Sabra Healthcare Reit ((SBRA)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Sabra Healthcare Reit recently held its earnings call, presenting a generally positive outlook. The company reported strong financial performance, robust investment activity, and improved operational metrics. However, it also acknowledged challenges such as the transition of the Holiday portfolio and limited skilled nursing acquisition opportunities.
Strong Medicaid and Medicare Rate Increases
Medicaid rate increases are expected to average 3.5%, with the top five states averaging above 5%. Additionally, the Medicare market basket increase was finalized upward from 2.8% to 3.2%, reflecting a favorable adjustment for the company.
Robust Investment Pipeline
Sabra has closed on $122 million of senior housing investments and has been awarded about $220 million more, with a target of $500 million in investments this year. This robust pipeline underscores the company’s strategic focus on growth and expansion.
Improved Operational Metrics
The company reported significant improvements in operational metrics, with triple net rent coverage up significantly and occupancy in the skilled portfolio continuing to increase. Contract labor and employment levels have also returned to pre-pandemic levels, indicating a recovery in operational efficiency.
Positive Financial Performance
Sabra’s financial performance was strong, with normalized FFO per share at $0.37 and normalized AFFO per share at $0.38, representing a 6% improvement over the same period in 2024. This performance highlights the company’s ability to generate steady financial returns.
Challenges with Holiday Portfolio Transition
The transition of Holiday assets impacted occupancy and operational noise, but improvements are expected moving forward. The company is optimistic about overcoming these challenges and enhancing the portfolio’s performance.
Limited Skilled Nursing Acquisition Opportunities
Despite a strong focus on skilled nursing, finding quality assets has been challenging, with more deals weighted towards SHOP investments. This highlights a strategic shift in the company’s investment focus.
Community Care Rent Coverage Decline
Rent coverage for Community Care declined slightly, though it remains at a healthy 1.77x. This indicates a stable performance despite minor setbacks.
Updated 2025 Earnings Guidance
Sabra provided updated guidance for 2025, with a normalized FFO per share range of $1.45 to $1.47 and normalized AFFO of $1.49 to $1.51. The company aims for $500 million in investments this year, with $350 million already closed or in progress. It also targets increasing its SHOP portfolio from 20% to 30% by 2026, requiring $1 billion in investments.
In summary, Sabra Healthcare Reit’s earnings call reflected a positive sentiment with strong financial performance and strategic growth plans. While challenges exist, particularly in the transition of the Holiday portfolio and skilled nursing acquisitions, the company’s robust investment pipeline and improved operational metrics position it well for future success.