Capital Senior Living (NYSE: CSU) took another step toward stabilizing its balance sheet.
Capital reached rent forbearance agreements with two of its real estate investment trust (REIT) landlords — Toledo, Ohio-based Welltower (NYSE: WELL) and Chicago-based Ventas (NYSE: VTR), the Dallas-based operator announced in an SEC Form 8-K filing on Monday.
Additionally, Capital agreed to early terminations of its master leases with these two of the “Big 3” REITs. This follows the operator’s termination last month of its master lease with the other “Big 3” REIT, Irvine, California-based Healthpeak Properties (NYSE: PEAK). Capital and Ventas reached an agreement on March 10; the Welltower deal was completed on March 15.
Capital had been negotiating with all three REITs for months on terminating the master leases and rent forbearance, the company said in an email to Senior Housing News.
The moves are expected to improve Capital’s cash flow by approximately $22 million and reduce lease liabilities by approximately $253 million. The company currently operates seven communities owned by Ventas and 24 communities in seven states owned by Welltower, secured by three master leases.
Under the new agreements, Capital will pay Ventas $1 million from February 1 through December 31, compared to $1.3 million, while Welltower will receive $2.2 million per month through the same period, compared to $2.8 million previously.
The operator will also release security deposits held by the REITs in order to fulfill the original contractual rent under its leases through December 31. Any properties that have not been transitioned or sold by then will be placed in management agreements.
These are the latest moves by Capital, which has worked over the past couple of years on operational improvements across its portfolio that it believes will position the company for sustained success. Capital CEO Kim Lody told SHN last November that the low point of the turnaround was behind the company.
“The management team will continue to take proactive actions to best position the company to drive sustainable growth and value creation. These agreements further progress our strategy to reduce our lease liabilities and increase the percentage of our portfolio that is company owned,” Lody said in a statement announcing the agreements.
Welltower declined comment to SHN on the agreement. Ventas had not returned requests for comment at the time this article was published.
Capital Senior Living stock ended trading Monday up 4.5%, to $0.70 per share, bucking the overall market on a day when the Dow plunged nearly 3,000 points. The operator postponed its Q4 2019 earnings release and call to March 31.