two puzzle pieces

As is the case with many healthcare real estate investment trusts involved in senior housing, Sabra Health Care REIT has lost ground in recent years, according to “Trapping Value,” writing on Seeking Alpha.

The REIT has produced a total return of negative 3.54% since August 2015, the author wrote.

“The reality is that the long-term earnings power of the underlying properties has declined substantially as the tenants cannot make money. A lot of tenants have folded or are about to fold and the captain obvious quote here is that you cannot force bankrupt tenants to pay the rent you want,” according to the column.

In light of recent mergers and acquisitions in the senior housing market, most notably Welltower’s acquisition of 86 Holiday Retirement communities and the Ventas acquisition of New Senior Investment Group, the author opines that Sabra might be looking to exit the market “while the overall returns still look ok.”

“Welltower is set up to be a nice prospective buyer and this should work out as a win-win,” according to the column. “While the sector is problematic, the relative valuation here looks compelling.”