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Irvine-based Sabra Health Care REIT, Inc. (SBRA - Snapshot Report) recently acquired a property named Stoney River Marshfield in Wisconsin for $8.2 million. Stoney River, a 60-bed assisted living facility, is located at 1204 W. McMillan Street in Marshfield city.

The transaction is 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.

The Stoney River acquisition is Sabra’s first transaction related to the ‘Pipeline Agreement’ that the company inked with First Phoenix Group, LLC in August 2012. According to the deal, Sabra committed to acquire newly constructed senior housing properties to be developed by First Phoenix. Sabra can acquire up to 10 assisted living and memory care facilities by 2014.

Sabra acquired Stoney River through a triple-net sale-leaseback transaction with First Phoenix. The acquisition was funded with available cash and proceeds from the secured revolving credit facility.  Post license transfer completion in first quarter of 2013, Sabra will terminate the existing lease and enter into a new triple-net deal with a 50/50 RIDEA-compliant joint venture between affiliates of Sabra and First Phoenix.

RIDEA or REIT Investment Diversification and Empowerment Act permit healthcare REITs to receive rents as a landlord and take share in operating profits as a tenant. Since the inception of the act in 2007, the healthcare REITs have widely used the RIDEA structure for real estate deals especially the independent and assisted living properties. In 2010, Health Care REIT, Inc. (HCN - Analyst Report) inked the first RIDEA-compliant senior housing joint venture with Merrill Gardens.

With the completion of transaction, Sabra’s investment in 2012 has amounted to $217.5 million, which represents an initial cash yield of 8.8%. The investment was funded through available cash in hand, proceeds from senior notes offering made in July 2012 and the rest from proceeds from the available funds under secured revolving credit facility. As of December 19, 2012, Sabra had $109.1 million of funds available under secured revolving credit facility.

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 December 19, 2012, Sabra Health Care properties comprised of 120 assets located in 27 states and included 12,552 licensed beds.

The company is expected to release its fourth-quarter 2012 results on February 26, 2013. The Zacks Consensus Estimate for fourth quarter FFO (fund from operations) is currently pegged at 37 cents per share.

We currently have a long-term Neutral recommendation on Sabra Health Care. Also, it carries a short-term Zacks #3 Rank (Hold).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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