Sabra Exits Enlivant JV, Citing ‘Double-Whammy’ of Debt Markets, Covid Challenges 

Sabra Health Care REIT (Nasdaq: SBRA) has fully exited its Enlivant joint-venture agreement with TPG as of May 1, according to CEO Rick Matros.

A “double whammy” of the downturn in debt markets and the lingering effects of the Covid-19 pandemic affected the portfolio’s ability to be sold and helped lead to the exit, he told investors and analysts on the company’s first-quarter earnings call Thursday.

Sabra — based in Irvine and soon to be headquartered in Tustin, California — exited the JV using a provision that allows either company to withdraw from it after a sufficient period of notice.


The JV, under which Sabra owned 49% and TPG owned 51%, involved 154 senior living communities operated by Enlivant. In March, Sabra management noted it had “substantial doubt” about the ability of the JV to continue as a going concern.

Expenses, lost revenue, occupancy woes and rising interest rates ate into the Enlivant JV’s bottom line and added to the company’s financial difficulties. Earlier this year, the JV was in the process of negotiating with lenders to restructure its financing following a notice of default.

“The lenders have the assets, they’re transitioning assets to other operators,” Matros said.


At the time, Sabra intended to transition the 11 Enlivant communities it owned outright from Enlivant to a new operator. That process is still ongoing as of May, and Matros noted on Thursday’s call that the communities were “larger facilities in larger markets” and are a combination of AL and memory care.

Despite the abrupt exit from the JV, Sabra management said the company would not see a financial impact from the move.

“There is no impact on earnings or any other ramifications to the company other than the fact that there are a number of folks out there, rating agencies and others, who still look at the debt carried by the JV — so that obviously is gone,” Matros said during the call.

The company’s stock price fell by 2.12% to rest at $11.10 per share on Thursday at market close.

Sabra Chief Investment Officer (CIO) Talya Nevo-Hacohen said the company’s wholly-owned and managed senior living portfolio saw continued recovery last year, but that the portfolio was “essentially flat” in 1Q23, having to overcome labor and wage challenges.

“Expenses are continuing to moderade…and the continued evolution of an investment in customer acquisitions strategies now seen as foundational,” Nevo Hacohen said on Thursday.

Sabra reported a slight decrease in occupancy across its senior housing operating portfolio (SHOP) in the first quarter, with occupancy falling to 80.7% from 81.7% in 4Q22. Same-store net operating income margin dipped from 37.2% in 4Q22 to 26.9%.

Revenue per occupied room (RevPOR) in the first quarter increased by 7.3% over 4Q22, driven by “nearly 10%” annual resident rate increases. Across the net-lease stabilized senior housing portfolio, there’s been consistent occupancy gains since February 2021. As of February of this year, occupancy recovered to 88.2%, a total that’s equal to the occupancy level immediately before the pandemic, Nevo-Hacohen said.

Also in the first quarter, Sabra reported a net loss of $0.04 per diluted common share, and saw its funds from operations (FFO) sit at $0.32 per diluted common share, and a normalized FFO of $0.33 per diluted common share.

The company additionally closed on the acquisition of one senior housing community for $48 million and another for $3.3 million with estimated stabilized cash yields of 8% going forward. In addition, Sabra acquired an 85% interest in one senior housing community in Canada for $18.9 million with an estimated 8% cash yield

Going forward, Matros said he felt 2023 would be “a relatively quiet year” for Sabra.

“We believe the continued diversification of our portfolio over the course of this year with our skilled nursing exposure at new lows, will be an additional factor in creating long-term value,” Matros said.

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