Omega Healthcare Investors, Inc. Aktie

Ladies and gentlemen, thank you for standing by. Welcome to Omega Healthcare Investors Inc. First Quarter Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Michele Reber. You may begin.

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett; President, Matthew Gourmand; CFO, Bob Stephenson; CIO, Vikas Gupta; and Megan Krull, Senior Vice President, Data Intelligence and Government Relations.

Comments made during this conference call that are not historical facts may be forward-looking statements, such as statements regarding our financial projections, potential transactions, operator prospects and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC.

During the call today, we will refer to some non-GAAP financial measures, such as NAREIT FFO, adjusted FFO, FAD and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega.

I will now turn the call over to Taylor.

Thanks, Michele. Good morning, and thank you for joining our first quarter 2026 earnings conference call. Today, I will discuss our first quarter financial results and certain key operating trends. First quarter adjusted funds from operations, AFFO of $0.82 per share and FAD funds available for distribution of $0.78 per share reflects strong revenue and EBITDA growth, principally fueled by acquisitions and active portfolio management.

Our dividend payout ratio has dropped to 82% for AFFO and 86% for FAD. Our exceptional first quarter results reflect our high-quality capital allocation throughout 2025 and the first quarter of 2026. We continue to find and close the RIDEA transactions while still allocating meaningful capital to SNF facilities and U.K. care homes. We expect our capital allocation and active portfolio management will drive significant future AFFO and FAD growth.

Our active portfolio management is highlighted by our planned and partially completed second quarter sales, generating $480 million in proceeds. We expect the redeployment of this capital will result in approximately $0.03 of annual AFFO and FAD accretion.

I will now turn the call over to Matthew.

Thanks, Taylor, and good morning, everyone. We have spoken in previous calls about the team's focus on creating shareholder value by growing FAD per share on a sustainable basis, and we saw this focus continue to bear fruit in the first quarter as our FAD per share increased 9.5% over the same quarter last year. This, along with a robust pipeline of investment opportunities gave us comfort to be able to increase the low end of our AFFO guidance moving the midpoint up by $0.02 to $3.22.

At the same time, our first quarter investments reflect the breadth of our capital allocation focus. We invested in both triple-net and RIDEA structures in skilled nursing, seniors housing and long-term care real estate across the United States, the U.K. and Canada. And we closed on our equity investment in Saber's operating company.

In addition, we are in the process of selling a portfolio of 18 CommuniCare assets for $480 million. Vikas will provide additional details around the sale. However, from an overarching perspective, it was about putting assets into the hands of strong stewards at a price that made sense for each party while also enhancing our credit with CommuniCare. While we would not expect to see this be a core element of our capital allocation strategy, we will continue to evaluate our portfolio and work with our operating partners to find innovative ways to both protect and enhance shareholder value over time.

Finally, I would like to thank the team who continue to work tirelessly to execute on our vision as well as our operating partners and their staff who work every day to look after some of the sickest and most frail members of our community. Without them, none of this would be possible.

I will now turn the call over to Vikas.

Thank you, Matthew, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio, including an update on Genesis, additional detail on our strategic sales, Omega's investment activity year-to-date and an update on our pipeline.

Turning to portfolio performance. Core portfolio coverage continues to trend in a favorable direction above industry average coverage levels with our trailing 12-month operator EBITDAR coverage for our triple-net and mortgage core portfolio as of December 31, 2025, at 1.58x compared to our third quarter 2025 reported coverage of 1.57x. This represents the highest coverage in our portfolio in over a decade and reflects the combination of a relatively favorable operating backdrop, combined with our active portfolio management, where we have focused on strengthening the lease credit across our portfolio.

The Genesis bankruptcy process continues to move forward with a few notable events having taken place in recent weeks. In March, we committed to fund up to $26.7 million or 1/3 of a new aggregate $80 million DIP loan. As of the end of the first quarter, we have funded our $25 million portion of the initial $75 million advance.

Proceeds from this new super-priority DIP financing were used to fully repay the original DIP loan and to fund working capital needs. Additionally, the debtors have advised that 101 West State Street has submitted a qualified financing commitment as required by the asset purchase agreement. The closing date, which can contractually be extended to the end of the third quarter, is conditioned on several factors, including receipt of regulatory change of ownership approval. We anticipate that 101 West State Street will assume our Genesis master lease and our DIP loan and term loan will be paid off from the consideration received by the debtors at closing.

We remain confident that our term loan is fully collateralized based on the underlying collateral and the ascribed value of the Genesis estate. These assumptions, along with all elements of the bankruptcy process are subject to further developments and events in the bankruptcy proceeding. As Taylor and Matthew mentioned, we're in the process of a strategic sale of 18 CommuniCare assets located in Maryland and West Virginia, for a contractual purchase price of $480 million and our rent discount at a blended 7.7%.

Subsequent to quarter end, 12 Maryland facilities were sold, and we expect the remaining 6 West Virginia facilities to be sold in the second quarter. While asset sales are not typically a core component of our capital allocation strategy, the strong pricing offered for these facilities, combined with the improvement of our credit with CommuniCare, presented an opportunity to realize significant value for our shareholders.

Turning to new investments. Our transaction activity for 2026 started strong with $326 million in new investments year-to-date. Similar to previous quarters, these transactions varied in size and asset type but demonstrate our ability to continue to develop, underwrite and close accretive transactions in our core asset classes. We continue to support the growth of existing and new operators in the U.S. skilled nursing space and U.K. care home space as well as expand our new senior housing RIDEA portfolio. As Matthew said earlier, our primary goal is to allocate capital with a focus on growing FAD per share on a sustainable basis.

During the first quarter of 2026, Omega completed a total of $251 million in new investments, not including $13 million in CapEx. These new investments included the previously announced purchase of 9.9% of the equity interest in Saber's operating company, the $109 million acquisition of 13 Georgia skilled nursing facilities and a $10 million investment in Alabama Senior Housing RIDEA transaction. Our other first quarter investments included the purchase of a U.K. care home for $7 million and $27 million in real estate loans. The weighted average yield on these leases and loans was 10.9%.

Subsequent to quarter end, we closed $75 million of additional investments. We purchased 2 Indiana skilled nursing facilities for $33 million and 3 senior housing facilities in Rhode Island for $42 million. The skilled nursing facilities will be leased to a current Omega operator at a lease yield of 10% and the senior housing facilities will be operated by Omega and managed by a third-party manager via RIDEA structure.

Turning to the pipeline. Our pipeline includes both marketed and off-market opportunities in the U.S. and the U.K. A large component of these opportunities are U.S. senior housing assets that will be structured and operated using our new RIDEA platform. As mentioned previously, we've built out our infrastructure at Omega with an experienced team of investment professionals that are finding deals that meet our investment criteria and then coupling them with proven third-party managers, who we believe will deliver on those underwritten expectations. We continue to pursue deals that will achieve IRRs in the mid-teens range.

In addition to senior housing RIDEA deals, we are aggressively pursuing both U.S. skilled nursing and U.K. care home deals. In the U.K., we've built out our team to help find off-market transactions and quickly evaluate opportunities with existing and new operators in order to continue to deploy meaningful capital through both triple-net and RIDEA structures.

I will now turn the call over to Bob.

Thanks, Vikas, and good morning. Turning to our financials for the first quarter of 2026. Revenue for the first quarter was $323 million compared to $277 million for the first quarter of 2025. The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2025 and '26, annual escalators and active portfolio management. Our net income for the first quarter of 2026 was $159 million or $0.47 per common share compared to $112 million or $0.33 per common share for the first quarter of 2025.

Our adjusted FFO was $260 million or $0.82 per share for the quarter, and our FAD was $247 million or $0.78 per share, and both are adjusted for several items outlined in our NAREIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our first quarter financial supplemental posted to our website.

Our first quarter 2026 adjusted FFO and FAD were both $0.02 greater than our fourth quarter, AFFO and FAD, with the increase primarily resulting from incremental net income from $585 million in new investments completed during the fourth and first quarters, and revenue from annual escalators of $2 million. These were partially offset by income related to $53 million in asset sales and $88 million in loan repayments over the past 2 quarters, resulting in a $1.4 million reduction to our first quarter adjusted FFO and FAD as well as the impact from the issuance of a combined 7.7 million common shares of stock and OP units over the past 2 quarters to fund the new investments.

Our balance sheet remains incredibly strong. Our debt is well laddered, and we have significant liquidity. At March 31, we had $425 million in borrowings on our credit facility. However, we also have $26 million in available cash and assets held for sale, which we expect to sell for approximately $480 million. Additionally, we have over $1.5 billion in available capacity on our $2 billion revolver with our next scheduled debt maturity not until April 2027. At quarter end, our fixed charge coverage ratio was 6.3x, and our leverage remained flat at 3.5x. We are excited as our balance sheet and cost of capital continue to position us to accretively fund our active pipeline.

Turning to guidance. As we press released yesterday, we narrowed our full year adjusted AFFO guidance to a range between $3.19 to $3.25 per share. This is a $0.02 increase over the midpoint of our February guidance. I'd like to take a moment to highlight a few of the guidance assumptions we outlined in our earnings release. Our guidance includes the impact of new investments completed as of April 27 and does not include any additional investments not outlined in our press release. It includes the impact of scheduled loan repayments and expected asset sales. Of the $159 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $65 million will convert to fee simple real estate and that the balance will be repaid.

Additionally, $224 million in non-real estate backed loans at March 31, 2026, are expected to be repaid throughout 2026, which includes approximately $159.5 million in Genesis loans. The 18 CommuniCare facilities in assets held for sale are expected to be sold for $480 million. Our Q1 rent related to these facilities totaled $9.2 million. The high end of the range in our guidance includes, but is not limited to, timing or potential extension of loan repayments and asset sales, additional cash from Maplewood as well as other cash-based operators, and G&A at the lower end of the guidance range, just to name a few. Our 2026 adjusted FFO guidance does not include any additional investments, asset sales or capital market transactions other than what I just mentioned or that was included in the earnings release.

I will now turn the call over to Megan.

Thanks, Bob, and good morning, everyone. With the budgetary season well underway in most states, we continue to watch for any signals of state reactions to the OBBBA as it relates to long-term care. As expected, things have been relatively quiet with most meaningful discussions not expected until sometime next year. On a separate note, over the last year or so, Medicare Advantage has come under scrutiny due to allegations of upcoding, high denial rates, delayed payments and cost savings not keeping pace with expectations. Last week, bipartisan legislation was introduced in Congress, applauded by industry associations, which addresses just these types of concerns.

While I noted last time that Medicare Advantage represents a relatively low portion of our operators' business, the momentum behind fixing these issues is important to our industry as similar issues arise in managed Medicaid. Indiana, for instance, who implemented managed Medicaid back in 2024 has decided to unwind that program, specifically for the long-term care population in nursing homes for very similar reasons that we see in Medicare Advantage. We applaud these efforts to deal with these fundamental structural problems head on to ensure that our payment systems align with the needs of this frail and vulnerable population.

[Operator Instructions] Your first question comes from the line of Nick Joseph with Citi.

This is [Lauren] on for Nick. Could you please elaborate on the rationale behind the CommuniCare asset sales and whether or not they're indicative of broader conditions in the Maryland and West Virginia markets?

Yes, it's Matthew here. So the primary reason for the disposition was opportunistic. We had an opportunity to sell assets and enhance our credit with CommuniCare. We were able to get a bid that we thought was fair to both parties. I think a little bit of it is a reflection of these are both relatively hot markets right now, both Maryland and Virginia markets that people are looking to acquire. So we took advantage of that to a certain extent. But I don't think you can expect us to be doing this as part of the core business. Occasionally, we will look to divest of assets. In this situation, we were also able to enhance our credit. So to the extent that we can continue to do that, we will. But as we look out through to 2026, I don't think you're going to see any large dispositions like this happening in the next few quarters.

Your next question comes from the line of Richard Anderson with Cantor Fitzgerald.

So when you think about your external growth strategy through all the different layers, you mentioned SHOP, skilled and care homes. Can you talk about your comfort level on the initial yield. I know we talked about this math at some length. But how low in the initial yield spectrum are you willing to go if you have line of sight into a reasonable IRR over the long term? Just curious what your thought process is there.

Yes. I don't think we have a number. I would encourage the team internally not to see this as a competition to see how low we can go. I think it's more really about trying to find the long-term opportunity. If there truly is a situation today that there's a lot of low-hanging fruit that we can fix immediately. I don't think that there's a number necessarily would ascribe to the lowest we would go. I think we really have to look at a, what the long-term opportunity is and b, the visibility around that. Obviously, we'd be less reluctant to take a swing at things where there's cost saving opportunities that we know a better manager can operate. I think situations where you're looking at a facility that maybe has very low occupancy and historically had low occupancy, relying on a paradigm shift in that occupancy is probably a level of naivete that we wouldn't necessarily look to underwrite to. But it's kind of contingent on the opportunities that present themselves in the risk-adjusted return that we assigned to that.

So like when you think about value-add like a low initial cap rate kind of concept, do you think it will be like a 50-50 split in terms of your -- what you're looking at today relative to a more stabilized entry-level?

It kind of depends what the market presents us, Rich. What you're finding right now is the stabilized assets that have both stabilized margins, high occupancy, relatively newer vintage. They tend to be coming in at lower yields but without that upside. So from that standpoint, we have been fortunate enough to find stuff that is kind of stabilized 7%, 8%, 9% that we think with a relatively easy lift we can take into the double digits. But I don't think that we're going to be looking at the true stabilized assets with the 7% where you're relying on predominantly rate increase to exceed costs to be able to drive that growth because occupancy and rate to a certain extent, are already fully baked in. So from that standpoint, I think that most of the stuff we're going to be looking at is what we would say is value add.

Okay. And then my second question is on RIDEA, will you take that show on the road a little bit in terms of looking at opportunities in the U.K. with the RIDEA mindset?

Yes. This is Vikas. Yes. We actually are looking at a few opportunities right now. So it will become part of our strategy in the U.K. going forward.

Next question comes from the line of Michael Goldsmith with UBS.

I am here with Dustin [Hausvik]. Maybe sticking with the CommuniCare, we estimate the cap rate was roughly 7.7% based on the contractual rent, but maybe it was a little bit lower given the EBITDAR coverage and assuming the rent is renegotiated. So is that right? And then also, why do you think the private market for U.S. SNFs is so competitive right now? And is the best path forward for Omega to focus more on other segments until the competition cools for business?

Your math is correct. So you are getting A for that. And yes, I think right now, the competition has been strong for a number of years. I think a lot of people are looking at this as a long-term secular play. That's part of the reason we really like the space. Ultimately, there's been no net new supply for over a decade in this space. Most states have some sort of restriction on new supply. So to the extent that an operator is getting in today, even with, let's say, it was a mid-6s yield, if they believe that occupancy is going to continue to improve and that they can run these facilities well, the operating leverage that exists within the business alone can move this into the high single and low double-digit yields over time for them. And then they have the opportunity once these buildings to stabilize to finance them through HUD, which is obviously at a relatively low cost debt.

So while there's a strong bid in the market, we don't think it's an irrational bid. We just think that it's reflective of the long-term secular plays that exists. And one of the reasons we aren't looking to sell prodigious amounts of our skilled nursing. In terms of opportunities, yes, we're seeing less of them, but we're still seeing select opportunities. So I think we're just going to -- we're not going to rule out or stop looking at skilled nursing. We're just going to continue to remain very disciplined and look for opportunities that align with what we're trying to achieve from a FAD per share growth standpoint.

Got it. And as a follow-up, I noticed another quarter of healthy investment volume for your new SHOP segment. So maybe you can provide some color on the economics of the Rhode Island portfolio. Does Omega take more of a hands-off approach to its SHOP operations given it's still a small segment or are you in the process of building out a data platform and other standard operating procedures related to SHOP.

Yes. So this Rhode Island deal falls right in the category of everything we've been talking about in our SHOP world. We are underwriting to stabilize mid-teen IRRs. And it just follows all the protocols we've been saying. We use our data, our underwriting, our entire team to get around that. So it's just a typical RIDEA deal value-add in our book.

And then the only thing I'd add is you're right. Obviously, we don't have the level of experience and sophistication of some of our peers who've devoted years and significant amounts of money to rolling out various different technologies and have experience in that side of things. I think our attitude right now is we spend an awful lot of time both hiring people internally who have great experience in the space, but also developing relationships as a team to understand really strong operators. And our attitude as of now is we are hiring them because of their expertise.

And for us, given our relative lack of expertise in the space, to start second-guessing them straight out of the gate, would probably be naive at best. So from that standpoint, while we obviously, by our very nature, extremely focused on what they're doing and seeking to learn from them and understand from them. I don't think we're in a position to necessarily tell them how to run their businesses at this point in time. That's effectively what we're hiring them to do on our behalf.

Your next question comes from the line of Julien Blouin with Goldman Sachs.

I guess I just wanted to touch on the level of competition you're seeing in the transaction market specifically in U.S. senior housing RIDEA structures. I mean we're seeing a lot of capital flowing into this space. And so -- just wondering if you're finding it may be increasingly more difficult to achieve sort of those mid-teens IRRs you're targeting?

Yes. So it is competitive. As you know, there's a lot of players in this space now. But as Matthew mentioned, we are looking at a lot of value-add product, and we're finding it. The team is going out there. We're reviewing all transactions. And if it fits, it fits -- so at the same time, everyone has its own underwriting criteria. And for what we're looking for, we continue to find assets.

Okay. Great. And then back to the CommuniCare sale, I mean, yes, clearly, a strong cap rate just on current rents, but even if we were to assume a resetting of rents to more like your average EBITDAR coverage of 1.5x that would mean an even sort of lower cap rate. I guess like -- is it -- what kind of buyer is it? Is this a buyer that really sees the potential to, I don't know, change management of the assets and improve operations. Is that a key part of their play?

I can't speak to what their rationale was behind that. What I can tell you is their long-term players in the space, highly established, look to own the operations and the properties. And I think that belief is kind of as we spoke to earlier, that there is a 20-year secular play here and that the price that they pay for these assets today in 10, 15 years' time, may actually look an extremely good buy given the fact that there's no new supply coming online in most states. So they are an established player, reputable. Other than that, I can't speak to what their plans are for the business.

Next question comes from the line of Omotayo Okusanya with Deutsche Bank.

I just wanted to talk a little bit about Medicare Advantage a little bit. I think you've kind of seen a bunch of health care providers report over the past last week, UnitedHealth, Humana, they all kind of talking about CMS Medicare Advantage and the rollout of all these value-based care systems. Some of them seem to be adopting really well. Some of the people are kind of struggling with it. I'm just kind of curious, again, when you were thinking about what the potential impact of this kind of more aggressive rollout of these value-based programs are in 2026, 2027, I mean how do you kind of see that impacting kind of skilled nursing referrals from the hospitals? And does that kind of change anything from that perspective? And how do you expect skilled nursing operators to kind of react to all this kind of potential kind of value-based programs that are now infiltrating the system, so to speak.

Like I said last time, the Medicare Advantage isn't a huge piece of our business. It definitely has less of a penetration in the skilled nursing space than it does in the general Medicare population. And so this point, there's not much in the way that it impacts our operators other than there are certain areas that have higher Medicare Advantage penetration. Sometimes those rates are materially lower than Medicare and sometimes that means taking a Medicaid resident might make more sense than taking a Medicare Advantage resident at times. And so as an industry, I think there's sort of a big pushback about trying to get those rates up to more reasonable numbers.

And like I said in my talking points, there's legislation last week to deal with some of these other issues that are going on like the high denial rates where typically you might have a high denial. But then if you push back, it will get approved, right? And so you shouldn't have that type of thing going on. But I think the value-based care is a big thing, and it's something to watch for all of us. And I think ultimately, we try to partner with the most sophisticated operators who've really got plays into their game plan really well.

That's helpful. And then just occupancy trends in the past few quarters have kind of stagnated. Just kind of curious what may be happening there? Is this stuff kind of changing with shift mix? Or how do you kind of think about that just kind of given the overall backdrop of kind of aging U.S. demographics and limited new supply.

I don't think there's any read through over a few quarters as to what the occupancy is doing. The demographics are here and coming. And so ultimately, you will see that needle move. And ultimately, when you look at our performance, the coverages provide ample coverage for our rent. And so we're good with where things are, and we expect to see the occupancy increase in the next year or 2.

Next question comes from the line of Nick Yulico with Scotiabank.

Next question comes from the line of Kilichowski with Wells Fargo.

My first question is just on the transaction market. Earlier, we talked about the competitiveness of SHOP, but I actually would be interested in talking about the competitiveness of the SNF landscape today. There's been a vacuum at least of REIT capital, but assuming that some other capital is as well moving from skilled nursing and into SHOP. Are you finding it incrementally any easier to transact in the SNF space given the money that's moving over? Or is it still heavily competitive?

This is Vikas. The short answer is heavily competitive. We were able to find an off-market larger deal than we did in the first quarter, but it is competitive. And a lot of that is coming from the family office space still. And otherwise, we're just not seeing a lot of trading at this time that we like and that fit our investment criteria.

Okay. Got it. Very helpful. And then my second one for you is we've got Tim Walz legalizing alcohol in Minnesota, what are we thinking for new build-outs? So Speakeasies or local pub vibes? Is this Medicaid reimbursed? Are non-tenants going to be allowed in.

I don't think that's necessarily something that we're looking at right now. Obviously, we have a history of partnering with operators who evolve, no matter what the operating backdrop is, even if that includes the use of things previously prohibited in the facility. So I suspect that our operators will try no matter what the circumstances are.

Next question comes from the line of Nick Yulico with Deutsche Bank.

This is Elmer Chang on for Nick. Sorry about that earlier. My phone dropped. And sorry if I missed this, but my first question is on recent senior housing RIDEA communities that you've been acquiring and as you further build out that platform? I know it's dependent on the opportunities that may be closer to stabilized assets. But how should we think about underwriting NOI upside to earnings for those recent acquisitions?

Yes. It's tough for me, thankfully, we're a $14 billion company. We've put a couple of hundred million dollars out, right? So from that standpoint, I don't think it's going to move the needle that much. I mean I think if you're looking generally Elmer, the idea that it may be I don't want to put a number in, but blended between 7% and 9% coming out of the gate on these things. I don't think you're going to be too far off. And then obviously, hopefully, that will meaningfully improve over time. But again, given the relative size of it right now, I think if you're in that ballpark, missing or exceeding expectations is probably going to be limited given the relative size.

Okay. Got it. And I guess second question is just going back to the planned CommuniCare sale. What assumptions in terms of initial yields and future growth or driving your estimates for the $0.03 of accretion to FAD that you expect? And how much of the $480 million that's to be reinvested or maybe already deals under LOIs or under contract.

So we went back and forth on what the number was. I want to say $0.04 because technically putting it back to work at a 10 gives you $0.035 -- and that rounds up, but we decided to be conservative. So the number is probably in the low 9s in terms of what we're saying, I still think we're going to expect to deploy capital in the 10s, but that's kind of the math around it. And then, yes, I mean, we're not going to talk too much about what's in LOIs today, but this is really -- it's an interesting market that we're in right now because to a certain extent, in senior housing and skilled nursing and care homes, you're seeing probably more appetite and more players than we've seen in well over a decade.

This is clearly a space that is exciting people and creating interest. And as a result, there are more competitors out there. But we still, as we look out in the portfolio, see significant opportunities across all 3 platforms. And so from that standpoint, I don't want people being confused that just because it's a competitive market that we don't think that the pipeline isn't going to be pretty robust for us over the next 24 months. We're just going to have to be more selective, more creative sometimes in our structuring and just be on the road, quite frankly, and find more off-market deals through relationships.

So from that standpoint, I think we're in a pretty good place going forward. But nonetheless, it is pretty competitive.

Next question comes from the line of Michael Carroll with RBC Capital Markets.

I wanted to circle up on the Saber equity deal. I know that there's a minimum yield to that transaction, it looks like the initial yield is coming in a little bit higher than that. Is this something that we should assume grows at a high single-digit, low double-digit rate each year just given the organic growth outlook that you're starting to see in skilled nursing facilities and maybe as you layer on new acquisitions in Saber can continue to grow externally. I mean, is that a good ballpark to think about the growth outlook that, that equity investment could potentially generate?

Yes, this is Vikas. Let me answer that a little differently. As we've said before, you're speaking of our Saber investment, Saber is a private company, so we can't release financial information for them, but we are very happy with our investment to date. It is beating expectations, and we're getting a return slightly above what we thought we would get. Saber plans to keep growing and they think like us, good, smart transactions that are accretive. So we just plan that there will be further growth here above our underwritten expectations.

Okay. No, that's helpful. And then just kind of circling back up with Maplewood. Has there ever been any discussions to kind of transition that Maplewood investment into like a pure RIDEA contract? I mean I know that Omega still gets a lot of that upside just given how it's structured on the net lease side. But does it help to just simplify that agreement, so everybody knows what needs to happen on that front? I mean, is that in the discussions at all?

To be honest, that's what we're doing right now. We see it as a RIDEA asset now. So we don't see the need to do that. We've thought about it from time to time. But right now, we are truly treating this like a RIDEA asset. All of the cash flow comes to Omega and the team receives promotes for hitting certain cash flow hurdles. So at this point, we don't see a need for it.

Next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just curious on the building out of the team in SHOP or RIDEA. How we should think about that? Is that more on trying to source opportunities? Or is that more or maybe inclusive of building out the asset management capabilities?

Again, this is Vikas. The answer is all of the above. We've hired a lot of smart people here to help us step up our investment criteria underwriting abilities to go out there and find more relationships. To give you an example, we have boots on the ground in the U.K. now to go out there and find off-market transactions for us. Additionally, both on asset management and accounting, we've hired a good bit of people to help us manage our transactions after they close.

And then just curious, there's some news about litigation and some punitive damages awarded to victims that the REIT was held culpable at the time it was Colony Capital, now DigitalBridge. Just curious on your thoughts there and does that change the calculus at all and/or make you less hesitant on these transactions potentially in states like California, where there's more litigious?

I would like to think that, that was a one-off unique situation because REITs do not get involved in the operations and are not involved in the patient care. And so to hold a REIT accountable for care that they're not providing does not make sense. But we'll continue to watch the various different areas and make sure that, that's part of our investment thesis.

Next question comes from the line of Wes Golladay with Baird.

I just wanted to have a quick question on how the SNF pipeline is evolving for the broader market. Are you starting to see more operators stabilizing assets and going directly to HUD?

Yes. This is Vikas again. I mean, to be honest, we're not seeing a lot of SNF assets trading at all right now. So again, I think people are sitting on their assets and taking them to HUD. We've also -- we've seen broken deals pop up from time to time. And so I think we're going to start seeing some more of those as well in the future.

And for those, would you look to loan on those or buy them outright?

Buy them outright.

Next question comes from the line of Vikram Malhotra with Mizuho.

I guess just to, one, you've had a nice pickup in FAD over the last several quarters. I'm wondering sort of what our latest thoughts on the dividend pushing that higher -- and then just, I think, Matthew, you made a comment on like focusing on the per share FAD growth. With all these different levers you've outlined, like where do you think that could trend to from today's growth?

Yes, a fair question. In terms of the dividend outlook, obviously, it's a Board decision. But when you think about Q1 of '25 at $0.71 of FAD Q1 this year at $0.78 of FAD and all the same tools in place to replicate that type of performance. I would think by year-end, the Board is going to start to need to have conversations about our dividend. And really, it just comes down to velocity of putting some of the capital back to work because the escalators are in place, the portfolio is stable.

We have excess cash flow rolling into the balance sheet into investments, and then you have the pipeline. And it's just how fast we recycle those dollars. We will get there, whether it's Q1 of '27 or Q2 of '27, the tools are all there for us to perform at that level of growth.

Next question comes from the line of Michael Stroyeck with Green Street.

Maybe going back to the earlier question on U.K. RIDEA. How does the competitive backdrop within the U.K. compared versus the U.S.? And has there been the same level of cap rate compression that we've seen in the states?

Yes. So there are some new players in the U.K. But again, through our relationships, we continue to find a good bit of deal activity out there that we can do at our current cap rates where we are still quoting 10%.

And that goes for the RIDEA side as well?

Yes. And that goes for RIDEA as well. Again, a little bit of our RIDEA growth there will be through our current relationships. So yes, same thing goes for RIDEA as well.

Got it. Got it. And then maybe one question on Maplewood. Last quarter, you outlined, call it, high single-digit rate increases across that portfolio. Can you just provide an update on how 1Q has progressed on that front?

Yes. I mean the net increases were just that, high single-digit increases with both D.C. and New York being at the very high end of it.

Next question comes from the line of Farrell Granath with Bank of America.

This is Farrell Granath. I first just wanted to ask about how you consider or think about the balance between triple-net with potential revenue upside baked into the contract or a pure-play RIDEA and how you consider that in your acquisition pipeline?

So you say triple-net with revenue upside?

With the revenue participation similar with Maplewood?

So yes, I mean, the Maplewood situation is kind of contrived from the background, right? In terms of that's how the deal started. At the end of the day, there is an operating team that have an operating company that have the rights to those operating profits if and when those profits exceed our rents. So I don't think -- I don't think we'd necessarily be looking to create that situation again.

As you say, we have had these situations where we've effectively provided a lease with upside upon value realization. And that's worked reasonably well. I think a lot of that was our first foray into some level of participation in the upside. But now we have kind of torn the Band-Aid off and gone full RIDEA. I think that's probably where our preference lies. But at the same time, it's very much about creating that alignment of interest with our partners, right? So if someone else wants to participate in that upside and is willing to put capital in, we're open to creative situations, be they JVs, be they leases with upside, be they some form of debt that can convert to equity over time.

We're really pretty agnostic as to that. I think the thing that we believe right now is that we have a strong underwriting ability and an ability to understand where value can be created. And as long as we see where that value can be created and we can share in that value, I think we can structure the deal however it works for our operating partners and us.

And I guess also on a similar vein, when selecting the operators themselves to enter on to your SHOP platform, how do you think about or underwrite these operators in your selection? Do you have more of a focus on scaled operators or those that are maybe smaller looking to expand rapidly?

We are looking for experienced operators who have a proven track record, and they tend to be regional. They know those markets well, have performed in those markets before. And to be honest, it's a process. We interviewed several managers, and we picked the best one that fit all of those criteria.

There are no further questions at this time. I will turn it back to Taylor Pickett for closing remarks.

Thanks all for joining us this morning. Please follow up with the team with any additional questions. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Dan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors Inc. Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Michele Reber, please go ahead.

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett; President, Matthew Gourmand; CFO, Bob Stephenson; CIO, Vikas Gupta; and Megan Krull, Senior Vice President, Data Intelligence and Government Relations.

Comments made during this conference call that are not historical facts may be forward-looking statements such as statements regarding our financial projections, potential transactions, operator prospects and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. During the call today, we will refer to some non-GAAP financial measures, such as NAREIT FFO, adjusted FFO, FAD and EBITDA.

Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega.

I will now turn the call over to Taylor.

Thanks, Michele. Good morning, and thank you for joining our fourth quarter 2025 earnings conference call. Today, I will discuss our fourth quarter financial results and certain key operating trends. .

Fourth quarter adjusted funds from operations, AFFO, of $0.80 per share and FAD, funds available for distribution of $0.76 per share reflects strong revenue and EBITDA growth principally fueled by acquisitions and active portfolio management. Our dividend payout ratio has dropped to 84% for AFFO and 88% for FAD. 2025 was a great year for our team. Full year AFFO and FAD growth exceeded 8% year-over-year, driven in part by $1.1 billion in capital deployment. In addition, the credit quality of our operators continue to improve as a result of active portfolio management and the overall improvement in industry fundamentals.

During the fourth quarter, we closed 2 RIDEA transactions totaling $80 million. We significantly expanded our Saber relationship, and we committed capital in Canada, all of this while delevering and strengthening the balance sheet. Our momentum from 2025 should carry us forward for another strong year in 2026. We will continue to actively manage and enhance the credit quality of our operating relationships. We will continue to deploy meaningful capital across all of our geographies and property types, including our new RIDEA platform. It is likely by year-end that Saber will be our largest source of revenue. Furthermore, by year-end, it is likely that we will have the strongest tenant credit profile and balance sheet in Omega's history.

I will now turn the call over to Vikas.

Thank you, Taylor, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio, including an update on Genesis as well as Omega's investment activity for 2025, including fourth quarter and subsequent closes, we will also give an update on Omega's pipeline and market trends for 2026.

Turning to portfolio performance. Omega has investments in 1,111 facilities consisting of 1,027 in our owned real estate and mortgage loan portfolio, 84 facilities in joint ventures with operating partners and third-party real estate investors. Of the total number of facilities, 62% are skilled nursing and transitional care facilities and 38% are U.S. senior housing in U.K. care. Trailing 12-month operator EBITDAR coverage our triple-net and mortgage core portfolio as of September 30, 2025, increased to 1.57x compared to our second quarter 2025 reported coverage of 1.55x. Core portfolio coverage continues to trend in a favorable direction, above-industry average coverage levels, and as discussed in prior quarters, provides us with confidence that our operating partners have sufficient means to provide superior clinical service to residents. In addition to the strong credit support this provides for existing investors, these coverage levels enable Omega and our operating partners to continue to grow our respective businesses.

As reported previously, Genesis filed for Chapter 11 bankruptcy protection in July 2025. As a reminder, Omega releases Genesis' 31 facilities for annual rent payments of $52 million. Our coverage continues to be above the mean coverage for our entire portfolio. Additionally, Omega has a $129 million piece of a term loan with Genesis which is secured by a first lien on essentially all of the assets of Genesis other than the AR, on which we have a second lien. We believe that the loan is fully secured. While the unsecured creditors committee has challenged the value of the loan collateral among other things, as part of the proceeding, we believe these arguments are without merit. Based on our lease coverage and collateral, we believe our credit position in this portfolio is strong.

The bankruptcy process is progressing with a few critical events taking place in the last few weeks, including a second auction of the Genesis assets and a related sale approval hearing. Per the judge's order after the results of the first auction of Genesis assets were not approved in November 2025. A second auction was held on January 13, and the winning bidder was a group known as 101 West State Street. This group's bid was approved by the bankruptcy court on January 26. The principals of 101 West Street currently operate approximately 60 facilities on the West Coast. As required, they have submitted a hard deposit of $54 million and have an aggregate of 85 days, inclusive of additional hard deposits needed for extensions to represent that they have procured market financing commitments, which with contributed equity satisfies the cash portion of its bid.

As previously reported, Omega committed to support Genesis by providing $8 million of a total $30 million debt earned possession loan. Genesis continues to pay us full contractual rent each month since filing bankruptcy. Due to the delays that came with having a second auction, the bankruptcy process is now anticipated to conclude in Q3 or Q4 of 2026. If 101 West Street consummates its purchase of the Genesis assets, Omega anticipates that it will assume our lease and the cash proceeds of the sale will be sufficient to cover the payment in full of our dip loan and term loan. These assumptions and time line, along with all elements of the bankruptcy process are subject to further development in events in the bankruptcy proceeding, and we cannot be certain of the outcome. There are no material open issues with any other large operators.

Turning to new investments. Omega's transaction activity in 2025 was very strong with over $1.1 billion in new investments. These transactions varied in size in nature, but demonstrate Omega's ability to adapt to the evolving investment landscape in the long-term care industry. In 2025, we continue to support the growth of our existing and new operators by focusing on strong credit back real estate and also closed on our first RIDEA transaction in the U.S. senior housing space. Of our total $1.1 billion in new investments a little over $700 million or approximately 66% was in senior housing facilities or U.K. care homes. Although we continue to invest in the U.S. skilled nursing sector to support and partner with best-in-class operators such as Saber. This demonstrates how we are focusing on all asset classes and deal structures to maximize returns for our shareholders.

As Matthew discussed on our last call, our primary goal is to allocate capital with a focus on growing FAD per share on a risk-adjusted basis. Accordingly, we have expanded our investment structures to now include RIDEA for U.S. senior housing and U.K. care homes with the goal of achieving higher risk-adjusted returns over time. We believe we are well positioned to enhance shareholder returns by acquiring underperforming assets at prices meaningfully below replacement costs. And then partnering with proven operators to enhance the cash flow and underlying real estate value of such assets. Our targeted return for our investment is an unlevered IRR of at least low to mid-teens not assuming any cap rate compression upon exit in our underwriting.

During the fourth quarter of 2025, Omega completed a total of $334 million in new investments, not including $31 million in CapEx. These new investments included the previously announced Saber JV real estate transaction, U.S. senior housing RIDEA transactions and various other real estate investments in the U.S. and the U.K. For our new RIDEA investments, we acquired 4 senior housing facilities located in New Jersey, Wisconsin and Indiana for $37 million. We have engaged 2 third-party managers to operate the facilities on our behalf. Additionally, we made a $43 million investment for a 49% equity interest in a Class A rental CCRC in North Carolina, which will also operate via a RIDEA structure.

Our other fourth quarter investments included the purchase of a U.K. care home for $16 million and $16 million in real estate loans. These additional investments were at a rate of 10% and the real estate loans have an option for Omega to realize upside upon a refinance or sale of the facilities. Subsequent to quarter end, Omega closed on $212 million of additional investments. As previously announced and anticipated, on January 1, Omega closed on the purchase of 9.9% of the equity interest in Saber's operating company for $93 million. Omega will receive a minimum 8% cash return on our investment. Cash flow from the Saber operating company is anticipated to support a greater payment, but cash will be retained for Saber's growth and all additional amounts due to Omega will be accrued.

As a reminder, this was step 2 of our overall investment in Saber. For step 1 was our $222 million real estate investment for a 49% equity interest in 64 facilities operated by Saber. The completion of our investment in the Saber operating company creates strong alignment between Omega and Saber with our geographic scope and capital and Saber's operational expertise, we collectively are in a unique position to evaluate growth opportunities and have optionality for deal structures, including our triple net master lease, the Saber Omega real estate joint venture and the Saber operating companies. We are actively evaluating additional opportunities to grow the Saber Omega relationship.

Also subsequent to quarter end, Omega closed on the purchase of 13 skilled nursing facilities located in Georgia or $109 million in 1 senior housing facility in Alabama for $10.3 million. The skilled nursing facilities will be leased to a current Omega operator and a lease yield of 10.6% and the senior housing facility will be operated by Omega and managed by a third-party manager via a RIDEA structure. Lastly, we are proud to announce that we have closed on a commitment to fund up to $64 million for the development of 5 replacement long-term care facilities in Ontario, Canada. The loan has a current pay interest rate of 10% and at Omega's option is convertible to a 34.9% equity stake in the borrower entity that owns 21 facilities. Omega's collateral for the loan is this entire 21 facility portfolio valued today at over $130 million.

Based on the credibility of our development and operating partner, a strong collateral for the loan, the wait list for long-term care facilities driven by demographics and the overall support of the Canadian government for the long-term care sector in Ontario. We believe this is a good risk-adjusted opportunity for our initial entry into Canada.

Turning to the pipeline. Similar to 2025, our pipeline for 2026 is strong. Market opportunities both in the U.S. and the U.K. continue to be substantial and we continue to see off-market opportunities through our operating partners, including our new RIDEA partners and managers. We continue to focus on growing our Rolodex and potential operating partners. As we have done for the past 2 decades, our relationships are a key component to our growth. As mentioned earlier, we continue to evaluate and focus on purchasing U.S. skilled nursing facilities, U.S. senior housing facilities in U.K. care homes with increased flexibility on deal structures to ensure that Omega and its shareholders are able to benefit from additional sources of income. Whether that be through variations on triple net lease structures, RIDEA for senior housing assets or U.K. care homes or strategic joint ventures.

I will now turn the call over to Bob.

Thanks, Vikas, and good morning. Turning to our financials for the fourth quarter of 2025. Revenue for the fourth quarter was $319 million compared to $279 million for the fourth quarter of 2024. The year-over-year increase is primarily the result of the timing and impact of revenue from net new investments completed throughout 2024 and 2025. Our net income for the fourth quarter was $172 million or $0.55 per common share compared to $116 million or $0.41 per common share for the fourth quarter of 2024. Our adjusted FFO was $250 million or $0.80 per share for the quarter, and our FAD was $238 million or $0.76 per share and both exclude several items outlined in our NAREIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our fourth quarter financial supplemental posted to our website. .

Our fourth quarter 2025 FAD was $0.01 greater than our third quarter FAD with the increase primarily resulting from incremental revenue related to the timing and completion of $485 million in new investments during the third and fourth quarters. Incremental Maplewood revenue as they paid $18.9 million in Q4, an increase of $200,000 compared to Q3. Lower net interest expense of approximately $1 million, resulting from bond and term loan payoffs in the fourth quarter. These were partially offset by $100 million in asset sales and $61 million in loan repayments over the past 2 quarters, resulting in a $2.1 million reduction to the fourth quarter FAD coupled with the issuance of a combined 7.8 million common shares of stock and OP units over the past 2 quarters to fund new investments. Our balance sheet remains incredibly strong as we continue to take steps to improve our liquidity, capital stack maturity ladder.

In the fourth quarter, we funded $334 million of new investments primarily by issuing 5.5 million Omega operating partnership units valued at $222 million. Additionally, in the fourth quarter, we reduced our funded debt by over $700 million as we repaid $600 million of senior unsecured notes, repaid a GBP 183 million secured mortgage loan and repaid the $428.5 million term loan all prior to their scheduled maturity dates. All 3 pieces of debt were repaid utilizing a combination of balance sheet cash or revolver and fully barring on the $300 million delayed draw term loan. Our next scheduled maturity is in April 2027.

In the fourth quarter, we also improved our liquidity as we entered into a new $2 billion ATM program. At December 31, we ended the quarter with $27 million in available cash on the balance sheet and over $1.7 billion of available capacity under our $2 billion revolver. Our fixed charge coverage ratio was 5.8x and our leverage was further reduced to 3.51x. We are excited as our balance sheet and cost of capital continue to position us to accretively fund our active pipeline.

Turning to guidance. As Taylor mentioned, our momentum from 2025 should carry us forward for another strong year in 2026. We are providing full year adjusted FFO guidance of a range between $3.15 to $3.25 per share, which includes the assumptions outlined in our press release issued yesterday. I'd like to take a moment to highlight a few of the guidance assumptions. It includes the impact of the new investments completed as of February 4 and does not include any additional investments not outlined in our press release and includes the impact of scheduled loan repayments and potential asset sales. Of the $213 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $157 million will be repaid and the balance will be converted to [ B ] simple real estate.

Similarly, of the $267 million in non-real estate backed loans that are scheduled to mature in 2026, it assumes $196 million will be repaid during 2026 which includes $137 million in Genesis loans, with the balance of the loans being extended beyond 2026. As I stated on our third quarter earnings call, we are always pruning and strengthening our portfolio through asset sales and our initial 2026 guidance includes approximately $15 million to $25 million per quarter in asset sales. The high end of the range in our guidance includes, but is not limited to, additional cash from Maplewood as well as other cash-based operators, timing or potential extension of loan repayments and asset sales, G&A at the lower end of the range to name a few. Our 2026 adjusted FFO guidance does not include any additional investments or additional capital market transactions other than what I just mentioned but what was included in the earnings release.

I will now turn the call over to Megan.

Thanks, Bob, and good morning, everyone. Last quarter, I mentioned the potential for an automatic 4% cut to Medicare related to the deficit caused by the OBBBA. Since then, the automatic reduction has been dealt with legislatively as has historically been the case and is therefore no longer an issue. Additionally, in December, HHS officially repealed the minimum staffing standards through an interim final rule an action that we applaud as the draconian nature of the rules stood to make the provision of and access to care more difficult.

Moving forward, we hope that this administration who has been so supportive of this industry, will work with industry leaders to find other ways to obtain regulatory rationalization going into 2026. Additionally, while Medicare Advantage has been a topic of conversation over the last week, with CMS proposing relatively flat rates in 2027 despite rising health care costs. I think it is important to point out that the impact to our portfolio would be minimal, if implemented as proposed. Not only are our current coverages as noted earlier by Vikas, able to withstand a certain level of expense pressure in the face of reimbursement not keeping pace. The percentage of our operators' revenue associated with Medicare Advantage is low.

With total Medicare accounting for less than 26.1% of overall operator revenue when excluding non-Medicare quality mix and a Medicare Advantage penetration arguably far less than the 50% plus you see in the overall Medicare population, only a small portion of the business is impacted by this news. While we are unconcerned with this latest development, we are still carefully watching state reactions to the OBBBA as well as the impact it may have on the overall health of our operators' referral sources. We continue to support the efforts of our operators, partners and industry associations in educating lawmakers both at the federal and state levels and the importance of the services provided by the long-term care industry and the need to fund it appropriately.

I will now open the call up for questions.

[Operator Instructions] Your first question comes from the line of [indiscernible] from Citi.

It's Nick Joseph here with Seth. Just wanted to dive in a little to the [ SHOP ] strategy? And kind of curious how you think of it being differentiated versus peers and the ability to grow just given the competition and the capital that has been moving into that space.

Sure, Nick. It's Matthew here. So I think the differentiation as much as anything is on 2 or 3 different fronts. Number one, we are looking at smaller deals tend to be relatively rifle shot deals as opposed to larger portfolio deals, you tend to find a little bit better economics in that situation. I would say a lot of the deals we're looking at are deals that need a little bit of love, a little bit of turnaround either lower occupancy, lower margin. We're aligning with operators who have expertise in that specific area. Be it the asset class that we're looking at and the region that we're looking at and have demonstrated the ability to turn around facilities like that.

So I think we're much more looking for the -- as Vikas said in his talking points, the low- to mid-teens IRRs, and the only real way to obtain that is taking assets that need a little bit more of a turnaround opportunity. And then obviously, we've structured the promotes as everyone tries to align our interests with those of our managers to make sure that they are sufficiently incentivized to obtain the financial returns that we're looking to achieve.

That's very helpful. As you think about kind of the turnarounds for those assets, do you assume that occupancy goes down initially? Or how do you underwrite at least the initial years of performance of those facilities?

Sure. It's a case-by-case basis. It's going to be determined on what we think needs to get done within those facilities, the ability of the former manager to market those effectively, the ability to push rate. Each one is very idiosyncratic. But needless to say, we spend a lot of time really understanding and scrubbing the reality of those numbers and the viability of those numbers to make sure that we're conservatively underwriting.

Our next question comes from the line of Omotayo Okusanya from Deutsche Bank.

This is Sam on for Tayo. I was wondering if you guys can give any update on [ PAC ], like do you guys have insight around the outcome of the federal investigation?

Yes, this is Vikas. No, we don't have any more info on the investigation than what the public knows. I will say we continue to be in close touch with the PACS management team. Their buildings continue to perform strongly here at Omega good credit, good operating results and good clinical performance. So right now, we feel generally good about.

And I guess my follow-up would be around Genesis. I guess, how should we think about the timing expected returns on the redeployment of proceeds from Genesis related loans in 2026?

This is Bob. In the guidance, what we're assuming is sometime midyear, the loans, as I said, $137 million, that's made up of the combination of $8 million for the dip and $129 million of what was on our balance sheet at 12/31. When that gets -- when we receive that back in, we will first pay off any balances on the credit facility and the balance of that then will be invested roughly 3.5% or overnight rates.

Our next question comes from the line of Michael Goldsmith from UBS.

First, I wanted to ask for just some color on the Georgia skilled nursing portfolio. Just given this a little bit of a higher initial yield at 10.6% that we've seen in the U.S. of late, is that pricing more of a function of having some hair on it or maybe more of a reflection of off-market deal flow? And am I reading it right that the facilities were transitioned to one of your existing operators from a prior operator?

Yes, Michael, this is Vikas. So just for some guidance. We are still quoting 10% for all SNF deals today. This deal was an off-market deal, and we were able to achieve slightly higher. Nothing super hairy about a good buildings in Georgia. And yes, we are leasing this to a current Omega operator.

Got it. And just as a follow-up here. Historically, acquisition volume upside tends to come from the portfolio transaction. So how does the outlook for portfolios look right now? Are you seeing portfolios trade? And if so, are they trading at a premium or a discount?

Sure. This is Matthew. They're trading to the extent that they do trade, they're trading at a premium, both on the skilled nursing and the seniors housing side of things and in the U.K. care homes. So there's not many chunky deals that we're seeing out there right now. But to the extent that they have traded over the last 6 to 12 months, we have tended to see a little bit of a premium there. Candidly, we'd rather choose selectively the facilities that we're looking to buy. And so particularly when you're paying a premium for those larger deals, they're not particularly attractive to us, but we obviously continue to look at everything.

Our next question comes from the line of Julien Blouin from Goldman Sachs.

Just regarding maybe the acquisitions that were closed in the fourth quarter and subsequent to quarter end. Can you give us a sense of how those were sourced, were they mostly on or off market? And then what were the motivations of the sellers? I know you mentioned some turnarounds. So were these deals sort of mostly distressed situations?

Yes. Just looking at the deals quickly, it's really a mixed bag. Some are marketed, some were not marketed. I will say there are quite a few that are off-marketed that came through current relationships, then the most notable, of course, being the Saber deal. And then the second question was?

What the motivation was?

I mean it's, again, a mixed bag. Some of it is liquidity. Some of it is [ exiting ]. There are some turnarounds here, which where we have put in new operators, such as the Georgia transaction. So once again, that's a mixed bag as well.

Got it. Okay. And then your tenant coverage, you mentioned continues to rise is the highest, I think, in recent history. Do you feel like at these coverage levels you're approaching sort of coverage levels where you might be able to release that sort of positive spreads in future years? I know there's not much expiring this year, but a little bit more in 2027? Or is it really more that it just sort of increases the likelihood of renewal upon expiration?

Yes. Unfortunately, it's much more the latter. The majority of our leases have renewal options unilaterally at the right of the tenant. So even though it might show that it's expiring in 2027 to your point, if they're covering well, the likelihood is they will exercise that option to renew and therefore, the opportunity for incremental pickup in the near term is relatively limited. But obviously, as we continue to look out, eventually the second and third renewal options that tend to normally be a couple of renewal options. We'll also expire in that pickup. We'll be opportunistic for us. However, we don't see anything in the next 3 or 4 years that's going to meaningfully move the needle on that front.

Our next question comes from the line of Nick Yulico from Scotiabank.

This is Elmer Chang on with Nick. Considering guidance assumes rental payments at the current run rate, is it reasonable to assume Maplewood returns to the contractual rate by year-end? Because I think based on the improvement in rent payments in recent quarters, maybe there was some expectation that would be at contractual rent by this quarter.

Yes. As we've said previously, Maplewood is paying us all their cash flow now. So as Bob discussed, we are getting a run rate of $76 million right now, and we assume that number will increase at a small level later this year.

We don't really look at it so much in terms of contract with Vikas' point. At the end of the day, they're going to continue to pay the cash flow. They obviously have some interest expense as well that is above and beyond their contractual rent obligations. So as they continue to improve and they've demonstrated a really decent ability to improve and enhance their cash flows over the last few years, and the management team is operating as well as any management team that we've seen out there right now, we will continue to benefit from that cash flow. But we don't look at it from a standpoint of contractual rent. We just look at it from a standpoint of more like a RIDEA like model at this point in time.

Maybe second question is how should we think about the cadence and potentially earnings impact of loan repayments this year and even in 2027 outside of the Genesis loans? Just given the volume of investments you've done in the last couple of years?

Sure. This is Matthew again. Yes, the loan repayments, it's tough to model. Bob has obviously given guidance as to what we think in 2026. Loans are not a large portion of our overall business, but they do represent a little bit of a headwind to the extent that they do come back. I don't think it's going to be a meaningful headwind over the longer term. Obviously, we have a fairly pronounced amount of stuff potentially coming back in 2026 that we've highlighted. But longer term, it obviously creates a little bit of a headwind until we able to redeploy the capital. But with the market being relatively robust today in terms of opportunities to deploy that capital, I don't think it's a long-term headwind for the company.

Our next question comes from the line of John Kilichowski from Wells Fargo.

Maybe just to go back to Maplewood here. With the core portfolio well occupied, what are you seeing in terms of [ Rev4 X4 ]? What can you kind of disclose about the success of really driving the economics there? I'm just curious about I understand you're not too focused on time line to full rent, but just sort of helpful to think about what's the growth of that existing portfolio?

Yes. John, this is Vikas. Just some stats for you here. The 2nd Avenue building is now at 97% and the overall core portfolio is at 96%. And as for growth, a lot of it is going to be driven by rate increases. Maplewood is shooting to do a single-digit percentage -- a high single-digit percentage increase this year. We still don't know what that's going to be net, but that will drive some growth, and we plan -- that will happen going forward in the years to come.

Okay. Very helpful. And then to stay on Maplewood here. For [ Embassy Row ], I don't know what else you can talk about here, but there's a JV partner in the OpCo, correct? And are you able to give any guidelines around maybe the remaining capital availability from them and helping make those yield on cost payments. I'm just curious sort of what's the lease-up trajectory and sort of time line that needs to take place at Embassy Row, such that you would need to pull, let's say, capital from the outperformance on the core portfolio to make hold the yield on cost payments?

So I would say that we actually -- for the first month, we've seen positive cash flow on that facility at the end of last year, which is great. That's obviously prior to paying any rent. The lease up is going in accordance with our expectations. I think Maplewood is extremely focused on ensuring that doesn't create too much of a headwind for their overall portfolio performance. It's tough to say when you're in lease-up, what that looks like, we look at it holistically over the context of the overall portfolio. And as Bob has indicated, we expect a modest pickup in February and an ability to continue to pay that rate going forward. But it's just too early to tell, both in the lease-up of that building and in the rate increases that they're trying to push across the portfolio right now what that's going to look like on a consolidated basis.

Congrats on the quarter.

Our next question comes from the line of Juan Sanabria from BMO Capital Markets.

Just on the SHOP investments, just curious, I know you talked about unlevered yields. But for the stuff you've done fourth quarter and year-to-date here. Just curious on the initial yields and how we should be modeling the returns on that capital? And as part of that, can you talk a little bit about the CapEx assumptions? And maybe just give a little color on how we should think about that relative to adjusted FFO from a guidance perspective for the full year?

Yes, I'll take the first part, Juan, it's Taylor. We're purposefully not disclosing initial yields because they're all over the place. We would have deals in the pipeline that have high single-digit yields right out of the box, some that are lower. And it all goes back to what Matthew said. Every deal is idiosyncratic, and we're looking at long-term IRRs and we're not aggressive in terms of how we underwrite to get to those. So we feel really good about what we're finding and the operators we're putting these buildings and enhance -- it is in Saber's hands where these buildings are going and that's probably all I can say about it. In terms of CapEx, do you want to take that?

Yes. So again, it's again, a little bit of a mixed bag one. Some of the facilities we've picked up really don't need a lot of initial CapEx. Other ones probably do need a little PLC. That's a little bit of the nature of the turnaround element. We tend to price that in initially within our expectations. And I would say that the yields that we're always quoting to you are yields that we think are sustainable after a decent CapEx assumption either from an initial investment standpoint or even from a recurring standpoint. I don't know what that does in terms of how that looks for all our AFFO relative to our FAD going forward. So we are primarily focused on just growing that FAB.

And just with regards to the '26 earnings guidance, any -- how should we think about the delta between FAD and adjusted FFO?

Well, remember -- okay, you're right. We only give AFFO guidance, but escalators will impact that as it goes along. But same with FAD, you got to remember that the asset sales and the repayment of the loan maturities also will impact that. So I would keep about the same relationship.

Yes. I think the ratio -- I mean, you have to remember, we're a $14 billion company, and we just started investing in RIDEA. So I think that the ratio that you've seen between AFFO and FAD over the last few years is probably not going to meaningfully change in 2026.

Okay. And then just Canada, a new market for you, and I think your first investment in the long-term care there. So just curious if you could give us a little bit of a quick one-on-one on the Canadian market versus the U.S. I'm assuming it's more akin to U.S. skilled nursing and kind of what opportunity this new sleeve potentially represents for Omega?

Sure. I mean as you can imagine, all of these things are up pretty involved in detail. If you were going to give an analogy, I'd probably say it's closest to the U.K. care home market, more than the skilled nursing market and the fact that it's a little bit more of a socialized medicine system there, so they don't make people exhaust their financial options to the thing they do in the U.S. At the same time, most people tend to be longer-term residents within those facilities. In terms of a little bit of a background on this, we're very excited about this opportunity.

We had an opportunity to invest with a very well-established and high-quality developer and operator in the Canadian long-term care market that we've got to know over the last year. We were able to structure a deal that we think can be sustainably accretive. However, I would say this is a little bit of an idiosyncratic investment. We wouldn't expect to significantly grow in the general Canadian senior housing market. As this is traditionally offered yields that are not particularly compelling to us given our cost of capital. However, we would be open to continue to grow with this operator, assuming they can find deals that fit within the parameters of our cost of capital and are able to be accretive deals for us.

Our next question comes from the line of Farrell Granath from Bank of America.

Similar, I guess, to that question is, thinking about the investment mix in '26. I'm just curious if what you've already closed in January of '26 and early February is kind of in line of how we should be thinking of a mixture of loans as well as triple net and SHOP?

Yes. I'll speak to the pipeline. I think that will help you. If you just look at our pipeline, it is strong as both Taylor and I said, it's in line with really where we closed 2025. And if you look at what's actionable, about 1/3 is skilled nursing, 1/3 is senior housing and 1/3 is U.K. care homes. As for structure, it's a mixed bag. I would say a lot of the U.K. and U.S. senior housing is RIDEA focused.

Okay. And also just given the recent headlines around the CMA investigating some peers for recent transactions in the U.K., does that change any of your feelings on transactions in the U.K. or influence any of your investment decisions?

Yes. No, we are not concerned about that. We -- our lawyers do similar type of checks for us every time we would do a U.K. care home transaction. We've never ever been in breach of anything or close to it. So from our perspective, we are not worried about growing in the U.K. right now.

Okay. And just one small follow-up also just on your dividend, if there's any additional updates on coverage or how you're thinking about your dividend?

We're getting closer to needing to increase the dividend, but obviously, it's a board call. And typically, we'll get to the point where we're required to increase our dividend from a tax perspective. And that's going to be in the low 80s of in terms of FAD payout. That's how we think about it.

Our next question comes from the line of Michael Carroll from RBC Capital Markets.

I wanted to circle back on the Canadian loan. I want to make sure I understand this. So I guess the initial loan, your security is these 5 long-term care developments, but you have the option to convert it into the entire operator, a 35% stake in the entire operator?

So the collateral is actually over 20 long-term care homes that they currently own. But as Vikas said, is valued meaningfully more than the loan that we're looking to put out there about twice the value of the loan that we're looking to put out there. And yes, initially, the yields, it's a loan structure to give us the yields that we're looking for. But to the extent that over time, the operating company is able to achieve yields similar to or above the yields we're achieving from a loan standpoint, we then have the optionality to flip that over. And based on our modeling, we would expect to be able to do that at some point during the term of the loan.

Okay. Can you give us an idea of what the equity stake would be, I guess, the yield on the equity stake today? And I'm assuming it's lower than the loan amounts, I guess. And then how much growth is in the long-term care market? I mean, how fast could that yield grow? So if you do convert it into an equity stake, I mean, are we thinking about a mid-single-digit type growth rate? Or is it potentially higher than that? Are they seeing the similar trends as we are in the U.S.?

Yes. The initial yield today is lower than obviously our 10% yield on the debt. I don't honestly know exactly what the number is, Michael, but it's cash flow positive, and it's obviously got a lot of collateral behind it. To the extent of when we convert it over, it's going to be somewhat contingent on whether there's continued opportunities to do these developments. It is nicely accretive. So I would say that mid-single-digit growth is on the conservative side of things. I think this could definitely be high single digit or even double-digit growth as they continue to develop. There's a lot of need within the Canadian market right now, and this is a proven developer and operator that we think can meet a certain amount of the need that the Canadian people have in the Ontario market.

Our next question comes from the line of Alec Feygin from Baird.

So first for would be when you evaluated the development loan in Canada, how would that compare to maybe similar loans in the United States? And would you expect that to be a bigger part of the investment flow in 2026?

So it's very different. In this situation, we had a lot of collateral sitting behind our loan. A lot of the time when you're putting these loans out there, the collateral might just be the development deal itself, which has inherently more risk attached to it. This also is a known entity that has proven an ability to develop a very, very consistent cost rates relative to budget over a prolonged period of time, which gave us increased comfort and so to that point, I don't think this is something that we're going to look to be doing. First of all, we're just not fans of loans generally to the point we were making earlier. Those loans tend to come back to you. And this really is a little bit of a loan with a vehicle to have equity interest longer term, which is obviously something that we are more interested in. But the idea of loaning into development deals is probably not something we're going to be looking to do.

All right. That's helpful. And maybe now that you're in the RIDEA business, are you looking to convert any current senior housing in the portfolio to that structure?

There's 2 forms of conversion here, right? There's a conversion out of the necessity and the conversion out of opportunity. You've seen a lot of people convert because ultimately, there wasn't a capacity to pay the rents. Where we sit today in our senior housing portfolio, obviously, we've talked about Maplewood being a RIDEA like model. But outside of that, all of our operators are cash flowing sufficiently to continue to pay our rent. So there's no necessity to do that. But if there were opportunistic chances to take operating exposure at a yield that is compelling to us, either in the U.S. or the U.K. We'd obviously look to do that. We understand that the nature of such operating exposure creates increased volatility, so we'd be looking for a fairly healthy yield in order to do that. But it's not outside of the realm of possibility we'd look to do so.

Our next question comes from the line of John Pawlowski from Green Street.

Matthew, first question on your [ guys' ] foray into RIDEA. It is I mean it is a different skill set for a triple net credit investor framework from Omega of old. And just curious, what has had to change internally either on the investment team or asset management team to get ready for a more operational-intensive tougher model to underwrite?

It's probably quicker to tell you what hasn't changed. You're absolutely right, John. This is inherently a higher risk, potentially higher return model. We don't have that credit support sitting behind in the form of coverage. And therefore, I would say that we have looked at every element of this from the standpoint of the quality of the underwriting. We brought in new members of the team who have decades of experience within the senior housing business, who have a very deep bench of operators that they know that they've worked with before.

We've looked at every element of the P&L in terms of trying to understand why lower occupancy happens, what the differentiation of CapEx is between the asset classes whether we want a first-tier market, a second-tier market, looking at the demographics. We have taken an extremely well, I think, thoughtful and intense approach to truly understand what the risks are around this, given the fact that there isn't that credit sitting behind us. We are still, I think, sufficiently conservative to understand that very much like the U.K. it makes sense for us to dip our toe into this judiciously. I wouldn't look to first to be doing a $1 billion deal anytime soon because we do think there's still more to learn but as we've seen in the U.K., the ability to deploy capital over the course of a decade for it to become not only a meaningful part of our business, but a highly accretive and valuable part of our business. I think we look at over the next decade, RIDEA being a similar opportunity.

Okay. I appreciate all those thoughts. And maybe a quick one for you at the state level. Are you hearing any concerning anecdotes or potential draft legislation for staffing mandates at the state level?

No, nothing more than what we've heard in the past. So there's always rumblings and there are states who are pushing the federal government to try to institute another staffing mandate, but we're not really hearing that across the board.

[Operator Instructions] I will now turn the call back over to Taylor Pickett for closing remarks.

Thank you. Thanks all for joining our call today. As always, we're available for follow-up questions.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Desiree, I will be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors Inc. Third Quarter Earnings Conference Call.

[Operator Instructions]

I would now like to turn the conference over to Michele Reber. You may begin.

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett; President, Matthew Gourmand; CFO, Bob Stephenson Stephenson; CIO, Vikas Gupta; and Megan Krull, Senior Vice President of Operations. Comments made during this conference call that are not historical facts may be forward-looking statements such as statements regarding our financial projections, potential transactions, operator prospects and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC. During the call today, we will refer to some non-GAAP financial measures such as NAREIT FFO, adjusted FFO, FAD and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega. I will now turn the call over to Taylor.

Thanks, Michele. Good morning, and thank you for joining our third quarter 2025 earnings conference call. Today, I will discuss our third quarter financial results and certain key operating trends. Third quarter adjusted funds from operations, AFFO, of $0.79 per share and FAD funds available for distribution of $0.75 per share reflects strong revenue and EBITDA growth principally fueled by acquisitions and active portfolio management. Our dividend payout ratio has dropped to 85% for AFFO and 89% for FAD. We again raised and narrowed our 2025 AFFO guidance from a per share range of $3.04 to $3.07 per share, up to $3.08 to $3.10 per share, which reflects our strong third quarter 2025 earnings. The $3.09 per share midpoint of our 2025 AFFO guidance range represents 8% year-over-year AFFO growth versus 2024 AFFO of $2.87 per share.

Turning to the portfolio. Our occupancy and coverage metrics continue to improve with EBITDAR coverage at its highest level in 12 years. Furthermore, as expected, the below 1x rent coverage bucket has dropped to 4.3% of total rent, with the expectation of further improvement and all but one below onetimes operator paying full contractual rent.

I will now turn the call over to Matthew.

Thanks, Taylor, and thanks to everyone for joining the call today. I'd like to take a few minutes this morning to discuss some of the ways in which we're looking to further enhance shareholder value. At Omega, our primary goal is to allocate capital primarily to health care real estate with a focus on growing FAD per share on a risk-adjusted basis. Historically, this is almost entirely involved acquiring health care real estate and entering into triple net leases at a yield above our cost of capital. This has been a very successful investment strategy, returning over 1,200% in total shareholder returns over the past 20 years, and it will likely continue to be a significant part of our capital allocation strategy going forward.

However, as the elder care industry embarks on an expected period of burgeoning growth that is likely to last for the next 2 decades, we have made a conscious decision to expand our investment structures to align ourselves with operators with the aim of achieving higher returns over time. There are multiple ways in which we can structure such deals from joint ventures and minority interest investments to back-end participation in value creation upon a sale or recapitalization as well as RIDEA like structures.

With decades of experience of prudent capital allocation and our platform of sophisticated operators, we believe we are extremely well positioned to enhance shareholder returns by acquiring underperforming assets, the price is meaningfully below replacement cost and partnering with proven operators to significantly enhance the cash flow and hence, value of such assets. We have been making such investments selectively on a small scale for approximately the past 12 months, primarily through investments in the capital stack of real estate that provide an immediate yield in excess of our cost of capital with an ability to participate in incremental returns upon the sale or recapitalization of the assets. And Vikas will give you a recent example of such an investment in a minute.

Our targeted returns for such investments is for an unlevered IRR of at least the low to mid-teens, not assuming any cap rate compression upon exit in our underwriting. Another example of such an investment is the 9.9% equity investment in Saber's operating company announced last night. Saber has been an operating partner with Omega for over a decade, and during that time, we have grown to understand their corporate culture with a fundamental focus on strong clinical care that drives sustainable financial performance.

While our investment will receive a minimum quarterly cash distribution equivalent to an annual 8% yield, we believe, over time, this investment will yield an IRR that will meaningfully surpass our low to mid-teen target. We are grateful to the principles of Saber for trusting us to invest in their operating company and look forward to continuing to support the further growth of Saber while adhering to the key resident-focused tenants that we believe are primary drivers of their success.

Going forward, we will continue to look at all opportunities and investment structures to potentially align with our operating partners and sustainably grow FAD per share. This includes RIDEA structures, which we are evaluating in both the U.S. and U.K. We will continue to be highly disciplined in our underwriting. And given the competition for such assets, there's no guarantee that this will become a meaningful part of our business in the next 12 to 24 months.

However, we do believe that this approach will provide a high level of conviction as to the value creation opportunity to each investment we make. More importantly, we believe the business decisions we are making, be it in capital allocation, active portfolio management or our balance sheet interest rate and currency management will be made prudently and diligently using are salient available data with the primary goal of sustainably growing FAD per share on a risk-adjusted basis. You've seen this in recent quarters, as our efforts have started to create traction in our FAD per share growth, and we are hopeful that this will continue over time as our capital allocation decisions bear further fruit.

And with that, I'll now hand the call over to Vikas.

Thank you, Matthew, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio, including an update on Genesis and Omega's investment activity in the third quarter of 2025, including the subsequent closing of the Saber JV transaction and an update on Omega's pipeline and market trends for the remainder of 2025.

Turning to portfolio performance. Our core portfolio consists of 1,024 facilities, of which 60% is comprised of skilled nursing facilities and transitional care facilities in the U.S. and the other 40% is U.S. senior housing in U.K. care homes. Trailing 12-month operator EBITDAR coverage for our core portfolio, as of June 30, 2025, increased to 1.55x compared to our first quarter 2025 reported coverage of 1.51x. Core portfolio coverage continues to trend in an increasingly favorable direction, above industry average coverage levels and as discussed in prior quarters, provides us with confidence that our operating partners have sufficient needs to continue to provide a superior clinical service to residents, even in a fluid regulatory and reimbursement environment.

In addition to the strong credit supporting our existing investments, these coverage levels enable Omega and our operating partners to continue to grow our respective businesses. with the support of the existing free cash flows produced by our current portfolio. As reported on our last call, Genesis filed for Chapter 11 bankruptcy protection in July 2025. As a reminder, Omega leases Genesis 31 facilities for annual rent payment of $52 million. Additionally, Omega has $125 million term loan with Genesis, which is secured by a first lien on the equity of Genesis' 4 and 3 businesses, which we believe fully secured a loan and a subordinated all assets coming from the overall business of Genesis. Based on lease coverage and collateral, we believe our credit position in this portfolio is strong. The bankruptcy process is progressing with a few milestones approaching, including the auction of the Genesis assets and the sale approval here. We expect this will result in our lease being sued by Genesis and assigned to the winning bidder. As previously reported, Omega committed to support Genesis by providing an $8 million in debtor possession financing as part of a total $30 million debt in position loan. We have now fully funded our $8 million commitment. Genesis has paid Omega full contractual rent each month since filing bankruptcy. The bankruptcy process is anticipated to conclude in Q1 or Q2 of 2026. This [indiscernible], along with all elements of the bankruptcy filing process is subject to the approval of the bankruptcy court. There are no material open issues with any other large operators.

Turning to new investments. We are very excited to announce Omega's 2025 transaction activity through the end of October, with over $978 million in total new investments, of which over $850 million or 87% were real estate investments added to our balance sheet. During the third quarter, Omega completed a total of $151 million in new investments, not including $24 million in CapEx. The new investments include 67 million real estate acquisitions. We had 2 separate transactions to acquire 2 facilities, 1 CCRC and 1 U.K. care home and leased them to 2 existing operators. Both transactions have an initial annual cash yield of 10% with annual escalators ranging from 2% to 2.5%. In addition, Omega invested $84 million real estate loans via 4 separate transactions where the 4 loans have an interest rate of 10% as well as an option for Omega to acquire an ownership interest in the underlying real estate upon the refinancing of the loans.

Regarding real estate loans, we would like to highlight that while we place a focus on allocating capital to own real estate investment to grow our balance sheet. We have and continue to see the opportunity to make strategic loan investments that provide Omega the ability to capture a portion of the upside in the underlying real estate. By way of example, in 2024, Omega made a loan investment for an assisted living facility in Connecticut, which provided for Omega to realize 50% of the value creation above the original cost basis. Since that time, our operating partner was able to dramatically improve performance and refinance Omega's loan in October 2025 for BBB original basis, providing Omega with a material return in excess of our loan repayment resulting in an IRR of 74%. This transaction is an example of how certain loan structures can provide for outsized returns in the absence of permanent real estate ownership.

Turning to subsequent events. Subsequent to quarter end, in October, Omega invested $222 million to acquire a 49% equity interest in a portfolio of 64 health care facilities under a real estate joint venture, which is majority owned by affiliates of Saber health care. All 64 facilities are leased to Saber under long-term triple net leases with 2% annual fixed [indiscernible] score and underlying portfolio rent coverage of over 1.46x. Omega anticipates receiving an initial annual return on its investment of 9.3% escalating thereafter. The investment represents a total portfolio value of approximately $900 million for the real estate, which is encumbered with $449 million of mortgage debt. This is a loan to value below 50%, which provides the joint venture with ample equity value to utilize from future acquisitions. Saber is a long-standing operating partner of Omega where in addition to the 64 joint venture facilities, Saber operates 51 additional facilities owned by us and leased under a consolidated triple-net pass lease. The entirety of the $222 million consideration was paid via the issuance of Omega operating partnership units. The ability to utilize Omega OP units as currency for a new investment is another powerful tool Omega has at its disposal. To provide sellers with a tax-efficient vehicle and to also create alignment with us as the value of those OP units is tied to the continued performance of our share price.

As Matthew mentioned, in conjunction with the closing of the Saber real estate joint venture, Omega and Saber entered into a definitive agreement for us to invest $93 million to acquire a 9.9% equity ownership interest in Saber Healthcare Holdings, Saber's parent operating company, which operates 139 facilities, 126 skilled nursing facilities and 13 assisted living facilities. The closing of our ownership interest in Saber's parent operating companies expected to occur in January 2026 and will represent a unique structure in the skilled nursing industry, creating a strong alignment between Omega as a major capital partner and Saber as a best-in-class operating partner.

With our geographic scope and access to capital and Saber's operational expertise, both companies will be an elevated position to evaluate further growth as a team, where real estate and operational success benefits both partners. It is our expectation that the Omega-Saber relationship will continue to grow meaningfully in the years ahead with the added benefit of having the ability to transact under various deal structures. Our own triple net portfolio, the Saber-Omega real estate joint venture and the Saber operating company. We are very excited about this new partnership and look forward to sharing that growth story in the years ahead.

Turning to the pipeline. Our pipeline transaction outlook for the remainder of 2025 and into 2026 continues to be very favorable. Market opportunities both in the U.S. and the U.K. continue to be substantial, and we are witnessing an increase in our ability to secure off-market opportunities that our operating partners and other relationships bring us. We are seeing individual and regional clusters of senior housing assets, many of which are underperforming or non-stabilized that can be acquired at prices meaningfully below replacement costs and the ultimate stabilized value.

Transaction activity for skilled nursing opportunities in the U.S. and care homes in the U.K. also continue to be robust, and we are evaluating numerous opportunities from individual owner operators and regional sellers, most of which Omega has sourced from existing relationships. We continue to evaluate and consider all assets with increased flexibility on yield structure to ensure that Omega and its shareholders are able to benefit from improvements to the underlying cash flows of our facilities whether that be through variations on triple net lease structures, RIDEA for senior housing assets or strategic joint ventures as exemplified by our new partnership with Saber.

I will now turn the call over to Bob.

Thanks, Vikas, and good morning. Turning to our financials for the third quarter of 2025. Revenue for the third quarter was $312 million compared to $276 million for the third quarter of 2024. The year-over-year increase is primarily the result of the timing and impact of revenue from net new investments completed throughout 2024 and 2025. Our net income for the third quarter was $185 million or $0.59 per common share compared to $112 million or $0.42 per common share for the third quarter of 2024. Our NAREIT FFO for the third quarter was $242 million or $0.78 per share as compared to $196 million or $0.71 per share for the third quarter of 2024. Our adjusted FFO was $243 million or $0.79 per share for the quarter, and our FAD was $231 million or $0.75 per share and both exclude several items outlined in our May REIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our third quarter financial supplemental posted to our website.

Our third quarter FAD was $0.014 greater than our second quarter FAD with the increase primarily resulting from incremental revenue related to the timing and completion of $678 million in new investments completed during the second and third quarters. Incremental Maplewood revenue as they pay $18.7 million in rent in the third quarter, an increase of $1.1 million compared to the second quarter. These were partially offset by $81 million of asset sales, representing $1.2 million of revenue recorded in the third quarter and the issuance of 9 million common shares of stock over the past 2 quarters. Our balance sheet remains incredibly strong, and we continue to take steps to improve our liquidity, capital stack and maturity ladder. We entered into a new $2.3 billion credit facility, consisting of a senior unsecured revolver and a $300 million delayed draw term loan. We intend to draw on the term loan [indiscernible] about November 25, and and used the proceeds to repay the $246 million secured mortgage loan we assumed in the acquisition of the Cindat JV last summer. Additionally, we both extended the maturity date of the existing $428.5 million term loan, 1 year to August 2026, amended the term loan to improve the pricing grid by 35 basis points.

At September 30, we ended the quarter with $737 million in cash on the balance sheet. On October 15, we repaid $600 million of the 5.25% senior unsecured notes at par. Our fixed charge coverage ratio was 5.1x and our leverage reduced to 3.59x. Given our strong equity currency, we have the flexibility to accretively fund investments with equity as we have for the past several quarters, including funding the Saber Propco JV using Omega operating partnership units. In addition, next week, we plan to put in place a new $2 billion ATM program. We are excited as our balance sheet and cost of capital have positioned us for significant adjusted FFO growth as we opportunistically look to the capital markets to fund our active pipeline.

Turning to guidance. As Taylor mentioned, we raised and narrowed our full year adjusted FFO guidance to a range between $3.08 to $3.10 per share. This is a [ $0.035 ] increase over the midpoint of our August guidance. The increase was due primarily to the completion of $374 million of new investments that closed post our second quarter earnings call. The key assumptions in our revised full year guidance are on the revenue and expense side. We're assuming no other changes in our revenue related to operators on an accrual basis of revenue recognition.

Genesis continues to pay full rent and interest payments pursuant to the terms of the DIP financing agreement. Maplewood continues to pay $6.3 million per month, which is consistent with our October payment. Derivative instruments reduced the impact of foreign currency fluctuations when income generated by our U.K. investments for the fourth quarter. We project our fourth quarter G&A expense runs between $13.5 million to $14.5 million. On the investment side, we've included the impact of the new investments completed as of October 30 and did not include any additional new investments.

On the balance sheet, of the $209 million in mortgages and other real estate-backed investments contractually maturing in 2025, we're assuming $56 million will convert from loans to fee simple real estate with the balance of the loans being extended. We repaid our $246 million of secured debt on or about November 25, using proceeds from the $300 million delayed draw term loan. Although we didn't end the quarter with any facilities classified as assets held for sale, we are always pruning and strengthening our portfolio, which has historically led to between $10 million to $20 million in asset sales in any given quarter and we assume no material changes in market interest rates. Our 2025 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital market transactions other than what I just mentioned or that was included in the earnings release. I will now turn the call over to Megan.

Thanks, Bob, and good morning, everyone. While there is no telling when the federal government shutdown will end, it thankfully has largely no impact on funding mechanisms to the long-term care industry. That said, given the current state of affairs, the automatic 4% cut in Medicare to occur in early 2026 as the result of the deficit COG by the OBBBA has not yet had a chance to be dealt with legislatively. As I noted last quarter, historically, legislative action has been taken to avoid this type of reduction. However, even without legislative action, netted with a 3.2% increase in Medicare effective October 1, the overall impact to our portfolio would be minimal. We continue to be grateful for the carve-out of skilled nursing from the Medicaid reductions in the OBBBA, but we are also carefully watching the landscape as the hospital systems deal with the reductions coming their way as this could cause states to reassess their allocation of funds amongst the various provider groups.

The state associations and our operators work closely on the local front to ensure an understanding of the necessity of long-term care. And that, coupled with our strong fundamentals and demographic tailwinds, continues to make us feel well positioned in light of that potential headwind. While the staffing mandate was all but dead given the loss in 2 federal courts surrounding its key provisions and the 10-year moratorium imposed on its implementation by the OBBBA, HHS has now also withdrawn its appeals in court. And as a final nail on the coffin, CMS has drafted an interim final rule under review by the Office of Management and Budget labeled, Repeal of Minimum Staffing Standards for Long-term Care Facilities. We applaud the continued efforts by industry associations partners and operators to educate the legislative and executive branches on the importance of the long-term care industry as well as the continued support by the administration.

We also look forward to the potential for regulatory changes signaled by the request for information in the skilled nursing proposed payment rule earlier this year on ways to streamline regulations and reduce administrative burdens. I will now open the call up for questions.

[Operator Instructions]

And our first question comes from the line of Jonathan Hughes with Raymond James.

Happy Halloween. Thanks for the prepared remarks and commentary. I was hoping you could share some more details on your pursuit of higher growth shop or RIDEA opportunities, maybe investment volume we could expect in the next 12, 24 months and then I think you mentioned low double-digit IRRs, but maybe what about initial yields that you're looking for?

Sure. Thanks, Jonathan, and happy Halloween to you, too. In terms of investment volumes on a quarterly basis on an annual basis, it's really going to depend on what opportunities present themselves. But I think as we look at it, we think back to the way we entered the U.K. market a decade ago, Initially, we dipped our toe in a little bit and really took some time to understand the industry, the operators within the industry, I think we have a much, much better understanding of a lot of that today within the U.S. senior housing side of things. But you saw us effectively aggressively grow that portfolio $2 billion of assets when the opportunities present themselves over the last 24 months.

And so I think it's really just going to come down to that. We are looking extensively at all different options, both in terms of structures and in terms of assets. And then in terms of your second question, going in yields. We clearly like to have a decent positive yield out of the gate. But again, I think it's just going to really depend on the long-term opportunity for value creation there understanding that sometimes the best opportunities don't necessarily have a very good return today.

I think there are ways in which we can structure that where we can have some level of accretion and participation if we don't want to take on the entirety of the risk, but at the same time, with RIDEA, we're willing to take on a lower yield going in, if it ultimately means they're meaningfully higher yields, and we're able to achieve in our triple nets over the longer term. So I think we're relatively agnostic and just looking at each deal on a deal-by-deal basis as to the long-term value creation for shareholders.

All right. That's great color. I appreciate it. I've got just one more for -- maybe for Taylor. I think at the start, you mentioned dividend coverage is now below 90% of FAD and you were able to successfully maintain that dividend through the pandemic. Can you just talk about the potential for future dividend growth and how the board views that dividend versus retaining funds for external growth?

Yes, you're exactly right. It's a board decision, Jonathan. From our perspective, we start to bump up against tax limitations in the low 80s. So -- and we're moving rapidly through the 80s towards the 70s. So I think every quarter, we'll look at that. There's a pathway in the near term to get to a dividend increase. And I would just say, if you look back, not only did we not cut dividends during COVID, if you look back to the period of growth a number of years ago, we were able to increase the dividend every quarter for 5 straight years. I think we have the setup in terms of our balance sheet and the team deploying capital in a way where returning to that type of growth is certainly a possibility. That's what we're aiming to do.

Our next question comes from the line of John Kilichowski with Wells Fargo.

Maybe if we could start with the Saber portfolio. I think you -- in the opening remarks, you made a comment that it was 1.46x covered. I'm curious how that's trended recently and then also the underlying occupancy of the portfolio and just sort of what you're forecasting for the next 12 months.

Yes. This is Vikas. So the coverage is trending above the 1.46. Saber continues to do very, very well. And the occupancy is in the low 90%. So overall, Saber is just outperforming budget and just doing a great job overall.

Okay. That's helpful. And then maybe just looking at the quarter holistically, you did a CCRC deal. You did an opco/propco deal with Saber. I'm just curious what the opportunity set looks like here going forward. Maybe it feels like a little bit of a diversion from maybe your typical triple-net SNFs and your housing, some care homes, there's only 1 care home in the quarter. What does this mean for the go-forward pipeline? Are we likely to resume maybe to more of that? Or do you think that there's a lot more opportunities out here with operators like a Saber that you have a lot of respect for how they operate and also are willing to participate in a structure like this.

Yes. A couple of comments around that. I think you've -- not I think. We've expanded the toolkit pretty broadly because we just have a deeper bench, we have a better team. We can look at a lot more types of transactions, particularly where the yields are higher than our traditional triple-net with escalators. That being said, we're still finding plenty to do in the triple-net side here and in the U.K. And then Saber in particular, and that's pretty unique. People should think of Saber, they're essentially the private [indiscernible] sign, and they're set up to grow really significantly in a very accretive way over the next 5-plus years. We're really excited to be part of that because I think the upside there in our investment plus the yield we're getting on that investment is really remarkable, and we'll see how that plays out. That being said, are there a lot of Sabers out there No, we're happy to partner with that. And we're excited at this point in their growth progression. I think that transaction for us is likely unique to the SNF industry.

Next question comes from the line of Seth Bergey with Citi.

Just a little bit more on Saber. Can you kind of talk about what the geographic focus is of the assets that are in the JV? And then Obviously, this transaction allowed Saber to kind of monetize some of their real estate kind of -- and you've talked about the growth opportunity with them. Can you kind of touch on maybe their motivation for monetizing the real estate and how they're thinking about deploying that capital?

Yes. This is Vikas. I'll take the first part. So these are 64 facilities, 58 are skilled nursing facilities and 6 are assisted living facilities. They are located in 6 states, Delaware, Indiana, North Carolina, Ohio, Pennsylvania and Virgin. I'll turn it over to Taylor for...

Yes. In terms of motivation, the executives that own and run Saber are relatively young, and they've created a lot of value and wealth. And they just -- I think from their perspective, it was a good time to take something off the table. But more importantly, the partner with a capital partner who can drive meaningful growth from here. So they retained obviously 51% of their real estate, they retained 90% of their operating company. That operating company generates substantial cash flow. They're setting themselves up for future growth, and we're lucky enough to be partnering with that.

And then just 1 more kind of as you kind of expand the toolkit of opportunities doing this type of structure. Are you kind of waiting shop for steel in the U.S. versus other markets? And as you kind of think about all that, how do you kind of see the '26 pipeline shaping up as it compares to kind of the level of transaction activity you've done year-to-date in '25?

So we don't want to give guidance in terms of what we expect the pipeline to look like. But if you look at the opportunities presenting themselves today, we've done nearly $1 billion of deals year-to-date. It feels like we're in that kind of cadence where we could allocate a similar amount of capital. And then in terms of the opportunities that present themselves, really it's going to come down to the risk-adjusted returns on everything. A couple of years ago, we were -- the vast majority of what we did was in the U.K. because that's where the opportunity presented itself. And my suspicion is that next year is going to look like a good year for U.S. SNF U.K. care homes. And I think we'll also be able to augment that with a decent amount of U.S. senior housing on top of that predominantly in a non-triple net format.

So I think the pipeline looks good on all of them, but it's really just going to be determined by what opportunities present themselves and provide a risk-adjusted return that is compelling to us.

Next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just hoping we could talk a little bit more about Saber. I guess one of the questions we've gotten, which I think is fair is just the investment in the OpCo, the going-in yield is lower than what you are getting on traditional triple net low-risk real estate investments. So if you could just talk about the strategy of why accepting a lower yield for that theoretically riskier OpCo investment.

Yes, Juan, I would tell you that our 9.9% of the projected 2026 cash flow is far more than 8%. But we're happy to have the operating company retain significant cash to them all their growth. So from our perspective, risk-adjusted returns, likely very high teens. This is a business where, from my perspective, I look at their equity value today. And I think about the Ensign trajectory in a very similar platform just smaller. I look at our equity investment, I'd be very disappointed. We don't double or triple that investment over time.

And then just on the investment, again, just if you could help us frame how you thought about valuing OpCo and if there's any EBITDA being generated outside of your prior existing lease in this kind of new lease joint venture you set up.

Well, as I mentioned earlier, my question -- or my response to your last question, the cash flow generated by the OpCo is very substantial. Our 9.9% of share of that cash flow is far more than the 8% yield that they're paying on our investment, but they're private companies. So beyond that, I can't disclose much more other than to say that stands on its own. It's got lots of cash flow. There's lots of opportunities. We think there's going to be great growth there.

Next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Just wanted to push a little bit more along Juan's line of questioning. In terms of the Saber OpCo, I mean just kind of give us a general sense of, I guess, what kind of growth profile did you guys kind of underwrite for that entity? Is it kind of similar to some of the stuff we've seen on the shop side on senior housing, where these things are growing 15%, 20% same-store NOI. We're just trying to get a better sense of kind of what the growth profile of that entity could be over the next few years.

Yes. So again, similar to inside, you can look at publicly how they've grown. It's not inside the -- it's not same-store inside the box growth, it's the platform finding opportunities, additional facilities that tend to be underperforming where you can be additive. So there's huge opportunities there. And it's really just -- it comes down to how fast do they grow? But again, I would point you to the public peer that I think is the best comp, and that's Ensign. And you can look at their growth quarter-over-quarter, it's really meaningful. And you don't have to rely on pushing rates. You don't have to rely on cutting expenses. It's really just taking underperforming assets in this industry and turning them around. And we've seen Saber do that for the last decade.

Got you. On the PropCo side, any opportunities to refinance the 6.1% debt to kind of a lower rate?

Yes, absolutely. The majority of the debt is HUD debt today, which is long-term good rates, but the plan is to further refinance the non-HUD debt into HUD debt and then continue to just keep looking at the debt profile to lower rates as that becomes available.

Next question comes from the line of John Pawlowski with Green Street.

I just have two questions on the labor backdrop. First, maybe a compare and contrast the U.S. versus U.K. When you talk to your operators, what type of wage increases or folks budgeting for next year in the U.S. versus the U.K.

I mean I think the wage increases are still pretty much matching inflation at this point in time. I don't know if that's different between the U.S. and U.K. The U.K. doesn't quite have the same staffing issues that we have here in the U.S., although those have eased a bit, but the expectation is as demographics increase there, there's going to be always an issue there.

Okay. Final question, maybe to follow on there. In the U.S., Megan, are you seeing -- I guess where are you seeing any pockets of labor availability issues resurfaced in certain states, are you seeing certain operators have to pool the temp agency, temp labor lever a little bit more?

We really haven't seen agency increase anywhere. It came down after COVID and has pretty much stayed down. Obviously, you're going to see it in a building here or there, right? People can't get 100% out of agency. That's a really tough thing to do. The rural areas tend to be the toughest. But really, I think what people are doing is rather than bring agency on, they just don't take the additional [indiscernible] until they have [indiscernible] in there. And it's a big culture push for all of our operators to really change the way that they hire people and make sure that they retain them.

Okay. But you haven't seen any -- in recent months or quarters, you haven't seen any glimpses of issues stemming from just slower migration.

No, we haven't.

Next question comes from the line of Farrell Granath with Bank of America.

This is Farrell Granath. I wanted to go back to Saber. I know that you just outlined the deal had a mix of SNFs and AL. And I was curious on Saber's acquisition front or at least their strategy going forward, are they aligned with you of also expanding into senior housing itself? Or do they want to maintain more of a skilled mix?

Yes. And just to repeat my numbers, there's 50 SNFs in this portfolio and 6 [indiscernible], and they're in 6 states. And the plan is to keep growing the SNF portfolio in those states in other states. So we are very much aligned with them with that plan.

We'll then talk about the -- that's within the JV, but then overall...

Yes. I mean, overall, I mean, the portfolio consists of 126 SNFs and 13 [indiscernible] so once again, Sabre is a very SNF-focused operator, as Taylor and both Matthew mentioned, we think of them as best-in-class. So again, the idea here is to keep growing the portfolio. If an occasional house is picked up in that, that's okay. Saber can handle it, but they are a very SNF-focused already.

Okay. And then also, when it comes to your coverage levels, you made a comment that you've reached almost new highs currently. And where are you seeing that trend going forward? And do you think we're reaching a point of leveling out when it comes to coverage.

I will tell you, the trend is still up. And I think to the extent that occupancy continues to grow, that will be the trend. And we know from demographics. We've seen it. We can model it. We know that occupancy is going to continue going up. We made for the first time in a while, begin to see some seasonality in occupancy. We haven't seen that for a while coming out of COVID with the COVID lows in terms of occupancy. But driving -- the occupancy will keep driving coverage. So I think 155 is not a baseline, and we'll keep growing.

Next question comes from the line of Wes Golladay with Baird.

I want to go back to the opportunity at the -- where you said you could do some loans with back-end recaps. Are you seeing a lot of competition for these types of deals? Does your position as an existing landlord give you a little bit of an advantage there?

Yes. So I mean this product started when the debt markets were extremely tight in the U.S. And we've partnered with many sponsors and operators to create a $300 million portfolio. As I said in 1 example, we created a lot of IRR with that 1 transaction. And we see a lot more of this coming, potentially with our portfolio. But no, we're not seeing a ton of competition in the space because what we've proven to our operating partners is we're there for them. So they turn around opportunities. And they've proven to us, they can turn them around. So we continue to keep growth -- keep growing that segment of our business meaningfully, but only if we believe in the upside.

Next question comes from the line of Michael Carroll with RBC Capital Markets.

How should we think about the opportunity set to do more of these opco type deals? Do you have any more in your pipeline? I guess what's the outlook on that front?

I'd say the opportunity set is very narrow in terms of the type of transaction that we did with Saber, they're a uniquely fantastic operator. That being said, it wouldn't be out of the question to see this again, but there is absolutely nothing in our pipeline today to repeat this transaction.

Okay. And then when you underwrite these types of transactions, I mean, should we think about the potential focus more on your existing tenant roster where you have, I guess, close knowledge of their business model? Or could you go outside of the tenant roster, if you can get comfortable with that?

Yes. I mean, obviously, the more knowledge you have of an operator and experience you have been operated both from a financial standpoint, but more importantly, from a clinical standpoint and understanding the sustainability of that business model the more comfortable you are going to be taking that alignment of interest by taking an operating exposure. And obviously, that aligns more likely with our current operator portfolio. But as Taylor said, there's nothing imminently on the horizon even within that portfolio today that would suggest this is going to be something we're going to be executing on in the next 6 to 12 months.

Next question comes from the line of Richard Anderson with Cantor Fitzgerald.

I'd like to ask a much larger picture question. You talked about sequestration risk being pushed into -- well, we know what happened in 2026 if the government ever gets it act together. But on the Medicaid side, obviously, SNFs were spared. But what is your comment about Medicaid cuts and state budgets and just an indirect concern about how states may be able to operate in the future with the Medicaid cuts, even though you -- your specific business wasn't targeted. Are you concerned at all about just state profitability or something. I'm just curious where you stand on that.

And it is definitely something that we're keeping an eye on and monitoring, and there have been a few states who have started to bring up OBBBA issues. I will say that in most of those states, there's very strong support for skilled nursing and not cutting skilled nursing rates, which has been a positive. We've seen some of those cuts come through, but we've seen that people are very supportive of maybe pulling back some of those cuts that have already occurred like in Idaho and North Carolina.

But the reality is when we look at our top 10 states, I think we're pretty well positioned. We've got Texas and Florida are in expansion states. They won't be touched at all. And then all of the other states really fall into. We haven't heard any concerns or they have higher coverages than our average coverage. So any cut would probably still keep them above that average coverage. And that's the case in North Carolina and Idaho right now or they are very much so in multiple states. And so they're a little bit insulated from any 1 given state having an issue. And then couple that all with the fact that our coverages are where they are, we feel pretty well insulated that we can weather that going forward.

Okay. Great. Second question, I'm not going to ask about Saber, it's been beaten to death. On Maplewood, I think it was $18.7 million of rent. That's $74 million, $75 million annualized. Is there an idea that you can ever get to the full $89 million in any kind of reasonable period of time? Is it starting to feel like it's approaching that? Because a couple of years ago, I didn't think it was ever in the radar, but is it getting in the radar in your mind?

I mean we have a lot of faith in that management team and they have been able to already demonstrate meaningful growth rate. You've seen it over the last couple of years where that number is moved up into where it sits today. So you look at that trajectory is that they have very high occupancy, which obviously limits their opportunity to push occupancy, but it increases the opportunity to push rate. These are highly, highly desirable properties in very wealthy affluent communities. So I think that as they're able to push that rate with the 30-plus percent margins they have, you see an opportunity for meaningful cash flow improvement continuing in that portfolio. And so I don't want like a time frame on it. But absolutely, I think there is a visibility into that number at some point in the not-too-distant future.

What would you say about Second Avenue progress lately?

Well, the occupancy there is 96%. So things are -- the billing is basically full as residents of that and more residents move in to Matthew's point, they can push rate. So we just -- we expect further cash flow growth there.

Next question comes from the line of Vikram Malhotra with Miso.

I guess just first, I wanted to clarify, you had mentioned that there was a loan that got repaid in October with an upside kicker that got you to high return. Just maybe give us a bit more detail how big was the loan? What was the gain above the interest rate?

Yes. It's a smaller deal, but I'll detail it a little bit. It was a $6 million transaction, a mega funded majority of the money and then the operator is able to improve performance and refinanced the building for $18 million. Omega's able to put $6 million [indiscernible]. So once again, this was -- and then -- sorry, on top of that, we maintained a contractual agreement that if the building is refinanced again or sold, we also share 50% of the upside. So again, it's a small example with a meaningful IRR out saying we will achieve that in all deals, but we want to show an example of the potential of the upside in these type of [indiscernible].

Okay. So just to be clear, the gain, you said was $6 million.

Correct, Yes. On that [indiscernible].

On that one, Okay. And then just going back to the broader opportunity set, I know you said they are very limited paper type deals, but just 2 clarifications. You referenced Ensign. Should we assume the Saber margins EBITDA operating net income margins are like Ensign, number one? And number two, just can you clarify the comment about senior housing RIDEA in the U.S. In the past, I think you've said you'd prefer more triple net-like deals where you can get higher yields over time. I just want to understand like what types of RIDEA senior housing U.S. would you be looking at? And kind of what's your -- the pipeline look like?

Sure. Saber margins are very strong in sign lighting margins. And then on the RIDEA front, I will tell you, we have a U.S. deal and a U.K. deal in the pipeline today, and we're working on [ dockings]. Does it mean they'll close, I don't know. But we're we're prepared to do your traditional RIDEA. We spent a lot of time making sure we had the tools here to handle that. And we do. Will those deals close, I don't now, but we'll keep looking at those and others.

Next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Yes. I wanted to go back to some of Megan's commentary just around CMS initiatives looking for input into how to streamline regulation within the skilled nursing industry. Just kind of curious what suggestions of mega making? What suggestions the industry as a whole may be making? And how does that end up whether improving the bottom line of skilled noting facilities improving operational processes and kind of whatever kind of you may make, whatever the potential impact could be if these recommendations are taken up by CMS.

Yes. I mean, look, all the various industry associations are really pushing us pretty hard. And the idea is sort of surround how do you make the survey process a little bit more rational and reasonable, where that if you go in and you see an operator that they've had something that you could call for a tag, they've already corrected it, and they've done all the the work to make sure they're in compliance and that it can't happen going forward, maybe don't have a system where you call that tag and you have financial repercussions when they're clearly showing that they're doing the right thing. So more rationalization around the survey process, more rationalization around the rating process as well, some of the maybe redundant reporting that's going on. I mean all of these things especially on the survey side would have a major impact. And I think they're looking at ways that they can just take that system, look at other systems, see if they can just, again, make it more rational in general. And I think that will all fall to the bottom line if they can fix some of those things. Because we really find that the survey process can really penalize unnecessarily good operators. So that's what we're looking forward to.

[Operator Instructions]

There are no further questions. At this time, I would like to turn the call back over to Mr. Taylor Pickett Mike for closing remarks.

Thanks, everyone, for joining the call today. As always, the team is available for follow-up. Have a great day. Have a happy Halloween.

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is and I will be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors second quarter earnings conference call. [Operator Instructions]

I would now like to turn the conference over to Michele Reber. You may begin.

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett; President, Matthew Gourmand; CFO, Bob Stephenson; CIO, Vikas Gupta; and Megan Krull, Senior Vice President of Operations. .

Comments made during this conference call that are not historical facts may be forward-looking statements such as statements regarding our financial projections, potential transactions, operator prospects and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC.

During the call today, we will refer to some non-GAAP financial measures such as NAREIT FFO, adjusted FFO, FAD and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega.

I will now turn the call over to Taylor.

Thanks, Michele. Good morning, and thank you for joining our second quarter 2025 earnings conference call. Today, I will discuss our second quarter financial results and certain key operating trends. Second quarter adjusted funds from operations of $0.77 per share and FAD, funds available for distribution of $0.74 per share reflects strong revenue and EBITDA growth principally fueled by acquisitions and active portfolio management. We again raised and narrowed our 2025 AFFO guidance from a per share range of $2.95 to $3.01, up to $3.04 to $3.07, which reflects our strong second quarter 2025 earnings and the issuance of $600 million in 5-year bonds versus the continued sale of equity.

Our balance sheet metrics are very strong with adjusted annualized EBITDA of nearly $1.2 billion and net funded debt of only $4.3 billion. In July, Genesis filed a Chapter 11 bankruptcy. Omega, along with other Genesis lenders has committed to debtor in possession financing. And in addition, to support a bid to buy assets via Section 363 bankruptcy sale process. In the interim, we expect to receive our full monthly contractual rent.

Turning to portfolio mix. Our senior housing portfolio continues to grow. It is now comprised of 396 facilities, which is 38% of our total operating facility portfolio. With our strong acquisition pipeline, a favorable operating environment and over $2 billion in liquidity with very low leverage, we are ideally positioned to grow both our senior housing and skilled nursing portfolios.

I will now turn the call over to Bob.

Thanks, Taylor, and good morning. Turning to our financials for the second quarter of 2025. Revenue for the second quarter was $283 million, compared to $253 million for the second quarter of 2024. The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2024 and 2025, operator restructurings and transitions and annual escalators, partially offset by asset sales completed during that same time period. .

Our net income for the second quarter was $140 million or $0.46 per share compared to $117 million or $0.45 per common share for the second quarter of 2024. Our NAREIT FFO for the second quarter was $213 million or $0.70 per share as compared to $189 million or $0.72 per share for the second quarter of 2024. Our adjusted FFO was $232 million or $0.77 per share for the quarter, and our FAD was $223 million or $0.74 per share and both exclude several items outlined in our NAREIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our second quarter financial supplemental posted to our website.

Our second quarter 2025 FAD was $0.021 greater than our first quarter 2025 FAD, with the increase primarily resulting from incremental revenue related to the timing and completion of $605 million in new investments completed during the first half of 2025. In addition, Maplewood paid $17.6 million in rent in the second quarter, an increase of $2 million, inclusive of an additional $1.1 million of rent related to the Washington, D.C. facility compared to the first quarter of 2025; and $1.9 million in higher rental income from our U.K. operators due to favorable foreign currency fluctuations. These were partially offset by the second quarter issuance of 7 million common shares of equity for gross proceeds totaling $258 million as we continue to prefund our investment pipeline.

Our balance sheet remains incredibly strong, and we've continued to take steps to improve our liquidity, capital stack and maturity ladder. In June, we opportunistically issued $600 million, 5.2% senior notes due in July 2030. Our notes issuance was leverage neutral as proceeds will be used to repay the $600 million of 5.25% senior notes maturing in January 2026. We will repay the notes on or about October 15, 2025, which is the earliest we can repay at par.

Additionally, we repaid a $50 million term loan in April. Our $1.45 billion undrawn product facility was extended to the end of October, and we also extended our $429 million term loan until August 2026. We anticipate completing a new credit facility in the next few months.

At June 30, we ended the quarter with $734 million in cash on the balance sheet. 95% of our $5 billion in debt was at fixed rates and our fixed charge coverage ratio was 5.4x. And our net funded debt to annualized adjusted normalized EBITDA was 3.67x, which is the lowest our leverage has been in over a decade. We still have targeted leverage range between 4 and 5x with the sweet spot being between 4.5 and 4.75x.

Given our strong equity currency, we have the flexibility to accretively fund investments with equity as we have over the past several quarters, thereby positioning ourselves for outsized adjusted AFFO growth as we can opportunistically look to the debt and banking markets. As Taylor mentioned, we raised and narrowed our full year adjusted FFO guidance to a range between $3.04 to $3.07 per share. The increase was primarily due to several factors. One, we completed $183 million of new investments post our first quarter earnings call. Two, our prior guidance assumed we would issue equity or have approximately $600 million of cash on hand to repay our $600 million of notes due January 2026. We were able to issue bonds versus equity to put the cash on the balance sheet to handle that maturity. In addition, that maturity will be repaid in October.

And three, following the completion of the LaVie bankruptcy, on June 1, our master lease was assigned to Avartis. Given the improved balance sheet of Avartis and the strong operating performance of the underlying facilities, effective June 1, Avartis was placed on a straight-line basis for revenue recognition.

Turning to our revised full year guidance. The key assumptions are as follows: On the revenue and expense side, we will record $3.6 million of monthly revenue related to Avartis, of which $3.1 million represents the contractual rent. We're assuming no other changes in our revenue related to operators on an accrual basis of revenue recognition. As a note, approximately 80% of our operators are currently on a straight-line basis of accounting, which means any growth in revenue through annual escalators will not yield further growth in adjusted FFO, but would yield cash flow growth.

We're assuming Genesis pays rent and interest pursuant to terms of the debt financing agreement. And Maplewood continues to pay at its July monthly run rate of $6.1 million. We entered into derivative instruments to reduce the impact of foreign currency fluctuations on income generated from our U.K. investments for the balance of the year. We project quarterly G&A expense to run between $13.5 million to $14.5 million for the remaining 2 quarters of 2025.

On the investment side, we've included the impact of new investments completed as of June 30 and did not include any additional new investments. On the balance sheet, of the $233 million in mortgages and other real estate-backed investments contractually maturing in 2025, we're assuming $65 million will convert from loans to fee simple real estate and $88 million will be repaid throughout 2025, and the balance of the loans being extended beyond 2025. We're assuming approximately $50 million of asset sales, of which $12 million qualified as assets held for sale as of the end of the quarter. We recorded $1.3 million of revenue in the second quarter related to these assets. We assume we will repay $252 million of secured debt on or about November 25, 2025, with equity, and we assume no material changes in market interest rates.

Our 2025 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital market transactions, other than what I just mentioned or that was included in our earnings release.

I will now turn the call over to Vikas.

Thank you, Bob, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio as well as recent activity for 3 of Omega's larger operators. Omega's investment activity in the second quarter of 2025 and an update on Omega's pipeline and market trends for the remainder of 2025.

Turning to portfolio performance. Trailing 12-month operator EBITDAR coverage for our core portfolio as of March 31, 2025, remained flat quarter-over-quarter at 1.51x. This strong coverage level demonstrates our operators' ability across skilled nursing and senior housing to cover their rent and retain sufficient cash for clinical care while the fluid regulatory and reimbursement environment. Our core portfolio consists of 1,032 facilities, of which 62% is comprised of skilled nursing facilities and other transitional care facilities in the U.S. And the other 38% is U.S. senior housing and U.K.

Genesis, as Taylor previously mentioned, Genesis filed for Chapter 11 bankruptcy protection on July 9, 2025, with the goal of selling substantially all of its assets through a Section 363 sale to a winning bidder of such assets, followed by a liquidating plan of reorganization. Omega believes this filing was a necessary and important step in creating an entity that is operationally solvent and sustainable with enhanced liquidity and a strengthened balance sheet. Omega has worked with Genesis in recent years to divest underperforming facilities from its mass release, which has resulted in a strong current trailing 12-month coverage of 1.5x.

As such, Omega's rent of $52 million generated by our 31 facility lease is stable and the credit of our tenants should become stronger via the bankruptcy process. During the bankruptcy, Omega is committed to support Genesis by providing up to $8 million in debt in possession financing. Genesis has agreed to pay full contractual rent to Omega during this period. In addition to our lease, Omega has a $121 million term loan with Genesis, which is secured by a first lien on Genesis' 4 ancillary businesses and subordinated all assets lean from the overall business of Genesis. We believe our loan is fully collateralized with the credit of the borrow improving via the bankruptcy process.

Genesis has paid full contractual rent each month since April 2025, and as previously mentioned, has committed to doing so going forward. The bankruptcy process is anticipated to take a period of 9 to 12 months. This time line, along with all elements of the bankruptcy filing process is subject to the approval of the bankruptcy court and other complexities inherent in Chapter 11 proceedings.

LaVie. LaVie exited bankruptcy on June 1, 2025, at which time the Omega LaVie mass lease was assumed and assigned to As anticipated, all material lease terms, including the contractual rent of $3.1 million per month or $37.5 million per annum, remain the same as under the legacy LaVie lease. Avartis has made full contractual payments for June and July.

Maplewood. Performance and occupancy for the 17 facility Maplewood portfolio, inclusive of Inspire Carnegie Hill in New York City remains strong with an occupancy level of 95% as of July 2025. We Inspire MSE, the new 174 unit senior housing facility in Washington, D.C. that opened in February 2025 is in the process of leasing with an occupancy of 30% as of the end of July. As Bob noted, all 18 facilities, Maplewood had paid $17.6 million in the second quarter. Omega expects rent payments to increase in coming quarters as Maplewood increases rates, pushes occupancy growth and realize further operational efficiencies.

Other than Genesis, Omega is currently not engaged in restructuring activity with any of our major operators.

Turning to new investments. We are pleased with Omega 2025 transaction activity through the end of June, with over $605 million in total new investments year-to-date through June 30, of which over $560 million or 93% were real estate investments added to our balance sheet. During the second quarter, Omega completed a total of $527 million in new investments, not including $30 million in CapEx. The new investments include $502 million in real estate acquisitions via 5 separate transactions.

As previously announced, in April 2025, we closed a $344 million investment for a portfolio of 45 care homes across the U.K. in the island of New Jersey. Omega leased the 45 care homes to 4 existing operators and 2 new operators. Additionally, in the second quarter, we invested $158 million across 4 separate transactions to acquire 12 facilities, 8 skilled nursing facilities and 4 assisted living facilities, and leased them to 2 existing operators and 2 new operators. All transactions have an initial annual cash yield of 10% with annual escalators ranging from 1.7% to 2.5%.

Lastly, Omega invested $25 million in real estate loans via 2 transactions where both loans have an interest rate of 10%. As discussed last quarter, the U.K. continued to be a large driver of our 2025 new investment activity, totaling approximately $392 million or 65% of our total new investments, excluding CapEx. We continue to see ample opportunities to deploy capital in the U.K., many of which are U.K. operating partners identify and secure off-market with a mega as their preferred capital partner.

Turning to the pipeline. Omega's pipeline transaction outlook for the second half of 2025 continues to be very favorable. We are witnessing an increase in marketed opportunities, both in the U.S. and the U.K. while also securing off-market opportunities that our operating partners and other relationships bring us.

Looking at asset mix, many of the larger market transactions we are seeing are for regional senior housing assets at prices meaningfully below replacement cost. Transaction activity on the skilled nursing front is also sizable, and we're seeing numerous opportunities from individual owner operators and regional sellers, while also seeing larger off-market opportunities brought to us by our existing relationships.

We are evaluating and considering all asset types with a focus on structuring new investments to be immediately accretive, while also providing opportunities for Omega to further improve returns in future years as the underlying cash flows of our communities increased from the continued occupancy gains and operational efficiencies.

I will now turn the call over to Megan.

Thanks, Vikas, and good morning, everyone. The One Big Beautiful Bill Act or OBBBA was signed into law on July 4, and as an industry, there's a lot to be thankful for. Despite pressure on the provider tax program, skilled nursing was specifically carved out from any Medicaid reductions.

Removing the usual target on the back of this industry is a major win for the industry associations and operators who continue to drive a broader understanding within the legislative and executive branches of the importance of the long-term care industry. It is also another indication of President Trump support similar to what we saw at the start of the pandemic.

As expected, the Medicaid expansion population, those able-bodied adults that were added with the Affordable Care Act were the target of much of the reform. However, non-SNF provider taxes and expansion states will also be reduced over time starting in 2028, which will have an impact on the hospital system.

Generally speaking, a reduction in the overall federal funding of Medicaid to the state regardless of the target may cause states to evaluate all programs. That said, given the continued improvement in fundamentals, the strong lobbying efforts on behalf of the industry, and demographic tailwinds, we feel well positioned to weather that potential storm.

While Medicare was not specifically targeted in the OBBBA, the expected increase in deficit caused by the act will without legislative action likely cause a 4% cut in the 2026 Medicare rate. However, given the scheduled Medicare rate increase later this year, coupled with the nature of our portfolio, with skilled nursing more heavily reliant on Medicaid and with an increasingly heavier concentration on private pay product, the near-term expected impact should be minimal. Historically, legislative actions have been taken to avoid this automatic reduction.

Finally, the OBBBA put a moratorium on the implementation of the staffing requirements of the staffing mandate for 10 years. That said, the Texas and Iowa federal courts have now both found that CMS locked the authority to issue the regulations surrounding the required hours and while still subject to appeal given the overturning of the Chevron doctrine, it seems more likely than not that the higher courts will uphold that finding. We are grateful to have this latest reconciliation chapter behind us. and look forward to continued support of this critical industry, serving some of the most vulnerable in our population.

I will now open the call up for questions.

[Operator Instructions] Your first question comes from Jonathan Hughes from Raymond James.

I was hoping you could share some more details of what the investment pipeline looks like today in terms of yields and specifically on the, I think, U.S. seniors housing opportunities you mentioned in the prepared remarks. And then maybe also yields on the sales in the quarter.

Sure. Here. As I mentioned, our pipeline is strong. It consists of U.S. senior housing, U.S. SNFs and care homes in the U.K. It's just as strong as it has been. It continues to be strong. We continue to just look at all the product that's out there for accretive investments. Yield, yield would continue to push 10% across the board for all of those asset classes.

[indiscernible]

And then on sales, we are -- any sales at this point forward are usually just strategic sales or at times purchase options related to old workouts. Or otherwise, we have no sales on the horizon.

Okay. And then my follow-up would be on Maplewood. They paid more rent versus the first quarter, and that was due in part to Capasse Row being in the full second quarter. But even excluding MBC Growth, the rent there did tick up. Can you just remind us of the expected rent trajectory there, what's embedded in guidance and when you expect them to hopefully return to paying full contract rent.

Yes. We'll tag team on this, Jonathan. So what's laid out -- what they paid in the quarter was actually laid out in the press release pretty nicely. But I look at it from a modeling standpoint, they paid $6.1 million most recently. That's what we model on a go-forward basis. My upside guidance would be based on any additional rent, and we're hoping to pay that. So...

Yes. And Jonathan, overall, Maplewood doing a great job. Occupancy in New York is 93%. They're going to keep pushing that occupancy, pushing rate, and we're just hoping for further improvement.

Our next question comes from John Kilichowski from Wells Fargo.

First one is for Bob. It seems like there's a bit of a change of strategy on the balance sheet versus what you're planning on raising and what you during the quarter. Bob, can you maybe talk about that and maybe if the stock starts to work in your favor again sort of on the trajectory it was in '24, that change things in the back half of the year?

We were a little hard to hear. I'll try to answer that if I don't, just reask the pace of it. So the strategy, again, we have an equity currency. So leading into the year, we said we're going to take advantage of that equity currency and the bond market was not available at the coupon we were looking for. We were -- we saw an opportunity and opportunistically took advantage of that. So that's why on the guidance side, instead of having -- issuing equity to fund the next year's bonds, we decided to do debt for debt. And as you saw, they're basically leverage neutral. So it was a great transaction from our standpoint. I didn't catch the second part, if you wouldn't mind repeating that?

No. It was just about if things change in the second half of the year building or the -- maybe the desire to try to fund future bonds with equity instead of just refi as you did? Or would you kind of hold here?

Yes, that's a great question. So again, we're going to keep that same strategy, what I discussed in our prepared points that we'll use equity given that it's a strong currency to fund acquisitions. There's a chance in the market, I am redoing our credit facility, if I could go out and potentially do a term loan, I may take out the secured debt with a term loan, if I do, that would take us to the outside of the guidance as well.

Okay. That's helpful. And then my second question is just on the sub-1 coverage bucket for EBITDA. There's a that growing. It looks like there's only 2 quarters currently included. But if you probably to a full number, I think you're roughly 11%. What gives you confidence in that met as they're growing with you? And then maybe the second part of that is there's also a tenant at 0.99% EBITDAR coverage. Do you think there's the potential for them to graduate out of this bucket and on a net basis next quarter, you'll be down quarter-over-quarter?

Yes. I'll take the -- this is Taylor. I'll take the question in reverse order. So you're right to focus on the 0.99%. That has continued to improve based on preliminary numbers in April and May. They will come out of the bucket next quarter if everything holds. So that's great news, and that takes the 9.8 down to 4 and change. And then if you look at the other -- two other big operators that are closed, one at 0.85 and one at 0.87. And they also, in 2025, have had performance above those coverage amounts. So remember, it's trailing 12, we're headed in the right direction with both of those you really get down to a modest under 1x bucket once you deal with those 3 big guys. We're really encouraged that directionally, we're in great shape. And I would add, just overall, although coverage at 151 was flat quarter-to-quarter. Again, if you look at April and May and the trajectory, we expect our overall coverages will continue to grow.

Our next question comes from Seth Berge from Citi.

Just going back to Maplewood, can you remind us how the lease is structured and quantify how much upside in rents you could potentially capture?

Yes. So this is Vikas. The lease structure, the contractual rent is $69 million, but at this point, we're not looking at it that way. We're looking at all the cash flow that comes to Omega. So they're trending close to full contractual rent. But like I said previously, we expect further improvements in coming quarters.

And just to add to that a little bit. Basically, all the cash that's generated in the Maplewood entity will come to us for the foreseeable future. So it's very much like a RIDEA structure.

Okay. That's helpful. And then -- can you just talk about who else you're seeing out there as you compete for investment opportunities? I mean, how is your underwriting things at all kind of just given that the legislation around provider tax cuts is behind us?

Yes. This is Vikas again. As for who we see out there, it hasn't really changed. We see our REIT years, we see private equity, we see family offices. And as for underwriting, we continue to underwrite the same. As I've said on previous calls, we didn't change our underwriting standards. So we've kept them the same, and now especially with the good news, we will continue to keep it the same.

Our next question comes from Juan Sanabria from BMO Capital Markets.

Just curious on the holistic portfolio metrics. Occupancy ticked up coverage kind of stayed flat. Just curious if why that was in confidence or visibility and future step-ups in rent coverage, I'm not sure if you could share Q3 or early thoughts on kind of the next quarter's EBITDA TTM coverage.

Yes. Juan, it's interesting when you have trailing 12, you can have a quarter that falls off and a quarter that comes in, and you're not necessarily going to get the reaction from occupancy right away because there can be just odd accruals or whatever. But the general trajectory, as I mentioned earlier, based particularly on the April and May preliminary results that we have is up. So I would expect, based on what we know today, that our overall coverages next quarter will be higher and to your point, reflecting just this continued occupancy driver of that coverage.

And second question, just wanted to follow up with the commentary made by Megan at the beginning about the potential for just given statutory I guess, considerations for Medicare, but then, obviously, there's a history of not doing that. So just curious if you could -- or hoping you could provide a little bit more color on the mechanics and the processes laid out?

Yes. There's just a general requirement that if there's an increase in the deficit by a certain amount, there has to be a cut as well to try to balance things out. And so it's capped for Medicare at 4%. So that's sort of worst case scenario, although keep in mind. At the same time, you're going to have a 3.2% rate increase that just got finalized yesterday, that's going to offset that. And as I said, the fundamentals are good, the demographics are good. But yes, legislatively, they have typically gone and gotten rid of that piece of it. Right now, I can see congresses and reset. So we wouldn't find out until a couple more months whether or not they'll be that.

Our next question comes from Michael from Green Street.

Maybe one on the labor side. What sort of wage increases are you seeing your operators pass along to employees today? And -- is there a meaningful difference between wage growth within your SNF and senior housing portfolios?

I mean I would say from a wage perspective, we're just seeing normal inflationary increases at this point, unlike what we have seen previously during COVID. And right after COVID where things were a little bit out of whack. And I don't know that we're seeing any differences between the SNF and the portfolio is on the wage side.

Okay. I guess, how about at the occupation level? Has there been any specific occupations that have been maybe more difficult to hire or retain?

I mean the CNAs are always a little bit more of a difficult piece of things just because of where these states have pushed the minimum wages. So it's tough to keep that an attractive business. But they -- our operators have been dealing with that over the last several years, and it's become more of a -- you just have to entice people as to the culture that you build and that you want to be working here and you want to attract the people who are looking to help people. And so I think it hasn't been as much of an issue that we've seen recently.

Our next question comes from Omotayo Okusanya from Deutsche Bank.

Just a quick question on the guidance raise. Again, it's pretty impressive. It feels like it's a bunch of things that are coming together there. And I guess my question is, it just feels like the company is figuring out ways to kind of drive additional earnings growth in create additional shareholder value. And I'm curious from internally what may be changing that's helping Omega identify these opportunities quicker, faster and also giving the company the ability to really kind of execute on these things?

Sure. Thanks, Tayo. It's Matthew here. I think we continue to just push active portfolio management as best we can. I think that we are actively looking at operators and facilities that maybe don't align working with operators to get them out of facilities that maybe don't -- shouldn't be part of their core portfolio and then sourcing other operators that are more suited to run those facilities. And you often presents an opportunity for either risk mitigation or even rent pickup in those situations. I would say also, as Vikas said in his talking points that we're considering multiple different structures to try to create that incremental value to align ourselves better with our operators and to potentially benefit from the further upside that we think will happen in both skilled nursing and senior housing facility operating metrics over the next 10-plus years.

That's helpful. Then one other quick one for me. Apologies, I joined the call a little late. Just curious if you address the past at all?

Yes. Tayo, For notes, we know just about everything just we only know is public markets now. But as an operator, we find packs to be clinically strong we continue to have strong conferences with them. So from our perspective, it's a nonevent at this point.

Our next question comes from Nick Yulico from Scotland Bank.

First question is on the dividend. With the FAD improving this quarter and improvement in the guidance in the second quarter, you're at looks like a 90% dividend payout ratio on FAD. And so I'm just wondering how the Board is thinking about potential dividend increase in the future? And how should we think about a payout ratio that you need to get to, to support dividend growth?

Yes, it's a great question, Nick. One that we actually talked about in our most recent Board meeting. I think the general view is that we need to be in the 80s, kind of that 85% payout ratio range before we contemplate a dividend raise. But from a tax perspective, you get into the high 70s, even low 80s, you start to push up against the threshold anyway. So we're not quite there, but I think we have some visibility into potentially having that conversation in the next 3, 4 quarters.

Okay. And then second is on Genesis. I know you talked about having gotten some work with them to get to some underperforming assets over the years. Just maybe remind us why you have confidence that the pool of assets you own with them is still assets they want to keep and that there's not a risk of some sort of rejection of lease or any sort of move to rightsize rent to a bankruptcy process?

Yes. So it's a master lease, first of all. So they would have to -- they can't cherry pick the assets. They'd have to reject all [ 31 ]. Highly desirable assets with really good coverage, I would say, the best portfolio in that Genesis entity. So the idea of doing going through a reorganization without that portfolio, I don't think makes any sense. We feel really good about the assumption and exit with our portfolio intact -- and as Vikas has mentioned, there are a handful of facilities, particularly in the Northeast that we've exited very tough markets. What we have left with them is Mid-Atlantic, principally and really strong coverages with a lot of good visibility for growth.

Our next question comes from Farrell Granath from Bank of America.

My first question is about when you're looking within the marketplace. So I was curious if you can explain the split between either unsolicited inbound and what either efficiencies you're doing internally on your team for that external growth outlook, more focused on faster connection to negotiation and execution of deals?

Yes, this is Vikas. We do a lot for new deals, and that includes incomings. We have a corporate development team that goes out, tries to meet new operators try to find real estate. And we also have a lot of data initiatives that we're using to look and see what's out there, what's available, what operators could want to sell real estate or partner with us. So I can't tell you like how that breaks down exactly, but we do it all. They look for new transactions.

Great. And I guess also, can you just share a few thoughts on how you think about either using new operators versus current operators while you're expanding your footprint?

Yes. We continue to -- a big part of our pipeline continues to be from our current operators, but we are actively looking for new operators. Sometimes that happens through a workout situation where we meet a new operator. But as I mentioned, we have a corporate development team that is just specifically going out there looking for new operators today. So it's become 1 of our strategic initiatives.

Our next question comes from Michael Carroll from RBC Capital Markets.

I want to circle back on the prepared remarks talking about, I guess, the senior housing transaction activity. It sounded like OHI is seeing more of these types of deals coming across their desk. I mean, would these be traditional net lease type transactions? I mean, is it hard to get those types of deals done? Or is this going to be more of a unique structure for Omega can also benefit in the upside?

This is Matthew here. Yes, I think you're right, the traditional triple-net structure is less appealing for a lot of operators these days. And so we continue to look at various different structures, Michael. Ultimately, it's about creating long-term sustainable shareholder growth. And that really means partnering with superior operators and buying properties that are sustainably fit for purpose in markets that we like at prices that make sense for us. And if we can do that, we will consider various different structures to align those interests and ultimately achieve accretive growth for our shareholders. So everything is on the table.

Okay. And then, Matthew, did I hear it correctly? It sounded like that this is something that's more in the forefront or that Omega is being more active on this front. Is that true? And would those structures be like a RIDEA structure or would it be something different?

It could be. I think we are continuing to look at it. We've always looked at it, but quite frankly, the market's changed. Previously, there was more appetite for triple nets. And now that doesn't seem to be the case. So yes, we would be open to that idea. But at the same time, a lot of what we're seeing right now doesn't fit what we think makes financial sense -- there are some stabilized portfolios with very little upside trading at prices that we can't reconcile. And so we're just going to have to be incredibly disciplined both with the operator and the real estate. So from that standpoint, I don't want to shout the word right here and assume that it's going to be a significant portion of our business. over the next 6 to 12 months. We are going to be opportunistic. If it happens, it happens. But at the same time, if it doesn't, because the opportunities aren't presenting themselves, we still feel that there's a decent pipeline available to us to continue to accretively invest.

Our next question comes from Vikram Malhotra from Mizuno.

I guess, Matthew, I just wanted to dig into that -- those comments a bit more. A lot of your peers have sort of been more aggressive on the RIDEA structure, buying more call it, 90-plus percent stabilized assets at 7% initial yields. I'm just sort of wondering, does that type -- is that structure is what you're talking about? Is there some other structure? And if you could just dig into the 4 assets you bought on AL, are -- like are those triple net? And what were the heels on those specifically?

Yes. So some of our peers are buying those because some of our peers have the cost of capital to be able to do that and not be dilutive. We don't have that luxury. And so therefore, we have to be a little bit more selective in terms of what we take over. The opportunities are likely to be smaller portfolios or a small cluster of facilities as opposed to larger portfolios because those tend to be marketed and tend to, quite frankly, get into a price range that doesn't make financial sense for our shareholders and us. But we still see a lot of opportunity out there of fit-for-purpose assets that if put in the hands of the right operator, and you have a rationalization of expenses and put some CapEx in to be able to push rate and occupancy can be highly accretive over time. So I think those are the kind of things that we're going to be looking at.

And for the second part of your question, Vikram, those 4 helps that we bought are triple net deals at 10%.

Okay. That's helpful. I guess just I wanted to go to the U.K. There's more competition there recently from 1 of your peers, still seems like a very attractive market based on your comments. But I'm wondering just in the past, you've said I guess the first half, you had said the U.K. was -- pipeline was good and then you had mentioned it was smaller. Do you mind just updating us like how are you looking at the U.K. in terms of specific opportunities? And like how big could that eventually become over the next few years?

Yes, I'll start with your last part of your question. There's 17,000 tariffs. So we believe there's still a lot of consolidation to take place in the U.K. We do think it will be part of our pipeline going forward. At this very moment, it is not the lion's share of our pipeline, but we do have an ongoing U.K. pipeline that is largely driven by our current operators out there.

Our next question comes from Alec Feygin from Baird.

I guess first one for me is, which segments in the U.S. senior housing space are the best opportunities to target today? And then also, how did the senior housing metrics currently in the portfolio compared to the SNF side?

So the first one, I think it just comes down to the individual asset. We've seen some portfolios that look interesting. We've seen some CCRCs that look interesting. We've seen IL/AL memory cares that don't have a SNF component, and therefore, can't really call themselves CCRCs that look interesting. But at the same time, we've seen multiple assets within all of those classes that we can't make sense of the pricing on. So I think from our standpoint, we have a fairly decent understanding. Obviously, we've been in this industry in the senior housing industry for many years. We have a fairly decent understanding as to what each of these should be able to achieve and what the value is, what the cost rebuild is. And so we're going to approach each one individually, especially in alignment with superior operating partners to understand what they can achieve. And ultimately, what we're looking for is a low to mid-teen IRR over time, not assuming any cap rate compression within that model of the CapEx that provides a sufficiently compelling return to be more appealing potentially than our standard triple net. Innately, our standard triple net structure has a little bit more consistency to it normally a little bit more visibility to it because you have that nonoperating exposure and that coverage support. So in order to invest in these assets, it has to be providing a sufficiently compelling return, and that can be over any of those classes.

And I guess the second part was, how do the senior housing metrics currently in the portfolio compared to the SNFs?

Sure. In terms of coverage, pretty similar. I would say that we include our U.K. care homes within our senior housing component. I would say they probably have a moderately higher occupancy and coverage than our overall portfolio. But other than that, our U.S. senior housing is materially in line metric wise from an operating -- obviously, the margins are higher, but in terms of occupancy and in terms of coverage, they're materially in line.

[Operator Instructions] There are no further questions at this time. I would now like to turn the call over back to Taylor Pickett for closing remarks.

Thanks for joining our call this morning. We appreciate the thoughtful questions, and we're here if there's any follow-up. Have a great day.

This concludes today's conference call. You may now disconnect.