There were a lot of moving parts during 2023 at Sabra Health Care REIT with regard to its former Enlivant portfolio, owned in a joint venture with private equity firm TPG. After defaulting on its Fannie Mae debt and basically handing the keys over to Fannie for a majority of its Enlivant assets, Sabra still owned 11 Enlivant-managed communities outside of its TPG joint venture.
These properties were transitioned to Inspirit Senior Living on July 6. In just three months, census in the portfolio increased by more than 230 basis points. We can’t wait to see where it will be this time next year. This has been a common theme of sorts: a new manager is brought in for underperforming assets, and what do you know, occupancy and cash flow rises. The manager really does matter.
One of the things we have also liked about Sabra has been its move into behavioral health, whether purpose-built properties or conversions from other uses, like senior care. Sabra’s behavioral health portfolio, which includes addiction treatment centers, had occupancy of 83.4% in the second quarter, and EBITDARM coverage of 1.92x in the second quarter, up from 1.71x in the fourth quarter last year. That provides a lot of comfort after the tight coverages in seniors housing and skilled nursing during the pandemic. The total behavioral health investment is now at approximately $800 million. Sabra’s specialty hospital division had EBITDARM coverage of 6.72x, a landlord’s dream.
In the senior care side of the business, Sabra’s seniors housing managed business, posted a year-over-year 28.2% increase in cash NOI on a same-community basis (42 properties) and a 460-basis point increase in NOI margin to 27.5%. Assisted living occupancy outperformed independent living with a 320-basis point increase in occupancy year over year to 82.9%, compared with a 50-basis point decrease for IL to 81.6%.
During the third quarter Sabra sold 13 skilled nursing facilities and two seniors housing communities for gross proceeds of $80 million, which was used to reduce the company’s debt.
