Post-acute giant Genesis Healthcare, Inc. (NYSE: GEN) will completely exit the skilled nursing space in Texas, selling 23 facilities and transferring operations of a 24th by the middle of this year.
The Kennett Square, Pa.-based operator announced the deal late Wednesday night, with the buyer identified as Regency REIT, LLC. That New York City-based real estate investment trust has a definitive agreement with Genesis to pick up the 23 SNFs — 22 of which Genesis owns, and one that is leased — by the estimated deal-close date of July 1.
Offloading the properties will cut Genesis’s overall debt load by $97 million and reduce annual rent expenses by $1.8 million, the company said. Altogether, the 24 facilities had revenue of $173.7 million in 2017, with an EBITDA of $7.4 million.
“We are constantly reviewing our portfolio with an emphasis on divesting underperforming assets or assets in non-strategic markets,” Genesis CEO George Hager said in a statement announcing the deal. “This deleveraging transaction will allow for additional focus on our core markets and strengthen our overall portfolio.”
Genesis will continue to operate other parts of its business, including its Genesis Rehab Services arm, in the state, a spokesperson told Skilled Nursing News.
The company has more than 450 skilled nursing and assisted living facilities across 30 states, according to a company presentation current as of last month. Those properties are largely concentrated in New England, the Mid-Atlantic, and California, though Genesis also has 19 facilities in New Mexico.
Documents filed with the Securities and Exchange Commission show that Regency REIT made an offering of securities in January 2017 and shares a Park Avenue address and phone number with BlueMountain Capital Management, the New York City-based alternative asset management firm whose affiliate purchased Kindred Healthcare’s (NYSE: KND) entire skilled nursing portfolio last year for $700 million.
The SEC filing also lists a Lawrence Deering as the CEO of Regency REIT; a Larry Deering serves as CEO of Regency Integrated Health Services, a Victoria, Texas-based operator of nursing homes and rehabilitation facilities. Two other members of Regency Integrated Health Services’ leadership team — chief operating officer Chris Murphy and chief financial officer Donovan Dekowski — are also listed as executive officers on the Regency REIT filing.
An e-mail to an address associated with Lawrence Deering was not returned as of press time, nor was a voicemail left on Regency Integrated Health Services’ corporate line.
A LinkedIn page for Regency Integrated Healthcare Services describes the company as a subsidiary of Capital Senior Care Ventures, a joint venture between BlueMountain Capital Management and Capital Funding Group.
The move comes amid landlord Sabra Healthcare REIT’s (Nasdaq: SBRA) long-term plan to divest the vast majority of its Genesis assets, and about a month after the provider reported an $89 million loss in the fourth quarter of 2017 and a $570.0 million loss for the entire year.
At the time, Hager blamed a demographic lull — pointing out that today’s 85-year-old was born in the middle of the Great Depression, a low period in the U.S. birthrate — and shifting payment models for the weak results. But he and chief financial officer Tom DiVittorio envisioned a sunnier 2018 ahead, citing the major restructuring effort with Sabra and Welltower, Inc. (NYSE: WELL), another Genesis landlord, announced last year and hinting at further sales to come.
“I expect that 2018, again, will be a busy year of transactional activity that will position our portfolio of facilities with greater concentration in our core markets,” Hager said on the earnings call.
Written by Alex Spanko