Diversicare and Omega Enter Into a New Master Lease Agreement
BRENTWOOD, TN–Healthcare Services, Inc. (NASDAQ: DVCR), a premier provider of long-term care services, today announced that pursuant to the binding agreement between Omega and Diversicare effective September 25, 2017, we have now entered into a New Master Lease agreement with Omega Healthcare Investors (NYSE: OHI) to lease 34 centers currently owned by Omega and operated by Diversicare.
Diversicare’s prior Master Lease with Omega provided for its operation of 23 skilled nursing centers in Texas, Kentucky, Alabama, Tennessee, Florida, and Ohio. Additionally, Diversicare operates 11 centers owned by Omega under separate leases in Missouri, Kentucky, Indiana, and Ohio. The New Master Lease agreement, effective October 1, 2018, consolidates the leases for all 34 centers under one New Master Lease.
Key terms of the New Master Lease are as follows:
- Common date of annual lease escalators, consolidated to October 1st of each year beginning on October 1, 2019;
- Fixed annual base rent escalator of 2.15%;
- Provides for a landlord funded capital expenditure fund, subject to annual rent impact;
- Initial lease term of 12 years with two 10 year extensions; and
- Provides a mechanism for potential divestitures of agreed upon centers.
Additionally, Diversicare ceased operations at its Ontario, Ohio stand-alone 50 bed assisted living facility on October 1, 2018, thus terminating its lease for this center owned by Omega.
“We are excited to announce the continuation of our partnership with Omega, and we look forward to an ongoing successful relationship with one another,” said Diversicare CEO Jay McKnight. “The New Master Lease has provisions in it that will give us added flexibility in the management of our portfolio and provides funds for future capital needs of the leased centers. In the coming months, we will provide details regarding the sweeping changes in lease accounting, which will be effective for us on January 1, 2019. This New Master Lease was crafted with those changes in mind by both Diversicare and Omega.”
As of October 1, 2018, Diversicare provides long-term care services to patients in 75 skilled nursing and senior housing centers containing 8,457 licensed nursing beds.