Sabra Pays Half-Billion for 21-Property Portfolio

Sabra Health Care REIT Inc. has just reconfigured its portfolio in one fell swoop with the acquisition of 21 independent living facilities from affiliates of Holiday Acquisition Holdings.
Holiday at the Atrium Glenville, N.Y.

Holiday at the Atrium Glenville, N.Y.

Sabra Health Care REIT Inc. has just reconfigured its portfolio in one fell swoop with the acquisition of 21 independent living facilities from affiliates of Holiday Acquisition Holdings Corp.

The REIT shelled out $550 million in cash for the 2,850-unit portfolio, and ensured a smooth transition by simultaneously securing a 15-year, triple-net master lease agreement with Holiday affiliate Holiday AL Holdings L.P.

The collection of private-pay properties boasts an occupancy level of 90.5 percent and spans 15 states, six of which mark new territory for Sabra. The assets range in size from 91 to 252 units and in age from four years to 29. Among the group are the 131-unit, 30-year-old Colonial Village in Longview, Texas; the 143-unit, eight-year-old Village at the Falls in Menomonee Falls, Wisc., and  Glenville, N.Y.’s  14-year-old Holiday at the Atrium, which features 103 units. And the list goes on.

Sabra’s geographic presence has expanded with the deal, but perhaps the most significant change is the composition of the property types. With the addition of the 21 independent living assets, Sabra decreases its exposure to skilled nursing/transitional care facilities, which previously totaled just more than 100 properties in what was a 130-property portfolio, from 68.6 percent to 55.6 percent.

Additionally, the purchase of the Holiday portfolio reduces the concentration of Sabra’s revenues earned from leading tenant Genesis HealthCare L.L.C. from 46.8 percent to 38.1 percent.

Big-ticket transactions in the seniors-housing real estate market have certainly increased over the last few years, but it’s not every day that an investor shells out more than a half-billion in cash on a deal. Sabra, however, was well-prepared for such a move. To finance the purchase, the REIT relied on borrowings totaling $560 million under its recently increased revolving credit facility, which allows for a maximum borrowing capacity of $750 million, and the REIT priced a public offering of 6 million shares of common stock at $24.25 per share to repay the borrowings.

In addition to closing the Holiday Portfolio acquisition, Sabra expects to complete approximately $100 million in sale/leaseback deals over the next 60 days. Per a note just released by Stifel, Nicolaus & Company Inc., “These investments far exceed our prior expectations of $195 million in the second half of 2014 and should allay investor fears of slowing transaction pace.”