Investor Presentation - Omega Healthcare/media/Files/O/Omega...Investor Presentation, June, 2016...

Investor Presentation

June 2016

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Investor Presentation, June, 2016

Forward-looking Statements and Non-GAAP Information

3

This presentation may include projections and other “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such statements relate to future events and expectations and involve unknown risks anduncertainties. Omega’s actual results or actions may differ materially from those projected in the forward-looking statements.For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-lookingstatements, see Omega’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

This presentation may contain certain non-GAAP financial information including EBITDA, Adjusted EBITDA, Total Adjusted Debt(aka, Funded Debt), Adjusted FFO, Total Cash Fixed Charges and certain related ratios. A reconciliation of these non-GAAPdisclosures is available in the Exhibit to this presentation or on our website under “Non-GAAP Financial Measures” atwww.omegahealthcare.com. Other financial information is also available on our website.

Information is provided as of March 31, 2016, unless specifically stated otherwise. We assume no duty to update or supplementthe information provided.

Omega Overview


Omega Overview: Key Credit Highlights

5

Financial Strength

Portfolio Strength

Strong portfolio TTM rent coverage of 1.8x (EBITDARM) and 1.4x (EBITDAR) at 12/31/2015

Geographic and operator diversification with 83 operators across 42 states and the United Kingdom

No upcoming material lease expirations and no material lease renewal risk

Stable reimbursement outlook

Conservative leverage level with Debt / Adj. EBITDA of 4.86x (Q1 2016), in-line with our leverage target

Consistent and stable free cash flow with strong fixed charge coverage of 5.0x (Q1 2016)

Low Secured debt / Adj. EBITDA of 0.3x and strong commitment to unsecured borrowing structure with ~$9.3B of unencumbered assets

Minimal short-term debt maturities

Positive ratings trajectory with history of upgrades and commitment to investment grade profile

Significant liquidity with $750 million of cash and credit facility availability at 5/5/2016

Experienced Management

Team

Senior management team with average tenure of 15+ years

Proven ability to execute on strategies

Proven ability to handle troubled assets


Omega Overview: Facility and Investment Overview at December 31, 2015

6

Omega is the largest SNF-focused REIT

As of March 31, 2016, Omega portfolio consisted of 969 (1) operating facilities

Completed AVIV acquisition on April 1, 2015

Combination created operating, growth and cost of capital efficiencies

High quality and complementary portfolio

Significantly increased state and operator diversification

Accretive to adjusted FFO and FAD

Completed over $1.1 billion of investments since the Aviv acquisition

Facility Statistics Revenue Statistics

Skilled Nursing/Transitional

Care, 89%

Senior Housing,

11%

Rental Property83%

Direct Financing

Leases7%

Mortgages8%

Other2%

1) Excludes non-operating facilities either held-for-sale, closed and/or not currently providing patient services


Financial Overview: Shareholder Returns

7

1/1/2004 to 12/31/2015

OHI Share Price: 274.4%

RMZ Index: 88.1%

Quarterly Dividends as of 2/15/2016

1 Year Total Growth: 7.8%



1/1/2004 to 12/31/2015

Real Estate Investments: 19.6%

Operating Revenue: 19.9%

Adjusted FFO per Share: 11.8%

OHI Share Price: 11.1%

Dividend Yield at $0.57/Share Per Quarter 7.5%

(based on closing price on 2/18/2016 of $30.32)

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

$26.00

$28.00

$30.00

$32.00

$34.00

$36.00

$38.00

$40.00

$42.00

$44.00

$46.00

Omega Share Price Growth, 2002-2015

Compounded Annual Growth Rates Total Growth Percentages


Financial Overview: Shareholder Returns (cont’d)

8

Total Return Ann. Equiv. Ranking (2)

1 Year: -5.2% -5.2% 3rd

3 Year: 74.4% 20.4% 1st

5 Year: 115.3% 16.6% 1st

7 Year: 274.4% 20.8% 1st

10 Year: 446.2% 18.5% 1st (3)

1) Source: Bloomberg Comparative Analytics 2) Ranking among health care REITS: VTR, HCP, HCN, LTC, HR, NHI, SNH, SBRA3) Ranked 3rd among all 181 publicly traded equity REITs. Source: KeyBanc Capital Markets “The Leaderboard”, December 31, 2015

Shareholder Returns Through 12/31/2015 (1)

Tax Treatment

Total

Dividends

Ordinary

Income

Return of

Capital

% Ordinary

Income

% Return of

Capital

2011 1.55$ 0.99$ 0.56$ 63.8% 36.2%

2012 1.69 0.88 0.81 52.3% 47.7%

2013 1.86 1.54 0.32 82.6% 17.4%

2014 2.02 1.83 0.19 90.8% 9.2%

2015 2.18 1.13 1.05 52.0% 48.0%

9.30$ 6.38$ 2.92$ 68.6% 31.4%

Dividends per Share and Return of Capital %

Omega's Total Returns vs Healthcare REIT Average (2)

(Years ending 12/31/2015)

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

350.0%

400.0%

450.0%

500.0%

2016 YTD 1 Year 3 Year 5 Year 7 Year 10 Year

Omega's Total Returns Avg. Total Returns of Healthcare REITs

SNF Industry and Reimbursement Overview


Medicare Payment System Continues to Evolve

10

Shift Away from Traditional Fee-for-Service (FFS) from 2010 to 2015, Continued but Slower Growth in Alternative Payment Going Forward

2010 2015E 2020E

Sources: CMS Office of the Actuary for Spending and Enrollment. Avalere analysis for alternative payment model projections.


Medicare Payment System Continues to Evolve

11

Increasingly FFS Payments will be Bundled or Subject to Value-Based Adjustments

Sources: CMS Office of the Actuary for Spending and Enrollment. Avalere analysis for alternative payment model projections.


Attractive Fundamentals: Primary PAC Site

12

SNFs – preferred post-acute care environment with growing demand and limited supply

Medicare

Acute

Hospital

Discharges

43% Sent to Post-Acute

SNFs

49%

HHAs

39%

IRFs

8%

LTACHs

3%

Source: MedPAC Data Book, June 2015


Attractive Fundamentals: Demographic Trends Will Drive Volume

13

Source: US Census Bureau, December 2014 Release

Source: CMS Nursing Home Data Compendium, 2015 Edition

Percentage of U.S. SNF Residents by Age

6,304 6,727

7,482

9,132

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2015 2020 2025 2030

Po

pu

lati

on

Projected Population Growth: Aged 85+

2015 to 2030

5,792 6,470

8,061

10,513

-

2,000

4,000

6,000

8,000

10,000

12,000

2015 2020 2025 2030

Po

pu

lati

on

Projected Population Growth: Aged 80-84

2015 to 2030

AHCA “DC Updated”, Presented by Mark Parkinson, Pres. & CEO, April 18, 2016


Industry Overview: Attractive Fundamentals

14

Supply of facilities and beds to meet increasing future demand is limited due to CON restrictions, increasing occupancy prospects for existing facilities

(figures in 000s, unlessotherwise indicated)

Source: Compiled by American Health Care Association (AHCA) Research Department from CMS OSCAR/CASPER survey data (2001-2015)

Dec'01

Dec'02

Dec'03

Dec'04

Dec'05

Dec'06

Dec'07

Dec'08

Dec'09

Dec'10

Dec'11

Dec'12

Dec'13

Dec'14

Dec'15

Certified Beds 1,695k 1,700k 1,690k 1,682k 1,676k 1,673k 1,671k 1,669k 1,667k 1,670k 1,665k 1,667k 1,666k 1,663k 1,662k

Patients in Certified Beds 1,457k 1,457k 1,447k 1,439k 1,433k 1,430k 1,420k 1,411k 1,400k 1,394k 1,384k 1,383k 1,372k 1,368k 1,357k

Certified Facilities 16.6k 16.4k 16.3k 16.1k 16.0k 15.9k 15.8k 15.7k 15.7k 15.7k 15.6k 15.7k 15.7k 15.6k 15.7k

14.0k

14.4k

14.8k

15.2k

15.6k

16.0k

16.4k

16.8k

17.2k

17.6k

18.0k

18.4k

18.8k

1,300k

1,350k

1,400k

1,450k

1,500k

1,550k

1,600k

1,650k

1,700k

1,750k

Ce

rtif

ied

Fac

iliti

es

Be

ds

& P

atie

nts

Trend in Certified Nursing Facilities, Beds and Residents


Industry Overview: Attractive Fundamentals

15

Source: SNF Volume from November 2015 Avalere Health projection model (“Assessment of SNF Reimbursement and Utilization Landscape” Report); Medicare enrollment from 2015 Medicare Trustees’ Report

SNF Medicare patient days projected to grow due to increasing enrollment, even while lengths of stay decline under alternative payment models (bundling, managed care, ACOs, VBP)

Note: Conservative, Moderate, and Aggressive refer to model assumptions about rate of growth in alternative payment models (not traditional fee-for-service)

47.72

55.83

64.47

81.97

92.40

105.79

81.97

91.22

101.53

81.97

91.22

96.59

40

50

60

70

80

90

100

110

2010 2015 2020

(Mill

ion

s o

f D

ays

or

Be

ne

fici

arie

s)

Yearly Medicare SNF Volume (Days)

Total Medicare Enrollment (Beneficiaries)

Conservative

Moderate

Aggressive

Portfolio Overview


Portfolio Overview: Summary

17

As of March 31, 2016

969 operating healthcare facilities, located in 42 states and the UK, operated by 83 third-party operators

Gross real estate investments of approximately $8.6B

Focused on leasing long-term care facilities (primarily skilled nursing facilities) to strong regional and local operators

Long term triple-net master leases with cross collateralization provisions

Strong credit profiles

Security deposits of three to six months

Monthly reporting requirements

Property level expenses are operator’s responsibility (labor, insurance, property taxes, capital expenditures)

Omega receives fixed rent payments from tenants, with annual escalators

Operators receive revenues through reimbursement of Medicare, Medicaid and private pay for services


Ohio11.2%

Florida10.0%

Texas8.3%

Michigan7.1%

California5.6%

Pennsylvania5.5%Indiana

5.4%South Carolina

2.9%

Arkansas2.9%

North Carolina2.9%

Mississippi2.9%

Virginia2.6%

Tennessee2.4%

Kentucky2.3%

Maryland2.2%

Washington2.1%

Other States & UK23.9%

Portfolio Overview: Omega State Diversification as of March 31, 2016

18

Rent/Interest by State 1

1) Rent excludes all GAAP required non-cash straight-line or lease inducement revenue2) Excludes seventeen facilities closed and/or not currently providing patient services; includes two facilities held-for-sale3) Many operators have facilities in multiple states

State

1Q16 Annualized

Contractual

Rent/Interest

% of Total

Rent/Interest Facilities (2)

Operators (3)

1. Ohio 89,121,209$ 11.2% 91 12

2. Florida 79,061,886 10.0% 97 12

3. Texas 65,446,721 8.3% 107 12

4. Michigan 56,160,428 7.1% 48 4

5. California 44,339,799 5.6% 60 11

6. Pennsylvania 43,399,177 5.5% 44 8

7. Indiana 43,103,672 5.4% 59 7

8. South Carolina 22,904,652 2.9% 20 2

9. Arkansas 22,864,449 2.9% 32 4

10. North Carolina 22,780,663 2.9% 31 5

11. Mississippi 22,733,956 2.9% 19 3

12. Virginia 20,284,777 2.6% 16 5

13. Tennessee 18,630,223 2.4% 20 8

14. Kentucky 17,922,599 2.3% 26 3

15. Maryland 17,752,214 2.2% 16 2

16. Washington 16,829,022 2.1% 21 6

Other States & UK 189,215,072 23.9% 262 72

TOTAL 792,550,521$ 100.0% 969 83


Ciena, 10.0%

Communicare, 6.7%

Genesis, 6.7%

Ark, 6.7%

Saber, 4.8%

HHC, 4.3%

Signature, 3.9%

Maplewood, 3.8%

Guardian, 3.7%Diversicare, 3.6%

73 Remaining

Operators, 45.9%

Portfolio Overview: Omega Operator Diversification as of March 31, 2016

19

Rent/Interest by Operator 1

1) Rent excludes all GAAP required non-cash straight-line or lease inducement revenue

Operator

1Q2016 Annualized

Contractual

Rent/Interest % of Total

1 Ciena 79,611,739$ 10.0%

2 Communicare 52,820,747 6.7%

3 Genesis 52,802,938 6.7%

4 Ark 52,727,047 6.7%

5 Saber 38,411,190 4.8%

6 HHC 34,092,055 4.3%

7 Signature 30,571,174 3.9%

8 Maplewood 30,336,535 3.8%

9 Guardian 29,129,509 3.7%

10 Diversicare 28,468,905 3.6%

73 Remaining Operators 363,578,683 45.9%

792,550,521$ 100.0%


Portfolio Overview: Omega’s Strong Portfolio Rent Coverage

20

Period Trailing Twelve Months (TTM) Period Trailing Twelve Months (TTM)

Ending EBITDARM EBITDAR Ending EBITDARM EBITDAR03/31/02 1.5 1.1 03/31/09 2.0 1.606/30/02 1.6 1.1 06/30/09 2.0 1.609/30/02 1.6 1.1 09/30/09 2.0 1.612/31/02 1.5 1.1 12/31/09 2.0 1.603/31/03 1.5 1.1 03/31/10 2.0 1.606/30/03 1.5 1.1 06/30/10 2.0 1.609/30/03 1.5 1.1 09/30/10 2.1 1.612/31/03 1.5 1.1 12/31/10 2.2 1.73/31/04 1.6 1.1 3/31/11 2.2 1.86/30/04 1.7 1.2 6/30/11 2.3 1.89/30/04 1.8 1.3 9/30/11 2.3 1.9

12/31/04 1.9 1.4 12/31/11 2.2 1.83/31/05 1.8 1.4 3/31/12 2.1 1.76/30/05 1.9 1.4 6/30/12 2.0 1.69/30/05 1.9 1.5 9/30/12 2.0 1.5

12/31/05 2.0 1.5 12/31/12 2.0 1.53/31/06 2.0 1.6 3/31/13 2.0 1.56/30/06 2.1 1.6 6/30/13 1.9 1.59/30/06 2.1 1.6 9/30/13 1.9 1.5

12/31/06 2.1 1.7 12/31/13 1.9 1.43/31/07 2.1 1.7 3/31/14 1.8 1.46/30/07 2.2 1.7 6/30/14 1.8 1.49/30/07 2.2 1.8 9/30/14 1.8 1.4

12/31/07 2.2 1.8 12/31/14 1.8 1.43/31/08 2.2 1.8 3/31/15 1.8 1.46/30/08 2.1 1.7 6/30/15 1.8 1.49/30/08 2.1 1.7 9/30/15 1.8 1.4

12/31/08 2.0 1.6 12/31/15 1.8 1.4

1.0

1.3

1.5

1.8

2.0

2.3

2.5

TTM EBITDARM & EBITDAR Coverage

12/31/2001 to 12/31/2015, Quarterly

Series1 Series2


Portfolio Overview: Operator Cash Flow Coverages – Peer Group Comparison

21

1.8x 1.9x

1.8x 1.7x 1.7x

1.1x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

OHI VTR SBRA HCN CCP HCP

1.4x 1.5x

1.4x 1.4x

1.2x

0.9x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

OHI VTR SBRA HCN CCP HCP

(1)

SNF EBITDARM Coverage (TTM) SNF EBITDAR Coverage (TTM)

Source: Q1 2016 Supplemental Information presentations. HCP coverages only include the HCR Manor Care portfolio, as it represents 77% ($3.94Bn) of their SNF investments. An additional 9.4% of their SNF investments covers at 1.8x and 1.4x, but coverages for the remaining 13% SNF portfolio are not reported.

1) Estimated based on the spread of EBITDARM to EBITDAR Coverage (~0.4x) for OHI, SBRA, HCN and CCP

Financial Overview


Financial Overview: Consistent Financial Policy

23

Q1 2016 (unless otherwise noted)

Conservative capitalization

Debt to adjusted EBITDA ratio of 4.0x – 5.0x: 4.86x (see website)

Significant liquidity

$1.25B revolving credit facility: $750 million of availability (as of May 5, 2016)

Well-laddered debt maturities No maturities until June 2019 (assuming allowable credit facility extensions)

Financial flexibility

Capital markets access

Minimize encumbered assets

Funded Debt to Total Asset Value: 46.0%

Adjusted Fixed Charge Ratio >3.5x: 5.0x (see website)

Stable dividend payout ratio

Less than 85% of AFFO: Payout of 70%

Less than 90% of AFAD: Payout of 78%

Fifteen consecutive quarters of dividend increases


3.8x

3.1x3.3x

3.5x

4.0x 4.1x

4.7x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

2009 2010 2011 2012 2013 2014 2015

3.7x

4.3x

4.8x 4.7x4.4x

4.7x 4.6x

1.3x

0.7x0.9x 0.9x

0.6x 0.5x0.3x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

2009 2010 2011 2012 2013 2014 2015

Total Debt / Adj. EBITDA Secured Debt / Adj. EBITDA

Financial Overview: Conservative Capitalization

24

(1) Adjusted annualized EBITDA includes revenue for all new investments as if they occurred January 1 of their respective year. Debt amounts exclude the fair value adjustments on HUD debt and the net premium or discount on the unsecured notes.

(2) Reflects adjusted annualized EBITDA divided by the sum of cash interest and preferred dividends, if any.

Leverage (1) Cash Fixed Charge Coverage (2)

Target Debt to Adjusted EBITDA Ratio of 4.0x – 5.0x

• Typically have used drawings under the revolver to make acquisitions and replenished revolver availability with long term debt and equity issuances

4.86x for Q1:16 Annualized 5.3x for Q1:16 Annualized


$530M $500MTermLoans

$350MTermLoan

$250MTermLoan

$400M5.875%Notes $250M

4.50%Notes

$600M5.25%Notes

$700M4.50%Notes

$720MAvailable

$180M

$20.0 Msub-

Notes

$400M4.95%Notes

$50M$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

$750

$800

$850

$900

$950

$1,000

$1,050

$1,100

$1,150

$1,200

$1,250

$1,300

$1,350

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028-45

$ M

illio

ns


25

Debt Maturity Schedule at 3/31/2016

• $2.35B unsecured revolving credit and term loan facilities

$1.25B revolver with a June 2018 maturity, with an additional year option

$1.1B term loans

$750MM available as of May 5,2016

• No near bond term maturities

2024 $400MM 5.875% Notes arecallable in March 2017

$1.25BRevolving

Credit Facility:$530M

drawn at3/31/2016

Approximatebalance ofamortizingHUD Loansat 12/31/28

with finalmaturities

to 2044

5.875% NotesCallable Mar 2017

$180MSecured loans at4.00%


Debt / Adj. Total

Assets

Unencumbered

Assets /

Unsecured Debt

Secured Debt /

Adj. Total Assets

Req. <= 60% >= 150% <= 40%

6/30/15 Actual 44% 241% 2%

Status Pass Pass Pass

Req. <= 60% >= 150% <= 40%

9/30/15 Actual 45% 204% 2%


Req. <= 60% >= 150% <= 40%

12/31/15 Actual 45% 204% 2%


Req. <= 60% >= 150% <= 40%

3/31/16 Actual 48% 204% 2%



26

Financial Covenant Review

• Strong balance sheet with significant cushion on all covenants

• Leverage ratio is key covenant

Defined as “Funded Debt to TotalAsset Value” not to exceed 60%

Approximately 46% at Q1 2016

• Debt to Adjusted EBITDA is 4.86x for Q1 2016

• Currently have ability to suspend high yield related covenants on 2024 bonds (have not elected to do so) leaving only standard REIT covenants

Key Bond Covenants

Key Credit Facility Covenants

Consolidated

Leverage

Ratio

Secured

Leverage

Ratio

Unsecured

Leverage

Ratio

Fixed

Charge Cov.

Ratio

Unsecured

Interest Cov.

Ratio

Req. <= 60% <=30% <= 60% >=1.50 to 1 >=2.00 to 1

6/30/15 Actual 42% 3% 39% 4.2 4.7

Status Pass Pass Pass Pass Pass

Req. <= 60% <=30% <= 60% >=1.50 to 1 >=2.00 to 1

9/30/15 Actual 50% 3% 50% 4.5 4.6


Req. <= 60% <=30% <= 60% >=1.50 to 1 >=2.00 to 1

12/31/15 Actual 41% 3% 41% 4.8 4.6


Req. <= 60% <=30% <= 60% >=1.50 to 1 >=2.00 to 1

3/31/16 Actual 46% 3% 46% 5.2 4.9


Investor Recap


Investor Recap

28

Attractive industry fundamentals

Consistent and stable free cash flow and conservative capitalization

Strong portfolio rent coverage

Geographic and operator diversification

No upcoming material lease expirations

Proven track record of acquisitions and growth

Seasoned capital markets issuer

No long-term debt maturities until 2024

Experienced senior management team with average tenure of 15+ Years

Investor Presentation - Omega Healthcare/media/Files/O/Omega...Investor Presentation, June, 2016...

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