Genesis HealthCare Enters Into Investment to Buy Back Real Estate Historically Leased
October 16 2019 - 4:01PM
Genesis HealthCare (Genesis or the Company), one of the nation’s
largest providers of post-acute care services, today announced that
it has made an investment with a private investor involving 18
skilled nursing facilities previously leased by Genesis from Second
Spring Healthcare Investments (Second Spring) and Welltower Inc.
(Welltower). Separately, eight owned facilities were sold to third
parties for total sale proceeds of approximately $89 million.
Proceeds were used to repay indebtedness and fund transaction
expenses. Genesis will no longer operate the eight facilities.
Genesis continues to operate the 18 facilities pursuant to a new
lease with the new owner. The 18 facilities had been included in
the Company’s master leases with Second Spring and Welltower and
were subject to annual rent escalators ranging from 2.0% to 2.5%.
Under the new lease, rent escalators do not begin until year five.
Through its investment, Genesis holds approximately a 30% interest
in the entity that owns the real estate of the 18 facilities.
Genesis also acquired a fixed price purchase option to acquire the
real estate in 2024 at a 10% premium above the original acquisition
cost.
The eight facilities that Genesis will no longer operate have
aggregate annual revenue of approximately $83 million. As a
result of all the transactions noted above, Genesis estimates its
annual Adjusted EBITDA will decline approximately $4.5 million and
pre-tax net loss will improve by $1.9 million.
“This transaction is very similar to the Next transaction we
completed earlier in the year,” noted George V. Hager, Jr., Chief
Executive Officer of Genesis. “Like Next, this delevering
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.”
About Genesis Healthcare, Inc. Genesis
Healthcare, Inc. (NYSE: GEN) is a holding company with subsidiaries
that, on a combined basis, comprise one of the nation's largest
post-acute care providers with nearly 400 skilled nursing
facilities and assisted/senior living communities in 26 states
nationwide. Genesis subsidiaries also supply rehabilitation and
respiratory therapy to approximately 1,200 healthcare providers in
44 states, the District of Columbia and China. References
made in this release to "Genesis," "the Company," "we," "us" and
"our" refer to Genesis Healthcare, Inc. and each of its
wholly-owned companies. Visit our website at
www.genesishcc.com.
Forward-Looking StatementsThis
release includes “forward-looking statements” within the meaning of
the federal securities laws, including the Private Securities
Litigation Reform Act of 1995. You can identify these statements by
the fact that they do not relate strictly to historical or current
facts. These statements contain words such as “may,” “will,”
“project,” “might,” “expect,” “believe,” “anticipate,” “intend,”
“could,” “would,” “estimate,” “continue,” “pursue,” “plans,” or
“prospect,” or the negative or other variations thereof or
comparable terminology. They include, but are not limited to,
statements about Genesis’ expectations and beliefs regarding its
future financial performance, anticipated cost management,
anticipated business development, anticipated financing activities
and anticipated demographic and supply-demand trends facing the
industry. These forward-looking statements are based on current
expectations and projections about future events, including the
assumptions stated in this release, and there can be no assurance
that they will be achieved or occur, in whole or in part, in the
timeframes anticipated by the Company or at all. Investors are
cautioned that forward-looking statements are not guarantees of
future performance or results and involve risks and uncertainties
that cannot be predicted or quantified and, consequently, the
actual performance of Genesis may differ materially from that
expressed or implied by such forward-looking statements.
These risks and uncertainties include, but are
not limited to, the following:
- reductions and/or delays in
Medicare or Medicaid reimbursement rates, or changes in the rules
governing the Medicare or Medicaid programs could have a material
adverse effect on our revenues, financial condition and results of
operations;
- reforms to the U.S. healthcare
system that have imposed new requirements on us and uncertainties
regarding potential material changes to such reforms;
- revenue we receive from Medicare
and Medicaid being subject to potential retroactive reduction;
- our success being dependent upon
retaining key executives and personnel;
- it can be difficult to attract and
retain qualified nurses, therapists, healthcare professionals and
other key personnel, which, along with a growing number of minimum
wage and compensation related regulations, can increase our costs
related to these employees;
- recently enacted changes in
Medicare reimbursements for physician and non-physician services
could impact reimbursement for medical professionals;
- we are subject to extensive and
complex laws and government regulations. If we are not operating in
compliance with these laws and regulations or if these laws and
regulations change, we could be required to make significant
expenditures or change our operations in order to bring our
facilities and operations into compliance;
- our physician services operations
are subject to corporate practice of medicine laws and regulations.
Our failure to comply with these laws and regulations could have a
material adverse effect on our business and operations;
- we face inspections, reviews,
audits and investigations under federal and state government
programs, such as the Department of Justice. These investigations
and audits could result in adverse findings that may negatively
affect our business, including our results of operations,
liquidity, financial condition, and reputation;
- significant legal actions, which
are commonplace in our industry, could subject us to increased
operating costs, which could materially and adversely affect our
results of operations, liquidity, financial condition, and
reputation;
- insurance coverages, including
professional liability coverage, may become increasingly expensive
and difficult to obtain for health care companies, and our
self-insurance may expose us to significant losses;
- failure to maintain effective
internal control over financial reporting could have an adverse
effect on our ability to report on our financial results on a
timely and accurate basis;
- we may be unable to reduce costs to
offset decreases in our patient census levels or other expenses
timely and completely;
- completed and future acquisitions
may consume significant resources, may be unsuccessful and could
expose us to unforeseen liabilities and integration risks;
- we lease a significant number of
our facilities and may experience risks relating to lease
termination, lease expense escalators, lease extensions, special
charges and leases that are not economically efficient in the
current business environment;
- our substantial indebtedness,
scheduled maturities and disruptions in the financial markets could
affect our ability to obtain financing or to extend or refinance
debt as it matures, which could negatively impact our results of
operations, liquidity, financial condition and the market price of
our common stock;
- exposure to the credit and
non-payment risk of our contracted customer relationships,
including as a result from bankruptcy, receivership, liquidation,
reorganization or insolvency, especially during times of systemic
industry pressures, economic conditions, regulatory uncertainty and
tight credit markets, which could result in material losses;
and
- some of our directors are
significant stockholders or representatives of significant
stockholders, which may present issues regarding diversion of
corporate opportunities and other potential conflicts.
The Company’s Annual Report on Form 10-K for the
year ended December 31, 2018, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and other filings with the U.S.
Securities and Exchange Commission, discuss the foregoing risks as
well as other important risks and uncertainties of which investors
should be aware. Any forward-looking statements contained herein
are made only as of the date of this release. Genesis disclaims any
obligation to update its forward-looking statements or any of the
information contained in this release. Investors are cautioned not
to place undue reliance on these forward-looking statements.
CONTACT:
Investor RelationsLori Mayer, Genesis HealthCare610-925-2000
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