Earlier this month, Sabra Health Care REIT (Nasdaq: SBRA) and Sienna Senior Living (TSX: SIA) joined forces to acquire Extendicare’s senior living portfolio in Canada — and that arrangement could help springboard similar deals in the future, according to the company’s leaders.
Under the deal announced in February, Sabra and Sienna agreed to acquire from Extendicare (TSX: EXE.TO) a portfolio of 11 Esprit senior living communities located in Ontario and Saskatchewan. The purchase price clocked in at $307.5 million Canadian dollars, or about $243 million.
That might help fuel new opportunities in Sabra’s current roughly $1.4 billion acquisition pipeline, according to Sabra CEO Rick Matros.
“We were seeing more deal flow anyway, but the announcement of the Canadian deal has increased that deal flow even more so,” Matros said during the company’s fourth-quarter earnings call with investors and analysts Tuesday.
Transaction activity in Canada has increased significantly in the last 12 months, the REIT “is well positioned both financially and operationally to pursue assets there,” including through its joint-venture with Sienna, according to CIO Talya Nevo-Hacohen.
“Given the vintage of the assets on average of six years old and the timing of the acquisition, there is a clear path to increase occupancy across the portfolio,” Nevo-Hacohen said. “Substantial expansion opportunities existed for the communities, providing for an additional avenue of growth.”
As of Dec. 31, Sabra’s investment portfolio included 279 skilled nursing facilities and 109 senior housing communities.
In addition to senior housing, Matros said the REIT is starting to see more opportunities to grow in the skilled nursing and behavioral health spaces.
More generally, Matros said “everybody is kind of waiting until things subside [so] that there is some recovery that people can project off of” to acquire bigger portfolios. He mentioned that he was aware of two large senior housing portfolios ready to trade hands — one marketed for about $2.5 billion and another for about $1 billion to $1.5 billion — that ultimately didn’t.
Senior housing occupancy in the fourth quarter of 2021 was 79.4%, excluding non-stabilized communities. That is an increase of about 60 basis points compared to the 78.8% occupancy rate reported in the prior quarter.
Today, gross move-ins “have remained in a range between even with 2019 and 10% higher,” Nevo-Hacohen added.
The real estate investment trust finished the quarter with revenue of $135.6 million in total revenue, falling short of projections by $18.93 million.
Total revenue hit $135.7 million in Q4, trailing behind the average analyst estimate of $154.5 million, according to Seeking Alpha. The REIT’s normalized FFO per share of $0.39 exceeded analysts’ expectations by one cent.
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