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Ventas Secures Agreements With Kindred & ScionHealth for 23 LTACs
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Ventas (VTR - Free Report) secured an agreement (“2024 Kindred Agreements”) with Kindred Healthcare, LLC and its parent company, ScionHealth. This agreement is regarding 23 long-term acute care hospitals (“LTACs”) whose lease term is scheduled to mature on April 30, 2025, under the existing master lease between Ventas and Kindred.
This move enhances patient care facilities, strengthens the existing master lease and provide upside for Ventas. The company also obtains rights to additional revenue-sharing rent and warrants.
The transactions outlined in the 2024 Kindred Agreements allow Kindred to enhance its credit profile.
2024 Kindred Agreements’ Key Terms
Under the agreement, starting from May 1, 2025, Ventas has set the initial annualized cash contractual base rent for the LTACs at $80 million. This rent will escalate annually by 2.75% through the extended lease maturity date of April 30, 2030.
Moreover, Ventas is entitled to receive additional revenue-sharing rent annually if revenues generated from these assets surpass specified thresholds. Also, ScionHealth has provided Ventas with warrants for 9.9% of its common equity. Kindred has agreed to pay full contractual cash rent for the LTACs through April 2025.
The agreements encompasses Ventas's acquisition of the real estate and related property of five performing LTAC assets for $189 million. Kindred will continue to manage these assets under the existing master lease for an initial duration of 10 years, commencing with an annual cash rent of $16 million.
ScionHealth has committed to utilizing the proceeds to enhance its credit profile and for other corporate purposes.
The transactions are expected to enhance EBITDARM to rent coverage under the Master Lease to a minimum of 1.3 times. ScionHealth will continue to guarantee Kindred's obligations under the Master Lease.
Ventas anticipates that the aggregate non-cash effect on its 2024 normalized FFO per share, associated with the LTAC lease extension, will align with its guidance previously issued for the year, beginning in the third quarter. The projected annualized impact on normalized FFO from the investment in performing LTACs, entirely financed through equity, is estimated to be around 1 cent per share.
Wrapping Up
Ventas’ diverse portfolio of healthcare real estate assets in the key markets of the United States and the United Kingdom. is well-poised to capitalize on the favorable industry fundamentals. The company is well-prepared for a compelling multiyear growth opportunity and with such long-term leases and agreements, its high-quality portfolio assures steady growth in cash flows.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 28.7%, outperforming its industry’s growth of 20.6%.
The Zacks Consensus Estimate for Healthpeak’s 2024 FFO per share is pegged at $1.80, indicating an increase of 1.1% from the year-ago reported figure.
The Zacks Consensus Estimate for Sabra’s 2024 FFO per share is pinned at $1.41, suggesting year-over-year growth of 6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Ventas Secures Agreements With Kindred & ScionHealth for 23 LTACs
Ventas (VTR - Free Report) secured an agreement (“2024 Kindred Agreements”) with Kindred Healthcare, LLC and its parent company, ScionHealth. This agreement is regarding 23 long-term acute care hospitals (“LTACs”) whose lease term is scheduled to mature on April 30, 2025, under the existing master lease between Ventas and Kindred.
This move enhances patient care facilities, strengthens the existing master lease and provide upside for Ventas. The company also obtains rights to additional revenue-sharing rent and warrants.
The transactions outlined in the 2024 Kindred Agreements allow Kindred to enhance its credit profile.
2024 Kindred Agreements’ Key Terms
Under the agreement, starting from May 1, 2025, Ventas has set the initial annualized cash contractual base rent for the LTACs at $80 million. This rent will escalate annually by 2.75% through the extended lease maturity date of April 30, 2030.
Moreover, Ventas is entitled to receive additional revenue-sharing rent annually if revenues generated from these assets surpass specified thresholds. Also, ScionHealth has provided Ventas with warrants for 9.9% of its common equity. Kindred has agreed to pay full contractual cash rent for the LTACs through April 2025.
The agreements encompasses Ventas's acquisition of the real estate and related property of five performing LTAC assets for $189 million. Kindred will continue to manage these assets under the existing master lease for an initial duration of 10 years, commencing with an annual cash rent of $16 million.
ScionHealth has committed to utilizing the proceeds to enhance its credit profile and for other corporate purposes.
The transactions are expected to enhance EBITDARM to rent coverage under the Master Lease to a minimum of 1.3 times. ScionHealth will continue to guarantee Kindred's obligations under the Master Lease.
Ventas anticipates that the aggregate non-cash effect on its 2024 normalized FFO per share, associated with the LTAC lease extension, will align with its guidance previously issued for the year, beginning in the third quarter. The projected annualized impact on normalized FFO from the investment in performing LTACs, entirely financed through equity, is estimated to be around 1 cent per share.
Wrapping Up
Ventas’ diverse portfolio of healthcare real estate assets in the key markets of the United States and the United Kingdom. is well-poised to capitalize on the favorable industry fundamentals. The company is well-prepared for a compelling multiyear growth opportunity and with such long-term leases and agreements, its high-quality portfolio assures steady growth in cash flows.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 28.7%, outperforming its industry’s growth of 20.6%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the healthcare REIT sector are Healthpeak Properties, Inc. (DOC - Free Report) and Sabra Healthcare REIT (SBRA - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Healthpeak’s 2024 FFO per share is pegged at $1.80, indicating an increase of 1.1% from the year-ago reported figure.
The Zacks Consensus Estimate for Sabra’s 2024 FFO per share is pinned at $1.41, suggesting year-over-year growth of 6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.