Omega Healthcare Investors, Inc. · NYSE:OHI
Omega Healthcare Investors — Investor Presentation (January 2023)
71 slides from Omega Healthcare Investors's investor presentation, January 2023
Slide 1: Omega Healthcare Investors Investor Presentation
OMEGA HEALTHCARE INVESTORS INVESTOR PRESENTATION January 2023
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 16 Why Invest? 20 Skilled Nursing Facilities: What Makes it an Attractive Asset Class? 29 Strong Portfolio of Skilled Operators 39 Benefits of Investing in Long-term Care 44 Excellent Financials and Execution Track Record 50 Proven Investment Strat
Slide 4: Company Profile & Strategy
1 Company Profile & Strategy INVESTOR PRESENTATION 4
Slide 5: Omega Snapshot
OMEGA SNAPSHOT (NYSE:OHI) 1992 $10.1B $12.4B Year Listed Total RE Investments Enterprise Value 63 916 91,643 Operators Properties (US & UK) Number of Beds BBB- 40% 9.1% 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 Assisted Living Facilities (ALFs) rel
Slide 10: COVID-19 Operator Update
COVID-19 Operator Update As previously disclosed, as of the end of 3Q22, operators representing approximately 12% of our 3Q22 annualized contractual rent and mortgage obligations did not pay all of their contractual obligations in 3Q22. In October 2022, Omega collected rent from operators representi
Slide 11: COVID-19 Operator Update – Maplewood Senior Living
COVID-19 Operator Update – Maplewood Senior Living Background Proposed Restructuring Maplewood specializes in operating high-end assisted living facilities in upscale urban and Under our legacy lease agreement, in the event of a sale, Maplewood is entitled to a suburban locations. At the end of 3Q22
Slide 12: COVID-19 Operator Update – LaVie (f/k/a Consulate)
COVID-19 Operator Update – LaVie (f/k/a Consulate) Background Proposed Restructuring At the end of 3Q22, LaVie operated 85 Omega-owned skilled nursing facilities in FL (51), NC 1) On 12/30/22, we sold 11 properties to a third party for $129.8M and provided seller (13), PA (9), MS (6), LA (4) and VA
Slide 13: COVID-19 Operator Update – Healthcare Homes
COVID-19 Operator Update – Healthcare Homes Background Proposed Restructuring At the end of 3Q22, Healthcare Homes operated 42 Omega-owned care homes in the UK. 1) We have agreed to allow a deferral up to 4 months of rent for Healthcare Homes – January through April 2023. In 4Q22 and FY22, Omega rec
Slide 14: Omega and Industry Outlook
Omega and Industry Outlook As a result of these restructurings, we expect both EBITDA and FAD to decline from 4Q22 to 1Q23. While Agemo is scheduled to resume paying rent in 2Q23, as we continue to work through the restructuring of the operators noted above, EBITDA and FAD will continue to be negati
Slide 15: 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 16: Why Invest?
2 Why Invest? INVESTOR PRESENTATION 16
Slide 17: Investment Thesis
Investment Thesis 1 2 3 4 5 Established, Strong Well Positioned to Consistent Anchored Experienced and Balance Sheet Capitalize on Growth, High-Yield Operating Model Diversified Management Future Growth INVESTOR PRESENTATION 17
Slide 18: Investment Thesis and Supporting Elements
Investment Thesis and Supporting Elements 1 2 3 4 5 Established, Consistent Growth, Anchored Operating Strong 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 19: Attractive Investment Opportunity
Attractive Investment Opportunity INCOME STOCK Dividend Yield of 9.1% VALUE STOCK Trades at GROWTH 9.7x AFFO STOCK Annualized AFFO Growth of 7.4% since 2004 Information provided as of June 30th, 2022 INVESTOR PRESENTATION 19
Slide 20: Skilled Nursing Facilities: What Makes it an Attractive Asset Class?
3 Skilled Nursing Facilities: What Makes it an Attractive Asset Class? INVESTOR PRESENTATION 20
Slide 21: Skilled Nursing Facilities Meet an Essential Need
Skilled Nursing Facilities Meet an Essential Need LOWER AVG. HIGHER AVG. COST COST INVESTOR PRESENTATION 21
Slide 22: 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 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 destination LTACH 0.9% INVESTOR PR
Slide 23: 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 24: 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 25: Omega's Average Facility Statistics
Omega’s Average Facility Statistics ~100 75.8% Avg. Beds in Facility Occupancy OPERATOR PAYOR MIX Medicare 32% 54% Medicaid 15% Private / Other INVESTOR PRESENTATION 25
Slide 26: 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 27: "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 28: 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 8.6% SNF other sectors 8.0% 7.4% (NNN & H) 7.0% 6.6% SH 6.0% 5.4% MOB 5.0% Average yield over 4.6% LS the last five years: 4.0% SH (NNN) 9.2% S
Slide 29: Strong Portfolio of Skilled Operators
4 Strong Portfolio of Skilled Operators INVESTOR PRESENTATION 29
Slide 30: Portfolio Overview
Portfolio Overview GEOGRAPHIC & OPERATOR DIVERSIFICATION Long-term Triple Net Master Leases: Operators are responsible for all property expenses 916 63 Properties Operators 42 States + the UK FACILITY INVESTMENT TYPES STRONG OPERATOR COVERAGE 25% Skilled Nursing/Transitional 1.39x 1.06x EBITDARM EBI
Slide 31: Diversified Geographic Portfolio
Diversified Geographic Portfolio Omega’s geographic diversification helps 63 916 42 1 Foreign minimize impact of regulatory or Operators Facilities States Country reimbursement changes in any individual state Investment Concentration by Location Florida 12.0% Texas 10.5% Indiana 6.7% California 6.0%
Slide 32: 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 33: 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 34: 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: 41%; Peer Avg: 55% 69.7% Favorable 55.2% portfolio diversification & exposure Reduced state- State diversification: specific risks rela
Slide 35: Long-Term Leases with Minimal Near-Term Expirations
Long-Term Leases with Minimal Near-Term Expirations % OF PORTFOLIO LEASE AND MORTGAGE EXPIRATIONS BY YEAR 35.8% 9.4 98% of portfolio years expirations Avg. lease term after 2024 19.2% 14.8% 13.5% 4.2% 4.0% 4.5% 0.7% 1.6% 1.5% 0.2% 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Thereafter INVESTOR
Slide 36: 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 36
Slide 37: 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 38: 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 39: Benefits of Investing in Long-term Care
5 Benefits of Investing in Long-term Care INVESTOR PRESENTATION 39
Slide 40: 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 41: 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 42: 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 1,000 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 7
Slide 43: SNF Demand Estimated to Outstrip Supply by 2030
SNF Demand Estimated 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.
Slide 44: Excellent Financials and Execution Track Record
6 Excellent Financials and Execution Track Record INVESTOR PRESENTATION 44
Slide 45: 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 $179 2009 2010
Slide 46: Strong Growth in Profitability
Strong Growth in Profitability Adjusted EBITDA Adjusted Funds from Operations ($ 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 47: 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 48: 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 49: 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 50: Proven Investment Strategy for Future Growth
7 Proven Investment Strategy for Future Growth INVESTOR PRESENTATION 50
Slide 51: A Long History of Prudent Capital Allocation
A Long History of Prudent Capital Allocation INVESTMENTS In billions Acquisitions Mortgages $4.4 $12.5 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 $0.3 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 N
Slide 52: 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 52
Slide 53: 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 54: 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 55: Liquidity Structure & Credit Profile
8 Liquidity Structure & Credit Profile INVESTOR PRESENTATION 55
Slide 56: 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: 4.8% $1.45B revolving credit 88.3% pro forma EBITDA ratio
Slide 57: Conservative Capitalization Policy
Conservative Capitalization Policy Targeted Funded Debt to Adjusted EBITDA Ratio Typically have used borrowings 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
Slide 58: 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 $1.45B Revolving Credit Facility • No near-term bond maturities • Minimal secured debt (~$368MM) • 98.3% of debt is fixed rate $1,400M Credit Facility & Ter
Slide 59: Strong Balance Sheet and Secure Credit Ratings
Strong Balance Sheet and Secure Credit Ratings Funded Debt/Adj. Ann. EBITDA 5.33x Adj. EBITDA/Total Interest Expense Ratio 4.2x BBB- Adj. Total Debt/Adj. Book Capitalization 57.8% Baa3 Adj. EBITDA/Fixed Coverage Ratio 4.1x Adj. Total Debt/Total Market Capitalization 42.9% 3Q22 Funds Available for Di
Slide 60: 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 61: Commitment to ESG Principles
9 Commitment to ESG Principles INVESTOR PRESENTATION 61
Slide 62: 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 63: Sources & Appendix
Sources & Appendix INVESTOR PRESENTATION 63
Slide 64: 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 11/3/2022 Page 10 - Information as of 11/3/2022 Page 11 - Information as of 1/9/2023 Page 12 - Information as of 1/9/
Slide 65: Source Index
SOURCE INDEX Page 51 - Current and historic supplemental information report located in the Investor Relations tab at www.omegahealthcare.com. 1) Includes the $3.9 billion 2015 Aviv acquisition; and the $623 million 2019 MRT acquisition 2) Included in “Acquisitions” prior to 2016 3) Consists primaril
Slide 66: 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 67: 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 68: 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 • Paid a $0.67 per share • Paid a $0.67 per share quarterly cash dividend on quarterly cash dividend on quarterly cash dividend on quarterly cash dividend on common stock common stock common s
Slide 69: 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 69
Slide 70: 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 71: 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
Omega Healthcare Investors — Investor Presentation (January 2023) on 6ix