Genesis Continues Real Estate Acquisition Push with 18-Building Joint Venture, Sells 8 More for $89M

Genesis HealthCare (NYSE: GEN) on Wednesday announced the acquisition of an ownership stake in 18 skilled nursing facilities in conjunction with a private investment firm, while also shedding eight more properties in a separate deal worth a total of $89 million.

The Kennett Square, Pa.-based post-acute giant has a 30% share of the new entity formed with the unnamed partner, which will lease the properties back to Genesis under a new agreement.

Previously leased from Second Spring Investments and Welltower Inc. (NYSE: WELL) at annual escalators of 2.0% to 2.5%, the properties will not see any rent hikes until year five under the new accord; Genesis has a fixed purchase option, set at 10% above the original acquisition cost, that the company can exercise in 2024.

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CEO George Hager noted the similarity between Wednesday’s transaction and the company’s $204 million joint venture with Next Healthcare Capital to acquire 15 SNFs from Welltower, which closed back in February. That deal saw Genesis acquire a 46% stake in the new entity formed with Next, which holds the remaining 56%; like Wednesday’s deal, Genesis will not see rent escalators for five years under its minority partnership with Next, and can elect a 10%-premium purchase option in 2026 on the 15 buildings.

“Like Next, this de-levering transaction provides us with the opportunity to participate in any upside accretion in the value of the real estate and is a positive step toward our goal of owning or having fixed-price purchase options on 30% of our assets by the end of 2020,” Hager said in a statement announcing the most recent deal.

In a separate agreement, Genesis sold off eight SNFs to unnamed third parties for a total of $89 million; the company will no longer operate those facilities moving forward. Those properties had total annual revenues of about $83 million.

Genesis will use the money to cover transactions and pay off debts, according to the release.

The company’s stock closed down two cents, ending Wednesday’s trading at $1.38 per share.

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