Omega Healthcare Investors (NYSE: OHI) executives remained optimistic about occupancy growth, although ongoing staffing pressures at partner nursing homes in certain states contributed to bottlenecks at hospitals.

The Maryland-based real estate investment trust (REIT) reported a strong third quarter, with executives touting a strong investment pipeline amid a flurry of dealmaking for the sector at large.

“The market has been and continues to be awfully active,” Bob Stephenson, chief financial officer at Omega, said during the company’s quarterly conference call.

There are multiple reasons underpinning this trend, he said, with lower interest rates and an influx of available capital being among the main drivers. Motivated sellers, especially those facing imminent refinancing challenges, have also created opportunities for acquisitions. Meanwhile, the availability of bridge-to-HUD lending is an additional factor bolstering the market. As a result, the environment for dealmaking should remain strong for at least another year, Stephenson said.

“People are seeing big dollars out there available. There is more capital now. So I think overall, that’s just creating a very active market,” he said.

Executives also noted positive trends in occupancy rates across their facilities, with an increase attributed to several factors, including generally improved staffing levels and greater resident penetration, with seasonal fluctuations per usual.

“The occupancy is going to continue to go up,” said Megan Krull, Omega’s senior vice president of operations. “We’ve seen some increases in the last couple months from [pre-COVID levels],” she said, adding, “Staffing has improved a little bit [but] it’s still a struggle in a lot of different areas. And so you’ll see different occupancies in different areas depending on what’s going on. But certainly, staffing continues to be a concern.”

However, staffing problems are weighing heavily on operations in Texas, for example, while hospitals face bottlenecks as SNFs cannot admit more residents. And as for Florida, it will be helped by the reimbursement rate increase that operators in the state are slated to receive, but it too has faced its share of staffing issues, executives said.

“Texas is tough. Some of the rural areas are just a little bit tougher to find the staffing still. And people are stuck in the hospital system who can’t get pushed out because there’s just not the ability to do that,” Krull said.

For the third quarter ended Sept. 30, revenues for Omega totaled $276 million, an increase of $34 million from a year ago. The REIT reported earnings per share of 74 cents, beating consensus estimates of 71 cents.

Omega shares closed on Thursday at $42.47 a share, down 6 cents, or 0.14%.

SNF weight reduced

As Omega explores new investments, exposure to skilled nursing assets was reduced during the quarter to below historial levels, according to investment analysts, in favor of senior housing, which has been deemed as less volatile operationally.

That said, CEO Taylor Pickett said that this wasn’t a result of a concerted effort to lower weightage of SNFs in Omega’s portfolio. And while there has been an increase in capital allocated to senior housing, the REIT remains committed to its skilled nursing investments.

“Our investments are principally driven by our operating partner relationships. So to the extent we can lever into any of those relationships with the right underwriting, that’s where our capital is going to go,” said Pickett. “We’ve driven a lot more capital into senior housing over the last couple years, and you’ve seen those percentages change a little bit, and I think that trend probably continues, but there’s no particular goal other than continuing to allocate capital with meaningful spreads for existing relationships.”

Omega has a robust pipeline of opportunities, including a recent skilled nursing facility development in Florida. Executives reported that the state has become a more favorable environment for investments, thanks to improved reimbursement rates. But the focus remains on identifying the right operators and ensuring that capital is directed towards projects with sound underwriting.

“With the right operator, we will continue to allocate into that market,” said Pickett. “If it fits our underwriting, we’ll continue to allocate into that state.”

In addition to acquisitions, Omega is exploring lending opportunities to enhance its portfolio. Although the REIT traditionally emphasizes real estate acquisitions, recent ventures into loan structures indicate a flexible approach to capital deployment. This includes a mix of med financing, long-term loans, and lease-like arrangements, enabling Omega to meet various operator needs.

Finally, Omega is actively assessing its existing portfolio, with 15 assets currently held for sale. The company anticipates selling half of these in the fourth quarter and the remainder early next year, indicating a strategic effort to optimize its holdings.

On the asset mix, size of the pipeline and location, COO Dan Booth said it was a “little bit of a mixed bag” in terms of the asset types.

“We’ve got a number of deals still that we’re looking at in the UK. The US pipeline activity is picked up. We’re looking at mostly SNFs,” said Booth.

And as far as the size of the portfolio, Booth said, “We’re obviously looking at virtually every deal that’s out there in the market, including the big ones.”

LaVie and Guardian updates

The executives also provided updates several of it operating partners undergoing Chapter 11 bankruptcy.

On the transition of LaVie Care Centers, which filed for Chapter 11 bankruptcy in June, executives said it was originally expected to emerge from the process with a restructured balance sheet sooner than the current delayed timeline of mid-November.

Omega provided $10.0 million of debtor-in-possession financing to support LaVie’s operations during bankruptcy. No additional draws were made by LaVie on the loan during the third quarter, while LaVie also paid full monthly contractual rent of $3 million from June through October 2024.

“We do expect [LaVie]t to go through with the plan [and] the sponsor will assume the lease as it stands today, which includes monthly rent payments of $3 million,” said Stephenson.

In other transitions related to operating partners, such as that of Guardian Healthcare facilities, Omega transitioned six facilities in April previously leased to Guardian Healthcare to a new operator with an initial annual contractual rent of $5.5 million.

Omega has been experiencing rent issues with the company since at least early 2022.

“We’re assuming the new operator of the Guardian Transition Properties continues to pay $2.9 million in rent per quarter consistent with the third quarter,” executives said.

The presidential elections

The company is also closely monitoring regulatory changes that could impact the skilled nursing sector, but isn’t overall concerned with who wins the presidential election. While concerns about minimum staffing mandates and Medicare Advantage denials have been raised, Omega executives expressed confidence that the industry would adapt.

“This industry always does better when there’s a balance of power. So regardless of who wins the presidency, we will be looking at Congress to sort of balance that piece of it,” Krull said.

Issues such as the in-home care proposal by presidential candidate Kamala Harris will not be ultimately consequential to the nursing home sector, executives said.

“Nursing homes have already pushed everybody out to home health… but I don’t think there’s going to be anything that would substantially change the industry,” Krull noted.