Sabra Health Care REIT Bullish About Its Slow-Growing Behavioral Business

Sabra Health Care REIT (Nasdaq: SBRA) is doubling down on its interest in behavioral health, especially addiction treatment, but don’t expect to see a whirlwind of deals just yet. 

“Our current acquisition pipeline is just under $1 billion,” CEO Rick Matros said Monday during the company’s fourth-quarter and year-end earnings call. “It’s still primarily senior housing, but we’re seeing more skilled [nursing] deals, and we’re also starting to see some behavioral and addiction investment opportunities as well. … We don’t expect the growth to be rapid there, but it’s getting off to a nice start for us.”

The Irvine, California-based real estate investment trust (REIT) first entered the behavioral health space in Q3 2019, when it invested $14.8 million into two addiction treatment facilities previously owned by Landmark Recovery.

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Sabra bought Landmark’s buildings in Carmel, Indiana, and Louisville, Kentucky, and is now leasing the properties back to the provider, who billed the agreement as an avenue for growth.

In Q4 2019, Sabra also completed the real estate acquisition of one addiction treatment center for $3.8 million, according to a press release published ahead of the call. The deal represents a small chunk of the company’s total $35.7 million in real estate acquisitions completed during the quarter.

While Sabra currently only has relationships with two operators in the behavioral space — both of which are in addiction treatment sector — Matros told investors to expect more in the future.

“Our focus on investments going forward is going to be on high-yield investing, specifically skilled nursing, behavioral and addiction,” Matros said.

In Q4 2019, Sabra reported net income attributable to common stockholders of 20 cents a share, compared with a net loss of 11 cents per share a year earlier. In 2019 as a whole, Sabra reported net income attributable to common stockholders of 37 cents per share, compared to $1.51 in 2018.

The company reported a total revenue of $661.7 million for 2019 and $155.8 for the quarter, both up year-over-year.