Item 1.01. Entry into a Material Definitive Agreement.
On November 11, 2016, as part of the strategic decision previously announced by Kindred Healthcare, Inc. (Kindred) to exit its
skilled nursing facility business, Kindred entered into Agreement Regarding Master Leases No. 3 (the Agreement) with Ventas, Inc. (Ventas) to provide Kindred with the option to acquire the real estate for all 36 skilled
nursing facilities (the Ventas Properties) leased under its master lease agreements with Ventas (each a Master Lease and, collectively, the Master Leases) for an aggregate consideration of $700 million. The
Agreement also provides that, through October 31, 2018, Kindred has the right to find one or more purchasers of the Ventas Properties. As Kindred locates new owners/operators for the Ventas Properties, in exchange for a payment by Kindred to Ventas
of the allocable portion of the $700 million purchase price, Ventas has agreed to convey the real estate for the applicable Ventas Property to the new owner/operator. Kindred, at its option, may also elect to renew the leases for any of the
Ventas Properties through April 30, 2025, and transfer them into Master Lease No. 5.
The Ventas Properties will remain leased under their
current Master Leases until Kindred exercises its purchase option or April 30, 2018, whichever comes first. Currently, 11 of the Ventas Properties are leased under Master Lease No. 1, 10 of the Ventas Properties are leased under Master Lease No. 2,
four of the Ventas Properties are leased under Master Lease No. 4, and 11 of the Ventas Properties are leased under Master Lease No. 5.
If Kindred does not complete the acquisition of the Ventas Properties by April 30, 2018, the lease for any remaining Ventas Properties will be
automatically renewed through April 30, 2025, and transferred into Master Lease No. 5. Base rent for the Ventas Properties that transfer into Master Lease No. 5 will escalate annually at three times the increase (if any) in the consumer price
index (with a floor of 0% and a cap of 4%).
Also on November 11, 2016, Kindred renewed the leases for eight long-term acute care
(LTAC) hospitals Kindred leases from Ventas (the Hospitals) through April 30, 2025, and transferred the Hospitals into Master Lease No. 5, which is being amended and restated. The Hospitals were previously leased under Master
Lease Nos. 1, 2 and 4, respectively, each of which were amended on November 11, 2016. The base rent and rent escalators will remain the same for the Hospitals, as well as for the other 23 LTAC hospitals currently in Master Lease No. 5. The Hospitals
will be combined into a single renewal bundle with Kindreds other LTAC hospitals expiring on April 30, 2025.
No rent from the
Ventas Properties will be allocated to Kindreds LTAC hospitals.
The amended and restated Master Lease No. 5 contains terms
substantially similar to the existing Master Lease No. 5, except for modifications to certain restrictions applicable to Kindred that will take effect if Kindred acquires all of the Ventas Properties and pays Ventas the aggregate consideration. As
noted above, since all of the Ventas Properties will either be sold or transferred into Master Lease No. 5, Kindreds other master lease agreements with Ventas will be effectively terminated and only Master Lease No. 5 will remain.
The foregoing description is qualified in its entirety by the Agreement, Amendment No. 4 to Master Lease Agreement No. 1, Amendment No. 2 to
Master Lease Agreement No. 2, Amendment No. 4 to Master Lease Agreement No. 4 and the Second Amended and Restated Master Lease Agreement No. 5, which are attached as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 hereto, respectively, and incorporated
herein by reference.