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AdCare Health Systems (ADK) Closes Acquisition of Four Skilled Nursing Facilities in Arkansas

AdCare Health Systems, Inc., a nursing home and assisted living company, has closed the previously announced asset purchase of four skilled nursing facilities in Arkansas, with the acquisition from the same seller of a 10-year lease for one skilled nursing facility in Missouri expected to close within the next 90 days. The aggregate purchase price of the five skilled nursing facilities is $20 million.

The five facilities have an aggregate 506 beds that generated revenues of more than $25 million in 2010, and their addition is anticipated to be accretive to AdCare’s earnings. Combined with other transactions previously announced and in the process of closing, AdCare’s estimated annualized revenue run-rate is expected to exceed $285 million. This would represent an increase of more than 436% over the company’s revenues in 2010, and an increase of more than 969% over revenues in 2009 when it initiated its current MA campaign.

“These four facilities bring the total to 26 — representing more than 2,700 beds — that we’ve purchased or leased since we began our MA program in the fall of 2009,” said Chris Brogdon, AdCare’s vice chairman and chief acquisitions officer. “They also mark our first entrance into Arkansas and are in line with our expansion throughout the South.”

Boyd Gentry, AdCare’s CEO, commented: “Our MA strategy is to acquire underperforming skilled nursing facilities, and then assist the facility leadership to improve care, increase post-acute census and optimize payment rate structure. When we entered into the definitive purchase agreement for these facilities, they had relatively low Medicare utilization of 11.3% and an average daily Medicare rate of $427 a day. This optimization opportunity is right in our strategic ‘sweet spot.'”

AdCare financed the asset purchase through a combination of traditional bank financing and loan guarantees by the United States Department of Agriculture (USDA). The USDA guarantee is provided through a program developed by the federal government to supply long-term financing for rural projects at favorable rates.

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