The omicron variant of COVID-19 has dramatically slowed skilled nursing facility occupancy recovery and created additional labor challenges, Omega Healthcare Investors CEO Taylor Pickett said Thursday during the company’s fourth-quarter 2021 earnings call.
Occupancy for the company’s overall core portfolio slowly trended up throughout 2021, reaching a high of 75.8% in December, up from a low of 72.3% in in January 2021. In January 2022, mid-month occupancy fell off slightly to 75.4%, mainly as a result of the robust omicron variant, Omega said.
“Omega SNF occupancy has been virtually flat for the three months ended Dec. 31, and the preliminary January occupancy is slightly down,” Pickett said.
Staffing shortages, he added, have limited many facilities’ ability to admit new residents.
“Although the impact of omicron appears to be rapid and transitory, it is impossible to predict how quickly the industry occupancy recovery will regain traction or how rapidly the current labor force pressures will subside,” Pickett said.
“In an industry where many operators continue to rely on federal and state support, it remains to be seen to what extent future support will be sufficient to fund operator obligations until occupancy returns to a sustainable level,” he added.
Hunt Valley, MD-based Omega reported net income for the quarter of $34.2 million, or $0.14 per common share. The company also reported net funds from operations for the quarter of $123.5 million, or $0.50 per common share; adjusted funds from operations of $190.4 million, or $0.77 per common share; and funds available for distribution of $178.8 million.
“As expected, our near-term adjusted FFO and FAD financial results were impacted by non-payment of rent by a few operators as well as a reduction in the collateral supporting non-paying operators,” Pickett said in a press release issued in conjunction with the earnings call. “This will likely continue in the next few quarters as we work to resolve these issues.”
Omega, however, he added, believes “that the strong appetite for these assets, as evidenced by the robust transaction market, and the secular tailwinds that continue to exist for this industry, should result in a relatively modest long-term financial impact to the business from the resolution of these operator issues.”
In the fourth quarter, Omega spent $20 million on capital renovation and construction-in-progress projects; sold three facilities for $8 million in cash proceeds, resulting in a $1 million gain; and paid a $0.67-per-share quarterly cash dividend on common stock.
Revenues for the quarter totaled $249.9 million, which included $13 million of straight-line and other non-cash revenue, $7.4 million of non-recurring revenue and $3.5 million of real estate tax and ground rents, which were partially offset by a $16.4 million write-off of straight-line and other non-cash revenue. Also, as of Dec. 31, the company had $5.3 billion of outstanding indebtedness.
So far this year, the company has acquired $16 million in real estate, authorized a $500 million stock repurchase program through March 2025, declared a $0.67-per-share quarterly cash dividend on common stock, and was listed on the 2022 Bloomberg Gender-Equality Index.
“We believe the actions taken to date provide us with significant liquidity and flexibility to weather the continued impact on our business, primarily driven by COVID-19,” Chief Financial Officer Robert Stephenson said. “The steps taken over the past 12 months also provide us with the tools we need to continue to evaluate and act upon any additional actions that may be needed to further enhance our liquidity or improve shareholder value.”