Richard K. Matros

Irvine, CA-based Sabra Health Care REIT and Chicago-based Care Capital Properties Inc. have agreed to a merger that will form a healthcare real estate investment trust with a portfolio of 564 investments across 43 states and Canada, the companies announced Sunday evening.

The deal is expected to close in the third quarter.

The combined company is expected to have a pro forma total market capitalization of approximately $7.4 billion and an equity market capitalization of approximately $4.3 billion.

Upon closing, Sabra shareholders are expected to own approximately 41% of the combined company and the former CCP shareholders are expected to own approximately 59%.

“Our balance sheet and access to capital will enable us to continue investing in senior housing assets to balance our portfolio mix, as we did after our spin-off” from Sun Healthcare, Rick Matros, CEO and chairman of Sabra, said in a statement. “The increased scale and portfolio diversification, strengthened balance sheet and earnings profile delivered through the merger position us to capitalize on the opportunity set in front of us in an industry that continues to have attractive fundamentals.”

By percentage, as of the fourth quarter of 2016, the two biggest operators in Sabra’s current portfolio were Genesis (32%) and Holiday Retirement (16%), according to a presentation dated May 8 that Sabra posted on its website. The biggest tenants in CCP’s portfolio were Senior Care Centers (18%), Signature Healthcare (15%) and Avamere (12%).

Going forward, the companies plan to optimize the portfolio by selling skilled nursing facilities and investing selectively in assisted living, memory care and independent living communities, according to the presentation.

“Since becoming a public company in August 2015,” Raymond Lewis, CEO of CCP, said, “CCP has worked hard to reposition our portfolio for success and growth with strategic operators. The combined company will have a diversified portfolio of quality operators and assets, with strong free cash flow, a rock-solid balance sheet and a highly competitive cost of capital.”

The company will continue to use the Sabra name and be headquartered in Irvine, CA.

Upon completion of the merger Matros, Harold Andrews and Talya Nevo-Hacohen will continue to serve in their current Sabra roles of chairman and CEO, chief financial officer and chief investment officer, respectively.

The Sabra Board of Directors will be expanded to eight members with the addition of Lewis and two more directors from CCP.