Skilled Nursing’s Moment: Omega’s Vikas Gupta on Strategy, RIDEA, and What’s Next

Vikas Gupta, chief investment officer of Omega Healthcare Investors, joins the NIC Chats podcast to explore why he believes it “feels like one of the best times” for skilled nursing and senior housing. Drawing on more than two decades in the industry, Gupta discusses occupancy and reimbursement tailwinds, lingering labor and staffing mandate pressures, and why it’s a good—if still challenging—time to be a skilled nursing operator or investor. 

He explains Omega’s shift into RIDEA for senior housing, why they are open to turnaround opportunities and “good bones” buildings, and how the team vets and “tiers” operators based on market fit, performance, and financial sophistication. The conversation also covers Omega’s capital structure, growth in UK care homes, selective development and replacement projects in the U.S. and Canada, and Gupta’s bullish but cautious outlook for 2026 as an energized sector moves further past COVID and into its next cycle. 

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Transcript

Lisa McCracken 0:02

Welcome everyone to the latest NIC Chats podcast. This is Lisa McCracken, the head of research and analytics with NIC, and I am excited to have Vikas Gupta with Omega Healthcare Investors with me today. Vikas, I'm going to let you say hello and tell everyone what you do at Omega and give a little bit of background on yourself.

Vikas Gupta 0:21

Yeah, thanks, Lisa, and thank you, NIC. As Lisa said, Vikas Gupta here. I am the chief investment officer of Omega Healthcare Investors. In that role, I oversee our portfolio and all the new investments that Omega makes. I've been with Omega now a little over 15 years, almost 16 years. I've been in the industry for 23 years. And I love senior housing and skilled nursing. If I can give a little bit about Omega, Lisa, that'd be helpful.

Lisa McCracken 0:50

Sure, yeah, go ahead. Yeah, and that background could be helpful because it's gonna shape some of what we're gonna talk about here. So go for it.

Vikas Gupta 0:56

Sure. Omega Healthcare Investors is a publicly traded REIT. Currently, our market cap is about 13 billion with the equity cap of about 18, 19 billion. We own nursing homes and senior housing and UK care homes. We're the third largest REIT in this sector. That's after Welltower and Ventas. Omega is always known to be more of the skilled nursing REIT. The majority of product is still skilled nursing. But if you break it down, about 60% of our revenue now comes from skilled nursing, and about 40% comes from non-skilled nursing, which is that senior housing and UK care homes at four.

Lisa McCracken 1:36

Yeah. So, and I want to come back to some of that in a little bit. But um, you know, you so you say 23 years, so you've seen a lot of ups and downs and cycles, and clearly right now there's a lot of focus on our sector in terms of there's a lot of momentum. Um, and and we'll talk a little separately about senior housing and skilled nursing and and so forth, but um generally folks are pretty bullish. I mean, definitely on the senior housing side of things. And I had someone say to me the other day, there's never been a better time to own skilled nursing. I think some would debate that, particularly the senior housing folks often say stay away from the skilled nursing. You guys obviously are very committed to it, but I'd love your take on that. Do you agree on terms of the bullish the demographics obviously are in our favor? But would love your take on that.

Vikas Gupta 2:24

Yeah, so first, a little disclaimer, Lisa. I work for a public company, so sometimes I'll be a politician. A little bit and we just had an earnings call last week, so I can at least give some quotes of things. Here, but even from my 23 years I've been in the industry, I would say it feels like one of the best times in the skilled space. It is an exciting time. Occupancy is at somewhat of an all-time high right now. Reimbursement is good, both federally, being Medicare and at the states, Medicaid. Um we're past the COVID issues, well past them now. And I just came back from a different conference, ECAP, which is very skilled nursing focused. And it it was crazy. People are so bullish. Now, skilled nursing always has its inherent risks, um, has a lot to do with government reimbursement, what states you're in. It's a tough business, but I do think there's a lot of good operators out there. And I wouldn't say necessarily it's the best time to get in, but it's a good time to be a skilled nursing operator or to be an investor in skilled nursing. This is, I don't want to talk too much in circles, but I will say if Omega tracks coverage of our nursing home objects, meaning NOI over their rent. And it's one of the things we always look at. In our of our own skilled nursing facilities, majority are skilled nursing, our coverage is currently 1.57. A really good coverage. We, in investor meetings, we get questions of like how high can that get. Right. I'll put it this way, by design, that has never gotten above two, nor do we think. And that's because this industry has been s it was privatized with government reimbursement. But I think the idea isn't to make people beyond wealth. So I think that is something that is always regulated and will always be, which makes this a tricky industry. It is a tough industry that you constantly need to watch that reimbursement and those regulations going on.

Lisa McCracken 4:23

Yeah, the operational expertise in general is elevated even more in the skilled nursing space. I mean, you know, senior housing overall, you know, has that elevated pressure on the skilled nursing space. Yeah, you mentioned COVID. We're definitely past that, you know, greater stability, but there are still some operational pressures, and I'm gonna bring up the labor. So I would love for you to comment, you know, where are we still seeing some pressure points? And you might say maybe less so on labor. I'd love for you to comment on where you're seeing any pressures on that front and and where it's impacting you or not.

Vikas Gupta 4:58

So it's still a pressure point, but I wouldn't say it's anywhere where it was. What was it called? The great staffing crisis. Um it's nothing like that anymore. We see it more in rural markets, yeah. We see it more in places in the skilled side, for example, there's staffing mandates in various states that the reimbursement doesn't cover the staffing. And you know, example of that is Pennsylvania, is very, very aggressive staffing mandates and rural PA that isn't paid for. And I hear stories from our operators where like A, there's no people there, B, we need to bus people in to hit the staffing mandates, C, we're not getting paid for it, so it doesn't work. So those are the stories we hear. I will say that they're spotty. Right, it isn't a crazy universal theme. People are finding the staff, and you know, the truth is a couple years ago, a lot of people had to just up their pay rates for everybody, get out of the agency, get out of things, and and to be honest, that noise has just died down a ton over the last I'd say six months to a year. Again, every so often you'll hear from an operator in a rural market. This is tough, we're struggling here, where I don't want that building because it is a tough rural market and I'm afraid of being out of staff, but sparse.

Lisa McCracken 6:18

Yeah, one of the things we do get asked sometimes how are people underrating labor these days? And I'm always curious to know you know, has has that changed in a post-COVID environment? And you always think has it going back to where we were, or is it just different?

Vikas Gupta 6:32

Yeah, I mean again, this underwriting's like a trick of its own in many days. We expect there to be wage increases year over year. What assumptions are you using? That's that that's kind of I'll leave that to each organization what they want to do. What we do, we it's not like it's staying flat. We know it needs to increase. The real question becomes is are revenues outpacing those increases? That's really the trick. And we are very conservative here at Omega of how we...

Lisa McCracken 6:59

Speaking of operational oversight. So many of your peers um have really been transitioning to their RIDEA structure. Um curious to know your your thoughts on that. I think you guys have had some movement in that direction.

Vikas Gupta 7:13

Yeah, this is the fun part. So we did have our earnings call last week, and I got to announce that we've also converted over to the RIDEA structure. Right, right. Um, and so we're probably one of the newest, latest folks who've done it. We've only done a few transactions. Those are only on what I would call senior housing. And when I say senior housing, I mean assisted living in memory care and independent living. We've done that, and I think that there's multiple reasons we're doing that. One, we're not scared of skilled nursing anymore. We like skilled nursing. We'll continue to do skilled nursing on a triple net basis. Buy them and lease them to co-operators. But to invest in senior housing, um no senior housing operator any longer wants to do a lease. Or most don't want any lease. I think this is a outcome. Um they don't want to take the downside risk, they'd rather just make promotes and incentives for performing well on behalf of the capital pro we it it takes a little bit of time for a REIT to get the infrastructure to do it. It took Omega about a year. And we spent that year trying to figure out how to do it, a lot of accounting work, a lot of legal work, but we've done it. So we've we've executed on a few deals, just a handful of honestly senior housing facilities. And really, Omega's approach is maybe different than other REITs. Other REITs look for very good stabilized facilities. Omega's looking for facilities that have turnaround opportunities.

Lisa McCracken 8:36

I was gonna ask you about that. Yeah. Yeah.

Vikas Gupta 8:38

So that is that's where we're focusing. If we find a a facility that we think doesn't have enough margin, we can put in a new manager to run it on our behalf. And they can turn it around to then ultimately get us a very good yield. And the idea is to get a yield that's comparable to what we would get, comparable or better to what we would get in our SNF investments that we gave to. So that it's there's a little bit of, you know, that might not be a forever thing, but that is our approach right now. It is hard to find products sometimes. So we're looking we're looking and looking, but we have found some. Um and then, you know, the next question that comes with, Are you buying crap? And it's like, no, we're not buying crap. We are trying to find facilities that have good bones, right? That are in good markets that were just undermanaged by a previous... so that brings me to another question.

Lisa McCracken 9:26

So that brings me to another question. Uh in a conversation recently, we're talking about a lot of the new capital coming into our space. So with you know, senior housing care being in the spotlight, that's great. And and we're gonna need capital to grow the space, but there's a lot of capital that doesn't know our sector. And sometimes they don't know how to select or vet operators. Sometimes it's an afterthought, they're in a transaction, they went and like, oh, I gotta pick an operator and and so forth. So you, I think mentioned earlier we we buy and lease to a good operator. How do you assess a good operator? I mean, that's tricky particular with turnarounds.

Vikas Gupta 10:01

It's a great question. So it sounds first, I don't want to speak to what other people are doing or not doing, but I actually do think we're really good. We've been doing we've even in our skilleds space, we've been choosing operators for 20 plus years here. We really take time to get to know them, to understand how they're operating, what they're doing in facilities they're currently in, and then on top of that, like what markets they're in and why they're good at it. So, what in this past year, when we were trying to build our infrastructure, we've also been building what I would call, I used this term the other day and got made fun of, a Rolodex of senior housing operators. Yeah, yeah, just just getting to know people and see like what's their styles. We don't have product for all of them now, but we built it, and to be honest, we put people on the A-list, the B list, and the C list. And of course, we're gonna want to grow with the A-list folks. And again, it really comes down to their infrastructure, their history, where they perform well. And again, this goes back to how we think about skilled nursing. Skilled nursing is very state-specific, market specific. Because every state's different, reimbursement and regulations. Because of that, Omega's always had a mantra that we're never gonna we're not taking West Coast operators and putting them in random East Coast buildings. But and so we've always been like, you know, we need we have a problem, we find a good operator within the state or a nearby state. We're actually taking the same approach on senior housing. We think it's similar. We think no, we're not merging skilled in senior housing, but we're trying to find senior housing operators that are already in those markets. Some of our peers, other investors, like one or two managers only, and they try to just expand those managers. That is not our approach, at least as of right now. But then that goes into something else. Omega's sourcing. Like you think everybody gets their deal sourced from the same place, like the market and you know what's being marketed and uh what's out there by brokers. Omega's biggest source of deals has always been operators. If uh operators tend to find deals sometimes off-mark, many times off-market, bring them to us. We're hoping the same thing happens on seniors housing. We built that rolodex for that reason. Um, hopefully the B's and the A's and the B's bring us the product, and that works out well, but that's our approach, and it you know, it also involves just your normal everyday stuff of going out to see their buildings, going out to see how they perform, the cleanliness, history. The and if they're and again, to be a RIDEA operator for a REIT, you do need to have a level of sophistication. I don't know if everybody always understands this, but they prepare our financials for us, and those financials go into our books. Right. I can still remember the day I told my chief accounting officer we're gonna do this. He's like, You're gonna have someone else his numbers merge into my numbers, like that. It is near and dear to our REIT, their numbers. So, so but it is something all REITs do, and you only do when you get comfortable with the infrastructure and the capabilities, especially on the financial side of the eshop.

Lisa McCracken 13:13

Right.

Vikas Gupta 13:13

So I think in itself, if you can produce financials, and it's a very quick turnaround round after a month that are good and quick. And I won't say the time period because every REIT kind of has a different time period, right? But if you can do that, you have a level of sophistication as an organization to begin with. Right, right. I mean, I've given that number to some people and they're like, yeah, I don't think we can. I mean, I'm like, and to be honest, it becomes almost like a non-starter in some ways.

Lisa McCracken 13:39

Yeah, and NIC's been working a lot in terms of you know, with our growth conference working with the small emerging operators and talking about you know, some of those those skills and things that you need to be competitive in that environment. One of those is being obviously the ability to generate some of those things quickly, you know, to be competitive with some of the people.

Vikas Gupta 13:58

I mean, when I was told the date, I was like, I don't think that's possible. But then I find out all t the REITS... So I go, all right, let's see if it's let's see if we can do it.

Lisa McCracken 14:07

Yeah, yeah. You know, as it relates to yeah, any of your acquisitions, you already commented about you know some of the off-the-market, you know, deals and so forth. And obviously that speaks to the relationships that you have. But you know, in terms of equity mix, debt, you know, any commentary on that, has that changed in recent years?

Vikas Gupta 14:25

And that's a good question, I mean, we're public, so it's not hard to look up. If you look at Omega, and I think this is pretty average for most REITs, yeah. I mean, we fund most things 50% equity, 50% debt. As a REIT, most of our debt at this time tends to be our bonds that we have, and we have an unsecured credit facility. So, and you know, you buy something quickly, that's one of the the perks of being a REIT. You have all this available capital. For example, Omega has a two billion dollar unsecured line of credit. We can draw on that at any time, close something, and then we we kind of backfill it with that type of leverage I just mentioned. Um, that's the general motto. That's how we underwrite. We will see if as things change, if HUD debt gets attractive, we might consider that. There's a lot of different things we would consider. Generally, if you look at like just our entire market gap, that's how we think of our leverage.

Lisa McCracken 15:15

Okay. You uh you mentioned the UK. You're obviously very active there. Talk about that. I mean, and I again I don't know the historical ratio of US versus UK, but I think you've grown a good bit even in recent years. You've done a lot of acquisitions there.

Vikas Gupta 15:31

Yeah, so I'm proud to say we own 2 billion US of product in the UK, which is 300 care homes. And so what's kind of fun about this story is we grew we started in the UK 11 years ago. And with one small investment, I think it was like 200 million. And we've grown the business as we've gone to know it, understand it. And we have some folks on the ground there now, and it's become a big part of our business. Um the comparison, just to go back, you know, when people ask how big are you going to grow your senior housing or RIDEA portfolio, we go, we don't know the answer to that, but we think it could be like the UK. Something we start out small in and understand it better and just keep growing as we as our capabilities improve or operators improve, we find better product. As for the UK itself, the product in the UK is known as a care home. It is, we like to say in simple terms, it's like some some folks in my team go if you put it a skilled nursing facility and a senior housing facility together, and they have a baby, it's called a care home. It is an interesting product where there is both nursing home and residential care in the same facility. There's also both private pay and government in the same it is it's a good product. It took us a while to learn it all. The government pay is known as local authority. And to be honest, some you know, now there's we have some other REITs that have gone out into the UK, including Welltower and Care Trust. Some folks don't want to touch the private, I'm sorry, the government pay. They want to stick with just the private pay. We're skilled nursing people, we learn government pay in the US, so we've learned government pay in the UK. And to be honest, it's a good system. It's uh it's more like a Medicaid system with different local authorities funding your money, and you just need to make sure that there's annual increases, it all tends to work, and all the money funnels up to a higher source. I will say, which which you may enjoy if you know nursing homes in the US, there's a couple big differences with the products. There is no rehab being done in care in the UK, it is still done in the hospitals. Also, one of the reasons why there is no there's wait lists to get into hospitals. Okay. We kind of joke. The UK is like behind the US in many cases. Yeah. Yeah. And we think there's improvements that could come, hopefully do come. We try to influence them. We don't have the most influence. But it that's one of those are some of the things we notice. But if you just going back to the good things, the demographics are very similar in the US. Yeah. Um, people are aging there. There's about 20,000 care homes in the UK. You can't just build all over each other. It's difficult. You have to get planning permissions to build. But it's a good, you just, you know, when how we invest is we look, we partner with good operators that know their markets, both national and local. And then the other thing that's now come to the UK and Omega's structure to do it is now RIDEA structures have come to the U K as well.

Lisa McCracken 18:29

Okay.

Vikas Gupta 18:30

And and we're excited. We haven't done a UK transaction in a RIDEA format yet, but we will. And um, and it's another way for us to continue to grow that business.

Lisa McCracken 18:39

Yeah, very cool, very cool. Okay, I'm gonna bring up the development topic. Sure. I was surprised to see recently Ensign talked about development, and you know, we're definitely in a drought and haven't seen a whole lot of skilled nursing development in particular. On your radar, I mean, you know, we feel like we're hearing ... somebody used the term trickles of it, chatter. Um yeah, what's your take on that?

Vikas Gupta 19:09

I don't know if you've listened to Ensign's entire call.

Lisa McCracken 19:50

I didn't.

Vikas Gupta 19:50

What they said was in one of our facilities in California, we partnered with our landlord Omega to develop out one of to develop out a parcel of land they had. And so I'm just I'm trying to partially answer your question. So when it comes to skilled nursing, I will say I think you would find this interesting, is that we're going to run into a supply issue at some point. And we don't know what's going to happen yet, but we're gonna run into a supply issue. California's a perfect example, and but California is also a very difficult place to build nursing homes.

Lisa McCracken 19:50

Yes, absolutely.

Vikas Gupta 19:52

So it is on our radar, but the problem is we can't just go build a nursing homes in California because A, it'll take us four years to build it. And the numbers don't make exact sense right now. But we actually want to help states if we understand if there's some tools to on how to build new facilities. One thing Omega has done and does continue to do is what we call replacement buildings.

Lisa McCracken 20:16

Yeah.

Vikas Gupta 20:17

When a nursing home is aged to the point where you can't do anything to help it, we will help our operators re- to replace that building and move those beds to another location. We have we probably we have two or three of those going on as we speak. That we're not scared of. Then the fun conversation comes to is senior housing. Um where I think everyone's token answers no no, we won't do it. We're not doing it. But I a couple things I think are interesting is Omega has this one relationship that most people know about. It's called Maplewood, it's a very high-end senior housing in the northeast of the U.S. 17 buildings, 18 buildings. We just opened a new building there with that relationship in March in Washington, DC. Brand new, beautiful building. Are we building anything else at this moment? No. But all 18 Maplewood buildings are ground, not all ground up, but they're all they're developed buildings. And like, and so we've done it. We're not scared of it, but we're gonna do what makes the most economic sense. Um we're and the other thing just to we did announce another development type of thing that we're doing, and you may not have heard this. We are now entered into a partnership with an operator in Canada to redevelop some of their products, and that is they call those long-term care, which is a nursing home effectively. But what's going on the Canadian government is supportive. It goes back to what we were talking about, SNFs in the US, if we can figure out a way. So we're we are we've entered into a venture to help redevelop long-term care homes in Canada. So I don't want to say that we are we're completely um scared of it, we're not. Well, we're gonna do it with calculated risk. That makes sense. Yeah. Right now, for our main senior housing growth platform, we're gonna try to find existing product. Yeah. But if somebody brings us a really good idea, it makes sense to us and we can risk adjust it, we will.

Lisa McCracken 22:17

We'll see what unfolds, yeah, in the coming years with that. And we're gonna need it and at certain some point, you know, we're gonna have to turn the corner on that front.

Vikas Gupta 22:25

So I'll be honest, I watch and I know a lot of senior housing developers people are developing. It's not like it's stopping happening. It's happening and it needs to happen. It's a little bit of it's a math equation of can you make it pencil for what your future rent will be? Like it doesn't really ... And some people can, some people believe in it, some people are trying to be a little bit more risk-averse. For sure.

Lisa McCracken 22:50

Final question. Just I always like to wrap up. Any final comments and just in terms of your outlook throughout '26 and final words of insights or wisdom to leave us with?

Vikas Gupta 23:03

At Omega, we're generally very bullish. We think that the sector is doing good, skilled, senior housing and the UK care home products. And so I know I I think it's an exciting year. I think we're I think things are going really good. I always say when things are going good, we're cautious because changes come. Right. In skilled, there's always government regulations, you never know what's gonna happen. Things pop up every day. A little bit of noise about private equity and REITs right now. We're watching those, we're not super scared of them. But no, generally I'm uh I'm excited. And um, we're excited in Omega. We think things are good, and we think that COVID helped get rid of a lot of bad actors. Right. And I think generally, like the industry's energized right now, and so are we.

Lisa McCracken 23:46

Yeah. Well, thanks for your time with me here today. And, thank you also for your participation as a NIC board member. You know, our volunteers and board members are very committed, so appreciate that very much.

Vikas Gupta 23:59

And so I should I should have said that as one of my titles, like a board member. Like I might maybe look for my full time job.

Lisa McCracken 24:06

And I saved it for the end well, also. Well, thank you all for listening, and um, you can always access more NIC Chat's podcasts at nic.org. Thank you all.