Omega Healthcare Investors, a real estate investment trust, announced in late September that it will move to a cash-basis accounting method for tenants Genesis HealthCare and Signature HealthCARE.
The move comes as the two firms expressed “doubt regarding their ability to continue as a going concern” in relation to uncertainty around future cash flows caused by the COVID-19 pandemic.
Similarly, Irvine, CA-based Sabra Health Care REIT days later revealed that it and its auditors were examining their accounting practices related to Genesis and Signature and may transition them to a cash-basis accounting method of rental revenue.
Omega reported that it expects to write down approximately $140 million in straight-line receivables and lease inducements in the third quarter as a result. In addition, the firm will also be recording an impairment estimated at $28 million, related to the uncollateralized portion of a loan to Signature.
“Based on our continuing dialogue with both companies, we are hopeful that ongoing government support and a return to pre-pandemic resident occupancies will provide them with the liquidity needed to meet all of their future Omega financial obligations,” Taylor Pickett, CEO of Omega, said.
Sabra said it would write off approximately $14.4 million of straight-line rental receivables and lease-related intangible assets if it needs to transition the leases with these tenants to cash-basis accounting. The firm expects to complete its evaluation during its third-quarter reporting cycle.
“While we understand the reasoning for the going concern disclosures for Genesis and Signature given the uncertainty of the operating environment, we are encouraged by the recent positive occupancy trends we see in our skilled nursing/transitional care portfolio and the continued government support for this vitally important component of healthcare delivery,” said Sabra CEO and Chairman Rick Matros.
From the November 2020 Issue of McKnight's Long-Term Care News
