain and difficult to predict. Due to these uncertainties, we are not able at this time to estimate the effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

Inflation could adversely impact our operators and our results of operations.

Inflation, both real or anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services to our operators or borrowers. Our long-term leases and loans typically contain provisions such as rent and interest escalators that are designed to mitigate the adverse impact of inflation on Omega’s results of operations. However, these provisions may have limited effectiveness at mitigating the risk of high levels of inflation due to contractual limits on escalation which exist on substantially all of our escalation provisions. Our leases are triple-net and typically require the operator to pay all property operating expenses and, therefore, increases in property-level expenses at our leased properties generally do not directly affect us. However, increased operating costs resulting from inflation could have an adverse impact on our operators and borrowers if increases in their operating expenses exceed increases in their revenue, which may adversely affect our operators’ or borrowers’ ability to pay rent or other obligations owed to us.

An increase in our operators’ expenses and a failure of their revenues to increase at least with inflation could adversely impact our operators’ and our financial condition and our results of operations.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended March 31, ~~2021,~~2022, Omega ~~issued an aggregate of 2,221~~did not issue any shares of Omega common stock in exchange for ~~an equivalent number of~~ Omega OP Units tendered to Omega OP for redemption in accordance with the provisions of the Partnership Agreement. The Company issued these shares of Omega common stock in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, based upon factual representations received from the limited partners who received the Omega common stock.Units.

Issuer Purchases of Equity Securities

On ~~March 20, 2020,~~January 27, 2022, the Company authorized the repurchase of up to ~~$200~~$500 million of our outstanding common stock from time to time ~~over the twelve months ending~~through March ~~20, 2021.~~2025. The Company is authorized to repurchase shares of its common stock in open market and privately negotiated transactions or in any other manner as determined by the Company’s management and in accordance with applicable law. The timing and amount of stock repurchases will be determined, in management’s discretion, based on a variety of factors, including but not limited to market conditions, other capital management needs and opportunities, and corporate and regulatory considerations. The Company has no obligation to repurchase any amount of its common stock, and such repurchases, if any, may be discontinued at any time.

During the first quarter of ~~2021,~~2022, we ~~did not purchase any~~repurchased shares of our outstanding common ~~stock.~~stock as follows:


					~~Maximum~~
				~~Total Number of~~	~~Number (or~~
				~~Shares~~	~~Approximate~~
				~~Purchased as~~	~~Dollar Value) of~~
				~~Part of Publicly~~	~~Shares that may~~
	~~Total Number~~			~~Announced~~	~~be Purchased~~
	~~of Shares~~	~~Average Price~~		~~Plans or~~	~~Under these Plans~~
~~Period~~	~~Purchased~~	~~Paid per Share~~		~~Programs~~	~~or Programs~~
~~January 1, 2021 to January 31, 2021~~	—	$	—	—	—
~~February 1, 2021 to February 28, 2021~~	—		—	—	—
~~March 1, 2021 to March 31, 2021~~	—		—	—	—
~~Total~~	—	$	—	—	—


					Maximum
				Total Number of	Number (or
				Shares	Approximate
				Purchased as	Dollar Value) of
				Part of Publicly	Shares that may
	Total Number			Announced	yet be Purchased
	of Shares	Average Price		Plans or	Under these Plans
Period	Purchased	Paid per Share		Programs	or Programs
January 1, 2022 to January 31, 2022	—	$	—	—	$	—
February 1, 2022 to February 28, 2022	—		—	—		—
March 1, 2022 to March 31, 2022	980,530		27.84	980,530		472,698,431
Total	980,530	$	27.84	980,530	$	472,698,431

4948

Table of Contents

Item 6–Exhibits


Exhibit No.
~~3.1~~		~~Amended and Restated Bylaws of Omega Healthcare Investors, Inc. as of April 8, 2021 (incorporated by reference to Exhibit 3.1 on the Company’s Form 8-K, filed on April 14, 2021).~~
~~4.1~~		Indenture dated as of March 10, 2021, among Omega Healthcare Investors, Inc., OHI Healthcare Properties Limited Partnership, as Subsidiary Guarantor, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 on the Company’s Form 8-K, filed on March 10, 2021).
~~10.1~~		Form of Amendment to Employment Agreement for the Company’s executive officers, effective as of January 1, 2021 for the Company’s executive officers (incorporated by reference to Exhibit 10.12 on the Company’s Form 10-K, filed on February 22, 2021).
~~22.1~~		Subsidiary guarantors of guaranteed securities.*
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Omega Healthcare Investors, Inc.*
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Omega Healthcare Investors, Inc.*
32.1		Section 1350 Certification of the Chief Executive Officer of Omega Healthcare Investors, Inc.*
32.2		Section 1350 Certification of the Chief Financial Officer of Omega Healthcare Investors, Inc.*
101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2021,~~2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104		Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101).

* Exhibits that are filed herewith.

5049

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OMEGA HEALTHCARE INVESTORS, INC.

Registrant

Date: May ~~4, 2021~~3, 2022	By:	/S/ C. TAYLOR PICKETT
		C. Taylor Pickett
		Chief Executive Officer

Date: May ~~4, 2021~~3, 2022	By:	/S/ ROBERT O. STEPHENSON
		Robert O. Stephenson
		Chief Financial Officer

5150



Segment	Financial Statement Line Item	Allowance for Credit Loss as of December 31, 2020		(Recovery) Provision for Credit Loss for the period ended March 31, 2021		Write-offs charged against allowance for the period ended March 31, 2021		Allowance for Credit Loss as of March 31, 2021
		(in thousands)
Segment A-4	Mortgage Notes Receivable	$	26,865	$	(913)	$	-	$	25,952
Segment B-3	Mortgage Notes Receivable		954		(38)		-		916
Segment C-5	Mortgage Notes Receivable		433		(107)		-		326
Segment E-6	Mortgage Notes Receivable		4,905		-		-		4,905
Segment F-2	Mortgage Notes Receivable		88		(45)		-		43
	Sub-total		33,245		(1,103)		-		32,142

Segment A-3	Investment in Direct Financing Leases		694		(6)		-		688
	Sub-total		694		(6)		-		688

Segment A-4	Other Investments		24,397		413		-		24,810
Segment B-3	Other Investments		5,113		217		-		5,330
Segment C-2	Other Investments		94		(40)		-		54
Segment D-5	Other Investments		1,853		(10)		(95)		1,748
	Sub-total		31,457		580		(95)		31,942

Segment A-4	Off-Balance Sheet Mortgage Commitments		24		38		-		62
Segment B-3	Off-Balance Sheet Note Commitments		2,305		(538)		-		1,767
Segment C-2	Off-Balance Sheet Note Commitments		116		5		-		121
	Sub-total		2,445		(495)		-		1,950

	Total	$	67,841	$	(1,024)	$	(95)	$	66,722


	March 31, 2021				December 31, 2020
	Agemo		Maplewood		Agemo		Maplewood
	(in thousands)				(in thousands)
Assets
Real estate investments – net	$	357,501		749,260	$	371,010	$	750,488
Assets held for sale		755		—		—		—
Other investments		34,253		162,368		34,253		147,148
Contractual receivables		615		979		346		887
Straight-line rent receivables		—		(52,892)		—		(56,664)
Lease inducement		—		68,326		—		69,666
Subtotal		393,124		928,041		405,609		911,525

Liabilities
Net in-place lease liability		—		(324)		—		(331)
Security deposit		(343)		(4,609)		—		—
Contingent liability		—		(43,915)		—		(43,915)
Subtotal		(343)		(48,848)		—		(44,246)

Collateral
Letters of credit		(9,253)		—		(9,253)		—
Personal guarantee		(8,000)		(40,000)		(8,000)		(40,000)
Other collateral		(358,256)		(749,260)		(371,010)		(750,488)
Subtotal		(375,509)		(789,260)		(388,263)		(790,488)

Maximum exposure to loss	$	17,272	$	89,933	$	17,346	$	76,791


	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	Agemo		Maplewood		Agemo		Maplewood
	(in thousands)
Revenue
Rental income	$	11,492	$	19,032	$	15,287	$	10,140
Other investment income		1,157		2,788		1,241		1,202
Total⁽¹⁾	$	12,649	$	21,820	$	16,528	$	11,342


	Properties Held For Sale
	Number of	Net Book Value
	Properties	(in thousands)
December 31, 2020	22	$	81,452
Properties sold ⁽¹⁾	(21)		(81,252)
Properties added ⁽²⁾	5		7,722
March 31, 2021⁽³⁾	6	$	7,922


	(in thousands)
Balance as of December 31, 2020	$	651,737
Add: foreign currency translation		(58)
Balance as of March 31, 2021	$	651,679