By October 1, Cascadia Healthcare will operate all seven of the skilled nursing facilities previously run by Kindred Healthcare (NYSE: KND) in Idaho — but its new landlord isn’t the company that agreed to buy Kindred’s entire SNF portfolio at the end of June.
The Eagle, Idaho-based Cascadia will lease the seven former Kindred SNFs from CareTrust REIT (Nasdaq: CTRE), which purchased three of the facilities at the beginning of September; the remaining four sales will close on the first of next month.
According to Steve LaForte, Cascadia’s director of acquisitions and finance, the seller was BlueMountain Capital — the alternative asset management firm that, through affiliated company BM Eagle Holdings, bought Kindred’s entire portfolio of 89 skilled nursing facilities.
The New York City-based firm is currently in the process of finding new operators for some facilities and disposing of others, LaForte said, and the 584-bed Idaho portfolio attracted the interest of both CareTrust and Cascadia. The real estate investment trust (REIT) and the operator already had an existing landlord-tenant relationship: After its founding in 2015, Cascadia’s very first transaction was a sale-leaseback arrangement with the San Clemente, Calif.-based CareTrust for a SNF in Boise, LaForte said.
Earlier this year, the company entered into three other leases for CareTrust properties, with one each in Nampa, Idaho; Portland, Ore; and Battle Ground, Wash.
A representative for BlueMountain declined to comment, and it is unclear whether the firm is also seeking quick sales of other Kindred properties. CareTrust REIT did not respond to a message from Skilled Nursing News as of press time.
The REIT did issue a press release on September 5 announcing the purchase of seven skilled nursing facilities in Idaho for a total purchase price of $65.5 million, though it did not list a seller. Cascadia was named as the new operator, with an average remaining lease term of 13.5 years with a pair of five-year renewal options and rent escalators.
An unexpected opportunity
After closing the three other leases with CareTrust earlier in the year, LaForte and the team at Cascadia — which was co-founded by former Ensign Group (Nasdaq: ENSG) executives Owen Hammond and Doug Bodily — didn’t expect to make another acquisition. After all, the company already had two new SNFs under construction in Idaho, with a site in Nampa set to welcome its first resident next month and another new location in Boise slated for a ribbon-cutting in December or January.
But Cascadia found the Kindred portfolio too good to pass up.
“It was an opportunity to gain a little bit more gravity, economies of scale in Idaho,” LaForte said, noting the company’s roots in the state and connections with the Idaho Health Care Association.
“The Kindred portfolio works,” he added.
While Cascadia has already identified some of its recent acquisitions as potential turnaround opportunities, LaForte said the Kindred sites offered long-term potential, with solid cashflow and well-maintained physical plants for buildings of their vintage.
“The Kindred buildings worked out to be very accretive to our bottom line,” LaForte said.
Cascadia has also spent the last few months beefing up its back-office staff with several former Kindred employees in an attempt to streamline the transition, with Kindred veterans hired as director of operations and a regional nurse — both of whom know many of the employees at the new Cascadia SNFs. While some facility-level workers may be replaced, LaForte said the operator has retained the majority of administrators and directors of nursing.
“The goal has been to shore up our resource staff, and to maintain the facility-level staff to the greatest degree possible,” LaForte said.
Written by Alex Spanko