Sabra Health Care REITs’s portfolio, particularly in the skilled nursing segment, “has continued to gain momentum as the year has progressed,” CEO and Chair Rick Matros said in prepared remarks released in conjunction with Thursday’s second-quarter earnings call.
“Growth in the managed senior housing portfolio has accelerated, leverage has ticked down, and we are pleased to be in a position to increase guidance,” he added.
Approximately $136 million in new investments were made during the quarter, the Irvine, CA-based real estate investment trust reported.
Matros said Thursday that the REIT’s skilled nursing portfolio “continues to surpass pre-pandemic levels.”
Medicaid rate increases, on a weighted basis, are estimated to be approximately 7%, which is 200 basis points higher than last year’s increases, according to Matros. The Medicaid rate increase for Sabra’s top five SNF tenants was 10.6%, he said.
Matros told investors on the line that the sector may have “hit a high point” this year as far as Medicaid hikes meant to catch up with inflation. He does, however, one more year of “outsized” state reimbursement increases before some moderation.
The REIT’s skilled nursing mix was up 110 basis points.
“We still haven’t hit our high on skilled nursing mix, so I would expect it to increase seasonality based,” the CEO said.
“As occupancy continues to improve, operators are able to be more selective in who they admit,” he said. “So, turning it around the other way, when you’ve got really low occupancy, everybody wants to get their beds filled, and you may see a bigger increase in Medicaid census than you do in Medicare census in those circumstances.”
Chief Investment Officer, Treasurer and Executive Vice President Talya Nevo-Hacohen said that Sabra’s 82-property managed senior housing portfolio had a very strong quarter. On a sequential quarter basis, she said, that portfolio in total, including non-stabilized communities, saw a 9.3% quarterly cash [net operating income] growth and 1.7% cash NOI margin increase.
“This is a product of flattening expenses and continued occupancy and RevPOR [revenue per occupied room] gains, the trends we have been noting for the past few quarters,” Nevo-Hacohen said.
Chief Financial Officer Michael Costa said the REIT updated its 2024 guidance for net income from $0.48 to $0.51, funds from operations from $1.33 to $1.36, adjusted FFO from $1.39 to $1.42, and normalized AFFO from 1.41 to $1.44.
“Our guidance incorporates all announced investment and disposition activity, as well as the announced activity under the asset market equity offering program and does not assume additional investment, disposition, or capital transactions beyond those already disclosed,” Costa said.
Sabra’s board of directors on Wednesday declared a quarterly cash dividend of $0.30 per share of common stock.
For additional coverage, see McKnight’s Senior Living.
McKnight’s Long-Term Care News Senior Editor Kimberly Marselas contributed to this report.
