Sabra(US:SBRA)2023-11-08 01:32Financial Data and Key Metrics Changes - For Q3 2023, normalized FFO per share was $0.33 and normalized AFFO per share was $0.34, consistent with previous quarters [16] - Annualized cash NOI was $453.5 million, with SNF exposure at 54.3%, down 140 basis points from Q2 and down 570 basis points year-over-year [39] - Cash NOI grew 5.3% sequentially and over 28% compared to Q3 2022, driven by revenue growth and controlled expenses [12] Business Line Data and Key Metrics Changes - Occupancy for the wholly owned managed portfolio was 81.9%, a sequential increase of 170 basis points, the highest in five quarters [6] - The independent living portfolio saw a significant occupancy improvement of 240 basis points sequentially [6] - The Holiday same-store portfolio experienced a 7.9% cash net operating income growth sequentially, with occupancy gains starting in June [13] Market Data and Key Metrics Changes - Inquiry volume and conversion to move-in rates increased significantly quarter-over-quarter, while move-outs declined to their lowest level in a year [13] - The skilled nursing concentration has decreased to its lowest point since inception, enhancing portfolio diversity [33] Company Strategy and Development Direction - The company plans to be a net acquirer in 2024, focusing on smaller acquisitions rather than large transformative deals [10][52] - The strategy includes leveraging a strong balance sheet with no near-term maturities and a commitment to maintaining a long-term average leverage target of 5x [18] - The company is optimistic about continued improvement in operations and cash NOI from its managed senior housing portfolio [35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's strength post-pandemic, with improved credit quality and EBITDARM coverage across asset classes [9] - The company anticipates that rent increases will be more tempered in the 5% to 7% range compared to previous years [12] - Management noted that the impact of regulatory changes from CMS will take several years to materialize, allowing time for the industry to adapt [5][58] Other Important Information - The Board of Directors declared a quarterly cash dividend of $0.30 per share, representing a payout of 88% of normalized AFFO per share [19] - The company has ample liquidity of $1 billion, consisting of unrestricted cash and available borrowings under its revolving credit facility [41] Q&A Session Summary Question: Can you walk us through the changes in timing of the long-term NOI growth opportunity? - Management indicated that the bottom-line number decreased due to asset sales during the quarter, impacting annualized NOI [51] Question: Can you comment on any potential small tenants that could be at risk? - Management stated that tenants under 1x remain at 5% to 6%, and Landmark represents less than 1% of NOI, with no current issues [68] Question: Would you be willing to temporarily lever up to do acquisitions in the current environment? - Management emphasized that they will pursue opportunities where they see fit, focusing on earnings growth while maintaining low leverage [72] Question: What are the expectations for Medicaid and Medicare rate increases next year? - Management expects Medicaid rates to be higher than the current 5% aggregate and Medicare to exceed 4%, anticipating robust rate increases for at least another year [108]