Sabra Grapples With Bankrupt Tenant

One of the nation’s major owners of senior housing real estate, Sabra Health Care REIT Inc. (Nasdaq: SBRA), is facing a challenge in another part of its portfolio, as a hospital tenant filed for bankruptcy protection earlier this week.

The tenant of the Forest Park Medical Center-Frisco filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the Eastern Texas on Sept. 22, Sabra announced Wednesday. 

Sabra is working with Frisco on a cooperative bankruptcy, CEO and Chairman Rick Matros said in a prepared statement. Matros predicted the bankruptcy will lead to either an outright sale of the hospital real estate or Sabra’s continuing ownership subject to a lease with a viable operating company.


“Having previously gone through reorganizations as the CEO of two publicly held operating companies, I believe this is the most advantageous approach to finding the best long-term solution for the hospital,” Matros said.

Frisco has retained a firm to market the hospital assets for sale, which may or may not include Sabra’s investment in the hospital real estate, according to a press release. Any new lease in favor of a buyer or any sale of the hospital real estate would require Sabra’s approval and consent.

Matros previously discussed the state of the Frisco facility during an Aug. 5 earnings call.


At the time, he said Sabra was committed to resolving the situation with the troubled tenant in some manner, including divesting the asset, stressing that “there’s no ego involved.” Matros also said Sabra would be happy to reach a solution similar to the one it reached on TRMC—the first hospital in its portfolio— when Tenet came in and took over the OpCo on that property.

Sabra is in early discussions with a different hospital company that is interested in coming into operate the entire platform, not just Sabra’s hospitals, Matros said during the call, adding that it remains to be seen whether that is the path Sabra will opt to go down.

Sabra leaders emphasized that the Frisco facility does not represent a sizable proportion of the REIT’s revenue. If the revenue from Frisco were wholly eliminated from Sabra’s financial statements, Sabra’s normalized FFO and normalized AFFO would be lower by only $0.03 and $0.05, respectively, Sabra CFO Harold Andrews said during the call.

On the same call, Matros disclosed that Sabra’s pipeline stood at $800 million in senior housing stabilized assets, and he noted that while the company remains positive about hospitals as an asset class, the size of its senior housing pipeline indicates the firm’s focus.

Written by Mary Kate Nelson

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