Sabra has $1 billion acquisition pipeline, but don't expect big news soon

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Richard K. Matros
Richard K. Matros

Sabra Health Care REIT has a $1 billion acquisition pipeline, CEO Rick Matros told participants in a third-quarter earnings call on Thursday. But don't expect any big announcements from the real estate investment trust for the rest of this year, he added.

“I think people can expect that things will be relatively quiet for us for the next few months,” Matros said. “I actually think right now it's probably good for us to be quiet for a little while and give the market time to absorb everything we've done and the benefits of what we've done.”

What Sabra has done lately is:

  • Merged with skilled nursing-focused Care Capital Properties in August in a controversial move to diversify its asset base. The combined company was expected to have a pro forma total market capitalization of approximately $7.4 billion and an equity market capitalization of approximately $4.3 billion, the REIT said when first announcing the move in May.
  • Announced in September plans to acquire a 49% equity interest in a $1.62 billion portfolio of 183 senior housing communities managed by Enlivant.
  • Announced that it will sell 43 facilities leased to Genesis (in addition to the ongoing sales of 35 other Genesis facilities), with sales expected to occur next year. When the sales are finalized, the REIT will have no exposure to Genesis.

Looking ahead, Matros said, most of the acquisitions on the horizon are senior housing properties, and primarily triple-net leases.

The CEO also said that the Enlivant deal, originally anticipated to close before the end of the year, now probably will close right after Jan. 1.

That transaction involves a RIDEA structure, but Matros said it is a “one-off” that he was willing to pursue because Enlivant is “on the way up.”

(Under a RIDEA structure, REITs own a stake in the taxable REIT subsidiary, typically the licensed community operator, so they share risk at the operational level. Under a triple-net lease, the tenant is solely responsible for all costs related to the asset being leased, plus the rent fee applied under the lease.)

“Enlivant is in a different place because they acquired a portfolio with [private equity firm] TPG, [Assisted Living Concepts] … that was just a disaster operationally, with 60 percent occupancy, a horrible reputation in the communities, a lot of licensing and regulatory issues,” he said. “TPG was smart enough to bring Jack Callison in, who … has a pretty pristine reputation in the space with Holiday and before Holiday as well. And he's put a fantastic management team together, and the results have been pretty remarkable pretty quickly, but [there's] still a long runway ahead of them.”

Enlivant's physical assets are “really nice assets and look very good compared with the competition in those markets,” Matros said.

The properties are in secondary markets, he added, “which we happen to like. There's very little competition from new entrants. The developers don't like to build smaller facilities in those smaller markets.”

Related to another tenant, Wingate Healthcare, Sabra executives said it is one of the REIT's tenants being evaluated for some rent adjustments. Negotiations are still underway, and the REIT also is helping the company evaluate which assets it should sell, Matros said.

See more news from the earnings call at our sister brand, McKnight's Long-Term Care News.

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