Sabra REIT Earnings Drag, Senior Housing Pipeline Grows to $300 Million

Net income and funds from operation (FFO) dropped for Sabra Health Care REIT, Inc. (NASDAQ:SBRA) in the second quarter ended June 30, 2013 as new senior living construction activity picked up. The REIT currently has an approximately $300 million development pipeline.

FFO dropped 64% to $0.13 in the second quarter compared to $0.36 one year previously. The REIT also reported a net loss attributable to common stockholders per diluted common share of $0.09. In 2012’s second quarter, Sabra had a net income attributable to common stockholders of $0.16.

However, second quarter normalized FFO rose to $15.6 million, or $0.41 per diluted common share, compared to normalized FFO of $13.7 million, or $0.37 per diluted share in the same period of 2012.


Revenues increased to $32.3 million from the previous year’s $25.1 million. Net cash provided by operating activities declined almost 5% to just under $23 million.

Recent activities include the $6.2 million acquisition of a Virginia assisted living community in the second quarter, and a new pipeline agreement with Meridian Realty Advisors. Sabra has previously spoken toward its strategy of building new assets as assisted living acuity rises.

“Although deal activity was light for the quarter, our pipeline showed an increase in activity by the end of the quarter and continues to be healthy at approximately $300.0 million, comprised of approximately 65% senior housing assets and 35% skilled nursing/post-acute assets,” said Rick Matros, CEO and chairman of Sabra, in the earnings statement. “We expect to hit our targeted range of investments for 2013 and we reaffirm our guidance as well, which excludes the impact of future investment activity.”


On July 29, the REIT agreed to terms on a non-binding term sheet on a forward purchase program with Meridian to acquire newly constructed senior housing, memory care, and skilled nursing properties that Meridian will develop. The agreement provides for the acquisition of up to 10 facilities with an estimated total cost of $100 million through 2015, including capital commitments for predevelopment.

The preferred equity investments will earn an annual 15% preferred rate of return.

“We’ve developed a long-standing relationship with the Meridian team having done repeat deals with them, and we look forward to entering into the new forward purchase program with Meridian and continuing our long-term relationship,” said Matros.

While occupancy in Sabra’s skilled nursing and post-acute care portfolio was down 80 basis points year-over-year, its senior housing portfolio occupancy increased by 320 basis points.

“We expect to see rent coverage continue to improve particularly in the Genesis portfolio as a result of the realization of synergies, the unexpected mitigation of sequestration, and improving skilled mix,” Matros said. “We also expect to announce additional development programs, primarily in assisted living and memory care asset classes.”

View Sabra’s second quarter earnings report.

Written by Alyssa Gerace

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