Sabra Health Care REIT continues to defy the naysayers, posting a decent third quarter overall, with its skilled nursing portfolio holding the line and its seniors housing portfolio growing revenues, cash net operating income and cash operating margin. Investors sent the shares to a new 52-week high, 56% above its 52-week low, and the forward yield of 7.3% is the lowest it has been in a while.
Sabra’s skilled nursing triple-net leased occupancy remained stable at 82.4%, and the EBITDAR coverage remained at 1.24x from the second quarter to the third. While we like to see at least a 1.4x lease coverage, if not higher, the coverage appears to have bottomed out. The seniors housing leased portfolio (down to 62 properties from 91 a year ago) saw its occupancy decline by 10 basis points year over year, but up 30 basis points from the second quarter this year based on 62 properties for both quarters.
In a case where they are going for cash flow and revenue per occupied room over occupancy, Sabra’s 49%-owned joint venture, Enlivant, saw its same-community revenues (170 communities) increase 3.2% year over year, while cash NOI surged by 15.3%, REVPOR increased by 6.9% and cash operating margin rose by 280 basis points to 26.7%.
All of this happened while occupancy declined by 90 basis points to 81.4% from last year’s third quarter, and down 40 basis points from the second quarter. That seems to be the debate – push occupancy and let rate suffer, or hold the line on rates (or increase them) and let occupancy settle where it may. We are sure that will be debated for months to come, and probably years to come.