Sabra Health Care REIT Inc. is relocating its headquarters from Irvine to Tustin, with the nearly $2.5 billion-valued investor in skilled nursing, assisted living and other healthcare properties set to become the most valuable publicly traded company based in the city.
The real estate investment trust’s (Nasdaq: SBRA) new base is set to be a 13,000-square-foot freestanding building at the Flight office campus in the Tustin Legacy, a slight increase from Sabra’s current 11,000-square-foot office in the Irvine Towers complex on Von Karman Avenue.
“We’ve been in our current space since we started the company” in 2010, Chief Executive Rick Matros told the Business Journal. “The new office will be able to accommodate our growth over the next few years.”
Tenant improvements are in the early stages for the office, located at 1781 Flight Way, with Sabra slated to make its move in October. The office will house Sabra’s administrative and financial operations, with about 35 employees based there; the company employs 42 in total.
Headwinds
Sabra was formed as a spinoff of Irvine-based nursing home operator Sun Healthcare Group Inc., which is now owned by Genesis HealthCare.
Matros previously served as CEO of Sun Healthcare.
Today, Sabra counts more than $5 billion in healthcare assets across 400 investments in skilled nursing and post-acute care facilities and specialty hospitals “in most states, and Canada,” according to Matros.
As of last week, the REIT’s shares were hovering around $10, less than half their value from early 2020, prior to the pandemic, which devastated the skilled nursing and assisted living sectors, due to declining occupancy levels and staffing shortages.
“It was cataclysmic,” Matros said. “The business is still recovering, with occupancy levels on the rise since the end of Omicron in early 2022. It’s just been a bit slower than anyone would like.”
Matros expects the company to regain its earnings growth next year, as it continues to diversify its portfolio and capture gains from the acquisitions it made last year.
Tailwinds
It paid $400 million for new investments in 2022 as the firm took advantage of debt markets prior to the interest rate hikes, with a growing focus on the behavioral health market, or centers specializing in addiction treatment.
“We were the first REIT to invest in that space,” Matros said.
This year will be slow on the acquisition front for Sabra as it focuses on its business recovery.
By the end of the year, roughly half of Sabra’s portfolio will be in skilled nursing, 35% will be in senior housing and assisted living and the remaining 15% will be in the behavioral space. The latter sector will be focused in the Midwest and Southeast.
Another tailwind for Sabra is the declining supply of skilled nursing facilities since the pandemic, which will help boost occupancy in the coming years.
“We have the same increasing demographic but no new supply coming online in the next five years, which will significantly impact existing supply,” Matros said.
ESG
Sabra’s move is the latest headquarters win for Flight, which is now about 96% occupied with several tenants listing the creative office campus as their home base, such as Virgin Galactic Holdings Inc. (NYSE: SPCE), 99 Cents Only Stores, Liberty Dental Plan of California and JustFoodforDogs, among others.
“We are down to two vacancies and have activity on both,” Parke Miller, executive vice president of Lincoln Property Co., the project’s developer, told the Business Journal. “The demand for differentiated office remains loud and clear.”
Luke Napolitano, Chon Kantikovit and Justin Cassell of Cushman & Wakefield’s Irvine office represented Sabra in the lease.
