Adcare Health Systems (ADK)

[MissionIR]

ADK Announces Acquisition of Skilled Nursing and Assisted Living Center for $12.5 Million

AdCare Health Systems, Inc., a rapidly growing nursing home and assisted living company, announced the completion of the previously announced agreement to purchase a skilled nursing and assisted living community in Ohio. The final purchase price totaled $12.5 million, $1.0 million less than the initial purchase agreement.

The community has 179 beds in service and generates approximately $12 million in gross annualized revenues according to its most recent financials. The addition of this skilled nursing and assisted living center is expected to be immediately accretive to AdCare’s earnings.

This transaction brings the total number of facilities AdCare’s purchased, leased, or managed to 44 facilities since its M&A campaign began in the fall of 2009, with more than 3,900 beds in service.

The company told investors that it intends to continue pursuing an aggressive M&A program. Combining its current annualized run-rate with transactions in the process of closing, AdCare’s estimated annualized revenue run-rate is expected to exceed $300 million. This would represent an increase of more than 460% over the company’s revenues in 2010, and an increase of more than 11 times revenues since initiating its M&A campaign in the fall of 2009.

“After expanding our operations to Alabama, Arkansas, Georgia, North Carolina and Oklahoma, with this acquisition we’ve built upon our home base in Ohio,” stated Chris Brogdon, AdCare’s vice chairman and chief acquisitions officer. “These new facilities will leverage the professional support staff we’ve long maintained in the state, as well as enhance our overall economies of scale.”

“We’re continuing to evaluate a number of attractive opportunities in the Midwest, as well as in the Southwest and Southeast with our M&A program and the integration of new facilities remaining our primary focus going forward,” continued Brogdon.

Boyd P. Gentry, AdCare’s president and chief executive officer, stated, “Our strategy of acquiring skilled nursing facilities is proving highly successful, not only in our closing rate and terms, but especially in our post-acquisition performance. We have been targeting facilities that have not traditionally concentrated on providing post-acute services, and then once acquired, we increase Medicare census and occupancy, as well as optimize reimbursement and patient care.”

“Historically, it takes our operations team a year to 15 months to fully harvest this opportunity in an individual facility,” added Boyd. “This means we still have optimization opportunities in our current portfolio, and significant upside exists in our pending acquisition pipeline.”

AdCare finished last year with 29 new facilities placed under contract, and the acquisition of 18 facilities completed. The company expects to complete the acquisition of at least 20 more in the next three months, including five facilities in Oklahoma and the company’s largest transaction to-date of 15 facilities across the Southeast.