Omega Healthcare Investors’ (OHI) 2Q16 Earnings Call Notes

posted in: Earnings Call, Notes | 0

Population over 80 to increase substantially in the next five years

“Look at the 80 to 84 age cohort, the growth rate from 2010 to 2015 was actually flat because of the World War II phenomenon. There wasn’t lot of births. That age cohort actually goes from about 0.14% CAGR for the last four years to about 1.5%. I know that doesn’t sound like a lot, but it’s a lot of bodies, and the 85 plus population goes up at the same rate. Starting in 2020, that number doubles, so when we talk about these initiatives, they’re pilots, they don’t penetrate all the markets. In the cardiac initiative, by example, it doesn’t start till the middle of 2017. So I actually applaud CMS for sort of getting ahead of this because if you wait until the demographic bubble comes, you’re going to have healthcare access issues.” Taylor Pickett – Chief Executive Officer

 

Despite three big senior housing projects in NYC, market penetrations rates are low

“Our current thinking is if you look at any sort of typical penetration rates of markets, that market could absorb well in excess of the three you are describing without putting a dent in it, and that’s before you get into the folks who will likely come in from outside that market to be with their children who live in Manhattan. The utilization penetration rates are off the charts low, given the population density there” Steven Insoft – Chief Corporate Development Officer

 

OHI makes capital allocation decisions based more on acquisition opportunities and less on stock price

“It’s really the latter. It’s the pipeline and the related yields and we correlate that all back into our stock price, and that’s part – that’s how we make our decisions in terms of allocating capital. But we’ve, as you know, we’ve stayed in that 4 to 5 times debt to EBITDA range and we are committed to that.” Robert Stephenson – Chief Financial Officer

 

OHI looks favorably on the UK despite Brexit

“I think there will be some opportunity in the UK. Obviously, there is a lot of turmoil around the whole Brexit issue. But frankly, our operators, their biggest issue in the UK and their biggest fear is labor. And so we are going to watch that carefully, but overall we like to – we continue to like the market a lot.” Taylor Pickett – Chief Executive Officer

 

OHI adds stock based compensation back to its adjusted FFO mainly out of habit

“I think that really goes back to more than a decade ago Nick, when we started adding it back because it’s such a material number and it wasn’t clear whether any of it was ever going to be realized. So it’s just very consistent, and we make it very clear what we’re adding back. So that folks that decide to push it back through the numbers can do that. But it just goes to a legacy that started many, many years ago when that was a fairly large component of a very, very much smaller company.” Taylor Pickett – Chief Executive Officer