Sabra Health Care REIT’s (NASDAQ: SBRA) senior housing portfolio has “exceeded expectations” and the company plans to increase its SHOP segment to represent 40% of its total portfolio by unit count in the future, according to CEO Rick Matros.
Tustin, California-based Sabra’s segment currently accounts for approximately 26% of its total portfolio unit count. The company previously increased its SHOP concentration from 20% to 30% in the second quarter of this year.
As Sabra moves closer to that target, Matros said the REIT “will reset that target again.”
Sabra in the third quarter of 2025 added 10 senior living properties to its SHOP portfolio, now representing 83 properties spanning 8,282 units as cash net operating income rose to $26 million.
Also in the quarter, Sabra acquired six communities for $217.5 million with an expected cash yield of 7.7% and converted four communities from triple-net lease structures to its SHOP segment through purchasing operations for $19.7 million and terminating the leases in lieu of management agreements.
In the future, Matros said Sabra would continue to “exceed the high end of our investment targets,” exceeding $500 million in 2025 acquisitions as the pipeline for investment “continues to be robust.”
Matros said Sabra’s SHOP assets remain a “much stronger driver of earnings growth” compared to its triple-net lease portfolio. Sabra estimates between 90% and 95% of its existing investment pipeline to include SHOP assets with the remainder being skilled nursing investments, according to Sabra Executive Vice President Darrin Smith.
“I would expect us to be heavily weighted towards SHOP moving forward,” Smith said.
Currently, Sabra is focused on buying “recent vintage assets” while staying away from value-add opportunities.
“The dynamics are dramatically different right now,” Matros said. “You’ve got demographics that everybody’s been waiting for for three decades to kick in. We’ve got several years of runway, if not longer, before new supply has any impact.”
Matros compared the plethora of deal opportunities to that of the skilled nursing investment environment prior to the 2020 Covid-19 pandemic when there were enough investment opportunities “for all of us to get our fair share.”
In 2026, Matros said Sabra was looking at “mid-single digit” rental rate increases as ownership groups and operators take a more conservative approach on rates in the year ahead.
Sabra funds from operations per diluted share was $0.33 in the third quarter, down $0.01 from the same period last year. Sabra stock rose 3.57% on Thursday, up $0.65 to rest at $18.85 per share.
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