Genesis plans to unload 13 more facilities; turns eye toward China
Genesis Healthcare plans to unload 13 more of its leased facilities, as part of ongoing efforts to optimize its portfolio and focus on core markets.
That was one of the key takeaways from a Thursday morning call to announce the Kennet Square, PA, skilled nursing giant's first quarter earnings. Unloading those 13 new facilities, Genesis said, will result in the provider shedding some $12.2 million of annual lease expenses altogether. And this may not be the end of its weight loss, CEO George Hager Jr. told investors.
“We will continue to thoughtfully evaluate additional opportunities to de-lever and focus on our core by shedding underperforming assets or exiting non-core markets with insufficient density to compete,” he said.
All told, Genesis is in the process of divesting or exiting operations of 43 facilities thus far in 2018. On top of the aforementioned 13, that also includes closing down one leased facility and exiting operations of five others. Plus, as previously reported, the company is divesting itself of 24 facilities in Texas and completely exiting the Lone Star State, which will lighten its load by shedding some $97 million in indebtedness.
Hager also spent a few minutes talking about Genesis HealthCare's first quarter activity overseas in China, where it has agreed to sell a 51% stake of its Chinese subsidiary, GRS-HS, to Riswein Health Industry Investment Co. That transaction will net Genesis some $30 million and is set to close in the first quarter of 2019.
They'll use those extra dollars to further fuel growth in Asia, the CEO said. “I am very excited about this transaction and what it means for the expansion of our rehab business in China. Having a well-established, highly regarded and well-capitalized partner in China to help us navigate the challenging landscape is key to our expansion and future success.”
Hager said they are looking to take things to “the next level” with the aim of developing what Riswein calls “ecosystems” in Shanghai and Beijing, which have traditionally been acute-care dominant. They would rely on rehab therapy facilities and partnerships with hospitals to develop post-acute care networks. “I believe there is huge potential, given the significance of the aging Chinese population and the lack of post-hospital and rehab infrastructure in China today,” he said.
All told, Genesis tallied a net loss of $68.5 million this past quarter, compared to $50.8 million during the same period last year. Hager attributed those weaker numbers to the divestures of 38 underperforming facilities since that Q1 of 2017.
Plus, he said, Genesis Healthcare's bottom line was dragged downward due to adverse weather patterns in the Northeast and Mid-Atlantic, resulting in some $4 million in incremental utility and maintenance costs. A rough flu season also tugged staffing costs upward and meant that 16 centers generated about $6 million less in earnings compared to the prior year, Hager said.