Omega Healthcare Investors (OHI) reported its 4th quarter earnings this week and spooked some investors with the announcement that one of its tenants, Daybreak, has entered into a forbearance agreement that effectively defers $2.5 million in rent per quarter for the next 2 quarters.
While REIT investors never want to hear such news, it is not surprising. Other Texas operators have reported financial challenges in recent months, and Omega has been open in highlighting that a robust job market has resulted in labor costs outstripping reimbursement increases. (See may latest article on LTC here.)
Nevertheless, on the earnings call, Dan Booth, Omega’s Chief Operating Officer, laid out a number of factors that should enable Daybreak to pay in accordance with its historical rent terms in the near future. The new reimbursement model, PDPM, is expected to aid operator profitability when it comes into effect in October.
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