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Sabra Health Care Disposes Genesis & Signature Facilities

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Recently, Sabra Health Care REIT (SBRA - Free Report) announced the selling of nine healthcare facilities leased to Genesis Healthcare (GEN - Free Report) on Jun 29, in a bid to dispose the properties leased to the latter. These healthcare facilities have been sold for $81.4 million.

The disposed assets include seven skilled nursing facilities, one senior housing community and one continuing care retirement community which were previously leased to Genesis.

The company had reached on an agreement with Genesis through memoranda of understanding to sell these facilities. As per terms of the memoranda, this disposition will reduce the operator’s rent obligations to Sabra by $7.4 million, annually.

Genesis is one of the top tenants of Sabra. In fact, for the 12-month period ended Mar 31, 2018, 49 of the company’s properties were leased to this operator, and accounted for 8.5% of Annualized Cash net operating income (NOI).

Notably, on Sep 25, 2017, Sabra announced that it intends to dispose 43 facilities leased to Genesis in 2018 in order to reduce the operator’s concentration in its portfolio. It anticipated sale proceeds of around $425-$475 million.

In addition to the above, on Jul 2, 2018, the company sold a skilled nursing facility previously leased to Signature Healthcare for $7 million. The sale will reduce Signature’s annual rent obligations by $0.6 million.   

The effect of the Genesis and Signature facility dispositions were acknowledged in the company’s recently-updated 2018 earnings guidance.

Sabra expects to utilize sale proceeds to pay down borrowings under its revolving credit facility, which will improve the company’s leverage ratio. This sale will reduce the company’s tenant concentration and improve diversity in its healthcare operators. While Sabra is shedding its problematic skilled nursing portfolio, it will enable the company to focus on higher performance assets. 

Also, shares of this Zacks Rank #2 (Buy) company have outperformed its industry in the past three months. During this time frame, the stock has soared 30.8%, while the industry recorded growth of 11.5%.


 

Other Key Picks

Some other top-ranked stocks from the same space are PS Business Parks and Columbia Property Trust, Inc. . Both stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PS Business Parks’ Zacks Consensus Estimate for 2018 funds from operations (FFO) per share has been revised 0.3% upward to $6.37 over the past month. Its shares have returned 14.8% in the past three months.

Columbia Property Trust’s FFO per share estimates for the current year remained unchanged at $1.46 in the past month. The stock has gained 12.8% in three months’ time.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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