The UK trade continued to be a massive driver of Omega Healthcare Investors (NYSE: OHI) investment activity in 2025, ending at the end of the first financial quarter with an investment of $344 million in the UK and Jersey 45 Care Home portfolio.
While UK care facilities are essentially nursing homes, they are also home-based and community-based services, using US terminology. UK assets account for 93% of Omega's total investment in 2025, or $392 million, according to Vikas Gupta, chief investment officer at Omega, based in Hunt Valley, Maryland.
“As a result of the size, reputation and a strong operator base across the UK, we have been able to quickly evaluate, structure and close complex transactions like the 45 Care Home transactions,” Gupta said.
The unnamed British seller was aiming to withdraw the business entirely, he said, and Omega came along with six different operators to give the seller a solution and was able to close it all on the same day. There was no competition, he said, given that many companies were unable to do what Omega did.
“These assets fit well. For the UK, Scotland, jerseys and all the operators taking them, it fits very well into their area.
The nursing home will be leased to four existing and two new operators at Omega, with annual rents of $34.4 million and an annual escalator of 1.7% will increase to 2.5% after five years.
Aside from the UK-Jersey deal, Omega executives mentioned the victory for the nursing home industry after the federal minimum staffing mandate was rejected in a Texas court.
The discussion of potential Medicaid reductions has been reflected by other REITs, with Omega's senior vice president of operations Megan Krull said the majority of the compensation focused on Medicaid expansion under the Obama administration's Affordable Care Act, rather than the traditional Medicaid dollars assigned to nurse industry operators.
Finally, Omega executives fell into existing issues with the coverage of Genesis Healthcare Rent and discussed the possibility of retenanting PACS Group (NYSE:PACS) assets.
Omega reported $184 million in net income for the first quarter, ending March 31st, rising compared to $69 million in the first quarter of 2024.
Omega shares closed on Friday at $37.02, $1.54, or 3.99%.
Genesis and PAC
Regarding the performance of Omega's PACS operating facility, Gupta states that Omega can retenant the current 50 PACS exercise facility, explaining the PACS property as “very well.”
“Overall, there's no concern that we won't be able to retenant any retenant on current rents and so on. We discussed it with the PAC. There was no discussion about closing the portfolio,” Gupta said.
The analyst also asked about Omega Tenant Genesis Healthcare, which did not pay a full contract rent of $4.2 million in March. Omega CEO Taylor Pickett said REIT partially pulled letters of credit to cover the shortfall.
“Genesis Management shows that current liquidity issues stem from tightening the borrowing base due to lenders and estates in the asset base, general and professional responsibility duties,” Pickett said. ”
Genesis's Omega credit position is strong with rental coverage with over 1.6 times the 12-month cash flow. Omega's $118 million term loan is protected by a priority lien from Genesis Ancillary Business, including Align Bed Physician Practice, its Accountable Care Organization (ACO), and Powerback Rehab.
Since then, Genesis paid full rent in April and remains current for all interest obligations arising from protected term mortgages.
“We will continue to choose and assess loan opportunities, primarily for existing operator relationships, but our priorities will always be to allocate capital to subsidies owned real estate transactions that expand the balance,” Gupta said.
Overall, the outlook for Omega's pipeline and the rest of the year is favorable and Gupta has marketed opportunities in the US and UK, with REITs continuing to look at real estate loan enquiries as the lending environment is limited and there are opportunities for trading in the US. Sellers range from individual owners and local operators to institutional real estate sellers, Gupta said.
Insights on Medicaid reductions, staffing powers of attorney
Potential Medicaid cuts, Doge staffing cuts, and the removal of federal minimum staffing mandate were other hot button topics for Omega executives.
Krull said some Medicaid reform is needed to meet Congressional budgets, referring to $880 billion in Medicaid cuts. While spending cuts on the expanded aspect of Medicaid under the Affordable Care Act may have the worst possible situation, it may still have an impact on the traditional Medicaid population.
“The expanded Medicaid population, healthy adults added in the Affordable Care Act, is likely the biggest goal for these spending cuts, given that the federal government averages around 63%, at a rate of 90% rather than the traditional Medicaid population,” Krull said.
Given the potential changes in Medicaid, underwriting criteria have not been affected. However, changes to Medicaid provider tax pose the greatest risk to traditional Medicaid, Krull said. Almost half of the states account for up to 6% of net patient income, with some who have no Medicaid provider taxes at all. Some states could close the gap due to cuts in Medicaid provider tax, she said.
“I haven't heard that (provider tax) will be wiped out completely. It's going to allow us to lower one or two percentages from an impact perspective. It's really hard to tell. From a portfolio perspective, every state is different,” says Krull.
It is important to note that the Trump administration has been by the industry during the pandemic, Krull adds, acknowledging that it is a sector that is too important to fail.
“We feel positioned and hope that no attempts to cut Draconia in this space will be proposed,” Krull said.
Gupta said that it cannot affect the availability of debt finance as Omega has yet to hear anything about federal agency Doge Staffing Cots, particularly HUD reductions.
Meanwhile, the reversal of staffing mandate will effectively save the federal government $22 billion over the next decade, Krull said. It is unlikely that the federal government will file an appeal regarding the decision, taking into account the push to reduce regulations and increase efficiency.
“It's not unexpected, but it's the news that it's highly praised,” Krull said. “We are extremely grateful to see some conclusions in this respect and to praise the efforts of all involved.”
