Omega Healthcare Investors (OHI) 8-K Adjusted Ffo of $0.27 Per Share for the Third Quarter

PRESS RELEASE - FOR IMMEDIATE RELEASE

OMEGA ANNOUNCES THIRD QUARTER 2005 FINANCIAL RESULTS AND

ADJUSTED FFO OF $0.27 PER SHARE FOR THE THIRD QUARTER

TIMONIUM, MARYLAND - October 27, 2005 - Omega Healthcare Investors, Inc. (NYSE:OHI) today announced its results of operations for the quarter ended September 30, 2005. The Company also reported Funds From Operations (“FFO”) available to common stockholders for the three months ended September 30, 2005 of $8.2 million or $0.16 per common share. The $8.2 million of FFO available to common stockholders for the quarter includes the impact of a $5.5 million non-cash provision for impairment and $0.3 million of non-cash restricted stock amortization expense. FFO is presented in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts (“NAREIT”). Adjusted FFO, which excludes the impact of the non-cash provision for impairment and the non-cash restricted stock amortization expense, was $0.27 per common share for the three months ended September 30, 2005. For more information regarding FFO, see “FFO Results” below.

GAAP NET INCOME

The Company reported net income of $5.1 million and $16.7 million for the three and nine month periods ending September 30, 2005, respectively. The Company also reported net income available to common stockholders of $2.6 million, or $0.05 per diluted common share, and operating revenues of $26.0 million for the three months ended September 30, 2005. This compares to net income available to common stockholders of $5.1 million, or $0.11 per diluted common share, and operating revenues of $21.2 million for the same period in 2004.

THIRD QUARTER 2005 RESULTS

Operating Revenues and Expenses - Operating revenues for the three months ended September 30, 2005 were $26.0 million. Operating expenses for the three months ended September 30, 2005 totaled $13.9 million, comprised of $6.2 million of depreciation and amortization expense, $2.0 million of general and administrative expenses, a non-cash provision for impairment of $5.5 million and $0.3 million of restricted stock amortization. The $5.5 million provision for impairment charge was recorded to reduce the carrying value of three facilities to their estimated fair value.

Other Expenses - Other expenses for the three months ended September 30, 2005 were $8.2 million and were comprised of $7.7 million of interest expense and $0.5 million of non-cash interest expense.

Funds From Operations - For the three months ended September 30, 2005, reportable FFO available to common stockholders was $8.2 million, or $0.16 per common share, compared to $10.5 million, or $0.22 per common share, for the same period in 2004. The $8.2 million of FFO for the quarter includes the impact of: i) $5.5 million of non-cash provision for impairment charges; and ii) $0.3 million of non-cash restricted stock amortization associated with the Company’s issuance of restricted stock grants to executive officers during 2004. However, when excluding the provision for impairment charge and the restricted stock amortization expense in 2005, as well as, certain other non-recurring expense items in 2004, adjusted FFO was $13.9 million, or $0.27 per common share, compared to $10.8 million, or $0.23 per common share, for the same period in 2004. For further information, see the attached “Funds From Operations” schedule and notes.

Asset Sales - On August 1, 2005, the Company sold 50.4 acres of undeveloped land, located in Ohio, for net cash proceeds of approximately $1 million. The sale resulted in an accounting gain of approximately $0.7 million.

On July 29, 2005, the Company received notice from AHC Properties, Inc. (“Alterra”) of its intent to exercise its option to purchase six assisted living facilities (“ALFs”) for approximately $20.4 million. The ALFs are currently leased to Alterra in a master lease with annual revenue of approximately $1.7 million. The closing of this transaction is scheduled for the fourth quarter of 2005, subject to closing conditions typical in real estate transactions. At September 30, 2005, the net book value of these facilities was approximately $15.4 million.

On June 23, 2005, a $1.0 million deposit related to an agreement to sell a skilled nursing facility (“SNF”) in Florida was received into escrow on the Company’s behalf. On July 26, 2005, an additional $0.5 million deposit was received into escrow. The purchase price of the facility is $14.5 million. The closing is scheduled for the fourth quarter of 2005. The due diligence period has expired and the deposits are not refundable unless the Company breaches its obligations under the purchase agreement. At September 30, 2005, the net book value of the facility was approximately $8.2 million.

DIVIDENDS

Common Dividends - On October 18, 2005, the Company’s Board of Directors announced a common stock dividend of $0.22 per share to be paid November 15, 2005 to common stockholders of record on October 31, 2005. At the date of this release, the Company had approximately 51 million outstanding common shares.

Series D Preferred Dividends - On October 18, 2005, the Company’s Board of Directors declared the regular quarterly dividends for its 8.375% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) to stockholders of record on October 31, 2005. The stockholders of record of the Series D Preferred Stock on October 31, 2005 will be paid dividends in the amount of $0.52344 per preferred share on November 15, 2005. The liquidation preference for the Company’s Series D Preferred Stock is $25.00 per share. Regular quarterly preferred dividends for the Series D Preferred Stock represent dividends for the period August 1, 2005 through October 31, 2005.

2005 ADJUSTED FFO GUIDANCE AFFIRMED

The Company affirmed its guidance for 2005 adjusted FFO available to common stockholders to $1.04 per common share.

The Company's adjusted FFO guidance (and related GAAP earnings projections) for 2005 excludes the future impacts of gains and losses on the sales of assets, additional divestitures, certain one-time revenue and expense items, capital transactions, and restricted stock amortization expense.

Reconciliation of the adjusted FFO guidance to the Company's projected GAAP earnings is provided on a schedule attached to this Press Release. The Company may, from time to time, update its publicly announced FFO guidance, but it is not obligated to do so.

The Company's adjusted FFO guidance is based on a number of assumptions, which are subject to change and many of which are outside the control of the Company. If actual results vary from these assumptions, the Company's expectations may change. There can be no assurance that the Company will achieve these results.

CONFERENCE CALL

The Company will be conducting a conference call on Thursday, October 27, 2005, at 10 a.m. EDT to review the Company’s 2005 third quarter results and current developments. To listen to the conference call via webcast, log on to www.omegahealthcare.com and click the “earnings call” icon on the Company’s home page. Webcast replays of the call will be available on the Company’s website for two weeks following the call.

* * * * * *

The Company is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. At September 30, 2005, the Company owned or held mortgages on 216 SNFs and ALFs with approximately 22,407 beds located in 28 states and operated by 38 third-party healthcare operating companies.

FOR FURTHER INFORMATION, CONTACT

Bob Stephenson, CFO at (410) 427-1700

________________________

This announcement includes forward-looking statements. All forward-looking statements included herein are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Such forward-looking statements should be regarded solely as reflections of the Company’s current operating plans and estimates. Statements regarding future events and developments and the Company’s future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, the Private Securities Litigation Reform Act of 1995 or in releases by the Securities and Exchange Commission, all of which may be amended from time to time. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. Actual results may differ materially from those reflected in such forward-looking statements as a result of a variety of factors, including, among other things: (i) uncertainties relating to the business operations of the operators of the Company’s properties, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels; (ii) regulatory and other changes in the healthcare sector, including without limitation, changes in Medicare reimbursement; (iii) changes in the financial position of the Company’s operators; (iv) the ability of operators in bankruptcy to reject unexpired lease obligations, modify the terms of the Company’s mortgages, and impede the ability of the Company to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor's obligations; (v) the availability and cost of capital; (vi) competition in the financing of healthcare facilities; and (vii) other factors identified in the Company’s filings with the Securities and Exchange Commission.

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,			December 31,
	2005			2004
		(Unaudited)
ASSETS
Real estate properties
Land and buildings at cost	$	869,382		$	808,574
Less accumulated depreciation		(151,410	)		(153,379	)
Real estate properties - net		717,972			655,195
Mortgage notes receivable - net		43,506			118,058
		761,478			773,253
Other investments - net		25,270			29,699
		786,748			802,952
Assets held for sale - net		23,624			—
Total investments		810,372			802,952
Cash and cash equivalents		768			12,083
Accounts receivable - net		4,778			5,582
Other assets		12,992			12,733
Operating assets for owned properties		—			213
Total assets	$	828,910		$	833,563
LIABILITIES AND STOCKHOLDERS’ EQUITY
Revolving line of credit	$	80,700		$	15,000
Unsecured borrowings		360,000			360,000
Premium on unsecured borrowings		1,219			1,338
Other long-term borrowings		2,800			3,170
Accrued expenses and other liabilities		22,294			21,067
Operating liabilities for owned properties		374			508
Total liabilities		467,387			401,083
Stockholders’ equity:
Preferred stock		118,488			168,488
Common stock and additional paid-in-capital		601,336			597,780
Cumulative net earnings		207,694			191,013
Cumulative dividends paid		(522,206	)		(480,292	)
Cumulative dividends - redemption		(43,067	)		(41,054	)
Unamortized restricted stock awards		(1,452	)		(2,231	)
Accumulated other comprehensive loss		730			(1,224	)
Total stockholders’ equity		361,523			432,480
Total liabilities and stockholders’ equity	$	828,910		$	833,563

OMEGA HEALTHCARE INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
Revenues
Rental income	$	23,962		$	17,201		$	67,862		$	49,742
Mortgage interest income		1,221			3,224			4,417			9,926
Other investment income - net		670			597			1,778			1,757
Miscellaneous		141			202			4,453			623
Total operating revenues		25,994			21,224			78,510			62,048
Expenses
Depreciation and amortization		6,230			4,858			18,052			14,393
General and administrative		1,950			1,947			5,614			5,733
Restricted stock expense		285			279			856			279
Provisions for impairment on real estate properties		5,454			-			9,154			-
Provisions for uncollectible mortgages, notes and accounts receivable		-			-			83			-
Leasehold expiration expense		-			-			750			-
Total operating expenses		13,919			7,084			34,509			20,405
Income before other income and expense		12,075			14,140			44,001			41,643
Other income (expense):
Interest and other investment income		25			7			90			103
Interest		(7,709	)		(5,873	)		(21,431	)		(16,319	)
Interest - amortization of deferred financing costs		(539	)		(479	)		(1,570	)		(1,359	)
Interest - refinancing costs		-			-			-			(19,106	)
Provisions for impairment on equity securities		-			-			(3,360	)		-
Owned and operated professional liability claims		-			-			-			(3,000	)
Adjustment of derivatives to fair value		-			-			-			256
Total other expense		(8,223	)		(6,345	)		(26,271	)		(39,425	)
Income from continuing operations		3,852			7,795			17,730			2,218
Gain (loss) from discontinued operations		1,267			847			(1,049	)		2,063
Net income		5,119			8,642			16,681			4,281
Preferred stock dividends		(2,481	)		(3,559	)		(8,904	)		(12,248	)
Preferred stock conversion and redemption charges		-			-			(2,013	)		(41,054	)
Net income (loss) available to common	$	2,638		$	5,083		$	5,764		$	(49,021	)
Income (loss) per common share:
Basic:
Income (loss) from continuing operations	$	0.03		$	0.09		$	0.13		$	(1.14	)
Net income (loss)	$	0.05		$	0.11		$	0.11		$	(1.09	)
Diluted:
Income (loss) from continuing operations	$	0.03		$	0.09		$	0.13		$	(1.14	)
Net income (loss)	$	0.05		$	0.11		$	0.11		$	(1.09	)
Dividends declared and paid per common share	$	0.22		$	0.18		$	0.63		$	0.53
Weighted-average shares outstanding, basic		51,187			46,552			51,050			44,798
Weighted-average shares outstanding, diluted		51,479			47,134			51,386			44,798
Components of other comprehensive income:
Net income	$	5,119		$	8,642		$	16,681		$	4,281
Unrealized gain (loss) on investments and hedging contracts		730			(708	)		730			2,015
Total comprehensive income	$	5,849		$	7,934		$	17,411		$	6,296

OMEGA HEALTHCARE INVESTORS, INC.

FUNDS FROM OPERATIONS

Unaudited

(In thousands, except per share amounts)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2005			2004		2005			2004
Net income (loss) available to common stockholders	$	2,638		$	5,083	$	5,764		$	(49,021	)
Add back loss (deduct gain) from real estate dispositions		(710	)		—		3,492			488
Sub-total		1,928			5,083		9,256			(48,533	)
Elimination of non-cash items included in net income (loss):
Depreciation and amortization		6,275			5,394		19,068			16,005
Funds from operations available to common stockholders	$	8,203		$	10,477	$	28,324		$	(32,528	)
Weighted-average common shares outstanding, basic		51,187			46,552		51,050			44,798
Effect of restricted stock awards		111			3		73			3
Assumed exercise of stock options		181			579		263			733
Weighted-average common shares outstanding, diluted		51,479			47,134		51,386			45,534
Fund from operations per share available to common stockholders	$	0.16		$	0.22	$	0.55		$	(0.73	)
Adjusted funds from operations:
Funds from operations available to common stockholders	$	8,203		$	10,477	$	28,324		$	(32,528	)
Deduct/add legal settlements		—			—		—			3,000
Deduct adjustment of derivatives to fair value		—			—		—			(256	)
Deduct revenue from prepayment penalty/administration fee		—			—		(4,059	)		—
Add back restricted stock amortization expense		285			279		856			279
Add back non-cash preferred stock conversion/redemption charges		—			—		2,013			41,054
Add back credit facility exit fee		—			—		—			6,378
Add back leasehold expiration expense		—			—		750			—
Add back non-cash provision for impairments on real estate properties		5,454			—		9,154			—
Add back non-cash provision for impairments on equity securities		—			—		3,360			—
Add back provisions for uncollectible mortgages, notes and accounts receivable		—			—		83			—
Add back write-off of deferred financing charges		—			—		—			12,728
Adjusted funds from operations available to common stockholders	$	13,942		$	10,756	$	40,481		$	30,655

This press release includes Funds From Operations, or FFO, which is a non-GAAP financial measure. For purposes of the Securities and Exchange Commission’s (“SEC”) Regulation G, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable financial measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows (or equivalent statements) of the company, or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable financial measure so calculated and presented. As used in this press release, GAAP refers to generally accepted accounting principles in the United States of America. Pursuant to the requirements of Regulation G, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

We calculate and report FFO in accordance with the definition and interpretive guidelines issued by the National Association of Real Estate Investment Trusts ("NAREIT"), and consequently, FFO is defined as net income available to common stockholders, adjusted for the effects of asset dispositions and certain non-cash items, primarily depreciation and amortization. FFO available to common stockholders is further adjusted for the effect of restricted stock awards and the exercise of in-the-money stock options. We believe that FFO is an important supplemental measure of our operating performance. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), 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. The term FFO was designed by the real estate industry to address this issue. FFO herein is not necessarily comparable to FFO of other real estate investment trusts, or REITs, that do not use the same definition or implementation guidelines or interpret the standards differently from the Company.

Adjusted FFO is calculated as FFO available to common stockholders less one-time revenue and expense items. The Company believes that adjusted FFO provides an enhanced measure of the operating performance of the Company’s core portfolio as a REIT. The Company's computation of adjusted FFO is not comparable to the NAREIT definition of FFO or to similar measures reported by other REITs, but the Company believes it is an appropriate measure for this Company.

The Company uses FFO as one of several criteria to measure operating performance of our business. The Company further believes that by excluding the effect of depreciation, amortization 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, FFO can facilitate comparisons of operating performance between periods and between other REITs. The Company offers this measure to assist the users of our financial statements in analyzing our performance; however, this is not a measure of financial performance under GAAP and 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 the Company’s securities should not rely on this measure as a substitute for any GAAP measure, including net income.

In February 2004, NAREIT informed its member companies that it was adopting the position of the SEC with respect to asset impairment charges and would no longer recommend that impairment write-downs be excluded from FFO. In the tables included in this press release, we have applied this interpretation and have not excluded asset impairment charges in calculating our FFO. As a result, our FFO may not be comparable to similar measures reported in previous disclosures. According to NAREIT, there is inconsistency among NAREIT member companies as to the adoption of this interpretation of FFO. Therefore, a comparison of our FFO results to another company's FFO results may not be meaningful.

The following table presents a range of the Company’s projected FFO per common share for 2005:

Per diluted share:
Net income available to common stockholders	$	0.32
Adjustments:
Depreciation and amortization		0.48
Funds from operations available to common stockholders	$	0.80
Adjustments:
Provision for impairment on real estate properties		0.18
Provision for impairment on equity securities		0.06
Lease expiration expense accrual		0.01
Provision for uncollectible notes receivable		0.00
One-time revenue items		(0.08	)
Restricted stock expense		0.02
Series B preferred stock redemption		0.04
Adjusted funds from operations available to common stockholders	$	1.04

The following table summarizes the results of operations of facilities sold or held for sale during the three and nine months ended September 30, 2005 and 2004, respectively.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005			2004
	(In thousands)				(In thousands)
Revenues
Rental income	$	602	$	1,371	$	3,434		$	4,122
Other income		—		12		24			41
Subtotal revenues		602		1,383		3,458			4,163
Expenses
Depreciation and amortization		45		536		1,015			1,612
Subtotal expenses		45		536		1,015			1,612
Income before loss on sale of assets		557		847		2,443			2,551
Gain (loss) on assets sold - net		710		—		(3,492	)		(488	)
Gain (loss) from discontinued operations	$	1,267	$	847	$	(1,049	)	$	2,063

The following tables present selected portfolio information, including operator and geographic concentrations and revenue maturities, for the period ending September 30, 2005.

Portfolio Composition ($000's)
Balance Sheet Data	# of Properties	# Beds		Investment	% Investment
Real Property	188	20,172	$	893,006	95	%
Loans Receivable	28	2,235		43,506	5	%
Total Investments	216	22,407	$	936,512	100	%
Investment Data	# of Properties	# Beds		Investment	% Investment			Investment per Bed
Skilled Nursing Facilities	202	21,686	$	882,440	94	%	$	41
Assisted Living Facilities	12	551		30,637	3	%		56
Rehab and LTAC Hospitals	2	170		23,435	3	%		138
	216	22,407	$	936,512	100	%	$	42

Revenue Composition ($000's)
Revenue by Investment Type	Three Months Ended					Nine Months Ended
	September 30, 2005					September 30, 2005
Rental Property	$	23,962		93	%	$	67,862		92	%
Mortgage Notes		1,221		5	%		4,417		6	%
Other Investment Income		670		2	%		1,778		2	%
	$	25,853		100	%	$	74,057		100	%
Revenue by Facility Type	Three Months Ended					Nine Months Ended
	September 30, 2005					September 30, 2005
Assisted Living Facilities	$	705		3	%	$	2,275		3	%
Skilled Nursing Facilities		24,478		95	%		70,004		95	%
Other		670		2	%		1,778		2	%
	$	25,853		100	%	$	74,057		100	%
Operator Concentration ($000's)
Concentration by Investment		# of Properties		Investment			% Investment
Sun Healthcare Group, Inc.		30	$	149,958			16	%
Advocat, Inc.		33		104,417			11	%
Guardian		16		80,200			9	%
Essex		13		79,354			8	%
CommuniCare		8		76,642			8	%
Remaining Operators		116		445,941			48	%
		216	$	936,512			100	%
Geographic Concentration ($000's)
Concentration by Region		# of Properties		Investment			% Investment
South		90	$	381,097			41	%
Midwest		65		238,447			25	%
Northeast		29		188,344			20	%
West		32		128,624			14	%
		216	$	936,512			100	%

Concentration by State	# of Properties		Investment		% Investment
Ohio		27	$	162,667		17	%
Florida		19		119,851		13	%
Pennsylvania		16		101,090		11	%
California		18		63,721		7	%
Texas		18		59,304		6	%
Remaining States		118		429,879		46	%
		216	$	936,512		100	%

Revenue Maturities ($000's)
Operating Lease Expirations & Loan Maturities	Year			Current Lease Revenue (1)			Current Interest Revenue (1)			Lease and Interest Revenue		%
		2005		$	1,260		$	-		$	1,260		1.3	%
		2006			-			3,051			3,051		3.1	%
		2007			363			145			508		0.5	%
		2008			877			-			877		0.9	%
		2009			445			-			445		0.5	%
		Thereafter			88,726			2,897			91,623		93.7	%
				$	91,671		$	6,093		$	97,764		100	%
Note: (1) Based on '05 contractual rents & interest (no annual escalators)
Selected Facility Data
TTM ending 6/30/05										Coverage Data
				% Payor Mix							Before		After
		Census			Private			Medicare			Mgmt. Fees		Mgmt. Fees
All Healthcare Facilities		81.7	%		11.8	%		12.7	%		1.9 x		1.4 x

The following tables present selected financial information, including leverage and interest coverage ratios, as well as a debt maturity schedule for the period ending September 30, 2005.

Current Capitalization ($000's)
	Outstanding Balance*			%
Borrowings Under Bank Lines	$	80,700			10	%
Long-Term Debt Obligations		362,800			45	%
Stockholder's Equity		361,523			45	%
Total Book Capitalization	$	805,023			100	%
*Excludes premium of $1.2 million from sale on October 29, 2004 of $60 million of 7.00% Notes due 2014.
Leverage & Performance Ratios
Debt / Total Book Cap		55	%
Debt / Total Market Cap		35	%
Interest Coverage:
Third quarter 2005		2.92 x

Debt Maturities ($000's)			Secured Debt
	Year		Lines of Credit (1)		Other		Senior Notes		Total
		2005	$	-	$	-	$	-	$	-
		2006		-		-		-		-
		2007		-		-		100,000		100,000
		2008		200,000		-		-		200,000
		Thereafter		-		2,800		260,000		262,800
			$	200,000	$	2,800	$	360,000	$	562,800
Note: (1) Reflected at 100% capacity.

The following table presents investment activity for the three- and nine-month periods ending September 30, 2005.

Investment Activity ($000's)
	Three Months Ended					Nine Months Ended
	September 30, 2005					September 30, 2005
	$ Amount		%			$ Amount		%
Funding by Investment Type:
Real Property	$	-		0	%	$	117,200		100	%
Mortgages		-		0	%		-		0	%
Other		-		0	%		-		0	%
Total	$	-		0	%	$	117,200		100	%