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Sabra Buys Five Senior Care Assets

VTR SBRA

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Irvine, California-based real estate investment trust (REIT), Sabra Health Care REIT Inc. (SBRA - Snapshot Report), recently acquired five senior care assets in Texas and Minnesota in two separate transactions. The properties, acquired for a total price of $50.2 million, were funded with existing cash and proceeds from its secured revolving credit facility.

The properties acquired in Texas comprise of three skilled nursing and one assisted living facility. Sabra Health Care exercised a purchase option on the Texas portfolio and completed the acquisition from Meridian Senior Properties Fund I, L.P. The portfolio, collectively known as the Meridian Portfolio, is situated in Dallas-Fort Worth Metroplex and Rockport in Texas.

In early 2012, Sabra Health Care had provided Meridian fund with a $10 million mezzanine loan secured by partnership interests under which the company had the option to purchase the assets for $43 million. By the time Sabra Health Care closed the acquisition, the outstanding mortgage debt and mezzanine loan had been repaid, resulting in a net payment of $33 million by the company for the acquisition.

Concomitant with the acquisition, Sabra Health Care penned a 15-year triple-net lease with the associates of the seller for the portfolio. The deal includes two five-year renewal options with annual rent increase equal to 3% for the first two years and the greater of the change in the Consumer Price Index (CPI) or 2.5% thereafter. The initial yield on cash rent is expected to be 9% with $4.7 million in annual lease revenues.

The fifth acquired property is an 87-bed skilled nursing facility known as Camden Care Center. The property, positioned in Minneapolis, was acquired for $7.2 million. Alongside, Sabra Health Care also inked a 15-year triple-net lease with Trinity Health Systems, LLC for the property. The terms of the agreement are same as in case of Meridian Portfolio lease. The initial yield on cash rent is expected to be 10% with $0.9 million  annual lease revenues.

The transactions are in line with Sabra Health Care’s objective to expand its portfolio through the acquisition of skilled nursing and long-term care facilities. The company’s strategy of diversifying its portfolio is backed by a professional management team.

Sabra Health Care through its subsidiaries owns and invests in real estate for the healthcare industry. The company leases properties to tenants and operators throughout the U.S. As of September 30, 2012, Sabra Health Care properties comprised of 105 assets located in 26 states and included 11,689 licensed beds.

We currently have a long-term Neutral recommendation on Sabra Health Care. Also, it carriers a short-term Zacks #3 Rank (Hold). One of its peers – Ventas, Inc. (VTR - Analyst Report) – carries a short-term Zacks #2 Rank (Buy).

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