Sabra Health Care REIT, Inc. (SBRA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial health, strategic growth in the SHOP portfolio, and favorable market conditions for senior housing. Despite minimal skilled nursing investments, the company is focusing on high-growth areas with robust occupancy potential. Shareholder returns are stable with no debt concerns, and the market strategy is well-received. The Q&A did not reveal significant risks, and management's optimistic guidance supports a positive outlook. Given the market cap of $3.5 billion, the stock is likely to experience a positive movement of 2% to 8% over the next two weeks.
Key Financial Performance
Normalized FFO per share $0.36, a year-over-year increase of approximately 5%. This reflects the continuing execution of the company's strategy.
Normalized AFFO per share $0.38, a year-over-year increase of approximately 5%. This reflects the continuing execution of the company's strategy.
Cash NOI from managed Senior Housing portfolio $35.6 million for the quarter, compared to $30.1 million last quarter, a sequential increase of $5.5 million. This increase was primarily the result of investment activity completed during the third and fourth quarters, together with sequential growth in the same-store portfolio.
Cash NOI from triple-net portfolio Decreased $1.3 million from the third quarter. This decrease was due to the transition of 4 previously triple-net lease senior housing facilities to the managed senior housing portfolio during the third quarter.
Revenue for same-store managed Senior Housing portfolio Grew 6.4% year-over-year, with Canadian communities growing revenue by 10% in the same period. This reflects strong performance and growth in the portfolio.
Occupancy in same-store managed Senior Housing portfolio Increased 160 basis points to 87.9% year-over-year. Domestic portfolio occupancy increased 80 basis points to 84.7%, while Canadian portfolio grew 300 basis points to 94.2%. This marks the seventh consecutive quarter where occupancy was over 90% in the Canadian portfolio.
RevPOR in same-store managed Senior Housing portfolio Increased 4.2% year-over-year, with the Canadian portfolio increasing 5.2% in the same period. This reflects continued growth in revenue per occupied room.
Cash NOI growth in same-store managed Senior Housing portfolio 12.6% year-over-year. This growth is attributed to rising RevPOR and occupancy, while exPOR increased only 1.6%.
Sequential revenue growth in total managed Senior Housing portfolio 15.8%, with cash NOI growth of 18.4% and margin expansion of 60 basis points. This demonstrates sequential improvement in operating results.
Net debt to adjusted EBITDA ratio 5.00x as of December 31, 2025, a decrease of 0.27x from December 31, 2024. This reflects the company's targeted leverage.
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Operating Highlights
NOI growth for SHOP portfolio: Expected to be sturdy in 2026 as it has been in 2025, with transition facilities contributing to overall growth.
2025 Investments: Completed approximately $450 million in investments, with $240 million of awarded deals expected to close in Q1 and early Q2 of 2026.
Managed Senior Housing Portfolio: Sequential revenue growth of 15.8%, cash NOI growth of 18.4%, and margin expansion of 60 basis points in Q4 2025.
Senior Housing Portfolio Occupancy: Same-store portfolio occupancy increased 160 basis points to 87.9% year-over-year, with Canadian portfolio occupancy at 94.2%.
Revenue Growth in Canadian Communities: Revenue grew by 10% year-over-year in Q4 2025.
Cash NOI Growth: Managed Senior Housing portfolio cash NOI increased by $5.5 million sequentially in Q4 2025.
Leverage: Maintained at a target of 5x, with net debt to adjusted EBITDA ratio at 5.00x as of December 31, 2025.
2026 Guidance: Normalized FFO and AFFO per share expected to increase approximately 5% over 2025.
Dividend Declaration: Quarterly cash dividend of $0.30 per share declared, representing a payout of 79% of Q4 normalized AFFO per share.
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Risk or Challenges
Interest and Other Income Decrease: Interest and other income decreased from $12.7 million to $10.6 million due to lease termination income recognized in the prior quarter, which could impact overall revenue stability.
Cash G&A Increase: Cash general and administrative expenses increased from $9.1 million to $12.5 million, primarily due to performance-based compensation adjustments, which could pressure operational margins.
Cash NOI Decrease in Triple-Net Portfolio: Cash NOI from the triple-net portfolio decreased by $1.3 million due to transitioning facilities to the managed senior housing portfolio, potentially impacting revenue from this segment.
Regulatory Environment Stability: While the regulatory environment is currently stable, any future changes could pose risks to operations and compliance.
Floating Rate Debt Exposure: Although there is no floating rate debt in the permanent capital stack, borrowings under the revolving credit facility are subject to floating rates, which could increase costs if interest rates rise.
Pipeline Execution Risks: The company has a robust pipeline of deals, but delays or failures in closing awarded deals could impact projected growth and financial performance.
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Guidance & Outlook
NOI growth for SHOP portfolio: Expected to be sturdy in 2026, with transition facilities contributing to overall growth.
Normalized FFO and AFFO growth: Guidance of 4.9% and 5.4% growth at the midpoint for normalized FFO and normalized AFFO, respectively, reflecting continued execution of strategy.
Investment activity: Expected to materially exceed the volume of 2025 investments, with $240 million of awarded deals closing in Q1 and early Q2 2026.
Managed Senior Housing portfolio: Expected to see both organic and external growth, supported by industry tailwinds and a robust pipeline.
2026 earnings guidance: Net income: $0.60 to $0.64 per share; FFO and normalized FFO: $1.49 to $1.53 per share; AFFO and normalized AFFO: $1.55 to $1.59 per share. At the midpoint, normalized FFO and AFFO per share are expected to increase approximately 5% over 2025.
Cash NOI growth for triple-net portfolio: Expected to be low single digit at the midpoint, in line with contractual escalators.
Cash NOI growth for same-store managed Senior Housing portfolio: Expected to be in the low to mid-teens for 2026.
General and administrative expense: Expected to be approximately $52 million at the midpoint, including $12 million of stock-based compensation expense.
Cash interest expense: Expected to be $103 million at the midpoint for 2026.
Leverage: Net debt to adjusted EBITDA ratio targeted at 5.00x, with no floating rate debt exposure in the permanent capital stack.
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Shareholder Return Plan
Quarterly cash dividend: On February 2, 2026, Sabra's Board of Directors declared a quarterly cash dividend of $0.30 per common share of stock. The dividend will be paid on February 27, 2026, to common stockholders of record as of the close of business on February 13, 2026. The dividend is adequately covered and represents a payout of 79% of the fourth quarter normalized AFFO per share.
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Key Q&A
Q:What are the building blocks of same-store growth for 2026?
A:The main building blocks include expected continued occupancy growth in the same-store portfolio, with occupancy expected to rise from just under 88% to the low 90s. Rate growth is anticipated to be in the low single digits or potentially higher. Expense growth is expected to be inflationary or below inflationary levels as assets approach 90% occupancy.
Q:What is the status of the RCA loan and its impact on guidance?
A:The RCA loan is being serviced as expected, and discussions with Deerfield and the RCA team are ongoing. The assumption in guidance is that the lease stays in place, though this may not be the ultimate outcome.
Q:What is the financial health of the RCA loan tenant?
A:The tenant is servicing the debt, indicating financial health, and is described as a great operational team.
Q:What are the expectations for maintenance and non-maintenance CapEx in 2026?
A:Maintenance CapEx is expected to remain at similar levels as disclosed quarter-over-quarter. Non-maintenance CapEx is estimated to be in the range of $20 million to $30 million.
Q:What is the expected occupancy growth for 2026 and the maximum occupancy level?
A:Occupancy is expected to exceed 90% in 2026, with mid-90s considered effectively full due to move-ins and move-outs. Some buildings, like one in Canada, have reached 100% occupancy, but this is unusual.
Q:What held back skilled nursing investment in 2025, and what is expected for 2026?
A:Skilled nursing investments were minimal in 2025 and are expected to remain minimal in 2026. SHOP represents 95% of investment opportunities, with skilled nursing investments coming from existing relationships.
Q:What is the performance of the holiday transition assets in the SHOP portfolio?
A:The holiday transition assets are lagging the overall same-store portfolio but have a longer runway for improvement. Guidance assumes some additional progress but not full catch-up within the year.
Q:What drove the outsized occupancy growth for SHOP assets in Canada?
A:The Canadian market is ahead of the U.S. in recovery and has a lower construction rate, contributing to a 300 basis point year-over-year occupancy growth.
Q:What is the composition of the $240 million awarded transactions, and how is the investment landscape changing?
A:The $240 million is significantly weighted towards SHOP, with only $20 million allocated to skilled nursing. The investment landscape is seeing more competition, but high-quality assets at good yields are still available. Return expectations remain in the low double digits.
Q:How are non-same-store SHOP assets performing, and what is their NOI growth potential?
A:Non-same-store SHOP assets include recent investments with high occupancy and assets undergoing recovery. These assets have room for NOI growth and will be included in the same-store pool once performance improves.
Q:What is the pricing power trajectory for the Canadian portfolio, and when will the U.S. catch up?
A:The Canadian portfolio is expected to maintain mid-single-digit RevPOR growth over the next year. The U.S. market is unlikely to catch up soon due to a significant gap in recovery.
Q:What occupancy levels are targeted for new SHOP acquisitions, and what is the potential for NOI growth?
A:New SHOP acquisitions target occupancy levels of 86%-87%, providing room for growth. Higher occupancy levels lead to greater revenue pull-through due to minimal incremental costs.
Q:What are the expectations for assisted living and independent living margins?
A:Assisted living margins are expected to exceed 35%, with independent living margins being even higher. Margin growth has a significant runway.
Q:How is competition affecting cap rates, and what is the focus for acquisitions?
A:Cap rate compression is occurring due to increased competition, but high-quality assets in solid markets are still available at around 7% cap rates. The focus is not on trophy assets or deep value-add opportunities.
Q:Is there interest in lending for new SHOP developments?
A:The company provides preferred equity for developments, offering double-digit returns with a purchase option and a kicker on the back end. Development opportunities are increasing but remain limited.
Q:What is the regulatory outlook for skilled nursing in 2026?
A:Medicaid and Medicare rates are expected to taper down to historical averages by 2026. There are no concerning dialogues at the state level regarding Medicaid rates.
Q:Has the flu season or weather impacted SHOP move-in/move-out activity in early 2026?
A:No significant impact has been observed from the flu season or weather on move-in/move-out activity.
Q:What lessons have been learned from operating the SHOP platform for 10 years?
A:Key lessons include the complexity of operations, the need for a team with operational experience, and the importance of evolving management processes. The company has built a robust operating bench and business intelligence unit to support growth.
Q:How many employees are focused on Senior Housing operations?
A:A significant portion of the 55 employees at Sabra are involved in Senior Housing operations, including asset management, accounting, and investment teams.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the financial health of the RCA loan tenant beyond stating that the debt is being serviced. They also did not provide specifics on the delta between holiday transition assets and the rest of the portfolio, nor did they give a clear timeline for when the U.S. market might catch up to the Canadian market in terms of pricing power. Additionally, they did not elaborate on the exact impact of non-same-store assets on overall performance or provide detailed insights into the SHOP platform's operational challenges faced by competitors.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AFFO investment
Chair Healthcare
Darrin detail
Executive Vice
Form Executive
Friday th
Happy Friday
Healthcare Lukas
Housing asset
Housing nursing
Housing occupancy
Housing portfolio
Housing triple
Lukas Happy
Matros CEO
Officer Secretary
President Finance
SHOP midpoint
Secretary Executive
Senior Housing
VP Senior
Vice President
activity process
age year
asset end
asset share
back portfolio
basis industry
cash yield
couple deal
coverage nursing
deal expectation
occupancy gain
period occupancy
point period
portfolio basis
store Senior
transition facility
venture asset
SBRA Transcript
Sabra Health Care REIT, Inc. (SBRA) Q4 2025 Earnings Call Transcript
Positive2-13
The earnings call reveals strong financial health, strategic growth in the SHOP portfolio, and favorable market conditions for senior housing. Despite minimal skilled nursing investments, the company is focusing on high-growth areas with robust occupancy potential. Shareholder returns are stable with no debt concerns, and the market strategy is well-received. The Q&A did not reveal significant risks, and management's optimistic guidance supports a positive outlook. Given the market cap of $3.5 billion, the stock is likely to experience a positive movement of 2% to 8% over the next two weeks.
Sabra Health Care REIT, Inc. (SBRA) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong financial metrics, strategic investments, and optimistic guidance, particularly in the senior housing sector. Despite the maintenance of guidance, the focus on SHOP investments and refinancing of debt are positive indicators. The Q&A reveals management's confidence in future growth, with strategic steps to stabilize and improve occupancy. The market cap suggests moderate volatility, leading to a positive stock price prediction in the range of 2% to 8%.
Sabra Health Care REIT, Inc. (SBRA) Q2 2025 Earnings Call Transcript
Positive8-5
The earnings call reflects a positive sentiment, with strong financial metrics such as increased FFO and AFFO, a steady dividend, and a busy deal pipeline. Though management provided moderate guidance, they expressed optimism about occupancy trends and market demand. The Q&A highlighted positive occupancy trends, a robust acquisition pipeline, and no major risks, reinforcing a positive outlook. Given the market cap, a 2% to 8% stock price increase is expected.
Earnings call transcript: Sabra Healthcare REIT Meets Q1 2025 Expectations, Stock Rises
Positive5-6
The earnings call reveals strong financial performance with a 6.3% revenue increase, improved occupancy rates, and solid cash NOI growth. The declaration of a $0.30 dividend and a decrease in net debt to adjusted EBITDA ratio indicate financial stability. Despite some concerns in the Q&A, such as unclear guidance on senior housing acquisitions and Medicaid impacts, the overall sentiment is positive. With a market cap of around $3.5 billion, the positive financial metrics and optimistic outlook are likely to result in a stock price increase of 2% to 8% over the next two weeks.
SBRA Report
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