Omega to Acquire MedEquities in $600M REIT Deal

Omega Healthcare Investors (NYSE: OHI) kicked off 2019 by announcing the $600 million acquisition of MedEquities Realty Trust (NYSE: MRT), marking the ownership shift of 34 skilled nursing and other health care properties.

The boards of both real estate investment trusts (REITs) approved the deal unanimously, Omega announced early Wednesday morning, with a final transaction closure date expected sometime in the first half of 2019.

The final purchase price works out to $10.26 per share of MedEquities stock.

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“This acquisition reinforces our commitment to the skilled nursing and senior housing industry, while adding new asset types to our portfolio [and] furthering our strategic objectives,” Omega CEO Taylor Pickett said in a statement announcing the deal.

A representative for MedEquities said company officials would not be available for interviews on the transaction, with no additional comment beyond the Omega statement and an 8-K filing with the Securities and Exchange Commission.

Omega did not respond to a request for further comment as of press time.

The transaction will bring nine new operators into the Hunt Valley, Md.-based Omega’s portfolio, with a total of 21 skilled nursing and assisted living facilities. The other 13 properties include behavioral health facilities, long-term acute care hospitals, and three acute care hospitals — including Baylor Scott & White Medical Center in Lakeway, Texas.

Omega’s concentration of non-SNF assets will thus rise by $296 million, the company noted, including $75 million related to Baylor Scott & White.

OnPointe, Fundamental Healthcare, and Vibra Healthcare were the Nashville, Tenn.-based MedEquities’ top three SNF operators as of the third quarter of last year, according to a presentation for investors — though the REIT moved to replace OnPointe with new operator Creative Solutions in Healthcare at 10 properties late in 2018.

The transaction requires the approval of MedEquities’ shareholders but not Omega’s; the latter firm does not plan to make any changes to its board of directors or executive staff. In addition to the fee simple interest in the 34 properties, Omega will also take on $34 million in mortgage loans from MedEquities.

“We believe going forward that our stockholders will be in an excellent position from having an investment in Omega’s diversified portfolio,” MedEquities CEO John McRoberts said in a statement. “Taylor and his team have a long and successful history of asset growth and diversification as well as solid asset management.”

The deal already fulfills a key prognostication that Pickett made on Omega’s third-quarter earnings call back in early November.

“We expect that in 2019, acquisitions will meaningfully outpace dispositions as we return to our historical growth mode,” the CEO said, referencing the imminent conclusion of a 71-property sell-off over the first three quarters of 2018.

Speaking at a conference last fall, Pickett also predicted that the persistent headwinds facing the skilled nursing industry will abate within the coming three years, informing the REIT’s long-term strategy. The past year had been an eventful one for Omega, which pulled off a major restructuring of leases with tenant Signature HealthCARE, consolidated leases with Diversicare Healthcare Services (Nasdaq: DVCR), and dealt with the bankruptcy of tenant Orianna Health Systems.

Omega stock fell slightly in the wake of the announcement, sliding around 3.4% to $33.95 at the close of trading Wednesday.

MedEquities shares soared 45% to $9.88, or a gain of $3.05 for the day.

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