Omega Healthcare Investors’ fourth-quarter 2023 operating performance continued to improve as occupancy moved past 80% in its core portfolio of senior living communities and nursing homes, but restructuring efforts with some operators continued to be a drag on the portfolio, according to CEO Taylor Pickett.
“As a result, we anticipate our 2024 first- and second-quarter earnings to continue to be impacted by these restructuring efforts, although we expect earnings will improve as the year progresses and our operator issues are resolved,” Pickett said Thursday during the Hunt Valley, MD, real estate investment trust’s fourth-quarter and full-year 2023 earnings call.
Westport, CT-based Maplewood Senior living was one of nine operators represented in Omega’s deferral of $33.6 million in contractual rent in the first half of 2023. Omega had entered a formal restructuring agreement with Maplewood in the first quarter of 2023, which included funding $22.5 million of capital expenditures through Dec. 31, 2025.
Maplewood short-paid its June 2023 rent by $1 million, and the company continued to short-pay its rent by $1 million per month during the third quarter of 2023. The REIT recorded $17.3 million in revenue from Maplewood during the third quarter. During the nine months that ended Sept. 30, Omega had allowed Maplewood to defer a total of $1.3 million in contractual rent and interest.
Maplewood paid $11.6 million in rent during the fourth quarter and $3.8 million in rent in January. Pickett said he believes that the operator is “well positioned” in the longer term to return to full contractual rent, potentially by year-end but “definitely going into 2025.”
“Maplewood continues to see strong performance across the portfolio, with 16 of its 17 facilities fully stabilized,” Chief Operating Officer Dan Booth said, adding that occupancy at its Inspir Carnegie Hill property in Manhattan is at 65%, and Maplewood sees a path to stabilization at that building soon, with expected rent increases of 7% to 8% this year.
Maplewood, he added, recently received 2024 Best of Senior Living Awards from A Place for Mom for all of its communities. Maplewood also was awarded a Top Provider Award as one of four organizations to have all of their communities recognized as top 1% to 2% performers nationally.
Occupancy at 80.2%
Occupancy for Omega’s overall core portfolio, which includes senior living communities as well as nursing homes, continued its recovery from a low of 74.6% in January 2022 to 80.2% in mid-January 2023. This compares with core portfolio occupancy of 83.2% in the fourth quarter of 2019, before the COVID-19 pandemic began.
“With operating metrics improving, state and federal support remaining predominantly solid, and favorable demographics set to provide a tailwind to industry occupancy for the foreseeable future, we believe the most significant challenges of the post-pandemic period are behind us,” PIckett said in a statement.
In the fourth quarter, Omega made $249 million in new investments, including $51 million in real estate acquisitions and $31 million in capital renovation and construction projects. For the full year of 2023, the company completed $667 million in new investments.
The company sold 32 facilities for $324 million in the fourth quarter and 69 facilities in the full year 2023 for a total of $485 million.
As of Dec. 31, Omega’s portfolio consisted of more than 860 operating facilities located in 42 states and the United Kingdom, and operated by 69 different operators. At that time, the portfolio included 24 Brookdale Senior Living communities and 17 Maplewood communities.
