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Press Release: Omega Reports Fourth Quarter 2020 -2-

· 02/04/2021 16:30
Equity Shelf (At-the-Market) Program for 2020 (in thousands, except price per share) Q1 Q2 Q3 Q4 Total ----------- ------ ------ -------- ------------- Number of shares 49 - - 4,172 4,221 Average price per share $ 41.05 $ - $ - $ 36.69 $ 36.74 Gross proceeds $ 2,000 $ - $ - $153,069 $ 155,069 Dividend Reinvestment and Common Stock Purchase Plan for 2020 (in thousands, except price per share) Q1 Q2 Q3 Q4 Total --------- ------ -------- -------- ----------------- Number of shares 90 - - - 90 Average price per share $ 41.80 $ - $ - $ - $ 41.80 Gross proceeds $ 3,747 $ - $ - $ - $ 3,747

Revenues and Expenses -- Revenues for the year ended December 31, 2020 totaled $892.4 million, which included $40.7 million of non-cash revenue, $12.6 million of real estate tax and ground rents, $16.2 million of non-recurring revenue offset by a write-off of $146.6 million in uncollectible accounts (primarily straight-line revenue) due to placing four operators on a cash basis for purposes of revenue recordation resulting from substantial doubt about their ability to continue as going concerns.

Expenses for the year ended December 31, 2020 totaled $734.9 million, consisting of $329.9 million of depreciation and amortization expense, $213.3 million of interest expense, $72.5 million of impairment on real estate properties, $39.6 million of G&A expense, $38.0 million in provision for credit losses based on a new accounting standard adopted January 1, 2020, $18.8 million of stock-based compensation expense, $13.8 million of real estate tax and ground lease expense, $10.1 million of amortized deferred financing costs, $2.0 million in acquisition, merger and transition related costs offset by a $3.1 million recovery on direct financing leases.

Other Income and Expense -- Other income and expense for the year ended December 31, 2020 was net income of $4.9 million primarily consisting of $13.3 million in charges on debt extinguishment offset by $19.1 million of gains on assets sold.

Funds From Operations -- NAREIT FFO for the year ended December 31, 2020 was $555.9 million, or $2.36 per common share, on 235 million weighted-average common shares outstanding, compared to $640.0 million, or $2.88 per common share on 222 million weighted-average common shares outstanding, for the same period in 2019.

The $555.9 million of NAREIT FFO includes $146.6 million write-off of non-cash revenue (primarily straight-line revenue), $39.6 million of provision for credit losses, $18.8 million of non-cash stock-based compensation expense, $15.8 million of loss on debt extinguishment, $2.0 million of acquisition, merger and transition related costs, and $0.9 million in severance expense offset by $16.2 million of non-recurring revenue and a $3.1 million recovery on direct financing leases.

The $640.0 million of NAREIT FFO for the year ended December 31, 2019 includes $14.9 million of non-cash stock-based compensation expense, a $11.1 million write-off of non-cash revenue (primarily straight-line revenue), $7.9 million of impairments on direct financing leases, $5.1 million of merger costs related to the May 2019 acquisition of MedEquities, $2.0 million of loss on debt extinguishment related to an unconsolidated joint venture, $1.7 million of restructuring costs and a $1.1 million one-time lease termination payment offset by $2.4 million of non-recurring revenue.

Adjusted FFO was $760.4 million, or $3.23 per common share, for the year ended December 31, 2020, compared to $681.4 million, or $3.07 per common share, for 2019. For further information, see the "Funds From Operations" schedule below and the Company's website.

FINANCING ACTIVITIES

Equity Shelf Program and Dividend Reinvestment and Common Stock Purchase Plan -- The Company reinstated its Dividend Reinvestment and Common Stock Purchase Plan on December 17, 2020 after temporarily suspending it on March 23, 2020. During the quarter ended December 31, 2020, the Company sold 4.2 million shares of its common stock, generating $153.1 million of gross proceeds, under its Equity Shelf Program:

$700 Million Senior Notes -- On October 9, 2020, the Company issued $700 million aggregate principal amount of its 3.375% Senior Notes due 2031. The notes were sold at a public offering price of 98.249% of their face value before the underwriters' discount. The Company's net proceeds from the offering were used to partially repay outstanding borrowings under the Company's revolving credit facility and term loans.

In conjunction with the repayments on the term loans, the Company settled several interest-rate swaps with an aggregate notional value of $275 million and paid the Company's swap counterparties approximately $11 million. The settlements of the swaps were recorded as interest -- refinancing costs on the Company's income statement.

2021 RECENT AND 2020 FOURTH QUARTER PORTFOLIO

Q1 2021 Portfolio Activity:

$510 Million Acquisition -- On January 20, 2021, the Company acquired 24 senior living facilities from Healthpeak Properties, Inc. (NYSE: PEAK) for $510 million. The acquisition included the assumption of an in-place master lease with Brookdale Senior Living (NYSE: BKD). The master lease has 2021 contractual rent of $43.5 million with a 2.4% annual escalator, and includes 24 facilities representing 2,552 operating units located in Arizona (1), California (1), Florida (1), Illinois (1), New Jersey (1), Oregon (6), Pennsylvania (1), Tennessee (1), Texas (6), Virginia (1), and Washington (4).

Q4 2020 Portfolio Activity:

$98 Million of New Investments -- In the fourth quarter of 2020, the Company completed approximately $78.4 million of new investments and $19.4 million in capital renovations and new construction projects consisting of the following:

$78.4 Million Acquisition -- On November 1, 2020, the Company acquired six skilled nursing facilities ("SNFs") and one assisted living facility ("ALF") located in Virginia from an unrelated third party for approximately $78.4 million. The seven facilities with 876 beds were added to an existing operator's master lease with an initial annual cash yield of 9.5% with 2.0% annual escalators.

$19.4 Million of New Investments -- In the fourth quarter of 2020, the Company invested $19.4 million under its capital renovation and construction-in-progress programs.

Asset Sales and Impairments:

$64 Million in Asset Sales -- In the fourth quarter of 2020, the Company sold 16 facilities for $63.7 million in cash, recognizing a gain of approximately $5.2 million. Twelve of the assets were previously classified as held for sale.

Impairments and Assets Held for Sale -- During the fourth quarter of 2020, the Company recorded a net impairment charge of $28.8 million to reduce the net book values on seven properties to their estimated fair values or expected selling prices.

As of December 31, 2020, the Company had 22 properties classified as assets held for sale, totaling approximately $81.5 million. On February 2, 2021, the Company sold 5 of the 22 held for sale assets (valued at $5.2 million at December 31, 2020) for $75.8 million in cash and expects to recognize a Q1 2021 gain of approximately $70.6 million from this sale.

BALANCE SHEET AND LIQUIDITY

As of December 31, 2020, the Company had $5.2 billion of outstanding indebtedness with a weighted-average annual interest rate of 4.2%. The Company's indebtedness consisted of an aggregate principal amount of $4.6 billion of senior unsecured notes, $186.7 million of unsecured term loans, $369.5 million of secured debt and GBP74.0 million (USD equivalent $101.2 million) of borrowings outstanding under its unsecured revolving credit facility. Total cash and cash equivalents were $163.5 million as of December 31, 2020, and the Company had $1.1 billion of undrawn capacity on its unsecured credit facility revolver.

CFO COMMENTS

Bob Stephenson, Omega's Chief Financial Officer, commented, "In October, we continued to improve our balance sheet with a $700 million senior unsecured notes offering. We were able to repay approximately $700 million of variable rate debt maturing in the next two years with 10-year fixed-rate paper, reducing our December 31st variable rate debt balance to approximately $240 million. The 3.375% coupon was the lowest 10-year coupon ever issued by Omega."

Mr. Stephenson continued, "Our bond deal was leverage-neutral and allowed us to repay all of our US dollar LIBOR-based revolving credit facility debt. In addition, we continued to lower our leverage in the fourth quarter with ATM share issuances and increased our balance sheet cash to help finance the Brookdale portfolio acquisition from Healthpeak in January 2021."

DIVIDENDS

On January 28, 2021, the Board of Directors declared a common stock dividend of $0.67 per share, to be paid February 16, 2021 to common stockholders of record as of the close of business on February 8, 2021.

TAX TREATMENT FOR 2020 DIVIDENDS

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February 04, 2021 16:30 ET (21:30 GMT)