Two major players in the senior care space have decided to join forces.
Senior housing owner Sabra Health Care REIT, Inc. (Nasdaq: SBRA) and former “pure play” skilled nursing real estate investment trust (REIT) Care Capital Properties, Inc. (NYSE: CCP) will combine in an all-stock merger, the companies announced Sunday. The resulting health care REIT, which will operate under the Sabra name, is expected to have a pro forma total market capitalization of about $7.4 billion and an equity market capitalization of about $4.3 billion.
The merger is anticipated to close in the third quarter of this year. Once it does close, Care Capital Properties shareholders are expected to own about 59% of the combined company, while Sabra shareholders are expected to own about 41%.
The new REIT will be based in Irvine, California, and will be led by Sabra’s current management team. Specifically, current Sabra CEO Rick Matros will serve as the chairman and CEO, Talya Nevo-Hacohen will serve as the CIO and Harold Andrews will serve as the CFO. Care Capital Properties’ current CEO, Raymond Lewis, will be added to Sabra’s board of directors, along with and two other directors from Care Capital Properties.
The new company will have a total of 564 investments—including senior housing, skilled nursing, behavioral health hospitals and transitional care facilities—across 43 U.S. states and Canada.
“We are excited to announce this transformative transaction that brings together two highly complementary portfolios in a merger we believe to have considerable benefits for all stakeholders,” Sabra Chairman and CEO Rick Matros said in a press release. “…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. 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.”
Sabra has been pursing aggressive growth for some time; the company announced a $1 billion pipeline in May 2015. Still, even with this merger, Sabra will remain significantly smaller than the “Big Three” health care REITS—Chicago-based health care REIT Ventas Inc. (NYSE: VTR), for instance, has an equity cap rate of approximately $22.6 billion.
Written by Mary Kate Nelson