Ventas Announces Agreements With Kindred Healthcare to Facilitate Kindred’s Exit from the Skilled Nursing Segment

  • Kindred Expected to Purchase 36 Ventas Skilled Nursing Facilities
    for $700 Million, Representing a 7% Yield on Current Cash Rent
  • Immediately Extends Long Term Acute Care Hospital Leases to 2025 at
    Current Rent Level

CHICAGO–(BUSINESS WIRE)–$VTR–Ventas, Inc. (NYSE: VTR) (“Ventas” or the “Company”) announced today
that it has reached mutually beneficial agreements with Kindred
Healthcare, Inc. (NYSE: KND) (“Kindred”) that further enhance the
companies’ longstanding relationship and improve both businesses. The
agreements:

1. provide that Kindred will either acquire all 36 skilled nursing
facilities (“SNFs”) owned by Ventas and operated by Kindred for $700
million, a 7% yield on current cash rent, in connection with Kindred’s
previously announced plan to exit its SNF business, or renew the current
lease on all unpurchased SNFs through 2025 at the current rent level; and

2. have extended the lease term to 2025 for all of Ventas’s Long Term
Acute Care Hospitals (the “LTACHs”) operated by Kindred that were
scheduled to mature in 2018 and 2020, at the current rent level.

“We are delighted to reach these agreements with Kindred, which enhance
our strong relationship and position both companies for success,” Ventas
Chairman and Chief Executive Officer Debra A. Cafaro said. “With these
agreements, we are improving our portfolio and enhancing our ability to
deliver reliable growth and income for our shareholders. Upon the
expected sale of our 36 skilled nursing facilities, we will further
reduce our skilled nursing rent to 1% of our total business, a trend we
initiated in 2015 with the spin-off of most of our skilled nursing
facilities. The agreements also provide Kindred with strategic
flexibility and significant cost savings, as it continues to re-shape
its business. These actions differentiate our high-quality portfolio of
leading properties and continue our long track record of working
cooperatively with our customers on innovative solutions.”

EXIT FROM SNF SEGMENT

To facilitate Kindred’s exit from its SNF segment, Ventas and Kindred
have agreed that Kindred may purchase some or all of the 36 SNFs
operated by Kindred for $700 million (or a pro rata portion thereof),
representing a 7% yield on current annual cash rent of $49 million, on
or prior to October 31, 2018. Any SNFs not so purchased by Kindred by
April 30, 2018 will be automatically renewed until 2025 at the current
rent level. Kindred has announced that it intends to resell the 36
purchased SNFs as part of its exit from its entire SNF business segment,
which it expects to complete by year end 2017.

Pro forma for the expected sale, SNF rent in total will constitute 1% of
Ventas’s net operating income (“NOI”) and total cash rent from Kindred
will constitute 7% of Ventas’s NOI. Upon the sale of the SNFs, Ventas is
expected to record a gain of over $600 million; however, there can be no
assurance that the sale of the SNFs will occur or the terms or timing of
such sale.

IMMEDIATE LTACH EXTENSION THROUGH 2025

Under the agreements, which evidence Kindred’s confidence in its leading
LTACH business, Ventas and Kindred have immediately extended leases
through 2025 on eight LTACH assets, representing over $39 million in
annual cash rent, at the current rent level. These LTACH leases were
previously up for renewal in 2018 and 2020. Ventas owns 31 LTACHs
operated by Kindred and, prior to these agreements, 23 LTACHs already
had lease terms that extended to 2023 and 2025. As a result of this
extension, over 75% of the $121 million in annual cash Kindred LTACH
rent is fully secured through 2025 and no leases with Kindred mature
prior to 2023. Kindred successfully transitioned all of its LTACHs to a
new reimbursement regime on September 1, 2016.

Finally, as part of the above agreements: on or before April 30, 2018,
all of the Ventas-Kindred assets will be consolidated into a single
Master Lease between the companies; upon the sale of the 36 SNFs to
Kindred and Ventas’s receipt of proceeds totaling $700 million, Kindred
will receive greater transactional flexibility under the Master Lease;
Kindred will continue to guarantee all rent due to Ventas; and existing
lease escalations for all SNFs whose leases are renewed, if any, will be
immaterially improved for Ventas and all LTACH lease escalations will
remain unchanged.

Ventas, Inc., an S&P 500 company, is a leading real estate investment
trust. Its diverse portfolio of approximately 1,300 assets in the United
States, Canada and the United Kingdom consists of seniors housing
communities, medical office buildings, life science and innovation
centers, skilled nursing facilities, specialty hospitals and general
acute care hospitals. Through its Lillibridge subsidiary, Ventas
provides management, leasing, marketing, facility development and
advisory services to highly rated hospitals and health systems
throughout the United States.

This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements regarding the Company’s or its tenants’, operators’,
borrowers’ or managers’ expected future financial condition, results of
operations, cash flows, funds from operations, dividends and dividend
plans, financing opportunities and plans, capital markets transactions,
business strategy, budgets, projected costs, operating metrics, capital
expenditures, competitive positions, acquisitions, investment
opportunities, dispositions, merger or acquisition integration, growth
opportunities, expected lease income, continued qualification as a real
estate investment trust (“REIT”), plans and objectives of management for
future operations and statements that include words such as
“anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,”
“may,” “could,” “should,” “will” and other similar expressions are
forward-looking statements. These forward-looking statements are
inherently uncertain, and actual results may differ from the Company’s
expectations. The Company does not undertake a duty to update these
forward-looking statements, which speak only as of the date on which
they are made.

The Company’s actual future results and trends may differ materially
from expectations depending on a variety of factors discussed in the
Company’s filings with the Securities and Exchange Commission. These
factors include without limitation: (a) the ability and willingness of
the Company’s tenants, operators, borrowers, managers and other third
parties to satisfy their obligations under their respective contractual
arrangements with the Company, including, in some cases, their
obligations to indemnify, defend and hold harmless the Company from and
against various claims, litigation and liabilities; (b) the ability of
the Company’s tenants, operators, borrowers and managers to maintain the
financial strength and liquidity necessary to satisfy their respective
obligations and liabilities to third parties, including without
limitation obligations under their existing credit facilities and other
indebtedness; (c) the Company’s success in implementing its business
strategy and the Company’s ability to identify, underwrite, finance,
consummate and integrate diversifying acquisitions and investments; (d)
macroeconomic conditions such as a disruption of or lack of access to
the capital markets, changes in the debt rating on U.S. government
securities, default or delay in payment by the United States of its
obligations, and changes in the federal or state budgets resulting in
the reduction or nonpayment of Medicare or Medicaid reimbursement rates;
(e) the nature and extent of future competition, including new
construction in the markets in which the Company’s seniors housing
communities and medical office buildings (“MOBs”) are located; (f) the
extent of future or pending healthcare reform and regulation, including
cost containment measures and changes in reimbursement policies,
procedures and rates; (g) increases in the Company’s borrowing costs as
a result of changes in interest rates and other factors; (h) the ability
of the Company’s tenants, operators and managers, as applicable, to
comply with laws, rules and regulations in the operation of the
Company’s properties, to deliver high-quality services, to attract and
retain qualified personnel and to attract residents and patients;
(i) changes in general economic conditions or economic conditions in the
markets in which the Company may, from time to time, compete, and the
effect of those changes on the Company’s revenues, earnings and funding
sources; (j) the Company’s ability to pay down, refinance, restructure
or extend its indebtedness as it becomes due; (k) the Company’s ability
and willingness to maintain its qualification as a REIT in light of
economic, market, legal, tax and other considerations; (l) final
determination of the Company’s taxable net income for the year
ending December 31, 2016; (m) the ability and willingness of the
Company’s tenants to renew their leases with the Company upon expiration
of the leases, the Company’s ability to reposition its properties on the
same or better terms in the event of nonrenewal or in the event the
Company exercises its right to replace an existing tenant, and
obligations, including indemnification obligations, the Company may
incur in connection with the replacement of an existing tenant; (n)
risks associated with the Company’s senior living operating portfolio,
such as factors that can cause volatility in the Company’s operating
income and earnings generated by those properties, including without
limitation national and regional economic conditions, costs of food,
materials, energy, labor and services, employee benefit costs, insurance
costs and professional and general liability claims, and the timely
delivery of accurate property-level financial results for those
properties; (o) changes in exchange rates for any foreign currency in
which the Company may, from time to time, conduct business; (p)
year-over-year changes in the Consumer Price Index or the UK Retail
Price Index and the effect of those changes on the rent escalators
contained in the Company’s leases and the Company’s earnings; (q) the
Company’s ability and the ability of its tenants, operators, borrowers
and managers to obtain and maintain adequate property, liability and
other insurance from reputable, financially stable providers; (r) the
impact of increased operating costs and uninsured professional liability
claims on the Company’s liquidity, financial condition and results of
operations or that of the Company’s tenants, operators, borrowers and
managers, and the ability of the Company and the Company’s tenants,
operators, borrowers and managers to accurately estimate the magnitude
of those claims; (s) risks associated with the Company’s MOB portfolio
and operations, including the Company’s ability to successfully design,
develop and manage MOBs and to retain key personnel; (t) the ability of
the hospitals on or near whose campuses the Company’s MOBs are located
and their affiliated health systems to remain competitive and
financially viable and to attract physicians and physician groups; (u)
risks associated with the Company’s investments in joint ventures and
unconsolidated entities, including its lack of sole decision-making
authority and its reliance on its joint venture partners’ financial
condition; (v) the Company’s ability to obtain the financial results
expected from its development and redevelopment projects; (w) the impact
of market or issuer events on the liquidity or value of the Company’s
investments in marketable securities; (x) consolidation activity in the
seniors housing and healthcare industries resulting in a change of
control of, or a competitor’s investment in, one or more of the
Company’s tenants, operators, borrowers or managers or significant
changes in the senior management of the Company’s tenants, operators,
borrowers or managers; (y) the impact of litigation or any financial,
accounting, legal or regulatory issues that may affect the Company or
its tenants, operators, borrowers or managers; and (z) changes in
accounting principles, or their application or interpretation, and the
Company’s ability to make estimates and the assumptions underlying the
estimates, which could have an effect on the Company’s earnings.

The Company uses its website (www.ventasreit.com)
as a channel of distribution of Company information. The information the
Company posts through its website may be deemed material. Accordingly,
investors should monitor the Company’s website, in addition to following
the Company’s press releases, Securities and Exchange Commission filings
and public conference calls and webcasts.

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Contacts

Ventas, Inc.
Ryan K. Shannon, 877-4-VENTAS