Deals in the U.K. continued to be a large driver of investment activity in 2025 for Omega Healthcare Investors (NYSE: OHI), with a $344 million April investment of a 45-care home portfolio in the U.K. and Jersey, closing after the first financial quarter’s end.

Care homes in the U.K. are essentially nursing homes, but can also be home and community-based services, using U.S. terminology. Year to date, U.K. assets made up 93%, or $392 million, of Omega’s total new investment in 2025, according to Vikas Gupta, chief investment officer with Hunt Valley, Md.-based Omega.

“As a result of our scale, reputation and strong operator base across the U.K., we were able to quickly evaluate, structure and close on complex transactions like the 45-care home transaction,” said Gupta.

An unnamed seller in the U.K. was looking to exit the business completely, he said, and Omega was able to come in with six different operators, give the seller a solution and close on everything in the same day. There wasn’t a ton of competition considering not a lot of companies could do what Omega did, he said.

“These assets fit well. They’re all over the U.K., Scotland and Jersey, and for all of our operators that are taking them, it fits really well in their geographies. They’re good, quality assets that have a very good useful life,” said Gupta.

The care homes were leased to four existing and two new operators with Omega, with annual rent of $34.4 million and annual escalators of 1.7%, which will increase to 2.5% after the fifth year.

Aside from the U.K. and Jersey deal, Omega executives mentioned the win for the nursing home industry, as the federal minimum staffing mandate was dismissed in a Texas court.

Discussion of potential Medicaid cuts have been echoed by other REITs, with Omega’s senior vice president of operations Megan Krull saying the majority of cuts focus more on Medicaid expansion under the Obama administration’s Affordable Care Act, rather than traditional Medicaid dollars allocated to operators in the nursing home industry.

Lastly, Omega execs dipped into existing issues with Genesis Healthcare rent coverage and discussed the possibility of re-tenanting PACS Group (NYSE: PACS) assets.

Omega reported net income of $112 million for the first quarter ending March 31, an increase compared to $69 million in Q1 2024, and funds from operations at $184 million, an increase compared to $153 million for Q1 2024.

Omega shares closed Friday at $37.02, $1.54, or 3.99%, lower.

Genesis and PACS

In terms of the performance of Omega’s PACS-operated facilities, Gupta said Omega would be able to re-tenant the current 50 PACS-operated facilities, explaining that the PACS properties do “extremely well.”

“Overall, we don’t have a worry that we would not be able to re-tenant on the current rent or even more. We’ve had discussions with PACS, and there’s been no discussions of trying to exit our portfolio,” said Gupta.

Analysts also inquired about Omega tenant Genesis Healthcare, which didn’t pay full contractual rent of $4.2 million in March. Omega CEO Taylor Pickett said the REIT partially pulled a letter of credit to cover the shortfall.

“Genesis management has indicated that their current liquidity issues stem from a tightening of their borrowing base by their asset base lender and legacy, general and professional liability obligations,” said Pickett.”

Omega’s credit position with Genesis is strong with a 12-month cash flow to rent coverage exceeding 1.6 times. Omega’s $118 million term loan is secured by a priority lien in Genesis ancillary businesses, including Align bed physician practice, its Accountable Care Organization (ACO) and Powerback Rehab.

Since then, Genesis paid full rent in April and has remained current on all interest obligations due on their secured term loan.

“We will continue to evaluate and engage in select loan opportunities, primarily for existing operator relationships, but our priority will always be allocating capital towards accretive, owned real estate deals that grow our balance,” said Gupta.

All in all, Omega’s pipeline and transaction outlook for the remainder of the year is favorable, Gupta said, with marketed opportunities in the U.S. and U.K. The REIT continues to see inquiries for real estate loans as a result of a restricted lending environment, with opportunities for deals in the U.S. specifically. Sellers range from individual owners and regional operators to institutional real estate sellers, Gupta said.

Insight on Medicaid cuts, staffing mandate

Potential Medicaid cuts, DOGE staffing reductions and the dismissal of the federal minimum staffing mandate were some other hot button topics for Omega executives.

Krull said that in order to meet the Congressional budget as it stands, referring to the $880 billion in Medicaid cuts, there would need to be some level of Medicaid reform. Spending cuts to expanded aspects of Medicaid under the Affordable Care Act may get the worst of it, but there may still be an impact to the traditional Medicaid population.

“The Medicaid expansion population, those able-bodied adults that were added with the Affordable Care Act, are likely the largest target of these spending cuts, given that the federal government covers a higher percentage of that Medicaid spend at 90% rather than the traditional Medicaid population, approximately 63% on average,” noted Krull.

Underwriting criteria hasn’t been impacted, given the potential changes to Medicaid. Any changes to Medicaid provider taxes, however, poses the greatest risk to traditional Medicaid, Krull said. Almost half of states have provider taxes make up to 6% of net patient revenues, and there are several that don’t have any Medicaid provider taxes at all. Some states might bridge the gap for any reductions in Medicaid provider taxes, she said.

“We’re not hearing that [the provider taxes] would be wiped out completely. It’s more so that it might come down a percentage or two in terms of the impact. It’s really difficult to tell. From a portfolio perspective, every state’s different,” said Krull.

It’s important to keep in mind that the Trump administration stood by the industry during the pandemic, Krull added, acknowledging that it was a sector too important to fail.

“We feel well positioned and are hopeful that no attempt at draconian cuts in this space will be proposed,” said Krull.

In terms of DOGE staffing cuts across federal agencies, notably HUD, Gupta said Omega hasn’t heard anything yet and so couldn’t speak to any impact on debt financing availability.

The reversal of the staffing mandate, meanwhile, effectively saves the federal government $22 billion over the next decade, Krull said. It’s unlikely the federal government will be filing an appeal on the decision, considering the administration’s push for less regulation and more efficiency.

“It’s news that, while not unexpected, is very much appreciated,” said Krull. “We are extremely grateful to finally see some conclusion on this front and applaud the efforts of all those involved.”