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Sabra Reports Fourth Quarter 2021 Results; Provides Business Update

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IRVINE, Calif., February 22, 2022--(BUSINESS WIRE)--Sabra Health Care REIT, Inc. ("Sabra," the "Company" or "we") (Nasdaq: SBRA) today announced its results of operations for the fourth quarter of 2021. In addition, the Company provided a business update.

FOURTH QUARTER 2021 RESULTS AND RECENT EVENTS

Results per diluted common share for the fourth quarter of 2021 were as follows:

  • Net Loss: $(0.11)

  • FFO: $0.11

  • Normalized FFO: $0.39

  • AFFO: $0.20

  • Normalized AFFO: $0.37

  • Included in net loss and FFO is the acceleration of amortization of the remaining $18.6 million ($0.08 per diluted common share) above-market lease intangible related to our lease with the Avamere Family of Companies ("Avamere"). This acceleration of amortization comes as a result of our recently amended lease with Avamere and is reflected as a reduction of our rental revenues for the fourth quarter of 2021. Additionally, Avamere’s December rental obligation of $3.6 million ($0.02 per diluted common share) was paid in January 2022, and accordingly will be reflected in our results for the first quarter of 2022. See further discussion on Avamere under "Business Update."

  • EBITDARM Coverage for our skilled nursing and specialty hospital portfolios were 1.77x and 3.83x, respectively. Pro forma for Avamere’s recently reduced rent, EBITDARM coverage for our skilled nursing portfolio was 1.86x. See further discussion on EBITDARM Coverage trends under "Business Update."

  • From the beginning of the COVID-19 pandemic through January 2022, we have collected 99.6% of our forecasted rents. This includes drawing on a letter of credit to fund $11.9 million of rent from Avamere. Rent collections through the first three weeks of February are in line with what we normally receive through this point of the month.

  • During the fourth quarter of 2021, we acquired a leased senior housing community for $26.3 million with an initial yield of 6.9%. Additionally, we acquired a closed hotel for $10.9 million that will be converted to an addiction treatment center, with Sabra’s total investment expected to be $33.4 million at a 7.5% yield. We also completed the first tranche of the previously announced investment in Recovery Centers of America for $290.0 million at a 7.5% yield. Our full year 2021 investment activity totaled $419.4 million with a weighted average estimated stabilized cash yield of 7.6%.

  • Subsequent to December 31, 2021, Sabra acquired a managed senior housing community from our proprietary development pipeline for a purchase price of $26.0 million, which includes $5.6 million previously funded through the Company’s preferred equity investment in the development. This investment has an estimated first year cash yield of 6.7%.

  • As noted in our February 3, 2022 press release, Sabra and Sienna Senior Living ("Sienna") have agreed to acquire a portfolio of 11 high-quality Canadian senior housing communities strategically positioned across the provinces of Ontario and Saskatchewan for total consideration of C$307.5 million (USD $243 million). The 1,048-unit portfolio will be acquired through a newly formed 50/50 joint venture, with Sienna to operate the portfolio. The transaction is expected to close upon receipt of regulatory approvals, which is anticipated to occur in the second quarter of 2022.

  • During the fourth quarter of 2021, we completed the sale of four skilled nursing/transitional care facilities, two senior housing communities and two hospitals for gross sales proceeds of $85.9 million. These facilities generated $7.0 million of Annualized Cash NOI.

  • We continue to maintain a strong Net Debt to Adjusted EBITDA ratio of 4.98x as of December 31, 2021.

  • On February 1, 2022, our Board of Directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on February 28, 2022 to common stockholders of record as of the close of business on February 11, 2022. The dividend represents a payout of 81% of our Normalized AFFO per share of $0.37.

BUSINESS UPDATE

Avamere

As noted in our February 2, 2022 press release, Sabra and Avamere entered into a definitive agreement to amend the Company’s master lease. Effective February 1, 2022, Avamere’s annual base rent on the current portfolio has been reduced roughly 30% to $30.7 million, representing an annual run rate reduction of $0.06 per diluted common share. Sabra has the opportunity to recapture this rent reduction as the portfolio’s performance improves. As a condition to amending this lease, Avamere has paid past due rent for December 2021 totaling $3.6 million and has agreed to pay January 2022 rent totaling $3.7 million by March 25, 2022.

The following table illustrates the pro forma impact of this rent reduction on our historical trailing twelve-month EBITDARM coverages for Avamere and our skilled nursing portfolio.

Avamere

1Q 2020

2Q 2020

3Q 2020

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

T12M Coverage - Reported

1.17x

1.20x

1.31x

1.37x

1.53x

1.54x

1.40x

1.33x

T12M Coverage - Pro Forma

1.53x

1.60x

1.77x

1.89x

2.14x

2.17x

1.99x

1.87x

Skilled Nursing / Transitional Care

1Q 2020

2Q 2020

3Q 2020

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

T12M Coverage - Reported

1.65x

1.66x

1.84x

1.93x

1.99x

1.99x

1.78x

1.77x

T12M Coverage - Pro Forma

1.71x

1.73x

1.92x

2.02x

2.09x

2.09x

1.87x

1.86x

Occupancy Trends — Skilled Nursing

On average, Sabra’s seven largest skilled nursing tenants (representing 39% of annualized cash NOI) saw a slight sequential decline in occupancy in the fourth quarter driven primarily by the rise of the Omicron variant of COVID-19, as well as admissions restrictions related to state mandates and labor shortages. These headwinds continued into January, while preliminary data for February suggests occupancy is beginning to rebound.

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

North American

77.5 %

79.6 %

78.7 %

78.7 %

79.8 %

79.7 %

78.9 %

Signature Healthcare

75.5 %

76.4 %

76.2 %

76.5 %

76.8 %

76.7 %

75.9 %

Avamere

75.5 %

75.6 %

72.7 %

71.7 %

69.6 %

70.8 %

71.8 %

Cadia

81.8 %

83.1 %

84.5 %

82.9 %

83.4 %

82.8 %

81.5 %

Healthmark

62.5 %

64.0 %

64.1 %

64.0 %

63.7 %

64.7 %

64.8 %

The McGuire Group

81.1 %

82.7 %

85.3 %

85.4 %

84.2 %

83.4 %

84.5 %

CommuniCare

80.2 %

80.8 %

83.2 %

83.0 %

81.6 %

79.3 %

79.0 %

Total

75.7 %

76.7 %

76.6 %

76.4 %

76.0 %

76.0 %

75.8 %

EBITDARM Coverage

Trailing 3-month EBITDARM coverage excluding Provider Relief Funds ("PRF") (reported one quarter in arrears) increased sequentially in our skilled nursing and specialty hospital segments as a result of improved operating performance. Meanwhile, trailing 3-month EBITDARM coverage excluding PRF in our leased senior housing segment held steady as higher occupancy was offset by labor cost pressure.

Skilled Nursing / Transitional Care

1Q 2020

2Q 2020

3Q 2020

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

T12M Coverage*

1.71x

1.73x

1.92x

2.02x

2.09x

2.09x

1.87x

1.86x

T12M Coverage w/o PRF*

1.71x

1.72x

1.66x

1.63x

1.51x

1.44x

1.44x

1.54x

T3M Coverage w/o PRF*

1.73x

1.81x

1.61x

1.36x

1.28x

1.52x

1.58x

1.78x

Senior Housing - Leased

1Q 2020

2Q 2020

3Q 2020

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

T12M Coverage

1.38x

1.38x

1.31x

1.25x

1.23x

1.12x

1.09x

1.04x

T12M Coverage w/o PRF

1.38x

1.38x

1.30x

1.23x

1.19x

1.08x

1.06x

1.02x

T3M Coverage w/o PRF

1.39x

1.33x

1.08x

1.18x

1.18x

0.91x

1.00x

1.00x

Specialty Hospitals and Other

1Q 2020

2Q 2020

3Q 2020

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

T12M Coverage

3.36x

3.31x

3.38x

3.55x

3.67x

3.91x

3.86x

3.83x

T12M Coverage w/o PRF

3.36x

3.25x

3.28x

3.45x

3.57x

3.87x

3.83x

3.80x

T3M Coverage w/o PRF

4.00x

2.34x

3.59x

3.86x

4.46x

3.59x

3.46x

3.73x

* Pro forma for Avamere's recently restructured lease

Same-Store Senior Housing - Managed

On average, REVPOR grew 3% sequentially across our assisted living communities driven primarily by annual rent increases implemented on October 1st in our Enlivant portfolio. REVPOR in our independent living portfolio has held steady as rate increases have been more prevalent in higher-acuity settings as operators attempt to offset rising labor costs.

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

YoY Change

Assisted living

$

6,061

$

5,951

$

6,028

$

6,065

$

6,247

Sequential Change

(1.8

) %

1.3

%

0.6

%

3.0

%

3.1

%

Independent living

$

2,529

$

2,553

$

2,544

$

2,531

$

2,542

Sequential Change

0.9

%

(0.4

) %

(0.5

) %

0.4

%

0.5

%

After several months of steady gains following the implementation of vaccine clinics, occupancy growth slowed in the fourth quarter due to the rise of the Omicron variant of COVID-19 and normal seasonality. In addition, Cash NOI declined sequentially as revenue growth was more than offset by operating expense headwinds. Operating expense growth was concentrated in our assisted-living portfolio and was primarily driven by labor challenges that forced operators to increase wages and utilize agency staffing to fill open positions.

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

Occupancy - AL

77.9

%

68.8

%

70.8

%

73.5

%

73.3

%

Sequential Change

(9.1

) %

2.0

%

2.7

%

(0.2

) %

Occupancy - IL

80.5

%

79.0

%

78.6

%

79.8

%

80.7

%

Sequential Change

(1.5

) %

(0.4

) %

1.2

%

0.9

%

Resident fees and services

$

38,343

$

35,675

$

36,636

$

37,002

$

37,852

Sequential Change

(7.0

) %

2.7

%

1.0

%

2.3

%

Cash NOI 1

$

10,199

$

6,945

$

9,316

$

8,246

$

7,374

Sequential Change

(31.9

) %

34.1

%

(11.5

) %

(10.6

) %

1 Resident fees and services and Cash NOI balances include $0.6 million and $0.5 million of Grant Income for 4Q 2020 and 2Q 2021, respectively.

Commenting on the fourth quarter's results, Rick Matros, CEO and Chair, said, "COVID cases in our portfolio peaked before the end of January and then started dropping, materially so for the staff at our facilities. Consequently, with more staff available, occupancy has increased the first two weeks of February. We are more optimistic that absent the emergence of a new variant, our portfolio and the broader industry can get back on track toward recovery. We are also pleased to have agreed with Avamere on a restructuring of their lease obligations and believe the restructured lease provides them with a path for success. Our pending Canadian joint venture gets 2022 off to a good start on the investment front. We have diligently pursued opportunities to expand our presence in Canada over the last several years. Canada has proven to be a stable market and we look forward to continued growth there. As always, we want to express gratitude to the staff at our facilities for their commitment to the mission, in the face of the most difficult of circumstances."

LIQUIDITY

As of December 31, 2021, we had approximately $1.1 billion of liquidity, consisting of unrestricted cash and cash equivalents of $112.0 million and available borrowings of $1.0 billion under our revolving credit facility. As of December 31, 2021, we also had $475.0 million available under the ATM Program.

CONFERENCE CALL AND COMPANY INFORMATION

A conference call with a simultaneous webcast to discuss the 2021 fourth quarter results will be held on Tuesday, February 22, 2022 at 10:00 am Pacific Time. The dial-in number for U.S. participants is (844) 862-3710. For participants outside the U.S., the dial-in number is (612) 979-9902. The conference ID number is 3672788. The webcast URL is https://edge.media-server.com/mmc/p/r5to66um. A digital replay of the call will be available on the Company’s website at www.sabrahealth.com. The Company’s supplemental information package for the fourth quarter will also be available on the Company’s website in the "Investors" section.

ABOUT SABRA

As of December 31, 2021, Sabra’s investment portfolio included 416 real estate properties held for investment (consisting of (i) 279 Skilled Nursing/Transitional Care facilities, (ii) 60 Senior Housing communities ("Senior Housing - Leased"), (iii) 49 Senior Housing communities operated by third-party property managers pursuant to property management agreements ("Senior Housing - Managed") and (iv) 28 Specialty Hospitals and Other facilities), one investment in a sales-type lease, 18 investments in loans receivable (consisting of (i) two mortgage loans, (ii) one construction loan and (iii) 15 other loans), eight preferred equity investments and one investment in an unconsolidated joint venture. As of December 31, 2021, Sabra’s real estate properties held for investment included 41,346 beds/units, spread across the United States and Canada.

FORWARD-LOOKING STATEMENTS SAFE HARBOR

This release contains "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. These statements may be identified, without limitation, by the use of "expects," "believes," "intends," "should" or comparable terms or the negative thereof. Examples of forward-looking statements include all statements regarding our expectations regarding our recent and pending investments; the impact of the COVID-19 pandemic on our tenants, operators and Senior Housing - Managed communities; our expectations regarding the potential mitigating effects of the state and federal assistance programs available to our tenants, operators and Senior Housing - Managed communities; our expectations regarding the recovery of our portfolio and industry from the COVID-19 pandemic; our expectations regarding opportunities for growth in the Canadian market; and our other expectations regarding our future financial position, results of operations, cash flows, liquidity, business strategy, growth opportunities, potential investments and dispositions, and plans and objectives for future operations and capital raising activity.

Our actual results may differ materially from those projected or contemplated by our forward-looking statements as a result of various factors, including, among others, the following: the ongoing COVID-19 pandemic and measures intended to prevent its spread, and the related impact on our tenants, operators and Senior Housing - Managed communities; operational risks with respect to our Senior Housing - Managed communities; competitive conditions in our industry; our ability to consummate the pending Canadian portfolio acquisition in a joint venture with Sienna on the terms and timing described in this press release or at all; the loss of key management personnel; uninsured or underinsured losses affecting our properties and the possibility of environmental compliance costs and liabilities; potential impairment charges and adjustments related to the accounting of our assets; the potential variability of our reported rental and related revenues as a result of Accounting Standards Update ("ASU") 2016-02, Leases, as amended by subsequent ASUs, on January 1, 2019; risks associated with our investment in our unconsolidated joint venture; catastrophic weather and other natural or man-made disasters, the effects of climate change on our properties and a failure to implement sustainable and energy-efficient measures; increased operating costs for our tenants and operators; increased healthcare regulation and enforcement; our tenants’ dependency on reimbursement from governmental and other third-party payor programs; the effect of our tenants declaring bankruptcy or becoming insolvent; our ability to find replacement tenants and the impact of unforeseen costs in acquiring new properties; the impact of litigation and rising insurance costs on the business of our tenants; the impact of required regulatory approvals of transfers of healthcare properties; environmental compliance costs and liabilities associated with real estate properties we own; our tenants’ or operators’ failure to adhere to applicable privacy and data security laws, or a material breach of our or our tenants’ or operators’ information technology; our concentration in the healthcare property sector, particularly in skilled nursing/transitional care facilities and senior housing communities, which makes our profitability more vulnerable to a downturn in a specific sector than if we were investing in multiple industries; the significant amount of and our ability to service our indebtedness; covenants in our debt agreements that may restrict our ability to pay dividends, make investments, incur additional indebtedness and refinance indebtedness on favorable terms; increases in market interest rates; adverse changes in our credit ratings; our ability to make dividend distributions at expected levels; our ability to raise capital through equity and debt financings; changes in foreign currency exchange rates and other risks associated with our ownership of property outside the U.S.; the relatively illiquid nature of real estate investments; our ability to maintain our status as a real estate investment trust ("REIT") under the federal tax laws; compliance with REIT requirements and certain tax and tax regulatory matters related to our status as a REIT; changes in tax laws and regulations affecting REITs (including the potential effects of the Tax Cuts and Jobs Act); the ownership limits and takeover defenses in our governing documents and under Maryland law, which may restrict change of control or business combination opportunities; and the exclusive forum provisions in our bylaws.

Additional information concerning risks and uncertainties that could affect our business can be found in our filings with the Securities and Exchange Commission (the "SEC"), including in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. We do not intend, and we undertake no obligation, to update any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, unless required by law to do so.

TENANT, OPERATOR AND BORROWER INFORMATION

This release includes information regarding certain of our tenants that lease properties from us and our operators and borrowers, most of which are not subject to SEC reporting requirements. The information related to our tenants, operators and borrowers that is provided in this release has been provided by, or derived from information provided by, such tenants, operators and borrowers. We have not independently verified this information. We have no reason to believe that such information is inaccurate in any material respect. We are providing this data for informational purposes only.

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

This release includes the following financial measures defined as non-GAAP financial measures by the SEC: Adjusted EBITDA, cash net operating income ("Cash NOI"), Annualized Cash NOI, funds from operations ("FFO"), Normalized FFO, Adjusted FFO ("AFFO"), Normalized AFFO, FFO per diluted common share, Normalized FFO per diluted common share, AFFO per diluted common share and Normalized AFFO per diluted common share. These measures may be different than non-GAAP financial measures used by other companies, and the presentation of these measures is not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U.S. generally accepted accounting principles. An explanation of these non-GAAP financial measures is included under "Reporting Definitions" in this release, and reconciliations of these non-GAAP financial measures to the GAAP financial measures we consider most comparable are included on the Investors section of our website at https://ir.sabrahealth.com/investors/financials/quarterly-results.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(dollars in thousands, except per share data)

Three Months Ended December 31,

Year Ended December 31,

2021

2020

2021

2020

Revenues:

Rental and related revenues (1)

$

87,183

$

110,733

$

396,716

$

430,584

Interest and other income

7,940

3,184

17,317

11,940

Resident fees and services

40,534

38,137

155,512

156,045

Total revenues

135,657

152,054

569,545

598,569

Expenses:

Depreciation and amortization

45,079

44,158

178,991

176,737

Interest

25,676

24,524

98,632

100,424

Triple-net portfolio operating expenses

5,011

5,109

20,221

20,590

Senior housing - managed portfolio operating expenses

32,373

27,987

120,980

110,963

General and administrative

8,237

8,105

34,669

32,755

Provision for loan losses and other reserves

2,045

1,149

3,935

1,855

Impairment of real estate

9,004

849

9,499

4,003

Total expenses

127,425

111,881

466,927

447,327

Other income (expense):

Loss on extinguishment of debt

(32,862

)

(34,622

)

(531

)

Other (expense) income

(13

)

(154

)

373

2,154

Net gain on sales of real estate

14,085

33

12,301

2,861

Total other (expense) income

(18,790

)

(121

)

(21,948

)

4,484

(Loss) income before loss from unconsolidated joint venture and income tax (expense) benefit

(10,558

)

40,052

80,670

155,726

Loss from unconsolidated joint venture

(13,264

)

(3,562

)

(192,081

)

(16,599

)

Income tax (expense) benefit

(531

)

627

(1,845

)

(710

)

Net (loss) income

$

(24,353

)

$

37,117

$

(113,256

)

$

138,417

Net (loss) income, per:

Basic common share

$

(0.11

)

$

0.18

$

(0.52

)

$

0.67

Diluted common share

$

(0.11

)

$

0.18

$

(0.52

)

$

0.67

Weighted-average number of common shares outstanding, basic

227,519,771

208,101,883

219,073,027

206,223,503

Weighted-average number of common shares outstanding, diluted

227,519,771

209,322,132

219,073,027

207,252,830

(1) See page 8 for additional details regarding Rental and related revenues.

SABRA HEALTH CARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME - SUPPLEMENTAL INFORMATION

(dollars in thousands, except per share data)

Three Months Ended December 31,

Year Ended December 31,

2021

2020

2021

2020

Cash rental income

$

99,023

$

99,779

$

404,503

$

405,257

Straight-line rental income

1,945

3,711

13,059

17,360

Straight-line rental income receivable write-offs

(157

)

(25,370

)

(13,750

)

Above/below market lease amortization

1,091

...