Key Takeaways:
- Sabra shares surged more than 10% after securing replacement tenants for 26 properties
- New annual rent of $53 million is nearly 30% above the prior $41 million
- Sabra raised 2026 normalized AFFO guidance to $1.59-$1.61 per share
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Sabra Health Care REIT jumps 10% on 30% rent hike for 26 properties
Sabra Health Care REIT secured new tenants paying nearly 30% more rent across 26 skilled nursing properties, sending shares up more than 10% on July 21.
Sabra Health Care REIT shares surged more than 10% July 21 after the company said it secured replacement tenants for 26 skilled nursing properties at a combined annual rent of $53 million, nearly 30% above the prior $41 million.
"The Avamere transition has been well-planned and is benefiting from a high level of cooperation across the various parties involved," said Rick Matros, chief executive officer of Sabra Health Care REIT, in a statement.
Sabra is reassigning 22 of the properties to Cascadia Healthcare and the remaining four to subsidiaries of an existing tenant described as a national leader in skilled nursing. The moves, expected to close in the second half of 2026, follow outreach by Avamere founder Rick Miller, who indicated a desire to exit the skilled nursing business entirely. Separately, Sabra agreed to retire a $300 million mortgage loan to Recovery Centers of America for $200 million in cash, using the proceeds to reduce its revolving credit line.
The operational reset lifted Sabra's 2026 normalized AFFO guidance to $1.59 to $1.61 per share from $1.55 to $1.59, while headline net income guidance fell to $0.37 to $0.39 from $0.60 to $0.64 due to one-time transition costs. For REIT investors, the AFFO upgrade signals that Sabra is clearing legacy underperformance from its portfolio and positioning for higher-quality income streams.
Operator Transition Reshapes Portfolio
The Avamere transition marks the end of a long-running relationship. The operator, which spun off its senior living holdings into Arete Living in 2022, is exiting skilled nursing entirely after managing those 26 properties for Sabra. Cascadia Healthcare, the primary replacement operator, will pay the $53 million base rent.
Sabra's balance sheet also benefits from the RCA loan resolution. By accepting $200 million in cash to retire a $300 million mortgage — a 33% discount — the REIT frees up capital to pay down its revolving credit facility, reducing interest expense at a time when borrowing costs remain elevated. The Federal Reserve held its benchmark rate at 5.25% to 5.5% through June, keeping short-term borrowing expensive for variable-rate debt.
The last time Sabra executed a large-scale operator transition of this magnitude was in 2021, when it replaced underperforming tenants across a portfolio of senior housing properties. Following that restructuring, the REIT's same-store net operating income improved by roughly 5% over the subsequent 12 months, according to company filings.
AFFO Yield Draws Sector Comparison
With the Avamere properties expected to change hands by year-end and the RCA loan resolved, Sabra's portfolio will carry higher rent from a more diversified operator base. The company's normalized AFFO yield, based on the midpoint of the updated guidance range of $1.60 per share and a stock price around $22, would sit at roughly 7.3%, competitive within the healthcare REIT sector where peers such as Welltower and Ventas trade at AFFO yields of approximately 5.5% to 6.5%.
This article is for informational purposes only and does not constitute investment advice.
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