Sabra Buys into Colder Climate

Sabra Health Care REIT has set foot in Canada with its newest acquisition.
Rick matros

Rick Matros, Sabra

By Keith Loria, Contributing Editor

Sabra Health Care REIT, Inc. has agreed to acquire a nine-property senior housing portfolio located in British Columbia and Ontario, Canada for approximately $137.1 million from the Leo Brown Group.

The properties consist of 100 percent private pay independent living and assisted living facilities, with 302 units situated in British Columbia and 563 units in Ontario. Sabra expects to enter into a triple-net master lease agreement with an affiliate of Senior Lifestyle Corporation.

“The Canadian Portfolio acquisition will give Sabra its first foothold in Canada and the opportunity to grow with two first-class operators: the existing operator who will be focusing on assisted living and memory care, and SLC,” Rick Matros, Sabra CEO & chairman, said in a company statement. “We have noted the opportunity for continued private-pay senior housing growth in Canada with smaller deals that are reflective of the bread-and-butter deals that have been our primary focus.”

This deal is keeping in line with the plan that Matros outlined to investors on last month’s earning call, when he said Sabra would be expanding its existing pipeline from $400 million to approximately $1 billion.

As of the end of March, Sabra’s investment portfolio included 170 real estate properties held for investment and leased to operators/tenants under triple-net lease agreements. Those properties consist of 104 skilled nursing/transitional care facilities, 64 senior housing facilities, and two acute-care hospitals.

Sabra also completed an additional $25.8 million of investments in the second quarter of 2015, including the $7.6 million acquisition of a 32-bed assisted living and memory care facility in Texas and a $11.7 million incremental funding of an interim mortgage loan on a 72-unit assisted living and memory care facility in Minnesota.

According to CBRE’s Canadian Market Outlook 2015, the need for senior housing in Canada is strong as matching supply and demand in advance of the expected surge of aging baby boomers in the country will be a major challenge in the years ahead.

Sean McCrorie, CBRE’s Seniors Housing & Healthcare Group’s director, said in the report that while a surge in demand from baby boomers is some ways off, there will be “a major push in Canada to educate this cohort on the changing reality of senior living in 2015.” A more favorable view of the sector could lift penetration rates from the current 8.9 percent of the target market and fuel demand over the coming decade.

The strength of the Canadian senior housing market, combined with low cap rates, has attracted the attention of U.S. and overseas buyers. In fact, two out of the three largest U.S. senior housing investors have made significant purchases in Canada between 2012 and 2014, and they are expected to increase their Canadian holdings in 2015, according to the report.