IRVINE, Calif. — Sabra Health Care REIT Inc. (NASDAQ: SBRA) has entered into a definitive agreement to amend the company’s master lease with a tenant, Avamere Group.
Avamere’s annual base rent on the current portfolio has been reduced roughly 30 percent to $30.7 million from $44.1 million. No changes have been made to the lease maturity date (May 31, 2031) or the annual base rent escalator (2.75 percent).
Sabra plans to recapture this rent reduction as the portfolio’s performance improves. Starting with the second lease year, Sabra will participate in the year-over-year improvement in the portfolio’s operating revenues. Beginning in the fourth lease year and through the sixth lease year, Sabra has the one-time option to reset Avamere’s rent to a fixed amount tied to the portfolio’s historical performance.
Avamere is expected to fund a security deposit of $7.7 million over the first 20 months of the newly amended lease. As a condition to amending this lease, Avamere has paid past-due rent for December 2021 totaling $3.6 million and has agreed to pay January 2022 rent totaling $3.7 million by March 25, 2022.
“Avamere is a highly respected operator that manages skilled nursing and seniors housing facilities as well as several ancillary companies that provide credit support to our lease through a corporate guaranty,” says Rick Matros, CEO and chairman of Sabra. “The combination of tight rent coverage on our portfolio prior to the COVID pandemic coupled with the unprecedented challenges of the past two years on Avamere’s overall operations necessitates a restructuring of our master lease. Importantly, this restructuring provides valuable breathing room to Avamere, while preserving optionality for Sabra to participate in operating upside.”
“The pandemic has led to one of the most challenging periods in our history,” adds Rick Miller, CEO of Avamere. “As we continue to operate in this new era, we are confident that our collaboration will continue to enhance Avamere’s position as a market-leading, value-enhancing, innovative provider of care and services to our patients and residents.”