Omega Healthcare Investors (OHI) 5 Nov 182018 Q3 Earnings call transcript

Good morning and welcome to the Omega Healthcare Investors Third Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note today’s event is being recorded. And at this time, I would like to turn the conference call over to Ms. Michele Reber. ahead. go please Ma’am,

and such cause be that financial me generally. our COO, Omega’s which Corporate press payments, Dan Commission, the financial Comments recent conference on statements outlook, Steven Please With CFO, to may Development These to Taylor identifies portfolio or our business with prospects or risks of Bob policy, events forward-looking Insoft. facts Exchange call XX-K, this during described Stephenson; our limitation, contemplated and differ as materially Booth may most restructurings, without from differ transitions including, acquisitions, our dividend forward-looking report results statements uncertainties, dispositions releases actual portfolio regarding made not statements. those today statements, see or forward-looking morning. rent condition historical results filings and CEO, that involve and our cause Form are Pickett; projections, may Officer, are in actual our Securities materially. which Good specific operators, and and Chief factors

During FFO, the most and adjusted our usefulness to will Generally of FFO, and explanation over the our of Accounting we call issued Reconciliations at in www.omegahealthcare.com, some to website Financial of turn in non-GAAP under and case EBITDA. adjusted measures these Taylor. Principles, now of section available call today. non-GAAP FAD measures, FFO FFO, are press Information the well the comparable measures, of such measure refer the as an non-GAAP I the release to financial today, under as as Accepted will the

made sales related asset revenue of our of our we our thank for XXXX these million. were and million. while a while completing quarter Today, not cash The assets sale trailing that to total underlying was repositioning we conference and quality dividend. Yet, month achieve of XX $XX these flow was first of our consideration restructuring impact. be did experiencing morning going Good yield revenue a and asset to flow these to the on on strategic portfolio $XX I rent. We've earnings quarter third $XXX The third equate will able proceeds XXXX, Michele. the cover for XX considerable higher with to disposed toward three In reduction believe portfolio million, cash call. cash you redeploy X.X%. minimal strategic the flow good proceeds to We and joining discuss these coverage, assets restructurings. quarters right facilities assets able progress repositioning Thanks, into we're

sold. be re-leased. annual of to XX million. Omega that remaining Tennessee have There will $XX.X facilities Orianna been likely $X.X facilities transitioned XX XX but will sell have XX the our are Orianna the asset complete, portfolio. five excluding the or are rent One re-leased bulk XX existing repositioning operators facilities, of was the XX million. sold additional ultimate We sales with of in for outcome to sold or related of been now facilities facility

in $XX expect will facilities our is of rent million, We or that these disclosures. and expectations equivalents rent generate previous which line with in excess

meaningfully sales that repositioning model. we acquisitions return behind of XXXX our in as and growth asset bulk the us, historical will we With our expect dispositions, to outpace

ratio dividend to distribution. $X.XX of of available a dividend, share XX% of funds our adjusted FFO quarter Turning quarter of and payout per third reflects for XX% our third

I over the of feel the ratios our of given comfortable we are we now incurred $X perspective, to quarter payout with continue turn excess million these to high will historical third call from fees While Orianna budget. ratio that a legal Bob. in

and morning. Taylor good Thanks,

of loss or the for dilutive on of of a $X.XX or to million FFO quarter basis $X.XX share $XXX a quarter the per a in XXXX. per share million third reportable $XX as loss was Our compared

made Operating the $X.X the XXXX. increases was $XXX period $XX incremental million combination $X million million revenue. for our quarter expense. result million share operators in partially loan non-cash warrants was million made in million market XXXX. XXXX since was in to or per amendments assets capital $X.XX as includes as mark completed new of revenue and $X of to of quarter the XXXX. Orianna loss $XXX the transitions resulting to revenue the versus time during produced of the June quarter uncollectible the and of from million asset $XXX well based excludes lease investments facilities, a revenue Those million third accounts, two $X of million by Omega adjusted impact transitioned of same Genesis from for $XXX to million transferred offset quarter occurred of for related third that non-cash the quarter and and million of of our a million of $X existing of a Our that increase payoff renovations compensation were were third on since FFO for stock recovery a revenue quarter for and $XXX The of approximately that sales, The primarily $X revenue revenue

quarterly million. project will For our at revenue revenue $XX continue we modeling purposes, approximately non-cash

annual starting revenue to million, and $X generate care XXXX million late between XXXX. expect in and $X transition We portfolio or the preferred early

transitioned Orianna facilities of when million to per We the rent equivalents expect legacy completed, complete annual related in $XX already $X over with quarter the and QX. $XX facilities the rent million to generate million is Orianna restructuring that to XX

quarter expense to expense. was primarily legal to greater million the G&A due third $X.X which XXXX operator was expenses The our than G&A Our restructurings. and related was quarter, increase million workouts for $XX.X

be returning G&A, than rate. the traditional quarterly result to quarter project quarter slightly consistent before transitions For third modeling $X G&A we continued to related million purposes, million run a with our expenses $X G&A operator or to workouts our of for and greater legal of our as XXXX of fourth to

addition, million by and with consistent we in million. per expense these assets compensation when was cost quarter In approximately expect quarter, quarter the non-cash quarters the as the stock related a revenue of our financing note, debt, first for non-cash seven we based third million balances were higher consideration three be XXXX, Interest quarter LIBOR of same offset fourth approximately cash the the in costs of $X million throughout loss $XX for expense the quarter, recognizing higher to approximately a third of of $X excluding or seven of XXXX, dispositions. seller lower quarter, net XXXX. to In blended roughly primarily million rates. of deferred the XXXX as a proceeds sold result $XXX,XXX and $X third In recorded a for $XX we as debt

required quarter, from a cash recorded was Orianna in XXXX. the receivable that the million and payments off recovery part During accounts bankruptcy million in $X written provision we $X to plan was received to of uncollectible for related as in accounts applied

approximately prices. We real on X the in to million selling $XX fair estate their or reduce charges impairment facilities expected net values estimate also recorded to book value

in sale could asset had $XX at and million, Turning balance approximately million over potential that XX XX, the for as disposition approximately at valued $XX we held assets we're classified September opportunities several to still quarters. occur evaluating sheet, facilities the next

strong. remains sheet balance Our

to fixed annualized from Orianna, related related facilities important roughly to was process EBITDA September pro quarter would new these coverage times. three the months X likely builds. to and X.XX our no ended the expected be new known rental the of over Orianna million to our revenue ratio adjusted now debt times. on only adjusting note annual X turn builds I'll removing EBITDA revenue calculations for net related and our to the the third forma charge call revenue and Booth. in construction XX, When to has range to times For revenue was It's Dan XX related sales, our leverage outcomes asset of and

and everyone. Bob good Thanks, morning,

quarter states facilities United beds. spread approximately and respectively respectively As EBITDARM XX XX,XXX X.XX March the ended XX of portfolio and XX, facilities Trailing September core located asset XX within for an EBITDAR operators the These on up times had portfolio XX XXXX. Omega and coverage XXX for XXXX the period trailing X.XX X.X times XX, with slightly second of during party month of Kingdom. operator operating versus third X.XX were and our was across XXXX, month operating at

and Turning effective earlier, four matters, an Orianna the Mexico in ongoing Arizona November in X, to operator. former preferred about to X portfolio Taylor to addition Omega five existing situation, New in spoke transferred care facilities, Omega which

several care Oklahoma facilities two re-lease in three relationship. which will we sell Over next Mexico, the additional expect and to facilities conclude our preferred months, New in

with unrelated an facilities of The rate lease a to by one living expects assignment existing Omega a XX, XXXX, nursing in Omega an covering and XX XXXX, one-time September is Turning seven day Virginia them million an before to on total loan loan new and the three approximately Omega mortgages, interest operator. On operating and party. investments. secured to a located the $XXX with loan extension. subject X.XX% term with beds. living the into maturity, Pennsylvania facility, independent to entered facilities, secured The current collateral master bears of XXXX February skilled assisted add XX, matures [indiscernible] facilities On or third and

total in aggregate $XX completed XX September year bring quarter, to through million, of These third date million also Omega’s inclusive expenditures. Omega capital to the investment During expenditures. capital transactions $XXX in

Omega’s to Turning activities. repositioning

$XX of consideration the three to quarter inclusive total sold payoffs facilities approximately XX so additional sold eight the million. year-to-date This During for far approximately quarter the million dispositions seven in brings Omega for $XXX fourth facilities an mortgage of loan XXXX. XXXX, third with of facilities, of

facilities from In Omega year-to-date, earlier XX includes preferred by from re-leased addition which Orianna the XX XX Taylor facilities mentioned and facility facilities portfolio has the to care sales, portfolio. transferred

sell the currently in are to or additional quarters. facilities approximately re-lease evaluating We XX coming

As always. turn portfolio opportunities with operators. now each and our review repositioning our the of Omega discuss over strategic to call Steven. to will I continues

our amongst In Care our The living Living, Maplewood and we for and million, as by of at project living XXXX. their assisted our and XXrd properties and on CIP and overall Dan relationship the housing now in portfolios Avenue of senior growing approximately thanks our On to US and conjunction with to one Project, scheduled senior is expected Senior healthcare UK, care basis, balance third open a at to its High at portfolio senior Rise City Memory cost lease covers including Senior billion only today. totaled the our investment rent best-in-class independent is continue in late $X.X the in York Omega not X.X the homes investment of work listed Thanks, Second end on Maplewood with accrued New standalone line the Manhattan. memory Street portfolio Anchored also Including quarter, living, $XXX everyone of Housing publicly the the well joining healthcare ALF Care in and the as and larger in sheet. core assets comprises housing XXX represents Gold obligations but UK. the times, REITs. land

grow The component to ability is new portfolio XX XX Manhattan. final approximately quarter remaining important to we Through construction a of I this Maplewood now expertise. for $XX.X and this total comments. and investment program. the commitment in by of million new Our of tenants Taylor the this reinvestment related and portfolio this projects some predominately invested same of $XX.X $XXX the third in ongoing call capabilities highlighted related on CapEx our design million million is our to turn budget successfully capability, construction to our investment coupling facilities our to having predicated active in-house construction reinvestment. $XX.X will continue related inclusive million, to is with of operating our was with pipeline over strategic

Thanks, Steven.

remain Our half into to very our for going demographics This new in skilled will of commencing oppose aging reimbursement PDPM positive We concludes term and the system occupancy near costs industry next and comments. year and nursing rates XXXX back the the prepared labor that challenges. be continue XXXX. will industry confident facility

questions. We will for open the now call up

from today question Stifel. first Chad Our comes from Instructions] [Operator Vanacore

because good a to in your of So an guidance. this on be I'm going end odd to you're way, ask in the pace high

put might guidance? So around, lower that on of end flip your or what contemplated the that factors could being are you

Hey, Chad. It’s Bob.

some one always on – asset purposes, just have page, so sales, what have occurred, makes you the for put mention, quarter. into asset up have on we of guidance the sales million timing them XX the the as We of already and to a of middle about saw modeling

is rates, our So, variable base. debt some Also, already happened than of of that sooner expected. the has LIBOR XX%

the cash during cash quarter or last thing or So a timing LIBOR with the a payment, payments number of and fourth on basis what we happens rates depending G&A. is and around of but operators still our we Orianna, a would the know, -- quarter, few have it expect you primarily our be said right as going I is around still bankruptcy third is to be what just -- on. the restructuring on

I what going So accuracy total that can't predict number really with to the be. is

the And that what the X was the bad one of sorry, fee, recovery then X I’m just debt, other million thing, from? legal million

pay That was Orianna a XXXX. us written it million in was received for month. was required quarter. that to We $X X off to a the We million outstanding AR applied

Instructions] from comes Wells [Operator Fargo. question Todd Our next from Stender

just to bit it the portfolio? to like hear little loan for It about color won't real want around sounds estate, long more converts but stick if that. just made, more the we a on it Can million you $XXX own hear the very

Sure.

exactly You're right.

short has a to of months. actually it expect It X We loan. be term maturity a

So sometime nuance the simple sellers. from we Pennsylvania properties it in was loan requested combination expect and that a was to first a in in with structure interest the quarter, the flip really Virginia. a to to The fee

I imagine? For this? like that upfront is make why you For tax reasons, loan the purposes tax

I for seller the be can't to honest. speak

that's But fair.

a will initial Okay. factor Will you payments lease -- roll of it'll any immediately cash is flow, lease yield? kind that it even into or the this just into just you'll and loan collect

No. we’re monthly [indiscernible] interest payments absolutely rate. the based We're actually getting -- of on

dispositions, you there And asset timing sales moving up to the spread Or and and ratio up or of portfolio Fed about sense cash on do out? you them sales you the gap cover may with think you. be delay payout getting do asset on you in Okay. to a hold How quicker? flow urgency XXX%, those dividend. them do all do Thank on around have a at to then just clean the

It’s the a QX won’t from on going From ratio. in we XXXX the of coverage better handful comments majority improve that asset we of the forward it's But up want as in a can a regular we've have in a fast than perspective, terms we really our can improve my and mentioned, stuff, that as that we're have lots repositioning actually Todd, as we a that timing go to XX%. we got basis, then we little we like forward things as we up vast will program -- be QX going bit the clean perspective, we still repositioning assets and of in on that about on that -- into to as aggressive sales. I clean to at And portfolio. we’ll think be just talking noted we and ’XX. will continue sideline of

from Street comes from Green question next Our Instructions] Lukas [Operator Advisors. Hartwich

On there the converts are costs additional that $XXX million loan, ownership? when fee any simple to

are documents is No. not. Those There done.

interest rate? then with the be those to line And is Okay. going yield, the that convert once in or

the Yes. exact It’s same.

Bernstein Our One. next question Capital from comes from Daniel

of any side, if better little through to you housing almost whether so terms that's the coverages looking acquisitions the what me a the talk about there. to you're and on out lease go between opportunities we or could getting SNF senior that's businesses maybe like yield after you're – again, maybe versus mix pipeline of in seeing to growing seems back ready It Are bit

Yes.

billions so we When on We've just are as that really that not if saying of one something type by pipeline. start in feel close. across that desk. at time. transactions must me talks desk our to It millions, if transactions going It's let our just of not generally coming what's we about hundreds not Omega up. given coming times, to pipelines, So signed millions, across we're are be refer many got about is any people clear at talk

we feel, most of seeing, We’re everything there. out that's

coming goes, pipeline quarter it's not the robust. fourth our once as here, far quarter, again, into As into still fourth terribly the

rates It's half. you a We've and XXXX imagine, little really the a is anything than have they're of our more last settle their we've paying do to of are in cap our of the in a of and attention attention so been starting really in I bit portfolios to get getting can to seen are been seeing reposition be repositioning of themselves, and of acquisitive to around lot obviously, We’re a jump in not this order. people we training that we’re of mean, a for then we’re in existing to over I operators stuff, some will the of a that at stuff. bit combination game. as of quite and ’XX, the deals their those a of waiting it It cards seems sort year think that a but house operators, course factors. back out mode lot as year a and we there pay and out look more more sort intuitive us, believe bunch

-- Coming underwriting out also aggressive for something trying equity seeing and your ’XX, going gauge been opportunities for to wasn't going just peers a really the is for equity, gain REIT other that's heard question. that I'm nick, you're in private their investment whether it ‘XX it's SNFs, had for an ’XX, better as than is you private again quite maybe in over advantage set maybe a the be we that to and to

Yeah.

this think, I is Taylor.

a Dan, a said, be of that yields, to in little starting more is exactly equity bit and less private nines the what SNFs In may you aggressive. see bit stability we're terms for little

I housing speak sure that I similar. to definitely, it's expect although, not that I'm side, do the to On as senior be can going

hop I'll and question And then off. last one

seems to lease of, stabilize. is I terms starting In your like coverage mean, it

are of end about the call right of out that wage some pressures mention there. did You the at the there

sense trying in little just of better the I operators they're or ’XX, headwinds, from the to get as you opportunities, pre-PDPM from risk was sense stability how what to months? are the bit terms a for I of to what trying next coverage seeing saying guess maybe in they're a what as about the get you're lease thinking seeing XX So

but coverages think improving. I stable, will see don't I be relatively them

and geographies our which a occupancy headwinds that stable. terms around for operators ongoing I’ll been in than has different held fairly others. battle market occupancy the But Texas note think tough have occupancy, of I are particularly portfolio different, labor our of the

headwinds So, we I rate to of think, the decent Medicaid we're Xst, going battle the some continue have increase benefit decent do a to stability and we general as see Medicare increases. October

So, it’s XX for the up months, I really taking in start the momentum the certainly think some don't see into next to ‘XX and come not next we'll all headwinds over even the in rebounding X.Xs We expect hold, XX months. positive but sure. to demographics post-PDPM coverages

[Operator Karin Instructions] next Ford Our question comes MUFG from Securities. from

more purposes high a Orianna, ask have rent to of final have else. Do visibility low resolved Orianna? next or modeling you just Wanted timing bias of of the be and a the on from question range year anything do end your you than projection will set the on when towards any on for the you more properties think the

That's right, had the few over it's be to of to be talked year. would next you're finalized this year. that we Orianna quarters not So, thinking be and Bankruptcies, case. going the going last

pretty the the we're at of range of good of still as estimate. where we in in And Our probably then are looking middle range, view, terms it’s ‘XX. a QX the

million side the would in modeling, range. X of terms of got either you’ve that, I the I middle but on So take of think

does around do just out your attractive you a if up is next capital you viewing what this about issuance on question second level? end can you're play and buyer my how then thoughts talk you being investments, most your at and equity net sources find And of today, pipeline the just year,

work, we source We mentioned, consistent X Avenue basis, work our forma if that will to biggest to when assets, parallel get had I use one will Orianna to a make obviously the equity comment and mean, certainly that but is us. at Bob on or is the going to continue deployment. find range, leverage come the equity extent to we're past. we put to to pro back being with Second you will back the The extent you put opportunities below. I our Orianna proceeds maintain cash we that our a be activity. capital to have source, in terms investment That's first which into the of issue would resolved,

over this And remarks. ladies any the gentlemen, questions. no to to back like I'd I'm at time, for and showing turn additional conference management call closing

you morning. thank call joining and this for Jamie Thanks, everyone our

As any a Have Bob questions always, for the available will Gourmand day. team, Stephenson particular you Matthew great and in management may be have.

attending And today's concludes ladies today's thank and We do gentlemen, you presentation. call. that for conference

You disconnect lines. your may now