Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced that it has entered into a new master lease agreement with Ventas, Inc. (“Ventas”) (NYSE:VTR) for ten long-term acute care (“LTAC”) hospitals. The Company previously announced that it did not renew seven lease renewal bundles containing 54 nursing and rehabilitation centers and ten LTAC hospitals. These same ten LTAC hospitals are covered by the new master lease agreement.
The new master lease agreement will be effective on May 1, 2013 and will have a term of ten years with three five-year renewal options. The annual rent for the new lease will be $28 million and is subject to annual increases based on the increase in the consumer price index (subject to an annual 4% cap). The current annual rent for these ten LTAC hospitals approximates $22 million. These ten LTAC hospitals contain 1,066 licensed hospital beds and generated revenues of approximately $276 million for the year ended December 31, 2011. The terms of the new master lease agreement are substantially similar to the terms of the other master lease agreements between Kindred and Ventas.
Kindred and Ventas also entered into a separate agreement to provide Ventas with more flexibility to accelerate the transfer of the 54 nursing and rehabilitation centers currently leased by Kindred that are scheduled to expire on April 30, 2013.
Management believes that entering into the new master lease agreement, along with the non-renewal of the 54 nursing and rehabilitation centers, will be slightly accretive to the Company’s consolidated earnings per diluted share in 2013. This estimate is based upon a number of assumptions, including the Company’s estimate of the impact of the recent and impending Medicare reimbursement reductions.Mr. Paul J. Diaz, Chief Executive Officer of the Company, remarked, “We are pleased to have negotiated a mutually beneficial transaction with Ventas that is accretive to Kindred and will allow us to retain all of our LTAC hospitals that were up for renewal, several of which are located in our cluster markets. As we have previously indicated, we believe that our capital investments and management efforts are best focused on home health, hospice and inpatient rehabilitation hospitals, as well as the development of LTAC hospitals and transitional care centers on a selective basis in our key cluster markets.”