ProMedica’s senior care portfolio is being pared down substantially. The Toledo, Ohio-based organization will continue to operate 58 Arden Courts memory care communities that are in a joint venture with Welltower (NYSE: WELL), but is shedding nearly 150 skilled nursing assets.
More specifically, Welltower is selling and transitioning 147 skilled nursing facilities currently operated by ProMedica to a newly formed joint venture with Integra Health, the company announced Monday.
ProMedica has agreed to surrender its 15% interest in the SNF assets involved in their existing 85/15 joint venture with the real estate investment trust (REIT) and will provide “significant working capital support” to ensure the new operators have a smooth transition of patient care and operations, Welltower noted.
This comes just a few months after ProMedica reported a $105 million operating loss in its senior care division for the second financial quarter of 2022 in a report using unaudited results of operations and its financial position ending June 30.
ProMedica will no longer be under its lease obligation with Welltower with these terms in place, related to the transitioning SNFs. The company acquired HCR ManorCare in 2018, rebranding the network of long-term care facilities to become ProMedica Senior Care.
The agreement does not include ProMedica’s non-Welltower leased senior care centers located in Adrian and Monroe, Mich., the skilled nursing and memory care facilities located on the ProMedica Flower Hospital campus in Sylvania, Ohio, and ProMedica’s home health and hospice, the company said in a statement issued Monday.
More specifically, ProMedica will continue to operate 10 skilled nursing facilities that are not part of the Welltower transaction.
ProMedica will continue operating those centers and agencies, as well as its Arden Courts memory care communities within its real estate joint venture with Welltower.
This “complex” transaction will allow the not-for-profit health and well-being organization to focus more closely and put resources toward other parts of the health system, according to ProMedica President and CEO Arturo Polizzi.
Polizzi took the helm as CEO last week after Randy Oostra announced his retirement.
“By engaging in this transaction, we will be able to increase focus and resources on the other areas of our health system as we continue to provide high-quality, compassionate care and invest in our communities and dedicated caregivers,” Polizzi said in a statement.
Integra Health will enter into an 85/15 joint venture with Welltower, which will include a master lease agreement that results in a combined cash rent increase of more than 4% to Welltower relative to the total current contractual rent from the existing ProMedica JV.
Welltower CEO and CIO Shankh Mitra said in a statement that while the ProMedica SNFs saw a “strong rebound in occupancy” in the last six months, agency labor has continued to plague the operator. In its 2Q 2022 earnings call Mitra said ProMedica had “significantly narrowed their operating losses” and that it had nearly halved use of agency labor.
“We are excited to announce this partnership with Integra as Integra’s focused asset management and vast network of strong regional providers will allow the new joint venture to build on ProMedica’s positive performance momentum, invest in the communities, and hire talent,” Mitra said.
The JV is expected to close before the end of 2022 and does not contain any financing contingencies.
“These communities are in extraordinary locations and comprise an important segment of the health care continuum. We aim to bring them back to their previous glory through focused asset management and a regional operator strategy with a primary focus on quality of care,” Integra Health CEO David Gefner said in a statement. “We believe there is significant value to be created here for all stakeholders, most importantly the facility residents and staff. We could not be more excited about what lies ahead.”
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