The remaining interest is held by Next, a privately owned healthcare real estate investment firm. The 15 facilities had been included in the Company’s master lease with Welltower and were subject to 2.0% annual rent escalators. Under the new lease, there are no rent escalators for the first five years.
The seven facilities that Genesis will no longer operate had aggregate annual revenue of approximately $73 million. As a result of the transaction, Genesis estimates its annual EBITDAR will decline $2.5 million and annual cash lease obligations will be reduced approximately $3.2 million. In year one, the transaction is accretive to EBITDA by $0.7 million.
“I am excited about these win-win transactions for all parties involved,” noted George V. Hager, Jr., Chief Executive Officer of Genesis. “This is a great example of the creative things we can accomplish with our partners. For Genesis, the transaction is accretive to earnings and provides us with the opportunity to participate in any upside accretion in the value of the real estate with a mechanism to purchase the real estate in the future.”