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AdCare Announces Favorable Modifications to Master Lease Agreement

ATLANTA – AdCare Health Systems, Inc. (NYSE MKT: ADK)(NYSE MKT: ADK.PRA), announced today that the company has signed an agreement to modify the master lease under which it leases eight skilled nursing facilities located in Georgia. As a result of the agreement, AdCare extended the current term of the master lease by seven years, through 2027, locking in a $1.9 million annual lease spread as a result of existing sublease agreements with third-party operators. The agreement also resolves all outstanding issues related to the subleasing of the properties by the company.

As previously disclosed, the company leases these eight skilled nursing facilities under a master lease with a single landlord which was originally set to expire after a 10-year term in 2020. All of these facilities have been subleased to third-party operators with transfers of operations complete. The company expects annual cash rent under the subleases, net of annual cash rent expense, to be approximately $1.9 million in the aggregate, excluding the effects of annual escalators. In connection with the lease modification and extension, the company will make an upfront cash payment to the landlord of $575,000, release to the landlord the company’s previously paid security deposit of $500,000 and one month of advance rent of $398,000.

“This agreement locks in a predictable lease spread and extends the maturity of our master lease, providing predictable cash flow for AdCare,” stated Bill McBride, AdCare’s Chairman and Chief Executive Officer. “It represents a ‘win-win’ for each of us from which we can both move forward. We will now begin the process of negotiating with the existing subtenants of the facilities to extend their subleases to mirror the modified master lease agreement.”

About AdCare Health Systems
AdCare Health Systems, Inc. (NYSE MKT: ADK) (NYSE MKT: ADK.PRA) is a self-managed healthcare real estate investment company that invests primarily in real estate purposed for senior living and long-term healthcare through facility lease and sub-lease transactions. The Company currently owns, leases or manages for third parties 39 facilities, primarily in the Southeast. For more information about AdCare, visit www.adcarehealth.com.