The discussion below contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those which are discussed in the "Risk Factors" section in Part I, Item 1A of
our 2020 Annual Report on Form 10-K. Also see "Statement Regarding
Forward-Looking Statements" preceding Part I.
The following discussion and analysis should be read in conjunction with our
accompanying condensed consolidated financial statements and the notes thereto.
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations is organized as follows:
•Overview
•Critical Accounting Policies
•Recently Issued Accounting Standards Update
•Results of Operations
•Liquidity and Capital Resources
•Concentration of Credit Risk
•Skilled Nursing Facility Reimbursement Rates
•Obligations and Commitments
•Off-Balance Sheet Arrangements
Overview
We operate as a self-administered, self-managed REIT that, through our
subsidiaries, owns and invests in real estate serving the healthcare industry.
Our primary business consists of acquiring, financing and owning real estate
property to be leased to third party tenants in the healthcare sector. We
primarily generate revenues by leasing properties to tenants and owning
properties operated by third-party property managers throughout the United
States ("U.S.") and Canada.
Our investment portfolio is primarily comprised of skilled nursing/transitional
care facilities, senior housing communities ("Senior Housing - Leased") and
specialty hospitals and other facilities, in each case leased to third-party
operators; senior housing communities operated by third-party property managers
pursuant to property management agreements ("Senior Housing - Managed");
investments in loans receivable; and preferred equity investments.
We expect to grow our investment portfolio while diversifying our portfolio by
tenant, facility type and geography within the healthcare sector. We plan to
achieve these objectives primarily through making investments directly or
indirectly in healthcare real estate, including the development of purpose-built
healthcare facilities with select developers. We also intend to achieve our
objective of diversifying our portfolio by tenant and facility type through
select asset sales and other arrangements with our tenants.
We expect to continue to grow our portfolio primarily through the acquisition of
assisted living, independent living and memory care communities in the U.S. and
Canada and through the acquisition of skilled nursing/transitional care and
behavioral health facilities in the U.S. We have and expect to continue to
opportunistically acquire other types of healthcare real estate, originate
financing secured directly or indirectly by healthcare facilities and invest in
the development of senior housing communities and skilled nursing/transitional
care facilities. We also expect to expand our portfolio through the development
of purpose-built healthcare facilities through pipeline agreements and other
arrangements with select developers. We further expect to work with existing
operators to identify strategic development opportunities. These opportunities
may involve replacing, renovating or expanding facilities in our portfolio that
may have become less competitive and new development opportunities that present
attractive risk-adjusted returns. In addition to pursuing acquisitions with
triple-net leases, we expect to continue to pursue other forms of investment,
including investments in Senior Housing - Managed communities, mezzanine and
secured debt investments, and joint ventures for senior housing communities and
skilled nursing/transitional care facilities. We also expect to continue to
enhance the strength of our investment portfolio by selectively disposing of
underperforming facilities or working with new or existing operators to transfer
underperforming but promising properties to new operators.
With respect to our debt and preferred equity investments, in general, we
originate loans and make preferred equity investments when an attractive
investment opportunity is presented and (a) the property is in or near the
development phase, (b) the development of the property is completed but the
operations of the facility are not yet stabilized or (c) the loan investment
                                       27
--------------------------------------------------------------------------------
  Table of Contents
will provide capital to existing relationships. A key component of our
development strategy related to loan originations and preferred equity
investments is having the option to purchase the underlying real estate that is
owned by our borrowers (and that directly or indirectly secures our loan
investments) or by the entity in which we have an investment. These options
become exercisable upon the occurrence of various criteria, such as the passage
of time or the achievement of certain operating goals, and the method to
determine the purchase price upon exercise of the option is set in advance based
on the same valuation methods we use to value our investments in healthcare real
estate. This proprietary development pipeline strategy allows us to diversify
our revenue streams and build relationships with operators and developers, and
provides us with the option to add new properties to our existing real estate
portfolio if we determine that those properties enhance our investment portfolio
and stockholder value at the time the options are exercisable.
We employ a disciplined, opportunistic approach in our healthcare real estate
investment strategy by investing in assets that provide attractive opportunities
for dividend growth and appreciation of asset values, while maintaining balance
sheet strength and liquidity, thereby creating long-term stockholder value.
We elected to be treated as a REIT with the filing of our U.S. federal income
tax return for the taxable year beginning January 1, 2011. We believe that we
have been organized and have operated, and we intend to continue to operate, in
a manner to qualify as a REIT. We operate through an umbrella partnership,
commonly referred to as an UPREIT structure, in which substantially all of our
properties and assets are held by Sabra Health Care Limited Partnership, a
Delaware limited partnership (the "Operating Partnership"), of which we are the
sole general partner and a wholly owned subsidiary of ours is currently the only
limited partner, or by subsidiaries of the Operating Partnership.
COVID-19
The ongoing COVID-19 pandemic and measures intended to prevent its spread have
negatively impacted and are expected to continue to negatively impact us and our
operations in a number of ways, including but not limited to:
•Decreased occupancy and increased operating costs for our tenants and
borrowers, which have negatively impacted their operating results and may
adversely impact their ability to make full and timely rental payments and debt
service payments, respectively, to us. In some cases, we may have to restructure
tenants' long-term rent obligations and may not be able to do so on terms that
are as favorable to us as those currently in place. Reduced or modified rental
and debt service amounts could result in the determination that the full amounts
of our investments are not recoverable, which could result in an impairment
charge. To date, the impact of COVID-19 on our skilled nursing/transitional care
facility operators has been significantly mitigated by the assistance they have
received or expect to receive from state and federal assistance programs,
including through the CARES Act (as defined and further described below under
"-Skilled Nursing Facility Reimbursement Rates"), although these benefits on an
individual operator basis vary and may not provide enough relief to meet their
rental obligations to us. As of September 1, 2020, eligible assisted living
facility operators may apply for funding through the CARES Act, and the
assistance received or expected to be received will partially mitigate the
negative impact of COVID-19 on our eligible assisted living facility operators.
As of June 30, 2021, our tenants and borrowers have continued to pay expected
cash rents and debt service obligations consistent with past practice. However,
the longer the duration of the COVID-19 pandemic, the more likely that our
tenants and borrowers will begin to default on these obligations. Such defaults
could materially and adversely affect our results of operations and liquidity,
in addition to resulting in potential impairment charges.
•Decreased occupancy and increased operating costs within our Senior Housing -
Managed portfolio which have negatively impacted and are expected to continue to
negatively impact the operating results of these investments. As noted above, as
of September 1, 2020, eligible assisted living facility operators may apply for
funding through the CARES Act, and the assistance received or expected to be
received will partially mitigate the negative impact of COVID-19 on our Senior
Housing - Managed portfolio. In addition, on October 1, 2020, the Department of
Health and Human Services announced $20 billion of new funding for assisted
living facility operators that have already received funds and to those who were
previously ineligible. During each of the three and six months ended June 30,
2021, we recognized government grants of $0.5 million in resident fees and
services. Prolonged deterioration in the operating results for our investments
in our Senior Housing - Managed portfolio could result in the determination that
the full amounts of our investments are not recoverable, which could result in
an impairment charge.
Our financial results as of and for the three and six months ended June 30, 2021
reflect the results of our evaluation of the impact of COVID-19 on our business
including, but not limited to, our evaluation of potential impairments of
long-lived or other assets, measurement of credit losses on financial
instruments, evaluation of any lease modifications, evaluation of lease
accounting impact, estimates of fair value and our ability to continue as a
going concern.
                                       28
--------------------------------------------------------------------------------
  Table of Contents
Impairment of Investment in Unconsolidated Joint Venture
We have a 49% equity interest in a joint venture (the "Enlivant Joint Venture")
with affiliates of TPG Real Estate, the real estate platform of TPG. TPG also
owns Enlivant, the senior housing management platform that manages the portfolio
owned by the Enlivant Joint Venture. During the second quarter of 2021, TPG
reached out to Sabra to explore our acquiring TPG's 51% interest in the Enlivant
Joint Venture. The parties were not able to reach mutually acceptable terms for
a transaction, in part due to modifications requested by TPG in the Enlivant
management fee structure. At that time, TPG informed Sabra of its intent to
re-evaluate its plans with respect to the management company. Furthermore,
decreased occupancy and revenues and increased operating costs during the
COVID-19 pandemic have had a significant negative impact on the financial
performance of the Enlivant Joint Venture. As a result, we re-evaluated our
plans with respect to the Enlivant Joint Venture and determined that we would no
longer seek to acquire TPG's majority interest in the Enlivant Joint Venture and
that we expect to sell our 49% equity interest should TPG secure a buyer for the
portfolio sometime in the future. In connection with this re-evaluation and our
eventual intent to exit our 49% stake, we revisited our estimate of the fair
value of our investment in the Enlivant Joint Venture and believe that it has
declined below our investment basis. We also believe that, given our intent to
sell the portfolio, it is unlikely that we will hold our investment for an
adequate period of time to recover this estimated decline in value. As such,
this decline was deemed to be other-than-temporary and we recorded an impairment
charge for the amount that the carrying value exceeds the estimated fair value
of the investment totaling $164.1 million during the three months ended June 30,
2021. This impairment is included in loss from unconsolidated joint venture on
the accompanying condensed consolidated statements of (loss) income. The ongoing
operating performance of the Enlivant Joint Venture, as well as whether TPG is
able to secure a buyer on favorable terms or at all, will impact the ultimate
amounts realized from the Enlivant Joint Venture and may require us to recognize
an additional impairment charge in the future with respect to this investment.
See Note 4, "Investment in Real Estate Properties," in the Notes to Condensed
Consolidated Financial Statements for additional information regarding this
impairment.
Acquisitions
During the six months ended June 30, 2021, we acquired two Senior Housing -
Managed communities, one addiction treatment center and one skilled
nursing/transitional care facility for an aggregate purchase price of $62.1
million. See Note 3, "Recent Real Estate Acquisitions," in the Notes to
Condensed Consolidated Financial Statements for additional information regarding
these acquisitions.
Dispositions
During the six months ended June 30, 2021, we completed the sale of four skilled
nursing/transitional care facilities for aggregate consideration, net of closing
costs, of $11.3 million. The net carrying value of the assets and liabilities of
these facilities was $14.7 million, which resulted in an aggregate $3.4 million
net loss on sale.
Critical Accounting Policies
Our condensed consolidated interim financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP") and in
conjunction with the rules and regulations of the SEC. The preparation of our
financial statements requires significant management judgments, assumptions and
estimates about matters that are inherently uncertain. These judgments affect
the reported amounts of assets and liabilities and our disclosure of contingent
assets and liabilities at the dates of the financial statements and the reported
amounts of revenue and expenses during the reporting periods. With different
estimates or assumptions, materially different amounts could be reported in our
financial statements. Additionally, other companies may utilize different
estimates that may impact the comparability of our results of operations to
those of companies in similar businesses. A discussion of the accounting
policies that management considers critical in that they involve significant
management judgments and assumptions, require estimates about matters that are
inherently uncertain and because they are important for understanding and
evaluating our reported financial results is included in Part II, Item 7 of our
2020 Annual Report on Form 10-K filed with the SEC. There have been no
significant changes to our critical accounting policies during the six months
ended June 30, 2021.
Recently Issued Accounting Standards Update
See Note 2, "Summary of Significant Accounting Policies," in the Notes to
Condensed Consolidated Financial Statements for information concerning recently
issued accounting standards updates.
Results of Operations
As of June 30, 2021, our investment portfolio consisted of 423 real estate
properties held for investment, three assets held for sale, one investment in a
sales-type lease, 18 investments in loans receivable, seven preferred equity
investments and one
                                       29
--------------------------------------------------------------------------------
  Table of Contents
investment in an unconsolidated joint venture. As of June 30, 2020, our
investment portfolio consisted of 427 real estate properties held for
investment, one investment in a direct financing lease, 19 investments in loans
receivable, five preferred equity investments and one investment in an
unconsolidated joint venture. In general, we expect that income and expenses
related to our portfolio will fluctuate in future periods in comparison to the
corresponding prior periods as a result of investment and disposition activity
and anticipated future changes in our portfolio. The results of operations
presented are not directly comparable due to ongoing acquisition and disposition
activity.
Comparison of results of operations for the three months ended June 30, 2021
versus the three months ended June 30, 2020 (dollars in thousands):
                                                                                                                             Variance due to
                                     Three Months Ended June 30,                                                              Acquisitions,
                                                                              Increase /              Percentage            Originations and           Remaining
                                       2021                  2020             (Decrease)              Difference            Dispositions (1)         Variance (2)
Revenues:
Rental and related revenues      $      110,783          $ 112,727          $     (1,944)                       (2) %       $       (1,179)         $       (765)
Interest and other income                 3,031              2,606                   425                        16  %                  519                   (94)
Resident fees and services               39,118             38,584                   534                         1  %                2,530                (1,996)

Expenses:


Depreciation and amortization            44,491             44,202                   289                         1  %                  271                    18
Interest                                 24,270             25,292                (1,022)                       (4) %                 (131)                 (891)
Triple-net portfolio operating
expenses                                  5,000              5,331                  (331)                       (6) %                   (8)                 (323)
Senior housing - managed
portfolio operating expenses             28,901             27,970                   931                         3  %                1,423                  (492)
General and administrative                8,811              8,673                   138                         2  %                    -                   138

(Recovery of) provision for loan
losses and other reserves                  (109)               129                  (238)                     (184) %                    -                  (238)

Other income (expense):
Loss on extinguishment of debt              (54)              (392)                  338                       (86) %                  392                   (54)
Other expense                               (24)               (66)                   42                       (64) %                    -                    42
Net (loss) gain on sales of real
estate                                   (3,752)               330                (4,082)                   (1,237) %               (4,082)            

-


Loss from unconsolidated joint
venture                                (169,789)           (12,136)             (157,653)                    1,299  %                9,454              (167,107)
Income tax expense                         (522)              (433)                  (89)                       21  %                    -                   (89)


(1)  Represents the dollar amount increase (decrease) for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020 as a result of
investments/dispositions made after April 1, 2020.
(2)  Represents the dollar amount increase (decrease) for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020 that is not a
direct result of investments/dispositions made after April 1, 2020.
Rental and Related Revenues
During the three months ended June 30, 2021, we recognized $110.8 million of
rental income compared to $112.7 million for the three months ended June 30,
2020. The $1.9 million net decrease in rental income is related to (i) a $1.2
million decrease from properties disposed of after April 1, 2020, (ii) a $1.0
million decrease related to lease intangibles that have been fully amortized and
(iii) a $0.5 million decrease due to transitioning four facilities to new
operators. The decreases are offset by a $0.9 million net decrease in write-offs
related to leases we concluded should no longer be accounted for on an accrual
basis during the three months ended June 30, 2020.
Our reported rental and related revenues may be subject to increased variability
in the future as a result of adopting Accounting Standards Update ("ASU")
2016-02, Leases (Topic 842), as amended by subsequent ASUs ("Topic
842"). However, there can be no assurances regarding the timing and amount of
these revenues. Amounts due under the terms of all of our lease agreements are
subject to contractual increases, and contingent rental income may be derived
from certain lease agreements. No material contingent rental income was derived
during the three months ended June 30, 2021 and 2020.
                                       30
--------------------------------------------------------------------------------
  Table of Contents
Interest and Other Income
Interest and other income primarily consists of income earned on our loans
receivable investments, preferred returns earned on our preferred equity
investments and income on the sales-type lease. During the three months ended
June 30, 2021, we recognized $3.0 million of interest and other income compared
to $2.6 million for the three months ended June 30, 2020. The net increase of
$0.4 million is due to a $0.5 million increase in income from investments made
after April 1, 2020.
Resident Fees and Services
During the three months ended June 30, 2021, we recognized $39.1 million of
resident fees and services compared to $38.6 million for the three months ended
June 30, 2020. The $0.5 million net increase is due to a $2.5 million increase
from three Senior Housing - Managed communities acquired after April 1, 2020,
partially offset by the impact of decreased occupancy as a result of the
COVID-19 pandemic.
Depreciation and Amortization
During each of the three months ended June 30, 2021 and 2020, we incurred $44.5
million of depreciation and amortization expense compared to $44.2 million for
the three months ended June 30, 2020. Depreciation and amortization expense
increased by $0.7 million from properties acquired after April 1, 2020. The
increase was offset by a $0.4 million decrease from properties disposed of after
April 1, 2020.
Interest Expense
We incur interest expense comprised of costs of borrowings plus the amortization
of deferred financing costs related to our indebtedness. During the three months
ended June 30, 2021, we incurred $24.3 million of interest expense compared to
$25.3 million for the three months ended June 30, 2020. The $1.0 million net
decrease is related to (i) a $0.5 million decrease in interest expense related
to a reduction in the borrowings outstanding under the Credit Agreement (as
defined below) and decrease in interest rates, (ii) a $0.1 million decrease in
interest expense related to one mortgage note assumed during 2020 by the buyer
of the facility securing the debt and (iii) a $0.3 million decrease in non-cash
interest expense related to our interest rate hedges.
Triple-Net Portfolio Operating Expenses
During the three months ended June 30, 2021, we recognized $5.0 million of
triple-net portfolio operating expenses compared to $5.3 million for the three
months ended June 30, 2020. The $0.3 million net decrease is related to a $0.1
million decrease related to property taxes paid during the three months ended
June 30, 2020 on facilities that have since been transitioned to new operators
who are now paying the property taxes directly, and the remaining decrease is
due to adjusting our estimates related to property taxes.
Senior Housing - Managed Portfolio Operating Expenses
During the three months ended June 30, 2021, we recognized $28.9 million of
Senior Housing - Managed portfolio operating expenses compared to $28.0
million for the three months ended June 30, 2020. The $0.9 million net increase
is due to (i) a $1.4 million increase related to three Senior Housing - Managed
communities acquired after April 1, 2020, (ii) a $0.4 million increase related
to marketing expenses due to increased activity and (iii) a $0.3 million
increase in insurance expenses due to a higher number of claims and increased
premiums. The increases are partially offset by a $1.3 million decrease in
supplies and labor needs related to the COVID-19 pandemic.
General and Administrative Expenses
General and administrative expenses include compensation-related expenses as
well as professional services, office costs, other costs associated with asset
management, and merger and acquisition costs. During the three months ended
June 30, 2021, general and administrative expenses were $8.8 million compared to
$8.7 million during the three months ended June 30, 2020. The $0.1 million net
increase is related to a $0.2 million increase in insurance expense due to
increased premiums.
(Recovery of) Provision for Loan Losses and Other Reserves
During the three months ended June 30, 2021, we recognized a $0.1 million
recovery of loan losses and other reserves associated with loan loss reserves.
During the three months ended June 30, 2020, we recognized a $0.1 million
provision for loan losses and other reserves associated with loan loss reserves.
                                       31
--------------------------------------------------------------------------------
  Table of Contents
Loss on Extinguishment of Debt
During the three months ended June 30, 2021, we recognized a $0.1 million loss
on extinguishment of debt related to write-offs of deferred financing costs in
connection with the partial pay down of the U.S. dollar Term Loans (as defined
below). During the three months ended June 30, 2020, we recognized a $0.4
million loss on extinguishment of debt related to write-offs of deferred
financing costs in connection with the sale of two facilities that secured two
mortgage notes.
Net (Loss) Gain on Sales of Real Estate
During the three months ended June 30, 2021, we recognized an aggregate net loss
on the sales of real estate of $3.8 million related to the disposition of two
skilled nursing/transitional care facilities. During the three months ended
June 30, 2020, we recognized an aggregate net gain on the sales of real estate
of $0.3 million related to the disposition of three skilled nursing/transitional
care facilities.
Loss from Unconsolidated Joint Venture
During the three months ended June 30, 2021, we recognized $169.8 million of
loss from the Enlivant Joint Venture compared to $12.1 million of loss for the
three months ended June 30, 2020. The $157.7 million net increase in loss is
related to (i) a $164.1 million other-than-temporary impairment recorded during
the three months ended June 30, 2021 (See Note 4, "Investments in Real Estate
Properties" in the Notes to Condensed Consolidated Financial Statements for
additional information regarding the impairment), (ii) a $2.4 million decrease
in revenue from the facilities owned by the Enlivant Joint Venture as of
June 30, 2021, primarily due to the impact of decreased occupancy as a result of
the COVID-19 pandemic and (iii) a $1.9 million increase in operating expenses
from the facilities owned by the Enlivant Joint Venture as of June 30, 2021. The
$1.9 million increase in operating expenses consists of (i) a $2.5 million
support payment paid to the manager of the Enlivant Joint Venture during the
current year, partially offset by a $1.0 million decrease in supplies and labor
needs related to the COVID-19 pandemic and a $0.4 million decrease in dining
related expenses due to decreased occupancy. The decreases are partially offset
by (i) a $9.1 million decrease in loss on sale related to the disposition of
nine senior housing communities during the three months ended June 30, 2020,
(ii) a $1.0 million decrease in deferred income tax due to lower taxable income
and (iii) a $0.5 million decrease in interest expense due to a decrease in
interest rates.
Income Tax Expense
During the three months ended June 30, 2021, we recognized $0.5 million of
income tax expense compared to $0.4 million for the three months ended June 30,
2020. The increase is due to higher taxable income from our Senior Housing -
Managed portfolio.
                                       32

--------------------------------------------------------------------------------

Table of Contents Comparison of results of operations for the six months ended June 30, 2021 versus the six months ended June 30, 2020 (dollars in thousands):


                                                                                                                           Variance due to
                                    Six Months Ended June 30,                                                               Acquisitions,
                                                                            Increase /              Percentage            Originations and           Remaining
                                     2021                  2020             (Decrease)              Difference            Dispositions (1)         Variance (2)
Revenues:
Rental and related revenues    $      224,166          $ 219,239          $      4,927                         2  %       $         (739)         $      5,666
Interest and other income               5,972              5,457                   515                         9  %                  805                  (290)
Resident fees and services             75,159             78,567                (3,408)                       (4) %                2,910                (6,318)

Expenses:


Depreciation and amortization          88,866             88,370                   496                         1  %                 (720)                1,216
Interest                               48,713             50,996                (2,283)                       (4) %                 (434)               (1,849)
Triple-net portfolio operating
expenses                               10,135             10,232                   (97)                       (1) %                  (53)               

(44)


Senior housing - managed
portfolio operating expenses           57,846             55,231                 2,615                         5  %                1,868                   747
General and administrative             17,749             17,434                   315                         2  %                    -                   315
Provision for loan losses and
other reserves                          1,916                796                 1,120                       141  %                    -                 1,120

Other income (expense):
Loss on extinguishment of debt           (847)              (392)                 (455)                      116  %                  392                  (847)
Other income                              109              2,193                (2,084)                      (95) %                    -                (2,084)
Net (loss) gain on sales of
real estate                            (2,439)               113                (2,552)                   (2,258) %               (2,552)                    -
Loss from unconsolidated joint
venture                              (174,799)           (15,803)             (158,996)                    1,006  %               11,441              (170,437)
Income tax expense                     (1,222)            (1,475)                  253                       (17) %                    -                   253


(1)  Represents the dollar amount increase (decrease) for the six months ended
June 30, 2021 compared to the six months ended June 30, 2020 as a result of
investments/dispositions made after January 1, 2020.
(2)  Represents the dollar amount increase (decrease) for the six months ended
June 30, 2021 compared to the six months ended June 30, 2020 that is not a
direct result of investments/dispositions made after January 1, 2020.
Rental and Related Revenues
During the six months ended June 30, 2021, we recognized $224.2 million of
rental income compared to $219.2 million for the six months ended June 30, 2020.
The $4.9 million net increase in rental income is related to (i) a $7.5 million
net decrease in write-offs related to leases we concluded should no longer be
accounted for on an accrual basis during the six months ended June 30, 2020 and
(ii) a $0.9 million increase from properties acquired after January 1, 2020.
These increases are partially offset by (i) a $1.6 million decrease from
properties disposed of after January 1, 2020, (ii) $1.5 million decrease related
to lease intangibles that have been fully amortized and (iii) a $1.2 million
decrease in property tax recoveries.
Our reported rental and related revenues may be subject to increased variability
in the future as a result of adopting Topic 842. However, there can be no
assurances regarding the timing and amount of these revenues. Amounts due under
the terms of all of our lease agreements are subject to contractual increases,
and contingent rental income may be derived from certain lease agreements. No
material contingent rental income was derived during the six months ended
June 30, 2021 and 2020.
Interest and Other Income
Interest and other income primarily consists of income earned on our loans
receivable investments, preferred returns earned on our preferred equity
investments and income on the sales-type lease. During the six months ended
June 30, 2021, we recognized $6.0 million of interest and other income compared
to $5.5 million for the six months ended June 30, 2020. The net increase of $0.5
million is due to a $1.0 million increase in income from investments made after
January 1, 2020, partially offset by a $0.2 million decrease in income from
investments repaid after January 1, 2020.
                                       33
--------------------------------------------------------------------------------
  Table of Contents
Resident Fees and Services
During the six months ended June 30, 2021, we recognized $75.2 million of
resident fees and services compared to $78.6 million for the six months ended
June 30, 2020. The $3.4 million net decrease is due to the impact of decreased
occupancy as a result of the COVID-19 pandemic, partially offset by a $2.9
million increase from three Senior Housing - Managed communities acquired after
January 1, 2020.
Depreciation and Amortization
During the six months ended June 30, 2021, we incurred $88.9 million of
depreciation and amortization expense compared to $88.4 million for the six
months ended June 30, 2020. The $0.5 million net increase is due to (i) a $2.1
million increase from additions to real estate and (ii) a $0.3 million increase
from properties acquired after January 1, 2020. The increases are partially
offset by (i) a $1.0 million decrease from properties disposed of after
January 1, 2020 and (ii) a $1.1 million decrease related to assets that have
been fully depreciated.
Interest Expense
We incur interest expense comprised of costs of borrowings plus the amortization
of deferred financing costs related to our indebtedness. During the six months
ended June 30, 2021, we incurred $48.7 million of interest expense compared to
$51.0 million for the six months ended June 30, 2020. The $2.3 million net
decrease is related to (i) a $1.0 million decrease in interest expense related
to a reduction in the borrowings outstanding under the Credit Agreement and
decrease in interest rates, (ii) a $0.4 million decrease in interest expense
related to three mortgage notes assumed during 2020 by the buyers of the
facilities securing the debt and (iii) a $0.6 million decrease in non-cash
interest expense related to our interest rate hedges.
Triple-Net Portfolio Operating Expenses
During the six months ended June 30, 2021, we recognized $10.1 million of
triple-net portfolio operating expenses compared to $10.2 million for the six
months ended June 30, 2020. The $0.1 million net decrease is primarily due to
facilities disposed of after January 1, 2020.
Senior Housing - Managed Portfolio Operating Expenses
During the six months ended June 30, 2021, we recognized $57.8 million of
operating expenses compared to $55.2 million for the six months ended June 30,
2020. The $2.6 million net increase is due to (i) a $1.9 million increase
related to three Senior Housing - Managed communities acquired after January 1,
2020, (ii) a $0.9 million increase in insurance expense due to a higher number
of claims and an increase in premiums and (iii) a $0.6 million increase in
marketing expenses due to increased activity, partially offset by a $0.7 million
decrease in supplies and labor needs related to the COVID-19 pandemic.
General and Administrative Expenses
General and administrative expenses include compensation-related expenses as
well as professional services, office costs, other costs associated with asset
management, and merger and acquisition costs. During the six months ended
June 30, 2021, general and administrative expenses were $17.7 million compared
to $17.4 million during the six months ended June 30, 2020. The $0.3 million net
increase is related to (i) a $0.5 million increase in insurance expense due to
an increase in premiums and (ii) a $0.4 million increase in compensation for our
team members as a result of increased staffing, partially offset by a $0.7
million decrease in professional and legal fees due to a decrease in transaction
activity.
Provision for Loan Losses and Other Reserves
During the six months ended June 30, 2021, we recognized a $1.9 million
provision for loan losses and other reserves associated with loan loss reserves.
During the six months ended June 30, 2020, we recognized a $0.8 million
provision for loan losses and other reserves associated with loan loss reserves.
The $1.1 million increase is due to one loan deemed uncollectible during the six
months ended June 30, 2021.
Loss on Extinguishment of Debt
During the six months ended June 30, 2021, we recognized a $0.8 million loss on
extinguishment of debt related to write-offs of deferred financing costs in
connection with the partial pay down of the U.S. dollar Term Loans. During the
six months ended June 30, 2020, we recognized a $0.4 million loss on
extinguishment of debt related to write-offs of deferred financing costs in
connection with the sale of two facilities that secured two mortgage notes.
                                       34
--------------------------------------------------------------------------------
  Table of Contents
Other Income
During the six months ended June 30, 2021 and June 30, 2020, we recognized $0.1
million and $2.2 million, respectively, of other income primarily related to
settlement payments received related to legacy Care Capital Properties ("CCP")
investments.
Net (Loss) Gain on Sales of Real Estate
During the six months ended June 30, 2021, we recognized a net loss on the sales
of real estate of $2.4 million. The $2.4 million includes an aggregate $3.4
million loss on sales of real estate related to the disposition of four skilled
nursing/transitional care facilities, partially offset by a $1.0 million gain on
sale of real estate due to reassessing the classification of a lease and
determining the lease, which requires the tenant to purchase the property at the
maturity of the lease, should be accounted for as a sales-type lease, which
required us to recognize the gain on sale prior to the actual sale to our
tenant. During the six months ended June 30, 2020, we recognized an aggregate
net gain on the sales of real estate of $0.1 million related to the disposition
of six skilled nursing/transitional care facilities.
Loss from Unconsolidated Joint Venture
During the six months ended June 30, 2021, we recognized $174.8 million of loss
from the Enlivant Joint Venture compared to $15.8 million of loss for the six
months ended June 30, 2020. The $159.0 million net increase in loss is related
to (i) a $164.1 million other-than-temporary impairment recorded during the
three months ended June 30, 2021 (See Note 4, "Investments in Real Estate
Properties" in the Notes to Condensed Consolidated Financial Statements for
additional information regarding the impairment), (ii) a $7.5 million decrease
in revenue from the facilities owned by the Enlivant Joint Venture as of
June 30, 2021, primarily due to the impact of decreased occupancy as a result of
the COVID-19 pandemic and (iii) a $2.2 million increase in operating expenses
from the facilities owned by the Enlivant Joint Venture as of June 30, 2021. The
$2.2 million increase in operating expenses consists of (i) a $2.5 million
support payment paid to the manager of the Enlivant Joint Venture during the
current year and (ii) a $0.3 million increase in supplies and labor needs
related to the COVID-19 pandemic, partially offset by (i) a $0.7 million
decrease in dining related expenses and (ii) a $0.5 million decrease in employee
compensation, both due to decreased occupancy. The decreases are partially
offset by (i) a $10.8 million decrease in loss on sale related to the
disposition of 11 senior housing communities in the prior year, (ii) a $2.0
million decrease in deferred income tax due to lower taxable income and (iii) a
$2.1 million decrease in interest expense due to a decrease in interest rates.
Income Tax Expense
During the six months ended June 30, 2021, we recognized $1.2 million of income
tax expense compared to $1.5 million of income tax expense recognized during the
six months ended June 30, 2020. The decrease is due to lower taxable income from
our Senior Housing - Managed portfolio and the tax impact of changes in fair
value for certain derivative instruments.

Funds from Operations and Adjusted Funds from Operations
We believe that net income as defined by GAAP is the most appropriate earnings
measure. We also believe that funds from operations ("FFO"), as defined in
accordance with the definition used by the National Association of Real Estate
Investment Trusts ("Nareit"), and adjusted funds from operations ("AFFO") (and
related per share amounts) are important non-GAAP supplemental measures of our
operating performance. Because the historical cost accounting convention used
for real estate assets requires straight-line depreciation (except on land),
such accounting presentation implies that the value of real estate assets
diminishes predictably over time. However, since real estate values have
historically risen or fallen with market and other conditions, presentations of
operating results for a REIT that uses historical cost accounting for
depreciation could be less informative. Thus, Nareit created FFO as a
supplemental measure of operating performance for REITs that excludes historical
cost depreciation and amortization, among other items, from net income, as
defined by GAAP. FFO is defined as net income, computed in accordance with GAAP,
excluding gains or losses from real estate dispositions and our share of gains
or losses from real estate dispositions related to our unconsolidated joint
venture, plus real estate depreciation and amortization, net of amounts related
to noncontrolling interests, plus our share of depreciation and amortization
related to our unconsolidated joint venture, and real estate impairment charges
of both consolidated and unconsolidated entities when the impairment is directly
attributable to decreases in the value of the depreciable real estate held by
the entity. AFFO is defined as FFO excluding merger and acquisition costs,
stock-based compensation expense, non-cash rental and related revenues, non-cash
interest income, non-cash interest expense, non-cash portion of loss on
extinguishment of debt, provision for loan losses and other reserves, non-cash
lease termination income and deferred income taxes, as well as other non-cash
revenue and expense items (including ineffectiveness gain/loss on derivative
instruments, and non-cash revenue and expense amounts related to noncontrolling
interests) and our share of non-cash adjustments related to our unconsolidated
joint venture. We believe that the use of FFO and AFFO (and the related per
share amounts), combined with the required GAAP presentations, improves the
                                       35
--------------------------------------------------------------------------------
  Table of Contents
understanding of our operating results among investors and makes comparisons of
operating results among REITs more meaningful. We consider FFO and AFFO to be
useful measures for reviewing comparative operating and financial performance
because, by excluding the applicable items listed above, FFO and AFFO can help
investors compare our operating performance between periods or as compared to
other companies. While FFO and AFFO are relevant and widely used measures of
operating performance of REITs, they do not represent cash flows from operations
or net income as defined by GAAP and should not be considered an alternative to
those measures in evaluating our liquidity or operating performance. FFO and
AFFO also do not consider the costs associated with capital expenditures related
to our real estate assets nor do they purport to be indicative of cash available
to fund our future cash requirements. Further, our computation of FFO and AFFO
may not be comparable to FFO and AFFO reported by other REITs that do not define
FFO in accordance with the current Nareit definition or that interpret the
current Nareit definition or define AFFO differently than we do.
The following table reconciles our calculations of FFO and AFFO for the three
and six months ended June 30, 2021 and 2020, to net (loss) income, the most
directly comparable GAAP financial measure, for the same periods (in thousands,
except share and per share amounts):
                                                         Three Months Ended June 30,                      Six Months Ended June 30,
                                                         2021                     2020                   2021                    2020
Net (loss) income                                 $       (132,573)

$ 29,623 $ (99,126) $ 64,840 Depreciation and amortization of real estate assets

                                                      44,491                 44,202                  88,866                 88,370

Depreciation and amortization of real estate
assets related to unconsolidated joint venture               5,879                  5,549                  11,723                 11,134
Net loss (gain) on sales of real estate                      3,752                   (330)                  2,439                   (113)
Net (gain) loss on sales of real estate related
to unconsolidated joint venture                                (18)                 9,079                      15                 10,808

Other-than-temporary impairment of unconsolidated
joint venture                                              164,126                      -                 164,126                      -

FFO                                                         85,657                 88,123                 168,043                175,039

Stock-based compensation expense                             2,271                  2,375                   4,559                  4,735
Non-cash rental and related revenues                        (4,914)                (6,202)                (10,627)                (6,567)
Non-cash interest income                                      (502)                  (574)                   (914)                (1,135)
Non-cash interest expense                                    1,749                  2,225                   3,645                  4,458
Non-cash portion of loss on extinguishment of
debt                                                            54                    392                     847                    392
(Recovery of) provision for loan losses and other
reserves                                                      (109)                   129                   1,916                    796

Other non-cash adjustments related to
unconsolidated joint venture                                  (618)                   404                  (1,214)                   943
Other non-cash adjustments                                     361                    402                     533                    455

AFFO                                              $         83,949          $      87,274          $      166,788          $     179,116

FFO per diluted common share                      $           0.39          

$ 0.43 $ 0.78 $ 0.85



AFFO per diluted common share                     $           0.39          

$ 0.42 $ 0.77 $ 0.87



Weighted average number of common shares
outstanding, diluted:
FFO                                                    217,462,704            206,219,162             215,015,226            206,194,282

AFFO                                                   217,946,731            207,003,252             215,550,317            206,933,563



                                       36

--------------------------------------------------------------------------------
  Table of Contents
The following table sets forth additional information related to certain other
items included in net (loss) income above, and the portions of each that are
included in FFO and AFFO, which may be helpful in assessing our operating
results. Please refer to "-Results of Operations" above for additional
information regarding these items (in millions):
                                                          Three Months Ended June 30,                                                              

Six Months Ended June 30,


                                 2021               2020           2021           2020          2021          2020              2021                 2020           2021           2020          2021          2020
                                  Net (Loss) Income                        FFO                         AFFO                       Net (Loss) Income                         FFO                         AFFO
Rental and related
revenues:
Reduction of revenues
related to non-cash
receivable balances / lease
intangible write-offs       $      -              $ 0.4          $   -          $ 0.4          $  -          $  -          $      -                $ 6.5          $   -          $ 6.5          $  -          $  -
Resident fess and services:
Grant income under
government programs (1)          0.5                  -            0.5              -           0.5             -               0.5                    -            0.5              -           0.5             -

Senior housing - managed
portfolio operating
expenses:
COVID-19 pandemic related
expenses (2)                     0.4                1.7            0.4            1.7           0.4           1.7               1.3                  2.0            1.3            2.0           1.3           2.0
General and administrative
expense:
Merger and acquisition
costs                            0.3                0.3            0.3            0.3             -             -               0.3                  0.4            0.3            0.4             -             -
(Recovery of) provision for
loan losses and other
reserves                        (0.1)               0.1           (0.1)           0.1             -             -               1.9                  0.8            1.9            0.8             -             -
Loss on extinguishment of
debt                            (0.1)              (0.4)          (0.1)          (0.4)            -             -              (0.8)                (0.4)          (0.8)          (0.4)            -             -
Other (expense) income             -               (0.1)             -           (0.1)            -             -               0.1                  2.2            0.1            2.2           0.2           2.1
Loss from unconsolidated
joint venture:

Deferred income tax
(benefit) expense               (0.9)               0.1           (0.9)           0.1             -             -              (1.6)                 0.4           (1.6)           0.4             -             -
COVID-19 pandemic related
expenses (2)                     1.1                2.3            1.1            2.3           1.1           2.3               3.0                  2.7            3.0            2.7           3.0           2.7
Support payment paid to
joint venture manager            2.5                  -            2.5              -           2.5             -               2.5                    -            2.5              -           2.5             -
Other-than-temporary
impairment of
unconsolidated joint
venture                        164.1                  -              -              -             -             -             164.1                    -              -              -             -             -


(1)  Consists of funds specifically paid to communities in our Senior Housing -
Managed portfolio from state or federal governments related to the pandemic and
were incremental to the amounts that would have otherwise been received for
providing care to residents.
(2)  Consists primarily of (i) personal protective equipment ("PPE") costs, (ii)
incremental labor costs (including bonuses, hero pay and additional labor needed
to implement new health and safety protocols) and (iii) incremental supply costs
required to implement new health and safety protocols (e.g., disposable food
containers and stronger disinfectants), in each case incurred by communities in
our Senior Housing - Managed portfolio specifically as a result of the COVID-19
pandemic.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $1.1 billion in liquidity, consisting
of unrestricted cash and cash equivalents of $69.3 million and available
borrowings under our Revolving Credit Facility of $1.0 billion. The Credit
Agreement also contains an accordion feature that can increase the total
available borrowings to $2.75 billion (from U.S. $2.0 billion plus CAD $125.0
million), subject to terms and conditions.
We have filed a shelf registration statement with the SEC that expires in
December 2022, which allows us to offer and sell shares of common stock,
preferred stock, warrants, rights, units, and certain of our subsidiaries to
offer and sell debt securities, through underwriters, dealers or agents or
directly to purchasers, on a continuous or delayed basis, in amounts, at prices
and on terms we determine at the time of the offering, subject to market
conditions.
On December 11, 2019, we established an at-the-market equity offering program
(the "ATM Program") pursuant to which shares of our common stock having an
aggregate gross sales price of up to $400.0 million may be sold from time to
time (i) by us through a consortium of banks acting as sales agents or directly
to the banks acting as principals or (ii) by a consortium of banks acting as
forward sellers on behalf of any forward purchasers pursuant to a forward sale
agreement. During the three
                                       37
--------------------------------------------------------------------------------
  Table of Contents
months ended June 30, 2021, we sold 1.0 million shares under the ATM Program at
an average price of $17.93 per share, generating gross proceeds of
$18.5 million, before $0.3 million of commissions (excluding sales utilizing the
forward feature of the ATM Program, as described below). During the six months
ended June 30, 2021, we sold 2.2 million shares under the ATM Program at an
average price of $17.78 per share, generating gross proceeds of $38.8 million,
before $0.6 million of commissions (excluding sales utilizing the forward
feature of the ATM Program, as described below).
Additionally, during the three months ended June 30, 2021, we utilized the
forward feature of the ATM Program to allow for the sale of up to 2.6 million
shares of our common stock at an initial weighted average price of $17.20 per
share, net of commissions, and settled 3.9 million shares at a weighted average
net price of $17.29 per share, after commissions and fees, resulting in net
proceeds of $66.8 million. During the six months ended June 30, 2021, we
utilized the forward feature of the ATM Program to allow for the sale of up to
6.8 million shares of our common stock at an initial weighted average price of
$17.49 per share, net of commissions, and settled 7.9 million shares at a
weighted average net price of $17.36 per share, after commissions and fees,
resulting in net proceeds of $137.0 million. As of June 30, 2021, no shares
remained outstanding under the forward sale agreements.
As of June 30, 2021, we had $75.8 million available under the ATM Program.
Subject to market conditions, we expect to use proceeds from our ATM Program to
finance future investments in properties.
Based on our current assessment of the impact of the COVID-19 pandemic on our
Company, we believe that our available cash, operating cash flows and borrowings
available to us under our Revolving Credit Facility provide sufficient funds for
our operations, scheduled debt service payments and dividend requirements for
the next twelve months. In addition, we do not believe that the restrictions
under our Senior Notes Indentures (as defined below) or Credit Agreement
significantly limit our ability to use our available liquidity for these
purposes.
We expect that future investments in properties, including any improvements or
renovations of current or newly-acquired properties, will depend on and will be
financed, in whole or in part, by our existing cash, borrowings available to us
under our Revolving Credit Facility and the proceeds from issuances of common
stock (including through our ATM Program), preferred stock, debt or other
securities. In addition, we may seek financing from U.S. government agencies,
including through Fannie Mae, Freddie Mac and the U.S. Department of Housing and
Urban Development, in appropriate circumstances in connection with acquisitions.
We also use derivative instruments in the normal course of business to mitigate
interest rate and foreign currency risk.
Cash Flows from Operating Activities
Net cash provided by operating activities was $152.3 million for the six months
ended June 30, 2021. Operating cash inflows were derived primarily from the
rental payments received under our lease agreements, resident fees and services
net of the corresponding operating expenses and payments from borrowers under
our loan and preferred equity investments. Operating cash outflows consisted
primarily of interest payments on borrowings and payment of general and
administrative expenses, including corporate overhead. We expect our annualized
cash flows provided by operating activities to fluctuate as a result of
completed investment and disposition activity, anticipated future changes in our
portfolio, fluctuations in collections from tenants and borrowers, and
fluctuations in the operating results of our Senior Housing - Managed
communities.
Cash Flows from Investing Activities
During the six months ended June 30, 2021, net cash used in investing activities
was $77.2 million and included $62.1 million used for the acquisition of four
facilities, $21.7 million used for additions to real estate and $3.4 million
used to provide funding for a preferred equity investment, partially offset by
$8.4 million in net sales proceeds related to dispositions, $1.1 million in
repayments of loans receivable and $0.5 million in repayments of preferred
equity investments.
Cash Flows from Financing Activities
During the six months ended June 30, 2021, net cash used in financing activities
was $66.8 million and included $110.0 million of principal repayments on term
loans, $128.1 million of dividends paid to stockholders and $1.4 million of
principal repayments on secured debt, partially offset by $172.7 million of net
proceeds from shares sold through our ATM Program, net of payroll tax payments
related to the issuance of common stock pursuant to equity compensation
arrangements.
Please see the accompanying condensed consolidated statements of cash flows for
details of our operating, investing and financing cash activities.
                                       38
--------------------------------------------------------------------------------
  Table of Contents
Loan Agreements
2024 Notes. On May 29, 2019, the Operating Partnership and Sabra Capital
Corporation, wholly owned subsidiaries of Sabra (together, the "Issuers"),
issued $300.0 million aggregate principal amount of 4.80% senior notes due 2024
(the "2024 Notes"), providing net proceeds of approximately $295.3 million after
deducting underwriting discounts and other offering expenses. In connection with
the October 2019 redemption of other senior notes of the Issuers, Sabra Capital
Corporation's obligations as a co-issuer were automatically released and
discharged.
2026 and 2027 Notes. In connection with our merger with CCP, on August 17, 2017,
Sabra assumed $500 million aggregate principal amount of 5.125% senior notes due
2026 (the "2026 Notes") and $100 million aggregate principal amount of 5.88%
senior notes due 2027 (the "2027 Notes").
2029 Notes. On October 7, 2019, the Issuers issued $350.0 million aggregate
principal amount of 3.90% senior notes due 2029 (the "2029 Notes" and, together
with the 2024 Notes, the 2026 Notes and the 2027 Notes, the "Senior Notes"),
providing net proceeds of $340.5 million after deducting underwriting discounts
and other offering expenses. In connection with the October 2019 redemption of
other senior notes of the Issuers, Sabra Capital Corporation's obligations as a
co-issuer were automatically released and discharged.
See Note 7, "Debt," in the Notes to Condensed Consolidated Financial Statements
for additional information concerning the Senior Notes, including information
regarding the indentures and agreements governing the Senior Notes (the "Senior
Notes Indentures"). As of June 30, 2021, we were in compliance with all
applicable covenants under the Senior Notes Indentures.
Subsidiary Issuer and Guarantor Financial Information. The 2024 Notes are issued
by the Operating Partnership and fully and unconditionally guaranteed, jointly
and severally, by us and one of our non-operating subsidiaries, subject to
release under certain customary circumstances as described below. In connection
with the Operating Partnership's assumption of the 2026 Notes, we have fully and
unconditionally guaranteed the 2026 Notes, subject to release under certain
circumstances as described below. The 2029 Notes are issued by the Operating
Partnership and guaranteed, fully and unconditionally, by us.
These guarantees are subordinated to all existing and future senior debt and
senior guarantees of the applicable guarantors and are unsecured. We conduct all
of our business through and derive virtually all of our income from our
subsidiaries. Therefore, our ability to make required payments with respect to
our indebtedness (including the Senior Notes) and other obligations depends on
the financial results and condition of our subsidiaries and our ability to
receive funds from our subsidiaries.
A guarantor will be automatically and unconditionally released from its
obligations under the guarantee with respect to the 2024 Notes in the event of:
•Any sale of the subsidiary guarantor or of all or substantially all of its
assets;
•A merger or consolidation of the subsidiary guarantor with the Operating
Partnership or Sabra, provided that the surviving entity remains a guarantor;
•The requirements for legal defeasance or covenant defeasance or to discharge
the indentures governing the 2024 Notes have been satisfied;
•A liquidation or dissolution, to the extent permitted under the indenture
governing the 2024 Notes, of the subsidiary guarantor;
•The release or discharge of the guaranty that resulted in the creation of the
subsidiary guaranty, except a discharge or release by or as a result of payment
under such guaranty; or
•If the subsidiary guarantor is not a guarantor or is not otherwise liable in
respect of any obligations under any credit facility (as defined in the
indenture governing the 2024 Notes) of us or any of our subsidiaries.
We will be automatically and unconditionally released from our obligations under
the guarantee with respect to the 2026 Notes in the event of:
•A liquidation or dissolution, to the extent permitted under the indenture
governing the 2026 Notes;
•A merger or consolidation, provided that the surviving entity remains a
guarantor; or
•The requirements for legal defeasance or covenant defeasance or to discharge
the indenture governing the 2026 Notes have been satisfied.
Pursuant to amendments to Regulation S-X, the following aggregate summarized
financial information is provided for Sabra, the Operating Partnership and Sabra
Health Care, L.L.C. (the guarantor subsidiary of the 2024 Notes). This aggregate
summarized financial information has been prepared from the books and records
maintained by us, the Operating Partnership and Sabra Health Care, L.L.C. The
aggregate summarized financial information does not include the investments in
non-
                                       39
--------------------------------------------------------------------------------
  Table of Contents
guarantor subsidiaries nor the earnings from non-guarantor subsidiaries and
therefore is not necessarily indicative of the results of operations or
financial position had the Operating Partnership and Sabra Health Care, L.L.C.
operated as independent entities. Intercompany transactions have been
eliminated. The aggregate summarized balance sheet information as of June 30,
2021 and December 31, 2020 and aggregate summarized statement of loss
information for the six months ended June 30, 2021 is as follows (in thousands):
                                        June 30, 2021               December 31, 2020
      Total assets            $                        94,889      $           77,825
      Total liabilities                             2,147,730               2,276,418

                               Six Months Ended June 30, 2021
      Total revenues          $                            25
      Total expenses                                   59,319
      Net loss                                        (61,117)


Credit Agreement. Effective on September 9, 2019, the Operating Partnership and
Sabra Canadian Holdings, LLC (together, the "Borrowers"), Sabra and the other
parties thereto entered into a fifth amended and restated unsecured credit
agreement (the "Credit Agreement").
The Credit Agreement includes a $1.0 billion revolving credit facility (the
"Revolving Credit Facility"), $845.0 million in U.S. dollar term loans and a CAD
$125.0 million Canadian dollar term loan (collectively, the "Term Loans").
Further, up to $175.0 million of the Revolving Credit Facility may be used for
borrowings in certain foreign currencies. The Credit Agreement also contains an
accordion feature that can increase the total available borrowings to $2.75
billion, subject to terms and conditions.
The Revolving Credit Facility has a maturity date of September 9, 2023, and
includes two six-month extension options. $345.0 million of the U.S. dollar Term
Loans has a maturity date of September 9, 2023, and the other Term Loans have a
maturity date of September 9, 2024.
The obligations of the Borrowers under the Credit Agreement are fully and
unconditionally guaranteed, jointly and severally, on an unsecured basis, by us
and one of our non-operating subsidiaries, subject to release under certain
customary circumstances.
See Note 7, "Debt," in the Notes to Condensed Consolidated Financial Statements
for additional information concerning the Credit Agreement, including
information regarding covenants contained in the Credit Agreement. As of
June 30, 2021, we were in compliance with all applicable covenants under the
Credit Agreement.
Secured Indebtedness
As of each of June 30, 2021 and December 31, 2020, 13 of our properties held for
investment were subject to secured indebtedness to third parties. As of June 30,
2021 and December 31, 2020, our secured debt consisted of the following (dollars
in thousands):
                                      Principal
                                    Balance as of           Principal Balance           Weighted Average
                                    June 30, 2021                 as of                 Interest Rate at                   Maturity
Interest Rate Type                       (1)              December 31, 2020 (1)        June 30, 2021 (2)                     Date
                                                                                                                       December 2021 -
Fixed Rate                         $      79,200          $           80,199                       3.40  %                August 2051


(1)  Principal balance does not include deferred financing costs, net of $1.1
million as of each of June 30, 2021 and December 31, 2020.
(2)  Weighted average interest rate includes private mortgage insurance.
Capital Expenditures
For the six months ended June 30, 2021 and 2020, our aggregate capital
expenditures were $21.7 million and $19.9 million, respectively. We anticipate
that our aggregate capital expenditure requirements for the next 12 months will
principally be for improvements to our facilities and will be approximately $78
million, of which $38 million is expected to directly result in incremental
rental income.
Dividends
We paid dividends of $128.1 million on our common stock during the six months
ended June 30, 2021. On August 4,
                                       40
--------------------------------------------------------------------------------
  Table of Contents
2021, our board of directors declared a quarterly cash dividend of $0.30 per
share of common stock. The dividend will be paid on August 31, 2021 to common
stockholders of record as of August 17, 2021.
Concentration of Credit Risk
Concentrations of credit risk arise when a number of operators, tenants or
obligors related to our investments are engaged in similar business activities,
or activities in the same geographic region, or have similar economic features
that would cause their ability to meet contractual obligations, including those
to us, to be similarly affected by changes in economic conditions. We regularly
monitor our portfolio to assess potential concentrations of risks.
Management believes our current portfolio is reasonably diversified across
healthcare related real estate and geographical location and does not contain
any other significant concentration of credit risks. Our portfolio of 423 real
estate properties held for investment as of June 30, 2021 is diversified by
location across the United States and Canada.
For the three and six months ended June 30, 2021, no tenant relationship
represented 10% or more of our total revenues.
Skilled Nursing Facility Reimbursement Rates
For the six months ended June 30, 2021, 54.7% of our revenues was derived
directly or indirectly from skilled nursing/transitional care
facilities. Medicare reimburses skilled nursing facilities for Medicare Part A
services under the Prospective Payment System ("PPS"), as implemented pursuant
to the Balanced Budget Act of 1997 and modified pursuant to subsequent laws,
most recently the Patient Protection and Affordable Care Act of 2010. PPS
regulations predetermine a payment amount per patient, per day, based on a
market basket index calculated for all covered costs.
Prior to October 1, 2019, the amount to be paid was determined by classifying
each patient into one of 66 Resource Utilization Group ("RUG") categories that
represented the level of services required to treat different conditions and
levels of acuity. The system of 66 RUG categories, or Resource Utilization
Group, version IV ("RUG IV"), became effective as of October 1, 2010. RUG IV
resulted from research performed by the Centers for Medicare & Medicaid Services
("CMS") and was part of CMS's continuing effort to increase the correlation of
the cost of services to the condition of individual patients.
On July 31, 2018, CMS issued a final rule, CMS-1696-F, which includes changes to
the case-mix classification system used under the PPS and fiscal year 2019
Medicare payment updates.
CMS-1696-F includes a new case-mix classification system called the skilled
nursing facility Patient-Driven Payment Model ("PDPM") that became effective on
October 1, 2019. PDPM reflects significant changes to the Resident
Classification System, Version I ("RCS-I") that was being considered to replace
RUG IV as outlined in an Advanced Notice of Proposed Rulemaking released by CMS
in May 2017.
PDPM focuses on clinically relevant factors, rather than volume-based service,
for determining Medicare payment. PDPM adjusts Medicare payments based on each
aspect of a resident's care, most notably for non-therapy ancillaries, which are
items and services not related to the provision of therapy such as drugs and
medical supplies, thereby more accurately addressing costs associated with
medically complex patients. It further adjusts the skilled nursing facility per
diem payments to reflect varying costs throughout the stay and incorporates
safeguards against potential financial incentives to ensure that beneficiaries
receive care consistent with their unique needs and goals.
On July 31, 2020, CMS released final fiscal year 2021 Medicare rates for skilled
nursing facilities providing an estimated net increase of 2.2% over fiscal year
2020 payments (comprised of a market basket increase of 2.2% and no productivity
adjustment). The new payment rates became effective on October 1, 2020.
On July 29, 2021, CMS released a final rule updating fiscal year 2022 Medicare
rates for skilled nursing facilities providing an estimated net increase of 1.2%
over fiscal year 2021 (comprised of a market basket increase of 2.7% less a
forecast error adjustment of 0.8% and a productivity adjustment of 0.7%). These
figures do not incorporate the value-based purchasing reductions that are
estimated to be $184.3 million in fiscal year 2022. No adjustments were made to
the PDPM rate methodology in this year's final rule. The new payment rates
become effective on October 1, 2021.
In response to the COVID-19 pandemic, several federal relief packages were
approved that have benefitted and may continue to benefit our tenants,
especially our tenants that operate skilled nursing/transitional care
facilities.
On March 18, 2020, President Trump signed into law the Families First
Coronavirus Response Act ("Families First Act"). Under the Families First Act, a
temporary 6.2% increase in Federal Medical Assistance Percentages ("FMAP") was
approved retroactive to January 1, 2020, and several states have directed FMAP
funds to skilled nursing/transitional care facilities.
                                       41
--------------------------------------------------------------------------------
  Table of Contents
On March 27, 2020, President Trump signed into law The Coronavirus Aid, Relief,
and Economic Security Act (the "CARES Act"). The CARES Act provides for a $175
billion fund for eligible health care providers, which includes skilled
nursing/transitional care operators, and as of September 1, 2020 also includes
assisted living facility operators. The CARES Act also includes (i) a temporary
suspension of 2% Medicare sequestration cut beginning May 1, 2020 through
December 31, 2020, (ii) a deferral of the employer's Social Security remittances
through December 31, 2020, (iii) the establishment of the Paycheck Protection
Program, a Small Business Administration loan to businesses with fewer than 500
employees that may be partially forgivable, and (iv) accelerated and advance
Medicare payments for certain providers, with deferred repayment obligations
that are interest-free for up to 29 months.
In addition to the above, there have been other actions taken that benefit
skilled nursing/transitional care operators, including the waiver of the
requirement for skilled nursing/transitional care patients to have stayed in a
hospital for three days in order for services rendered in a skilled
nursing/transitional care facility to qualify for Medicare Part A, the
acceleration and advance of three months of Medicare billing, and relaxation of
certification requirements for employees performing non-clinical services in
these facilities.
The Department of Health and Human Services ("HHS") most recently extended the
COVID-19 Public Health Emergency for another 90 days, effective July 20, 2021,
which allows HHS to continue providing temporary regulatory waivers, including
the waiver of the three-day hospital stay requirement, and new rules to equip
skilled nursing facilities and some assisted living operators with flexibility
to respond to the COVID-19 pandemic. Lastly, both the FMAP funding increase and
suspension of the Medicare sequestration were extended through December 31,
2021.
Obligations and Commitments
The following table summarizes our contractual obligations and commitments in
future years, including our secured indebtedness to third parties on certain of
our properties, our Revolving Credit Facility, our Term Loans, our Senior Notes
and our operating leases. The following table is presented as of June 30, 2021
(in thousands):

                                                     July 1 through                                 Year Ending December 31,
                                                      December 31,
                                    Total                 2021               2022                   2023                    2024              2025             After 2025
Secured indebtedness (1)        $   103,147          $    18,617          $  4,161          $       4,161               $   4,161          $  4,161          $    67,886
Revolving Credit Facility (2)         5,563                1,278             2,535                  1,750                       -                 -                    -
Term Loans (3)                    1,015,772               12,523            24,842                366,813                 611,594                 -                    -
Senior Notes (4)                  1,589,643               29,528            59,055                 59,055                 359,055            44,655            1,038,295

Operating leases                      2,231                  224               467                    507                     529               504                    -
Total                           $ 2,716,356          $    62,170          $ 91,060          $     432,286               $ 975,339          $ 49,320          $ 1,106,181


(1)Secured indebtedness includes principal payments and interest payments
through the applicable maturity dates. Total interest on secured indebtedness,
based on contractual rates, is $23.9 million, which is attributable to fixed
rate debt.
(2)Revolving Credit Facility consists of payments related to the facility fee
due to the lenders based on the amount of commitments under the Revolving Credit
Facility through the maturity date (assuming no exercise of our two six-month
extension options) totaling $5.6 million.
(3)Term Loans includes interest payments through the applicable maturity dates
totaling $69.9 million, which reflects the impact of interest rate swaps.
(4)Senior Notes includes interest payments through the applicable maturity dates
totaling $339.6 million.
In addition to the above, as of June 30, 2021, we have committed to provide up
to $9.8 million of future funding related to one preferred equity investment and
four loans receivable investments with maturity dates ranging from December 2021
to December 2022.
Off-Balance Sheet Arrangements
We have a 49% interest in the Enlivant Joint Venture. See Note 4, "Investment in
Real Estate Properties-Investment in Unconsolidated Joint Venture," in the Notes
to Condensed Consolidated Financial Statements for additional information. We
have no other off-balance sheet arrangements that we expect would materially
affect our liquidity and capital resources.

© Edgar Online, source Glimpses