Sabra Inks Deal To Buy Stake In Enlivant Joint Ventures
Zacks Investment Research | Sep 20, 2017 08:59AM ET
Sabra Health Care REIT (NYSE:HCN), Inc. (NASDAQ:SBRA) has struck a deal to acquire a 49% equity interest in senior housing joint ventures managed by Enlivant. The deal values the portfolio at $1.62 billion and Sabra’s 49% minority interest investment at $371 million. This move will enable the company to achieve greater diversification of its portfolio as well as increase net operating income (NOI) contribution from private pay senior housing assets.
The deal is likely to close prior to year-end 2017 and is structured in a manner such that it paves way for Sabra to gain 100% ownership of the portfolio. Particularly, there is an option which allows Sabra to acquire the residual majority stake over the next three years in the Enlivant Joint Ventures. Sabra plans to finance the investment with proceeds from its revolving credit facility and cash reaped through asset dispositions.
Deal Benefits
The Enlivant Joint Ventures, which also includes the TPG Real Estate — the real estate platform of TPG — as a partner, owns 183 senior housing communities. These communities comprise a total of 8,280 units, across 20 states and are almost 100% private pay.
Currently 82% occupied as against 60% in 2013, this portfolio is anticipated to have scope for additional NOI growth, according to Sabra. In fact, the properties are situated in markets which enjoy stable demographics and limited new supply.
The properties are likely to experience solid demand going forward amid rising senior population. Moreover, the assisted living/memory care demand is basically needs driven and through several market cycles, its demand has proved to be resilient.
Further, the stake acquisition would raise Sabra’s percentage of cash NOI from private payors from 36.7% (pro forma annualized Q2 2017) to 42.4%. Also, it would diversify the Sabra portfolio by tenants.
Presently, the Enlivant Joint Ventures are aiming for 2018 NOI after management fees of around $100-$105 million before projected capital expenditures. This indicates a year-one unlevered cap rate of 6.2%-6.5% and a levered cash-on-cash return of 7.3%-7.9% for Sabra, per the press release. Also, there are scopes of benefit for Sabra from incremental acquisition and developmental prospects.
Sabra currently carries a Zacks Rank #2 (Buy). Also, shares of the company have outperformed the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.