ProMedica late Monday called its departure from a massive skilled nursing joint venture a way to resolve its “ongoing operating losses within its Senior Care Division” and a cornerstone of a planned financial turnaround.
Toledo, OH-based real estate investment trust Welltower announced Monday afternoon that it will move 147 skilled nursing facilities currently operated by ProMedica Senior Care into a joint venture between Welltower and Integra Health. The transfer takes effect Dec. 19, ProMedica said.
“The communities have enjoyed a strong rebound in occupancy over the last six months but have been impacted by the elevated use of agency labor,” Welltower CEO and Chief Investment Officer Shankh Mitra said in a statement.
ProMedica Senior Care will continue to operate 10 skilled nursing facilities that are not part of the Welltower transaction, a spokeswoman told McKnight’s Long-Term Care News Monday night. Those include leased senior care centers in Adrian and Monroe, MI, and the skilled nursing and memory care facilities located on the ProMedica Flower Hospital campus in Sylvania, OH. ProMedica’s Senior Care Division will also maintain 58 private-pay assisted living and memory care communities under a lease backed by the existing guaranty.
“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. “We believe the transactions announced today will benefit all of Welltower’s stakeholders and ensure first-rate resident care continues long into the future. The increase in skilled nursing rent, even under challenging operating and financial market conditions, validates our fundamental investment thesis: favorable basis and staying power are what drives real estate returns over time.”
Integra Health CEO David Gefner said in a statement that his company is “excited” about the joint venture.
“These communities are in extraordinary locations and comprise an important segment of the healthcare continuum,” he said. “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. 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.”
As part of an agreement between Welltower and ProMedica, ProMedica will surrender its 15% interest in the skilled nursing assets currently held within the existing 85/15 Welltower/ProMedica joint venture and “provide significant working capital support for the new operators to ensure a smooth transition of patient care and operations.”
Welltower released ProMedica from its skilled nursing lease obligation for these considerations, which it said totaled almost $500 million.
ProMedica officials called the “complex” transaction a cornerstone element of ProMedica’s ongoing comprehensive financial performance improvement plan.
“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,” said Arturo Polizzi, president and CEO of ProMedica.