Sabra Health Care's Strategic Shift to the SHOP Model: Operational Efficiency and Value Unlocking

Sabra Health Care REIT (NASDAQ: SBRA) has embarked on a transformative strategic shift, prioritizing its Senior Housing - Managed (SHOP) model to enhance operational efficiency and unlock long-term value. This pivot, announced in 2025, aims to increase SHOP exposure from 20% to 30% of the company's total portfolio by 2026, requiring approximately $1 billion in investments, according to a beyondSPX report. The initiative reflects Sabra's disciplined approach to portfolio optimization, leveraging the SHOP model's demonstrated ability to drive earnings durability and asset performance.

Operational Efficiency: A Catalyst for Growth

Sabra's recent financial results underscore the operational momentum of its SHOP strategy. In Q2 2025, the same-store SHOP portfolio achieved 17.1% year-over-year cash NOI growth, driven by an 86% occupancy rate and a 3.9% increase in revenue per occupied room (RevPOR), as the beyondSPX report noted. These metrics highlight the model's resilience in a competitive healthcare real estate landscape. By focusing on high-quality, managed assets, Sabra has minimized the risks associated with traditional triple-net leases, where operators have less incentive to optimize performance, according to an Investing.com presentation.

The company's strategic rebalancing further amplifies efficiency. For instance, the transition of underperforming assets-such as the Holiday portfolio-to new operators has already yielded tangible improvements in occupancy and revenue generation, a point also highlighted in the beyondSPX report. This proactive management approach aligns with broader industry trends, where operators with skin in the game (e.g., equity stakes in properties) are more likely to invest in facility upgrades and service enhancements, as noted in a Seeking Alpha article.

Value Unlocking Through Portfolio Rebalancing

Sabra's shift to the SHOP model is not merely operational but also structural. By converting a significant portion of its triple-net senior housing assets to managed models, the company is positioning itself to capture a larger share of the value generated by its properties. This is evident in the 17.8% year-over-year cash NOI increase reported in Q3 2024, which analysts attribute to the compounding effects of portfolio rebalancing, according to a SAHM Capital analysis.

Moreover, Sabra's disciplined capital allocation strategy-dispositioning non-core assets like the Genesis portfolio in 2024-has freed up resources for strategic reinvestment. The company's focus on selective acquisitions and operator transitions ensures that capital is directed toward assets with the highest growth potential, as discussed in the beyondSPX report. This approach has attracted investor attention, with five analysts revising their price targets upward in the past three months, averaging a $21.00 target per share, per the SAHM Capital analysis.

Technology as a Differentiator

A critical enabler of Sabra's efficiency gains is its integration of artificial intelligence (AI) into asset management systems. By leveraging AI-driven analytics, the company can optimize occupancy rates, predict maintenance needs, and enhance operator performance tracking, a capability the beyondSPX report highlights. This technological edge not only reduces operational costs but also accelerates value creation cycles, allowing Sabra to respond swiftly to market dynamics.

Market Validation and Forward-Looking Outlook

The market has begun to validate Sabra's strategic direction. As of May 2025, the company trades at a forward FFO multiple of 11.9x, significantly below the peer range of 12.9x–19.6x, according to the SAHM Capital analysis. This discount suggests undervaluation relative to its operational performance and growth trajectory. Analysts project continued momentum, with Sabra's 7.6% year-over-year revenue growth in Q3 2024 and its $1 billion SHOP expansion plan serving as key catalysts, per the SAHM Capital analysis.

Conclusion

Sabra Health Care's strategic shift to the SHOP model represents a masterclass in operational efficiency and value unlocking. By prioritizing managed assets, leveraging technology, and executing disciplined portfolio rebalancing, the company is not only mitigating risks but also positioning itself as a leader in the evolving senior housing sector. For investors, the combination of strong financial performance, a compelling valuation, and a clear growth roadmap makes Sabra an attractive long-term opportunity.