Richard Matros, CEO of Sabra Health Care REIT Inc (SBRA), says his company has recently experienced increased competition from financial buyers in the senior housing space. He says that trend is creating some price dislocation, particularly on smaller portfolios.
“It’s interesting because they’re entering the market at what some would think of as a peak, if not a bubble,” Matros says. “Since those financial buyers have five- to seven-year horizons, it’s a little bit perplexing why they’re doing what they’re doing because they are paying 15% to 20% more than most of the rest of us will pay for the same assets, and when they have to exit in five to seven years, they’re not going to get that.”
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However, Matros says many of the deals that Sabra does are sale/leasebacks, where operators want to stay in place. Those operators, he says, are more inclined to continue a long-standing relationship than to take more money from a financial buyer.
“But for those transactions where operators are staying in place, and they are just recapitalizing or cashing in some equity, then we’re still in good shape there,” Matros says. “And that’s a lot of the deal activity that’s out there, so our pipeline — despite all that — has remained healthy, but it’s definitely created some dislocation.”
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