Pennant to Transfer 5 Communities to Ensign After Strategic Review

The Pennant Group (Nasdaq: PNTG) is shedding some communities from its portfolio. 

The company has entered into definitive agreements to transfer the operations of five senior living communities to affiliates of The Ensign Group (Nasdaq: ENSG), the company it spun off from in 2019. The communities, located in Arizona, California, and Washington, are all located near skilled nursing facilities that Ensign’s affiliates operate.

The management transfers are slated to take place across a series of separate closings in the first half of this year.

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“The transaction with Ensign allows us to focus our growing leadership strength on fewer operations across a tighter geographic footprint,” Pennant CEO Danny Walker said in a press release about the move. “We are confident in the long-term value of our senior living portfolio and believe this minor reconstitution will accelerate the realization of that value.”

The move to transfer five communities to Ensign came after a “one-time strategic review” of the company’s senior living portfolio, according to Walker.

Like Ensign, Pennant operates on a locally-focused model that centers on empowering leaders at the community level. The two companies also currently collaborate through a preferred provider network called the Ensign-Pennant Care Continuum, and Walker added that the latest transaction underscores the value of that partnership.

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“In addition to being co-located with Ensign-affiliated operations, these campuses are uniquely positioned within strong Ensign markets, and through Pennant’s home health and hospice portfolio, we can continue to support the needs of these residents and their families,” Walker added. “We believe this transaction benefits all parties involved.”

Pennant also announced it has entered into a letter of intent to lease operations of a Class A senior living community “in a key market.” If all goes according to plan, Pennant said it will begin managing the community under a triple-net lease in the second quarter of 2022.

Ensign CEO Barry Port called the transaction a “win-win” for both Pennant and Ensign.

“We hope this shows the continued commitment we have to Pennant, and Pennant has to Ensign,” Port said.

With the transfers and the addition of the new Class A building, Pennant expects to operate 50 senior living communities across six states, along with its 88 home health and hospice agencies.

Eagle, Idaho-based Pennant has had its fair share of challenges amid the Covid-19 pandemic. The company reported “sobering” earnings results in the third quarter of 2021 as Covid-19 infection rates and labor pressures slowed its positive momentum.

“In general, the demands of completing the spin off successfully, the high volume of home health and hospice acquisitions, the leadership overhaul of our senior living segment and the investment of time and resources in early stage new business ventures, all when coupled with the unique pressures of the Covid-19 pandemic, have diluted our effectiveness at operating to our standards,” Walker said last November.

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