Ladies and gentlemen, thank you for being here. My name is Desiree, and I will be your conference operator today. I would like to welcome everyone to the Omega Healthcare Investors Inc. Third Quarter Earnings Conference Call. I will now hand 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 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 1x 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 has 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 two 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 in prudent capital allocation and our platform of sophisticated operators, we believe we are extremely well positioned to enhance shareholder returns by acquiring underperforming assets at prices 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 Sabre's operating company announced last night. Sabre 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 principals of Sabre for trusting us to invest in their operating company and look forward to continuing to support the further growth of Sabre while adhering to the key resident-focused tenets 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 for 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 all 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 Sabre joint venture transaction, 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 and 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 means 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 a $125 million term loan with Genesis, which is secured by a first lien on the equity of Genesis' four ancillary businesses, which we believe fully secures the loan and has subordinated all asset liens from the overall business of Genesis. 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 milestones approaching, including the auction of the Genesis assets and the sale approval hearing. We expect this will result in our lease being assumed by Genesis and assigned to the winning bidder. As previously reported, Omega committed to support Genesis by providing $8 million in debtor and possession financing as part of a total $30 million debtor and possession 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 timeline, 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 in real estate acquisitions via two separate transactions to acquire two facilities, one CCRC and one U.K. care home and lease them to two 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 in real estate loans via four separate transactions, where the four 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 focus on allocating capital to own real estate investments that 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 has been able to dramatically improve performance and refinance Omega's loan in October 2025 for triple the 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 Sabre Healthcare. All 64 facilities are leased to Sabre under long-term triple net leases with 2% annual fixed escalators 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 for future acquisitions. Sabre is a long-standing operating partner of Omega, where in addition to the 64 joint venture facilities, Sabre operates 51 additional facilities owned by us and leased under a consolidated triple net master 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 Sabre Real Estate joint venture, Omega and Sabre entered into a definitive agreement for us to invest $93 million to acquire a 9.9% equity ownership interest in Sabre Healthcare Holdings, Sabre's parent operating company, which operates 139 facilities, 126 skilled nursing facilities and 13 assisted living facilities. The closing of our ownership interest in Sabre's parent operating company is 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 Sabre as a best-in-class operating partner. With our geographic scope and access to capital and Sabre's operational expertise, both companies will be in 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 Sabre 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 Sabre Omega Real Estate joint venture and the Sabre 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 cost 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 asset types with increased flexibility on deal 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 Sabre. 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 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 $0.014 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 paid $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 two quarters. Our balance sheet remains incredibly strong, and we've continued 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 $2 billion senior unsecured revolver and a $300 million delayed draw term loan. We intend to draw on the term loan on or about November 25 and use 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 one 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 Sabre 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 on 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.

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 caused 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 two 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.

Our first question comes from Jonathan Hughes with Raymond James.

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. I think in terms of investment volumes on a quarterly basis or on an annual basis, it's just 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 to $2 billion of assets when the opportunities presented 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 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 a meaningfully higher yield than we're able to achieve in our triple net over the longer term. So I think we're relatively agnostic in just looking at each deal on a deal-by-deal basis to the long-term value creation for shareholders.

That's great information. I appreciate it. I have one more question for Taylor. At the beginning, you mentioned that dividend coverage is now below 90% of Free Adjusted Distribution and that you were able to maintain the dividend during the pandemic. Can you discuss the potential for future dividend growth and how the Board considers the dividend in relation to retaining funds for external growth?

Yes, you're correct. It's a decision made by the Board. From our perspective, we start to encounter tax limitations in the low 80s. We are quickly moving from the 80s to the 70s. Therefore, we will evaluate this every quarter. There is a potential pathway for a dividend increase in the near term. Historically, we maintained our dividends during COVID, and in previous growth periods, we successfully increased the dividend every quarter for five consecutive years. Our balance sheet is well positioned, and our team is effectively deploying capital, so returning to that level of growth is a definite possibility. That's our goal.

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

Maybe if we could start with the Sabre 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. Sabre continues to do very, very well. And the occupancy is in the low 90%. So overall, Sabre 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 Sabre. 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 SNF's senior housing, some care homes, there's only one 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 Sabre that you have a lot of respect for how they operate and also are willing to participate in a structure like this?

We have significantly broadened our toolkit due to an enhanced team, allowing us to explore various types of transactions, especially those with higher yields compared to our traditional triple net leases with escalators. However, we continue to find ample opportunities in the triple net sector both here and in the U.K. Specifically, Sabre stands out as a unique investment opportunity. They are positioned for substantial growth in an accretive manner over the next five years, and we are enthusiastic about our involvement, as the potential return on our investment, along with the yield, is quite impressive. While there aren't many opportunities like Sabre available, we are pleased to collaborate with them during this pivotal phase of their growth, which we believe is distinctive in the skilled nursing facility industry.

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

Can you discuss the geographic focus of the assets in the joint venture? This transaction allowed Sabre to monetize some real estate, and you've mentioned the growth opportunity with them. Can you explain their motivation for monetizing the real estate and how they plan to deploy 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're located in 6 states, Delaware, Indiana, North Carolina, Ohio, Pennsylvania, and Virginia, and I'll turn it over to Taylor.

Yes. The executives running Sabre are relatively young and have created significant value. From their viewpoint, it seems like a good time to access some liquidity. More importantly, they seek to collaborate with a financial partner who can help foster substantial growth moving forward. They have kept 51% of their real estate and 90% of their operating company, which produces considerable cash flow. They are positioning themselves for future expansion, and we are fortunate to be collaborating with them.

And then just one more kind of as you expand the toolkit of opportunities doing this type of structure, how are you kind of weighing shop for skilled in the U.S. versus other markets? And as you 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?

We typically do not provide guidance on the expected pipeline. However, considering the current opportunities, we have completed nearly $1 billion in deals so far this year. It appears we are at a point where we might allocate a similar amount of capital. The opportunities we pursue will depend on the risk-adjusted returns they offer. In the past, most of our activities were concentrated in the U.K. due to available opportunities. I believe next year will be favorable for U.S. skilled nursing facilities and U.K. care homes. Additionally, we should see a considerable amount of U.S. senior housing, mostly not in triple net leases. Overall, the pipeline appears promising, but it will ultimately depend on which opportunities arise and their risk-adjusted returns that we find attractive.

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

Just hoping we could talk a little bit more about Sabre. 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 build on their growth. So from our perspective, risk-adjusted returns are 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 and a very similar platform, just smaller. I look at our equity investment, and I'd be very disappointed if 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 the 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?

As I mentioned earlier, the cash flow generated by the OpCo is very substantial. Our 9.9% share of that cash flow is significantly higher than the 8% yield on our investment. Since they are a private company, I can't share much more, but it is important to note that it is self-sustaining, has robust cash flow, and presents many opportunities. We believe there is strong growth potential.

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 Sabre OpCo, just kind of give us a general sense of, again, 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. Similar to Ensign, you can observe their public growth. It's not about same-store growth; it’s about the platform identifying opportunities in additional facilities that are underperforming, where improvements can be made. There are significant opportunities available, and it ultimately depends on the pace of their growth. I would highlight Ensign as the best comparable in the public space. Their quarter-over-quarter growth is substantial, and success doesn’t rely on increasing rates or reducing expenses. It simply involves revitalizing underperforming assets in the industry, which Sabre has been successfully doing for the past 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 compare and contrast the U.S. versus U.K. When you talk to your operators, what type of wage increases are folks budgeting for next year in the U.S. versus 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 that there's going to be always an issue there.

Okay. Final question to follow up. In the U.S., Megan, where are you noticing any issues with labor availability in certain states? Are you observing some operators relying more on temporary labor?

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 resident on until they have staff 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.

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

This is Farrell Granath. I wanted to go back to Sabre. I know that you just outlined the deal had a mix of SNFs and ALFs. And I was curious on Sabre'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 ALFs, and they're in 6 states. And the plan is to keep growing the SNF portfolio in those states and other states. So we are very much aligned with them with that plan.

And then talk about what's within the joint venture, but then overall.

Yes, overall the portfolio consists of 126 skilled nursing facilities and 13 assisted living facilities. Sabre is primarily focused on skilled nursing facilities, as both Taylor and Matthew have mentioned. We consider them to be best-in-class. The goal is to continue expanding the skilled nursing facility portfolio, and if an occasional assisted living facility is added, that's acceptable. Sabre is capable of managing that, but their main focus remains on skilled nursing facilities.

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?

The trend is still upward, and as occupancy continues to increase, that will maintain the trend. Based on demographics, we expect to see occupancy rise further. For the first time in a while, we might observe some seasonality in occupancy, which we haven't seen since the lows during COVID. Increased occupancy will continue to enhance coverage. Therefore, I believe 1.55x is not a baseline, and we will continue to grow.

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

I want to return to the opportunity you mentioned regarding loans with back-end recaps. Are you experiencing significant competition for these types of deals? Does your status as an existing landlord offer you any advantages in this area?

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. And as I said in one example, we created a lot of IRR with that one 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 for these turnaround opportunities. And they've proven good they can turn them around. So we continue to 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 that opportunity set is very narrow in terms of the type of transaction we did with Sabre. 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 of an operator, 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 broader question. You mentioned that sequestration risk is delayed, and we know it will occur in 2026 if the government gets organized. On the Medicaid front, while skilled nursing facilities were protected, what are your thoughts on Medicaid cuts and state budgets? I'm concerned about how states might manage with these cuts, even though your specific business wasn't affected. Are you at all worried about state profitability? I'm interested in your perspective on this.

We are actively monitoring the situation and have noted that several states are beginning to raise issues related to OBBBA. Fortunately, there is strong support for skilled nursing, with many states opposing cuts to skilled nursing rates, which is encouraging. While we have seen some cuts implemented, there is a growing sentiment to reverse some of those reductions, particularly in states like Idaho and North Carolina. When we evaluate our top ten states, we feel confident in our position. Texas and Florida are not expansion states and will remain unaffected, while the other states have not raised any concerns and have coverages that exceed our average. Any potential cuts are likely to keep them above the average coverage level. This is currently true for North Carolina and Idaho, among others, indicating they are somewhat insulated from issues in any specific state. Given our strong coverage levels, we believe we are well-positioned to navigate any challenges that may arise in the future.

Okay. Great. Second question, I'm not going to ask about Sabre. 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? Or 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, right? You've seen it over the last couple of years where that number has moved up into where it sits today. So you look at that trajectory, they have very high occupancy, which obviously limits their opportunity to push occupancy, but it increases their opportunity to push rate. These are 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 to put a time frame on it, but absolutely, I think there is 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%. The building is essentially full. As residents move out and new residents move in, they have the opportunity to increase the rates. Therefore, we expect further growth in cash flow there.

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

I guess just first 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. Omega funded the majority of the money, and then the operator was able to improve performance and refinance the building for $18 million. Omega was able to invest $6 million in that deal. Additionally, we maintained a contractual agreement that if the building is refinanced again or sold, we share 50% of the upside. So again, it's a small example with a meaningful internal rate of return. I'm not indicating that we will achieve this in all deals, but we want to illustrate the potential for upside in these types of transactions.

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

Correct. Yes. On that large transaction.

On that one, okay. And then just going back to the broader opportunity set. I know you said they're very limited Sabre-type deals, but just two clarifications. You referenced Ensign. Should we assume the Sabre 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 what types of RIDEA senior housing U.S. would you be looking at? And kind of what's the pipeline look like?

Sure. Sabre margins are very strong, Ensign-like 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 documents. Does it mean they'll close? I don't know. But we're prepared to do your traditional RIDEA. We spent a lot of time making sure we have the tools here to handle that, and we do. So will those deals close? I don't know, 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 inputs into how to streamline regulation within the skilled nursing industry. Just kind of curious what suggestions Omega may be making, what suggestions the industry as a whole may be making? And how does that end up whether improving the bottom line of skilled nursing facilities, improving operational processes and kind of whatever you may make, whatever the potential impact could be if these recommendations are taken up by CMS.

Yes, various industry associations are advocating for a more sensible survey process. The goal is to establish a system where, if an operator has already addressed a compliance issue, they shouldn't face financial penalties when demonstrating their commitment to maintaining standards. There needs to be more rationality in both the survey and rating processes, along with reducing redundant reporting. These changes, particularly in the survey area, could significantly benefit operators. The industry is exploring ways to refine the system, drawing inspiration from others to create a more logical approach. Improving these processes could positively impact the bottom line, as the current survey methods sometimes unfairly penalize competent operators. That's what we are hopeful for.

I would like to turn the call back over to Mr. Taylor Pickett 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. You may now disconnect.