IRVINE, Calif.–(BUSINESS WIRE)–#3Q22–Sabra Health Care REIT, Inc. (“Sabra,” the “Company” or “we”) (Nasdaq: SBRA) today announced its results of operations for the third quarter of 2022. In addition, the Company provided a business update.
THIRD QUARTER 2022 RESULTS AND RECENT EVENTS
Results per diluted common share for the third quarter of 2022 were as follows:
Net Loss: $(0.22)
FFO: $0.28
Normalized FFO: $0.36
AFFO: $0.34
Normalized AFFO: $0.35
EBITDARM Coverage Summary:
Skilled Nursing/Transitional Care:
1.83x (pro forma for North American transition, Avamere lease amendment)
1.60x (pro forma for North American transition, Avamere lease amendment, and excluding Provider Relief Funds)
Senior Housing – Leased: 1.13x
Behavioral Health: 1.72x
Specialty Hospitals & Other: 7.30x
As detailed in a separate press release, Sabra announced that it will transition the 24-property portfolio previously leased to North American Health Care, Inc. (“North American”) to two of Sabra’s existing tenants, The Ensign Group (“Ensign”) and the Avamere Family of Companies (“Avamere”), for a combined initial annual rent of $34.5 million.
During the third quarter of 2022, we acquired two senior housing managed communities, including one through our proprietary development pipeline, for $71.7 million with an estimated blended stabilized cash yield of 7.2%.
During the third quarter of 2022, we generated $23.1 million of gross proceeds from the disposition of three facilities. As previously disclosed, we continue to make progress on additional dispositions that are expected to generate gross proceeds of over $200 million. The sales under contract are expected to close by December 31, 2022, subject to customary closing and diligence conditions.
Our Net Debt to Adjusted EBITDA ratio was 5.50x as of September 30, 2022, and we expect to reduce leverage closer to our 5.0x long-term leverage target by the end of the year with proceeds from our disposition activity described above. We remain committed to maintaining a strong balance sheet and strengthening our portfolio without accessing the capital markets.
On November 7, 2022, our Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on November 30, 2022 to common stockholders of record as of the close of business on November 17, 2022.
BUSINESS UPDATE
Expanding Relationship with Ensign and Avamere
As detailed in a separate press release, Sabra announced that it will transition the 24-property portfolio previously leased to North American to two of Sabra’s existing tenants, Ensign and Avamere, for a combined initial annual rent of $34.5 million. As a result, Ensign will become one of Sabra’s largest relationships, representing approximately 8% of Annualized Cash NOI, while Avamere will remain one of Sabra’s largest relationships, also accounting for roughly 8% of Annualized Cash NOI. Sabra believes this transaction represents a unique opportunity to improve the long-term value of this high-quality real estate portfolio, noting the enhanced credit profile that supports its rental income, highlighted by Ensign’s corporate guaranty and $5 billion of equity market capitalization. The transition of these facilities to Ensign operating companies and Avamere is expected to be completed by February 1, 2023 and remains subject to the completion of certain regulatory approvals and other closing conditions. Sabra expects to recognize a total of $14.7 million in revenue from these facilities during the fourth quarter through the end of the transition period, which approximates the rent Sabra would have received during this timeframe under the previous leases with North American.
Commenting on the third quarter’s results, Rick Matros, CEO and Chair, said, “The transition of the North American portfolio should enhance the durability of Sabra’s earnings stream going forward. We appreciate the extension of the Public Health Emergency as the health care industry continues to navigate the challenging operating environment. Although the recovery in both the skilled and senior housing asset classes has been slower than we all would have preferred, we are heartened by the continued, albeit slow, improvement in the labor market which has been a major barrier to a quicker recovery. The asset sales we previously disclosed are proceeding as expected and we continue to receive interest in acquiring additional skilled nursing assets. We plan on continuing this strategy which will further diversify our asset classes and fund our ongoing investment activity.”
LIQUIDITY
As of September 30, 2022, we had approximately $887.7 million of liquidity, consisting of unrestricted cash and cash equivalents of $26.3 million and available borrowings of $861.4 million under our revolving credit facility. As of September 30, 2022, we also had $475.0 million available under the ATM Program.
CONFERENCE CALL AND COMPANY INFORMATION
A conference call with a simultaneous webcast to discuss the 2022 third quarter results will be held on Tuesday, November 8, 2022 at 10:00 am Pacific Time. The webcast URL is https://edge.media-server.com/mmc/p/eyzpt5x9. To participate via telephone, please register in advance at https://register.vevent.com/register/BId527bdd7b5cd4bd685268d3255d6aed6 to receive a unique PIN needed to access the call. The dial-in number is (844) 543-0451. A digital replay of the call will be available on the Company’s website at www.sabrahealth.com. The Company’s supplemental information package for the third quarter will also be available on the Company’s website in the “Investors” section.
ABOUT SABRA
As of September 30, 2022, Sabra’s investment portfolio included 407 real estate properties held for investment (consisting of (i) 270 Skilled Nursing/Transitional Care facilities, (ii) 52 Senior Housing communities (“Senior Housing – Leased”), (iii) 54 Senior Housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing – Managed”), (iv) 16 Behavioral Health facilities and (v) 15 Specialty Hospitals and Other facilities), one asset held for sale, one investment in a sales-type lease, 15 investments in loans receivable (consisting of two mortgage loans and 13 other loans), seven preferred equity investments and two investments in unconsolidated joint ventures. As of September 30, 2022, Sabra’s real estate properties held for investment included 41,053 beds/units, spread across the United States and Canada.
FORWARD-LOOKING STATEMENTS SAFE HARBOR
This release contains “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. Any statements that do not relate to historical or current facts or matters are forward-looking statements. These statements may be identified, without limitation, by the use of “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. Examples of forward-looking statements include all statements regarding our expectations regarding our recent and pending investments and dispositions; our pending transition of the North American portfolio and our expectations regarding the related impact on our earnings stream; our expectations regarding growth in our relationships with Ensign and Avamere and the resulting impact on the long-term value of the 24 properties to be transitioned to Ensign and Avamere; our expectations regarding our leverage ratio; and our other expectations regarding our future financial position, results of operations, cash flows, liquidity, business strategy, growth opportunities, potential investments and dispositions, and plans and objectives for future operations and capital raising activity.
Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following: epidemic diseases, pandemics or other contagious diseases, including the ongoing impact of COVID-19, and measures intended to prevent their spread, and the related impact on our tenants, operators and Senior Housing – Managed communities; operational risks with respect to our Senior Housing – Managed communities; competitive conditions in our industry; the loss of key management personnel; uninsured or underinsured losses affecting our properties and the possibility of environmental compliance costs and liabilities; potential impairment charges and adjustments related to the accounting of our assets; the potential variability of our reported rental and related revenues as a result of Accounting Standards Update (“ASU”) 2016-02, Leases, as amended by subsequent ASUs; risks associated with our investment in our unconsolidated joint ventures; catastrophic weather and other natural or man-made disasters, the effects of climate change on our properties and a failure to implement sustainable and energy-efficient measures; increased operating costs for our tenants and operators, due to labor market challenges and macroeconomic factors such as inflation; increased healthcare regulation and enforcement; our tenants’ dependency on reimbursement from governmental and other third-party payor programs; the effect of our tenants declaring bankruptcy or becoming insolvent; our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties; the impact of litigation and rising insurance costs on the business of our tenants; the impact of required regulatory approvals of transfers of healthcare properties; environmental compliance costs and liabilities associated with real estate properties we own; our tenants’ or operators’ failure to adhere to applicable privacy and data security laws, or a material breach of our or our tenants’ or operators’ information technology; our concentration in the healthcare property sector, particularly in skilled nursing/transitional care facilities and senior housing communities, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; the significant amount of and our ability to service our indebtedness; covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms; increases in market interest rates; adverse changes in our credit ratings; our ability to make dividend distributions at expected levels; our ability to raise capital through equity and debt financings; changes in foreign currency exchange rates and other risks associated with our ownership of property outside the U.S.; the relatively illiquid nature of real estate investments; our ability to maintain our status as a real estate investment trust (“REIT”) under the federal tax laws; compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT; changes in tax laws and regulations affecting REITs; the ownership limits and takeover defenses in our governing documents and under Maryland law, which may restrict change of control or business combination opportunities; and the exclusive forum provisions in our bylaws.
Additional information concerning risks and uncertainties that could affect our business can be found in our filings with the Securities and Exchange Commission (the “SEC”), including in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, unless required by law to do so.
TENANT, OPERATOR AND BORROWER INFORMATION
This release includes information regarding certain of our tenants that lease properties from us and our operators and borrowers, most of which are not subject to SEC reporting requirements. The information related to our tenants, operators and borrowers that is provided in this release has been provided by, or derived from information provided by, such tenants, operators and borrowers. We have not independently verified this information. We have no reason to believe that such information is inaccurate in any material respect. We are providing this data for informational purposes only.
NOTE REGARDING NON-GAAP FINANCIAL MEASURES
This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, Net Debt to Adjusted EBITDA, net operating income (“NOI”), Cash NOI, Annualized Cash NOI, funds from operations (“FFO”), Normalized FFO, Adjusted FFO (“AFFO”), Normalized AFFO, FFO per diluted common share, Normalized FFO per diluted common share, AFFO per diluted common share and Normalized AFFO per diluted common share. These measures may be different than non-GAAP financial measures used by other companies, and the presentation of these measures is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U.S. generally accepted accounting principles. An explanation of these non-GAAP financial measures is included under “Reporting Definitions” in this release, and reconciliations of these non-GAAP financial measures to the GAAP financial measures we consider most comparable are included on the Investors section of our website at https://ir.sabrahealth.com/investors/financials/quarterly-results.
SABRA HEALTH CARE REIT, INC.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(dollars in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Revenues:
Rental and related revenues (1)
$
84,214
$
85,367
$
297,268
$
309,533
Interest and other income
8,940
3,405
28,585
9,377
Resident fees and services
47,610
39,819
133,973
114,978
Total revenues
140,764
128,591
459,826
433,888
Expenses:
Depreciation and amortization
47,427
45,046
137,855
133,912
Interest
27,071
24,243
77,573
72,956
Triple-net portfolio operating expenses
5,120
5,075
14,983
15,210
Senior housing – managed portfolio operating expenses
36,705
30,761
103,835
88,607
General and administrative
9,676
8,683
28,721
26,432
(Recovery of) provision for loan losses and other reserves
(217
)
(26
)
(12
)
1,890
Impairment of real estate
60,857
495
72,602
495
Total expenses
186,639
114,277
435,557
339,502
Other income (expense):
Loss on extinguishment of debt
(140
)
(913
)
(411
)
(1,760
)
Other income (expense)
994
277
(1,101
)
386
Net (loss) gain on sales of real estate
(80
)
655
(4,581
)
(1,784
)
Total other income (expense)
774
19
(6,093
)
(3,158
)
(Loss) income before loss from unconsolidated joint ventures and income tax expense
(45,101
)
14,333
18,176
91,228
Loss from unconsolidated joint ventures
(4,384
)
(4,018
)
(9,715
)
(178,817
)
Income tax expense
(579
)
(92
)
(1,118
)
(1,314
)
Net (loss) income
$
(50,064
)
$
10,223
$
7,343
$
(88,903
)
Net (loss) income, per:
Basic common share
$
(0.22
)
$
0.05
$
0.03
$
(0.41
)
Diluted common share
$
(0.22
)
$
0.05
$
0.03
$
(0.41
)
Weighted-average number of common shares outstanding, basic
230,982,227
220,865,518
230,936,032
216,227,221
Weighted-average number of common shares outstanding, diluted
230,982,227
222,063,910
231,779,750
216,227,221
(1)
See page 6 for additional details regarding Rental and related revenues.
SABRA HEALTH CARE REIT, INC.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME – SUPPLEMENTAL INFORMATION
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Cash rental income
$
92,966
$
101,496
$
288,532
$
305,480
Straight-line rental income
2,006
3,391
7,042
11,114
Straight-line rental income receivable write-offs
(16,606
)
(25,213
)
(17,068
)
(25,213
)
Above/below market lease amortization
1,569
1,081
4,730
3,985
Above/below market lease intangible write-offs
—
—
326
—
Operating expense recoveries
4,279
4,612
13,706
14,167
Rental and related revenues
$
84,214
$
85,367
$
297,268
$
309,533
SABRA HEALTH CARE REIT, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
September 30, 2022
December 31, 2021
Assets
Real estate investments, net of accumulated depreciation of $882,755 and $831,324 as of September 30, 2022 and December 31, 2021, respectively
$
5,018,903
$
5,162,884
Loans receivable and other investments, net
390,275
399,086
Investment in unconsolidated joint ventures
207,616
96,680
Cash and cash equivalents
26,289
111,996
Restricted cash
4,859
3,890
Lease intangible assets, net
48,299
54,063
Accounts receivable, prepaid expenses and other assets, net
148,674
138,108
Total assets
$
5,844,915
$
5,966,707
Liabilities
Secured debt, net
$
49,706
$
66,663
Revolving credit facility
138,551
—
Term loans, net
524,457
594,246
Senior unsecured notes, net
1,734,228
1,733,566
Accounts payable and accrued liabilities
145,217
142,989
Lease intangible liabilities, net
44,023
49,713
Total liabilities
2,636,182
2,587,177
Equity
Preferred stock, $0.01 par value; 10,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2022 and December 31, 2021
—
—
Common stock, $0.01 par value; 500,000,000 shares authorized, 230,976,606 and 230,398,655 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
2,310
2,304
Additional paid-in capital
4,484,769
4,482,451
Cumulative distributions in excess of net income
(1,296,868
)
(1,095,204
)
Accumulated other comprehensive income (loss)
18,522
(10,021
)
Total equity
3,208,733
3,379,530
Total liabilities and equity
$
5,844,915
$
5,966,707
SABRA HEALTH CARE REIT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended September 30,
2022
2021
Cash flows from operating activities:
Net income (loss)
$
7,343
$
(88,903
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
137,855
133,912
Non-cash rental and related revenues
4,970
10,113
Non-cash interest income
(1,683
)
(1,444
)
Non-cash interest expense
8,300
5,389
Stock-based compensation expense
5,367
6,987
Loss on extinguishment of debt
411
1,760
(Recovery of) provision for loan losses and other reserves
(12
)
1,890
Net loss on sales of real estate
4,581
1,784
Impairment of real estate
72,602
495
Other-than-temporary impairment of unconsolidated joint venture
—
164,126
Loss from unconsolidated joint ventures
9,715
14,691
Other non-cash items
2,167
—
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses and other assets, net
(5,631
)
13,062
Accounts payable and accrued liabilities
2,161
(5,403
)
Net cash provided by operating activities
248,146
258,459
Cash flows from investing activities:
Acquisition of real estate
(83,985
)
(62,116
)
Origination and fundings of loans receivable
(4,500
)
—
Origination and fundings of preferred equity investments
(5,813
)
(4,153
)
Additions to real estate
(33,809
)
(29,278
)
Escrow deposits for potential investments
(836
)
—
Repayments of loans receivable
4,885
2,432
Repayments of preferred equity investments
4,173
683
Investment in unconsolidated joint venture
(128,019
)
—
Net proceeds from the sales of real estate
62,816
15,066
Net cash used in investing activities
(185,088
)
(77,366
)
Cash flows from financing activities:
Net borrowings from revolving credit facility
147,353
—
Proceeds from issuance of senior unsecured notes
—
791,520
Principal payments on term loans
(63,750
)
(455,000
)
Principal payments on secured debt
(17,030
)
(2,185
)
Payments of deferred financing costs
(6
)
(7,444
)
Payment of contingent consideration
(2,500
)
—
Issuance of common stock, net
(4,394
)
172,188
Dividends paid on common stock
(207,861
)
(194,311
)
Net cash (used in) provided by financing activities
(148,188
)
304,768
Net (decrease) increase in cash, cash equivalents and restricted cash
(85,130
)
485,861
Effect of foreign currency translation on cash, cash equivalents and restricted cash
392
34
Cash, cash equivalents and restricted cash, beginning of period
115,886
65,523
Cash, cash equivalents and restricted cash, end of period
$
31,148
$
551,418
Supplemental disclosure of cash flow information:
Interest paid
$
68,778
$
66,051
Supplemental disclosure of non-cash investing activities:
Decrease in loans receivable and other investments due to acquisition of real estate
$
14,311
$
—
SABRA HEALTH CARE REIT, INC.
FUNDS FROM OPERATIONS (FFO), NORMALIZED FFO,
ADJUSTED FUNDS FROM OPERATIONS (AFFO) AND NORMALIZED AFFO
(dollars in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net (loss) income
$
(50,064
)
$
10,223
$
7,343
$
(88,903
)
Add:
Depreciation and amortization of real estate assets
47,427
45,046
137,855
133,912
Depreciation, amortization and impairment of real estate assets related to unconsolidated joint ventures
6,090
4,806
15,856
16,529
Net loss (gain) on sales of real estate
80
(655
)
4,581
1,784
Net loss (gain) on sales of real estate related to unconsolidated joint ventures
—
15
(220
)
30
Impairment of real estate
60,857
495
72,602
495
Other-than-temporary impairment of unconsolidated joint ventures
—
—
—
164,126
FFO
$
64,390
$
59,930
$
238,017
$
227,973
Write-offs of cash and straight-line rental income receivable and lease intangibles
16,370
24,326
15,831
22,054
Lease termination income
—
—
(2,338
)
—
Loss on extinguishment of debt
140
913
411
1,760
(Recovery of) provision for credit and loan losses and other reserves
(217
)
(26
)
(12
)
1,890
Support payments paid to joint venture manager (1)
2,254
—
5,880
2,450
Other normalizing items (2)
(65
)
148
2,586
852
Normalized FFO
$
82,872
$
85,291
$
260,375
$
256,979
FFO
$
64,390
$
59,930
$
238,017
$
227,973
Stock-based compensation expense
2,117
2,428
5,367
6,987
Non-cash rental and related revenues
13,031
20,740
4,970
10,113
Non-cash interest income
(589
)
(530
)
(1,683
)
(1,444
)
Non-cash interest expense
2,798
1,744
8,300
5,389
Non-cash portion of loss on extinguishment of debt
140
913
411
1,760
(Recovery of) provision for loan losses and other reserves
(217
)
(26
)
(12
)
1,890
Other adjustments related to unconsolidated joint ventures
(2,378
)
(150
)
(4,056
)
(1,364
)
Other adjustments
36
(213
)
2,430
320
AFFO
$
79,328
$
84,836
$
253,744
$
251,624
Cash portion of lease termination income
—
—
(2,338
)
—
Write-off of cash rental income
—
—
71
—
Support payments paid to joint venture manager (1)
2,254
—
5,880
2,450
Other normalizing items (2)
(80
)
405
250
963
Normalized AFFO
$
81,502
$
85,241
$
257,607
$
255,037
Amounts per diluted common share:
Net income (loss)
$
(0.22
)
$
0.05
$
0.03
$
(0.41
)
FFO
$
0.28
$
0.27
$
1.03
$
1.05
Normalized FFO
$
0.36
$
0.38
$
1.12
$
1.18
AFFO
$
0.34
$
0.38
$
1.09
$
1.15
Normalized AFFO
$
0.35
$
0.38
$
1.11
$
1.17
Weighted average number of common shares outstanding, diluted:
Net income (loss)
230,982,227
222,063,910
231,779,750
216,227,221
FFO and Normalized FFO
231,993,295
222,063,910
231,779,750
217,385,804
AFFO and Normalized AFFO
232,858,600
222,542,049
232,810,528
217,906,904
Contacts
Investor & Media Inquiries: (888) 393-8248 or investorinquiries@sabrahealth.com
