An Ohio-based nursing home management company has signed an agreement to take over five bankrupt nursing homes in Georgia, continuing its national effort to acquire and rehabilitate underperforming or badly managed facilities.
AdCare Health Systems, based in Springfield, announced Wednesday that it would pay $700,000 in cash for the five south Georgia-based homes and assume approximately $1.3 million in negative working capital, plus legal and accounting closing costs. AdCare will also spend about $2 million for existing receivables, which are worth about $5.5 million, due to the facilities.
Combined, the nursing homes represent 615 beds and generate approximately $36 million in annualized revenue. AdCare is signing a five-year lease with the owner and debtor-in-possession, with approval from bankruptcy officials in Georgia, and has an option on a five-year extension.
“This lease is the third major deal we have signed since March, and represents one of several potential acquisitions in the pipeline we established at the beginning of the year,” said Chris Brogdon, AdCare's vice chairman and chief acquisitions officer. “We expect these facilities to be very profitable for AdCare, especially as they come under our more capable management and benefit from the economies of scale we bring to the table.”
Since announcing a new M&A strategy last September – when Brogdon joined the company – AdCare has raised $2.5 million in cash through a private placement and acquired two nursing homes in Alabama for $18.5 million. In April, the company reported record annual revenues of $26.7 million for 2009, an 8 percent increase over 2008, while net income was $440,000, vs. a $1.1 million net loss in 2008.
“As we have outlined in our M&A strategy, we will continue to evaluate foreclosures and other poorly run facilities that we can secure at below-market prices, as well as target acquisitions of both profitable and turnaround properties to grow our business,” Brogdon said.
Company officials say the closing of this deal, along with two other target acquisitions expected to close soon, will create a revenue run-rate of approximately $80 million and boost the company’s revenues by 200 percent over 2009 figures.
AdCare manages 19 nursing homes, assisted living facilities and retirement communities – owns eight of them – and provides home healthcare services.