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Operator: Ladies and gentlemen, thank you for standing by. My name is Jericho, and I will be your conference operator today. At this time, I would like to welcome everyone to the Omega Healthcare Investors Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Michele Reber. You may begin.

Michele Reber: 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 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.

C. Taylor Pickett: Thanks, Michele. Good morning, and thank you for joining our second quarter 2025 earnings conference call. Today, I will discuss our second quarter financial results and certain key operating trends. Second quarter adjusted funds from operations of $0.77 per share and FAD, funds available for distribution, of $0.74 per share reflects strong revenue and EBITDA growth principally fueled by acquisitions and active portfolio management. We again raised and narrowed our 2025 AFFO guidance from a per share range of $2.95 to $3.01, up to $3.04 to $3.07, which reflects our strong second quarter 2025 earnings and the issuance of $600 million in 5-year bonds versus the continued sale of equity. Our balance sheet metrics are very strong with adjusted annualized EBITDA of nearly $1.2 billion and net funded debt of only $4.3 billion.

In July, Genesis filed a Chapter 11 bankruptcy. Omega, along with other Genesis lenders has committed to debtor-in- possession financing. And in addition, to support a bid to buy assets via Section 363 bankruptcy sale process. In the interim, we expect to receive our full monthly contractual rent. Turning to portfolio mix. Our senior housing portfolio continues to grow. It is now comprised of 396 facilities, which is 38% of our total operating facility portfolio. With our strong acquisition pipeline, a favorable operating environment and over $2 billion in liquidity with very low leverage, we are ideally positioned to grow both our senior housing and skilled nursing portfolios. I will now turn the call over to Bob.

Robert O. Stephenson: Thanks, Taylor, and good morning. Turning to our financials for the second quarter of 2025. Revenue for the second quarter was $283 million, compared to $253 million for the second quarter of 2024. The year-over-year increase is primarily the result of the timing and impact of revenue from new investments completed throughout 2024 and 2025, operator restructurings and transitions and annual escalators, partially offset by asset sales completed during that same time period. Our net income for the second quarter was $140 million or $0.46 per share compared to $117 million or $0.45 per common share for the second quarter of 2024. Our Nareit FFO for the second quarter was $213 million or $0.70 per share as compared to $189 million or $0.72 per share for the second quarter of 2024.

Our adjusted FFO was $232 million or $0.77 per share for the quarter, and our FAD was $223 million or $0.74 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 second quarter financial supplemental posted to our website. Our second quarter 2025 FAD was $0.021 greater than our first quarter 2025 FAD, with the increase primarily resulting from incremental revenue related to the timing and completion of $605 million in new investments completed during the first half of 2025. In addition, Maplewood paid $17.6 million in rent in the second quarter, an increase of $2 million, inclusive of an additional $1.1 million of rent related to the Washington, D.C. facility compared to the first quarter of 2025; and $1.9 million in higher rental income from our U.K. operators due to favorable foreign currency fluctuations.

These were partially offset by the second quarter issuance of 7 million common shares of equity for gross proceeds totaling $258 million as we continue to prefund our investment pipeline. Our balance sheet remains incredibly strong, and we’ve continued to take steps to improve our liquidity, capital stack and maturity ladder. In June, we opportunistically issued $600 million, 5.2% senior notes due in July 2030. Our notes issuance was leverage neutral as proceeds will be used to repay the $600 million of 5.25% senior notes maturing in January 2026. We will repay the notes on or about October 15, 2025, which is the earliest we can repay at par. Additionally, we repaid a $50 million term loan in April. Our $1.45 billion undrawn credit facility was extended to the end of October, and we also extended our $429 million term loan until August 2026.

We anticipate completing a new credit facility in the next few months. At June 30, we ended the quarter with $734 million in cash on the balance sheet. 95% of our $5 billion in debt was at fixed rates, and our fixed charge coverage ratio was 5.4x. And our net funded debt to annualized adjusted normalized EBITDA was 3.67x, which is the lowest our leverage has been in over a decade. We still have targeted leverage range between 4 and 5x with the sweet spot being between 4.5 and 4.75x. Given our strong equity currency, we have the flexibility to accretively fund investments with equity as we have over the past several quarters, thereby positioning ourselves for outsized adjusted AFFO growth as we can opportunistically look to the debt and banking markets.

As Taylor mentioned, we raised and narrowed our full year adjusted FFO guidance to a range between $3.04 to $3.07 per share. The increase was primarily due to several factors. One, we completed $183 million of new investments post our first quarter earnings call. Two, our prior guidance assumed we would issue equity or have approximately $600 million of cash on hand to repay our $600 million of notes due January 2026. We were able to issue bonds versus equity to put the cash on the balance sheet to handle that maturity. In addition, that maturity will be repaid in October. And three, following the completion of the LaVie bankruptcy, on June 1, our master lease was assigned to Avardis. Given the improved balance sheet of Avardis and the strong operating performance of the underlying facilities, effective June 1, Avardis was placed on a straight-line basis for revenue recognition.

Turning to our revised full year guidance. The key assumptions are as follows: On the revenue and expense side, we will record $3.6 million of monthly revenue related to Avardis, of which $3.1 million represents the contractual rent. We’re assuming no other changes in our revenue related to operators on an accrual basis of revenue recognition. As a note, approximately 80% of our operators are currently on a straight-line basis of accounting, which means any growth in revenue through annual escalators will not yield further growth in adjusted FFO, but would yield cash flow growth. We’re assuming Genesis pays rent and interest pursuant to terms of the debt financing agreement. And Maplewood continues to pay at its July monthly run rate of $6.1 million.

We entered into derivative instruments to reduce the impact of foreign currency fluctuations on income generated from our U.K. investments for the balance of the year. We project quarterly G&A expense to run between $13.5 million to $14.5 million for the remaining 2 quarters of 2025. On the investment side, we’ve included the impact of new investments completed as of June 30 and did not include any additional new investments. On the balance sheet, of the $233 million in mortgages and other real estate-backed investments contractually maturing in 2025, we’re assuming $65 million will convert from loans to fee simple real estate and $88 million will be repaid throughout 2025, and the balance of the loans being extended beyond 2025. We’re assuming approximately $50 million of asset sales, of which $12 million qualified as assets held for sale as of the end of the quarter.

We recorded $1.3 million of revenue in the second quarter related to these assets. We assume we will repay $252 million of secured debt on or about November 25, 2025, with equity, 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 our earnings release. I will now turn the call over to Vikas.

Vikas Gupta: Thank you, Bob, and good morning, everyone. Today, I will discuss the most recent performance trends for Omega’s operating portfolio as well as recent activity for 3 of Omega’s larger operators. Omega’s investment activity in the second quarter of 2025 and an update on Omega’s pipeline and market trends for the remainder of 2025. Turning to portfolio performance. Trailing 12-month operator EBITDAR coverage for our core portfolio as of March 31, 2025, remained flat quarter-over-quarter at 1.51x. This strong coverage level demonstrates our operators’ ability across skilled nursing and senior housing to cover their rent and retain sufficient cash for clinical care while in a fluid regulatory and reimbursement environment.

Our core portfolio consists of 1,032 facilities, of which 62% is comprised of skilled nursing facilities and other transitional care facilities in the U.S. And the other 38% is U.S. senior housing and U.K. care homes. Genesis. As Taylor previously mentioned, Genesis filed for Chapter 11 bankruptcy protection on July 9, 2025, with the goal of selling substantially all of its assets through a Section 363 sale to a winning bidder of such assets, followed by a liquidating plan of reorganization. Omega believes this filing was a necessary and important step in creating an entity that is operationally solvent and sustainable with enhanced liquidity and a strengthened balance sheet. Omega has worked with Genesis in recent years to divest underperforming facilities from its master lease, which has resulted in a strong current trailing 12-month coverage of 1.5x.

As such, Omega’s rent of $52 million generated by our 31 facility lease is stable, and the credit of our tenants should become stronger via the bankruptcy process. During the bankruptcy, Omega is committed to support Genesis by providing up to $8 million in debtor- in-possession financing. Genesis has agreed to pay full contractual rent to Omega during this period. In addition to our lease, Omega has a $121 million term loan with Genesis, which is secured by a first lien on Genesis’ 4 ancillary businesses and subordinated all assets lien from the overall business of Genesis. We believe our loan is fully collateralized with the credit of the borrower improving via the bankruptcy process. Genesis has paid full contractual rent each month since April 2025, and as previously mentioned, has committed to doing so going forward.

The bankruptcy process is anticipated to take a period of 9 to 12 months. This time line, along with all elements of the bankruptcy filing process is subject to the approval of the bankruptcy court and other complexities inherent in Chapter 11 proceedings. LaVie. LaVie exited bankruptcy on June 1, 2025, at which time the Omega LaVie master lease was assumed and assigned to Avardis. As anticipated, all material lease terms, including the contractual rent of $3.1 million per month or $37.5 million per annum, remain the same as under the legacy LaVie lease. Avardis has made full contractual payments for June and July. Maplewood. Performance in occupancy for the 17 facility Maplewood portfolio, inclusive of Inspir Carnegie Hill in New York City remains strong with an occupancy level of 95% as of July 2025.

Inspir Embassy Row, the new 174 unit senior housing facility in Washington, D.C. that opened in February 2025 is in the process of leasing up with an occupancy of 30% as of the end of July. As Bob noted, for all 18 facilities, Maplewood paid $17.6 million in rend in the second quarter. Omega expects rent payments to increase in coming quarters as Maplewood increases rates, pushes occupancy growth and realizes further operational efficiencies. Other than Genesis, Omega is currently not engaged in restructuring activity with any of our major operators. Turning to new investments. We are pleased with Omega’s 2025 transaction activity through the end of June, with over $605 million in total new investments year-to-date through June 30, of which over $560 million or 93% were real estate investments added to our balance sheet.

During the second quarter, Omega completed a total of $527 million in new investments, not including $30 million in CapEx. The new investments include $502 million in real estate acquisitions via 5 separate transactions. As previously announced, in April 2025, we closed a $344 million investment for a portfolio of 45 care homes across the U.K. in the island of Jersey. Omega leased the 45 care homes to 4 existing operators and 2 new operators. Additionally, in the second quarter, we invested $158 million across 4 separate transactions to acquire 12 facilities, 8 skilled nursing facilities and 4 assisted living facilities and leased them to 2 existing operators and 2 new operators. All transactions have an initial annual cash yield of 10% with annual escalators ranging from 1.7% to 2.5%.

Lastly, Omega invested $25 million in real estate loans via 2 transactions where both loans have an interest rate of 10%. As discussed last quarter, the U.K. continued to be a large driver of our 2025 new investment activity, totaling approximately $392 million or 65% of our total new investments, excluding CapEx. We continue to see ample opportunities to deploy capital in the U.K., many of which are U.K. operating partners identify and secure off-market with Omega as their preferred capital partner. Turning to the pipeline. Omega’s pipeline transaction outlook for the second half of 2025 continues to be very favorable. We are witnessing an increase in marketed opportunities, both in the U.S. and the U.K., while also securing off-market opportunities that our operating partners and other relationships bring us.

Looking at asset mix, many of the larger marketed transactions we are seeing are for regional senior housing assets at prices meaningfully below replacement cost. Transaction activity on the skilled nursing front is also sizable, and we’re seeing numerous opportunities from individual owner operators and regional sellers, while also seeing larger off-market opportunities brought to us by our existing relationships. We are evaluating and considering all asset types with a focus on structuring new investments to be immediately accretive, while also providing opportunities for Omega to further improve returns in future years as the underlying cash flows of our communities increased from the continued occupancy gains and operational efficiencies.

I will now turn the call over to Megan.

Megan M. Krull: Thanks, Vikas, and good morning, everyone. The One Big Beautiful Bill Act or OBBBA was signed into law on July 4, and as an industry, there’s a lot to be thankful for. Despite pressure on the provider tax program, skilled nursing was specifically carved out from any Medicaid reductions. Removing the usual target on the back of this industry is a major win for the industry associations and operators who continue to drive a broader understanding within the legislative and executive branches of the importance of the long-term care industry. It is also another indication of President Trump’s support similar to what we saw at the start of the pandemic. As expected, the Medicaid expansion population, those able-bodied adults that were added with the Affordable Care Act were the target of much of the reform.

However, non-SNF provider taxes and expansion states will also be reduced over time starting in 2028, which will have an impact on the hospital system. Generally speaking, a reduction in the overall federal funding of Medicaid to the states regardless of the target may cause states to evaluate all programs. That said, given the continued improvement in fundamentals, the strong lobbying efforts on behalf of the industry and demographic tailwinds, we feel well positioned to weather that potential storm. While Medicare was not specifically targeted in the OBBBA, the expected increase in deficit caused by the act will, without legislative action, likely cause a 4% cut in the 2026 Medicare rate. However, given the scheduled Medicare rate increase later this year, coupled with the nature of our portfolio, with skilled nursing more heavily reliant on Medicaid and with an increasingly heavier concentration on private pay product, the near-term expected impact should be minimal.

Historically, legislative action has been taken to avoid this automatic reduction. Finally, the OBBBA puts a moratorium on the implementation of the staffing requirements of the staffing mandate for 10 years. That said, the Texas and Iowa federal courts have now both found that CMS locked the authority to issue the regulations surrounding the required hours and while still subject to appeal given the overturning of the Chevron doctrine, it seems more likely than not that the higher courts will uphold that finding. We are grateful to have this latest reconciliation chapter behind us and look forward to continued support of this critical industry, serving some of the most vulnerable in our population. I will now open the call up for questions.

Operator: [Operator Instructions] Your first question comes from Jonathan Hughes from Raymond James.

Jonathan Hughes: I was hoping you could share some more details of what the investment pipeline looks like today in terms of yields and specifically on the, I think, U.S. seniors housing opportunities you mentioned in the prepared remarks. And then maybe also yields on the sales in the quarter.

Vikas Gupta: Sure. Vikas here. As I mentioned, our pipeline is strong. It consists of U.S. senior housing, U.S. SNFs and care homes in the U.K. It’s just as strong as it has been. It continues to be strong. We continue to just look at all the product that’s out there for accretive investments. Yield. Yield, we continue to push 10% across the board for all of those asset classes.

Robert O. Stephenson: Yield on the sales.

Vikas Gupta: And then on sales, we are — any sales at this point forward are usually just strategic sales or at times purchase options related to old workouts. But otherwise, we have no sales on the horizon.

Jonathan Hughes: Okay. And then my follow-up would be on Maplewood. They paid more rent versus the first quarter and that was due in part to Embassy Row being in the full second quarter. But even excluding Embassy Row, the rent there did tick up. Can you just remind us of the expected rent trajectory there, what’s embedded in guidance and when you expect them to hopefully return to paying full contract rent?

Robert O. Stephenson: Yes. We’ll tag team on this, Jonathan. So what’s laid out — what they paid in the quarter was actually laid out in the press release pretty nicely. But I look at it from a modeling standpoint, they paid $6.1 million most recently. That’s what we model on a go-forward basis. My upside guidance would be based on any additional rent, and we’re hoping they do pay that. So…

Vikas Gupta: Yes. And Jonathan, overall, Maplewood is doing a great job. Occupancy in New York is 93%. They’re going to keep pushing that occupancy, pushing rate, and we’re just hoping for further improvement.

Operator: Our next question comes from John Kilichowski from Wells Fargo.

William John Kilichowski: First one is for Bob. It seems like there’s a bit of a change of strategy on the balance sheet versus what you’re planning on raising and what [ you’ve done in ] the quarter. Bob, can you maybe talk about that and maybe if the stock starts to work in your favor again sort of on the trajectory it was in ’24, if that could change things in the back half of the year?

Robert O. Stephenson: We were a little hard to hear. I’ll try to answer that. If I don’t, just reask a piece of it. So the strategy, again, we were — we have an equity currency. So leading into the year, we said we’re going to take advantage of that equity currency and the bond market was not available at the coupon we were looking for. We were — we saw an opportunity and opportunistically took advantage of that. So that’s why on the guidance side, instead of having issuing equity to fund the next year’s bonds, we decided to do debt for debt. And as you saw, they’re basically leverage neutral. So it was a great transaction from our standpoint. I didn’t catch the second part, if you wouldn’t mind repeating that?

William John Kilichowski: No. It was just about if things change in the second half of the year, is there the ability to — or the — maybe the desire to try to fund future bonds with equity instead of just refi as you did? Or would you kind of hold course here?

Robert O. Stephenson: Yes, that’s a great question. So again, we’re going to keep that same strategy, what I discussed in our prepared points that we’ll use equity given that it’s a strong currency to fund acquisitions. There’s a chance in the bank market, I am redoing our credit facility, if I could go out and potentially do a term loan, I may take out the secured debt with a term loan, if I do, that would take us to the outside of the guidance as well.

William John Kilichowski: Okay. That’s helpful. And then my second question is just on the sub-1 coverage bucket for EBITDAR. There’s a tenant that’s growing. It looks like there’s only 2 quarters currently included. But if you grow into a full number, I think you’re roughly 11%. What gives you confidence in that tenant as they’re growing with you? And then maybe the second part of that is there’s also a tenant at 0.99% EBITDAR coverage. Do you think there’s the potential for them to graduate out of this bucket and on a net basis next quarter, you’d be down quarter-over-quarter?

C. Taylor Pickett: Yes. I’ll take the — this is Taylor. I’ll take the question in reverse order. So you’re right to focus on the 0.99%. That tenant has continued to improve based on preliminary numbers in April and May. They will come out of the bucket next quarter if everything holds. So that’s great news, and that takes the 9.8 down to 4 and change. And then if you look at the other — two other big operators that are close, one at 0.85 and one at 0.87. And they also, in 2025, have had performance above those coverage amounts. So remember, it’s trailing 12, we’re headed in the right direction with both of those. So you really get down to a modest under 1x bucket once you deal with those 3 big guys. We’re really encouraged that directionally, we’re in great shape. And I would add, just overall, although coverage at 1.51 was flat quarter-to-quarter. Again, if you look at April and May and the trajectory, we expect our overall coverages will continue to grow.

Operator: Our next question comes from Seth Bergey from Citi.

Seth Eugene Bergey: Just going back to Maplewood, can you remind us how the lease is structured and quantify how much upside in rents you could potentially capture?

Vikas Gupta: Yes. So this is Vikas. The lease is structured — the contractual rent is $69 million, but at this point, we’re not looking at it that way. We’re looking at all cash flow that comes to Omega. So they’re trending close to full contractual rent. But like I said previously, we expect further improvements in coming quarters.

C. Taylor Pickett: And just to add to that a little bit. Basically, all the cash that’s generated in the Maplewood entity will come to us for the foreseeable future. So it’s very much like a RIDEA structure.

Seth Eugene Bergey: Okay. That’s helpful. And then can you just talk about who else you’re seeing out there as you compete for investment opportunities? I mean, how has your underwriting changed at all kind of just given that the legislation around provider tax cuts is behind us?

Vikas Gupta: Yes. This is Vikas again. As for who we see out there, it hasn’t really changed. We see our REIT peers, we see private equity, we see family offices. And as for underwriting, we continue to underwrite the same. As I’ve said on previous calls, we didn’t change our underwriting standards. So we’ve kept them the same, and now especially with the good news, we will continue to keep it the same.

Operator: Our next question comes from Juan Sanabria from BMO Capital Markets.

Juan Carlos Sanabria: Just curious on the holistic portfolio metrics. Occupancy ticked up, but coverage kind of stayed flat. Just curious if — why that was in confidence or visibility in future step-ups in rent coverage, I’m not sure if you could share [ Q3 or early ] thoughts on kind of the next quarter’s EBITDAR TTM coverage.

C. Taylor Pickett: Yes. Juan, it’s interesting when you have trailing 12, you can have a quarter that falls off and a quarter that comes in, and you’re not necessarily going to get the reaction from occupancy right away because there can be just odd accruals or whatever. But the general trajectory, as I mentioned earlier, based particularly on the April and May preliminary results that we have is up. So I would expect, based on what we know today, that our overall coverages next quarter will be higher and to your point, reflecting just this continued occupancy driver of that coverage.

Juan Carlos Sanabria: And second question, just wanted to follow up with the commentary made by Megan at the beginning about the potential for a cut just given statutory, I guess, considerations for Medicare, but then, obviously, there’s a history of not doing that. So just curious if you could — or hoping you could provide a little bit more color on the mechanics and the processes laid out?

Megan M. Krull: Yes. There’s just a general requirement that if there’s an increase in the deficit by a certain amount, there has to be a cut as well to try to balance things out. And so it’s capped for Medicare at 4%. So that’s sort of worst case scenario, although keep in mind, at the same time, you’re going to have a 3.2% rate increase that just got finalized yesterday, that’s going to offset that. And as I said, the fundamentals are good, the demographics are good. But yes, legislatively, they have typically gone and gotten rid of that piece of it. Right now, I think the congress is in recess. So we wouldn’t find out until a couple more months whether or not they’ll do that.

Operator: Our next question comes from Michael Stroyeck from Green Street.

Michael Lee Stroyeck: Maybe one on the labor side. What sort of wage increases are you seeing your operators pass along to employees today? And is there a meaningful difference between wage growth within your SNF and senior housing portfolios?

Megan M. Krull: I mean I would say from a wage perspective, we’re just seeing normal inflationary increases at this point, unlike what we have seen previously during COVID and right after COVID where things were a little bit out of whack. And I don’t know that we’re seeing any differences between the SNF and the ALF portfolios on the wage side.

Michael Lee Stroyeck: Okay. I guess, how about at the occupation level? Has there been any specific occupations that have been maybe more difficult to hire or retain?

Megan M. Krull: I mean the CNAs are always a little bit more of a difficult piece of things just because of where these states have pushed the minimum wages. So it’s tough to keep that an attractive business. But they — our operators have been dealing with that over the last several years, and it’s become more of a — you just have to entice people to the culture that you build and that you want to be working here and you want to attract the people who are looking to help people. And so I think it hasn’t been as much of an issue that we’ve seen recently.

Operator: Our next question comes from Omotayo Okusanya from Deutsche Bank.

Omotayo Tejumade Okusanya: Just a quick question on the guidance raise. Again, it’s pretty impressive. It feels like it’s a bunch of things that are coming together there. And I guess my question is, it just feels like the company is figuring out ways to kind of drive additional earnings growth and create additional shareholder value. And I’m curious from a — internally, what may be changing that’s helping Omega identify these opportunities quicker, faster and also giving the company the ability to really kind of execute on these things?

Matthew P. Gourmand: Sure. Thanks, Tayo. It’s Matthew here. I think we continue to just push active portfolio management as best we can. I think that we are actively looking at operators and facilities that maybe don’t align working with operators to get them out of facilities that maybe don’t — shouldn’t be part of their core portfolio and then sourcing other operators that are more suited to run those facilities. And often that presents an opportunity for either risk mitigation or even rent pickup in those situations. I would say also, as Vikas said in his talking points, that we’re considering multiple different structures to try to create that incremental value to align ourselves better with our operators and to potentially benefit from the further upside that we think will happen in both skilled nursing and senior housing facility operating metrics over the next 10-plus years.

Omotayo Tejumade Okusanya: That’s helpful. Then one other quick one for me. Apologies, I joined the call a little late. Just curious if you addressed PACS at all?

Vikas Gupta: Yes. So Tayo, for PACS, we know just about everything but just we only know what the public markets know. But as an operator, we find PACS to be clinically strong. We continue to have strong coverages with them. So from our perspective, it’s a nonevent at this point.

Operator: Our next question comes from Nick Yulico from Scotiabank.

Nicholas Philip Yulico: First question is on the dividend. With the FAD improving this quarter and improvement in the guidance in the second quarter, you’re at looks like a 90% dividend payout ratio on FAD. And so I’m just wondering how the Board is thinking about potential dividend increase in the future? And how should we think about a payout ratio that you need to get to, to support dividend growth?

C. Taylor Pickett: Yes, it’s a great question, Nick. One that we actually talked about in our most recent Board meeting. I think the general view is that we need to be in the 80s, kind of that 85% payout ratio range before we contemplate a dividend raise. But from a tax perspective, you get into the high 70s, even low 80s, you start to push up against the threshold anyway. So we’re not quite there, but I think we have some visibility into potentially having that conversation in the next 3, 4 quarters.

Nicholas Philip Yulico: Okay. And then second is on Genesis. I know you talked about having gotten rid of some — worked with them to get rid of some underperforming assets over the years. Just maybe remind us why you have a confidence that the pool of assets you own with them is still assets they want to keep and that there’s not a risk of some sort of rejection of lease or any sort of move to rightsize rent to a bankruptcy process?

C. Taylor Pickett: Yes. So it’s a master lease, first of all. So they would have to — they can’t cherry pick the assets. They’d have to reject all 31, highly desirable assets with really good coverage, I would say, the best portfolio in that Genesis entity. So the idea of doing — going through a reorganization without that portfolio, I don’t think makes any sense. We feel really good about the assumption and exit with our portfolio intact, and as Vikas mentioned, there are a handful of facilities, particularly in the Northeast that we’ve exited very tough markets. What we have left with them is Mid-Atlantic principally and really strong coverages with a lot of good visibility for growth.

Operator: Our next question comes from Farrell Granath from Bank of America.

Farrell Granath: My first question is about when you’re looking within the marketplace. So I was curious if you can explain the split between either unsolicited inbound and what either efficiencies you’re doing internally on your team for that external growth outlook, more focused on faster connection to negotiation, to execution of deals?

Vikas Gupta: Yes, this is Vikas. We do a lot for new deals, and that includes incomings. We have a corporate development team that goes out, tries to meet new operators, try to find real estate. And we also have a lot of data initiatives that we’re using to look and see what’s out there, what’s available, what operators could want to sell real estate or partner with us. So I can’t tell you like how that breaks down exactly, but we do it all. They look for new transactions.

Farrell Granath: Great. And I guess also, can you just share a few thoughts on how you think about either using new operators versus current operators while you’re expanding your footprint?

Vikas Gupta: Yes. We continue to — a big part of our pipeline continues to be from our current operators, but we are actively looking for new operators. Sometimes that happens through a workout situation where we meet a new operator. But as I mentioned, we have a corporate development team that is just specifically going out there looking for new operators today. So it’s become one of our strategic initiatives.

Operator: Our next question comes from Michael Carroll from RBC Capital Markets.

Michael Albert Carroll: I want to circle back on the prepared remarks talking about, I guess, the senior housing transaction activity. It sounded like OHI is seeing more of these types of deals coming across their desk. I mean, would these be traditional net lease type transactions? I mean, is it hard to get those types of deals done? Or is this going to be more of a unique structure where Omega can also benefit in the upside?

Matthew P. Gourmand: Actually, this is Matthew here. Yes, I think you’re right, the traditional triple-net structure is less appealing for a lot of operators these days. And so we continue to look at various different structures, Michael. Ultimately, it’s about creating long-term sustainable shareholder growth. And that really means partnering with superior operators and buying properties that are sustainably fit for purpose in markets that we like at prices that make sense for us. And if we can do that, we will consider various different structures to align those interests and ultimately achieve accretive growth for our shareholders. So everything is on the table.

Michael Albert Carroll: Okay. And then, Matthew, did I hear it correctly? It sounded like that this is something that’s more in the forefront or that Omega is being more active on this front. Is that true? And would those structures be like a RIDEA structure or would it be something different?

Matthew P. Gourmand: It could be. I think we are continuing to look at it. We’ve always looked at it, but quite frankly, the market’s changed. Previously, there was more appetite for triple nets. And now that doesn’t seem to be the case. So yes, we would be open to that idea. But at the same time, a lot of what we’re seeing right now doesn’t fit what we think makes financial sense. There are some stabilized portfolios with very little upside trading at prices that we can’t reconcile. And so we’re just going to have to be incredibly disciplined both with the operator and the real estate. So from that standpoint, I don’t want to shout the word RIDEA and assume that it’s going to be a significant portion of our business over the next 6 to 12 months.

We are going to be opportunistic. If it happens, it happens. But at the same time, if it doesn’t, because the opportunities aren’t presenting themselves, we still feel that there’s a decent pipeline available to us to continue to accretively invest.

Operator: Our next question comes from Vikram Malhotra from Mizuho.

Vikram L. Malhotra: I guess, Matthew, I just wanted to dig into that — those comments a bit more. A lot of your peers have sort of been more aggressive on the RIDEA structure, buying more, call it, 90-plus percent stabilized assets at 7% initial yields. I’m just sort of wondering, does that type — is that structure is what you’re talking about? Is there some other structure? And if you could just dig into the 4 assets you bought on AL, like are those triple net? And what were the yields on those specifically?

Matthew P. Gourmand: Yes. So some of our peers are buying those because some of our peers have the cost of capital to be able to do that and not be dilutive. We don’t have that luxury. And so therefore, we have to be a little bit more selective in terms of what we take over. The opportunities are likely to be smaller portfolios or a small cluster of facilities as opposed to larger portfolios because those tend to be marketed and tend to, quite frankly, get into a price range that doesn’t make financial sense for our shareholders and us. But we still see a lot of opportunity out there of fit-for-purpose assets that if put in the hands of the right operator and you have rationalization of expenses and put some CapEx in to be able to push rate and occupancy can be highly accretive over time. So I think those are the kind of things that we’re going to be looking at.

Vikas Gupta: And for the second part of your question, Vikram, those 4 ALFs that we bought are triple net deals at 10%.

Vikram L. Malhotra: Okay. That’s helpful. I guess just I wanted to go to the U.K. There’s more competition there recently from one of your peers, still seems like a very attractive market based on your comments. But I’m wondering just in the past, you’ve said — I guess, the first half, you had said the U.K. was — pipeline was good and then you had mentioned it was smaller. Do you mind just updating us like how are you looking at the U.K. in terms of specific opportunities? And like how big could that eventually become over the next few years?

Vikas Gupta: Yes, I’ll start with your last part of your question. There are 17,000 care homes. So we believe there’s still a lot of consolidation to take place in the U.K. We do think it will be part of our pipeline going forward. At this very moment, it is not the lion’s share of our pipeline, but we do have an ongoing U.K. pipeline that is largely driven by our current operators out there.

Operator: Our next question comes from Alec Feygin from Baird.

Alec Gregory Feygin: I guess first one for me is, which segments in the U.S. senior housing space are the best opportunities to target today? And then also, how do the senior housing metrics currently in the portfolio compare to the SNF side?

Matthew P. Gourmand: So the first one, I think it just comes down to the individual asset. We’ve seen some IL portfolios that look interesting. We’ve seen some CCRCs that look interesting. We’ve seen IL/AL memory cares that don’t still have a SNF component, and therefore, can’t really call themselves CCRCs that look interesting. But at the same time, we’ve seen multiple assets within all of those classes that we can’t make sense of the pricing on. So I think from our standpoint, we have a fairly decent understanding. Obviously, we’ve been in this industry, in the senior housing industry for many years. We have a fairly decent understanding as to what each of these should be able to achieve and what the value is, what the cost to rebuild is.

And so we’re going to approach each one individually, especially in alignment with superior operating partners to understand what they can achieve. And ultimately, what we’re looking for is a low to mid-teen IRR over time, not assuming any cap rate compression within that model of the CapEx that provides a sufficiently compelling return to be more appealing potentially than our standard triple net. Innately, our standard triple net structure has a little bit more consistency to it, normally a little bit more visibility to it because you have that nonoperating exposure and that coverage support. So in order to invest in these assets, it has to be providing a sufficiently compelling return, and that can be over any of those classes.

Alec Gregory Feygin: And I guess the second part was, how do the senior housing metrics currently in the portfolio compare to the SNFs?

Matthew P. Gourmand: Sure. In terms of coverage, pretty similar. I would say that we include our U.K. care homes within our senior housing component. I would say they probably have a moderately higher occupancy and coverage than our overall portfolio. But other than that, our U.S. senior housing is materially in line metric wise from an operating — obviously, the margins are higher, but in terms of occupancy and in terms of coverage, they’re materially in line.

Operator: [Operator Instructions] There are no further questions at this time. I would like to turn the call over back to Taylor Pickett for closing remarks.

C. Taylor Pickett: Thanks for joining our call this morning. We appreciate the thoughtful questions, and we’re here if there’s any follow-up. Have a great day.

Operator: This concludes today’s conference call. You may now disconnect.