Omega Healthcare Investors (NYSE:OHI) disclosed that two of its operators failed to meet their contractual rent obligations in November, raising concerns about the potential impact on the company’s fourth-quarter funds available for distribution.
During the company’s third quarter 2023 earnings call previously, Omega had announced that it sold 29 LaVie facilities for gross proceeds of $305 million, marking a substantial reduction in Omega’s exposure to LaVie assets, decreasing associated risk, CEO Taylor Pickett had said.
Yet today the Maryland-based real estate investment trust (REIT) announced that LaVie paid $1.4 million in rent for November, a significant drop from its previous monthly rate of $2.5 million. Moreover, the company’s payment for December remains uncertain, according to Omega.
Following the recent sale of the 29 facilities, Omega anticipates transitioning another six. This would leave Omega with 31 LaVie properties, located in North Carolina, Virginia, Pennsylvania, Mississippi and Florida.
These are “extremely strong states,” and the LaVie portfolio going forward should generate “an enormous amount of cash flow, supporting a lot of rent,” Pickett said.
However, Omega is “still chopping the wood” to complete the portfolio restructuring and the exact timing remains in question, he added.
On the senior housing side, Maplewood fell short by $3.3 million in meeting its contractual rent in November and anticipates a further shortfall of $3.0 million in December.
“We continue to work diligently to resolve our outstanding operator issues. However, until we reach agreements with these operators, the ultimate resolution of these operator issues is unknown,” Omega wrote in a presentation for investors. “Furthermore, with many operators continuing to struggle with the impact of Covid-19on both occupancy and staffing, there remains an elevated risk that additional operators may be unable to pay in accordance with their contractual terms.”
However, the health-care REIT sees better days ahead for the two operators. “We continue to believe in the long-term value and cash flow of these portfolios,” Omega said in an announcement to investors.
OHI said they foresee a substantial augmentation in contractual rental income surpassing the Q4 run-rate, with the with the successful conclusion of the Lavie restructuring.
