Good day, everyone. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sabra fourth quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star followed by one on your telephone keypad. If you would like to withdraw your question, again, press the Star one. I would now like to turn the call over to Lukas Hartwich, Senior Vice President of Finance. Please go ahead, Mr. Hartwich.
Thank you, and good morning. Before we begin, I want to remind you that we will be making forward-looking statements in our comments and in response to your questions concerning our expectations regarding our future financial position and results of operations, including our expectations regarding our tenants and operators and our expectations regarding our acquisition, disposition, and investment plans. These forward-looking statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially, including the risks listed in our Form 10-K for the year ended December 31st, 2022, as well as in our earnings press release included as Exhibit 99.1 to the Form 8-K we furnished to the SEC yesterday.
We undertake no obligation to update our forward-looking statements to reflect subsequent events or circumstances, and you should not assume later in the quarter that the comments we make today are still valid. In addition, references will be made during this call to non-GAAP financial results. Investors are encouraged to review these non-GAAP financial measures as well as the explanation and reconciliation of these measures to the comparable GAAP results included on the Financials page of the Investors section of our website at sabrahealth.com. Our Form 10-K earnings release and supplement can also be accessed in the Investors section of our website. With that, let me turn the call over to Rick Matros, CEO, President, and Chair of Sabra Health Care REIT.
Thanks, Lukas. Good day, everybody. Thanks for joining us. We appreciate it. First, I just want to comment on our asset recycling program. We've got a couple of transactions that we're hoping to close over the next couple of months or so, and that'll pretty much be the end of the program. After that, we'll continue to have dispositions, but it's more ordinary course of business disposition. We're looking forward to that. Just a quick comment on the North American transition. As we put out earlier, that transition closed effective February first, as we anticipated. The operations held up really well throughout the period prior to the transition and continue to do so.
In addition to the improvement in credit quality that we get from replacing North American with Ensign, I did want to point out that for Avamere, it will strengthen their portfolio as well. The four facilities that Avamere is picking up or has picked up in Washington State densifies a key market for them, which is allowing them to enter into managed care contracts that should help both occupancy and revenue overall in that particular market. Next, there's been a lot of talk about PLRs recently, and I just wanted to remind everybody that Sabra got a PLR in February of 2020, right before the pandemic hit. That came shortly after we converted the Holiday portfolio from triple net to managed, allowing us to now have Holiday in the right data structure.
We, at one point, we had some internal discussions about whether we wanted to do anything else relative to management because at the time there was an unsure environment relative to what Fortress was going to do with the portfolio. After Atria wound up taking over the portfolio, we decided that we would just keep that as optionality for us going forward. We've been really pleased with what Atria has done with the portfolio. We're happy to collaborate with them operationally. As I said, this provides some optionality for us going forward, but we don't anticipate doing anything different with it at this time. Moving on to the operating environment. Occupancy held steady over the holidays with some skilled operators up and some slightly down.
Overall, a better outcome than we anticipated. We've had very little impact, if any, from flu, RSV, or COVID. That's been helpful as well. Our sequential quarterly performance on the skilled space showed improved occupancy and skill mix. Labor pressures persist, but has slowly been improving, but that's still going to take quite some time. Our sequential occupancy for our senior housing triple net portfolio was up materially by 240 basis points and over the fourth quarter moved up very nicely as well. Not quite at that pace, but at a pretty healthy clip. We currently don't have any discussions ongoing with any tenants relative to lease restructurings. Our coverage in our skilled portfolio is down primarily due to the quarter dropping off, having lower labor costs than the one coming on.
We anticipated that, I think most everybody else did as well. Our skilled nursing exposure is now down to 58%. That's 1% higher than our all-time low. It will continue to drop this year and resulting in the most diversified by asset class the Sabra portfolio has ever been. We don't anticipate at any point that it would drop below 50% because we still anticipate doing skilled nursing acquisitions. You know, we like being in a different place relative to the level of diversification in our portfolio. Our investment pipeline is lighter than historical. We're starting to see some skilled opportunities and continue to see behavioral opportunities. The bulk of what we're seeing continues to be senior housing.
As everybody knows, the PHE expired or is expiring effective May 11th. There's no real impact. Skilled in place has become negligible as Acuity has normalized post-COVID breakouts. That's not to say that we wouldn't like that to stay in place, it just doesn't seem to be in the cards at this particular point in time. The FMAP increase of 6.2% is no longer attached to the PHE and is unaffected by the May 11th date. We're not issuing guidance and, you know, it appears that there's some consternation about the fact that we are still not issuing guidance. We, you know, we issued guidance in 21, and we see some of appears that issue guidance, just particularly when you have a managed portfolio, really impossible to project the velocity of the recovery.
Until we have a little bit more clarity there, you know, we just don't want to be in a position where we put a number out and then we have to change it again, which is what we see happening throughout. Mike will talk a little bit more about that in his talking points. Hopefully at some point this year, we will be able to put guidance out. Generally speaking, we expect a relatively quiet year as our asset classes continue to recover. We do expect, based on all the initiatives we've embarked on, the asset sales that we've done, the transitions that we've talked about, and the general recovery of the managed portfolio all to result in nice earnings growth for us as we look at 2024.
With that, I'll turn the call over to Talya.
Thank you, Rick. Let me turn first to the results of our managed senior housing portfolio, including our joint venture investments in Canada, and then to an update on our investment activity in behavioral health. Our wholly-owned managed senior housing portfolio continued its recovery throughout 2022, with revenue increasing through a combination of materially higher RevPOR and growing occupancy. As operators have worked diligently to recruit, hire, and retain staff and reduce agency to pre-pandemic levels and even zero, expenses have plateaued and begun to decline, allowing for cash net operating income to grow significantly and margins to climb.
The headline numbers for the wholly-owned managed portfolio on a same-store basis, excluding government stimulus, are as follows: Occupancy for the fourth quarter of 2022, excluding non-stabilized assets, was 81.8%, driven by a 2.4% percentage point increase in our assisted living communities over the prior quarter. Comparing fourth quarter 2022 to fourth quarter 2021, our occupancy increased 5.9 percentage points in our assisted living communities and 90 basis points in our independent living communities. RevPOR for the fourth quarter, excluding non-stabilized assets, was $6,608 in our assisted living portfolio, a 5.3 percentage point increase over the prior quarter and an 8.9 percentage point increase over fourth quarter 2021, driven largely by the October 1st annual rate increases in our Enlivant portfolio.
RevPOR for the period, excluding non-stabilized assets, was $2,751 in our independent living communities, a 1.6% increase over the prior quarter and a 6.6% increase over fourth quarter 2021. We anticipate that rate increases in 2023 will be in the same 5%-10% range as those seen in 2022. Excluding government stimulus funds, cash NOI for the quarter was 22.9% higher than the prior quarter. Similarly, cash NOI margin in the fourth quarter grew to 26.9% from 22.7% in the prior quarter and 20% in the fourth quarter of 2021 as top line increases in active expense management impacted the bottom line.
Senior housing operators continue to drive revenue to offset materially higher costs by raising rates and focusing on more efficient customer acquisition. The investment in digital marketing that began during the pandemic has continued to produce better qualified leads with more move-ins than other sources. Move-in rates are above pre-pandemic levels, while move-out levels seem to have stabilized. With expenses under greater control, our wholly owned managed portfolio had nearly 50% growth in cash NOI in the fourth quarter of 2022 compared with the same quarter in 2021. If we compare the fourth quarter same-store revenue, occupancy, and RevPOR results of our wholly owned managed portfolio by country, excluding government stimulus, our Canadian assets have outperformed our U.S. communities relative to the fourth quarter of 2021.
In those same periods, occupancy in our Canadian portfolio rebounded by 7.2%, with revenue growing 19% compared to our U.S. portfolio, which saw occupancy growth of 1% and revenue growth of 10%. However, expenses in the Canadian portfolio rose 14% in that period while staying flat in the U.S. Both portfolios saw significant growth in cash NOI, with our domestic portfolio outpacing our Canadian portfolio by combining significant cost controls with high RevPOR growth. Sabra's unconsolidated joint ventures in Canada now include 15 communities in Ontario, Saskatchewan, and Quebec. Our 50/50 joint venture with Sienna Senior Living, which includes 12 properties, has performed well since closing mid-year 2022, with occupancy and revenue continuing to rise steadily.
As part of the effort to significantly cut agency spending, we incurred additional employee costs in the fourth quarter of $200,000, that's U.S. dollars, at share to hire, incentivize, and retain employees at those communities. We share this to illustrate that availability and cost of labor in the early post-pandemic economy is not limited to the U.S. market. Turning to our behavioral health portfolio. At the end of the fourth quarter, Sabra's investment in behavioral health included 17 properties and two mortgages with a total investment of $784 million at the end of the fourth quarter. We intend to invest an additional $63 million of capital to complete the conversion of six of these properties and an additional identified property, all of which have been leased to operators.
During the fourth quarter, we entered into a lease on one of these properties with an experienced operator that is new to Sabra. As part of our ongoing initiative to recycle assets, we continue to review opportunities to convert more of our properties into higher-yielding assets that will deliver the types of care needed most in their communities. With that, I will turn the call over to Michael Costa, Sabra's Chief Financial Officer.
Thanks, Talya. For the fourth quarter of 2022, we recognized normalized FFO per share of $0.37 and normalized AFFO per share of $0.37. Compared to the third quarter of 2022, normalized FFO per share increased $0.01, and normalized AFFO per share increased $0.02, primarily due to increased triple net NOI due to the timing of rents from leases accounted for on a cash basis, which we highlighted on last quarter's call. This accounted for a little over $0.01 of additional normalized FFO and normalized AFFO per share this quarter that is not expected to reoccur. In addition, normalized FFO and normalized AFFO per share were higher this quarter as a result of increased NOI from our senior housing managed portfolio. These increases were partially offset by lower NOIs in the Enlivant Joint Ventures and higher interest in G&A costs.
Normalized FFO and normalized AFFO for this quarter included $1.2 million of excess rents paid by Genesis pursuant to the memorandums of understanding entered into in 2017 when we began the disposition of a majority of our Genesis exposure. As we noted last quarter, these rents had a burn-off period of just over four years from the date the properties were sold and are now reaching the end of that burn-off period. We expect the amount of excess Genesis rents we recognize in earnings to decrease to $1.1 million in the first quarter of 2023 and decline to approximately $200,000 per quarter for each of the five quarters after that.
When the excess rent amount steps down in the second quarter of this year, we expect it to result in a reduction to our quarterly earnings run rate of just under $0.01 per share. During the quarter, we successfully completed the transition of the portfolio formerly leased to North American Health Care to Ensign and Avamere. As noted on last quarter's call, the earnings impact from this transition is expected to result in a reduction to our quarterly earnings run rate of just under $0.01 per share. As of December 31, 2022, less than 5% of our NOI is below one times EBITDARM coverage, which is in line with previous quarters.
As of December 31st, 2022, our annualized cash NOI was $456.2 million, and our SNF exposure represented 58.1% of our annualized cash NOI, down 190 basis points from the third quarter and down 330 basis points from a year ago. We expect this percentage to continue moving lower throughout 2023 as a result of our recently completed SNF sales and further earnings recovery in our senior housing managed portfolio. G&A costs for the quarter totaled $10.9 million compared to $9.7 million in the third quarter of 2022. The majority of this increase is due to adjusting our estimates for compensation that is based on 2022 annual performance.
Cash G&A for the quarter was $8.8 million compared to $7.6 million in the third quarter. After factoring in the adjustment and estimates that I noted, cash G&A is basically flat sequentially. Now turning to the balance sheet. On January 4, 2023, we amended and restated our credit facility, improving our debt maturity profile while keeping capacity and pricing consistent with our prior credit facility. As a result, we have no material debt maturities until 2026. Shortly after amending and restating our credit facility, we entered into a series of current and forward-starting interest rate swap agreements that cover the entire five-year duration of the term loans under our credit facility.
These hedging activities, our term loans totaling $540.7 million will have an average fixed rate of approximately 4% over the next 5 years, providing us with significant cost certainty and eliminating any long-term exposure to floating rate debt. The earnings benefit of this proactive approach to managing our interest expense is meaningful as our annual interest expense would be over $12 million higher if our term loan debt remains floating at today's rates. We are in compliance with all of our debt covenants, and our liquidity as of December 31, 2022 totaled $852 million, consisting of unrestricted cash and cash equivalents of $49 million and available borrowings of $803 million under our revolving credit facility.
Subsequent to December 31, we received approximately $159 million of gross proceeds from the sale of assets and repaymentProceeds were used to repay borrowings under our revolving credit facility, further increasing our liquidity. These asset sales and repayments are expected to reduce our quarterly earnings run rate by approximately $0.01 per share. As of December 31, 2022, and pro forma for the investment and disposition activity subsequent to December 31, our leverage was 5.38 times, a sequential decrease of 0.12 times. We expect our leverage to further improve in future quarters as a result of continued recovery in our senior housing managed portfolio and from any potential future asset sales.
We continue to focus on strengthening our balance sheet and portfolio without having to access the capital markets until the cost is more favorable. We are well-positioned to do just that. On February 1st, 2023, our board of directors declared a quarterly cash dividend of $0.30 per share of common stock. The dividend will be paid on February 28th, 2023 to common stockholders of record as of the close of business on February 13th, 2023. The dividend represents a payout of 81% of our normalized AFFO per share of $0.37. Lastly, as Rick noted, we do not issue guidance this quarter. We continue to closely monitor the operational recovery of our portfolio. We are encouraged by the progress we continue to see on the occupancy and cost side.
With that said, labor pressures and operating headwinds still remain, and visibility is limited to when these factors will normalize in a way that would allow us to confidently estimate our earnings over the next several quarters. However, when you aggregate the various moving pieces I highlighted earlier, and assuming all else remains equal, the run rate for fourth quarter normalized ASFO per share would be between $0.03-$0.04 lower than the reported number. With that, we'll open up the lines for Q&A.
At this time, I would like to remind everyone, in order to ask a question, press star then the number 1 on your telephone keypad. Your first question comes from the line of Michael Griffin from Citi. Your line is open.
Hello, this is Avery Tiras for Michael Griffin. My first question's on just the labor environment. I mean, what are your expectations around labor in the SNF portfolio, and any additional color you can provide on what your operators are seeing on the ground?
Yeah, look, it's still a slog. It's certainly better than it was. It continues to show some improvement, but it's really slow. I think the thing that the operators are most looking forward to to help them out on the labor side is a very positive expected market basket on Medicare come October 1st. Before that, and obviously this depends on the state you're in, but we expect to see in July and August better than historical Medicaid rates. As you may know, there's a cost report process in each state, and there's a lag time before the actual costs get reflected in new rates. This summer we'll start seeing that reflected really for the 1st time.
Next summer, they'll really be reflected even more, but we do expect some outsized Medicaid rates this summer, so that's gonna help the operators quite a bit. Other than that, you know, it's impossible to project, you know, how sort of the pace of this thing getting any better.
That's helpful. Thank you. My follow-up question is a little bit on the transaction market. What are you seeing in the transaction market in terms of investor appetite for skilled assets? I know the capital recycling program is largely complete, but, I mean, what are your thoughts? Any additional color there would be helpful.
I'll take that. The limiting factor is the availability and cost of bridge to HUD financing above all else. The interest is there, and I think we'll continue to see a queue of deals with various sellers. It's all taking longer because debt is just tougher to procure at the levels and at the amounts that people were easily able to obtain six months ago. That's really the challenge. It's just taking, I think, longer for various sellers, various buyers to get their deals done, and that applies to all the sellers out there, and there are many.
That's very helpful. Thank you. That's all for me.
Your next question comes from the line of Juan Sanabria from BMO Capital Markets. Your line is open.
Hi. Good morning. Just a follow-up question or a question for Michael, I should say. You kind of gave a run rate. I was hoping you could maybe break the major pieces that you kind of went over at the very end of your prepared remarks, just to get a better sense of how we should be thinking about the model going forward.
Hey, Juan. Yeah. I mean, the major pieces are, like I said in the prepared remarks, we had cash basis rents. There was a timing difference, which I talked about on the third quarter call, where we received some rents from tenants on a cash basis in the fourth quarter, that should have come in in the third quarter. That, you know, brought third quarter down lower than it should have been. It brought fourth quarter up higher than it should have been. Just to normalize for that, it's a little over $0.01 per share per quarter. You also have the sales. All the dispositions we completed throughout the fourth quarter and subsequent to the fourth quarter, that's gonna, you know, be another $0.01 per share reduction.
The combination of the North American transition, as well as, you know, starting in the second quarter, you have the Genesis excess rent stepping down. You kind of put that all together, and that's how I come up with the $0.03-$0.04 reduction in run rate.
Thanks. Then just on the dispositions transitions,
Yeah.
What is left dollar-wise to sell and/or?
To transition there that's left. You guys have done a lot here in the fourth and early to 2023 to start the year, just curious the quantum of what's contemplated that's left at this point?
We haven't disclosed what we have left. The only thing I will say is that what's left is substantially less than what we just disclosed that we got done post-year-end.
Okay. Thank you.
Your next question comes from the line of Vikram Malhotra from Mizuho. Your line is open.
Thanks for taking the questions. Maybe just to start off, can you clarify, you had some comments on collections. I just wanna make sure, is there a number you can give us in terms of rent collections in the quarter? Is there any % of the tenant, the skilled nursing tenant base that is on that partial paid in the quarter?
I mean, in terms of rent collection, that's been pretty steady, as it has been throughout the pandemic, you know, in the high 90% range. The hard part about using that number, Vikram, is that because we have a percentage of our portfolio, call it 5%-6%, that's on a cash basis. A true cash basis where the amounts we receive every month vary. It's gonna jump around a little bit, again, it's a small percentage of our portfolio that has remained consistent.
Okay. There are no new tenants that, kind of were partial paying in the quarter.
We did not put any tenants on cash basis this quarter.
Okay. Just to clarify, the AFFO run rate, given the $0.03-$0.04 that you mentioned, I think you reported, if I'm not wrong, $0.34, or $0.37 and adjusted $0.34. Is, you know, without you redeploying the proceeds you have for new acquisitions, is the right run rate somewhere in the low 30s? Is it like $0.31, in that range?
Our normalized number is $0.37. I think you would take that and, you know, make those adjustments as you deem fit.
Okay. Just last one. Any broader comments you can, you know, give on a potential mandate around, you know, minimum staffing and, you know, even anecdotally, if what you've heard from a federal perspective, any specific states you would call out and what the impact theoretically could be on operator financial health? Thank you.
Yeah, Vikram, it's really impossible to say now. Those discussions are still ongoing, and there isn't a whole lot of specificity to them. The lobbying effort on the part of the trade association and operators is really twofold. One, anything that you're going to do needs to be paid for, and certainly those discussions have occurred with CMS, who seems to acknowledge that that would be important. I don't want to speak for them, but that was kind of our take on that. But the other is, why would you put a mandate in place when there simply aren't nurses out there? Now there was one state, and I believe it was Missouri, but I might be off on that, and this is very recent, that did come out with a staffing mandate.
They worked with the industry, and the industry actually in that state was supportive of it because the mandate itself, number one, was reasonable. Number two, there were incentives for being able to meet the mandate, and there were qualifications around the effort being made to procure new staff. In other words, if there were staffing shortages, but operators were able to demonstrate to the regulators that they've made real good faith efforts and had that documented, that they wouldn't be penalized for it. As a result of that in that state, it got operator support. You know, there are ways of making this work, but it would have to be, I think, along those kind of lines. At this point, we have no idea where it's gonna fall.
Okay, thanks for the color.
Yeah.
Your next question comes from the line of Rich Anderson from SMBC. Your line is open.
Thanks. Good morning out there.
Hey, Rich.
I think it was said that you're expecting rate growth of 5%-10% in your senior housing portfolio. Does that hold true in its where it shows up in your portfolio? Whether it's the joint venture with TPG or your managed, wholly managed assets or even your triple net. Is it all that in that 5%-10% range, or is it more or less in some of those buckets?
I can say affirmatively for our managed portfolio that that's the case. Even more narrowly, all the operators within our wholly owned same store numbers. That's very much the case because that is actually where that information comes from. It is like I think that's a reasonable range for the rest of the portfolio as well.
Okay. Do you have any concerns around the country about future nursing strikes? You know, we had some of that going on in New York, in, you know, in the, in the conventional, you know, acute care hospital system. Is that something, you know, when you think about unionization of nursing around the country that you're keeping an eye on and that has, you know, keeps you up at night to a degree?
Well, it definitely doesn't keep me up at night. I would say the answer is no. One. Those strikes happen typically in states that are pretty fully unionized, and not just in our space, but in other spaces. We don't have a whole lot of exposure in states that are sort of a more militant union environment. No, it really doesn't concern us. You know, in the state of California, unions are strong in the north, not so strong in the south. Of our entire California portfolio, we have three facilities that are unionized.
Okay. Last for me is, I know you're gonna kinda keep it quiet or however we put it this year and sort of get your portfolio back into shape and return to growth next year. To what degree are you missing, you know, by taking that path? Is there anything going on transaction-wise that if you were a little bit more active, you could actually get more stuff done? Or is this a convenient time to be quiet because there's not a whole lot going on anyway, so you know, it kind of works out for you timing-wise?
Yeah, no, it's a fair question. We did actually a lot of transactions last year. It was a really healthy year for us. A lot of those transactions are operations that are also improving, the recovery over the course of the pandemic that are gonna be accretive to earnings next year. This year, I think there are a couple of factors. One, the activity is kinda light out there. The debt markets change things, and as Holly talked about on the skilled nursing comment. It's just, it's light in terms of opportunity. Secondly, you know, cost of capital is an issue, and, you know, we don't think until you all in the investment community believe that the industry really is recovered or has gotten a lot closer, you know, we think most everybody's gonna trade relatively sideways.
We wanna be cognizant of that as well. It's all because we feel really good about where we're gonna be next year based on all the activity that we've done. As we've said on past calls, Rich, for us, a lot of the focus of the pandemic has been to better position Sabra to grow as we come out of the pandemic. I think between all of the initiatives with the transitions and the asset recycling, all the balance sheet improvements made and the new credit facility, and the overall quality of the portfolio improving as a result of all these activities, I just think we're gonna be a much stronger REIT coming out of the pandemic.
Okay. Sounds good. Thanks, Rick. Thanks, everyone.
Yeah. Thanks, Rich.
Your next question comes from the line of Joshua Dennerlein from Bank of America. Your line is open.
Yeah. Hey, guys. Thanks for the time.
Hey, Josh.
I guess I just wanted to follow up on a comment you mentioned in your opening remarks, Rick, about guidance. Sounded like you might issue it later this year. I guess what are you waiting to see as far as, like, reinstating it? Just kinda curious given your comment.
It's primarily a trajectory that we actually think is predictable on senior housing. That's really the main thing. You know, we've seen, we experienced the inability to project in 2021 when we're actually, we're giving guidance and with some of our peers who have chosen to give guidance where in the next quarter they have to make some changes on it. It's just really difficult. We've kind of jokingly said, but it's true, is, and for me, for all my decades in the business, you know, I've never been as wrong in terms of predicting as I've been these last three years. We just want a little bit more certainty in terms of the rate of the velocity of recovery.
Okay. Okay. helpful. You brought up the private letter ruling you received in February 2020, I think.
Yes.
I was just curious why you brought that up, and does it apply to any other assets or just the Holiday assets? Just kinda curious.
It applies to the independent living assets in the States, which for us is primarily Holiday. I brought it up because it's gotten a lot of attention since Welltower received theirs. It is something that's really good to have from an optionality perspective, even if you don't want to use in the way they have this time, although it did allow us to transition Holiday in a non-REIT structure. I just wanted to remind everybody because the pandemic feels like it's been longer than two years, that we actually have a private letter ruling as well. I believe that we were the first in our space to have one that had that outcome.
No, yeah, helpful. I think a lot of us forgot. Thank you.
Sure.
Your next question comes from the line of Steven Valiquette from Barclays. Your line is open.
Great. Thanks. Hello, everyone. Thanks for taking the question. I think a lot of the operational stuff's been covered so far, but one thing just on the kind of interest expense and balance sheet. You know, you guys renewed the extent of the credit facility in early January, closed some dispositions. Obviously, things are already improving this year. You know, despite those favorable developments, you know, amongst some of the healthcare REITs that have given 2023 guidance, one of the trends seems to be that interest expense headwinds for 2023 have been greater than what was reflected in street consensus, at least for a few companies.
I know you're not giving 23 operational guidance, but I'm wondering if you can at least just talk directionally on just where you think interest expense might shake out for 23 versus the $105 million just reported for 22, you know, just directionally, just based on the variables that you're aware of today, just to make sure we're not?
Yeah.
missing anything obvious.
Sure. Yeah. I mean, the two variables there would be any variable rate debt, pardon the pun, that we have in our portfolio. Right before we did the credit facility, all of our variable rate debt, excluding our revolver balance, was effectively fixed. We had already swaps in place, and as I mentioned in my prepared remarks, we entered into additional swaps and current starting and four starting swaps to lock in that interest for the next five years. If you look at the predominance of our debt that's outstanding, it's all fixed rate, you know, between our public bonds and our term loans, and we have a little bit of mortgage debt as well. It's all fixed rate.
The only variability you would experience, or that we would experience from the debt side would be on our revolver balance. We've paid that down significantly subsequent to year-end. We'll continue to look to pay that down through, you know, available cash flow. If there's, you know, additional sales proceeds as we generate, you know, more earnings out of our senior housing managed portfolio, that's all gonna help reduce that balance down even further, you know, reduce whatever exposure we may have to variable rates.
Okay. Got it. Okay, one other kind of random question here. You talked about the PLR. Obviously, that's for independent living and, you know, and kind of just for data structure overall. I guess I'm kind of curious on, you know, if you do believe that there's a potential turnaround in the, you know, the SNF sector longer term, does it make sense at some point to explore even doing, you know, a data structure for, you know, for skilled nursing? You know, there are, you know, some other REITs that, you know, are involved in that. I'm wondering if that's ever crossed your mind or if that's something you wanna, you know, steer away from for other REITs? Just curious to get your high-level thoughts around that.
Yeah. You know how people will say never say never? This is like never, ever will it happen. There's only one REIT out there that's done that. They're a private non-traded REIT. No, I think the liability is tremendous. It's different with skilled because in the skilled nursing space, there's a national database called Nursing Home Compare, that's where the trial attorneys go. They go into that database, they go fishing, they look for facilities that have had, you know, certain numbers of deficiencies or issues with the regulators. It's right there for the taking, they can put classes around that. Whereas in senior housing, the private pay industry with no federal regulations, that doesn't exist.
To me, there's huge liability risks there, and this has come up on occasion over the years, and just won't do it. Just not gonna happen.
Okay. All right. No, I appreciate you clarifying that.
Yeah, sure. The other thing I want to just point out, it wasn't Missouri that has the state mandate that the industry supported. It was the state of Virginia. I just wanted to clarify that.
Your next question comes from the line of Tayo Okusanya from Credit Suisse. Your line is open.
Oh, yes. Good morning out there. I just want a clarification on the Enlivant JV. I think Mike, you made commentary that the JV had less contributions to your bottom line this quarter than last quarter, which again seemed contrary to what was happening in your wholly owned portfolio. Can you just talk a little bit about kind of the outlook for the Enlivant JV and maybe any updates on talks with TPG about a potential sale?
The sales process is ongoing, and you're right about the trends there are counter to what we're seeing elsewhere in the portfolio, which we've seen some really great gains on the AL side. The issue really is, you know, for anybody that's ever taken a company through a sales process, it creates a lot of uncertainty and it's a very big distraction for management. In this case, the sale process was supposed to start after Labor Day of 2021, which is why we had to make the announcement on our second quarter call of 21, that the sale was gonna happen, and we had to address it in terms of the write down as well. They decided not to start the sale process at that point in time.
You've had 18 months now where this thing has hung over the head of the portfolio and it's created problems. There's been a lot of attrition, and it's been a big distraction for the management team, and I give the management team there a lot of credit for essentially being able to sort of hold steady through this whole process. It is being marketed now and, you know, from our perspective, we don't expect much and that's kinda it.
Yeah. Tayo, the only thing I would add to that in addition to what Rick said on the operating performance, if you recall, that's a pretty highly levered portfolio. Debt service costs have been eating away at AFFO as well.
Gotcha. Okay. That's helpful.
Yeah. just,
Operationally, I mean, is this occupancy down? Is occupancy continuing to kind of trend down versus the rest of your portfolio that's improving? Just give us a sense of operationally what's happening.
It's just flat. It's just flat. It's just not, it's not going up. It's not going down. That's why I said, you know, they're basically holding serve, and I give them credit for that, given everything that they've gone through. The other thing I wanna remind everybody that relative to the support payments that have been ongoing for the operating company, we don't contribute anything to those.
Yep.
None of that comes from Sabra.
Okay. That's helpful. Thank you.
Yep.
Again, if you'd like to ask a question, press Star, then the number one on your telephone keypad. Your next question comes from the line of John Pawlowski from Green Street. Your line is open.
Thanks. Maybe just a follow-up to that last question. Assuming the credit markets remain challenging, Rick, would you expect, or do you expect to have to invest additional capital in the Enlivant JV if TPG can't find a seller?
So-
A buyer.
We don't have that expectation. We've made that clear to TPG as well. We haven't been investing anything, and we don't intend to invest anything. The debt is non-recourse. We actually could just walk if we think that's the right thing to do.
Okay. Understood. I have one for you, Talya. With respect to your mortgage loans and preferred equity investments, can you give me a sense for how well covered the debt service costs are today? If you're becoming incrementally more concerned about just credit behind any of the properties?
There's only one loan that's really more substantial, that is our loan to RCA, which is collateralized by six assets. Their operations are improving, so we're not really concerned. Those are core assets to their operations, A, and B, they're on the upswing from an occupancy, an EBITDA, and coverage perspective. We have a degree of confidence there.
Okay. On the preferred equity side, any concerns there?
No. That's a pretty small amount of money at this point. So no.
Your ne-
Hello? Rob, I think we're done then. Well, thanks everybody for their participation today. We appreciate it. We are available as always for any follow-up, and have a great day. Thank you.