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Sabra(SBRA) - 2025 Q1 - Earnings Call Transcript
SBRASabra(SBRA)2025-05-06 17:00

Financial Data and Key Metrics Changes - For Q1 2025, normalized FFO per share was 0.35andnormalizedAFFOpersharewas0.35 and normalized AFFO per share was 0.37, compared to 0.34and0.34 and 0.35 in Q1 2024, representing a year-over-year increase of 79% for both metrics [14][15] - Cash rental income from the triple net portfolio totaled 90million,upfrom90 million, up from 89 million in Q1 2024, despite the disposal of 115millionofrealestatefromtheportfoliolastyear[15]−CashNOIfromthemanagedseniorhousingportfoliototaled115 million of real estate from the portfolio last year [15] - Cash NOI from the managed senior housing portfolio totaled 24.1 million, compared to 19.1millioninQ12024,drivenbystrongoccupancyandmargingains[15][12]BusinessLineDataandKeyMetricsChanges−SkillednursingandtriplenetseniorhousingEBITDARMrentcoveragereachednewhighsat2.19and1.41,respectively,withbehavioralhealthcoverageat3.77[5]−Skilledoccupancyincreasedby80basispointssequentially,whiletriplenetseniorhousingoccupancyroseby50basispoints[6]−Revenueforthesamestoremanagedseniorhousingportfoliogrew6.319.1 million in Q1 2024, driven by strong occupancy and margin gains [15][12] Business Line Data and Key Metrics Changes - Skilled nursing and triple net senior housing EBITDARM rent coverage reached new highs at 2.19 and 1.41, respectively, with behavioral health coverage at 3.77 [5] - Skilled occupancy increased by 80 basis points sequentially, while triple net senior housing occupancy rose by 50 basis points [6] - Revenue for the same store managed senior housing portfolio grew 6.3% year-over-year, with occupancy at 85.4% compared to 82.6% in Q1 2024 [11] Market Data and Key Metrics Changes - The domestic portfolio occupancy was 83%, gaining 340 basis points year-over-year, while the Canadian portfolio occupancy was 90.9%, adding 140 basis points [11] - RevPAR in the same store portfolio increased by 2.8% year-over-year, with Canadian RevPAR growing by 4.9% [11] - The company noted a robust deal pipeline, with over 200 million in awarded deals, which is more than the total for all of 2024 [7][8] Company Strategy and Development Direction - The company is focusing on internal and external growth opportunities in senior housing, with little new supply expected in the coming years [10] - Management emphasized a commitment to maintaining a balanced portfolio between senior housing and skilled nursing, avoiding large portfolio acquisitions to keep operations predictable [78] - The company is actively using its ATM program to raise equity for funding growth, with a focus on accretive capital [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued occupancy growth and potential Medicaid rate increases in the summer, which could enhance coverage [86] - The company is cautious about the skilled nursing facility (SNF) market due to challenges in structuring leases around underperforming assets [66][68] - Management believes that the current operating environment will allow for improved coverage and revenue growth, despite potential headwinds from provider taxes [85] Other Important Information - The Board of Directors declared a quarterly dividend of 0.30pershare,representingapayoutof810.30 per share, representing a payout of 81% of the first quarter normalized AFFO per share [19] - The company has ample liquidity of over 1 billion, consisting of unrestricted cash and available borrowings [18] Q&A Session Summary Question: Update on skilled nursing facility sale - Management confirmed that the expected 50millionskillednursingfacilitysaleisstillontrack,thoughregulatoryhurdleshavedelayedtheprocess[21]Question:TrajectoryofRevPORandexpensegrowth−Managementexpectsoccupancytorise,whichwillallowforincreasedpricingpower,whileexpensesareanticipatedtoremainstable[22][23]Question:GuidanceonacquisitionsandSHOPperformance−Managementreiteratedthatacquisitionsarenotincludedincurrentguidanceuntilclosed,andreaffirmedexpectationsforlowtomid−teenscashNOIgrowth[27][28]Question:Insightsontransactionmarketanddealflow−Managementnotedarobustpipelineofdeals,primarilyinseniorhousing,withprivateequityfirmsasfrequentsellers[31][33]Question:Detailson50 million skilled nursing facility sale is still on track, though regulatory hurdles have delayed the process [21] Question: Trajectory of RevPOR and expense growth - Management expects occupancy to rise, which will allow for increased pricing power, while expenses are anticipated to remain stable [22][23] Question: Guidance on acquisitions and SHOP performance - Management reiterated that acquisitions are not included in current guidance until closed, and reaffirmed expectations for low to mid-teens cash NOI growth [27][28] Question: Insights on transaction market and deal flow - Management noted a robust pipeline of deals, primarily in senior housing, with private equity firms as frequent sellers [31][33] Question: Details on 200 million of awarded deals - All awarded deals are domestic, primarily in the Eastern U.S., with growth potential embedded in the assets [40][41] Question: Changes in underwriting criteria - Management stated that underwriting criteria remain unchanged, focusing on cost of capital and accretive deals [60] Question: Concerns regarding SNF acquisitions - Management highlighted challenges in acquiring SNFs due to financial instability and the difficulty in structuring leases [66][68] Question: Expectations for SHOP occupancy cadence - Management anticipates an increase in occupancy as seasonal factors improve, particularly in Canadian assets [70] Question: Interest in large portfolio acquisitions - Management confirmed a commitment to smaller, more manageable deals to maintain operational simplicity and predictability [78] Question: Medicare reimbursement impacts - Management expressed confidence that Medicare will not be significantly impacted by current government budget discussions [97]