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Omega Announces 2003 Financial Results and FFO of $0.20 Per Share for the Fourth Quarter

TIMONIUM, Md.--Jan. 2, 20049, 2004--Omega Healthcare Investors, Inc. today announced its results of operations for the quarter and fiscal year ended December 31, 2003. The Company also reported Funds From Operations ("FFO") on a diluted basis for the three months ended December 31, 2003 of $11.0 million or $0.20 per common share and $43.9 million or $0.80 per common share, respectively. The $43.9 million of FFO for the year excludes the impact of $8.9 million of non-cash impairment charges in accordance with the guidelines for the calculation and reporting of FFO issued by the National Association of Real Estate Investment Trusts ("NAREIT"). At December 31, 2003, the Company had 55.5 million diluted shares outstanding.

GAAP NET INCOME

After adjusting for the loss from discontinued operations of ($2.1) million for the three months ended December 31, 2003, the Company reported net income available to common stockholders of $154 thousand or $0.00 per fully diluted common share on revenues of $20.8 million. This compares to a net loss of ($15.7) million or ($0.42) per fully diluted common share for the same period in 2002. A breakout of discontinued operations is included in a schedule attached to this Press Release.

After adjusting for the loss from discontinued operations of ($0.3) million for the twelve months ended December 31, 2003, the Company reported net income available to common stockholders of $2.9 million or $0.08 per diluted common share on revenues of $86.3 million. This compares to a net loss of ($34.8) million or ($1.00) per diluted common share in 2002.

FOURTH QUARTER AND YEAR END RESULTS

Revenues, excluding nursing home revenues of owned and operated assets and one-time revenue items, for the three- and twelve-month periods ended December 31, 2003, totaled $20.8 million and $84.1 million, respectively, a decrease of $3.1 million over the same periods in 2002. The decreases were primarily the result of operator restructurings during 2003, slightly offset by contractual lease escalations.

Expenses for the three and twelve months ended December 31, 2003 were $12.7 million and $63.6 million, respectively, versus $29.6 million and $139.9 million for the same periods in 2002. When excluding nursing home expenses of owned and operated assets, expenses were $12.7 million and $62.1 million, respectively, for the three and twelve months ended December 31, 2003 versus $20.7 million and $76.1 million for the same periods in 2002. The $8.0 million favorable decrease in expenses for the three-month period resulted from a $7.0 million refinancing expense and a $1.0 million provision for impairment, both taken in the fourth quarter of 2002. The $14.0 million favorable annual decrease for 2003 primarily resulted from $4.0 million in reduced interest expense, $0.9 million in reduced general, administrative and legal expenses, as well as the $7.0 million refinancing expense and the $8.8 million provisions for uncollectible notes and accounts receivable recorded in 2002. This favorable annual decrease was partially offset by $8.9 million of impairment provisions taken in the first quarter and third quarter of 2003.

Nursing home expenses, net of nursing home revenues, for owned and operated assets for the three and twelve months ended December 31, 2003 were $9 thousand and $1.5 million, a decrease of $5.4 million and $18.0 million from the same periods in 2002. The decrease was primarily a result of the decrease in the number of owned and operated facilities from 33 at December 31, 2001, three at December 31, 2002 to one at December 31, 2003.

For the twelve months ended December 31, 2003, the Company recorded provisions for impairment totaling $8.9 million. The provisions were taken in the first quarter and third quarter of 2003. The provisions reduced the carrying value of two facilities in the process of being closed to their estimated fair value less costs to dispose. The buildings are being actively marketed for sale; however, there can be no assurance if, or when, such sales will be completed or whether such sales will be completed on terms that allow the Company to realize the carrying value of the assets.

During the three-month period ended December 31, 2003, the Company sold one leased facility, four closed facilities and the remaining facility which was classified as asset held for sale in six separate transactions. The Company realized proceeds of approximately $10.7 million, net of closing costs and other expenses, resulting in a loss of approximately $3.0 million. The Company also sold its investment in Principal Healthcare Finance Trust realizing proceeds of approximately $1.5 million, net of closing costs, resulting in a gain of approximately $0.1 million.

The Company believes that presentation of the Company's revenues and expenses, excluding nursing home owned and operated assets, provides a useful measure of the operating performance of the Company's core portfolio as a Real Estate Investment Trust ("REIT") in view of the disposition of all but one of the Company's owned and operated assets. For 2003, nursing home revenues, nursing home expenses, operating assets and operating liabilities for the Company's owned and operated properties are shown on a net basis on the face of the Company's consolidated financial statements. For 2002, nursing home revenues, nursing home expenses, operating assets and operating liabilities for the Company's owned and operated properties are shown separately on a gross basis on the face of the Company's consolidated financial statements.

FFO RESULTS

For the three and twelve months ended December 31, 2003, reportable diluted FFO was $11.0 million or $0.20 per share and $43.9 million or $0.80 per share, respectively, compared to $2.0 million (diluted loss of $0.02 per share) and $8.9 million (diluted loss of $0.05 per share) for the same periods in 2002 due to the factors mentioned above. The $43.9 million of FFO excludes the impact of $8.9 million of non-cash impairment charges in accordance with the guidelines for the calculation and reporting of FFO issued by NAREIT. For further information, see the attached "Funds From Operations" schedule and notes.

PORTFOLIO DEVELOPMENTS

Sun Healthcare Group, Inc. ("Sun"). Effective January 1, 2004, the Company re-leased five skilled nursing facilities ("SNFs") to an existing operator under a new Master Lease, which has a five-year term and has an initial annual lease rate of $0.75 million. Four SNFs formerly leased by Sun, three located in Illinois and one located in Indiana, representing 449 total beds, were part of this transaction. The fifth SNF in the transaction, located in Illinois, representing 128 beds, was the last remaining owned and operated facility in the Company's portfolio.

Also on December 1, 2003 the Company re-leased one SNF, formerly leased by Sun, located in California and representing 59 beds, to a new operator under a lease, which has a ten-year term and has an initial annual lease rate of $0.12 million.

As a result of the above-mentioned transitions of the five former Sun facilities, Sun now operates 35 of the Company's facilities, down from 51 facilities one year ago. On January 26, 2004, Sun and the Company jointly announced that they have reached an agreement in principle regarding the 51 properties owned by the Company that were leased to various affiliates of Sun. The agreement in principle has been memorialized in a non-binding term sheet, pursuant to which, among other things, Sun will continue to operate and occupy 23 long-term care facilities, five behavioral properties and two hospital properties. One property in the State of Washington, formerly operated by a Sun affiliate, has already been closed and the lease relating to that property will be terminated. With respect to the remaining 20 facilities, 15 have already been transitioned to new operators and five are in the process of being transferred to new operators. The non-binding term sheet executed by Sun and Omega anticipates execution and delivery of a new Master Lease with the following general terms:

-- Term: Through December 31, 2013

-- Base Rent: Commencing February 1, 2004, monthly base rent will be $1,560,190, subject to annual increases not to exceed 2.5% per year.

-- Deferred Base Rent: $7,761,000, representing a portion of the Base Rent that has not and will not be paid by Sun under the current leases (the "Deferred Base Rent"), will be deferred and shall bear interest at a floating rate with a floor of 6% per annum. That interest shall accrue but shall not be payable to Omega through January 3, 2008. Interest thereafter accruing shall be paid monthly. Omega is releasing all other claims for Base Rent which otherwise would be due under the current leases.

-- Conversion of Deferred Base Rent: Omega will have the right at any time to convert the Deferred Base Rent into 800,000 shares of Sun's common stock, subject to certain non-dilution provisions and the right of Sun to pay cash in an amount equal to the value of that stock in lieu of issuing stock to Omega. If the value of the common stock exceeds 140% of the Deferred Base Rent, Sun may require Omega to convert the Deferred Base Rent.

Claremont Healthcare Holdings, Inc. ("Claremont"). Effective December 1, 2003, the Company sold one SNF formerly leased by Claremont, located in Illinois and representing 150 beds, for $9.0 million. The Company received net proceeds of approximately $6.0 million in cash and a $3.0 million, five-year, 10.5% secured note for the balance. This transaction results in a non-cash, non-FFO accounting loss of approximately $3.8 million, which was recorded in the fourth quarter of 2003.

On November 7, 2003, the Company re-leased two SNFs formerly leased by Claremont, located in Ohio and representing 270 beds, to a new operator under a Master Lease, which has a ten-year term and has an initial annual lease rate of $1.2 million.

Separately, the Company continues its ongoing restructuring discussions with Claremont regarding the five facilities Claremont currently leases from the Company. At the time of this press release, the Company cannot determine the timing or outcome of these discussions. Claremont failed to pay base rent due during the fourth quarter of 2003 in the amount of $1.5 million. During the fourth quarter of 2003, the Company applied security deposits in the amount of $1.0 million to pay Claremont's rent payments and the Company demanded that Claremont restore the $1.5 million security deposit. As of the date of this press release, the Company has no additional security deposits with Claremont. The Company is recognizing revenue from Claremont on a cash-basis as it is received.

ACQUISITION LINE

Effective December 31, 2003, the Company closed on a four-year, $50 million revolving acquisition line of credit arranged by GE Healthcare Financial Services. The acquisition line of credit will be secured by first liens on potential facilities acquired or assignments of mortgages made on new acquisitions. The interest rate of LIBOR plus 3.75% with a 6% floor on the revolving acquisition line of credit is identical to the Company's existing Credit Facility also arranged by GE Healthcare Financial Services.

DIVIDEND POLICY

On January 21, 2004, the Company's Board of Directors declared a common stock dividend of $0.17 per share, increasing the quarterly common dividend by $0.02 per share or 13%. The common stock dividend will be paid on February 13, 2004 to common stockholders of record on February 2, 2004. At the date of this press release, the Company had approximately 37.5 million outstanding common shares.

The Company's Board of Directors also declared its regular quarterly dividends for all classes of preferred stock, payable February 13, 2004 to preferred stockholders of record on February 2, 2004. Series A and Series B preferred stockholders of record on February 2, 2004 will be paid dividends in the amount of approximately $0.578 and $0.539, per preferred share, respectively, on February 13, 2004. The Company's Series C preferred stockholder will be paid a dividend of $2.72 per Series C preferred share on February 13, 2004. The liquidation preference for the Company's Series A, B and C preferred stock is $25.00, $25.00 and $100.00 per share, respectively. Regular quarterly preferred dividends represent dividends for the period November 1, 2003 through January 31, 2004. Total dividend payments for all classes of preferred stock are approximately $5.2 million.

TAX TREATMENT FOR 2003 DIVIDENDS

On August 15, 2003 the Company paid dividends to the Preferred A, B and C stockholders in the approximate per share amounts of $6.359, $5.930 and $27.307, respectively, for stockholders of record on August 5, 2003. Also, on November 17, 2003 the Company paid dividends to the Preferred A, B and C stockholders in the approximate per share amounts of $0.578, $0.539 and $2.50, respectively, for stockholders of record on October 31, 2003. The Company has determined that 84.66% of all preferred dividends in 2003 should be treated for tax purposes as a return of capital, with the balance, 15.34%, treated as an ordinary dividend. On November 17, 2003 the Company paid a common dividend in the amount of $0.15 per share to stockholders of record on October 31, 2003. The Company has determined that 100% of the common dividends paid in 2003 should be treated for tax purposes as a return of capital.

CONFERENCE CALL

The Company will be conducting a conference call on Thursday, January 29, 2004, at 10 a.m. EST to review the Company's 2003 fourth quarter and year end 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.

Omega is a Real Estate Investment Trust investing in and providing financing to the long-term care industry. At December 31, 2003, the Company owned or held mortgages on 211 skilled nursing and assisted living facilities with approximately 21,500 beds located in 28 states and operated by 39 third-party healthcare operating companies.

This announcement includes forward-looking statements. All forward-looking statements included herein are based on information available to the Company on the date hereof. Such statements only speak as of the date hereof and the Company assumes no obligation to update such forward-looking 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) uncertainties relating to the restructuring of Sun's remaining obligations and payment of contractual rents, including without limitation the ability of the parties to execute and perform under definitive agreements reflecting the non-binding term sheet, and the potential that definitive agreements, if executed, may differ materially from the non-binding term sheet, (iii), regulatory and other changes in the healthcare sector, including without limitation, changes in Medicare reimbursement; (iv) changes in the financial position of the Company's operators; (v) 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; (vi) the availability and cost of capital; (vii) competition in the financing of healthcare facilities; and (viii) other factors identified in the Company's filings with the Securities and Exchange Commission.

                   Omega Healthcare Investors, Inc.
                      Consolidated Balance Sheets
                            (in Thousands)


                                                      December 31,
                                                   -------------------
                                                     2003      2002
                                                   --------- ---------
                      ASSETS
Real estate properties
  Land and buildings at cost                       $692,454  $669,188
  Less accumulated depreciation                    (134,477) (117,986)
                                                   -------------------
    Real estate properties--net                     557,977   551,202
  Mortgage notes receivable--net                    119,815   173,914
                                                   -------------------
                                                    677,792   725,116
Other investments--net                               29,787    36,887
                                                   -------------------
                                                    707,579   762,003
Assets held for sale--net                                --     2,324
                                                   -------------------
  Total investments                                 707,579   764,327
Cash and cash equivalents                             3,094    14,340
Accounts receivable--net                              1,893     2,766
Interest rate cap                                     5,537     7,258
Other assets                                          6,951     5,597
Operating assets for owned properties                    --     9,721
                                                   -------------------
  Total assets                                     $725,054  $804,009
                                                   ===================
        LIABILITIES AND STOCKHOLDERS EQUITY
  Revolving lines of credit                        $177,074  $177,000
  Unsecured borrowings                              100,000   100,000
  Other long--term borrowings                         3,520    29,462
  Accrued expenses and other liabilities              6,583    13,234
  Operating liabilities for owned properties             --     4,612
  Operating assets and liabilities for owned
   properties - net                                   1,642        --
                                                   -------------------
    Total liabilities                               288,819   324,308
                                                   -------------------
Stockholders equity:
  Preferred stock $1.00 par value; authorized--
   10,000 shares:
     Issued and outstanding--2,300 shares Class A
      with an aggregate liquidation preference of
      $57,500                                        57,500    57,500
     Issued and outstanding--2,000 shares Class B
      with an aggregate liquidation preference of
      $50,000                                        50,000    50,000
     Issued and outstanding--1,048 shares Class C
      with an aggregate liquidation preference of
      $104,842                                      104,842   104,842
Common stock $.10 par value; authorized--100,000
 shares
     Issued and outstanding--37,291 shares in 2003
      and 37,141 shares in 2002                       3,729     3,714
Additional paid-in capital                          481,467   481,052
Cumulative net earnings                             174,275   151,245
Cumulative dividends paid                          (431,123) (365,654)
Unamortized restricted stock awards                      --      (116)
Accumulated other comprehensive loss                 (4,455)   (2,882)
                                                   --------- ---------
    Total stockholders equity                       436,235   479,701
                                                   --------- ---------
    Total liabilities and stockholders equity      $725,054  $804,009
                                                   ========= =========




                   OMEGA HEALTHCARE INVESTORS, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share amounts)


                                 Three Months Ended     Year Ended
                                    December 31,       December 31,
                                 ------------------ ------------------
                                   2003      2002     2003      2002
                                 -------- --------- -------- ---------
Revenues
  Rental income                  $16,536   $16,755  $65,121   $61,346
  Mortgage interest income         3,401     5,056   14,747    20,922
  Other investment income - net      576     1,075    2,982     5,302
  Nursing home revenues of owned
   and operated assets                --     3,521       --    44,277
  Litigation settlement               --        --    2,187        --
  Miscellaneous                      240       998    1,230     1,757
                                 -------- --------- -------- ---------
                                  20,753    27,405   86,267   133,604
                                 -------- --------- -------- ---------
Expenses
  Nursing home expenses of owned
   and operated assets                --     8,884       --    63,778
  Nursing home revenues and
   expenses of owned and
      operated assets - net            9        --    1,466        --
  Depreciation and amortization    5,234     5,125   20,985    20,538
  Interest                         5,425     5,613   23,388    27,381
  General and administrative       1,518     1,220    5,943     6,285
  Legal                              421       606    2,301     2,869
  State taxes                        141       220      614       490
  Refinancing expenses                --     7,000       --     7,000
  Provisions for impairment           --     1,000    8,894     3,657
  Provisions for uncollectible
   mortgages, notes and accounts
   receivable                         --       (54)      --     8,844
  Adjustment of derivatives to
   fair value                         --        --       --      (946)
                                 -------- --------- -------- ---------
                                  12,748    29,614   63,591   139,896
                                 -------- --------- -------- ---------

Income (loss) before (loss) gain
 on assets sold                    8,005    (2,209)  22,676    (6,292)
(Loss) gain on assets sold - net    (764)      693      665     2,548
                                 -------- --------- -------- ---------
Income (loss) from continuing
 operations                        7,241    (1,516)  23,341    (3,744)
Loss from discontinued operations (2,058)   (9,185)    (311)  (10,902)
                                 -------- --------- -------- ---------
Net income (loss)                  5,183   (10,701)  23,030   (14,646)
Preferred stock dividends         (5,029)   (5,029) (20,115)  (20,115)
                                 -------- --------- -------- ---------
Net income (loss) available to
 common                             $154  $(15,730)  $2,915  $(34,761)
                                 ======== ========= ======== =========

Income (loss) per common share:
  Basic:
    Income (loss) from continuing
     operations                    $0.06    $(0.18)   $0.09    $(0.69)
                                 ======== ========= ======== =========
    Net income (loss)                $--    $(0.42)   $0.08    $(1.00)
                                 ======== ========= ======== =========
  Diluted:
    Income (loss) from continuing
     operations                    $0.06    $(0.18)   $0.08    $(0.69)
                                 ======== ========= ======== =========
    Net income (loss)                $--    $(0.42)   $0.08    $(1.00)
                                 ======== ========= ======== =========

Dividends declared per common
 share                             $0.15       $--    $0.15       $--
                                 ======== ========= ======== =========

Weighted-average shares
 outstanding, basic               37,264    37,140   37,189    34,739
                                 ======== ========= ======== =========
Weighted-average shares
 outstanding, diluted             38,699    37,140   38,154    34,739
                                 ======== ========= ======== =========

Components of other comprehensive
 income:
  Unrealized gain on Omega
   Worldwide, Inc                    $--       $--      $--      $969
                                 ======== ========= ======== =========
  Unrealized gain (loss) on
   hedging contracts                $362   $(1,081) $(1,572)  $(2,033)
                                 ======== ========= ======== =========

Total comprehensive income (loss) $5,545  $(11,782) $21,458  $(15,710)
                                 ======== ========= ======== =========





                   OMEGA HEALTHCARE INVESTORS, INC.
                        FUNDS FROM OPERATIONS
                              Unaudited
               (In thousands, except per share amounts)

                                        Three Months
                                           Ended         Year Ended
                                       December 31,     December 31,
                                    ----------------------------------
                                       2003     2002    2003    2002
                                    --------- -------- ------- -------

Net income (loss) available to
 common                              $  154 $(15,730) $2,915 $(34,761)
 Add back loss (deduct gain) from
  real estate dispositions            2,927     (693)    149   (2,548)
 Add back impairment charges             --   10,513   8,894   15,366
                                     ------- -------- ------- --------
   Sub-total                          3,081   (5,910) 11,958  (21,943)
 Elimination of non-cash items
  included in net income (loss):
   Depreciation                       5,269    5,248  21,264   21,092
   Amortization                          39       46     162      178
   Adjustment of derivatives to fair
    value                                --       --      --     (946)
                                     ------- -------- ------- --------
Funds from operations, basic          8,389     (616) 33,384   (1,619)
Series C Preferred Dividends          2,621    2,621  10,484   10,484
                                     ------- -------- ------- --------
Funds from operations, diluted       $11,010 $ 2,005 $43,868  $ 8,865
                                     ------- -------- ------- --------

Weighted-average common shares
 outstanding, basic                  37,264   37,140  37,189   34,739
  Assumed conversion of Series C
   Preferred Stock                   16,775   16,775  16,775   16,775
  Assumed exercise of stock options   1,435      726     965    1,062
                                     ------- -------- ------- --------
Weighted-average common shares
 outstanding, diluted                55,474   54,641  54,929   52,576
                                     ------- -------- ------- --------

FFO per share, basic                $  0.23 $  (0.02)$  0.90 $  (0.05)
FFO per share, diluted (1)          $  0.20 $  (0.02)$  0.80 $  (0.05)

Adjusted funds from operations:
  Funds from operations, diluted    $11,010 $  2,005 $43,868 $  8,865
  Deduct legal settlement                --       --  (2,187)      --
  Deduct nursing home revenues         (939)  (3,521) (4,601) (44,277)
  Deduct one-time revenue and other
   adjustments                           --   (1,239)     --   (3,037)
  Add back one-time refinancing
   expense                               --    7,000      --    7,000
  Add back nursing home expenses        948    8,884   6,067   65,746
  Add back provisions for
   uncollectible mortgages, notes
   and accounts receivable               --      (54)     --    8,844
  Add back write-off of deferred
   financing cost                        --       --   2,586       --
                                     ------- -------- ------- --------
Adjusted funds from operations       $11,019 $13,075  $45,733  $43,141
                                     ------- -------- ------- --------
      (1) Lower of basic or diluted FFO per share.

    The Company believes that Funds From Operations ("FFO") is an
important supplemental measure of the Company's 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. The
Company calculates and reports FFO in accordance with the definition
and interpretive guidelines issued by the National Association of Real
Estate Investment Trusts ("NAREIT"). The Company defines FFO as net
income available to common stockholders, adjusted for the effects of
asset dispositions and impairments and certain non-cash items,
primarily depreciation and amortization. NAREIT's implementation
guidance provides that impairment write-downs associated with
previously depreciable operators' property should be added back to
GAAP net income to calculate FFO. FFO herein is not necessarily
comparable to FFO of other REITs that do not use the same definition
or implementation guidelines or interpret the standards differently
from the Company. Diluted FFO is adjusted for the assumed conversion
of Series C preferred stock and the exercise of in-the-money stock
options.
    Adjusted FFO is calculated as diluted FFO less revenues and
expenses related to nursing home operations and one-time revenue or
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 in view of the disposition of all but one of the
Company's owned and operated assets.
    Neither FFO nor adjusted FFO represents cash generated from
operating activities in accordance with GAAP, and therefore, should
not be considered alternatives to net income as indications of
operating performance or to net cash flow from operating activities,
as determined by GAAP, as a measure of liquidity, and such measures
are not necessarily indicative of cash available to fund cash needs or
dividends. The Company believes that in order to facilitate a clear
understanding of the consolidated historical operating results of the
Company, FFO and adjusted FFO should be examined in conjunction with
net income as presented elsewhere in this press release.


    In October 2003, NAREIT informed its member companies that the
Securities and Exchange Commission ("SEC") has taken the position that
asset impairment charges should not be excluded in calculating FFO.
The SEC's interpretation is that recurring impairments on real
property are not an appropriate adjustment. If the Company adopted the
SEC's interpretation of FFO and did not adjust for asset impairment
charges, the Company's basic FFO, diluted FFO and FFO per diluted
share for historical periods would be different than the amounts
reported in this release and in previous disclosures. According to
NAREIT, there is inconsistency among NAREIT member companies as to the
adoption of the SEC's interpretation of FFO. Therefore, a comparison
of the Company's FFO results to another company's FFO results may not
be meaningful.

   The following table presents the Company's FFO results reflecting
the impact of asset impairment charges (the SEC's interpretation) for
the quarters and years ended December 31, 2003 and 2002:


                               Three Months Ended      Year Ended
                                  December 31,        December 31,
                                 2003      2002       2003      2002
                               -------- ---------- --------- ---------

Funds from operations, basic   $ 8,389  $    (616) $ 33,384  $ (1,619)
Impairment charges                  --    (10,513)   (8,894)  (15,366)
                               -------- ---------- --------- ---------
Funds from operations, basic
 including impairment charges    8,389    (11,129)   24,490   (16,985)
Series C Preferred Dividends     2,621      2,621    10,484    10,484
                               -------- ---------- --------- ---------
Funds from operations, diluted
 including impairment charges  $11,010  $  (8,508) $ 34,974  $ (6,501)
                               ======== ========== ========= =========

Weighted-average common shares
 outstanding, basic             37,264     37,140    37,189    34,739
  Assumed conversion of Series
   C Preferred Stock            16,775     16,775    16,775    16,775
  Assumed exercise of stock
   options                       1,435        726       965     1,062
                               -------- ---------- --------- ---------
Weighted-average common shares
 outstanding, diluted           55,474     54,641    54,929    52,576
                               ======== ========== ========= =========

FFO per share, basic including
 impairment charges            $  0.23  $   (0.30) $   0.66  $  (0.49)
                               ======== ========== ========= =========
FFO per share, diluted
 including impairment 
 charges (1)                   $  0.20  $   (0.30) $   0.64  $  (0.49)
                               ======== ========== ========= =========

Adjusted funds from operations
 including impairment charges:
 Funds from operations, diluted
  including impairment 
  charges                     $ 11,010 $   (8,508)$  34,974 $  (6,501)
  Deduct legal settlement           --         --    (2,187)       --
  Deduct nursing home revenues    (939)    (3,521)   (4,601)  (44,277)
  Deduct one-time revenue and
   other adjustments                --     (1,239)       --    (3,037)
  Add back one-time
   refinancing expense              --      7,000        --     7,000
  Add back nursing home
   expenses                        948      8,884     6,067    65,746
  Add back provisions for
   uncollectible mortgages,
   notes and accounts
   receivable                       --        (54)       --     8,844
  Add back write-off of
   deferred financing               --         --     2,586        --
                               -------- ---------- --------- ---------
Adjusted funds from operations
 including impairment charges  $11,019  $   2,562  $ 36,839  $ 27,775
                               ======== ========== ========= =========
 
    (1) Lower of basic or diluted FFO per share.

    Nursing home revenues and nursing home expenses in the Company's
consolidated financial statements which relate to the Company's owned
and operated assets are as follows:


                                       Three Months
                                            Ended        Year Ended
                                        December 31,    December 31,
                                      --------------------------------
                                         2003   2002     2003     2002
                                      -------- ------- ------- -------
                                       (In thousands)  (In thousands)
Nursing home revenues (1)
Medicaid                              $   551 $ 2,048 $ 2,624 $26,947
Medicare                                  101     645     747   9,307
Private & other                           287     828   1,230   8,023
                                      --------------------------------
 Total nursing home revenues (2)          939   3,521   4,601  44,277
                                      --------------------------------

Nursing home expenses
Patient care expenses                     546   2,223   2,566  31,219
Administration                            293   1,250   2,245  13,463
Property & related                         61     316     389   3,861
Leasehold buyout expense                   --   2,672     582   4,342
Management fees                            48     173     257   2,465
Rent                                       --     579      28   2,536
Provision for uncollectible accounts       --   1,671      --   5,892
                                       -------------------------------
 Total nursing home expenses (2)          948   8,884   6,067  63,778
                                      --------------------------------
Nursing home revenues and expenses of
 owned and operated assets - net (2)  $    (9)$    -- $(1,466)$    --
                                      ================================
    (1) Nursing home revenues from these owned and operated assets are
        recognized as services are provided.
    (2) Nursing home revenues and expenses of owned and operated
        assets for the three and twelve months ended December 31, 2003
        are shown on a net basis on the face of the Company's 
        Consolidated Statements of Operations and are shown on a gross
        basis for the three and twelve months ended December 31, 2002.
 
   The table below reconciles reported revenues and expenses to
revenues and expenses excluding nursing home revenues and expenses of
owned and operated assets. Nursing home revenues and expenses of owned
and operated assets for the three and twelve months ended December 31,
2003 are shown on a net basis on the face of the Company's
Consolidated Statements of Operations and are shown on a gross basis
for the three and twelve months ended December 31, 2002. Since nursing
home revenues are not included in reported revenues for the three and
twelve months ended December 31, 2003, no adjustment is necessary to
exclude nursing home revenues.



                                         Three Months
                                           Ended         Year Ended
                                        December 31,     December 31,
                                     ---------------------------------
                                       2003     2002    2003     2002
                                      ------- ------- ------- --------
                                      (In thousands)  (In thousands)
Total revenues                       $20,753 $27,405 $86,267 $133,604
Nursing home revenues of owned and
 operated assets                          --   3,521      --   44,277
                                      ------- ------- ------- --------
 Revenues excluding nursing home
  revenues of owned and operated
  assets                             $20,753 $23,884 $86,267 $ 89,327
                                      ======= ======= ======= ========

Total expenses                       $12,748 $29,614 $63,591 $139,896
Nursing home expenses of owned and
 operated assets                          --   8,884      --   63,778
Nursing home revenues and expenses of
 owned and  operated assets - net          9      --   1,466       --
                                      ------- ------- ------- --------
 Expenses excluding nursing home
  expenses of owned and operated
  assets                             $12,739 $20,730 $62,125 $ 76,118
                                      ======= ======= ======= ========

    The assets and liabilities in the Company's financial statements
which relate to the Company's owned and operated assets are as
follows:

                                                  December  31,
                                                2003         2002
                                            ------------- ------------
                                                 (In thousands)

                  ASSETS
Cash                                       $         624 $        838
Accounts receivable - net                          1,412        7,491
Other current assets                                 253        1,207
                                            ------------- ------------

  Total current assets (1)                         2,289        9,536
                                            ------------- ------------
Investment in leasehold - net (1)                     --          185
Land and buildings                                 5,295        5,571
Less accumulated depreciation                       (681)        (675)

                                           ---------------------------
Land and buildings - net                           4,614        4,896
                                            ------------- ------------
Assets held for sale - net                            --        2,324
                                            ------------- ------------

    Total assets                           $       6,903 $     16,941
                                            ============= ============


                LIABILITIES
Accounts payable                           $          98 $        389
Other current liabilities                          3,833        4,223
                                            ------------- ------------

  Total current liabilities                        3,931        4,612
                                            ------------- ------------

  Total liabilities (1)                    $       3,931 $      4,612
                                            ============= ============

Operating assets and liabilities for owned
 properties - net (1)                      $      (1,642)$         --
                                            ============= ============
   (1) Operating assets and liabilities for owned properties as of
       December 31, 2003 are shown on a net basis on the face of our
       Consolidated Balance Sheet and are shown on a gross basis as of
       December 31, 2002.
 

   The following table summarizes the results of operations of the
sold and held for sale facilities during the three and twelve months
ended December 31, 2003 and 2002, respectively.


                                       Three Months
                                           Ended         Year Ended
                                       December 31,     December 31,
                                     ---------------------------------
                                       2003     2002   2003    2002
                                      -------- ------- ------ --------
                                      (In thousands)   (In thousands)
Revenues
  Rental income                      $    179 $   496 $  944 $  3,474
  Mortgage interest income                 --      --     --       33
                                      -------- ------- ------ --------
                                          179     496    944    3,507
                                      -------- ------- ------ --------
Expenses
  Operating                                --      --     --   (1,968)
  Depreciation and amortization           (74)   (169)  (441)    (732)
  Provision for impairment                 --  (9,512)    --  (11,709)
                                      -------- ------- ------ --------
                                          (74) (9,681)  (441) (14,409)
                                      -------- ------- ------ --------

Income (loss) before loss on sale of
 assets                                   105  (9,185)   503  (10,902)
Loss on assets sold - net              (2,163)     --   (814)      --
                                      -------- ------- ------ --------
Loss from discontinued operations    $ (2,058)$(9,185)$ (311)$(10,902)
                                      ======== ======= ====== ========



    The table below summarizes the Company's number of properties and
investment by category for the quarter ended December 31, 2003:


                              Purchase/ Mortgages   Owned &    Closed
        Facility Count        Leaseback Receivable Operated Facilities
----------------------------------------------------------------------
Balance at September 30, 2003      155         51        1          9
Properties closed                   (1)         -        -          1
Properties sold/mortgages
 paid                               (1)         -        -         (4)
Transition leasehold interest        -          -        -          -
Properties leased /mortgages
 placed                              -          -        -          -
Properties transferred to
 purchase/leaseback                  -          -        -          -
                             -----------------------------------------
  Balance at December 31,
   2003                            153         51        1          6
                             =========================================

     Investment ($000's)
-----------------------------
Balance at September 30, 2003 $698,362   $120,314   $5,295     $6,168
Properties transferred to
 assets held for sale                -          -        -          -
Properties closed               (1,297)         -        -      1,297
Properties sold/mortgages
 paid                          (14,700)         -        -     (2,868)
Transition leasehold interest        -          -        -          -
Properties leased/mortgages
 placed                              -          -        -          -
Properties transferred to
 purchase/leaseback                  -          -        -          -
Impairment on properties             -          -        -          -
Capex and other                    197       (499)       -          -
                             -----------------------------------------
  Balance at December 31,
   2003                       $682,562   $119,815   $5,295     $4,597
                             =========================================


                                                        Assets
                                              Total      Held
                                            Healthcare   for
       Facility Count                       Facilities   Sale   Total
----------------------------------------------------------------------
Balance at September 30, 2003                   216        1      217
Properties closed                                 -        -        -
Properties sold/mortgages paid                   (5)      (1)      (6)
Transition leasehold interest                     -        -        -
Properties leased /mortgages placed               -        -        -
Properties transferred to
 purchase/leaseback                               -        -        -
                                           ---------------------------
  Balance at December 31, 2003                  211        -      211
                                           ===========================

            Investment ($000's)
-------------------------------------------
Balance at September 30, 2003                $830,139  $2,091 $832,230
Properties transferred to assets held for
 sale                                             -        -        -
Properties closed                                 -        -        -
Properties sold/mortgages paid                (17,568) (2,091)(19,659)
Transition leasehold interest                     -        -        -
Properties leased/mortgages placed                -        -        -
Properties transferred to
 purchase/leaseback                               -        -        -
Impairment on properties                          -        -        -
Capex and other                                (302)       -     (302)
                                           ---------------------------
  Balance at December 31, 2003               $812,269   $  -  $812,269
                                           ===========================