26 Aug, 2021

Omega Healthcare gets dividend safety rating downgrade from Simply Safe Dividends

The nursing home REIT is suffering from a host of issues related to the pandemic. One of its operators reported it would no longer be able to pay rent due to lack of occupancy and rising labor costs. Vaccine mandates aren’t making things easier either with only about 61% of the nation’s nursing home staff vaccinated. Omega could face nursing walkouts from those not willing to be vaccinated.

I’m not bailing out on this one yet but I’m watching things closely. Hopefully I don’t get behind another 8 ball on this.

A number of Omega’s facilities already have self-imposed admission bans as they cannot staff at clinically appropriate levels. With these restrictions in place due to labor shortages, a facility cannot improve its biggest earnings driver: occupancy rates.

Across Omega’s portfolio, occupancy has improved from a low of 72.3% in January to an average of 75.7% in July. But management has said the REIT’s operators need occupancy to return to over 80% in order to meaningfully mitigate the cash flow reductions caused by the pandemic.

The Biden administration’s vaccine mandate could slow the recovery in occupancy. Without additional federal and state aid, this could push more operators to the brink. Cracks are starting to show already.

In June, Omega had an operator, representing 3% of annual revenue, inform the company it would no longer be able to pay rent due to occupancy and labor issues. This marked the first major lease default in Omega’s portfolio since the pandemic began.

Vaccine Mandate for Nursing Home Staff Threatens to Exacerbate Pressure on Omega’s Tenants (simplysafedividends.com)
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