Executive Summary / Key Takeaways

• Omega Healthcare Investors is strategically evolving beyond traditional triple-net leases, expanding its investment toolkit to include joint ventures and operating company equity stakes, aiming for higher risk-adjusted returns and deeper alignment with its healthcare operators.
• The company reported robust financial performance in Q3 2025, with Adjusted FFO of $0.79 per share and FAD of $0.75 per share, driven by successful acquisitions and active portfolio management, leading to an 8% year-over-year AFFO growth forecast for 2025.
• OHI's balance sheet remains exceptionally strong, characterized by a net funded debt to annualized adjusted normalized EBITDA of 3.59x, the lowest in over a decade, providing substantial liquidity for future accretive investments and debt management.
• Strategic investments in operator-enabling technologies, such as AI-powered reimbursement software, indirectly enhance the financial health and operational efficiency of OHI's tenant base, strengthening its core revenue streams and competitive moat.
• While facing industry-wide challenges like staffing shortages and regulatory shifts, OHI's diversified portfolio across the U.S. and U.K., coupled with improving operator coverage metrics and a disciplined capital allocation strategy, positions it for sustainable long-term growth.

A New Chapter in Healthcare Real Estate Investment

Omega Healthcare Investors, Inc. (NYSE:OHI) stands as a prominent Real Estate Investment Trust (REIT) with a rich history spanning over two decades in the long-term healthcare industry. Its core business revolves around providing financing and capital to healthcare-related real estate properties, primarily skilled nursing facilities (SNFs) and assisted living facilities (ALFs) across the United States and the United Kingdom. This foundational strategy has enabled OHI to consistently outperform its peers, driven by a disciplined approach to capital allocation and active portfolio management.

The company's strategic evolution is now taking center stage, moving beyond its successful triple-net lease model to embrace a more diversified investment toolkit. This includes joint ventures, minority interest investments, and RIDEA-like structures, all designed to foster deeper alignment with its operating partners and capture higher risk-adjusted returns. This shift is particularly pertinent in an industry shaped by an aging population, persistent staffing shortages, and a complex, evolving regulatory landscape. OHI's ability to adapt and innovate its investment structures provides a crucial competitive edge against a backdrop of traditional healthcare REITs, private equity, and family offices.

OHI's strategic investments in technology, while not proprietary to its direct operations, are a critical differentiator that indirectly strengthens its competitive position. The company has made strategic investments in operator-enabling technologies, such as MedaSync, an AI-powered reimbursement optimization software for SNFs. This investment aims to reduce administrative burden for its operators, enhancing their efficiency and financial health. Similarly, its prior investment related to ShiftMed addresses critical staffing shortages, a persistent challenge in the healthcare sector. These technological enhancements for its operators translate into more resilient and profitable tenant relationships for OHI, thereby fortifying its revenue streams and asset values. This proactive support for its ecosystem creates a strategic moat, fostering stronger, more sustainable partnerships in a competitive environment.

Financial Strength and Strategic Capital Deployment

OHI's financial performance in the third quarter of 2025 underscores the effectiveness of its strategic initiatives and active portfolio management. The company reported Adjusted Funds From Operations (AFFO) of $0.79 per share and Funds Available for Distribution (FAD) of $0.75 per share. These figures reflect robust revenue and EBITDA growth, primarily fueled by strategic acquisitions and the ongoing optimization of its asset base. Total revenues for Q3 2025 reached $311.591 million, a notable increase from $276.028 million in Q3 2024. This growth was largely driven by a $26.4 million increase from facility acquisitions, lease extensions, and escalations, alongside an $8.1 million net increase in rental income from cash basis operators, predominantly Maplewood.

The company's balance sheet remains a significant strength, providing a solid foundation for future growth. As of September 30, 2025, OHI reported a net funded debt to annualized adjusted normalized EBITDA of 3.59x, marking its lowest leverage in over a decade. This strong liquidity position is further bolstered by $737.2 million in cash and cash equivalents, a $2 billion revolving credit facility, and a $300 million delayed draw term loan. OHI's ability to maintain long-term credit ratings of Baa3 from Moody's (MCO) and BBB- from S&P Global (SPGI) and Fitch highlights its financial stability and access to capital. The company strategically manages its debt, with 95.10% of its outstanding debt having fixed interest payments after hedging, mitigating interest rate risk.

OHI's capital allocation strategy is clearly focused on accretive investments. In the nine months ended September 30, 2025, the company deployed $637.90 million to acquire 66 facilities, including a significant $344.20 million acquisition of 45 care homes in the U.K. and Jersey in April 2025. Concurrently, OHI divested 45 facilities for $264.10 million in net cash proceeds, demonstrating a continuous effort to optimize its portfolio. The company's strategic use of real estate loans, such as a recent investment in an assisted living facility that yielded a 74% internal rate of return (IRR) upon refinancing, exemplifies its pursuit of outsized returns beyond traditional lease structures.

Expanding the Investment Horizon and Competitive Positioning

OHI's competitive positioning is defined by its specialized focus and evolving investment strategy. While direct competitors like Welltower (WELL), Ventas (VTR), and Sabra Health Care REIT (SBRA) operate in similar healthcare real estate segments, OHI differentiates itself through its deep expertise in skilled nursing and assisted living, coupled with a growing international presence in the U.K. Its triple-net lease model provides a competitive advantage by transferring operational burdens and many property-related expenses to tenants, potentially leading to superior margins and more predictable cash flows compared to REITs with more direct operational exposure. This model also offers greater cost predictability for investors.

The company's strategic expansion into joint ventures and operating company equity stakes, as exemplified by its recent partnership with Saber Healthcare Holdings, LLC, marks a significant step in its competitive strategy. In October 2025, OHI invested $222 million for a 49% equity interest in a real estate joint venture with Saber, encompassing 64 facilities. This was followed by an agreement to acquire a 9.9% equity interest in Saber's operating company for $93 million, expected to close in January 2026. This unique structure, particularly the operating company investment, aims to create strong alignment with a "best-in-class" operator, fostering mutual growth and potentially yielding very high returns, akin to the trajectory of successful operators like Ensign (ENSG). This approach allows OHI to participate more directly in the upside of operational improvements, a qualitative advantage that many traditional triple-net REITs do not possess.

OHI's geographic diversification across the U.S. and U.K. further enhances its competitive resilience, spreading risk and offering varied growth opportunities. The U.K. market, in particular, is viewed as highly compelling due to limited new supply and favorable demographics, where OHI has cultivated a strong platform of operators. This international exposure provides a differentiator that many U.S.-centric peers lack. While OHI's regulatory sensitivity and operator dependency remain vulnerabilities, its proactive engagement in supporting operator efficiency through technology investments and its diversified operator base help mitigate these risks.

Outlook, Guidance, and Key Risks

Omega Healthcare Investors has demonstrated confidence in its future trajectory by raising and narrowing its 2025 Adjusted FFO guidance to a range of $3.08 to $3.10 per share. The midpoint of $3.09 per share represents an impressive 8% year-over-year AFFO growth compared to 2024. This guidance is underpinned by several key assumptions, including the continued full contractual rent and interest payments from Genesis Healthcare, Inc. (GENN), despite its Chapter 11 bankruptcy filing in July 2025. OHI has provided $8 million in debtor-in-possession (DIP) financing to Genesis and expects the bankruptcy process to conclude in Q1 or Q2 of 2026. Furthermore, the guidance assumes Maplewood Senior Living continues to pay $6.3 million per month, with expectations for further improvements as its properties stabilize and occupancy grows.

The company's pipeline for the remainder of 2025 and into 2026 remains favorable, with opportunities identified in both the U.S. and U.K. across SNFs, care homes, and U.S. senior housing, including non-triple net formats. Management anticipates a pathway to a dividend increase in the near term, aiming for a payout ratio in the low 80s before tax limitations become a factor. The Q3 2025 payout ratios of 85% for AFFO and 89% for FAD indicate progress towards this goal.

Despite this positive outlook, OHI faces several pertinent risks. The broader healthcare industry continues to grapple with staffing shortages and inflation-related cost increases, which can impact operator profitability. Regulatory changes, particularly the estimated $920 billion in Medicaid cuts over the next decade under the One Big Beautiful Bill Act (OBBBA), present a significant, albeit indirect, risk. While skilled nursing was carved out of direct Medicaid reductions, states may reduce reimbursement levels to offset cuts to other providers. Additionally, the OBBBA triggers an automatic 4% reduction in Medicare reimbursement rates starting in 2026, though management notes historical legislative action has often averted such cuts, and the net impact may be minimal due to scheduled rate increases. The ongoing scrutiny of private equity ownership in healthcare facilities and potential litigation, such as the dispute over Gulf Coast Subordinated Debt, also represent areas of watchfulness for investors.

Conclusion

Omega Healthcare Investors is charting a compelling course for sustained growth, strategically adapting its investment approach to capitalize on the evolving dynamics of the healthcare real estate market. By expanding its toolkit beyond traditional triple-net leases to include aligned partnerships and equity stakes in operating companies, OHI is positioning itself to unlock higher risk-adjusted returns and deepen its competitive moat. The company's robust financial health, characterized by low leverage and ample liquidity, provides a strong foundation for executing its ambitious capital allocation strategy.

OHI's proactive engagement with technology, through investments in operator-enabling solutions, further strengthens its ecosystem and indirectly enhances the performance of its underlying assets. While the healthcare industry presents inherent regulatory and operational challenges, OHI's diversified portfolio, improving operator coverage, and disciplined management team are critical factors supporting its resilience. The positive 2025 AFFO guidance and a favorable investment pipeline underscore the company's potential for continued FAD per share growth, making OHI a compelling consideration for discerning investors seeking exposure to the long-term healthcare sector.