Real estate investment trust Sabra Health Care REIT based in Irvine, Calif., will transfer a portfolio of 24 skilled nursing properties leased to North American Health Care to two of Sabra’s existing tenants, The Ensign Group and Avamere Family of Companies, a announced the REIT on Monday. The combined initial annual rent will be $34.5 million.
Ensign will add 20 California properties to two master leases with its operating companies with initial terms of 18 and 20 years. Avamere will add four properties in Washington State to its existing head lease, which includes nine additional properties in Washington, with an initial term of 13 years.
The transition is expected to be complete by February 1. At that time, Ensign will become one of Sabra’s largest tenants, representing approximately 8% of annualized NOI, and Avamere will remain one of Sabra’s largest tenants, also representing approximately 8% of annualized NOI in species. Other long-term care operators among Sabra’s top 10 relationships include skilled nursing providers Signature Healthcare, Cadia Healthcare, The McGuire Group and CommuniCare, as well as independent living operator Holiday by Atria (formerly Holiday Retirement) and assisted living provider Leo Brown Group, according to supplemental information filed with the Securities and Exchange Commission.
Sabra said the transition of the 24 NFCs represents a “unique opportunity” to enhance the long-term value of the property portfolio, which the REIT has described as “high quality”.
“This is an opportunity to expand our relationship with Ensign, significantly improving the credit profile of our portfolio,” Sabra Chairman and CEO Rick Matros said in a statement. “Importantly, the addition of the four properties to Avamere’s existing Washington facility also enhances this portfolio, even more so after taking into account the recent increase in Washington’s Medicaid rates by nearly 20 percent.”
Ensign CEO Barry Port said Ensign was “honoured to have Sabra entrust us with the operation of this portfolio and is very pleased to expand our growing relationship with them.”
California properties, he added, “are a perfect fit for our existing footprint in one of our strongest and most mature markets.”
Avamere CEO Rick Miller called Sabra a “valuable, highly valued and collaborative partner to Avamere, our valued staff and our customers” and said the company is “looking forward” to bringing the culture from Avamere to the facilities.
“The North American portfolio represents the right geographic and strategic fit for Avamere in our growing Pacific Northwest footprint, which aligns with our relationships with local hospitals and Med Advantage partners,” Miller said.
Sabra said it expects to recognize a total of $14.7 million in fourth quarter facility revenue through the end of the transition period, which approximates the rent the REIT would have received during that quarter. period under previous leases with North American.
The initial annual rent attributable to the 20 properties awarded to Ensign will be $29.4 million, with annual rent escalations based on the Consumer Price Index not to exceed 2.5%. The initial annual rent attributable to the four additional properties leased to Avamere will be $5.1 million, with an annual rent escalation of 2.75%.