Sabra Takes a Second Look at Maryland

Prudence proves key in Sabra's recent portfolio acquisition.
Rick Matros, CEO & Chairman, Sabra

Sabra Chairman & CEO Rick Matros

After passing on it several years ago, Sabra Health Care REIT decided to take a second look at four transitional care facilities in Maryland and acquired the portfolio with a total of 678 beds for $234 million.

The four skilled nursing facilities, known as the NMS portfolio, specialize in transitional care and medically complex post-surgical, ventilator and dialysis patients. Sabra Chairman & CEO Rick Matros said the state has specialized Medicaid rates for complex medical patients that approximate Medicare rates so the operating team can access Medicare, managed care and non-traditional Medicaid reimbursement sources for the services.

“We had first looked at this portfolio a few years ago and were very impressed with the team. Their focus was and is on short-stay, post-surgical patients and longer-term complex medical patients requiring ventilator care and other complex conditions,” Matros said in a news release. “They’ve continued to build on that capability since we were first introduced to them.”

Matros said the nine-property acquisition of a Canadian portfolio made earlier this month reduced the REIT’s skilled nursing exposure to approximately 50 percent, allowing the company to look at more skilled nursing acquisitions.

“The NMS Portfolio will only increase that exposure to 55.9 percent, and our intent is to maintain our skilled nursing exposure at or around 50 percent,” he said in the release.

Matros said the Irvine, Calif.-based REIT expects to add more skilled nursing facilities similar to the NMS portfolio.

“We are pleased to be aligned with the NMS team and look forward to a productive partnership,” he said in the prepared statement.

In the Canadian deal, Sabra paid approximately $137.1 million to the Leo Brown Group for a seniors housing portfolio consisting of 302 units in British Columbia and 563 units in Ontario. The properties are 100 percent private pay independent living and assisted living facilities. Sabra planned to enter into a triple-net master lease agreement with an affiliate of Senior Lifestyle Corp.

The sellers of the Maryland portfolio were not identified. But Sabra also expects to enter into a triple-net master lease agreement with the current operator on three of the facilities and a triple-net lease agreement on the fourth asset which is encumbered by a HUD loan. Each of the master leases and the lease for the fourth facility will have an initial term of 15 years with two 10-year renewal options and annual rent escalations.

Closing on the three properties, expected to sell for a total of $175.2 million, is expected to occur by June 30. Sabra said in the release that closing of the fourth facility will occur upon assumption of an existing $10.8 million HUD loan that has an annual interest rate of 5.60 percent.

In addition to assuming the HUD loan, the REIT expects to pay for the acquisition with cash and proceeds from its revolving credit line. Once the acquisition of the portfolio is completed, Sabra’s total investments for the first half of 2015 would be $406.5 million.

As of late March, Sabra owned 170 properties that are 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.