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Sabra Health Care (SBRA) Disposes 20 Genesis Facilities

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In a final bid to dispose the properties leased to Genesis, Sabra Health Care REIT (SBRA - Free Report) recently announced the selling of 20 facilities leased to Genesis Healthcare on Dec 22, 2017. These skilled nursing facilities, located in Kentucky, Ohio and Indiana, have been sold for $103.3 million.

The company had reached on an agreement with Genesis through a memoranda of understanding to sell 35 facilities. As per terms of the memoranda, the sale of these facilities     will reduce the operator’s rent obligations to Sabra by $9.3 million annually. Notably, the disposed facilities are part of these 35 facilities that the company had marketed for sale.

Genesis is one of the top tenants of Sabra. In fact, for the 12-month period ended Sep 30, 2017, 76 of the company’s properties were leased to Genesis and it accounted for 13.3% of Annualized Cash net operating income (NOI).

On Sep 25, 2017, Sabra announced that it intends to dispose 43 facilities leased to Genesis in 2018. It anticipated sale proceeds of around $425-$475 million.

Sabra expects to utilize sale proceeds to pay down borrowings under its revolving credit facility. This will improve the company’s leverage ratio. The sale will reduce the company’s tenant concentration and improve diversity in its healthcare operators. While the company is shedding its problematic skilled nursing portfolio, it will enable Sebra to focus on higher performance assets.  Amid such efforts, the company’s funds from operation (FFO) per share for 2017 have been revised upward to $2.47 in a month’s time.

However, such asset pruning is anticipated to result in earnings dilution and impact the company’s financial performance in the near term.

Shares of this Zacks Rank #3 (Hold) company have underperformed its industry over the past year. While the stock has lost 24%, the industry recorded growth of 2.4%, during the same time period.


 

Better-ranked stocks in the REIT space include Lamar Advertising Company (LAMR - Free Report) , Outfront Media (OUT - Free Report) and Healthcare Trust of America . All three carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamar’s FFO per share estimates for 2017 remained unchanged at $4.96 over the past month. Its share price has increased 5.8% in three months’ time.

Outfront Media’s FFO per share estimates for the current year has remained unchanged at $1.98 in a month’s time. Over the past three months, the stock has declined 6.7%.

Healthcare Trust’s 2017 FFO per share estimates remained unchanged at $1.65 over the past month. The stock has been down 0.1% for the past three months.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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