Omega Healthcare Investors Inc

NYSE:OHI

Earnings Call Analysis

Omega Healthcare Posts Strong Q4 and Gives 2024 Guidance

Omega Healthcare Investors reported FAD (Funds Available for Distribution) at $2.62 per share for the full year, marginally below their dividend of $2.68, indicating a 102% payout ratio. Despite uncertainty in first-quarter 2024 FAD, the long-term outlook appears strong, promising stable and increasing cash flow, especially from holdings like Maplewood. Improvement is notable, as EBITDAR coverage decreased from 27.5% to 13.2% of total rent, with significant portions of the portfolio transitioning to stronger performance or being sold. Fourth-quarter revenue surged to $239 million from the previous year's $145 million, attributed to strategic operator restructurings, new investments, and netting off asset sales. The solid balance sheet closed the quarter with over $440 million in cash after significant mortgage repayments. The company outlines its 2024 AFFO guidance to be in the range of $2.70 to $2.80 per share, premised on stable revenue recognition, the completion of operator restructurings, and anticipated asset sales totaling $94 million. Rent collections from LaVie and applicated security deposits from Guardian contributed to the fourth quarter's earnings. Encouragingly, core portfolio occupancy climbed from January 2022's low of 74.6% to 80.2% by mid-January 2024.

Financial Performance Overview

The company concluded the fourth quarter with a funds available for distribution (FAD) of $0.64 per share, aligning with expectations and hinting at a brighter future with anticipated improvements from portfolios in transition. For the entire year, the FAD was $2.62 per share, which presents a solid ground for potential FAD growth in the forthcoming quarters. Moreover, they have projected a full year adjusted funds from operations (AFFO) guidance for 2024 to range between $2.70 and $2.80 per share, which is indicative of optimistic tenant occupancy and rent coverage trends.

Revenue and Earnings Growth

The company's revenue recorded a significant jump to $239 million in the fourth quarter, compared to $145 million in the same quarter the previous year, crediting this surge largely to the effects of operator restructurings, investments made in recent years, and adjustments from asset sales. In terms of NAREIT funds from operations (FFO), they marked an impressive turnaround with $129 million or $0.50 per share, up from a loss in the prior year. Adjusted FFO too rose to $173 million or $0.68 per share, along with a notable FAD of $163 million or $0.64 per share.

Balance Sheet Stability

The balance sheet appeared solid with over $440 million in cash and more than $1.4 billion available in credit facility borrowing capacity, bolstering the company's ability to settle a $400 million bond maturity and to finance future investments. Highlighting the strength of the company's debt profile, 99% of its $5.1 billion total debt was fixed-rate, combined with a leverage of 4.96 times net funded debt to annualized adjusted normalized EBITDA and a healthy fixed charge coverage ratio of 3.8 times.

Forward-Looking Guidance

The company anticipates the full year adjusted FFO to lie between $2.70 and $2.80 per share, assuming no significant alterations in revenue from operators currently on an accrual basis. Moreover, it expects to stay on track with key operator restructurings, while estimating $94 million in assets sales, factoring in the effect of newly completed investments and maintenance of general and administrative expenses. Furthermore, the guidance presumes no substantial shifts in market interest rates, thus excluding the impacts of potential new investments or additional asset sales not already accounted for.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings, and welcome to the Omega Healthcare Investors Fourth Quarter 2023 Earnings Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded. I will now turn the conference over to Michele Reber. You may begin.

[Michele Reber, executive]

Thank you, and good morning. With me today is Omega's CEO, Taylor Pickett; COO, Dan Booth; CFO, Bob Stephenson; and Megan Krull, Senior Vice President of Operations. Comments made during this conference call that are not historical facts may be forward-looking statements, such as statements regarding our financial projections, potential transactions, operator prospects and outlook generally. Factors that could cause actual results to differ materially from those in the forward-looking statements are detailed in the company's filings with the SEC.

During the call today, we will refer to some non-GAAP financial measures, such as NAREIT FFO, adjusted FFO, FAD and EBITDA. Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles, are available in the quarterly supplement. In addition, certain operator coverage and financial information that we discuss is based on data provided by our operators that has not been independently verified by Omega.

I will now turn the call over to Taylor.

[C. Pickett, executive]

Thanks, Michele. Good morning, and thank you for joining our fourth quarter 2023 earnings conference call. Today, I will discuss our fourth quarter financial results and certain key operating trends. Fourth quarter FAD, funds available for distribution, of $0.64 per share was as expected, reflecting several portfolios that are in the process of being transitioned, which will result in meaningful FAD upside over the next few quarters.

Full year FAD was $2.62 per share, slightly below our full year dividend of $2.68 per share, resulting in a payout ratio of 102%. We continue to have a handful of cash-basis operators, including Maplewood, that will impact our go-forward AFFO and FAD, making first quarter 2024 FAD difficult to predict. However, longer term, we believe all of these assets, but in particular, Maplewood, are well positioned to generate reliable and growing cash flows and related rent.

We believe that we have enough visibility into the timing and ultimate resolution of the portfolios that are being transitioned or sold to provide guidance for the first time since the pandemic started. Our 2024 AFFO guidance is between $2.70 and $2.80 per share. As Dan will discuss, key tenant occupancy and rent coverage metrics continue to improve, including the under 1x EBITDAR coverage operator metric, which dropped from 27.5% of total rent to 13.2% of total rent.

We can break the 13.2% into a handful of buckets. Operators representing 7.5% of the 13.2%, our strong credits and therefore, payment of rent should not be an issue. Operators representing 1.2% at third quarter and October EBITDAR coverage above 1.0x, benefiting from state rate increases and operational improvements that we expect to continue on a go-forward basis. 0.9% represents facilities that have already transitioned to performing credit. That leaves operators representing 3.6%, of which an operator representing 0.5% was recently transitioned, which leaves a balance of 3.1%, representing 11 small operating relationships.

I will now turn the call over to Bob.

[Robert O. Stephenson, executive]

Thanks, Taylor, and good morning. Turning to our financials for the fourth quarter. Revenue for the fourth quarter was $239 million before adjusting for certain non-recurring items compared to $145 million for the fourth quarter of 2022. The year-over-year increase is primarily a result of timing related to operator restructurings, revenue from new investments completed in 2022 and '23 and net straight-line write-offs, partially offset by asset sales completed during that same time period.

Our NAREIT FFO for the fourth quarter was $129 million or $0.50 per share as compared to a loss of $30 million or a loss of $0.13 per share for the fourth quarter of 2022. Our adjusted FFO was $173 million or $0.68 per share for the quarter, and our FAD was $163 million or $0.64 per share and both exclude several items consistent with historical practices and outlined in our NAREIT FFO, adjusted FFO and FAD reconciliations to net income found in our earnings release as well as our fourth quarter financial supplemental posted to our website.

Our balance sheet continues to remain strong. In the fourth quarter, we repaid 25 HUD mortgages, totaling $227 million, these repayments stemmed from the previously disclosed LaVie asset sales and transitions. We ended the quarter with over $440 million of cash on the balance sheet and over $1.4 billion in credit facility borrowing capacity and are well positioned to pay off our April 1, $400 million bond maturity and fund new investments.

As of year-end, 99% of our $5.1 billion in debt was at fixed rates and our net funded debt to annualized adjusted normalized EBITDA was 4.96x and our fixed charge coverage ratio was 3.8x.

As Taylor mentioned, for the first time since the start of the pandemic, we are providing full year adjusted FFO guidance of between $2.70 to $2.80 per share. We're assuming no change in our revenue related to operators currently on an accrual basis of revenue recognition or stated another way, no additional operators being placed on a cash basis for revenue recognition.

We're assuming a timely completion of operator restructurings, which includes both the LaVie and Guardian portfolios and Maplewood's eventual return to full contractual rent. We're assuming $94 million in asset sales related to the facilities classified as held for sale as of year-end. We've included the annual impact of new investments completed in 2023 as well as $27 million of new investments completed year-to-date.

We project our quarterly G&A expense to run between $11.5 million to $13.5 million per quarter, with the first quarter typically being the highest. Non-cash stock-based compensation expense, which is included in NAREIT FFO, but eliminated in our adjusted FFO is estimated to be approximately $9.2 million per quarter. We assumed a repayment of our April 1, $400 million bond maturity. We assume no material changes in market interest rates as it relates to either the overnight investment rates earned on balance sheet cash or interest expense charge on credit facility borrowings.

Our 2024 adjusted FFO guidance excludes any additional new investments or asset sales as well as any additional capital transactions other than what was already mentioned. As several operator transitions are still in negotiations and the precise timing is unknown. We provided a wide range to our adjusted FFO guidance. As stated in yesterday's earnings press release, in the fourth quarter, LaVie paid $5.3 million in rent. And in January, LaVie paid approximately $1.45 million in rent. We utilized Guardian's $4.4 million security deposit to record fourth quarter rent. The remaining $60,000 in security deposit was exhausted in January and no additional cash rent was received from Guardian in January.

And lastly, we recorded $11.6 million in Maplewood revenue in the fourth quarter through a combination of cash and security deposit applications. In January, Maplewood paid $3.8 million in rent. Dan will provide additional color on these operators in his prepared remarks.

And with that, I will turn the call over to Dan.

[Daniel J. Booth, executive]

Thanks, Bob, and good morning, everyone. As of the December 31, 2023, Omega had an operating asset portfolio of 862 facilities with approximately 84,000 operating beds. These facilities were spread across 69 third-party operators and located within 42 states in the United Kingdom. Trailing 12-month operator EBITDAR coverage for our core portfolio as of September 30, 2023, increased to 1.28x versus 1.15x for the trailing 12-month period ended June 30, 2023.

During the third quarter of 2023, our operators cumulatively recorded approximately $12 million in Federal Stimulus Funds as compared to approximately $13.2 million recorded during the second quarter. Trailing 12-month operator EBITDAR coverage would have increased during the third quarter of 2023 to 1.21x as compared to 1.07x for the second quarter when excluding the benefit of any Federal Stimulus Funds.

EBITDAR coverage for the stand-alone quarter ended September 30, 2023, for our core portfolio was 1.33x, including Federal Stimulus and 1.27x, excluding the $12 million of Federal Stimulus Funds. This compares favorably to the stand-alone second quarter of 1.21x and 1.15x with and without $13.2 million in Federal Stimulus Funds, respectively. Occupancy for our overall core portfolio has continued to recover from a low of 74.6% in January of 2022 to 80.2% as of mid-January 2024 based upon preliminary reporting from our operators. For comparative purposes, occupancy for our core portfolio was 83.2% for the fourth quarter of 2019 just prior to the onset of the COVID pandemic.

Turning to portfolio matters. LaVie. In the fourth quarter of 2023, Omega sold a total of 30 LaVie facilities for $317.9 million of gross proceeds. All of the facilities were located in Florida. Omega is currently in the process of transitioning 6 additional facilities, 4 in Louisiana and 2 in Florida to third-party operators. Omega's remaining portfolio with LaVie will consist of 30 facilities, which include 13 facilities in North Carolina, 9 in Pennsylvania, 6 in Mississippi and 2 in Virginia.

Three of those 4 states are considered highly desirable from an operating environment standpoint. We are currently in ongoing discussions with LaVie on the best overall future for each of these remaining 30 facilities. LaVie has paid approximately $1.45 million per month for the last 3 months, including January of 2024.

Maplewood. During the fourth quarter of 2023, Maplewood paid rent of $11.6 million, consisting of $9.8 million of cash payments and $1.8 million in security deposit applications. In January of 2024, Maplewood paid $3.8 million in rent. Maplewood continues to see strong performance across the portfolio with 16 of the 17 facilities fully stabilized.

Occupancy-inspired New York City is currently at 65%. And Maplewood believes there is a path to stabilization at the facility in the near future. Maplewood was recently awarded Best of Senior Living Awards at all 17 facilities, which places the communities in the top 1% to 2% of senior housing care providers nationwide. This remarkable achievement reflects the dedication and commitment of the Maplewood employees.

Guardian. Omega currently leases 6 facilities to Guardian, 5 in Pennsylvania and 1 in West Virginia. We are currently negotiating lease terms to re-lease the remaining 6 facilities to an unrelated third party subject to normal regulatory approvals and the finalization of certain documentation. In addition to the aforementioned restructurings and transitions, Omega is working with several other relatively small operators on various restructurings.

Turning to new investments. During the fourth quarter of 2023, Omega completed a total of $249 million in new investments, consisting of $167 million in real estate loans and other loans, $51 million in real estate acquisitions and $31 million in capital expenditures. These new loans have a weighted average interest rate of 10.5%. The new acquisitions have a weighted average annual yield of 9% with 2.5% annual escalators.

During the full year of 2023, Omega made new investments totaling $667 million, including $84 million in capital expenditures. Subsequent to year-end 2023, Omega has closed on $27 million in new mortgage loans. These new loans completed in 2024, have a weighted average interest rate of 9.6%. Turning to dispositions. During the fourth quarter of 2023, Omega sold 32 facilities for $324 million. During the full year of 2023, Omega sold 69 facilities for $485 million.

I will now turn the call over to Megan.

[Megan Krull, executive]

Thanks, Dan, and good morning, everyone. There continues to be positive momentum on the staffing front, albeit with wide variation by market. Agency expense on a per patient day basis for our core portfolio for third quarter 2023 dropped to 3x where it was in 2019 in comparison to the 4x we reported last quarter, and the 5x we reported 2 quarters ago. And as expected, with the staffing shortages easing, we see occupancy continue to slowly improve with a slight slowdown in the winter months as is typical. The number of core facilities recovered is now at 42%, up from the 37% reported in the second quarter. Additionally, 22% of core facilities that have not yet fully recovered are at or above 84% occupancy.

Overshadowing these improvements, however, is the promise by CMS that they will finalize the staffing mandate sometime this year. This was not entirely unexpected given the current administration had promised its implementation. Despite the long-term impact that this could have on the industry, especially if left unfunded, the impact is negligible in the near term. Recall, that the mandate, as currently proposed, is already slated to have a delayed implementation with the 24/7 RN requirement going into effect 2 years after the mandate is finalized for urban facilities and 3 years for rural and the required hours per resident day for RNs and nursing aids going into effect 3 years after the mandate is finalized for urban facilities and 5 years for rural.

With AHCA's strong track record in getting improvements made to proposed rules, and more than 40,000 comments received by CMS, all of which need to be reviewed and considered, it is too soon to tell what the ultimate mandate will look like. We can only hope that reasonable minds will prevail and then any final mandate will be well balanced. And of course, we also need to remember that a lot can happen in 2 years when the first impact is currently proposed is slated to occur.

There's always the potential that additional rulemaking or legislation will change the final rule substantially within that time, not to mention the possibility that legislation could block the mandate altogether, with bipartisan legislation already introduced in Congress to do just that.

I will now open the call up for questions.

[Operator]

[Operator Instructions]

And our first question comes from the line of Jonathan Hughes from Raymond James.

[Jonathan Hughes, analyst]

On the fourth quarter acquisitions, I see the initial cash yields were 9%. Can you just share if those were snaps or seniors housing? And then maybe what yields you're underwriting on the current investment pipeline?

[Daniel J. Booth, executive]

Yes. So most of the yields that we're underwriting to are over 10% or even north or -- fourth quarter yields on those -- the investments that you highlighted were 9%. Some of those deals were a long time in the making, have been in the pipeline for a while. So we had quoted a price some quarters back. The overall yield for the year is north of 10%. I think it's 10.4% blended. So -- and that's pretty much what we're quoting today is 10% in North.

[Jonathan Hughes, analyst]

Okay. And then that mix of investment activity over the past year, it's been -- you call it, 60% loan investments versus 40% acquisitions. And I get the loan investments might be because you're filling a void left by banks and those have been with existing relationships. But when do we see acquisitions pick up and comprise the majority of your investment activity?

[Daniel J. Booth, executive]

I think we still did a number of acquisitions, right? I'd say that that's one of our same store that we've done in prior years. I think we just have a pick up in loans, and as you said or kind of answering your own question, but it was just filling a void in the capital markets as they stand today, I mean, there's a lot of banks that aren't active and we're filling that void. We could continue to see that certainly in '24.

[Jonathan Hughes, analyst]

Okay. And maybe just one more for me. Can you share some details on the $50 million term loan made in December. What are use of proceeds? What is exposure to that operator and the EBITDAR coverage of that portfolio? And maybe why do such a short-term non-real estate investment?

[Daniel J. Booth, executive]

Yes. So our relationship with that individual or companies that he controls is less than 1% of Omega's revenue. And just a couple of facts to highlight that relationship goes back for many, many years. Those individuals been in the industry for over 35 years. Our worlds cross on multiple fronts, including the fact that we share multiple relationships.

He has an excellent history. He is a high net worth and the investment was actually to allow him to make an investment in another company that he privately owns, and so it falls outside of any relationship we have in this world, in the snip world. And it's collateralized as well by the equity interest in that private investment. So it's well collateralized high net worth individual with great track record.

[Jonathan Hughes, analyst]

And then maybe -- I don't know if I heard you, but what's maybe the coverage of that portfolio? I realize it's close to 1%, but if you have that, that would be great.

[Daniel J. Booth, executive]

So I mean, we just generally don't comment on individual operator coverages, so I'm not going to go there today, but I'll just say that, we've been paying for probably 10-plus years on both those leases and they pay like clockwork.

[Operator]

The next question is from the line of Vikram Malhotra with Mizuho.

[Vikram Malhotra, analyst]

Maybe just to start off the guide. Could you give us some color on sort of what's baked in at the low end versus the high end? And how we should think about sort of operator resolution and investments, both at the high end and low end?

[Robert O. Stephenson, executive]

We returned to, happily so, our adjusted FFO guidance based on historical practices and gave a little bit wider range because we did mention we have LaVie and Guardian in the transition/restructuring mode and Maplewood needs to return to paying full contractual rent. So at the low end, it means it takes a little bit longer on those transactions and the repayment on the high end, it's just sooner. I mean it's kind of that simple.

[Vikram Malhotra, analyst]

Got it. Okay. And then specifically for Maplewood, as you look through the year, you mentioned sort of you're hoping as we go through the year, the return to more normal paying any assumptions you can share with us, one, just in terms of the Jan payment? Is that sort of a good run rate near term? And then second, what are you assuming for occupancy of the New York asset as we go through the year for that normalized payment to occur?

[C. Pickett, executive]

So obviously, the January cash is a good run rate to start, but it doesn't reflect the impact of rate increases for '24, which the Maplewood team expects to be 7% to 8% net. So that's -- we'll see a pickup there as we start to march through the early part of the year, Vikram. And then the team is still working through some revisions on Second Avenue.

The thought process now is they'll be able to go from 65% into the 80s by year-end. But you have to remember that, buildings has become a little bit mature in a competitive market now in Manhattan. So even though we might have 10 move-ins in a month, you'll see 6 or 7 move out. So the net is -- it's real work to increase that occupancy over the next 10 months. Team hasn't finalized their plan. We'll probably have a lot more color on that for the next call.

[Vikram Malhotra, analyst]

Okay. Great. And then just, sorry, one -- if I can just follow up on the $50 million loan. It is sort of -- it seems like a one-off. I just wanted to hear from your perspective if this is truly a one-off? And is there something strategic to it as well? Because it sounded like not kind of focused on real estate, but more relationship based. So I just want to understand the kind of -- is this truly something very unique. And then if there is something else or strategic to it as well?

[Daniel J. Booth, executive]

Yes. I would say that this is more of a one-off than anything else. It's not where we're going to focus our attention.

[Operator]

Our next question is from the line of Michael Griffin with Citi.

[Michael Griffin, analyst]

Just wanted to ask a question around occupancy. You said that in January, you're seeing it north of 80%, but at the end of the year, it was about 79%. Given that we're in a more seasonal time period, can you maybe just give some more color on why you're seeing occupancy increase? Is it a function of some of these facilities being better staffed or anything you could provide there would be helpful.

[Megan Krull, executive]

I think what we're hearing from our operators is mostly the fact that the staffing is easing up, right? Some of the agency has come down. They're getting more permanent staff and they're building up their cultures again. And it's just easier to have staff in the building and increase that occupancy. So that's really what's driving it.

[Michael Griffin, analyst]

Great. That's helpful. And then just on the remaining LaVie assets in the portfolio. Is the plan to ultimately sell out of all of them and exit that relationship? Or do you see yourself kind of hanging on to some once the restructuring process comes to an end?

[C. Pickett, executive]

Dan and his team are still in the middle of the discussions. So it's -- we don't really have an answer for that. I will tell you, though, the important thing is, as Dan mentioned, those assets performed well. So if -- whichever hands they end up, there's a lot of value there. It's just a question of working through the process to make sure we maximize the value proposition.

[Operator]

Our next question is from the line of Connor Siversky with Wells Fargo.

[Connor Siversky, analyst]

One on Maplewood, I'm curious what we should expect from the Washington, D.C. development when it rolls online next year. Do you have any sense of what that fixed cost load will look like once the doors are open? Is it reasonable to assume that opening that operation would impact Maplewood's forward cash flow profile negatively? And then could you put any numbers around it at this time?

[C. Pickett, executive]

Yes. It's a little too early to put numbers around it. I will tell you that, it's about $200 million project. The expectation is that the cash returns there will be at least 8%. It could be higher.

We're working through the presales now. They've opened their sales office, and they've got a decent list right now. People are looking forward to being there. In terms of the costs, Maplewood as an entity doesn't have a source of capital or fund to fill up. So ultimately, that's going to fall on us, it will be additional capital. How that gets accounted for, I can't tell you and it's going to depend on Maplewood when we get to the day the doors open.

[Connor Siversky, analyst]

Okay. That's helpful. And then maybe one on rent coverage. So I'm curious to see if there are any expectations for that number trending into 4Q. We have mix data suggesting that occupancy had more or less flattened down as expected given the seasonality. I'm wondering if any Medicaid rate hikes took hold towards the end of the year that could push the number higher specifically.

[Megan Krull, executive]

We did have the Medicare rate hikes in October, and we had some increases in Medicaid. But I think you'll just continue to see as the occupancy improves, so that coverage is going to improve. With the exception, obviously, that December, you have audit adjustments and that can sometimes play into what the coverage looks like.

[Operator]

Our next question is from the line of Tayo Okusanya with Deutsche Bank.

[Omotayo Okusanya, analyst]

One just about general regulatory backdrop. Again, the -- from CMS and minimum staffing rules, the comments period has ended, just kind of curious what kind of came out of the comment period, what could potentially be next steps as CMS continues to kind of think through implementation of minimum staffing rules.

[Megan Krull, executive]

So like I said, there were about 40,000 comments plus that we're submitting, and every single one of them needs to be reviewed and considered. I think the idea right now is that the likely implementation of the rule would be sometime in the summer at the earliest, potentially a little bit later than that. And to the extent we don't really know the extent of how that rule is going to change from where it was proposed.

But with that many comments, it's likely that there are going to be some improvements in it. But at the end of the day, even after it gets finalized, there's still legislative action that can be taken to repeal it, that's in Congress right now. And there are other ways that, that can be changed over time. And so it's really too soon to tell what the ultimate impact of that final rule...

[Omotayo Okusanya, analyst]

Got you. That's helpful. And then just quickly indulge me on the acquisition front as well. Again, I know you don't have acquisitions in guidance. You did do decent volume in 4Q. Just kind of -- as you kind of think going forward, opportunities to buy skilled nursing versus senior housing and potential cap rates? Any kind of color you could provide on that would be helpful.

[Daniel J. Booth, executive]

I will say that we are seeing a very active pipeline at this point. It's probably been as active, but since before the start of COVID. So we are, as we pointed out, seeing a number of loan requests. But we're sort of able to pick and choose the right deals, and we are able to -- we are holding pretty firm on our 10% yield requirements.

[Operator]

Our next question is from the line of Josh Dennerlein with Bank of America.

[Unknown Analyst]

This is [ Carol Grana ] on behalf of Josh. I had a question about the Medicaid reimbursement. Are there any states that you are currently trying to avoid or target in that sense?

[Megan Krull, executive]

Sincerely same target. I mean there are certainly some states that have their difficulties right now, like Pennsylvania is one of those, not necessarily that we would avoid it because we think, ultimately, that it will head in the right direction down the road. Florida, as you know, we exited quite a bit in 2023 and 2022. So we're not looking to jump back in there quickly anytime soon.

And then there are certain states, Texas has staffing issues, our operators personally do pretty well there, but there are staffing issues in the state. You've got states like Iowa and Missouri, you just had recent rate increases that's too soon to tell how those states are going to do. So -- and we just look at where our operators are, where they're looking to do business and where the right opportunities are, and just make sure we understand the risk of each individual state.

[Unknown Analyst]

Great. And one other question about the debt investments, though, $167 million we are discussing the makeup between the loan and acquisition volumes. Do you see that going forward of continuing to bridge that gap in the capital markets? Or is there another color that you're seeing in the deal flow?

[Daniel J. Booth, executive]

Right now, I think there's just a dearth in senior lending. And otherwise, it's just -- there's not a lot of people out there with capital that are prepared to lend at this point. So we're just filling the void. I can't predict that one little aspect.

[Operator]

The next question is from the line of John Pawlowski with Green Street.

[John Pawlowski, analyst]

Megan, your conversations with your operators, can you give us a rough sense for the average labor cost increases your operators are expecting in 2024?

[Megan Krull, executive]

I think it's going to vary by operator depending on what regions they're in. There already have been large wage increases over the past several years. And so it just depends on the competition in those particular states.

[John Pawlowski, analyst]

Can you give us some direction? Is it closer to 3%? Is it closer to 10%? I'm just trying to get a sense for the pace of moderation labor cost backdrop?

[Megan Krull, executive]

Again, it's going to be very operator-specific. I would say, on average, I'm sure it's probably in the 4% or 5%, but I can't really say for sure where that would end up. It just depends on where they're located.

[John Pawlowski, analyst]

Got it. And then as occupancy builds across markets, there's still staffing shortages, have you seen pockets of your portfolio where that haven't needed to go back to the agency labor from pretty hard and pull that lever just to compete with, again, just the demand of health care rising in the markets?

[Megan Krull, executive]

So I would say, in general, I mean, like I noted, the agency has come down pretty substantially over the last few quarters. There are definitely pockets where you have buildings that are using a lot of agency. But I would say, if we talk operator to operator, most of the time in a few of their buildings that have an agency as opposed to all of their buildings to have agency.

[Operator]

The next question is from the line of Juan Sanabria with BMO Capital Markets.

[Juan Sanabria, analyst]

Just a 2-parter, I guess, on dispositions. I guess, first, how should we think about the rents collected for the dispositions that took place in the fourth quarter largely tied to LaVie. Was there anything being accrued or accounted for there? And secondly, how should we think about the held for sale or '24 guidance on dispositions in terms of potential yields on those proceeds?

[Daniel J. Booth, executive]

So the LaVie assets were sold, right? So we just put a cap rate on those sold assets and then turn around and obviously, reinvest those proceeds. We're still working through the restructuring of LaVie, so we haven't determined exactly what the actual rent will be when that's all shaped out. So that's kind of the TBD.

[Robert O. Stephenson, executive]

Juan, on Page 18 of the supplemental, we show -- we list how much we booked in the fourth quarter around what was disposed of and you could see it's 244,000, its very immaterial.

[Juan Sanabria, analyst]

And how about -- what should we be assuming for the '24 guidance in terms of dispose?

[Robert O. Stephenson, executive]

Held from assets that -- yes, the held for sale assets, we booked 788,000 in the fourth quarter related to those.

[Juan Sanabria, analyst]

Okay. And then just on Guardian. So what's the status there? Do you have an operator offset? It's just a question of getting the state approvals? Or if you could just give us a little color on the process from here and where you stand?

[C. Pickett, executive]

Yes. Dan and the team have identified likely transition partner and they're working through the process. Again, the timing is -- I'm hopeful that by the time we have our second quarter call, we can tell you where it landed, but we all know right now.

[Juan Sanabria, analyst]

And then just last one for me. You gave the adjusted FFO guidance, but how should we think about that as it relates to that adjusted FFO and any commentary you can give on when you'd expect the dividend to be covered?

[Robert O. Stephenson, executive]

Juan, so based on the assumptions in the forecast, I would assume that, that's going to run anywhere from $0.02 to $0.04 less per quarter based on the AFFO guidance. And there's possibility that based on -- given the range and what we see, but really timing to know that we could, on a run rate basis, cover the dividend in the late second quarter. But again, timing is the key there.

[Operator]

Our next question is from the line of Michael Carroll with RBC.

[Michael Carroll, analyst]

Now with regard to your investment outlook, should we assume that Omega is mainly targeting individual deals to achieve that 10% yield target. I know there are big -- or a few bigger portfolios out there. Is that something that you guys are going to kind of stay away from just given your current cost of capital?

[C. Pickett, executive]

It's -- I think that's a fair statement. Your bread-and-butter tends to be the singles and doubles. There are some relative -- there are some more sizable transactions in the U.K. that are hitting the pipeline. So you might see some stuff there. That's all 10. If you want to call us back and tell us the sizable ones we're not aware of here in the states we've...

[Michael Carroll, analyst]

And then with regard to Guardian, how long does it take for the approval process to go through. So if the tenant that you're talking to decides that they want to take the assets, how long does it take to get the regulatory approval before they can get in there?

[Daniel J. Booth, executive]

In the state that we're talking about 30 to 60 days, from the time that you file.

[Michael Carroll, analyst]

Okay. And then as Guardian kind of winds down, is there any chance that you can get a true up rent payment as the transition is completed and that operator kind of moves away?

[Daniel J. Booth, executive]

Not likely.

[Michael Carroll, analyst]

Okay. And then just last one. I believe in your prepared remarks when you were talking about guidance, you kind of implied that you think your guidance implies that Maplewood eventually returned back to full contractual rent. Was that a comment that, that could occur in 2024? Or was that just a general comment that, that will occur sometime in the future?

[C. Pickett, executive]

We are not -- we haven't finalized with the Maplewood team, their cash budgets for '24. But I think they're aspirational that by the end of the year, they can reach that target, but is definitely going into '25 will be there. Assuming nothing else happens -- unusual happens.

[Operator]

Our next question is from the line of Nick Yulico with Scotiabank.

[Nicholas Yulico, analyst]

Maybe a question for Bob. I was hoping to just get a kind of a walk on the balance sheet based on some of the activity you're assuming on asset sales. I wasn't sure if there's any more HUD repayment associated with those. And then you have sort of the cash that's earmarked it sounds like a lot for the bond maturity.

Just trying to understand like from a point in time where you guys are at from a cash available to invest into new acquisitions based on all that? And then how are you thinking about funding additional acquisitions, whether it's equity or debt?

[Robert O. Stephenson, executive]

There -- a lot of questions within that one. So let me try to address them all. So I'll start saying -- today, we're sitting with $440-plus-million worth of cash on the balance sheet. And yes, it's earmarked for the April 1 maturity of $400 million. However, if an acquisition comes up for us. And as I stated in my prepared remarks, we have over $1.4 billion in credit facility capacity to handle a combination either the debt repayment and/or future acquisitions.

We're also, as I stated in the assumptions that we're assuming that we will dispose the $94 million of assets held for sale. So that's additional cash to help us handle that maturity/acquisitions. Again, it's really -- it's going to be dependent on the pipeline from a capital funding standpoint, but I think we're well positioned just where the balance sheet sits today.

[Nicholas Yulico, analyst]

Okay. And then, I guess, second question is on some of the recent loan investments, whether it was the $50 million term loan or other loans. Were any of those -- is there a noncash interest portion of any of those recent loans? And maybe if you could also just break out on Page 3 of the sup, you guys do give all the buckets on the different loans. If there's any noncash interest income associated with any of those different loan investments you have.

[Daniel J. Booth, executive]

Certainly not on the new deals that we just did. I don't think there's a -- embedded in Page 3, but...

[C. Pickett, executive]

Yes. All the -- Nick, all the numbers that we're quoting for yields are all cash. There are a couple of loan deals where we have some upside opportunity if there's a refi for excess proceeds, but we don't include any of that in our yield calculation.

[Nicholas Yulico, analyst]

Okay. And then so just on Page 3 then all the interest income associated with the various loans you're saying is like 100% cash. I wasn't sure if there was any like pick component from any of these loans.

[Robert O. Stephenson, executive]

Yes. As you know, we have a few contracts out there, a few loans out there that has an okay component that as and I walked through in the past, they are still in place.

[Operator]

Our next question is from the line of Wes Golladay with Baird.

[Wesley Golladay, analyst]

I just have a quick question on the New York asset for Maplewood. Do you see that asset stabilizing by the end of next year? And then if you haven't handy, do you know how much EBITDA upside is that the asset?

[C. Pickett, executive]

Well, as I mentioned, we're still working through with the Maplewood management team, a revision of the cash flows there. But yes, I would think if you're talking about end of next year, end of '25, I think that's absolutely fair to assume it will be fully leased up. And the cash flow number is substantial, but they haven't finished their plans. So we're not prepared to talk about that today.

[Wesley Golladay, analyst]

Okay. And then looking at the held-for-sale assets, those mostly LaVie or would it be the 11 small operators that make up that 3.1% of total tenants?

[Robert O. Stephenson, executive]

So the held-for-sale assets -- it's some properties from one existing operator that we just carving out a few properties. And the second one is one portfolio that we're in the process of selling.

[Wesley Golladay, analyst]

Okay. So would that be part of that 3.1%, you did mention 11 operators are still working through would that, I guess, come down after you sell these assets?

[Robert O. Stephenson, executive]

Yes, there is one operator in that 3.1% that we will likely exit those assets and the 3.1% will go down.

[Operator]

Thank you. There are no further questions at this time. I would like to turn the floor back over to Taylor Pickett for closing comments.

[C. Pickett, executive]

Thanks for joining us this morning. We appreciate the time. Feel free to call the team if you have any follow-up questions.

[Operator]

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.