Name Unknown: Yeah, that's a helpful detail. And I guess, you know, how deep is the opportunity set for shop investments in that 8% yield range? And can you provide some characteristics just around the size, vintage of the facilities that you acquired in the first quarter and as well as, you know, what's in that awarded pipeline?
Name Unknown: Yeah, so there's definitely some cap rate pressure. Most of what we see on the market and the opportunities right now are in the 7% range, low sevens. What we closed on is IL, AL, and memory care, although it's more heavily weighted to AL and memory care. On the vintage, these are roughly 14 years old is the average age with respect to the 690 that I mentioned that has an average age of 8. And also low 7% for those that are more stable, but we are actually also looking at some slight value-add opportunities where there's lower occupancy, but a clear line of sight to stabilization, and some of those we're looking at will have initial yields in the sixes, but should provide more meaningful IRRs with the upside opportunity.
Rick Matros: And as you know, we focus on secondary markets, so we're not seeing the same level of cap rate compression in the secondary markets as you all see in the primary markets.
Name Unknown: Very helpful. Thanks for the time.
Operator: Your next question comes from a line of Juan Centavria from BMO Capital Markets. Your line is open.
Juan Centavria: Hi, good morning. Just hoping you could talk a little bit more about those shop assets that you transitioned last year that you're now looking to sell. If you can comment on the book value or the expected proceeds and And if you had not excluded those from the same store pool, do you know what shop same store NOI would have been for the quarter on a year-over-year basis?
Rick Matros: We're just selling those right now. We don't know what the outcome is going to be. We're not disclosing any of that information at this point. A couple of quarters ago, when we talked about the transition of that portfolio, we did say that we'd be evaluating the viability of retaining all these assets going forward. So that's just kind of a normal process. But we're not breaking out all these different portfolios in terms of the individual growth of SHOP NOI in these portfolios.
Juan Centavria: Just to confirm, these were old original holiday assets. Is that fair?
Rick Matros: Yes, they are. Okay, great. It's three assets that we're selling and we brought another holiday asset into the same store that it stabilized.
Juan Centavria: Great. And just appreciate that. Thanks, Rick. Just on the behavioral, could you just give an update on Landmark that was in the press and any updated thoughts on how we should be thinking about the RCA loan?
Rick Matros: Sure, we always reserve the RCA question for you on just so you know it's special. But so on landmark we had worked. We've been working with them. They obviously in the court system for an exit with those facilities and we were able to. We actually helped bring somebody in to buy a bunch of the assets. The landmark team is buying some of the assets themselves, so we were able to get a price that was actually. Pretty attractive from our perspective. outside of that group of landmark assets, we've got three others that we are in the process of selling as well, so we'll have some more proceeds to add to the ones that you saw in the article. So, you know, as we've talked about, you know, that team did a really good job running that company for a while, and they had those unfortunate incidents with resident deaths in Indiana and got shut down by the regulator. So just a bad turn for them. And we hung in for a while. But at this point, we felt it was better just to get out from under. And on RCA, our talks are continuing to progress and We it's possible we'll be in a position to make an announcement on that before our second quarter call. And if that's the case, we will do so. But it's, as I mentioned on the last call, Deerfield, it's their biggest investment. They really believe in the portfolio and our talks are very constructive.
Juan Centavria: And was there any NOI or rents collected related to landmark flow into the first quarters? And should we think about that as How should we think about, I guess, that going forward?
Darren Lee: Yeah, there's somewhere around like a million and a half, I want to say, won in the first quarter that we collected on them. And we would expect that same run rate through whatever these assets ultimately transact.
Juan Centavria: Thank you.
Operator: Your next question comes from a line of Seth Berge from Citi. Your line is open.
Seth Berge: Hi, thanks for taking the question. You mentioned in the prepared remarks some AI initiatives. Could you just kind of expand on some of those and how you're using AI within the platform and maybe talk a little bit about what differentiates kind of the Sabra platform from like an AI perspective versus some of the peers that are also competing in the shop and skilled businesses?
Darren Lee: Yeah, so I'll take that one, Seth. So, you know, at a corporate level, you know, As Darren mentioned, we've been leaning into automation and AI over the last several quarters, and primarily at the corporate level, it's been to speed up back office workflows and data processing, primarily in our shop portfolio. At the same time, we're also advancing some initiatives that are going to further reduce manual processes and accelerate analysis. It's not the sexiest thing in the world. I'll be very you know, I'm very cognizant of that, but it is very impactful, particularly as it improves how we interact with our operators, what kind of value we could give back to our operators in the form of data and insights, and it could have some really meaningful benefits, not only to us, but to our operators as well. And then, as Rick mentioned, you know, we have pilots going on at the facility level that, you know, in addition to several PropTech solutions that have already been deployed, There's a whole bunch of other solutions like medical records and fall detection that are leveraging AI that are going to make operations more efficient and, more importantly, improve resident care.
Seth Berge: And then maybe just a little bit on kind of the deal flow and the opportunity set. What's kind of the mix between shop and field of the opportunity set, and are there any particular geographies you're looking at?
Name Unknown: Nothing has really changed. It's still, I'd say, 95% plus shop is the opportunity set. The skilled nursing investments and the opportunities that we've announced were all done off market with direct relationships. Still don't see that much volume in the skilled space. And when you do, it's very heavily competitive. And the private groups tend to be able to pay up a little bit more.
Rick Matros: Yeah, remember the private buyers that we're all up against are buying opco and propco and they also are feeding ancillary businesses so um as a buyer of real estate you know we just we just can't compete with that and there's not enough volume out there for for everybody to go around for everybody as there is on shop or there was on skills if you go back to uh prior to the pandemic when there was enough for everybody to go around And at this point, we don't see that changing, at least for a while. I think a lot of it's just a function of a lot of these operators who don't have to sell got really slammed during the pandemic and had pretty huge losses. And now you've had a couple of years of some really good performance and that performance will continue to improve. So I think for a lot of the operators out there that don't have to sell, that normally would put their assets on the market, They're just recouping and they're probably enjoying some really nice cash flow. That wasn't the case a few years ago. So maybe we'll see that change later on in the year or going into 2027, but it's a little hard to tell.
Name Unknown: On the shop side, as far as the markets are concerned, we're still looking at secondary markets is the focus here. And as far as the volume is concerned, it's showing no signs of slowing whatsoever. In fact, it actually feels like it's picking up speed.
Rick Matros: And we're geographically agnostic, though, in terms of what states we'll be in for either asset class.
Seth Berge: Great. Thanks.
Operator: Your next question comes from the line of Michael Stroyek from Green Street. Your line is open.
Michael Stroyek: Thanks, and good morning. Maybe following up on that question and just going back to the strong pricing on the Communicare sale, your comments on not being able to compete as well on the sniff transaction market i guess just what sort of yields or multiples are you seeing there on those marketed sniff deals and how different is that versus you know the typical call it nine to ten percent uh lease yields we see in sniffs there's not a lot of data out on that um it's a problem because they are all private they are all private deals and um so
Rick Matros: I don't really have a good answer for that. Darren, I don't know if you've seen anything.
Name Unknown: No. I mean, it's definitely a couple hundred basis points inside of what the standard skilled nursing transaction would typically run at.
Michael Stroyek: Got it. Okay. And then maybe going back to behavioral health discussion. One of your peers had talked about labor being a challenge within that business. Are you experiencing a meaningfully tougher labor backdrop within behavioral health versus, call it other areas of the portfolio?
Rick Matros: No, not at all. I'm a little bit surprised to hear that. We haven't seen that at all in our portfolio.
Michael Stroyek: Understood. Thanks for the time. Yep.
Operator: Your next question comes from the line of Alec Fagan from Baird. Your line is open.
Alec Fagan: Hey, thanks for taking my question. Can you maybe comment on how the opportunity set of funding for development and redevelopment projects have trended? And do you expect this to be a bigger part of your investment activity going forward?
Name Unknown: As far as the developments, we still see a fair amount of development opportunities that come in. I would say of those development opportunities that come in, maybe 10% pencil. You're still having, and basically when I say pencil, always looking for a stabilized return on costs on the development to be 200 to 250 basis points wider than the current market cap rate equivalent. Maybe only 10% of those. I do expect that it's going to pick up, but not meaningfully for some period of time.
Alec Fagan: And can you comment, are these development opportunities also in the secondary market? Or I guess tertiary markets, secondary markets?
Name Unknown: Yeah, so the one prep equity development that we announced is in, it's in Indiana. And then the other one is actually it's a redevelopment of a former SNF property that was shut down and we're redeveloping that into a senior housing property and that's in Kentucky.
Alec Fagan: Got it. Thanks for the time.
Operator: Your next question comes from a line of Vikram Malhotra from Mizuho Securities. Your line is open.
Vikram Malhotra: Thanks for the question. I guess I just want to go back to the question on the guide. just the cadence of SFO or ASFO, you just take your quarterly number and just multiply it by four, you're very easily in the range. So I'm just wondering, is there a one-time item? Is there maybe this loan that you've got baked in? Any other asset transition or sale? What should we infer as a pretty steady number? So if you can go back and give us any more color on what other puts and takes for the year that we should be modeling.
Darren Lee: Yeah. So as you rightly pointed out, if you take our first quarter results and you annualize them, they're right at, or if you do it on actual dollars and run the math out, you're probably just slightly below where our midpoint is. So there's that data point. I think the other data point is we guided towards low to mid-teen, same store NOI growth in our shop portfolio, and we came at 14. So right in the middle of that range as well. And as we talked about many times before, the biggest driver of where we end up landing on an earnings perspective, especially relative to our guidance range, is going to be dictated by our shop and OI growth. So given that our current quarter earnings are right at the midpoint or even slightly below the midpoint, given that our shop growth is right where we guided for the full year, And we reaffirmed our guidance. Let's not lose sight of that. We reaffirmed the guidance that we put out. We still feel, as we sit here today, two months after we put out our initial guidance, that reaffirming where we stand or where we put out previously still makes sense. As Rick mentioned, we've historically taken the approach that in Q1, we're not going to generally revisit guidance unless there's some material change one way or another. There hasn't been. And we're going to reevaluate it in Q2 as we have a better line of sight into what the shop growth is going to look like for the year and as our investment pipeline takes greater form.
Rick Matros: And we totally get the questions, particularly since some of our peers raised guidance in some form or fashion over this past week.
Vikram Malhotra: know we totally get it but we like the trends we're seeing as i said earlier we like the volume that we're seeing and we like the yields we're getting things done and so um we'll see how it goes okay and then i mean i'm not reading into the communicare pricing but in general there seems to be downward pressure on cap rates for smiths um given especially this you know hope to improve the operations um so i'm wondering is there an opportunity for you to given your desire for SHOP to do a bigger portfolio sale in SNFs and, you know, raise $500 million or billions and recycle that into SHOP?
Rick Matros: Well, I'm not sure there's downward pressure on cap rates because of the private buyers. The REITs are pretty disciplined about holding firm on the cap rates that we've historically acquired SNFs at. But we like the fact that We've got a very strong triple net skilled nursing portfolio. We're at all-time highs on rent coverage. We're at all-time highs on margins. Occupancy continues to grow, so they're still upside there. And it's a base that we have that everybody can depend on. And then the shop side of it, which gets bigger and bigger for us, obviously provides more outsized earnings growth. So we like having that balance. And our portfolio today is better balanced than it's ever been. For us to pass the 50% mark on private pay revenues is a material change. You know, we started out as a 96% skilled REIT. So, you know, we've evolved quite a bit. But we're not going to sell portfolios that we think are really good just to shift the percentages of shops. We've got plenty of access to capital. We have plenty of liquidity available to invest in all the shop opportunities that we have ahead of us.
Vikram Malhotra: Okay. And then, um, if I can just clarify, Rick, I think you said the Canadian portfolios. 93, you think it's essentially full, but I guess in this environment, everyone, you know, a lot of folks are talking about 95 plus. So, you know, is, is 93 sort of the peak for the Canadian portfolio in absolute?
Rick Matros: No, not necessarily. I just think when you start to get to the mid-90s, you'll have some ups and downs. But look, we have a facility up there that's 100% almost all the time. That's unusual, you know, but it happens. So I think it's important to focus on, I think we had a 270 basis point year-over-year growth in that Canadian portfolio. So We expect occupancy to continue to trend up there, but it's not going to be at the same velocity as if it was still 86% or 85%. Okay, thank you.
Operator: Your next question comes from a line of Richard Anderson from Cantor Fitzgerald. Your line is open.
Richard Anderson: Thanks. Good morning. On CommuniCare, you're selling or sold omega is selling i think to communicare if that's correct me if i'm wrong about that um and if i'm no that's right that's not right okay excuse me that's not right no okay um in their case i believe that's the case but both maryland i'm just curious is there any dotted line between what omega is doing and what you're doing that you could share on you know communicare and if there's some sort of trend that we can draw from from both of those transactions
Rick Matros: I don't really think so. I mean, they were hoping to get cooperation from both us and Omega. And they just really wanted to exit a state that was a really, really tough state for them. They thought it would strengthen their portfolio overall. And we're seeing that as a result. And when they first called us, I mean, it resonated with us because, as I said earlier, we shed facilities in Maryland several years ago. You know, it's just tough there. So, yeah, but I don't think there's any trend here or anything like that. CommuniCare still wants to grow. As I said earlier, we're seeing some growth with them. Omega may or may not be as well. So, yeah, but no dotted lines or anything like that other than we think the Omega team is a great team.
Richard Anderson: Okay. Fair enough. Rick, no guidance update, which is fine with me, but also no change to your target shop. I think it was 40% as of last quarter. Let's say you bite into this $690 million to a certain degree between now and three months from now. Are you closing in on 40% and might we have an update on a new target for shop this time in three months?
Rick Matros: Well, we will be closing... I mean, if we say we're to do a billion this year, we definitely are going to be in pretty good shape in terms of the 40%, but then we'll just set a higher target. So, you know, as I said earlier, we're not going to shed any sort of major skilled portfolios. But there's always some stuff that you sell. So between some of that, which is probably incremental, we're on the margin, and almost all of our investment activity being on shop, you're just going to continue to see skill being a smaller percentage of the portfolio and shop continuing to grow. But we don't have any sort of guardrails or anything about how much we want to do in shop. And as you know, because we've been doing shop for over 10 years, and we've all the improvements we're making in the existing platform with our initiatives, we're going to be our platforms could be more scalable than it's ever been. We'll be able to continue to grow our shop, our shop exposure and the amount of infrastructure we'll have to add as a result of that will be lower than it normally would have been in the absence of the initiatives.
Richard Anderson: OK, great. And last for me, and this is just more of a theoretical sort of big picture question, but obviously a lot of your peers are taking a shop on goal, I guess they'll say it that way. And, you know, a lot of, you know, kind of working in individual silos. It seems to me that, you know, you guys have been doing it for a while, so it's not a conversation about Sabra in particular, but what do you think about the potential that there'll be some sort of combination activity between to attack the shop opportunity. Um, you know, uh, it, it seems like it makes sense. It's, it's a business that requires scale and, you know, some of the things that you're doing. I'm just curious if you could comment on that at all.
Rick Matros: Uh, you know, just generally, uh, Richie, you talked about MNA activity with the.
Richard Anderson: Yeah. Yeah.
Rick Matros: Yeah. So look, we all know there are too many of us. Um, and now with everybody jumping on the shop bandwagon, like it's, you know, a new form of breakfast cereal or something that everybody likes better now. I mean, we, the only concern I have, and look, there's a lot of mutual respect in our space between all of our teams. We all know each other really well. We hang together when we have the opportunity. But, and there's plenty to go around. I just hope people are prudent in making sure they have the infrastructure in place to support the operators and to assess the quality of deals that are being looked at. This is much, much different than a triple net business. And I think for us, we've been able to be successful, not just because we've been doing it for a long time, but as you know, and I think most others do, Rich, our entire asset management team are operators. So the transition for them to work with, to transition from working with triple net to shop, really wasn't that difficult. So you get a little bit concerned about missteps with everybody and their brother jumping into it. And hopefully that won't be the case. But as far as M&A activity, yeah, I mean, you're right. There should be some M&A activity. But it seems like that's hard to make happen in REIT world.
Richard Anderson: Yeah. Fair enough. Okay. Thanks very much.
Operator: Yep. Your next question comes from the line of Michael Goldsmith from UBS. Your line is open.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. Maybe first, can you comment on the Medicare rate proposal for 2027 of 2.4%? Maybe we can get your high-level outlook on Medicare and Medicaid and just the overall health of reimbursement.
Rick Matros: Sure. So I'll give myself a little credit because I did predict that the Medicare market basket would have a two handle, and I predict that the Medicaid rate increases in the aggregate will have the three handle. So it really did meet our expectations. But the other thing that we've talked about is coming off of the pandemic and the really extraordinarily high inflation that we saw during the pandemic, everything's normalizing. And we should expect to see rates both on the Medicaid and the Medicare side revert back to the historical norm before the pandemic. So that's really what we're seeing. I think Medicare and Medicaid rates peaked in 2024. They were still really healthy last year, but we did see them come down quite a bit last year. So it's all formulaic, so it's pretty normal stuff. So while you can't predict the exact number, the trend is going to be pretty apparent.
Michael Goldsmith: Got it. Thanks for that. And then just doing a little math, which can always be a little bit of a dangerous thing, but, you know, from your occupancy and unit numbers in the subunit, we estimate your non-same sort of shop occupancy is in the high 70s percent. So I was wondering if you could write a little bit of color into the types of shop assets you've been accumulating over the past year. It looks like these have been unstabilized with a little bit of occupancy upside. And, you know, if you could talk about what market the assets are in and the unit mix, that would be helpful.
Name Unknown: Yeah, so the total just in the entire overall senior housing managed portfolio for the quarter ended, I think the occupancy for the entire portfolio is 85.6%. As far as the assets we've been acquiring, we've been acquiring assets in the upper mid, I'd say upper 80s to the low 90s percent occupancy. So I'm not sure. I'd like to see that 70% math.
Rick Matros: All right. Where are you getting that from, Michael?
Michael Goldsmith: We ran some numbers based on what we saw in the sub, but we'll take another look at it or catch up offline. But maybe just to round it out, when do you expect some of these AI initiatives to translate to measurable financial outcomes like a lower G&A or higher margins or better asset level decision making?
Darren Lee: Yeah, I mean, from a G&A perspective, I wouldn't expect there to be a ton of G&A savings. What is going to be more impactful from a G&A perspective, it'll slow down the ramp of G&A as we grow. I think that's the right way to look at it. And that's going to be incremental and ongoing and as we speak, right? Because we're in the middle of a lot of these initiatives. And as they continue to be implemented, we're going to see the real benefits to how we operate and how we scale as a company. Additionally, as we continue to roll out this information to our operators and give them better insights into their own businesses and help them operate their facilities better, there will be, we firmly believe there's going to be a tangible improvement in their performance. When that's going to be, how quickly that's going to be, it's hard to tell at this point.
Rick Matros: And it's also going to make it easier for us to absorb information the increased level of volume on investments that we're seeing. We do have some 90-day milestones in place, so we'll start to see some benefits in the near term with the initiatives that we have.
Michael Goldsmith: Thank you very much. Good luck in the second quarter. Thank you.
Operator: Our next question comes from a line of Omoteo Oksanya from Deutsche Bank. Your line is open. Well, Mateo, your line is open.
Mateo Oksanya: Good morning out there. I wanted to continue along the lines of the Medicare, Medicaid questions and get your thoughts around CMS's increased focus on these value-based care programs on the Medicare Advantage side. You know, what are you hearing from your operators about how it's impacting, like, the referral rates in hospitals or how you may potentially be kind of changing your business and how they're kind of responding to it?
Rick Matros: Sure. Thanks, Kyle. So we're not seeing that much impact yet, but we are really bullish on value-based care. And we are working with our operators. Some of our operators are already pursuing it. They already have agreements in place. There's sort of different levels that you can do with the insurers. You can have arrangements with ACOs. There's a lot of different levels of arrangements that you can have with value-based care that have different levels of risk, starting with upside but no downside. And as they get better and better, they'll take on some downside risk, but they'll have more upside risk. So we think it's a really big deal. We think it's great for the space because we know our operators can take care of patients that are being cared for in much higher cost settings like LTACs or like rehab hospitals with really good outcomes. In fact, a few weeks ago, last month, we had our operators conference And value-based care was the central topic for the conference and just a lot of excitement from our operators on it. And there's also similar opportunities for senior living as well. It isn't just skilled. So there's maybe more there for skilled, but there's opportunities there with the insurers and with ACOs particularly on the senior housing side as well. So we were able to talk about initiatives and we had some great speakers coming in and gave great examples In fact, one of our board members, Lynn Katzman, who runs a senior living company called Juniper, is probably front and center, further ahead on those kind of initiatives with AL and memory care than anybody else in the space. So her expertise has been great as well. So yeah, really excited about that.
Mateo Oksanya: Gotcha. So I guess, how do we kind of juxtapose that versus comments coming out you know, for example, during this earnings season when some of the hospital names are saying it's helping them reduce referrals to skilled nursing and things of that like.
Rick Matros: I think it's just a function. Are you going to embrace what's inevitable and coming down the line and make sure that you've got the clinical products in place to take advantage of that? And then you'll have increased referrals. So, you know, I think I just think you have to be really forward-thinking on this, and we've got a number of operators who are, and as I mentioned, we've got operators who have already embraced this and made inroads into it, and they're doing well with it. So I think if you have operators out there that are more passive, then, yeah, it's not going to kind of go your way. because as more and more time goes by, those insurers, the ACOs are going to have more opportunities to divert patients to operators that are really embracing these opportunities.
Mateo Oksanya: Makes sense. Thank you very much.
Rick Matros: Yeah.
Operator: Again, if you'd like to ask a question, press star one in your telephone keypad. Your next question comes from the line of Austin Werschmidt from KeyBank. Your line is open.
Name Unknown: Great. Thanks for taking the follow up. I just want to go back to something to make sure I understand some of the components of guidance. The one and a half million of income received from Landmark in the first quarter, was that contemplated in initial guidance? Or is that a source of upside when you go and reevaluate, you know, guidance in the coming quarters? And then I guess, is it appropriate to annualize the first quarter number given your plan to sell those assets?
Darren Lee: Uh, so to answer your first question, the 1.5 was included in our original guidance. Um, now in terms of annualizing that, yeah, I mean, that's something that's going to go away at some point this year. Um, you know, probably I would say probably end of the second quarter is probably when we would realistically think that would go away, but you know, it could slip as well. Um, But it isn't something we expect to have in there for the entire 12 months, if that's what you're asking.
Name Unknown: Yeah, no, that's helpful. Thank you.
Operator: Okay. And that concludes our question and answer session. I will now turn the call back over to Rick Matros for closing remarks.
Rick Matros: Thanks, everybody, for your time today and your continuing support. And we'll look forward to seeing a lot of you at the Wells Conference and at NAIT in June. Thanks very much. Have a great day. And for any moms that are on the call, happy Mother's Day.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
