Sabra Reports Second Quarter 2022 Results; Provides Business Update

IRVINE, Calif.–(BUSINESS WIRE)–#2Q22–Sabra Health Care REIT, Inc. (“Sabra,” the “Company” or “we”) (Nasdaq: SBRA) today announced its results of operations for the second quarter of 2022. In addition, the Company provided a business update.

SECOND QUARTER 2022 RESULTS AND RECENT EVENTS

• Results per diluted common share for the second quarter of 2022 were as follows:
  • Net Income: $0.07
  • FFO: $0.36
  • Normalized FFO: $0.39
  • AFFO: $0.36
  • Normalized AFFO: $0.38
• EBITDARM Coverage Summary:
  • Skilled Nursing/Transitional Care: 1.88x (pro forma for Avamere lease amendment), and 1.66x (pro forma for Avamere lease amendment and excluding Provider Relief Funds)
  • Senior Housing – Leased: 1.09x
  • Behavioral Health: 1.83x
  • Specialty Hospitals & Other: 7.07x
• During the second quarter of 2022, we acquired 12 Canadian senior housing communities with our newly formed — and previously announced — 50/50 joint venture with Sienna for $147.4 million with an estimated stabilized cash yield of 6.5%. Subsequent to the quarter, we closed on the acquisition of two additional managed senior housing communities for $71.7 million with a weighted average initial cash yield of 7.2%. Our year-to-date investment activity totals $264.9 million with a weighted average initial cash yield of 6.9%.
• During the second quarter of 2022, we generated $40.2 million of gross proceeds from the disposition of eight facilities. In addition, subsequent to June 30, 2022, we completed the sale of two facilities and have six facilities under contract for sale, which, collectively, are anticipated to generate gross proceeds of over $210 million. We expect the sales under contract to close by the end of the year, subject to customary closing and diligence conditions. We continue to evaluate additional assets for sale as part of our initiative to recycle capital and further improve our portfolio quality.
• Year to date, we have transitioned, or are in the process of transitioning, 25 triple-net leased assets to existing — as well as one new — operators, including growing our relationship with the Ensign Group from three to nine properties. We have also identified four wholly-owned assets for conversion to addiction treatment centers.
• Our Net Debt to Adjusted EBITDA ratio was 5.44x as of June 30, 2022, and we expect to reduce leverage closer to our 5.0x long-term leverage target by the end of the year with proceeds from disposition activity. We continue to focus on strengthening our balance sheet and portfolio without accessing the capital markets.
• On August 3, 2022, our Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on August 31, 2022 to common stockholders of record as of the close of business on August 17, 2022. The dividend represents a payout of 79% of our Normalized AFFO per share of $0.38.

BUSINESS UPDATE

Behavioral Health

Sabra’s growing behavioral health portfolio represents a total investment of approximately $730 million with a weighted average cash yield of over 8%, which accounts for roughly 13% of the Company’s Annualized Cash NOI. In addition to potential acquisitions, the Company continues to explore asset recycling opportunities within its existing portfolio. In total, nine properties have been converted or are in the process of being converted to addiction treatment centers, and we are negotiating several additional conversion opportunities for existing wholly-owned assets.

Same-Store Senior Housing – Managed

Revenue increased roughly 6.5% sequentially across our assisted living portfolio, which was driven by both higher occupancy and REVPOR. A combination of revenue growth, modestly higher operating expenses, and operating leverage resulted in a greater than 50% sequential increase in Cash NOI and over 450 bps sequential increase in Cash NOI margin.

While more discretionary in nature, operating performance across our independent living portfolio also improved during the second quarter. Higher occupancy and REVPOR drove a 2.5% sequential increase in revenue, while Cash NOI also grew over 2% sequentially.

Medicaid Trends

With distributions from the CARES Act Provider Relief Fund effectively completed, many states have increased their support to skilled nursing providers. The Families First Coronavirus Response Act provided a temporary 6.2% increase in Federal Medical Assistance Percentages (“FMAP”) retroactive to January 1, 2020 with continuation through December 31, 2022, and states have discretion regarding the distribution of these funds to healthcare providers. Several states have continued, and in some cases extended, these benefits to providers. The following is a summary of what the top ten states in our SNF portfolio have announced with regards to FMAP benefits via a per-diem add-on to the Medicaid rate, which is one of various ways states have supported the skilled nursing industry during the pandemic.

Additionally, several states have increased their base Medicaid reimbursement rates outside of continuation or extension of FMAP. The following summary illustrates the announced Medicaid rate increases for FY ’22/’23 in our top ten states in our SNF portfolio. For context, Medicaid rate increases have averaged 1.7% per year over the past decade according to NIC MAP. Medicaid reimbursements accounted for approximately 43% of revenues for our skilled nursing/transitional care tenants for the twelve months ended June 30, 2022 (one quarter in arrears).

Commenting on the second quarter’s results, Rick Matros, CEO and Chair, said, “Our perspective is that we have moved from the pandemic phase of COVID-19 to endemic. Occupancy is increasing, albeit still hampered by labor shortages. Hiring has improved and agency utilization is coming down, but this will take time. Our portfolio continues to be resilient. Our cash collections remain in line with where they have been. Anticipated dispositions, which are primarily comprised of skilled nursing facilities, will leave us with a more diversified portfolio. We are comfortable with our leverage being temporarily elevated as we await these disposition proceeds and we see no need to access the capital markets as we look out to the rest of 2022. We are pleased with the progress we are making as we expand our footprint in behavioral health, including the adaptive re-use of existing assets which create value in obsolete properties, fill a need for those services and create jobs in those communities. On the reimbursement side, Medicaid is an important source of revenue for the skilled nursing industry and we feel very good about the increases we are seeing in those rates, which creates a smoother path to recovery as the federal assistance we have been accustomed to expires over time. We also appreciate the recently announced net 2.7% increase in Medicare rates for skilled nursing facilities, which is 340 bps higher than what was initially proposed.”

LIQUIDITY

As of June 30, 2022, we had approximately $924.8 million of liquidity, consisting of unrestricted cash and cash equivalents of $67.2 million and available borrowings of $857.7 million under our revolving credit facility. As of June 30, 2022, we also had $475.0 million available under the ATM Program.

CONFERENCE CALL AND COMPANY INFORMATION

A conference call with a simultaneous webcast to discuss the 2022 second quarter results will be held on Thursday, August 4, 2022 at 10:00 am Pacific Time. The webcast URL is https://edge.media-server.com/mmc/p/8y4hfs37. To participate via telephone, please register in advance at https://register.vevent.com/register/BIc05c360c08b0486980f4d682637b42b2 to receive a unique PIN needed to access the call. The dial-in number is (844) 543-0451. A digital replay of the call will be available on the Company’s website at www.sabrahealth.com. The Company’s supplemental information package for the second quarter will also be available on the Company’s website in the “Investors” section.

ABOUT SABRA

As of June 30, 2022, Sabra’s investment portfolio included 406 real estate properties held for investment (consisting of (i) 272 Skilled Nursing/Transitional Care facilities, (ii) 55 Senior Housing communities (“Senior Housing – Leased”), (iii) 50 Senior Housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing – Managed”), (iv) 14 Behavioral Health facilities and (v) 15 Specialty Hospitals and Other facilities), three assets held for sale, one investment in a sales-type lease, 14 investments in loans receivable (consisting of two mortgage loans and 12 other loans), eight preferred equity investments and two investments in unconsolidated joint ventures. As of June 30, 2022, Sabra’s real estate properties held for investment included 40,669 beds/units, spread across the United States and Canada.

FORWARD-LOOKING STATEMENTS SAFE HARBOR

This release contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. These statements may be identified, without limitation, by the use of “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. Examples of forward-looking statements include all statements regarding our expectations regarding our recent and pending investments and dispositions; our expectations regarding growth in our relationship with Ensign; our expectations regarding our leverage ratio; our expectations regarding the timing of improvements in hiring and agency utilization; our expectations regarding the diversification of our portfolio; and our other expectations regarding our future financial position, results of operations, cash flows, liquidity, business strategy, growth opportunities, potential investments and dispositions, and plans and objectives for future operations and capital raising activity.

Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following: the ongoing COVID-19 pandemic and measures intended to prevent its spread, and the related impact on our tenants, operators and Senior Housing – Managed communities; operational risks with respect to our Senior Housing – Managed communities; competitive conditions in our industry; the loss of key management personnel; uninsured or underinsured losses affecting our properties and the possibility of environmental compliance costs and liabilities; potential impairment charges and adjustments related to the accounting of our assets; the potential variability of our reported rental and related revenues as a result of Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs; risks associated with our investment in our unconsolidated joint ventures; catastrophic weather and other natural or man-made disasters, the effects of climate change on our properties and a failure to implement sustainable and energy-efficient measures; increased operating costs for our tenants and operators, due to labor market challenges and macroeconomic factors such as inflation; increased healthcare regulation and enforcement; our tenants’ dependency on reimbursement from governmental and other third-party payor programs; the effect of our tenants declaring bankruptcy or becoming insolvent; our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties; the impact of litigation and rising insurance costs on the business of our tenants; the impact of required regulatory approvals of transfers of healthcare properties; environmental compliance costs and liabilities associated with real estate properties we own; our tenants’ or operators’ failure to adhere to applicable privacy and data security laws, or a material breach of our or our tenants’ or operators’ information technology; our concentration in the healthcare property sector, particularly in skilled nursing/transitional care facilities and senior housing communities, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; the significant amount of and our ability to service our indebtedness; covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms; increases in market interest rates; adverse changes in our credit ratings; our ability to make dividend distributions at expected levels; our ability to raise capital through equity and debt financings; changes in foreign currency exchange rates and other risks associated with our ownership of property outside the U.S.; the relatively illiquid nature of real estate investments; our ability to maintain our status as a real estate investment trust (“REIT”) under the federal tax laws; compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT; changes in tax laws and regulations affecting REITs; the ownership limits and takeover defenses in our governing documents and under Maryland law, which may restrict change of control or business combination opportunities; and the exclusive forum provisions in our bylaws.

Additional information concerning risks and uncertainties that could affect our business can be found in our filings with the Securities and Exchange Commission (the “SEC”), including in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, unless required by law to do so.

TENANT, OPERATOR AND BORROWER INFORMATION

This release includes information regarding certain of our tenants that lease properties from us and our operators and borrowers, most of which are not subject to SEC reporting requirements. The information related to our tenants, operators and borrowers that is provided in this release has been provided by, or derived from information provided by, such tenants, operators and borrowers. We have not independently verified this information. We have no reason to believe that such information is inaccurate in any material respect. We are providing this data for informational purposes only.

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, Net Debt to Adjusted EBITDA, net operating income (“NOI”), Cash NOI, Annualized Cash NOI, funds from operations (“FFO”), Normalized FFO, Adjusted FFO (“AFFO”), Normalized AFFO, FFO per diluted common share, Normalized FFO per diluted common share, AFFO per diluted common share and Normalized AFFO per diluted common share. These measures may be different than non-GAAP financial measures used by other companies, and the presentation of these measures is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U.S. generally accepted accounting principles. An explanation of these non-GAAP financial measures is included under “Reporting Definitions” in this release, and reconciliations of these non-GAAP financial measures to the GAAP financial measures we consider most comparable are included on the Investors section of our website at https://ir.sabrahealth.com/investors/financials/quarterly-results.

Contacts

Investor & Media Inquiries: (888) 393-8248 or investorinquiries@sabrahealth.com

Read full story here