Includes 36 skilled nursing facilities
LOUISVILLE, Ky. (Nov. 14, 2016) — Kindred Healthcare, Inc. today announced that it has entered into agreements with Ventas, Inc. to facilitate its previously announced plan to exit the skilled nursing facility business.
Kindred has initiated a process to sell all of its owned and leased nursing centers, which includes all 36 skilled nursing facilities currently leased from Ventas. The agreements with Ventas provide Kindred with the option to acquire the real estate for all of the Ventas Properties for an aggregate consideration of $700 million. The agreements with Ventas also provide that, through Oct. 31, 2018, Kindred has the right to find one or more purchasers of the Ventas Properties.
As Kindred locates new owners/operators for the Ventas Properties, in exchange for a payment by Kindred to Ventas of the allocable portion of the $700 million purchase price, Ventas has agreed to convey the applicable Ventas Property to the new owner/operator. At its option, Kindred may also elect to renew the leases for any of the Ventas Properties through April 30, 2025, and transfer them into the single remaining master lease agreement.
“Kindred’s nursing center portfolio primarily consists of the 36 Ventas Properties (4,363 licensed beds), 26 owned nursing centers (3,503 licensed beds), 25 nursing centers (3,217 licensed beds) leased from other third parties and four managed nursing centers (485 licensed beds), along with seven assisted living facilities (380 licensed beds), of which two are owned and five are leased,” said Stephen D. Farber, Executive Vice President and Chief Financial Officer of Kindred.
“We expect the after-tax net proceeds from the sale of these assets will range from $100 million to $300 million after transaction costs, severance expenses, and the amount payable to Ventas for the sale of the Ventas Properties,” he said. “We expect to apply these anticipated net proceeds to reduce funded debt, which combined with the impact of our cost realignment initiative, the elimination of approximately $90 million of annual rents, and the reduction of approximately $30 million of annual capital expenditures will reduce our leverage.”
Kindred will continue to operate the Ventas Properties as it works to sell them to new owners/operators, and they will remain leased under their current master lease agreements until Kindred exercises its purchase option or April 30, 2018, whichever comes first. If Kindred does not complete the acquisition of the Ventas Properties by April 30, 2018, the lease for any remaining Ventas Properties will be automatically renewed through April 30, 2025, and transferred into Master Lease No. 5.