Sabra Health Care REIT Q1 2026 Earnings Call - SHOP Pipeline Accelerates as SNF Market Cools

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Ladies and gentlemen, this is the operator. Today’s conference will begin shortly. Thank you for holding.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets6: We come from the land of the ice and snow, from the midnight sun, where the hot springs flow. Hammer of the gods, will drive our ships to new lands. To fight the horde, sing and cry, "Valhalla, I am coming." Always we’ve been, respecting all. Out on the go, we’ll be the wrath of God. We come from the land of the ice and snow, from the midnight sun, where the hot springs flow. Don’t you feel so green? Whisper tales of gore. Of how we calmed the tides of war. We are your overlords. Always we’ve been, respecting all. Out on the go, we’ll be the wrath of God. Tonight, you better stop and rebuild all you ruined. For peace and trust can win the day, despite all you’re losing.

We come from the land of the ice and snow, from the midnight sun, where the hot springs flow. Hammer of the gods, will drive our ships to new lands. To fight the horde, sing and cry, "Valhalla, I am coming." Always we’ve been, respecting all. Out on the go, we’ll be the wrath of God. We come from the land of the ice and snow, from the midnight sun, where the hot springs flow. Don’t you feel so green? Whisper tales of gore. Of how we calmed the tides of war. We are your overlords. Always we’ve been, respecting all.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Good day, everyone. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sabra Health Care REIT 1st quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Lukas Hartwich, EVP Finance. Please go ahead, Mr. Hartwich.

Lukas Hartwich, Executive Vice President, Finance, Sabra Health Care REIT: Thank you and good morning. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations, including our earnings guidance for 2026 and our expectations regarding our tenants and operators and our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31st, 2025, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.

We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the Financials page of the Investor section of our website at sabrahealth.com.

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Our Form 10-Q, earnings release, and supplement can also be accessed in the Investor section of our website. With that, let me turn the call over to Rick Matros, CEO, President, and Chair of Sabra Health Care REIT.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Thanks, Lukas, and thanks everybody for joining us today. Starting with our deal flow. Our deal flow continues to be robust. We fully expect to materially exceed 2025’s total investments. We have already closed or been awarded $400 million year to date. In addition to the opportunities we see in SHOP, we’re also seeing some in skilled, but the ones that are appealing are off-market deals, both acquisitions and development, brought to us by existing operators. Our skilled nursing rent coverages continue to grow, as did our senior housing triple net and behavioral, all of which hit new highs in coverage. Our occupancy growth continued in our skilled and senior housing triple net portfolios. Our top 10 coverage is stronger than it’s ever been. Our SHOP margins continue to grow in our consolidated, unconsolidated, and same-store portfolios.

Our year-over-year same-store SHOP NOI growth came in higher than the two previous quarters. SHOP occupancy dipped slightly overall, but it was all in Canada, which had very strong year-over-year growth and currently sits at 93.4. It’s almost effectively full, and there’ll be ups and downs a little bit with that portfolio. The U.S. portfolio was up 10 basis points sequentially. For the first time in the company’s history, our private pay concentration is now over 50% of the portfolio. Our leverage ticked up slightly, but is still on current target. The regulatory environment is stable. The Medicare market basket proposal is within our expectations. We expect Medicaid rates to be within expectations as well. We have a number of AI initiatives that will streamline and enhance the effectiveness of Sabra corporate. Our intent is to be an AI-enabled REIT.

This, of course, is in addition to the numerous clinical pilots we have ongoing primarily in our SHOP portfolio, which have been really exciting to watch evolve. We’re affirming guidance, but we will be revisiting guidance in Q2 given all the current trends. With that, I will turn the call over to Darren.

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Thank you, Rick. Sabra’s managed senior housing portfolio had another great quarter with continued growth. The total managed senior housing portfolio, including non-stabilized communities and joint venture assets at Share, had sequential revenue growth of 7.2%, cash NOI growth of 9.5% with margin expansion of 60 basis points. These statistics demonstrate sequential improvement in operating results that reflect the continued growth and strong performance in Sabra’s senior housing portfolio. During the first quarter, Sabra invested $102 million, adding 3 properties to Sabra’s managed senior housing portfolio, one skilled nursing community, and preferred equity investment in a senior housing development.

Subsequent to quarter end, Sabra invested an additional $104.1 million, adding two properties to Sabra’s managed senior housing portfolio and the redevelopment of a senior housing community, bringing total year-to-date investments to roughly $206 million, with an estimated initial cash yield of 8%. Additionally, Sabra has another $107 million of additional awarded managed senior housing and $94 million of awarded skilled nursing investments, most of which should close in the second quarter. In addition to the over $400 million in closing awarded investments, Sabra has an additional $690 million of managed senior housing investments that we are actively pursuing.

On a year-over-year basis, Sabra added 21 assets to our managed senior housing portfolio, a nearly 25% increase by number of assets and 62% increase in total managed senior housing NOI. Deal flow shows no signs of slowing. Sabra remains competitive on new investments. As our investment pipeline continues to be extremely active, particularly in managed senior housing, we’ve remained focused on ensuring foundation underneath is built to accommodate that growth. Over the past several quarters, we’ve been advancing automation, data, and AI-enabled initiatives to support faster, more consistent decision-making, deeper operating insights across the portfolio for us and our operators, and importantly, meaningfully increase the scalability of our platform. This is a continuation of how we’ve evolved the platform over the last decade. We view it as an accelerator of portfolio and earnings growth as well as long-term value creation.

Moving on to the same-store portfolio. Sabra’s same-store managed senior housing portfolio, including joint venture assets at Share, continued its strong performance in the first quarter. The key numbers are: revenue for the quarter grew 7.9% year over year, with our Canadian communities growing revenue by 9.6% in the same period. First quarter occupancy in our same-store portfolio was up 280 basis points to 88.4% year over year. Notably, our domestic portfolio occupancy increased 280 basis points to 85.6% during that period, while our Canadian portfolio grew 270 basis points to 93.4% in the same period, marking the 8th consecutive quarter where occupancy was over 90%.

RevPAR in the 1st quarter continued to rise with an increase of 4.6% year-over-year, with our Canadian portfolio increasing 6.5% in the same period. While RevPAR and occupancy continue to grow, ExpPOR increased only 1.8% for the same period, providing for cash NOI growth of 14.4% on a year-over-year basis. With over $400 million.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Enclosed and awarded investments today, a very robust pipeline, industry tailwinds at our backs, we should continue to see solid growth in our portfolio. Our net leasing our housing portfolio continues to do well with continued strong rent coverage. With that, I will turn the call over to Michael Costa, Sabra’s Chief Financial Officer.

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Thanks, Darren. For the first quarter of 2026, we recognized normalized FFO per share of $0.38 and normalized AFFO per share of $0.39, which represents a 9% and 5% increase respectively over the same periods in 2025. In absolute dollars, normalized FFO and normalized AFFO totaled $96.1 million and $100.6 million this quarter respectively. Cash NOI from our triple net portfolio increased $2.2 million from last quarter, primarily due to annual rent escalators and increased collections from certain cash basis tenants. Cash NOI from our managed senior housing portfolio totaled $39 million for the quarter compared to $35.6 million last quarter. This $3.4 million increase was primarily the result of recent investment activity together with sequential growth in our same-store portfolio.

Interest and other income was $10 million for the quarter compared to $10.6 million last quarter. This decrease was primarily due to pay downs received during the quarter and lower interest income on our cash balances. Cash interest expense was $26 million compared to $26.6 million last quarter. Normalized cash G&A was $11 million this quarter compared to $10.6 million last quarter. This increase was primarily related to hosting our 2026 operator conference last month. Subsequent to quarter end, we completed the disposition of three skilled nursing facilities in Maryland leased to CommuniCare for gross proceeds of $79.4 million, equating to a 6.8% lease yield. These facilities were classified as held for sale as of March 31st, 2026.

As noted in our earnings release, we have reaffirmed our previously issued 2026 earnings guidance, and the results for this quarter are in line with our assumptions underlying that guidance. Briefly turning to the balance sheet. Our net debt to adjusted EBITDA ratio was 5.04 times as of March 31st, 2026 and continues to be in line with our targeted leverage. As we have stated previously, while we are comfortable with our leverage level, we will continue to assess opportunities to reduce leverage over time, where doing so supports our continued focus on strong year-over-year earnings growth. As of March 31st, 2026, the cost of our permanent debt was 3.92%, and the weighted average remaining term on our debt was approximately four years, with the next material maturity being in 2028.

Additionally, we have no floating rate debt exposure in our permanent capital stack, with the only floating rate debt being borrowings under our revolving credit facility. As Darren noted, our pipeline of investment opportunities has remained extremely active, that has coincided with continual improvements in the cost of our equity capital. Accordingly, we have been actively utilizing the forward feature under our ATM to lock in this attractive cost of capital to fund our investment pipeline. During the quarter, we issued $128 million on a forward basis at an average price of $20.19 per share after commissions. In total, we have $451 million outstanding under forward contracts at an average price of $19.03 per share after commissions.

We expect to use a portion of the proceeds from the outstanding forward contracts together with the proceeds from the CommuniCare asset sales to close on the investments we have been awarded on a leverage neutral basis, while still retaining meaningful dry powder to fund additional investments. As of March 31st, 2026, we are in compliance with all of our debt covenants and have ample liquidity of approximately $1.2 billion, consisting of unrestricted cash and cash equivalents of $117 million, available borrowings under our revolving credit facility of $645 million, and the $451 million outstanding under forward sales agreements under our ATM program. As of March 31st, 2026, we also had $353 million available under the ATM program.

Finally, on April 29th, 2026, Sabra’s board of directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on May 29th, 2026 to common stockholders of record as of the close of business on May 15th, 2026. The dividend is adequately covered and represents a payout of 77% of our 1st quarter normalized AFFO per share. With that, we’ll open up the lines for Q&A.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Thank you. We will now begin the question and answer session. Your first question comes from the line of John Kilichowski from Wells Fargo. Your line is open.

John Kilichowski, Analyst, Wells Fargo: All right. Thanks for taking my question. Rick, really appreciate the opening remarks. It sounds like it was a great quarter all around on, you know, the SHOP side. We got the acquisitions done. Looking at the guide being held still here, you know, what’s the reason for the conservatism there? I understand that that’s typical in 1Q for you, but it sounds like things are working, and I understand future acquisitions aren’t considered, but, you know, what would it really take at this point to get to the lower midpoint?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah, we are typically conservative this early in the year, but all the trends are obviously going in the right direction. You see the yields that we’re investing in, that looks good for us as well. It’s really just kind of as simple as that. We’ll reevaluate earning guidance rather for the second quarter.

John Kilichowski, Analyst, Wells Fargo: Mm-hmm. Okay. On the opening remarks, you know, you have the 200 awarded. If you could talk to maybe a cadence of that closing. Beyond that, the 690. You know, if you think about deals historically that have been in that level of the funnel, what’s been your historical rate of execution on those deals? Just trying to distill what, you know, what might be the final number that you execute on.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: I’ll make one comment and kick it over to Darren. The 200 from our perspective, will close. We don’t have any doubt or concern about the 200. Darren?

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Yeah. With respect to the 690, these are investment opportunities that we are actively pursuing. These include opportunities where we have submitted an initial LOI and are moving forward in the process. As far as the probability of success, it’s hard to tell because it is a bit of a competitive environment, but we would expect to close on a fair number of that investment opportunity.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah, the, you know, the volume’s so high, John, there really hasn’t been a precedent for this in terms of trying to be a little bit more predictive about what the percentage of deals we’ll close on. It’ll be a good enough percentage that, as I said in my opening remarks, we’ll exceed pretty materially how much we did last year.

John Kilichowski, Analyst, Wells Fargo: Very helpful. Thanks, Rick.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from the line of Joshua Farrell-Grath from Bank of America. Your line is open.

Joshua Farrell-Grath, Analyst, Bank of America: Thank you so much. This is Joshua Farrell-Grath. I first wanted to ask about your pipeline. What % of that are you sourcing off market or just through your relationships, and what % is through marketed deals?

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Yeah, I don’t have the exact percentages, but on the skilled nursing side it’s 100% off market through existing relationships. On the senior side, I don’t. It’s maybe, say, 20%. We do have existing relationships that bring us off market deals, but the bulk of the pipeline that we have is marketed.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: I also just want to note on the CommuniCare sale. It’s not indicative of us sort of aggressively looking to sell other skilled assets. This was a very unique situation where CommuniCare approached us wanting to exit Maryland, which is not an easy state. We actually had other buildings in Maryland that we exited several years ago. There’s a lot of markets in Maryland that are over-bedded, so we were happy to work with CommuniCare on that. CommuniCare is also one of our operators that we’re doing some of these off market things with.

Joshua Farrell-Grath, Analyst, Bank of America: Okay, thank you. I also wanted to touch on the ExpPOR growth that you highlighted, the 1.8%. Is that being driven just based on the operating leverage of where you are in your occupancy, or are there other puts and takes that are going into that number?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: It’s the operating leverage. We would expect it to continue at levels that low for the foreseeable future.

Joshua Farrell-Grath, Analyst, Bank of America: Great.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Your line is open.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Great, thanks. Just within the SHOP portfolio, just wondering how you’re feeling about the exit velocity and kind of leading indicators from March looking into kind of April and May. I think you surpassed the one-year anniversary this month since transitioning the communities away from Holiday. What’s just sort of the latest update and trajectory for that portfolio?

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Yeah, it’s definitely getting better.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah. You know, we’re not disclosing the numbers on that, but it is progressing. We’re also assessing, you probably noted, there was a slight change in same store. That’s just a function of having had these new operators in that portfolio for a year now. We’ve determined that a few of those assets are assets that we no longer wanna retain in the portfolio.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Yeah, that’s a helpful detail. I guess, you know, how deep is the opportunity set for SHOP investments in that 8% yield range? Can you provide some characteristics just around the size, vintage of the facilities that you acquired in the first quarter, as well as, you know, what’s in that awarded pipeline?

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: There’s definitely some cap rate pressure. Most of what we see on the market and the opportunities right now are in the 7% range, low 7s. What we closed on is IL, AL, and memory care, although it’s more heavily weighted to AL and memory care. On the vintage, these are roughly 14 years old is the average age. With respect to the 690 that I mentioned, that has an average age of 8, and also low 7% for those that are more stable. We are actually also looking at some slight value add opportunities where there’s lower occupancy, but a clear line of sight to stabilization. Some of those we’re looking at will have initial yields in the 6s, but should provide more meaningful IRRs with the upside opportunity.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: As you know, we focus on secondary markets, so we’re not seeing the same level of cap rate compression in the secondary markets as you all see in the primary markets.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Very helpful. Thanks for the time.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is open.

Juan Sanabria, Analyst, BMO Capital Markets: Hi. Good morning. Just hoping you could talk a little bit more about those SHOP assets that you transitioned last year that, you’re now, it seems like, looking to sell. You know, if you can comment on the book value or the expected proceeds. If you had not excluded those from the same-store pool, do you know what SHOP same-store NOI would have been for the quarter on a year-over-year basis?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: We’re just selling those right now, Juan, we don’t know what the outcome is gonna be. We’re not disclosing any of that information at this point. You know, when a couple of quarters ago when we talked about the transition of that portfolio, we did say that we’d be evaluating the viability of retaining all these assets going forward. That’s just kind of a normal process. We’re not breaking out all these different portfolios in terms of the individual growth of SHOP NOI in these portfolios.

Juan Sanabria, Analyst, BMO Capital Markets: Just to confirm, these were old, original Holiday assets. Is that fair?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yes, they are.

Juan Sanabria, Analyst, BMO Capital Markets: Okay, great. Then just.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: It’s three assets that we’re selling, and we brought another Holiday asset into same store that had stabilized.

Juan Sanabria, Analyst, BMO Capital Markets: Great. Just to switch gears, appreciate that. Thanks, Rick. Just on the behavioral, could you just give an update on Landmark that was in the press and any updated thoughts on how we should be thinking about the RCA loan?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Sure. We always reserve the RCA question for you, Juan, just so you know it’s special. On Landmark, we had worked, we had been working with them, they obviously are in the court system for an exit with those facilities. We actually helped bring somebody in to buy a bunch of the assets. The Landmark team is buying some of the assets themselves, so we were able to get a price that was actually pretty attractive from our perspective. Outside of that group of Landmark assets, we’ve got 3 others that we are in the process of selling as well. We’ll have some more proceeds to add to the ones that you saw in the article.

You know, as we’ve talked about, you know, that team did a really good job running that company for a while, and then they had those unfortunate incidents with resident deaths in Indiana and got shut down by the regulators. Just a bad turn for them. We hung in for a while, but at this point, we felt it was better just to get out from under. On RCA, our talks are continuing to progress and it’s possible we’ll be in a position to make an announcement on that before our second quarter call, and if that’s the case, we will do so. It’s, as I mentioned on the last call, Deerfield, it’s their biggest investment. They really believe in the portfolio and our talks are very constructive.

Juan Sanabria, Analyst, BMO Capital Markets: Was there any NOI or rent collected related to Landmark flowing through the first quarters? How should we think about, I guess, that going forward?

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Yeah. There is somewhere around, like, a million and a half, I wanna say, Juan, in the first quarter that we collected on them. We would expect that same run rate through whenever these assets ultimately transact.

Juan Sanabria, Analyst, BMO Capital Markets: Thank you.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from the line of Seth Bergey from Citi. Your line is open.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets4: Hi. Thanks for taking my question. You mentioned in the prepared remarks some AI initiatives. Could you just kind of expand on, you know, some of those and how you’re using AI within the platform and maybe talk a little bit about what differentiates kind of the Sabra platform from, like, an AI perspective versus some of the peers that are also competing in the SHOP and skilled businesses?

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Yeah. I’ll take that one, Seth. You know, as Darren mentioned, we’ve been leaning into automation and AI over the last several quarters. Primarily at the corporate level, it’s been, you know, to speed up back office workflows and data processing, primarily in our SHOP portfolio. At the same time, we’re also advancing some initiatives that are gonna further reduce manual processes and accelerate analysis. Not the sexiest thing in the world. I’ll be very, you know, I’m very cognizant of that, but it is very impactful, particularly as it improves how we interact with our operators, what kind of value we could give back to our operators in the form of data and insights.

It could have some really meaningful benefits, not only to us, but to our operators as well. Then, as Rick mentioned, you know, we have pilots going on at the facility level that, you know, in addition to several PropTech solutions that have already been deployed, there’s a whole bunch of other solutions like medical records and fall detection that are leveraging AI that are gonna make operations more efficient and, more importantly, improve resident care.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets4: Then maybe just a little bit on kind of the deal flow and the opportunity set. What’s kind of the mix between SHOP and skilled of the opportunity set, and are there any particular geographies you’re looking at?

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Yeah. Nothing has really changed. It’s still, I’d say, 95% plus SHOP is the opportunity set. The skilled nursing investments and the opportunities that we’ve announced were all done off market with direct relationships.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Still don’t see that much volume in the skilled space, and when you do it’s very heavily competitive and, the private groups tend to be able to pay up a little bit more.

Yeah, remember the private buyers that we’re all up against are by OpCo and PropCo. They also are feeding ancillary businesses. As a buyer of real estate, you know, we just can’t compete with that. There’s not enough volume out there for everybody to go around for everybody as there is on SHOP or there was on SNF, if you go back to prior to the pandemic when there was enough for everybody to go around. At this point, we don’t see that changing, at least for a while.

I think a lot of it’s just a function of a lot of these operators who don’t have to sell got really slammed during the pandemic and had pretty huge losses, and now you’ve had 2 years of some really good performance, and that performance will continue to improve. I think for a lot of the operators out there that don’t have to sell that normally would put their assets on the market, they’re just recouping, and they’re probably enjoying some really nice cash flow. That wasn’t the case a few years ago, so maybe we’ll see that change later on in the year or going into 2027, but it’s a little hard to tell.

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: On the SHOP side, as far as the markets are concerned, we’re still looking at the secondary markets is the focus here. As far as the volume is concerned, it’s showing no signs of slowing whatsoever. In fact, it actually feels like it’s picking up speed.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah. We’re geographically agnostic, though, in terms of what states we’ll be in for either asset class.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets4: Great. Thanks.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from a lineup. Michael Stroyeck from Green Street, your line is open.

Michael Stroyeck, Analyst, Green Street: Thanks, and good morning. Maybe following up on that question and just going back to the strong pricing on the CommuniCare sale and your comments on not being able to compete as well on the SNF transaction market. I guess just what sort of yields or multiples are you seeing there on those marketed SNF deals, how different is that versus, you know, the typical, call it 9%-10% lease yields we see in SNFs?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: There’s not a lot of data out on that is the problem because they are all private, they are all private deals. So I don’t really have a good answer for that. Darren, I don’t know if you’ve seen anything.

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: No, I mean, it’s definitely a couple hundred basis points inside of what the standard skilled nursing transaction would typically run at.

Michael Stroyeck, Analyst, Green Street: Got it. Okay. Then maybe going back to behavioral health discussion, one of your peers had talked about labor being a challenge within that business. Are you experiencing a meaningfully tougher labor backdrop within behavioral health versus, call it, other areas of the portfolio?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: No, not at all.

Michael Stroyeck, Analyst, Green Street: Okay.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: I’m a little bit surprised to hear that. We haven’t seen that at all in our portfolio.

Michael Stroyeck, Analyst, Green Street: Okay. Understood. Thanks for the time.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yep.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from a line of Alec Feygin from Baird. Your line is open.

Alec Feygin, Analyst, Baird: Hey, thanks for taking my question. Can you maybe comment on how the opportunity set of funding for development and redevelopment projects have trended? Do you expect this to be a bigger part of your investment activity going forward?

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: As far as the developments, we still see a fair amount of development opportunities that come in. I would say of those development opportunities that come in, maybe 10% pencil. Basically, when I say pencil, always looking for a stabilized return on costs on the development to be 200 to 250 basis points wider than the current market cap rate equivalent, maybe only 10% of those. I do expect that it’s gonna pick up, but not meaningfully for some period of time.

Alec Feygin, Analyst, Baird: Can you comment, are these development opportunities also in the secondary market, or I guess tertiary markets, secondary markets?

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Yeah. The one prep equity development that we announced is in Indiana. Actually, the other one is a redevelopment of a former SNF property that was shut down, and we’re redeveloping that into a senior housing property, and that’s in Kentucky.

Alec Feygin, Analyst, Baird: Got it. Thanks for the time.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from a line of Vikram Malhotra from Mizuho Securities. Your line is open.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets5: Thanks for taking the question. I guess I just wanna go back to the question on the guide. Just the cadence of SS4, ASF4. You just take your quarterly number and, you know, just multiply it by 4. You’re very, very easily in the range. I’m just wondering, is there a one-time item? Is there maybe this loan that you’ve got baked in, any other asset transition or sale? Like, how should we, you know, what should we infer is a pretty steady number. If you can go back and give us any more color on, like, what other puts and takes for the year that we should be modeling.

Darren Schreiber, Chief Operating Officer, Sabra Health Care REIT: Yeah. As you rightly pointed out, if you take our first quarter results and you annualize them, or if you do it on, you know, actual dollars and run the math out, you’re probably just slightly below where our midpoint is. There’s that data point. I think the other data point is we guided towards, you know, low to mid-teen same store NOI growth in our SHOP portfolio, and we came at 14, right in the middle of that range as well. As we talked about

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: You know, many times before, the biggest driver of where we end up landing on a earnings perspective, especially relative to our guidance range, is going to be dictated by our SHOP NOI growth. Given that our current quarter earnings are right at the midpoint or even slightly below the midpoint, given that our SHOP growth is right where we guided for the full year, you know, and we reaffirmed our guidance, let’s not lose sight of that. We reaffirmed the guidance that we put out. We still feel as we sit here today, two months after we put out our initial guidance, that you know, reaffirming where we stand or where we put out previously still makes sense.

As Rick mentioned, you know, we’ve historically taken the approach that in Q1 we’re not gonna generally revisit guidance unless there’s some material change one way or another. There hasn’t been. We’re gonna reevaluate it in Q2 as we have a better line of sight into what the SHOP growth is gonna look like for the year and as our investment pipeline takes greater form.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Look, we totally get the questions, particularly since some of our peers raised guidance in some form or fashion over this past week. You know, we totally get it. We like the trends we’re seeing, as I said earlier. We like the volume that we’re seeing, and we like the yields we’re getting things done in. We will see how it goes.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets5: Okay. Then, I mean, I’m not reading into the CommuniCare pricing, but in general, there seems to be downward pressure on cap rates for SNFs, given especially this, you know, hope to improve the operations. I’m wondering, is there an opportunity for you to, given your desire for SHOP, to do a bigger portfolio sale in SNFs, and raise $500 million or billions and recycle that into SHOP?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: I’m not sure there’s downward pressure on cap rates because of the private buyers. The REITs are pretty disciplined about holding firm on the cap rates that we’ve historically acquired SNFs at. We like the fact that we’ve got a very strong triple net skilled nursing portfolio. We’re at all-time highs on rent coverage. We’re at all-time highs on margins. Occupancy continues to grow, so there’s still upside there. It’s something, it’s a base that we have that everybody can depend on. Then the SHOP side of it, which gets bigger and bigger for us, obviously provides more outsized earnings growth. We like having that balance, and our portfolio today is better balanced than it’s ever been. For us to pass the 50% mark on private pay revenues is a material change.

You know, we started out as a 96% SNF REIT. You know, we’ve evolved quite a bit. We’re not gonna sell portfolios that we think are really good just to shift the percentages of SHOP. We’ve got plenty of access to capital. We have plenty of liquidity available to invest in all the SHOP opportunities that we have ahead of us.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets5: Okay. If I can just clarify, Rick, I think you said the Canadian portfolio’s 93. You think it’s essentially full. I guess in this environment, you know, a lot of folks are talking about 95 plus. You know, is 93 sort of the peak for the Canadian portfolio in absolute?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: No. No, not necessarily. I just think when you start to get to the mid-90s, you’ll have some ups and downs. Look, we have a facility up there that’s 100% almost all the time. That’s unusual, you know, but it happens. I think it’s important to focus on. I think we had a 270 basis points year-over-year growth in that Canadian portfolio. Yeah, we expect occupancy to continue to trend up there. It’s not going to be sort of at the same velocity as if it was still, you know, 86% or 85%.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets5: Okay. Thank you.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from the line of Richard Anderson from Cantor Fitzgerald. Your line is open.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: Thanks. Good morning. On CommuniCare, you’re selling or sold. Omega is selling, I think, to CommuniCare. Correct me if I’m wrong about that.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: No, that’s not right.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: That’s not right? Okay. Excuse me.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Sorry. That’s not right. No.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: Okay. In their case, I believe that’s the case. Both Maryland. I’m just curious, is there any dotted line between what Omega’s doing and what you’re doing that you could share on you know, CommuniCare, and if there’s some sort of trend that we can draw from both of those transactions?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: No, I don’t really think so. I mean, they were hoping to get cooperation from both us and Omega. They just really wanted to exit a state that was a really, really tough state for them. They thought it would strengthen their portfolio overall. We’re seeing that as a result. When they first called us, I mean, it resonated with us because as I said earlier, we shed facilities in Maryland several years ago. It’s, you know, it’s just tough there. Yeah, I don’t think there’s any trend here or anything like that. CommuniCare still wants to grow. As I said earlier, we’re seeing some growth with them. Omega may or may not be as well.

Yeah, but no dotted lines or anything like that other than, we think the Omega team’s a great team.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: Okay. Fair enough. Rick, no guidance update, which is fine with me, but also no change to your target SHOP I think it was 40% as of last quarter. Let’s say you bite into this $690 million to a certain degree, between now and 3 months from now. Are you closing in on 40%? Might we have an update on a new target for SHOP, this time in 3 months?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Well, we will be closing. I mean, if we say we’re to do $1 billion this year, we definitely are gonna be in pretty good shape in terms of the 40%. We’ll just set a higher target. You know, as I said earlier, we’re not gonna shed any sort of major skilled portfolios, there’s always some stuff that you sell. Between some of that, which is probably incremental or on the margin, and almost all of our investment activity being on SHOP, you’re just gonna continue to see skill being a smaller percentage of the portfolio and SHOP continuing to grow. We don’t have any sort of guardrails or anything about how much we wanna do in SHOP.

As you know, because we’ve been doing SHOP for over 10 years and with all the improvements we’re making in the existing platform, with our AI initiatives, our platform is gonna be more scalable than it’s ever been. We’ll be able to continue to grow our SHOP, our SHOP exposure, and the amount of infrastructure we’ll have to add as a result of that will be lower than it normally would have been in the absence of the AI initiatives.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: Okay, great. Last for me, this is just more of a theoretical sort of big picture question, but, you know, obviously a lot of your peers are taking a SHOP on goal, I guess they’ll say it that way. You know, a lot, you know, kind of working in individual silos. It seems to me that, you know, you guys have been doing it for a while, so it’s not a conversation about Sabra in particular, but what do you think about the potential that there’ll be some sort of combination activity to attack the SHOP opportunity? You know, it seems like it makes sense. It’s a business that requires scale and, you know, some of the things that you’re doing.

I’m just curious if you could comment on that at all, you know, just generally.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: You, Rich, are you talking about M&A activity with the REITs?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: Yeah. Yeah.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah. Look, we all know there are too many of us. Now with everybody jumping on the SHOP bandwagon like it’s, you know, a new form of breakfast cereal or something that everybody likes better now. I mean, the only concern I have. Look, there’s a lot of mutual respect in our space between all of our teams. We all know each other really well. We hang together when we have the opportunity. There’s plenty to go around. I just hope people are prudent in making sure they have the infrastructure in place to support the operators and to assess the quality of deals that are being looked at. This is much, much different than a triple net business.

I think for us, we’ve been able to be successful, not just because we’ve been doing it for a long time, but as you know, and I think most others do, Rich, our entire asset management team are operators. The transition for them to transition from working with triple net to SHOP, really wasn’t that difficult. You get a little bit concerned about missteps with everybody and their brother jumping into it. Hopefully that won’t be the case. As far as M&A activity, yeah, I mean, you’re right. There should be some M&A activity. It seems like that’s hard to make happen in REIT world.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets2: Yeah. Fair enough. Okay. Thanks very much.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yep.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from the line of Michael Goldsmith from UBS. Your line is open.

Michael Goldsmith, Analyst, UBS: Good afternoon. Thanks a lot for taking my question. Maybe first, can you comment on the Medicare rate proposal for 2027 of 2.4%? Maybe we can get your high level look, outlook on Medicare and Medicaid and just the overall health of reimbursement.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Sure. I’ll give myself a little credit because I did predict that the Medicare market basket would have a 2 handle, and I predict that the Medicaid rate increases and the aggregate will have a 3 handle. It really did meet our expectations. The other thing that we’ve talked about is coming off of the pandemic and the really extraordinarily high inflation that we saw during the pandemic, everything’s normalizing, and we should expect to see rates both on the Medicaid and the Medicare side revert back to the historical norm before the pandemic. That’s really what we’re seeing. I think Medicare and Medicaid rates peaked in 2024. They were still really healthy last year, but we did see them come down quite a bit last year. It’s all formulaic, so it’s pretty normal stuff.

Say while you can’t predict the exact number, you know, the trend is gonna be pretty apparent.

Michael Goldsmith, Analyst, UBS: Got it. Thanks for that. Just doing a little math, which can always be a little bit of a dangerous thing, you know, from your occupancy and unit numbers and, you know, we estimate your non-same sort of SHOP occupancy is in the high 70%. Just wondering if you could provide a little bit color into the types of SHOP assets you’ve been accumulating over the past year. It looks like these have been unstabilized with a little bit of occupancy upside. You know, if you could talk about like what market the assets are in and the unit mix, that would be helpful.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah. The total just in the entire overall senior housing managed portfolio for the quarter ended, I think, the occupancy for the entire portfolio is 85.6%.

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: As far as the assets we’ve been acquiring, we’ve been acquiring assets in the upper 80s to the low 90s% occupancy. I’m not sure. I’d like to see that 70% math.

Michael Goldsmith, Analyst, UBS: All right.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah, where are you getting that from, Michael?

Michael Goldsmith, Analyst, UBS: We just, we ran some numbers based on what we saw on the spot, but we’ll take another look at it or catch up offline. Maybe just to round it out, like when do you expect some of these AI initiatives to translate into measurable financial outcomes like a lower G&A or higher margins or better asset level decision-making?

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Yeah, I mean, from a G&A perspective, you know, I wouldn’t expect there to be a ton of G&A savings. What is gonna be more impactful from a G&A perspective, it’ll slow down the ramp of G&A as we grow. I think that’s the right way to look at it. That’s gonna be incremental and ongoing and as we speak, right? ’Cause we’re in the middle of a lot of these initiatives, and as they continue to be implemented, we’re gonna see the real benefits to how we operate as, and how we scale as a company. Additionally, as we continue to roll out this information to our operators and give them better insights into their own businesses and help them operate their facilities better, we firmly believe there’s gonna be a tangible improvement in their performance.

When that’s gonna be, how quickly that’s gonna be, it’s hard to tell at this point.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: It’s also gonna make it easier for us to absorb the increased level of volume on investments that we’re seeing. We do have some 90-day milestones in place, so we’ll start to see some benefits in the near term with the initiatives that we have.

Michael Goldsmith, Analyst, UBS: Thank you very much. Good luck in the second quarter.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Thank you.

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Thank you.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Your next question comes from a line of Omotayo Okusanya from Deutsche Bank. Your line is open. Omotayo, your line is open.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets0: Good morning out there. Wanted to continue along the lines of the Medicare, Medicaid questions. Rick, to get your thoughts around kind of, again, CMS’ kind of increased focus on these kind of value-based care programs on the Medicare Advantage side. Just kind of curious, you know, what are you hearing from your operators about how it’s impacting like the referral rates from hospitals or how you may potentially be kind of changing your business and how they’re kind of responding to it?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Sure. Thanks, Kyle. We’re not seeing that much impact yet, but we are really bullish on value-based care. We are working with our operators. Some of our operators are already pursuing it. They already have agreements in place. There’s sort of different levels that you can, you can do with the insurers. You can have arrangements with ACOs. There’s a lot of different levels of arrangements that you can have with value-based care that have different levels of risk, starting with upside but no downside. As they get better and better, they’ll take on some downside risk, but they’ll have more upside risk. We think it’s a really big deal.

We think it’s great for the space because we know our operators can take care of patients that are being cared for in much higher cost settings like LTAC or like rehab hospitals with really good outcomes. In fact, a few weeks ago, last month, we had our operators conference, value-based care was the central topic for the conference and just a lot of excitement on, from our operators on it. There’s also similar opportunities for senior living as well. It isn’t just skilled. There’s maybe more there for skilled, but there’s opportunities there with the insurers and with ACOs particularly on the senior housing side as well. We were able to talk about initiatives and we had some great speakers coming in and gave great examples.

In fact, one of our board members, Lynne Katzmann, who runs a senior living company called Juniper, is probably front and center further ahead on those kind of initiatives with AL and memory care than anybody else in the space. Her expertise has been great as well. Yeah, really excited about that.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets0: Gotcha. I guess then how do we kind of juxtapose that versus comments coming out, you know, for example, during this earnings season when some of the hospital names are saying, you know, it’s helping them reduce referrals to skilled nursing and things of that like?

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: I think it’s just a function of are you gonna embrace what’s inevitable and coming down the line and make sure that you’ve got the clinical products in place to take advantage of that? Then you’ll have increased referrals. You know, I just think you have to be really forward-thinking on this, and we’ve got a number of operators who are. As I mentioned, we’ve got operators who have already embraced this and made inroads into it and they’re doing well with it. I think if you have operators out there that are more passive, then yeah, it’s not gonna kinda go your way.

Because as more and more time goes by, they’re gonna those insurers, the ACOs are gonna have more opportunities to divert patients to operators that are really embracing these opportunities.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets0: Makes sense. Thank you very much.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Yeah.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: Again, if you’d like to ask a question, press star one in your telephone keypad. Your next question comes from the line of Austin Wurschmidt from KeyBank. Your line is open.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Great. Thanks for taking the follow-up. I just wanna go back to something and make sure I understand some of the components of guidance. The one and a half million dollars of income received from Landmark in the first quarter, was that contemplated in initial guidance, or is that a source of upside when you go and reevaluate, you know, guidance in the coming quarters? Then I guess, is it appropriate to annualize the first quarter number given your plan to sell those assets?

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: To answer your first question, the 1.5 was included in our original guidance. In terms of annualizing that, yeah, I mean, that’s something that’s gonna go away at some point this year. You know, probably, I would say probably end of the 2nd quarter is probably when we would realistically think that would go away, but you know, it could slip as well. It, it isn’t something we expect to have in there for the entire 12 months, if that’s what you’re asking.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Yeah. No, that’s helpful. Thank you.

Michael Costa, Chief Financial Officer, Sabra Health Care REIT: Okay.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: That concludes our question and answer session. I will now turn the call back over to Rick Matros for closing remarks.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets3: Thanks everybody for your time today and your continuing support and, we’ll look forward to seeing a lot of you at the Wells Conference and at Nareit in June. Thanks very much. Have a great day and for any moms that are on the call, Happy Mother’s Day.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets1: This concludes today’s conference call. Thank you for your participation. You may now disconnect.