The ongoing rollout of the COVID-19 vaccine within skilled nursing facilities and senior living communities has many investors focused on a recovery scenario for Sabra Health Care REIT. Concerns still loom within the Irvine, CA-based real estate investment trust’s senior housing portfolio, however.
In its fourth-quarter and year-end earnings report Monday, Sabra reported normalized adjusted funds from operations of 41 cents per share in the fourth quarter, just below the 43 cents per share predicted by Mizuho Securities USA.
The firm also reported that its managed senior housing portfolio continues to experience occupancy pressures offset in part by continued growth in rates charged to residents. Excluding government grant income of $1.1 million and $4.2 million recognized in the fourth and third quarters of 2020, respectively, fourth quarter revenue declined 2.1% and cash net operating income declined 14.1% on a sequential quarter basis.
Although occupancy appears to have stabilized in the firm’s skilled nursing sector, ongoing occupancy declines in senior housing continue to put pressure on net operating income generated from these investments. Sabra noted that as tenants within its leased portfolios continue to experience the occupancy declines brought on by the pandemic, the firm may consider rent relief.
The firm reported that it has agreed to short-term, temporary pandemic-related rent deferral for two tenants of one to two months of rent, equal to approximately $400,000 since the beginning of the pandemic, but it has not granted any permanent pandemic-related rent concessions.
Sabra limited its 2021 guidance to the first quarter, noting that it expected net income between 16 cents and 17 cents per share, FFO of 39 cents to 40 cents per share and AFFO of 38 to 39 cents per share.
“In the last month, we have seen the acceleration of the COVID-19 vaccine distribution and the deceleration in COVID-19 cases, which makes us more optimistic than at any time since the pandemic began,” the firm said in its earnings press release Monday. “Nevertheless, uncertainty remains, and accuracy in projecting the pace of recovery remains difficult beyond the very near term.”