Q1 2026 Sabra Health Care REIT Inc Earnings Call

April 30, 2026

Speaker #3: Only sleeping and fetching up, I'm only going deeper and deeper.

Speaker #5: Ladies and gentlemen, this is the operator. Today's conference will begin shortly. Thank you for holding.

Operator 2: Ladies and gentlemen, this is the operator. Today's conference will begin shortly. Thank you for holding.

Operator: Ladies and gentlemen, this is the operator. Today's conference will begin shortly. Thank you for holding.

Operator 1: We come from the land of the ice and snow, From the midnight sun, where the hot springs flow. Hammer of the gods, will drive our ships to new lands. To fight the horde, sing and cry, Valhalla, I am coming. On we sweep with threshing oar, our only goal will be the western shore. We come from the land of the ice and snow, From the midnight sun, where the hot springs flow. Don't you feel so green. Whisper tales of gore of how we calmed the tides of war. We are your overlords. On we sweep with threshing oar, our only goal will be the western shore. Tonight you better stop and rebuild all your ruins, for peace and trust can win the day despite all your losing. We come from the land of the ice and snow, From the midnight sun, where the hot springs flow.

Operator: We come from the land of the ice and snow, From the midnight sun, where the hot springs flow. Hammer of the gods, will drive our ships to new lands. To fight the horde, sing and cry, Valhalla, I am coming. On we sweep with threshing oar, our only goal will be the western shore. We come from the land of the ice and snow, From the midnight sun, where the hot springs flow. Don't you feel so green. Whisper tales of gore of how we calmed the tides of war. We are your overlords. On we sweep with threshing oar, our only goal will be the western shore. Tonight you better stop and rebuild all your ruins, for peace and trust can win the day despite all your losing. We come from the land of the ice and snow, From the midnight sun, where the hot springs flow.

Speaker #6: We come from the land of the ice and grow from the midnight sand where the hot springs flow.

Speaker #4: We come off the cold, we'll drive our ships to new lands. To fight the horde, sing and cry. Valhalla, I am coming.

Speaker #3: Only sleeping and fetching up, I'm only going deeper and deeper. And we come from the land of the ice and grow from the midnight sand, where the midnight sand, where the hot springs flow.

Speaker #4: We come to feel so free. Come with the spirit, tales of gold. Of how we come, the tides of war. We are your overload.

Speaker #3: Only sleep and fetching up, I'm only going deeper and deeper. Tonight you better stop and rebuild all your ruins. For peace and trust can win the day—just smile upon your losing.

Speaker #6: We come from the land of the ice and grow from the midnight sand, where the hot springs flow.

Operator 1: Hammer of the gods, will drive our ships to new lands. To fight the horde, sing and cry, Valhalla, I am coming. On we sweep with threshing oar, our only goal will be the western shore. We come from the land of the ice and snow, From the midnight sun, where the hot springs flow. Don't you feel so green. Whisper tales of gore of how we calmed the tides of war. We are your overlords.

Operator: Hammer of the gods, will drive our ships to new lands. To fight the horde, sing and cry, Valhalla, I am coming. On we sweep with threshing oar, our only goal will be the western shore. We come from the land of the ice and snow, From the midnight sun, where the hot springs flow. Don't you feel so green. Whisper tales of gore of how we calmed the tides of war. We are your overlords.

Speaker #4: We come off the cold, we'll drive our ships to new lands. To fight the horde, sing and cry. Valhalla, I am coming.

Speaker #3: Only sleeping and fetching up, I'm only going deeper and deeper. And we come from the land of the ice and grow from the midnight sand where the hot springs flow.

Speaker #4: We come to feel so free. Come with the spirit, tales of gold. Of how we come, the tides of war. We are your overload.

Speaker #3: Only sleep and fetching up, I'm only going deeper.

Operator 2: Good day, everyone. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sabra Health Care REIT Q1 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Lukas Hartwich, EVP Finance. Please go ahead, Mr. Hartwich.

Operator: Good day, everyone. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sabra Health Care REIT Q1 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to Lukas Hartwich, EVP Finance. Please go ahead, Mr. Hartwich.

Speaker #5: Good day, everyone. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sabra Health Care REIT, first quarter 2026 earnings call.

Speaker #5: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

Speaker #5: If you would like to withdraw your question, press star one again. I would now like to turn the call over to Lucas Hartwich, EVP Finance.

Speaker #5: Please go ahead, Mr. Hartwich.

Lukas Hartwich: Thank you and good morning. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations, including our earnings guidance for 2026 and our expectations regarding our tenants and operators and our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31st, 2025, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.

Speaker #7: Thank you and good morning. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations.

Speaker #7: Including our earnings guidance for 2026 and our expectations regarding our tenants and operators, as well as our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially.

Speaker #7: Including the risks listed in our Form 10-K for the year ended December 31, 2025, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.

Lukas Hartwich: We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the Financials page of the Investor section of our website at sabrahealth.com. Our Form 10-Q, earnings release, and supplement can also be accessed in the Investor section of our website. Let me turn the call over to Rick Matros, CEO, President, and Chair of Sabra Health Care REIT.

Speaker #7: We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid.

Speaker #7: In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures, as well as the explanation and reconciliation of these measures to the comparable GAAP results, included on the Financials page of the Investor section of our website at sabrahealth.com.

Speaker #7: Our Form 10-Q earnings release and supplement can also be accessed in the investor section of our website. And with that, let me turn the call over to Rick Matros, CEO, President and Chair of Sabra Health Care REIT.

Rick Matros: Thanks, Lukas, thanks everybody for joining us today. Starting with our deal flow. Our deal flow continues to be robust. We fully expect to materially exceed 2025's total investments. We have already closed or been awarded $400 million year to date. In addition to the opportunities we see in SHOP, we're also seeing some in skilled, the ones that are appealing are off-market deals, both acquisitions and development, brought to us by existing operators. Our skilled nursing rent coverages continue to grow, as did our senior housing triple net and behavioral, all of which hit new highs in coverage. Our occupancy growth continued in our skilled and senior housing triple net portfolios. Our top 10 coverage is stronger than it's ever been. Our SHOP margins continue to grow in our consolidated, unconsolidated, and same store portfolios.

Speaker #8: Thanks, Lukas, and thanks, everybody, for joining us today. Starting with our deal flow, our deal flow continues to be robust. We fully expect to materially exceed 2025's total investments.

Speaker #8: We've already been closed. We have already closed. We've been awarded $400 million year to date. In addition to opportunities we see in SHOP, we're also seeing some unskilled, but the ones that are appealing are off-market deals, both acquisitions and development, brought to us by existing operators.

Speaker #8: Our skilled nursing rent coverage is continuing to grow as did our senior housing triple net and behavioral, all of which hit new highs in coverage.

Speaker #8: Our occupancy growth continued and our skilled and senior housing triple net portfolios. Our top 10 coverage is stronger than it's ever been. Our SHOP margins continue to grow and our consolidated and unconsolidated and same-store portfolios.

Rick Matros: Our year-over-year same store SHOP NOI growth came in higher than the 2 previous quarters. SHOP occupancy dipped slightly overall, but it was all in Canada, which had very strong year-over-year growth and currently sits at 93.4. It's almost effectively full, and there'll be ups and downs a little bit with that portfolio. The US portfolio was up 10 basis points sequentially. For the first time in the company's history, our private pay concentration is now over 50% of the portfolio. Our leverage ticked up slightly but is still on current target. The regulatory environment is stable. The Medicare market basket proposal is within our expectations. We expect Medicaid rates to be within expectations as well. We have a number of AI initiatives that will streamline and enhance the effectiveness of Sabra corporate. Our intent is to be an AI-enabled REIT.

Speaker #8: Our year-over-year same-store SHOP NOI growth came in higher than the two previous quarters. SHOP occupancy dipped slightly overall, but it was all in Canada, which had very strong year-over-year growth and currently sits at 93.4%.

Speaker #8: So, it's almost effectively full, and probably there'll be ups and downs a little bit. With that portfolio, the U.S. portfolio was up 10 basis points sequentially.

Speaker #8: For the first time in the company's history, our private pay concentration is now over 50% of the portfolio. Our leverage ticked up slightly, but is still on current target.

Speaker #8: The regulatory environment is stable. The Medicare market basket proposal is within our expectations. We expect Medicaid rates to be within expectations as well. We have a number of AI initiatives that will streamline and enhance the effectiveness of Sabra Corporate.

Speaker #8: Our intent is to be an AI-enabled REIT. This, of course, is in addition to the numerous clinical pilots we have ongoing, primarily in our SHOP portfolio, which have been really exciting to watch evolve.

Rick Matros: This, of course, is in addition to the numerous clinical pilots we have ongoing primarily in our SHOP portfolio, which have been really exciting to watch evolve. We're affirming guidance, but we will be revisiting guidance in Q2 given all the current trends. With that, I will turn the call over to Darren.

Speaker #8: We're affirming guidance, but we will be revisiting guidance in Q2 given all the current trends. And with that, I will turn the call over to Darren.

Darren: Thank you, Rick. Sabra's managed senior housing portfolio had another great quarter with continued growth. The total managed senior housing portfolio, including non-stabilized communities and joint venture assets at share, had sequential revenue growth of 7.2%, cash NOI growth of 9.5% with margin expansion of 60 basis points. These statistics demonstrate sequential improvement in operating results that reflect the continued growth and strong performance in Sabra's senior housing portfolio. During Q1, Sabra invested $102 million, adding 3 properties to Sabra's managed senior housing portfolio, 1 skilled nursing community, and preferred equity investment in a senior housing development.

Darrin Smith: Thank you, Rick. Sabra's managed senior housing portfolio had another great quarter with continued growth. The total managed senior housing portfolio, including non-stabilized communities and joint venture assets at share, had sequential revenue growth of 7.2%, cash NOI growth of 9.5% with margin expansion of 60 basis points. These statistics demonstrate sequential improvement in operating results that reflect the continued growth and strong performance in Sabra's senior housing portfolio. During Q1, Sabra invested $102 million, adding 3 properties to Sabra's managed senior housing portfolio, 1 skilled nursing community, and preferred equity investment in a senior housing development.

Speaker #7: Thank you, Rick. Sabra's managed senior housing portfolio has had another great quarter with continued growth. The total managed senior housing portfolio, including non-stabilized communities and joint venture assets at share, had sequential revenue growth of 7.2%, cash NOI growth of 9.5%, with margin expansion of 60 basis points.

Speaker #7: These statistics demonstrate sequential improvement in operating results that reflect the continued growth and strong performance in Sabra's senior housing portfolio. During the first quarter, Sabra invested $102 million, adding three properties to Sabra's managed senior housing portfolio, one skilled nursing community, and a preferred equity investment in a senior housing development.

Darren: Subsequent to quarter end, Sabra invested an additional $104.1 million, adding 2 properties to Sabra's managed senior housing portfolio and the redevelopment of a senior housing community, bringing total year-to-date investments to roughly $206 million with an estimated initial cash yield of 8%. Additionally, Sabra has another $107 million of additional awarded managed senior housing and $94 million of awarded skilled nursing investments, most of which should close in Q2. In addition to the over $400 million in closing awarded investments, Sabra has an additional $690 million of managed senior housing investments that we are actively pursuing.

Darrin Smith: Subsequent to quarter end, Sabra invested an additional $104.1 million, adding 2 properties to Sabra's managed senior housing portfolio and the redevelopment of a senior housing community, bringing total year-to-date investments to roughly $206 million with an estimated initial cash yield of 8%. Additionally, Sabra has another $107 million of additional awarded managed senior housing and $94 million of awarded skilled nursing investments, most of which should close in Q2. In addition to the over $400 million in closing awarded investments, Sabra has an additional $690 million of managed senior housing investments that we are actively pursuing.

Speaker #7: Subsequent to quarter end, Sabra invested an additional $104.1 million, adding two properties to Sabra's managed senior housing portfolio and redeveloping a senior housing community, bringing total year-to-date investments to roughly $206 million, with an estimated initial cash yield of 8%.

Speaker #7: Additionally, Sabra has another $107 million of additional awarded managed senior housing and $94 million of awarded skilled nursing investments most of which should close in the second quarter.

Speaker #7: In addition to the over $400 million in closing awarded investments, Sabra has an additional $690 million of managed senior housing investments that we are actively pursuing.

Darren: On a year-over-year basis, Sabra added 21 assets to our managed senior housing portfolio in nearly a 25% increase by number of assets and a 62% increase in total managed senior housing NOI. Deal flow shows no signs of slowing, and Sabra remains competitive on new investments. As our investment pipeline continues to be extremely active, particularly in managed senior housing, we've remained focused on ensuring the foundation underneath is built to accommodate that growth. Over the past several quarters, we've been advancing automation, data, and AI-enabled initiatives to support faster, more consistent decision-making, deeper operating insights across the portfolio for us and our operators, and importantly, meaningfully increase the scalability of our platform. This is a continuation of how we've evolved the platform over the last decade, and we view it as an accelerator of portfolio and earnings growth as well as long-term value creation.

Darrin Smith: On a year-over-year basis, Sabra added 21 assets to our managed senior housing portfolio in nearly a 25% increase by number of assets and a 62% increase in total managed senior housing NOI. Deal flow shows no signs of slowing, and Sabra remains competitive on new investments. As our investment pipeline continues to be extremely active, particularly in managed senior housing, we've remained focused on ensuring the foundation underneath is built to accommodate that growth. Over the past several quarters, we've been advancing automation, data, and AI-enabled initiatives to support faster, more consistent decision-making, deeper operating insights across the portfolio for us and our operators, and importantly, meaningfully increase the scalability of our platform. This is a continuation of how we've evolved the platform over the last decade, and we view it as an accelerator of portfolio and earnings growth as well as long-term value creation.

Speaker #7: On a year-over-year basis, Sabra added 21 assets to our managed senior housing portfolio, representing a nearly 25% increase by number of assets and a 62% increase in total managed senior housing NOI.

Speaker #7: Deal flow shows no signs of slowing and Sabra remains competitive on new investments. As our investment pipeline continues to be extremely active, particularly in managed senior housing, we've remained focused on ensuring foundation underneath is built to accommodate that growth.

Speaker #7: Over the past several quarters, we've been advancing automation, data, and AI-enabled initiatives to support faster, more consistent decision-making, deeper operating insights across the portfolio for us and our operators, and, importantly, meaningfully increase the scalability of our platform.

Speaker #7: This is a continuation of how we've evolved the platform over the last decade, and we view it as an accelerator of portfolio and earnings growth, as well as long-term value creation.

Darren: Moving on to the same-store portfolio. Sabra's same-store managed senior housing portfolio, including joint venture assets at share, continued its strong performance in Q1. The key numbers are: revenue for the quarter grew 7.9% year-over-year, with our Canadian communities growing revenue by 9.6% in the same period. Q1 occupancy in our same-store portfolio was up 280 basis points to 88.4% year-over-year. Notably, our domestic portfolio occupancy increased 280 basis points to 85.6% during that period, while our Canadian portfolio grew 270 basis points to 93.4% in the same period, marking the eighth consecutive quarter where occupancy was over 90%.

Darrin Smith: Moving on to the same-store portfolio. Sabra's same-store managed senior housing portfolio, including joint venture assets at share, continued its strong performance in Q1. The key numbers are: revenue for the quarter grew 7.9% year-over-year, with our Canadian communities growing revenue by 9.6% in the same period. Q1 occupancy in our same-store portfolio was up 280 basis points to 88.4% year-over-year. Notably, our domestic portfolio occupancy increased 280 basis points to 85.6% during that period, while our Canadian portfolio grew 270 basis points to 93.4% in the same period, marking the eighth consecutive quarter where occupancy was over 90%.

Speaker #7: Moving on to the same-store portfolio, Sabra's same-store managed senior housing portfolio, including joint venture assets at share, continued its strong performance in the first quarter.

Speaker #7: The key numbers are: revenue for the quarter grew 7.9% year-over-year, with our Canadian communities growing revenue by 9.6% in the same period. First quarter occupancy in our same-store portfolio was up 280 basis points to 88.4% year-over-year.

Speaker #7: Notably, our domestic portfolio occupancy increased 280 basis points to 85.6% during that period, while our Canadian portfolio grew 270 basis points to 93.4% in the same period, marking the eighth consecutive quarter where occupancy was over 90%.

Darren: RevPOR in the Q1 continued to rise with an increase of 4.6% year over year, with our Canadian portfolio increasing 6.5% in the same period. While RevPOR and occupancy continue to grow, ExpPOR increased only 1.8% for the same period, providing for cash NOI growth of 14.4% on a year-over-year basis. With over $400 million in closed and awarded investments to date, a very robust pipeline, and industry tailwinds at our backs, we should continue to see solid growth in our portfolio. Our net leasing or housing portfolio continues to do well with continued strong rent coverage. With that, I will turn the call over to Michael Costa, Sabra's Chief Financial Officer.

Darrin Smith: RevPOR in the Q1 continued to rise with an increase of 4.6% year over year, with our Canadian portfolio increasing 6.5% in the same period. While RevPOR and occupancy continue to grow, ExpPOR increased only 1.8% for the same period, providing for cash NOI growth of 14.4% on a year-over-year basis. With over $400 million in closed and awarded investments to date, a very robust pipeline, and industry tailwinds at our backs, we should continue to see solid growth in our portfolio. Our net leasing or housing portfolio continues to do well with continued strong rent coverage. With that, I will turn the call over to Michael Costa, Sabra's Chief Financial Officer.

Speaker #7: Rev4 in the first quarter continued to rise, with an increase of 4.6% year-over-year, with our Canadian portfolio increasing 6.5% in the same period. While Rev4 and occupancy continue to grow, Export increased only 1.8% for the same period, providing for cash NOI growth of 14.4% on a year-over-year basis.

Speaker #7: With over $400 million in closed and awarded investments to date, a very robust pipeline, and industry tailwinds at our backs, we should continue to see solid growth in our portfolio.

Speaker #7: Our net lease senior housing portfolio continues to do well, with continued strong rent coverage. And with that, I will turn the call over to Michael Costa, Sabra's Chief Financial Officer.

Michael Costa: Thanks, Darren. For Q1 2026, we recognized normalized FFO per share of $0.38 and normalized AFFO per share of $0.39, which represents a 9% and 5% increase respectively over the same periods in 2025. In absolute dollars, normalized FFO and normalized AFFO totaled $96.1 million and $100.6 million this quarter respectively. Cash NOI from our triple-net portfolio increased $2.2 million from last quarter, primarily due to annual rent escalators and increased collections from certain cash basis tenants. Cash NOI from our managed senior housing portfolio totaled $39 million for the quarter compared to $35.6 million last quarter. This $3.4 million increase was primarily the result of recent investment activity together with sequential growth in our same store portfolio.

Michael Costa: Thanks, Darrin. For Q1 2026, we recognized normalized FFO per share of $0.38 and normalized AFFO per share of $0.39, which represents a 9% and 5% increase respectively over the same periods in 2025. In absolute dollars, normalized FFO and normalized AFFO totaled $96.1 million and $100.6 million this quarter respectively. Cash NOI from our triple-net portfolio increased $2.2 million from last quarter, primarily due to annual rent escalators and increased collections from certain cash basis tenants. Cash NOI from our managed senior housing portfolio totaled $39 million for the quarter compared to $35.6 million last quarter. This $3.4 million increase was primarily the result of recent investment activity together with sequential growth in our same store portfolio.

Speaker #5: Thanks, Darren. For the first quarter of 2026, we recognized normalized FFO per share of $0.38, and normalized AFO per share of $0.39, which represents a 9% and 5% increase, respectively, over the same periods in 2025.

Speaker #5: In absolute dollars, normalized FFO and normalized AFFO totaled $96.1 million and $100.6 million this quarter, respectively. Cash NOI from our triple net portfolio increased $2.2 million from last quarter, primarily due to annual rent escalators and increased collections from certain cash basis tenants.

Speaker #5: Cash NOI from our managed senior housing portfolio totaled $39 million for the quarter, compared to $35.6 million last quarter. This $3.4 million increase was primarily the result of recent investment activity, together with sequential growth in our same-store portfolio.

Michael Costa: Interest and other income was $10 million for the quarter compared to $10.6 million last quarter. This decrease was primarily due to pay downs received during the quarter and lower interest income on our cash balances. Cash interest expense was $26 million compared to $26.6 million last quarter. Normalized cash G&A was $11 million this quarter compared to $10.6 million last quarter. This increase was primarily related to hosting our 2026 operator conference last month. Subsequent to quarter end, we completed the disposition of 3 skilled nursing facilities in Maryland leased to CommuniCare for gross proceeds of $79.4 million, equating to a 6.8% lease yield. These facilities were classified as held for sale as of March 31, 2026.

Speaker #5: Interest and other income was $10 million for the quarter, compared to $10.6 million last quarter. This decrease was primarily due to paydowns received during the quarter and lower interest income on our cash balances.

Speaker #5: Cash interest expense was $26 million, compared to $26.6 million last quarter. Normalized cash G&A was $11 million this quarter, compared to $10.6 million last quarter.

Speaker #5: This increase was primarily related to hosting our 2026 operator conference last month. Subsequent to quarter end, we completed the disposition of three skilled nursing facilities in Maryland, leased to CommuniCare, for gross proceeds of $79.4 million, equating to a 6.8% lease yield.

Speaker #5: These facilities were classified as held for sale as of March 31, 2026. As noted in our earnings release, we have reaffirmed our previously issued 2026 earnings guidance, and the results for this quarter are in line with our assumptions underlying that guidance.

Michael Costa: As noted in our earnings release, we have reaffirmed our previously issued 2026 earnings guidance, and the results for this quarter are in line with our assumptions underlying that guidance. Now briefly turning to the balance sheet. Our net debt to adjusted EBITDA ratio was 5.04x as of 31 March 2026 and continues to be in line with our targeted leverage. As we have stated previously, while we are comfortable with our leverage level, we will continue to assess opportunities to reduce leverage over time, where doing so supports our continued focus on strong year-over-year earnings growth. As of 31 March 2026, the cost of our permanent debt was 3.92%, and the weighted average remaining term on our debt was approximately 4 years, with the next material maturity being in 2028.

Speaker #5: Now, briefly turning to the balance sheet. Our net debt-to-adjusted EBITDA ratio was 5.04 times as of March 31, 2026, and continues to be in line with our targeted leverage.

Speaker #5: As we have stated previously, while we are comfortable with our leverage level, we will continue to assess opportunities to reduce leverage over time, where doing so supports our continued focus on strong year-over-year earnings growth.

Speaker #5: As of March 31, 2026, the cost of our permanent debt was 3.92%, and the weighted average remaining term on our debt was approximately four years.

Speaker #5: With the next material maturity being in 2028, additionally, we have no floating rate debt exposure in our permanent capital stack, with the only floating rate debt being borrowings under our revolving credit facility.

Michael Costa: Additionally, we have no floating rate debt exposure in our permanent capital stack, with the only floating rate debt being borrowings under our revolving credit facility. As Darren noted, our pipeline of investment opportunities has remained extremely active, and that has coincided with continual improvements in the cost of our equity capital. Accordingly, we have been actively utilizing the forward feature under our ATM to lock in this attractive cost of capital to fund our investment pipeline. During the quarter, we issued $128 million on a forward basis at an average price of $20.19 per share after commissions. In total, we have $451 million outstanding under forward contracts at an average price of $19.03 per share after commissions.

Speaker #5: As Darren noted, our pipeline of investment opportunities has remained extremely active, and that has coincided with continual improvements in the cost of our equity capital.

Speaker #5: Accordingly, we have been actively utilizing the forward feature under our ATM to lock in this attractive cost of capital to fund our investment pipeline.

Speaker #5: During the quarter, we issued $128 million on a forward basis at an average price of $20.19 per share after commissions, and in total, we have $451 million outstanding under forward contracts at an average price of $19.03 per share after commissions.

Michael Costa: We expect to use a portion of the proceeds from the outstanding forward contracts, together with the proceeds from the CommuniCare asset sales, to close on the investments we have been awarded on a leverage neutral basis, while still retaining meaningful dry powder to fund additional investments. As of 31 March 2026, we are in compliance with all of our debt covenants and have ample liquidity of approximately $1.2 billion, consisting of unrestricted cash and cash equivalents of $117 million, available borrowings under our revolving credit facility of $645 million, and the $451 million outstanding under forward sales agreements under our ATM program. As of 31 March 2026, we also had $353 million available under the ATM program.

Speaker #5: We expect to use a portion of the proceeds from the outstanding forward contracts, together with the proceeds from the Communicare asset sales, to close on the investments we have been awarded on a leveraged mutual basis, while still retaining meaningful dry powder to fund additional investments.

Speaker #5: As of March 31, 2026, we are in compliance with all of our debt covenants and have ample liquidity of approximately $1.2 billion, consisting of unrestricted cash and cash equivalents of $117 million, available borrowings under our revolving credit facility of $645 million, and the $451 million outstanding under forward sales agreements under our ATM program.

Speaker #5: As of March 31, 2026, we also had $353 million available under the ATM program. Finally, on April 29, 2026, Sabra's board of directors declared a quarterly cash dividend of $0.30 per share of common stock.

Michael Costa: Finally, on 29 April 2026, Sabra's board of directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on 29 May 2026 to common stockholders of record as of the close of business on 15 May 2026. The dividend is adequately covered and represents a payout of 77% of our Q1 normalized AFFO per share. With that, we'll open up the lines for Q&A.

Speaker #5: The dividend will be paid on May 29, 2026, to common stockholders of record as of the close of business on May 15, 2026. The dividend is adequately covered and represents a payout of 77% of our first quarter normalized AFFO per share.

Speaker #5: And with that, we'll open up the lines for Q&A.

Operator 2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of John Kilichowski from Wells Fargo. Your line is open.

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of John Kilichowski from Wells Fargo. Your line is open.

Speaker #1: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

Speaker #1: If you would like to withdraw your question, simply press *1 again. Your first question comes from the line of John Kilicowsky from Wells Fargo.

Speaker #1: Your line is open.

John Kilichowski: Hi. Thanks for taking my question. Rick, really appreciate the opening remarks. It sounds like it was a great quarter all around on, you know, the SHOP side. We got the acquisitions done. Looking at the guide being held still here, you know, what's the reason for the conservatism there? I understand that that's typical in Q1 for you, but it sounds like things are working, and I understand future acquisitions aren't considered, but, you know, what would it really take at this point to get to the lower midpoint?

Speaker #4: All right. Thanks for taking my question. Rick, I really appreciate the opening remarks. It sounds like it was a great quarter all around on the SHOP side.

Speaker #4: We got the acquisitions done. Looking at the guide being held still here, what's the reason for the conservatism there? I understand that that's typical in one queue for you.

Speaker #4: But it sounds like things are working, and I understand future acquisitions aren't considered. But what would it really take at this point to get to the lower midpoint?

Rick Matros: Yeah, we are typically conservative this early in the year. All the trends are obviously going in the right direction. You see the yields that we're investing in, so that looks good for us as well. It's really just kind of as simple as that. We'll reevaluate guidance rather for Q2.

Speaker #3: So yeah, we are typically conservative this early in the year, but all the trends are obviously going in the right direction. You see the yields that we're investing in.

Speaker #3: So that looks good for us as well. So it’s really just kind of as simple as that. We’ll reevaluate guidance for the second quarter.

John Kilichowski: Mm-hmm. Okay. On the opening remarks, you know, you have the 200 awarded. If you could talk to maybe a cadence of that closing, beyond that, the 690. You know, if you think about deals historically that have been in that level of the funnel, what's been your historical rate of execution on those deals? Just trying to distill what, you know, what might be the final number that you execute on.

Speaker #4: Okay. And then on the opening remarks, you have the $200 million awarded. If you could talk to maybe a cadence of that closing and then beyond that, the $690 million.

Speaker #4: If you think about deals historically that have been in that level of the funnel, what's been your historical rate of execution on those deals?

Speaker #4: Just trying to distill what might be the final number that you execute on.

Rick Matros: I'll make 1 comment, then kick it over to Darren. The $200, from our perspective, will close. We don't have any doubt or concern about the $200. Darren?

Speaker #3: I'll make one comment and kick it over to Darren. The $200 million, from our perspective, will close. We don't have any doubt or concern.

Speaker #4: About the 200. Darren?

Darren: Yeah. With respect to the 690, these are investment opportunities that we are actively pursuing. These include opportunities where we have submitted an initial LOI and are moving forward in the process. As far as the probability of success, it's hard to tell because it is a bit of a competitive environment, but we would expect to close on a fair number of that investment opportunity.

Darrin Smith: Yeah. With respect to the 690, these are investment opportunities that we are actively pursuing. These include opportunities where we have submitted an initial LOI and are moving forward in the process. As far as the probability of success, it's hard to tell because it is a bit of a competitive environment, but we would expect to close on a fair number of that investment opportunity.

Speaker #5: Yeah, so with respect to the 690, these are investment opportunities that we are actively pursuing. These include opportunities where we have submitted an initial LOI and are moving forward in the process.

Speaker #5: As far as the probability of success, it's hard to tell because it is a bit of a competitive environment, but we would expect to close on a fair number of that investment opportunity.

Rick Matros: Yeah. You know, the volume is so high, John, there really hasn't been a precedent for this in terms of trying to be a little bit more predictive about what the percentage of deals will close on. It'll be a good enough percentage that, as I said in my opening remarks, we'll exceed pretty materially how much we did last year.

Speaker #3: Yeah. The volume's so high, John, it really hasn't been a precedent for this. In terms of trying to be a little bit more predictive about what the percentage of deals will close on.

Speaker #3: But it'll be a good enough percentage that, as I said in my opening remarks, will exceed pretty materially how much we did last year.

John Kilichowski: Very helpful. Thanks, Rick.

Speaker #4: Very helpful. Thanks, Rick.

Rick Matros: Yeah.

Operator 2: Your next question comes from the line of Farrell Granath from Bank of America. Your line is open.

Operator: Your next question comes from the line of Farrell Granath from Bank of America. Your line is open.

Speaker #1: Your next question comes from Pharrell Granath from Bank of America. Your line is open.

Farrell Granath: Thank you so much. This is Farrell Granath. I first wanted to ask about your pipeline. Also, what percentage of that are you sourcing off market or just through your relationships, and what percentage is through marketed deals?

Speaker #6: Thank you so much. This is Pharrell Granath. I first wanted to ask about your pipeline also. What percentage of that are you sourcing off-market or just through your relationships, and what percentage is through marketed deals?

Darren: Yeah, I don't have the exact percentages, but on the skilled nursing side, it's 100% off market through existing relationships. On the senior side, it's maybe, say, 20%. We do have existing relationships that bring us off-market deals, but the bulk of the pipeline that we have is marketed.

Darrin Smith: Yeah, I don't have the exact percentages, but on the skilled nursing side, it's 100% off market through existing relationships. On the senior side, it's maybe, say, 20%. We do have existing relationships that bring us off-market deals, but the bulk of the pipeline that we have is marketed.

Speaker #5: Yeah. I don't have the exact percentages, but on the skilled nursing side, it's 100% off-market through existing relationships. On the senior side, it's maybe, say, 20%.

Speaker #5: We do have existing relationships that bring us off-market deals, but the bulk of the pipeline that we have is marketed.

Rick Matros: I also just wanna note on the CommuniCare sale that it's not indicative of us sort of aggressively looking to sell the skilled assets. This was a very unique situation where CommuniCare approached us wanting to exit Maryland, which is not an easy state. We actually had other buildings in Maryland that we exited several years ago. There's a lot of markets in Maryland that are overbedded, so we were happy to work with CommuniCare on that. CommuniCare is also one of our operators that we're doing some of these off-market things with.

Speaker #3: And I also just want to note, on the Communicare sale, it's not indicative of us sort of aggressively looking to sell the skilled assets.

Speaker #3: This was a very unique situation where CommuniCare approached us wanting to exit Maryland, which is not an easy state. We actually had other buildings in Maryland that we exited several years ago.

Speaker #3: There are a lot of markets in Maryland that are overbedded, so we were happy to work with CommuniCare on that. And CommuniCare is also one of our operators that we're doing some of these off-market things with.

Farrell Granath: Okay. Thank you. I also wanted to touch on the ExpPOR growth that you highlighted, the 1.8%. Is that being driven just based on the operating leverage of where you are in your occupancy, or are there other puts and takes that are going into that number?

Speaker #6: Okay. Thank you. And I also wanted to touch on the export growth that you highlighted, the 1.8%. Is that being driven just based on the operating leverage of where you are in your occupancy?

Speaker #6: Or were there other puts and takes that are going into that number?

Rick Matros: It's the operating leverage. We would expect it to continue at levels that low for the foreseeable future.

Speaker #3: It's the operating leverage, so we would expect it to continue at levels that low for the foreseeable future.

Farrell Granath: Great.

Speaker #6: Great.

Operator 2: Your next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Your line is open.

Operator: Your next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Your line is open.

Speaker #1: Your next question comes from a line of Austin Wehrschmidt from KeyBank. Your line is open.

Austin Wurschmidt: Great. Thanks. Just within the SHOP portfolio, just wondering how you're feeling about the exit velocity and leading indicators from March looking into April and May. I think you surpassed the one-year anniversary this month since transitioning the communities away from Holiday. What's just sort of the latest update and trajectory for that portfolio?

Speaker #4: Great, thanks. Just within the SHOP portfolio, just wondering how you’re feeling about the exit velocity and kind of leading indicators from March, looking into kind of April and May.

Speaker #4: And I think you surpassed the one-year anniversary this month since transitioning the communities away from Holiday. What's just sort of the latest update and trajectory for that portfolio?

Darren: Yeah, it's definitely getting better.

Darrin Smith: Yeah, it's definitely getting better.

Speaker #5: Yeah. It's definitely getting better.

Rick Matros: Yeah. You know, we're not disclosing the numbers on that, but it is progressing. We're also assessing, you probably noted there was a slight change in same store. That's just a function of having had these new operators in that portfolio for a year now. We've determined that a few of those assets are assets that we no longer want to retain in the portfolio.

Speaker #3: Yeah. We're not disclosing the numbers on that, but it is progressing. We're also assessing you probably noted there was a slight change in same-store and that's just a function of having had these new operators in that portfolio for a year now.

Speaker #3: We've determined that a few of those assets are assets that we no longer want to be want to retain in the portfolio.

Austin Wurschmidt: That's helpful detail. I guess, you know, how deep is the opportunity set for SHOP investments in that 8% yield range? Can you provide some characteristics just around the size, vintage of the facilities that you acquired in Q1 and as well as, you know, what's in that awarded pipeline?

Speaker #4: Yeah. That's helpful detail. And I guess how deep is the opportunity set for shop investments in that 8% yield range? And can you provide some characteristics just around the size, vintage of the facilities that you acquired in the first quarter as well as what's in that awarded pipeline?

Darren: There's definitely some cap rate pressure. Most of what we see on the market and the opportunities right now are in the 7% range, low sevens. What we closed on is IL, AL, and memory care, although it's more heavily weighted to AL and memory care. On the vintage, these are roughly 14 years old is the average age. With respect to the 690 that I mentioned, that has an average age of 8, and also low 7% for those that are more stable. We are actually also looking at some slight value add opportunities where there's lower occupancy, but a clear line of sight to stabilization.

Speaker #5: Yeah, so there's definitely some cap rate pressure. Most of what we see on the market and the opportunities right now are in the 7% range, low 7s.

Darrin Smith: There's definitely some cap rate pressure. Most of what we see on the market and the opportunities right now are in the 7% range, low sevens. What we closed on is IL, AL, and memory care, although it's more heavily weighted to AL and memory care. On the vintage, these are roughly 14 years old is the average age. With respect to the 690 that I mentioned, that has an average age of 8, and also low 7% for those that are more stable. We are actually also looking at some slight value add opportunities where there's lower occupancy, but a clear line of sight to stabilization. Some of those we're looking at will have initial yields in the sixes, but should provide more meaningful IRR with the upside opportunity.

Speaker #5: What we closed on is IL, AL, and memory care, although it's more heavily weighted to AL and memory care. On the vintage, these are roughly 14 years old is the average age with respect to the 690 that I mentioned that has an average age of 8.

Speaker #5: And also low 7% for those that are more stable, but we are actually also looking at some slight value-add opportunities where there's lower occupancy but a clear line of sight to stabilization. In some of those we're looking at, we'll have initial yields in the 6s.

Darren: Some of those we're looking at will have initial yields in the sixes, but should provide more meaningful IRR with the upside opportunity.

Speaker #5: But should provide more meaningful IRRs with the upside opportunity.

Rick Matros: As you know, we focus on secondary markets, so we're not seeing the same level of cap rate compression in the secondary markets as you all see in the primary markets.

Speaker #3: And as you know, we focus on secondary markets, so we're not seeing the same level of cap rate compression in the secondary markets as you all see in the primary markets.

Speaker #4: Very helpful. Thanks for the time.

Operator 2: Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is open.

Operator: Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is open.

Speaker #1: Your next question comes from Juan Senabria from BMO Capital Markets. Your line is open.

Juan Sanabria: Hi. Good morning. Just hoping you could talk a little bit more about those SHOP assets that you transitioned last year that you're now, seems like, looking to sell. You know, if you can comment on the book value or the expected proceeds. If you had not excluded those from the same-store pool, do you know what SHOP same-store NOI would have been for the quarter on a year-over-year basis?

Speaker #3: Hi. Good morning. Just hoping you could talk a little bit more about those SHOP assets that you transitioned last year that you're now, it seems like, looking to sell.

Speaker #3: If you can comment on the book value or the expected proceeds, and if you had not excluded those from the same-store pool, do you know what same-store NOI would have been for the quarter on a year-over-year basis?

Rick Matros: We're just selling those right now. Juan, we're not we don't know what the outcome is going to be. We're not disclosing any of that information at this point. You know, a couple of quarters ago, when we talked about the transition of that portfolio, we did say that we'd be evaluating the viability of retaining all these assets going forward. That's just kind of a normal process. We're not breaking out all these different portfolios in terms of the individual growth, SHOP NOI in these portfolios.

Speaker #3: We were just selling those right now, Juan, so we don't know what the outcome is going to be. We're not disclosing any of that information at this point.

Speaker #3: So, when a couple of quarters ago, when we talked about the transition of that portfolio, we did say that we'd be evaluating the viability of retaining all these assets going forward.

Speaker #3: So that's just kind of a normal process. But we're not breaking out all these different portfolios in terms of the individual growth of SHOP NOI in these portfolios.

Juan Sanabria: to, just to confirm, these were old, original Holiday assets. Is that fair?

Speaker #4: Since it's just to confirm, these were old or original holiday assets. Is that fair?

Rick Matros: Yes, they are.

Speaker #3: Yes, they are. Three assets. It's three assets. And let me it's three assets that we're selling, and we brought another holiday asset into same-store that had stabilized.

Juan Sanabria: Okay, great.

Rick Matros: It's 3 assets.

Juan Sanabria: And then just, uh-

Rick Matros: It's three assets that we're selling, and we brought another Holiday asset into same store that had stabilized.

Juan Sanabria: Great. Just to switch gears, appreciate that. Thanks, Rick. Just on the behavioral, could you just give an update on Landmark that was in the press and any updated thoughts on how we should be thinking about the RCA loan?

Speaker #4: Great. And just to switch gears—I appreciate that, thanks, Rick. Just on the behavioral, could you give an update on Landmark that was in the press, and any updated thoughts on how we should be thinking about the RCA loan?

Rick Matros: Sure. We always reserve the RCA question for you, Juan, just so you know it's special. On Landmark, we had been working with them. They obviously are in the court system for an exit with those facilities, and we actually helped bring somebody in to buy a bunch of the assets. The Landmark team is buying some of the assets themselves. We were able to get a price that was actually pretty attractive from our perspective. Outside of that group of Landmark assets, we've got three others that we are in the process of selling as well. We'll have some more proceeds to add to the ones that you saw in the article.

Speaker #3: Sure. And we always reserve the RCA question for you, Juan, just so you know it's special. But so on landmark, we had been working with, and they obviously are in the court system.

Speaker #3: For an exit with those facilities, we were able to— we actually helped bring somebody in to buy a bunch of the assets. The Landmark team is buying some of the assets themselves.

Speaker #3: So, we were able to get a price that was actually pretty attractive from our perspective. Outside of that group of landmark assets, we've got three others that we are in the process of selling as well.

Speaker #3: So we'll have some more proceeds to add to the ones that you saw in the article. So, as we've talked about, that team did a really good job running that company for a while, and then they had those unfortunate incidents with resident deaths in Indiana and got shut down by the regulator.

Rick Matros: You know, as we've talked about, you know, that team did a really good job running that company for a while, and then they had those unfortunate incidents with resident deaths in Indiana and got shut down by the regulators. Just a bad term for them, and we hung in for a while. At this point, we felt it was better just to get out from under. On RCA, our talks are continuing to progress and It's possible we'll be in a position to make an announcement on that before our Q2 call, and if that's the case, we will do so. It's, as I mentioned on the last call, Deerfield, it's their biggest investment. They really believe in the portfolio and our talks are very constructive.

Speaker #3: So just a bad turn for them, and we hung in for a while. But at this point, we felt it was better just to get out from under.

Speaker #3: And on RCA, our talks are continuing to progress, and it's possible we'll be in a position to make an announcement on that before our second quarter call.

Speaker #3: And if that's the case, we will do so. But it's, as I mentioned on the last call, Deerfield, it's their biggest investment. They really believe in the portfolio, and our talks are very constructive.

Juan Sanabria: Was there any NOI or rents collected related to Landmark flowing through Q1, and how should we think about, I guess, that going forward?

Speaker #4: And was there any NOI or rent collected related to Landmark flowing through the first quarters? And should we think about that as—how should we think about, I guess, that going forward?

Michael Costa: Yeah, there is somewhere around, like, a million and a half, I wanna say, Juan, in Q1 that we collected on them. We would expect that same run rate through whenever these assets ultimately transact.

Speaker #5: Yeah. There is somewhere around $1.5 million, I want to say, Juan, in the first quarter that we collected on them. And we would expect that same run rate through whenever these assets ultimately transact.

Juan Sanabria: Thank you.

Speaker #4: Thank you.

Operator 2: Your next question comes from the line of Seth Bergey from Citi. Your line is open.

Operator: Your next question comes from the line of Seth Bergey from Citi. Your line is open.

Speaker #1: Your next question comes from Seth Bergy from Citi. Your line is open.

Seth Bergey: Hi. Thanks for taking my question. You mentioned in the prepared remarks some AI initiatives. Could you just kind of expand on, you know, some of those and how you're using AI within the platform and maybe talk a little bit about what differentiates kind of the Sabra platform from like an AI perspective versus some of the peers that are also competing in the shop and skilled business?

Speaker #6: Hi, thanks for taking my question. You mentioned in the prepared remarks some AI initiatives. Could you just kind of expand on some of those and how you're using AI within the platform, and maybe talk a little bit about what differentiates the Sabra platform from an AI perspective versus some of the peers that are also competing in the SHOP and skilled business?

Michael Costa: Yeah. I'll take that one, Seth. You know, at a corporate level, you know, as Darren mentioned, we've been leaning into automation and AI over the last several quarters. Primarily at the corporate level, it's been, you know, to speed up back office workflows and data processing, primarily in our SHOP portfolio. At the same time, we're also advancing some initiatives that are gonna further reduce manual processes and accelerate analysis. Not the sexiest thing in the world. I'll be very, you know, I'm very cognizant of that, but it is very impactful, particularly as it improves how we interact with our operators, what kind of value we could give back to our operators in the form of data and insights.

Speaker #5: Yeah, so I'll take that one, Seth. So, at a corporate level, as Darren mentioned, we've been leaning into automation and AI over the last several quarters.

Speaker #5: And primarily at the corporate level, it's been to speed up back-office workflows and data processing, primarily in our shop portfolio. At the same time, we're also advancing some initiatives that are going to further reduce manual processes and accelerate analysis.

Speaker #5: Not the sexiest thing in the world. I'll be very—I'm very cognizant of that. But it is very impactful, particularly as it improves how we interact with our operators, what kind of value we could give back to our operators in the form of data and insights.

Michael Costa: It could have some really meaningful benefits not only to us, but to our operators as well. As Rick mentioned, you know, we have pilots going on at the facility level that, you know, in addition to several proptech solutions that have already been deployed, there's a whole bunch of other solutions like medical records and fall detection that are leveraging AI that are gonna make operations more efficient and, more importantly, improve resident care.

Speaker #5: And it could have some really meaningful benefits, not only to us, but to our operators. As well, and then as Rick mentioned, we have pilots going on at the facility level that in addition to several PropTech solutions that have already been deployed, there's a whole bunch of other solutions like medical records and fall detection that are leveraging AI that are going to make operations more efficient and, more importantly, improve resident care.

Seth Bergey: Maybe just a little bit on kind of the deal flow and the opportunity set. What's kind of the mix between SHOP and field of the opportunity set, and are there any particular geographies you're looking at?

Speaker #6: And then, maybe just a little bit on the deal flow and the opportunity set. What's kind of the mix between SHOP and skilled of the opportunity set?

Speaker #6: And are there any particular geographies you're looking at?

Michael Costa: Nothing's really changed. It's still, I'd say 95% plus SHOP is the opportunity set. The skilled nursing investments and the opportunities that we've announced were all done off market with direct relationships. Still don't see that much volume in the skilled space, and when you do it's very heavily competitive and, the private groups tend to be able to pay up a little bit more.

Speaker #5: Nothing's really changed. It's still, I'd say, 95% plus shop is the opportunity set. The skilled nursing investments and the opportunities that we've announced were all done off-market with direct relationships.

Darren: Still don't see that much volume in the skilled space, and when you do it's very heavily competitive and, the private groups tend to be able to pay up a little bit more.

Speaker #5: Still don't see that much volume in the skilled space. And when you do, it's very heavily competitive, and the private groups tend to be able to pay up a little bit more.

Rick Matros: Yeah, remember the private buyers that we're all up against are buy opco and propco, and they also are feeding ancillary businesses. As a buyer of real estate, you know, we just can't compete with that. There's not enough volume out there for everybody, to go around for everybody as there is on SHOP or there was on SNF, if you go back to prior to the pandemic when there was enough for everybody to go around. At this point, we don't see that changing, at least for a while.

Speaker #3: Yeah. Remember, the private buyers that were all up against are buying Opco and Propco. And they also are feeding ancillary businesses. So as a buyer of real estate, we just can't compete with that.

Speaker #3: And there’s not enough volume out there for everybody to go around, for everybody, as there is on shop, or there was on skilled if you go back to prior to the pandemic when there was enough for everybody to go around.

Speaker #3: And at this point, we don't see that changing, at least for a while. I think a lot of it's just a function of a lot of these operators who don't have to sell, got really slammed during the pandemic and had pretty huge losses.

Rick Matros: I think a lot of it's just a function of a lot of these operators who don't have to sell got really slammed during the pandemic and had pretty huge losses, and now you've had a couple of years of some really good performance, and that performance will continue to improve. So I think for a lot of the operators out there that don't have to sell that normally would put their assets on the market, they're just recouping, and they're probably enjoying some really nice cash flow that wasn't the case a few years ago. Maybe we'll see that change later on in the year or going into 2027, but it's a little hard to tell.

Speaker #3: And now you've had a couple of years of some really good performance, and that performance will continue to improve. So I think for a lot of the operators out there that don't have to sell, that normally would put their assets on the market, they're just recouping, and they're probably enjoying some really nice cash flow that wasn't the case a few years ago.

Speaker #3: So maybe we'll see that change later on in the year or going into 2027, but it's a little hard to tell.

Darren: On the SHOP side, as far as the markets are concerned, we're still looking at secondary markets is the focus here. As far as the volume is concerned, it's showing no signs of slowing whatsoever. In fact, it actually feels like it's picking up speed.

Darrin Smith: On the SHOP side, as far as the markets are concerned, we're still looking at secondary markets is the focus here. As far as the volume is concerned, it's showing no signs of slowing whatsoever. In fact, it actually feels like it's picking up speed.

Speaker #5: On the shop side, as far as the markets are concerned, we're still looking at secondary markets—that is the focus here. And as far as the volume is concerned, it's showing no signs of slowing whatsoever.

Speaker #5: In fact, it actually feels like it's picking up speed.

Rick Matros: Yeah. We're geographically agnostic, though, in terms of what states we'll be in for either asset class.

Speaker #3: Yeah. And we're geographically agnostic, though, in terms of what the states will be in for either asset class.

Seth Bergey: Great. Thanks.

Speaker #6: Great. Thanks.

Operator 2: Your next question comes from a line of Michael Stroyeck from Green Street. Your line is open.

Operator: Your next question comes from a line of Michael Stroyeck from Green Street. Your line is open.

Speaker #1: Your next question comes from Michael Strojek with Green Street. Your line is open.

Michael Stroyeck: Thanks, and good morning. Maybe following up on that question and just going back to the strong pricing on the CommuniCare sale and your comments on not being able to compete as well on the SNF transaction market. I guess just what sort of yields or multiples are you seeing there on those marketed SNF deals, and how different is that versus, you know, the typical, call it 9% to 10%, lease yields we see in SNFs?

Speaker #4: Thanks, and good morning. Maybe following up on that question, and just going back to the strong pricing on the CommuniCare sale, and your comments on not being able to compete as well on the SNF transaction market.

Speaker #4: I guess just, what sort of yields or multiples are you seeing there on those marketed SNF deals? And how different is that versus the typical, call it, 9% to 10% lease yields we see in SNFs?

Rick Matros: There's not a lot of data out on that, is the problem because they are all private, they are all private deals. I don't really have a good answer for that. Darren, I don't know if you've seen anything.

Speaker #3: There's not a lot of data out on that. It's the problem because they are all private. They are all private deals. And so I don't really have a good answer for that.

Speaker #3: Darren, I don't know if you've seen anything.

Darren: No. I mean, it's definitely a couple hundred basis points, inside of what the standard skilled nursing transaction would typically run at.

Darrin Smith: No. I mean, it's definitely a couple hundred basis points, inside of what the standard skilled nursing transaction would typically run at.

Speaker #5: No, I mean, it's definitely a couple hundred basis points inside of what the standard skilled nursing transaction would typically run at.

Michael Stroyeck: Got it. Okay. Maybe going back to behavioral health discussion. One of your peers had talked about labor being a challenge within that business. Are you experiencing a meaningfully tougher labor backdrop within behavioral health versus, call it, other areas of the portfolio?

Speaker #4: Got it. Okay. And then, maybe going back to the behavioral health discussion, one of your peers had talked about labor being a challenge within that business.

Speaker #4: Are you experiencing a meaningfully tougher labor backdrop within behavioral health versus, call it, other areas of the portfolio?

Rick Matros: No, not at all.

Speaker #3: No, not at all. I'm a little bit surprised. I'm a little bit surprised to hear that. We haven't seen that at all in our portfolio.

Michael Stroyeck: Okay.

Rick Matros: I'm a little bit surprised to hear that. We haven't seen that at all in our portfolio.

Michael Stroyeck: Understood. Thanks for the time.

Speaker #4: Okay. Understood. Thanks for the time.

Rick Matros: Yep.

Speaker #3: Yep.

Operator 2: Your next question comes from a line of Alec Feygin from Baird. Your line is open.

Operator: Your next question comes from a line of Alec Feygin from Baird. Your line is open.

Speaker #1: Your next question comes from a line of Alec Fagan from Baird. Your line is open.

Alec Feygin: Hey, thanks for taking my question. Can you maybe comment on how the opportunity set of funding for development and redevelopment projects have trended? Do you expect this to be a bigger part of your investment activity going forward?

Speaker #4: Hey, thanks for taking my question. Can you maybe comment on how the opportunity set of funding for development and redevelopment projects has trended? And do you expect this to be a bigger part of your investment activity going forward?

Darren: As far as the developments, we still see a fair amount of development opportunities that come in. I would say of those development opportunities that come in, maybe 10% pencil. Basically when I say pencil, always looking for a stabilized return on our costs on the development to be 200 to 250 basis points wider than the current market cap rate equivalent, maybe only 10% of those. I do expect that it's gonna pick up, but not meaningfully for some period of time.

Darrin Smith: As far as the developments, we still see a fair amount of development opportunities that come in. I would say of those development opportunities that come in, maybe 10% pencil. Basically when I say pencil, always looking for a stabilized return on our costs on the development to be 200 to 250 basis points wider than the current market cap rate equivalent, maybe only 10% of those. I do expect that it's gonna pick up, but not meaningfully for some period of time.

Speaker #5: As far as the developments, we still see a fair amount of development opportunities that come in. I would say of those development opportunities that come in, maybe 10% pencil. You're still having—and basically when I say pencil, always looking for a stabilized return on cost on the development to be 200 to 250 basis points wider than the current market cap rate equivalent.

Speaker #5: Maybe only 10% of those. I do expect that is going to pick up, but not meaningfully for some period of time.

Alec Feygin: Can you comment, are these development opportunities also in the secondary market? I guess tertiary markets, secondary markets?

Speaker #4: And can you comment, are these development opportunities also in the secondary market? Or I guess tertiary markets, secondary markets?

Darren: Yeah. The one preferred equity development that we announced is in Indiana. The other one is a redevelopment of a former SNF property that was shut down, and we're redeveloping that into a senior housing property, and that's in Kentucky.

Darrin Smith: Yeah. The one preferred equity development that we announced is in Indiana. The other one is a redevelopment of a former SNF property that was shut down, and we're redeveloping that into a senior housing property, and that's in Kentucky.

Speaker #5: Yeah. So the one prep equity development that we announced is in Indiana. It's about and then the other one is actually, it's a redevelopment of a former sniff property that was shut down and we're redeveloping that into a senior housing property.

Speaker #5: And that's in Kentucky.

Alec Feygin: Got it. Thanks for the time.

Speaker #4: Got it. Thanks for the time.

Operator 2: Your next question comes from a line of Vikram Malhotra from Mizuho Securities. Your line is open.

Operator: Your next question comes from a line of Vikram Malhotra from Mizuho Securities. Your line is open.

Speaker #1: Your next question comes from Vikram Malhotra with Mizuho Securities. Your line is open.

Vikram Malhotra: Thanks for taking the question. I guess I just wanna go back to the question on the guide. Just the cadence of SS4, AFFO, you just take your quarterly number and, you know, just multiply it by four. You're very, very easily in the range. I'm just wondering, is there a one-time item? Is there maybe this loan that you've got baked in, any other asset transition or sale? Like, how should we, you know, what should we infer is a pretty steady number. If you can go back and give us any more color on, like, what other puts and takes for the year that we should be modeling.

Speaker #6: Thanks for taking the question. I guess I just want to go back to the question on the guide. Just the cadence of SFO or ASFO—you just take your quarterly number and multiply it by four.

Speaker #6: You're very, very easily in the range. So I'm just wondering, is there a one-time item? Is there maybe this loan that you've got baked in?

Speaker #6: Any other asset transition or sale? How should we—what should we infer as a pretty steady number? So, I’m just—if you can go back and give us any more color on whether there are other puts and takes for the year that we should be modeling?

Michael Costa: Yeah. As you rightly pointed out, if you take our Q1 results and you annualize them, they're right at. If you do it on, you know, actual dollars and run the math out, you're probably just slightly below where our midpoint is. There's that data point. I think the other data point is we guided towards, you know, low to mid-teen same store NOI growth in our SHOP portfolio, and we came at 14, so right in the middle of that range as well. As we talked about, you know, many times before, the biggest driver of where we end up landing on an earnings perspective, especially relative to our guidance range, is going to be dictated by our SHOP NOI growth.

Speaker #5: Yeah, so as you rightly pointed out, if you take our first quarter results and annualize them, they're right at—or if you do it on actual dollars and run the math out, you're probably just slightly below where our midpoint is.

Speaker #5: So there's that data point. I think the other data point is we guide it towards low to mid-teens, same store NOI growth in our shop portfolio.

Speaker #5: And we came in at 14, so right in the middle of that range as well. And as we've talked about many times before, the biggest driver of where we end up landing on our earnings perspective—especially relative to our guidance range—is going to be dictated by our SHOP NOI growth.

Michael Costa: Given that our current quarter earnings are right at the midpoint or even slightly below the midpoint, given that our SHOP growth is right where we guided for the full year, you know, and we reaffirmed our guidance, let's not lose sight of that. We reaffirmed the guidance that we put out. We still feel as we sit here today, 2 months after we put our initial guidance, that you know, reaffirming where we stand or where we put out previously still makes sense. As Rick mentioned, you know, we've historically taken the approach that in Q1 we're not gonna generally revisit guidance unless there's some material change one way or another. There hasn't been.

Speaker #5: So given that our current quarter earnings are right at the midpoint or even slightly below the midpoint, given that our shop growth is right where we guided for the full year, and we reaffirmed our guidance, let's not lose sight of that.

Speaker #5: We reaffirmed the guidance that we put out. We still feel as we sit here today, two months after we put out our initial guidance, that reaffirming where we stand or where we put out previously still makes sense.

Speaker #5: As Rick mentioned, we've historically taken the approach that in Q1, we're not going to generally revisit guidance unless there's some material change one way or another.

Speaker #5: There hasn't been. And we're going to reevaluate it in Q2 as we have a better line of sight into what the shop growth is going to look like for the year.

Michael Costa: We're gonna reevaluate it in Q2 as we have a better line of sight into what the SHOP growth is gonna look like for the year and as our investment pipeline takes greater form.

Speaker #5: And as our investment pipeline takes greater form.

Rick Matros: We totally get the questions, particularly since some of our peers raised guidance in some form or fashion over this past week. You know, we totally get it, but we like the trends we're seeing, as I said earlier. We like the volume that we're seeing, and we like the yields we're getting things done in. We will see how it goes.

Speaker #3: And we totally get the questions. Particularly since some of our peers raised guidance and some former fashion over this past week. So we totally get it, but we'd like the trends we're seeing, as I said earlier, we'd like the volume that we're seeing, and we'd like the yields we're getting things done in.

Speaker #3: So we'll see how it goes.

Vikram Malhotra: Okay. I mean, I'm not reading into the CommuniCare pricing, but in general, there seems to be downward pressure on cap rates for SNFs, given especially this, you know, hope to improve the operations. I'm wondering, is there an opportunity for you to, given your desire for SHOP, to do a bigger portfolio sale in SNFs, and raise $500 million or billions and recycle that into SHOP?

Speaker #6: Okay. And then, I mean, I'm not reading into the communicare pricing, but in general, there seems to be downward pressure on cap rates for SNFs given especially this hope to improve the operations.

Speaker #6: So I'm wondering, is there an opportunity for you to, given your desire for SHOP, to do a bigger portfolio sale in SNFs and reach $500 million, a billion, and recycle that into SHOP?

Rick Matros: Well, I'm not sure there's downward pressure on cap rates because of the private buyers. The REITs are pretty disciplined about holding firm on the cap rates that we've historically acquired SNFs at. We like the fact that we've got a very strong triple-net skilled nursing portfolio. We're at all-time highs on rent coverage. We're at all-time highs on margins. Occupancy continues to grow, there's still upside there. It's a base that we have that everybody can depend on. The SHOP side of it, which is gets bigger and bigger for us, obviously provides more outsized earnings growth. We like having that balance, our portfolio today is better balanced than it's ever been. For us to pass the 50% mark on private pay revenues is a material change.

Speaker #3: Well, I'm not sure there's downward pressure on cap rates because of the private buyers. The REITs are pretty disciplined about holding firm on the cap rates that we've historically acquired SNFs at.

Speaker #3: But we like the fact that we've got a very strong triple net skilled nursing portfolio. We're at all-time highs on rent coverage. We're at all-time highs on margins.

Speaker #3: Occupancy continues to grow, so there's still upside there, and it's something—it's a base that we have that everybody can depend on. And then the SHOP side of it, which gets bigger and bigger for us, obviously provides more outsized earnings growth.

Speaker #3: So, we like having that balance. And our portfolio today is better balanced than it's ever been. For us to pass the 50% mark on private pay revenues is a material change.

Rick Matros: You know, we started out as a 96% skilled REIT. You know, we've evolved quite a bit. We're not gonna sell portfolios that we think are really good just to shift the percentages of SHOP. We've got plenty of access to capital. We have plenty of liquidity available to invest in all the SHOP opportunities that we have ahead of us.

Speaker #3: We started out as a 96% skilled REIT. So we've evolved quite a bit, but we're not going to sell portfolios that we think are really good just to shift the percentages of SHOP.

Speaker #3: We've got plenty of access to capital. We have plenty of liquidity available to invest in all the shop opportunities that we have ahead of us.

Vikram Malhotra: Okay. If I can just clarify, Rick, I think you said the Canadian portfolio's 93%. You think it's essentially full. In this environment, everyone, a lot of folks are talking about 95% plus. Is 93% sort of the peak for the Canadian portfolio in absolute?

Speaker #6: Okay. And then if I can just clarify, Rick, I think you said the Canadian portfolio is 93 — you think it's essentially full. But I guess in this environment, a lot of folks are talking about 95-plus.

Speaker #6: So is 93 sort of the peak for the Canadian portfolio in absolute?

Rick Matros: No. No, not necessarily. I just think when you start to get to the mid-90s, you'll have some ups and downs. Look, we have a facility up there that's 100% almost all the time. That's unusual, you know, but it happens. I think it's important to focus on, I think we had a 270 basis point year-over-year growth in that Canadian portfolio. Yeah, we expect occupancy to continue to trend up there, but it's not gonna be sort of the same, at the same velocity as if it was still, you know, 86% or 85%.

Speaker #3: No, no, not necessarily. I just think when you start to get to the mid-90s, you'll have some ups and downs. But look, we have a facility up there that's 100% almost all the time.

Speaker #3: That's unusual, but it happens. So, I think it's important to focus on—I think we had a 270-basis-point year-over-year growth in that Canadian portfolio.

Speaker #3: So, yeah, we expect occupancy to continue to trend up there. But it's not going to be at the same velocity as if it was still 86% or 85%.

Vikram Malhotra: Okay. Thank you.

Speaker #6: Okay. Thank you.

Rick Matros: Yeah.

Speaker #3: Yeah.

Operator 2: Your next question comes from the line of Richard Anderson from Cantor Fitzgerald. Your line is open.

Operator: Your next question comes from the line of Richard Anderson from Cantor Fitzgerald. Your line is open.

Speaker #5: Your next question comes from a line of Richard Anderson from Cantor Fitzgerald. Your line is open.

Richard Anderson: Thanks. Good morning. On CommuniCare, you're selling or sold. Omega is selling, I think, to CommuniCare, if correct me if I'm wrong about that.

Rich Anderson: Thanks. Good morning. On CommuniCare, you're selling or sold. Omega is selling, I think, to CommuniCare, if correct me if I'm wrong about that.

Speaker #7: Thanks. Good morning. On CommuniCare, you're selling or sold—Omega is selling, I think, to CommuniCare, if that's correct. Correct me if I'm wrong about that, and if I'm...

Rick Matros: No, that's not.

Richard Anderson: That's not right?

Rich Anderson: That's not right?

Speaker #5: No, that's not that.

Rick Matros: Sorry.

Richard Anderson: Okay, excuse me.

Rich Anderson: Okay, excuse me.

Speaker #7: That's not right? Okay. Excuse me.

Rick Matros: That's not right, no.

Richard Anderson: Okay. In their case, I believe that's the case. Both Maryland. I'm just curious, is there any dotted line between what Omega's doing and what you're doing that you could share on you know, CommuniCare, and if there's some sort of trend that we can draw from both of those transactions?

Rich Anderson: Okay. In their case, I believe that's the case. Both Maryland. I'm just curious, is there any dotted line between what Omega's doing and what you're doing that you could share on you know, CommuniCare, and if there's some sort of trend that we can draw from both of those transactions?

Speaker #5: That's not right, no.

Speaker #7: Okay. In their case, I believe that's the case. But both Maryland—I'm just curious, is there any dotted line between what Omega is doing and what you're doing that you could share on CommuniCare, and if there's some sort of trend that we can draw from both of those transactions?

Rick Matros: No, I don't really think so. I mean, they were hoping to get cooperation from both us and Omega. They just really wanted to exit a state that was a really, really tough state for them. They thought it would strengthen their portfolio overall. We're seeing that as the result. When they first called us, I mean, it resonated with us because I said, as I said earlier, we shed facilities in Maryland several years ago. It's, you know, it's just tough there. Yeah, I don't think there's any trend here or anything like that. CommuniCare still wants to grow. As I said earlier, we're seeing some growth with them. Omega may or may not be as well. Yeah.

Speaker #3: No, I don't really think so. I mean, they were hoping to get cooperation from both us and Omega, and they just really wanted to exit a state that was a really, really tough state for them.

Speaker #3: They thought it would strengthen their portfolio overall, and we're seeing that as the result. And when they first called us, I mean, it resonated with us because, as I said earlier, we shed facilities in Maryland several years ago.

Speaker #3: It's just tough there, so yeah. But I don't think there's any trend here or anything like that. Communicare still wants to grow. As I said earlier, we're seeing some growth with them.

Speaker #3: Omega may or may not be as well. So yeah, but no dotted lines or anything like that, other than we think the Omega team's a great team.

Rick Matros: No, no dotted lines or anything like that other than, we think the Omega team is a great team.

Richard Anderson: Okay. Fair enough. Rick, no guidance update, which is fine with me, but also no change to your target SHOP. I think it was 40% as of last quarter. Let's say you bite into this $690 million to a certain degree, between now and three months from now. Are you closing in on 40%? Might we have an update on a new target for SHOP this time in three months?

Rich Anderson: Okay. Fair enough. Rick, no guidance update, which is fine with me, but also no change to your target SHOP. I think it was 40% as of last quarter. Let's say you bite into this $690 million to a certain degree, between now and three months from now. Are you closing in on 40%? Might we have an update on a new target for SHOP this time in three months?

Speaker #7: Okay, fair enough. Rick, no guidance update, which is fine with me, but also no change to your target SHOP. I think it was 40% as of last quarter.

Speaker #7: Let's say you bite into this $690 million, to a certain degree, between now and three months from now. Are you closing in on 40%?

Speaker #7: And might we have an update on a new target for SHOP this time in three months?

Rick Matros: Well, we will be closing. I mean, if we say we are to do $1 billion this year, we definitely are going to be in pretty good shape in terms of the 40%. We will just set a higher target. You know, as I said earlier, we are not going to shed any sort of major skilled portfolios, but there is always some stuff that you sell. Between some of that, which is probably incremental or on the margin, and almost all of our investment activity being on SHOP, you are just going to continue to see skill being a smaller percentage of the portfolio and SHOP continuing to grow. We do not have any sort of guardrails or anything about how much we want to do in SHOP.

Speaker #3: Well, we will be closing I mean, if we say we're to do a billion this year, we definitely are going to be in pretty good shape in terms of the 40%.

Speaker #3: But then we'll just set a higher target. So as I said earlier, we're not going to shed any sort of major skilled portfolios. But there's always some stuff that you sell.

Speaker #3: So between some of that, which is probably incremental, we're on the margin. And almost all of our investment activity being on shop, you're just going to continue to see skill being a smaller percentage of the portfolio and shop continuing to grow.

Speaker #3: But we don't have any sort of guardrails or anything about how much we want to do in shop. And as you know, because we've been doing shop for over 10 years, and with all the improvements we're making in the existing platform, with our AI initiatives, our platform is going to be more scalable than it's ever been.

Rick Matros: As you know, because we've been doing SHOP for over 10 years, and with all the improvements we're making in the existing platform, with our AI initiatives, our platform's gonna be more scalable than it's ever been. We'll be able to continue to grow our SHOP, our SHOP exposure. The amount of infrastructure we'll have to add as a result of that will be lower than it normally would have been in the absence of the AI initiatives.

Speaker #3: We'll be able to continue to grow our shop. Our shop exposure, and the amount of infrastructure we'll have to add as a result of that, will be lower than it normally would have been in the absence of the AI initiatives.

Richard Anderson: Okay, great. Last for me, this is just more of a theoretical sort of big picture question, but, you know, obviously a lot of your peers are taking a SHOP on goal, I guess they'll say it that way. You know, a lot of, you know, kind of working in individual silos. It seems to me that, you know, you guys have been doing it for a while, so it's not a conversation about Sabra in particular, but what do you think about the potential that there'll be some sort of combination activity to attack the SHOP opportunity? You know, it seems like it makes sense. It's a business that requires scale and, you know, some of the things that you're doing.

Rich Anderson: Okay, great. Last for me, this is just more of a theoretical sort of big picture question, but, you know, obviously a lot of your peers are taking a SHOP on goal, I guess they'll say it that way. You know, a lot of, you know, kind of working in individual silos. It seems to me that, you know, you guys have been doing it for a while, so it's not a conversation about Sabra in particular, but what do you think about the potential that there'll be some sort of combination activity to attack the SHOP opportunity? You know, it seems like it makes sense. It's a business that requires scale and, you know, some of the things that you're doing. I'm just curious if you could comment on that at all, you know, just generally.

Speaker #7: Okay, great. And then this is just more of a theoretical, sort of big-picture question, but obviously a lot of your peers are taking a shot on goal—I guess I'll say it that way.

Speaker #7: And a lot of kind of working in individual silos. It seems to me that you guys have been doing it for a while, so it's not a conversation about Sabra in particular, but what do you think about the potential that there'll be some sort of combination activity to attack the SHOP opportunity?

Speaker #7: It seems like it makes sense. It's a business that requires scale. And some of the things that you're doing, I'm just curious if you could comment on that at all, just generally.

Richard Anderson: I'm just curious if you could comment on that at all, you know, just generally.

Rick Matros: Rich, are you talking about M&A activity with the REITs?

Speaker #3: Rick, can you talk about M&A activity with the Roots?

Richard Anderson: Yeah. Yeah.

Rich Anderson: Yeah. Yeah.

Rick Matros: Yeah. Look, we all know there are too many of us. Now with everybody jumping on the SHOP bandwagon like it's, you know, a new form of breakfast cereal or something that everybody likes better now. I mean, the only concern I have. Look, there's a lot of mutual respect in our space between all of our teams. We all know each other really well. We hang together when we have the opportunity. There's plenty to go around. I just hope people are prudent in making sure they have the infrastructure in place to support the operators and to assess the quality of deals that are being looked at. This is much, much different than a triple-net business.

Speaker #7: Yeah. Yeah.

Speaker #3: Yeah, so look, we all know there are too many of us. And now, with everybody jumping on the shop bandwagon, it's a new form of breakfast cereal or something that everybody likes better now.

Speaker #3: I mean, the only concern I have—and look, there's a lot of mutual respect in our space between all of our teams. We all know each other really well.

Speaker #3: We hang together when we have the opportunity, but there's plenty to go around. I just hope people are prudent in making sure they have the infrastructure in place to support the operators and to assess the quality of deals that are being looked at.

Speaker #3: This is much, much different than a triple-net business. And I think for us, we've been able to be successful not just because we've been doing it for a long time, but as you know—and I think most others do, Rick—our entire asset management team are operators.

Rick Matros: I think for us, we've been able to be successful, not just because we've been doing it for a long time, but as you know, and I think most others do, Rich, our entire asset management team are operators. The transition for them to transition from working with triple-net to SHOP, really wasn't that difficult. You get a little bit concerned about missteps with everybody and their brother jumping into it. Hopefully, that won't be the case. As far as M&A activity, yeah, I mean, you're right. There should be some M&A activity. It seems like that's hard to make happen in REIT world.

Speaker #3: So, the transition for them to work with—to transition from working with triple-net to SHOP—really wasn't that difficult. So, you get a little bit concerned about missteps with everybody and their brother jumping into it.

Speaker #3: And hopefully that won't be the case. But as far as M&A activity, yeah, I mean, you're right. There should be some M&A activity, but it seems like that's hard to make happen in the REIT world.

Richard Anderson: Yeah. Fair enough. Okay. Thanks very much.

Rich Anderson: Yeah. Fair enough. Okay. Thanks very much.

Speaker #7: Yeah, fair enough. Okay, thanks very much.

Rick Matros: Yep.

Speaker #3: Yep.

Operator 2: Your next question comes from the line of Michael Goldsmith from UBS. Your line is open.

Operator: Your next question comes from the line of Michael Goldsmith from UBS. Your line is open.

Speaker #1: Your next question comes from the line of Michael Goldsmith from UBS. Your line is open.

Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. Maybe first, can you comment on the Medicare rate proposal for 2027 of 2.4%? Maybe we can get your high-level look, outlook on Medicare and Medicaid and just the overall health of reimbursement.

Speaker #3: Good afternoon. Thanks a lot for taking my question. Maybe first, can you comment on the Medicare rate proposal for 2027 of 2.4%? Maybe we can get your high-level outlook on Medicare and Medicaid and just the overall health of reimbursement.

Rick Matros: Sure. I'll give myself a little credit because I did predict that the Medicare market basket would have a 2 handle, and I predict that the Medicaid rate increases in the aggregate will have the 3 handle. It really did meet our expectations. The other thing that we've talked about is coming off of the pandemic and the really extraordinarily high inflation that we saw during the pandemic, everything's normalizing, and we should expect to see rates both on the Medicaid and the Medicare side revert back to the historical norm before the pandemic. That's really what we're seeing. I think Medicare and Medicaid rates peaked in 2024. They were still really healthy last year, but we did see them come down quite a bit last year. It's all formulaic, so it's pretty normal stuff.

Speaker #5: Sure. So I'll give myself a little credit because I did predict that the Medicare market basket would have a two-handle, and I predict that the Medicaid rate increases in the aggregate will have a three-handle.

Speaker #5: So it really did meet our expectations. But the other thing that we've talked about is, coming off of the pandemic and the really extraordinarily high inflation that we saw during the pandemic, everything's normalizing.

Speaker #5: And we should expect to see rates, both on the Medicaid and the Medicare side, revert back to the historical norm before the pandemic. So that's really what we're seeing.

Speaker #5: I think Medicare and Medicaid rates peaked in 2024. They were still really healthy last year, but we did see them come down quite a bit last year.

Speaker #5: So, it's all formulaic. It's pretty normal stuff. You can't predict the exact number, but the trend is going to be pretty apparent.

Rick Matros: While you can't predict the exact number, you know, the trend is gonna be pretty apparent.

Michael Goldsmith: Got it. Thanks for that. Just doing a little math, which can always be a little bit of a dangerous thing, but, you know, from your occupancy and unit numbers in the sub, we estimate your non-same sort of SHOP occupancy is in the high 70s%. Just wondering if you could provide a little bit color into the types of SHOP assets you've been accumulating over the past year. It looks like these have been unstabilized with a little bit of occupancy upside. You know, if you could talk about like what market the assets are in and the unit mix, that would be helpful.

Speaker #3: Got it. Thanks for that. And then just doing a little math, which can always be a little bit of a dangerous thing, but from your occupancy and unit numbers, we estimate your non-SNF sort of SHOP occupancy is in the high 70s percent.

Speaker #3: So, I was wondering if you could provide a little bit of color into the types of SHOP assets you've been accumulating over the past year.

Speaker #3: It looks like these have been unstabilized with a little bit of occupancy upside, and if you could talk about what market the assets are in and the unit mix, that would be helpful.

Darren: Yeah. The total just in the entire overall senior housing managed portfolio for the quarter ended, I think, the occupancy for the entire portfolio is 85.6%.

Darrin Smith: Yeah. The total just in the entire overall senior housing managed portfolio for the quarter ended, I think, the occupancy for the entire portfolio is 85.6%.

Speaker #5: Yeah, so the total just in the entire overall senior housing managed portfolio for the quarter ended, I think the occupancy for the entire portfolio was 85.6%.

Michael Costa: As far as the assets we've been acquiring, we've been acquiring assets in the I'd say upper 80s to the low 90s percent occupancy. I'm not sure. I'd like to see that 70% math.

Speaker #5: As far as the assets we've been acquiring, we've been acquiring assets in the upper mid, I'd say upper 80s to the low 90s percent occupancy.

Speaker #5: So I'm not sure I'd like to see that 70% math.

Michael Goldsmith: All right.

Rick Matros: Yeah. I know. Where are you getting that from, Michael?

Speaker #3: All right.

Speaker #5: Where are you getting that from, Michael?

Michael Goldsmith: We just ran some numbers based on what we saw on the SOP, but we'll take another look at it or catch up offline. Maybe just to round it out, like when do you expect some of these AI initiatives to translate into measurable financial outcomes like a lower G&A or higher margins or better asset level decision-making?

Speaker #3: We ran some numbers based on what we saw in the SOP, but we'll take another look at it or catch up offline. But maybe just to round it out, when do you expect some of these AI initiatives to translate into measurable financial outcomes, like a lower G&A or higher margins, or better asset-level decision-making?

Michael Costa: Yeah, I mean, from a G&A perspective, you know, I wouldn't expect there to be a ton of G&A savings. What is gonna be more impactful from a G&A perspective. It'll slow down the ramp of G&A as we grow. I think that's the right way to look at it. That's gonna be incremental and ongoing and as we speak, right? 'Cause we're in the middle of a lot of these initiatives, and as they continue to be implemented, we're gonna see the real benefits to how we operate as and how we scale as a company. Additionally, as we continue to roll out this information to our operators and give them better insights into their own businesses and help them operate their facilities better, we firmly believe there's gonna be a tangible improvement in their performance.

Speaker #5: Yeah, I mean, from a G&A perspective, I wouldn't expect there to be a ton of G&A savings. What’s going to be more impactful from a G&A perspective is that it’ll slow down the ramp of G&A as we grow.

Speaker #5: I think that's the right way to look at it. And that's going to be incremental and ongoing, and as we speak, right? Because we're in the middle of a lot of these initiatives.

Speaker #5: And as they continue to be implemented, we're going to see the real benefits to how we operate and how we scale as a company.

Michael Costa: Additionally, as we continue to roll out this information to our operators and give them better insights into their own businesses and help them operate their facilities better, we firmly believe there's gonna be a tangible improvement in their performance. When that's gonna be, how quickly that's gonna be, it's hard to tell at this point.

Speaker #5: Additionally, as we continue to roll out this information to our operators and give them better insights into their own businesses and help them operate their facilities better, we firmly believe there's going to be a tangible improvement in their performance.

Michael Costa: When that's gonna be, how quickly that's gonna be, it's hard to tell at this point.

Speaker #5: When that's going to be, how quickly that's going to be—it's hard to tell at this point. And it's also going to make it easier for us to absorb the increased level of volume on investments that we're seeing.

Rick Matros: It's also gonna make it easier for us to absorb the increased level of volume on investments that we're seeing. We do have some 90-day milestones in place. We'll start to see some benefits in the near term with the initiatives that we have.

Speaker #5: We do have some 90-day milestones in place, so we'll start to see some benefits in the near term with the initiatives that we have.

Michael Goldsmith: Thank you very much. Good luck in Q2.

Speaker #3: Thank you very much. Good luck in the second quarter.

Rick Matros: Thank you.

Speaker #5: you.

Michael Costa: Thank you.

Operator 2: Your next question comes from a line of Omotayo Okusanya from Deutsche Bank. Your line is open. Omotayo, your line is open.

Operator: Your next question comes from a line of Omotayo Okusanya from Deutsche Bank. Your line is open. Omotayo, your line is open.

Speaker #1: Your next question comes from a line of Omateo Oksenya from Deutsche Bank. Your line is open. Omateo, your line is open.

Omotayo Okusanya: Good morning out there. Wanted to continue along the lines of the Medicare/Medicaid questions. Rick, just get your thoughts around kind of, again, CMS' kind of increased focus on these kind of value-based care programs on the Medicare Advantage side. Just kind of curious, you know, what are you hearing from your operators about how it's impacting, like, the referral rates from hospitals or how you may potentially be kind of changing your business and how they're kind of responding to it?

Speaker #6: Good morning out there. One of the—continues along the lines of the Medicare, Medicaid questions. And just get your thoughts around, kind of again, CMS’s kind of increased focus on these kind of value-based care programs on the Medicare Advantage side.

Speaker #6: Just kind of curious, what are you hearing from your operators about how it's impacting the referral rates on hospitals, or how you may potentially be kind of changing their business, and how they're kind of responding to it?

Rick Matros: Sure. Thanks, Kyle. We're not seeing that much impact yet, but we are really bullish on value-based care. We are working with our operators. Some of our operators are already pursuing it. They already have agreements in place. There's sort of different levels that you can do with the insurers. You can have arrangements with ACOs. There's a lot of different levels of arrangements that you can have with value-based care that have different levels of risk, starting with upside but no downside. As they get better and better, they'll take on some downside risk, but they'll have more upside risk. We think it's a really big deal.

Speaker #5: Sure. Thanks, Tyler. So we're not seeing that much impact yet, but we are really bullish on value-based care, and we are working with our operators.

Speaker #5: Some of our operators were already pursuing it. They already have agreements in place. There are sort of different levels that you can do with the insurers.

Speaker #5: You can have arrangements with ACOs. There are a lot of different levels of arrangements that you can have. With value-based care, that has different levels of risk, starting with upside, but no downside.

Speaker #5: And then as they get better and better, they'll take on some downside risk, but they'll have more upside risk. So we think it's a really big deal.

Rick Matros: We think it's great for the space, because we know our operators can take care of patients that are being cared for in much higher cost settings like LTAC or like rehab hospitals, with really good outcomes. In fact, a few weeks ago, last month, we had our operators conference and value-based care was the central topic for the conference and just a lot of excitement from our operators on it. There's also similar opportunities for senior living as well. It isn't just skilled. There's maybe more there for skilled, but there's opportunities there with the insurers and with ACOs particularly on the senior housing side as well. We were able to talk about initiatives and we had some great speakers coming in and gave great examples.

Speaker #5: We think it's great for the space because we know our operators can take care of patients that are being cared for in much higher-cost settings, like LTACH or rehab hospitals, outcomes.

Speaker #5: In fact, a few weeks ago—last month—we had our operators' conference, and value-based care was the central topic for the conference. And just a lot of excitement from our operators on it.

Speaker #5: And there’s also similar opportunities for senior living as well. It isn’t just skilled. So there’s maybe more there for skilled, but there’s opportunities there with the insurers and with ACOs, particularly on the senior housing side as well.

Speaker #5: So, we were able to talk about initiatives, and we had some great speakers come in and give great examples. In fact, one of our board members, Lynn Katzman, who runs the senior living company called Juniper, is probably front and center—further ahead on those kind of initiatives with AL and memory care than anybody else in the space.

Rick Matros: In fact, one of our board members, Lynne Katzmann, who runs a senior living company called Juniper Communities, is probably front and center further ahead on those kind of initiatives with AL and memory care than anybody else in the space. Her expertise has been great as well. Yeah, really excited about that.

Speaker #5: So her expertise has been great as well, so yeah, really excited about that.

Omotayo Okusanya: Gotcha. I guess then how do we kind of juxtapose that versus comments coming out, you know, for example, during this earnings season when some of the hospital names are saying, you know, it's helping them reduce referrals to skilled nursing and things of that like?

Speaker #1: Gotcha. So I guess then, how do we kind of juxtapose that versus comments coming out? For example, during this earnings season, when some of the hospital names are saying, 'It's helping them reduce referrals to skilled nursing and things of that like.'

Rick Matros: I think it's just a function of you. Are you gonna embrace what's inevitable and coming down the line and make sure that you've got the clinical products in place to take advantage of that? Then you'll have increased referrals. You know, I just think you have to be really forward-thinking on this, and we've got a number of operators who are, and as I mentioned, we've got operators who already embrace this and made inroads into it and they're doing well with it. I think if you have operators out there that are more passive, then yeah, it's not gonna kinda go your way.

Speaker #5: I think it's just a function of you. Are you going to embrace what's inevitable and coming down the line, and make sure that you've got the clinical products in place to take advantage of that?

Speaker #5: And then you'll have increased referrals. So I think—I just think you have to be really forward-thinking on this, and we've got a number of operators who are. And as I mentioned, we've got operators who have already embraced this and made inroads into it.

Speaker #5: And they're doing well with it. So I think if you have operators out there that are more passive, then yeah, it's not going to kind of go your way.

Rick Matros: Because as more and more time goes by, those insurers, the ACOs are gonna have more opportunities to divert patients to operators that are really embracing these opportunities.

Speaker #5: Because as more and more time goes by, they're going to those insurers, the ACOs are going to have more opportunities to divert patients to operators that are really embracing these opportunities.

Omotayo Okusanya: Makes sense. Thank you very much.

Speaker #3: Makes sense. Thank you very much.

Rick Matros: Yeah.

Speaker #5: Yeah.

Operator 2: Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Austin Wurschmidt from KeyBank. Your line is open.

Operator: Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Austin Wurschmidt from KeyBank. Your line is open.

Speaker #1: Again, if you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Austin Wehrschmidt from KeyBank.

Speaker #1: Your line is open.

Austin Wurschmidt: Great. Thanks for taking the follow-up. I just wanna go back to something and make sure I understand some of the components of guidance. The $one and a half million of income received from Landmark in Q1, was that contemplated in initial guidance, or is that a source of upside when you go and reevaluate, you know, guidance in the coming quarters? Then, I guess, is it appropriate to annualize the Q1 number given your plan to sell those assets?

Speaker #4: Great. Thanks for taking the follow-up. I just want to go back to something and make sure I understand some of the components of guidance.

Speaker #4: The one and a half million of income received from Landmark in the first quarter—was that contemplated in initial guidance, or is that a source of upside when you go and reevaluate guidance in the coming quarters?

Speaker #4: And then I guess, is it appropriate to annualize the first quarter number given your plan to sell those assets?

Michael Costa: To answer your first question, the 1.5 was included in our original guidance. In terms of annualizing that, yeah, I mean, that is going to go away at some point this year. You know, probably, I would say probably end of Q2 is probably when we would realistically think that would go away, you know, it could slip as well. It is not something we expect to have in there for the entire 12 months, if that is what you are asking.

Speaker #5: So, to answer your first question, the $1.5 million was included in our original guidance. Now, in terms of annualizing that—yeah, I mean, that's something that's going to go away at some point this year.

Speaker #5: Probably, I would say probably end of the second quarter is probably when we would realistically think that would go away. But it could slip as well.

Speaker #5: But it isn't something we expect to have in there for the entire 12 months. That's what you're asking.

Austin Wurschmidt: Yeah. No, that's helpful. Thank you.

Speaker #4: Yeah, no, that's helpful. Thank you.

Michael Costa: Okay.

Speaker #5: Okay.

Operator 2: That concludes our question and answer session. I will now turn the call back over to Rick Matros for closing remarks.

Operator: That concludes our question and answer session. I will now turn the call back over to Rick Matros for closing remarks.

Speaker #1: And that concludes our question and answer session. I will now turn the call back over to Rick Matros for closing remarks.

Rick Matros: Thanks everybody for your time today and your continuing support. We'll look forward to seeing a lot of you at the Wells Conference and at Nareit in June. Thanks very much. Have a great day. For any moms that are on the call, Happy Mother's Day.

Speaker #5: Thanks, everybody, for your time today and your continuing support. We look forward to seeing a lot of you at the Wells conference and at NAREIT in June.

Speaker #5: Thanks very much. Have a great day. And for any moms that are on the call, happy Mother's Day.

Operator 2: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker #1: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker #6: We come from the land of the ice and grow from the midnight sand where the hot springs flow. We come of the cold. We'll drive our ships to new lands.

Q1 2026 Sabra Health Care REIT Inc Earnings Call

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