Kindred to Buy 36 Ventas Facilities for $700M

by Jeff Shaw

LOUISVILLE, Ky. — Kindred Healthcare Inc. (NYSE: KND) plans to buy the 36 skilled nursing facilities it currently operates for Ventas for $700 million. The move is the latest step in Kindred’s plan to fully exit the skilled nursing business. The company will presumably try to sell the facilities that it will now both own and operate.

Kindred announced its plan to leave skilled nursing last week on its third-quarter earnings call, which revealed a quarterly loss of $671.3 million. The company will focus instead on home healthcare and post-acute care hospitals.

Ventas (NYSE: VTR), one of the largest healthcare REITs in the country, sent out its own statement the next day, noting that Kindred could not sell or lease the 36 Ventas-owned facilities without Ventas’ consent. By buying those 36 facilities, Kindred is now free to sell or lease the properties.

As part of the deal, Ventas has extended its lease with Kindred for all the Ventas-owned acute-care hospitals in Kindred’s operational portfolio. The leases were set to expire between 2018 and 2020, but have all been extended to 2025.

Ventas itself is attempting to exit the skilled nursing business as well. The company created a separate spinoff company — Care Capital Properties (NYSE: CCP) — for the bulk of its skilled nursing portfolio last year.

“We are delighted to reach these agreements with Kindred, which enhance our strong relationship and position both companies for success,” says Debra Cafaro, Ventas chairman and CEO. “Upon the expected sale of our 36 skilled nursing facilities, we will further reduce our skilled nursing rent to 1 percent of our total business, a trend we initiated in 2015 with the spinoff of most of our skilled nursing facilities.”

The wording of the deal leaves some room for Ventas to continue owning some of the facilities, noting that the sale will be for “some or all” of the facilities. Any facilities that Kindred does not successfully purchase will also have their leases extended through 2025.

Kindred plans to fully exit the skilled nursing business by the end of 2017. The company’s stock price fell sharply following last week’s earnings call — dropping from $8.75 per share to $5.70 per share overnight — but have since partially recovered to $6.55 on Friday, Nov. 11. At its annual peak in April, Kindred’s stock traded at $14.90 per share.

— Jeff Shaw

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