Kindred Healthcare, Inc. (NYSE: KND) on Thursday took the first step toward its planned exit from the skilled nursing space, announcing the sale of 54 SNFs in 10 states.
The $519 million transaction involves the majority of the 89 total SNFs and seven assisted living facilities that Kindred will sell to BM Eagle Holdings — a joint venture run by affiliates of alternative asset management company BlueMountain Capital Management — as part of the overall deal.
Kindred and BM Eagle announced the blockbuster transaction back in June, laying out a two-step process in which Kindred would handle the sale of all the SNFs — including 36 owned by Chicago-based real estate investment trust (REIT) Ventas, Inc. (NYSE: VTR). In turn, Kindred planned to pay Ventas, which would then transfer the real estate to BlueMountain.
The REIT owned 22 of the SNFs involved in Thursday’s deal, and Ventas announced that it had received $488 million from Kindred upon closing. That’s a 7% cash yield on rent for the assets involved, the REIT reported.
“We are delighted to work with Kindred to position both companies for continued success,” Ventas chairman and CEO Debra Cafaro said in a statement. “We are also pleased with the successful completion of the majority of our skilled nursing facility sales as we continue to deemphasize our SNF business in a profitable way.”
Once Ventas sheds the remaining SNFs — which both the REIT and Kindred expect to happen by the end of 2017 — it will only generate 1% of its net operating income from skilled nursing tenants.
In all, the parties estimated that the Louisville, Ky.-based Kindred would net $700 million from the SNF sale, which it would then pay to Ventas for its real estate. The $210 million expected windfall for Kindred would largely come from cash benefits associated with net operating losses and lower working capital, according to analysts who weighed in after the deal was originally announced.
Written by Alex Spanko