Sabra Health Care REIT, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. Sabra is a healthcare real estate investment trust that owns and leases properties to third-party operators and operates senior housing communities through managers. This unaudited filing covers the three months ended March 31, 2024; balance-sheet figures are as of March 31, 2024. The portfolio included 374 properties held for investment, four assets held for sale, 14 loan investments, five preferred equity investments and two unconsolidated joint ventures.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $166.7 million | $161.3 million; up 3% |
| Rental and related revenue | $91.8 million | $95.9 million; down 4% |
| Resident fees and services | $66.0 million | $56.7 million; up 16% |
| Net income (loss) | $26.3 million; $0.11 per diluted share | $(9.5) million; $(0.04) per diluted share |
| FFO / AFFO, non-GAAP | $74.5 million / $81.2 million | $74.0 million / $78.2 million; diluted per-share FFO $0.32 and AFFO $0.35, versus $0.32 and $0.34 |
| Net cash from operating activities | $52.8 million | $68.3 million |
| Cash, cash equivalents and restricted cash | $65.9 million | $38.7 million at March 31, 2023 |
| Total debt, principal | $2.485 billion | Debt carrying value, net: $2.463 billion |
| Quarterly common dividend | $0.30 per share | $69.4 million paid in Q1 |
At quarter-end, total assets were $5.374 billion and total equity was $2.767 billion. Liquidity was approximately $913.8 million, comprising $59.9 million of unrestricted cash and $853.9 million available under the revolving facility. Revolver borrowings were $146.1 million; its weighted-average rate was 6.51%. Interest expense was $28.4 million, approximately unchanged from Q1 2023. The company reported compliance with its debt covenants.
Material changes versus the prior comparable period
- Revenue increased by $5.4 million, primarily as resident fees rose with communities transitioned to managed operations, higher occupancy and rates. Rental revenue declined $4.1 million, reflecting dispositions, rent write-offs and lower Genesis excess rents, partly offset by acquisitions and capital improvements.
- Net income improved by $35.7 million, including the absence of Q1 2023’s $21.5 million net real estate sale loss and $1.5 million debt-extinguishment loss. Q1 2024 also had lower depreciation and impairment expense. The comparison therefore reflects significant prior-year unusual items.
- Operating cash flow fell $15.5 million. Investing activities used $13.2 million, while financing activities used $20.2 million; the latter included $69.4 million of dividends and was partly offset by $52.4 million of net revolver proceeds.
- Senior Housing–Managed operating expenses rose $6.0 million, alongside the increase in resident fees. General and administrative expense increased $1.4 million.
Outlook, commentary, risks and unusual items
- Management stated that available cash, operating cash flows and revolver capacity are expected to meet short-term liquidity requirements for the next 12 months. The filing provides no numerical full-year earnings or FFO guidance.
- Management cited improving occupancy and reimbursement rates, but noted that some occupancy remains below pre-pandemic levels and labor availability and costs remain worse than pre-pandemic levels. Higher labor costs, inflation and interest rates, tenant or borrower financial stress, and possible rent restructurings or defaults could affect collections and asset values.
- CMS’s proposed FY2025 skilled-nursing Medicare rate update estimated a 4.1% net increase, subject to finalization. A final minimum nurse-staffing rule was issued April 22, 2024; management said it could worsen tenants’ staffing challenges.
- Q1 included a $3.1 million impairment on three skilled-nursing facilities held for sale and $0.9 million of business-interruption insurance income related to a fire. Four facilities with a $4.4 million net book value were held for sale at quarter-end; three were sold afterward for $6.2 million gross proceeds. Management continues to evaluate assets for sale and cautioned that future impairments or sale losses could be material.
- Debt maturities include $500 million of senior notes due in 2026 and approximately $540.8 million of term loans due in 2028. The company estimates interest and facility-fee payments of $84.2 million for the remainder of 2024. It has approximately $21 million of future triple-net property capital commitments, with about $11 million expected over the next 12 months.
- The board declared a $0.30-per-share dividend on May 8, payable May 31, 2024. The filing reports no material legal proceedings, no material change in risk factors and no material change in market-risk disclosures.
Important facts for investors to verify
- Whether tenant rent coverage, occupancy, reimbursement rates and staffing costs continue to improve, particularly in skilled nursing and managed senior housing.
- Whether cash generation and liquidity remain adequate to fund dividends, capital needs and debt service, especially given Q1 operating cash flow below dividends paid.
- Progress on asset dispositions, proceeds received and any additional impairment charges or changes in rental collections.
- Refinancing plans and financing costs for the 2026 notes and 2028 term loans, and the effects of variable rates despite hedging.
- Implementation and financial impact of CMS’s minimum staffing standards and final FY2025 reimbursement rates.