Kindred Healthcare, Inc. (NYSE: KND) today announced it has entered into agreements to renew early its leases with Ventas, Inc. (NYSE: VTR) for 48 properties comprising transitional care hospitals and nursing centers.
Kindred will renew the existing leases for three transitional care hospitals and 15 nursing and rehabilitation centers for an additional five year term effective May 1, 2015. The annual rents for these facilities will increase by $4 million on October 1, 2014.
Additionally, the company will renew the leases for 19 transitional care hospitals and 11 nursing and rehab centers for a term of 10 years and seven months, also effective October 1, 2014. Annual rents for these facilities will increase by $11 million and are subject to annual increases based upon the change in the consumer price index.
In total, the 22 transitional care hospitals contain 1,753 licensed beds and generated revenues of $572 million for the year ended December 31, 2012.
The 26 nursing and rehabilitation centers contain 3,134 licensed beds and generated revenues of approximately $271 million for the same year ended December 31, 2012.
Earnings before interest, income taxes, depreciation, amortization and rent (EBITDAR) for both sets of facilities were approximately $98 million for the transitional care hospitals and $48 million for the nursing centers, respectively, for the year ended December 31, 2012.
Also of note, Kindred announced that it would not renew the leases for 60 nursing centers, which will expire on September 30, 2014. These facilities comprise 7,214 licensed beds and generated revenues for the year ended December 31, 2012 of $540 million.
EBITDAR for these 60 properties was $58 million for the year ended December 31, 2012.
The agreements between Kindred and Ventas, a real estate investment trust (REIT), are designed to provide Ventas with more flexibility to accelerate the transfer of the 60 nursing centers to new operators.
Kindred expects to exit these facilities on or before September 30, 2014, and in connection with the transaction, the company will pay Ventas $20 million.
Kindred management believes that entering into these new lease agreements will be slightly accretive to the company’s consolidated earnings per diluted share in 2014, as well as help to boost the company’s Integrated Care Market strategy, according to company CEO Paul J. Diaz.
“We are pleased to have negotiated a mutually beneficial transaction with Ventas that accelerates our strategic repositioning plan in 2014 and paves the way for us to grow and advance our Integrated Care Market development plans,” said Diaz. “These transactions reflect another step in our maturing and improving relationship with Ventas and allow both companies to focus on the future and the creation of value for our patients and shareholders.”
Written by Jason Oliva
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