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AdCare Completes Operations Transfer on Two Facilities and Extends Leases on Eight Additional Facilities

ATLANTA, AdCare Health Systems, Inc. (NYSE MKT: ADK), (NYSE MKT: ADK.PRA), a self-managed healthcare real estate investment company that invests primarily in real estate purposed for senior living and long-term healthcare, today announced continued progress in its efforts to increase the value of its portfolio of healthcare properties.

AdCare has negotiated extensions to leases for a total of 12 facilities, including eight in the last month, providing tenants with longer leases typically in return for increased annual rent escalators. As a result, nearly all of AdCare’s leases have initial terms of 10 years or longer with an average, annual escalator of approximately 2.5%.

“We continue to work closely with the operators of our recently transitioned facilities, identifying opportunities to further stabilize and increase our cash flow by lengthening the terms of leases, and increasing rent escalations whenever possible,” commented Bill McBride, AdCare’s Chairman and Chief Executive Officer. “The willingness of our operators to accept lease term changes is a reflection of the improvements the operators are making to the underlying operating performance of the facilities.”

Lease Extensions and Refinancing Activity

  • AdCare extended the initial term on five of the eight facilities with existing operators leased from a single landlord to 12 years from five years, providing AdCare with increased rental revenue visibility and matching the underlying lease.
  • AdCare extended the initial term on a facility in Ohio from 4 to 10 years. As previously announced, AdCare extended the initial term on four facilities in Ohio from five to 10 years.
  • AdCare extended the initial term on two facilities in Alabama from 5 to 15 years.
    AdCare also submitted a HUD financing application to refinance debt on a facility the company owns in South Carolina. The proposed loan would refinance $6.5 million of existing debt and result in an approximate 100 basis point reduction in interest as well as free up additional cash for AdCare to reinvest in additional properties. Management expects the financing to be completed in the first quarter of 2016. Furthermore, the Company expects to refinance existing debt on selected properties with HUD debt in the future.

“We are taking actions to increase the value of our existing portfolio by locking in predictable rental payments and freeing up cash that can be redeployed for the acquisition of additional properties,” added Mr. McBride. “Submission of a HUD financing application on ourSouth Carolina property, the first submission following our transition, demonstrates our ability to work in concert with the new facilities’ operators to complete the required documentation and create favorable financial benefits for each of us.”

Transition Update
As expected, AdCare successfully transferred operations on two facilities in Georgia on September 1, 2015. In addition, the Company has received preliminary HUD approval on its remaining facility in Georgia.

As a result, 34 facilities have transferred operations to third-party operators or are under management contracts with an indefinite term. Of the remaining facilities:

  • One facility in Georgia has received preliminary HUD approval and is expected to transfer on October 1
  • One facility in Arkansas is also expected to transfer on October 1
  • Two facilities in Oklahoma are expected to transfer during the fourth quarter
  • One facility in Oklahoma is expected to be sold during the fourth quarter

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. For more information about AdCare, visitwww.adcarehealth.com.

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