Sabra CEO: REIT poised to grow, with little skepticism about future staff rule defeat

While Sabra Health Care executives on Thursday portrayed their first-quarter performance as a certain continuation of the successes of late 2023, analysts asked pointed questions about the potential impact of a nursing home staffing mandate on the portfolio.

CEO Rick Matros said the “ridiculous” rule would not stop the real estate investment trust from making acquisitions on the skilled side of its business, especially as occupancy rates improve and reliance on contract labor decreases.

“Our strong balance sheet positions us to grow,” Matros said during a first-quarter earnings call. “Our deal flow is improving and while it is mainly SHOP (senior housing), we are finally starting to see some skilled nursing opportunities.”

Matros added that the mix of skilled nurses was higher than “several quarters,” and an additional presentation released ahead of the call put that figure at 35% as of March 31. On the same date, the utilization of skilled nurses was 78.%.

When later asked how he thought the staffing rule would impact the portfolio, Matros seemed confident that providers would benefit from a resolution before specific staffing requirements were phased in over two years.

“The rule is ridiculous on its face, simply because there are no workers available,” Matros said. “You can expect both legal and legislative action to reverse this.”

While the REIT said it is too early to assess how individual operators and partners might be affected by the recruitment requirements, Matros said most buildings are in “fairly good condition” and are “above the national average” in their assets to fulfill the RN and CNA of mandate. provisions.

“Labor has improved – certainly contract labor has improved dramatically – so presumably things will continue to improve,” Matros said. “But it’s not just a matter of marketing a number. This will leave many operators in certain markets unable to fill their positions at all. It actually has nothing to do with quality of care. It has everything to do with punishing nursing homes.”

Despite the threat of the rule, Matros and his management team appear keen to resume playing a more active role in the skills market. At the end of last year, the REIT’s SNF holdings were at their lowest point since Sabra’s inception.

“There is a good flow of skills again, so you see a lot,” says Chief Investment Officer Talya Nevo-Hacohen. “But the best deals we see are the deals that come to us outside the market. I suspect that this also applies to our peers. We are focusing more on acquiring assets, although we are open to lending.”

Buyers’ and sellers’ price expectations have also become “much closer,” allowing more deals to be struck, she added.

“We manage our balance sheet carefully, but we see opportunities that are worthwhile,” she explains.

The company could revise its annual guidance, which was issued in late 2023, in the second quarter, Matros noted. But any deals in the second half of the year would have a “muted” impact.

“We are further along than we thought we would be already, but it has nothing to do with any assumptions about any acquisitions this year,” he said. “That would just be gravy.”