Sabra Health Care REIT, Inc.

Good day, everyone. My name is Greg and I will be your conference operator today. At this time, I would like to welcome everyone to the 2025 Sabra second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. Once again, star one. And if you'd like to withdraw your question, simply press star one again. I would now like to turn the call over to Lucas Hartwich, EVP Finance. Please go ahead, Mr. 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 2025, 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 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 December 31, 2024, 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 10Q earnings release and supplement can also be accessed in the investor section of our website. And with that, let me turn the call over to Rick Matros, CEO, President, and Chair of Sabra Healthcare REIT.

Thanks, Lucas, and thanks, everybody, for joining us today. We appreciate it. I'll start first with the holiday transition. As many of you know, our relationship with holiday goes back to 2015. We had a number of really good years with holiday transition. Then the pandemic hit, and during the pandemic, they were acquired by Atria. Still, from our perspective, managed really effectively, given how tough the circumstances were during the pandemic. Since the pandemic ended, however, we just haven't seen the same kind of uplift that we've seen in the rest of our shop portfolio. So that was really why we decided to make the change. We had been looking for new opportunities to expand our relationship with Discovery and with Inspiris, and this was perfect for that. And we have been developing a relationship with Sunshine. So it all worked out really well for us. So we look forward over time to improve performance from the portfolio. And of course, breaking up such a large portfolio, large for us, into smaller pieces is helpful as well. Moving on to reimbursement, we now know most of our Medicaid rate increases are going to be on average It'll be somewhere in the 3.5% range, but our top five skilled nursing tenants, which are about 50% of our skilled facilities, are averaging just above 5%. So another good year for us on Medicaid rate increases. The Medicare market best that I think is everybody's seen got finalized upward from 2.8 to 3.2, which is pretty unusual, but we're happy, of course, that that's happened. In terms of investments, I just want to reconcile a couple of numbers going back to the last call and to the NAE REIT conference. So on the prior, on the last quarterly call, we talked about 200 million in awarded deals. So those are all either have been closed or in the process of closing. So that pipeline is closing as expected. Just some of it didn't close by the time we had this call. I also talked about at NAE REIT that we are actively working on another 300 million in investments at that time. The total number that I've talked about, that we talked about in our earnings release of about 350 million in close, about to be closed or awarded deals includes a chunk of the deals from that 300 million that we decided to fully proceed on. In addition to that, we have released hundreds of millions of dollars worth of deals that we're looking at on a weekly basis. So we feel really good about our target of $500 million in investments this year. We feel particularly good about our goal of getting shopped from 20% to 30% and expect that to be accomplished at least on a run rate basis sometime in 2026. It requires a billion dollars in investments. So by the end of this year, we'll be somewhere around halfway there. We are finally starting to see some skilled opportunities that we feel are worth the time for us to spend on, and hopefully we'll be transacting on some skilled opportunities over the remainder of this year as well. Moving on to operations, just another really strong quarter. Our triple net rent coverage was up significantly in all asset classes. New highs in skilled and senior housing triple net. Our occupancy and skilled mix And the skilled portfolio continues to increase. Our contract labor and our employment levels are now at pre-pandemic levels. So all in all, everything's really turning in the right direction. We love the investment activity that we have and look forward to finishing out the year and going into 26 on a good growth momentum. And with that, I will turn it over to Talia.