Thank you for waiting. My name is Jill and I will be your conference operator today. I would like to welcome everyone to the Omega Healthcare Investors Incorporated Third Quarter Earnings Conference Call. I will now turn the conference over to Michele Reber. You may begin.

Thank you and good morning. With me today is Omega CEO, Taylor Pickett, COO Dan Booth, CFO Bob Stephenson, 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 2024 earnings conference call. Today I will discuss our third quarter financial results and certain key operating trends. Third quarter FAD, funds available for distribution of $0.70 per share was better than expected, and it should continue to improve as several portfolios are in the process of being transitioned, which will result in FAD upside over the next few quarters. Our dividend payout ratio is now 96% and should continue to drop into the low 90% range in the upcoming quarters. As a result of our year-to-date portfolio transitions and acquisitions, we have again narrowed and increased our 2024 AFFO guidance to a range of $2.84 and $2.86 per share. We have issued a significant amount of equity to fund our robust pipeline, which has bolstered our liquidity and further delevered the balance sheet. As Dan will discuss, key tenant occupancy and rent coverage metrics are strong, while the under one times EBITDAR coverage operator metric has no material risks or concerns. During the first three quarters of 2024, we have issued over $800 million in equity, and year-to-date, we've invested over $900 million. The pipeline remains very active. Our annual revenue run rate now exceeds $1.1 billion with 25% of that revenue coming from our large and growing senior housing portfolio. We are well positioned to continue to deploy capital accretively, increasing our revenue, AFFO, FAD, and dividend coverage. I will now turn the call over to Bob.

Thanks, Taylor, and good morning. Turning to our financials for the third quarter, revenue for the third quarter was $276 million compared to $242 million for the third quarter of 2023. The year-over-year increase is primarily the result of the timing and impact of operator restructurings, transitions, and revenue from new investments completed throughout 2023 and 2024, partially offset by asset sales completed during that same time period. Our NAREIT FFO for the third quarter was $196 million or $0.71 per share compared to $161 million or $0.63 per share for the third quarter of 2023. Our adjusted FFO was $203 million or $0.74 per share for the quarter, and our FAD was $192 million or $0.70 per share. 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 third quarter financial supplemental posted to our website. Our third quarter FAD was $0.02 greater than our second quarter FAD. As highlighted in yesterday's earnings press release, LaVie paid an additional $3 million in the third quarter as they've continued to pay monthly rent of $3 million per month starting in June. LaVie paid $3 million in rent for the month of October as well. Maplewood paid $12.1 million in rent in the third quarter versus $11.8 million in the second quarter. In October, Maplewood paid $4.05 million in rent. Lastly, we continue to issue equity to both prefund acquisitions and prepare for our $400 million bond maturing in January 2025. We generated almost $2 million or $900,000 in incremental short-term interest income over the second quarter as we ended the quarter with $307 million of incremental balance sheet cash over the second quarter. Our balance sheet continues to remain strong. In the third quarter, we completed $467 million in new investments, including CapEx, and funded the investments through a combination of cash from operations, the assumption of $243 million in debt, and the issuance of 14.2 million shares of common stock or over $0.5 billion in equity proceeds. We ended the quarter with over $340 million in cash on the balance sheet and a fully available credit facility with a borrowing capacity of $1.45 billion. At September 30, 95% of our $4.9 billion in debt was at fixed rates and our net funded debt to annualized adjusted EBITDA was 4.23x, down from 4.76x in the second quarter. Our fixed charge coverage ratio was 4.6x. As Taylor mentioned, we increased our full year adjusted FFO guidance to a range between $2.84 to $2.86 per share. A few of the key fourth quarter assumptions are: we're assuming no change in our revenue related to operators on an accrual basis of revenue recognition. We're assuming LaVie continues to pay at the existing rate of $3 million per month, and Maplewood's ability to pay contractual rent continues to improve. We're assuming the new operator of the Guardian transition properties continues to pay $2.9 million in rent per quarter, consistent with the third quarter. We're assuming $31 million in asset sales in the fourth quarter related to the sale of a portion of the facilities classified as held for sale at the end of the third quarter, for which we recorded $200,000 in revenue in the third quarter. We've included the impact of the $119 million of new investments completed in October, which were funded with equity. We project our quarterly G&A expense to continue to run between $11.5 million and $13.5 million in the fourth quarter. We assume no material changes in market interest rates as they relate to either the interest earned on balance sheet cash or interest expense charged on credit facility borrowings. Finally, we assume we will continue to prefund acquisitions and prepare for our January 2025 $400 million bond maturity by issuing equity. As a reminder, for every 4 million shares issued, our quarterly adjusted FFO is negatively impacted by slightly less than $0.01 per share until the cash is put back to work in new investments. Our 2024 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital transactions other than what I just mentioned or what was included in the earnings release. I will now turn the call over to Dan.

Thanks, Bob, and good morning, everyone. As of September 30, 2024, Omega had an operating asset portfolio of 962 facilities with approximately 90,000 operating beds. These facilities were spread across 81 third-party operators and located within 42 states in the United Kingdom. Trailing 12-month operator EBITDAR coverage for our core portfolio as of June 30, 2024, increased to 1.49x versus 1.42x for the trailing 12-month period ended March 31, 2024. Turning to portfolio matters, as of today, Omega is currently not engaged in any restructuring activity with any of its material operators, the one exception being LaVie, which will be seeking confirmation of its plan of reorganization in mid-November. Turning to new investments, during the third quarter of 2024, Omega completed a total of $467 million in new investments, inclusive of $27 million in CapEx. The new investments include the previously announced buyout of our 51% JV partner in 63 care homes in the United Kingdom. The 63 care homes are leased to 2 established U.K. operators with current annual rent of $43.6 million. Inclusive of Omega's third quarter investment of $365 million, Omega's total cash investment in the 63 care homes is $441 million, which results in a gross return of 9.9%. The additional third quarter new investments of $75 million have a weighted average cash yield of 10.1% and involve 7 facilities in 3 states and the United Kingdom. Subsequent to the third quarter of 2024, Omega closed on $119 million in additional new investments, excluding CapEx. The investments involve 3 facilities in 2 states and 14 facilities in the United Kingdom and have a weighted average yield of 10.5%. Year-to-date through October, Omega has closed on $915 million in new investments, including CapEx through the third quarter. I will now turn the call over to Megan.

Thanks, Dan, and good morning, everyone. State reimbursement continues to be one of the keys to the improved metrics that Dan spoke to. While we applaud the fact that many states have and continue to step up in very meaningful ways, we also know that reimbursement support has a tendency to ebb and flow, and therefore, we would caution anyone from thinking that these levels of increases are guaranteed to continue in the long term. Meanwhile, we are all anxiously awaiting the outcome of the various efforts against the staffing mandate. Plaintiffs, including certain industry associations, have filed a motion for summary judgment in federal court in the state of Texas with respect to their lawsuit against the mandate, which they argue oversteps CMS's authority. While not guaranteed, the ruling on that could come as early as the first quarter of 2025. Additionally, 20 Attorneys General have also filed suit against the staffing mandate in federal court in Iowa. While the overturning of the Chevron doctrine by the Supreme Court earlier this year certainly appears to pave the way for a victory on the legal front, post-election legislative efforts also remain as the reversal of the rule would stand to save the federal government $22 billion over 10 years according to the Congressional Budget Office. With no federal funding specifically earmarked for the mandate and no imminent structural improvements that would improve staffing availability, we are hopeful that the rule will ultimately be overturned and that any future regulatory changes, staffing or otherwise, will be introduced in a much more thoughtful way. I will now open the call up for questions.

Your first question comes from Jonathan Hughes of Raymond James.

Looking at EBITDAR coverage, and it's now basically 1.5x. That's, I think, the highest in the post-pandemic world. And the outlook for improving coverage is strong due to some favorable supply-demand dynamics that I think we all know about. But I wanted to ask about the triple net lease structure. I know you don't necessarily get to participate in that EBITDAR upside, but the safety of the rent paid to you does increase. I don't believe I've ever asked a question about lease expirations. But for those few leases that do expire, what's the ability you have to either increase rent and maybe reset coverage back to, say, a historical 1.3, 1.4x range? Or would you rather just renew them higher modestly and take the higher coverage and greater rent safety?

That's a great question, Jonathan. We have a couple of significant maturities coming up in 2027. This illustrates the typical structure in our industry, where leases usually span 10 to 15 years and include renewal options for the operator. Consequently, there aren't many opportunities to reset most leases. We do have a few with reset rights for various reasons, but overall, this is not how the industry has developed.

Okay. And then I’ll stick with just one more and looking at leverage. So maybe for Bob or you, Taylor as well. I think the 4.2x leverage today is a decade low. I don’t know what the all-time low is, but it’s lower than at any point, I think, since 2014. The investment spreads today are really wide and accretive using equity that obviously never has to be refinanced. So my question is, has there been any change to the leverage target of 4 to 5x? Or is it still that range? Maybe any consideration to running even lower to put you in a better position for opportunities over the next several years?

We haven't changed the stated guidance. It's still between 4 and 5 times. However, considering the pipeline and the equity currency along with the spread you just mentioned, it seems likely that it will continue to decrease.

Your next question comes from the line of Michael Griffin of Citi.

Just wanted to touch on occupancy for a bit. Obviously, it continues to increase on a sequential basis. And I'm curious if you can kind of give us some building blocks on what the drivers of this are? Is this due to facility staffing increasing? Is it due to greater resident penetration? And do you think we're in a world and a scenario in the near term where we are at or above kind of your pre-COVID level of occupancy?

Yes, I believe the occupancy will keep rising. We've noticed some increases over the past few months. However, we are entering a cyclical period where occupancy might dip slightly during the summer and winter months. Staffing has improved somewhat, though there are still challenges in various areas. Consequently, occupancy rates may vary depending on local conditions, but staffing remains a significant concern.

Great. That's helpful. And then just maybe turning to the transaction activity and kind of your thoughts on the acquisition environment. Are you seeing a lot of these deals mostly driven by motivated sellers that have upcoming maturities they can't refinance? Or has the market become more deep and liquid and bid-ask spreads have narrowed somewhat? And then if you could comment maybe on the availability of any bridge to HUD lending, that would be helpful, too.

Yes. I mean, the market has been and continues to be awfully active. I think that there’s no one reason to point to, to tell why that’s become so active. But obviously, the rates have come down a little bit and people are seeing big dollars out there available. There is more capital now. So I think overall, that’s just creating a very active market. And I think we’ll see that going forward here for the next at least 12 months.

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

It's on for John. Just outside of the minimum staffing, what else should we be aware of? We've heard discussions around care at home, Medicare Advantage denying skilled nursing facility claims at elevated levels, and we would like your thoughts on how each candidate would impact the skilled nursing facility landscape.

I mean, look, at the end of the day, we can't really determine what's going to happen with the election or what would happen depending on who gets put into power. But this industry always does better when there's a balance of power. So regardless of who wins the presidency, we will be looking at Congress to sort of balance that piece of it. You mentioned a bunch of regulatory items and certainly, will those have an impact on the industry? Potentially. But really, nursing homes have already pushed everybody out to home health that could be there. It's really a needs-based industry. And I think you'll see stuff around the edges, but I don't think that there's going to be anything that would substantially change the industry.

Appreciate the color. And just a quick follow-up here. So just talk about the original expectations back in June for LaVie to emerge out of the bankruptcy process here with the restructured balance sheet and how you expect the situation to play out during 4Q as comments seem to indicate that you guys are expecting some resolution here come mid-November. Is there going to be any loss of rent or downtime as a result of this transition?

So they’re currently scheduled for a plan of confirmation in mid-November. We do expect that to go through. The plan sponsor will assume the lease as it stands today, which includes monthly rent payments of $3 million, and that we expect to be the rent going forward. There is a difference in timing between confirmation and the effectiveness, but we expect to receive the full $3 million in that period. And the effective date is reliant upon regulatory approvals.

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

Megan, one for you on the regulatory front. I know state support has been a positive surprise for a while now. Have any of your major states' reimbursement or kind of tied staffing service roles actually surprised negatively in recent months?

Can you repeat that? Sorry, the end of that?

Yes. Have any states experienced negative surprises in support recently?

I haven't seen anything negative. There have been some neutral ones where there's slightly positive to slightly negative, but most of what we've been seeing is pretty nice sizable increases.

Okay. And then any kind of concerning staffing rules kind of in the realm of a Pennsylvania-like scenario rumored right now in the market in any other states?

No. I mean, look, states are always looking at doing things like that, but I think everybody is holding off a little bit to see what happens with the staffing mandate.

Your next question comes from the line of Nick Yulico of Scotia Bank.

This is Elmer Chang on with Nick. I mean, just looking at your exposure to different segments, skilled nursing, senior housing. I mean, this is a function of what you've been investing in. But given exposure to skilled nursing ticked down this quarter, maybe below at least historical levels, how are you thinking about operational volatility and investments going forward between these 2 segments?

Our investments are primarily guided by our relationships with operating partners. Whenever possible, we aim to leverage those connections with appropriate underwriting, which directs our capital allocation. Recently, we have increased our investment in senior housing significantly over the past couple of years, which has resulted in some changes in those percentages. I believe this trend will likely continue, but we don't have a specific goal beyond continuing to allocate capital in a way that yields meaningful returns with our current relationships.

Okay, that makes sense. Regarding investments, I believe you added a skilled nursing facility development in Florida this quarter to the pipeline. How do you view exposure to that market and the potential for development as an investment option moving forward, based on the spreads you're observing?

Again, with the right operator, we’ll continue to allocate into that market. But the reimbursement has gotten much better in the state of Florida. So it’s a lot friendlier environment than it was a few years ago. So if it fits our underwriting, we’ll continue to allocate into that state.

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

This is someone sitting in for Juan. I was just curious about Maplewood; what is the occupancy trend at the second out assets? And what is the outlook for stabilization at this point?

So just a little note on Maplewood. We're finished with the financial restructuring there. There is still some change of ownership and legal work surrounding those documents. It's important to mention that there is no significant financial restructuring, but Maplewood has some additional legal matters to address. Inspir is currently 72% occupied, and it’s a gradual climb. I'm not certain when they will reach 85% or 90%, but they are adding net residents each month. It will take time, so I'm hopeful that by 2025, we will see them at those occupancy levels, but that remains to be seen.

Got it. On the DC development, what's the level of confidence there that Maplewood can increase incremental rents?

Yes, DC is going to be net additive to our rent pretty meaningfully. It's 6%, 7%, 8% year-over-year, and our expectation is we'll be receiving them.

Okay. And just on the investment pipeline, what's the appetite to do bigger deals at this point?

I mean, there have been some bigger deals out there. We’ve had an opportunity to look at them. Maybe our underwriting is a little bit more disciplined than others. We’ve mostly passed on some of these bigger deals or, to some degree, we might still play some role in their cap structure on a go-forward basis.

Your next question comes from the line of Justin Haasbeek of RBC Capital Markets.

Just where do you see the best new investment opportunities? Should we still think about the best opportunities being in the U.K. care home market?

I think in the short run, meaning fourth quarter and maybe even first quarter, that will be a lot of what the pipeline is currently made up of. I think after that, we'll see. Obviously, the U.S. pipeline or the U.S. activity has picked up quite a bit throughout this year. So I expect that will shift at some point in 2025.

Okay. And then you mentioned that there are some bigger portfolios on the market that you guys did see. Can you just provide some color on sort of the pipeline, the size of the pipeline right now and the asset mix and location?

It’s a little bit of a mixed bag. As I said, we’ve got a number of deals still that we’re looking at in the U.K. The U.S. pipeline activity has picked up. We’re looking at mostly SNFs, but we’ve got some ALFs sprinkled in there as well. So as far as size goes, we don’t – it’s hard to comment on what exists inside the pipeline, but we’re obviously looking at virtually every deal that’s out there in the market, including the big ones.

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

Kind of off the pipeline question, you already talked about the U.S. versus U.K., but can you talk about lending versus real estate acquisitions and where the pipeline is headed so far in 4Q? It looks like it's been weighted to the loan side.

Yes, I think we will continue to focus more on real estate acquisitions, particularly in fee-simple properties. Recently, we have also explored the loan side. These loans come with various characteristics, including mezzanine financing, loans for leasing, and long-term loans that resemble leases but include lockout provisions. Therefore, we have a diverse range of loan types we are considering. Many of these loans cater to existing operators and address their needs, while some of them involve new operators as we look to expand into different areas.

Okay. And maybe speak on the 15 assets that are currently held for sale? And then also how much of the portfolio can be a candidate for asset sales?

Yes. We have 15 currently. It’s made up of really 3 operators. As I said in my talking point, I expect half of that to be sold in the fourth quarter and the other half early next year. And there really is very limited. We’re always looking at ways to improve the portfolio and there might be sales opportunities, but there’s not a lot of that within the existing portfolio as we sit here today.

Your next question comes from the line of Bank of America.

Just to go back on Maplewood. Do you provide any color on why you pushed back on the timing for the Maplewood development?

The DC development, we were scheduled for December and now it looks like January. So it goes quarter-to-quarter, but this is really getting certificate buttoning up the last pieces of construction and getting the CO. We’re talking about 30 days.

Your next question comes from the line of Joe Dickstein of Jefferies.

It seems that a new SNF operator was included in the sub 1x EBITDAR coverage list, accounting for 3.2% of rent. Could you provide some insight into what caused the coverage decline and in which states the operator is located?

Yes. We have one operator that is always sort of on that cusp of falling below or above 1.0x, but they’re primarily in the state of Florida, which is going to have a large rate increase. So we expect that to, over the next several quarters, work its way out of that bucket.

And your last question comes from the line of Juan Sanabria of BMO Capital Markets.

This is Robin here again. I just had a follow-up on Guarding actually. Curious why they paid slightly higher rents and what it would take going forward to unlock the full $12.4 million.

Yes. I mean, we obviously were able to hit the higher rent for 2024. Obviously, we won't know until 2025 whether we hit the upper end of the rent range.

Okay. Got it. And Megan, just one for you. You mentioned there are some areas that are seeing staffing difficulties still. Could you maybe just elaborate on specific states or markets?

I mean, look, Florida is tough at times, but I think with the rate increase they’re getting, that hopefully helps things out a little bit. Texas is tough. Some of these rural areas are just a little bit tougher to find the staffing still. And so you do have people who are stuck in the hospital system who can’t get pushed out because there’s just not the ability to do that.

Thank you. And with that, that concludes our Q&A session. I'll now turn the conference back over to Taylor Pickett for closing remarks.

Thanks, everyone, for joining today. Please direct any follow-up calls to the team. Have a great day.

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