Sabra Transitions Operations of 24 West Coast Skilled Nursing Facilities to Ensign, Avamere

IRVINE, Calif. — Sabra Health Care REIT Inc. (NASDAQ: SBRA), an Irvine-based investor, plans to transition a 24-property portfolio previously leased to North American Health Care Inc. to two of Sabra’s existing tenants: The Ensign Group (NASDAQ: ENSG) and the Avamere Family of Companies.

Ensign will add 20 properties located in California to two master leases with Ensign operating companies with initial terms of 18 and 20 years, each with an accompanying corporate guarantee from Ensign. The initial annual rent attributable to the 20 properties will be $29.4 million, with CPI-based annual rent escalators not to exceed 2.5 percent.

Avamere will add four properties located in Washington to its existing master lease, which includes nine other properties in Washington, with an initial term of 13 years. The initial annual rent attributable to the four additional properties leased to Avamere will be $5.1 million, with an annual rent escalator of 2.75 percent.

After the transition, Ensign will become one of Sabra’s largest tenants, representing about 8 percent of annualized cash net operating income (NOI), while Avamere will remain one of Sabra’s largest tenants, also accounting for roughly 8 percent of annualized cash NOI.

Sabra believes this transition represents a unique opportunity to improve the long-term value of this high-quality real estate portfolio, noting the enhanced credit profile that supports its rental income, highlighted by Ensign’s corporate guaranty and $5 billion equity market capitalization.

“This is an opportunity to expand our relationship with Ensign, substantially improving the credit profile of our portfolio,” says Rick Matros, CEO of Sabra. “Importantly, adding the four properties to Avamere’s existing Washington facilities enhances that portfolio as well, even more so after consideration of the recent increase in Washington’s Medicaid rates of nearly 20 percent.”

“These California operations are a perfect fit with our existing footprint in one of our strongest and most mature markets,” adds Barry Port, Ensign’s CEO.

“The North American portfolio represents the right geographic and strategic fit for Avamere in our growing Pacific Northwest footprint that aligns with our relationships with local hospitals and Medicare Advantage partners,” notes Rick Miller, CEO of Avamere.

The transition of these facilities is scheduled for completion by Feb. 1, subject to the completion of certain regulatory approvals and other closing conditions.