Omega Healthcare Investors, Inc. · NYSE:OHI
Omega Healthcare Investors — Investor Presentation (May 2021)
65 slides from Omega Healthcare Investors's investor presentation, May 2021
Slide 1: Omega Healthcare Investors Investor Presentation
OMEGA HEALTHCARE INVESTORS INVESTOR PRESENTATION May 2021
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 11 Why Invest? 15 Skilled Nursing Facilities: What Makes it an Attractive Asset Class? 24 Strong Portfolio & Skilled Operators 34 Benefits of Investing in Long-term Care 39 Excellent Financials and Execution Track Record 45 Proven Investment Strate
Slide 4: Company Profile & Strategy
1 Company Profile & Strategy INVESTOR PRESENTATION 4
Slide 5: Omega Snapshot
OMEGA SNAPSHOT (NYSE:OHI) 1992 $10.2B $14.3B Year Listed Total Investments Enterprise Value 70 954 96,653 Operators Properties (US & UK) Number of Beds BBB- 68% 7.3% Investment Grade 3-Year TSR Dividend Yield INVESTOR PRESENTATION 5 For source information see page 59 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 17 consecutive years of dividend growth Positioned to benefit from macro tailwinds 6 3 Diversified
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 35 years in industry 34 years in industry 34 years in industry 19 years at OHI 19 years at OHI 19 years at OHI Steven Insoft Gail Makode Neal Ballew
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 Operators implemented new The contagion rate within SNFs 1 impactful to the old and frail, 1 and evolving protocols to 1 has declined by more than 95% a key cohort of SNFs and ALFs limit the spread of COVID-19 since the peak of the pa
Slide 10: 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 11: Why Invest?
2 Why Invest? INVESTOR PRESENTATION 11
Slide 12: 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 12
Slide 13: 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 14: Attractive Investment Opportunity
Attractive Investment Opportunity INCOME STOCK Dividend Yield of 7.3% VALUE STOCK Trades at GROWTH 10.8x AFFO STOCK Annualized AFFO Growth of 8.6% since 2004 INVESTOR PRESENTATION 14
Slide 15: Skilled Nursing Facilities: What Makes it an Attractive Asset Class?
3 Skilled Nursing Facilities: What Makes it an Attractive Asset Class? INVESTOR PRESENTATION 15
Slide 16: Skilled Nursing Facilities Meet an Essential Need
Skilled Nursing Facilities Meet an Essential Need LOWER AVG. HIGHER AVG. COST COST INVESTOR PRESENTATION 16
Slide 17: 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) 20.9% Home Health Care 19.4% Other 7.0% IRFs 3.7% Over the last decade, SNFs have consistently been the highest discharge desti
Slide 18: 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 19: Skilled Nursing Facilities are Primarily Funded Through Medicare and Medicaid
Skilled Nursing Facilities are Primarily Funded Through Medicare and Medicaid MEDICARE MEDICAID $575 Patient Per Day (PPD) $250 Patient Per Day (PPD) $525 $225 $475 $200 $425 $175 $375 $150 Early 80’s 20-25 Days $400-$500 Early 80’s 18 Months $210 Age of Resident Length of Stay Cost Per Day Age of R
Slide 20: Omega's Average Facility Statistics
Omega’s Average Facility Statistics ~100 78% Avg. Beds in Facility Occupancy OPERATOR PAYOR MIX Medicare 38% 51% Medicaid 11% Private / Other INVESTOR PRESENTATION 20
Slide 21: 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 22: "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 23: 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% 9.4% consistently been favorable to all 9.0% other sectors 7.9% SNF 8.0% SH (NNN) 7.0% SH 7.0% Hospital 6.1% LS 6.0% 6.1% MOB Average yield over the last five years: 5.0% 4.8% 9.2% 4.
Slide 24: Strong Portfolio & Skilled Operators
4 Strong Portfolio & Skilled Operators INVESTOR PRESENTATION 24
Slide 25: Portfolio Overview
Portfolio Overview GEOGRAPHIC & OPERATOR DIVERSIFICATION Long-term Triple Net Master Leases: Operators are responsible for all property expenses 954 70 Properties Operators 42 States + the UK FACILITY INVESTMENT TYPES STRONG OPERATOR COVERAGE 78% Skilled Nursing/Transitional 1.86x 1.50x EBITDARM EBI
Slide 26: Diversified Geographic Portfolio
Diversified Geographic Portfolio Omega’s geographic diversification helps 70 954 41 1 Foreign minimize impact of regulatory or Operators Facilities States Country reimbursement changes in any individual state Contractual Rent/Interest Concentration by Location Florida 16.1% Texas 9.0% Indiana 7.2% M
Slide 27: 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 28: 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 94% • months Monthly reporting requirements 97% Revenues tied to Fixed-Rate Revenues tied Esca
Slide 29: Favorable Portfolio Composition to Peers
Favorable Portfolio Composition to Peers EBITDA / Total Revenue Compared to other Healthcare REITS 6th Highest Concentration of 87.7% ALL REITs Top 5 relationships: 37%; Peer Avg: 53% 66.9% Favorable 55.6% portfolio diversification & exposure Reduced state- State diversification: specific risks rela
Slide 30: 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% 9.0 95% of portfolio years expirations Avg. lease term after 2023 16.3% 12.3% 12.0% 10.9% 4.2% 3.5% 1.3% 1.8% 0.7% 0.4% 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Thereafter INVESTO
Slide 31: Strong Returns Start with Strong Operators
Strong Returns Start with Strong Operators Diversified Group of Operators OPERATOR CONCENTRATION 75% of all investments in the past five years have been with current operators INVESTOR PRESENTATION 31
Slide 32: Skilled Operators with Extensive Patient Expertise
Skilled Operators with Extensive Patient Expertise Highly Reputable Highly Engaged Typically repeat business with Over 77% 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 33: 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 34: Benefits of Investing in Long-term Care
5 Benefits of Investing in Long-term Care INVESTOR PRESENTATION 34
Slide 35: 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 36: 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 37: Significant Increase in SNF Utilization by Those Aged 75+
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 38: SNF Demand to Outstrip Supply by 2030
SNF Demand to Outstrip Supply by 2030 1 126% 130% Aging demographics 113% should drive SNF 97% occupancy beyond 82% 100% capacity in the next decade. 2 Prudent incremental supply will create 2020 2025 2030 2035 2040 additional Residents Capacity Occupancy development growth opportunities. INVESTOR P
Slide 39: Excellent Financials and Execution Track Record
6 Excellent Financials and Execution Track Record INVESTOR PRESENTATION 39
Slide 40: Consistently Performing and Growing
Consistently Performing and Growing Omega Gross Investments Omega Core Operations Revenue ($ in billions) ($ in millions) $929 $901 $908 $882 $892 $10.40$10.35 $9.17 $9.09 $9.13 $744 15.7% $8.11 CAGR 19.2% CAGR $505 $419 $4.47 $350 $3.92 $3.33 $292 $2.83 $251 $2.50 $179 $1.80 2009 2010 2011 2012 201
Slide 41: Strong Growth in Profitability
Strong Growth in Profitability Adjusted EBITDA Adjusted Funds from Operations ($ in millions) ($ in millions) $760 $988 $689 $683 $681 $893 $638 $870 $882 $843 $564 $716 17.3% 18.0% CAGR CAGR $363 $487 $402 $299 $334 $236 $279 $193 $236 $156 $170 $123 2009 2010 2011 2012 2013 2014 2015 2016 2017 201
Slide 42: 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% Consistency Genuine Triple- Conservative of Revenue Net Nature of G&A Load Streams Leases #2 #2 #2 #2 #2 #6 Resulting in: 1 2 3 Surplus free cash High return of
Slide 43: High-Yield and Historically Consistent Dividend
High-Yield and Historically Consistent Dividend $3.00 $2.68 $2.68 Increased for 17 $2.58 $2.64 $2.66 $2.50 consecutive years $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 2
Slide 44: Top-Tier Total Shareholder Returns
Top-Tier Total Shareholder Returns Shareholder Returns Through 12/31/20 OHI Total Returns vs. Healthcare REIT Averages (Years ending 12/31/2020) 232.0% 3 5 TOTAL RETURN TOTAL RETURN 68% 54% ANN. EQUIV. ANN. EQUIV. YEAR 19% YEAR 9% 110% 68.0% 54.0% 10 25% TOTAL RETURN 13% 232% YEAR ANN. EQUIV. 3 Yr.
Slide 45: Proven Investment Strategy for Future Growth
7 Proven Investment Strategy for Future Growth INVESTOR PRESENTATION 45
Slide 46: A Long History of Prudent Capital Allocation
A Long History of Prudent Capital Allocation INVESTMENTS In billions Acquisitions $11.9 Mortgages $4.4 Capex CIP (2) billion $1.7 Other (3) New investments since January 2010 (1) $1.3 $0.6 $0.6 $0.6 $0.6 $0.5 $0.5 $0.5 $0.4 $0.3 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Note: 2015
Slide 47: External Growth Augmented by Development
External Growth Augmented by Development New Builds by In-Service Year 2019 2020 2021E $133 645 6 $405 516 4 $48 105 1 Million investment Beds Projects Million investment Beds Projects Million investment Beds Projects INVESTOR PRESENTATION 47
Slide 48: 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 70 operator relationships Justify the cost of capital advantage through strong growth 3 Invest primarily in current core markets 4 Maintai
Slide 49: 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 50: Liquidity Structure & Credit Profile
8 Liquidity Structure & Credit Profile INVESTOR PRESENTATION 50
Slide 51: 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: 5.6% $1.45B revolving credit 78.9% proforma EBITDA ratio:
Slide 52: 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 5.1x 5.2x 5.1x 4.9x 5.0x 4.7
Slide 53: Well-Laddered Debt Provides Stability
Well-Laddered Debt Provides Stability Debt Maturity Schedule as of 4/30/21 $1.8B unsecured revolving credit • No near-term bond maturities and term loan facilities • Minimal secured debt (~$365MM) $1.45B Revolving $50MM unsecured term loan • 98% of debt is fixed rate at 4/3/21 Credit Facility: $50M
Slide 54: Strong Balance Sheet and Secure Credit Ratings
Strong Balance Sheet and Secure Credit Ratings Funded Debt/Adj. Ann. EBITDA 5.1x Adj. EBITDA/Total Interest Expense Ratio 4.5x BBB- Adj. Total Debt/Adj. Book Capitalization 56.9% Baa3 Adj. EBITDA/Fixed Coverage Ratio 4.5x Adj. Total Debt/Total Market Capitalization 38.4% 1Q21 Funds Available for Dis
Slide 55: 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 $859 $785 $760 $777 500 $592 775 700 $453 700 650 700 400 $339 700 $293 260 $231 610 530 225 $138 $102 $125 118 $91 339 $33 221 19
Slide 56: Commitment to ESG Principles
9 Commitment to ESG Principles INVESTOR PRESENTATION 56
Slide 57: 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 fewer than 15 US REITs to be included 88% of directors are independent, LEED certification
Slide 58: Sources & Appendix
Sources & Appendix INVESTOR PRESENTATION 58
Slide 59: Source Index
SOURCE INDEX Page 5 - Current supplemental information report located in the Investor Relations tab at www.omegahealthcare.com. 3-Year TSR as of 12/31/2020. Page 9 - Information as of Omega’s 1Q 2021 earnings call on 5/4/2021 Page 14 - Historical AFFO and dividend information can be found in the Inv
Slide 60: Source Index
SOURCE INDEX Page 46 - 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 61: 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 62: 2021 Quarterly Highlights
2021 Quarterly Highlights 1Q 2021 2Q 2021 3Q 2021 4Q 2021 • Paid a $0.67 per share • Declared a $0.67 per share quarterly common stock quarterly common stock dividend dividend • Completed a $510 million • Closed a new $1.45 billion acquisition unsecured credit facility • Included in the 2021 • Close
Slide 63: 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 63
Slide 64: 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 65: 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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