Barclays Global Healthcare Conference Investor Presentation March 2019
Forward-looking Statements and Non-GAAP Information ➢ This presentation may include projections and other “forward -looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve unknown risks and uncertainties. Omega’s actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, see Omega’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. ➢ This presentation may contain certain non-GAAP financial information including EBITDA, Adjusted EBITDA, Total Adjusted Debt (a/k/a, Funded Debt), Adjusted FFO, FAD, Total Cash Fixed Charges and certain related ratios. A reconciliation of these non-GAAP disclosures is available in the Exhibit to this presentation or on our website under “Non -GAAP Financial Measures” at www.omegahealthcare.com. Other financial information is also available on our website. ➢ Information is provided as of December 31, 2018, unless specifically stated otherwise. We assume no duty to update or supplement the information provided. Investor Presentation, March 2019 2
What does Omega Healthcare do?
What does Omega Healthcare do? ◼ Among all REITS, Omega has the largest portfolio of Skilled Nursing Facilities (“SNFs”) Number of SNF Properties 1000 792 800 600 335 400 187 140 200 93 76 0 OHI SBRA WELL CTRE LTC NHI Source: MedPAC Report to the Congress: Medicare Payment Policy March 2018 ◼ We also have a growing Senior Housing portfolio concentrated in areas with high barriers to entry ◼ We are a “Triple Net” REIT - meaning we own the real estate and improvements but our tenants are responsible for capex, taxes and insurance Investor Presentation, March 2019 4
What is a SNF?
What is a SNF? ◼ SNFs are post-acute providers of 24 hour nursing care ◼ SNFs are primarily funded through Medicare and Medicaid reimbursement ◼ SNFs are the lowest cost provider of post-acute 24 hour nursing care ◼ SNFs provide care for much higher acuity patients than can be handled in Senior Housing or Home Health settings – so hospital discharges to SNFs have held steady Average Cost per Day per Care Setting % of Discharges to SNFs Acute Care Post-Acute Care 22.0% $2,271 20.3% 20.2% $2,500 20.0% 19.7% 19.3% 19.3% 20.0% 19.1% 18.9% $2,000 $1,512 18.0% $1,456 $1,500 16.0% $1,000 $508 14.0% $500 12.0% $0 10.0% Hospital LTACH IRF SNF 2009 2010 2011 2012 2013 2014 2015 2016 Sources: 1999-2015 AHA Annual Survey; MedPAC Data Book, June 2016, NIC Skilled Source: Medicare claims and enrollment, 2009 - 2016 Nursing Data Report, June 2017 Investor Presentation, March 2019 6
Why do we like SNFs?
Why do we like SNFs? Accelerating demand from demographics ◼ The aging of the baby boomers will drive a multi-decade increase in demand for SNFs ◼ Increasing occupancy will improve SNF operator financial performance and increase their capacity to pay rent Source: www.cdc.gov Source: Avalere analysis of Medicare Part A 100% Standard Analytic File (SAF) for 2016 Investor Presentation, March 2019 8
Why do we like SNFs? Limited supply growth ◼ Certified facilities and beds have remained steady for many years, with no net new supply (figures in 000s, unless otherwise indicated) Source: Compiled by American Health Care Association (AHCA) Research Department from CMS OSCAR/CASPER survey data (2009-2018) ◼ Certificates of Need restrictions apply in 36 states and many other states have various other restrictions, e.g., bed moratoriums, etc. Investor Presentation, March 2019 9
Why do we like SNFs? Limited disintermediation Per the most recent MedPAC data, the average SNF margin is 0.7%. This low margin ◼ provides little opportunity for disintermediation. Average SNF Profit Margin 1.90% 1.90% 2.0% 1.80% 1.60% 1.5% 1.0% 0.70% 0.5% 0.0% 2012 2013 2014 2015 2016 ◼ Low disintermediation risk provides additional clarity into investing in the SNF asset class. Investor Presentation, March 2019 10
Why do we like SNFs? Excellent investment yields ◼ Investing in SNFs is able to provide an excellent entry yield of ~9.5% ◼ This yield compares very favorably with all other healthcare real estate sub- sectors. ◼ Our standard annual rent escalator is 2.5%, providing a compelling and growing return for investors. Investor Presentation, March 2019 11
Why do we like SNFs? Long growth runway ◼ Even though Omega is the largest owner of SNFs, we still only own about 5% of the market. % of SNF Ownership CTRE WELL SBRA LTC OHI NHI OHI 5% SBRA WELL CTRE LTC Other 89% NHI Other ◼ Given the accretion created from acquisitions, the fragmented ownership of SNFs provides a significant opportunity for further growth. Investor Presentation, March 2019 12
How are Omega’s tenants faring?
How are Omega’s tenants faring? Overall, tenants are faring quite well considering average EBITDAR coverage, a proxy ◼ for an operator’s capacity to pay rent, has declined in recent years. Caused by multiple headwinds: ◼ ❑ Baby bust ❑ Migration to Medicare Advantage and reduction in length of stay ❑ Increase in observation stays ❑ Wage pressures These headwinds are starting to moderate and the demographic tailwinds will help ◼ occupancy and operator performance going forward Investor Presentation, March 2019 14
How has Omega performed?
How has Omega performed? ◼ Omega has a history of strong shareholder returns Omega’s Total Returns vs Healthcare REIT Averages (1) Omega Share Price Growth, 12/31/2002 to 2/15/2019 (Years ending 12/31/2018) ◼ We believe we will continue to provide solid shareholder returns through: ❑ Accretive capital allocation ❑ A strong dividend yield Built-in escalators ❑ A value-enhancing development platform ❑ Source: KeyBanc Capital Markets The Leaderboard , December 28, 2018. Peer returns are simple average of returns of NHI, HR, LTC, SABRA, VTR, WELL, and HCP 1) Investor Presentation, March 2019 16
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