CHICAGO-Louisville, KY-based Kindred Healthcare Inc. has announced that it will not renew its leases on 64 properties owned by locally based Ventas Inc. Kindred, which Thursday announced a fourth quarter loss of $71.8 million, said in a statement that the leases no longer fit within the company’s strategic plan.

Kindred leases 89 properties from Ventas, including 73 nursing and rehabilitation centers and 16 long-term acute care hospitals, through 10 master lease bundles. Kindred said Thursday that it will renew three of the bundles containing 19 nursing and rehab centers and six of the hospitals, which generated annual rent for Ventas of about $46 million. Kindred said it does not intend to renew the other leases, which generated about $77 million in rent.

In a separate statement, Ventas said the 25 leases were renewed until April 30, 2018. The other leases expire April 30, 2013. A plan to market the properties to qualified healthcare providers is underway, the company said.

Debra Cafaro, chairwoman and CEO of Ventas, said in the REIT’s statement that she believes the assets will be attractive to possible tenants. “We are eager to begin the marketing process, which will improve our diversification and broaden our tenant base.” Ventas earns an annualized net operating income of $1.4 billion.

Kindred and its subsidiary RehabCare provides services in 2,200 locations in 46 states. It is unclear where the Ventas-owned properties are located. Spokespeople from both companies did not return calls for comment.

Kindred technically has until April 30 to renew leases on 56 of the assets, and until July 2012 for the eight additional assets. However, in his firm’s statement, Kindred president and CEO Paul Diaz said the properties are no longer a fit for the company’s strategy of higher acuity, transitional care. The majority of the Ventas sites, he said, are outside of the firm’s preferred markets, and are predominantly chronic care and Medicaid dependent.

“Given the current reimbursement environment, particularly around nursing centers, we believe that our capital investments and management efforts are best focused in other areas of growth including home health, acute rehabilitation units, newer owned LTAC and inpatient rehabilitation hospitals, as well as investments in new integrated care models,” Diaz said. “In addition, we believe that, over time, these divestitures will substantially improve our capital structure by reducing our lease obligations and related leverage and the earnings leakage associated with rent escalators.”

Instant Insights /

Kindred Healthcare To Drop 64 Ventas Leases

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