Note: EPS may not be comparable

Sabra Health Care REIT (NASDAQ: SBRA) reported Q4 EPS of $0.57, $0.26 better than the analyst estimate of $0.31. Revenue for the quarter came in at $160.54 million versus the consensus estimate of $159.41 million.

RECENT HIGHLIGHTS (1)

• For the fourth quarter of 2017, net income attributable to common stockholders, FFO, Normalized FFO, AFFO and Normalized AFFO per diluted common share were $0.57, $0.60, $0.66, $0.60 and $0.60, respectively, compared to $0.31, $0.62, $0.62, $0.59 and $0.54, respectively, for the fourth quarter of 2016.
• For the fourth quarter of 2017, Normalized AFFO per diluted common share increased 11.1% over the same quarter in 2016 primarily as a result of the completion of the Care Capital Properties, Inc. (CCP) merger in the third quarter of 2017.
• We completed our CCP portfolio repositioning evaluation and have reduced the expected long-term annual impact on rents from $33.5 million to between $28.2 million and $31.2 million, after adjusting for the anticipated redeployment of proceeds from strategic asset sales. As previously disclosed, one of the repositioning strategies is to sell certain facilities and redeploy the related proceeds in a manner that results in no significant long-term cash rent reduction. The sales of these facilities are estimated to generate proceeds totaling approximately $58.8 million and we expect to largely offset the $5.5 million of current annual cash rents derived from these facilities through the redeployment of the sales proceeds.
• After giving effect to the anticipated long-term impact on rents, our pro forma Skilled Nursing/Transitional Care EBITDAR Coverage for the 12 months ended December 31, 2017 would have been between 1.38x and 1.40x. This compares to our actual Skilled Nursing/Transitional Care EBITDAR Coverage for the 12 months ended December 31, 2017 of 1.36x, which includes the CCP tenants for the month of September only (the month following the CCP merger). Lease Coverage for the seven Skilled Nursing/Transitional Care facility operators included in our pro forma top 10 relationships (which top 10 relationships represent 63.9% of our pro forma annualized Cash NOI) would have been 1.30x (1.32x excluding Genesis) after giving effect to the anticipated long-term impact on rents from the CCP portfolio repositioning and Genesis's recently announced restructuring plan.
• We have fully completed the integration of the CCP portfolio and operations into our Company, ahead of the one year time frame we initially expected.
• On January 2, 2018, we completed our previously announced transaction with affiliates of Enlivant and TPG Real Estate, the real estate platform of TPG, pursuant to which we acquired (i) a 49% equity interest in an entity that collectively owns 172 Senior Housing communities managed by Enlivant (the “Enlivant Joint Venture”) and (ii) 11 Senior Housing communities under the Senior Housing - Managed structure that are operated by Enlivant pursuant to property management agreements (the “Enlivant Owned Portfolio”). Our investment in the Enlivant Joint Venture and Enlivant Owned Portfolio totaled $491 million, including net working capital. Our purchase price for the Enlivant Owned Portfolio reflected an effective 2% discount to the price we would have paid had we waited to exercise our option on 51% of this portfolio. The joint venture agreement includes an option for us to acquire the remaining majority interest in the Enlivant Joint Venture which terminates on January 2, 2021. Our partner in the Enlivant Joint Venture has the option to transfer its interest commencing on January 2, 2020 subject to our right of first offer.
• We have begun the process of marketing for sale 46 of our remaining 54 facilities leased to Genesis Healthcare, Inc. (“Genesis”). We expect to retain eight strong-performing facilities having annual cash rents of $10.4 million, which would keep our Genesis exposure below 2% of our pro forma annualized Cash NOI, before any residual rents, as described below. 35 of the 46 facilities are under contract, with expected total sales proceeds of $296.9 million. Those sales are expected to be completed by the third quarter of 2018. Annual cash rents expected to be eliminated upon sale total $25.6 million. These sales are expected to trigger residual rents to be paid to Sabra of $5.2 million per year for the following 4.28 years as provided for in our agreement with Genesis. The remaining 11 facilities, with $10.0 million of annual cash rents, are expected to be sold in 2018 generating sales proceeds of approximately $70.7 million.
• On December 15, 2017, we exercised our options to acquire a 140 bed Skilled Nursing/Transitional Care facility in Texas for $12.8 million (inclusive of $2.0 million used to repay a portion of our related loan receivable investment), having an initial cash yield of 9.5%, and a 95 unit Senior Housing community in Colorado for $20.7 million (inclusive of $4.9 million used to repay our preferred equity investment in this property), having an initial cash yield of 7.5%. The two accretive investments were sourced through our proprietary development pipeline.
• In January 2018, we acquired the remaining two Skilled Nursing/Transitional Care facilities that were part of the North American Healthcare portfolio transaction that we executed in the third quarter of 2017. The purchase price for these two facilities was $42.8 million, having an initial cash yield of 8.0%.
• We have updated our 2018 earnings guidance ranges as follows (per diluted common share): Net income attributable to common stockholders - $2.16 to $2.24 (from $2.09 to $2.15), FFO - $2.31 to $2.39 (from $2.43 to $2.49), Normalized FFO - $2.48 to $2.56 (from $2.48 to $2.54), AFFO - $2.15 to $2.23 (from $2.30 to $2.36) and Normalized AFFO - $2.28 to $2.36 (from $2.33 to $2.39). Normalized FFO per diluted share guidance range is essentially unchanged, and the midpoint of the updated Normalized AFFO per diluted share guidance range decreased by 1.7%.
• On February 5, 2018, our board of directors declared a quarterly cash dividend of $0.45 per share of common stock. The dividend will be paid on February 28, 2018 to common stockholders of record as of the close of business on February 15, 2018. This dividend represents a 75% payout based on our fourth quarter 2017 Normalized AFFO per share.
• On February 5, 2018, our board of directors declared a quarterly cash dividend of $0.4453125 per share of Series A preferred stock. The dividend will be paid on February 28, 2018 to preferred stockholders of record as of the close of business on February 15, 2018.

GUIDANCE:

Sabra Health Care REIT sees FY2018 EPS of $2.16-$2.22, versus the consensus of $1.83.

For earnings history and earnings-related data on Sabra Health Care REIT (SBRA) click here.