Sabra Health Care REIT, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; balance-sheet figures are as of March 31, 2023. Sabra owns and invests in healthcare real estate, including skilled nursing, senior housing, behavioral health and specialty facilities, across the U.S. and Canada.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $161.3 million | $163.1 million; down 1% |
| Net income (loss) | $(9.5) million; $(0.04) per diluted share | $40.6 million; $0.18 per diluted share |
| FFO / diluted share | $74.0 million / $0.32 | $90.5 million / $0.39 |
| AFFO / diluted share | $77.9 million / $0.33 | $90.6 million / $0.39 |
| Operating cash flow | $68.3 million | $63.1 million |
| Cash, cash equivalents and restricted cash | $38.7 million at quarter-end | $53.9 million at 2022 year-end |
| Total debt | $2.42 billion gross; $2.40 billion net of discounts and financing costs | — |
| Liquidity | Approximately $954 million, including $33.5 million unrestricted cash and $920.4 million available on revolver | — |
| Common dividend | $0.30 per share declared and paid in Q1; $69.4 million paid | $0.30 per share in Q1 2022 |
Material changes versus prior comparable period
- Revenue mix shifted: rental and related revenue declined $14.0 million to $95.9 million, while resident fees and services increased $14.5 million to $56.7 million. Sabra attributed managed-care revenue growth to acquisitions, operator transitions, higher occupancy and rates.
- Interest expense rose $3.6 million to $28.5 million, mainly due to higher rates and increased borrowings. Managed-portfolio operating expenses increased $10.5 million to $43.6 million, including costs from acquisitions and transitions and higher labor expense.
- Q1 2023 included a $21.5 million net loss on real estate sales and $7.1 million of real estate impairment; neither item occurred in Q1 2022. Depreciation and amortization increased $7.6 million, including an $8.0 million acceleration tied to a facility expected to be demolished.
- Investing cash flow was $113.2 million provided, largely reflecting real estate sale proceeds and proceeds from a sales-type lease property purchase. Financing cash use was $196.1 million, including $118.4 million of revolver repayments and $69.4 million of dividends.
Outlook, management commentary and risks
- Management said occupancy had improved somewhat but remained below pre-pandemic levels; labor availability remained constrained and labor costs elevated. Inflation, supply-chain disruption, higher interest rates and capital-market volatility may pressure operators, borrowers and managed communities, with potential effects on rent, debt service, liquidity and asset values.
- Sabra reported approximately $954 million of liquidity and believes cash, operating cash flows and available revolver capacity will fund requirements for the next 12 months. No specific earnings or FFO guidance is provided in the filing.
- The January 2023 amended credit agreement includes a $1.0 billion revolver, $430 million U.S. term loan and CAD $150 million Canadian term loan. Revolver availability was $920.4 million; stated quarter-end rates were 6.05% on revolver borrowings and 6.22% and 6.20% on the U.S. and Canadian term loans, respectively. Sabra said it complied with applicable debt covenants.
- Capital commitments included approximately $65 million for triple-net leased properties and an estimated $54 million for managed communities; Sabra expected to spend approximately $45 million and $36 million, respectively, over the next 12 months. It also had up to $28 million of future funding commitments for loans and preferred equity.
- The board declared a $0.30-per-share quarterly dividend on May 3, 2023, payable May 31. A $500 million at-the-market stock program was available at quarter-end; no shares had been sold under it through March 31.
- Sabra continues to evaluate asset sales to recycle capital and improve portfolio quality; further sales could cause additional impairment charges. Other key exposures include tenant and borrower defaults, healthcare reimbursement and regulation, labor costs, interest rates, REIT qualification and the concentration in healthcare real estate. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Most important facts for investors to verify
- Whether the managed-portfolio occupancy and labor-cost trends continue to improve, and how they affect operator coverage and rent collections.
- The filing gives differing disposition descriptions: the Note 5 table reports eight facilities and $160.3 million consideration net of closing costs, while MD&A describes seven skilled nursing facilities plus two senior housing communities and $185.8 million aggregate consideration. Reconcile facility count, scope and proceeds with the underlying disclosures.
- How much of the $21.5 million sale loss and $7.1 million impairment is nonrecurring, and whether additional portfolio sales generate further impairments.
- Debt costs and refinancing exposure, particularly variable-rate borrowing, the 2026–2027 note maturities and covenant headroom; verify the impact of hedges and interest-rate changes.
- Whether cash generation supports the dividend and planned capital spending. Q1 operating cash flow was $68.3 million versus $69.4 million of dividends paid; AFFO was $77.9 million, a non-GAAP measure that Sabra cautions is not cash available for future requirements.
- Progress on the $500 million ATM program and the company’s stated liquidity position, including any subsequent changes after March 31.