AdCare Health Systems, Inc., announced on Jan. 3 that it has completed the previously announced agreement to purchase a skilled nursing and assisted living community in Ohio for a final purchase price of $12.5 million—$1.0 million less than the initial purchase agreement.
AdCare Property Holdings, LLC, a wholly owned subsidiary of AdCare Health Systems, had entered into a purchase and sale agreement with Eaglewood Villa, Ltd. and Woodland Manor, Ltd. on Aug. 15, which it since amended on Oct. 19 and most recently on Dec. 16, 2011.
The second amendment decreases the amount of the purchase price for the Eaglewood properties payable in cash at closing from $12.0 million to $7.5 million, and increases the principal amount of the promissory notes to be issued at closing in favor of the Eaglewood sellers from $500,000 to $5.0 million.
Now, the promissory notes will consist of a $500,000 note, repayable within two years following closing and bearing interest at the annual interest rate of 6.5%, and also a note in the amount of $4.5 million, repayable within six months of closing and with an annual interest rate of 6.5% from closing to 59 days following closing, increasing to 8.5% from 60 days following closing to 119 days, and rising again to 10.5% from 120 following closing until the repayment of the loan.
Eaglewood Village, an assisted living facility, has a purchase price of $5.5 million, with Woodland Manor, a skilled nursing facility, going for $7.0 million. Both facilities are located in Ohio, and the transaction was closed on Dec. 30, 2011.
AdCare will finance the assisted living facility acquisition with a 30-year, fixed-rate, tax-exempt bond issuance, and financed the skilled nursing facility with a traditional bank loan.
The transaction brings the total number of facilities that AdCare has purchased, leased, or managed to 44 since it began its M&A campaign in the fall of 2009, and the company says it will continue pursuing an aggressive M&A program.
“Our strategy of acquiring skilled nursing facilities is proving highly successful, not only in our closing rate and terms, but especially in our post-acquisition performance,” said Boyd Gentry, AdCare’s president and chief executive officer. “We have been targeting facilities that have not traditionally concentrated on providing post-acute services, and then once acquired, we increase Medicare census and occupancy, as well as optimize reimbursement and patient care.”
By the end of 2011, AdCare had placed 29 new facilities under contract during the year, completing 18 facility acquisitions. It expects to complete the acquisition of at least 20 more in the first quarter of 2012.
Written by Alyssa Gerace