Sabra Restructures Leases with Signature, Extends $12M Loan

After hinting at a possible solution earlier this year, Sabra Health Care REIT (Nasdaq: SBRA) has reached a deal to restructure its lease agreements with troubled tenant Signature HealthCARE.

Signature on Monday entered into an 11-year lease with the Irvine, Calif.-based real estate investment trust (REIT), with options for three five-year extensions. Sabra will collect $35 million in cash rent, net of a $15 million annual rent deferral, with annual escalators of between 2.5% to 3.5%.

Sabra will also provide the Louisville, Ky.-based skilled nursing operator with up to $12 million in term loan financing, and extend an estimated rent credit of $1.9 million following the disposition of up to four non-core assets for an estimated $22 million.

“As expected, we’ve completed the previously discussed restructuring with Signature, and our confidence in their management team and operating personnel remains strong,” Sabra CEO Rick Matros said in a statement announcing the deal.

Matros also thanked fellow REIT Omega Healthcare Investors, Inc. (NYSE: OHI), another Signature landlord, for the “collaborative effort” in reaching the restructuring deal.

Signature had fallen behind on rent with Omega last summer, owing the REIT $10 million; Omega officials are set to discuss the company’s first-quarter earnings on a call with investors and analysts at 10 a.m. Eastern time on Tuesday.

Matros floated the existence of a deal with Signature on Sabra’s fourth-quarter earnings call in February, though he cautioned that medical malpractice issues within the deal were causing delays in the negotiation process.

Signature officials informed Sabra that the provider has reached final settlement agreements with “a significant percentage” of its medical malpractice claimants, the REIT said; a settlement regarding a civil investigation into Signature’s therapy services is also “imminent.”

Sabra could potentially collect the deferred rent, and reset the base rent, if those issues are resolved.

The REIT also affirmed that Signature’s management team remains “intact.”

“We believe they are committed to operate the restructured company going forward,” Sabra said in its announcement.

Written by Alex Spanko