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Certain subsidiaries of Sabra
Health Care REIT, Inc. ("Sabra," the "Company" or "we")
completed the issuance of $200 million aggregate principal amount of 5.375%
senior notes due 2023 (the "2023 Notes"). Sabra expects to use a portion of
the net proceeds of the offering to redeem $113.8 million of the 8.125% senior
notes due 2018 (the "2018 Notes") of certain of its subsidiaries. The 2018
Notes permit us to redeem up to 35% of the outstanding 2018 Notes with an
amount equal to the net cash proceeds of certain equity offerings, including
the March 2013 offering of our Series A Cumulative Redeemable Preferred Stock.
On May 23, 2013, the issuers of the 2018 Notes issued a notice of redemption
for $113.8 million of the 2018 Notes, providing for a redemption price of
108.125% of the principal amount being redeemed, plus accrued and unpaid
interest thereon to the date of redemption. Sabra expects to use the remainder
of the net proceeds from the offering of the 2023 Notes of approximately $71.6
million to fund future possible acquisitions and for general corporate
purposes.
The issuance of the 2023 Notes and the redemption of a portion of the 2018
Notes will result in net additional cash expenditures for interest and the
redemption premium of $0.8 million when compared to waiting to call the same
amount of the 2018 Notes at the first call date of November 1, 2014 at
104.063%. These transactions are expected to result in AFFO dilution of $0.01
in fiscal 2013, excluding the one-time redemption premium payment of $9.2
million and assuming the excess cash is invested by the end of the third
quarter of 2013, and are expected to be $0.03 accretive in 2014 assuming the
excess funds are invested prior to the beginning of 2014. After adjusting for
the repayment of $7.3 million of mortgage debt subsequent to March 31, 2013,
the issuance of the 2023 Notes and the redemption of a portion of the 2018
Notes, our weighted average interest rate on our total debt as of March 31,
2013 declines from 6.77% to 6.04% on a pro forma basis and the maturity date
of 24% of our total outstanding debt at March 31, 2013 extends from 2018 to
2023. The excess cash of $71.6 million increases our pro forma liquidity as of
March 31, 2013 to $311.8 million. When combined with the additional borrowing
capacity of $36.0 million under Sabra's secured revolving credit facility and
the potential for additional capital from the $100.0 million ATM program, the
Company has access to capital of up to $447.8 million for future acquisition
activities.
Sabra has updated its 2013 guidance to account for these transactions as well
as actual activity through the first quarter as shown below.
Commenting on the transactions, Rick Matros, Chairman and CEO said, "Our
approach to the capital markets has been and continues to be opportunistic as
evidenced by the $100 million add-on to the 2018 Notes we completed last
summer and the preferred equity offering we completed earlier this year. We
continue to focus on proactive steps to improve our credit rating with the
principal goal of achieving investment grade status. That will take time.
Given the current robust capital market environment, we were able to
successfully complete the issuance of the 2023 Notes at a rate that
historically has been reserved for investment grade companies. The preferred
equity offering created the opportunity to claw back 35% of the 2018 Notes
making it possible to issue the 2023 Notes on a basis that will be accretive
to 2014 AFFO, the first full year it is in place, after investing the excess
proceeds. We expect interest rates will increase over time, so we have
positioned ourselves to have enough liquidity to grow the Company to the point
where we believe we can make a strong case for the ratings agencies to upgrade
our ratings and thereby allow us to continue to improve our cost of capital
despite the potential for an increasing interest rate environment. We remain
confident regarding our ability to deploy our capital consistent with our
investment goals. We will continue to target high quality senior housing and
post-acute assets as well as look to expand our development projects."
2013 Outlook Update
The Company has updated its 2013 guidance to take into account the issuance of
the 2023 Notes, redemption of $113.8 million of the 2018 Notes and investments
through March 31, 2013 of $17.5 million. In addition, the updated 2013
guidance no longer contemplates an issuance of $75.0 to $100.0 million of
equity securities in 2013.
For fiscal 2013 the Company expects FFO to range between $1.53 and $1.57 per
diluted common share and Normalized FFO, after adjusting for the redemption
premium, write-off of deferred financing costs and issuance premiums
associated with the redemption of $113.8 million of the 2018 Notes, to range
between $1.79 and $1.83 per diluted common share. The Company expects AFFO for
fiscal 2013 to range between $1.42 and $1.46 per diluted common share and
Normalized AFFO, after adjusting for the redemption premium, to range between
$1.66 and $1.70 per diluted common share. The Company expects net income
attributable to common stockholders for fiscal 2013 to range between $0.65 and
$0.69 per diluted common share.
The Company's guidance excludes the impact of investments that may be made
during the remainder of 2013, which the Company expects to total between
$150.0 million and $200.0 million for the full fiscal year, a significant
portion of which is expected to close in the latter part of the year and
having a continued focus on senior housing and memory care facilities. These
future investments in 2013 are expected to be funded first with available cash
and then with borrowings available under the secured revolving credit
facility.
Except as otherwise noted above, the foregoing projections reflect
management's view of current and future market conditions. There can be no
assurance that the Company's actual results will not differ materially from
the estimates set forth above. Except as otherwise required by law, the
Company assumes no, and hereby disclaims any, obligation to update any of the
foregoing projections as a result of new information or new or future
developments.
The table below sets forth Sabra's updated 2013 full year guidance compared to
its previously issued guidance:
Updated Guidance Previously Issued Guidance
Low High Low High
Net income attributable to common $0.65 $0.69 $1.03 $1.07
stockholders
Add:
Depreciation and amortization 0.88 0.88 0.82 0.82
FFO 1.53 1.57 1.85 1.89
Normalizing items 0.26 0.26 — —
Normalized FFO $1.79 $1.83 $1.85 $1.89
FFO $1.53 $1.57 $1.85 $1.89
Acquisition pursuit costs 0.02 0.02 0.04 0.04
Stock-based compensation expense 0.18 0.18 0.11 0.11
Straight-line rental income (0.37) (0.37) (0.32) (0.32)
adjustments
Amortization of deferred financing 0.13 0.13 0.08 0.08
costs
Amortization of debt premiums (0.06) (0.06) (0.02) (0.02)
Non-cash interest income (0.01) (0.01) — —
adjustments
AFFO 1.42 1.46 1.74 1.78
Normalizing items 0.24 0.24 — —
Normalized AFFO $1.66 $1.70 $1.74 $1.78
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