Third-quarter earnings reports continued Tuesday with calls held by Brookdale Senior Living and Sabra Health Care REIT.
Brookdale Senior Living
The third quarter was marked by “incredible progress” on key strategic priorities, Brookdale Senior Living President and CEO Lucinda “Cindy” Baier said.
“I believe that this progress is evidenced by our strong year-to-date results, as well as another quarter of consistently delivering against our commitments,” she added. For the quarter, both revenue per available room and adjusted earnings before interest, taxes, depreciation and amortization exceeded the company’s previously provided guidance ranges, she said.
Baier noted that the Brentwood, TN-based operator’s same-community RevPAR creased 10.8% compared with the third quarter of 2022.
According to Executive Vice President and Chief Financial Officer Dawn L. Kussow, the third quarter represented “continued positive momentum and progress this year.”
Revenue from residents grew more than 10% above the same quarter a year ago, to $717 million. Other operating income, which largely included federal and state grants, was $2.6 million in the third quarter compared with $67 million in the third quarter of 2022. Last year’s third-quarter operating income included $61 million of Phase 4 provider relief funds from the federal government, Kussow noted.
The operator’s third-quarter consolidated facility operating expense was $537 million.
“Year-over-year labor costs increased approximately 1%, and other operating expenses increased just under 6% compared to the nearly 11% revenue increase,” Kussow said. “This impressive revenue-to-expense spread drove 580 basis points of third-quarter adjusted same-community operating margin growth to 25.4%, which excludes the impact of other operating income.”
The third quarter was the third consecutive one in which same-community adjusted operating income growth was more than 40% greater than the prior year.
“We are pleased to have delivered positive year-over-year adjusted operating income growth within our same-community group for each of the last eight quarters,” Kurrow said. “As part of this, we are pleased to deliver additional reductions in premium labor expenses in the third quarter.”
As of Sept. 30, Brookdale’s total liquidity was $405 million.
Baier said company executives are “extremely pleased” with its performance so far this year.
“From our steady occupancy increases to our consecutive quarters of year-over-year same-community adjusted operating margin growth to our positive adjusted free cash flow in the third quarter, our disciplined approach to ensuring sustainable forward progress is continuing to yield positive results,” she said.
For additional coverage of the Brookdale Senior Living earnings call, see McKnight’s Senior Living.
Sabra Health Care REIT
Sabra Health Care REIT’s transitions of its North American properties to The Ensign Group and its owned Enlivant portfolio to Inspirit Senior Living continue to show material growth, “validating our decision to move those portfolios to those particular operators,” Sabra CEO and Chair Rick Matros said on Tuesday’s earnings call.
The Irvine, CA-based real estate investment trust’s skilled nursing concentration has dropped into its lowest point since inception, “enhancing the diversity of our portfolio,” he said.
According to Matros, the REIT’s balance sheet is “exemplary.” The company has no near-term maturities, and no floating rate debt outside of its revolver, he said, adding that leverages ticked down and are expected to continue to improve.
For the third quarter, the REIT recognized normalized funds from operations, or FFO, per share of $0.33 and normalized adjusted funds from operations, or AFFO, per share of $0.34, Chief Financial Officer Michael Costa said.
Those numbers, he said, are in line with earnings reported for the second quarter of this year and consistent with earnings over the past several quarters
“In terms of absolute dollars, normalized AFFO increased $2.1 million sequentially, driven primarily by a $700,000 increase in NOI [net operating income] from our managed senior housing portfolio, a $600,000 increase in cash rental income and a $200,000 decrease in cash interest expense,” Costa said.
In terms of the total revenue, he said, the company has seen an increase of $1.5 million in cash rental income. SNF exposure represented 54.3% of the REIT’s annualized cash NOI, down 140 basis points from the second quarter and down 570 basis points from a year ago.
Through hedging activities, Costa said, Sabra currently is saving more than $16 million per year in interest expense, “which provides a solid foundation to realize earnings growth in future periods.”
As of Sept. 30, the company was in compliance with all of its debt covenants and has “ample liquidity” of $1 billion, consisting of unrestricted cash and cash equivalents of $33 million and available borrowings of $967 million under its revolving credit facility.
On Monday, Sabra’s board of directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid Nov. 30 to common stockholders of record as of the close of business on Nov. 17. According to Costa, the dividend represents a payout of 88% of the REIT’s normalized AFFO per share.
For additional coverage of the Sabra Health Care REIT earnings call, see McKnight’s Senior Living.
