Omega Healthcare Investors, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Omega Healthcare Investors Inc. first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the conference over to Michelle Weber. You may begin.

Thank you, and good morning. With me today is Omega CEO Taylor Pickett, President Matthew Gorman, CFO Bob Stevenson, 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 NAREID 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 supplements. 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, Michelle. 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 82 cents per share, and FAD funds available for distribution of 78 cents 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 RIDEA transactions while still allocating meaningful capital to SNF facilities and UK 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 3 cents 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 two cents to $3.22. At the same time, our first quarter investments reflect the breadth of our capital allocation focus. We invested in both TripleNet and RIDEA structures, in skilled nursing, seniors housing, and long-term care real estate across the United States, the UK, and Canada. And we closed on our equity investment in Savers Operating Company. In addition, we're 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 Vekas.

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 Genesys, 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 EBITDA coverage for our triple net and mortgage core portfolio as of December 31st, 2025, at 1.58 times compared to our third quarter 2025 reported coverage of 1.57 times. 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 one-third, of a new aggregate $80 million diplo. 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 are 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 approvals. We anticipate that 101 West State Street will assume our Genesis mass release 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 in 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 a rent discount at a blended 7.7%. Subsequent to quarter end, 12 Maryland facilities were sold, and we expect the remaining six 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 idea 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 Sabres Operating Company, the $109 million acquisition of 13 Georgia skilled nursing facilities, and a $10 million investment in an Alabama senior housing idea transaction. Our other first quarter investments included the purchase of a UK 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 two Indiana skilled nursing facilities for $33 million and three 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%. The senior housing facilities will be operated by Omega and managed by a third-party manager via a 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 deploying meaningful capital through both triple net and RIDEA structures. I will now turn the call over to Bob.

Thanks, Vickis, 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 NAE REIT 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 two pennies greater than our fourth quarter AFFO and FAD, with the increase primarily resulting from incremental net income of $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 two 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 two quarters to fund the new investments. Our balance sheet remains incredibly strong. Our debt is well laddered and we have significant liquidity. At March 31st, we have $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 6.3 times, and our leverage remained flat at 3.5 times. 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 two penny 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 27th 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 community care facilities and 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, 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 where 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 OBVBA 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 advantages 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 operator's 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. I will now open the call-up for questions.

Thank you. As a reminder, to ask a question, you will need to press star, then the number 1 on your telephone keypad. And if you would like to redraw your question, press star 1 again. We do request for today's session that you please limit to one question and one follow-up. Your first question comes from the line of Nick Joseph with Citi. Your line is open.

Hi, this is Lauren for Nick. Could you please elaborate on the rationale behind the community care asset sales and whether or not they're indicative of broader conditions in the Maryland and West Virginia markets?

Thanks. Hi, 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's a reflection of these are both relatively hot markets right now. Both Maryland and Virginia are markets that people are looking to acquire. And 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 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.

Got it. Thank you.

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

Hey, thanks. Good morning, everyone. 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, Matt, in some length, but How low on 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. Thanks.

Yeah, I don't think we have a number. I would encourage the term 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 a 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 we 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 naivety that we wouldn't necessarily look to underwrite to. But it's kind of contingent on the opportunities that present themselves and the risk-adjusted return that we assign to that.

So when you think about value-add, like a low initial cap rate kind of concept, what Do you think it would be like a 50-50 split in terms of 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 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 a 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 Rightdea. Will you take that show on the road a little bit in terms of, you know, looking at opportunities in the UK with a Rightdea mindset?

Yeah, this is Vikas. Yes, we actually are looking at a few opportunities right now, so it will become part of our strategy in the UK going forward.

Okay. Thanks very much.

Thanks. Your next question comes from the line of Michael Goldsmith with UBS. Your line is open.

Good morning. I'm here with Dustin Haswick. Thanks for taking my question. Maybe sticking with the CommuniCare, We estimate the cap rate was roughly 7.7% based on a contractual rent, but maybe it was a little bit lower given the EBITDA coverage and assuming the rent is renegotiated. So is that right? And then also, you know, 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 the SNFs? Thanks.

Your math is correct, so you get an A for that. And, yeah, 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-60s 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 are stabilized to finance them to HUD, which is obviously a relatively low cost debt. So that, that, 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 exist. And one of the reasons we aren't looking to sell prodigious amounts of our skilled nursing. In terms of opportunities, yeah, we're seeing less of them, but we're still seeing select opportunities. So I think we're just going to, you know, 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 Fed per share growth standpoint.

Yeah, thanks for that. 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 that 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?

Yeah, 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 or underwriting our entire team to get around that. So it's just a typical RIDEA deal value add in our book.

And then the other 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 the really strong operators and our attitude as of now is we're 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 are, 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.

Thank you very much. Good luck in the second quarter. Thanks.

Your next question comes from the line of Julianne Bluin with Goldman Sachs. Your line is open.

Yeah, thank you for taking my question. 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. Just wondering if you're finding it maybe increasingly more difficult to achieve sort of those mid-teens IRRs you're targeting.

Yeah, 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's going out there. We're reviewing all transactions, and if it fits, it fits. So, you know, at the same time, everyone has its own underwriting criteria, and, you know, for what we're looking for, we continue to find assets.

Okay, great. And then back to the CommuniCare sale, I mean, yeah, 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 EBITDA coverage of 1.5, that would mean an even sort of lower cap rate. I guess like What kind of buyer is this? 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 they're long-term players in the space, highly established, live to own the operations and the properties. And I think that they're Their belief is kind of, as we spoke to earlier, that there is a 20-year secular play here, and that the price that they paid 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. Okay. Thank you.

Next question comes from the line of Omotayo Okasanya with Dolce Bank. Your line is open.

Yes, good morning, guys. I just wanted to talk a little bit about Medicare Advantage a little bit. I think you've kind of seen a bunch of healthcare providers report over the past last week, UnitedHealth, Humana. They're 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, 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?

You know, 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 at 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, you know, 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'll 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, you know, for all of us. And I think ultimately we try to partner with the most sophisticated operators who really that plays into their game plan really well.

That's helpful. And then just occupancy trends in the past few quarters have kind of stagnated. I'm just kind of curious what may be happening there. Is the stock kind of changing with shift mix? How do you kind of think about that, just kind of given the overall backdrop of aging U.S. demographics and limited new supplies?

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, you know, provide ample coverage for our rent, and so we're good with where things are, and we expect to see the occupancy increase in this next year or two. Thank you.

Next question comes from the line of Nick with Scotia Bank. Your line is open. Next question comes from the line of John with Wells Fargo. Your line is open.

Good morning. Thank you. 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. You know, there's been a vacuum at least of re-capital, but I'm assuming that some other capital is 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 Vickis. The short answer is heavily competitive. We were able to find an off-market larger deal that 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 Waltz legalizing alcohol in Minnesota. You know, what are we thinking for new build-outs? So are 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 thrive no matter what the circumstances are.

Got it. Thank you.

Next question comes from the line of Nick Uliko with Deutsche Bank. Your line is open.

Hi, good morning. This is Elmer Chang with Nick. Sorry about that earlier. My phone dropped. And sorry if I missed this, but my first question is on recent senior housing for data 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?

Yeah, it's tough. I mean, thankfully, we're a $14 billion company. We've put a couple 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, Omar, at the idea that it may be able to, I don't want to put a number on it, but, you know, blend it between seven and nine 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. Thank you. And I guess the second question is going back to the planned communiCare sale. What assumptions in terms of initial yield and future growth are 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 are maybe already deals under LOIs or under contract?

So, yeah, we went back and forth on what the number was. I want to say four pennies because technically putting it back to look at a 10 gives you three and a half pennies and that rounds up. But we decided to be conservative. So the numbers probably are in the low nines in terms of what we're saying. I still think we're going to expect. to deploy capital in the tens, but that's kind of the math around it. And then, yeah, I mean, we're not going to talk too much about what's in LOIs today, but this is a really, it's an interesting market that we're in right now because to a certain extent in seniors 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 three 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 flexible. be on the road, quite frankly, and find more off-market deal-through relationships. So from that standpoint, I think we're in a pretty good place going forward. But nonetheless, it is pretty competitive.

Okay, thank you.

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

Thanks. I wanted to circle up on the Sabre equity deal. I know that there's a minimum yield to that transaction. It looks like that 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 and Sabre 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?

Yeah, this is Vick. Let me answer that a little differently. As we've said before, you're speaking of our Sabre investment. Sabre 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. Sabre 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 discussion to kind of transition that Maplewood investment into like a pure Radea contract? I mean, I know that Omega still gets a lot of that upside, just given how it's structured in 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.

Okay, great. Thanks. Appreciate it.

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

Hi, good morning. Just Curious on the building out of the team in shopper idea, 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 UK 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 about, You know, 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, not digital. We're 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 it'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.

Thank you.

Next question comes from the line of Wes Goloday with Beard. Your line is open.

Hey, good morning, everyone. I just want 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?

Yeah, 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, you know, 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. Okay. Thank you.

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

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

Yeah, fair question. In terms of the dividend outlook, obviously it's a board decision, but when you think about Q1 of 25 at 71 cents of fad, Q1 this year at 78 cents of fad, and all the same tools in place to replicate that type of performance, um, I would think by year end, the board's going to start that need to have conversations about our dividend. Um, and really it just comes down to the velocity of putting some of the capital back to work because the escalators in place, the portfolio is stable. We have excess cashflow rolling, um, 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 Troyek with Green Street. Your line is open.

Thanks, and good morning. Maybe going back to the earlier question on UK RIDEA, How does the competitive backdrop within the UK compare versus the US? And has there been the same level of cap rate compression that we've seen in the States?

Yeah, so there are some new players in the UK. 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?

Yeah, and it goes for idea as well. Again, a little bit of our idea growth there will be through our current relationships. So, yes, same thing goes for idea as well.

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

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

Got it. Thanks for the time.

Next question comes from the line of Pharrell Granath with Bank of America. Your line is open.

Oh, this is Pharrell Granath. I first just wanted to ask about how you consider or think about the balance between TripleNet with potential revenue upside baked into the contract or a pure player idea and how you consider that in your acquisition pipeline.

So, you say TripleNet with revenue upside?

With like a revenue participation similar with a Maplewood?

So, yes. 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 are 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 we 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 bandaid off and gone full right deer. I think that's probably where our preference lies. But at the same time, it's very much about creating that alignment of interests 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.

Thank you. And I guess also in a similar vein, when selecting the operators themselves to enter onto 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. Okay, thank you so much.

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.