Ventas Buys 5 Long-Term Acute Care Hospitals For $189M
As part of the deal, Ventas structured a lease extension with Kindred on 23 LTACs through 2030.
Senior housing and healthcare REIT Ventas announced that it entered an agreement with Kindred Healthcare and its parent, ScionHealth, to buy five long-term acute care (LTAC) facilities and to extend leases on 23 others into 2025.
Early signs of the deal were made public in Ventas’s August 2 earnings call. Kindred was already operating 23 LTACs owned by Ventas, as advanced discussions between the two sides continue.
“While a deal is not done and terms could change, we and Kindred are close to a transaction that would result in a 25% to 30% full-year rent reduction on these 23 LTACs starting May 1, 2025,” Ventas chairman and CEO Debra Cafaro, said in the call.
“About two-thirds of that amount would be reflected in calendar year 2025. We’ll be happy to share more with you if and when a deal is concluded. We continue working toward a positive lease resolution that optimizes Ventas value and the NOI from these 23 properties, strengthens the master lease and supports Kindred’s future success.”
Answering one analyst’s question, Cafaro also said “we’re working for multiple goals, which is to improve Ventas enterprise value to get the most NOI from those properties that we can and also to strengthen the master lease and to support Kindred’s future success.”
The acquisition of the five LTAC properties is for $189 million. Kindred will continue to operate them, and the properties will be added to the master lease for an initial 10-year term. The annual cash rent will be $16 million and will increase by 2.75% every year. ScionHealth will use the proceeds to “further improve its credit profile and for other bona fide corporate purposes.”
The extended lease for the 23 other properties will start with a base rent of $80 million. That will increase annually by 2.75% through the extended lease maturity date of April 30, 2030. Ventas says that if rent at these assets exceeds certain thresholds, it can receive annual revenue-sharing rent. ScionHealth has also provided Ventas with warrants for 8.9% of its common equity exercisable at the pre-transaction value of the common equity.
Ventas also said the transactions would strengthen EBITDARM (earnings less interest, taxes, depreciation, amortization, rental costs, and management fees) to rent coverage under the master lease to at least 1.3 times.