Omega Looks for New Operators for Orianna Portfolio after $137.5M Q3 Loss

by Jeff Shaw

HUNT VALLEY, Md. — Omega Healthcare Investors (NYSE: OHI), a skilled nursing and assisted living REIT based in Hunt Valley, announced a third-quarter loss of $137.5 million on its earnings call on Monday, Oct. 30.

The company noted its funds from operations (FFO) included $194.7 million in impairments on direct financing leases related to its Orianna Health Systems portfolio, $11.9 million in provisions for uncollectible accounts, and $3.9 million of non-cash stock-based compensation expense.

Due to the losses, Omega is now seeking to replace Orianna as operator for the communities it owns.

“We are in active discussions with Orianna regarding the transition of some or all of their remaining portfolio to new operators,” says Taylor Pickett, Omega’s COO. “Since 2014, occupancy in the Orianna portfolio has declined from 92 percent to 89 percent. Revenue has grown by 2 percent, while operating expenses have grown by 6 percent.”

“We believe that for some of the Orianna facilities new operators may be able to improve occupancy and reduce expenses; however, based on current facility performance, we anticipate that the current annual contractual rent of $46 million will likely be reduced to a range of $32 million to $38 million once the transition process is complete,” continues Pickett. “The transition timing is expected to take approximately six months.”

The company noted that it still has experienced positive net income on the year, reporting $39.8 million on operating revenues of $687.2 million for the year through Sep. 30.

“During our second-quarter earnings call, we stated we were closely monitoring one of our operators and may have to place them on a cash basis for revenue recognition if their performance did not improve,” says Bob Stephenson, Omega’s CFO. “Since Orianna did not achieve their revised operating plan and pay their full contractual rent, we placed them on a cash basis and therefore our third-quarter results … do not include any revenue related to Orianna.”

To view the full third-quarter report, click here

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