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Presentation

Operator: Ladies and gentlemen, this is the operator. Today’s conference will begin shortly. Thank you for holding. Good day, everyone. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sabra Health Care REIT, Inc. First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to withdraw your question, press 1 again. I would now like to turn the call over to Lukas Michael Hartwich, EVP Finance. Please go ahead, Mr. Hartwich.

Lukas Michael Hartwich: Thank you, and good morning. 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, our expectations regarding our tenants and operators, and our expectations regarding our acquisition, disposition, and investment plan. These forward-looking statements are based on management’s current expectations and 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 12/31/2025, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K 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 are 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 investor section of our website at sabrahealth.com. Our Form 10-Q, earnings release, and supplement can also be accessed in the investor section of our website. I will now turn the call over to Richard K. Matros, President, CEO, and Chair of Sabra Health Care REIT, Inc.

Richard K. Matros: Thanks, Lukas, and thanks everybody for joining us today. Starting with our deal flow, our deal flow continues to be robust. We fully expect to materially exceed February total investments. We have already closed or been awarded $400 million year to date. In addition to opportunities we see in SHOP, we are also seeing some skilled, but the ones that are appealing are off-market deals, both acquisitions and development, brought to us by existing operators. Our skilled nursing rent coverages continue to grow, as did our senior housing triple-net and behavioral, all of which hit new highs in coverage. Our occupancy growth continued in our skilled and senior housing triple-net portfolios. Our top 10 coverage is stronger than it has ever been.

Our SHOP margins continue to grow, and our consolidated, unconsolidated, and same-store portfolios continue to perform. Our year-over-year same-store SHOP NOI growth came in higher than the two previous quarters. SHOP occupancy dipped slightly overall, but it was all in Canada, which had very strong year-over-year growth and currently sits at 93.4%, so almost effectively full, and there will probably be ups and downs a little bit with that portfolio. The U.S. portfolio was up 10 basis points sequentially. For the first time in the company’s history, our private pay concentration is now 50% of the portfolio. Our leverage ticked up slightly, but it is still on current target. The regulatory environment is stable. The Medicare market basket proposal is within our expectations.

We expect Medicaid rates to be within expectations as well. We have a number of AI initiatives that will streamline and enhance the effectiveness of Sabra Health Care REIT, Inc.’s corporate functions. Our intent is to be an AI-enabled REIT. This, of course, is in addition to the numerous clinical pilots we have ongoing primarily in our SHOP portfolio that have been really exciting to watch evolve. We are affirming guidance, but we will be revisiting guidance in Q2 given all the current trends. And with that, I will turn the call over to Darrin.

Darrin Smith: Thank you, Rick. Sabra Health Care REIT, Inc.’s managed senior housing portfolio had another great quarter with continued growth. The total managed senior housing portfolio, including non-stabilized communities and joint venture assets at share, had sequential revenue growth of 7.2% and cash NOI growth of 9.5% 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 Health Care REIT, Inc.’s senior housing portfolio. During the first quarter, Sabra Health Care REIT, Inc. invested $102 million, adding three properties to Sabra Health Care REIT, Inc.’s managed senior housing portfolio, one skilled nursing community, and a preferred equity investment in a senior housing development.

Subsequent to quarter end, Sabra Health Care REIT, Inc. invested an additional $14.1 million, adding two properties to Sabra Health Care REIT, Inc.’s managed senior housing portfolio and the redevelopment of a senior housing community, bringing total year-to-date investments to roughly $206 million with an estimated initial cash yield of 8%. Additionally, Sabra Health Care REIT, Inc. has another $107 million of additional awarded managed senior housing and $94 million of awarded skilled nursing investments, most of which should close in the second quarter. In addition to the over $400 million in closed and awarded investments, Sabra Health Care REIT, Inc. has an additional $690 million of managed senior housing investments that we are actively pursuing.

On a year-over-year basis, Sabra Health Care REIT, Inc. added 21 assets to our managed senior housing portfolio, a nearly 25% increase by number of assets and 62% increase in total managed senior housing NOI. Deal flow shows no signs of slowing, and Sabra Health Care REIT, Inc. remains competitive on new investments. As our investment pipeline continues to be extremely active, particularly in managed senior housing, we have remained focused on ensuring the foundation underneath is built to accommodate that growth. Over the past several quarters, we have been advancing automation, data, and AI-enabled initiatives to support faster, more consistent decision making, deeper operating insights across the portfolio for us and our operators, and, importantly, meaningfully increase the scalability of our platform.

This is a continuation of how we have evolved the platform over the decade, and we view it as an accelerator of portfolio and earnings growth as well as long-term value creation. Moving on to the same-store portfolio, Sabra Health Care REIT, Inc.’s same-store managed senior housing portfolio, including joint venture assets at share, continued its strong performance in the first quarter. The key numbers are: revenue for the quarter grew 7.9% year over year, with our Canadian communities growing revenue by 9.6% in the same period. First-quarter occupancy in our same-store portfolio was up 280 basis points to 88.4% year over year. Notably, our domestic portfolio occupancy increased 280 basis points to 85.6% during that period, while our Canadian portfolio grew 270 basis points to 93.4% in the same period, marking the eighth consecutive quarter where occupancy was over 90%.

RevPAR in the first quarter continued to rise with an increase of 4.6% year over year, with our Canadian portfolio increasing 6.5% in the same period. While RevPAR and occupancy continue to grow, expense per occupied room increased only 1.8% for the same period, providing for cash NOI growth of 14.4% on a year-over-year basis. With over $400 million in closed and awarded investments to date, a very robust pipeline, and industry tailwinds at our backs, we should continue to see solid growth in our portfolio. Our net-leased senior housing portfolio continues to do well with continued strong rent coverage. I will now turn the call over to Michael Lourenco Costa, Chief Financial Officer of Sabra Health Care REIT, Inc.

Michael Lourenco Costa: Thanks, Darrin. For the first quarter of 2026, we recognized normalized FFO per share of $0.38 and normalized AFFO per share of $0.39, which represents a 9% to 5% increase respectively over the same periods in 2025. In absolute dollars, normalized FFO and normalized AFFO totaled $96.1 million and $100.6 million this quarter, respectively. Cash NOI from our triple-net portfolio increased $2.2 million from last quarter, primarily due to annual rent escalators and increased collections from certain cash-basis tenants. Cash NOI from our managed senior housing portfolio totaled $39 million for the quarter, compared to $35.6 million last quarter. This $3.4 million increase was primarily the result of recent investment activity together with sequential growth in our same-store portfolio.

Interest and other income was $10 million for the quarter, compared to $10.6 million last quarter. This decrease was primarily due to paydowns received during the quarter and lower interest income on our cash balances. Cash interest expense was $26 million, compared to $26.6 million last quarter. Normalized cash G&A was $11 million this quarter, compared to $10.6 million last quarter. This increase was primarily related to hosting our 2026 operator conference last month. Subsequent to quarter end, we completed the disposition of three skilled nursing facilities in Maryland leased to CommuniCare for gross proceeds of $79.4 million, equating to a 6.8% lease yield. These facilities were classified as held for sale as of 03/31/2026. As noted in our earnings release, we have reaffirmed our previously issued 2026 earnings guidance, and the results for this quarter are in line with our assumptions underlying that guidance.

Now briefly turning to the balance sheet, our net debt to adjusted EBITDA ratio was 5.04x as of 03/31/2026, and continues to be in line with our targeted leverage. As we have stated previously, while we are comfortable with our leverage level, we will continue to assess opportunities to reduce leverage over time where doing so supports our continued focus on strong year-over-year earnings growth. As of 03/31/2026, the cost of our permanent debt was 3.92%, and the weighted average remaining term on our debt was approximately four years, with 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.

As Darrin noted, our pipeline of investment opportunities has remained extremely active, and that has coincided with continual improvements in the cost of our equity capital. Accordingly, we have been actively utilizing the forward feature under our ATM to lock in this attractive cost of capital to fund our investment pipeline. During the quarter, we issued $128 million on a forward basis at an average price of $20.19 per share after commissions, and in total, we have $451 million outstanding under forward contracts at an average price of $19.03 per share after commissions. We expect to use a portion of the proceeds from the outstanding forward contracts, together with the proceeds from the CommuniCare asset sales, to close on the investments we have been awarded on a leverage-neutral basis while still retaining meaningful dry powder to fund additional investments.

As of 03/31/2026, we are in compliance with all of our debt covenants and have ample liquidity of approximately $1.2 billion, consisting of unrestricted cash and cash equivalents of $117 million, available borrowings under our revolving credit facility of $645 million, and the $451 million outstanding under forward sales agreements under our ATM program. As of 03/31/2026, we also had $353 million available under the ATM program. Finally, on 04/29/2026, Sabra Health Care REIT, Inc.’s board of directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on 05/29/2026 to common stockholders of record as of the close of business on 05/15/2026. The dividend is adequately covered and represents a payout of 77% of our first-quarter normalized AFFO per share.

We will now open the call for questions.

Operator: Simply press star 1 again. Your first question comes from the line of William John Kilichowski from Wells Fargo. Your line is open.

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William John Kilichowski: Hi. Thanks for taking my question. Rick, really appreciate the opening remarks. It sounds like it was a great quarter all around on the SHOP side. You got the acquisitions done. Looking at the guide being held still here, what is the reason for the conservatism there? I understand that is typical in Q1 for you. But it sounds like things are working, and I understand future acquisitions are not considered. What would it take at this point to get to the lower or midpoint?

Richard K. Matros: Yes, we are typically conservative this early in the year. But all the trends are obviously going in the right direction. You see the yields that we are investing in, so that looks good for us as well. So it is really just as simple as that. We will reevaluate earnings guidance for the second quarter.

William John Kilichowski: Okay. And then on the opening remarks, you have the $200 million awarded. If you could talk to maybe a cadence of that closing and then beyond that, the $690 million. If you think about deals historically that have been in that level of the funnel, what has been your historical rate of execution on those deals? Just trying to distill what might be the final number that you execute on.

Richard K. Matros: I will make one comment then hand it over to Darrin. The $200 million, from our perspective, will close. I do not have any doubt or concern about the $200 million. Darrin?

Darrin Smith: With respect to the $690 million, these are investment opportunities that we are actively pursuing, including opportunities where we have submitted an initial LOI and are moving forward in the process. As far as the probability of success, it is hard to tell because it is a bit of a competitive environment, but we would expect to close on a fair number of that investment opportunity.

Richard K. Matros: The volume is so high, John, there really has not been a precedent for this in terms of trying to be a little bit more predictive about what percentage of deals we will close on. But it will be a good enough percentage that, as I said in my opening remarks, we will exceed pretty materially how much we did last year.

William John Kilichowski: Very helpful. Thanks, Rick.

Richard K. Matros: Yes.

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

Farrell Granath: Thank you so much. I first wanted to ask about your pipeline also. What percentage of that are you sourcing off market or just through your relationships, and what percentage is through marketed deals?

Richard K. Matros: I do not have the exact percentages, but on the skilled nursing side, it is 100% off market through existing relationships. On the senior side, maybe say 20%. We do have existing relationships that bring us off-market deals, but the bulk of the pipeline that we have is marketed. And I also just want to note on the CommuniCare sale, that is not indicative of us aggressively looking to sell skilled assets. This is a very unique situation where CommuniCare approached us wanting to exit Maryland, which is not an easy state. We actually had other buildings in Maryland that we exited several years ago. There are a lot of markets in Maryland that are over-bedded, so we were happy to work with CommuniCare on that. And CommuniCare is also one of our operators that we are doing some of these off-market things with.

Farrell Granath: Okay. Thank you. And also wanted to touch on the expense per occupied room growth that you highlighted, the 1.8%. Is that being driven just based on the operating leverage where you are in your occupancy? Or were there other puts and takes that are going into that number?

Richard K. Matros: It is the operating leverage. So we would expect it to continue at levels that low for the foreseeable future.

Farrell Granath: Great.

Operator: Your next question comes from the line of Austin Todd Wurschmidt from KeyBanc. Your line is open.

Austin Todd Wurschmidt: Great. Thanks. Just within the SHOP portfolio, just wondering how you are feeling about the exit velocity and kind of leading indicators from March looking into April and May. I think you surpassed the one-year anniversary this month since transitioning the communities away from Holiday. What is the latest update and trajectory of that portfolio?

Richard K. Matros: Yes, it is definitely getting better. We are not disclosing the numbers on that, but it is progressing. You probably noted there was a slight change in same store, and that is just a function of having had these new operators in that portfolio for a year now. We determined that a few of those assets are assets that we no longer want to retain in the portfolio.

Austin Todd Wurschmidt: Yes, that is helpful. And how deep is the set for SHOP investments in that 8% yield range? And can you provide some characteristics around the size and vintage of the facilities that you acquired in the first quarter as well as what is in that awarded pipeline?

Darrin Smith: There is definitely some cap rate pressure. Most of what we see on the market and the opportunities right now are in the low 7% range. What we closed on is IL, AL, and memory care, although it is more heavily weighted to AL and memory care. On vintage, these are roughly 14 years old on average. With respect to the $690 million that I mentioned, that has an average age of eight years, and also low 7% for those that are more stable. But we are also looking at some slight value-add opportunities where there is lower occupancy but a clear line of sight to stabilization. Some of those we are looking at will have initial yields in the 6s but should provide more meaningful IRRs with the upside opportunity.

Richard K. Matros: And as you know, we focus on secondary markets, so we are not seeing the same level of cap rate compression in the secondary markets as you all see in the primary markets.

Austin Todd Wurschmidt: Very helpful. Thanks for the time.

Operator: Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is open.

Juan Sanabria: Hi. Good morning. Just hoping you could talk a little bit more about those SHOP assets that you transitioned last year that you are now looking to sell. If you can comment on the book value or the expected proceeds, 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?

Richard K. Matros: We are just selling those right now, so we do not know what the outcome is going to be. We are 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 would be evaluating the viability of retaining all these assets going forward. That is just a normal process. But we are not breaking out all these different portfolios in terms of the individual growth of SHOP NOI in these portfolios.

Juan Sanabria: And to just to confirm, these were old original Holiday assets. Is that fair?

Richard K. Matros: Yes, they are.

Juan Sanabria: Okay, great.

Richard K. Matros: It is three assets that we are selling, and we brought another Holiday asset into same store that had stabilized.

Juan Sanabria: Great. And just to switch gears, appreciate that. Thanks, Rick. Just on the behavioral, could you give an update on Landmark that was in the press and any updated thoughts on how we should be thinking about the RCA loan?

Richard K. Matros: Sure. And we always reserve the RCA question for you, Juan, just so you know.

Juan Sanabria: Special.

Richard K. Matros: On Landmark, we have been working with them. They are in the court system for an exit with those facilities, and we were able to help bring somebody in to buy a bunch of the assets. The Landmark team is buying some of the assets themselves. We were able to get a price that was actually pretty attractive from our perspective. Outside of that group of Landmark assets, we have three others that we are in the process of selling as well. So we will have some more proceeds to add to the ones that you saw in the article. We hope to make an announcement on that before our second quarter call. And if that is the case, we will do so. As I mentioned on the last call, Deerfield—this is their biggest investment—they really believe in the portfolio, and our talks are very constructive.

Michael Lourenco Costa: And on NOI or rent collected related to Landmark, there is somewhere around, like, $1.5 million that we collected in the first quarter, and we would expect that same run rate through whenever these assets ultimately transact.

Juan Sanabria: Thank you.

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

Seth Eugene Bergey: Hi, thanks for taking my question. You mentioned in the prepared remarks some AI initiatives. Could you expand on some of those and how you are using AI within the platform? And maybe talk about what differentiates the Sabra Health Care REIT, Inc. platform from an AI perspective versus some of the peers that are also competing in the SHOP and skilled business? And then maybe just a little bit on the deal flow and the opportunity set—what is the mix between SHOP and skilled of the opportunity set, and are there any particular geographies you are looking at?

Darrin Smith: I will take that one, Seth. At a corporate level, as I mentioned, we have been leaning into automation and AI over the last several quarters. Primarily at the core level, it has been to speed up back-office workflows and data processing, primarily in our SHOP portfolio. At the same time, we are advancing initiatives that will further reduce manual processes and accelerate analysis. Not the sexiest thing in the world, but it is very impactful, particularly as it improves how we interact with our operators and what kind of value we can give back to our operators in the form of data and insights. It could have some really meaningful benefits, not only to us, but to our operators as well. And then, as Rick mentioned, we have pilots going on at the facility level.

In addition to several prop-tech solutions that have already been deployed, there are a whole bunch of other solutions like medical records and fall detection that are leveraging AI to make operations more efficient and, more importantly, improve resident care. On the opportunity set, nothing has really changed. It is still, I would say, 95%+ SHOP in the opportunity set. The skilled nursing investments and opportunities that we have announced were all done off market with direct relationships. We still do not see that much volume in the skilled space, and when you do, it is very heavily competitive, and the private groups tend to be able to pay up a little bit more.

Richard K. Matros: Remember the private buyers that we are all up against are buying OpCo and PropCo, and they also are feeding ancillary businesses. So as a buyer of real estate, we just cannot compete with that. And there is not enough volume out there for everybody to go around on skilled as there is on SHOP—or there was on skilled if you go back to prior to the pandemic when there was enough for everybody to go around. At this point, we do not see that changing at least for a while. A lot of it is a function of operators who do not have to sell but got really slammed during the pandemic and had pretty huge losses. Now you have 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 do not have to sell that normally would put their assets on the market, they are just recouping, and they are probably enjoying some really nice cash flow that was not the case a few years ago. Maybe we will see that change later on in the year going into 2027, but it is a little hard to tell. On the SHOP side, as far as the markets are concerned, we are still looking at secondary markets as the focus here. And as far as the volume is concerned, it is showing no signs of slowing whatsoever. In fact, it actually feels like it is picking up speed. And we are geographically agnostic in terms of what states we will be in for either class.

Seth Eugene Bergey: Great. Thanks.

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

Michael Lee Stroyeck: Thanks, and good morning. Maybe following up on that question and just going back to the strong pricing on the CommuniCare sale, and your comments on not being able to compete as well in the SNF transaction market, what sort of yields or multiples are you seeing there on those marketed SNF deals? And how different is that versus the typical 9% to 10% lease yields we see in SNFs?

Richard K. Matros: There is not a lot of data out on that. The problem is they are all private deals. I do not really have a good answer for that. Darrin, I do not know if you have seen anything.

Darrin Smith: No. I mean, it is definitely a couple hundred basis points inside of what the standard skilled nursing transaction would typically run at.

Michael Lee Stroyeck: Got it. Okay. And then going back to the 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 other areas of the portfolio?

Richard K. Matros: No, not at all. I am a little bit surprised to hear that. We have not seen that at all in our portfolio.

Michael Lee Stroyeck: Understood. Thanks for the time.

Operator: Your next question comes from the line of Alec Gregory Feygin from Baird. Your line is open.

Alec Gregory Feygin: Can you comment on how the opportunity set of funding for development and redevelopment projects has trended? Do you expect this to be a bigger part of your investment activity going forward? And are these development opportunities also in secondary or tertiary markets?

Darrin Smith: As far as developments, we still see a fair amount of development opportunities that come in. I would say of those development opportunities, maybe 10% pencil. When I say pencil, we are looking for a stabilized return on cost on the development to be 200 to 250 basis points wider than the current market cap rate equivalent. Maybe only 10% of those meet that. I do expect that it is going to pick up, but not meaningfully for some period of time. The one private equity development that we announced is in Indiana, and the other is actually a redevelopment of a former SNF property that was shut down, and we are redeveloping that into a senior housing property in Kentucky.

Alec Gregory Feygin: Got it. Thanks for the time.

Operator: Your next question comes from the line of Vikram L. Malhotra from Mizuho Securities. Your line is open.

Vikram L. Malhotra: I want to go back to the question on the guide. The cadence of FFO or AFFO—if you take your quarterly number and multiply it by four, you are very easily in the range. So I am wondering if there are one-time items, maybe this loan that you have got baked in, any other asset transition or sale. What should we infer is a pretty steady number? If you can give us any more color on other puts and takes for the year that we should be modeling?

Michael Lourenco Costa: As you rightly pointed out, if you take our first-quarter results and annualize them, they are right at—or if you do it on actual dollars and run the math out, you are probably just slightly below—where our midpoint is. So there is that data point. The other data point is we guided towards low- to mid-teens same-store NOI growth in our SHOP portfolio, and we came in at 14%, right in the middle of that range. As we have talked about many times before, the biggest driver of where we end up landing from an earnings perspective, especially relative to our guidance range, is going to be dictated by our SHOP NOI growth. Given that our current quarter earnings are right at the midpoint or even slightly below the midpoint, and given that our SHOP growth is right where we guided for the full year, and we reaffirmed our guidance—let us not lose sight of that—we still feel as we sit here today, two months after we put our initial guidance out, that reaffirming what we put out previously still makes sense.

As Rick mentioned, we have historically taken the approach that in Q1 we are not going to generally revisit guidance unless there is some material change one way or another. There has not been, and we are 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.

Richard K. Matros: And we totally get the questions, particularly since some of our peers raised guidance in some form or fashion over this past week. We totally get it, but we like the trends we are seeing, as I said earlier. We like the volume that we are seeing, and we like the yields we are getting things done in. So we will see how it goes.

Vikram L. Malhotra: Okay. And then, I am not reading into the CommuniCare pricing, but in general, there seems to be downward pressure on cap rates for SNFs, given the hope to improve the operations. Is there an opportunity for you, given your desire for SHOP, to do a bigger portfolio sale in SNFs—$500 million, $1 billion—and recycle that into SHOP?

Richard K. Matros: I am not sure there is downward pressure on cap rates because of the private buyers. The REITs are pretty disciplined about holding firm on the cap rates that we have historically acquired SNFs at. We like the fact that we have a very strong triple-net skilled nursing portfolio. We are at all-time highs on rent coverage. We are at all-time highs on margins. Occupancy continues to grow, so there is still upside there. It is a base that we have that everybody can depend on. And then the SHOP side, which gets bigger and bigger for us, obviously provides more outsized earnings growth. So we like having that balance. Our portfolio today is better balanced than it has ever been. For us to pass the 50% mark on private pay revenues is a material change.

We started out as a 96% skilled REIT. We have evolved quite a bit, but we are not going to sell portfolios that we think are really good just to shift the percentages of SHOP. We have plenty of access to capital and plenty of liquidity available to invest in all the SHOP opportunities that we have ahead of us.

Vikram L. Malhotra: Okay. And then if I can just clarify, Rick, I think you said the Canadian portfolio is 93%. You think it is essentially full. But in this environment, a lot of folks are talking about 95%+. Is 93% the peak for the Canadian portfolio in absolute?

Richard K. Matros: No, not necessarily. I just think when you start to get to the mid-90s, you will have some ups and downs. We have a facility up there that is 100% almost all the time. That is unusual, but it happens. 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 is not going to be at the same velocity as if it was still 85% or 86%.

Vikram L. Malhotra: Okay. Thank you.

Richard K. Matros: Yep.

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

Richard Anderson: Thanks. Good morning. On CommuniCare, you are selling or sold—Omega is selling, I think, to CommuniCare, if that is—correct me if I am wrong about that. And if I am—

Richard K. Matros: No, that is not right.

Richard Anderson: Okay. In their case, I believe that is the case. But both are Maryland. I am just curious, is there any dotted line between what Omega is doing and what you are doing that you could share on CommuniCare, and if there is some sort of trend that we can draw from both of those transactions?

Richard K. Matros: I do not really think so. They were hoping to get cooperation from both us and Omega. They just really want to exit a state that was a really, really tough state for them and thought it would strengthen their portfolio overall. We are seeing that as a result. When they first called us, it resonated with us because, as I said earlier, we shed facilities in Maryland several years ago. It is tough there. I do not think there is any trend here. CommuniCare still wants to grow. As I said earlier, we are seeing some growth with them. Omega may or may not be as well. But no dotted lines or anything like that, other than we think the Omega team is a great team.

Richard Anderson: 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 us 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?

Richard K. Matros: If we say we are to do $1 billion this year, we definitely are going to be in pretty good shape in terms of the 40%. But then we will just set a higher target. As I said earlier, we are not going to shed any sort of major skilled portfolios. There is always some stuff that you sell, so between some of that—which is probably incremental on the margin—and almost all of our investment activity being on SHOP, you are just going to continue to see skilled being a smaller percentage of the portfolio and SHOP continuing to grow. We do not have any guardrails about how much we want to do in SHOP. We have been doing SHOP for over ten years, and with all the improvements we are making in the existing platform, with our AI initiatives, our platform is going to be more scalable than it has ever been.

We will be able to continue to grow our SHOP exposure, and the amount of G&A we will have to add as a result of that will be lower than it normally would have been in the absence of the AI initiatives.

Richard Anderson: Okay, great. And last for me—more of a theoretical big-picture question. A lot of your peers are taking a SHOP-on goal, working in individual silos. You guys have been doing it for a while, so not a conversation about Sabra Health Care REIT, Inc. in particular. What do you think about the potential that there will be some sort of combination activity to attack the SHOP opportunity? It seems like it makes sense. It is a business that requires scale.

Richard K. Matros: Are you talking about M&A activity with the REITs?

Richard Anderson: Yes.

Richard K. Matros: Look, we all know there are too many of us. Now with everybody jumping on the SHOP bandwagon—it is like a new form of breakfast cereal or something that everybody likes better now—the only concern I have: there is a lot of mutual respect in our space. All of our teams, we all know each other really well. We hang together when we have the opportunity. There is 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. For us, we have been able to be successful not just because we have been doing it for a long time, but as most others know, our entire asset management team are operators.

So the transition for them to work from triple net to SHOP really was not that difficult. You get a little bit concerned about missteps with everybody jumping into it. Hopefully that will not be the case. As far as M&A activity, you are right—there should be some M&A activity, but it seems like that is hard to make happen in REIT world.

Richard Anderson: Fair enough. Okay. Thanks very much.

Operator: 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 [inaudible]. Maybe we can get your high-level outlook on Medicare and Medicaid and just the overall health of reimbursement.

Richard K. Matros: Sure. I will 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. It really did meet our expectations. Coming off of the pandemic and the extraordinarily high inflation that we saw during the pandemic, everything is 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. That is what we are 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. It is all formulaic, so it is pretty normal stuff. While you cannot predict the exact number, the trend is pretty apparent.

Michael Goldsmith: Got it. Thanks for that. And then doing a little math, which can always be a little bit of a dangerous thing, from your occupancy and unit numbers in the supplement, we estimate your non-same-store SHOP occupancy is in the high 70s percent. Could you add a little color on the types of SHOP assets you have been accumulating over the past year? It looks like these have been unstabilized with occupancy upside, and if you could talk about what markets the assets are in and the unit mix, that would be helpful. And when do you expect some of these AI initiatives to translate to measurable financial outcomes like lower G&A or higher margins or better asset-level decision making?

Darrin Smith: For the entire senior housing managed portfolio for the quarter ended, occupancy for the entire portfolio is 85.6%. As far as the assets we have been acquiring, we have been acquiring assets in the upper 80s to low 90s percent occupancy. I am not sure where you are getting the 70% math, but we can follow up offline. From a G&A perspective, I would not expect there to be a ton of G&A savings. What is going to be more impactful from a G&A standpoint is it will slow down the ramp of G&A as we grow. That is the right way to look at it, and that will be incremental and ongoing as we speak. We are in the middle of a lot of these initiatives, and as they continue to be implemented, we are going to see 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, we firmly believe there is going to be a tangible improvement in their performance. When and how quickly is hard to tell at this point.

Richard K. Matros: It is also going to make it easier for us to absorb the increased level of volume on investments that we are seeing. We do have some 90-day milestones in place, so we will 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.

Richard K. Matros: Thank you.

Operator: Your next question comes from the line of Omotayo Tejumade Okusanya from Deutsche Bank. Your line is open. Omotayo, your line is open.

Omotayo Tejumade Okusanya: Good morning out there. I wanted to continue along the lines of the Medicare/Medicaid questions and, Rick, get your thoughts around CMS’s increased focus on value-based care programs on the Medicare Advantage side. What are you hearing from your operators about how it is impacting referral rates from hospitals or how they may be changing their business and how they are responding?

Richard K. Matros: Thanks, Tayo. We are not seeing that much impact yet, but we are really bullish on value-based care. We are working with our operators. Some of our operators are already pursuing it and have agreements in place. There are different levels that you can do with the insurers. You can have arrangements with ACOs. There are 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. As they get better and better, they will take on some downside risk, but they will have more upside. We think it is a really big deal. It is 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 LTACHs or rehab hospitals with really good outcomes.

Last month, we had our operators conference and value-based care was a central topic. There was a lot of excitement from our operators. There are also similar opportunities for senior living as well—it is not just skilled. There may be more there for skilled, but there are opportunities with insurers and ACOs, particularly on the senior housing side as well. One of our board members, Lynne Katzmann, who runs the senior living company Juniper, is probably front and center—further ahead—on those kinds of initiatives with AI and memory care than anybody else in the space. Her expertise has been great as well. We are really excited about that.

Omotayo Tejumade Okusanya: Gotcha. How do we juxtapose that versus comments coming out during this earnings season when some of the hospital names are saying it is helping them reduce referrals to skilled nursing and things of that nature?

Richard K. Matros: I think it is a function of whether you are going to embrace what is inevitable and make sure you have the clinical products in place to take advantage of that. Then you will have increased referrals. If you have operators that are more passive, it is not going to go your way, because as more time goes by, insurers and ACOs are going to have more opportunities to divert patients to operators that are really embracing these opportunities.

Analyst: Makes sense.

Omotayo Tejumade Okusanya: Thank you very much.

Richard K. Matros: Yes.

Operator: Again, if you would like to ask a question—your next question comes from the line of Austin Todd Wurschmidt from KeyBanc. Your line is open.

Austin Todd Wurschmidt: Great. Thanks for taking the follow-up. I want to go back to make sure I understand some of the components of guidance. The $1.5 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 reevaluate guidance in the coming quarters? And is it appropriate to annualize the first-quarter number given your plan to sell those assets?

Michael Lourenco Costa: To answer your first question, the $1.5 million was included in our original guidance. In terms of annualizing that, it is something that is going to go away at some point this year. Probably, I would say, end of the second quarter is when we would realistically think that would go away, but it could slip as well. It is not something we expect to have in there for the entire 12 months, if that is what you are asking.

Austin Todd Wurschmidt: No, that is helpful. Thank you.

Operator: And that concludes our question and answer session. I will now turn the call back over to Richard K. Matros for closing remarks.

Richard K. Matros: Thanks everybody for your time today and continuing support. We look forward to seeing a lot of you at the Wells conference and at NAREIT 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.

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