AdCare’s M&A Spree Continues with 3 Skilled Nursing Facilities for $27.3 Million

AdCare Health Systems, Inc. (NYSE Amex:ADK) announced on Jan. 6 that it had signed a definitive purchase agreement for three skilled nursing facilities located in Arkansas, for $27.3 million.

There are a combined 439 beds in the facilities, which generate an estimated $22.2 million in gross annualized revenue, according to their most recent financials.

“Included in this portfolio is a 157 bed skilled nursing facility located in close proximity to a major Little Rock acute-care hospital,” said Boyd Gentry, AdCare’s president and chief executive officer, in a statement. “This facility has recently been completely renovated, which allows us to reposition it as a major provider of sub-acute services. We expect this strategy to generate a significant increase in revenues as we improve this facility’s occupancy with higher acuity patients. The other two facilities are ideally configured with a significant number of private rooms.”

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AdCare anticipates the acquisition will be completed within the first quarter of 2012, and plans to finance the facilities with a traditional bank loan.

Considering AdCare’s current annualized run-rate along with facilities that are in the process of closing, the company’s estimated annualized revenue run-rate is expected to exceed $322 million, representing an increase of more than 500% compared to its 2010 revenues. Additionally, the company has seen a revenue increase of more than 12 times since it initiated its M&A campaign.

“This signing brings the total number of facilities we’ve put under contract to 54 since we began our current M&A program,” said Chris Brogdon, Adcare’s vice chairman and acquisitions officer. “With our M&A program and the integration of new facilities remaining our major focus in 2012, we continue to evaluate a number of opportunities that fit our acquisition strategy.”

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The company has been targeting facilities in the Midwest and Southern states that haven’t traditionally concentrated on providing post-acute services, said Gentry, who added that the company works to increase Medicare census and occupancy once it has acquired facilities, as well as optimize reimbursement and patient care.

“This strategy continues to yield results, as our team has been successful at increasing both higher acuity patients and associated reimbursement rates in excess of 25% versus pre-acquisition levels,” Gentry said.

Throughout the first quarter of 2012, AdCare has plans to complete acquisitions of at least 23 additional facilities, including these three nursing facilities, five Oklahoma facilities, and a 15-facility portfolio across the Southeast.

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Written by Alyssa Gerace