Sabra Health Care REIT is continuing to pursue behavioral health and addiction services in repurposed skilled nursing buildings as a business strategy, executives said Thursday.
“Few operators have been active in that regard, and there aren’t very many other uses for skilled nursing facilities,” Sabra CEO Rick Matros said in a second quarter investment call. “This is a perfect avenue to pursue in those markets.”
In a later answer, Matros added that existing facilities wouldn’t require much in capital improvements to address behavioral health needs.
“The physical plant can pretty much accomodate any kind of behavioral services,” he said, noting he had past experience running behavioral health programs. “If you walked through them, you wouldn’t notice any difference, other than who the clients are.”
However, it’s still a “fragmented space” with minimal opportunities, he noted.
“It’s a little bit tough to find things, but we’re working at it,” he said. With addiction centers, the idea is “even younger.” With both types of approaches, there would be a stronger emphasis on components of programming and psychological services than in most SNFs, but still a need for medication management.
Sabra posted increased occupancy levels in senior housing but decreases in skilled nursing in the second quarter. Occupancy and skilled mix were down 20 basis points and 30 basis points.
Among its second quarter items was selling 11.1 million shares of common stock under the ATM Program, generating $217.3 million in gross proceeds before $3.3 million in commissions. The proceeds from that and real estate sales was used to reduce total consolidated debt from $3.2 billion to $2.7 billion as of June 30.
Rent coverage was down for tenants Avamere, Healthmark and McGuire. But Sabra noted that Avamere in particular is expected to improve due to a Medicaid rate increase in Oregon and a new pharmacy contract.
Sabra officials also discussed its continued march towards owning Enlivant, which manages 183 senior housing communities. In the near future Sabra hopes to gain a controlling stake of 51% in Enlivant.
Eventually having controlling interest will “limit our downside risk and give the portfolio a little more time to mature,” Matros said.
