Kindred's SNF operating portfolio consists primarily of the facilities it leases from Ventas, which total 4,363 beds, 26 Kindred-owned properties totaling 3,503 beds, 25 nursing centers totaling 3,217 beds that it leases from other third parties and four managed nursing centers with 485 beds, along with seven assisted living facilities, of which two are owned and five are leased. The company expects 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 SNFs.

In order to meet the needs and demands of the changing healthcare industry, real estate professionals need to adapt their strategies to new circumstances. Join us at RealShare Healthcare Real Estate on Dec. 7 and 8 for insights on succeeding in both the right markets and product types as well as navigating and finding opportunities in the more challenging ones. Learn more.

CHICAGO—Ventas Inc. and Kindred Healthcare Inc. said Monday they had agreed on a plan to facilitate Kindred's exit from the skilled nursing segment, which Louisville, KY-based Kindred announced this past Thursday. Under the agreement, Ventas will either sell Kindred up to 36 of the Ventas-owned, Kindred-operated skilled nursing facilities in Ventas' portfolio, which Kindred can then resell at a later date, or renew the current leases on any unpurchased SNFs through 2025 at current rent levels.

If Kindred acquires all 36 of the SNFs, the aggregate purchase price will be $700 million, representing a 7% yield on current cash rent. Also as part of the agreement, Ventas and Kindred have extended to '25 the lease term for all of Ventas' long-term acute care hospitals operated by Kindred, which were scheduled to mature in 2018 and 2020. Current rent levels will be maintained under the extension.

“With these agreements, we are improving our portfolio and enhancing our ability to deliver reliable growth and income for our shareholders, says Debra A. Cafaro, chairman and CEO of Chicago-based Ventas. “Upon the expected sale of our 36 skilled nursing facilities, we will further reduce our skilled nursing rent to 1% of our total business, a trend we initiated in 2015 with the spin-off of most of our skilled nursing facilities.” Currently, 4% of Ventas' NOI comes from SNFs.

At Kindred, president and CEO Benjamin Breier says, “We expect our exit from the SNF business to be accretive to earnings and to substantially improve our cash flow generation and leverage profile going forward.” The company expects its associated cost realignment initiative to eliminate approximately $70 million to $100 million of costs, which includes approximately $60 million of direct costs associated with our nursing center division, “with the balance primarily derived from reductions of indirect costs in our shared service support centers. The agreements with Ventas represent an important step forward in the success of this initiative.”

Kindred's SNF operating portfolio consists primarily of the facilities it leases from Ventas, which total 4,363 beds, 26 Kindred-owned properties totaling 3,503 beds, 25 nursing centers totaling 3,217 beds that it leases from other third parties and four managed nursing centers with 485 beds, along with seven assisted living facilities, of which two are owned and five are leased. The company expects 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 SNFs.

In order to meet the needs and demands of the changing healthcare industry, real estate professionals need to adapt their strategies to new circumstances. Join us at RealShare Healthcare Real Estate on Dec. 7 and 8 for insights on succeeding in both the right markets and product types as well as navigating and finding opportunities in the more challenging ones. Learn more.