Sabra REIT Q1 Results Exceed Expectations

IRVINE, CA—“We had an amazing quarter, with 26% revenue growth and 23% FFO growth—we're ahead of schedule.” So says Rick Matros, CEO of Sabra Healthcare REIT, who tells GlobeSt.com that the firm's Q1 results “exceeded our expectations. 2013 was our best year yet from an investment perspective, and 2014 is set up to be the best year we've had.”

In a report, analyst firm RBC Capital Markets LLC echoes that Sabra's earnings were superior in some cases, but points out some areas where it missed the mark. According to the firm, Sabra's reported FFO of $0.55 per share “met our expectation and surpassed consensus of $0.54 per share. The company's property-level income and mortgage income exceeded our expectation, but was offset by higher than expected G&A expenses. Including $0.56 per share of debt charges and straight-line rent write-offs, Q1 2014 NAREIT FFO was negative $0.01 per share, which missed our expectation of positive $0.01 per share.”

In addition, RBC reports that the company's trailing 12-month SNF EBITDARM coverage ratio trended lower during the quarter to 1.66x from 1.72x in the previous quarter, “likely related to the inclusion of another quarter of Genesis' implementing its operational synergies from the Sun Healthcare merger. The trailing 12-month senior-housing EBITDARM coverage ratio improved modestly to 1.41x compared to 1.40x. Additionally, Genesis' underlying fixed charge coverage ratio was 1.25x.”

Year-to-date, according to RBC, Sabra has deployed $165.9 million of capital. Matros says, “We had planned to do $170 million by June, and we're already there before the end of the first half of the year.”

Also year-to-date, the company acquired roughly $138 million of assets, largely consisting of senior-housing and memory-care facilities and invested another roughly $28 million in construction loans and preferred-equity investments, RBC reports. It expects to be able to deploy another $180 million to $230 million during the rest of the year.

RBC estimates that the REIT has roughly $82 million of dry powder and reports management indicated at quarter-end that it had $129.8 million of liquidity including unrestricted cash and availabilities on the line of credit. Subsequent to quarter-end, Sabra invested roughly $18 million of cash and repaid a $30 million mortgage loan, making its liquidity position appear tight currently. “We had a successful equity offering and deleveraged our balance sheet last week,” Matros says.

In addition, Sabra has refinanced roughly $270 million of high-yielding debt year-to-date and issued $350 million of unsecured notes during the quarter with an interest rate of 5.5%, according to RBC. The REIT also repaid $211 million of high-yielding unsecured notes that had an interest rate of 8.1%. Also, the company refinanced $44.8 million of high-yielding mortgage debt with HUD at an average of 4.25%, and subsequent to quarter-end, refinanced another $11.6 million at 4.1%.

RBC's research analyst Michael Carroll, who co-authored the analysis of the REIT, was unavailable for comment prior to deadline.

As GlobeSt.com reported in February, the REIT acquired for $90 million cash six senior-housing facilities in the Midwest that have a total of 673 beds or units. The six sit within a 100-mile radius of Omaha and provide a variety of living arrangements including 292 skilled nursing beds, 213 independent living units and 168 assisted living units.