Fitch Ratings affirmed its ratings on healthcare real estate investment trust Sabra Health Care REIT Inc. at BBB- and revised the ratings outlook to negative from stable.
The ratings affirmed include the REIT's long-term issuer default rating, as well as the long-term IDR, unsecured revolving credit facility, unsecured term loan and senior unsecured notes ratings of the company's operating partnership, Sabra Health Care LP.
Fitch said the ratings take into account the REIT's improved credit metrics following its recent transactions, which improved the company's portfolio and tenancy. The company's leverage, however, has approached the upper end of its target range and surpassed the rating agency's negative sensitivity, possibly remaining there over the near term.
Fitch sees Sabra's focus on skilled nursing facilities and seniors housing properties as its "largest credit concern." According to the agency, the REIT's cash flows are potentially under pressure due to broader headwinds in the sector, related to volume and margin compression faced by its skilled nursing tenants and surplus seniors housing supply.
Fitch said it could resolve the negative outlook and return to a stable outlook within the next 12 to 18 months if Sabra managed to sustain leverage below its 5.5x rating threshold.