As part of its ongoing plan to transition out of senior housing operations, AdCare Health Systems, Inc. (NYSE MKT: ADK) has signed agreements with third-party operators to lease seven of its skilled nursing facilities in Georgia and Ohio.
The lease on the five facilities in Ohio will be effective upon securing approval from the Department of Housing and Urban Development (HUD), which is expected by the end of the year. The lease on the two facilities in Georgia to a different operator will be effective November 1, 2014. The names of the operators were not disclosed.
“We are moving expeditiously to execute our stated strategic plan of transitioning to a health care property holding and leasing company, and these transactions indicate the progress we have made,” said Bill McBride, AdCare’s President and CEO, in a statement. “We are moving quickly to secure the necessary approvals and finalize negotiations with additional operators to lease our remaining facilities.”
McBride, a senior housing and REIT veteran, was recently hired as head of AdCare, a move the company said would help “further our transition” from senior housing operations.
Under terms of the triple-net lease agreements, the lessees of the facilities will be responsible for day-to-day management, ongoing maintenance and facility improvements for the duration of the leases.
The initial term of the leases is five years with renewal options after that period. The annual lease payments will exceed the interest and other property-related costs on the facilities by approximately $2 million.
AdCare continues to pursue similar lease options across its portfolio to drive cash flow and maximize shareholder value. To date, the long-term care provider has entered into agreements to lease 14 facilities, while 23 facilities remain to be leased to third parties.
Written by Emily Study