Omega Seeks Restructuring for Maplewood Portfolio As Operator Faces ‘Modest Liquidity Crunch’

Omega Healthcare Investors (NYSE: OHI) is looking to restructure the 17 communities in its portfolio managed by Maplewood Senior Living.

The Hunt Valley, Maryland-based real estate investment trust (REIT) is seeking to undertake a handful of measures under its proposed restructuring. They include deferring rent escalators through 2025; deferring 7% interest on a $250.5 million secured revolving credit facility in 2023, with cash interest payments starting in 2024; increasing a secured credit facility by about $13 million to support Maplewood’s near-term cash needs; and as of the fourth quarter of 2022, placing Maplewood on a cash basis for revenue.

“With the Manhattan and Princeton facilities still in lease-up, Maplewood’s current cash flows, absent a portfolio restructuring, are insufficient to cover their rent and interest obligations to us in the near-term,” a Jan. 9 business update from Omega reads.

Advertisement

Maplewood CEO Gregory Smith said the restructuring allows the company to “focus on our core business of providing exceptional care and service to our customers, stabilizing our newest assets, and continuing to lead the way in developing best-in class options for seniors with future projects like Inspir Embassy Row in Washington, D.C.”

“With this restructuring, we are paying the full contractual 2023 rent and the interest on the working capital loan is being deferred, but remains an obligation to be paid,” Smith told Senior Housing News. “We are working hand-in-hand as partners to get through this relatively modest liquidity crunch as we work to fill our new luxury senior housing projects that we are confident will create significant value for the portfolio.”

As outlined in the business update, Omega believes it will under the restructuring receive annual rent payments from Maplewood of about $69.2 million through 2025.

Advertisement

Although occupancy for Omega’s 17 Maplewood communities has largely rebounded since dropping with the pandemic, rate increases still have not matched the pace of inflation, according Omega.

At the same time, the REIT said Maplewood ran into elevated costs and delayed openings at its Manhattan and Princeton developments thanks to supply chain challenges and received too little federal aid to offset the financial impact of the pandemic.

Omega believes that, by stabilizing the properties in Manhattan and Princeton along with enacting other operating improvements, the operator can return to paying the REIT its full rent and interest.

“However, to the extent that these deferred payments are not fully repaid when operating performance improves, in the event of a sale, the remaining accrued balance will be reflected in the allocation of sales proceeds,” the Omega business update added.

During the NIC Fall Conference in Washington, D.C. last September, Maplewood CEO Greg Smith said he expected the industry will “feel a little bit of pain before we get better.”

“We’re 95% occupied, and we told our team to stay at that level and increase our rates, try to keep wages and culture at a certain level, and keep a retention to a level that we don’t have to continue to go out and deal with turnover,” he said at the time.

Companies featured in this article:

,