Omega Healthcare Investors, Inc. · NYSE:OHI
Omega Healthcare Investors — Investor Presentation (September 2022)
67 slides from Omega Healthcare Investors's investor presentation, September 2022
Slide 1: Omega Healthcare Investors Investor Presentation
OMEGA HEALTHCARE INVESTORS INVESTOR PRESENTATION September 2022
Slide 2: Disclaimers; Forward-looking Statements and Non-GAAP Information
Disclaimers; Forward-looking Statements and Non-GAAP Information • This presentation may include projections and other “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve unknown
Slide 3: Table of Contents
Table of Contents Page 4 Company Profile & Strategy 12 Why Invest? 16 Skilled Nursing Facilities: What Makes it an Attractive Asset Class? 25 Strong Portfolio & Skilled Operators 35 Benefits of Investing in Long-term Care 40 Excellent Financials and Execution Track Record 46 Proven Investment Strate
Slide 4: Company Profile & Strategy
1 Company Profile & Strategy INVESTOR PRESENTATION 4
Slide 5: Omega Snapshot
OMEGA SNAPSHOT (NYSE:OHI) 1992 $9.8B $12.2B Year Listed Total RE Investments Enterprise Value 63 921 92,204 Operators Properties (US & UK) Number of Beds BBB- 40% 9.5% Investment Grade 5-Year TSR Dividend Yield INVESTOR PRESENTATION 5 For source information see page 60 onwards
Slide 6: Differentiators that Support Today's Strength and Tomorrow's Opportunity
Differentiators that Support Today’s Strength and Tomorrow’s Opportunity Largest Skilled Long-term triple net 1 Nursing Facilities (SNF) focused REIT master leases provide lower risk, steady income 5 2 Consistent dividend growth Positioned to benefit from macro tailwinds 6 3 Diversified geographic e
Slide 7: Experienced and Proven Management Team
Experienced and Proven Management Team Taylor Pickett Dan Booth Bob Stephenson Chief Executive Officer Chief Operating Officer Chief Financial Officer 38 years in industry 37 years in industry 37 years in industry 22 years at OHI 22 years at OHI 22 years at OHI Gail Makode Neal Ballew Matthew Gourma
Slide 8: Strategy that Supports Long-Term Shareholder Value Creation
Strategy that Supports Long-Term Shareholder Value Creation Growth Through Accretive Investments Maintain Shareholder Continued Financial Solid Dividend Value Creation Strength Growth Leverage Sound Corporate Stewardship Practices INVESTOR PRESENTATION 8
Slide 9: COVID-19 Update
COVID-19 Update Impact Response Outcomes COVID-19 is particularly impactful to Federal and many State governments Operators still face a difficult, albeit 1 the old and frail, a key cohort of SNFs 1 provided significant and necessary 1 improving, environment and ALFs relief to the industry Staff at
Slide 10: COVID-19 Operator Update
COVID-19 Operator Update As previously disclosed, as of the end of 2Q22, operators representing approximately 15% of our 2Q22 annualized contractual rent and mortgage obligations did not pay all of their contractual obligations in 2Q22. In July 2022, Omega collected rent from operators representing
Slide 11: What Will Happen Next Regarding COVID-19?
What Will Happen Next Regarding COVID-19? While Questions Remain … When will the Will government financial How quickly will Will operator costs If these costs occur, pandemic end? support continue to be occupancy remain elevated for the will they be covered by both sufficient and timely recover to p
Slide 12: Why Invest?
2 Why Invest? INVESTOR PRESENTATION 12
Slide 13: Investment Thesis
Investment Thesis 1 2 3 4 5 Established, Effective Well Positioned to Consistent Anchored Experienced and Balance Sheet Capitalize on Growth, High-Yield Operating Model Diversified Management Future Growth INVESTOR PRESENTATION 13
Slide 14: Investment Thesis and Supporting Elements
Investment Thesis and Supporting Elements 1 2 3 4 5 Established, Consistent Growth, Anchored Operating Effective Well Positioned to Experienced and High-Yield Model Balance Sheet Capitalize on Future Diversified Management Growth • Experienced and proven • Prudent fixed rent • A low cost, needs-base
Slide 15: Attractive Investment Opportunity
Attractive Investment Opportunity INCOME STOCK Dividend Yield of 9.5% VALUE STOCK Trades at GROWTH 9.2x AFFO STOCK Annualized AFFO Growth of 7.5% since 2004 INVESTOR PRESENTATION 15
Slide 16: Skilled Nursing Facilities: What Makes it an Attractive Asset Class?
3 Skilled Nursing Facilities: What Makes it an Attractive Asset Class? INVESTOR PRESENTATION 16
Slide 17: Skilled Nursing Facilities Meet an Essential Need
Skilled Nursing Facilities Meet an Essential Need LOWER AVG. HIGHER AVG. COST COST INVESTOR PRESENTATION 17
Slide 18: More Patients Are Discharged to Skilled Nursing Facilities Than to Any Other Type of Facility
More Patients Are Discharged to Skilled Nursing Facilities Than to Any Other Type of Facility MEDICARE FFS HOSPITAL DISCHARGE DESTINATIONS Skilled Nursing Facilities (SNFs) 20.5% Home Health Care 19.3% IRFs 3.8% Other 3.3% Over the last decade, SNFs have consistently been the highest discharge desti
Slide 19: Lowest Cost Provider of Post-Acute 24-Hour Nursing Care
Lowest Cost Provider of Post-Acute 24-Hour Nursing Care SNFs provide care for much higher acuity patients that can be handled in Senior Housing or Home Health settings – so hospital discharges to SNFs have held steady AVG. COST PER DAY PER CARE SETTING $2,607 $1,689 $1,671 $547 Hospital IRF LTACH SN
Slide 20: Skilled Nursing Facilities are Primarily Funded Through Medicare and Medicaid
Skilled Nursing Facilities are Primarily Funded Through Medicare and Medicaid $600 MEDICARE MEDICAID Patient Per Day (PPD) $275 Patient Per Day (PPD) $550 $250 $500 $225 $450 $200 $400 $175 $350 $150 Early 80’s 20-25 Days $450-$575 Early 80’s 18 Months $250 Age of Resident Length of Stay Cost Per Da
Slide 21: Omega's Average Facility Statistics
Omega’s Average Facility Statistics ~100 75.1% Avg. Beds in Facility Occupancy OPERATOR PAYOR MIX Medicare 36% 51% Medicaid 13% Private / Other INVESTOR PRESENTATION 21
Slide 22: Limited Supply Growth Due to Regulatory Restrictions
Limited Supply Growth Due to Regulatory Restrictions 1.65M Certificate of Need Certified Beds Moratorium on New Beds 86% Both States have a moratorium on None new beds or CON restrictions • Supply of facilities and beds to meet increasing future demand is limited due to Certificate of Need (CON) and
Slide 23: "Stroke-of-the-Pen" Risk Overstated
“Stroke-of-the-Pen” Risk Overstated 1 • Most patients are too sick to 4 SNFs are a necessary care for at home, even with • SNFs are a low-margin business Efficient and lean part of the healthcare home health support • Reimbursement cuts could impact business model continuum • However, they do not re
Slide 24: Highest Investment Yields Compared to Other Healthcare Real Estate Assets
Highest Investment Yields Compared to Other Healthcare Real Estate Assets 11.0% Investment yields in SNFs have 10.0% consistently been 9.0% favorable to all 8.5% other sectors 8.0% SH (NNN) 7.5% 7.2% SH 7.0% SNF 6.5% 6.0% LS MOB 5.2% Hospital 5.0% Average yield over 4.4% the last five years: 4.0% 9.
Slide 25: Strong Portfolio & Skilled Operators
4 Strong Portfolio & Skilled Operators INVESTOR PRESENTATION 25
Slide 26: Portfolio Overview
Portfolio Overview GEOGRAPHIC & OPERATOR DIVERSIFICATION Long-term Triple Net Master Leases: Operators are responsible for all property expenses 921 63 Properties Operators 43 States + the UK FACILITY INVESTMENT TYPES STRONG OPERATOR COVERAGE 24% Skilled Nursing/Transitional 1.44x 1.10x EBITDARM EBI
Slide 27: Diversified Geographic Portfolio
Diversified Geographic Portfolio Omega’s geographic diversification helps 63 921 42 1 Foreign minimize impact of regulatory or Operators Facilities States Country reimbursement changes in any individual state Investment Concentration by Location Florida 13.5% Texas 10.2% Indiana 6.6% California 5.8%
Slide 28: United Kingdom: An Attractive and Profitable Market
United Kingdom: An Attractive and Profitable Market 1 Highly Compelling Supply/Demand Dynamic: Between 2012 and 2018, care home beds declined 1.5% while the population over 75 increased by 9.6% 2 Attractive Investment Yields: Initial cash yields standardly 8%+ with annual escalators of ~2.5% 3 Publi
Slide 29: Triple-Net Leases Provide a Secure, Steady Source of Revenue
Triple-Net Leases Provide a Secure, Steady Source of Revenue Long-term triple-net master leases with cross collateralization provisions • • Seek strong credit profiles Security deposits of generally 3 to 6 95% • months Monthly reporting requirements 97% Revenues tied to Fixed-Rate Revenues tied Esca
Slide 30: Favorable Portfolio Composition to Peers
Favorable Portfolio Composition to Peers EBITDA / Total Revenue Compared to other Healthcare REITS 3rd 90.2% Highest Concentration of ALL REITs Top 5 relationships: 39%; Peer Avg: 55% 69.7% Favorable 55.2% portfolio diversification & exposure Reduced state- State diversification: specific risks rela
Slide 31: Long-Term Leases with Minimal Near-Term Expirations
Long-Term Leases with Minimal Near-Term Expirations % OF PORTFOLIO LEASE AND MORTGAGE EXPIRATIONS BY YEAR 36.6% 9.4 98% of portfolio years expirations Avg. lease term after 2024 17.4% 14.7% 15.5% 4.3% 3.9% 4.8% 0.4% 1.2% 1.0% 0.2% 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Thereafter INVESTOR
Slide 32: Strong Returns Start with Strong Operators
Strong Returns Start with Strong Operators Diversified Group of Operators OPERATOR CONCENTRATION 70% of all investments in the past five years have been with current operators INVESTOR PRESENTATION 32
Slide 33: Skilled Operators with Extensive Patient Expertise
Skilled Operators with Extensive Patient Expertise Highly Reputable Highly Engaged Typically repeat business with Over 80% of our operator strong relationships to local businesses are privately doctors and hospitals. owned and operated. Highly Experienced Geographic Experts Our average operator has
Slide 34: Operators Continue to be Profitable
Operators Continue to be Profitable RECENT HEADWINDS Since 2007, despite declining operator EBITDAR coverage across The Baby Bust healthcare REITs, our operators continue to be profitable. Average birth rate between 1928 and 1940 was 15% lower than prior decade. This smaller cohort drove lower occup
Slide 35: Benefits of Investing in Long-term Care
5 Benefits of Investing in Long-term Care INVESTOR PRESENTATION 35
Slide 36: A Growing Aging Population Provides Opportunity
A Growing Aging Population Provides Opportunity 65+ Age Population 80.8 78.0 73.1 65.2 56.1 22% 21% 21% 19% 17% Aging Baby Boomers expected to drive a 1 multi-decade increase in demand for SNFs 44% projected increase in Adults 65+ 2020 2025 2030 2035 2040 2 in the next 20 years Census Estimates % of
Slide 37: Demographic Tailwinds Expected to Drive Occupancy Growth For the Next 20 Years
Demographic Tailwinds Expected to Drive Occupancy Growth For the Next 20 Years 1 Medicare utilization of SNFs materially increases from 75 years old The SNF industry has been Based on birth rates beginning in the 1940s and current SNF 2 This utilization increases through their late 80s battling with
Slide 38: SNF Days per 1,000 Beneficiaries
Significant Increase in SNF Utilization by Those Aged 75+ SNF UTILIZATION BY AGE AVERAGE SNF DAYS PER 6,500 1000 BENEFICIARIES BY AGE RANGE 6,000 SNF Days per 1,000 Beneficiaries 5,500 5,000 4,500 75-84 65-74 2,461 849 4,000 3,500 3,000 85+ 2,500 2,000 1,500 5,331 1,000 500 0 65 66 67 68 69 70 71 72
Slide 39: SNF Demand to Outstrip Supply by 2030
SNF Demand to Outstrip Supply by 2030 1 116% Aging demographics 112% should drive SNF 101% 87% occupancy beyond 76% 100% capacity in the next decade. 2 Prudent incremental supply will create 2021 2025 2030 2035 2040 additional Residents Capacity Occupancy development growth opportunities. INVESTOR P
Slide 40: Excellent Financials and Execution Track Record
6 Excellent Financials and Execution Track Record INVESTOR PRESENTATION 40
Slide 41: Consistently Performing and Growing
Consistently Performing and Growing Omega Gross Investments Omega Core Operations Revenue ($ in billions) ($ in millions) $10.40$10.35 $1,063 $10.06 $9.17 $9.09 $9.13 $929 $901 $908 $882 $892 16.0% $8.11 $744 CAGR 15.4% CAGR $505 $4.47 $419 $3.92 $3.33 $350 $2.83 $292 $2.50 $251 $1.80 $179 2009 2010
Slide 42: Strong Growth in Profitability
Strong Growth in Profitability Adjusted EBITDA Adjusted Funds from Operations ($ in millions) ($ in millions) $1,047 $810 $988 $760 $870 $882 $893 $689 $683 $843 $681 $638 $716 16.4% $564 17.0% CAGR CAGR $487 $363 $402 $299 $334 $279 $236 $236 $193 $156 $170 $123 2009 2010 2011 2012 2013 2014 2015 2
Slide 43: Outstanding Financial Performance Among ALL REITs
Outstanding Financial Performance Among ALL REITs EBITDA / TOTAL REVENUES Exceptional EBITDA margins are driven by: 94% 93% 91% 93% 92% 88% 90% Consistency Genuine Triple- Conservative of Revenue Net Nature of G&A Load Streams Leases #2 #2 #2 #2 #2 #6 #3 Resulting in: 1 2 3 Surplus free cash High re
Slide 44: High-Yield and Historically Consistent Dividend
High-Yield and Historically Consistent Dividend $3.00 $2.68 $2.64 $2.66 $2.68 $2.68 $2.58 $2.50 $2.41 $2.22 $2.06 $2.00 $1.90 $1.73 $1.59 $1.50 $1.42 $1.20 $1.22 $1.11 $0.98 $1.00 $0.88 $0.75 $0.64 $0.50 $0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 45: Top-Tier Total Shareholder Returns
Top-Tier Total Shareholder Returns Shareholder Returns Through 12/31/21 OHI Total Returns vs. Healthcare REIT Averages (Years ending 12/31/2021) 214.2% 3 5 TOTAL RETURN TOTAL RETURN 5.7% 41.4% ANN. EQUIV. ANN. EQUIV. YEAR 2% YEAR 7% 122% 41.1% 10 TOTAL RETURN 5.7% 10% 13% 214.2% YEAR ANN. EQUIV. 3 Y
Slide 46: Proven Investment Strategy for Future Growth
7 Proven Investment Strategy for Future Growth INVESTOR PRESENTATION 46
Slide 47: A Long History of Prudent Capital Allocation
A Long History of Prudent Capital Allocation INVESTMENTS In billions Acquisitions Mortgages $4.4 $12.4 Capex CIP (2) billion New investments since $1.7 Other (3) January 2010 (1) $1.3 $0.8 $0.6 $0.6 $0.6 $0.5 $0.5 $0.5 $0.4 $0.3 $0.2 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 N
Slide 48: External Growth Augmented by Development
External Growth Augmented by Development New Builds by In-Service Year 2023E 2024E $26M 154 1 $178M 174 1 Investment Beds Projects Investment Beds Projects INVESTOR PRESENTATION 48
Slide 49: Proven Investment Strategy for Future Growth
Proven Investment Strategy for Future Growth Partner with quality operators 1 Continue to pursue accretive transactions with ambition to grow 2 Leverage existing 63 operator relationships Justify the cost of capital advantage through strong growth 3 Invest primarily in current core markets 4 Maintai
Slide 50: Ample Opportunity to Expand Portfolio
Ample Opportunity to Expand Portfolio SNF OWNERSHIP Omega Publicly Traded REITs Other Even as the largest owner of SNFs, we still only own 5% of the market. Given the accretion created from acquisitions, the fragmented ownership of SNFs provides a significant opportunity for further growth. EXPECTAT
Slide 51: Liquidity Structure & Credit Profile
8 Liquidity Structure & Credit Profile INVESTOR PRESENTATION 51
Slide 52: Effective Balance Sheet Management Provides Financial Flexibility
Effective Balance Sheet Management Provides Financial Flexibility CONSERVATIVE SIGNIFICANT FINANCIAL DIVIDEND PAYOUT CAPITALIZATION LIQUIDITY FLEXIBILITY RATIOS Debt to adjusted Availability under Minimal encumbered assets: AFFO Payout Ratio: 4.9% $1.45B revolving credit 87.9% pro forma EBITDA ratio
Slide 53: Conservative Capitalization Policy
Conservative Capitalization Policy Targeted Funded Debt to Adjusted EBITDA Ratio Typically have used drawings under the revolver to make acquisitions and replenished revolver 4.0x – 5.0x availability with long-term debt and equity issuances Leverage Fixed Charge Coverage 5.3x 5.1x 5.2x 5.1x 4.9x 5.0
Slide 54: Well-Laddered Debt Provides Stability
Well-Laddered Debt Provides Stability Debt Maturity Schedule as of 6/30/22 $1.45B unsecured revolving credit facility $50MM unsecured term loan $1.05B Revolving Credit Facility • No near-term bond maturities • Minimal secured debt (~$380MM) $1,362M • 97.9% of debt is fixed rate Credit Facility & Ter
Slide 55: Strong Balance Sheet and Secure Credit Ratings
Strong Balance Sheet and Secure Credit Ratings Funded Debt/Adj. Ann. EBITDA 5.29x Adj. EBITDA/Total Interest Expense Ratio 4.2x BBB- Adj. Total Debt/Adj. Book Capitalization 57.7% Baa3 Adj. EBITDA/Fixed Coverage Ratio 4.2x Adj. Total Debt/Total Market Capitalization 44.1% 2Q22 Funds Available for Di
Slide 56: Readily Accessible Capital Markets as a Seasoned Issuer
Readily Accessible Capital Markets as a Seasoned Issuer Capital Markets Accessibility Common Equity $1,910 Preferred Equity Senior Unsecured Notes 1,300 $996 $1,030 $960 $982 $859 $785 $760 500 $592 700 775 700 $453 700 650 400 $339 700 $293 260 $231 610 530 225 $138 $102 $125 118 $91 339 282 $33 22
Slide 57: Commitment to ESG Principles
9 Commitment to ESG Principles INVESTOR PRESENTATION 57
Slide 58: Prudent and Responsible ESG Program
Prudent and Responsible ESG Program E S G STEWARDS OF THE ENVIRONMENT SOCIAL RESPONSIBILITY STRONG CORPORATE GOVERNANCE Independence 65%+ Of Omega’s development in the past five years has been built to One of 15 US REITs to be included in the 88% of directors are independent, LEED certification stan
Slide 59: Sources & Appendix
Sources & Appendix INVESTOR PRESENTATION 59
Slide 60: Source Index
SOURCE INDEX Page 5 - Current supplemental information report located in the Investor Relations tab at www.omegahealthcare.com. 5-Year TSR as of 6/30/2022. Page 9 - Information as of 8/2/2022 Page 10 - Information as of 8/2/2022 Page 15 - Historical AFFO and dividend information can be found in the
Slide 61: Source Index
SOURCE INDEX Page 47 - Current and historic supplemental information report located in the Investor Relations tab at www.omegahealthcare.com. 1) Includes the $3.9 billion Aviv acquisition via merger on April 1, 2015; and the $623 million MRT acquisition via merger on May 17, 2019 2) Included in “Acq
Slide 62: 2020 Quarterly Highlights
2020 Quarterly Highlights 1Q 2020 2Q 2020 3Q 2020 4Q 2020 • Paid a $0.67 per share • Paid a $0.67 per share • Paid a $0.67 per share • Paid a $0.67 per share quarterly common stock quarterly common stock quarterly common stock quarterly common stock dividend dividend dividend dividend • Sold six fac
Slide 63: 2021 Quarterly Highlights
2021 Quarterly Highlights 1Q 2021 2Q 2021 3Q 2021 4Q 2021 • Paid a $0.67 per share • Paid a $0.67 per share • Paid a $0.67 per share • Paid a $0.67 per share quarterly common stock quarterly cash dividend on quarterly cash dividend on quarterly cash dividend on dividend common stock common stock com
Slide 64: 2022 Quarterly Highlights
2022 Quarterly Highlights 1Q 2022 2Q 2022 3Q 2022 4Q 2022 • Paid a $0.67 per share • Paid a $0.67 per share • Declared a $0.67 per share quarterly cash dividend on quarterly cash dividend on quarterly cash dividend on common stock common stock common stock to be paid in • Completed $121 million of r
Slide 65: Industry Overview: Baby Boomers Started Turning 75 in 2016
Industry Overview: Baby Boomers Started Turning 75 in 2016 U.S. Birthrates, 1909 to 1980 5,000 4,500 4,000 Births (000’s) 3,500 3,000 2,500 2,000 1928 to 1940 1941 to 1964 Avg. 2,476 Avg. 3,767 1,500 INVESTOR PRESENTATION 65
Slide 66: Industry Overview: Percentage of Historical Hospital Discharges to SNFs
Industry Overview: Percentage of Historical Hospital Discharges to SNFs has Remained Steady in Recent Years Discharge Disposition by Year 21.8% 21.4% 21.0% 20.9% Skilled Nursing Facilities 20.5% 19.6% 19.7% Home Health Care 19.4% 19.5% 19.3% IRF 3.5% 3.5% 3.5% 3.7% 3.8% Other 3.3% 3.3% 3.3% 3.3% 3.3
Slide 67: Industry Overview: Limited Supply Availability
Industry Overview: Limited Supply Availability Trend in Certified Nursing Facilities, Beds and Residents 1,700k 16.0k 1,650k 15.9k 1,600k 15.8k 15.7k Certified Facilities 1,550k 15.6k Beds & Patients 1,500k 15.5k 1,450k 15.4k 1,400k 15.3k 1,350k 15.2k 1,300k 15.1k 1,250k 15.0k Dec-10 Dec-11 Dec-12 D
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