Omega Healthcare Investors, Inc. Stock

Hello, everyone. Thank you for joining us, and welcome to Omega Healthcare Investors Second Quarter Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Michele Reber. Please go ahead.

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett; President, Matthew Gourmand; CFO, Bob Stephenson; CIO, Vikas Gupta; CAO, Neal Ballew; and Megan Krull, Senior Vice President, Data Intelligence and Government Relations.

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 second quarter 2026 earnings conference call. For me and Bob, this is our 100th and our final Omega earnings call. Today, I'm going to reflect back on the evolution of the skilled nursing and senior housing industry and look forward to Omega's extremely bright future.

In the 1990s, skilled nursing and senior housing facilities traded at very similar cap rates. Skilled nursing was considered a low-risk asset class with relatively low volatility. Medicare reimbursement was cost-based and many state Medicaid rates were also cost-based, resulting in low but predictable margins. Senior housing, particularly assisted living and memory care, was viewed as a less intensive but similar health care asset.

Over the last 25 years, the cap rate difference between SNFs and senior housing has meaningfully separated. Why? In the late 1990s, Medicare reimbursement changed from an inefficient cost-based system to a fixed fee acuity-driven system called PPS. Five of the 7 largest SNF public companies filed for bankruptcy, mostly caused by significant leverage used to acquire facilities and ancillary companies, rehab, pharmacy, respiratory, et cetera. The margins of the ancillary companies declined dramatically, making it impossible to maintain debt obligations. Billions in investment dollars were lost.

The phrase stroke of the pen risk related to SNFs has existed since this major capital market upheaval. As you would expect, SNF cap rates increased significantly. On the other hand, senior housing began to be viewed like multifamily. The housing component of monthly rates could be flexed to reflect market demand and residents stayed for extended periods of time. Senior housing cap rates fell.

This cap rate differential has persisted and widened over the years. Now, however, the long anticipated baby boomer aging is here and is showing up in demand for both SNFs and senior housing, which is now resulting in lower cap rates for SNFs and a continuation of the lower cap rates for senior housing.

The key takeaway looking back over 25-plus years is that skilled nursing and senior housing facilities are resilient, reliable assets and have weathered reimbursement changes, periods of oversupply, the global financial crisis and a pandemic.

Omega's portfolio has materially changed as we responded to capital allocation opportunities and shifting industry dynamics, including asset valuation changes. We've gone from nearly 100% SNF exposure in 2001 to significant senior housing and U.K. care home exposure by expanding and growing in those product lines while simultaneously growing our industry-leading SNF portfolio.

In addition, we continue to evolve our capital allocation products to gain exposure to operating cash flow upside. Our top 10 operators reflect our capital allocation priorities as we have new top 10 entrants, including PACS and the Gold Care U.K. portfolio and major shifts with Saber jumping to #1. In addition, our operating portfolio, SHOP, is growing rapidly, and we expect to deploy significant operating portfolio capital going forward.

I am very confident in Omega's future growth prospects. We have the right culture, products and importantly, the people to maximize value over the next 10 years. Our culture is anchored by fact-based intellectual rigor applied to operator underwriting, conservative balance sheet management and continuous forward-looking portfolio decisions. Our products continue to expand and evolve, going beyond triple net SNFs with a whole array of property and structuring options, allowing us to solve the capital needs of our partners.

Lastly, our people are the difference in the value creation equation. I believe that our team under Matthew's leadership will generate outsized results for many years to come. The team is young, highly driven and very diverse with talent from both industry backgrounds and sophisticated capital allocation organizations. Focusing on culture, product and people is the playbook that the most successful REITs have deployed and one that we have enthusiastically embraced.

Lastly, a special thanks to Bob. He has been a trusted partner and good friend for over 30 years. I know that he will have no shortage of future Board and business opportunities during his retirement. I wish him and his wife, Cheryl, the very best.

I will now turn the call over to Matthew.

Thanks, Taylor. And on behalf of all stakeholders in the company, thanks so much for all you and Bob have done to create prodigious shareholder value and set the company up for continued success. You've done it with humility, intellectual curiosity and a great deal of hard work. The team will look to continue not only the success, but also the key tenets that drove this success as we work to build upon your legacy.

Moving on to business matters. Today, I will discuss our second quarter results, certain key operating trends as well as certain expectations for the remainder of the year. First quarter adjusted funds from operations, or AFFO, of $0.83 per share and FAD, funds available for distribution, of $0.78 per share reflects strong year-over-year growth. However, sequentially, these financial metrics were effectively flat, driven by the headwind from $563 million of asset sales in the second quarter.

With some of these asset sales occurring at the end of the quarter, we would expect this headwind to impact third quarter earnings as well. However, as we have been at pains to stress in our discussions with investors, we are managing this business to create long-term sustainable value. We believe these dispositions, which we sold at an effective 6.7% cap rate on cash flow, not only strengthened the underlying credit support of the related operators, but also sets us up for strong earnings accretion once the proceeds are redeployed.

Furthermore, as Taylor highlighted in his press release quotation, we do not believe the acquisition run rate for the first 7 months of 2026 is reflective of what we expect for the remainder of the year. Based on the transactions forecasted to close in the coming months, we would expect a meaningful increase in transaction dollar volume through the end of 2026 and into 2027.

Furthermore, similar to our first U.K. care home operating company acquisition, which we closed this month, we believe many of these pending deals are creatively structured and should provide a significantly higher level of earnings accretion than our traditional triple net acquisitions. With an excellent cost of capital, EBITDA coverage at the highest level in over a decade, robust secular tailwinds and a portfolio of strong operating partners looking to grow, we are very optimistic about our ability to create shareholder value for the foreseeable future.

I will now turn the call over to Vikas.

Thank you, Matthew, and good morning, everyone. Today, I will discuss the most recent performance trends for our triple net and operating portfolios, provide an update on Genesis, our strategic sales, our proactive portfolio management strategy and give some additional details on our investment activity and pipeline.

Turning to portfolio performance. Our coverage for our core triple net and mortgage loan portfolio continues to trend in a favorable direction. Our trailing 12-month operator EBITDAR coverage as of March 31, 2026, is 1.65x compared to our fourth quarter 2025 reported coverage of 1.58x. Additionally, despite being in its infancy and with limited reporting periods, our senior housing operating portfolio, or SHOP, is performing in line with our underwritten expectations.

The Genesis bankruptcy process continues to move forward with the closing expected by the end of the year, at which time the buyer will assume our Genesis master lease at the same economic terms, and we expect both our term loan and DIP loan will be satisfied from the consideration received by the debtors. In the second quarter, Omega received a $16 million paydown on our $25 million super priority secured DIP loan, reducing our loan balance to $9 million.

We completed the previously announced strategic exit of 18 CommuniCare assets located in Maryland and West Virginia for a contractual sales price of $480 million and a rent discount of approximately 7.7%. As we have previously said and Matthew mentioned, this was a strategic sale that was driven by the strong pricing received for these facilities, combined with the ability to significantly improve our credit with CommuniCare. We expect significant value creation when the proceeds are redeployed into new investments.

As part of our proactive portfolio management strategy, during the quarter, we transitioned 20 facilities from Ciena to two other current operators, Saber and HHC, each with strong credit. There is no negative FAD impact related to this transaction. Late last year, we approached Ciena regarding exiting their leased Laurels portfolio, a 20-facility portfolio of assets in Ohio, North Carolina, Virginia and Indiana. This portfolio had historically weighed down the performance of Ciena as reflected in the trailing 12-month EBITDAR coverage of 0.87x based on the allocated rent of $33 million.

We were able to successfully transition 18 facilities to the Saber master lease, one facility to the HHC master lease, and we sold one facility to the Saber PropCo JV. In addition, Ciena agreed to exit their eight owned Laurel assets through a sale to the Saber PropCo JV. While the culmination of these transactions is initially FAD neutral for Omega, it allowed us to strengthen the overall credit profile of Ciena. Additionally, given our 9.9% ownership in the Saber operating company, we would expect to further benefit as Saber improves the operating performance of these assets over time.

Turning to new investments. We closed $470 million in new investments year-to-date, with $218 million closed in Q2 and subsequently in Q3. As you will see, we continue to support the growth of our existing and new operators in the U.S. skilled nursing space and U.K. care home space as well as expand our new senior housing RIDEA portfolio, all while providing for strong risk-adjusted returns for Omega shareholders as facilities stabilize.

During the second quarter of 2026, Omega completed a total of $126 million in new investments, not including $18 million in CapEx. These new investments include the previously announced $43 million acquisition of three Rhode Island senior housing communities and a $33 million acquisition of two Indiana skilled nursing facilities. Our other second quarter investments included the purchase of a $15 million Tennessee senior housing community, $11 million for a U.K. care home, $8 million for a Texas skilled nursing facility and $16 million in real estate loans.

Subsequent to quarter end, we closed $93 million of additional investments. We purchased six Texas skilled nursing facilities for $73 million under a triple net structure and acquired the operations of four Omega-owned care homes in the U.K. for $20 million, converting the investment into our RIDEA structure. This is our first RIDEA investment in the U.K. And to be clear, this transaction was not converted to RIDEA due to any issues with the operator, but rather we saw an opportunity for enhanced accretive growth under our RIDEA structure.

For the announced transactions that I just detailed, we expect stabilized unlevered returns in the low double digits for the triple net deals and low to mid-teens for the RIDEA deals. In addition to these investments, and as I previously mentioned, the Saber PropCo JV, which Omega owns a 49% equity interest in, acquired nine skilled nursing facilities in the Laurels portfolio for $160 million using cash on hand and third-party debt. No additional equity was needed from Saber or Omega.

As we've said in the past, we have high confidence in the Saber management team and their operating platform and expect to achieve additional growth in both the OpCo JV and the PropCo JV via improvements to same-store financial performance as well as future new deal transactions.

Turning to the pipeline. As both Taylor and Matthew mentioned, we have a strong pipeline and expect a material pickup in transactions through year-end. Our pipeline includes both marketed and off-marketed opportunities in the U.S. and the U.K., but a large component of these opportunities are RIDEA. While we will continue to do triple net deals in the U.K., now that we have completed our first RIDEA transaction there, we can move more efficiently to use the structure going forward in the U.K. for both new deals and conversions of triple net deals when the underwriting supports enhanced growth. We have such opportunities in our U.K. pipeline as well as additional triple net opportunities.

We continue to build out our infrastructure at Omega by implementing increasingly creative deal structures and adding to our team of investment professionals, both in the U.S. and the U.K. The team continues to search for deals that meet our investment criteria, including high real estate quality, strong markets based on demographics and healthy stabilized returns. For RIDEA deals, the team continues to develop new relationships with high-performing managers that have demonstrated a proven ability to drive occupancy, margins and cash flow growth. These relationships not only support strong operating performance, but also provide an additional source of off-market RIDEA acquisition opportunities to help facilitate future growth.

Lastly, we continue to focus on alignment of interest between us and our operating partners, be it in a triple net or RIDEA structure. We are pricing deals in a way that allows both parties to win, throughout ultimately Omega will share in a greater portion of the stabilized cash flow compared to our historical contractual structures. Overall, with the backdrop of our highly experienced team and new structures we have in place, we are excited to deliver further accretive growth in the coming quarters and years ahead.

I will now turn the call over to Neal.

Thanks, Vikas, and good morning. Turning to financials for the second quarter of 2026. Revenue for the second quarter was $328 million compared to $283 million for the second quarter of 2025. The year-over-year increase was primarily the result of the timing and impact of revenue from net new investments completed throughout 2025 and 2026, annual escalators and active portfolio management.

Net income available to common shareholders for Q2 2026 was $363 million or $1.19 per common share compared to $137 million or $0.46 per common share for Q2 2025. The year-over-year increase was primarily the result of a $247 million gain on asset sales in Q2 2026, primarily from the sale of 18 community care facilities. Adjusted FFO was $261 million or $0.83 per share for the quarter and FAD was $248 million or $0.78 per share. Reconciliations of these non-GAAP measures to net income are included in our earnings release and second quarter financial supplemental posted to our website.

Q2 2026 AFFO increased by approximately $0.01 compared to Q1 AFFO. The increase was primarily driven by incremental net income from $377 million in new investments completed during the first and second quarters, $1.6 million of revenue from annual escalators and lower net interest expense of approximately $1.6 million resulting from credit facility paydowns during the quarter. These items were materially offset by reduced revenue related to $597 million in asset sales and $209 million in loan repayments over the past two quarters, which reduced Q2 AFFO by $7.5 million.

Our balance sheet remains incredibly strong. Our debt is well laddered, and we have significant liquidity. During the quarter, approximately $700 million in proceeds received from asset sales and loan repayments allowed us to pay down our $2 billion revolver to only $6 million in borrowings. The monetization of assets at accretive valuations created capital for higher return deployment opportunities and further strengthened our balance sheet position.

Additionally, as of June 30, we had $39 million in available cash and $145 million in restricted cash, of which $118 million was sales proceeds held by qualified intermediaries and a 1031 exchange to fund future investments. We continue to have access to the equity market through our DRIP and ATM programs, and our next scheduled debt maturity is not until April 2027.

At quarter end, our fixed charge coverage ratio was 6.5x, and our leverage decreased to 3.3x. Our leverage remains at historically low levels, and that, coupled with our substantial liquidity and ATM capacity, gives us significant flexibility to fund our 2027 debt maturity and still capitalize on accretive investment opportunities.

Turning to guidance. As we announced in yesterday's press release, we increased and tightened our full year adjusted FFO guidance to a range of $3.22 to $3.26 per share from our prior range of $3.19 to $3.25 per share. With that change, the midpoint of our guidance increased to $3.24 per share, a $0.02 increase over the midpoint of our April guidance. Our updated guidance reflects the impact of approximately $9 million of quarterly revenue associated with assets sold and loans repaid late in the second quarter. The volume of asset sales and loan repayments year-to-date muted AFFO growth for Q2.

Additionally, the timing of some sales and repayments toward quarter end, along with an investment pipeline more heavily weighted toward the back half of Q3 and Q4 is expected to create a temporary earnings headwind. However, we believe those proceeds position us for meaningful deployment opportunities that support stronger growth in Q4 and into 2027.

With that said, I'd like to take a moment to highlight a few of the guidance assumptions we outlined in our press release. Guidance includes the impact of new investments completed as of July 29 and does not include any additional investments not outlined in our press release. Guidance includes the impact of scheduled loan repayments of $144 million in mortgages and other real estate loans scheduled to mature in 2026, guidance assumes $56 million will convert to fee simple real estate and that the balance will be repaid.

Additionally, $180 million of non-real estate-backed loans outstanding as of June 30, 2026, are expected to be repaid throughout 2026. This includes approximately $148 million in Genesis loans that we expect to be repaid at the conclusion of the bankruptcy process. As we said at the beginning of the year, we are always pruning and strengthening our portfolio, which could include $15 million to $25 million per quarter in asset sales.

And lastly, the guidance includes the $0.01 increase to our common dividend announced last week. The high end of our guidance range includes, but is not limited to, the timing or potential extension of loan repayments and asset sales, additional payments from cash basis operators, exposure to our operating portfolio through RIDEA and JV investments and G&A at the lower end of the range. Our 2026 adjusted FFO guidance does not include any additional investments, asset sales or capital market transactions other than what I just mentioned or what was included in the earnings release.

I will now turn the call over to Megan..

Thanks, Neal, and good morning, everyone. According to industry experts, by 2022, the nursing home industry had lost 14% of its workforce in comparison to pre-pandemic levels. In June 2026, 4 years later, according to the Bureau of Labor Statistics, the industry finally recovered to those prior levels. We joined with the industry in celebrating this long-awaited milestone.

That said, we also recognize that more needs to and should be done to support the industry to ensure that current and future staffing keeps pace with the growing demographic demand. Additionally, we are seeing some positive momentum on the regulatory front with CMS announcing a risk-based survey process to be rolled out later this year. And while there have been a small handful of negative state rate setting outcomes, none of which is expected to materially impact our coverages, for the most part, rate setting has been consistent or better than our expectations.

On a separate note, I would be remiss if I did not note the recent focus of both HHS and CMS on fraud and abuse within the health care sector. While the spotlight has thus far been on home health and hospice amongst other non-nursing home providers, similar to the OBBBA, we are watching carefully for any indirect impact to our space caused by state budget constraints. To date, we have heard of none. We applaud efforts to reduce fraud and abuse in health care, thereby leading to a less strained system. However, we hope efforts are squarely focused on those bad actors committing nefarious acts and that outstanding providers aren't inadvertently impacted.

I will now turn the call over to Bob.

Thanks, Megan, and good morning. As Taylor mentioned, this is our 100th and final earnings call, spanning 25 years of leading Omega. I'd like to express my gratitude to everyone for their kind and heartwarming words you shared with us since the announcement of our planned retirements a few months ago. I want to extend special thanks to Taylor for asking me to help manage and grow Omega into one of the most successful REITs over the past 25 years. His steadfast leadership, creativity and guidance have been truly admirable and astonishing and produce tremendous shareholder value.

It takes more than a few individuals to build a great company. Therefore, I would also like to thank all of our past and current Board members, former and current Omega employees, bankers and our operators for their contributions. In addition, I will miss the numerous conversations over the years with our analysts and investors and thank them for their support and investing in Omega. Lastly, we leave Omega and our investors with an incredibly talented executive team and employee base that we know will continue Omega's growth and deliver continued significant total shareholder returns.

I will now open the call up for any questions.

[Operator Instructions] your first question comes from the line of Justin Haasbeek with UBS.

This is Justin on for Michael Goldsmith. Congratulations to Taylor and Bob. On the U.K. OpCo acquisition, if the EBITDAR coverage was previously quite high at 2.4x, can you provide some color on why the operator agreed to shift the structure to triple net or from triple net to RIDEA? Was it because the purchase price on the deal was pretty attractive, and so they agreed to the transition beforehand? Just trying to understand the dynamics of that transaction and the potential for future RIDEA transactions and transitions in the U.K.

This is Matthew here. Well, I wouldn't to speak exactly for the operator in the situation. My sense was that he had created a decent amount of money and value in this portfolio and was looking to monetize some of that. We obviously spent a decent amount of time trying to understand whether there was opportunity for further growth, and we're very comfortable with that. And then we're able to strike a price that will create outsized returns, so meaningfully more than our low to mid-teen returns, we believe, over time, while also allowing him to take a little bit of risk off the table.

We will continue, I hope, to grow with that operator potentially both in a RIDEA and triple net format. So it's all about the alignment of interest longer term with our operators, and this is a perfect reflection of that.

Okay. Great. And then last one for me. Just curious on how you guys think of RIDEA contracts as it -- as it becomes a bigger percentage of NOI, specifically the management and incentive fees. Has your strategy evolved on that in order to get aligned more so with your SHOP operators? Or is there still that industry standard of 5% of revenue that the REITs generally need to adhere to?

Yes. We spent an awful lot of time both understanding what that promote structure would look like and talking to our potential managing partners in the situation to align those interests as best we can, so I don't know that I would compare it to others because we didn't spend an awful lot of time focusing on that. We really focus primarily on aligning our interest economically, and I think that all of the economic opportunities comes down to buying good assets at decent prices.

Ultimately, if you're able to buy a good asset that has growth opportunities, everyone is able to do well, and you're not fighting over the pie because there's enough of it to go around. So I think not only are we focused on an alignment of interest and a fairness for superior performance with our managers, we're also primarily focused on just finding the opportunities to create that value that allows both parties to succeed.

Your next question comes from the line of Seth Bergey with Citi.

This is Lauren on for Seth. Congrats on the retirement. You mentioned the expected increase in CapEx deployment for the remainder of the year and into 2027. With the investment environment increasingly more competitive, I guess, one, could you go into more detail on where you're seeing the opportunities today? And two, as the spread between stabilized pricing and value-add pricing changed recently, maybe finding it more difficult to source those transactions with that embedded upside?

Yes. Lauren, this is Vikas. As we've all said, our pipeline is extremely strong. That's in all three asset classes we look at skilled nursing, senior housing and U.K. care homes. At this time, it's more weighted towards senior housing and care homes. And as we said, yes, a good bit of it is value add, and we continue to apply that in all of our asset classes.

Your next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Bob and Taylor, congratulations to the dynamic duo. I have done 17 of those 25 years with you, and it's been quite a ride and all the best to both of you. In terms of my question, SHOP, curious if you guys are willing to explicitly put out a target of how big you want that to be over time the way some of your peers have? And also if you could talk internally about some of the changes you've made operationally, whether it's with staff, whether it's with technology to kind of ensure that you are kind of ready to kind of grow that business?

Sure. Matthew here. We've never really given out kind of expectations around skilled nursing quantities of acquisitions. I think that was by design in the fact that we just didn't know what opportunities were going to present themselves. And so from that standpoint, in an area that we obviously have huge amounts of expertise in, if we're not willing to provide quantity guidance on that, I think it would be probably somewhat naive for us to provide it in an area where we're just really getting started.

That having been said, Tayo, we do see a very decent amount of opportunities to put money to work, so I would expect that very much like we've seen in the U.K. where we continue to grow that acquisition quantity over time, we'll look to do the same thing in seniors housing. But it's really going to come down to the opportunities that present themselves that fit within our parameters and that we are fortunate enough to win.

In terms of the structuring of the company and that side of things, obviously, you're aware that we've taken some new employees on from Wall Street, have very deep capital allocation backgrounds, have a very logical way of thinking. We've also hired some people from the industry, from the operational side of things, from the relationship management side of things that have deep experience on that side. We've also extended out our data analysis and AI capabilities with some hiring of some talent in that side of things as well. It's still very much all in its infancy. It will probably continue to grow. I think we're going to continue to also increase our accounting and back office side of things to make sure that not only are we capable of allocating that capital, but that we're managing it prudently relative to expectations and staying on top of that side of things.

So I think we have the bench now to continue to grow without having to add great amounts to it. But nonetheless, just the very nature of this business being more involved in triple net means that as we continue to expand the platform, we'll probably look to grow the headcount to match that.

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

Congratulations, Taylor and Bob, on two phenomenal careers. I really enjoyed working with you both, and you've done a great job choosing the new leadership team. My first question is, could you give us a breakdown of Maplewood's performance in 2Q, both on the DC side and on the existing portfolio?

Yes. John, this is Vikas. As we've always said, we think of RIDEA -- think of Maplewood as RIDEA today. So what I would just say is the Maplewood team is doing an excellent job, and we continue to take all the cash flow. So what I would look at is the rent that's coming into Omega is reflective of the overall performance of Maplewood. Occupancy, the occupancy there is 94% for our New York facility, 66% for our D.C. facility. And then the rest of the portfolio is stabilized, like I said in the past.

Okay. That's helpful. And then just a second, kind of on the operators as you look across your portfolio, as you work through Genesis and Maplewood, coverage continues to improve across the portfolio. Is there a watch list today for you? Or are there tenants that are a majority of your portfolio maintenance efforts? Or are we in a place right now where you're confident that there aren't many near-term operator concerns given the healthy coverage we're seeing across the sector?

Yes, John, Vikas again. We really have no major concerns in our portfolio. We will, from time to time, play defense and offense with our portfolio management, similar to what we did with CommuniCare and Ciena, but we have nobody major on our trouble list.

The only thing that I would add to that is just as we now -- I mean the team has done a phenomenal job of addressing these things so proactively and getting us to a position, as you say, where the coverage has improved and the watch list is dramatically reduced. I think we can start focusing on, as Vikas said, the offense side of active portfolio management. We can't address some of those things right now because they're not fully baked. But I think that in the next few quarters, you'll start to see opportunities to improve our accretion through the portfolio as well as obviously through capital allocation to external assets.

Your next question comes from the line of Dave Rodgers with Raymond James.

This is Ravin Reddy on for Dave Rodgers. Congratulations on the quarter. Texas is your largest market, but also has your lowest occupancy, and as the team goes down this path of getting in front of problems and turning the portfolio, do you guys have any concerns about Texas and coverage?

Matthew here. No, this isn't a situation that has manifested itself recently. Texas has historically had low occupancy, and we acquired these assets at that occupancy level. So our coverage in our Texas portfolio today sits in a very strong position. We don't have any worries about that.

Quite frankly, we think probably both from a demographic standpoint and the occupancy availability standpoint, as all states start to see an increase in occupancy, Texas is probably one of the better positions to meet that increased demand relative to some other states, and I think we'll probably continue to go from strength to strength. So we very much like the state and I think we're in a good position today, and that will only get better.

Your next question comes from the line of Nick Yulico with Scotiabank.

Maybe this is for Neal, but just on the dividend increase, was that a pull-forward decision maybe given your ability to get the CommuniCare deal done in the quarter and prior quarter comments about discussing the dividend maybe later in the year?

And then just a two-parter, just thinking about comfortability with future FAD coverage. What sort of magnitude of acceleration in FAD do you expect heading into year-end and early 2027 based on the amount of capital you put to work and associated incremental CapEx in the near term?

Yes. Nick, I start on the dividend question saying that's very much a Board decision. So as we met the last Board, I think as we reflect in some of our comments, looking at portfolio where it stands now, where coverage is has been based on the operators and the watch list that Vikas alluded to and how there aren't problems on the watch list, the Board felt confident that now was an appropriate time to take up the dividend.

To your point about CommuniCare, I think you might be referring to the fact that we had a large sale with a large gain. But as I mentioned in my prepared remarks, some of those proceeds went to a lifetime exchange. And so I think we're managing the gain in a tax-efficient way that's not really playing a factor into causing us to step up the dividend. I think that's a completely separate factor and that didn't play into the calculus for the dividend increase.

And then as far as the Q4, I mean, I don't think we historically give that level of granularity, but I think through my prepared remarks and when I gave the guidance, I think I gave you the building blocks for where we think we'll end up for Q3 and Q4.

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

This is Robin Haneland for Juan. I was just curious on the pipeline, if you could help us quantify the size of it today versus historically? I'm just curious if there are any chunkier deals you're looking at.

Yes. This is Vikas again. So as I said, the pipeline is robust. It is a mix of both small deals and some chunky deals. We don't give a number for where we see that, but we do think this year could turn out to be close to historical levels.

Got it. And on the SHOP U.K., just curious where cap rates are for those assets compared to triple net. And if you can talk generally about NOI growth expectations versus the U.S., that would be helpful.

Sure. That's a good question. So in this situation, it was a little bit different, right, because we own the real estate already. So from that standpoint, we were just buying the OpCo. I would say that in that situation, you're normally looking at probably a high-teen yield going in, possibly into the 20s.

In a situation where you're taking a RIDEA structure where you're taking the OpCo and PropCo together, it very much depends on what the opportunity is very much like in the U.S. seniors housing side of things. If it's a well-managed portfolio with decent margins and decent occupancy, you're probably going to be looking at a stabilized low double digits. If there's a situation where there's a lot of opportunity for enhancement and you think you can get into the mid-teens or even high teens, you might be willing to start out at a lower initial yield. It very much varies on that side of things and each -- we look at each asset individually.

From a standpoint of the growth opportunity in terms of the cadence of earnings growth, I would say it's somewhat similar to the U.S. RIDEA side of things. You obviously have a little bit of a public pay percentage in that, but that has been growing quite nicely, and so it may be modestly slower growth, but it is predominantly in line with what you see in U.S. RIDEA.

Your next question comes from the line of Vikram Malhotra with Mizuho.

This is Jyoti on for Vikram. Congratulations to Taylor or Bob, firstly. And on the question, I wanted to ask like just focusing on the Omega strategies to unlock value, like what would you say is the dollar opportunity set, maybe like as a percentage of NOI, just like transitional asset management that you've been doing?

It's really tough to quantify that because obviously, a certain amount of it is with the active portfolio management already in our portfolio today. But at the same time, we continue to grow those opportunities through our acquisitions. I think we've talked about the fact that we would like to be growing in aggregate in that kind of mid-single-digit number.

Personally, I think 6%, 7% annualized FAD growth is eminently achievable, and there will be some years where we're able to move some levers to make that into the high single, possibly low double-digit growth. But I think that's the natural cadence of things as we sit here today. But the opportunities, both from an external standpoint and even from an internal standpoint, are going to be very much determined by having partners who are willing to work with us to create that opportunity, and it's just tough to quantify what that dollar amount is until we've had those conversations.

Your next question comes from the line of Henry Newell with RBC Capital Markets.

Congratulations on another successful quarter. Just want to talk about the SHOP transaction market. How difficult is it today to source new SHOP acquisitions versus, say, 6 months ago? And who are you seeing as your typical competitors when you're finding deals?

Henry, it's Vikas. We are being -- we are finding SHOP deals. I mean, as we -- our mantra has been looking for value add. And I will say as time has continued, we are finding more opportunities, both marketed and off-marketed in the type of deals we're looking for, so no shortage of deals. They do tend to be smaller, but the team is working hard, and we're doing a lot of those transactions. The competition, we're not playing against the other REITs for the most part. We're playing against private buyers.

Your next question comes from the line of Duane Green with Green Street.

Congratulations, Taylor and Bob. I was curious about Saber. This relationship has really grown rather quickly over the last couple of quarters, and there's a strong alignment of economic interest there. I'm just curious if this playbook is replicable for other either operators in the existing portfolio or potentially new operators within SHOP or the U.K.

So yes, I would start by saying that even though, obviously, our relationship has grown in the last couple of years, we've known this team for the better part of the decade, and we've got to really work with them closely and understand how they transact, how they run their business, the quality from a clinical standpoint, from an operational standpoint and just how they see the world, and it very, very much aligns with how we see the world.

It starts with clinical quality first, it starts with rational decision-making, prudent allocation of capital. And so from that standpoint, to the extent that we find other operating partners that we have that similar kind of alignment of interests and philosophy, I think we'd be open to that.

I'll tell you that Sabers don't grow on trees. This is a particularly exceptional company led by an exceptional management team. And so therefore, I don't think it's going to become a pervasive part of our business. But obviously, we continue to evaluate all opportunities to align interests, both with them and with other partners that make sense economically and philosophically.

Absolutely. That makes a lot of sense. And then my second question is just on payer mix. How much of that would you say is driven, call it, like organically by SNF operators, maybe same-store concept versus shifting portfolio mix? And what are your expectations for how that metric will trend over the next couple of years?

I think there's a good piece of that, that's related to the fact that we're trying to exit certain states that have reimbursement that we don't know is sustainable like the West Virginia. And we had higher concentration of Medicaid also in the Maryland portfolio that we exited, and so that's some of what you're seeing there.

Your next question comes from the line of Alex Feygin with Baird.

And just one big one for me. You did CommuniCare last quarter and now Ciena this quarter. It seems like on the CommuniCare stuff that was -- that came to you, is it similar for Ciena? Did they come to you? Are they exiting somehow? Or was that something that you pushed? And then following up on that, are there any other kinds of big portfolio transition opportunities that you're actively evaluating?

Yes. Alex, like I said in my prepared remarks, this was proactive asset management on our behalf for Ciena. We approach them because their coverage is not good in those non-Michigan assets. I will note, Ciena is an excellent offering in Michigan, but this portfolio that was out of Michigan, they were not performing well. So we saw an opportunity to transition those buildings to high credit operators like Saber and HHC and then improve the coverage with Ciena at the same time.

And then we also got the benefit of additional growth with Saber as they continue to stabilize those facilities and through our 9.9%. So overall, win-win for everybody in that situation, for Ciena, for the new operators and for us. Again, this was a little bit of defense with offense. We will continue to look for that. But at this moment, we have nothing that we're particularly working on.

Yes. The only thing I would add is CommuniCare was led by us as well. The team came up with something that we felt made sense from our standpoint and engaged CommuniCare in that and ultimately came up with what I think was an obvious win-win for both parties. But it's all coming from us and the active portfolio management.

The operations team is doing an outstanding job of looking at that and have candidly addressed most of the things from a defensive standpoint that we need to do and now they are continuing to look for those opportunistic offensive areas where we could enhance the portfolio as well.

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

Congratulations to Taylor and Bob on 100 earnings calls. That's a great number. So my first question is, you continue to mention Saber. If you could give a little bit more detail about really where you see this relationship going. We've obviously seen you lean into different aspects of the relationship through your JVs as well as also utilizing them in this transition for operators. And also, if you could address if there's a certain cap for exposure that you'd be willing to include.

Yes. So I'll start. This is Vikas. So as Matthew said, we know the Saber management team extremely well, and we think very highly of them. This was an example of something that in our portfolio, we were able to move to Saber, stay FAD neutral and then realize future growth as they grow.

We could have more opportunities like this, but we really do expect to have other new opportunities we will add. And that could be both in our triple net or in our JVs. That will depend on things like who is the seller, what is the timing and what is the size. It will probably be a combination of both going forward. So the possibilities are somewhat endless with Saber. They do want to continue to grow. They do want to continue to enter new states, and we are very supportive of that based on our road map to date.

And then in terms of the sizing, obviously, you want to have a diversified portfolio of operators. But if we think back over the last 10 years, a lot of the challenges that we've had have actually come from some of our smaller operating partners. So when you have this situation, I would put Saber in this bucket, I put a number of other of our top 10 operators in this bucket, where you have these high-caliber operators that you know provide both strong clinical care and able to achieve decent financial results. From that standpoint, you're quite happy to grow with them.

And in many situations, putting incremental assets into their hands, both from an ability standpoint and from the support of the master lease makes more financial sense than just growing for the sake of diversification. So I don't think we have a quantification as to what that will look like. I do think that the pipeline is robust enough that we're going to continue to be adding assets and managers/operators to that portfolio. So intrinsically, it's not going to grow to an outsized amount. But internally, if we see opportunities to grow with Saber or any of our larger operating partners that make financial sense, we'll continue to do so and won't let diversification be the defining decision as to whether we do so or not.

Great. And my second question is about the U.K. Prime Minister Burnham discussing adult social care systems recently and potentially implementing tax or having greater reform. And I was curious if you could add any comments or opinions on what that could mean for public REIT exposure, especially in the U.K. and if that changes at all your deployment of capital into the area?

Sure. Great question. This is a situation that we're seeing in the U.K. and candidly, we've been seeing it in states in the United States as well, where people start to look at their budgets and try to understand whether they're getting value for money. And from our standpoint, we have been very, very disciplined, both in our U.K. expansion and in the U.S. in buying assets that not only are vital assets within the care continuum, but that also have an alignment of value relative to the underlying real estate.

One of the situations we've seen is where cash flows will support or warrant a valuation being assigned to real estate that effectively is significantly higher than the underlying value of the real estate itself. There's huge need in the United Kingdom to continue to provide care. Candidly, the most efficient way of providing that care is in one holistic setting rather than having carers care for people in individual accommodations, which is far less efficient.

And so we actually think that as they start to look at opportunities to cut costs while not cutting quality of care, care homes that provide decent quality in holistic settings and that have fees that are in alignment with the value that they're providing are probably going to benefit in that situation, and that's ultimately where we've been allocating our capital, both within the U.K. and within the U.S. And therefore, we feel comfortable that should these situations manifest into changes in reimbursement, our portfolios will likely benefit from that in a net capacity as opposed to having a headwind.

Your next question comes from the line of Marc Akinbi with Barclays.

You mentioned yields on the OpCos range from the high teens to 20%. This seems pretty attractive relative to senior housing given you still get the growth but then also get higher yields. So I'm wondering if there's a constraint on your ability to do more acquisitions and how much is in your pipeline.

Thanks for the question. Yes. So just to clarify, that's in a situation where we already own the real estate, and we're just acquiring the OpCo. The OpCo multiples might be 4 or 5x earnings, right? So from that standpoint, we're not going to get 20% when we're going out and buying the OpCo/PropCo combo. That's more an opportunity to grow into the low to mid-teens. Ultimately, there may be opportunities for us to take the operating companies of real estate that we own today. We continue to engage with operators and try to look for a price that suits both parties.

But at the same time, there's a finite amount of opportunity in that a lot of operators want to keep operating their facilities, so they have to be in alignment of interest, around both an exit decision and the price that makes sense in that situation. But I do think that the U.K. has now three effective ways to allocate capital, both from a triple-net standpoint, from a RIDEA standpoint where you take down the OpCo and the PropCo and potentially down the line, some conversions of OpCos into a RIDEA structure where we already own real estate.

That's helpful. And then my next question is in regards to the transition. Now that Saber is taking on those assets, I'm curious what the coverage is for the OpCo?

You want to know what the coverage is on Ciena or on Saber?

Now that Saber is taking on the Ciena assets, I was wondering if you could provide detail on assuming there's a master lease or some sort of corporate guarantee, what the coverage is at the OpCo of Saber.

Yes. So we don't release coverages by operator, but Saber is an extremely strong operator with coverage well above. So there's no concerns on our site, even with the addition of these buildings that still need to stabilize, Saber's overall coverage is extremely strong.

We have reached the end of the Q&A session. I will now turn the call back to Taylor Pickett, CEO, for closing remarks.

Thanks, everyone, for joining our call this morning. I look forward to future calls as a shareholder.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to Omega Healthcare Investors Inc. First Quarter Earnings Conference Call. [Operator Instructions] I will now turn 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, Data Intelligence and Government Relations.

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 first quarter 2026 earnings conference call. Today, I will discuss our first quarter financial results and certain key operating trends. First quarter adjusted funds from operations, AFFO of $0.82 per share and FAD funds available for distribution of $0.78 per share reflects strong revenue and EBITDA growth, principally fueled by acquisitions and active portfolio management.

Our dividend payout ratio has dropped to 82% for AFFO and 86% for FAD. Our exceptional first quarter results reflect our high-quality capital allocation throughout 2025 and the first quarter of 2026. We continue to find and close the RIDEA transactions while still allocating meaningful capital to SNF facilities and U.K. care homes. We expect our capital allocation and active portfolio management will drive significant future AFFO and FAD growth.

Our active portfolio management is highlighted by our planned and partially completed second quarter sales, generating $480 million in proceeds. We expect the redeployment of this capital will result in approximately $0.03 of annual AFFO and FAD accretion.

I will now turn the call over to Matthew.

Thanks, Taylor, and good morning, everyone. We have spoken in previous calls about the team's focus on creating shareholder value by growing FAD per share on a sustainable basis, and we saw this focus continue to bear fruit in the first quarter as our FAD per share increased 9.5% over the same quarter last year. This, along with a robust pipeline of investment opportunities gave us comfort to be able to increase the low end of our AFFO guidance moving the midpoint up by $0.02 to $3.22.

At the same time, our first quarter investments reflect the breadth of our capital allocation focus. We invested in both triple-net and RIDEA structures in skilled nursing, seniors housing and long-term care real estate across the United States, the U.K. and Canada. And we closed on our equity investment in Saber's operating company.

In addition, we are in the process of selling a portfolio of 18 CommuniCare assets for $480 million. Vikas will provide additional details around the sale. However, from an overarching perspective, it was about putting assets into the hands of strong stewards at a price that made sense for each party while also enhancing our credit with CommuniCare. While we would not expect to see this be a core element of our capital allocation strategy, we will continue to evaluate our portfolio and work with our operating partners to find innovative ways to both protect and enhance shareholder value over time.

Finally, I would like to thank the team who continue to work tirelessly to execute on our vision as well as our operating partners and their staff who work every day to look after some of the sickest and most frail members of our community. Without them, none of this would be possible.

I will now turn 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, additional detail on our strategic sales, Omega's investment activity year-to-date and an update on our pipeline.

Turning to portfolio performance. Core portfolio coverage continues to trend in a favorable direction above industry average coverage levels with our trailing 12-month operator EBITDAR coverage for our triple-net and mortgage core portfolio as of December 31, 2025, at 1.58x compared to our third quarter 2025 reported coverage of 1.57x. This represents the highest coverage in our portfolio in over a decade and reflects the combination of a relatively favorable operating backdrop, combined with our active portfolio management, where we have focused on strengthening the lease credit across our portfolio.

The Genesis bankruptcy process continues to move forward with a few notable events having taken place in recent weeks. In March, we committed to fund up to $26.7 million or 1/3 of a new aggregate $80 million DIP loan. As of the end of the first quarter, we have funded our $25 million portion of the initial $75 million advance.

Proceeds from this new super-priority DIP financing were used to fully repay the original DIP loan and to fund working capital needs. Additionally, the debtors have advised that 101 West State Street has submitted a qualified financing commitment as required by the asset purchase agreement. The closing date, which can contractually be extended to the end of the third quarter, is conditioned on several factors, including receipt of regulatory change of ownership approval. We anticipate that 101 West State Street will assume our Genesis master lease and our DIP loan and term loan will be paid off from the consideration received by the debtors at closing.

We remain confident that our term loan is fully collateralized based on the underlying collateral and the ascribed value of the Genesis estate. These assumptions, along with all elements of the bankruptcy process are subject to further developments and events in the bankruptcy proceeding. As Taylor and Matthew mentioned, we're in the process of a strategic sale of 18 CommuniCare assets located in Maryland and West Virginia, for a contractual purchase price of $480 million and our rent discount at a blended 7.7%.

Subsequent to quarter end, 12 Maryland facilities were sold, and we expect the remaining 6 West Virginia facilities to be sold in the second quarter. While asset sales are not typically a core component of our capital allocation strategy, the strong pricing offered for these facilities, combined with the improvement of our credit with CommuniCare, presented an opportunity to realize significant value for our shareholders.

Turning to new investments. Our transaction activity for 2026 started strong with $326 million in new investments year-to-date. Similar to previous quarters, these transactions varied in size and asset type but demonstrate our ability to continue to develop, underwrite and close accretive transactions in our core asset classes. We continue to support the growth of existing and new operators in the U.S. skilled nursing space and U.K. care home space as well as expand our new senior housing RIDEA portfolio. As Matthew said earlier, our primary goal is to allocate capital with a focus on growing FAD per share on a sustainable basis.

During the first quarter of 2026, Omega completed a total of $251 million in new investments, not including $13 million in CapEx. These new investments included the previously announced purchase of 9.9% of the equity interest in Saber's operating company, the $109 million acquisition of 13 Georgia skilled nursing facilities and a $10 million investment in Alabama Senior Housing RIDEA transaction. Our other first quarter investments included the purchase of a U.K. care home for $7 million and $27 million in real estate loans. The weighted average yield on these leases and loans was 10.9%.

Subsequent to quarter end, we closed $75 million of additional investments. We purchased 2 Indiana skilled nursing facilities for $33 million and 3 senior housing facilities in Rhode Island for $42 million. The skilled nursing facilities will be leased to a current Omega operator at a lease yield of 10% and the senior housing facilities will be operated by Omega and managed by a third-party manager via RIDEA structure.

Turning to the pipeline. Our pipeline includes both marketed and off-market opportunities in the U.S. and the U.K. A large component of these opportunities are U.S. senior housing assets that will be structured and operated using our new RIDEA platform. As mentioned previously, we've built out our infrastructure at Omega with an experienced team of investment professionals that are finding deals that meet our investment criteria and then coupling them with proven third-party managers, who we believe will deliver on those underwritten expectations. We continue to pursue deals that will achieve IRRs in the mid-teens range.

In addition to senior housing RIDEA deals, we are aggressively pursuing both U.S. skilled nursing and U.K. care home deals. In the U.K., we've built out our team to help find off-market transactions and quickly evaluate opportunities with existing and new operators in order to continue to deploy meaningful capital through both triple-net and RIDEA structures.

I will now turn the call over to Bob.

Thanks, Vikas, and good morning. Turning to our financials for the first quarter of 2026. Revenue for the first quarter was $323 million compared to $277 million for the first quarter of 2025. The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2025 and '26, annual escalators and active portfolio management. Our net income for the first quarter of 2026 was $159 million or $0.47 per common share compared to $112 million or $0.33 per common share for the first quarter of 2025.

Our adjusted FFO was $260 million or $0.82 per share for the quarter, and our FAD was $247 million or $0.78 per share, and both are adjusted for several items outlined in our NAREIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our first quarter financial supplemental posted to our website.

Our first quarter 2026 adjusted FFO and FAD were both $0.02 greater than our fourth quarter, AFFO and FAD, with the increase primarily resulting from incremental net income from $585 million in new investments completed during the fourth and first quarters, and revenue from annual escalators of $2 million. These were partially offset by income related to $53 million in asset sales and $88 million in loan repayments over the past 2 quarters, resulting in a $1.4 million reduction to our first quarter adjusted FFO and FAD as well as the impact from the issuance of a combined 7.7 million common shares of stock and OP units over the past 2 quarters to fund the new investments.

Our balance sheet remains incredibly strong. Our debt is well laddered, and we have significant liquidity. At March 31, we had $425 million in borrowings on our credit facility. However, we also have $26 million in available cash and assets held for sale, which we expect to sell for approximately $480 million. Additionally, we have over $1.5 billion in available capacity on our $2 billion revolver with our next scheduled debt maturity not until April 2027. At quarter end, our fixed charge coverage ratio was 6.3x, and our leverage remained flat at 3.5x. We are excited as our balance sheet and cost of capital continue to position us to accretively fund our active pipeline.

Turning to guidance. As we press released yesterday, we narrowed our full year adjusted AFFO guidance to a range between $3.19 to $3.25 per share. This is a $0.02 increase over the midpoint of our February guidance. I'd like to take a moment to highlight a few of the guidance assumptions we outlined in our earnings release. Our guidance includes the impact of new investments completed as of April 27 and does not include any additional investments not outlined in our press release. It includes the impact of scheduled loan repayments and expected asset sales. Of the $159 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $65 million will convert to fee simple real estate and that the balance will be repaid.

Additionally, $224 million in non-real estate backed loans at March 31, 2026, are expected to be repaid throughout 2026, which includes approximately $159.5 million in Genesis loans. The 18 CommuniCare facilities in assets held for sale are expected to be sold for $480 million. Our Q1 rent related to these facilities totaled $9.2 million. The high end of the range in our guidance includes, but is not limited to, timing or potential extension of loan repayments and asset sales, additional cash from Maplewood as well as other cash-based operators, and G&A at the lower end of the guidance range, just to name a few. Our 2026 adjusted FFO guidance does not include any additional investments, asset sales or capital market transactions other than what I just mentioned or that was included in the earnings release.

I will now turn the call over to Megan.

Thanks, Bob, and good morning, everyone. With the budgetary season well underway in most states, we continue to watch for any signals of state reactions to the OBBBA as it relates to long-term care. As expected, things have been relatively quiet with most meaningful discussions not expected until sometime next year. On a separate note, over the last year or so, Medicare Advantage has come under scrutiny due to allegations of upcoding, high denial rates, delayed payments and cost savings not keeping pace with expectations. Last week, bipartisan legislation was introduced in Congress, applauded by industry associations, which addresses just these types of concerns.

While I noted last time that Medicare Advantage represents a relatively low portion of our operators' business, the momentum behind fixing these issues is important to our industry as similar issues arise in managed Medicaid. Indiana, for instance, who implemented managed Medicaid back in 2024 has decided to unwind that program, specifically for the long-term care population in nursing homes for very similar reasons that we see in Medicare Advantage. We applaud these efforts to deal with these fundamental structural problems head on to ensure that our payment systems align with the needs of this frail and vulnerable population.

[Operator Instructions] Your first question comes from the line of Nick Joseph with Citi.

This is [Lauren] on for Nick. Could you please elaborate on the rationale behind the CommuniCare asset sales and whether or not they're indicative of broader conditions in the Maryland and West Virginia markets?

Yes, it's Matthew here. So the primary reason for the disposition was opportunistic. We had an opportunity to sell assets and enhance our credit with CommuniCare. We were able to get a bid that we thought was fair to both parties. I think a little bit of it is a reflection of these are both relatively hot markets right now, both Maryland and Virginia markets that people are looking to acquire. So we took advantage of that to a certain extent. But I don't think you can expect us to be doing this as part of the core business. Occasionally, we will look to divest of assets. In this situation, we were also able to enhance our credit. So to the extent that we can continue to do that, we will. But as we look out through to 2026, I don't think you're going to see any large dispositions like this happening in the next few quarters.

Your next question comes from the line of Richard Anderson with Cantor Fitzgerald.

So when you think about your external growth strategy through all the different layers, you mentioned SHOP, skilled and care homes. Can you talk about your comfort level on the initial yield. I know we talked about this math at some length. But how low in the initial yield spectrum are you willing to go if you have line of sight into a reasonable IRR over the long term? Just curious what your thought process is there.

Yes. I don't think we have a number. I would encourage the team internally not to see this as a competition to see how low we can go. I think it's more really about trying to find the long-term opportunity. If there truly is a situation today that there's a lot of low-hanging fruit that we can fix immediately. I don't think that there's a number necessarily would ascribe to the lowest we would go. I think we really have to look at a, what the long-term opportunity is and b, the visibility around that. Obviously, we'd be less reluctant to take a swing at things where there's cost saving opportunities that we know a better manager can operate. I think situations where you're looking at a facility that maybe has very low occupancy and historically had low occupancy, relying on a paradigm shift in that occupancy is probably a level of naivete that we wouldn't necessarily look to underwrite to. But it's kind of contingent on the opportunities that present themselves in the risk-adjusted return that we assigned to that.

So like when you think about value-add like a low initial cap rate kind of concept, do you think it will be like a 50-50 split in terms of your -- what you're looking at today relative to a more stabilized entry-level?

It kind of depends what the market presents us, Rich. What you're finding right now is the stabilized assets that have both stabilized margins, high occupancy, relatively newer vintage. They tend to be coming in at lower yields but without that upside. So from that standpoint, we have been fortunate enough to find stuff that is kind of stabilized 7%, 8%, 9% that we think with a relatively easy lift we can take into the double digits. But I don't think that we're going to be looking at the true stabilized assets with the 7% where you're relying on predominantly rate increase to exceed costs to be able to drive that growth because occupancy and rate to a certain extent, are already fully baked in. So from that standpoint, I think that most of the stuff we're going to be looking at is what we would say is value add.

Okay. And then my second question is on RIDEA, will you take that show on the road a little bit in terms of looking at opportunities in the U.K. with the RIDEA mindset?

Yes. This is Vikas. Yes. We actually are looking at a few opportunities right now. So it will become part of our strategy in the U.K. going forward.

Next question comes from the line of Michael Goldsmith with UBS.

I am here with Dustin [Hausvik]. Maybe sticking with the CommuniCare, we estimate the cap rate was roughly 7.7% based on the contractual rent, but maybe it was a little bit lower given the EBITDAR coverage and assuming the rent is renegotiated. So is that right? And then also, why do you think the private market for U.S. SNFs is so competitive right now? And is the best path forward for Omega to focus more on other segments until the competition cools for business?

Your math is correct. So you are getting A for that. And yes, I think right now, the competition has been strong for a number of years. I think a lot of people are looking at this as a long-term secular play. That's part of the reason we really like the space. Ultimately, there's been no net new supply for over a decade in this space. Most states have some sort of restriction on new supply. So to the extent that an operator is getting in today, even with, let's say, it was a mid-6s yield, if they believe that occupancy is going to continue to improve and that they can run these facilities well, the operating leverage that exists within the business alone can move this into the high single and low double-digit yields over time for them. And then they have the opportunity once these buildings to stabilize to finance them through HUD, which is obviously at a relatively low cost debt.

So while there's a strong bid in the market, we don't think it's an irrational bid. We just think that it's reflective of the long-term secular plays that exists. And one of the reasons we aren't looking to sell prodigious amounts of our skilled nursing. In terms of opportunities, yes, we're seeing less of them, but we're still seeing select opportunities. So I think we're just going to -- we're not going to rule out or stop looking at skilled nursing. We're just going to continue to remain very disciplined and look for opportunities that align with what we're trying to achieve from a FAD per share growth standpoint.

Got it. And as a follow-up, I noticed another quarter of healthy investment volume for your new SHOP segment. So maybe you can provide some color on the economics of the Rhode Island portfolio. Does Omega take more of a hands-off approach to its SHOP operations given it's still a small segment or are you in the process of building out a data platform and other standard operating procedures related to SHOP.

Yes. So this Rhode Island deal falls right in the category of everything we've been talking about in our SHOP world. We are underwriting to stabilize mid-teen IRRs. And it just follows all the protocols we've been saying. We use our data, our underwriting, our entire team to get around that. So it's just a typical RIDEA deal value-add in our book.

And then the only thing I'd add is you're right. Obviously, we don't have the level of experience and sophistication of some of our peers who've devoted years and significant amounts of money to rolling out various different technologies and have experience in that side of things. I think our attitude right now is we spend an awful lot of time both hiring people internally who have great experience in the space, but also developing relationships as a team to understand really strong operators. And our attitude as of now is we are hiring them because of their expertise.

And for us, given our relative lack of expertise in the space, to start second-guessing them straight out of the gate, would probably be naive at best. So from that standpoint, while we obviously, by our very nature, extremely focused on what they're doing and seeking to learn from them and understand from them. I don't think we're in a position to necessarily tell them how to run their businesses at this point in time. That's effectively what we're hiring them to do on our behalf.

Your next question comes from the line of Julien Blouin with Goldman Sachs.

I guess I just wanted to touch on the level of competition you're seeing in the transaction market specifically in U.S. senior housing RIDEA structures. I mean we're seeing a lot of capital flowing into this space. And so -- just wondering if you're finding it may be increasingly more difficult to achieve sort of those mid-teens IRRs you're targeting?

Yes. So it is competitive. As you know, there's a lot of players in this space now. But as Matthew mentioned, we are looking at a lot of value-add product, and we're finding it. The team is going out there. We're reviewing all transactions. And if it fits, it fits -- so at the same time, everyone has its own underwriting criteria. And for what we're looking for, we continue to find assets.

Okay. Great. And then back to the CommuniCare sale, I mean, yes, clearly, a strong cap rate just on current rents, but even if we were to assume a resetting of rents to more like your average EBITDAR coverage of 1.5x that would mean an even sort of lower cap rate. I guess like -- is it -- what kind of buyer is it? Is this a buyer that really sees the potential to, I don't know, change management of the assets and improve operations. Is that a key part of their play?

I can't speak to what their rationale was behind that. What I can tell you is their long-term players in the space, highly established, look to own the operations and the properties. And I think that belief is kind of as we spoke to earlier, that there is a 20-year secular play here and that the price that they pay for these assets today in 10, 15 years' time, may actually look an extremely good buy given the fact that there's no new supply coming online in most states. So they are an established player, reputable. Other than that, I can't speak to what their plans are for the business.

Next question comes from the line of Omotayo Okusanya with Deutsche Bank.

I just wanted to talk a little bit about Medicare Advantage a little bit. I think you've kind of seen a bunch of health care providers report over the past last week, UnitedHealth, Humana, they all kind of talking about CMS Medicare Advantage and the rollout of all these value-based care systems. Some of them seem to be adopting really well. Some of the people are kind of struggling with it. I'm just kind of curious, again, when you were thinking about what the potential impact of this kind of more aggressive rollout of these value-based programs are in 2026, 2027, I mean how do you kind of see that impacting kind of skilled nursing referrals from the hospitals? And does that kind of change anything from that perspective? And how do you expect skilled nursing operators to kind of react to all this kind of potential kind of value-based programs that are now infiltrating the system, so to speak.

Like I said last time, the Medicare Advantage isn't a huge piece of our business. It definitely has less of a penetration in the skilled nursing space than it does in the general Medicare population. And so this point, there's not much in the way that it impacts our operators other than there are certain areas that have higher Medicare Advantage penetration. Sometimes those rates are materially lower than Medicare and sometimes that means taking a Medicaid resident might make more sense than taking a Medicare Advantage resident at times. And so as an industry, I think there's sort of a big pushback about trying to get those rates up to more reasonable numbers.

And like I said in my talking points, there's legislation last week to deal with some of these other issues that are going on like the high denial rates where typically you might have a high denial. But then if you push back, it will get approved, right? And so you shouldn't have that type of thing going on. But I think the value-based care is a big thing, and it's something to watch for all of us. And I think ultimately, we try to partner with the most sophisticated operators who've really got plays into their game plan really well.

That's helpful. And then just occupancy trends in the past few quarters have kind of stagnated. Just kind of curious what may be happening there? Is this stuff kind of changing with shift mix? Or how do you kind of think about that just kind of given the overall backdrop of kind of aging U.S. demographics and limited new supply.

I don't think there's any read through over a few quarters as to what the occupancy is doing. The demographics are here and coming. And so ultimately, you will see that needle move. And ultimately, when you look at our performance, the coverages provide ample coverage for our rent. And so we're good with where things are, and we expect to see the occupancy increase in the next year or 2.

Next question comes from the line of Nick Yulico with Scotiabank.

Next question comes from the line of Kilichowski with Wells Fargo.

My first question is just on the transaction market. Earlier, we talked about the competitiveness of SHOP, but I actually would be interested in talking about the competitiveness of the SNF landscape today. There's been a vacuum at least of REIT capital, but assuming that some other capital is as well moving from skilled nursing and into SHOP. Are you finding it incrementally any easier to transact in the SNF space given the money that's moving over? Or is it still heavily competitive?

This is Vikas. The short answer is heavily competitive. We were able to find an off-market larger deal than we did in the first quarter, but it is competitive. And a lot of that is coming from the family office space still. And otherwise, we're just not seeing a lot of trading at this time that we like and that fit our investment criteria.

Okay. Got it. Very helpful. And then my second one for you is we've got Tim Walz legalizing alcohol in Minnesota, what are we thinking for new build-outs? So Speakeasies or local pub vibes? Is this Medicaid reimbursed? Are non-tenants going to be allowed in.

I don't think that's necessarily something that we're looking at right now. Obviously, we have a history of partnering with operators who evolve, no matter what the operating backdrop is, even if that includes the use of things previously prohibited in the facility. So I suspect that our operators will try no matter what the circumstances are.

Next question comes from the line of Nick Yulico with Deutsche Bank.

This is Elmer Chang on for Nick. Sorry about that earlier. My phone dropped. And sorry if I missed this, but my first question is on recent senior housing RIDEA communities that you've been acquiring and as you further build out that platform? I know it's dependent on the opportunities that may be closer to stabilized assets. But how should we think about underwriting NOI upside to earnings for those recent acquisitions?

Yes. It's tough for me, thankfully, we're a $14 billion company. We've put a couple of hundred million dollars out, right? So from that standpoint, I don't think it's going to move the needle that much. I mean I think if you're looking generally Elmer, the idea that it may be I don't want to put a number in, but blended between 7% and 9% coming out of the gate on these things. I don't think you're going to be too far off. And then obviously, hopefully, that will meaningfully improve over time. But again, given the relative size of it right now, I think if you're in that ballpark, missing or exceeding expectations is probably going to be limited given the relative size.

Okay. Got it. And I guess second question is just going back to the planned CommuniCare sale. What assumptions in terms of initial yields and future growth or driving your estimates for the $0.03 of accretion to FAD that you expect? And how much of the $480 million that's to be reinvested or maybe already deals under LOIs or under contract.

So we went back and forth on what the number was. I want to say $0.04 because technically putting it back to work at a 10 gives you $0.035 -- and that rounds up, but we decided to be conservative. So the number is probably in the low 9s in terms of what we're saying, I still think we're going to expect to deploy capital in the 10s, but that's kind of the math around it. And then, yes, I mean, we're not going to talk too much about what's in LOIs today, but this is really -- it's an interesting market that we're in right now because to a certain extent, in senior housing and skilled nursing and care homes, you're seeing probably more appetite and more players than we've seen in well over a decade.

This is clearly a space that is exciting people and creating interest. And as a result, there are more competitors out there. But we still, as we look out in the portfolio, see significant opportunities across all 3 platforms. And so from that standpoint, I don't want people being confused that just because it's a competitive market that we don't think that the pipeline isn't going to be pretty robust for us over the next 24 months. We're just going to have to be more selective, more creative sometimes in our structuring and just be on the road, quite frankly, and find more off-market deals through relationships.

So from that standpoint, I think we're in a pretty good place going forward. But nonetheless, it is pretty competitive.

Next question comes from the line of Michael Carroll with RBC Capital Markets.

I wanted to circle up on the Saber equity deal. I know that there's a minimum yield to that transaction, it looks like the initial yield is coming in a little bit higher than that. Is this something that we should assume grows at a high single-digit, low double-digit rate each year just given the organic growth outlook that you're starting to see in skilled nursing facilities and maybe as you layer on new acquisitions in Saber can continue to grow externally. I mean, is that a good ballpark to think about the growth outlook that, that equity investment could potentially generate?

Yes, this is Vikas. Let me answer that a little differently. As we've said before, you're speaking of our Saber investment, Saber is a private company, so we can't release financial information for them, but we are very happy with our investment to date. It is beating expectations, and we're getting a return slightly above what we thought we would get. Saber plans to keep growing and they think like us, good, smart transactions that are accretive. So we just plan that there will be further growth here above our underwritten expectations.

Okay. No, that's helpful. And then just kind of circling back up with Maplewood. Has there ever been any discussions to kind of transition that Maplewood investment into like a pure RIDEA contract? I mean I know that Omega still gets a lot of that upside just given how it's structured on the net lease side. But does it help to just simplify that agreement, so everybody knows what needs to happen on that front? I mean, is that in the discussions at all?

To be honest, that's what we're doing right now. We see it as a RIDEA asset now. So we don't see the need to do that. We've thought about it from time to time. But right now, we are truly treating this like a RIDEA asset. All of the cash flow comes to Omega and the team receives promotes for hitting certain cash flow hurdles. So at this point, we don't see a need for it.

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

Just curious on the building out of the team in SHOP or RIDEA. How we should think about that? Is that more on trying to source opportunities? Or is that more or maybe inclusive of building out the asset management capabilities?

Again, this is Vikas. The answer is all of the above. We've hired a lot of smart people here to help us step up our investment criteria underwriting abilities to go out there and find more relationships. To give you an example, we have boots on the ground in the U.K. now to go out there and find off-market transactions for us. Additionally, both on asset management and accounting, we've hired a good bit of people to help us manage our transactions after they close.

And then just curious, there's some news about litigation and some punitive damages awarded to victims that the REIT was held culpable at the time it was Colony Capital, now DigitalBridge. Just curious on your thoughts there and does that change the calculus at all and/or make you less hesitant on these transactions potentially in states like California, where there's more litigious?

I would like to think that, that was a one-off unique situation because REITs do not get involved in the operations and are not involved in the patient care. And so to hold a REIT accountable for care that they're not providing does not make sense. But we'll continue to watch the various different areas and make sure that, that's part of our investment thesis.

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

I just wanted to have a quick question on how the SNF pipeline is evolving for the broader market. Are you starting to see more operators stabilizing assets and going directly to HUD?

Yes. This is Vikas again. I mean, to be honest, we're not seeing a lot of SNF assets trading at all right now. So again, I think people are sitting on their assets and taking them to HUD. We've also -- we've seen broken deals pop up from time to time. And so I think we're going to start seeing some more of those as well in the future.

And for those, would you look to loan on those or buy them outright?

Buy them outright.

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

I guess just to, one, you've had a nice pickup in FAD over the last several quarters. I'm wondering sort of what our latest thoughts on the dividend pushing that higher -- and then just, I think, Matthew, you made a comment on like focusing on the per share FAD growth. With all these different levers you've outlined, like where do you think that could trend to from today's growth?

Yes, a fair question. In terms of the dividend outlook, obviously, it's a Board decision. But when you think about Q1 of '25 at $0.71 of FAD Q1 this year at $0.78 of FAD and all the same tools in place to replicate that type of performance. I would think by year-end, the Board is going to start to need to have conversations about our dividend. And really, it just comes down to velocity of putting some of the capital back to work because the escalators are in place, the portfolio is stable.

We have excess cash flow rolling into the balance sheet into investments, and then you have the pipeline. And it's just how fast we recycle those dollars. We will get there, whether it's Q1 of '27 or Q2 of '27, the tools are all there for us to perform at that level of growth.

Next question comes from the line of Michael Stroyeck with Green Street.

Maybe going back to the earlier question on U.K. RIDEA. How does the competitive backdrop within the U.K. compared versus the U.S.? And has there been the same level of cap rate compression that we've seen in the states?

Yes. So there are some new players in the U.K. But again, through our relationships, we continue to find a good bit of deal activity out there that we can do at our current cap rates where we are still quoting 10%.

And that goes for the RIDEA side as well?

Yes. And that goes for RIDEA as well. Again, a little bit of our RIDEA growth there will be through our current relationships. So yes, same thing goes for RIDEA as well.

Got it. Got it. And then maybe one question on Maplewood. Last quarter, you outlined, call it, high single-digit rate increases across that portfolio. Can you just provide an update on how 1Q has progressed on that front?

Yes. I mean the net increases were just that, high single-digit increases with both D.C. and New York being at the very high end of it.

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

This is Farrell Granath. I first just wanted to ask about how you consider or think about the balance between triple-net with potential revenue upside baked into the contract or a pure-play RIDEA and how you consider that in your acquisition pipeline?

So you say triple-net with revenue upside?

With the revenue participation similar with Maplewood?

So yes, I mean, the Maplewood situation is kind of contrived from the background, right? In terms of that's how the deal started. At the end of the day, there is an operating team that have an operating company that have the rights to those operating profits if and when those profits exceed our rents. So I don't think -- I don't think we'd necessarily be looking to create that situation again.

As you say, we have had these situations where we've effectively provided a lease with upside upon value realization. And that's worked reasonably well. I think a lot of that was our first foray into some level of participation in the upside. But now we have kind of torn the Band-Aid off and gone full RIDEA. I think that's probably where our preference lies. But at the same time, it's very much about creating that alignment of interest with our partners, right? So if someone else wants to participate in that upside and is willing to put capital in, we're open to creative situations, be they JVs, be they leases with upside, be they some form of debt that can convert to equity over time.

We're really pretty agnostic as to that. I think the thing that we believe right now is that we have a strong underwriting ability and an ability to understand where value can be created. And as long as we see where that value can be created and we can share in that value, I think we can structure the deal however it works for our operating partners and us.

And I guess also on a similar vein, when selecting the operators themselves to enter on to your SHOP platform, how do you think about or underwrite these operators in your selection? Do you have more of a focus on scaled operators or those that are maybe smaller looking to expand rapidly?

We are looking for experienced operators who have a proven track record, and they tend to be regional. They know those markets well, have performed in those markets before. And to be honest, it's a process. We interviewed several managers, and we picked the best one that fit all of those criteria.

There are no further questions at this time. I will turn it back to Taylor Pickett for closing remarks.

Thanks all for joining us this morning. Please follow up with the team with any additional questions. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Dan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors Inc. Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Michele Reber, please go ahead.

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, Data Intelligence and Government Relations.

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 fourth quarter 2025 earnings conference call. Today, I will discuss our fourth quarter financial results and certain key operating trends. .

Fourth quarter adjusted funds from operations, AFFO, of $0.80 per share and FAD, funds available for distribution of $0.76 per share reflects strong revenue and EBITDA growth principally fueled by acquisitions and active portfolio management. Our dividend payout ratio has dropped to 84% for AFFO and 88% for FAD. 2025 was a great year for our team. Full year AFFO and FAD growth exceeded 8% year-over-year, driven in part by $1.1 billion in capital deployment. In addition, the credit quality of our operators continue to improve as a result of active portfolio management and the overall improvement in industry fundamentals.

During the fourth quarter, we closed 2 RIDEA transactions totaling $80 million. We significantly expanded our Saber relationship, and we committed capital in Canada, all of this while delevering and strengthening the balance sheet. Our momentum from 2025 should carry us forward for another strong year in 2026. We will continue to actively manage and enhance the credit quality of our operating relationships. We will continue to deploy meaningful capital across all of our geographies and property types, including our new RIDEA platform. It is likely by year-end that Saber will be our largest source of revenue. Furthermore, by year-end, it is likely that we will have the strongest tenant credit profile and balance sheet in Omega's history.

I will now turn the call over to Vikas.

Thank you, Taylor, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega's operating portfolio, including an update on Genesis as well as Omega's investment activity for 2025, including fourth quarter and subsequent closes, we will also give an update on Omega's pipeline and market trends for 2026.

Turning to portfolio performance. Omega has investments in 1,111 facilities consisting of 1,027 in our owned real estate and mortgage loan portfolio, 84 facilities in joint ventures with operating partners and third-party real estate investors. Of the total number of facilities, 62% are skilled nursing and transitional care facilities and 38% are U.S. senior housing in U.K. care. Trailing 12-month operator EBITDAR coverage our triple-net and mortgage core portfolio as of September 30, 2025, increased to 1.57x compared to our second quarter 2025 reported coverage of 1.55x. Core portfolio coverage continues to trend in a 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 provide superior clinical service to residents. In addition to the strong credit support this provides for existing investors, these coverage levels enable Omega and our operating partners to continue to grow our respective businesses.

As reported previously, Genesis filed for Chapter 11 bankruptcy protection in July 2025. As a reminder, Omega releases Genesis' 31 facilities for annual rent payments of $52 million. Our coverage continues to be above the mean coverage for our entire portfolio. Additionally, Omega has a $129 million piece of a term loan with Genesis which is secured by a first lien on essentially all of the assets of Genesis other than the AR, on which we have a second lien. We believe that the loan is fully secured. While the unsecured creditors committee has challenged the value of the loan collateral among other things, as part of the proceeding, we believe these arguments are without merit. 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 critical events taking place in the last few weeks, including a second auction of the Genesis assets and a related sale approval hearing. Per the judge's order after the results of the first auction of Genesis assets were not approved in November 2025. A second auction was held on January 13, and the winning bidder was a group known as 101 West State Street. This group's bid was approved by the bankruptcy court on January 26. The principals of 101 West Street currently operate approximately 60 facilities on the West Coast. As required, they have submitted a hard deposit of $54 million and have an aggregate of 85 days, inclusive of additional hard deposits needed for extensions to represent that they have procured market financing commitments, which with contributed equity satisfies the cash portion of its bid.

As previously reported, Omega committed to support Genesis by providing $8 million of a total $30 million debt earned possession loan. Genesis continues to pay us full contractual rent each month since filing bankruptcy. Due to the delays that came with having a second auction, the bankruptcy process is now anticipated to conclude in Q3 or Q4 of 2026. If 101 West Street consummates its purchase of the Genesis assets, Omega anticipates that it will assume our lease and the cash proceeds of the sale will be sufficient to cover the payment in full of our dip loan and term loan. These assumptions and time line, along with all elements of the bankruptcy process are subject to further development in events in the bankruptcy proceeding, and we cannot be certain of the outcome. There are no material open issues with any other large operators.

Turning to new investments. Omega's transaction activity in 2025 was very strong with over $1.1 billion in new investments. These transactions varied in size in nature, but demonstrate Omega's ability to adapt to the evolving investment landscape in the long-term care industry. In 2025, we continue to support the growth of our existing and new operators by focusing on strong credit back real estate and also closed on our first RIDEA transaction in the U.S. senior housing space. Of our total $1.1 billion in new investments a little over $700 million or approximately 66% was in senior housing facilities or U.K. care homes. Although we continue to invest in the U.S. skilled nursing sector to support and partner with best-in-class operators such as Saber. This demonstrates how we are focusing on all asset classes and deal structures to maximize returns for our shareholders.

As Matthew discussed on our last call, our primary goal is to allocate capital with a focus on growing FAD per share on a risk-adjusted basis. Accordingly, we have expanded our investment structures to now include RIDEA for U.S. senior housing and U.K. care homes with the goal of achieving higher risk-adjusted returns over time. We believe we are well positioned to enhance shareholder returns by acquiring underperforming assets at prices meaningfully below replacement costs. And then partnering with proven operators to enhance the cash flow and underlying real estate value of such assets. Our targeted return for our investment is an unlevered IRR of at least low to mid-teens not assuming any cap rate compression upon exit in our underwriting.

During the fourth quarter of 2025, Omega completed a total of $334 million in new investments, not including $31 million in CapEx. These new investments included the previously announced Saber JV real estate transaction, U.S. senior housing RIDEA transactions and various other real estate investments in the U.S. and the U.K. For our new RIDEA investments, we acquired 4 senior housing facilities located in New Jersey, Wisconsin and Indiana for $37 million. We have engaged 2 third-party managers to operate the facilities on our behalf. Additionally, we made a $43 million investment for a 49% equity interest in a Class A rental CCRC in North Carolina, which will also operate via a RIDEA structure.

Our other fourth quarter investments included the purchase of a U.K. care home for $16 million and $16 million in real estate loans. These additional investments were at a rate of 10% and the real estate loans have an option for Omega to realize upside upon a refinance or sale of the facilities. Subsequent to quarter end, Omega closed on $212 million of additional investments. As previously announced and anticipated, on January 1, Omega closed on the purchase of 9.9% of the equity interest in Saber's operating company for $93 million. Omega will receive a minimum 8% cash return on our investment. Cash flow from the Saber operating company is anticipated to support a greater payment, but cash will be retained for Saber's growth and all additional amounts due to Omega will be accrued.

As a reminder, this was step 2 of our overall investment in Saber. For step 1 was our $222 million real estate investment for a 49% equity interest in 64 facilities operated by Saber. The completion of our investment in the Saber operating company creates strong alignment between Omega and Saber with our geographic scope and capital and Saber's operational expertise, we collectively are in a unique position to evaluate growth opportunities and have optionality for deal structures, including our triple net master lease, the Saber Omega real estate joint venture and the Saber operating companies. We are actively evaluating additional opportunities to grow the Saber Omega relationship.

Also subsequent to quarter end, Omega closed on the purchase of 13 skilled nursing facilities located in Georgia or $109 million in 1 senior housing facility in Alabama for $10.3 million. The skilled nursing facilities will be leased to a current Omega operator and a lease yield of 10.6% and the senior housing facility will be operated by Omega and managed by a third-party manager via a RIDEA structure. Lastly, we are proud to announce that we have closed on a commitment to fund up to $64 million for the development of 5 replacement long-term care facilities in Ontario, Canada. The loan has a current pay interest rate of 10% and at Omega's option is convertible to a 34.9% equity stake in the borrower entity that owns 21 facilities. Omega's collateral for the loan is this entire 21 facility portfolio valued today at over $130 million.

Based on the credibility of our development and operating partner, a strong collateral for the loan, the wait list for long-term care facilities driven by demographics and the overall support of the Canadian government for the long-term care sector in Ontario. We believe this is a good risk-adjusted opportunity for our initial entry into Canada.

Turning to the pipeline. Similar to 2025, our pipeline for 2026 is strong. Market opportunities both in the U.S. and the U.K. continue to be substantial and we continue to see off-market opportunities through our operating partners, including our new RIDEA partners and managers. We continue to focus on growing our Rolodex and potential operating partners. As we have done for the past 2 decades, our relationships are a key component to our growth. As mentioned earlier, we continue to evaluate and focus on purchasing U.S. skilled nursing facilities, U.S. senior housing facilities in U.K. care homes with increased flexibility on deal structures to ensure that Omega and its shareholders are able to benefit from additional sources of income. Whether that be through variations on triple net lease structures, RIDEA for senior housing assets or U.K. care homes or strategic joint ventures.

I will now turn the call over to Bob.

Thanks, Vikas, and good morning. Turning to our financials for the fourth quarter of 2025. Revenue for the fourth quarter was $319 million compared to $279 million for the fourth 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 fourth quarter was $172 million or $0.55 per common share compared to $116 million or $0.41 per common share for the fourth quarter of 2024. Our adjusted FFO was $250 million or $0.80 per share for the quarter, and our FAD was $238 million or $0.76 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 fourth quarter financial supplemental posted to our website. .

Our fourth quarter 2025 FAD was $0.01 greater than our third quarter FAD with the increase primarily resulting from incremental revenue related to the timing and completion of $485 million in new investments during the third and fourth quarters. Incremental Maplewood revenue as they paid $18.9 million in Q4, an increase of $200,000 compared to Q3. Lower net interest expense of approximately $1 million, resulting from bond and term loan payoffs in the fourth quarter. These were partially offset by $100 million in asset sales and $61 million in loan repayments over the past 2 quarters, resulting in a $2.1 million reduction to the fourth quarter FAD coupled with the issuance of a combined 7.8 million common shares of stock and OP units over the past 2 quarters to fund new investments. Our balance sheet remains incredibly strong as we continue to take steps to improve our liquidity, capital stack maturity ladder.

In the fourth quarter, we funded $334 million of new investments primarily by issuing 5.5 million Omega operating partnership units valued at $222 million. Additionally, in the fourth quarter, we reduced our funded debt by over $700 million as we repaid $600 million of senior unsecured notes, repaid a GBP 183 million secured mortgage loan and repaid the $428.5 million term loan all prior to their scheduled maturity dates. All 3 pieces of debt were repaid utilizing a combination of balance sheet cash or revolver and fully barring on the $300 million delayed draw term loan. Our next scheduled maturity is in April 2027.

In the fourth quarter, we also improved our liquidity as we entered into a new $2 billion ATM program. At December 31, we ended the quarter with $27 million in available cash on the balance sheet and over $1.7 billion of available capacity under our $2 billion revolver. Our fixed charge coverage ratio was 5.8x and our leverage was further reduced to 3.51x. We are excited as our balance sheet and cost of capital continue to position us to accretively fund our active pipeline.

Turning to guidance. As Taylor mentioned, our momentum from 2025 should carry us forward for another strong year in 2026. We are providing full year adjusted FFO guidance of a range between $3.15 to $3.25 per share, which includes the assumptions outlined in our press release issued yesterday. I'd like to take a moment to highlight a few of the guidance assumptions. It includes the impact of the new investments completed as of February 4 and does not include any additional investments not outlined in our press release and includes the impact of scheduled loan repayments and potential asset sales. Of the $213 million in mortgages and other real estate loans that are scheduled to mature in 2026, it assumes $157 million will be repaid and the balance will be converted to [ B ] simple real estate.

Similarly, of the $267 million in non-real estate backed loans that are scheduled to mature in 2026, it assumes $196 million will be repaid during 2026 which includes $137 million in Genesis loans, with the balance of the loans being extended beyond 2026. As I stated on our third quarter earnings call, we are always pruning and strengthening our portfolio through asset sales and our initial 2026 guidance includes approximately $15 million to $25 million per quarter in asset sales. The high end of the range in our guidance includes, but is not limited to, additional cash from Maplewood as well as other cash-based operators, timing or potential extension of loan repayments and asset sales, G&A at the lower end of the range to name a few. Our 2026 adjusted FFO guidance does not include any additional investments or additional capital market transactions other than what I just mentioned but what was included in the earnings release.

I will now turn the call over to Megan.

Thanks, Bob, and good morning, everyone. Last quarter, I mentioned the potential for an automatic 4% cut to Medicare related to the deficit caused by the OBBBA. Since then, the automatic reduction has been dealt with legislatively as has historically been the case and is therefore no longer an issue. Additionally, in December, HHS officially repealed the minimum staffing standards through an interim final rule an action that we applaud as the draconian nature of the rules stood to make the provision of and access to care more difficult.

Moving forward, we hope that this administration who has been so supportive of this industry, will work with industry leaders to find other ways to obtain regulatory rationalization going into 2026. Additionally, while Medicare Advantage has been a topic of conversation over the last week, with CMS proposing relatively flat rates in 2027 despite rising health care costs. I think it is important to point out that the impact to our portfolio would be minimal, if implemented as proposed. Not only are our current coverages as noted earlier by Vikas, able to withstand a certain level of expense pressure in the face of reimbursement not keeping pace. The percentage of our operators' revenue associated with Medicare Advantage is low.

With total Medicare accounting for less than 26.1% of overall operator revenue when excluding non-Medicare quality mix and a Medicare Advantage penetration arguably far less than the 50% plus you see in the overall Medicare population, only a small portion of the business is impacted by this news. While we are unconcerned with this latest development, we are still carefully watching state reactions to the OBBBA as well as the impact it may have on the overall health of our operators' referral sources. We continue to support the efforts of our operators, partners and industry associations in educating lawmakers both at the federal and state levels and the importance of the services provided by the long-term care industry and the need to fund it appropriately.

I will now open the call up for questions.

[Operator Instructions] Your first question comes from the line of [indiscernible] from Citi.

It's Nick Joseph here with Seth. Just wanted to dive in a little to the [ SHOP ] strategy? And kind of curious how you think of it being differentiated versus peers and the ability to grow just given the competition and the capital that has been moving into that space.

Sure, Nick. It's Matthew here. So I think the differentiation as much as anything is on 2 or 3 different fronts. Number one, we are looking at smaller deals tend to be relatively rifle shot deals as opposed to larger portfolio deals, you tend to find a little bit better economics in that situation. I would say a lot of the deals we're looking at are deals that need a little bit of love, a little bit of turnaround either lower occupancy, lower margin. We're aligning with operators who have expertise in that specific area. Be it the asset class that we're looking at and the region that we're looking at and have demonstrated the ability to turn around facilities like that.

So I think we're much more looking for the -- as Vikas said in his talking points, the low- to mid-teens IRRs, and the only real way to obtain that is taking assets that need a little bit more of a turnaround opportunity. And then obviously, we've structured the promotes as everyone tries to align our interests with those of our managers to make sure that they are sufficiently incentivized to obtain the financial returns that we're looking to achieve.

That's very helpful. As you think about kind of the turnarounds for those assets, do you assume that occupancy goes down initially? Or how do you underwrite at least the initial years of performance of those facilities?

Sure. It's a case-by-case basis. It's going to be determined on what we think needs to get done within those facilities, the ability of the former manager to market those effectively, the ability to push rate. Each one is very idiosyncratic. But needless to say, we spend a lot of time really understanding and scrubbing the reality of those numbers and the viability of those numbers to make sure that we're conservatively underwriting.

Our next question comes from the line of Omotayo Okusanya from Deutsche Bank.

This is Sam on for Tayo. I was wondering if you guys can give any update on [ PAC ], like do you guys have insight around the outcome of the federal investigation?

Yes, this is Vikas. No, we don't have any more info on the investigation than what the public knows. I will say we continue to be in close touch with the PACS management team. Their buildings continue to perform strongly here at Omega good credit, good operating results and good clinical performance. So right now, we feel generally good about.

And I guess my follow-up would be around Genesis. I guess, how should we think about the timing expected returns on the redeployment of proceeds from Genesis related loans in 2026?

This is Bob. In the guidance, what we're assuming is sometime midyear, the loans, as I said, $137 million, that's made up of the combination of $8 million for the dip and $129 million of what was on our balance sheet at 12/31. When that gets -- when we receive that back in, we will first pay off any balances on the credit facility and the balance of that then will be invested roughly 3.5% or overnight rates.

Our next question comes from the line of Michael Goldsmith from UBS.

First, I wanted to ask for just some color on the Georgia skilled nursing portfolio. Just given this a little bit of a higher initial yield at 10.6% that we've seen in the U.S. of late, is that pricing more of a function of having some hair on it or maybe more of a reflection of off-market deal flow? And am I reading it right that the facilities were transitioned to one of your existing operators from a prior operator?

Yes, Michael, this is Vikas. So just for some guidance. We are still quoting 10% for all SNF deals today. This deal was an off-market deal, and we were able to achieve slightly higher. Nothing super hairy about a good buildings in Georgia. And yes, we are leasing this to a current Omega operator.

Got it. And just as a follow-up here. Historically, acquisition volume upside tends to come from the portfolio transaction. So how does the outlook for portfolios look right now? Are you seeing portfolios trade? And if so, are they trading at a premium or a discount?

Sure. This is Matthew. They're trading to the extent that they do trade, they're trading at a premium, both on the skilled nursing and the seniors housing side of things and in the U.K. care homes. So there's not many chunky deals that we're seeing out there right now. But to the extent that they have traded over the last 6 to 12 months, we have tended to see a little bit of a premium there. Candidly, we'd rather choose selectively the facilities that we're looking to buy. And so particularly when you're paying a premium for those larger deals, they're not particularly attractive to us, but we obviously continue to look at everything.

Our next question comes from the line of Julien Blouin from Goldman Sachs.

Just regarding maybe the acquisitions that were closed in the fourth quarter and subsequent to quarter end. Can you give us a sense of how those were sourced, were they mostly on or off market? And then what were the motivations of the sellers? I know you mentioned some turnarounds. So were these deals sort of mostly distressed situations?

Yes. Just looking at the deals quickly, it's really a mixed bag. Some are marketed, some were not marketed. I will say there are quite a few that are off-marketed that came through current relationships, then the most notable, of course, being the Saber deal. And then the second question was?

What the motivation was?

I mean it's, again, a mixed bag. Some of it is liquidity. Some of it is [ exiting ]. There are some turnarounds here, which where we have put in new operators, such as the Georgia transaction. So once again, that's a mixed bag as well.

Got it. Okay. And then your tenant coverage, you mentioned continues to rise is the highest, I think, in recent history. Do you feel like at these coverage levels you're approaching sort of coverage levels where you might be able to release that sort of positive spreads in future years? I know there's not much expiring this year, but a little bit more in 2027? Or is it really more that it just sort of increases the likelihood of renewal upon expiration?

Yes. Unfortunately, it's much more the latter. The majority of our leases have renewal options unilaterally at the right of the tenant. So even though it might show that it's expiring in 2027 to your point, if they're covering well, the likelihood is they will exercise that option to renew and therefore, the opportunity for incremental pickup in the near term is relatively limited. But obviously, as we continue to look out, eventually the second and third renewal options that tend to normally be a couple of renewal options. We'll also expire in that pickup. We'll be opportunistic for us. However, we don't see anything in the next 3 or 4 years that's going to meaningfully move the needle on that front.

Our next question comes from the line of Nick Yulico from Scotiabank.

This is Elmer Chang on with Nick. Considering guidance assumes rental payments at the current run rate, is it reasonable to assume Maplewood returns to the contractual rate by year-end? Because I think based on the improvement in rent payments in recent quarters, maybe there was some expectation that would be at contractual rent by this quarter.

Yes. As we've said previously, Maplewood is paying us all their cash flow now. So as Bob discussed, we are getting a run rate of $76 million right now, and we assume that number will increase at a small level later this year.

We don't really look at it so much in terms of contract with Vikas' point. At the end of the day, they're going to continue to pay the cash flow. They obviously have some interest expense as well that is above and beyond their contractual rent obligations. So as they continue to improve and they've demonstrated a really decent ability to improve and enhance their cash flows over the last few years, and the management team is operating as well as any management team that we've seen out there right now, we will continue to benefit from that cash flow. But we don't look at it from a standpoint of contractual rent. We just look at it from a standpoint of more like a RIDEA like model at this point in time.

Maybe second question is how should we think about the cadence and potentially earnings impact of loan repayments this year and even in 2027 outside of the Genesis loans? Just given the volume of investments you've done in the last couple of years?

Sure. This is Matthew again. Yes, the loan repayments, it's tough to model. Bob has obviously given guidance as to what we think in 2026. Loans are not a large portion of our overall business, but they do represent a little bit of a headwind to the extent that they do come back. I don't think it's going to be a meaningful headwind over the longer term. Obviously, we have a fairly pronounced amount of stuff potentially coming back in 2026 that we've highlighted. But longer term, it obviously creates a little bit of a headwind until we able to redeploy the capital. But with the market being relatively robust today in terms of opportunities to deploy that capital, I don't think it's a long-term headwind for the company.

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

Maybe just to go back to Maplewood here. With the core portfolio well occupied, what are you seeing in terms of [ Rev4 X4 ]? What can you kind of disclose about the success of really driving the economics there? I'm just curious about I understand you're not too focused on time line to full rent, but just sort of helpful to think about what's the growth of that existing portfolio?

Yes. John, this is Vikas. Just some stats for you here. The 2nd Avenue building is now at 97% and the overall core portfolio is at 96%. And as for growth, a lot of it is going to be driven by rate increases. Maplewood is shooting to do a single-digit percentage -- a high single-digit percentage increase this year. We still don't know what that's going to be net, but that will drive some growth, and we plan -- that will happen going forward in the years to come.

Okay. Very helpful. And then to stay on Maplewood here. For [ Embassy Row ], I don't know what else you can talk about here, but there's a JV partner in the OpCo, correct? And are you able to give any guidelines around maybe the remaining capital availability from them and helping make those yield on cost payments. I'm just curious sort of what's the lease-up trajectory and sort of time line that needs to take place at Embassy Row, such that you would need to pull, let's say, capital from the outperformance on the core portfolio to make hold the yield on cost payments?

So I would say that we actually -- for the first month, we've seen positive cash flow on that facility at the end of last year, which is great. That's obviously prior to paying any rent. The lease up is going in accordance with our expectations. I think Maplewood is extremely focused on ensuring that doesn't create too much of a headwind for their overall portfolio performance. It's tough to say when you're in lease-up, what that looks like, we look at it holistically over the context of the overall portfolio. And as Bob has indicated, we expect a modest pickup in February and an ability to continue to pay that rate going forward. But it's just too early to tell, both in the lease-up of that building and in the rate increases that they're trying to push across the portfolio right now what that's going to look like on a consolidated basis.

Congrats on the quarter.

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

Just on the SHOP investments, just curious, I know you talked about unlevered yields. But for the stuff you've done fourth quarter and year-to-date here. Just curious on the initial yields and how we should be modeling the returns on that capital? And as part of that, can you talk a little bit about the CapEx assumptions? And maybe just give a little color on how we should think about that relative to adjusted FFO from a guidance perspective for the full year?

Yes, I'll take the first part, Juan, it's Taylor. We're purposefully not disclosing initial yields because they're all over the place. We would have deals in the pipeline that have high single-digit yields right out of the box, some that are lower. And it all goes back to what Matthew said. Every deal is idiosyncratic, and we're looking at long-term IRRs and we're not aggressive in terms of how we underwrite to get to those. So we feel really good about what we're finding and the operators we're putting these buildings and enhance -- it is in Saber's hands where these buildings are going and that's probably all I can say about it. In terms of CapEx, do you want to take that?

Yes. So again, it's again, a little bit of a mixed bag one. Some of the facilities we've picked up really don't need a lot of initial CapEx. Other ones probably do need a little PLC. That's a little bit of the nature of the turnaround element. We tend to price that in initially within our expectations. And I would say that the yields that we're always quoting to you are yields that we think are sustainable after a decent CapEx assumption either from an initial investment standpoint or even from a recurring standpoint. I don't know what that does in terms of how that looks for all our AFFO relative to our FAD going forward. So we are primarily focused on just growing that FAB.

And just with regards to the '26 earnings guidance, any -- how should we think about the delta between FAD and adjusted FFO?

Well, remember -- okay, you're right. We only give AFFO guidance, but escalators will impact that as it goes along. But same with FAD, you got to remember that the asset sales and the repayment of the loan maturities also will impact that. So I would keep about the same relationship.

Yes. I think the ratio -- I mean, you have to remember, we're a $14 billion company, and we just started investing in RIDEA. So I think that the ratio that you've seen between AFFO and FAD over the last few years is probably not going to meaningfully change in 2026.

Okay. And then just Canada, a new market for you, and I think your first investment in the long-term care there. So just curious if you could give us a little bit of a quick one-on-one on the Canadian market versus the U.S. I'm assuming it's more akin to U.S. skilled nursing and kind of what opportunity this new sleeve potentially represents for Omega?

Sure. I mean as you can imagine, all of these things are up pretty involved in detail. If you were going to give an analogy, I'd probably say it's closest to the U.K. care home market, more than the skilled nursing market and the fact that it's a little bit more of a socialized medicine system there, so they don't make people exhaust their financial options to the thing they do in the U.S. At the same time, most people tend to be longer-term residents within those facilities. In terms of a little bit of a background on this, we're very excited about this opportunity.

We had an opportunity to invest with a very well-established and high-quality developer and operator in the Canadian long-term care market that we've got to know over the last year. We were able to structure a deal that we think can be sustainably accretive. However, I would say this is a little bit of an idiosyncratic investment. We wouldn't expect to significantly grow in the general Canadian senior housing market. As this is traditionally offered yields that are not particularly compelling to us given our cost of capital. However, we would be open to continue to grow with this operator, assuming they can find deals that fit within the parameters of our cost of capital and are able to be accretive deals for us.

Our next question comes from the line of Farrell Granath from Bank of America.

Similar, I guess, to that question is, thinking about the investment mix in '26. I'm just curious if what you've already closed in January of '26 and early February is kind of in line of how we should be thinking of a mixture of loans as well as triple net and SHOP?

Yes. I'll speak to the pipeline. I think that will help you. If you just look at our pipeline, it is strong as both Taylor and I said, it's in line with really where we closed 2025. And if you look at what's actionable, about 1/3 is skilled nursing, 1/3 is senior housing and 1/3 is U.K. care homes. As for structure, it's a mixed bag. I would say a lot of the U.K. and U.S. senior housing is RIDEA focused.

Okay. And also just given the recent headlines around the CMA investigating some peers for recent transactions in the U.K., does that change any of your feelings on transactions in the U.K. or influence any of your investment decisions?

Yes. No, we are not concerned about that. We -- our lawyers do similar type of checks for us every time we would do a U.K. care home transaction. We've never ever been in breach of anything or close to it. So from our perspective, we are not worried about growing in the U.K. right now.

Okay. And just one small follow-up also just on your dividend, if there's any additional updates on coverage or how you're thinking about your dividend?

We're getting closer to needing to increase the dividend, but obviously, it's a board call. And typically, we'll get to the point where we're required to increase our dividend from a tax perspective. And that's going to be in the low 80s of in terms of FAD payout. That's how we think about it.

Our next question comes from the line of Michael Carroll from RBC Capital Markets.

I wanted to circle back on the Canadian loan. I want to make sure I understand this. So I guess the initial loan, your security is these 5 long-term care developments, but you have the option to convert it into the entire operator, a 35% stake in the entire operator?

So the collateral is actually over 20 long-term care homes that they currently own. But as Vikas said, is valued meaningfully more than the loan that we're looking to put out there about twice the value of the loan that we're looking to put out there. And yes, initially, the yields, it's a loan structure to give us the yields that we're looking for. But to the extent that over time, the operating company is able to achieve yields similar to or above the yields we're achieving from a loan standpoint, we then have the optionality to flip that over. And based on our modeling, we would expect to be able to do that at some point during the term of the loan.

Okay. Can you give us an idea of what the equity stake would be, I guess, the yield on the equity stake today? And I'm assuming it's lower than the loan amounts, I guess. And then how much growth is in the long-term care market? I mean, how fast could that yield grow? So if you do convert it into an equity stake, I mean, are we thinking about a mid-single-digit type growth rate? Or is it potentially higher than that? Are they seeing the similar trends as we are in the U.S.?

Yes. The initial yield today is lower than obviously our 10% yield on the debt. I don't honestly know exactly what the number is, Michael, but it's cash flow positive, and it's obviously got a lot of collateral behind it. To the extent of when we convert it over, it's going to be somewhat contingent on whether there's continued opportunities to do these developments. It is nicely accretive. So I would say that mid-single-digit growth is on the conservative side of things. I think this could definitely be high single digit or even double-digit growth as they continue to develop. There's a lot of need within the Canadian market right now, and this is a proven developer and operator that we think can meet a certain amount of the need that the Canadian people have in the Ontario market.

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

So first for would be when you evaluated the development loan in Canada, how would that compare to maybe similar loans in the United States? And would you expect that to be a bigger part of the investment flow in 2026?

So it's very different. In this situation, we had a lot of collateral sitting behind our loan. A lot of the time when you're putting these loans out there, the collateral might just be the development deal itself, which has inherently more risk attached to it. This also is a known entity that has proven an ability to develop a very, very consistent cost rates relative to budget over a prolonged period of time, which gave us increased comfort and so to that point, I don't think this is something that we're going to look to be doing. First of all, we're just not fans of loans generally to the point we were making earlier. Those loans tend to come back to you. And this really is a little bit of a loan with a vehicle to have equity interest longer term, which is obviously something that we are more interested in. But the idea of loaning into development deals is probably not something we're going to be looking to do.

All right. That's helpful. And maybe now that you're in the RIDEA business, are you looking to convert any current senior housing in the portfolio to that structure?

There's 2 forms of conversion here, right? There's a conversion out of the necessity and the conversion out of opportunity. You've seen a lot of people convert because ultimately, there wasn't a capacity to pay the rents. Where we sit today in our senior housing portfolio, obviously, we've talked about Maplewood being a RIDEA like model. But outside of that, all of our operators are cash flowing sufficiently to continue to pay our rent. So there's no necessity to do that. But if there were opportunistic chances to take operating exposure at a yield that is compelling to us, either in the U.S. or the U.K. We'd obviously look to do that. We understand that the nature of such operating exposure creates increased volatility, so we'd be looking for a fairly healthy yield in order to do that. But it's not outside of the realm of possibility we'd look to do so.

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

Matthew, first question on your [ guys' ] foray into RIDEA. It is I mean it is a different skill set for a triple net credit investor framework from Omega of old. And just curious, what has had to change internally either on the investment team or asset management team to get ready for a more operational-intensive tougher model to underwrite?

It's probably quicker to tell you what hasn't changed. You're absolutely right, John. This is inherently a higher risk, potentially higher return model. We don't have that credit support sitting behind in the form of coverage. And therefore, I would say that we have looked at every element of this from the standpoint of the quality of the underwriting. We brought in new members of the team who have decades of experience within the senior housing business, who have a very deep bench of operators that they know that they've worked with before.

We've looked at every element of the P&L in terms of trying to understand why lower occupancy happens, what the differentiation of CapEx is between the asset classes whether we want a first-tier market, a second-tier market, looking at the demographics. We have taken an extremely well, I think, thoughtful and intense approach to truly understand what the risks are around this, given the fact that there isn't that credit sitting behind us. We are still, I think, sufficiently conservative to understand that very much like the U.K. it makes sense for us to dip our toe into this judiciously. I wouldn't look to first to be doing a $1 billion deal anytime soon because we do think there's still more to learn but as we've seen in the U.K., the ability to deploy capital over the course of a decade for it to become not only a meaningful part of our business, but a highly accretive and valuable part of our business. I think we look at over the next decade, RIDEA being a similar opportunity.

Okay. I appreciate all those thoughts. And maybe a quick one for you at the state level. Are you hearing any concerning anecdotes or potential draft legislation for staffing mandates at the state level?

No, nothing more than what we've heard in the past. So there's always rumblings and there are states who are pushing the federal government to try to institute another staffing mandate, but we're not really hearing that across the board.

[Operator Instructions] I will now turn the call back over to Taylor Pickett for closing remarks.

Thank you. Thanks all for joining our call today. As always, we're available for follow-up questions.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Desiree, I will be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors Inc. Third Quarter Earnings Conference Call.

[Operator Instructions]

I would now like to turn 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 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 onetimes 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 is 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 2 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 of prudent capital allocation and our platform of sophisticated operators, we believe we are extremely well positioned to enhance shareholder returns by acquiring underperforming assets, the price is 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 Saber's operating company announced last night. Saber 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 principles of Saber for trusting us to invest in their operating company and look forward to continuing to support the further growth of Saber while adhering to the key resident-focused tenants 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 to 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 are 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 Saber JV transaction and 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 in 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 needs 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 $125 million term loan with Genesis, which is secured by a first lien on the equity of Genesis' 4 and 3 businesses, which we believe fully secured a loan and a subordinated all assets coming from the overall business of Genesis. Based on 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 here. We expect this will result in our lease being sued by Genesis and assigned to the winning bidder. As previously reported, Omega committed to support Genesis by providing an $8 million in debtor possession financing as part of a total $30 million debt in position 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 [indiscernible], 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 real estate acquisitions. We had 2 separate transactions to acquire 2 facilities, 1 CCRC and 1 U.K. care home and leased them to 2 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 real estate loans via 4 separate transactions where the 4 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 place a focus on allocating capital to own real estate investment to 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 was able to dramatically improve performance and refinance Omega's loan in October 2025 for BBB 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 Saber health care. All 64 facilities are leased to Saber under long-term triple net leases with 2% annual fixed [indiscernible] score 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 from future acquisitions. Saber is a long-standing operating partner of Omega where in addition to the 64 joint venture facilities, Saber operates 51 additional facilities owned by us and leased under a consolidated triple-net pass 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 Saber real estate joint venture, Omega and Saber entered into a definitive agreement for us to invest $93 million to acquire a 9.9% equity ownership interest in Saber Healthcare Holdings, Saber's parent operating company, which operates 139 facilities, 126 skilled nursing facilities and 13 assisted living facilities. The closing of our ownership interest in Saber's parent operating companies 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 Saber as a best-in-class operating partner.

With our geographic scope and access to capital and Saber's operational expertise, both companies will be 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-Saber 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 Saber-Omega real estate joint venture and the Saber 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 costs 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 assets with increased flexibility on yield 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 Saber.

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 May REIT 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 pay $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 2 quarters. Our balance sheet remains incredibly strong, and we continue 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 senior unsecured revolver and a $300 million delayed draw term loan. We intend to draw on the term loan [indiscernible] about November 25, and and used 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, 1 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 Saber 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 when 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. Our 2025 adjusted FFO guidance does not include any additional investments or asset sales as well as any additional capital market transactions other than what I just mentioned or that was included in the earnings release. I will now turn the call over to Megan.

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 COG 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 2 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.

[Operator Instructions]

And our first question comes from the line of Jonathan Hughes with Raymond James.

Happy Halloween. Thanks for the prepared remarks and commentary. 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. In terms of investment volumes on a quarterly basis on an annual basis, it's 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 $2 billion of assets when the opportunities present 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 and 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 they're meaningfully higher yields, and we're able to achieve in our triple nets over the longer term. So I think we're relatively agnostic and just looking at each deal on a deal-by-deal basis as to the long-term value creation for shareholders.

All right. That's great color. I appreciate it. I've got just one more for -- maybe for Taylor. I think at the start, you mentioned dividend coverage is now below 90% of FAD and you were able to successfully maintain that dividend through the pandemic. Can you just talk about the potential for future dividend growth and how the board views that dividend versus retaining funds for external growth?

Yes, you're exactly right. It's a board decision, Jonathan. From our perspective, we start to bump up against tax limitations in the low 80s. So -- and we're moving rapidly through the 80s towards the 70s. So I think every quarter, we'll look at that. There's a pathway in the near term to get to a dividend increase. And I would just say, if you look back, not only did we not cut dividends during COVID, if you look back to the period of growth a number of years ago, we were able to increase the dividend every quarter for 5 straight years. I think we have the setup in terms of our balance sheet and the team deploying capital in a way where returning to that type of growth is certainly a possibility. That's what we're aiming to do.

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

Maybe if we could start with the Saber 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. Saber continues to do very, very well. And the occupancy is in the low 90%. So overall, Saber 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 Saber. 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 SNFs and your housing, some care homes, there's only 1 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 Saber that you have a lot of respect for how they operate and also are willing to participate in a structure like this.

Yes. A couple of comments around that. I think you've -- not I think. We've expanded the toolkit pretty broadly because we just have a deeper bench, we have a better team. We can look at a lot more types of transactions, particularly where the yields are higher than our traditional triple-net with escalators. That being said, we're still finding plenty to do in the triple-net side here and in the U.K. And then Saber in particular, and that's pretty unique. People should think of Saber, they're essentially the private [indiscernible] sign, and they're set up to grow really significantly in a very accretive way over the next 5-plus years. We're really excited to be part of that because I think the upside there in our investment plus the yield we're getting on that investment is really remarkable, and we'll see how that plays out. That being said, are there a lot of Sabers out there No, we're happy to partner with that. And we're excited at this point in their growth progression. I think that transaction for us is likely unique to the SNF industry.

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

Just a little bit more on Saber. Can you kind of talk about what the geographic focus is of the assets that are in the JV? And then Obviously, this transaction allowed Saber to kind of monetize some of their real estate kind of -- and you've talked about the growth opportunity with them. Can you kind of touch on maybe their motivation for monetizing the real estate and how they're thinking about deploying 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 are located in 6 states, Delaware, Indiana, North Carolina, Ohio, Pennsylvania and Virgin. I'll turn it over to Taylor for...

Yes. In terms of motivation, the executives that own and run Saber are relatively young, and they've created a lot of value and wealth. And they just -- I think from their perspective, it was a good time to take something off the table. But more importantly, the partner with a capital partner who can drive meaningful growth from here. So they retained obviously 51% of their real estate, they retained 90% of their operating company. That operating company generates substantial cash flow. They're setting themselves up for future growth, and we're lucky enough to be partnering with that.

And then just 1 more kind of as you kind of expand the toolkit of opportunities doing this type of structure. Are you kind of waiting shop for steel in the U.S. versus other markets? And as you kind of 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?

So we don't want to give guidance in terms of what we expect the pipeline to look like. But if you look at the opportunities presenting themselves today, we've done nearly $1 billion of deals year-to-date. It feels like we're in that kind of cadence where we could allocate a similar amount of capital. And then in terms of the opportunities that present themselves, really it's going to come down to the risk-adjusted returns on everything. A couple of years ago, we were -- the vast majority of what we did was in the U.K. because that's where the opportunity presented itself. And my suspicion is that next year is going to look like a good year for U.S. SNF U.K. care homes. And I think we'll also be able to augment that with a decent amount of U.S. senior housing on top of that predominantly in a non-triple net format.

So I think the pipeline looks good on all of them, but it's really just going to be determined by what opportunities present themselves and provide a risk-adjusted return that is compelling to us.

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

Just hoping we could talk a little bit more about Saber. 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 them all their growth. So from our perspective, risk-adjusted returns, 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 in a very similar platform just smaller. I look at our equity investment, I'd be very disappointed. 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 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.

Well, as I mentioned earlier, my question -- or my response to your last question, the cash flow generated by the OpCo is very substantial. Our 9.9% of share of that cash flow is far more than the 8% yield that they're paying on our investment, but they're private companies. So beyond that, I can't disclose much more other than to say that stands on its own. It's got lots of cash flow. There's lots of opportunities. We think there's going to be great growth there.

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 Saber OpCo, I mean just kind of give us a general sense of, I guess, 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. So again, similar to inside, you can look at publicly how they've grown. It's not inside the -- it's not same-store inside the box growth, it's the platform finding opportunities, additional facilities that tend to be underperforming where you can be additive. So there's huge opportunities there. And it's really just -- it comes down to how fast do they grow? But again, I would point you to the public peer that I think is the best comp, and that's Ensign. And you can look at their growth quarter-over-quarter, it's really meaningful. And you don't have to rely on pushing rates. You don't have to rely on cutting expenses. It's really just taking underperforming assets in this industry and turning them around. And we've seen Saber do that for the last 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 a compare and contrast the U.S. versus U.K. When you talk to your operators, what type of wage increases or folks budgeting for next year in the U.S. versus the 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 there, there's going to be always an issue there.

Okay. Final question, maybe to follow on there. In the U.S., Megan, are you seeing -- I guess where are you seeing any pockets of labor availability issues resurfaced in certain states, are you seeing certain operators have to pool the temp agency, temp labor lever a little bit more?

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 [indiscernible] until they have [indiscernible] 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.

Okay. But you haven't seen any -- in recent months or quarters, you haven't seen any glimpses of issues stemming from just slower migration.

No, we haven't.

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

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

We'll then talk about the -- that's within the JV, but then overall...

Yes. I mean, overall, I mean, the portfolio consists of 126 SNFs and 13 [indiscernible] so once again, Sabre is a very SNF-focused operator, as Taylor and both Matthew mentioned, we think of them as best-in-class. So again, the idea here is to keep growing the portfolio. If an occasional house is picked up in that, that's okay. Saber can handle it, but they are a very SNF-focused already.

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.

I will tell you, the trend is still up. And I think to the extent that occupancy continues to grow, that will be the trend. And we know from demographics. We've seen it. We can model it. We know that occupancy is going to continue going up. We made for the first time in a while, begin to see some seasonality in occupancy. We haven't seen that for a while coming out of COVID with the COVID lows in terms of occupancy. But driving -- the occupancy will keep driving coverage. So I think 155 is not a baseline, and we'll keep growing.

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

I want to go back to the opportunity at the -- where you said you could do some loans with back-end recaps. Are you seeing a lot of competition for these types of deals? Does your position as an existing landlord give you a little bit of an advantage there?

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. As I said in 1 example, we created a lot of IRR with that 1 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. So they turn around opportunities. And they've proven to us, they can turn them around. So we continue to keep growth -- 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 the opportunity set is very narrow in terms of the type of transaction that we did with Saber, 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 been operated 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 much larger picture question. You talked about sequestration risk being pushed into -- well, we know what happened in 2026 if the government ever gets it act together. But on the Medicaid side, obviously, SNFs were spared. But what is your comment about Medicaid cuts and state budgets and just an indirect concern about how states may be able to operate in the future with the Medicaid cuts, even though you -- your specific business wasn't targeted. Are you concerned at all about just state profitability or something. I'm just curious where you stand on that.

And it is definitely something that we're keeping an eye on and monitoring, and there have been a few states who have started to bring up OBBBA issues. I will say that in most of those states, there's very strong support for skilled nursing and not cutting skilled nursing rates, which has been a positive. We've seen some of those cuts come through, but we've seen that people are very supportive of maybe pulling back some of those cuts that have already occurred like in Idaho and North Carolina.

But the reality is when we look at our top 10 states, I think we're pretty well positioned. We've got Texas and Florida are in expansion states. They won't be touched at all. And then all of the other states really fall into. We haven't heard any concerns or they have higher coverages than our average coverage. So any cut would probably still keep them above that average coverage. And that's the case in North Carolina and Idaho right now or they are very much so in multiple states. And so they're a little bit insulated from any 1 given state having an issue. And then couple that all with the fact that our coverages are where they are, we feel pretty well insulated that we can weather that going forward.

Okay. Great. Second question, I'm not going to ask about Saber, 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? 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 rate. You've seen it over the last couple of years where that number is moved up into where it sits today. So you look at that trajectory is that they have very high occupancy, which obviously limits their opportunity to push occupancy, but it increases the opportunity to push rate. These are highly, 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 like a time frame on it. But absolutely, I think there is a 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%. So things are -- the billing is basically full as residents of that and more residents move in to Matthew's point, they can push rate. So we just -- we expect further cash flow growth there.

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

I guess just first, I 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, a mega funded majority of the money and then the operator is able to improve performance and refinanced the building for $18 million. Omega's able to put $6 million [indiscernible]. So once again, this was -- and then -- sorry, on top of that, we maintained a contractual agreement that if the building is refinanced again or sold, we also share 50% of the upside. So again, it's a small example with a meaningful IRR out saying we will achieve that in all deals, but we want to show an example of the potential of the upside in these type of [indiscernible].

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

Correct, Yes. On that [indiscernible].

On that one, Okay. And then just going back to the broader opportunity set, I know you said they are very limited paper type deals, but just 2 clarifications. You referenced Ensign. Should we assume the Saber 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 like what types of RIDEA senior housing U.S. would you be looking at? And kind of what's your -- the pipeline look like?

Sure. Saber margins are very strong in sign lighting 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 [ dockings]. Does it mean they'll close, I don't know. But we're we're prepared to do your traditional RIDEA. We spent a lot of time making sure we had the tools here to handle that. And we do. Will those deals close, I don't now, 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 input into how to streamline regulation within the skilled nursing industry. Just kind of curious what suggestions of mega making? What suggestions the industry as a whole may be making? And how does that end up whether improving the bottom line of skilled noting facilities improving operational processes and kind of whatever kind of you may make, whatever the potential impact could be if these recommendations are taken up by CMS.

Yes. I mean, look, all the various industry associations are really pushing us pretty hard. And the idea is sort of surround how do you make the survey process a little bit more rational and reasonable, where that if you go in and you see an operator that they've had something that you could call for a tag, they've already corrected it, and they've done all the the work to make sure they're in compliance and that it can't happen going forward, maybe don't have a system where you call that tag and you have financial repercussions when they're clearly showing that they're doing the right thing. So more rationalization around the survey process, more rationalization around the rating process as well, some of the maybe redundant reporting that's going on. I mean all of these things especially on the survey side would have a major impact. And I think they're looking at ways that they can just take that system, look at other systems, see if they can just, again, make it more rational in general. And I think that will all fall to the bottom line if they can fix some of those things. Because we really find that the survey process can really penalize unnecessarily good operators. So that's what we're looking forward to.

[Operator Instructions]

There are no further questions. At this time, I would like to turn the call back over to Mr. Taylor Pickett Mike 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 and you may now disconnect.