Sabra to Acquire 49% Stake in $1.62 Billion Enlivant Portfolio

Sabra Health Care REIT (Nasdaq: SBRA), which became the eighth-largest health care real estate investment trust (REIT) in the U.S. after a recent mega-merger, has plans to get even bigger.

The Irvine, California-based REIT has entered into a definitive agreement to purchase a 49% equity interest in a joint venture that owns 183 senior housing communities managed by Chicago-based operator Enlivant, according to a Tuesday press release.

Assisted living accounts for almost the entirety of the portfolio, Enlivant CEO Jack Callison told Senior Housing News.

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The deal values the 20-state, 8,280-unit portfolio at $1.62 billion, and Sabra’s 49% minority interest investment at $371 million. Presently, the almost 100% private-pay portfolio is 82% occupied. That’s an improvement from 60% in 2013, when Enlivant was established as the next-generation version of troubled Assisted Living Concepts.

Sabra anticipates that it may own the entire 183-property portfolio in the future—the joint venture agreements include an option for Sabra to purchase the remaining majority interest in the portfolio during the next three years. At that point, the portfolio would be owned in a traditional RIDEA structure with Enlivant, Sabra CEO Rick Matros told Senior Housing News.

The REIT anticipates that it can continue to help drive net operating income growth even after the properties reach full stabilization, according to a press release issued Tuesday.

Global private investment firm TPG—which manages the private equity funds that own Enlivant—will remain the 51% majority owner in the portfolio after Sabra’s initial investment.

The acquisition is scheduled to close before Jan. 1, 2018.

Once the deal has closed, Enlivant will continue to manage the properties under a new, 10-year management contract with two, sequential five-year extension options. Separately, TPG Real Estate will still own more than 40 senior living communities primarily acquired in late 2016, which Enlivant will continue to operate. Enlivent is the 10th-largest operator nationally, according to recently released rankings from the American Seniors Housing Association (ASHA).

Sabra anticipates that it will finance this investment using proceeds from its revolving credit facility, cash generated from the planned dispositions of specific facilities operated by skilled nursing giant Genesis HealthCare (NYSE: GEN), and other asset sales.

Portfolio diversification

Sabra took some heat from shareholders after announcing its planned $7.4 billion merger with Care Capital Properties, a large skilled nursing REIT, in May. Critics questioned the decision to increase Sabra’s SNF exposure during a time when the industry is facing serious headwinds.

In response, Matros expressed confidence in the long-term prospects for the skilled nursing industry as a whole, and for the operators in Sabra’s portfolio specifically. He also argued that the merger would enable Sabra to be more competitive in the M&A market, closing larger deals that could help diversify the portfolio.

This Enlivant deal appears to be a quick example of that strategy playing out. With the Enlivant portfolio, Sabra’s percentage of cash NOI derived from senior housing increases from 16.8% to 24.3% on a pro-forma basis.

Sabra intends to use the Enlivant properties as a platform for future senior housing growth, Matros said in Tuesday’s press release.

Written by Mary Kate Nelson

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