Sabra (SBRA) Q4 2025 Earnings Call Transcript

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DATE

Friday, Feb. 13, 2026 at 1:00 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer, President, and Chair — Richard K. Matros
• Chief Financial Officer — Michael Lourenco Costa
• SVP, Finance and Chief Accounting Officer — Darrin Smith
• SVP, Investments — Elmer Chang
• SVP, Finance and Investments — Lukas Hartwich

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TAKEAWAYS

• Normalized FFO per share -- $0.36 for the quarter with normalized FFO totaling $91,200,000.
• Normalized AFFO per share -- $0.38 for the quarter with normalized AFFO totaling $95,200,000.
• 2026 Earnings Guidance -- Normalized FFO per share expected at $1.49-$1.53 and normalized AFFO per share at $1.55-$1.59, reflecting an approximate 5% increase at the midpoint.
• SHOP Portfolio Cash NOI -- Increased $5,500,000 sequentially to $35,600,000, driven by recent acquisitions and same-store growth.
• Triple Net Portfolio Cash NOI -- Decreased by $1,300,000 sequentially due to transition of four facilities to managed senior housing.
• Same-store Managed Senior Housing Revenue -- Grew 6.4% year over year, with Canadian communities posting 10% growth.
• Same-store Managed Senior Housing Cash NOI -- Increased 12.6% year over year, reflecting occupancy and rate gains.
• Same-store Managed Senior Housing Occupancy -- Rose 160 basis points to 87.9% year over year; Canadian occupancy at 94.2%, U.S. occupancy at 84.7%.
• RevPOR -- Increased 4.2% year over year across the managed senior housing portfolio and 5.2% in Canada.
• Investment Activity -- $450,000,000 completed for 2025 with roughly $240,000,000 in awarded deals pending, most expected to close by early Q2 2026.
• Deal Pipeline -- $220,000,000 of pending senior housing and $20,000,000 of skilled nursing investments to close primarily in early 2026; pipeline expected to materially exceed prior year volume.
• Initial Cash Yield on 2025 Investments -- Estimated at 7.5% with average property age less than ten years.
• Leverage Metrics -- Net debt to adjusted EBITDA at 5.00 times, down 0.27 times from the prior year-end, in line with target.
• Cash and Liquidity Position -- $1,200,000,000 comprising $71,500,000 in unrestricted cash, $782,400,000 in available revolver capacity, and $322,700,000 of forward equity.
• Dividend Declaration -- Quarterly cash dividend of $0.30 per share for holders of record as of Feb. 13, 2026, representing 79% of normalized AFFO per share for the quarter.
• Permanent Debt Cost and Maturity -- Weighted average cost of 3.92% and remaining term of 4.2 years; next material maturity in 2028.
• General and Administrative Expense -- $12,500,000 in the quarter, with normalized cash G&A of $10,600,000 after excluding prior period adjustments; 2026 guidance assumes $52,000,000 for the year, including $12,000,000 of stock-based compensation.
• SHOP Guidance Drivers -- Ongoing occupancy growth, targeted to increase from just under 88% to the low 90% range, and low single digit rate growth.
• Forward Equity -- $206,000,000 issued at $18.79 per share average in Q4, with $322,700,000 outstanding under forward contract at $18.60 per share average price.
• Maintenance CapEx -- Expected to remain consistent with prior quarters; non-recurring CapEx estimated in the $20,000,000-$30,000,000 range for 2026 for the SHOP portfolio.

SUMMARY

Sabra Health Care REIT (NASDAQ:SBRA) introduced 2026 normalized FFO and AFFO per share guidance implying near 5% growth, signaling anticipated performance improvements across its senior housing portfolios. The managed senior housing division demonstrated sequential increases in revenue, cash NOI, and occupancy, with Canadian assets sustaining particularly high occupancy and revenue gains. The company reported a $240,000,000 pipeline of awarded acquisitions set to close in early 2026, and expects material investment activity above 2025 levels. Debt metrics remained stable, with net debt to EBITDA at 5.00 times and sizeable liquidity to support upcoming transactions. The company maintained its dividend, appropriately covered by AFFO, and confirmed no material regulatory or portfolio health concerns during the period.

• Guidance for the upcoming year assumes no unannounced dispositions or capital markets activities beyond those already completed.
• Triple net cash NOI growth is projected to be in the low single digits, consistent with lease escalators.
• The company holds no floating rate permanent debt exposure, reducing interest-rate sensitivity except for revolver balances.
• Competition for assets has increased, leading to some cap rate compression, but Sabra continues to acquire new properties with estimated 7% yield profiles and low double-digit IRR targets.
• SHOP portfolio investments targeted properties with average initial occupancy in the 86%-87% range, providing substantial room for operational and NOI growth.
• Preferred equity deployment in new development projects continues, offering double-digit returns and potential future acquisition pipeline.

INDUSTRY GLOSSARY

• SHOP (Senior Housing Operating Portfolio): Properties managed by third-party operators where Sabra directly recognizes facility operating performance rather than receiving fixed rents.
• Triple Net Lease: A lease structure under which the tenant is responsible for maintenance, insurance, and taxes, providing Sabra with predictable rent payments.
• RevPOR: Revenue per Occupied Room, measuring average revenue generated per occupied residential unit in the managed senior housing portfolio.
• ATM (At-The-Market) Program: Facility allowing the company to raise equity capital through periodic sales of stock into the open market, often via forward contracts.

Full Conference Call Transcript

Lukas Hartwich: Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position, and results of operations. Including our earnings guidance for 2026, and our expectations regarding our tenants and operators, and our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management's current expectations, are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31, 2025 as well as in our earnings press release included as Exhibit 99.1 to the Form 8-Ks we furnished to the SEC yesterday.

We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the financials page of the investors section of our website at sabrahealth.com. Our Form 10-K, earnings release, and supplement can also be accessed in the investor section of our website. With that, let me turn the call over to Richard K.

Matros, CEO, President, and Chair of Sabra Health Care REIT, Inc. Thanks, Lukas. Happy Friday the Thirteenth, everybody. Sabra's NOI growth for the SHOP portfolio, excluding our transition facilities, is expected to be sturdy in 2026 as it has been in 2025. And we expect the transition facilities as they continue to improve to add to the overall growth in our SHOP performance. Our guidance at 4.9–5.4% growth at the midpoint for normalized FFO and normalized AFFO, respectively, reflects continuing execution of our strategy. Our pipeline continues to be robust, we completed approximately $450,000,000 in investments for 2025. We had discussed on our last call exceeding $500,000,000.

A couple of those deals fell over into 2026 but no deals fell out. So we are closing on everything that we said we would close on our last call. Our investment activity has grown $200,000,000 since our last call, we are currently in the process of closing $240,000,000 of awarded deals most of which will close in Q1 and early Q2. Our expectation is that we will materially exceed the volume of 2025 investments and are clearly off to a strong start in 2026. Moving on to our operational results. They continue to be impressive. Our SHOP operational performance showed strong occupancy gains, and increased cash NOI margins. Our same-store senior housing also showed occupancy gains and margin improvement.

Our same-store senior housing triple net showed improved occupancy and maintained high rent coverage. The skilled nursing portfolio again showed increased rent coverage hitting an all-time high well as increased occupancy. And our top 10 triple net relationships also had another strong showing. Our leverage stayed steady at our current target of five times, and the regulatory environment remains stable. And with that, I will turn the call over to Darrin Smith for detail on our senior housing portfolio.

Darrin Smith: Thank you, Rick. Sabra's managed senior housing portfolio had another solid quarter with continued growth. The total managed portfolio, including non-stabilized communities and joint venture assets at share, had sequential revenue growth of 15.8%, cash NOI growth of 18.4% with margin expansion of 60 basis points. These statistics demonstrate sequential improvement in operating results that reflect the continued growth and strong performance in Sabra's senior housing portfolio. During the quarter, Sabra invested over $150,000,000 adding four properties to Sabra's managed portfolio bringing total year investments to roughly $450,000,000 with an estimated initial cash yield of 7.5% and an average age of less than ten years.

Additionally, Sabra closed on $27,000,000 of additional managed senior housing assets subsequent to year-end and has another $220,000,000 of awarded senior housing and $20,000,000 of awarded skilled nursing investments most of which should close in the first quarter or early second quarter. Deal flow shows no signs of slowing and despite increased interest in the sector, Sabra remains competitive on new investments. Moving on to the same-store portfolio. Sabra's same-store managed senior housing portfolio, including joint venture assets at share, continued its strong performance in the fourth quarter. The key numbers are revenue for the quarter grew 6.4% year-over-year with our Canadian communities growing revenue by 10% in the same period.

Fourth quarter occupancy in our same-store portfolio was up 160 points to 87.9% year-over-year. Notably, our domestic portfolio occupancy increased 80 basis points to 84.7% during that period while our Canadian portfolio grew 300 basis points to 94.2% in the same period, marking the seventh consecutive quarter where occupancy was over 90%. RevPOR in the fourth quarter 2025 continued to rise with an increase of 4.2% year-over-year with our Canadian portfolio increasing 5.2% in the same period. While RevPAR and occupancy continue to grow, XPOR increased only 1.6% for the same period providing for cash NOI growth of 12.6% on a year-over-year basis.

With industry tailwinds at our backs, and a very robust pipeline, we should continue to see both organic and external growth in our portfolio. Our net-leased senior housing portfolio continues to do well, with continued strong rent coverage reflecting the underlying operational recovery. And with that, will turn the call over to Michael Lourenco Costa, Sabra's Chief Financial Officer.

Michael Lourenco Costa: Thanks, Darrin. For the fourth quarter 2025, we recognized normalized debt FFO per share of $0.36, normalized AFFO per share of $0.38. In absolute dollars, normalized FFO and normalized AFFO totaled $91,200,000 and $95,200,000 for the quarter, respectively. Cash NOI from our triple net portfolio decreased $1,300,000 from the third quarter, while cash NOI from our managed senior housing portfolio increased $5,500,000 for a net sequential increase of $4,200,000. As noted last quarter, we transitioned four previously triple net lease senior housing facilities to our managed senior housing portfolio during the third quarter, which accounted for the $1,300,000 sequential decrease in triple net cash NOI from the third quarter to the fourth quarter.

Cash NOI from our managed senior housing portfolio totaled $35,600,000 for the quarter compared to $30,100,000 for the last quarter. This $5,500,000 increase was primarily the result of investment activity completed during the third and fourth quarters together with sequential growth in our same-store portfolio. Interest and other income was $10,600,000 for the quarter, compared to $12,700,000 last quarter. This decrease was primarily due to $2,800,000 of lease termination income recognized last quarter and backed of normalized FFO and normalized AFFO. Cash interest expense was $26,600,000 which is consistent with last quarter. Cash G&A was $12,500,000 this quarter, compared to $9,100,000 last quarter.

The increase of $3,300,000 was primarily due to truing a performance-based compensation expense for the year as a result of hitting certain performance targets. Normalizing for the portion of this adjustment that related to prior periods, cash G&A was $10,600,000 for this quarter. As noted in our earnings release, we have introduced 2026 earnings guidance which I will discuss in further detail. Our full-year 2026 guidance on a diluted per share basis is as follows. Net income, $0.60 to $0.64. FFO and normalized FFO, $1.49 to $1.53. AFFO and normalized AFFO, $1.55 to $1.59. At the midpoint, we expect both normalized FFO per share and normalized AFFO per share to increase approximately 5% over 2025.

As a reminder, our guidance does not assume any 2026 disposition, or capital markets activities that have not yet been completed. There are a few other important assumptions built into our guidance that I would like to point out. Cash NOI growth for our triple net portfolio is expected to be low single digit at the midpoint, in line with contractual escalators. Additionally, our guidance assumes no additional tenants are placed on cash basis or moved to accrual basis for revenue recognition. Average full-year cash NOI growth for our same-store managed senior housing portfolio is expected to be in the low to mid-teens.

General and administrative expense at the midpoint is expected to be approximately $52,000,000, which includes $12,000,000 of stock-based compensation expense. Cash interest expense is expected to be $103,000,000 at the midpoint. The weighted average share count assumed in our guidance is approximately 255,000,000 and 256,000,000 for normalized FFO and normalized AFFO, respectively, and is in line with our fourth quarter weighted average share count after adjusting for the timing of ATM share issuances during the fourth quarter. Now briefly turning to the balance sheet. Our net debt to adjusted EBITDA ratio was 5.00 times as of 12/31/2025, in line with our targeted leverage and a decrease of 0.27 times from 12/31/2024.

As of 12/31/2025, the cost of our permanent debt was 3.92% and the weighted average remaining term on our debt was 4.2 years, the next material maturity being in 2028. Additionally, we have no floating rate debt exposure in our permanent capital stack, with the only floating rate debt being borrowings under our revolving credit facility. We have continued to proactively use the forward feature under our ATM to issue equity when prices present an opportunity to lock in attractive cost of capital to fund our active pipeline of deals.

During the quarter, we issued $206,000,000 on a forward basis at an average price of $18.79 per share after commissions and in total, we currently have $322,700,000 outstanding under forward contract at an average price of $18.60 per share after commissions. We also settled $40,000,000 of outstanding forward contracts to fund this quarter's investment activity. We expect to use the proceeds from the outstanding forward contracts to on the investments we have been awarded and do so on a leverage-neutral basis.

As of 12/31/2025, we are in compliance with all of our debt covenants and have ample liquidity of approximately $1,200,000,000, consisting of unrestricted cash and cash equivalents of $71,500,000, available borrowings under our revolving credit facility of $782,400,000, and the $322,700,000 outstanding under forward sales agreements under our ATM program. As of 12/31/2025, we also had $483,000,000 available under the ATM program. Finally, on 02/02/2026, Sabra Health Care REIT, Inc.'s board of directors declared a quarterly cash dividend of $0.30 per common share of stock. The dividend will be paid on 02/27/2026 to common stockholders of record as of the close of business on 02/13/2026.

The dividend is adequately covered and represents a payout of 79% of our fourth quarter normalized AFFO per share. And with that, we will open up the lines for Q&A. We will now open for questions.

Operator: Star and then the number one on your telephone keypad. We will pause for just a moment. And our first question comes from the line of William John Kilichowski with Wells Fargo. Your line is open.

William John Kilichowski: Hi. Good afternoon. Thanks for taking the question. Maybe just starting on the building blocks of your same-store growth. I know you do not give specifics, but maybe you could help us think about it in relation to what you accomplished in 2025. From a Rev four x four and occupancy perspective. And then maybe just as we look forward to 2027–2028, how does the success that you are achieving today make you feel about the long-term growth prospects of this business given the supply-demand profile you are facing?

Michael Lourenco Costa: Yes. I will take your first question, John, with regards I am assuming you are referring to our 2026 same-store guidance, correct?

William John Kilichowski: Yes. Correct. So, I mean, the main building blocks are you know, we expect to see continued occupancy growth in our same-store portfolio. We closed you know, fourth quarter just under 88%, and, you know, we fully expect our portfolio to get into the low nineties. So that is one of the key building blocks. In our guidance. We do expect there to be, you know, some rate growth probably, you know, along the lines of what we have seen this last year. You know? In, you know, low single digit rate growth for you know, and potentially more.

On the expense side, especially since these assets in that pool are approaching kind of that 90% occupancy level, the overall expense growth should be inflationary, right, or somewhere in line with inflation. There is not a lot of incremental expense that is going to be, added on as they keep pushing past that 90%, occupancy level. So the x four growth, should remain, you know, pretty muted, and below, you know, an inflationary level. Hopefully, that helps.

William John Kilichowski: Yes. That was helpful. And then maybe if we could just jump to the loans receivable book. It looks like there is a maturity towards the end of the year. I do not know if you could tell us a little bit more about that, the yield. And then obviously, what is included in guide? I am assuming that there is nothing on the other side of that. So what is there any incremental upside from recapturing that and putting some of that back to work? Or is there an assumption of what you do with capital at the end of it?

Richard K. Matros: Yeah. So the loan you are referring to is the RCA loan. And we are having conversations with Deerfield, who is the equity sponsor, as well as the RCA team kind of as we speak. And so there is nothing really to report on that. They are servicing their debt as they should be. So everything is copacetic there. And since it does not expire till the end of the year, the assumption of guidance is that the lease stays in place. It does not mean that is gonna be the ultimate but it made the most sense for this year's guidance.

William John Kilichowski: Mhmm. Got it. Thank you.

Operator: And our next question comes from the line of Juan Sanabria with BMO. Your line is open.

Juan Sanabria: Maybe just piggyback on the back of that last question. On the RCA loan, could you just make any comments, or could you update us on kinda how the tenants' health in terms of financial strength how they are positioned.

Richard K. Matros: Yeah. There is nothing else for us to comment on. We are having discussions. As I said, they are serving the debt, which should give you an indication of their health. And they are a great operational team.

Juan Sanabria: Okay. Fair enough. And then just with regards to CapEx, could you just give us a sense of how much you are expecting to spend on maintenance CapEx as well as anything kind of over and above you know, you kinda look at what you have disclosed, and thank you for adding disclosure there around SHOP CapEx, it has been a bit outsized I am sure there is some deferred CapEx you have seen with others. So just curious if you can give us some rough expectation, you know, what you think you will spend in 2026 on the SHOP portfolio.

Michael Lourenco Costa: Yeah. I mean, in terms of maintenance CapEx, I think you could it to be at similar levels like we have been disclosing on our portfolio. You know, quarter over quarter. On the you know, non-maintenance CapEx, the non nonrecurring as we call it in our supplement, it is probably gonna be somewhere in that $20 to $30,000,000 range if I had to ballpark it. For 2026.

Juan Sanabria: Thanks, Mark. Appreciate it.

Operator: And our next question comes from the line of Michael Griffin with UBS. Your line is open.

Michael Griffin: Maybe following up on the first question on occupancy. I think you talked fourth quarter just under 88%. I think you said expected to get in the low 90%. Is that expected for 2026? And then what is the maximum? You know, is this something that kinda caps out at low nineties, mid nineties, high nineties? How you thinking about the opportunity on occupancy there? Thanks.

Richard K. Matros: Yeah. So we think we can exceed 90%. How much further just in 2026, we will see. But once you get to the mid-nineties, you are kind of effectively full as people are moving in and out. Mean, we have buildings. We have a building in Canada that runs a 100% for long periods of time, but that is that is unusual. So if you are looking at it decent sized portfolio in the aggregate, probably mid-nineties is a pretty decent number to think about as effectively full.

Michael Griffin: Thanks for that. And then as a follow-up, a small portion of the $240,000,000 of awarded deals is skilled nursing. In your view, what held that the skilled nursing investment in 2025? Do you expect that to change in 2026? Thanks.

Michael Lourenco Costa: No. We still expect the lion's share of the investment activity to be at SHOP. Of all the transactions we see, it is probably SHOP represents probably 95% of the opportunity. Of the skilled nursing investments that we have that we are looking at that are either have been awarded or we are looking at from an off-market basis they are all coming directly from existing relationships I would expect that to continue, but it will be minimal compared to the senior housing investment.

Michael Griffin: Thank you very much. Good luck in 2026.

Michael Lourenco Costa: Thank you. Thank you. Appreciate it.

Operator: And our next question comes from the line of Austin Todd Wurschmidt with KeyBanc Capital Markets. Your line is open.

Austin Todd Wurschmidt: Great. Thanks. Hello out there. Just when thinking about the SHOP NOI guidance, should we think about the Holiday transition assets as lagging a bit versus the rest of the portfolio currently, but maybe there is potential for those to catch up and being a source of upside as the year progresses?

Michael Lourenco Costa: Yes. Definitely, the Holiday portfolio is lagging the overall same-store portfolio. But they have a much longer runway as far as upside with respect to occupancy and all the other metrics.

Richard K. Matros: Yeah. And that goes to my opening comment that is gonna bolster our overall SHOP growth for the year. Our non-Holiday portfolio has been doing really well. And so that should bolster because we do expect it to improve.

Austin Todd Wurschmidt: Can you give us just a sense of what that delta is between the Holiday transition assets in the fourth quarter? Maybe what the rest of the portfolio did to just understand what the catch up opportunity is and then does guidance assume that it fully catches up or just you know, kinda make some additional progress through the year?

Michael Lourenco Costa: Yeah.

Elmer Chang: No. I would I think the way we would answer that question is I mean, you saw the year-over-year growth for our entire same-store portfolio. And it is about for the ex-Holiday portfolio that we transitioned last year. You know, it is somewhere below that. Right? And we are not gonna give specifics on to what degree it is below that, but not at, you know, 13%, 12% like the entire portfolio was. But to Rick's earlier point, Darrin's earlier point, you know, as those continue to recover, we do expect there to be some additional NOI uplift as a result.

Richard K. Matros: Right. So we came in at 15% for the year prior to the prior to the transition, we were in high teens. And so that is that is an expectation that we have. It is just hard to pinpoint the time frame under which the transition facilities will improve enough to get us back there. That is that is the direction.

Austin Todd Wurschmidt: Yeah. And then just one more. I was curious what was the driver of the outsized occupancy growth for the SHOP assets in Canada was. I think you said it was 300 basis points year-over-year. I think that was closer to 150 basis points last quarter. Anything specific that is driving that sort of acceleration in occupancy upside?

Elmer Chang: No. Nothing specific. I would just say that the Canadian market is ahead of the US market as far the recovery is concerned. And from a new supply perspective, I think Canada is even has a lower sort of construction rate that is happening there versus in the US, which we all know is at near historic lows. Got it. The lack of supply. Everybody.

Elmer Chang: Yep.

Operator: And our next question comes from the line of Seth Eugene Bergey with Citi. Your line is open.

Seth Eugene Bergey: Maybe just going back to kind of the overall investment opportunity set, what part of the 240 is skilled versus SHOP? And then maybe broadly, you know, how are you seeing kind of the investment landscape change and the opportunity set change? Are your return requirements changing at all, or you know, how is the acquisition pipeline changing as a result of you know, as we kind of see more REITs kind of get involved in the in the SHOP space.

Elmer Chang: So number one, the $240,000,000 of, awarded transactions is significantly weighted towards SHOP. There are a couple of skilled nursing actually, there is one skilled nursing opportunity that we discussed, which is only $20,000,000 of two forty. As far as the continued competitiveness, in the market, you know, we are definitely seeing more competition, but with such an enormous deal volume in the market, still able to find high-quality newer vintage assets at good yields.

Richard K. Matros: And our return ex expectations have not changed. So our IRR return expectations are still low double digit.

Seth Eugene Bergey: Thank you. That is helpful.

Operator: And our next question comes from the line of Michael Lee Stroyeck with Green Street. Your line is open.

Michael Lee Stroyeck: Thanks. Good morning. You shed some light on how the non same-store SHOP assets are growing? And are you expecting meaningfully different NOI growth within that portfolio relative to the same-store pool in 2026?

Michael Lourenco Costa: Yeah. I mean, in terms of the facilities that are not included in our same-store pool, you know, there is a component of that are more recent investments. Right? They just do not meet the same-store criteria because we have not owned them long enough. And as we have talked about on calls, the last couple calls, the investments that we have been making are we are going into those with, call it, you know, high 80%, maybe even low 90% occupancy. But there is still some room to run there on the NOI side. And once those get folded into the same-store pool, you know, those will be their performance will be reflected.

And then in terms of other assets that may not be included in the pool, that are not recent transactions. You know, their occupancy is a little bit lower. They have they are they are excluded for a reason. You know, there may have been some renovations done. Some repositioning of the asset at some point in time, and those assets are in the process of recovering. And once they get to a reasonable spot, then we will include them into the pool. But those assets know, by definition, will have some opportunity for increased NOI growth given where they are performance wise today.

Richard K. Matros: But as the non as a non same-store gets folded in over time, it is not gonna re result in reduced numbers for us.

Michael Lee Stroyeck: Okay. Understood. And then maybe one question on pricing power. How long do you expect that mid single digit RevPAR growth to continue within the Canadian portfolio? And then when or if do you expect the US business to catch up?

Elmer Chang: I would expect the Canadian portfolio should continue on with that same sort of trajectory at least over the next year and it depends with respect to on the US portfolio. It depends on the occupancy as occupancy continues to increase. There will be more pricing power, and we should see some elevated growth at that point. But it is it is pretty impossible to sort of even take a guess at how long that is gonna take for the US market to catch up to the Canadian market. Because it is a pretty big gap. Right now.

Operator: Makes sense.

Elmer Chang: For the time.

Richard K. Matros: Yep. Yep.

Operator: And our next question comes from the line of Farrell Granath with Bank of America. Your line is open.

Farrell Granath: Thank you for taking my questions. My first one is regards to as you are entering into these SHOP assets, largely, which occupancy are you trying to enter in at? And does that allow a greater ramp as that enters from your non same-store into your same-store providing potentially greater duration as we are talking about the same-store NOI growth.

Richard K. Matros: Yeah. A lot of the assets that we are acquiring sort of 86%, 87%. There is some that are a little bit higher, but mostly the sort of 86, 87% range. So that gives us plenty of room for growth, particularly when you factor in the operating leverage you know, once you get to those higher numbers. You just have a great pull-through on the revenue side. Because, as Mike mentioned earlier, do not have much in the way of incremental costs. So the growth becomes outsized

Farrell Granath: Great. And I guess similar along those lines, while we were just speaking about the Canadian portfolio, and thinking about NOI margins going forward, at what point does that almost cap out? Or have you do you have an example of one of a facility with higher pricing power, high occupancy, has been able to really level out expenses just to give a sense of what direction this portfolio can go towards.

Richard K. Matros: So we have some anecdotal evidence in Canada with a couple of buildings where they have really maxed out and the margins are really quite high, but it is anecdotal. It is one or two buildings. You cannot really extrapolate from it. Much less take that and make assumptions about the US. But the margin growth is we saw the pretty nice runway there. So to expect know, assisted living margins to exceed 35% is not is not low-balling it or high-balling it. It is a realistic expectation. From our perspective, the question is how much higher can it go than that and obviously, independent living is even higher.

Elmer Chang: Thank you.

Operator: And our next question comes from the line of Alex Hagen with Baird. Your line is open.

Alex Hagen: Hey. Thanks for taking my question. Maybe if you can speak on deal flow and how competition is evolving. Maybe where are you seeing cap rate compression? And where is pricing holding up? We are you are we are definitely seeing cap rate compression. As the sector gains more and more popular and then private equity as well is getting involved. However, the private equity investment they have not made a big splash. Typically, when you see them transacting on opportunities, it is kind of a one to three asset sort of acquisition. And they tend to be focused more on either trophy assets in premier locations or deep sort of value-add opportunities, neither of which we are focused on.

Fortunately, the cap rate compression, although it is it is definitely there, we have still been able to find and continue to find newer assets in solid markets in that seven cap range.

Richard K. Matros: Nice.

Alex Hagen: And just sticking with the SHOP stuff, are you willing to lend to the development of new SHOP. Are there any of those opportunities bubbling up.

Elmer Chang: Yes. Actually, we have a program that is, preferred equity, so we are not lending. But we will provide preferred equity on developments. Those typically carry with them, you know, double digit returns. With a purchase option and then a kicker on the back end. So it creates, provides us with a solid investment return along the way. And provides optionality in the future and to some extent creates a future pipeline. Although, the although we I am continuing continue to see more development opportunities, most of them still do not pencil. But I am starting or we are starting to see, deals that actually pencil. So I think it will pick up

Michael Lourenco Costa: Yeah.

Alex Hagen: So thank you, guys. That is it for me.

Operator: And as a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Omotayo Tejumade Okusanya with Deutsche Bank. Your line is open.

Omotayo Tejumade Okusanya: Hi. Yes. Good morning out there. Great to see all this activity. On the skilled nursing side for a second, could you just talk a little bit about how you are seeing the regulatory outlook for the rest of the year, whether it is on the Medicaid side, whether, again, also on the Medicare Part A side, just kinda giving some of what we saw with the Medicaid Advantage.

Richard K. Matros: Yeah. I do not think there is a read-through from the MA rate decision. So I think for our space, look. It is very formulaic. Kind of as I said over the last couple of calls, the outsized rate increases both on the Medicaid side the Medicare side. We got through the pandemic. You know, really started tapering down a little bit last year. We hit a high point think, in 2023 on both Medicaid and Medicare rates. Because of the time frame through which the cost support process runs. And when that all that inflation was captured. So they came down a little bit in 2025. But was still quite robust.

And expect them to come down some more this year. Until the and then maybe when you get into 2026, you sort of back to where you were with historical averages. So I do not see anything unusual there. At all. And there is no there is no dialogue that is happening at the state level around Medicaid rates that are causing us any concern

Omotayo Tejumade Okusanya: That is helpful. And then also on the SHOP side, again, first kind of six weeks of 2026 have been a little bit strange, kind of higher flu season. Very strange weather. Just kind of curious if that is impacting moving move-out activity at least for the first six weeks of the year. And if it is, if that started to stabilize out,

Richard K. Matros: Yeah. Not really. Been pretty muted. Flu season has been relatively muted. So yeah. Not much.

Omotayo Tejumade Okusanya: Great. Thank you.

Richard K. Matros: Thanks, Kyle.

Operator: And our next question comes from the line of Richard Anderson with Cantor Fitzgerald. Your line is open.

Richard Anderson: Hey, thanks. And good morning out there. So I have just one question as it relates to SHOP and the execution of the SHOP platform. Know, Ventas and Welltower have established programs to grow you know, in the year following. I am not worried about people finding, acquisitions. I am worried about them executing on the operations in the aftermath. You guys have been doing this for ten years on the SHOP side. Now a lot of your peers are sort of getting into it today.

You find or do you think back that, boy, you kinda learned a lot of lessons out of the gate that having been in it for ten years has given you sort of an advantage. From an operating point of view. And, you know, I am I am just curious if you think that there are it is more complicated perhaps as an operating business than maybe some on the outside looking in might realize. And I am wondering if there were lessons learned earlier on in your SHOP existence that you that you put into, you know, into execution over the course of the past several years that puts you at a better advantage to grow. Thanks.

Richard K. Matros: Yeah. Thanks, Rich. So a couple of things. One, it is more complicated than becoming more complicated. As acuity rises. Under the assumption that you are aligning yourself with operators that are pushing acuity up which we are. I think, you know, one of one of the lessons that got learned along the way is when you have got a team at the REIT that is used to working with just triple net. Working and really getting into the details and working side by side with those operators under a SHOP structure, is very different. And so it took some time, I think, to acclimate to that.

I think one of the advantages that we have is from the very beginning, our asset management team has only been comprised of ex-operators. So that was something that we did intentionally when we first did the spin. And started building up all those functions. So I know folks know kind of my operating background, but it is not it is not just me. We have built a really deep operating bench. Throughout the company. And we have added a business intelligence unit along the way as well. For better data analysis and so I think being robust in those areas has paid off for us.

And so as we grow the SHOP portfolio going forward, everything that we add from an infrastructure perspective at this point is just incremental for us. So you know, now it is a matter of continuing to fine tune, especially with all the technological and advancements and utilization of AI and things like that. But I think the formation of our biz intelligence unit positions us well-to-do that.

Elmer Chang: And, Nguyen, I will add something to that. Sorry. I will add something else to that, Rich. And it is not necessarily I would not call it a lesson learned. I think it is just good management which is the way that we internally manage, oversee, and operate on that portfolio has evolved over the last ten years as you would expect. I think it would be kind of foolish for somebody to assume somebody with company with 10 SHOP assets is gonna have the same infrastructure, same process, same everything as somebody with a thousand SHOP assets. Right? Mhmm.

But that willingness and that appetite to continue to evolve ourselves and reinvent ourselves in how we do that and continue getting better that is something that has changed over the years. I would not say that is a lesson learned. I think that is just the know, spirit of constant improvement.

Richard Anderson: When you think of I do not know. Maybe you have 60 employees at Sabra. Present company excluded. How many of them would you say are sort of focused primarily on senior housing operating I mean, in terms of people that are completely dedicated senior housing operating, that would we have a section of our accounting group that is probably I do not know, six, seven professionals. That is all they do. Our asset managers spend a lot of their time, as you would expect, on that portfolio. They also spend time on our triple net portfolio as well. But I think everybody to a person here at Sabra is involved as we should be.

Richard K. Matros: And the other thing I would point out is our investment team who do not necessarily have an operational background. They work completely in sync with the management team, and they go out to the buildings with them. So over the years, our investment management team who does not have an operational background, has now spent so much time going through buildings that we are looking to acquire side by side with our asset managers who are operators. That their understanding of operations has really expanded tremendously.

So if you look at our investment team, our asset management team, and the folks that completely dedicated to SHOP, in accounting and finance it is a pretty big chunk of that with 55 people of that 55 of those 55 people.

Richard Anderson: Okay. Great. All I got. Thanks. Thanks.

Operator: And as a reminder, it is star one if you would like to ask a question. And with no additional questions at this time, I will turn the call back over to Mr. Richard K. Matros for closing remarks.

Richard K. Matros: Thank you for your support, and thanks for dialing in for the call. And I hope you all have a great Valentine's Day weekend. With whoever you spend Valentine's Day with. Take care.

Operator: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

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