While short-term rent challenges remain between Maplewood Senior Living to Omega Healthcare Investors (NYSE: OHI), CEO Taylor Pickett believes the operator and other partners will in the future generate “reliable and growing cash flows” – the only thing he is unsure of is the timing of the company’s repayments.
During the company’s third quarter earnings call with investors and analysts Friday, Pickett outlined how Westport, Connecticut-based Maplewood paid partial rent, continuing to short-pay contractual rent by $1 million per month in the third quarter and last month.
“We are currently working with Maplewood and the estate of Greg Smith to address these shortfalls,” Pickett said.
The former CEO of Maplewood passed away suddenly earlier this spring, having been remembered by those in the industry as an innovator and passionate leader..
To make progress on the arrears, Maplewood believes there is a path ahead to meet full rental obligations via 2024 rental rate increases that will hit the books in January and growing occupancy recovery at the Inspir Carnegie Hill luxury senior living community located in Manhattan. The luxury community is part of how operators are evolving for a new era of technology across the senior living industry.
“Maplewood believes there is a pathway forward to meet its full contractual rental obligations, however, the timing at this point is unknown,” Pickett added.
That sentiment around optimism on future revenue was echoed in August during the company’s second quarter earnings call, with CFO Robert Stephenson noting at the time that Maplewood could potentially meet its rental obligations in the first quarter of next year.
In the meantime, Omega has spent $4 million of Maplewood Senior Living’s $4.8 million security deposit to cover those rent shortcomings, but company leadership continued once again to put their confidence behind the operator during Friday’s earnings call.
In February, Omega restructured a 17-property portfolio operated by Maplewood after the operator faced a “modest liquidity crunch” to start 2023. In its restructuring with Omega, Maplewood agreed to a fixed operator annual rent of $69.3 million with deferring annually 2.5% rent escalator through 2025. Maplewood was placed on a revenue cash basis starting in the fourth quarter of last year.
In terms of revenue, Maplewood reported $17.3 million in revenue during the third quarter for Omega that included $14.3 million in rent payments and $3 million in security deposits. In a news release ahead of the third quarter earnings call, Omega said the company was “taking actions to preserve its rights and is in discussions with Maplewood to address the deficiency.”
On Friday, Omega Healthcare Investors stock fell 6.55% to rest at 31.52 per share as of market close on Friday afternoon.
Occupancy within the company’s core portfolio has continued to recover from a low of 74.6% in January 2022 to 80.1% by the middle of October.
Omega closed on $60.7 million in new investments made up of $38 million in real estate loans to a new operator with the intent of acquiring two Pennsylvania-based assisted living (AL) facilities. The loans have a weighted average interest rate of 9.3% with a maturity in October of 2026.
The Hunt Valley, Maryland-based real estate investment trust received $204 million in proceeds from seller not repayments and asset sales, having been repaid in the third quarter a $104.8 million seller note and the sale of 15 facilities for $98.7 million.
As of the end of September, Omega has 14 facilities as being held for sale worth a total of $67.5 million in net value.