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DERIVATIVES AND HEDGING

6 Months Ended

Jun. 30, 2025

DERIVATIVES AND HEDGING [Abstract]

DERIVATIVES AND HEDGING

NOTE 16 – DERIVATIVES AND HEDGING

We are exposed to, among other risks, the impact of changes in foreign currency exchange rates as a result of our investments in the U.K. and interest rate risk related to our capital structure. As a matter of policy, we do not use derivatives for trading or speculative purposes. Our risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes foreign currency forward contracts, interest rate swaps and debt issued in foreign currencies to offset a portion of these risks. As of June 30, 2025, we have 11 interest rate swaps with $428.5 million in notional value and four interest rate caps with £190.0 million in notional value. The swaps and the majority of the caps are designated as cash flow hedges of the interest payments on two of Omega’s variable interest loans. Additionally, we have 11 foreign currency forward contracts with £258.0 million in notional value issued at a weighted average GBP-USD forward rate of 1.2899 that are designated as net investment hedges.

During the second quarter of 2025, we terminated one interest rate swap with $50.0 million of notional value and paid our swap counterparty $0.5 million in connection with the repayment of the OP Term Loan.

On March 27, 2020, we entered into five forward starting swaps totaling $400 million, indexed to 3-month LIBOR, that were issued at a weighted average fixed rate of approximately 0.8675% and were subsequently designated as cash flow hedges of interest rate risk associated with interest payments on a forecasted issuance of fixed rate long-term debt, initially expected to occur within the next five years. The swaps had an effective date of August 1, 2023 and an expiration date of August 1, 2033. In conjunction with the October 2020 issuance of $700 million of 3.375% Senior Notes due 2031 (the “2031 Senior Notes”) and the March 2021 issuance of $700 million aggregate principal amount of our 3.25% Senior Notes due 2033 (the “2033 Senior Notes”), we applied hedge accounting for these five forward starting swaps and began amortization. Simultaneously, we re-designated these swaps in new cash flow hedging relationships of interest rate risk associated with interest payments on another forecasted issuance of long-term debt. We were hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 46 months (excluding forecasted transactions related to the payment of variable interest on existing financial instruments). As a result of these transactions, the aggregate unrealized gain of $41.2 million ($9.5 million gain related to the 2031 Senior Notes issuance and $31.7 million gain related to the 2033 Senior Notes issuance) included within accumulated other comprehensive income at the time of the Senior Notes issuances is being ratably reclassified as a reduction to interest expense, net over 10 years. On May 30, 2023, the five forward starting swaps were terminated, and Omega received a net cash settlement of $92.6 million from the swap counterparties. The incremental $51.4 million of gains related to the forward swaps, recorded in accumulated other comprehensive income, were frozen at the time of termination and will be recognized ratably over 10 years in earnings when the next qualifying debt issuance occurs. The $600 million of 2030 Senior Notes that were issued in June 2025, as discussed further in Note 15 – Borrowing Activities and Arrangements, were determined to be a qualifying issuance, and amortization of the $51.4 million began as of the issuance date of the 2030 Senior Notes. The amortization is recorded as a reduction to interest expense.

The location and fair value of derivative instruments designated as hedges, at the respective balance sheet dates, were as follows:


	June 30,			December 31,
	2025			2024

Cash flow hedges:	(in thousands)
Other assets	$	10		$	381
Accrued expenses and other liabilities	$	5,304		$	554

Net investment hedges:
Other assets	$	—		$	8,434
Accrued expenses and other liabilities	$	15,775		$	—

The fair value of the interest rate swaps and foreign currency forwards is derived from observable market data such as yield curves and foreign exchange rates and represents a Level 2 measurement on the fair value hierarchy.

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency exchange swap agreements to reduce the effects of currency exchange rate fluctuations between the USD, our reporting currency, and GBP. These derivative contracts generally mature within one year and are not designated as hedge instruments for accounting purposes. As the currency exchange swap is not accounted for as a hedging instrument, the change in fair value is recorded in earnings through other income – net in the Consolidated Statements of Operations.

In connection with funding a $344.2 million acquisition in the U.K. (see Note 2 – Real Estate Assets), in April 2025, Omega entered a GBP/USD currency forward with a notional value of £90.0 million and a GBP-USD forward rate of 1.2733. The swap was settled on the closing date of the acquisition, and we recorded a $5.2 million gain from its termination within other income – net in the Consolidated Statements of Operations for the three months ended June 30, 2025.