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AdCare Health Systems, Inc. (ADK) Executes Purchase Agreement for Three Skilled Nursing Facilities in Arkansas

AdCare Health Systems, Inc., a leading nursing home and assisted living company, today announced the company has signed a definitive purchase agreement for three skilled nursing facilities in Arkansas for $27.3 million.

According to the press release, the acquisition is expected to be completed within the current quarter. The facilities have an aggregate of 439 beds and generate an estimated $22.2 million in gross annualized revenues. AdCare anticipates financing the acquisition with a traditional bank loan.

“Included in this portfolio is a 157 bed skilled nursing facility located in close proximity to a major Little Rock acute-care hospital,” stated Boyd Gentry, AdCare’s president and chief executive officer. “This facility has recently been completely renovated, which allows us to reposition it as a major provider of sub-acute services. We expect this strategy to generate a significant increase in revenues as we improve this facility’s occupancy with higher acuity patients. The other two facilities are ideally configured with a significant number of private rooms.”

Chris Brogdon, AdCare’s vice chairman and chief acquisitions officer, commented, “This signing brings the total number of facilities we’ve put under contract to 54 since we began our current M&A program. With our M&A program and the integration of new facilities remaining our major focus in 2012, we continue to evaluate a number of opportunities that fit our acquisition strategy.”

Combining the company’s current annualized run-rate with transactions in the process of closing, the company’s estimated annualized revenue run-rate is projected to exceed $322 million. This would represent an increase of more than 500% over the company’s revenues last year, and an increase of more than 12 times revenues since AdCare initiated its M&A campaign in the fall of 2009.

Gentry added, “We have been targeting facilities in the Midwest and Southern states that have not traditionally concentrated on providing post-acute services. Then, once acquired, we have worked to increase Medicare census and occupancy, as well as optimize reimbursement and patient care. This strategy continues to yield results, as our team has been successful at increasing both higher acuity patients and associated reimbursement rates in excess of 25% versus pre-acquisition levels.”

AdCare expects to complete the acquisition of at least 23 additional facilities in the next three months: the three announced today, five facilities in Oklahoma and the company’s largest transaction to-date of 15 facilities across the Southeast.

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