Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sabra Health Care REIT Inc (SBRA, Financial) reported several consecutive quarters of improvement in primary asset classes, distancing itself from pandemic impacts.
- Occupancy rates for the Skilled Nursing Facility (SNF) portfolio increased by 130 basis points sequentially, with skilled mix also rising by 110 basis points.
- The company's EBITDARM rent coverage for Skilled Nursing and triple-net senior housing portfolios reached 1.94 times and 1.37 times, respectively, higher than pre-pandemic levels.
- Sabra Health Care REIT Inc (SBRA) increased its earnings guidance at the midpoint, expecting strong growth of over 6% year-over-year.
- The company has ample liquidity of $947.8 million, including unrestricted cash and available borrowings, supporting its financial stability and growth plans.
Negative Points
- Avamere, one of Sabra Health Care REIT Inc (SBRA)'s top 10 tenants, experienced a decrease in performance due to percentage rents, although rent coverage remained strong.
- Coverage and occupancy in the behavioral and other categories were flat sequentially, partly due to a lower occupancy stabilized addiction treatment center.
- The company is seeing more portfolio opportunities but remains cautious about engaging in larger deals due to potential complexities and noise.
- Despite improvements, the skilled nursing opportunities have not been as robust as expected, limiting potential acquisitions in this area.
- The regulatory environment remains uncertain, with potential challenges from CMS regarding minimum staffing requirements, which could impact operations.
Q & A Highlights
Q: Over the last year, you've had a few quarters of accelerating year-over-year occupancy growth at the SHOP segment. Does that give you more confidence in providing additional segment guidance items for 2025?
A: It's a little too early to talk about 2025 guidance. We'll address this when we release our fourth-quarter earnings and evaluate what is meaningful to provide with a high degree of confidence. - Michael Costa, CFO
Q: What do credit rating agencies want to see in terms of your leverage target or operating metrics to maybe earn an upgrade in the future?
A: Rating agencies focus on leverage levels and debt service coverage levels. For Moody's, they want to see sustained and continued improvement in these areas. Given the positive outlook, we are hopeful for an investment-grade rating in the near future. - Michael Costa, CFO
Q: Can you talk about how yields have trended over the quarter and what you're seeing into 4Q?
A: The opportunity remains robust, particularly while the cost of debt remains high. We are seeing high-quality new or newer vintage assets, especially in senior housing, that are performing well. The opportunity set is large, but pricing is still tough. - Talya Nevo-Hacohen, CIO
Q: What's held you back from buying more since this past quarter? Are you losing out on deals, or is everything taking longer to materialize?
A: We are being selective and understanding the risks in some assets. Most of the higher-quality assets we have been bidding on, sometimes we don't win the bid, but it's our choice whether to pursue or not. - Talya Nevo-Hacohen, CIO
Q: Can you give some additional color on the occupancy gains in the SNF portfolio during the quarter?
A: The increase in occupancy is due to improved labor availability, allowing us to admit more patients. We expect occupancy to continue to increase, and it's possible that declining supply could mask some of the seasonality. - Richard Matros, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
