OMEGA HEALTHCARE INVESTORS INC. Management’s Discussion and Analysis of Financial Position and Operating Results (Form 10-Q)

Forward-Looking Statements and Factors Affecting Future Results

The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this document. This document
contains "forward-looking statements" within the meaning of the federal
securities laws. These statements relate to our expectations, beliefs,
intentions, plans, objectives, goals, strategies, future events, performance and
underlying assumptions and other statements other than statements of historical
facts. In some cases, you can identify forward-looking statements by the use of
forward-looking terminology including, but not limited to, terms such as "may,"
"will," "anticipates," "expects," "believes," "intends," "should" or comparable
terms or the negative thereof. These statements are based on information
available on the date of this filing and only speak as to the date hereof and no
obligation to update such forward-looking statements should be assumed. Our
actual results may differ materially from those reflected in the forward-looking
statements contained herein as a result of a variety of factors, including,
among other things:

(i) the elements discussed under “Risk factors” in part I, element 1A of our

     report on   Form 10-K  ;


      uncertainties relating to the business operations of the operators of our

(ii) assets, including those relating to reimbursement by third party payers,

      regulatory matters and occupancy levels;


       the impact of the novel coronavirus ("COVID-19") on our business and the
       business of our operators, including without limitation, the extent and

the duration of the COVID-19 pandemic, rising costs, staff shortages and

decrease in occupation levels experienced by skilled nursing operators

(iii) establishments (“SNF”) and serviced residences (“ALF”) related to

thus, the ability of operators to comply with infection control and

vaccination protocols, the long-term impact of vaccination on the facility

infection rate and the extent to which continued government support can

be available to operators to offset these costs and the related conditions

to that ;

the ability of any bankrupt Omega operator to reject

lease obligations, change the terms of Omega’s mortgages and prevent the

(iv) Omega’s ability to collect unpaid rent or interest during the term of a

bankruptcy proceedings and keep security deposits for the debtor

obligations and other costs and uncertainties associated with the operator

bankruptcies;

our ability to re-let, otherwise transition or sell underperforming assets

(v) or assets held for sale on a timely basis and on terms that allow us to

realize the carrying amount of these assets;

(vi) the availability and cost of capital to us;

(vii) changes in our credit ratings and the ratings of our debt securities;

(viii) competition in the financing of health establishments;

(ix) competition in the long-term healthcare sector and changes in the perception of

various types of long-term care facilities, including SNFs and ALFs;

(x) regulatory and other additional changes in the health sector;

(xi) changes in the financial situation of our operators;

(xii) the effect of economic and market conditions in general and, in particular,

in the health sector;

(xiii) changes in interest rates;

(xiv) the timing, amount and return of any additional investment;

(xv) changes in tax laws and regulations affecting real estate investment trusts

      ("REITs");


       the potential impact of changes in the SNF and ALF markets or local real

(xvi) the inheritance conditions on our ability to dispose of assets held for sale for the

planned or timely product, or redeploy the product

thence on favorable terms;

(xvii) our ability to maintain our REIT status; and

the effect of other factors affecting our business or the activities of

(xviii) our operators that are beyond our or their control, including natural

disasters, other health crises or pandemics and government action;

         particularly in the healthcare industry.


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Overview

Omega Healthcare Investors, Inc. ("Parent") is a Maryland corporation that,
together with its consolidated subsidiaries (collectively, "Omega", the
"Company", "we", "our", "us") invests in healthcare-related real estate
properties located in the United States ("U.S.") and the United Kingdom
("U.K."). Our core business is to provide financing and capital to operators (we
use the term "operator" to refer to our tenants and mortgagors and their
affiliates who manage and/or operate our properties) within the long-term
healthcare industry with a particular focus on SNFs, ALFs, and to a lesser
extent, independent living facilities ("ILFs"), rehabilitation and acute care
facilities ("specialty facilities") and medical office buildings. Our core
portfolio consists of long-term "triple net" leases and mortgage agreements.

Omega has elected to be taxed as a REIT for federal income tax purposes and is
structured as an umbrella partnership REIT ("UPREIT") under which all of Omega's
assets are owned directly or indirectly by, and all of Omega's operations are
conducted directly or indirectly through, its operating partnership subsidiary,
OHI Healthcare Properties Limited Partnership (collectively with subsidiaries,
"Omega OP"). Omega has exclusive control over Omega OP's day-to-day management
pursuant to the partnership agreement governing Omega OP. As of September 30,
2021, Parent owned approximately 97% of the issued and outstanding units of
partnership interest in Omega OP ("Omega OP Units"), and other investors owned
approximately 3% of the outstanding Omega OP Units.

Update on the COVID-19 pandemic

The COVID-19 pandemic has significantly and adversely impacted SNFs and
long-term care providers due to the higher rates of virus transmission and
fatality among the elderly and frail populations that these facilities serve. As
a result, many of our operators have been and may continue to be significantly
impacted by the pandemic. During the third and fourth quarters of 2020, four of
our operators, including Agemo Holdings, LLC ("Agemo") and Genesis Healthcare,
Inc. ("Genesis"), indicated in their financial statements substantial doubt
regarding their ability to continue as going concerns, citing in part the impact
of the COVID-19 pandemic and uncertainties regarding the continuing availability
of sufficient government support. This resulted in placing these operators on a
cash basis of revenue recognition and a corresponding write-off of approximately
$143.0 million in aggregate of contractual receivables, straight-line
receivables, and lease inducements to rental income during fiscal year 2020.
During the nine months ended September 30, 2021, Agemo, Gulf Coast Health Care
LLC (together with certain affiliates "Gulf Coast") and one other operator
either failed to make contractual rent or interest payments for a period or have
informed us that they would be unable to pay us rent for the foreseeable future.
As of September 30, 2021, we have placed four operators, inclusive of Gulf Coast
and the one other non-paying operator noted above, on a cash basis of revenue
recognition during 2021 as collection of substantially all contractual lease
payments with these four operators was no longer probable. On October 14, 2021,
Gulf Coast commenced voluntary cases under chapter 11 of the United States
Bankruptcy Code. See "Receivables, Other Investments and Operator Collectibility
- Gulf Coast" below. Additionally, in October 2021, Guardian Healthcare
("Guardian"), excluded from the discussion above, failed to make contractual
rent and interest payments under its lease agreement for 26 operating facilities
and on its $112.5 million mortgage loan agreement. See "Portfolio and Recent
Developments - Guardian" below.



We believe these operators were impacted by, among other things, reduced revenue
as a result of lower occupancy and increased expenses resulting from the
COVID-19 pandemic and uncertainties regarding the continuing availability of
sufficient government support. In connection with these developments, we wrote
off approximately $20.8 million in aggregate of straight-line receivables to
rental income for the nine months ended September 30, 2021. Additionally, in the
third quarter of 2021, we have recorded impairment charges of $16.7 million
related to two loans outstanding with Agemo. The operators that have missed rent
or interest payments, stopped paying rent or that were placed on a cash basis
prior to the end of the third quarter of 2021 collectively represent 7.6% and
9.3%, respectively, of our total revenues (excluding the impact of the
write-offs in 2021 and 2020) for the nine months ended September 30, 2021 and
2020. We remain cautious as the COVID-19 pandemic continues to have a
significant impact on our operators and their financial conditions, particularly
given continued uncertainty regarding the availability of sufficient government
support, the persistence of staffing shortages that continue to impact our
operators' occupancy levels and profitability, the impact of governmental
vaccine mandates for staff on these ongoing staffing shortages, other factors
that may impact virus transmission in our facilities, the commencement in April
2021 for many of our operators of the repayment of accelerated payments of
Medicare funds that were previously received as Advanced Medicare payments in
2020 and the expected commencement in December 2021 of repayment of deferred
FICA obligations.

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As of October 27, 2021, our operators reported cases of COVID-19 within 263, or
27.7%, of our 949 operating facilities as of December 31, 2020, which includes
cases involving employees and residents. This represents a meaningful decline in
cases from the 614 facilities with cases, or 64% of our 959 operating
facilities, that our operators reported as of December 22, 2020, but an increase
from the 153 facilities with cases, or 16%, of our 949 operating facilities,
that our operators reported as of July 27, 2021. Consistent with national
trends, we experienced a slight downturn in the number of COVID-19 cases in our
facilities during September 2021. We caution that we have not independently
validated any such facility virus incidence information, it may be reported on
an inconsistent basis by our operators, and we can provide no assurance
regarding its accuracy or that there have not been any changes since the time
the information was obtained from our operators; we also undertake no duty to
update this information. While we believe the decline noted above in reported
cases since late 2020 is due in large part to vaccination programs for COVID-19
which have been implemented in most of our facilities, it remains uncertain when
and to what extent vaccination programs for COVID-19 and any booster doses will
continue to mitigate the effects of COVID-19 in our facilities, the impact of
governmental vaccine mandates for staff on ongoing staffing shortages in our
facilities, other factors that impact virus transmission in our facilities, or
how effective existing vaccines or booster doses will be against the variants of
the COVID-19 virus; the impact of these programs will depend in part on the
continued speed, distribution, efficacy and delivery of the vaccine and booster
doses in our facilities, compliance with staff vaccination requirements as well
as participation levels in vaccination programs among the residents and
employees of our operators.

In addition to experiencing outbreaks of positive cases and deaths of residents
and employees during the pandemic, our operators have been required to, and
continue to, adapt their operations rapidly throughout the pandemic to manage
the spread of the COVID-19 virus as well as the implementation of new treatments
and vaccines, and to implement new requirements relating to infection control,
staffing levels, personal protective equipment ("PPE"), quality of care,
visitation protocols, and reporting, among other regulations, throughout the
pandemic while facing staffing shortages that have accelerated during the
pandemic and that may impede the delivery of care. Many of our operators have
reported incurring significant cost increases as a result of the COVID-19
pandemic, with dramatic increases for facilities with positive cases. These
increases have been offset to some extent by increases in reimbursements due to
increased skilling in place, which has been necessitated by pandemic-related
protocols and which may decrease when such protocols subside.  We believe these
increases primarily stem from elevated labor costs, including increased use of
overtime and bonus pay and reliance on agency staffing due to staffing
shortages, as well as a significant increase in both the cost and usage of PPE,
testing equipment and processes and supplies, as well as implementation of new
infection control protocols and vaccination programs. The federal government
announced in August and September 2021 that it would be requiring SNF and health
care workers to be vaccinated against COVID-19 and issued an emergency
implementing regulation effective November 5, 2021 requiring covered health care
facilities to ensure eligible staff have received a first vaccine dose as of
December 5, 2021 and a second dose of a two-dose vaccine as of January 4, 2022,
with certain permitted exemptions in alignment with federal law. While we expect
vaccination rates in our facilities to increase once such requirements are
implemented, significant uncertainty remains regarding the potential impact such
mandates may have on ongoing staffing shortages in our facilities. In addition,
our facilities, on average, have experienced declines, in some cases that are
material, in occupancy levels as a result of the pandemic. While these declines
have improved on average during 2021, average occupancy has not returned to
pre-pandemic levels and improvements in occupancy levels remain uneven; it
remains unclear when and the extent to which demand and occupancy levels will
return to pre-COVID-19 levels. We believe these challenges to occupancy recovery
may be in part due to staffing shortages, which in some cases have required
operators to limit admissions, as well as COVID-19 related fatalities at the
facilities, the delay of SNF placement and/or utilization of alternative care
settings for those with lower level of care needs, the suspension and/or
postponement of elective hospital procedures, fewer discharges from hospitals to
SNFs and higher hospital readmittances from SNFs.

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While substantial government support, primarily through the federal CARES Act in
the U.S. and distribution of PPE, vaccines and testing equipment by federal and
state governments, was allocated to SNFs and to a lesser extent to ALFs in 2020,
federal relief efforts have been limited in 2021 as have relief efforts in
certain states, and further government support will likely be needed to continue
to offset these impacts. It is unclear whether and to what extent such
government support will continue to be sufficient and timely to offset these
impacts. In particular, while $25.5 billion in federal funding for health care
providers impacted by COVID-19 was announced in September 2021, it remains
unclear the extent to which these funds or remaining unallocated funds under the
Public Health and Social Services Emergency Fund ("Provider Relief Fund") will
be distributed to our operators in any meaningful way, whether additional funds
will be added to the Provider Relief Fund or otherwise allocated to health care
operators or our operators, or whether additional Medicaid funds under the
American Rescue Plan Act of 2021 (the "American Rescue Plan Act") in the U.S.
will ultimately support reimbursement to our operators. Further, to the extent
the cost and occupancy impacts on our operators continue or accelerate and are
not offset by continued government relief that is sufficient and timely, we
anticipate that the operating results of certain of our operators would be
materially and adversely affected, some may be unwilling or unable to pay their
contractual obligations to us in full or on a timely basis and we may be unable
to restructure such obligations on terms as favorable to us as those currently
in place.

There are a number of uncertainties we face as we consider the potential impact
of COVID-19 on our business, including how long census disruption and elevated
COVID-19 costs will last, the impact of vaccination programs, including booster
doses, and participation levels in those programs in reducing the spread of
COVID-19 in our facilities, the impact of vaccine mandates on ongoing staffing
shortages in our facilities, and the extent to which funding support from the
federal government and the states will continue to offset these incremental
costs as well as lost revenues. Notwithstanding vaccination programs, we expect
that heightened clinical protocols for infection control within facilities will
continue for some period; however, we do not know if future reimbursement rates
or equipment provided by governmental agencies will be sufficient to cover the
increased costs of enhanced infection control and monitoring.

While we continue to believe that longer term demographics will drive increasing
demand for needs-based skilled nursing care, we expect the uncertainties to our
business described above to persist at least for the near term until we can gain
more information as to the level of costs our operators will continue to
experience and for how long, and the level of additional governmental support
that will be available to them, the potential support our operators may request
from us and the future demand for needs-based skilled nursing care and senior
living facilities. We continue to monitor the rate of occupancy recovery at many
of our operators, and it remains uncertain whether and when demand, staffing
availability and occupancy levels will return to pre-COVID-19 levels.

We continue to monitor the impacts of other regulatory changes, as discussed
below, including any significant limits on the scope of services reimbursed and
on reimbursement rates and fees, which could have a material adverse effect on
an operator's results of operations and financial condition, which could
adversely affect the operator's ability to meet its obligations to us.

Government regulations and reimbursement

The following information supplements and updates, and should be read in conjunction with the information in Section 1. Businesses – Government Regulation and Reimbursement in our Annual Report on Form 10-K for the year ended December 31, 2020.

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The healthcare industry is heavily regulated. Our operators, which are primarily
based in the U.S., are subject to extensive and complex federal, state and local
healthcare laws and regulations; we also have several U.K.-based operators that
are impacted by a variety of laws and regulations in their jurisdiction. These
laws and regulations are subject to frequent and substantial changes resulting
from the adoption of new legislation, rules and regulations, and administrative
and judicial interpretations of existing law. The ultimate timing or effect of
these changes, which may be applied retroactively, cannot be predicted. Changes
in laws and regulations impacting our operators, in addition to regulatory
non-compliance by our operators, can have a significant effect on the operations
and financial condition of our operators, which in turn may adversely impact us.
There is the potential that we may be subject directly to healthcare laws and
regulations because of the broad nature of some of these regulations, such as
the Anti-kickback Statute and False Claims Act, among others.

The U.S. Department of Health and Human Services ("HHS") declared a public
health emergency on January 31, 2020 following the World Health Organization's
decision to declare COVID-19 a public health emergency of international concern.
This declaration, which has been extended through January 16, 2022, allows HHS
to provide temporary regulatory waivers and new reimbursement rules designed to
equip providers with flexibility to respond to the COVID-19 pandemic by
suspending various Medicare patient coverage criteria and documentation and care
requirements, including, for example, suspension of the three-day prior hospital
stay coverage requirement and expanding the list of approved services which may
be provided via telehealth. These regulatory actions could contribute to a
change in census volumes and skilled nursing mix that may not otherwise have
occurred. It remains uncertain when federal and state regulators will resume
enforcement of those regulations which are waived or otherwise not being
enforced during the public health emergency due to the exercise of enforcement
discretion.

These temporary changes to regulations and reimbursement, as well as emergency
legislation, including the CARES Act enacted on March 27, 2020 and discussed
below, continue to have a significant impact on the operations and financial
condition of our operators. The extent of the COVID-19 pandemic's effect on the
Company's and our operators' operational and financial performance will depend
on future developments, including the sufficiency and timeliness of additional
governmental relief, the duration, spread and intensity of the outbreak, the
impact of vaccine distributions and booster doses on our operators and their
populations, the impact of vaccine mandates on staffing shortages at our
operators, as well as the difference in how the pandemic may impact SNFs in
contrast to ALFs, all of which developments and impacts are uncertain and
difficult to predict. Due to these uncertainties, we are not able at this time
to estimate the effect of these factors on our business; however, the adverse
impact on our business, results of operations, financial condition and cash
flows could be material.

A significant portion of our operators' revenue is derived from
government-funded reimbursement programs, consisting primarily of Medicare and
Medicaid. As federal and state governments continue to focus on healthcare
reform initiatives, efforts to reduce costs by government payors will likely
continue. Significant limits on the scope of services reimbursed and/or
reductions of reimbursement rates could therefore have a material adverse effect
on our operators' results of operations and financial condition. Additionally,
new and evolving payor and provider programs that are tied to quality and
efficiency could adversely impact our tenants' and operators' liquidity,
financial condition or results of operations, and there can be no assurance that
payments under any of these government health care programs are currently, or
will be in the future, sufficient to fully reimburse the property operators for
their operating and capital expenses.

COVID-19 related reimbursement changes:

U.S. Federal Stimulus Funds and Financial Assistance for Health Care Providers.
In response to the pandemic, Congress has enacted a series of economic stimulus
and relief measures. On March 18, 2020, the Families First Coronavirus Response
Act was enacted in the U.S., providing a temporary 6.2% increase to each
qualifying state and territory's Medicaid Federal Medical Assistance Percentage
("FMAP") effective January 1, 2020. The temporary FMAP increase will extend
through the last day of the calendar quarter in which the public health
emergency terminates. States will make individual determinations about how this
additional Medicaid reimbursement will be applied to SNFs, if at all.

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In further response to the pandemic, in 2020, the CARES Act authorized
approximately $178 billion to be distributed through the Provider Relief Fund to
reimburse eligible healthcare providers for health care related expenses or lost
revenues that are attributable to coronavirus, and in September 2021, HHS
announced the availability of $25.5 billion in provider funding through the
CARES Act and American Rescue Plan Act.  The Provider Relief Fund is
administered under the broad authority and discretion of HHS and recipients are
not required to repay distributions received to the extent they are used in
compliance with applicable requirements.

HHS began distributing Provider Relief Fund grants in April 2020 and has made
grants available to various provider groups in four general phases. In May 2020,
HHS announced that approximately $9.5 billion in targeted distributions would be
made available to eligible skilled nursing facilities, approximately $2.5
billion of which were composed of performance-based incentive payments tied to a
facility's infection rate. Approximately $8.5 billion in additional funds were
added to the Provider Relief Fund through the American Rescue Plan Act enacted
on March 11, 2021; however, these funds are limited to rural providers and
suppliers.  In September 2021, HHS announced the release of $25.5 billion of
funding, including $17 billion in Phase 4 Provider Relief Fund payments for a
broad range of healthcare providers who can document revenue loss and expenses
associated with the pandemic between July 1, 2020 and March 31, 2021, as well as
release of the $8.5 billion in funding for rural providers, including those with
Medicaid and Medicare patients.  In addition, in September 2021, the CDC
announced it would allocate $500 million to staffing, training and deployment of
state-based nursing home and long-term care "strike teams" to assist facilities
with known or suspected COVID-19 outbreaks.

Given that HHS has announced that a portion of the Provider Relief Fund is being
allocated to reimbursement of the testing, treatment and vaccination of
uninsured patients, it remains unclear the extent to which any additional
amounts from the Provider Relief Fund will be released to support healthcare
providers. In general, there are substantial uncertainties regarding the extent
to which our operators will receive funds under the additional funding announced
in September 2021, or will receive funds which have not been allocated, whether
additional funds will be allocated to the Provider Relief Fund, health care
providers or senior care providers and whether additional payments will be
distributed to providers, the financial impact of receiving any of these funds
on their operations or financial condition, and whether operators will be able
to meet the compliance requirements associated with the funds. HHS continues to
evaluate and provide allocations of, and issue regulation and guidance
regarding, grants made under the CARES Act.

The CARES Act and related legislation also made other forms of financial
assistance available to healthcare providers, which have the potential to impact
our operators to varying degrees. This assistance includes Medicare and Medicaid
payment adjustments and an expansion of the Medicare Accelerated and Advance
Payment Program, which made available accelerated payments of Medicare funds in
order to increase cash flow to providers. These payments are loans that
providers are scheduled to repay beginning one year from the issuance date of
each provider's or supplier's accelerated or advance payment, with repayment
made through automatic recoupment of 25% of Medicare payments otherwise owed to
the provider or supplier for eleven months, followed by an increase to 50% for
another six months, after which any outstanding balance would be repaid subject
to an interest rate of 4%. We believe these repayments commenced for many of our
operators in April 2021 and have adversely impacted, and will continue to
adversely impact, operating cash flows of these operators.

Additionally, the Centers for Medicare and Medicaid Services ("CMS") suspended
Medicare sequestration payment adjustments, which would have otherwise reduced
payments to Medicare providers by 2%, from May 1, 2020 through December 31,
2021, but also extended sequestration through 2030.  While not limited to
healthcare providers, the CARES Act additionally provided payroll tax relief for
employers, allowing them to defer payment of employer Social Security taxes that
are otherwise owed for wage payments made after March 27, 2020 through December
31, 2020 to December 31, 2021 with respect to 50% of the payroll taxes owed,
with the remaining 50% deferred until December 31, 2022.

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Quality of Care initiatives and additional requirements related to COVID-19:

In addition to COVID-19 reimbursement changes, several regulatory initiatives
announced in 2020 and 2021 focused on addressing quality of care in long-term
care facilities, including those related to COVID-19 testing and infection
control protocols, vaccine protocols, staffing levels, reporting requirements,
and visitation policies, as well as increased inspection of nursing homes. In
August 2021,  CMS announced it was developing an emergency regulation requiring
staff vaccinations within the nation's more than 15,000 Medicare and
Medicaid-participating nursing homes, and in September 2021, CMS further
announced that the scope of the regulation will be expanded to include workers
in hospitals, dialysis facilities, ambulatory surgical settings, and home health
agencies. In addition, recent updates to the Nursing Home Care website and the
Five Star Quality Rating System include revisions to the inspection process,
adjustment of staffing rating thresholds and the implementation of new quality
measures. Although the American Rescue Plan Act did not allocate specific funds
to SNF or assisted living facility providers, approximately $200 million was
allocated to quality improvement organizations to provide infection control and
vaccination uptake support to SNFs and $500 million has been allocated by the
CDC to staffing, training and deployment of state-based nursing home and
long-term care "strike teams" to assist facilities with known or suspected
COVID-19 outbreaks.

On June 16, 2020, the U.S. House of Representatives Select Subcommittee on the
Coronavirus Crisis announced the launch of an investigation into the COVID-19
response of nursing homes and the use of federal funds by nursing homes during
the pandemic. The Select Subcommittee continued to be active throughout the
remainder of 2020 and the third quarter of 2021. In March 2021, the Oversight
Subcommittee of the House Ways and Means Committee held a hearing on examining
the impact of private equity in the U.S. health care system, including the
impact on quality of care provided within the skilled nursing industry. These
hearings, as well as additional calls for government review of the role of
private equity in the U.S. healthcare industry, could result in legislation
imposing additional requirements on our operators.

Refund In general:

Medicaid.  The American Rescue Plan Act contains several provisions designed to
increase coverage, expand benefits, and adjust federal financing for state
Medicaid programs. For example, the American Rescue Plan Act increases the FMAP
by 10 percentage points for state home and community-based services expenditures
beginning April 1, 2021 through March 30, 2022 in an effort to assist seniors
and people with disabilities to receive services safely in the community rather
than in nursing homes and other congregate care settings. As a condition for
receiving the FMAP increase, states must enhance, expand, or strengthen their
Medicaid home and community-based services program during this period. These
potential enhancements to Medicaid reimbursement funding may be offset in
certain states by state budgetary concerns, the ability of the state to allocate
matching funds and to comply with the new requirements, the potential for
increased enrollment in Medicaid due to unemployment and declines in family
incomes resulting from the COVID-19 pandemic, and the potential allocation of
state Medicaid funds available for reimbursement away from SNFs in favor of home
and community-based programs. These challenges may particularly impact us in
states where we have a larger presence, including Florida and Texas. In Texas in
particular, several of our operators have historically experienced lower
operating margins on their SNFs, as compared to other states, as a result of
lower Medicaid reimbursement rates and higher labor costs. Our operators in
Texas may also be adversely impacted by the expected expiration, to be effective
upon expiration of the federally declared public health emergency, of an add-on
by the state to the daily reimbursement rate for Medicaid patients during the
pandemic. In Florida, while added support to our operators during the pandemic
has generally been limited, we expect our operators in the state may receive
some additional support through the state's approval on November 4, 2021, of
approximately $100 million in additional FMAP funds for nursing homes, to be
distributed through increased Medicaid rates over a three-month period . Since
our operators' profit margins on Medicaid patients are generally relatively low,
more than modest reductions in Medicaid reimbursement or an increase in the
percentage of Medicaid patients has in the past and may in the future adversely
affect our operators' results of operations and financial condition, which in
turn could adversely impact us.

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Medicare.  On July 29, 2021, CMS issued a final rule regarding the government
fiscal year 2022 Medicare payment rates and quality payment programs for SNFs,
with aggregate Medicare Part A payments projected to increase by $410 million,
or 1.2%, for fiscal year 2022 compared to fiscal year 2021. This estimated
reimbursement increase is attributable to a 2.7% market basket increase factor
less a 0.8 percentage point forecast error adjustment and a 0.7 percentage point
productivity adjustment, and a $1.2 million decrease due to the proposed
reduction to the SNF prospective payment system rates to account for the recent
blood-clotting factors exclusion.  The annual update is reduced by two
percentage points for SNFs that fail to submit required quality data to CMS
under the SNF Quality Reporting Program. CMS has indicated that these impact
figures did not incorporate the SNF Value-Based Program reductions that are
estimated to be $184.25 million in fiscal year 2022.

Payments to providers continue to be increasingly tied to quality and
efficiency.  The Patient Driven Payment Model ("PDPM"), which was designed by
CMS to improve the incentives to treat the needs of the whole patient, became
effective October 1, 2019. Prior to COVID-19, we believed that certain of our
operators could realize efficiencies and cost savings from increased concurrent
and group therapy under PDPM and some had reported early positive results. Given
the ongoing impacts of COVID-19, many operators are and may continue to be
restricted from pursuing concurrent and group therapy and unable to realize
these benefits. Additionally, our operators continue to adapt to the
reimbursement changes and other payment reforms resulting from the value based
purchasing programs applicable to SNFs under the 2014 Protecting Access to
Medicare Act. These reimbursement changes have had and may, together with any
further reimbursement changes to PDPM or value-based purchasing models, in the
future have an adverse effect on the operations and financial condition of some
operators and could adversely impact the ability of operators to meet their
obligations to us.

Ministry of Justice and other enforcement measures:

SNFs are under intense scrutiny for ensuring the quality of care being rendered
to residents and appropriate billing practices conducted by the facility. The
Department of Justice ("DOJ") has historically used the False Claims Act to
civilly pursue nursing homes that bill the federal government for services not
rendered or care that is grossly substandard. For example, California
prosecutors announced in March 2021 an investigation into a skilled nursing
provider that is affiliated with one of our operators, alleging the chain
manipulated the submission of staffing level data in order to improve its Five
Star rating. In 2020, the DOJ launched a National Nursing Home Initiative to
coordinate and enhance civil and criminal enforcement actions against nursing
homes with grossly substandard deficiencies. Such enforcement activities are
unpredictable and may develop over lengthy periods of time. An adverse
resolution of any of these enforcement activities or investigations incurred by
our operators may involve injunctive relief and/or substantial monetary
penalties, either or both of which could have a material adverse effect on their
reputation, business, results of operations and cash flows.

Results of operations

The following is our discussion of the consolidated results of operations, financial condition, liquidity and capital resources, which should be read in conjunction with our unaudited consolidated financial statements and accompanying notes.

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Three months ended September 30, 2021 and 2020

Income

Our revenues for the three months ended September 30, 2021 totaled $281.7
million, an increase of approximately $162.5 million over the same period in
2020. The $162.5 million increase was primarily the result of (i) a $142.2
million increase in rental income due to a net reduction in straight-line rent
receivable and lease inducement write-offs in 2021 following significant
write-offs associated with Agemo and Genesis in the third quarter of 2020 as a
result of placing these operators on a cash basis for revenue recognition and
(ii) a $28.1 million increase in rental income resulting from facility
acquisitions, facilities placed in service, and facility transitions.  These
increases were partially offset by (i) a $2.6 million decrease in rental income
resulting from the acceleration of certain in-place lease liabilities, (ii) a
$1.1 million decrease in rental income due to facility sales and (iii) a $1.5
million decrease in mortgage interest income and other investment income
primarily related to loan settlements, and principal payments made against
outstanding loans.

Expenses

Expenses for the three months ended September 30, 2021 totaled $194.2 million, a
decrease of approximately $18.0 million over the same period in 2020. The $18.0
million decrease was primarily due to: (i) a $6.6 million decrease in provision
for credit losses primarily as a result of lower reserves taken against loans
outstanding to Agemo (see Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Receivables, Other Investments
and Operator Collectibility- Agemo) in the third quarter of 2021 compared to the
same period in 2020 and (ii) a $23.2 million decrease in impairment on real
estate properties related to six facilities in the third quarter of 2021
compared to seven facilities during the same period in 2020. These decreases
were partially offset by (i) a $5.0 million increase in depreciation expense
primarily resulting from facility acquisitions and capital additions, offset by
facility sales and facilities reclassified to assets held for sale and (ii) a
$4.7 million increase in interest expense primarily resulting from the issuance
during the fourth quarter of 2020 of the $700 million of Senior Notes due 2031
and the issuance during the first quarter of 2021 of the $700 million of Senior
Notes due 2033, partially offset by the retirement of term loans in the fourth
quarter of 2020 and lower average borrowings under the revolving credit
facility.

Other income (expenses)

For the three months ended September 30, 2021, total other income was $54.8
million, an increase of approximately $56.5 million over the same period in
2020. The decrease was mainly due to a $56.9 million increase in gain on assets
sold related to the sale of 15 facilities in the third quarter of 2021 compared
to the sale of six facilities during the same period in 2020.

Nine months ended September 30, 2021 and 2020

Income

Our revenues for the nine months ended September 30, 2021 totaled $812.9
million, an increase of approximately $184.3 million over the same period in
2020. The $184.3 million increase was primarily the result of (i) a $123.7
million increase in rental income due to a net reduction in straight-line rent
receivable and lease inducement write-offs in 2021 following significant
write-offs associated with Agemo and Genesis in the third quarter of 2020 as a
result of placing these operators on a cash basis for revenue recognition, (ii)
a $83.1 million increase in rental income resulting from facility acquisitions,
facilities placed in service, and facility transitions and (iii) an $6.7 million
increase in mortgage interest income and other investment income primarily due
to new and refinanced mortgages and notes and additional funding to existing
operators partially offset by principal payments. These increases were partially
offset by (i) a $25.9 million decrease in rental income resulting from not
recording straight-line rent for operators placed on a cash basis for revenue
recognition in 2020 and facility sales and (ii) a $2.0 million decrease in
miscellaneous income which is primarily related to an operator's late fees

and
reduced management fees.

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Expenses

Expenses for the nine months ended September 30, 2021 totaled $560.4 million, an
increase of approximately $18.0 million over the same period in 2020. The $18.0
million increase was primarily due to: (i) a $11.6 million increase in interest
expense primarily resulting from the issuance during the fourth quarter of 2020
of the $700 million of Senior Notes due 2031 and the issuance during the first
quarter of 2021 of the $700 million of Senior Notes due 2033, partially offset
by the retirement of term loans in the fourth quarter of 2020 and lower average
borrowings under the credit facility, (ii) a $9.4 million increase in
depreciation expense primarily resulting from facility acquisitions and capital
additions, offset by facility sales and facilities reclassified to assets held
for sale (discussed in further detail below) and (iii) a $1.8 million increase
in acquisition, merger and transition related costs primarily resulting from
transitioning 14 facilities and selling 4 facilities associated with Daybreak
Ventures, LLC ("Daybreak"). These increases were partially offset by (i) a $1.3
million decrease in impairment on real estate properties related to 13
facilities compared to 18 facilities during the same period in 2020 and (ii) a
$5.6 million decrease in provision for credit losses as a result of lower
reserves taken against loans outstanding to Agemo (see Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Receivables, Other Investments and Operator Collectibility - Agemo) in the third
quarter of 2021 compared to the same period in 2020.

Other income (expenses)

For the nine months ended September 30, 2021, total other income was $129.9
million, an increase of approximately $117.6 million over the same period in
2020. The increase was mainly due to a $146.7 million increase in gain on assets
sold related to the sale of 45 facilities compared to the sale of 27 facilities
during the same period in 2020 offset by a $29.8 million increase in loss on
debt extinguishment primarily related to fees, premiums, and expenses related to
the purchase of $350 million of the 4.375% Senior Notes due 2023 during the
first quarter of 2021.

National Association of Real Estate Investment Trusts Funds From Operations

We use funds from operations ("Nareit FFO"), a non-GAAP financial measure, as
one of several criteria to measure the operating performance of our business. We
calculate and report Nareit FFO in accordance with the definition of Funds from
Operations and interpretive guidelines issued by the National Association of
Real Estate Investment Trusts ("Nareit"). Nareit FFO is defined as net income
(computed in accordance with GAAP), adjusted for the effects of asset
dispositions and certain non-cash items, primarily depreciation and amortization
and impairment on real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures and changes in the fair value of warrants.
Adjustments for unconsolidated partnerships and joint ventures are calculated to
reflect funds from operations on the same basis. Revenue recognized based on the
application of security deposits and letters of credit or based on the ability
to offset against other financial instruments is included within Nareit FFO. We
believe that Nareit FFO is an important supplemental measure of our operating
performance. As real estate assets (except land) are depreciated under GAAP,
such accounting presentation implies that the value of real estate assets
diminishes predictably over time, while real estate values instead have
historically risen or fallen with market conditions. Nareit FFO was designed by
the real estate industry to address this issue. Nareit FFO herein is not
necessarily comparable to Nareit FFO of other REITs that do not use the same
definition or implementation guidelines or interpret the standards differently
from us.

We further believe that by excluding the effect of depreciation, amortization,
impairment on real estate assets and gains or losses from sales of real estate,
all of which are based on historical costs and which may be of limited relevance
in evaluating current performance, Nareit FFO can facilitate comparisons of
operating performance between periods and between other REITs. We offer this
measure to assist the users of our financial statements in evaluating our
financial performance under GAAP, and Nareit FFO should not be considered a
measure of liquidity, an alternative to net income or an indicator of any other
performance measure determined in accordance with GAAP. Investors and potential
investors in our securities should not rely on this measure as a substitute for
any GAAP measure, including net income.

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The following table shows our Nareit FFO results for the three and nine months ended. September 30, 2021 and 2020.

                                                Three Months Ended          Nine Months Ended
                                                  September 30,              September 30,
                                                2021          2020         2021           2020

                                                  (in thousands)             (in thousands)
Net income (loss)(1)(2)                      $  142,835    $ (93,768)   $   394,064    $  100,471
(Deduct gain) add back loss from real
estate dispositions                            (56,169)           749     (160,634)      (13,932)
Add back loss (deduct gain) from real
estate dispositions - unconsolidated
joint ventures                                        2       (4,483)     

(14,745) (6,438)

                                                 86,668      (97,502)       218,685        80,101
Elimination of non-cash items included in
net income:
Depreciation and amortization                    86,097        81,072       256,745       247,301
Depreciation - unconsolidated joint
ventures                                          2,951         3,379         9,379        10,561
Add back impairments on real estate
properties                                        4,942        28,105        42,453        43,732
Add back impairments on real estate
properties - unconsolidated joint
ventures                                              -             -         4,430             -
Add back unrealized loss on warrants                  -            87      

     43           927
Nareit FFO                                   $  180,658    $   15,141   $   531,735    $  382,622

The three and nine months ended September 30, 2021 includes the application (1) of $ 9.3 million and $ 11.7 million, respectively, of Agemo and Gulf Coast

security deposits (letter of credit and cash deposits) in revenue.

The three and nine months ended September 30, 2021 understand $ 6.5 million of (2) income related to Gulf Coast recognized on the basis of our ability to compensate

rent not collected on interest and principal (in the fourth quarter)

certain debt securities of Omega.

Portfolio and recent developments

The following table summarizes the significant asset acquisitions that took place during the first nine months of 2021:

              Number of                                                           Total              Initial
              Facilities                        Country/                       Investment             Annual

Period    SNF ALF Specialty                      State                     

  (in millions)       Cash Yield(1)
  Q1        -  17         7    AZ, CA, FL, IL, NJ, OR, PA, TN, TX, VA, WA    $         511.3 (2)            8.43 %
  Q1        6   -         -                        FL                                   83.1                9.25 %
  Q3        -   2         -                       U.K.                                   9.6                7.89 %
Total       6  19         7                                                  $         604.0

(1) The initial annual cash yield reflects the initial annual cash rent divided

by the purchase price.

At January 20, 2021, we acquired 24 facilities from Healthpeak Properties, (2) Inc. The acquisition involved the assumption of a head lease in place with

Brookdale Senior Living Inc.

During the second quarter of 2021, we acquired a parcel of land (not reflected in the table above) for approximately $ 10.4 million.

During the third quarter of 2021, we purchased a real estate property located in
Washington, D.C. (not reflected in the table above) for approximately $68.0
million and plan to redevelop the property into a 174 bed ALF. Concurrent with
the acquisition, we entered into a single facility lease for this property with
Maplewood Senior Living ("Maplewood") through August 31, 2045. For accounting
purposes, the lease will commence upon the substantial completion of
construction of the ALF, which is currently expected to be in the first quarter
of 2025. The lease provides for the accrual of financing costs at a rate of 5%
per annum during the construction phase. The lease provides for an annual cash
yield of 6% in the first year following the completion of construction,
increasing to 7% in year two and 8% in year three with 2.5% annual escalators
thereafter. We are committed to a maximum funding of $177.7 million for the
redevelopment of the real estate property, subject to ordinary development
related cost changes (see Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- Commitments).

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On July 1, 2021, we financed six SNFs in Ohio and amended an existing $6.4
million mortgage, inclusive of 2 Ohio SNFs, to include the six facilities in a
consolidated $72.4 million mortgage for eight Ohio facilities bearing interest
at an initial rate of 10.5% per annum. In conjunction with this transaction, we
also acquired three Maryland facilities that were previously subject to a
mortgage issued by Omega bearing interest at 13.75% per annum with a principal
balance of $36.0 million that was included in other mortgage notes outstanding.
The purchase price for these three facilities was equal to the remaining
mortgage principal amount, and the three acquired Maryland facilities were
subsequently leased back to the seller for a term expiring on December 31, 2032,
assuming Omega exercises the options under the agreement. The base rent in the
initial year is approximately $5.0 million and includes annual escalators of
2.5%.

Other Equity Investments

In the third quarter of 2021, we made an investment of $20.0 million in
SafelyYou, Inc. ("SafelyYou"), a technology company that has developed
artificial-intelligence enabled video that detects and helps prevent resident
falls in ALFs and SNFs. Through our investment, we obtained preferred shares
representing 5% of the outstanding equity of SafelyYou and warrants to purchase
SafelyYou common stock representing an additional 5% of outstanding equity as of
the date of our investment. SafelyYou has committed, for a specified period, to
using the proceeds of our investment to install its technology in our facilities
or other facilities of our operators. The vesting of the warrants is contingent
upon SafelyYou's attainment of certain installation targets in our facilities.
To the extend these installation targets are not attained, the investment funds
associated with the unvested warrants would be returned to Omega. The investment
in the preferred shares and warrants are recorded within other assets on the
consolidated balance sheets.

Other Recent Developments

Gulf Coast

During the second quarter of 2021, Gulf Coast stopped paying contractual rent
under its master lease agreement for 24 facilities because of on-going liquidity
issues. On October 14, 2021, Gulf Coast commenced voluntary cases under chapter
11 of the United States Bankruptcy Code. See "Receivables, Other Investments and
Operator Collectibility - Gulf Coast" below.

Guardian

In October 2021, Guardian failed to make contractual rent and interest payments
under its lease agreement for 26 operating facilities and on its $112.5 million
mortgage loan agreement, bearing interest at 10.81%, for nine facilities, due to
on-going liquidity issues. We have had discussions with Guardian regarding
restructuring certain lease and mortgage loan terms but have yet to reach an
agreement. As of September 30, 2021, we had $7.4 million of letters of credit
from Guardian as collateral which may be applied against our uncollected rent
and interest receivables. As discussed in Note 7 - Allowance for Credit Losses,
during the third quarter of 2021, we reduced the risk rating on the mortgage
loan from a 4 to a 5. Guardian represents approximately 3.2% and 3.5% of our
total revenues (excluding the impact of straight-line write-offs) for the nine
months ended September 30, 2021, and 2020, respectively.

Asset sales and impairment

Asset sales

During the three and nine months ended September 30, 2021, we sold 15 and 45
facilities, subject to operating leases, for approximately $109.7 million and
$310.8 million in net cash proceeds, recognizing net gains of approximately
$56.2 million and $160.6 million.

From September 30, 2021, we have 11 facilities and a plot of land, totaling
$ 21.5 million, classified as assets held for sale. We expect to sell these facilities over the next twelve months.

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Daybreak

During the first quarter of 2021, we transitioned 14 Daybreak facilities to
existing operators and sold two Daybreak facilities. During the second quarter
of 2021, we sold the two remaining Daybreak facilities. The total annual rent or
rent equivalents achieved through transitioning the Daybreak portfolio equal
$16.6 million. On April 6, 2021, we terminated the Daybreak master lease and
exited that relationship.

Real Estate Impairments

During the three and nine months ended September 30, 2021, we recorded
impairments on six and 13 facilities of approximately $4.9 million and $42.5
million, respectively. Our recorded impairments were primarily the result of
reclassifying 12 facilities to assets held for sale for which the carrying
values exceeded the estimated fair values less costs to sell. We also recognized
an impairment on one held for use facility because of the closure of the
facility in the first quarter. To estimate the fair value of these facilities,
we utilized a market approach which considered binding sale agreements (a Level
1 input) or non-binding offers from unrelated third parties and/or broker quotes
(a Level 3 input).

Receivables, other investments and recovery of the operator

A summary of our net receivables by nature is as follows:

                                            September 30,       December 31,
                                                 2021               2020

                                                     (in thousands)

Contractual receivables - net              $         16,658    $        10,408

Effective interest rate receivable $ 10,031 $ 12,195
Rents to be received on the shelf

                      149,134            

139,046

Lease inducements                                    77,799             

83,425

Other receivables and rental incentives $ 236,964 $ 234,666

Agemo

In August and September 2021, Agemo, a nonconsolidated variable interest entity
("VIE"), failed to pay contractual rent and interest due under their lease and
loan agreements. Subsequent to quarter end, Agemo also failed to make
contractual payments in October 2021. Agemo was formed in May 2018 by Signature
Healthcare, LLC, as part of an out-of-court restructuring agreement, to be the
holding company of their leases and loans with Omega. We placed Agemo on a cash
basis of revenue recognition during the third quarter of 2020 as collection of
substantially all contractual lease payments due from them was deemed no longer
probable because of information received regarding substantial doubt of their
ability to continue as a going concern. Agemo continued to make their rental and
interest payments to us until August 2021. During August and September 2021, we
recorded $8.4 million of revenue by drawing on the letter of credit and through
application of the security deposit balance. For the nine months ended September
30, 2021 and 2020, Agemo generated approximately 4.7% and 6.0%, respectively, of
our total revenues (excluding the impact of write-offs related to this operator
in 2020).

As part of the 2018 restructuring agreement with Agemo discussed above, Omega
agreed to, among other terms, defer rent of $6.3 million per annum through April
2021. During the nine months ended September 30, 2021, the Agemo lease was
amended to allow for the extension of the rent deferral through October 2021,
which represents an additional deferral of approximately $3.2 million of rent.
Additionally, in the third quarter, we entered into a forbearance agreement with
Agemo pursuant to which we agreed to forbear from exercising remedies under our
lease and loan agreements until October 31, 2021. The forbearance period and
rent deferral period were subsequently extended to November 30, 2021.

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As of September 30, 2021, we have two loans outstanding to Agemo, a term loan
with remaining principal of $32.0 million that bears interest at 9% per annum
and matures on December 31, 2024 (the "Agemo Term Loan") and a $25.0 million
secured working capital loan bearing interest at 7% per annum that matures on
April 30, 2025 (the "Agemo WC Loan"). The Agemo Term Loan is secured by a
security interest in certain collateral of Agemo and the Agemo WC Loan is
secured by a collateral package that includes a second lien on the accounts
receivable of Agemo. During the third quarter of 2020, we evaluated both loans
for impairment upon receiving information from Agemo regarding substantial doubt
of its ability to continue as a going concern. Based on our evaluation, we
recorded a provision for credit loss of $22.7 million in the third quarter of
2020 to reduce the carrying value of the loans to the fair value of the
underlying collateral.

We have continued to monitor the fair value of the collateral associated with
these loans on a quarterly basis. In the third quarter of 2021, we recorded an
additional provision for credit losses of $16.7 million related to these loans
as a result of a reduction in the fair value of the underlying collateral assets
supporting the current carrying values. The reduction in fair value of the
collateral assets was primarily driven by the application of Agemo's $9.3
million letter of credit to Omega's uncollected receivables, that supported the
value of the Agemo Term Loan, and a reduction in Agemo's working capital
accessible to Omega as collateral, after considering other liens on the assets.

Gulf Coast

During the second quarter of 2021, Gulf Coast stopped paying contractual rent
under its master lease agreement for 24 facilities because of on-going liquidity
issues. As discussed below, on October 14, 2021, Gulf Coast commenced voluntary
cases under chapter 11 of the United States Bankruptcy Code. Gulf Coast
represents approximately 2.6% and 2.8% of our total revenues (excluding the
impact of write-offs related to Gulf Coast in 2021) for the nine months ended
September 30, 2021 and 2020, respectively.

As a result of Gulf Coast's non-payment of contractual rent, in the second
quarter of 2021, we placed Gulf Coast on a cash basis of revenue recognition and
wrote-off straight-line rent receivable balances of $17.4 million through rental
income. Subsequent to placing Gulf Coast on a cash basis of revenue recognition
in June 2021, we recognized $9.8 million of contractual rent during the second
and third quarters, based on our ability to offset any uncollected rent
receivables against Gulf Coast's security deposit and against certain debt
obligations of Omega, as discussed further below. We held a security deposit of
$3.3 million from Gulf Coast, which we have applied against Gulf Coast's
obligations in the second and third quarters of 2021. In relation to Gulf Coast,
Omega, through subsidiaries, is the obligor on five notes due to third parties
with aggregate outstanding principal of $20.0 million (collectively, the
"Subordinated Debt") that bear interest at 9% per annum with a maturity date of
December 21, 2021 (see Note 15 - Borrowing Activities and Arrangements). Under
the terms of the Subordinated Debt, to the extent Gulf Coast fails to pay rent
when due to us under its master lease, Gulf Coast's unpaid rent can be used to
offset Omega's obligations under the Subordinated Debt (on a quarterly basis
with respect to interest and, under some circumstances, on an annual basis with
respect to principal). As of September 30, 2021, we have offset $0.9 million of
accrued interest under the Subordinated Debt against the uncollected receivables
of Gulf Coast. We intend to offset any unpaid contractual receivables, after
reflecting the application of security deposits and interest offsets, against
the principal of the Subordinated Debt in the fourth quarter of 2021. As of
September 30, 2021, we have $5.6 million of contractual rent receivables
outstanding from Gulf Coast, after reflecting the application of security
deposits and interest offsets, and without giving effect to our legal
acceleration of rent discussed below.

As a result of Gulf Coast's non-payment of contractual rent, in August 2021, we
exercised our right to accelerate the full amount of rent due under Gulf Coast's
master lease agreement, payment of which will be subject to the Bankruptcy Code
and approval of the bankruptcy court in Gulf Coast's chapter 11 cases. In August
2021, following an assertion by the holders of the Subordinated Debt that our
prior exercise of offset rights had resulted in defaults under the terms of the
Subordinated Debt, we also filed suit in the Circuit Court for Baltimore County
against the holders of the Subordinated Debt seeking a declaratory judgment to,
among other items, declare that the aggregate amount of unpaid rent due from
Gulf Coast under the master lease agreement exceeds all amounts which otherwise
would be due and owing by Omega under the Subordinated Debt, and that all
principal and interest due and owing under the Subordinated Debt are to be
offset in full as of December 31, 2021. In October 2021, the defendants in the
case filed a motion to dismiss for lack of personal jurisdiction. While Omega
believes it is entitled to the enforcement of the offset rights sought in the
action, the outcome of litigation is unpredictable, and Omega cannot predict the
outcome of the declaratory judgment action.

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Contents

As noted above, on October 14, 2021, Gulf Coast commenced voluntary cases under
chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). As described in
Gulf Coast's filings with the Bankruptcy Court, we have entered into a
Restructuring Support Agreement (the "Support Agreement") that is expected to
form the basis for Gulf Coast's restructuring and liquidation. The Support
Agreement establishes a timeline (subject to Gulf Coast's assumption of the
Support Agreement with the approval of the Bankruptcy Court) for the
implementation of Gulf Coast's planned restructuring and liquidation, including
the potential transition of management of the operations of the facilities to a
third-party operator. In order to provide liquidity to Gulf Coast during its
chapter 11 cases, we have committed to provide up to $25 million of senior
secured debtor-in-possession ("DIP") financing, a portion of which funding is
tied to certain milestones, including the transition of the management of the
operations of the facilities. The DIP financing is guaranteed by all debtors and
is secured by liens on substantially all of their assets, including
post-petition accounts receivable, subject in certain cases to other priorities.
The Bankruptcy Court has approved on an interim basis the debtors' borrowing of
up to $15.75 million of DIP financing. The Bankruptcy Court has scheduled a
hearing to consider approval of all borrowings available under the DIP facility
on a final basis on November 12, 2021.

Omega's collection of unpaid rent due from Gulf Coast, repayment of the DIP
financing and ability to offset unpaid rent against amounts due under
third-party debt are subject to risks. These include limits that may be applied
by the Bankruptcy Court to Omega's ability to enforce its master lease, the
Support Agreement, and DIP financing terms, including any potential caps imposed
by the Bankruptcy Code on Omega's rent claims, and the other risks described
under the caption "The bankruptcy or insolvency of our operators could limit or
delay our ability to recover on our investments" in Part I, Item1A - Risk
Factors of our   Form 10-K   for the year ended December 31, 2020. Omega's
ability to transfer and/or sell the leased facilities to third parties may be
subject to delays that Omega cannot control. If Omega is unable to transfer
and/or sell the leased facilities in a timely manner or for sufficient
consideration, we may experience a material adverse effect on our properties,
operations, or business.

Other receivables and write-downs on a linear basis

In addition to the Gulf Coast straight-line receivable write-off in the second
quarter discussed above, during the nine months ended September 30, 2021, we
wrote-off straight-line rent receivable balances of $3.4 million through rental
income primarily due to placing three other operators (1 operator in the first
quarter and 2 operators in the third quarter) on a cash basis of revenue
recognition. We determined that collection of substantially all contractual
lease payments with these operators was no longer probable for various reasons.
The placement of an operator on a cash basis of revenue recognition during the
first quarter was because the operator stopped paying contractual rent under our
lease agreement. The two operators placed on a cash basis of revenue recognition
during the third quarter are current with rent payments as of September 30,
2021. The three operators collectively represent approximately 0.3% and 0.5%,
respectively, of our total revenues (excluding the impact of write-offs related
to these operators in 2021) for the nine months ended September 30, 2021 and
2020.

We continue to closely monitor the performance of all of our operators, as well as general industry trends and developments.

Liquidity and capital resources

TO September 30, 2021, we had total assets of $ 9.8 billion, the total equity of $ 4.2 billion and the debt of $ 5.3 billion, representing approximately 55.7% of the total capitalization.

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Financing activities and borrowing terms

Revolving credit facility

On April 30, 2021, Omega entered into a credit agreement (the "2021 Omega Credit
Agreement") providing us with a new $1.45 billion senior unsecured multicurrency
revolving credit facility (the "Revolving Credit Facility"), replacing our
previous $1.25 billion senior unsecured 2017 multicurrency revolving credit
facility (the "2017 Revolving Credit Facility"). The 2021 Omega Credit Agreement
contains an accordion feature permitting us, subject to compliance with
customary conditions, to increase the maximum aggregate commitments thereunder
to $2.5 billion, by requesting an increase in the aggregate commitments under
the Revolving Credit Facility or by adding term loan tranches.

The Revolving Credit Facility bears interest at LIBOR (or in the case of loans
denominated in GBP, the Sterling overnight index average reference rate plus an
adjustment of 0.1193% per annum) plus an applicable percentage (with a range of
95 to 185 basis points) based on our credit ratings. The Revolving Credit
Facility matures on April 30, 2025, subject to Omega's option to extend such
maturity date for two six-month periods. The Revolving Credit Facility may be
drawn in Euros, GBP, Canadian Dollars (collectively, "Alternative Currencies")
or U.S. Dollars ("USD"), with a $1.15 billion tranche available in USD and a
$300 million tranche available in Alternative Currencies. For purposes of the
Revolving Credit Facility, references to LIBOR include the Canadian dealer
offered rates for amounts offered in Canadian Dollars and any other Alternative
Currency rate approved in accordance with the terms of the 2021 Omega Credit
Agreement for amounts offered in any other non-London interbank offered rate
quoted currency, as applicable.

we hired $ 12.9 million deferred charges under the Omega 2021 credit agreement.

OP Term Loan

On April 30, 2021, Omega OP entered into a credit agreement (the "2021 Omega OP
Credit Agreement") providing it with a new $50 million senior unsecured term
loan facility (the "OP Term Loan"). The OP Term Loan replaces the $50 million
senior unsecured term loan obtained in 2017 (the "2017 OP Term Loan") and the
related credit agreement. The OP Term Loan bears interest at LIBOR plus an
applicable percentage (with a range of 85 to 185 basis points) based on our
credit ratings. The OP Term Loan matures on April 30, 2025, subject to Omega
OP's option to extend such maturity date for two, six-month periods.

we hired $ 0.4 million deferred charges under the Omega OP 2021 credit agreement.

$ 700 million 3.250% senior bonds maturing in 2033

In March 2021, we issued $700 million aggregate principal amount of our 3.250%
Senior Notes due 2033 (the "2033 Senior Notes"). The 2033 Senior Notes mature on
April 15, 2033. The 2033 Senior Notes were sold at an issue price of 99.304% of
their face value before the underwriters' discount. We used the proceeds from
this offering to pay down outstanding borrowings on the Revolving Line of
Credit, repay the Sterling term loan, and fund the tender offer to purchase $350
million of the 4.375% Senior Notes due 2023 and the payment of accrued interest
and related fees, premiums and expenses. In connection with this transaction, we
recorded approximately $29.7 million in related fees, premiums, and expenses
which were recorded as Loss on debt extinguishment in our Consolidated Statement
of Operations.

Interest rate risk cash flow hedges

We enter into interest rate swaps in order to maintain a capital structure
containing targeted amounts of fixed and floating-rate debt and manage interest
rate risk. Interest rate swaps designated as cash flow hedges involve the
receipt of variable amounts from a counterparty in exchange for our fixed-rate
payments. These interest rate swap agreements are used to hedge the variable
cash flows associated with variable-rate debt.

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On March 27, 2020, we entered into five forward starting swaps totaling $400
million. We designated the forward starting swaps as cash flow hedges of
interest rate risk associated with interest payments on a forecasted issuance of
fixed rate long-term debt, initially expected to occur within the next five
years. The swaps are effective on August 1, 2023 and expire on August 1, 2033
and were issued at a fixed rate of approximately 0.8675%. In March 2021, in
conjunction with the issuance of $700 million aggregate principal amount of our
3.25% Senior Notes due 2033, we discontinued hedge accounting for these five
forward starting swaps. Amounts reported in accumulated other comprehensive
income ("AOCI") related to these discontinued cash flow hedging relationships
will be reclassified to interest expense over a ten-year term. Simultaneously,
we re-designated these swaps in new cash flow hedging relationships of interest
rate risk associated with interest payments on another forecasted issuance of
long-term debt. We are hedging our exposure to the variability in future cash
flows for forecasted transactions over a maximum period of 46 months (excluding
forecasted transactions related to the payment of variable interest on existing
financial instruments).

In addition to the forward swaps discussed above, we also have two interest rate
swaps that were entered into in May 2019 with aggregate notional amounts of
$50.0 million. These interest rate swaps are designated as hedges against our
exposure to changes in interest payment cash flow fluctuations in the variable
interest rates on the OP Term Loan.

Foreign exchange forward contracts and debt designated as net investment hedges

British pound ("GBP") denominated borrowings under the Sterling term loan and
the 2017 Revolving Credit Facility, were previously used to hedge a portion of
our investments in the U.K. against fluctuations in GBP against the USD. The GBP
denominated borrowings under both debt instruments were deemed an effective
hedge from there issuance in May 2017 until the settlement of the Sterling term
loan and the repayment of the GBP denominated borrowings under the 2017
Revolving Credit Facility in March 2021. Gains and losses associated with these
nonderivative net investment hedges were recorded in foreign currency
translation within other comprehensive income (loss) ("OCI").

Concurrent with the settlement of the GBP denominated debt, we entered into four
foreign currency forwards with notional amounts totaling £174.0 million, that
mature on March 8, 2024, to hedge a portion of our net investments in the U.K.,
effectively replacing the terminated net investment hedge. The gains and losses
associated with these foreign currency forwards are also recorded in foreign
currency translation within OCI. Amounts associated with these net investment
hedges would be reclassified out of AOCI into earnings when our hedged net
investment in the U.K. is either sold or substantially liquidated.

Additional information about the guarantor

Parent has issued approximately $4.9 billion aggregate principal of senior notes
outstanding at September 30, 2021 that were registered under the Securities Act
of 1933, as amended. The senior notes are guaranteed by Omega OP.

The SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01
to simplify disclosure requirements related to certain registered securities,
such as our senior notes. As a result of these amendments, registrants are
permitted to provide certain alternative financial and non-financial
disclosures, to the extent material, in lieu of separate financial statements
for subsidiary issuers and guarantors of registered debt securities.
Accordingly, separate consolidated financial statements of Omega OP have not
been presented. Parent and Omega OP, on a combined basis, have no material
assets, liabilities or operations other than financing activities (including
borrowings under the outstanding senior notes, the Revolving Credit Facility and
the OP Term Loan) and their investments in non-guarantor subsidiaries.

Omega OP is currently the sole guarantor of our senior notes. The guarantees by
Omega OP of our senior notes are full and unconditional and joint and several
with respect to the payment of the principal and premium and interest on our
senior notes. The guarantees of Omega OP are senior unsecured obligations of
Omega OP that rank equal with all existing and future senior debt of Omega OP
and are senior to all subordinated debt. However, the guarantees are effectively
subordinated to any secured debt of Omega OP. As of September 30, 2021, there
were no significant restrictions on the ability of Omega OP to make
distributions to Omega.

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Market offer programs

During the third quarter of 2015, Omega entered into Equity Distribution
Agreements with several financial institutions to sell $500.0 million of shares
of common stock from time to time through an "at-the-market" ("ATM") offering
program (the "2015 ATM Program").

During the second quarter of 2021, the we terminated the 2015 ATM Program and
entered into a new ATM Equity Offering Sales Agreement pursuant to which shares
of common stock having an aggregate gross sales price of up to $1.0 billion (the
"2021 ATM Program") may be sold from time to time (i) by Omega through several
financial institutions acting as a sales agent or directly to the financial
institutions as principals, or (ii) by several financial institutions acting as
forward sellers on behalf of any forward purchasers pursuant to a forward sale
agreement. Under the 2021 ATM Program, compensation for sales of the shares will
not exceed 2% of the gross sales price per share for shares sold through each
financial institution. The use of forward sales under the 2021 ATM Program
generally allows Omega to lock in a price on the sale of shares of common stock
when sold by the forward sellers but defer receiving the net proceeds from such
sales until the shares of our common stock are issued at settlement on a later
date. We did not utilize the forward provisions under the 2021 ATM Program
during the second or third quarter of 2021.

The table below presents information regarding the shares issued under the 2021
and 2015 ATM Programs for the three and nine months ended September 30, 2020 and
2021:


                                      Shares issued  Average Net Price   Gross Proceeds   Commissions  Net Proceeds
                      Period Ended    (in millions)    Per Share(1)                    (in millions)
Three Months Ended September 30, 2020             - $                 - $              - $           - $           -
Three Months Ended September 30, 2021           0.1               32.82              1.3           0.1           1.2
Nine Months Ended  September 30, 2020           0.1               34.64              2.0           0.3           1.7
Nine Months Ended  September 30, 2021           4.2               36.56            155.1           3.3         151.8

(1) Represents the average price per share after commissions.

Dividend Reinvestment and Common Share Purchase Plan

The table below presents information regarding the shares issued under the dividend reinvestment and common share purchase plan for the three and nine months ended. September 30, 2020 and 2021:

                                      Shares issued  Gross Proceeds
                      Period Ended    (in millions)  (in millions)
Three Months Ended September 30, 2020             - $              -
Three Months Ended September 30, 2021           1.3             47.2
Nine Months Ended  September 30, 2020           0.1              3.7
Nine Months Ended  September 30, 2021           3.3            124.5


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Commitments

We have committed to fund the construction of new leased and mortgaged
facilities, capital improvements and other commitments. We expect the funding of
these commitments to be completed over the next several years. Our remaining
commitments at September 30, 2021, are outlined in the table below (in
thousands):



Total commitments (1)         $   743,154
Amounts funded to date (2)      (502,020)
Remaining commitments (3)     $   241,134

Includes our $ 177.7 million commitment relating to the redevelopment of the (1) property located at Washington DC discussed in point 2 –

Management report and analysis of the financial position and results of

Operations – Portfolio and recent developments.

(2) Includes financial charges.

(3) This amount excludes our remaining commitments to be financed under our other

investments of about $ 60.1 million.

Dividends

As a REIT, we are required to distribute dividends (other than capital gain
dividends) to our stockholders in an amount at least equal to (A) the sum of (i)
90% of our "REIT taxable income" (computed without regard to the dividends paid
deduction and our net capital gain), and (ii) 90% of the net income (after tax),
if any, from foreclosure property, minus (B) the sum of certain items of
non-cash income. In addition, if we dispose of any built-in gain asset during a
recognition period, we will be required to distribute at least 90% of the
built-in gain (after tax), if any, recognized on the disposition of such asset.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before we timely file our tax return for
such year and paid on or before the first regular dividend payment after such
declaration. In addition, such distributions are required to be made pro rata,
with no preference to any share of stock as compared with other shares of the
same class, and with no preference to one class of stock as compared with
another class except to the extent that such class is entitled to such a
preference. To the extent that we do not distribute all of our net capital gain
or do distribute at least 90%, but less than 100% of our "REIT taxable income"
as adjusted, we will be subject to tax thereon at regular ordinary and capital
gain corporate tax rates.

For the nine months ended September 30, 2021, we paid dividends of approximately
$477.1 million to our common stockholders. On February 16, 2021, we paid
dividends of $0.67 per outstanding common share to the common stockholders of
record as of the close of business on February 8, 2021. On May 17, 2021, we paid
dividends of $0.67 per outstanding common share to the common stockholders of
record as of the close of business on May 3, 2021. On August 13, 2021, we paid
dividends of $0.67 per outstanding common share to the common stockholders of
record as of the close of business on August 2, 2021. On November 15, 2021, we
will pay dividends of $0.67 per outstanding common share to the common
stockholders of record as of the close of business on November 5, 2021.

Liquidity

We believe our liquidity and various sources of available capital, including
cash from operations, our existing availability under our credit facilities,
existing equity sales programs, facility sales and expected proceeds from
mortgage and other investment payoffs are adequate to finance operations, meet
recurring debt service requirements and fund future investments through the next
twelve months.

We regularly review our liquidity needs, the adequacy of operating cash flows and other sources of liquidity expected to meet those needs. We believe that our main short-term liquidity needs are to finance:

 ? normal recurring expenses;


 ? debt service payments;

? capital improvement programs;

? dividends in ordinary shares; and

? growth through the acquisition of additional buildings.

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The primary source of liquidity is our cash flows from operations. Operating
cash flows have historically been determined by: (i) the number of facilities we
lease or have mortgages on; (ii) rental and mortgage rates; (iii) our debt
service obligations; (iv) general and administrative expenses and (v) our
operators' ability to pay amounts owed. The timing, source and amount of cash
flows provided by or used in financing activities and in investing activities
are sensitive to the capital markets environment, especially to changes in
interest rates. Changes in the capital markets environment may impact the
availability of cost-effective capital and affect our plans for acquisition and
disposition activity.

Total cash, cash equivalents and restricted cash $ 106.0 million from
September 30, 2021, a decrease in $ 61.6 million compared to the balance of
December 31, 2020. The following is a discussion of changes in cash, cash equivalents and restricted cash due to operating, investing and financing activities, which are presented in our Consolidated Statements of Cash Flows.

Operating Activities - Operating activities generated $565.6 million of net cash
flow for the nine months ended September 30, 2021, as compared to $510.9 million
for the same period in 2020, an increase of $54.7 million, which is primarily
driven by an increase of $59.4 million of net income, adjusted for non-cash
items, due to revenue growth as a result of facility acquisitions and
transitions, investments in mortgages and other investments. A $4.7 million
change in the net movements of the operating assets and liabilities, primarily
driven by a reduction in lease inducements provided to our operators, also
contributed to the overall increase in cash provided by operating activities.

Investing Activities - Net cash flow from investing activities was an outflow of
$452.2 million for the nine months ended September 30, 2021, as compared to an
outflow of $56.0 million for the same period in 2020. The $396.2 million change
in cash flow from investing activities related primarily to (i) a $588.7 million
increase in real estate acquisitions driven by the acquisition of 24 senior
living facilities from Healthpeak Properties, Inc. for $511.3 million in the
first quarter of 2021, (ii) a $8.3 million increase in investments in
unconsolidated joint ventures and (iii) a $31.9 million increase in investment
in construction in progress and capital expenditures, offset by (i) a $193.7
million increase in proceeds from the sales of real estate investments, (ii) a
$15.9 million increase in mortgages collections, net of placements, (iii) $14.6
million increase in other investment proceeds, net of new investments, (iv) a
$5.6 million increase in receipts from insurance proceeds and (v) a $2.5 million
refund of an acquisition related deposit in the first quarter of 2021.

Financing Activities - Net cash flow from financing activities was an outflow of
$175.0 million for the nine months ended September 30, 2021, as compared to an
outflow of $447.5 million for the same period in 2020. The $272.5 million change
in cash flow from financing activities was primarily related to (i) a $271.0
million increase in cash proceeds from the issuance of common stock in 2021 due
to increased issuances under our Dividend Reinvestment and Common Stock Purchase
Plan and our 2015 and 2021 ATM Programs, as compared to the same period in 2020
and (ii) $70.6 million increase in proceeds from other long-term borrowings, net
of repayments offset by (i) a $48.0 million increase in payment of financing
related costs and (ii) a $17.3 million increase in dividends paid.

Critical accounting conventions and estimates

Our financial statements are prepared in accordance with generally accepted
accounting principles ("GAAP") in the U.S. Our preparation of the financial
statements requires us to make estimates and assumptions about future events
that affect the amounts reported in our financial statements and accompanying
footnotes. Future events and their effects cannot be determined with absolute
certainty. Therefore, the determination of estimates requires the exercise of
judgment. Actual results inevitably will differ from those estimates, and such
differences may be material to the consolidated financial statements. We have
described our accounting policies in Note 2 - Summary of Significant Accounting
Policies to our Annual Report on   Form 10-K   for the year ended December 31,
2020. There have been no material changes to our critical accounting policies or
estimates since December 31, 2020.

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