Sabra Health Care REIT and Care Capital Properties announced their merger in a somewhat negative SNF market for REITs.

When I wrote the lead story for the May issue of The SeniorCare Investor talking about the return of the “Big Deal” to the market, I hope you didn’t think I had any inside information. Just days after it was published, Sabra Health Care REIT and Care Capital Properties announced their merger. I had written that a REIT buying a smaller REIT could make sense, except that one of the problems with that type of deal is that you end up with a certain amount of unwanted assets. That said, the transaction makes a lot of sense for both REITs. Separately, their cost of capital was on the high end, and over time, post merger, that should decline. And the increased diversification of assets and tenants will decrease the combined risk profile. Sabra had been diversifying from the SNF business, but now it will be getting a REIT that primarily owns SNFs. In today’s market, that is not so great. In addition, I am sure there will be CCP assets that Sabra will want to divest. These things can get messy, but Sabra CEO Rick Matros is one of the savviest guys I know in the SNF business. Although a little smaller in size, Sabra and Rick’s team will be running the show at the combined company. So, who’s next?