Sabra(SBRA) - 2024 Q3 - Quarterly Report

FORM 10-Q Registrant Information This section provides key identification details for Sabra Health Care REIT, Inc., including its incorporation state, address, trading symbol (SBRA) on The Nasdaq Stock Market LLC, and confirms its status as a large accelerated filer that has met all SEC filing requirements - Sabra Health Care REIT, Inc. is incorporated in Maryland, with its principal executive offices in Tustin, CA[1] Title of each class and trading symbol on each exchange: | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common stock, $.01 par value | SBRA | The Nasdaq Stock Market LLC | - The registrant is a large accelerated filer and has filed all required reports and interactive data files during the preceding 12 months[2] Table of Contents Part I. Financial Information This section outlines the financial statements and related disclosures, including consolidated balance sheets, income statements, comprehensive income statements, equity statements, cash flow statements, and notes to consolidated financial statements. It also covers management's discussion and analysis, market risk, and controls and procedures - The financial information includes primary financial statements and detailed notes[3] - Key sections covered are Financial Statements, Management's Discussion and Analysis, Market Risk, and Controls and Procedures[3] Part II. Other Information This section details other non-financial disclosures, including legal proceedings, risk factors, other information, and a list of exhibits - This part covers legal proceedings, risk factors, and exhibits[3] Statement Regarding Forward-Looking Statements Nature of Forward-Looking Statements This section clarifies that the report contains forward-looking statements, which are not historical facts but rather projections about future financial position, operations, cash flows, and business strategies. These statements are identifiable by words like 'anticipate,' 'believe,' 'plan,' and 'expect' - The report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995[5] - These statements relate to expected future financial position, results of operations, cash flows, liquidity, financing plans, business strategy, and other future-oriented matters[5] - Forward-looking statements can be identified by words such as 'anticipate,' 'believe,' 'plan,' 'estimate,' 'expect,' and 'intend'[5] Factors Affecting Actual Results Actual results may differ materially from forward-looking statements due to various factors, including increased labor costs, rising interest rates and inflation, pandemics, operational risks in senior housing, competitive conditions, loss of key personnel, and regulatory changes. The company advises caution and refers readers to its 2023 Annual Report on Form 10-K for a comprehensive list of risk factors - Actual results may differ due to factors such as increased labor costs, rising market interest rates and inflation, and the impact of pandemics like COVID-19[6] - Operational risks in Senior Housing - Managed communities, competitive conditions, and the loss of key management personnel are also significant factors[6] - Other risks include potential impairment charges, increased healthcare regulation, tenant dependency on third-party payor programs, and the ability to maintain REIT status[6] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited consolidated financial statements for Sabra Health Care REIT, Inc. and its subsidiaries, including the balance sheets, statements of income (loss), comprehensive income (loss), equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, recent acquisitions, real estate investments, impairments, dispositions, operating leases, loans, debt, derivatives, fair value disclosures, equity, earnings per share, commitments, contingencies, and subsequent events Consolidated Balance Sheets Consolidated Balance Sheet Highlights (dollars in thousands): | Item | September 30, 2024 (unaudited) | December 31, 2023 | | :----------------------------------- | :----------------------------- | :---------------- | | Assets | | | | Real estate investments, net | $ 4,574,268 | $ 4,617,261 | | Loans receivable and other investments, net | 441,825 | 420,624 | | Investment in unconsolidated joint ventures | 130,811 | 136,843 | | Cash and cash equivalents | 63,004 | 41,285 | | Total assets | $ 5,366,126 | $ 5,386,150 | | Liabilities | | | | Secured debt, net | $ 45,817 | $ 47,301 | | Revolving credit facility | 152,558 | 94,429 | | Term loans, net | 535,984 | 537,120 | | Senior unsecured notes, net | 1,735,848 | 1,735,253 | | Total liabilities | 2,621,282 | 2,583,616 | | Equity | | | | Total equity | 2,744,844 | 2,802,534 | | Total liabilities and equity | $ 5,366,126 | $ 5,386,150 | - Total assets decreased slightly from $5,386,150 thousand at December 31, 2023, to $5,366,126 thousand at September 30, 2024[10] - Total liabilities increased from $2,583,616 thousand to $2,621,282 thousand, while total equity decreased from $2,802,534 thousand to $2,744,844 thousand[10][11] Consolidated Statements of Income (Loss) Consolidated Statements of Income (Loss) Highlights (dollars in thousands, except per share data): | Item | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $ 178,001 | $ 161,627 | $ 520,889 | $ 484,117 | | Total expenses | 142,947 | 131,312 | 436,815 | 409,008 | | Net income (loss) | $ 29,788 | $ (15,101) | $ 80,017 | $ (3,400) | | Basic common share | $ 0.13 | $ (0.07) | $ 0.34 | $ (0.01) | | Diluted common share | $ 0.13 | $ (0.07) | $ 0.34 | $ (0.01) | - Net income significantly improved, moving from a loss of $15,101 thousand in Q3 2023 to a gain of $29,788 thousand in Q3 2024[13] - For the nine months, net income also saw a substantial turnaround, from a loss of $3,400 thousand in 2023 to a gain of $80,017 thousand in 2024[13] Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Comprehensive Income (Loss) Highlights (dollars in thousands): | Item | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $ 29,788 | $ (15,101) | $ 80,017 | $ (3,400) | | Total other comprehensive (loss) income | (14,206) | 7,430 | (6,806) | 20,606 | | Comprehensive income (loss) | $ 15,582 | $ (7,671) | $ 73,211 | $ 17,206 | - Comprehensive income for the three months ended September 30, 2024, was $15,582 thousand, a significant improvement from a loss of $7,671 thousand in the prior year period[15] - For the nine months, comprehensive income increased to $73,211 thousand in 2024 from $17,206 thousand in 2023[15] Consolidated Statements of Equity Consolidated Statements of Equity Highlights (dollars in thousands, except per share data): | Item | Balance, Sep 30, 2024 | Balance, Dec 31, 2023 | | :----------------------------------- | :-------------------- | :-------------------- | | Common Stock, $0.01 par value | $ 2,366 | $ 2,313 | | Additional paid-in capital | 4,574,707 | 4,494,755 | | Cumulative distributions in excess of net income | (1,849,168) | (1,718,279) | | Accumulated other comprehensive income | 16,939 | 23,745 | | Total equity | $ 2,744,844 | $ 2,802,534 | - Total equity decreased from $2,802,534 thousand at December 31, 2023, to $2,744,844 thousand at September 30, 2024[20] - Common stock issuance, net, contributed $71,825 thousand to equity during the nine months ended September 30, 2024[20] - Common dividends paid amounted to $210,906 thousand for the nine months ended September 30, 2024[20] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (dollars in thousands): | Item | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $ 230,573 | $ 221,834 | | Net cash (used in) provided by investing activities | (127,561) | 164,909 | | Net cash used in financing activities | (80,597) | (400,937) | | Net increase (decrease) in cash, cash equivalents and restricted cash | 22,415 | (14,194) | | Cash, cash equivalents and restricted cash, end of period | $ 68,976 | $ 38,858 | - Net cash provided by operating activities increased to $230,573 thousand for the nine months ended September 30, 2024, from $221,834 thousand in the prior year[22] - Investing activities shifted from providing $164,909 thousand in 2023 to using $127,561 thousand in 2024, primarily due to increased real estate acquisitions and reduced proceeds from sales[22] - Net cash used in financing activities significantly decreased from $400,937 thousand in 2023 to $80,597 thousand in 2024, driven by net borrowings from the revolving credit facility and proceeds from common stock issuance[22] Notes to Consolidated Financial Statements 1. BUSINESS - Sabra Health Care REIT, Inc. (Sabra) operates as a REIT, primarily acquiring, financing, and owning real estate in the healthcare sector, leasing properties to third-party tenants in the U.S. and Canada[23] - The investment portfolio includes skilled nursing/transitional care facilities, Senior Housing - Leased, behavioral health facilities, specialty hospitals, Senior Housing - Managed communities, joint ventures, loans receivable, and preferred equity investments[23] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, with all significant intercompany transactions eliminated[24][25] - The Company evaluates entities for control and primary beneficiary status for Variable Interest Entities (VIEs) and joint ventures, determining it was not the primary beneficiary of any VIEs as of September 30, 2024[26][28][30] - Recently adopted ASUs (2020-04, 2021-01, 2022-06) related to Reference Rate Reform did not materially impact financial statements, while ASUs 2023-07 (Segment Reporting) and 2023-09 (Income Tax Disclosures) are not yet adopted but will require additional disclosures in future 10-K filings[32][33][34][35] 3. RECENT REAL ESTATE ACQUISITIONS (CONSOLIDATED) - During the nine months ended September 30, 2024, Sabra acquired two Senior Housing - Managed communities and one Senior Housing - Leased community for a total consideration of $112.2 million[36][37] Acquisition Consideration (in thousands): | Item | Nine Months 2024 | Nine Months 2023 | | :----------------------------------- | :--------------- | :--------------- | | Land | $ 7,063 | $ 3,415 | | Building and improvements | 100,862 | 45,333 | | Tenant origination and absorption costs intangible assets | 4,094 | 2,706 | | Tenant relationship intangible assets | 206 | 20 | | Total consideration | $ 112,225 | $ 51,474 | - These acquisitions generated $5.9 million in total revenues and $1.5 million in net income for the nine months ended September 30, 2024[38] 4. INVESTMENT IN REAL ESTATE PROPERTIES Real Estate Properties Held for Investment (dollars in thousands): | Property Type | Number of Properties (Sep 30, 2024) | Total Real Estate at Cost (Sep 30, 2024) | Total Real Estate Investments, Net (Sep 30, 2024) | | :----------------------------------- | :---------------------------------- | :--------------------------------------- | :---------------------------------------- | | Skilled Nursing/Transitional Care | 233 | $ 2,992,712 | $ 2,405,895 | | Senior Housing - Leased | 39 | 512,037 | 409,846 | | Senior Housing - Managed | 68 | 1,487,337 | 1,179,792 | | Behavioral Health | 18 | 479,189 | 402,671 | | Specialty Hospitals and Other | 15 | 225,498 | 173,981 | | Total | 373 | $ 5,699,738 | $ 4,574,268 | - As of September 30, 2024, the Company's real estate portfolio comprised 373 properties with a net investment of $4,574,268 thousand, a slight decrease from $4,617,261 thousand at December 31, 2023[40][41][42] - The largest segment remains Skilled Nursing/Transitional Care with 233 properties and a net investment of $2,405,895 thousand[40] 5. IMPAIRMENT OF REAL ESTATE AND DISPOSITIONS - During the nine months ended September 30, 2024, the Company recognized $18.5 million in real estate impairment, primarily related to four skilled nursing/transitional care facilities sold and two non-operational facilities[49] Dispositions Summary (dollars in millions): | Item | Nine Months 2024 | Nine Months 2023 | | :----------------------------------- | :--------------- | :--------------- | | Number of facilities | 8 | 27 | | Consideration, net of closing costs | $ 40.5 | $ 256.2 | | Net carrying value | 44.5 | 332.1 | | Net loss on sale | $ (4.0) | $ (75.9) | - The Company disposed of 8 facilities for $40.5 million (net of closing costs) during the nine months ended September 30, 2024, resulting in a net loss on sale of $4.0 million[52] 6. OPERATING LEASES - As of September 30, 2024, most of the Company's real estate properties (excluding 68 Senior Housing - Managed communities) were leased under triple-net operating leases with a weighted average remaining term of seven years[54] Future Minimum Rental Payments (in thousands): | Period | Amount | | :----------------------------------- | :------------- | | October 1 through December 31, 2024 | $ 92,198 | | 2025 | 371,685 | | 2026 | 358,650 | | 2027 | 342,012 | | 2028 | 319,885 | | Thereafter | 1,422,310 | | Total | $ 2,906,740 | - The Company monitors tenant creditworthiness using lease coverage ratios (EBITDAR to rent) and parent fixed charge coverage ratios to assess their ability to meet lease obligations[57] 7. LOANS RECEIVABLE AND OTHER INVESTMENTS Loans Receivable and Other Investments (dollars in thousands): | Investment Type | Quantity (Sep 30, 2024) | Principal Balance (Sep 30, 2024) | Book Value (Sep 30, 2024) | Book Value (Dec 31, 2023) | Weighted Average Contractual Interest Rate | | :----------------------------------- | :---------------------- | :------------------------------- | :------------------------ | :------------------------ | :--------------------------------------- | | Mortgage Loans | 3 | $ 335,600 | $ 335,600 | $ 319,000 | 7.7 % | | Other Loans | 11 | 56,085 | 52,636 | 50,440 | 7.9 % | | Total Loans Receivable | 14 | $ 391,685 | $ 388,236 | $ 369,440 | 7.8 % | | Allowance for loan losses | | — | (6,219) | (6,665) | | | Net Loans Receivable | | $ 391,685 | $ 382,017 | $ 362,775 | | | Preferred Equity Investments | 5 | 59,611 | 59,808 | 57,849 | 10.9 % | | Total | 19 | $ 451,296 | $ 441,825 | $ 420,624 | 8.2 % | - Total loans receivable and other investments increased to $441,825 thousand as of September 30, 2024, from $420,624 thousand at December 31, 2023[63] - The allowance for loan losses decreased from $6,665 thousand at December 31, 2023, to $6,219 thousand at September 30, 2024[63][65] 8. DEBT Secured Indebtedness (dollars in thousands): | Interest Rate Type | Principal Balance (Sep 30, 2024) | Principal Balance (Dec 31, 2023) | Weighted Average Interest Rate (Sep 30, 2024) | Maturity Date | | :----------------------------------- | :------------------------------- | :------------------------------- | :-------------------------------------------- | :-------------------------- | | Fixed Rate | $ 46,623 | $ 48,143 | 2.85 % | May 2031 - August 2051 | Senior Unsecured Notes (dollars in thousands): | Title | Maturity Date | Principal Balance (Sep 30, 2024) | Principal Balance (Dec 31, 2023) | | :----------------------------------- | :------------ | :------------------------------- | :------------------------------- | | 5.125% senior unsecured notes due 2026 | August 15, 2026 | $ 500,000 | $ 500,000 | | 5.88% senior unsecured notes due 2027 | May 17, 2027 | 100,000 | 100,000 | | 3.90% senior unsecured notes due 2029 | October 15, 2029 | 350,000 | 350,000 | | 3.20% senior unsecured notes due 2031 | December 1, 2031 | 800,000 | 800,000 | | Total | | $ 1,750,000 | $ 1,750,000 | - The Company's Credit Agreement includes a $1.0 billion revolving credit facility and $430.0 million U.S. dollar and CAD $150.0 million Canadian dollar term loans, with $152.6 million outstanding under the revolving facility as of September 30, 2024[74][75] - Interest expense for the three months ended September 30, 2024, was $29.5 million, up from $28.2 million in the prior year, primarily due to increased borrowings under the Credit Agreement[82] 9. DERIVATIVE AND HEDGING INSTRUMENTS - The Company uses derivative financial instruments, including interest rate swaps and collars, to manage exposure to interest rate and foreign exchange rate fluctuations, not for speculative purposes[84][86] Notional Amount of Derivative Instruments (in thousands): | Type | September 30, 2024 | December 31, 2023 | | :----------------------------------- | :----------------- | :---------------- | | Derivatives designated as cash flow hedges (U.S. Dollars) | $ 430,000 | $ 753,750 | | Derivatives designated as cash flow hedges (Canadian Dollars) | $ 150,000 | $ 300,000 | | Derivatives designated as net investment hedges (Canadian Dollars) | $ 47,358 | $ 55,335 | | Financial instruments designated as net investment hedges (Canadian Dollars) | $ 191,300 | $ 194,300 | | Derivatives not designated as net investment hedges (Canadian Dollars) | $ 8,942 | $ 965 | - As of September 30, 2024, approximately $3.3 million of gains from cash flow hedges are expected to be reclassified into earnings within the next 12 months[87] 10. FAIR VALUE DISCLOSURES - The Company measures certain financial instruments at fair value using a three-tiered GAAP framework (Level 1, 2, 3), with Level 3 inputs used for loans receivable, preferred equity investments, and secured indebtedness[95][97][99][102] Fair Value of Financial Instruments (in thousands, as of September 30, 2024): | Item | Carrying Amount | Fair Value | | :----------------------------------- | :-------------- | :--------- | | Loans receivable | $ 382,017 | $ 403,673 | | Preferred equity investments | 59,808 | 61,606 | | Senior Notes | 1,735,848 | 1,644,025 | | Secured indebtedness | 45,817 | 36,431 | Fair Value Measurements on a Recurring Basis (in thousands, as of September 30, 2024): | Item | Total | Level 2 (Significant Other Observable Inputs) | | :----------------------------------- | :---- | :------------------------------------------ | | Interest rate swaps (assets) | $ 5,884 | $ 5,884 | | Cross currency interest rate swaps (assets) | 3,824 | 3,824 | | Interest rate swaps (liabilities) | 292 | 292 | 11. EQUITY - The Company established an at-the-market (ATM) equity offering program in February 2023, allowing for the sale of up to $500.0 million in common stock[106] - During the nine months ended September 30, 2024, the Company settled 5.0 million shares under the ATM Program, generating net proceeds of $74.2 million[108] - As of September 30, 2024, $386.7 million remained available under the ATM Program, and accumulated other comprehensive income totaled $16,939 thousand[111][115] 12. EARNINGS PER COMMON SHARE Earnings Per Common Share (in thousands, except per share amounts): | Item | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $ 29,788 | $ (15,101) | $ 80,017 | $ (3,400) | | Basic common share | $ 0.13 | $ (0.07) | $ 0.34 | $ (0.01) | | Diluted common share | $ 0.13 | $ (0.07) | $ 0.34 | $ (0.01) | | Weighted average number of common shares outstanding, basic | 234,290,187 | 231,224,692 | 232,459,388 | 231,197,375 | | Weighted average number of common shares outstanding, diluted | 237,043,400 | 231,224,692 | 234,777,101 | 231,197,375 | - Basic and diluted EPS for the three months ended September 30, 2024, were $0.13, a significant improvement from a loss of $0.07 in the prior year[116] - For the nine months, basic and diluted EPS were $0.34, up from a loss of $0.01 in the prior year[116] 13. COMMITMENTS AND CONTINGENCIES - The Company is subject to various federal, state, and local environmental laws but is not aware of any environmental liability that could materially adversely affect its financial condition or results of operations[117] - Management is not aware of any material legal proceedings where a loss contingency is reasonably possible and material to the Company's results of operations, financial condition, or cash flows[118] 14. SUBSEQUENT EVENTS - On October 31, 2024, the board of directors declared a quarterly cash dividend of $0.30 per share of common stock, payable on November 29, 2024, to stockholders of record as of November 15, 2024[120] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition and results of operations, highlighting key business activities, market trends, and financial performance. It covers an overview of the REIT's healthcare real estate investments, the impact of economic conditions, recent acquisitions and dispositions, critical accounting policies, and a detailed comparison of financial results for the three and nine months ended September 30, 2024, versus 2023, including Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) Overview - Sabra operates as a self-administered, self-managed REIT, investing in healthcare real estate, primarily generating revenue by leasing properties to third-party tenants in the U.S. and Canada[124] - The investment portfolio includes skilled nursing/transitional care, senior housing (leased and managed), behavioral health, specialty hospitals, joint ventures, loans, and preferred equity investments[125] - The Company aims to grow and diversify its portfolio through direct investments, development, and selective asset sales, while maintaining balance sheet strength and REIT qualification[126][127][128] Market Trends and Uncertainties - Operations are impacted by economic conditions, including increased interest rates, labor shortages, inflation, and market volatility, leading to higher costs and limited capital availability[129] - COVID-19 has resulted in decreased occupancy and increased operating costs for tenants and Senior Housing - Managed communities, potentially affecting their ability to make timely payments[129][131] - Despite occupancy still being below pre-pandemic levels, increases in skilled nursing/transitional care reimbursement rates are leading to margin recovery, and reliance on agency staffing has significantly reduced[131] Acquisitions - During the nine months ended September 30, 2024, the Company acquired two Senior Housing - Managed communities and one Senior Housing - Leased community for an aggregate consideration of $112.2 million[132] Dispositions - During the nine months ended September 30, 2024, the Company sold eight skilled nursing/transitional care facilities for $40.5 million (net of closing costs), resulting in a $4.0 million net loss on sale[133] - The Company continues to evaluate additional assets for sale as part of its capital recycling initiative to improve portfolio quality[133] Critical Accounting Policies and Estimates - The financial statements require significant management judgments, assumptions, and estimates, which are inherently uncertain and could materially affect reported amounts[134] - There have been no significant changes to the Company's critical accounting policies during the nine months ended September 30, 2024[134] Recently Issued Accounting Standards Update - Information regarding recently issued accounting standards updates is detailed in Note 2, 'Summary of Significant Accounting Policies,' of the Consolidated Financial Statements[135] Results of Operations Comparison of results of operations for the three months ended September 30, 2024 versus the three months ended September 30, 2023 Key Financial Performance (Three Months Ended September 30, dollars in thousands): | Item | 2024 | 2023 | Increase / (Decrease) | Percentage Difference | | :----------------------------------- | :--- | :--- | :-------------------- | :-------------------- | | Rental and related revenues | $ 94,555 | $ 93,085 | $ 1,470 | 2 % | | Resident fees and services | 73,746 | 59,748 | 13,998 | 23 % | | Interest and other income | 9,700 | 8,794 | 906 | 10 % | | Depreciation and amortization | 42,720 | 43,242 | (522) | (1)% | | Interest expense | 29,467 | 28,156 | 1,311 | 5 % | | Senior housing - managed portfolio operating expenses | 54,234 | 44,523 | 9,711 | 22 % | | Net loss on sales of real estate | (5,745) | (46,545) | 40,800 | (88)% | | Income (loss) from unconsolidated joint ventures | 214 | (645) | 859 | (133)% | - Total revenues increased by $16.4 million (10%) to $178.0 million, driven by a $14.0 million increase in resident fees and services and a $1.5 million increase in rental income[137][138][139] - Net loss on sales of real estate significantly improved, decreasing by $40.8 million to a loss of $5.7 million, while income from unconsolidated joint ventures turned positive[137][150][151] Comparison of results of operations for the nine months ended September 30, 2024 versus the nine months ended September 30, 2023 Key Financial Performance (Nine Months Ended September 30, dollars in thousands): | Item | 2024 | 2023 | Increase / (Decrease) | Percentage Difference | | :----------------------------------- | :--- | :--- | :-------------------- | :-------------------- | | Rental and related revenues | $ 285,427 | $ 283,229 | $ 2,198 | 1 % | | Resident fees and services | 207,716 | 174,897 | 32,819 | 19 % | | Interest and other income | 27,746 | 25,991 | 1,755 | 7 % | | Depreciation and amortization | 127,315 | 140,211 | (12,896) | (9)% | | Interest expense | 87,189 | 85,024 | 2,165 | 3 % | | Senior housing - managed portfolio operating expenses | 154,258 | 132,124 | 22,134 | 17 % | | Impairment of real estate | 18,472 | 7,064 | 11,408 | 161 % | | Net loss on sales of real estate | (3,969) | (75,893) | 71,924 | (95)% | | Loss from unconsolidated joint ventures | (301) | (2,136) | 1,835 | (86)% | - Total revenues increased by $36.8 million (7.6%) to $520.9 million, primarily due to a $32.8 million increase in resident fees and services and a $2.2 million increase in rental income[153][154][156] - Net loss on sales of real estate decreased significantly by $71.9 million to a loss of $4.0 million, and loss from unconsolidated joint ventures improved by $1.8 million[153][168][169] Funds from Operations and Adjusted Funds from Operations FFO and AFFO (in thousands, except per share amounts): | Item | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $ 29,788 | $ (15,101) | $ 80,017 | $ (3,400) | | FFO | 80,496 | 76,941 | 236,453 | 226,273 | | AFFO | $ 85,590 | $ 81,677 | $ 250,593 | $ 237,170 | | FFO per diluted common share | $ 0.34 | $ 0.33 | $ 1.01 | $ 0.97 | | AFFO per diluted common share | $ 0.36 | $ 0.35 | $ 1.06 | $ 1.01 | - FFO increased by $3.5 million (4.6%) to $80.5 million for the three months ended September 30, 2024, and by $10.2 million (4.5%) to $236.5 million for the nine months[173] - AFFO increased by $3.9 million (4.8%) to $85.6 million for the three months and by $13.4 million (5.6%) to $250.6 million for the nine months[173] Liquidity and Capital Resources - As of September 30, 2024, the Company had approximately $947.8 million in liquidity, comprising $63.0 million in cash, $847.4 million available under its Revolving Credit Facility, and $37.4 million from forward sale agreements[175] - The ATM Program has $386.7 million available, and proceeds are expected to finance future investments[181] - Short-term liquidity requirements include operating expenses, capital expenditures, interest expense, debt service, and dividends, which are expected to be met by available cash, operating cash flows, and the Revolving Credit Facility[182] - Long-term liquidity needs for future investments and debt maturities will be met through various financing sources, including equity and debt issuances, additional borrowings, and property sales[183] Concentration of Credit Risk - The Company monitors concentrations of credit risk arising from tenants or obligors in similar business activities, geographic regions, or with similar economic features[202] - Management believes the current portfolio of 373 real estate properties is reasonably diversified across healthcare real estate and geographical locations in the U.S. and Canada[205] - For the three and nine months ended September 30, 2024, no single tenant relationship accounted for 10% or more of total revenues[205] Skilled Nursing Facility Reimbursement Rates - For the nine months ended September 30, 2024, 39.6% of revenues were derived directly or indirectly from skilled nursing/transitional care facilities[206] - CMS issued a final rule for fiscal year 2024 Medicare rates, providing an estimated net increase of 4.0% for skilled nursing facilities, effective October 1, 2023[208] - CMS also issued a final rule for fiscal year 2025 Medicare rates, providing an estimated net increase of 4.2% for skilled nursing facilities, effective October 1, 2024[210] - New Minimum Staffing Standards for long-term care facilities, effective June 21, 2024, are expected to exacerbate staffing challenges for tenants, despite ongoing legal challenges[209] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section states that there have been no material changes to the quantitative and qualitative disclosures about market risk from those reported in the Company's 2023 Annual Report on Form 10-K - No material changes to market risk disclosures have occurred since the 2023 Annual Report on Form 10-K[211] ITEM 4. CONTROLS AND PROCEDURES Management, including the chief executive officer and chief financial officer, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2024. There were no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2024[212] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2024[213] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Neither the Company nor its subsidiaries are party to any material legal proceedings, nor is any of their property subject to such proceedings, beyond those arising in the ordinary course of business - No material legal proceedings are currently pending against the Company or its subsidiaries[215] ITEM 1A. RISK FACTORS There have been no material changes to the Company's risk factors from those previously disclosed in Part I, Item 1A of its 2023 Annual Report on Form 10-K - No material changes to risk factors have occurred since the 2023 Annual Report on Form 10-K[216] ITEM 5. OTHER INFORMATION This section indicates that there is no other information to report - No other information is reported in this section[217] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including articles of amendment, bylaws, subsidiary lists, certifications from the CEO and CFO, and XBRL-related documents - Exhibits include corporate governance documents (Articles of Amendment, Bylaws), subsidiary information, and certifications from the CEO and CFO[218] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase, and Cover Page Interactive Data File are also included[218][220] SIGNATURES Signatories The report is duly signed on behalf of Sabra Health Care REIT, Inc. by Richard K. Matros, Chief Executive Officer, President and Chair, and Michael Costa, Chief Financial Officer, Secretary and Executive Vice President, both on October 31, 2024 - The report is signed by Richard K. Matros, Chief Executive Officer, President and Chair[223] - The report is also signed by Michael Costa, Chief Financial Officer, Secretary and Executive Vice President[223] - Both signatures are dated October 31, 2024[223]