Sabra’s Senior Housing Portfolio Shows Resilience Against Pandemic Pressures

For Sabra Health Care REIT’s (Nasdaq: SBRA) senior housing portfolio, the worst has not come to pass.

That is evident in the Irvine, California-based company’s average senior housing occupancy rate, which declined between February and July — but not to a calamitous degree. Sabra’s managed senior housing portfolio, which consists of 47 communities, shed almost 4% in average occupancy between February and July of this year.

Meanwhile, its triple-net senior housing portfolio, which consists of 65 communities, declined about 1.4% in that time — which is “pretty remarkable” given the disruptive nature of the pandemic, according to Sabra Chairman, President and CEO Rick Matros.


For its 159-property joint venture with Chicago-based Enlivant, Sabra reported an average occupancy rate of 78.9% in the second quarter of 2020. By July, that number had shrunk to 77.3% — 440 basis points lower than the Enlivant portfolio’s occupancy rate in February.

Occupancy in Sabra’s leased portfolios has stayed about flat since the end of May, while the rate of decline in July for its managed senior housing portfolio decelerated to roughly half of the monthly drop the REIT saw in April.

Much of that has to do with where Sabra’s communities are located. The REIT’s managed portfolio consists primarily of buildings located in secondary and tertiary markets, which has shielded it somewhat from the pandemic and its impacts, according to Talya Nevo-Hacohen, Sabra’s executive vice president, chief investment officer and treasurer.


“The only variable that clearly impacted operators is geographic location,” Nevo-Hacohen said during Thursday’s call. “Even in late July, cases per capita in primary markets are 26% higher than in secondary markets, and 64% higher than in tertiary markets.”

The number of Sabra properties with active Covid-19 cases has also dwindled. Of the 202 facilities that reported positive cases since the beginning of the pandemic, 113 have “completely recovered,” Matros said. And the REIT has not yet provided any rent deferrals to tenants amid the pandemic.

Joining Matros and Nevo-Hacohen on the second-quarter earnings call was Lilly Donohue, CEO of Holiday Retirement, who shared an update of how the Winter Park, Florida-based provider is holding up against the pandemic’s pressures. As of June 30, Holiday Retirement made up about 5.4% of Sabra’s total NOI.

Sabra reported normalized funds from operations (FFO) of $0.45 per share for the second quarter of 2020, missing analysts’ expectations by about two cents.

Overall, Sabra outperformed against tempered expectations for the quarter, according to BMO Capital Markets Analyst John Kim.

“We believe SBRA had a solid 2Q20, beating consensus,” Kim wrote in a note to investors. “We estimate its senior housing managed portfolio [same-store NOI] declined by 23.8%, year-over-year, versus our -34% projection.”

Green Street Advisors Senior Analyst Lukas Hartwich, meanwhile, struck a more cautiously optimistic tone in his note to investors.

“Sabra’s 2Q20 results were roughly as expected,” Hartwich wrote. “While Sabra’s real-time occupancy trends appear to be holding up better than average, investors should expect coverage levels to decline going forward.”

Sabra’s share value rose 3.2% to rest at $15.12 by the time the markets closed Thursday afternoon.

Holiday update

While the coronavirus pandemic has tested operations and finances at Holiday Retirement’s 261 communities in 43 states, CEO Donohue said it has also strengthened the company’s core mission.

The operator’s Covid-19 infection rate is currently 0.71% among its residents, and 1.2% among employees, numbers that “really reflect how we are adhering to our protocols in the 43 states where we have communities,” Donohue said on Thursday’s earnings call.

Holiday’s same-store NOI is down about 5% in the second quarter of 2020 when compared with the same period in the previous year, and revenues dropped about 3%. But that is without any kind of government support, Donohue noted.

“Given that softness, we were quite diligent managing our expenses,” she added. “As a mid-market expert in staying ahead of our needs, we’ve been able to efficiently procure PPE and other Covid-related items.”

Although the pandemic has affected all kinds of asset classes, Donohue said she was heartened by the fact that Holiday’s communities — which are mostly independent living properties — were not hit as hard as some others. She also touted the operator’s data-collection efforts as helping to mitigate the Covid-19 pandemic and its pressures.

“We have no reason to panic, and we are already seeing our leads and leases kick back up,” Donohue said. “The fundamentals of our business are intact. In fact, I believe they’re stronger than ever.”

She added: “I’m seeing a resiliency in Holiday, and in independent living, that does not just indicate we are here to stay as a business and a sector — it also says we have a larger mission.”

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