Senior housing continued its recovery in 2022, with 2023 expected to be “relatively quiet” for Irvine, CA-based Sabra Healthcare REIT, according to CEO and Chair Rick Matros.
“Generally speaking, we expect a relatively quiet year as our asset classes continue to recover,” he said Wednesday during a fourth-quarter and year-end 2022 earnings call.
Matros said that previous initiatives, asset sales and transitions are contributing to the general recovery of its managed portfolio, resulting in earnings growth as the real estate investment trust looks to 2024.
Occupancy holds steady and continues improving
Matros said that occupancy held steady over the holidays, with outcomes better than anticipated in the senior living communities and skilled nursing facilities in its portfolios. Sequential occupancy for the senior housing triple net portfolio was up 240 basis points, and fourth-quarter occupancy moved up “at a healthy clip.”
Sabra’s managed senior living portfolio continued its recovery throughout 2022, with revenue increasing as a result of higher occupancy, according to Chief Investment Officer Talya Nevo-Hacohen. On a same-store basis, occupancy in the fourth quarter reached 81.8%, driven by a 2.4 percentage point increase in assisted living occupancy over the prior quarter.
Compared with fourth quarter of 2021, occupancy in the same-store managed portfolio increased 5.9 percentage points in assisted living and 90 basis points in independent living year over year.
Senior housing investments in digital marketing that began during the pandemic have continued to produce better qualified leads, with more move-ins compared with other products, according to Nevo-Hacohen. Move-in rates are above pre-pandemic levels, whereas move-out levels stabilized.
Nevo-Hacohen said that Sabra anticipates that rate increases in its senior living portfolio this year will be between 5% and 10%, similar to rate increases seen last year.
Canadian senior housing properties outperformed US properties in the fourth quarter of 2022 relative to the fourth quarter of 2021. Occupancy in the Canadian portfolio rebounded by 7.2%, with revenue growing 19%, whereas US occupancy experienced 1% in growth and revenue growth of 10%. But expenses in Canada rose 14% in the period, whereas express in the US portfolio remained flat.
Investment pipeline remains light
Matros characterized the REIT’s investment pipeline as “lighter than historical,” with the bulk of opportunities in senior living.
During the fourth quarter, Sabra acquired an 85% interest in three Canadian senior living managed communities through a joint venture with Ontario-based Sienna Senior Living. After the quarter ended, the REIT acquired a managed senior housing community from its development pipeline.
As of Dec. 31, Sabra’s investment portfolio included 402 properties held for investment, including 47 senior living communities, as well as 59 senior housing communities operated by third-party property managers.
“We continue to closely monitor the operational recovery of our portfolio, and we are encouraged by the progress we continue to see on the occupancy and cost side,” Chief Financial Officer Michael Costa said. “With that said, labor pressures and operating headwinds still remain, and visibility is limited to when these factors will normalize in a way that will allow us to confidently estimate our earnings over the next several quarters.”
