Executives at Omega Healthcare Investors (NYSE: OHI), which posted better-than-expected fourth-quarter results, foresee more positive developments ahead, given the Trump administration’s favorable stance toward the nursing home sector and the potential Medicaid cuts being considered by Republican lawmakers as largely a non-issue.

“Coverages are the strongest they have been in years, which is reflective of the continuing recovery from the pandemic,” Megan Krull, senior vice president of operations at Omega, said during the company’s quarterly conference call on Thursday. “The industry still grapples with the overhang of many issues, most notably staffing shortages, but for now, things appear relatively stable.”

While the Trump agenda specifically calls entitlement reform into the forefront of potential policy changes, Krull said that President Donald Trump, “stepped up big time” and supported the industry with government funds during COVID.

“And so we hope…nothing draconian will happen,” she said.

House Republicans are pushing over $5 trillion in potential cuts to offset priorities such as tax cuts and border security as part of a massive party-line bill. Cuts to Medicaid could save up to $2.3 trillion by introducing per-capita caps and work requirements. Another potential saving includes $690 billion from equalizing Medicaid payments for able-bodied adults with traditional enrollment categories.

Many in the sector have expressed concerns over decreased funding for Medicaid for their services, but Krull said that although it was too soon to tell of the final Congressional outcome, prior conversations and lobbying efforts by the American Health Care Association (AHCA) lead her to believe that Medicaid funds for the sector might not be on the chopping block.

Instead, Affordable Care Act’s (ACA) Medicaid expansion, which covers non-elderly adults without children and accounts for over 25% of federal Medicaid spending, was the “low hanging fruit” and the likely target for the possible cuts, Krull said.  

“AHCA would very much push for some sort of per-capita cap so that if enrollment increases, the funding increases as well. And, they would look for some sort of inflationary increases on the long-term care side, plus some factor above that,” she added.  “So we feel very good about what [AHCA] would be able to accomplish.” 

Executives also expressed optimism regarding the potential legal repeal of the staffing mandate, but said the sector is still facing ongoing staffing challenges and will need the federal government to enlarge the nursing home labor force by reconsidering a stance on immigration.

“The labor environment is still tough, especially in the more rural areas, and that is probably going to continue to be tough for a long time unless something changes,” said Krull. “And so the immigration policy is definitely going to play into that to the extent that we can legally bring in immigrants to supplement the nursing force.”

That said, Omega hasn’t yet been impacted by the recent executive orders on immigration, executives said.

And while occupancy levels have reached pre-pandemic levels and are beginning to hit a plateau, especially amid staffing shortages, executives said the company has also been largely insulated from operators struggling to make their rent payments.

For the fourth quarter ended Dec. 31, 2024, Omega’s posted an adjusted FFO of $214 million, or $0.74 per share, compared to $173 million, or $0.68 per share a year ago, beating analyst estimates by 2 cents. Meanwhile, its quarterly revenue stood at $279.32 million, surpassing Wall Street expectations by $53.1 million.

Shares for the Maryland-based real estate investment trust (REIT) closed Friday at $37.92, down 0.14 cents, or 0.37%.

Health of sector

In providing an update on Omega’s recent performance trends, its operating portfolio, investment activities in 2024, and the outlook for 2025, Vikas Gupta, chief investment officer, said that Omega’s trailing 12-month operator EBITDA coverage for its core portfolio rose slightly, reflecting a year-long trend of improving coverage, driven by strong operating partners, resolution of most portfolio restructurings, and disciplined investment capital allocation.

And despite challenges such as labor and reimbursement pressures, the long-term care industry is improving due to an aging population and operators’ ability to serve increasingly complex resident needs, Gupta said.

Operational and financial malaise that is being felt by some operators in the sector wasn’t an industry-wide trend, and more “idiosyncratic” and confined, and certainly one not seen among Omega’s operators, he said.

“We continue to underwrite the way we have, historically, credit-based deals with strong operators,” Gupta said.

Gupta highlighted LaVie as the only major operator undergoing restructuring, with an exit from bankruptcy expected by the second quarter of 2025, contingent on pending court rulings. In the interim, Omega will continue receiving full contractual rent from LaVie, amounting to $37.5 million annually.

Future acquisitions, ‘strong’ balance sheet

Executives said that the outlook for 2025 remains strong, with continued interest in both U.S. and U.K. opportunities. And, Omega plans to prioritize investments in real estate ownership, while also evaluating selective loan opportunities.

CEO Taylor Pickett emphasized a steady approach to future investments for 2025 after noting the closing of 36 transactions, and deployment of approximately $1.1 billion in capital

In 2024 the team did a great job staying “disciplined,” Pickett said. “The 2025 acquisition pipeline remains active,” he said.

In 2024, Omega’s investments focused on strong credit-backed real estate and loans, with a notable portion – about 31% – in real estate loans that provide an option for Omega to acquire properties. The UK market was a major driver of these investments, accounting for 68% of total new investments, benefiting from Omega’s long-standing operating relationships.

All in all, in the fourth quarter of 2024, Omega made $363 million in new investments, including $179 million in real estate acquisitions with a 9.9% cash yield and $162 million in real estate loans with a 10.9% interest rate.

Bob Stephenson, Omega’s chief financial officer, highlighted a revenue increase to $279 million during the fourth quarter, driven by new investments, operator restructurings, and asset transitions.

Stephenson noted the growth despite the issuance of 14 million shares in Q3 and 11 million shares in Q4 for new investments.

Omega’s balance sheet remained strong, executives said.

“[W] e ended the year with over $500 million in cash that was used to repay a $400 million bond on January 15, 2025 [and] we ended the month of January with over $240 million in cash, the full borrowing capacity, or $5 billion credit facility, and approximately $820 million available under our ATM program, all ready to deploy as needed in new investments,” Pickett said.