Sabra Health Care REIT, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; it does not provide a standalone Q4 results summary. Sabra owns and invests in healthcare real estate, primarily skilled nursing and senior housing, across the U.S. and Canada.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $624.8 million | $569.5 million |
| Net income (loss) | $(77.6) million | $(113.3) million |
| Diluted GAAP earnings (loss) per share | $(0.34) | $(0.52) |
| Nareit FFO | $295.9 million; $1.28 per diluted share | $253.2 million; $1.15 per diluted share |
| AFFO | $331.8 million; $1.43 per diluted share | $297.1 million; $1.35 per diluted share |
| Cash provided by operating activities | $315.7 million | $356.4 million |
| Cash and cash equivalents at year-end | $49.3 million | $112.0 million |
| Debt, principal balance | $2.526 billion | Not stated here on a directly comparable basis |
| Liquidity at year-end | Approximately $852.3 million | — |
- Revenue rose 9.7%. Resident fees and services increased 20% to $186.7 million, while rental and related revenue increased 1% to $400.6 million.
- GAAP net loss narrowed by $35.7 million. Results included $94.0 million of real estate impairment, a $12.0 million net loss on property sales, and a $98.0 million loss from unconsolidated joint ventures.
- FFO and AFFO are non-GAAP supplemental measures, not substitutes for GAAP earnings or operating cash flow. Their increases contrast with lower operating cash flow year over year.
- Year-end debt comprised $1.75 billion of senior notes, $528.5 million of term loans, $197.0 million drawn on the revolving facility, and $50.1 million of secured debt. Sabra reported compliance with applicable debt covenants at year-end.
- Cash used in investing activities was $216.2 million; cash used in financing activities was $161.7 million. Sabra paid $277.2 million in common dividends during 2022, or $1.20 per share.
Material changes and portfolio developments
- Sabra acquired three managed senior housing communities and one behavioral health facility for an aggregate $106.5 million. It also invested in two Canadian joint ventures that acquired 15 senior housing communities; Sabra’s equity investment was CAD $178.4 million.
- Sabra sold 18 facilities for net proceeds of $87.3 million, recognizing a $12.0 million net loss. It recorded $94.0 million of real estate impairment related to 10 skilled nursing facilities sold or under contract.
- The Enlivant joint venture investment was written down to an estimated fair value of zero; Sabra recorded a $57.8 million impairment in 2022, following a $164.1 million impairment in 2021.
- Avamere’s annual base rent was reduced from $44.1 million to $30.7 million effective February 1, 2022. North American Health Care leases were terminated in 2022, and the facilities transitioned to Ensign or Avamere effective February 1, 2023.
- Occupancy improved in several property categories versus 2021 but remained below pre-pandemic levels. Skilled nursing/transitional care occupancy was 73.5% versus 71.4%; leased senior housing was 84.4% versus 78.1%; managed senior housing was 82.1% versus 79.4%.
Outlook, risks and unusual items
- Management provided no numerical earnings or investment guidance in the supplied filing text. It expects macroeconomic conditions and COVID-19 effects to continue affecting tenants, borrowers and managed communities; occupancy and labor conditions remained weaker or more costly than before the pandemic.
- Six tenants had pandemic-related rent deferrals totaling $4.4 million as of year-end; $3.0 million had been repaid. Nonpayment or further restructuring could reduce cash flows or lead to impairments.
- Key risks include labor shortages and wage inflation, higher interest rates, inflation, reimbursement changes, tenant or borrower distress, lease collectability, refinancing and covenant constraints, and concentration in healthcare real estate. Sabra stated that 47.5% of 2022 revenue, excluding lease termination income, derived directly or indirectly from skilled nursing/transitional care.
- Management estimated that a 100-basis-point change in rates on variable-rate debt, after hedging, would change interest expense by approximately $1.9 million over the following 12 months.
- As of year-end, Sabra estimated approximately $73 million of future commitments for capital and other expenditures at triple-net leased properties, about $55 million expected over the next 12 months; managed-community capital expenditures were estimated at $45 million, about $27 million expected over the next 12 months. It also had up to $33.6 million of future funding commitments for two preferred equity investments.
- Effective January 4, 2023, Sabra amended and restated its credit agreement, extending the revolving facility maturity to January 2027 and term loan maturities to January 2028. On February 1, 2023, the board declared a quarterly dividend of $0.30 per share.
Important facts for investors to verify
- Whether the Enlivant valuation and planned exit assumptions, including the estimated fair value of zero, remain supportable.
- Progress and operating results following the North American Health Care transitions, and the financial effect of Avamere’s rent reduction.
- Tenant and borrower rent/debt-service coverage, rent-deferral collections, and the recovery in occupancy and staffing costs.
- Debt maturities, variable-rate exposure, covenant headroom, and the effect of the January 2023 credit agreement terms.
- Whether operating cash flow and recurring AFFO adequately support dividends, capital spending, and funding commitments; AFFO is a company-defined non-GAAP measure.
- The filing notes that tenant and borrower operating data was supplied by those parties and was not independently verified by Sabra.