Form: 424B5

Prospectus filed pursuant to Rule 424(b)(5)

April 25, 1997

424B5: Prospectus filed pursuant to Rule 424(b)(5)

Published on April 25, 1997


Filed Pursuant To Rule 424(b)(5)
Registration Statement No. 333-20967

Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus supplement shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.

Subject to Completion Dated July 28, 1997

PROSPECTUS SUPPLEMENT

(To Prospectus Dated February 14, 1997)

OMEGA LOGO
OMEGA HEALTHCARE INVESTORS, INC.
$94,000,000
% Notes due 2007

Interest payable and
ISSUE PRICE: %

Interest on the % Notes due 2007 (the "Notes") of Omega Healthcare
Investors, Inc. (the "Company") offered hereby is payable semiannually on
and , commencing , 1998. See "Description
of Notes -- Principal and Interest." The Notes will mature on , 2007.
The Notes may be redeemed at any time at the option of the Company, in whole or
in part, at a redemption price equal to the sum of (i) the principal amount of
the Notes being redeemed plus accrued interest thereon to the redemption date
and (ii) the Make-Whole Amount (as hereinafter defined), if any. See
"Description of Notes -- Optional Redemption."

The Notes will be represented by one or more Global Securities (as hereinafter
defined) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Securities will be shown on, and transfer
thereof will be effected only through, records maintained by DTC and its
participants. Except as provided herein, Notes in definitive form will not be
issued. See "Description of Notes."

SEE "RISK FACTORS" COMMENCING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE NOTES OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------



UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------------------

Per Note % % %
- -----------------------------------------------------------------------------------------------------------
Total $ $ $
- -----------------------------------------------------------------------------------------------------------


(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses of $ payable by the Company.

The Notes are offered subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriters. It is expected that
delivery of the Notes will be made on or about , 1997 through the
facilities of DTC, against payment therefor in immediately available funds.
J.P. MORGAN & CO. BEAR, STEARNS & CO. INC.

, 1997

MAP OF OMEGA HEALTHCARE INVESTORS, INC. FACILTIES IN THE UNITED STATES

S-2

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS WHICH
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR,
AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus Supplement or the accompanying Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any Underwriter. This Prospectus Supplement and the
accompanying Prospectus do not constitute an offer to sell or the solicitation
of an offer to buy any securities other than the securities to which they relate
or any offer to sell or the solicitation of any offer to buy such securities in
any jurisdiction in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus Supplement nor the accompanying Prospectus nor any
sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained or incorporated by reference
herein or therein is correct as of any time subsequent to the date of such
information.

Statements contained or incorporated by reference in this document that are not
based on historical fact are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include statements regarding the Company's future development activities, the
future condition and expansion of the Company's markets, the Company's ability
to meet its liquidity requirements and the Company's growth strategies, as well
as other statements which may be identified by the use of forward-looking
terminology such as "may," "will," "expect," "estimate," "anticipate,"
"continue" or similar terms, variations of those terms or the negative of those
terms. Investors should carefully consider the statements set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996
(incorporated herein by reference) under the heading "Business of the Company"
as well as statements set forth herein under the headings "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which constitute cautionary statements identifying important
factors that could cause actual results to differ materially from those in the
forward-looking statements.

TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT



PAGE
----

Summary..................................................... S-4
Risk Factors................................................ S-8
The Company................................................. S-12
Properties.................................................. S-15
Use of Proceeds............................................. S-17
Capitalization.............................................. S-18
Selected Financial and Operating Data....................... S-19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-20
Description of Notes........................................ S-23
Certain Federal Income Tax Considerations................... S-30
Underwriting................................................ S-32
Legal Matters............................................... S-32


PROSPECTUS



PAGE
----

Available Information....................................... 3
Documents Incorporated by Reference......................... 3
The Company................................................. 4
Ratio of Earnings to Fixed Charges.......................... 5
Use of Proceeds............................................. 5
Description of Securities................................... 5
Common Stock................................................ 6
Preferred Stock............................................. 7
Debt Securities............................................. 11
Securities Warrants......................................... 15
Plan of Distribution........................................ 17
Legal Matters............................................... 18
Experts..................................................... 18


S-3

SUMMARY

The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein or therein by reference.
Investors should consider carefully the risk factors related to the purchase of
the Notes of the Company. See "Risk Factors."

THE COMPANY

Omega Healthcare Investors, Inc. (the "Company") was incorporated in the State
of Maryland on March 31, 1992. The Company is a self administered real estate
investment trust ("REIT") which invests in income-producing healthcare
facilities, principally long-term care facilities located in the United States.

As of June 30, 1997, the Company's portfolio of investments in the United States
consisted of 232 long-term care facilities and 3 medical office buildings. The
Company owns and leases to healthcare operators 144 of such long-term care
facilities with a total of approximately 13,250 beds and the 3 medical office
buildings, and provides mortgages, including participating and convertible
mortgages, on 88 of such long-term care facilities with a total of approximately
9,200 beds. See "Properties." The Company's facilities are located in 26 states
and operated by 34 unaffiliated operators. The Company also has an interest in
and provides management/advisory services to Principal Healthcare Finance
Limited, a partially-owned affiliate which owns and leases to healthcare
operators 116 nursing homes in the United Kingdom. The net carrying amount of
the Company's investments at June 30, 1997 totaled $711 million.

The Company's business objectives are to generate stable and increasing cash
flow and provide the opportunity for increased dividends from annual increases
in rental and interest revenue participation and from portfolio growth and to
preserve and protect shareholders' capital, pay regular cash dividends and
provide holders of common stock the opportunity to realize capital growth.

The executive offices of the Company are located at 905 West Eisenhower Circle,
Suite 110, Ann Arbor, Michigan 48103. The Company's telephone number is (313)
747-9790.

INVESTMENT STRATEGIES AND POLICIES

The Company maintains a diversified portfolio of income-producing healthcare
facilities or mortgages thereon, with a primary focus on long-term care
facilities located in the United States. In making investments, the Company
generally seeks established, creditworthy, middle market healthcare operators
which meet the Company's standards for quality and experience of management.
Although the Company has emphasized long-term care investments, it intends to
diversify prudently into other types of healthcare facilities or other
properties. The Company actively seeks to diversify its investments in terms of
geographic location, operators and facility types.

In evaluating potential investments, the Company considers such factors as: (i)
the quality and experience of management and the creditworthiness of the
operator of the facility; (ii) the adequacy of the facility's historical,
current and forecasted cash flow to meet operational needs, capital expenditures
and lease or debt service obligations; (iii) the construction quality, condition
and design of the facility; (iv) the geographic area and type of facility; (v)
the tax, growth, regulatory and reimbursement environment of the community in
which the facility is located; (vi) the occupancy and demand for similar
healthcare facilities in the same or nearby communities; and (vii) the payor mix
of private, Medicare and Medicaid patients.

The Company plans to maintain its percentage of equity and equity-linked
investments at approximately 70% of its portfolio and to increase the number of
operators and geographic diversity of the facilities in its portfolio as well as
to continue to expand its relationships with current operators.

The Company believes that a growing market exists for REITs focusing in the
long-term care industry. According to data from the U.S. Census Bureau, in 1995
there were approximately 3.6 million Americans over the age of 85, comprising
1.4% of the total U.S. population. From 1960 to 1994, the population within this
age group increased at more than five times the rate of the increase for the
total population. The
S-4

Company believes that the fundamentals of the long-term care and nursing home
industry will continue to be strong and provide good opportunity for additional
investment in the foreseeable future. The long-term care industry provides
sub-acute medical and custodial care to the senior population of the United
States. The demand for long-term care comes principally from those individuals
over 85 years of age. Due to demographic trends, regulation and government
support, the Company believes that the long-term care sector of the healthcare
industry has been one of the less volatile segments of the industry.

The Company continually assesses and reassesses investments in other healthcare
and senior medical services markets, including the assisted living market.
Assisted living units are designed for seniors who need assistance with basic
activities such as bathing, meal preparation and eating. While strong
demographic demands support this segment, low barriers to entry and the
unregulated nature of assisted living pose additional risks in this healthcare
segment. The Company believes that there may be selected opportunities to
participate in this sector, but to date has not made significant investments in
properties of this type.

Additionally, the Company believes that acute care hospitals presently represent
a substantial portion of healthcare expenditures in the United States. While the
Company has made limited investments in this segment, with a total of
approximately $30 million invested to date, the Company anticipates that future
investments will result from the need for capital and the evolving demand for
healthcare properties operated by acute care delivery systems.
S-5

THE OFFERING

SECURITIES OFFERED......... $ aggregate principal amount of the
% Notes due , 2007.

MATURITY................... The Notes will mature on , 2007.

INTEREST PAYMENT DATES..... Semi-annually on and
, commencing
, 1998.

RANKING.................... The Notes will be senior unsecured obligations of
the Company and will rank equally with the
Company's other unsecured and unsubordinated
indebtedness. The Notes will be effectively
subordinated to mortgages and other secured
indebtedness of the Company and to indebtedness and
other liabilities of the Company's subsidiaries.

USE OF PROCEEDS............ The net proceeds to the Company from the offering
of the Notes will be used to repay a portion of the
Company's revolving line of credit, to fund
additional portfolio investments and for general
corporate purposes. See "Use of Proceeds."

OPTIONAL REDEMPTION........ The Notes are redeemable at any time at the option
of the Company, in whole or in part, at a
redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed plus
accrued interest to the redemption date and (ii)
the Make-Whole Amount, if any. See "Description of
Notes -- Optional Redemption." The Notes will not
be entitled to the benefit of any sinking fund.

LIMITATIONS ON INCURRENCE
OF INDEBTEDNESS............ The Notes contain various covenants including the
following:

(1) Neither the Company nor any Subsidiary (as
hereinafter defined) may incur any Debt (as
hereinafter defined) if, after giving effect
thereto, the aggregate principal amount of all
outstanding Debt of the Company and its
Subsidiaries on a consolidated basis is greater
than 60% of the sum ("Adjusted Total Assets") of
(i) the Total Assets (as hereinafter defined) of
the Company and its Subsidiaries as of the end of
the most recent calendar quarter and (ii) the
purchase price of any real estate assets or
mortgages receivable acquired, and the amount of
any securities offering proceeds received (to the
extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used
to reduce Debt), by the Company or any Subsidiary
since the end of such calendar quarter, including
those proceeds obtained in connection with the
incurrence of such additional Debt.

(2) Neither the Company nor any Subsidiary may
incur any Secured Debt (as hereinafter defined) if,
after giving effect thereto, the aggregate
principal amount of all outstanding Secured Debt of
the Company and its Subsidiaries on a consolidated
basis is greater than 40% of Adjusted Total Assets.

(3) The Company and its Subsidiaries will maintain
Total Unencumbered Assets (as hereinafter defined)
of not less than 200% of the aggregate outstanding
principal amount of the Unsecured Debt (as
hereinafter defined) of the Company and its
Subsidiaries on a consolidated basis.
S-6

(4) Neither the Company nor any Subsidiary may
incur any Debt if, after giving effect thereto, the
ratio of Consolidated Income Available for Debt
Service (as hereinafter defined) to the Annual
Service Charge (as hereinafter defined) for the
four consecutive fiscal quarters most recently
ended prior to the date on which such additional
Debt is to be incurred shall have been less than
1.5x on a pro forma basis after giving effect to
certain assumptions.

For a more complete description of the terms and
definitions used in the foregoing limitations, see
"Description of Notes -- Certain Covenants."
S-7

RISK FACTORS

An investment in the Notes involves various risks, including those described
below. Investors should carefully consider these risk factors together with all
of the information set forth or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus in determining whether to purchase
any Notes. Information contained or incorporated by reference in this Prospectus
Supplement or in the accompanying Prospectus may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, which statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate," or
"continue" or the negative thereof or other comparable terminology. The
following matters and certain other factors noted throughout this Prospectus
Supplement and the accompanying Prospectus, and any documents incorporated by
reference herein or therein and exhibits hereto and thereto, constitute
cautionary statements identifying important factors with respect to any such
forward-looking statements, including certain risks and uncertainties, that
could cause the Company's actual results to differ materially from those
contained in any such forward-looking statements.

RISKS ARISING FROM GOVERNMENT REGULATION

Potential Reduction in Revenues of Lessees/Borrowers Due to Healthcare
Reform. Federal healthcare legislation enacted in 1996 focused on assuring
portability of employee healthcare benefits and increasing enforcement powers of
federal agencies that investigate and prosecute fraud and abuse in federally
funded healthcare programs. Renewed efforts in 1997 to balance the federal
budget will continue to place priority on the need to slow the growth rate in
federal healthcare expenditures. It is anticipated that further debate on
overall structural reform of federal healthcare programs will affect additional
legislative action on cost-containment. It also is anticipated that private
payor efforts to contain or reduce healthcare costs will continue. These trends
are likely to lead to reduced or slower growth in reimbursement for certain
services provided by some of the Company's lessees and borrowers. No assurance
can be given that the implementation of any reforms will not have a material
adverse effect on the Company's financial condition or results of operations.

Potential Loss of Licensure or Certification by Lessees/Borrowers. The
healthcare industry is highly regulated by federal, state and local law, and is
directly affected by state and local licensure, fines, and loss of certification
to participate in the Medicare and Medicaid programs, as well as potential
criminal penalties. The failure of any lessee or borrower to comply with such
laws, requirements and regulations could adversely affect its ability to operate
its facilities and could affect such lessee's or borrower's ability to make debt
or lease payments to the Company.

Reliance on Government Reimbursement by Lessees/Borrowers. A significant portion
of the revenue of the Company's lessees and borrowers is derived from
governmentally-funded reimbursement programs, such as Medicare and Medicaid.
These programs are highly regulated and subject to frequent and substantial
changes resulting from legislation, adoption of rules and regulations, and
administrative and judicial interpretations of existing law.

Any changes in reimbursement policies which reduce reimbursement levels could
adversely affect revenues of the Company's lessees and borrowers and thereby
adversely affect those lessees' and borrowers' abilities to make their monthly
lease or debt payments to the Company. Failure of the lessees or borrowers to
make their monthly payments would have a direct and material adverse impact on
the Company.

HEALTHCARE REAL ESTATE INVESTMENT RISKS

The Company's investments in healthcare facilities are subject to various real
estate-related risks.

Volatility of Income and Returns. The possibility that the healthcare facilities
will not generate income sufficient to meet operating expenses or will yield
returns lower than those available through investments in comparable real estate
or other investments are additional risks of investing in healthcare related
real estate. Income from properties and yields from investments in such
properties may be affected by many factors, including changes in governmental
regulation (such as zoning laws), general or local economic conditions

S-8

(such as fluctuations in interest rates and employment conditions), the
available local supply of and demand for improved real estate, a reduction in
rental income as the result of an inability to maintain occupancy levels,
natural disasters (such as earthquakes and floods) or similar factors.

Illiquidity of Real Estate Investments. Real estate investments are relatively
illiquid and, therefore, tend to limit the ability of the Company to vary its
portfolio promptly in response to changes in economic or other conditions. All
of the Company's properties are "special purpose" properties that could not be
readily converted to general residential, retail or office use. Transfers of
operations of nursing homes and other healthcare-related facilities are subject
to regulatory approvals not required for transfers of other types of commercial
operations and other types of real estate. Thus, if the operation of any of the
Company's properties becomes unprofitable due to competition, age of
improvements or other factors such that the lessee or borrower becomes unable to
meet its obligations on the lease or mortgage loan, the liquidation value of the
property may be substantially less -- particularly relative to the amount owing
on any related mortgage loan, than would be the case if the property were
readily adaptable to other uses. The receipt of liquidation proceeds or the
replacement of an operator that has defaulted on its lease or loan could be
delayed by the approval process of any federal, state or local agency necessary
for the transfer of the property or the replacement of the operator licensed to
manage the facility. In addition, certain significant expenditures associated
with real estate investment (such as real estate taxes and maintenance costs)
are generally not reduced when circumstances cause a reduction in income from
the investment. Should such events occur, the Company's income and cash flows
from operations would be adversely affected.

Uninsured Loss. The Company currently requires, and it is the intention of the
Company to continue to require, all lessees and borrowers to secure adequate
comprehensive property and liability insurance that covers the Company as well
as the lessee and borrower. Certain risks may, however, be uninsurable or not
economically insurable and there can be no assurance the Company or a lessee or
borrower will have adequate funds to cover all contingencies itself.

RELIANCE ON OPERATORS OF HEALTHCARE FACILITIES

As of June 30, 1997, three public companies (Advocat Inc., Sun Healthcare Group,
Inc., and GranCare, Inc.) operated/managed 68 facilities representing 39% ($267
million) of the total of the Company's real estate investments. The financial
position of the Company and its ability to service its debt may be adversely
affected by financial difficulties experienced by any of such operators, or any
other major operator of the Company. See "Properties -- Operators of
Properties."

Recently, Unison Healthcare Corp. ("Unison"), a lessee and mortgagor of the
Company, announced a restatement of earnings with respect to its operations for
the nine-month period ended September 30, 1996. Unison's announcement indicated
that the restatement was necessary to correct certain inaccuracies generated by
its accounting systems. Unison's Annual Report on Form 10-K filed in May, 1997
revealed a net loss of $23.4 million. Additionally, in a press release for the
1997 first quarter, Unison reported a loss of $4.1 million for the period. The
Company's investment with Unison represents approximately $45 million related to
approximately 2,000 beds and approximately 6.56% of total assets of the Company
at June 30, 1997 and approximately 6.28% of the Company's annualized revenue at
the same date. The Company will continue to monitor the situation so as to
exercise appropriate steps to protect the interests of the Company. The Company
believes there will be no material adverse effect on its financial position or
results of operations as a result of Unison's current financial situation.
However, there can be no assurance that there will be no further adverse
financial developments within Unison.

DEBT FINANCING RISKS

Debt Financing. The Company is subject to the risks associated with debt
financing, including the risk that the cash provided by the Company's operating
activities will be insufficient to meet required payments of principal and
interest, the risk of rising interest rates on the Company's floating rate debt
that is not hedged, the risk that the Company will not be able to repay or
refinance existing indebtedness (which generally will not have been fully
amortized at maturity) or that the terms of such refinancing will not be as
favorable as

S-9

the terms of existing indebtedness. In the event the Company is unable to secure
refinancing of such indebtedness on acceptable terms, the Company might be
forced to dispose of properties upon disadvantageous terms, which might result
in losses to the Company, or to obtain financing at unfavorable terms either of
which might adversely affect the cash flow available to meet debt service
obligations. In addition, if a property or properties are mortgaged to secure
payment of indebtedness and the Company is unable to meet required mortgage
payments, the mortgage securing the property could be foreclosed upon by, or the
property could be otherwise transferred to, the mortgagee with a consequent loss
of income and asset value to the Company.

Degree of Leverage. At June 30, 1997, on a consolidated basis, the Company's
borrowings were $256 million and the ratio of its borrowings to total assets was
34.9%. On a pro forma basis at June 30, 1997, after giving effect to the
issuance of the Notes and the application of the estimated net proceeds
therefrom and certain other pro forma adjustments, the Company, on a
consolidated basis, would have had borrowings of $299 million and had a ratio of
borrowings to total assets of 38.6%. The degree to which the Company is
leveraged could have important consequences to holders of the Notes, including
affecting the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, development or other
general corporate purposes and making the Company more vulnerable to a downturn
in its business or the economy generally. The Indenture (as hereinafter defined)
contains financial and operating covenants including, among other things,
limitations on the Company's ability to incur other indebtedness, sell assets
and engage in mergers and consolidations and certain acquisitions. If the
Company fails to comply with these covenants, the holders of the Notes will be
able to accelerate the maturity of the applicable indebtedness. See "Description
of Notes."

POSSIBLE ENVIRONMENTAL LIABILITIES

Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real property or a secured lender (such as the Company)
may be liable in certain circumstances for the costs of removal or remediation
of certain hazardous or toxic substances at, under or disposed of in connection
with such property, as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and damages for
injuries to persons and adjacent property). Such laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence or disposal of such substances and may be imposed on the owner in
connection with the activities of an operator of the property. The cost of any
required remediation, removal, fines or personal or property damages and the
owner's liability, therefore, could exceed the value of the property, and/or the
assets of the owner. In addition, the presence of such substances, or the
failure to properly dispose of or remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral which, in turn, would reduce the Company's revenues.

Although the Company's leases and mortgage loans require the lessee and the
borrower to indemnify the Company for certain environmental liabilities, the
scope of such obligations may be limited and there can be no assurance that any
such borrower or lessee would be able to fulfill its indemnification
obligations.

POTENTIAL RISKS FROM BANKRUPTCY LIMITATIONS OF LESSEES

Generally, the Company's lease arrangements with a single operator who operates
more than one of the Company's facilities is pursuant to a single master lease
(a "Master Lease" or collectively, the "Master Leases"). Although each lease or
Master Lease provides that the Company may terminate the Master Lease upon the
bankruptcy or insolvency of the tenant, the Bankruptcy Reform Act of 1978
("Bankruptcy Code") provides that a trustee in a bankruptcy or reorganization
proceeding under the Bankruptcy Code (or debtor-in-possession in a
reorganization under the Bankruptcy Code) has the power and the option to assume
or reject the unexpired lease obligations of a debtor-lessee. In the event that
the unexpired lease is assumed on behalf of the debtor-lessee, all the rental
obligations thereunder generally would be entitled to a priority over other
unsecured claims. However, the court also has the power to modify a lease if a
debtor-lessee in a reorganization were required to perform certain provisions of
a lease that the court determined to be unduly burdensome. It is not possible to
determine at this time whether or not any lease or Master Lease contains

S-10

any such provisions. If a lease is rejected, the lessor has a general unsecured
claim limited to any unpaid rent already due plus an amount equal to the rent
reserved under the lease, without acceleration, for the greater of one year or
15% of the remaining term of such lease, not to exceed three years. If any lease
is rejected, the Company may also lose the benefit of any participation interest
or conversion right.

COMPETITION

The Company competes for additional healthcare facility investments with other
healthcare investors, including other real estate investment trusts. The
operators of the facilities compete with other regional or local nursing care
facilities for the support of the medical community, including physicians and
acute care hospitals, as well as the general public. Some significant
competitive factors for the placing of patients in skilled and intermediate care
nursing facilities include quality of care, reputation, physical appearance of
the facilities, services offered, family preferences, physician services and
price.

POSSIBLE CHANGE OF INVESTMENT STRATEGIES AND POLICIES AND CAPITAL STRUCTURE

The Board of Directors, without the approval of the Company's shareholders, may
alter the Company's investment strategies and policies if they determine in the
future that such a change is in the best interests of the Company and its
shareholders. The Indenture governing the Notes contains no restrictions on the
future investment strategies and policies of the Company. The methods of
implementing the Company's investment strategies and policies may vary as new
investments and financing techniques are developed. See "Summary -- Investment
Strategies and Policies."

ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT

The Company was organized and believes that it has conducted and it intends to
conduct its operations so as to qualify for taxation as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code").
See "Certain Federal Income Tax Considerations -- Taxation of the Company."
Qualification as a REIT involves the satisfaction of numerous requirements (some
on an annual and quarterly basis) established under highly technical and complex
Code provisions for which there are only limited judicial and administrative
interpretations and involve the determination of various factual matters and
circumstances not entirely within the Company's control. No assurances can be
given that the Company will at all times satisfy these rules and tests.

If the Company were to fail to qualify as a REIT in any taxable year, as a
result of a determination that it failed to meet the annual distribution
requirements or otherwise, the Company would be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Moreover, unless entitled to relief under certain
statutory provisions, the Company also would be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification is
lost. This treatment would reduce the net earnings and cash flow of the Company
available for investment and debt service because of the additional tax
liability to the Company for the years involved. See "Certain Federal Income Tax
Considerations -- Taxation of the Company."

S-11

THE COMPANY

The Company is a self administered REIT which invests in income-producing
healthcare facilities, principally long-term care facilities located in the
United States. The Company's business objectives are to generate stable and
increasing cash flow and provide the opportunity for increased dividends from
annual increases in rental and interest revenue participation and from portfolio
growth and to preserve and protect shareholders' capital, pay regular cash
dividends and provide holders of common stock the opportunity to realize capital
growth.

The Company intends to make and manage its investments (including the sale or
disposition of property or other investments) in such a manner as to be
consistent with the requirement of the Code (and regulations thereunder) to
qualify as a REIT, unless, because of changes in circumstances or changes in the
Code (or regulations thereunder), the Board of Directors determine that it is no
longer in the best interest of the Company to qualify as a REIT.

As of June 30, 1997, the Company's portfolio of investments in the United States
consisted of 232 long-term care facilities and 3 medical office buildings. The
Company owns and leases to healthcare operators 144 of such long-term care
facilities with a total of approximately 13,250 beds and the 3 medical office
buildings, and provides mortgages, including participating and convertible
mortgages, on 88 long-term care facilities with a total of approximately 9,200
beds. The Company's facilities are located in 26 states and operated by 34
unaffiliated operators. The Company also has an interest in and provides
management/advisory services to Principal Healthcare Finance Limited
("Principal"), a partially-owned affiliate which owns and leases to healthcare
operators 116 nursing homes in the United Kingdom. The net carrying amount of
the Company's investments at June 30, 1997 totaled $711 million.

INVESTMENT STRATEGIES AND POLICIES

A fundamental investment strategy of the Company is to obtain contractual rent
escalations under long-term, non-cancelable triple net leases (whereby the
tenant is responsible for all maintenance, repairs, taxes and insurance on the
leased properties) and revenue participation through participating mortgage
loans, and to obtain substantial security deposits. Additional security is
typically provided by covenants regarding minimum working capital and net worth,
liens on accounts receivable and other operating assets, and various provisions
for cross-default, cross-collateralization, and corporate/personal guarantees,
when appropriate.

The Company prefers to invest in equity ownership of properties. Due to
regulatory, tax or other considerations, the Company sometimes pursues
alternative investment structures, including Convertible Participating and
Participating Mortgages, that are intended to achieve returns comparable to
equity investments. The following summarizes the four primary structures
currently used by the Company:

Purchase/Leaseback. The Company's owned properties are generally
leased under provisions of leases for terms ranging from 5 to 17 years,
plus renewal options. The leases originated by the Company generally
provide for minimum annual rentals which are subject to annual formula
increases (i.e., based upon such factors as increases in the Consumer Price
Index ("CPI") or increases in the revenues of the underlying properties),
with certain fixed minimum and maximum levels. Generally, the operator
holds an option to repurchase the property at set dates at prices based on
specified formulas.

Convertible Participating Mortgage. Convertible Participating
Mortgages are secured by first mortgage liens on the underlying real estate
and personal property of the mortgagor. Interest rates are usually subject
to annual increases based upon increases in the CPI or increases in
revenues of the underlying long-term care facilities, with certain maximum
limits. Convertible Participating Mortgages afford the Company an option to
convert its mortgage into direct ownership of the property, generally at a
point six to nine years from inception; they are then subject to a
leaseback to the operator for the balance of the original agreed term and
for the original agreed participations in revenues or CPI adjustments. This
allows the Company to capture a portion of the potential appreciation in
value of the real estate. The operator has the right to purchase the
Company's option at prices based on specified formulas.

S-12

Participating Mortgage. Participating Mortgages of the Company are
secured by first mortgage liens on the underlying real estate and personal
property of the mortgagor. Interest rates are usually subject to annual
increases based upon increases in the CPI or increases in revenues of the
underlying long-term care facilities, with certain maximum limits.

Fixed-Rate Mortgage. These mortgages of the Company, with a fixed
interest rate for the mortgage term, are also secured by first mortgage
liens on the underlying real estate and personal property of the mortgagor.

The Company may determine to finance acquisitions through the exchange of
properties or the issuance of shares of its capital stock to others, if such
transactions otherwise satisfy the Company's investment criteria. The Company
also has authority to repurchase or otherwise reacquire its common stock or any
other securities and may determine to do so in the future.

To the extent that the Company's Board of Directors determines to obtain
additional capital, the Company may raise such capital through additional debt
offerings, equity offerings or retention of cash flow (subject to provisions of
the Code, as amended concerning the taxability of undistributed income of
REITs), or a combination of these methods.

The Board of Directors, without the approval of the shareholders, may alter the
Company's investment policies if they determine in the future that such a change
is in the best interests of the Company and its shareholders. The methods of
implementing the Company's investment policies may vary as new investments and
financing techniques are developed or otherwise employed.

INVESTMENT IN PRINCIPAL HEALTHCARE FINANCE LIMITED

In July 1995, the Company became a primary sponsor of Principal. Principal is an
Omega-affiliated company which provides sale/leaseback financing to the
healthcare and nursing home industry in the United Kingdom. In October 1996,
Principal completed a private placement of equity primarily to U.K.
institutional investors. Following the placement the Company owns, directly or
indirectly, non-voting shares of Principal representing an aggregate equity
investment of approximately $7 million. The Company also has invested
approximately $23 million in the form of a pounds sterling denominated
subordinated loan due December 31, 2000. Principal currently owns and leases to
operators 116 nursing home facilities in the U.K. The Company also provides
management and advisory services for the administration, marketing,
identification and evaluation of potential investments and the monitoring of the
performance of the healthcare operators financed by Principal. In addition, the
Company maintains relationships with institutional capital sources on behalf of
Principal. The Company views its initial U.K. investment structure as a way to
capitalize on the high growth potential of the U.K. market.

The Company has from time to time provided temporary advances to Principal.
Funds advanced bear interest at 9.25% and are typically outstanding for no more
than ninety days. At June 30, 1997 the balance of temporary advances to
Principal was $12.7 million. In July 1997, the Company made available to
Principal a commitment for additional temporary advances collateralized by a
mortgage of L30 million (approximately $49.8 million) on certain properties. As
of the date of this Prospectus Supplement, L24.3 million (approximately $40.3
million) has been drawn by Principal under this commitment.

The Company has also provided a guarantee of Principal's borrowings of up to L46
million (approximately $76.4 million), pending Principal's obtaining permanent
financing for its purchase of a public company which operates nursing homes in
the United Kingdom, which homes have been leased to independent third party
nursing home operators. As of the date of this Prospectus Supplement, Principal
has borrowed substantially all of the funds available subject to such guarantee.
The Company will receive approximately $360,000 plus its cost incurred, as a fee
for this guarantee.

To date, the Company has arranged for Sterling denominated borrowings and/or
forward currency contracts to hedge its pounds sterling currency exposure.
Borrowings denominated in pounds sterling as of July 24, 1997 approximate L28.3
million.

S-13

INDUSTRY

The Company believes that a growing market exists for REITs focusing in the
long-term care industry. According to data from the U.S. Census Bureau, in 1995
there were approximately 3.6 million Americans over the age of 85, comprising
1.4% of the total U.S. population. From 1960 to 1994, the population within this
age group increased at more than five times the rate of the increase for the
total population. The Company believes that the fundamentals of the long-term
care and nursing home industry will continue to be strong and provide good
opportunity for additional investment in the foreseeable future. The long-term
care industry provides sub-acute medical and custodial care to the senior
population of the United States. The demand for long-term care comes principally
from those individuals over 85 years of age. Due to demographic trends,
regulation and government support, the Company believes that the long-term care
sector of the healthcare industry has been one of the less volatile segments of
the industry.

The demand for long-term care will be met by several types of care providers,
including acute care hospitals, skilled nursing facilities and assisted living
facilities. The level of care required by the individual will be a significant
determinant of the type of facility that the individual chooses.

S-14

PROPERTIES

The following is a summary of the Company's investments as of June 30, 1997:

OWNED PROPERTIES



NUMBER OF NUMBER OF COST OF ANNUALIZED
LOCATION FACILITIES BEDS INVESTMENTS REVENUES(1)
-------- ---------- --------- ----------- -----------

Alabama......................... 9 1,121 $ 35,223,753 $ 3,884,918
Arkansas........................ 12 1,273 37,887,832 5,033,826
Colorado........................ 1 56 750,000 92,000
Florida......................... 4 770 35,642,178 4,143,035
Idaho........................... 1 40 600,000 81,964
Illinois........................ 9 1,302 42,972,770 4,524,068
Indiana......................... 68 3,327 101,391,238 12,642,904
Iowa............................ 1 77 2,700,000 283,500
Kansas.......................... 1 173 2,500,000 223,602
Kentucky........................ 10 1,103 35,928,445 3,847,739
Louisiana....................... 1 131 4,602,573 456,369
Massachusetts................... 1 135 8,300,000 1,133,839
Missouri........................ 1 360 9,000,000 1,160,052
North Carolina.................. 6 805 27,418,132 2,862,284
Ohio............................ 1 151 6,069,351 727,839
Pennsylvania.................... 3 0 30,031,250 3,785,868
Tennessee....................... 5 606 17,447,259 2,050,987
Texas........................... 9 1,315 35,663,571 4,061,124
Washington...................... 2 319 15,900,000 1,686,903
West Virginia................... 2 182 5,637,061 675,999
--- ------ ------------ -----------
Total...................... 147 13,246 $455,665,413 $53,358,820
=== ====== ============ ===========


- -------------------------
(1) Based upon contractual terms of leases and levels of investment at June 30,
1997.

MORTGAGES



AMOUNT OF
FACE AMOUNT OF NUMBER OF NUMBER OF MORTGAGE LOANS ANNUALIZED
LOCATION MORTGAGE LOANS FACILITIES BEDS OUTSTANDING REVENUES(1)
-------- -------------- ---------- --------- -------------- -----------

California...................... $ 8,928,501 6 571 $ 7,706,489 $ 924,188
Florida......................... 43,953,750 12 1,370 43,918,270 5,229,884
Iowa............................ 3,799,546 2 250 3,300,171 388,936
Kentucky........................ 14,703,692 6 486 14,650,304 1,584,961
Maine........................... 24,386,000 11 619 24,247,501 2,875,227
Massachusetts................... 2,114,000 1 33 2,101,994 249,251
Michigan........................ 58,800,000 13 1,863 58,800,000 9,060,578
Missouri........................ 5,600,000 5 330 5,339,694 615,930
Nevada.......................... 598,661 1 73 473,371 55,788
New Mexico...................... 1,623,692 2 156 1,407,517 165,881
Ohio............................ 20,031,888 7 735 19,326,525 2,197,764
Tennessee....................... 21,605,178 5 666 21,179,815 2,907,540
Texas........................... 22,272,734 16 1,913 20,149,839 2,419,958
Utah............................ 1,917,430 1 100 1,667,759 196,551
Other -- construction loans..... 2,181,597 -- -- 2,181,597 206,580
------------ -- ------ ------------ -----------
Total...................... $232,516,669 88 9,165 $226,450,846 $29,079,017
============ == ====== ============ ===========


- -------------------------
(1) Based upon contractual terms of the mortgages and principal outstanding at
June 30, 1997.

The mortgage notes are secured by first mortgage liens on the borrowers'
underlying real estate and personal property.

S-15

OPERATORS OF PROPERTIES

The Company's strategy incorporates the expansion of its base of operators.
Since the initial public offering of the Company in 1992, the number of
operators has increased from 2 to 34 as of June 30, 1997. The following is a
summary of current operators that represent more than 4% of total real estate
investments.



PERCENT OF INVESTMENT
OPERATOR/STATE TOTAL INVESTMENT AMOUNT
-------------- ---------------- ----------

Advocat Inc. ............................................... 16.53% $112,758,339
Alabama, Arkansas, Florida, Kentucky, Ohio, Tennessee
Sun Healthcare Group, Inc. ................................. 14.01 95,541,999
Alabama, Florida, Idaho, Illinois, Indiana, Iowa,
Louisiana, Massachusetts, Texas, Washington State
GranCare, Inc. ............................................. 8.62 58,800,000
Michigan
Unison Healthcare Corp. .................................... 6.56 44,732,354
Indiana, Texas
Regency Health Services, Inc. .............................. 5.44 37,123,270
North Carolina, Tennessee
Res-Care, Inc. ............................................. 4.18 28,500,000
Indiana, Kentucky
Other Public Companies...................................... 3.06 20,889,312
------- ------------
Public Companies Total............................... 58.40% $398,345,274
------- ------------
Emerald Healthcare, Inc. ................................... 7.01% $ 47,823,631
Florida, Illinois, Indiana
Extendacare, Inc. .......................................... 5.60 38,203,938
Indiana, Kentucky
Alden Management Services, Inc. ............................ 4.57 31,166,475
Illinois
The Graduate Hospital....................................... 4.40 30,031,250
Pennsylvania
Other Private Companies..................................... 20.02 136,545,691
------- ------------
Private Companies Total.............................. 41.60% $283,770,985
------- ------------
Grand Total.......................................... 100.00% $682,116,259
======= ============


S-16

USE OF PROCEEDS

The net cash proceeds to the Company from the sale of the Notes (after payment
of all underwriting discounts and commissions and expenses of the Offering) are
estimated to be approximately $ . The Company intends to use
substantially all such net proceeds to pay down a portion of its borrowings
under its revolving line of credit (of which approximately $51 million was
outstanding at June 30, 1997 and approximately $85 million was outstanding as of
the date of this Prospectus Supplement). Such borrowings bear interest at LIBOR
plus 1.125% or, at the Company's option, at the prime rate and the current
agreement extends through July 1999. The Company intends to use the remainder of
the net proceeds to fund additional portfolio investments and for general
corporate purposes. As part of its investment strategies, the Company
continually assesses and reassesses investments and from time to time engages in
discussions concerning possible acquisitions, some of which may be material in
size. The Company expects to incur additional indebtedness under the revolving
credit facility to finance future investments.

S-17

CAPITALIZATION

The following table sets forth the historical consolidated capitalization of the
Company as of June 30, 1997, and the capitalization of the Company as of that
date as adjusted to give effect to the issuance of the $94,000,000 of Notes
offered hereby (the "Offering") and the application of the net proceeds
therefrom as described in "Use of Proceeds." The capitalization table should be
read in conjunction with the Company's Quarterly Report on Form 10-Q for the
six-month period ended June 30, 1997 and related notes thereto incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus.



JUNE 30, 1997
----------------------
AS
HISTORICAL ADJUSTED
---------- --------
(UNAUDITED)
(IN THOUSANDS)

Debt:
Acquisition line of credit................................ $ 50,865 $ --
% Notes due 2007........................................ -- 94,000
Bank term loan............................................ 25,000 25,000
Unsecured borrowings...................................... 86,381 86,381
Secured borrowings........................................ 22,523 22,523
Subordinated convertible debentures(1).................... 71,025 71,025
-------- --------
Total debt........................................... 255,794 298,929
Shareholders' Equity:
Preferred stock $1.00 par value: 10,000 shares
authorized; 2,300 shares Series A issued and
outstanding......................................... 57,500 57,500
Common stock $.10 par value; 50,000 shares
authorized, 19,065 issued and outstanding........... 1,907 1,907
Additional paid-in capital................................ 426,676 426,676
Cumulative net earnings................................... 112,280 112,280
Cumulative dividends paid................................. (138,438) (138,438)
Unamortized restricted stock awards....................... (479) (479)
-------- --------
Total shareholders' equity........................... 459,446 459,446
-------- --------
Total Capitalization................................. $715,240 $758,375
======== ========


- -------------------------
(1) On January 24, 1996, the Company issued $95 million of 8.5% Subordinated
Convertible Debentures (the "Debentures") due 2001. The Debentures are
convertible at any time into shares of Common Stock at a conversion price of
$28.625 per share.

S-18

SELECTED FINANCIAL AND OPERATING DATA

The following table sets forth summary operating and financial information which
should be read in conjunction with the condensed consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, and the Quarterly Report on Form 10-Q
for the six-month period ended June 30, 1997, which are incorporated by
reference into this Prospectus Supplement. This data also should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus
Supplement.



NINE-MONTH
PERIOD FROM
DATE OF
SIX-MONTH PERIOD INCORPORATION
ENDED JUNE 30, YEAR ENDED DECEMBER 31, TO
------------------- ----------------------------------------- DECEMBER 31,
1997 1996 1996 1995 1994(1) 1993 1992
---- ---- ---- ---- ------- ---- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS,
(UNAUDITED) RATIOS, AND PROPERTY DATA)

OPERATING DATA:
Revenue:
Rental income...................... $ 25,133 $ 21,008 $ 42,688 $ 40,335 $ 22,142 $ 10,035 $ 2,654
Mortgage interest income........... 13,989 11,251 24,692 18,621 14,578 10,077 3,236
Other.............................. 3,405 2,590 5,747 2,474 1,027 638 78
-------- -------- -------- -------- -------- -------- --------
42,527 34,849 73,127 61,430 37,747 20,750 5,968
EXPENSES:
Depreciation and amortization...... 7,903 6,785 13,693 12,995 6,684 2,743 717
Interest........................... 11,416 9,520 20,836 15,325 10,549 4,605 306
General and administrative......... 2,302 1,875 4,008 3,620 2,737 1,829 521
-------- -------- -------- -------- -------- -------- --------
21,621 18,180 38,537 31,940 19,970 9,177 1,544
-------- -------- -------- -------- -------- -------- --------
Net earnings available to common
before extraordinary charge........ 20,906 16,669 34,590 29,490 17,777 11,573 4,424
Extraordinary charge from prepayment
of debt............................ -- -- -- 6,479 -- -- --
Preferred stock dividends............ 886 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings available to common..... $ 20,020 $ 16,669 $ 34,590 $ 23,011 $ 17,777 $ 11,573 $ 4,424
======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE:
Net earnings before extraordinary
charge........................... $ 1.06 $ .98 $ 2.01 $ 1.83 $ 1.70 $ 1.78 $ .68
Net earnings....................... $ 1.06 $ .98 $ 2.01 $ 1.43 $ 1.70 $ 1.78 $ .68
Dividends per share(2)............. $ 1.29 $ 1.24 $ 2.48 $ 2.36 $ 2.20 $ 2.04 $ .26
Weighted average number of common
shares outstanding (000's)....... 18,884 17,011 17,196 16,071 10,451 6,513 6,464
BALANCE SHEET DATA (AT END OF
PERIOD):
Real estate properties -- net........ $415,702 $331,321 $343,293 $336,720 $325,048 $123,753 $ 76,448
Mortgage notes receivable............ 226,451 192,243 217,474 158,290 141,360 104,641 65,831
Total investments.................... 711,002 573,737 610,377 527,609 466,408 228,394 142,279
Total assets......................... 731,568 599,034 634,836 551,188 500,731 243,587 144,752
Acquisition line of credit........... 50,865 25,250 6,000 74,690 20,000 14,500 14,083
Subordinated convertible
debentures......................... 71,025 95,000 94,810 -- -- -- --
OTHER BORROWINGS:
Secured borrowings................. 22,523 24,119 24,274 34,069 128,603 95,123 4,146
Unsecured borrowings............... 111,381 86,384 111,384 86,384 5,000 8,450 2,100
Total liabilities.................... 272,122 243,984 251,829 204,059 162,188 120,873 22,241
Total shareholders' equity........... 459,446 355,050 383,007 347,129 338,543 122,714 122,511
OTHER DATA:
EBITDA/interest...................... 3.66x 3.55x 3.41x 4.05x 3.68x 4.38x 20.48x
EBITDA/fixed charges................. 3.27x 3.46x 3.33x 3.77x 3.32x 4.11x 17.80x
Number of facilities................. 235 193 217 186 176 71 39


- -------------------------
(1) The Company acquired Health Equity Properties Incorporated ("HEP") on
September 30, 1994. (See Note 13 to the Consolidated Financial Statements
for the year ended December 31, 1996.)

(2) Dividends per share are those declared and paid during such period with
respect to common stock.

(3) EBITDA comprises the sum of earnings before interest income, interest
expense, income taxes, depreciation and amortization. EBITDA is not a
measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as an alternative to
net income as a measure of operating performance or to cash flows from
operating activities as a measure of liquidity. EBITDA should be considered
in conjunction with all of the information in the Selected Consolidated
Financial and Operating Data. The Company's Consolidated Financial
Statements and the Notes thereto prepared in accordance with generally
accepted accounting principles and included in the Company's Form 10-K for
the year ended December 31, 1996 and the Company's Form 10-Q for the
six-month period ended June 30, 1997 are incorporated herein by reference.
The Company has presented EBITDA because it is used by certain investors to
determine a company's ability to service debt.

S-19

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements that are not based on historical fact are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include statements regarding the Company's
future development activities, the future condition and expansion of the
Company's markets, the Company's ability to meet its liquidity requirements and
the Company's growth strategies, as well as other statements which may be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "estimate," "anticipate," "continue," or similar terms, variations of
those terms or the negative of those terms. Statements that are not historical
facts contained in Management's Discussion and Analysis involve risks and
uncertainties that could cause actual results to differ from projected results.
Some of the factors that could cause actual results to differ materially
include: the financial strength of the operators of the Company's facilities as
it affects their continuing ability to meet their obligations to the Company
under the terms of the Company's agreements with such operators; changes in the
reimbursement levels under the Medicare and Medicaid programs; operators'
continued eligibility to participate in the Medicare and Medicaid programs;
changes in reimbursement by other third party payors; occupancy levels at the
Company's facilities; the availability and cost of capital; the strength and
financial resources of the Company's competitors; the Company's ability to make
additional real estate investments at attractive yields and changes in tax laws
and regulations affecting REITS.

Following is a discussion of the consolidated financial condition and results of
operations of the Company which should be read in conjunction with the
consolidated financial statements and accompanying notes.

RESULTS OF OPERATIONS

Revenues for the six-month period ended June 30, 1997 totaled $42.5 million, an
increase of $7.7 million over revenues for the same period ended June 30, 1996.
The 1997 revenue growth stems primarily from additional real estate investments
of approximately $140 million during the twelve-month period ended June 30,
1997. Additionally, revenue growth of approximately $1.0 million stems from
participating incremental net revenues which became effective in 1997. Gross
real estate investments of $682 million as of June 30, 1997 have an average
annualized yield of 12.1%.

Expenses for the six-month period ended June 30, 1997 totaled $21.6 million,
increasing $3.4 million over the expenses of $18.2 million for the 1996
six-month period. The provision for depreciation and amortization for the
six-month period ended June 30, 1997 totaled $7.9 million, increasing by $1.1
million over the same period in 1996 as a result of additional investments.

Interest expense for the six-month period ended June 30, 1997 was $11.4 million,
compared with $9.5 million for the 1996 same six-month period. The increase in
1997 is primarily due to higher average outstanding borrowings during the 1997
period, partially offset by slightly lower interest rates.

General and administrative expenses for the six-month period ended June 30, 1997
totaled approximately $2.3 million, an increase of approximately $425,000 over
the same period in 1996. These expenses were approximately 5.4% of revenues for
both six-month periods ended June 30, 1997 and June 30, 1996.

No provision for Federal income taxes has been made since the Company intends to
continue to qualify as a real estate investment trust under the provision of
Section 856 through 860 of the Code. Accordingly, the Company will not be
subject to Federal income taxes on amounts distributed to shareholders provided
it distributes at least 95% of its real estate investment trust taxable income
and meets certain other conditions.

Net earnings available to common shareholders was $20 million for the 1997
six-month period, an increase of approximately $3.4 million over the comparable
1996 period as a result of the various factors mentioned above, partially offset
by the cumulative preferred dividends in 1997. Net earnings per common share
increased $.08 (8.2%) to $1.06 for the 1997 six-month period.

S-20

LIQUIDITY AND CAPITAL RESOURCES

The Company continually seeks new investments in healthcare real estate
properties, primarily long-term care facilities, with the objective of
profitable growth and further diversification of the investment portfolio.
Permanent financing for future investments is expected to be provided through a
combination of both private placement and public offerings of debt and/or equity
securities. Management believes the Company's liquidity and various sources of
available capital are adequate to finance operations, fund future investments in
additional facilities and meet debt service requirements.

The Company has demonstrated an ability to access the capital markets by raising
more than $950 million in capital since it was organized in 1992. The Company
has raised more than $450 million in equity, including $130 from the initial
public offering in 1992, $73 million from a follow-on common stock offering in
1994, $165 million from the HEP acquisition in 1994 and $57 million from a
preferred stock offering completed in April 1997. Additionally, nearly $500
million of debt capital has been raised, some of which has been used to retire
secured borrowing debt with higher interest rates. In 1996, the Company
completed a placement of $95 million of 8.5% Convertible Subordinated Debentures
due 2001, and executed an agreement to increase its revolving line of credit
facility by $50 million and to extend the term of the revolving credit agreement
to July 1999. The increase in the revolving line of credit facility allows for
an additional $25 million, plus the equivalent of $25 million in a pounds
sterling denominated term loan due in October, 2000 for a total permitted
borrowings of up to $150 million.

In February 1997, the Company filed two shelf registration statements with the
Securities and Exchange Commission permitting the issuance of up to $250 million
of securities. The Company registered up to $150 million related to common
stock, unspecified debt, preferred stock, and convertible securities which may
be issued from time to time in connection with a Registration Statement on Form
S-3. After the preferred stock offering, approximately $94 million remains under
this registration statement which will be used in connection with the offering
of Notes in this Prospectus Supplement. Additionally, the Company registered on
Form S-4 common stock totaling $100 million to be issued in connection with
future property acquisitions.

As of June 30, 1997, the Company has total assets of approximately $732 million,
shareholders' equity of $459 million, and long-term borrowings of $205 million,
representing 28% of the total capitalization. The Company anticipates eventually
attaining and then expects to generally maintain a long-term debt-to-
capitalization ratio of approximately 40%. At June 30, 1997 the Company had
available permitted additional borrowings of $74.1 million under its revolving
line of credit arrangement ($125 million after giving effect to this Offering
and the application of the net proceeds therefrom as described under "Use of
Proceeds"), of which approximately $35 million has been subsequently drawn to
fund additional investments.

On May 16, 1997, the Company provided a guarantee of Principal's borrowings of
up to L46 million (approximately $76.4 million). See "The Company -- Investment
in Principal Healthcare Finance Limited." To provide such guarantee, the Company
obtained a waiver to certain provisions of its revolving line of credit
facility. The lenders under the revolving credit facility and the Company have
agreed that such waiver will expire on September 30, 1997, which waiver was
satisfactory to the lender providing borrowings subject to such guarantee.
Although there can be no assurance, the Company believes that it has sufficient
liquidity and would be able to refinance or amend the revolving line of credit
facility if the guarantee is required to stay in effect subsequent to September
30, 1997.

The Company distributes a large portion of the cash available from operations.
Cash dividends paid totaled $1.29 per share for the six-month period ended June
30, 1997, compared with $1.24 per share for the same six-month period in 1996.
On July 16, 1997, the Board of Directors declared a quarterly common dividend of
$.645 per share, payable on August 15, 1997 to common shareholders of record on
August 4, 1997. The current $.645 per quarter rate represents an annualized rate
of $2.58 per share. Additionally, a regular quarterly preferred stock dividend
of $.578 per share was declared payable on August 15, 1997 to Series A (9.25%)
Cumulative Preferred shareholders of record on July 31, 1997.

New investments generally are funded from temporary borrowings on the revolving
line of credit facility. Interest cost incurred by the Company on borrowings
under the acquisition line will vary depending upon

S-21

fluctuations in prime and/or LIBOR rates, and upon changes in the Company's
ratings by rating agencies. The Company's borrowings under its revolving line of
credit currently bear interest at LIBOR plus 1.125% or, at the Company's option
at the prime rate. The Company expects to periodically replace funds drawn on
the acquisition line through fixed-rate long-term borrowings, the placement of
convertible debentures, or the issuance of additional shares of capital stock.
Historically, the Company's strategy has been to match the maturity of its
indebtedness with the maturity of its assets and to employ fixed-rate long-term
debt to the extent practicable.

S-22

DESCRIPTION OF NOTES

The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the "Debt Securities" set forth in the
accompanying Prospectus under "Securities -- Debt Securities," to which
reference is hereby made.

GENERAL

The Notes constitute a separate series of Debt Securities (which are more fully
described in the accompanying Prospectus) to be issued under an Indenture, dated
as of January 28, 1997 (the "Original Indenture"), as supplemented by
Supplemental Indenture No. 1, dated as of , 1997 (the
"Supplemental Indenture") and together with the Original Indenture as
supplemented, the "Indenture") between the Company and NBD Bank, as trustee (the
"Trustee"). The form of the Indenture has been filed as an exhibit to (or
incorporated by reference into) the Registration Statement of which this
Prospectus Supplement is a part and is available for inspection at the offices
of the Company. The Indenture is subject to, and governed by, the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made hereunder
relating to the Indenture and the Notes are summaries of certain provisions
thereof, do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture and the Notes.
All capitalized terms used but not defined herein shall have the respective
meanings set forth in the Indenture.

The Notes will be limited to an aggregate principal amount of $ . The
Notes will be direct, senior unsecured obligations of the Company and will rank
equally with all other unsecured and unsubordinated indebtedness of the Company
from time to time outstanding. The Notes will be effectively subordinated to
mortgages and other secured indebtedness of the Company and to indebtedness and
other liabilities of the Company's Subsidiaries. Accordingly, such prior
indebtedness will have to be satisfied in full before holders of the Notes will
be able to realize any value from encumbered or indirectly-held properties.

As of June 30, 1997, on an as adjusted basis after giving effect to the Offering
and the application of the net proceeds therefrom as described under "Use of
Proceeds," the Company would have had approximately $299 million of
indebtedness, of which approximately $23 million would have been secured by 11
properties. The Company may incur additional indebtedness, including secured
debt, subject to the provisions described below under "-- Certain Covenants --
Limitations on Incurrence of Debt."

The Notes will be represented by one or more Global Securities registered in the
name of Depository Trust Company ("DTC") or its nominees. The Notes will only be
issued in fully registered form in denominations of $1,000 and integral
multiples thereof. The Notes will not be entitled to the benefit of any sinking
fund.

PRINCIPAL AND INTEREST

The Notes will bear interest at % per annum and will mature on .
The Notes will bear interest from , 1997 or from the immediately
preceding Interest Payment Date (as defined below) to which interest has been
paid, payable semi-annually in arrears on and of
each year, commencing , 1998 (each, an "Interest Payment Date"),
to the Persons in whose name the Notes are registered in the Security Register
on the preceding or (whether or not a Business
Day, as defined below), as the case may be (each, a "Regular Record Date").
Interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months.

If any Interest Payment Date or Stated Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Maturity Date, as the case may be if such payment is timely made.
"Business Day" means any day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which banks in the City of New York are authorized or
required by law, regulation or executive order to close.

S-23

For so long as the Notes are represented by a Global Security registered in the
name of a Depositary, payments of principal, premium, if any, and interest will
be made in the manner set forth in the Section entitled "Securities -- Debt
Securities -- Global Securities" in the Prospectus accompanying this Prospectus
Supplement.

OPTIONAL REDEMPTION

The Notes may be redeemed at any time at the option of the Company, in whole or
in part, at a redemption price equal to the sum of (i) the principal amount of
the Notes being redeemed plus accrued interest thereon to the redemption date
and (ii) the Make-Whole Amount, if any, with respect to such Notes (the
"Redemption Price").

If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Notes will be to receive payment of the
Redemption Price.

Notice of any optional redemption of any Notes will be given to Holders at their
addresses, as shown in the Security Register, not more than 60 nor less than 30
days prior to the date fixed for redemption. The notice of redemption will
specify, among other items, the Redemption Price and the principal amount of the
Notes held by such Holder to be redeemed.

If less than all the Notes are to be redeemed at the option of the Company, the
Company will notify the Trustee at least 45 days prior to the redemption date
(or such shorter period as is satisfactory to the Trustee) of the aggregate
principal amount of Notes to be redeemed and their redemption date. The Trustee
shall select, in such manner as it shall deem fair and appropriate, Notes to be
redeemed in whole or in part. Notes may be redeemed in part in the minimum
authorized denomination for Notes or in any integral multiple thereof.

"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semi-annual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the
respective Notes being redeemed or paid.

"Reinvestment Rate" means .25% (twenty-five one hundredths of one percent) plus
the arithmetic means of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For such purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.

"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination of the Make-Whole Amount, then
such other reasonably comparable index which shall be designated by the Company.

S-24

CERTAIN COVENANTS

Limitations on Incurrence of Debt. The Company will not, and will not permit any
Subsidiary to, incur any Debt (as defined below) if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of the
Company and its Subsidiaries on a consolidated basis determined in accordance
with GAAP is greater than 60% of the sum ("Adjusted Total Assets") of (without
duplication) (i) the Total Assets (as defined below) of the Company and its
Subsidiaries as of the end of the calendar quarter covered in the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the Commission (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Debt and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Debt), by the
Company or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Debt.

In addition to the foregoing limitation on the incurrence of Debt, the Company
will not, and will not permit any Subsidiary to, incur any Secured Debt (as
defined below) if, immediately after giving effect to the incurrence of such
additional Secured Debt and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Secured Debt of the Company and
its Subsidiaries on a consolidated basis is greater than 40% of Adjusted Total
Assets.

In addition to the foregoing limitations on the Incurrence of Debt, the Company
will not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service (as defined below) to the Annual
Service Charge (as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be incurred
shall have been less than 1.5x on a pro forma basis after giving effect thereto
and to the application of the proceeds therefrom, and calculated on the
assumption that (i) such Debt and any other Debt incurred by the Company and its
Subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other Debt, had occurred at
the beginning of such period; (ii) the repayment or retirement of any other Debt
by the Company and its Subsidiaries since the first day of such four-quarter
period has been repaid or retired at the beginning of such period (except that,
in making such computation the amount of Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Debt
since the first day of such four-quarter period; (iii) in the case of Acquired
Debt (as defined below) or Debt incurred in connection with any acquisition
since the first day of such four-quarter period, the related acquisition had
occurred as of the first day of such period with the appropriate adjustments
with respect to such acquisition being included in such pro forma calculation;
and (iv) in the case of any acquisition or disposition by the Company or its
Subsidiaries of any asset or group of assets since the first day of such
four-quarter period, whether by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation.

Maintenance of Total Unencumbered Assets. The Company and its Subsidiaries will
maintain Total Unencumbered Assets (as defined below) of not less than 200% of
the aggregate outstanding principal amount of the Unsecured Debt (as defined
below) of the Company and its Subsidiaries on a consolidated basis.

Provision of Financial Information. Whether or not the Company is subject to
Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 and 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days after each Required Filing
Date (i) if the Company is not then subject to such Section 13 or 15(d),
transmit by mail to all Holders of Notes, as their names and

S-25

addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports that the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections, (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents that
the Company would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective Holder.

Waiver of Certain Covenants. The Company may omit to comply with any term,
provision or condition of the foregoing covenants, and with any other term,
provision or condition with respect to the Notes (except any such term,
provision or condition which could not be amended without the consent of all
Holders of Notes), if before or after the time for such compliance the Holders
of at least a majority in principal amount of all the outstanding Notes, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition. Except to the extent so
expressly waived, and until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.

Existence. Except as permitted under "-- Merger, Consolidation or Sale," the
Company will be required to do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any right or franchise if it determines that
the preservation thereof is no longer desirable in the conduct of its business.

As used herein, and in the Indenture:

"Acquired Debt" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.

"Annual Service Charge" as of any date means the maximum amount which is
expensed in any 12-month period for interest on Debt of the Company and its
Subsidiaries.

"Capital Stock" means, with respect to any Person, any capital stock (including
preferred stock), shares, interests, participation or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into or exchangeable for corporate stock) warrants or options to
purchase any thereof.

"Consolidated Income Available for Debt Service" for any period means Earnings
from Operations (as defined below) of the Company and its Subsidiaries plus
amounts which have been deducted, and minus amounts which have been added, for
the following (without duplication): (i) interest on Debt of the Company and its
Subsidiaries, (ii) provision for taxes of the Company and its Subsidiaries based
on income, (iii) amortization of debt discount and deferred financing costs,
(iv) provisions for gains and losses on properties and property depreciation and
amortization, (v) the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations for such period
and (vi) amortization of deferred charges.

"Debt" of the Company or any Subsidiary means, without duplication, any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness for borrowed money of a Person other than
the Company or a Subsidiary which is secured by any Encumbrance existing on
property owned by the Company or any Subsidiary, (iii) the reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued (other than letters of credit issued to provide credit
enhancement or support with respect to other indebtedness of the Company or any
Subsidiary otherwise reflected as Debt hereunder) or amounts representing the
balance deferred and unpaid of the purchase price of any property or services,
except any

S-26

such balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention agreement,
(iv) the principal amount of all obligations of the Company or any Subsidiary
with respect to redemption, repayment or other repurchase of any Disqualified
Stock, or (v) any lease of property by the Company or any Subsidiary as lessee
which is reflected on the Company's consolidated balance sheet as a capitalized
lease in accordance with GAAP, to the extent, in the case of items of
indebtedness under (i) through (iii) above, that any such items (other than
letters of credit) would appear as a liability on the Company's consolidated
balance sheet in accordance with GAAP, and also includes, to the extent not
otherwise included, any obligation by the Company or any Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purpose of
collection in the ordinary course of business). Debt of another Person (other
than the Company or any Subsidiary), (it being understood that Debt shall be
deemed to be incurred by the Company or any Subsidiary whenever the Company or
such Subsidiary shall create, assume, guarantee or otherwise become liable in
respect thereof).

"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the term of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), (ii) is convertible into or exchangeable or exercisable for
Debt or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for common stock or shares), in each case on or prior to the
Stated Maturity of the Notes.

"Earnings from Operations" for any period means net earnings excluding gains and
losses on sales of investments, as reflected in the financial statements of the
Company and its Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP.

"Encumbrance" means any mortgage, lien, charge, pledge or security interest of
any kind.

"Secured Debt" means Debt secured by an Encumbrance.

"Subsidiary" means, with respect to any Person, any corporation or other entity
of which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests of which are owned, directly or
indirectly, by such Person. For the purposes of this definition, "voting equity
securities" means equity securities having voting power for the election of
directors, whether at all times or only so long as no senior class of security
has such voting power by reason of any contingency.

"Total Assets" as of any date means the sum of (i) the Undepreciated Real Estate
Assets and (ii) all other assets of the Company and its Subsidiaries determined
in accordance with GAAP (but excluding accounts receivable and intangibles).

"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real Estate
Assets not subject to an Encumbrance for borrowed money and (ii) all other
assets of the Company and its Subsidiaries not subject to an Encumbrance for
borrowed money, determined in accordance with GAAP (but excluding accounts
receivable and intangibles).

"Undepreciated Real Estate Assets" as of any date means the cost (original cost
plus capital improvements) of real estate assets of the Company and its
Subsidiaries on such date, before depreciation and amortization, determined on a
consolidated basis in accordance with GAAP.

"Unsecured Debt" means Debt which is not secured by any Encumbrance upon any of
the properties of the Company or any Subsidiary.

MERGER, CONSOLIDATION OR SALE OF ASSETS

The Company may not consolidate with or merge into any other entity, or convey,
lease or transfer all or substantially all of its properties or assets to any
Person, unless (i) the Person formed by such consolidation or into which the
Company is merged the Person which acquires by conveyance, lease or transfer all
or substantially all of the properties and assets of the Company shall be a
person organized and existing under

S-27

the laws of the United States of America or any State or the District of
Columbia, and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium and Make-Whole Amount, if any)
and interest, if any, on all the Debt Securities and the performance of every
covenant of the Indenture on the part of the Company to be performed or
observed, (ii) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing and (iii) an
officer's certificate and legal opinion covering such conditions shall be
delivered to the Trustee.

EVENTS OF DEFAULT

The Indenture provides that the following events are "Events of Default" with
respect to the Notes: (a) default in the payment of any interest on any Notes
when such interest becomes due and payable that continues for a period of 30
days, (b) default in the payment of the principal of (or Make-Whole Amount, if
any, on) any Notes when due and payable; (c) default in the performance, or
breach, of any other covenant or warranty of the Company in the Indenture with
respect to the Notes and continuance of such default or breach for a period of
60 days after written notice as provided in the Indenture; (d) default under any
bond, debenture, note, mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any indebtedness for
money borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor), having an aggregate principal amount
outstanding of at least $10,000,000, whether such indebtedness now exists or
shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 10 days after written notice to the Company as provided in
the Indenture; (e) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any Subsidiary in an
aggregate amount (excluding amounts covered by insurance) in excess of
$10,000,000 and such judgments, orders or decrees remain undischarged, unstayed
and unsatisfied in an aggregate amount (excluding amounts covered by insurance)
in excess of $10,000,000 for a period of 30 consecutive days; and (f) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Company or any Significant Subsidiary.
The term "Significant Subsidiary" has the meaning ascribed to such term in
Regulation S-X promulgated under the Securities Act of 1933, as amended.

If an Event of Default specified in clause (f) above, relating to the Company or
any Significant Subsidiary occurs, the principal amount of and the Make-Whole
Amount on, all outstanding Notes shall become due and payable without any
declaration or other act on the part of the Trust or of the Holders.

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

The provisions of the Indenture relating to defeasance and covenant defeasance
will apply to the Notes. Each of the covenants described under "-- Certain
Covenants" herein will be subject to covenant defeasance.

BOOK-ENTRY SYSTEM

The provisions described under "Securities -- Debt Securities -- Global
Securities" in the accompanying Prospectus will apply to the Notes.

DTC has advised the Company of the following information regarding DTC: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities that
its participants (as defined in the accompanying Prospectus) deposit with DTC.
DTC also facilitates the settlement among its participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized

S-28

book-entry changes in its participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct participants of DTC
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its direct participants and by the NYSE, the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant of DTC, either directly or indirectly.
The rules applicable to DTC and its participants are on file with the
Commission.

GOVERNING LAW

The Indenture will be governed by and shall be construed in accordance with the
laws of the State of New York.

NO PERSONAL LIABILITY

No past, present or future stockholder, employee, officer or director of the
Company or any successor thereof shall have any liability for any obligation,
covenant or agreement of the Company contained under the Notes or the Indenture.
Each Holder of Notes by accepting such Notes waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Notes.

S-29

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF THE
NOTES INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF
SUCH PURCHASE, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.

TAXATION OF THE COMPANY

General. The Company has elected to be taxed as a REIT under Section 856 through
860 of the Code. The Company believes that it has been organized and has
operated in such a manner as to qualify for taxation as a REIT under the Code
for its taxable years since inception and through and including December 31,
1996, and the Company intends to continue to operate in such a manner, but no
assurance can be given that the Company has operated or will be able to continue
to operate in a manner so as to qualify or remain qualified.

The sections of the Code that govern the federal income tax treatment of a REIT
are highly technical and complex. This summary in qualified in its entirety by
the applicable Code provisions, rules and regulations promulgated thereunder,
and the administrative and judicial interpretations thereof.

In the opinion of Argue Pearson Harbison & Myers, LLP as REIT counsel to the
Company, whose opinion has been filed as an Exhibit to the Registration
Statement of which the Prospectus Supplement is a part, the Company is organized
and has operated in conformity with the requirements for qualification and
taxation as a REIT, and its proposed method of operation will enable it to
continue to meet the requirements for continued qualification and taxation as a
REIT under the Code. This opinion is based on various assumptions, and is
conditioned upon certain representations made by the Company concerning its
business and properties. Moreover, such qualification and taxation as a REIT
depends upon the Company's ability to meet, through actual annual operating
results, distribution levels and diversity of stock ownership, and the various
qualification tests imposed under the Code including but not limited to the
source or its income and the nature and diversification of its assets.
Accordingly, no assurance can be given that the various results of the Company's
operation from any particular taxable year will satisfy such requirements.
Further, such requirements may be changed, perhaps retroactively, by legislative
or administrative actions at any time. The Company has neither sought nor
obtained any formal ruling from the Internal Revenue Service (the "IRS")
regarding its qualification as a REIT and presently has no plan to apply for any
such ruling. See "-- Failure to Qualify."

If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to shareholders. This treatment substantially eliminates the "double
taxation" (at the corporate and shareholder levels) that generally results from
investment in a corporation. However, the Company will be subject to federal
income tax as follows: First, the Company will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains; provided, however, that if the Company has a net capital gain, it
will be taxed at regular corporate rates on its undistributed REIT taxable
income, computed without regard to net capital gain and the deduction for
capital gains dividends, plus a 35% tax on undistributed net capital gain, if
its tax as thus computed is less than the tax computed in the regular manner.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if the Company
has (i) net income from the sale or other disposition of "foreclosure property"
which is held primarily for sale to customers in the ordinary course of business
or (ii) other nonqualifying income from foreclosure property, it will be subject
to tax at the highest regular corporate rate on such income. Fourth, if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property (other than foreclosure
property) held primarily for sale to customers in the ordinary course of
business by the Company, (i.e., when the Company is acting as a dealer)), such
income will be subject to a 100% tax. Fifth, if the Company should fail to
satisfy the 75% gross income test or the 95%

S-30

gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by (b) a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute by the end of
each year at least the sum of (i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, the Company will be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company acquires any asset (a "Built-In
Gain Asset") from a C corporation (i.e. generally a corporation subject to full
corporate-level tax) in a transaction in which the basis of the Built-In Gain
asset in the Company's hands is determined by reference to the basis of the
asset (or any other property) in the hands of the C corporation, and the Company
recognizes gain on the disposition of such asset during the 10-year period (the
"Recognition Period") beginning on the date on which such asset was acquired by
the Company, then, to the extent of the Built-In Gain (i.e., the excess of (a)
the fair market value of such asset on the date such asset was acquired by the
Company over (b) the Company's adjusted basis in such asset on such date), such
gain will be subject to tax at the highest regular corporate rate pursuant to
Treasury Regulations that have not yet been promulgated. The results described
above with respect to the recognition of Built-In Gain assume the Company will
make an election pursuant to IRS Notice 88-19.

Failure to Qualify. If the Company fails to qualify as a REIT in any taxable
year, and certain relief provisions do not apply, the Company will be subject to
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Company fails to qualify will not be deductible and the Company's failure to
qualify as a REIT would reduce the cash available for distribution by the
Company to its shareholders or to meet debt service obligations. Unless entitled
to relief under specific statutory provisions, the Company will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances the Company would be entitled to such statutory relief.
Failure to qualify could result in the Company's incurring indebtedness or
liquidating investments in order to pay the resulting taxes.

BACKUP WITHHOLDING

Under the backup withholding rules, a Noteholder may be subject to backup
withholding at the rate of 31% with respect to interest paid unless such holder
(a) is a corporation or comes within certain other exempt categories and when
required, demonstrates this fact, or (b) provides a correct tax payor
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A Noteholder that does not provide the Company with his
correct tax payor identification number may also be subject to penalties imposed
by the IRS.

OTHER TAX CONSEQUENCES

The Company and its investors may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they
transact business or reside. There may be other federal, state, local or foreign
tax considerations applicable to the circumstances of a particular investor.
Prospective investors are urged to consult their own tax advisors with respect
to such matters.

Certain employee benefit plans and individual retirement accounts and individual
retirement annuities ("IRAs") (collectively, "Plans"), are subject to various
provisions of the Employee Retirement Income Security Act 1974, as amended
("ERISA") and the Code. Before investing in the Notes of the Company, a Plan
fiduciary should ensure that such investment is in accordance with ERISA's
general fiduciary standards. In making such a determination, a Plan fiduciary
should ensure that the investment is in accordance with the governing
instruments and the overall policy of the Plan, and that the investment will
comply with the diversification and composition requirements of ERISA. In
addition, provisions of ERISA and the Code prohibit certain transactions using
Plan assets that involve persons who have specified relationships with a Plan.
The consequences of such prohibited transactions include excise taxes,
disqualifications of IRAs and other liabilities. A Plan fiduciary should ensure
that any investment in the Notes will not constitute such a prohibited
transaction.

S-31

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, dated the
date hereof (the "Underwriting Agreement"), the Company has agreed to sell to
each of the Underwriters named below (the "Underwriters"), and each of the
Underwriters has severally agreed to purchase, the respective principal amount
of Notes set forth opposite its name below:



PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
- ------------ ----------------

J.P. Morgan Securities Inc. ................................ $
Bear, Stearns & Co. Inc. ................................... $
----------
Total.................................................. $
==========


Under the terms and conditions of the Underwriting Agreement, the Underwriters
will be obligated to purchase all of the Notes if any are purchased.

The Underwriters have advised the Company that they propose initially to offer
the Notes directly to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at that price
less a concession not in excess of % of the principal amount of the Notes.
The Underwriters may allow, and the dealers may reallow, a concession not in
excess of % of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering price and the concession
may be changed.

In connection with the offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the prices of the Notes.
Specifically, the Underwriters may overallot the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, in the
open market to cover syndicate shorts or to stabilize the prices of the Notes.
Finally, the underwriting syndicate may reclaim selling concessions allowed for
distributing the Notes in the offering, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
prices of the Notes above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time. The Notes are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the Notes but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.

The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
thereof.

In the ordinary course of their respective businesses, affiliates of the
Underwriters have engaged, or may in the future engage, in commercial banking
and investment banking transactions with the Company and its affiliates.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Willkie Farr &
Gallagher, New York, New York and by Argue Pearson Harbison & Myers, LLP, Los
Angeles, California. Certain legal matters will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.

S-32

PROSPECTUS

OMEGA HEALTHCARE INVESTORS, INC.

COMMON STOCK, PREFERRED STOCK,
DEBT SECURITIES AND SECURITIES WARRANTS

Omega Healthcare Investors, Inc. (the "Company") may from time to time
offer in one or more series (i) shares of its common stock, par value $.10 per
share (the "Common Stock"); (ii) shares of its preferred stock, par value $1.00
per share (the "Preferred Stock"); (iii) its unsecured debt securities (the
"Debt Securities"); or (iv) warrants to purchase Common Stock (the "Common Stock
Warrants"), warrants to purchase Debt Securities (the "Debt Securities
Warrants"), and warrants to purchase Preferred Stock (the "Preferred Stock
Warrants"), with an aggregate public offering price of up to $150,000,000, on
terms to be determined at the time of offering. The Common Stock Warrants, the
Debt Securities Warrants and the Preferred Stock Warrants shall be referred to
herein collectively as the "Securities Warrants." The Common Stock, Preferred
Stock, Debt Securities, and Securities Warrants (collectively, the "Securities")
may be offered, separately or together, in separate series amounts, at prices
and on terms to be set forth in a supplement to this Prospectus (a "Prospectus
Supplement").
(continued on next page)

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------------

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.

------------------------

THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.

------------------------

THE DATE OF THIS PROSPECTUS IS FEBRUARY 14, 1997

The terms of the Preferred Stock, including specific designation and stated
value per share, any dividend, liquidation, redemption, conversion, voting and
other rights, and all other specific terms of the Preferred Stock will be set
forth in the applicable Prospectus Supplement. In the case of the Debt
Securities, the specific title, aggregate principal amount, form (which may be
registered or bearer, or certified or global), maturity, rate (or manner of
calculation thereof) and time of payment of interest, terms for redemption at
the option of the Company or repayment at the option of the Holder, any sinking
fund provisions and any conversion provisions will be set forth in the
applicable Prospectus Supplement. In the case of the Securities Warrants, the
duration, offering price, exercise price and detachability, if applicable, will
be set forth in the applicable Prospectus Supplement. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Securities or redemption or conversion terms, in each case as
may be appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for United States federal income tax purposes. The
applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.

In the case of Securities Warrants, the duration, offering price, exercise
price and detachability, if applicable, will be set forth in the applicable
Prospectus Supplement. In addition, such specific terms may include limitations
on direct or beneficial ownership and restrictions on transfer of the
Securities, in each case as may be appropriate to preserve the status of the
Company as a real estate investment trust ("REIT") for United States federal
income tax purposes. The applicable Prospectus Supplement will also contain
information, where applicable, about certain United States federal income tax
considerations relating to, and any listing on a securities exchange of, the
Securities covered by such Prospectus Supplement.

Securities may be offered directly, through agents designated from time to
time by the Company, or to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the Securities, their names, and
any applicable purchase price, fee, commission or discount arrangement between
or among them, will be set forth, or will be calculable from the information set
forth, in the applicable Prospectus Supplement. See "Plan of Distribution." No
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such series of Securities.
The net proceeds to the Company from the sale of any of the Securities will be
set forth in the applicable Prospectus Supplement.

2

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission in Washington, D.C. (Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549), and at the Commission's Regional Offices in Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois 60665) and New York City
(7 World Trade Center, 13th Floor, New York, New York 10048). Copies of such
material can be obtained from the Commission's Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The common stock
of the Company is listed on the New York Stock Exchange and reports, proxy
statements and other information concerning Omega Healthcare Investors, Inc. can
be inspected at 20 Broad Street, New York, New York. The Company has filed with
the Commission a Registration Statement on Form S-3 with respect to the
securities offered hereby. This Prospectus and any accompanying Prospectus
Supplement do not contain all information set forth in the Registration
Statement, in accordance with the rules and regulations of the Commission, and
exhibits thereto which the Company has filed with the Commission under the
Securities Act of 1933 and to which reference is hereto made.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents previously filed with the Commission are
incorporated in this Prospectus by reference:

- Annual Report of the Company on Form 10-K for the year ended December 31,
1995;

- Quarterly Reports of the Company on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996, and September 30, 1996;

- Current Reports of the Company on Form 8-K dated June 10, 1996, and
January 19, 1996; and

- The description of the Company's Common Stock, $.10 par value, contained
in its Initial Registration Statement on Form 8-A, filed under Section 12
of the Securities Exchange Act of 1934, and declared effective by the
Commission on August 7, 1992.

All documents filed by Omega Healthcare Investors, Inc. pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the date hereof and prior to the termination of the offering made hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents. All information appearing in this
Prospectus is qualified in its entirety by the detailed information and
financial statements (including the notes thereto) appearing in the documents
incorporated by reference. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.

Omega Healthcare Investors, Inc. will provide without charge to each person
to whom this Prospectus is delivered, on written or oral request of such person,
a copy (without exhibits other than exhibits specifically incorporated by
reference therein) of any or all documents incorporated by reference into this
Prospectus within the meaning of Section 10(a) of the Securities Act of 1933.
Requests for such copies should be directed to Essel W. Bailey, Jr., President
and Secretary of the Company, at the Company's principal executive offices at
905 West Eisenhower Circle, Suite 110, Ann Arbor, Michigan 48103, telephone
(313) 747-9790.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF THE
COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

3

THE COMPANY

Omega Healthcare Investors, Inc. (the "Company") was incorporated in the
State of Maryland on March 31, 1992. It is a self administered real estate
investment trust ("REIT") which invests in income producing healthcare
facilities, principally long-term care facilities located primarily in the
United States.

As of December 31, 1996, the Company's portfolio of domestic investments
consisted of 214 long-term care facilities and 3 medical office buildings. The
Company owns and leases 132 long-term care facilities and 3 medical office
buildings, and provides mortgages, including participating and convertible
mortgages, on 82 long-term care facilities. The facilities are located in 24
states and operated by 34 unaffiliated operators. The Company is also an owner
of and provides management/advisory services to Principal Healthcare Finance
Limited which owns and leases 42 nursing homes in the United Kingdom. The
Company's gross investments at December 31, 1996 totaled $643.3 million.

The Company anticipates providing lease or mortgage financing in the future
for healthcare facilities to qualified operators, and also anticipates acquiring
additional healthcare facility types, including assisted living and acute care
facilities.

The investment objectives of the Company are: To pay regular cash dividends
to shareholders; to provide the opportunity for increased dividends from annual
increases in rental and interest income from revenue participations and from
portfolio growth; to preserve and protect shareholders' capital; and to provide
the opportunity to realize capital growth resulting from appreciation.

The Company intends to make and manage its investments (including the sale
or disposition of property or other investments) in such a manner as to be
consistent with the requirements of the Code (or regulations thereunder) to
qualify as a real estate investment trust ("REIT"), unless, because of changes
in circumstances or changes in the Code (or regulations thereunder), the Board
of Directors determines that it is no longer in the best interests of the
Company to qualify as a REIT.

The executive offices of the Company are located at 905 West Eisenhower
Circle, Suite 110, Ann Arbor, Michigan 48103. Its telephone number is (313)
747-9790.

INVESTMENT STRATEGIES AND POLICIES

The Company maintains a diversified portfolio of income-producing health
care facilities or mortgages thereon, with a primary focus on long-term care
facilities located primarily in the United States. In evaluating potential
investments, the Company considers such factors as: (i) the quality and
experience of management and the creditworthiness of the operator of the
facility; (ii) the facility's historical, current and forecasted cash flow and
its adequacy to meet operational needs, capital expenditures and lease or debt
service obligations, while providing a competitive return on investment to the
Company; (iii) the construction quality, condition and design of the facility;
(iv) the geographic area and type of facility; (v) the tax, growth, regulatory
and reimbursement environment of the community in which the facility is located;
(vi) the occupancy and demand for similar health care facilities in the same or
nearby communities; and (vii) the payor mix of private, Medicare and Medicaid
patients.

In making investments, the Company generally seeks established,
creditworthy, "middle market" health care operators which meet the Company's
standards for quality and experience of management. Although the Company has
emphasized long-term care investments, it will diversify prudently into other
types of health care investments. The Company actively seeks to diversify its
investments in terms of geographic location, operators and facility types.

A fundamental investment strategy of the Company is to obtain contractual
rent escalations under long-term, non-cancelable "triple net" leases and revenue
participations through participating mortgage loans, and to obtain substantial
security deposits. The Company may participate in mortgage loans through
ownership of collateralized mortgage obligations or other securitization of
mortgages.

The Company may determine to finance acquisitions through the exchange of
properties or the issuance of shares of its capital stock to others, if such
transactions otherwise satisfy the Company's investment criteria.

4

The Company also has authority to repurchase or otherwise reacquire its Common
Stock or any other securities and may determine to do so in the future.

To the extent that the Company's Board of Directors determines to obtain
additional capital, the Company may raise such capital through additional equity
offerings, debt financings or retention of cash flow (subject to provisions of
the Internal Revenue Code of 1986, as amended concerning the taxability of
undistributed income of "real estate investment trusts"), or a combination of
these methods.

The Bylaws of the Company permit the Board of Directors, without the
approval of the shareholders, to alter the Company's investment policies if they
determine in the future that such a change is in the best interests of the
Company and its shareholders. The methods of implementing the Company's
investment policies may vary as new investments and financing techniques are
developed or otherwise employed.

BORROWING POLICIES

The Company may incur additional indebtedness, and intends to eventually
attain and then maintain a long-term debt-to-capitalization ratio of
approximately 40%. The Company intends to review periodically its policy with
respect to its debt-to-capitalization ratio and to adapt such policy as its
management deems prudent in light of prevailing market conditions. The Company's
strategy generally has been to match the maturity of its indebtedness with the
maturity of its assets, and to employ long term, fixed rate debt to the extent
practicable.

The Company will use the proceeds of any additional indebtedness to provide
permanent financing for investments in additional health care facilities. The
Company may obtain either secured or unsecured indebtedness, which may be
convertible into capital stock or accompanied by warrants to purchase capital
stock. Where debt financing is present on terms deemed favorable, the Company
may invest in properties subject to existing loans, secured by mortgages, deeds
of trust or similar liens on the properties.

RATIO OF EARNINGS TO FIXED CHARGES

The ratio of earnings to fixed charges are as follows:



YEAR ENDED
AUGUST 14, 1992 DECEMBER 31,
(INCEPTION) TO ----------------------------
DECEMBER 31, 1992(1) 1993 1994 1995 1996
-------------------- ---- ---- ---- ----

Ratio of Earnings to Fixed Charges(2).......... 15.45x 3.51x 2.69x 2.92x 2.67x


- ---------------

(1) Operations of the Company commenced on August 14, 1992.

(2) For purposes of calculating the ratio of earnings to fixed charges, net
earnings (before extraordinary charge from prepayment of debt in 1995) has
been added to fixed charges and that sum has been divided by such fixed
charges. Fixed charges consist of interest expense and amortization of
deferred financing costs.

USE OF PROCEEDS

Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities offered from
time to time hereby will be used for the repayment of short term bank lines of
credit and general corporate purposes, including additional investments in
health care properties.

DESCRIPTION OF SECURITIES

The Company may offer under this Prospectus one or more of the following
categories of its Securities: (i) shares of its Common Stock, par value $0.10
per share; (ii) shares of its Preferred Stock, par value $1.00 per share, in one
or more series; (iii) Debt Securities, in one or more series; (iv) Common Stock
Warrants;

5

(v) Preferred Stock Warrants; (vi) Debt Warrants; and (vii) any combination of
the foregoing, either individually or as units consisting of one or more of the
types of Securities described in clauses (i) through (vi). The terms of any
specific offering of Securities, including the terms of any units offered, will
be set forth in a Prospectus Supplement relating to such offering.

The authorized capital stock of the Company currently consists of
50,000,000 shares of Common Stock, par value $0.10 per share, and 10,000,000
shares of Preferred Stock, par value $1.00 per share. As of December 31, 1996,
the Company had 18,175,268 shares of its Common Stock issued and outstanding.
The Common Stock is listed on the New York Stock Exchange. The Company intends
to list any additional shares of its Common Stock which are issued and sold
hereunder. No shares of the Company's Preferred Stock are outstanding. The
Company may list any Preferred Stock which is offered and sold hereunder, as
described in the Prospectus Supplement relating to such Preferred Stock.

COMMON STOCK

All shares of Common Stock participate equally in dividends payable to
stockholders of Common Stock when and as declared by the Board of Directors and
in net assets available for distribution to stockholders of Common Stock on
liquidation or dissolution, have one vote per share on all matters submitted to
a vote of the stockholders and do not have cumulative voting rights in the
election of directors. All issued and outstanding shares of Common Stock are,
and the Common Stock offered hereby will be upon issuance, validly issued, fully
paid and nonassessable. Holders of the Common Stock do not have preference,
conversion, exchange or preemptive rights. The Common Stock is listed on the New
York Stock Exchange (NYSE Symbol "OHI").

REDEMPTION AND BUSINESS COMBINATION PROVISIONS

If the Board of Directors shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of at least 9.9% or more of the voting
shares of capital stock has or may become concentrated in the hands of one
beneficial owner, the Board of Directors shall have the power (i) by lot or
other means deemed equitable by it to call for the purchase from any stockholder
of the Company a number of voting shares sufficient, in the opinion of the Board
of Directors, to maintain or bring the direct or indirect ownership of voting
shares of capital stock of such beneficial owner to a level of no more than 9.9%
of the outstanding voting shares of the Company's capital stock, and (ii) to
refuse to transfer or issue voting shares of capital stock to any person whose
acquisition of such voting shares would, in the opinion of the Board of
Directors, result in the direct or indirect ownership by that person of more
than 9.9% of the outstanding voting shares of capital stock of the Company.
Further, any transfer of shares, options, warrants, or other securities
convertible into voting shares that would create a beneficial owner of more than
9.9% of the outstanding voting shares shall be deemed void ab initio and the
intended transferee shall be deemed never to have had an interest therein. The
purchase price for any voting shares of capital stock so redeemed shall be equal
to the fair market value of the shares reflected in the closing sales prices for
the shares, if then listed on a national securities exchange, or the average of
the closing sales prices for the shares if then listed on more than one national
securities exchange, or if the shares are not then listed on a national
securities exchange, the latest bid quotation for the shares if then traded
over-the-counter, on the last business day immediately preceding the day on
which notices of such acquisitions are sent by the Company, or, if no such
closing sales prices or quotations are available, then the purchase price shall
be equal to the net asset value of such stock as determined by the Board of
Directors in accordance with the provisions of applicable law. From and after
the date fixed for purchase by the Board of Directors, the holder of any shares
so called for purchase shall cease to be entitled to distributions, voting
rights and other benefits with respect to such shares, except the right to
payment of the purchase price for the shares.

The Articles of Incorporation require that, except in certain
circumstances, Business Combinations (as defined) between the Company and a
beneficial holder of 10% or more of the Company's outstanding voting stock (a
"Related Person") be approved by the affirmative vote of at least 90% of the
outstanding voting shares of the Company.

6

A Business Combination is defined in the Articles of Incorporation as (a)
any merger or consolidation of the Company with or into a Related Person, (b)
any sale, lease, exchange, transfer or other disposition, including without
limitation a mortgage or any other security device, of all or any "Substantial
Part" (as defined) of the assets of the Company (including without limitation
any voting securities of a subsidiary) to a Related Person, (c) any merger or
consolidation of a Related Person with or into the Company, (d) any sale, lease,
exchange, transfer or other disposition of all or any Substantial Part of the
assets of a Related Person to the Company, (e) the issuance of any securities
(other than by way of pro rata distribution to all stockholders) of the Company
to a Related Person, and (f) any agreement, contract or other arrangement
providing for any of the transactions described in the definition of Business
Combination. The term "Substantial Part" shall mean more than 10% of the book
value of the total assets of the Company as of the end of its most recent fiscal
year ending prior to the time the determination is being made.

Pursuant to the Articles of Incorporation, the Company's Board of Directors
is classified into three classes. Each class of directors serves for a term of
three years, with one class being elected each year. As of the date of this
Prospectus, there are seven directors, two in each of two classes of directors,
and three in one class.

The foregoing provisions of the Articles of Incorporation and certain other
matters may not be amended without the affirmative vote of at least 90% of the
outstanding voting shares of the Company.

The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain stockholders might deem
in their interests or in which they might receive a substantial premium. The
Board of Directors' authority to issue and establish the terms of currently
authorized Preferred Stock, without stockholder approval, may also have the
effect of discouraging takeover attempts. See "Preferred Stock." The provisions
could also have the effect of insulating current management against the
possibility of removal and could, by possibly reducing temporary fluctuations in
market price caused by accumulation of shares, deprive stockholders of
opportunities to sell at a temporarily higher market price. However, the Board
of Directors believes that inclusion of the Business Combination provisions in
the Articles of Incorporation may help assure fair treatment of stockholders and
preserve the assets of the Company.

The foregoing summary of certain provisions of the Articles of
Incorporation does not purport to be complete or to give effect to provisions of
statutory or common law. The foregoing summary is subject to, and qualified in
its entirety by reference to, the provisions of applicable law and the Articles
of Incorporation, a copy of which is incorporated by reference as an exhibit to
the Registration Statement of which this Prospectus is a part.

TRANSFER AGENT AND REGISTRAR

First Chicago Trust Company of New York is the transfer agent and registrar
of the Common Stock.

PREFERRED STOCK

The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Articles of Incorporation (the "Articles of Incorporation"), and the
Board of Directors' resolution or articles supplementary (the "Articles
Supplementary") relating to each series of the Preferred Stock which will be
filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of the Preferred Stock.

7

GENERAL

The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, $0.10 par value per share, and 10,000,000 shares of preferred
stock, $1.00 par value per share ("preferred stock of the Company," which term,
as used herein, includes the Preferred Stock offered hereby).

Under the Articles of Incorporation, the Board of Directors of the Company
is authorized without further stockholder action to provide for the issuance of
up to 10,000,000 shares of preferred stock of the Company, in one or more
series, with such designations, preferences, powers and relative participating,
optional or other special rights and qualifications, limitations or restrictions
thereon, including, but not limited to, dividend rights, dividend rate or rates,
conversion rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price or prices, and the liquidation
preferences as shall be stated in the resolution providing for the issue of a
series of such stock, adopted, at any time or from time to time, by the Board of
Directors of the Company.

The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (ii) the amount of liquidation preference per share; (iii) the
initial public offering price at which such Preferred Stock will be issued; (iv)
the dividend rate (or method of calculation), the dates on which dividends shall
be payable and the dates from which dividends shall commence to cumulate, if
any; (v) any redemption or sinking fund provisions; (vi) any conversion rights;
(vii) any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions.

The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. Unless otherwise stated in a Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and distributions
of assets with each other series of the Preferred Stock. The rights of the
holders of each series of the Preferred Stock will be subordinate to those of
the Company's general creditors.

CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION

See "Common Stock -- Redemption and Business Combination Provisions" for a
description of certain provisions of the Articles of Incorporation, including
provisions relating to redemption rights and provisions which may have certain
anti-takeover effects.

DIVIDEND RIGHTS

Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available therefor, cash dividends on such dates and at
such rates as will be set forth in, or as are determined by, the method
described in the Prospectus Supplement relating to such series of the Preferred
Stock. Such rate may be fixed or variable or both. Each such dividend will be
payable to the holders of record as they appear on the stock books of the
Company on such record dates, fixed by the Board of Directors of the Company, as
specified in the Prospectus Supplement relating to such series of Preferred
Stock.

Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the holders of such series of Preferred Stock will have no
right to receive a dividend in respect of the dividend period ending on such
dividend payment date, and the Company shall have no obligation to pay the
dividend accrued for such period, whether or not dividends on such series are
declared payable on any future dividend payment dates. Dividends on the shares
of each series of Preferred Stock for which dividends are cumulative will accrue
from the date on which the Company initially issues shares of such series.

8

So long as the shares of any series of the Preferred Stock shall be
outstanding, unless (i) full dividends (including if such Preferred Stock is
cumulative, dividends for prior dividend periods) shall have been paid or
declared and set apart for payment on all outstanding shares of the Preferred
Stock of such series and all other classes and series of preferred stock of the
Company (other than Junior Stock as defined below) and (ii) the Company is not
in default or in arrears with respect to the mandatory or optional redemption or
mandatory repurchase or other mandatory retirement of, or with respect to any
sinking or other analogous fund for, any shares of Preferred Stock of such
series or any shares of any other preferred stock of the Company of any class or
series (other than Junior Stock), the Company may not declare any dividends on
any shares of Common Stock of the Company or any other stock of the Company
ranking as to dividends or distributions of assets junior to such series of
Preferred Stock (the Common Stock and any such other stock being herein referred
to as "Junior Stock"), or make any payment on account of, or set apart money
for, the purchase, redemption or other retirement of, or for a sinking or other
analogous fund for, any shares of Junior Stock or make any distribution in
respect thereof, whether in cash or property or in obligations or stock of the
Company, other than Junior Stock which is neither convertible into, nor
exchangeable or exercisable for, any securities of the Company other than Junior
Stock.

LIQUIDATION PREFERENCE

In the event of any liquidation, dissolution or winding up of the Company,
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made to the
holders of Common Stock or any other shares of stock of the Company ranking
junior as to such distribution to such series of Preferred Stock, the amount set
forth in the Prospectus Supplement relating to such series of the Preferred
Stock. If, upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the amounts payable with respect to the Preferred Stock of
any series and any other shares of preferred stock of the Company (including any
other series of the Preferred Stock) ranking as to any such distribution on a
parity with such series of the Preferred Stock are not paid in full, the holders
of the Preferred Stock of such series and of such other shares of preferred
stock of the Company will share ratably in any such distribution of assets of
the Company in proportion to the full respective preferential amounts to which
they are entitled. After payment of the holders of the Preferred Stock of each
series of the full preferential amounts of the liquidating distribution to which
they are entitled, the holders of each such series of the Preferred Stock will
be entitled to no further participation in any distribution of assets by the
Company.

If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of Junior Stock, according to their respective
rights and preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Company with or
into any other corporation, or the sale, lease or conveyance of all or
substantially all of the property or business of the Company, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.

REDEMPTION

A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Shares of the Preferred Stock redeemed by the Company
will be restored to the status of authorized but unissued shares of preferred
stock of the Company.

In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless
default shall be made by the Company in providing for the payment of the
redemption price plus accumulated and unpaid dividends, if any), dividends shall
cease to

9

accumulate on the shares of the Preferred Stock called for redemption and all
rights of the holders thereof (except the right to receive the redemption price
plus accumulated and unpaid dividends, if any) shall cease.

So long as any dividends on shares of any series of the Preferred Stock or
any other series of preferred stock of the Company ranking on a parity as to
dividends and distribution of assets with such series of the Preferred Stock are
in arrears, no shares of any such series of the Preferred Stock or such other
series of preferred stock of the Company will be redeemed (whether by mandatory
or optional redemption) unless all such shares are simultaneously redeemed, and
the Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares pursuant to a purchase or exchange offer made on the same terms to
holders of all such shares outstanding.

CONVERSION RIGHTS

The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion.

VOTING RIGHTS

Except as indicated below or in a Prospectus Supplement relating to a
particular series of the Preferred Stock, or except as required by applicable
law, the holders of the Preferred Stock will not be entitled to vote for any
purpose.

So long as any shares of the Preferred Stock of a series remain
outstanding, the consent or the affirmative vote of the holders of at least 80%
of the votes entitled to be cast with respect to the then outstanding shares of
such series of the Preferred Stock together with any Other Preferred Stock (as
defined below), voting as one class, either expressed in writing or at a meeting
called for that purpose, will be necessary (i) to permit, effect or validate the
authorization, or any increase in the authorized amount, of any class or series
of shares of the Company ranking prior to the Preferred Stock of such series as
to dividends, voting or upon distribution of assets and (ii) to repeal, amend or
otherwise change any of the provisions applicable to the Preferred Stock of such
series in any manner which adversely affects the powers, preferences, voting
power or other rights or privileges of such series of the Preferred Stock. In
case any series of the Preferred Stock would be so affected by any such action
referred to in clause (ii) above in a different manner than one or more series
of the Other Preferred Stock then outstanding, the holders of shares of the
Preferred Stock of such series, together with any series of the Other Preferred
Stock which will be similarly affected, will be entitled to vote as a class, and
the Company will not take such action without the consent or affirmative vote,
as above provided, of at least 80% of the total number of votes entitled to be
cast with respect to each such series of the Preferred Stock and the Other
Preferred Stock, then outstanding, in lieu of the consent or affirmative vote
hereinabove otherwise required.

With respect to any matter as to which the Preferred Stock of any series is
entitled to vote, holders of the Preferred Stock of such series and any other
series of preferred stock of the Company ranking on a parity with such series of
the Preferred Stock as to dividends and distributions of assets and which by its
terms provides for similar voting rights (the "Other Preferred Stock") will be
entitled to cast the number of votes set forth in the Prospectus Supplement with
respect to that series of Preferred Stock. As a result of the provisions
described in the preceding paragraph requiring the holders of shares of a series
of the Preferred Stock to vote together as a class with the holders of shares of
one or more series of Other Preferred Stock, it is possible that the holders of
such shares of Other Preferred Stock could approve action that would adversely
affect such series of Preferred Stock, including the creation of a class of
capital stock ranking prior to such series of Preferred Stock as to dividends,
voting or distributions of assets.

The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of the Preferred Stock shall

10

have been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.

TRANSFER AGENT AND REGISTRAR

Unless otherwise indicated in a Prospectus Supplement relating thereto,
First Chicago Trust Company of New York, will be the transfer agent, dividend
and redemption price disbursement agent and registrar for shares of each series
of the Preferred Stock.

DEBT SECURITIES

Debt Securities may be issued from time to time in series under an
Indenture (the "Indenture") dated January 24, 1997, between the Company and NBD
Bank, as Trustee (the "Trustee"). As used under this caption, unless the context
otherwise requires, Offered Debt Securities shall mean the Debt Securities
offered by this Prospectus and the accompanying Prospectus Supplement. The
statements under this caption are brief summaries of certain provisions
contained in the Indenture, do not purport to be complete and are qualified in
their entirety by reference to the Indenture, including the definition therein
of certain terms, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following sets forth certain
general terms and provisions of the Debt Securities. Further terms of the
Offered Debt Securities will be set forth in the Prospectus Supplement.

GENERAL

The Indenture provides for the issuance of Debt Securities in series, and
does not limit the principal amount of Debt Securities which may be issued
thereunder.

Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (1) the specific title of the Offered Debt
Securities; (2) the aggregate principal amount of the Offered Debt Securities;
(3) the percentage of their principal amount at which the Offered Debt
Securities will be issued payable; (4) the date on which the Offered Debt
Securities will mature; (5) the rate or rates per annum or the method for
determining such rate or rates, if any, at which the Offered Debt Securities
will bear interest; (6) the times at which any such interest will be payable;
(7) any provisions relating to optional or mandatory redemption of the Offered
Debt Securities at the option of the Company or pursuant to sinking fund or
analogous provisions; (8) the denominations in which the Offered Debt Securities
are authorized to be issued if other than $100,000; (9) any provisions relating
to the conversion or exchange of the Offered Debt Securities into Common Stock
or into Debt Securities of another series; (10) the portion of the principal
amount, if less than the principal amount, payable on acceleration; (11) the
place or places at which the Company will make payments of principal (and
premiums, if any) and interest, if any, and the method of payment; (12) whether
the Offered Debt Securities will be issued in whole or in part in global form;
(13) any additional covenants and Events of Default and the remedies with
respect thereto not currently set forth in the Indenture; (14) the identity of
the Trustee for the Debt Securities, and if not the Trustee, the identity of
each paying agent and the Debt Securities Registrar; (15) the currency or
currencies other than United States Dollars in which any series of Debt
Securities will be issued; and (16) any other specific terms of the Offered Debt
Securities.

One or more series of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or bearing interest at a rate which at the time
of issuance is below market rates) to be sold at a substantial discount below
their stated principal amount. Tax and other special considerations applicable
to any such discounted Debt Securities will be described in the Prospectus
Supplement relating thereto.

STATUS OF DEBT SECURITIES

The Debt Securities will be unsecured obligations of the Company and may be
ranking on a parity with all other unsecured and unsubordinated indebtedness, or
may be subordinated to certain other indebtedness of the Company.

11

CONVERSION RIGHTS

The terms, if any, on which Debt Securities of a series may be exchanged
for or converted into shares of Common Stock or Debt Securities of another
series will be set forth in the Prospectus Supplement relating thereto. To
protect the Company's status as a REIT, a Holder may not convert any Debt
Security, and such Debt Security shall not be convertible by any Holder, if as a
result of such conversion any person would then be deemed to beneficially own,
directly or indirectly, 9.9% or more of the Company's shares of Common Stock.

ABSENCE OF RESTRICTIVE COVENANTS

Except as noted below under "Dividends, Distributions and Acquisitions of
Capital Stock," the Company is not restricted by the Indenture from paying
dividends or from incurring, assuming or becoming liable for any type of debt or
other obligations or from creating liens on its property for any purpose. The
Indenture does not require the maintenance of any financial ratios or specified
levels of net worth or liquidity. Except as may be set forth in the Prospectus
Supplement, there are no provisions of the Indenture which afford holders of the
Debt Securities protection in the event of a highly leveraged transaction
involving the Company.

OPTIONAL REDEMPTION

The Debt Securities will be subject to redemption, in whole or from time to
time in part, at any time for certain reasons intended to protect the Company's
status as a REIT, at the option of the Company in the manner specified in the
Indenture at a redemption price equal to 100% of the principal amount, plus
interest accrued to the date of redemption. The Indenture does not contain any
provision requiring the Company to repurchase the Debt Securities at the option
of the Holders thereof in the event of a leveraged buyout, recapitalization or
similar restructuring of the Company.

DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF CAPITAL STOCK

The Indenture provides that the Company will not (i) declare or pay any
dividend or make any distribution on its capital stock or to holders of its
capital stock (other than dividends or distributions payable in its capital
stock or other than as the Company determines is necessary to maintain its
status as a REIT) or (ii) purchase, redeem or otherwise acquire or retire for
value any of its capital stock, or any warrants, rights or options or other
securities to purchase or acquire any Shares of its capital stock (other than
the Debt Securities) or permit any subsidiary to do so, if at the time of such
action an Event of Default (as defined in the Indenture) has occurred and is
continuing or would exist immediately after giving effect to such action.

EVENTS OF DEFAULT

An Event of Default with respect to Debt Securities of any series is
defined in the Indenture as being (a) failure to pay principal of or any premium
on any Debt Security of that series when due; (b) failure to pay any interest on
any Debt Security of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment when due, in respect of any Debt Security of
that series; (d) failure to perform any other covenant of the Company in the
Indenture (other than a covenant included in the Indenture solely for the
benefit of one or more series of Debt Securities other than that series),
continued for 60 days after written notice as provided in the Indenture; (e)
certain events of bankruptcy, insolvency, conservatorship, receivership or
reorganization; and (f) any other Event of Default provided with respect to the
Debt Securities of that series.

If an Event of Default with respect to the outstanding Debt Securities of
any series occurs and is continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
that series may declare the principal amount (or, if the Debt Securities of that
series are original issue discount Debt Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
outstanding Debt Securities of that series to be due and payable immediately. At
any time after the declaration of acceleration with respect to the Debt
Securities of any series has been made, but before a judgment or decree based on
acceleration has been obtained, the Holders of a majority in aggregate principal
amount of the outstanding Debt Securities of that series may, under certain
circumstances, rescind and annul such acceleration.

12

The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee and subject to certain limitations, the Holders
of a majority in aggregate principal amount of the outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of that series.

The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.

MODIFICATIONS AND WAIVER

Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holders to, among other things, (a)
evidence the succession of another corporation to the Company, (b) add to the
covenants of the Company or surrender any right or power conferred upon the
Company, (c) to establish the form or terms of Debt Securities, including any
subordination provisions, (d) cure any ambiguity, correct or supplement any
provision which may be defective or inconsistent or make any other provisions
with respect to matters or questions arising under the Indenture, provided that
such action does not adversely affect the interests of the Holders of Debt
Securities of any series in any material respect, (e) to add to, delete, or
revise conditions, limitations and restrictions on the authorized amounts, terms
or purpose of Debt Securities, as set forth in the Indenture, or (f) evidence
and provide for a successor Trustee.

Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity date of the principal
of, or any installment of principal of or interest , if any, on any Debt
Security , (b) reduce the principal amount of, or premium or interest if any, on
any Debt Security, (c) reduce the amount of principal of an original issue
discount Debt Security payable upon acceleration of the maturity thereof, (d)
change the currency of payment of the principal of, or premium or interest, if
any, on any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) modify
the conversion provisions, if any, of any Debt Security in a manner adverse to
the Holder of that Debt Security, or (g) reduce the percentage in principal
amount of the outstanding Debt Security of any series, the consent of whose
Holders is required for modification or amendment of that Indenture or for
waiver of compliance with certain provisions of that Indenture or for waiver of
certain defaults.

The Holders of a majority in aggregate principal amount of the outstanding
Debt Security of each series may, on behalf of all Holders of the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of each series may, on behalf of all Holders of the Debt Securities
of that series, waive any past default under the Indenture with respect to the
Debt Securities of that series, except a default in the payment of principal or
premium or interest, if any, or a default in respect of a covenant or provision
which under the terms of the Indenture cannot be modified or amended without the
consent of the Holder of each outstanding Debt Security of the series affected.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Indenture provides that the Company, without the consent of the Holders
of any of the Debt Securities, may consolidate or merge with or into or transfer
its assets substantially as an entirety to, any entity organized under the laws
of the United States or any state, provided that the successor entity assumes
the Company's obligations under the Indenture, that after giving effect to the
transaction no Event of Default, and no event which, after notice or lapse of
time, would become an Event of Default, shall have occurred and be continuing,
and that certain other conditions are met.

13

GLOBAL SECURITIES

The Debt Securities of a series may be issued in whole or in part in global
form (the "Global Securities"). Except as set forth in a Prospectus Supplement,
the terms and provisions with respect to any Global Securities will be as set
forth in this Section captioned "Global Securities." The Global Securities will
be deposited with a depositary (the "Depositary"), or with a nominee for a
Depositary, identified in the Prospectus Supplement. In such case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive form, a Global Security may not be transferred except
as a whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.

The specific material terms of the depositary arrangement with respect to
any portion of a series of Debt Securities to be represented by a Global
Security will be described in the Prospectus Supplement. The Company anticipates
that the following provisions will apply to all depositary arrangements.

Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in a Global Security will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depositary for such Global Security (with respect to interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participant). So long as the
Depositary for a Global Security, or its nominee, is the registered owner of
such Global Security, such Depositary or such nominee, as the case may be, will
be considered the sole owner or Holder of the Debt Securities represented by
such Global Security for all purposes under the Indenture; provided, however,
that the purposes of obtaining any consents or directions required to be given
by the Holders of the Debt Securities, the Company, the Trustee and its agents
will treat a person as the holder of such principal amount of Debt Securities as
specified in a written statement of the Depositary. Except as set forth herein
or otherwise provided in the Prospectus Supplement, owners of beneficial
interests in a Global Security will not be entitled to have the Debt Securities
represented by such Global Security registered in their names, will not receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or Holders thereof under the Indenture.

Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to such Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any Paying Agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.

The Company expects that the Depositary for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium, if any,
or interest will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names" and will be the
responsibility of such participants.

14

If the Depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by the Company within 90 days, the Company will
issue such Debt Securities in definitive form in exchange for such Global
Security. In addition, the Company may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of such
series in definitive form in exchange for all of the Global Security or
Securities representing such Debt Securities.

The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Debt Securities represented by
Global Securities.

SECURITIES WARRANTS

The Company may issue Securities Warrants for the purchase of Common Stock,
Preferred Stock or Debt Securities. Securities Warrants may be issued
independently or together with Common Stock, Preferred Stock or Debt Securities
offered by any Prospectus Supplement and may be attached to or separate from
such Common Stock, Preferred Stock, or Debt Securities. Each series of
Securities Warrants will be issued under a separate warrant agreement (a
"Securities Warrant Agreement") to be entered into between the Company and a
bank or trust company, as Securities Warrant agent, all as set forth in the
Prospectus Supplement relating to the particular issue of offered Securities
Warrants. The Securities Warrant agent will act solely as an agent of the
Company in connection with the Securities Warrants of such series and will not
assume any obligation or relationship of agency or trust for or with any holders
or beneficial owners of Securities Warrants. The following summaries of certain
provisions of the Securities Warrant Agreement and Securities Warrants do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Securities Warrant Agreement and the
Securities Warrants relating to each series of Securities Warrants which will be
filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of Securities Warrants.

In the case of Securities Warrants for the purchase of Common Stock or
Preferred Stock, the applicable Prospectus Supplement will describe the terms of
such Securities Warrants, including the following where applicable: (i) the
offering price; (ii) the aggregate number of shares purchasable upon exercise of
such Securities Warrants, the exercise price, and in the case of Securities
Warrants for Preferred Stock the designation, aggregate number and terms of the
series of Preferred Stock purchasable upon exercise of such Securities Warrants,
(iii) the designation and terms of any series of Preferred Stock with which such
Securities Warrants are being offered and the number of such Securities Warrants
being offered with such Preferred Stock, (iv) the date, if any, on and after
which such Securities Warrants and the related series of Preferred Stock or
Common Stock will be transferable separately; (v) the date on which the right to
exercise such Securities Warrants shall commence and the Expiration Date; (vi)
any special United States Federal income tax consequences; and (vii) any other
terms of such Securities Warrants.

15

If Securities Warrants for the purchase of Debt Securities are offered, the
applicable Prospectus Supplement will describe the terms of such Securities
Warrants, including the following where applicable: (i) the offering price; (ii)
the denominations and terms of the series of Debt Securities purchasable upon
exercise of such Securities Warrants; (iii) the designation and terms of any
series of Debt Securities, with which such Securities Warrants are being offered
with each such Debt Securities; (iv) the date, if any, on and after which such
Securities Warrants and the related series of Debt Securities will be
transferable separately; (v) the principal amount of the series of Debt
Securities purchasable upon exercise of each such Securities Warrant and the
price at which such principal amount of Debt Securities of such series may be
purchased upon such exercise; (vi) the date on which the right shall expire (the
"Expiration Date"); (vii) whether the Securities Warrants will be issued in
registered or bearer form; (viii) any special United States Federal income tax
consequences; (ix) the terms, if any, on which the Company may accelerate the
date by which the Securities Warrants must be exercised; and (x) any other terms
of such Securities Warrants.

Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal or premium,
if any, or interest, if any, on such Debt Securities or to enforce covenants in
the applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Common Stock or Preferred Stock, holders of such Securities Warrants
will not have any rights of holders of such Common Stock or Preferred Stock,
including the right to receive payments of dividends, if any, on such Common
Stock or Preferred Stock, or to exercise any applicable right to vote.

EXERCISE OF SECURITIES WARRANTS

Each Securities Warrant will entitle the holder thereof to purchase a
number of shares of Common Stock, Preferred Stock or such principal amount of
Debt Securities, as the case may be, at such exercise price as shall in each
case be set forth in, or calculable from, the Prospectus Supplement relating to
the offered Securities Warrants. After the close of business on the Expiration
Date (or such later date to which such Expiration Date may be extended by the
Company), unexercised Securities Warrants will become void.

Securities Warrants may be exercised by delivering to the Securities
Warrant agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Common Stock, Preferred Stock or Debt
Securities, as the case may be, purchasable upon such exercise together with
certain information set forth on the reverse side of the Securities Warrant
certificate. Securities Warrants will be deemed to have been exercised upon
receipt of payment of the exercise price, subject to the receipt within five (5)
business days, of the Securities Warrant certificate evidencing such Securities
Warrants. Upon receipt of such payment and the Securities Warrant certificate
properly completed and duly executed at the corporate trust office of the
Securities Warrant agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, issue and
deliver the Common Stock, Preferred Stock or Debt Securities, as the case may
be, purchasable upon such exercise. If fewer than all of the Securities Warrants
represented by such Securities Warrant certificate are exercised, a new
Securities Warrant certificate will be issued for the remaining amount of
Securities Warrants.

AMENDMENTS AND SUPPLEMENTS TO SECURITIES WARRANT AGREEMENT

The Securities Warrant Agreements may be amended or supplemented without
the consent of the holders of the Securities Warrants issued thereunder to
effect changes that are not inconsistent with the provisions of the Securities
Warrants and that do not adversely affect the interests of the holders of the
Securities Warrants.

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COMMON STOCK WARRANT ADJUSTMENTS

Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by a Common
Stock Warrant are subject to adjustment in certain events, including (i) payment
of a dividend on the Common Stock payable in capital stock and stock splits,
combinations or reclassifications of the Common Stock, (ii) issuance to all
holders of Common Stock of rights or warrants to subscribe for or purchase
shares of Common Stock at less than their current market price (as defined in
the Securities Warrant Agreement for such series of Common Stock Warrants), and
(iii) certain distributions of evidences of indebtedness or assets (including
cash dividends or distributions paid out of consolidated earnings or retained
earnings or dividends payable in Common Stock) or of subscription rights and
warrants (excluding those referred to above).

No adjustment in the exercise price of, and the number of shares of Common
Stock covered by a Common Stock Warrant will be made for regular quarterly or
other periods or recurring cash dividends or distributions or for cash dividends
or distributions to the extent paid from consolidated earnings or retained
earnings. No adjustment will be required unless such adjustment would require a
change of at least 1% in the exercise price then in effect. Except as stated
above, the exercise price of, and the number of shares of Common Stock covered
by, a Common Stock Warrant will not be adjusted for the issuance of Common Stock
or any securities convertible into or exchangeable for Common Stock, or carrying
the right or option to purchase or otherwise acquire the foregoing in exchange
for cash, other property or services.

In the event of any (i) consolidation or merger of the Company with or into
any entity (other than a consolidation or a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of the Company or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value or from par value to no par value), then any holder of a Common Stock
Warrant will be entitled, on or after the occurrence of any such event, to
receive on exercise of such Common Stock Warrant the kind and amount of shares
of stock or other securities, cash or other property (or any combination
thereof) that the holder would have received had such holder exercised such
holder's Common Stock Warrant immediately prior to the occurrence of such event.
If the consideration to be received upon exercise of the Common Stock Warrant
following any such event consists of common stock of the surviving entity, then
from and after the occurrence of such event, the exercise price of such Common
Stock Warrant will be subject to the same anti-dilution and other adjustments
described in the second preceding paragraph, applied as if such common stock
were Common Stock.

PLAN OF DISTRIBUTION

The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell Securities directly to investors on its own
behalf in those jurisdictions where and in such manner as it is authorized to do
so.

Underwriters may offer and sell Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Company
also may, from time to time, authorize underwriters or dealers, acting as the
Company's agents, to offer and sell Securities upon the terms and conditions as
are set forth in the applicable Prospectus Supplement. In connection with the
sale of Securities, underwriters may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of the Securities for whom they may act
as agent. Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.

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Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.

The net proceeds to the Company from the sale of the Securities will be the
purchase price of the Securities less any such discounts or commissions and the
other attributable expenses of issuance and distribution.

Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.

LEGAL MATTERS

Certain legal matters with respect to the Securities offered hereby will be
passed upon for the Company by Argue Pearson Harbison & Myers, LLP, Los Angeles,
California.

EXPERTS

The consolidated financial statements of Omega Healthcare Investors, Inc.
(the Company), incorporated by reference from the Company's Annual Report on
Form 10-K, for the year ended December 31, 1995, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

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