Form: 10-K

Annual report pursuant to Section 13 and 15(d)

March 31, 1998

10-K: Annual report pursuant to Section 13 and 15(d)

Published on March 31, 1998



================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-11316

OMEGA HEALTHCARE INVESTORS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



MARYLAND 38-3041398
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)

905 W. EISENHOWER CIRCLE, SUITE 110 48103
ANN ARBOR, MICHIGAN (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 734-747-9790

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:



NAME OF EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- -------------------

COMMON STOCK, $.10 PAR VALUE NEW YORK STOCK EXCHANGE
8.5% CONVERTIBLE DEBENTURES, DUE 2001 NEW YORK STOCK EXCHANGE
9.25% SERIES A PREFERRED STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE


SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

NONE

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
NON-AFFILIATES WAS $745,498,000 BASED ON THE $38.8125 CLOSING PRICE PER SHARE
FOR SUCH STOCK ON THE NEW YORK STOCK EXCHANGE ON FEBRUARY 27, 1998.

AS OF FEBRUARY 27, 1998, THERE WERE 19,635,322 SHARES OUTSTANDING.

DOCUMENTS INCORPORATED BY REFERENCE

PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1997, ARE INCORPORATED BY REFERENCE IN PART II OF THIS FORM
10-K.

THE REGISTRANT'S DEFINITIVE PROXY STATEMENT, WHICH WILL BE FILED WITH THE
COMMISSION ON OR ABOUT APRIL 1, 1998, IS INCORPORATED BY REFERENCE IN PART III
OF THIS FORM 10-K.
================================================================================

PART I

ITEM 1 -- BUSINESS OF 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 in the United States.
The Company anticipates providing lease or mortgage financing for healthcare
facilities to qualified operators and acquiring additional healthcare facility
types, including assisted living and acute care facilities. Financing for such
future investments may be provided by borrowings under the Company's bank line
of credit, private placements or public offerings of debt or equity, the
assumption of secured indebtedness, or a combination of these methods. The
Company also may finance acquisitions through the exchange of properties or the
issuance of shares of its capital stock, if such transactions otherwise satisfy
the Company's investment criteria.

Effective September 30, 1994, the Company acquired all the outstanding
common stock of Health Equity Properties Incorporated ("HEP"), a healthcare real
estate investment trust. The total purchase consideration for HEP approximated
$180 million, comprising common stock of $143 million represented by 5,826,000
shares, long-term debt assumed of $26 million, and other obligations,
professional fees and costs incurred in the transaction.

During 1995, the Company became a primary sponsor of Principal Healthcare
Finance Limited ("Principal"), an Isle of Jersey (United Kingdom) company
established to provide capital and medium-term financing on a stable, continuing
basis to the private-sector healthcare industry in the United Kingdom. The
nursing home industry in the United Kingdom, like that in the United States, is
consolidating and capital demand exists. At December 31, 1997, Principal owned
154 properties for which it has invested L215 million (approximately $354
million). The Company also provides 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 November, 1997 the Company formed Omega Worldwide, Inc. (Worldwide), a
company which will provide investment advisory and management services and hold
equity and debt interests in companies engaged in providing sale/leaseback and
other capital financing to healthcare service providers throughout the world. In
connection with the formation of Worldwide, the Company will receive on or about
April 1, 1998, 8.5 million shares of Worldwide common stock and rights to
receive up to 5,000,000 shares of Series B Preferred Stock in exchange for
substantially all of the Company's interests in Principal. The Company's
interests in Principal which will be exchanged for its ownership in Worldwide
include: (a) 3,337,500 ordinary shares of Principal and warrants to purchase 10
million ordinary shares of Principal expiring June 30, 2001 at an exercise price
of L1.50 (approximately $2.40) per share and 554,583 ordinary shares of
Principal expiring December 31, 2000 at an exercise price of L1.00
(approximately $1.60) per share; (b) the Company's right to payment of L15
million (approximately $24 million) from the Sterling denominated subordinated
loan; (c) the Company's interest in a ten-year British pound currency swap
contract under which Omega Worldwide, Inc. will have the right to exchange
L20,000,000 for $31,740,000 on October 15, 2007; (d) and the Amended and
Restated Advisory Services Agreement between the Company and Principal. The
Company will retain 900,000 Class A Voting Shares of Principal.

Omega Worldwide, Inc. has filed a Registration Statement with respect to
rights to acquire 2,250,000 shares of its common stock, 500,000 shares to be
sold in a primary offering and 2.3 million shares to be sold in a secondary
offering by the Company. Each common shareholder of the Company will receive a
pro-rata share of approximately 5.2 million common shares of Omega Worldwide,
Inc. and will be eligible to receive a portion of the 2.25 million rights to
purchase Omega Worldwide, Inc. common stock. The Company will retain a 9%
interest in Omega Worldwide, Inc. The date of the distribution of Omega
Worldwide, Inc. shares has not been set since it depends upon, among other
matters, the date of approval by the Securities and Exchange Commission of the
Registration Statement. As of the date of the distribution, the cost of assets
transferred to Omega Worldwide, Inc., less the net proceeds of the secondary
offering received by the Company, will be charged to shareholders' equity in the
form of a special dividend. Management estimates the special dividend will
approximate $10 million.

1

As of December 31, 1997, the Company's portfolio of domestic investments
consisted of 258 long-term care facilities, 3 medical office buildings and 2
rehabilitation hospitals. The Company owns and leases 178 long-term facilities,
3 medical office buildings and 2 rehabilitation hospitals, and provides
mortgages, including participating and convertible participating mortgages, on
80 long-term healthcare facilities. The facilities are located in 26 states and
operated by 29 unaffiliated operators. The Company's gross real estate
investments at December 31, 1997 totaled $779.4 million. During 1997, new
investments approximated $196 million as a result of entering into
sale/leaseback transactions and making mortgage loans and other investments.

At March 6, 1998, the Company employed 26 full-time employees. The
executive offices of the Company are located at 905 West Eisenhower Circle,
Suite 110, Ann Arbor, Michigan 48103. Its telephone number is (734) 747-9790.

INVESTMENT OBJECTIVES

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.

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 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.

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.

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. The average annualized yield from leases was 11.57% at
January 1, 1998.

2

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. The average
annualized yield on these mortgages was approximately 12.75% at January 1,
1998.

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. The
average annualized yield on these investments was approximately 14.36% at
January 1, 1998.

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 average annualized yield on these investments was 11.16% at January 1,
1998.

The table set forth in Item 2 -- Properties, herein, contains information
regarding the Company's real estate properties, their locations, and the types
of investment structures as of December 31, 1997.

BORROWING POLICIES

The Company may incur additional indebtedness, and anticipates attaining
and then maintaining a long-term debt-to-capitalization ratio of approximately
40%. The Company intends to review periodically its policy with respect to its
debt-to-equity 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 healthcare 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
generally may invest in properties subject to existing loans, secured by
mortgages, deeds of trust or similar liens on properties.

The Company has an unsecured acquisition line of credit which permits
borrowings of up to $200,000,000, of which approximately $129 million was used
at February 27, 1998. This credit facility provides temporary funds for new
investments in healthcare facilities. The Company expects to periodically
replace funds drawn on the acquisition line through long-term, fixed-rate
borrowings, the issuance of equity linked borrowings, or the issuance of
additional shares of capital stock.

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.

GOVERNMENT HEALTHCARE REGULATION AND REIMBURSEMENTS

Healthcare is an area of extensive government regulation and dynamic
regulatory change. The Company's lessees and mortgagors are and will continue to
be subject to extensive federal, state and local

3

regulation, including facility inspections, reimbursement policies, and control
over certain expenditures. Changes in laws or regulations, or new
interpretations of existing laws or regulations, can have a dramatic effect on
methods and costs of doing business, as well as the amounts of reimbursement by
government and private third-party payors.

A significant portion of the revenues of the Company's lessees and
mortgagors are and will be dependent upon reimbursement from third-party payors,
including the Medicaid and Medicare programs, post-retirement benefit plans,
private insurance companies and health maintenance organizations. Operators also
are subject to extensive federal, state and local regulations relating to their
operations, and the Company's facilities are subject to periodic inspection by
government and other authorities to assure continual compliance with mandated
procedures, licensure requirements under state law and certification standards
under the Medicare and Medicaid programs.

Since 1976, healthcare regulation through Certificates of Need ("CON") have
tended to limit construction of new long-term care facilities in many states.
Several states in which the Company has investments have repealed CON
legislation, including Indiana, California and Texas, which may adversely affect
customers of the Company.

The levels of revenues and profitability of the Company's lessees and
mortgagors will continue to be affected by the ongoing efforts of third-party
payors to contain or reduce the costs of healthcare. Recent legislation changes
the Medicare payment methodology for skilled nursing facilities effective for
cost reporting years commencing after July 1, 1998. The cost-based system is
replaced by a federal per diem rate that is phased in over four years. The new
per diem rate will be the sole payment for both direct nursing care ("Part A
services") and ancillary services that were previously billed separately from
the cost-based reimbursement system ("Part B services"). Capital costs are also
included in the per diem rate. Many states have also converted to a system based
on prospectively determined fixed rates.

Until 1997, state Medicaid programs were required to reimburse nursing
facilities based on rates that were reasonable and adequate to meet the costs
that must be incurred by efficiently and economically operated facilities in
order to provide services in conformity with federal and state standards and to
assure reasonable access to patients. This law restricted the ability of the
states to reduce Medicaid payments. Congress repealed this requirement in 1997.
Under the new law, states need only publish the methodology used to develop the
proposed rates, along with a justification for the methodology, and allow public
comment. This change could result in reduced Medicaid payments to facilities
operated by the Company's customers. The Company expects that there will
continue to be proposals to limit Medicaid and Medicare reimbursement for
healthcare services in an attempt to reduce the United States federal budget
deficit. Proposals have also been made to limit Medicaid reimbursement for
healthcare services in many of the states in which the Company's facilities are
located. The Company cannot at this time predict whether any of these proposals
will be adopted at the federal or state level or, if adopted and implemented,
what effect, if any, such proposals will have on the lessees or mortgagors of
the Company, and, indirectly, the Company. A significant change in coverage,
reduction in payment rates by third-party payors, or the decline in availability
of funding could have a material adverse effect on the business and financial
condition of the Company's lessees and mortgagors, and, indirectly, the
Company's financial condition.

There can be no assurance that the Medicaid reimbursement programs in each
of the states where the lessees' and mortgagors' facilities are located will
reimburse rent or interest costs of the lessees and mortgagors at increased
levels recognizing the initial sales to or borrowings from the Company. Failure
by these state Medicaid programs to provide reimbursement at current or
increased levels could have an adverse effect upon the cash flow of the
facilities and, hence, on the ability of the Company's lessees and mortgagors to
meet their respective payment obligations to the Company. Additionally, Medicare
regulations provide that effective December 1, 1997, when a facility changes
ownership (by sale or under certain lease transactions), reimbursement for
depreciation and interest will be based on the cost to the owner of record as of
August 5, 1997, less depreciation allowed. Previously, the buyer would use its
cost of purchase up to the original owner's historical cost before depreciation.
Such changes could adversely affect the resale value of the Company's healthcare
facilities.

4

Healthcare facilities that participate in Medicare or Medicaid must meet
extensive program requirements, including physical plant and operational
requirements, which are revised from time to time. Such requirements may include
a duty to admit Medicare and Medicaid patients, limiting the ability of the
facility to increase its private pay census beyond certain limits. Medicare and
Medicaid facilities are regularly inspected to determine compliance, and may be
excluded from the programs -- in some cases without a prior hearing -- for
failure to meet program requirements. In 1997, two facilities of the Company in
Alabama were excluded from programs for 68 and 72 days. This had no effect on
the rents received by the Company and the facilities in question have been
reinstated. Other changes in the healthcare industry include continuing trends
toward shorter lengths of hospital stay, increased use of outpatient services,
increased federal, state and third party oversight of healthcare company
operations and business practices, and increased demand for capitated healthcare
services (delivery of services at a fixed price per capita basis to a defined
group of covered parties). The entrance of insurance companies into managed care
programs is also accelerating the introduction of managed care in new
localities, and states and insurance companies continue to negotiate actively
the amounts they will pay for services. Moreover, the percentage of healthcare
services that are reimbursed under Medicare and Medicaid programs continues to
increase as the population ages and as states expand their Medicaid programs.
Continued eligibility to participate in these programs is crucial to a
provider's financial strength. As a result of the foregoing, the revenues and
margins of the operators of the Company's facilities may decrease, resulting in
a reduction of the Company's rent/interest coverage from investments.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

At all times, the Company intends to make and manage its investments
(including the sale or disposition of property or other investments) and to
operate in such a manner as to be consistent with the requirements of the
Internal Revenue Code of 1986, as amended (the "Code") (or 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
determines that it is no longer in the best interests of the Company to qualify
as a REIT. As such, it generally will not pay federal income taxes on the
portion of its income which is distributed to shareholders.

EXECUTIVE OFFICERS OF THE COMPANY

At the date of this report, the executive officers of the Company are:

Essel W. Bailey, Jr. (53) has been President, Chief Executive Officer
and Secretary of the Company since March 1992, and Chairman of the board
since July 1995. Prior to that he was a Managing Director of Omega Capital,
a healthcare investment partnership, from 1986 to 1992. He was previously a
partner in a major Michigan law firm. Mr. Bailey is also a director of
Principal Healthcare Finance Limited and of Vitalink Pharmacy Services,
Inc., an NYSE listed company and the fourth largest institutional pharmacy
serving the long-term care industry in the United States.

James P. Flaherty (50) joined the Company in 1996 and was appointed
Vice President-International of the Company and Managing Director and Chief
Executive of Omega U.K. Limited in January 1997. Before he joined the
Company, he was Chairman of Black Rock Capital Corporation, a leasing and
merchant banking firm he founded in 1994. From April 1991 until December of
1993 Mr. Flaherty was Managing Partner of Pareto Partners, a London based
investment management firm. Prior to 1991, he was employed by American
Express Bank Ltd. in London and Geneva in a number of senior management
capacities and by State National Bank of Connecticut and its successor, The
Connecticut Bank & Trust Co.

F. Scott Kellman (41) joined the Company as Senior Vice
President-Acquisitions in August 1993, and was appointed Executive Vice
President in August 1994. From 1986 to 1989, he was Vice President of
Meritor Savings Bank, the last two years as director of the healthcare
lending unit. From 1989 to 1991, he served as Vice President of Van Kampen
Merritt, Inc., an investment banking subsidiary of Xerox. From 1991 through
1993 he was employed by several investment banking and healthcare
investment firms. In March 1998 he was named Chief Operating Officer of the
Company.

5

Susan A. Kovach (38) joined the Company in December 1997 as Vice
President, General Counsel and Secretary. Before she joined the Company,
she was a lawyer with Dykema Gossett PLLC in Detroit, Michigan for 12
years, the last three years as a senior member of the firm.

David A. Stover (52) joined the Company as Vice President and Chief
Financial Officer in September 1994. Mr. Stover is a Certified Public
Accountant and has 23 years' experience with the international accounting
firm of Ernst & Young LLP and its predecessor firms. From 1981 through
1990, he was an audit, tax and consulting partner, spending the last of
those years as area partner-in-charge of services for the firm's healthcare
clients in Western Michigan. From 1992 to 1994, Mr. Stover was principal of
his own consulting firm and, from 1990 to 1992, he was Chief Financial
Officer of International Research and Development Corporation.

OTHER KEY PERSONNEL

Todd Robinson (32), Assistant Vice President and Director of Acquisitions,
is a Certified Public Accountant who joined Omega in June 1995 after five years
with the real estate group at Interstate/Johnson Lane, where he was responsible
for the healthcare portfolio. Prior to joining Interstate, Mr. Robinson was a
tax consultant with Arthur Andersen & Company, LLP.

Laurence Rich (38), Managing Director of Acquisitions, joined the Company
in January 1998 after 5 years working as a lawyer with the firms of Dykema
Gossett PLLC and Pepper, Hamilton & Scheetz. Previously Mr. Rich was Director of
Operations for The Ivanhoe Companies, a residential and commercial land
development and construction company located in West Bloomfield, Michigan from
1988 to 1992, and from 1983 to 1987 was Director of Marketing for Acorn Building
Components, Inc., a national manufacturer of residential and commercial building
products located in Detroit, Michigan. He is a certified public accountant.

Carol Albaugh (35) joined the Company in December 1996 as Controller after
completing her MBA at the University of Michigan. Prior to joining the Company,
she held various progressively responsible positions for nine years at Borders
Group Incorporated, most recently serving as Manager of Financial Planning and
Analysis through March 1996.

6

ITEM 2 -- PROPERTIES

At December 31, 1997, the Company's real estate investments were in
long-term care facilities, medical office buildings and rehabilitation
hospitals. The investments are either in the form of purchased facilities, which
are leased to operators, or mortgages on facilities which are operated by the
mortgagors or their affiliates. The facilities are located in 26 states and are
operated by 29 unaffiliated operators. Basic information regarding investments
as of December 31, 1997 is as follows:



NO. OF NO. OF
INVESTMENT STRUCTURE/OPERATOR TOTAL BEDS FACILITIES OCCUPANCY %
- ----------------------------- ---------- ---------- -----------

PURCHASE/LEASEBACK PROPERTIES
Sun Healthcare Group, Inc................................... 5,557 51 91
Advocat, Inc................................................ 2,959 28 85
Unison Healthcare Corp...................................... 1,664 17 79
Emerald Healthcare Inc...................................... 1,336 31 75
ExtendaCare, Inc............................................ 880 22 74
Alden Management Services, Inc.............................. 870 4 89
Senior Care Properties, Inc................................. 644 3 79
Res-Care, Inc............................................... 596 8 93
Five Star Corporation....................................... 491 6 82
First Health Care Associates................................ 360 1 71
Hunter Management Group, Inc................................ 300 1 91
Complete Care, Inc.......................................... 278 2 81
Meadowbrook Healthcare of N.C............................... 192 2 82
Kansas & Missouri, Inc...................................... 173 1 57
Integrated Health Services, Inc............................. 160 1 67
Liberty Assisted Living Centers, LP......................... 120 1 92
Tutera Evergreen, LLC....................................... 56 1 97
The Graduate Hospital....................................... 0 3 N/A
------ --- ---
16,636 183 84
CONVERTIBLE PARTICIPATING MORTGAGES
Sun Healthcare Group, Inc................................... 546 4 94
Unison Healthcare Corp...................................... 347 3 69
ExtendaCare, Inc............................................ 283 3 98
Premiere HCP III Hillsborough, Inc.......................... 180 1 75
Senior Care Properties, Inc................................. 150 2 82
------ --- ---
1,506 13 81
PARTICIPATING MORTGAGES
Paragon Health Network, Inc................................. 1,863 13 88
North Country Healthcare Associates......................... 652 12 87
ExtendaCare, Inc............................................ 203 3 92
Advocat, Inc................................................ 317 3 89
------ --- ---
3,035 31 88
FIXED-RATE MORTGAGES
Horizon/CMS Healthcare Corp................................. 1,179 11 N/A
Essex Healthcare Corporation................................ 635 6 88
Advocat, Inc................................................ 423 4 92
Tiffany Care Centers........................................ 330 5 80
Emerald Healthcare, Inc..................................... 300 2 97
Quality Care, Inc........................................... 75 1 91
American Healthcare Centers, Inc............................ 100 1 89


7



NO. OF NO. OF
INVESTMENT STRUCTURE/OPERATOR TOTAL BEDS FACILITIES OCCUPANCY %
----------------------------- ---------- ---------- -----------

Other Mortgages............................................. 601 6 N/A
------ --- ---
3,643 36 90
------ --- ---
Totals................................................. 24,820 263 85
====== === ===


- -------------------------
N/A -- Data are not reported or not applicable.

The distribution of real estate investments by investment type and state is
as follows:



TOTAL
NUMBER OF TOTAL INVESTMENT INVESTMENT
INVESTMENT STRUCTURE/STATE FACILITIES BEDS ($1,000) YIELD
-------------------------- ---------- ----- ---------- ----------

PURCHASE/LEASEBACK PROPERTIES
Indiana............................................... 68 3,327 $101,391 12.68%
California............................................ 18 1,453 56,012 9.76
Texas................................................. 14.... 2,099 42,221 11.85
Arkansas.............................................. 12 1,273 37,888 13.55
Illinois.............................................. 9 1,302 42,973 10.84
Alabama............................................... 9 1,121 35,224 12.01
Kentucky.............................................. 9 943 35,995 10.76
North Carolina........................................ 7 891 29,746 10.58
Iowa.................................................. 7 568 15,693 10.82
West Virginia......................................... 6 616 23,184 10.32
Tennessee............................................. 5 606 17,447 11.99
Florida............................................... 4 770 35,643 11.26
Ohio.................................................. 4 453 15,954 10.58
Pennsylvania.......................................... 3 0 30,031 13.14
Washington............................................ 2 319 15,900 11.08
Missouri.............................................. 1 360 9,000 13.15
Kansas................................................ 1 173 2,500 8.77
Massachusetts......................................... 1 135 8,300 10.71
Louisiana............................................. 1 131 4,602 11.25
Colorado.............................................. 1 56 750 13.06
Idaho................................................. 1 40 600 10.71
--- ------ -------- ------
Total............................................ 183... 16,636 561,054 11.57
CONVERTIBLE PARTICIPATING MORTGAGES
Tennessee............................................. 4 546 18,232 14.17
Texas................................................. 3 347 10,200 12.54
Kentucky.............................................. 3 283 10,250 11.09
Florida............................................... 3 330 10,934 12.14
--- ------ -------- ------
Total Convertible Participating..................... 13 1,506 49,616 12.75
PARTICIPATING MORTGAGES
Michigan.............................................. 13 1,863 58,800 15.72
Maine................................................. 11 619 24,183 12.09
Florida............................................... 3 317 7,031 13.42
Kentucky.............................................. 3 203 4,397 11.26
Massachusetts......................................... 1 33 2,096 12.09
--- ------ -------- ------
Total Participating Mortgages....................... 31 3,035 96,507 14.36


8



TOTAL
NUMBER OF TOTAL INVESTMENT INVESTMENT
INVESTMENT STRUCTURE/STATE FACILITIES BEDS ($1,000) YIELD
-------------------------- ---------- ----- ---------- ----------

FIXED RATE MORTGAGES
Texas................................................. 9 1,026 9,101 10.75
Ohio.................................................. 7 735 19,141 10.91
Florida............................................... 6 723 25,935 11.61
California............................................ 3 250 2,851 11.18
Missouri.............................................. 5 330 5,296 11.32
Iowa.................................................. 2 250 3,730 10.75
New Mexico............................................ 2 156 1,588 10.75
Utah.................................................. 1 100 1,910 10.75
Nevada................................................ 1 73 496 10.75
Other, primarily construction......................... 2,182 10.75
--- ------ -------- ------
Total Fixed Rate Mortgages....................... 36 3,643 72,230 11.16
--- ------ -------- ------
Total Real Estate Investments.................... 263 24,820 $779,407 11.95%
=== ====== ======== ======


ITEM 3 -- LEGAL PROCEEDINGS

There were no legal proceedings pending as of December 31, 1997, or as of
the date of this report, to which the Company is a party or to which the
properties are subject, which were likely to have a material adverse effect on
the operations of the Company or on its financial condition.

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to shareholders during the fourth quarter of the
year covered by this report.

PART II

ITEM 5 -- MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's shares of common stock are traded on the New York Stock
Exchange under the symbol OHI. The following table sets forth, for the periods
shown, the high and low prices as reported on the New York Stock Exchange
Composite and dividends per share:



1997 1996
- -------------------------------------------- --------------------------------------------
DIVIDENDS DIVIDENDS
QUARTER HIGH LOW PER SHARE QUARTER HIGH LOW PER SHARE
- ------- ---- --- --------- ------- ---- --- ---------

First $32.8750 $30.7500 $0.645 First $29.7500 $26.3750 $0.62
Second $33.5625 $30.5000 $0.645 Second $29.1250 $27.1250 $0.62
Third $36.1875 $31.8125 $0.645 Third $30.1250 $27.7500 $0.62
Fourth $38.6250 $35.5000 $0.645 Fourth $33.5000 $29.1250 $0.62
------ -----
$ 2.58 $2.48


The closing price on February 27, 1998 was $38.8125 per share. As of
February 27, 1998, there were 19,635,322 shares of common stock outstanding with
approximately 3,200 registered holders and approximately 30,000 beneficial
owners.

9

ITEM 6 -- SELECTED FINANCIAL DATA

The following selected financial data with respect to the Company should be
read in conjunction with the Company's Consolidated Financial Statements, which
are incorporated herein by reference to the Company's 1997 Annual Report to
Shareholders, which is included herein as Exhibit 13.



YEAR ENDED DECEMBER 31
---------------------------------------------------
1997 1996 1995 1994(1) 1993
---- ---- ---- ------- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

OPERATING DATA
Revenues....................................... $90,820 $73,127 $61,430 $37,747 $20,750
Net Earnings Available to Common (before
Extraordinary Charge from Prepayment of
Debt in 1995)............................. 41,305 34,590 29,490 17,777 11,573
Net Earnings Available to Common............... 41,305 34,590 23,011 17,777 11,573
Per Share Amounts:
Net Earnings (before Extraordinary Charge in
1995)..................................... $ 2.16 $ 2.01 $ 1.83 $ 1.70 $ 1.78
Net Earnings Available to Common, Basic........ 2.16 2.01 1.43 1.70 1.78
Net Earnings Available to Common, Diluted...... 2.16 2.01 1.43 1.70 1.78
Dividends, Preferred(2)........................ 1.16
Dividends, Common(2)........................... 2.58 2.48 2.36 2.20 2.04
Weighted Average Shares Outstanding, Basic..... 19,085 17,196 16,071 10,451 6,513
Weighted Average Shares Outstanding, Diluted... 19,137 17,240 16,081 10,459 6,518




DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----

BALANCE SHEET DATA
Cost of Investments....................... $839,827 $643,261 $547,923 $475,961 $231,751
Total Assets.............................. 816,108 634,836 551,188 500,731 243,587
Acquisition Line of Credit................ 58,300 6,000 74,690 20,000 14,500
Long-Term Borrowings...................... 208,966 135,659 120,453 133,602 103,573
Subordinated Convertible Debentures....... 62,485 94,810
Shareholders' Equity...................... 468,221 383,007 347,129 338,543 122,714


- -------------------------
(1) The Company acquired Health Equity Properties Incorporated on September 30,
1994.

(2) Dividends per share are those declared and paid during such period.

ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The information required by this item is incorporated herein by reference
to the caption "Management's Discussion and Analysis" on Pages 8 through 10 of
the Company's Annual Report to Shareholders, included herein as Exhibit 13.

ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated herein by reference
to the Consolidated Financial Statements included in Pages 11 through 23 of the
Company's Annual Report to Shareholders, included herein as Exhibit 13.

ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

10

PART III

ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is contained in Item 1 herein or
incorporated herein by reference to the Company's definitive proxy statement for
the Annual Meeting of Shareholders to be held on May 7, 1998 at 11:00 a.m. EST,
which will be filed on or about April 1, 1998 with the Securities and Exchange
Commission pursuant to Regulation 14A.

ITEM 11 -- EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on May 7, 1998 at 11:00 a.m. EST, which will be filed on
or about April 1, 1998 with the Securities and Exchange Commission pursuant to
Regulation 14A.

ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on May 7, 1998, which will be filed on or about April 1,
1998 with the Securities and Exchange Commission pursuant to Regulation 14A.

ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference
to the Company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on May 7, 1998, which will be filed on or about April 1,
1998 with the Securities and Exchange Commission pursuant to Regulation 14A.

PART IV

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K

(a)(1) Listing of Consolidated Financial Statements -- See Index to
Financial Information on Page F-2 of Exhibit 13 of this report.

(a)(2) Listing of Financial Statement Schedules -- See Index to Financial
Information on Page F-2 of Exhibit 13 of this report.

(a)(3) Listing of Exhibits -- See Index to Exhibits beginning on Page 16 of
this report.

(b) Reports on Form 8-K. The following reports on Form 8-K were filed
during the fourth quarter of 1997:

Form 8-K dated November 10, 1997: Report with the following exhibits:

Bylaws of Omega Healthcare Investors, Inc. as Amended and Restated on
October 15, 1997

Second Amended and Restated Loan Agreement by and among Omega
Healthcare Investors, Inc., the banks signatory hereto and Fleet
Bank, N.A., as agent for such banks, dated September 30, 1997

(c) Exhibits -- See Index to Exhibits beginning on Page 16 of this report.

(d) Financial Statement Schedules -- The following consolidated financial
statement schedules are included herein:

Schedule III Real Estate and Accumulated Depreciation

Schedule IV Mortgage Loan on Real Estate

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.

11

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION
OMEGA HEALTHCARE INVESTORS, INC.
DECEMBER 31, 1997


COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E(5) COLUMN F
- ------------------------------- ------------ --------------- ----------------------- ------------------ ---------------
GROSS AMOUNT AT
WHICH CARRIED AT
CLOSE OF PERIOD
INITIAL COST TO ------------------
COMPANY COST CAPITALIZED
--------------- SUBSEQUENT TO
ACQUISITION BUILDINGS
BUILDINGS ----------------------- AND LAND
AND LAND CARRYING IMPROVEMENTS ACCUMULATED
DESCRIPTION(1) ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS TOTAL DEPRECIATION(6)
-------------- ------------ ------------ ------------ -------- ------------ ---------------

Sun Healthcare Group, Inc.:
Alabama (LTC)................ $ 23,584,956 $ 0 $0 $ 23,584,956 $ 509,221
California (LTC, RH)......... 56,012,510 0 0 56,012,510 335,934
Florida (LTC)................ 10,700,000 0 0 10,700,000 256,692
Florida (LTC)................ 10,796,688 0 0 10,796,688 233,110
Idaho (LTC).................. 600,000 0 0 600,000 14,394
Illinois (LTC)............... 4,900,000 0 0 4,900,000 206,887
Illinois (LTC)............... 3,942,726 0 0 3,942,726 85,127
Indiana (LTC)................ 3,000,000 0 0 3,000,000 126,666
Iowa (LTC)................... 2,700,000 0 0 2,700,000 113,999
Louisiana (LTC).............. 4,602,574 0 0 4,602,574 99,374
Massachusetts (LTC).......... 8,300,000 0 0 8,300,000 199,116
North Carolina (LTC)......... 8,818,000 0 0 8,818,000 910,442
North Carolina (LTC)......... 11,100,131 0 0 11,100,131 1,146,068
North Carolina (LTC)......... 2,327,608 0 0 2,327,608 13,960
Ohio (LTC)................... 10,099,452 0 0 10,099,452 60,571
Tennessee (LTC).............. 7,905,139 0 0 7,905,139 816,191
Texas (LTC).................. 7,100,000 0 0 7,100,000 299,776
Texas (LTC).................. 9,415,056 0 0 9,415,056 203,279
Washington (LTC)............. 5,900,000 0 0 5,900,000 141,540
West Virginia (LTC).......... 17,397,883 0 0 17,397,883 104,343
------------ ---------- -- ------------ -----------
209,202,724 0 0 209,202,724 5,876,690
Advocat, Inc.:
Alabama (LTC)................ 11,638,797 0 0 11,638,797 1,913,325
Arkansas (LTC)............... 37,887,832 0 0 37,887,832 6,228,457
Tennessee (LTC).............. (2) 9,542,121 0 0 9,542,121 1,568,649
Kentucky (LTC)............... (3) 16,149,775 1,816,000 0 17,965,775 1,883,442
Ohio (LTC)................... 5,854,186 0 5,854,186 472,905
West Virginia (LTC).......... 5,283,525 502,338 0 5,785,863 467,386
------------ ---------- ------------ -----------
86,356,236 2,318,338 0 88,674,574 12,534,164
Emerald Healthcare, Inc.:
Illinois (LTC)............... 2,963,578 0 0 2,963,578 436,397
Indiana (LTC)................ 33,782,788 0 0 33,782,788 4,974,645
------------ ---------- ------------ -----------
36,746,366 36,746,366 5,411,042
Unison Healthcare Corp.:
Indiana (LTC)................ 19,760,000 823,839 0 20,583,839 3,101,876
Texas (LTC).................. 13,810,000 138,515 0 13,948,515 1,324,933
------------ ---------- ------------ -----------
33,570,000 962,354 0 34,532,354 4,426,809
Alden Management Services, Inc:
Illinois (LTC)............... 31,000,000 166,475 0 31,166,475 3,334,479
The Graduate Hospital:
Pennsylvania (MOB)........... 30,031,250 0 0 30,031,250 4,557,371


COLUMN A COLUMN G COLUMN H COLUMN I
- ------------------------------- ---------- ------------------ -----------------

LIFE ON WHICH
DEPRECIATION
IN LATEST
DATE OF DATE INCOME STATEMENTS
DESCRIPTION(1) RENOVATION ACQUIRED IS COMPUTED
-------------- ---------- -------- -----------------

Sun Healthcare Group, Inc.: 1940-1995
Alabama (LTC)................ March 31, 1997 33 years
California (LTC, RH)......... October 8, 1997 33 years
Florida (LTC)................ February 28, 1997 33 years
Florida (LTC)................ March 31, 1997 33 years
Idaho (LTC).................. February 28, 1997 33 years
Illinois (LTC)............... August 30, 1996 30 years
Illinois (LTC)............... March 31, 1997 33 years
Indiana (LTC)................ August 30, 1996 30 years
Iowa (LTC)................... August 30, 1996 30 years
Louisiana (LTC).............. March 31, 1997 33 years
Massachusetts (LTC).......... February 28, 1997 33 years
North Carolina (LTC)......... June 30, 1994 39 years
North Carolina (LTC)......... September 30, 1994 29 years
North Carolina (LTC)......... October 8, 1997 33 years
Ohio (LTC)................... October 8, 1997 33 years
Tennessee (LTC).............. September 30, 1994 30 years
Texas (LTC).................. August 30, 1996 30 years
Texas (LTC).................. March 31, 1997 33 years
Washington (LTC)............. March 31, 1997 33 years
West Virginia (LTC).......... October 8, 1997 33 years

Advocat, Inc.: 1948-1995
Alabama (LTC)................ August 14, 1992 31.5 years
Arkansas (LTC)............... August 14, 1992 31.5 years
Tennessee (LTC).............. August 14, 1992 31.5 years
Kentucky (LTC)............... July 1, 1994 33 years
Ohio (LTC)................... July 1, 1994 33 years
West Virginia (LTC).......... July 1, 1994 33 years

Emerald Healthcare, Inc.: 1960-1975
Illinois (LTC)............... April 1, 1996 25 years
Indiana (LTC)................ April 1, 1996 25 years

Unison Healthcare Corp.: 1963-1993
Indiana (LTC)................ December 23, 1992 31.5 years
Texas (LTC).................. December 1, 1993 39 years

Alden Management Services, Inc: 1958-1981
Illinois (LTC)............... September 30, 1994 30 years
The Graduate Hospital: 1929-1984
Pennsylvania (MOB)........... October 28, 1993 27.5 years


12


COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E(5) COLUMN F
- -------------------------------- ------------ --------------- ----------------------- ---------------- ---------------
GROSS AMOUNT AT
WHICH CARRIED AT
CLOSE OF PERIOD
INITIAL COST TO ----------------
COMPANY COST CAPITALIZED
--------------- SUBSEQUENT TO
ACQUISITION BUILDINGS
BUILDINGS ----------------------- AND LAND
AND LAND CARRYING IMPROVEMENTS ACCUMULATED
DESCRIPTION(1) ENCUMBRANCES IMPROVEMENTS IMPROVEMENTS COSTS TOTAL DEPRECIATION(6)
-------------- ------------ ------------ ------------ -------- ------------ ---------------

Res-Care Health Services, Inc.:
Indiana (LTC).................. 20,470,968 0 0 20,470,968 2,293,102
Kentucky (LTC)................. 8,029,032 0 0 8,029,032 899,390
------------ ---------- ------------ -----------
28,500,000 0 0 28,500,000 3,192,492
ExtendaCare, Inc.:
Indiana (LTC).................. 23,553,634 0 0 23,553,634 2,266,746
Five Star Corporation:
Iowa (LTC)..................... 12,993,318 0 0 12,993,318 74,419
Senior Care Properties, Inc.:
Texas (LTC).................... 5,200,000 0 0 5,200,000 441,071
Texas (LTC).................... 6,557,143 0 0 6,557,143 62,922
------------ ---------- -- ------------ -----------
11,757,143 0 0 11,757,143 503,993
Integrated Health Services,
Inc.:
Washington (LTC)............... $ 10,000,000 $ 0 $0 $ 10,000,000 $ 1,070,833
First HealthCare Associates:
Missouri (LTC)................. 9,000,000 0 0 9,000,000 1,158,519
Hunter Management Group Inc.:
Florida (LTC).................. 8,150,000 866 0 8,150,866 779,043
Meadowbrook Healthcare of North
Carolina: (4)
North Carolina (LTC)........... 7,500,000 0 0 7,500,000 788,895
Liberty Assisted Living Centers
LTD
Partnership:
Florida (LTC).................. 5,994,730 760 0 5,995,490 802,712
Miscellaneous Investments:
13,250,000 0 0 13,250,000 1,369,068
------------ ---------- -- ------------ -----------
$557,605,401 $3,448,793 $0 $561,054,194 $48,147,275
============ ========== == ============ ===========


COLUMN A COLUMN G COLUMN H COLUMN I
- -------------------------------- ---------- ------------------ -----------------

LIFE ON WHICH
DEPRECIATION
IN LATEST
DATE OF DATE INCOME STATEMENTS
DESCRIPTION(1) RENOVATION ACQUIRED IS COMPUTED
-------------- ---------- -------- -----------------

Res-Care Health Services, Inc.: 1962-1972
Indiana (LTC).................. September 30, 1994 25-30 years
Kentucky (LTC)................. September 30, 1994 30 years
ExtendaCare, Inc.: 1967-1974
Indiana (LTC).................. January 16, 1996 25 years
Five Star Corporation: 1963-1983
Iowa (LTC)..................... October 7, 1997 33 years
Senior Care Properties, Inc.: 1929-1996
Texas (LTC).................... January 1, 1995 31.5 years
Texas (LTC).................... September 5, 1997 33 years
Integrated Health Services,
Inc.: 1965-1967
Washington (LTC)............... September 1, 1996 20 years
First HealthCare Associates: 1978-1986
Missouri (LTC)................. August 14, 1992 31.5 years
Hunter Management Group Inc.: 1977-1978
Florida (LTC).................. September 13, 1993 39 years
Meadowbrook Healthcare of North
Carolina: 1984-1985
North Carolina (LTC)........... September 30, 1994 31.5 years
Liberty Assisted Living Centers
LTD Partnership: 1989
Florida (LTC).................. September 30, 1994 27 years
Miscellaneous Investments:
1956-1985 Various 20-39 years


- ------------------
(1) All of the real estate included in this schedule are being used in either
the operation of long-term care facilities (LTC), rehabilitation hospitals
(RH) or medical office buildings (MOB) located in the states indicated.
(2) Certain of the real estate indicated are security for Industrial Development
Revenue Bonds totaling $8,980,000 at December 31, 1997.
(3) Certain of the real estate indicated are security for notes payable totaling
$7,900,628 at December 31, 1997.
(4) Certain of the real estate indicated are security for HUD loans totaling
$5,380,148 at December 31, 1997.



COLUMN E 1995 1996 1997
-------- ---- ---- ----

(5) Balance at beginning of period.......................... $334,600,764 $357,556,246 $376,177,045
Additions during period:

Acquisitions............................................ 22,747,486 17,700,000 183,229,915
Improvements and other.................................. 207,996 920,799 1,647,234
------------ ------------ ------------
Balance at close of period............................... $357,556,246 $376,177,045 $561,054,194
============ ============ ============




COLUMN F 1995 1996 1997
-------- ---- ---- ----

(6) Balance at beginning of period.......................... $ 9,552,587 $20,836,153 $32,884,104
Additions during period:
Provisions for depreciation............................. 11,283,566 12,047,951 15,263,171
----------- ----------- -----------
Balance at close of period............................... $20,836,153 $32,884,104 $48,147,275
=========== =========== ===========


13

SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
OMEGA HEALTHCARE INVESTORS, INC.
DECEMBER 31, 1997


COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------- --------------- ------------------ ------------------------------------------------ --------

FINAL
INTEREST MATURITY PRIOR
DESCRIPTION(1) RATE DATE PERIODIC PAYMENT TERMS LIENS
-------------- -------- -------- ---------------------- -----

Michigan (13 LTC facilities)... 15.46% August 13, 2007 - Interest payable at 14.46% payable monthly None
- Deferred interest at 1% accrues monthly and is
payable at maturity of the note
- Quarterly amortization of $1,470,000
commencing in the year 2002
Florida (3 LTC facilities)..... 13.10% August 4, 2012 - Interest payable monthly None
- Quarterly amortization of $50,000 commencing
in the year 2002
Florida (4 LTC facilities)..... 11.50% February 28, 2010 - Interest plus $1,700 of principal payable None
monthly
Florida (2 LTC facilities)..... 11.50% June 4, 2006 - Interest plus $1,400 of principal payable None
monthly
Maine (11 LTC facilities)
Massachusetts (1 LTC
facility)..................... 11.81% September 30, 2000 - Interest payable monthly None
- Quarterly payment of $37,500 commencing in
1996
Texas (3 LTC facilities)....... 12.23% December 31, 2005 - Interest payable monthly None
- Annual amortization of $60,000 commencing in
years 1997-1999 and $120,000 commencing in year
2000
Kentucky (3 LTC facilities).... 10.75% July 31, 2011 - Interest payable monthly None

Texas (9 LTC facilities)....... 10.75% Various - Interest plus $84,700 of principal payable None
monthly
Tennessee (2 LTC facilities)... 14.81% April 30, 2001 - Interest payable monthly None
Tennessee (2 LTC facilities)... 13.36% August 1, 2016 - Interest payable monthly None

Ohio (7 LTC facilities)........ 11.00% January 1, 2015 - Interest plus $33,600 of principal payable None
monthly
Other Mortgage Notes:
Various........................ 10.75% to 13.5% 1998 to 2007 - Interest payable monthly None


COLUMN A COLUMN F COLUMN G COLUMN H
- ------------------------------- ------------ --------------- ----------------
PRINCIPAL AMOUNT
OF LOANS SUBJECT
FACE CARRYING TO DELINQUENT
AMOUNT OF AMOUNT OF PRINCIPAL OR
DESCRIPTION(1) MORTGAGES MORTGAGES(2)(3) INTEREST
-------------- --------- --------------- ----------------

Michigan (13 LTC facilities)... $ 58,800,000 $ 58,800,000 None




Florida (3 LTC facilities)..... $ 7,031,250 $ 7,031,250 None


Florida (4 LTC facilities)..... $ 12,891,500 $ 12,863,600 None


Florida (2 LTC facilities)..... $ 11,090,000 $ 11,070,996 None

Maine (11 LTC facilities)
Massachusetts (1 LTC
facility)..................... $ 26,500,000 $ 26,279,402 None


Texas (3 LTC facilities)....... $ 10,200,000 $ 10,200,000 None



Kentucky (3 LTC facilities).... $ 10,250,000 $ 10,250,000 None

Texas (9 LTC facilities)....... $ 10,370,450 $ 9,101,416 None

Tennessee (2 LTC facilities)... $ 8,932,000 $ 8,932,000 None
Tennessee (2 LTC facilities)... $ 9,300,000 $ 9,300,000

Ohio (7 LTC facilities)........ $ 20,031,888 $ 19,141,118 None

Other Mortgage Notes:
Various........................ $ 36,188,898 $ 35,383,225 None
------------ ------------
$221,585,986 $218,353,007
============ ============


- -------------------------
(1) The mortgage loans included in this schedule represent first mortgages on
facilities used in the delivery of long-term healthcare, such facilities are
located in the states indicated.

(2) The aggregate cost for federal income tax purposes is equal to the carrying
amount.



COLUMN G RECONCILIATION 1995 1996 1997
----------------------- ---- ---- ----

(3) Balance at beginning of period................... $141,359,387 $158,289,097 $217,474,072
Additions during period -- Placements............ 21,131,000 66,222,620 11,155,491
Deductions during period -- Collection of (850,959) (956,646) (13,365,432)
principal........................................
Conversion to purchase leaseback/other changes... (3,350,331) (6,080,999) 3,088,876
------------ ------------ ------------
Balance at close of period....................... $158,289,097 $217,474,072 $218,353,007
============ ============ ============


14

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

OMEGA HEALTHCARE INVESTORS, INC.

By: /s/ DAVID A. STOVER

------------------------------------
David A. Stover
Chief Financial Officer
Dated: March 27, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities on the date indicated.



SIGNATURES TITLE DATE
---------- ----- ----

PRINCIPAL EXECUTIVE OFFICER

/s/ ESSEL W. BAILEY, JR. Chairman, President, Chief March 27, 1998
- ------------------------------------------------ Executive Officer, Secretary and
Essel W. Bailey, Jr. Director

PRINCIPAL FINANCIAL OFFICER and
PRINCIPAL ACCOUNTING OFFICER

/s/ DAVID A. STOVER Vice President, Chief Financial March 27, 1998
- ------------------------------------------------ Officer and Chief Accounting
David A. Stover Officer

DIRECTORS

Director March , 1998
- ------------------------------------------------
Martha A. Darling

/s/ JAMES A. EDEN Director March 27, 1998
- ------------------------------------------------
James A. Eden

/s/ THOMAS F. FRANKE Director March 27, 1998
- ------------------------------------------------
Thomas F. Franke

/s/ HAROLD J. KLOOSTERMAN Director March 27, 1998
- ------------------------------------------------
Harold J. Kloosterman

/s/ BERNARD J. KORMAN Director March 27, 1998
- ------------------------------------------------
Bernard J. Korman

/s/ EDWARD LOWENTHAL Director March 27, 1998
- ------------------------------------------------
Edward Lowenthal

/s/ ROBERT L. PARKER Director March 27, 1998
- ------------------------------------------------
Robert L. Parker


15

INDEX TO EXHIBITS



SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------

3.1 Articles of Incorporation, as amended (Incorporated by
reference to the Registrant's Form 10-Q for the quarter
ended March 31, 1995).......................................
3.2 Amended and Restated Bylaws, as amended October 15, 1997
(Incorporated by reference to Exhibit 3 to the Registrant's
Form 8-K dated November 10, 1997)...........................
4.1 Form of Convertible Debenture (Incorporated by reference to
Exhibit 4.2 to the Company's Form S-3 dated February 3,
1997).......................................................
4.2 Form of Indenture (Incorporated by reference to Exhibit 4.2
to the Company's Form S-3 dated February 3, 1997)...........
4.3 Indenture dated December 27, 1993 (Incorporated by reference
to Exhibit 4.2 to the Company's Form S-3 dated December 29,
1993).......................................................
4.4 First Supplemental Indenture dated January 23, 1996
(Incorporated by reference to Exhibit 4 to the Company's
Form 8-K dated January 19, 1996)............................
4.5 1993 Stock Option and Restricted Stock Plan, as amended
(Incorporated by reference to Exhibit 10.11 to the Company's
Form 10-Q for the quarterly period ended March 31, 1995)....
4.6 Form of Articles Supplementary for Series A Preferred Stock
(Incorporated by reference to Exhibit 4.1 of the Company's
Form 10-Q for the quarterly period ended March 31, 1997)....
4.7 Form of Series A Preferred Stock Certificate (Incorporated
by reference to Exhibit 4.2 of the Company's Form 10-Q for
the quarterly period ended March 31, 1997)..................
10.1 1993 Retirement Plan for Directors, effective March 2, 1993
to (Incorporated by reference Exhibit 10.15 to the Company's
Form 10-K ended for the year December 31, 1992).............
10.2 1993 Deferred Compensation Plan, effective March 2, 1993
(Incorporated by reference to Exhibit 10.16 to the Company's
Form 10-K for the year ended December 31, 1992).............
10.3 Form of Note Exchange Agreement -- 10% Senior Notes due July
15, 2000 (Incorporated by reference to Exhibit 10.1 to the
Company's Form 10-Q for the quarterly period ended September
30, 1995)...................................................
10.4 Form of Note Exchange Agreement -- 7.4% Senior Notes due
July 15, 2000 (Incorporated by reference to Exhibit 10.2 to
the Company's Form 10-Q for the quarterly period ended
September 30, 1995).........................................
10.5 Form of Note Purchase Agreement -- 7.4% Senior Notes due
July 15, 2000 (Incorporated by reference to Exhibit 10.25 to
the Company's Form 10-K for the year ended December 31,
1995).......................................................
10.6 Second Amended and Restated Loan Agreement by and among
Omega Healthcare Investors, Inc., the banks signatory hereto
and Fleet Bank, N.A., as agent for such banks, dated
September 30, 1997 (Incorporated by reference to Exhibit 10
to the Company's Form 8-K dated November 10, 1997)..........
10.7 Purchase Agreement and Agreement of Lease between Delta
Investors I, LLC, Delta Investors II, LLC and subsidiaries
of Regency Health Services, Inc. dated October 7, 1997*.....
11 Statement re: computation of per share earnings*............
12 Ratio of Earnings to Combined Fixed Charges and Preferred
Stock Dividends*............................................
13 Excerpts from Omega Healthcare Investors, Inc. Annual Report
to Shareholders for the period ended December 31, 1997, to
the extent referred to in Part II of this Form 10-K*........


16



SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGES
- ------- ----------- ------------

21 Subsidiaries of the Registrant*.............................
23 Consent of Independent Auditors*............................
27 Financial Data Schedule*....................................


- -------------------------
* Exhibits which are filed herewith on the indicated sequentially numbered page.

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