Sabra Health Care REIT, Inc. (SBRA) Q2 2025 Earnings Call Transcript

Sabra Health Care REIT, Inc. (NASDAQ: SBRA) Q2 2025 Earnings Call dated Aug. 05, 2025

Corporate Participants:

Lukas Hartwich — Executive Vice President

Richard Matros — Chairman of the Board, President, Chief Executive Officer

Talya Nevo Hacohen — Executive Vice President, Chief Investment Officer, Treasurer

Michael Costa — Chief Financial Officer, Executive Vice President, Secretary

Analysts:

John Kilichowsk — Analyst

Farrell Granath — Analyst

Elmer Chang — Analyst

Austin Wurschmidt — Analyst

Vikram Malhotra — Analyst

Alec Feygin — Analyst

Omotayo Okusanya — Analyst

Michael Stroyeck — Analyst

Seth Bergey — Analyst

Presentation:

Operator

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. [Operator Instructions] I would now like to turn the call over to Lukas Hartwich, EVP Finance.

Please go ahead, Mr. Hartwich.

Lukas Hartwich — Executive Vice President

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 10K for the year ended December 31st, 2024, as well as in our earnings press release included as Exhibit 99.1 to the Form 8K 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.

Richard Matros — Chairman of the Board, President, Chief Executive Officer

Thanks, Lukas 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 and 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 inspiration. 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 basket, I think as everybody has 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, just want reconcile a couple of numbers going back to the last call and to the NAREIT 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 NAREIT that we were 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 really 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 shop 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 investment. 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 and skilled and senior housing triple net. Our occupancy and skilled mix in 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 trending 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 good growth momentum. And with that I will turn it over to Talya.

Talya Nevo Hacohen — Executive Vice President, Chief Investment Officer, Treasurer

Thank you, Rick. Sabra has managed senior housing portfolio continues to grow and at nearly 21% of our total annualized cash NOI, it is a meaningful contributor to our earnings growth. As Rick stated, Sabra has closed on $122 million of senior housing investment so far this year and has been awarded about $220 million more in senior housing investments, most of which are expected to close by the end of the year.

Deal flow remains very strong and Sabra’s cost of capital allows us to bid competitively for senior housing properties. In the first quarter, we were pleased with the tailwinds that offset a typical seasonal cooling of demand. In the second quarter, we saw an uptick in positive momentum. Key operating statistics such as cash NOI and cash NOI margin are up 5.3% and 70 basis points respectively on a sequential basis for the total managed portfolio including non-stabilized communities and joint venture assets at share.

With the opportunity to develop new inventory constrained by the high cost of capital, building materials and labor, we do not see a near term catalyst that will reverse the supply versus demand equation that exists right now. Today, we believe that acquiring well performing newer senior housing communities geared to the taste of the baby boomer generation will be additive to Sabra’s portfolio for years to come.

Now let me turn to the same store portfolio numbers. Sabra’s same store managed senior housing portfolio including joint venture assets at share and excluding including non-stabilized assets, continued its strong performance in the second quarter. The key numbers are, revenue for the quarter grew 5.6% year over year. Second quarter occupancy in our same store portfolio was 86% compared to 84.6% in the second quarter of 2024. Notably, our domestic portfolio occupancy was 83.5% gaining 190 basis points of occupancy over the same period.

RevPAR in the second quarter of 2025 increased 3.9% year over year for the same period. RevPAR grew 6.8% this quarter on a year over year basis in our Canadian portfolio, where occupancy has been above 90% for over five quarters, demonstrating the pricing power that comes with elevated occupancy. Importantly, as RevPAR and occupancy continue to increase, export declined 70 basis points across the same store portfolio driven by controlled costs and occupancy increases.

Cash net operating income for the quarter grew 17.1% year over year in the same store portfolio. In our US communities, cash NOI grew 17.6% on a year over year basis while in our Canadian communities, cash NOI for the quarter increased 15.9% over the same period. The trends that we have been seeing for the past year continue. Senior housing communities continue to fill up and operators are balancing rate and occupancy to maximize revenue.

With cost structure stable and revenue increasing, cash NOI and margin are growing. Our net lease stabilized senior housing portfolio also continues to do well with sequentially improving rent coverage, a reflection of continued strong operating results.And with that I will turn the call over to Michael Costa, Sabra’s Chief Financial Officer.

Michael Costa — Chief Financial Officer, Executive Vice President, Secretary

Thanks, Talya. For the second quarter of 2025, we recognized normalized FFO per share of $0.37 and normalized AFFO per share of $0.38 compared to $0.35 and $0.37 respectively for the first quarter. The current quarter results represent a 6% improvement over the same period in 2024. Normalized FFO and normalized AFFO totaled $89.2 million and $91.6 million this quarter respectively, which reflects strong sequential growth from increased NOI in both our triple net and managed senior housing portfolios.

Cash rental income from our triple net portfolio increased $2.3 million from the first quarter. This was a result of a $1.4 million increase in percentage rents received with the remainder being primarily driven by contractual annual rent increases. These percentage rents will vary from quarter to quarter and therefore this increased level of percentage rents should not be assumed to be part of our earnings run rate.

During the quarter, we updated our estimates of collectability for certain leases within our triple net lease portfolio and move the leases for two tenants, Avamere national, from cash basis back to accrual resulting in a net increase in normalized straight line rental income of $454,000 for the quarter. Cash NOI from our managed senior housing portfolio totaled $25.3 million for the quarter compared to $24.1 million last quarter. This increase was driven by the strong sequential revenue and margin gains in our same store portfolio.

Interest and other income was $10.3 million for the quarter compared to $10.1 million last quarter. Cash interest expense was $25.8 million compared to $25.4 million last quarter. Recurring cash G&A was $9.4 million this quarter compared to $9.5 million last quarter. As noted in our earnings release, we have updated our 2025 earnings guidance on a diluted per share basis as follows: net income $0.77 to $0.79; FFO $1.52 to $1.54; normalized FFO $1.45 to $1.47; AFFO $1.47 to $1.49; and normalized AFFO of $1.49 to $1.51. This updated guidance increases our midpoint of normalized FFO and normalized AFFO to $1.46 and $1.50 respectively. This represents an increase in our normalized FFO midpoint of one and a half pennies and an increase to our normalized AFFO midpoint of half a penny.

At this updated midpoint, we expect both normalized FFO per share and normalized AFFO per share to increase approximately 5% and 4% respectively over 2024. It is important to note that our guidance only includes completed investment disposition and capital markets activity. We are also reaffirming the following assumptions included in our previously issued guidance. General and administrative expense of approximately $50 million which includes $11 million of stock based compensation expense.

Ignoring the impact of acquisitions and dispositions, cash NOI growth for our triple net portfolio is expected to be low single digit in line with contractual escalators. Additionally, our guidance assumes no additional tenants are placed on cash basis or moved to accrual basis for revenue recognition. Cash NOI growth for our same store managed senior housing portfolio is expected to be in the low to mid teens.

Our updated guidance also assumes that cash interest expense is approximately $102 million and that the weighted average share count is approximately $241.5 million and $242.5 million for normalized FFO and normalized AFFO respectively, which is in-line with this quarter’s weighted average share count after adjusting for the timing of ATM issuances during the quarter.

Now briefly turning to the balance sheet. Our net debt to adjusted EBITDA ratio was 5 times as of June 30th, 2025, a decrease of 0.19 times from March 31st, 2025 and a decrease of 0.45 times from June 30th, 2024. As we have previously stated, the growth in our managed senior housing portfolio would provide us a pathway to get to our long term average target leverage of five times without having to access the equity market to delever our balance sheet. And this is precisely what has happened.

And now that we’ve achieved that, we will evaluate our long term average leverage target as earnings continue to improve. We have been practically using the forward feature under our ATM to raise equity when our share price presents an attractive opportunity to lock in an accretive cost of capital to fund the deal flow we see in our pipeline. During the quarter, we issued $186.6 million on a forward basis at an average price of $17.86 per share after commissions and in total, we currently have $266.5 million outstanding under forward contracts at an average price of $17.69 per share after commissions.

During the quarter, we settled $29.9 million of outstanding forward contracts to help fund investment activity during and immediately after the quarter. We expect to use the proceeds from the outstanding forward contracts to close on the investments we’ve been awarded and do so on a leverage neutral basis. Subsequent to quarter end, we enter into a new five year $500 million term loan and use those proceeds to repay our $500 million, 5% and 1.8% unsecured bonds that were set to mature in 2026.

The interest rate on this term loan is floating at SOFR plus120 basis points and we can currently enter into interest rate swaps that fix SOFR at 3.44%, effectively fixing the rate on this loan at 4.64% for the full term. The term loan also contains an accordion feature that can increase the total available borrowings to $1 billion, subject to terms and conditions. Pro forma for this financing, our weighted average maturity on our debt increases from four years to nearly five years, and our weighted average interest rate decreases 10 basis points from 4.14% to 4.04%.

The successful financing not only address an upcoming maturity at a lower rate, but the effective rate is meaningfully lower than we would have achieved had we used the unsecured bond market. As of June 30th, 2025, we’re 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 $95.2 million, available borrowings under our revolving credit facility of $837 million, and the $266.5 million outstanding under Ford sales agreements under our ATM program. As of June 30th, we also had $109.3 million available under the ATM program.

Finally, on August 4th, 2025, Sabra’s board director declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on August 29th, 2025, to common stockholders of record as of the close of business on Aug 15th, 2025. The dividend is adequately covered and represents a payout of 79% of our second quarter normalized AFFO per share.

And with that, we’ll open up the lines for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] All right, looks like our first question comes from the line of John Kilichowski with Wells Fargo. John, your line is open.

John Kilichowsk

Thank you. Good afternoon. Maybe my first one. Rick, in the opening remarks, I thought your color was really helpful on the investment guide. At NAREIT you spoke to the $200 million and the $300 million, and then now it’s kind of — we’re back into a 350 number. It sounds like you’re still confident that you can get to about $500 million for the year, which I think is even more positive than you were at NAREIT. Am I thinking about that correctly?

Richard Matros

It’ll be somewhere in the $400 million to $500 million range. Just depend on timing my guess is there’ll be some deals that may close, like on January 1, maybe tax reasons or whatever else, but it’ll be close.

John Kilichowsk

Okay. That’s helpful. And then I think — do you think that the rest of that number would be comprised of skilled nursing deals and what’s kind of keeping those from entering the pipeline so far? Like, how close are you on pricing?

Richard Matros

Well, pricing isn’t an issue at all. It’s actually just finding deals that we think are good deals, quality assets in the right markets. A lot of the stuff that we looked at just isn’t good. And I think that if you look at our triple net portfolio, whether you look at the skilled portfolio or the senior housing portfolio, between the merger from a number of years ago and all the cleanup that we did subsequent as a function of that and the pandemic, both selling assets and transitioning assets, we’ve got a really great core of operators now, as evidenced by our coverage.

Our coverage is stronger than most out there. And so, we’re really being particular about the quality of the assets that we’re bringing into the portfolio. So I think it’s fair to say that the majority of it will probably still be shot. But we are definitely focused on working on the skilled side and trying to get some deals on that. But I still think it would be weighted a little bit more towards shop than skilled. But we certainly want to do more skilled.

John Kilichowsk

Okay. Very helpful. And then maybe last [Speech Overlap]

Richard Matros

Yeah. The other thing I should just note is we’re still not interested in building a loan book, which is how — some of these deals are getting done. And we’re not interested in doing sort of complex JV kind of structures or mes debt or anything like that. We’re just not interested in doing that. We just want to do straight forward, kind of simple to understand traditional deals. And just one other comment I want to make that I’ll know you had another piece is I mis-stated in the opening remarks. The 5% on the Medicaid rate increase is for the top five states that were in, not the top five operators.

John Kilichowsk

Got it. Okay. Very helpful. And then the last part for me was just on the same store shop NOI, that number continues to run at the high end or even maybe slightly above that sort of low to mid teens number that you’ve given. I think you’re at 17%, 1H today. What’s keeping you from maybe taking that guide up? I know Michael spoke last quarter about comps were maybe slightly tougher in the latter half of the year. I’m curious if you’re still seeing that quarter to date or if maybe there’s room for upside there.

Richard Matros

We’re hoping that there’ll be upside. We just, we felt we could move guidance a little bit and still be in a position where we hope we can beat it. So we’re just being sort of moderate in our approach.

John Kilichowsk

Got it. Thank you.

Richard Matros

Yeah.

Operator

All right. Thank you, John. And our next question comes from the line of Farrell Granath with Bank of America. Farrell, your line is open.

Farrell Granath

Thank you. Good afternoon. My question is about your same store shop occupancy. I was wondering if you could add a little bit more color so sequentially. There wasn’t much movement, if there was anything specific going on. Just given the 2Q tends to be a little bit stronger in occupancy growth.

Talya Nevo Hacohen

Yeah. I think. Hi, it’s Talya. I think you have to realize that despite transitioning the Holiday portfolio on April 1, so in the very beginning of Q2, 16 of the 21 Holiday assets remained in same store sales. We decided to do that. That had an impact, as you can imagine, just because the usual noise you have in transition. So, if you pulled that out, the number would have looked more exciting to you.

Farrell Granath

Okay. Thank you. And then also on the comments of skilled opportunities starting to come up and looking to transact more, I was curious if you could add in a little bit more color. What’s driving that more the opportunity opening up, was it the [Indecipherable]? And also, are you hearing anything in terms of concern on health systems and is that driving any of the conversation?

Talya Nevo Hacohen

I don’t think that we’re seeing a significant change in the volume of skilled nursing coming to market. I think we have seen for a while now, last few years, a significant move of transactions into the private market by owner operators with capital backing them up outside of the REIT space. So we are seeing assets come to market in the SNF space. We’re not seeing a lot, but we are seeing some. I think the only thing that has shaped the volume of deals we’ve seen has been true both on skilled and senior housing over the last few years is the recovery in fundamental operations.

Just thinking about owners, whether or not they had financing in place. The fact is operations have recovered significantly both in skilled and in senior housing and that allows for much more robust pricing even if cap rates have moved up somewhat from pre-pandemic. But the operational recovery has been very effective in raising absolute prices.

Farrell Granath

Okay. And just to confirm when you’re saying that is the influence of kind of moving past the reconciliation bill, has that up or lifted any potential weight or concern while you’ve been having your conversations or was that not always even a part of the conversation?

Richard Matros

No, that’s a non issue.

Farrell Granath

Okay. Thank you.

Operator

Thanks, Farrell. And our next question comes from the line of Nick Yulico with Scotiabank. Nick, your line is open.

Elmer Chang

Hi, this is Elmer Chang on with Nick. First question is just on the shop portfolio again. How do you expect component drivers to trend in the back half of the year since as mentioned, NOI growth guidance implies some slowdown. Given just previous comments in your remarks about employment levels returning to pre-pandemic levels and maybe some potential impact from the Holiday transition assets.

Talya Nevo Hacohen

I hate to try to predict the future, but right now it all looks very positive. There is –I mean, if you follow the Nick statistics, there’s essentially no new inventory coming in the system. And we’re seeing very few development deals actually for a while we started seeing some we see none right now and we see virtually none in the pipeline, in the markets where we have been investing and where we have assets.

So with that is the fundamental context, the demand is increasing just because the number of people who are aging and ready to move-in is rising. Our focus is on the care segment with most of our assets being assisted living and memory care with some IL. And I think the fundamental demand in the secondary markets in more — in the middle market price point is very well positioned and therefore likely to increase.

Elmer Chang

Okay. Thank you. And then second question. On a holiday transition portfolio, you mentioned that you transition them to trusted operators and you’ve been building a relationship with Sunshine for some time, but how are you getting comfortable with maybe diversifying the tenant base a little bit? And then could you provide additional color on what that bidding process entails for operators looking to take on transition assets?

Richard Matros

Well, I’m not sure what you mean by the benefit of the transition and breaking it up. I think having less, having less concentration in one operator is always helpful. So — and to be able to do that when you’ve already got a pre-existing relationship in this case with two of the three operators and the bulk of the facilities. So I’m not really, I think, I’m not understanding your question. And in terms of the bidding process, whenever we look to transition, we usually identify those operators that we think would be the right fit and we ask them to submit. We probably give them the information they need, they submit proposals, just like with any other process and you go from there.

Elmer Chang

Okay. Yeah. Thanks for that.

Operator

All right. Thanks, Elmer. And our next question comes from the line of Seth Bergey with Citi. Seth, please go ahead. Seth, are you there? Might be muted. Going once, going twice. All right, we will move on. And our next question comes from the line of Austin Wurschmidt with KeyBanc. Austin with KeyBanc Capital Markets. Excuse me. Austin and Austin your line is open.

Austin Wurschmidt

Great. Thank you. Rick, appreciate the details on the transitions. I guess I’m just curious, kind of how long you’ve been evaluating transitioning these assets and when kind of, you made that final decision to move forward. Because it does sound like there was a little bit of a process in selecting operators for these buildings.

Richard Matros

You might recall that there was a change in leadership at Holiday. We thought that we should give the new team time and look, they may be doing a great job with other things. So I don’t want to sort of be negative about anyone. But post the transition, despite all the positive interactions with the new team, we just weren’t getting the results that we expected to get and that we were seeing in the rest of our shop portfolio. So, it was really as simple as that.

And so, last year we started having serious discussions about moving the portfolio. And by the end of the year, we had pretty much identified a list of potential operators that could take over different pieces of that portfolio and targeted, put the process in place and then targeted the transition date. So that was all before the end of last year.

Austin Wurschmidt

That’s helpful. And then for the five assets that you excluded from the same store pool, I mean, how impactful has the transition been? Were these already the most underperforming assets, and are you planning on investing, any additional capital into those specific assets?

Richard Matros

Yeah. Some of those assets that are excluded more than our same store pool leading up to the transition. So not a major change there. And it shows, given, how little the overall pool changed sequentially. And we have been putting capital into those assets, that entire portfolio, quite frankly, over the last couple years, I’d have to look to see if those five assets specifically were part of that program. I’d have to imagine they were given. We need to see that performance turnaround.

Austin Wurschmidt

Got it. And then with the Holiday assets transition in April, I guess, can you share kind of how, I mean, the occupancy trended through the quarter and maybe what the momentum looks like into July, just to help us understand the fact that NOI is tracking ahead, but there is this implied deceleration with presumably occupancy being a big piece of that. So just give us a sense of what that momentum looks like headed into the back half of the year.

Talya Nevo Hacohen

Sure. I’ll kind of give you the directions we’re seeing over the course of the second quarter just to give you a sense. And these are just the holiday transition assets. So we saw tours as you can imagine, decline initially, but they have definitely picked up since after June. Move-ins actually picked up starting in May. So they — well, I don’t have a measurement for before April, but they basically have picked up and move outs are declining sequential multiple months now. So the momentum is the right momentum. Tours up, move-ins up, move-outs down and that kind of put that together and you get higher occupancy.

So, we’re anticipating that the noise of the transition is basically in the rearview mirror and we should be seeing improvement in occupancy and how that flows through the rest of the P&L.

Austin Wurschmidt

Great. Thanks for the time.

Operator

Thank you, Austin. And our next question comes from the line of Vikram Malhotra with Mizuho Securities. Vikram, please go ahead.

Vikram Malhotra

Afternoon. Thanks for taking the questions. I guess just going back to the external growth of the pipeline, kind of what you laid out, I guess Rick implies a pretty big acceleration in the back half and I’m wondering, kind of how timing wise is more back end weighted and how sustainable is its pace into ’26 given your goal of kind of hitting 30% of shop. Thanks.

Richard Matros

Well, I don’t think that we need — I don’t think the momentum is overly weighted towards the latter half because we have about $350 million right now of that $4 million to $5 million that were either closed or closing or awarded. So, I think it’s pretty spread, it’s spread out pretty nicely over the next — over these next couple of quarters. And Talya, do you want to talk about going into next year and?

Talya Nevo Hacohen

The volume that we’re seeing is unabated and we continue to bid based on what we believe is fair as appropriate pricing for Sabra given cost of capital. And we are finding ourselves in the second round and touring on any, every asset that we’re interested in frankly. And you’ve heard us talk about the profile of those assets, all of which are newer builds, senior housing, strong markets and opportunity for growth. So not bond type return for the most part.

So, so far it looks good. I can tell you the team’s out on two tours touring two different properties this week. So the momentum continues. So I mean you can do the timing. I think the, what we’ve talked about is being awarded as well under, well in process, in terms of documentation and a process to close. So it’s not as back ended as you as it sounds.

Vikram Malhotra

Okay. And then I just wanted to clarify two quick things. So one, I think you mentioned the transition assets in the pool like — I think you had mentioned if we strip them out, there would have been different occupancy or different NOI growth. You mind just clarifying like if you didn’t have the transition assets, what the growth would be? And then just the other clarification essentially was that on the — just the overall acquisitions you talked about the pipeline. I’m just wondering, does is some of that sitting in Canada as well?

Talya Nevo Hacohen

I’ll take the second part of that. So, in Canada we continue to look, it’s frankly, I’d love to do some more deals in Canada, but the challenge is that — that rates are about 200 basis points lower than they are here, which means the cap rates are also 150 ish to 200 basis points lower. So you’ve seen from some of our peers, they’re doing deals that call it a 6% going in yield or a 5.5% going in yield in Canada, and that’s — that pricing is just too rich for us, no matter how much we might like to buy the asset.

Vikram Malhotra

Yeah. And then on your first question, like we didn’t disclose that. I guess one thing I would say is that if we didn’t have those transition assets in our same store numbers, the numbers would be better.

Talya Nevo Hacohen

That’s along the lines of what I said before about occupancy as well.

Vikram Malhotra

Thank you.

Operator

All right. Thank you, Vikram. And our next question comes from the line of Alec Feygin with Baird. Alec, your line is open.

Alec Feygin

Yeah. And thank you for taking my question. Just to circle back on the Holiday transition, can you articulate maybe some of the NOI upside that you’ve already captured and will continue to capture throughout this year next?

Richard Matros

Look, I think we’re not going to get specific about that because it really requires a crystal ball. I think listening to one of our peers calls, they’re seeing nice improvement in the transition they went through a year later. So we fully expect it to improve. But to specify how much it’s going to improve and what that timeframe is, there’s no way we can be right about that answer. So, it’s too much specificity you’re looking for with a crystal ball.

Alec Feygin

Okay, fair. No crystal balls. So that’s totally fair. Second for me,

Richard Matros

Appreciate that.

Alec Feygin

On the actual pipeline, maybe just speak on the mix of assets, whether they’re IL, AL campus and is it new operators or existing operators? Just maybe some more details there.

Talya Nevo Hacohen

Are you talking about deals that we’re seeing in the market or that we’re revaluating or ones that are, that were

Alec Feygin

In the pipeline that $220 million.

Talya Nevo Hacohen

Okay. So those — some of them are deal transactions with groups we know and have and are trusted operators. Some are groups with whom we have been working to establish a relationship. And so it’s an opportunity for us to do something. And most of the — they are all institutional quality assets being sold typically for vintage issues by institutional owners.

Alec Feygin

All right. Well, thank you.

Operator

All right. Thank you, Alec. And our next question comes from the line of Omotayo Okusanya with Deutsche Bank. Omotayo, your line is open.

Omotayo Okusanya

Yes. Good afternoon, everyone. Just a quick [Speech Overlap] just a couple of really quick words. Community care, the rent coverage there kind of declined slightly. Just kind of curious, give us an update on how they’re doing and if there’s anything we should be paying attention to that there.

Richard Matros

Yeah. Nothing that we’re really concerned about. They’ve had some challenges in one of their states, as a lot of operators are, and so they’re focused on divesting a few facilities and that’s basically all there is to it. So they’ll be fine when that occurs.

Talya Nevo Hacohen

1.77 times coverage is not something we’re complaining about either.

Richard Matros

Right, right. But in terms of — right, but, but they, but they, you know, they’ve been working on these facilities and it’s just not happening the way they would like it to. And we’ve been in that market with others besides them and it’s a tough market that these particular facilities are in. So we have no — they’re a good sized company, they’re very strong, they’re a good operator. We love working with them. And so we’re very confident that once they divest a few of these things, things they’ll be good. But again, as Talya said, even with the reduction, there’s no concerns.

Omotayo Okusanya

Are these your assets that they’re going to be divesting?

Richard Matros

Yes.

Omotayo Okusanya

Okay. Gotcha. That’s helpful. And then second of all, again, just with all the questions around debt ceiling and fiscal deficits and stuff like that. Do you see any risk where we might kind of start ending up in a sequestration situation a year or two from now. And what impact did I have on Medicare?

Richard Matros

I don’t think so, but that stuff’s really hard to tell. But, I think that we’ve done our — our lobbying groups have done a really fantastic job for us. And with all these Medicaid cuts in the bill, we were carved out. We understand it may put pressure on state governments, but we were carved out. The upward revision in the Medicare market basket was a good sign. There’s no kinds of dialogue with CMS that is causing us any concerns as we look out over the next year.

Plus, so, I think we’re in a really good place. And the other thing, Tayo, I think to remember is, the whole space is in a different place now relative to the continued decline in supply and the continued increase in occupancy. So the space also can afford. There’s a lot more cushion now. You look at our rent coverage, right. There’s so much more cushion that this space has that it hasn’t had before. And as occupancy continues to increase, we’ve already passed that inflection point with the operating leverage.

So that pull through for every additional patient just gets stronger and stronger. So, it feels really, really good right now, even when we look out to the next couple years, because I would anticipate, as inflation’s come down, just like we saw this year’s Medicaid rate increases lower than last year’s Medicaid rate increases. Those will moderate more over the next couple of years and the market basket for Medicare will moderate as well. But that moderation comes at a time when the industry is finally very, very healthy again.

Omotayo Okusanya

Gotcha. Thank you.

Operator

Thank you, Tayo. [Operator Instructions] All right. Our next question comes from the line of Michael Stroyeck with Green Street. Michael, your line is open.

Michael Stroyeck

Thanks, and good morning. Maybe on the labor side, what sort of wage increases are you seeing your operators pass along to employees today? And is there any difference in wage growth between your SNF and senior housing portfolios?

Richard Matros

Now it’s all somewhere, give or take 4% ish. Pretty sure. And it’s been that way now for we’re probably going into year three with that, with those kind of wage increases. Just to refresh it for everybody, it was really, it was 2022 where there were huge, huge adjustments in the wage basis for employees across the board in both spaces. And then in ’23, it really moderated down to sort of mid-single digit, which demonstrated that what our operators did in ’22 is effective and it’s held steady since then. And the fact that we’ve been able to get to pre-pandemic employment levels and temporary agency levels at that level of wage increases. I think is kind of proves the point that it’s all worked.

Michael Stroyeck

Yeah. That makes sense. I guess, are there any states or markets where you are seeing a particularly tight labor market either on the skilled nursing or senior housing side?

Richard Matros

Can’t pinpoint one really off the top of my head. I mean, everything’s better. There are difference in degrees as to how much better. But we’re not, we don’t — we’re not. There’s sort of not undue suffering going on in any particular market.

Michael Stroyeck

Got it. Thanks for the time.

Richard Matros

Yep. Thank you.

Operator

Thanks, Michael. And it looks like our final question today comes from the line of Seth Bergey at Citi. Seth, your line is open.

Seth Bergey

Hi. Thanks for taking my question. I think in talking about, kind of the opportunities that you’ve been awarded, some of them are with new operators, some of them are with existing. Can you talk a little bit about, your selection criteria for new operators.

Richard Matros

Well, the one we spend a lot of time with them prior to even looking at a deal with them. So we get to know them, we get to understand how they operate, the kind of markets they picked and most importantly, what do their outcomes look like from a quality perspective. So it’s really all those things. It’s pretty traditional stuff really. But the other characteristic I would say is, we have a lot of really good. We have a lot of really good operators that don’t, aren’t interested in growing that much. They’re happy with their portfolios. So part of what we’ve been looking for with new operators or operators that want to actively grow so that we have a higher number of operators within our existing portfolio that we can depend on to grow with and not just always look for new operators.

Seth Bergey

Great. And then just, I think on the last call you mentioned kind of as the outlook for shop has improved, that there’s actually been a smaller, smaller pool of buyers. Just kind of curious, as you look out there for investment opportunities, kind of how the buyer pool has changed, if at all.

Talya Nevo Hacohen

The buyer pool has changed very little over the last call it year, certainly six months. You have primarily the REITs and you have private capital in the market as well. The private equity funds that there are plenty that have stepped away from the sector and there are some that are coming in, but I’d say they’re coming in, in a small way and not trying to do not not trying to do something big right away. And there are some that, like Harrison street, that’s been consistently in the space and they remain consistently in the space.

Seth Bergey

Great. Thank you.

Operator

All right. Thank you so much, Seth. And that does conclude our Q&A session today. I will now turn the call back over to Rick Matros.

Rick?

Richard Matros

Thank you. And thank you all for joining us today. As always, we’re available for more dialogue and we look forward to talking with you and enjoy the rest of the summer. Take care.

Operator

[Operator Closing Remarks]