Core Viewpoint - The article discusses the performance of three high-yield healthcare stocks during the COVID-19 pandemic, highlighting the contrasting strategies and outcomes of Sabra Healthcare, Omega Healthcare, and Alexandria Real Estate [1][2]. Group 1: Sabra Healthcare (SBRA) - Sabra Healthcare made decisions during the pandemic that ensured its long-term survival, but it significantly cut its dividend from $0.45 to $0.30 per share, a 33% reduction, which has remained unchanged since then [4][5]. - The company generates approximately 70% of its rents from senior housing, a sector severely impacted by the pandemic, leading to challenges for income investors relying on dividends [5][6]. - Compared to other healthcare REITs that have started to raise their dividends again, Sabra is lagging behind, making it less attractive for dividend-focused investors [6]. Group 2: Omega Healthcare (OHI) - Omega Healthcare maintained its dividend at $0.67 per share since 2019, avoiding cuts during the pandemic, which is reassuring for passive income investors [8][10]. - The company reported an 8% year-over-year increase in adjusted funds from operations (FFO) in Q2 2025 and made over half a billion in investments, indicating a readiness for growth [9]. - With the recovery in the senior housing sector, Omega is positioned as a reliable high-yield option for investors, despite not expecting significant dividend increases [10]. Group 3: Alexandria Real Estate (ARE) - Alexandria Real Estate focuses on medical research office assets and has increased its dividend annually for 15 consecutive years, even during the pandemic [11]. - The REIT's occupancy rate fell from 94.6% to 90.8% in 2025, and its FFO has been weak, but the dividend remains well-covered with an FFO payout ratio of approximately 57% [12]. - Despite concerns about the office downturn and changes in the healthcare industry, Alexandria's business model is expected to endure, making it a potential high-yield investment for conservative income investors [13][14].

Core Insights - Sunshine Retirement Living is expanding its national presence through a new management agreement with Sabra Health Care REIT, Inc., adding five independent living communities and increasing its portfolio from 35 to 40 communities across 17 states [1][5] - This marks Sunshine Retirement Living's first third-party management agreement, transitioning the company from an owner-operator to a full-scale third-party management provider [2][5] - The demand for senior housing is growing, and the company aims to enhance the lives of seniors nationwide by extending its service model to third-party owners [3][5] Company Strategy - Sunshine Retirement Living focuses on affordability, compassionate care, community engagement, and culinary excellence, addressing the needs of the underserved mid-market segment in senior housing [2][4] - The company is committed to wellness-focused living, offering innovative programs that promote physical fitness, mindfulness, and lifelong learning, including the introduction of the Blue Zones program [4][5] - Sunshine Retirement Living is actively seeking partnerships with real estate investment trusts (REITs) and other senior housing owners to maximize occupancy and enhance resident satisfaction [6][5] Market Trends - The senior housing market is experiencing favorable long-term demographic trends, with the 85+ population expected to triple by 2050, driving demand for quality senior housing [4][5] - The mid-market segment remains one of the fastest-growing areas in senior housing, and Sunshine Retirement Living is positioned to pioneer innovative solutions to make high-quality senior living accessible [3][4]

Financial Data and Key Metrics Changes - The company reported normalized FFO per share of $0.37 and normalized AFFO per share of $0.38, representing a 6% improvement over the same period in 2024 [20][22] - Total normalized FFO and normalized AFFO for the quarter were $89.2 million and $91.6 million respectively, reflecting strong sequential growth from increased NOI [20][22] - The net debt to adjusted EBITDA ratio was five times as of June 30, 2025, a decrease of 0.19 times from March 31, 2025 [24][26] Business Line Data and Key Metrics Changes - The managed senior housing portfolio contributed nearly 21% of total annualized cash NOI, with cash NOI for the quarter growing 17.1% year over year in the same store portfolio [14][18] - Cash rental income from the triple net portfolio increased by $2.3 million from the first quarter, driven by a $1.4 million increase in percentage rents [20][21] - The occupancy rate in the same store portfolio was 86% compared to 84.6% in 2024, with cash NOI growth expected to be in the low to mid-teens for the same store managed senior housing portfolio [16][24] Market Data and Key Metrics Changes - The average Medicaid rate increase is expected to be around 3.5%, with the top five skilled nursing tenants averaging just above 5% [9][12] - The Medicare market saw an upward revision from 2.8% to 3.2%, which is considered unusual but positive for the company [9][12] - The Canadian portfolio's RevPAR increased by 6.8% year over year, with occupancy above 90% for over five quarters [17][18] Company Strategy and Development Direction - The company aims to increase its SHOP (Senior Housing Operating Portfolio) from 20% to 30% by 2026, requiring approximately $1 billion in investments [11][12] - The focus is on acquiring well-performing newer senior housing communities that cater to the baby boomer generation, as the supply-demand equation remains constrained [15][18] - The company is not interested in building a loan book or engaging in complex joint venture structures, preferring straightforward traditional deals [36][104] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the investment pipeline, targeting $4.5 billion in investments for the year, with a strong deal flow expected to continue [11][70] - The company noted that the operational recovery in skilled nursing and senior housing has allowed for robust pricing, despite some challenges in the market [46][92] - Management remains optimistic about future occupancy and NOI growth, anticipating improvements as the transition from the holiday portfolio stabilizes [65][66] Other Important Information - The company declared a quarterly cash dividend of $0.30 per share, representing a payout of 79% of the second quarter normalized AFFO per share [27][28] - The company has ample liquidity of approximately $1.2 billion, consisting of unrestricted cash and available borrowings [27][26] Q&A Session Summary Question: Investment guidance and pipeline - Management indicated confidence in reaching the $400 million to $500 million investment range for the year, depending on timing [30][31] Question: Same store SHOP NOI growth - Management noted that the same store SHOP NOI growth is running at the high end of expectations, with hopes for upside [38][40] Question: Skilled nursing opportunities - Management clarified that while pricing is not an issue, the focus is on finding quality assets in the right markets [32][34] Question: Holiday transition impact - Management explained that the transition of holiday assets has had an impact on occupancy and NOI, but they expect improvements moving forward [44][65] Question: Labor market conditions - Management reported wage increases of around 4% across both skilled nursing and senior housing portfolios, with no significant labor market issues identified [96][99] Question: Operator selection criteria - Management emphasized the importance of understanding operators' outcomes and their willingness to grow as key selection criteria for new operators [103][104]

Financial Data and Key Metrics Changes - The normalized FFO per share for Q2 2025 was $0.37, and normalized AFFO per share was $0.38, representing a 6% improvement over the same period in 2024 [21][24] - Total normalized FFO and normalized AFFO for the quarter were $89.2 million and $91.6 million respectively, reflecting strong sequential growth from increased NOI in both triple net and managed senior housing portfolios [21][22] - Cash rental income from the triple net portfolio increased by $2.3 million from the first quarter, driven by a $1.4 million increase in percentage rents [22] Business Line Data and Key Metrics Changes - The managed senior housing portfolio contributed nearly 21% to total annualized cash NOI, with cash NOI for the quarter growing 17.1% year over year in the same store portfolio [14][18] - Revenue for the same store managed senior housing portfolio grew 5.6% year over year, with occupancy increasing to 86% from 84.6% in 2024 [16] - Cash NOI from the managed senior housing portfolio totaled $25.3 million for the quarter, up from $24.1 million last quarter [22] Market Data and Key Metrics Changes - The average Medicaid rate increase is expected to be around 3.5%, with the top five skilled nursing tenants averaging just above 5% [8] - The Medicare market saw an upward revision from 2.8% to 3.2%, which is considered unusual but positive [8] - The Canadian portfolio's RevPAR increased by 6.8% year over year, with occupancy above 90% for over five quarters [17] Company Strategy and Development Direction - The company aims to increase its SHOP (Senior Housing Operating Portfolio) from 20% to 30% by 2026, requiring $1 billion in investments [11] - The focus remains on acquiring well-performing newer senior housing communities that cater to the baby boomer generation [15] - The company is not interested in building a loan book or complex joint venture structures, preferring straightforward traditional deals [38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the investment activity and operational performance, noting that triple net rent coverage is at new highs across all asset classes [12] - The company anticipates continued growth momentum into 2026, with a strong pipeline of investment opportunities [12][71] - Management remains cautious about the potential impact of economic factors on Medicare and Medicaid but believes the industry is in a healthier position than before [92][96] Other Important Information - The company declared a quarterly cash dividend of $0.30 per share, representing a payout of 79% of the second quarter normalized AFFO per share [29][30] - The net debt to adjusted EBITDA ratio was five times as of June 30, 2025, a decrease from previous quarters, indicating improved leverage [25][26] Q&A Session Summary Question: Investment guidance and confidence in reaching $500 million for the year - Management indicated that the investment range would be between $400 million to $500 million, depending on timing [33] Question: Composition of future investments and skilled nursing deals - Management clarified that while pricing is not an issue, the focus is on finding quality assets in the right markets, with a majority of future investments likely still in SHOP [35] Question: Same store SHOP NOI performance and guidance - Management expressed hope for upside but opted for a moderate approach in guidance adjustments [42] Question: Impact of holiday transition on occupancy and NOI - Management noted that the transition had an initial negative impact but expected improvements in occupancy and NOI moving forward [66] Question: Labor market conditions and wage increases - Wage increases across operators are around 4%, with no significant issues in specific markets [100][103] Question: Selection criteria for new operators - The selection process involves understanding operators' quality outcomes and their desire for growth [107]

Financial Performance & Guidance - Sabra is updating its 2025 Net Income guidance to a range of $0.77 to $0.79 per diluted common share[18] - The company projects 2025 FFO (Funds From Operations) to be in the range of $1.52 to $1.54 per diluted common share[18] - Normalized FFO for 2025 is guided between $1.45 and $1.47 per diluted common share[18] - Sabra anticipates 2025 AFFO (Adjusted Funds From Operations) to range from $1.47 to $1.49 per diluted common share[18] - Normalized AFFO for 2025 is expected to be between $1.49 and $1.51 per diluted common share, implying a 4% year-over-year growth[18, 19] Portfolio Metrics - As of June 30, 2025, the weighted average remaining lease term for the portfolio is 7 years[43] - The company has 392 investments and 58 relationships[43] - Skilled Nursing facilities represent 38% of the portfolio mix[43] - The average occupancy percentage is 83% for SNF/TC (Skilled Nursing/Transitional Care) Leased, 90% for SH (Senior Housing) - Leased, and 78% for BH/Hosp/Oth (Behavioral Health/Hospital/Other)[43] - SNF/TC EBITDARM coverage is 2.27x, and SH EBITDARM coverage is 1.49x[43] Balance Sheet & Capitalization - As of June 30, 2025, the company's consolidated enterprise value is $6.7 billion[67] - Common equity represents 64% of the capital structure[67] - Secured debt accounts for 1% of the capital structure[67]

Core Insights - Sabra Healthcare reported revenue of $189.15 million for the quarter ended June 2025, reflecting a 7.4% increase year-over-year and a surprise of +1.98% over the Zacks Consensus Estimate of $185.47 million [1] - The company's EPS for the quarter was $0.38, significantly higher than $0.10 in the same quarter last year, with an EPS surprise of +2.7% compared to the consensus estimate of $0.37 [1] Financial Performance Metrics - Interest and other income reached $10.34 million, exceeding the estimated $10.03 million, marking a +13.6% change year-over-year [4] - Rental and related revenues were reported at $99.82 million, surpassing the estimated $95.9 million, with a +0.7% change compared to the previous year [4] - Resident fees and services generated $78.99 million, slightly above the $78.6 million estimate, representing a +16.3% year-over-year increase [4] - Net Earnings Per Share (Diluted) was $0.27, compared to the average estimate of $0.17, indicating a positive performance [4] Stock Performance - Over the past month, Sabra's shares have returned -1.8%, contrasting with the Zacks S&P 500 composite's +0.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance in the near term [3]

Core Viewpoint - Sabra Health Care REIT significantly outperformed market expectations in Q2 2025, with strong growth in both normalized FFO and revenue, indicating robust operational momentum and balance sheet improvement [1][2]. Financial Performance - Normalized FFO per diluted share was $0.37, exceeding the analyst forecast of $0.17, and up 5.7% from $0.35 in Q2 2024 [2]. - Revenue (GAAP) reached $189.15 million, surpassing estimates of $180.97 million, and reflecting a 7.4% increase compared to Q2 2024 [1][2]. - Net income per diluted common share (GAAP) was $0.27, a significant increase of 170.0% from $0.10 in Q2 2024 [2]. Operational Highlights - Managed senior housing was a key driver of performance, with a 17.1% year-over-year increase in same-store managed senior housing Cash NOI in Q2 2025 [5]. - The company aims to increase the share of managed senior housing in its portfolio from 20% to 30% [4]. - Operational disruptions from transitioning 21 senior housing properties to new operators were minimal, indicating effective management [5]. Investment Activity - Sabra closed $122.3 million in new senior housing investments year-to-date as of Q2 2025, with an additional $220 million in awarded deals pending [5][7]. - Expected cash yields on new investments are projected to be in the high-7% range [7]. Financial Management - The company refinanced $500 million in unsecured notes with a five-year unsecured term loan at a lower fixed rate, expected to reduce future interest expenses [8]. - Net debt to adjusted EBITDA improved to 5.00x as of June 30, 2025, down from 5.19x as of March 31, 2025 [9]. Future Outlook - Management provided updated guidance for FY2025, projecting net income between $0.77 and $0.79, FFO between $1.52 and $1.54, and normalized FFO between $1.45 and $1.47 [12]. - The outlook anticipates low single-digit growth in triple-net cash net operating income and low- to mid-teens growth in managed senior housing cash NOI for 2025 [12]. - The company is focused on executing over $350 million in senior housing investments and monitoring EBITDARM coverage as new Medicare and Medicaid rates take effect [13].

Financial Performance - Sabra Healthcare reported quarterly funds from operations (FFO) of $0.38 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, and up from $0.36 per share a year ago, representing an FFO surprise of +2.70% [1] - The company posted revenues of $189.15 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.98%, compared to year-ago revenues of $176.14 million [2] Market Performance - Sabra shares have increased approximately 5.6% since the beginning of the year, while the S&P 500 has gained 6.1% [3] - The current consensus FFO estimate for the upcoming quarter is $0.38 on revenues of $188.99 million, and for the current fiscal year, it is $1.49 on revenues of $749.82 million [7] Industry Outlook - The REIT and Equity Trust - Other industry, to which Sabra belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in estimate revisions, which can impact Sabra's stock performance [5]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended June 30, 2025, show an increase in total assets to $5.33 billion, with net income rising significantly to $105.8 million [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased slightly to $5.33 billion from $5.30 billion at year-end 2024, primarily driven by a rise in cash and cash equivalents Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$5,327,997** | **$5,303,679** | | Real estate investments, net | $4,479,291 | $4,513,734 | | Cash and cash equivalents | $95,175 | $60,468 | | **Total Liabilities** | **$2,616,512** | **$2,562,391** | | Revolving credit facility | $163,023 | $106,554 | | Senior unsecured notes, net | $1,736,398 | $1,736,025 | | **Total Equity** | **$2,711,485** | **$2,741,288** | [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) For the six months ended June 30, 2025, total revenues increased to $372.7 million, and net income more than doubled to $105.8 million, significantly boosted by gains on real estate sales and other income Six Months Ended June 30, (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total revenues | $372,693 | $342,888 | | Total expenses | $291,708 | $293,868 | | Net gain on sales of real estate | $9,974 | $1,776 | | **Net income** | **$105,846** | **$50,229** | | Diluted EPS | $0.44 | $0.22 | Three Months Ended June 30, (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total revenues | $189,150 | $176,141 | | **Net income** | **$65,542** | **$23,975** | | Diluted EPS | $0.27 | $0.10 | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) For the six months ended June 30, 2025, comprehensive income was $82.9 million, lower than net income due to a total other comprehensive loss of $23.0 million Comprehensive Income Summary (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income | $105,846 | $50,229 | | Total other comprehensive (loss) income | $(22,971) | $7,400 | | **Comprehensive income** | **$82,875** | **$57,629** | [Consolidated Statements of Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Equity) Total equity decreased from $2.74 billion to $2.71 billion at June 30, 2025, primarily due to common dividends and other comprehensive loss, partially offset by net income and stock issuance - Key movements in equity for the six months ended June 30, 2025 included **$105.8 million of net income**, offset by **$145.1 million in common dividends** ($0.60 per share) and a **$23.0 million other comprehensive loss**[25](index=25&type=chunk) - The company issued **2.2 million shares of common stock**, net, resulting in proceeds of **$24.7 million** during the first six months of 2025[25](index=25&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities increased to $161.2 million, while investing and financing activities resulted in net cash outflows Six Months Ended June 30, (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $161,222 | $132,923 | | Net cash used in investing activities | $(61,576) | $(70,531) | | Net cash used in financing activities | $(64,517) | $(66,642) | | **Net increase (decrease) in cash** | **$35,129** | **$(4,250)** | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, real estate acquisitions of $61.1 million, dispositions yielding $10.0 million in gains, and the subsequent redemption of $500 million in senior notes - During the first six months of 2025, the company acquired one Senior Housing - Managed community and 24 units for a total consideration of **$61.1 million**[41](index=41&type=chunk) - The company disposed of six facilities for net consideration of **$37.1 million**, resulting in a net gain on sale of **$10.0 million**[53](index=53&type=chunk) - Subsequent to the quarter end, on July 31, 2025, the company redeemed all **$500.0 million** of its 5.125% senior unsecured notes due 2026[66](index=66&type=chunk) - The company utilized its at-the-market (ATM) program, issuing **1.8 million shares** to settle forward sale agreements for net proceeds of **$29.9 million**[106](index=106&type=chunk)[107](index=107&type=chunk) - As of June 30, 2025, **15.1 million shares** remained outstanding under forward sale agreements[107](index=107&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses revenue growth driven by increased resident fees, significant net income growth from asset sales and other income, a strong liquidity position, and recent debt refinancing activities [Overview](index=29&type=section&id=Overview) Sabra operates as a REIT focused on healthcare real estate, growing its portfolio through acquisitions and selective asset sales, and recently refinanced debt by redeeming 2026 notes - The company's primary business is acquiring, financing, and owning healthcare real estate leased to third-party tenants or operated by third-party managers[117](index=117&type=chunk)[118](index=118&type=chunk) - In the first six months of 2025, Sabra acquired one Senior Housing - Managed community and 24 units for **$61.1 million**[126](index=126&type=chunk) - The company sold six facilities for **$37.1 million**, generating a **$10.0 million net gain** as part of its capital recycling initiative[127](index=127&type=chunk) - On July 31, 2025, the company redeemed all **$500.0 million** of its 5.125% senior unsecured notes due 2026, financed by a new term loan[128](index=128&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2025, total revenues increased by 8.7% to $372.7 million, and net income surged to $105.8 million, boosted by property sales gains and other income Comparison of Results (Six Months Ended June 30, in thousands) | Line Item | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental and related revenues | $195,860 | $190,872 | $4,988 | 3% | | Resident fees and services | $156,432 | $133,970 | $22,462 | 17% | | Interest expense | $54,648 | $57,722 | $(3,074) | (5)% | | Impairment of real estate | $4,103 | $18,472 | $(14,369) | (78)% | | Other income | $14,747 | $838 | $13,909 | 1,660% | - The **$22.5 million increase** in Resident fees and services was driven by **$12.5 million from acquisitions** and the remainder from increased occupancy and rates[152](index=152&type=chunk) - Other income for the six months of 2025 included a **$17.2 million gain** from the reclassification of previously terminated interest rate swaps[162](index=162&type=chunk) [Funds from Operations and Adjusted Funds from Operations](index=37&type=section&id=Funds%20from%20Operations%20and%20Adjusted%20Funds%20from%20Operations) For the six months ended June 30, 2025, FFO increased to $191.3 million ($0.79 per share), and AFFO was $177.4 million ($0.73 per share), reflecting improved operating performance FFO and AFFO Reconciliation Summary (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $105,846 | $50,229 | | **FFO** | **$191,278** | **$155,957** | | **AFFO** | **$177,354** | **$165,003** | FFO and AFFO Per Diluted Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | FFO per diluted common share | $0.79 | $0.67 | | AFFO per diluted common share | $0.73 | $0.70 | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Sabra had approximately $1.2 billion in liquidity, actively utilizing its ATM equity program, and subsequently redeemed $500.0 million in senior notes - Total liquidity as of June 30, 2025, was approximately **$1.2 billion**[169](index=169&type=chunk) - The company utilized its ATM program, issuing **1.8 million shares** for net proceeds of **$29.9 million** in the first six months of 2025[173](index=173&type=chunk)[174](index=174&type=chunk) - As of June 30, 2025, **$109.3 million** remained available under the program[174](index=174&type=chunk) - On July 31, 2025, the company redeemed all **$500.0 million** of its 2026 Senior Notes, financed with proceeds from a new **$500.0 million term loan** maturing in 2030[182](index=182&type=chunk)[187](index=187&type=chunk) - The company has a commitment for future capital expenditures of approximately **$16 million** as of June 30, 2025[189](index=189&type=chunk) [Concentration of Credit Risk](index=42&type=section&id=Concentration%20of%20Credit%20Risk) Management believes its portfolio is reasonably diversified by healthcare property type and geography, with no single tenant accounting for 10% or more of total revenues - The company's portfolio of **359 properties** is diversified across the U.S. and Canada[198](index=198&type=chunk) - No single tenant relationship represented **10% or more of total revenues** for the first six months of 2025[198](index=198&type=chunk) [Skilled Nursing Facility Reimbursement Rates](index=42&type=section&id=Skilled%20Nursing%20Facility%20Reimbursement%20Rates) For the six months ended June 30, 2025, 37.8% of revenues were from skilled nursing facilities, with CMS providing an estimated net increase of 3.2% in Medicare rates for fiscal year 2026 - CMS issued a final rule for fiscal year 2026 providing an estimated net increase of **3.2%** for skilled nursing facility Medicare rates, effective October 1, 2025[202](index=202&type=chunk) - A 10-year moratorium has been placed on CMS enforcement of the Minimum Staffing Standards, but new Assessment Requirements remain in effect, which could still present staffing challenges for tenants[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes to the quantitative and qualitative disclosures about market risk from its 2024 Annual Report on Form 10-K - No material changes to market risk disclosures were reported for the period[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[205](index=205&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[206](index=206&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that neither it nor any of its subsidiaries are party to any material legal proceedings outside of the ordinary course of business - The company is not involved in any material legal proceedings[209](index=209&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes in the company's assessment of its risk factors from those disclosed in its 2024 Annual Report on Form 10-K - No material changes to risk factors were reported for the period[210](index=210&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - None[211](index=211&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, a new credit agreement, certifications, and XBRL data files - Exhibits filed include the Credit Agreement dated July 30, 2025, Sarbanes-Oxley Act certifications, and XBRL interactive data files[212](index=212&type=chunk)[213](index=213&type=chunk)

[Sabra Health Care REIT, Inc. Non-GAAP Financial Measures Reconciliation](index=1&type=section&id=Sabra%20Health%20Care%20REIT%2C%20Inc.%20Non-GAAP%20Financial%20Measures%20Reconciliation) [2025 Full-Year Guidance](index=2&type=section&id=2025%20OUTLOOK) Sabra Health Care REIT projects 2025 Normalized FFO per diluted share between $1.45-$1.47 and Normalized AFFO between $1.49-$1.51, based on portfolio growth assumptions | Per Diluted Common Share | Low | High | | :--- | :--- | :--- | | **Net income** | $0.77 | $0.79 | | **FFO** | $1.52 | $1.54 | | **Normalized FFO** | $1.45 | $1.47 | | **AFFO** | $1.47 | $1.49 | | **Normalized AFFO** | $1.49 | $1.51 | - Key assumptions for the 2025 guidance include: low-single-digit Cash NOI growth for the triple-net portfolio and low-to-mid teens Cash NOI growth for the same-store Senior Housing - Managed portfolio[5](index=5&type=chunk) - General and administrative expenses are projected at approximately **$50 million**, with cash interest expense around **$102 million**[5](index=5&type=chunk) - The weighted average diluted share count is approximately **241.5 million** for Normalized FFO and **242.5 million** for Normalized AFFO[5](index=5&type=chunk) [Reconciliation of FFO and AFFO](index=3&type=section&id=RECONCILIATIONS%20OF%20NON-GAAP%20FINANCIAL%20MEASURES%20FFO%2C%20Normalized%20FFO%2C%20AFFO%20and%20Normalized%20AFFO) The company reports significant year-over-year growth in Q2 and H1 2025 Net Income and Normalized FFO per share, reflecting improved financial performance Q2 and H1 2025 vs 2024 Performance (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net income** | $65,542 | $23,975 | $105,846 | $50,229 | | **FFO** | $105,300 | $81,423 | $191,278 | $155,957 | | **Normalized FFO** | $89,159 | $82,536 | $174,966 | $160,975 | | **AFFO** | $89,200 | $83,853 | $177,354 | $165,003 | | **Normalized AFFO** | $91,641 | $84,979 | $179,879 | $167,235 | Q2 and H1 2025 vs 2024 Per Share Performance | Per Diluted Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net income** | $0.27 | $0.10 | $0.44 | $0.22 | | **FFO** | $0.44 | $0.35 | $0.79 | $0.67 | | **Normalized FFO** | $0.37 | $0.35 | $0.73 | $0.69 | | **Normalized AFFO** | $0.38 | $0.36 | $0.74 | $0.71 | - Normalizing items for FFO in Q2 2025 included a **$17.2 million gain** from terminated interest rate swaps and **$3.2 million** in transition expenses for Senior Housing - Managed communities[7](index=7&type=chunk) [Reconciliation of EBITDA and Net Debt](index=4&type=section&id=RECONCILIATIONS%20OF%20NON-GAAP%20FINANCIAL%20MEASURES%20EBITDA%2C%20Adjusted%20EBITDA%2C%20Adjusted%20EBITDA%2C%20as%20adjusted%20and%20Adjusted%20EBITDA%2C%20as%20adjusted%2C%20annualized%20Net%20Debt%20and%20Net%20Debt%20to%20Adjusted%20EBITDA) As of June 30, 2025, Sabra's Net Debt was approximately $2.37 billion, with an annualized Adjusted EBITDA of $473.7 million, resulting in a 5.00x Net Debt to Adjusted EBITDA ratio EBITDA and Net Debt Calculation (Q2 2025, in thousands) | Metric | Amount (in thousands) | | :--- | :--- | | Net income | $65,542 | | EBITDA | $137,173 | | Adjusted EBITDA, as adjusted | $118,416 | | **Adjusted EBITDA, as adjusted, annualized** | **$473,664** | | Consolidated Debt | $2,497,955 | | Cash and cash equivalents | ($128,697) | | **Net Debt** | **$2,369,258** | - The Net Debt to Adjusted EBITDA ratio was **5.00x** as of June 30, 2025[9](index=9&type=chunk) [Supplemental Revenue Information](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20Supplemental%20Information) This section details rental and related revenues, showing total revenues of $195.9 million for H1 2025, driven by cash and non-cash components Rental and Related Revenues Breakdown (in thousands) | Component | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Cash rental income | $92,397 | $182,468 | | Straight-line rental income | $1,382 | $2,671 | | Recoveries (write-offs) | $1,463 | $1,463 | | Above/below market lease amortization | $1,059 | $2,198 | | Operating expense recoveries | $3,522 | $7,060 | | **Total Rental and related revenues** | **$99,823** | **$195,860** | [Segment Performance Analysis](index=6&type=section&id=Segment%20Performance%20Analysis) This section analyzes Cash Net Operating Income (Cash NOI) across segments, detailing performance by property type, payor source, and operator relationship [Senior Housing - Managed Performance](index=6&type=section&id=Senior%20Housing%20-%20Managed%20Revenues%20and%20Cash%20NOI) The Senior Housing - Managed portfolio shows strong quarterly growth, with same-store Cash NOI increasing to $22.4 million in Q2 2025 Quarterly Same Store Performance (in thousands) | Metric | June 30, 2024 | March 31, 2025 | June 30, 2025 | | :--- | :--- | :--- | :--- | | Same store resident fees and services | $66,705 | $69,775 | $70,440 | | Same store Cash Net Operating Income | $19,128 | $21,106 | $22,401 | [Cash NOI by Property Type](index=8&type=section&id=Cash%20NOI%20by%20Property%20Type) Skilled Nursing/Transitional Care was the largest Cash NOI contributor in Q2 2025 at $64.9 million, followed by Total Senior Housing at $36.8 million Cash NOI by Property Type (Q2 2025, in thousands) | Property Type | Cash NOI | | :--- | :--- | | Skilled Nursing/Transitional Care | $64,937 | | Total Senior Housing | $36,795 | | Behavioral Health | $11,011 | | Specialty Hospitals and Other | $4,828 | | Other | $10,345 | | **Total** | **$127,916** | Annualized Cash NOI by Property Type (H1 2025, in thousands) | Property Type | Annualized Cash NOI | | :--- | :--- | | Skilled Nursing/Transitional Care | $251,026 | | Total Senior Housing | $148,270 | | Behavioral Health | $43,610 | | Specialty Hospitals and Other | $19,311 | | Other | $36,506 | | **Total** | **$498,723** | [Annualized Cash NOI by Payor Source](index=10&type=section&id=Annualized%20Cash%20NOI%20by%20Payor%20Source) H1 2025 Annualized Cash NOI shows a balanced payor mix, with Non-Private Payors contributing $249.3 million and Private Payors $212.9 million Annualized Cash NOI by Payor Source (H1 2025, in thousands) | Payor Source | Annualized Cash NOI | | :--- | :--- | | Private Payors | $212,948 | | Non-Private Payors | $249,269 | | Other | $36,506 | | **Total** | **$498,723** | [Annualized Cash NOI by Relationship](index=11&type=section&id=Annualized%20Cash%20NOI%20by%20Relationship) The portfolio shows operator diversification, with 'All Other Relationships' contributing $295.7 million to H1 2025 Annualized Cash NOI Annualized Cash NOI by Relationship (H1 2025, in thousands) | Relationship | Annualized Cash NOI | | :--- | :--- | | Avamere Family of Companies | $42,019 | | Ensign Group | $41,596 | | Signature Healthcare | $40,181 | | Signature Behavioral | $33,723 | | Recovery Centers of America | $27,465 | | The McGuire Group | $18,009 | | All Other Relationships | $295,730 | | **Total** | **$498,723** | [Reporting Definitions](index=12&type=section&id=REPORTING%20DEFINITIONS) This section defines key non-GAAP financial measures and terms, including FFO, AFFO, EBITDA, Cash NOI, and Net Debt, for report clarity - **Funds From Operations (FFO):** Defined by Nareit as net income excluding gains/losses from real estate sales, plus real estate depreciation and amortization, and impairment charges[34](index=34&type=chunk) - **Adjusted Funds from Operations (AFFO):** Defined as FFO excluding various non-cash items such as stock-based compensation, non-cash rental revenues, non-cash interest, and provision for loan losses[34](index=34&type=chunk) - **Normalized FFO/AFFO:** Represents FFO or AFFO adjusted for certain income and expense items that management does not believe are indicative of ongoing operating results, aiming to improve comparability between periods[40](index=40&type=chunk) - **Cash Net Operating Income (Cash NOI):** Defined as total revenues less operating expenses and non-cash revenues and expenses, used to evaluate the operating performance of the company's investments[32](index=32&type=chunk)