Omega Healthcare Investors late Monday shared restructuring plans for three operators in its portfolio: LaVie Care Centers, Maplewood Senior Living and UK-based Healthcare Homes.
LaVie
In a presentation to investors, the Hunt Valley, MD-based real estate investment trust cited low occupancy and increased daily care costs per resident as reasons leading to the restructuring plan for LaVie Care Centers, formally known as Consulate Health Care. The plan includes the sale of some LaVie-operated properties.
Dec. 22, Omega sold 11 of the 85 LaVie-operated properties in its portfolio to a third party for $129.8 million, providing seller financing of $104.8 million at a rate of 8%. Omega said it likely will sell additional LaVie properties in the coming months.
The restructuring plan likely will result in at least several months of partially deferred rent, Omega said. LaVie has been placed on a cash basis for revenue recognition.
Maplewood
Omega’s 17-property Maplewood portfolio has seen a decline in occupancy and an increase in costs, particularly labor costs, since the pandemic, the REIT reported. Absent a portfolio restructuring, Omega said, Maplewood cannot cover its rent and interest obligations in the near term.
Under the restructuring plan, Omega will defer rent escalators through 2025; will defer 7% interest on a $250.5 million secured revolving credit facility in 2023, with cash interest payments starting in 2024; and will increase a secured credit facility by about $13 million to support Maplewood’s near-term cash needs. As of the fourth quarter of 2022, Omega placed Maplewood on a cash basis for revenue.
“We believe that stabilization of the Manhattan and Princeton facilities, as well as further underlying operating improvements, may allow Maplewood to return to paying full contractual rent and interest,” Omega said. “However, to the extent that these deferred payments are not fully repaid when operating performance improves, in the event of a sale, the remaining accrued balance will be reflected in the allocation of sales proceeds.”
Healthcare Homes
The portfolio of 42 Omega-owned care homes operated by Healthcare Homes in the United Kingdom also is being restructured.
“In late 2022, due to the timing of the expiration of their prior utility contracts, energy costs increased in excess of 300%, based on October 2022 financials, which, along with continuing provisions for agency costs, impinged the operator’s near-term liquidity,” the REIT said.
Under the proposed restructuring plan, Omega has agreed to allow a deferral up to four months of rent through April, with the REIT noting that Healthcare Homes may choose not to defer any or all of the rent. Additionally, Omega said it is providing “nominal short-term financing” to Healthcare Homes.
