Dallas-based Capital Senior Living has reached agreements to terminate its master leases with real estate investment trusts Ventas and Welltower, the operator announced Monday.
The Ventas master lease covered seven communities, and the Welltower termination involves three leases with a total of 24 communities across seven states. Agreements to terminate the leases were reached March 10 and March 15, respectively, according to filings with the Securities and Exchange Commission.
The terminations follow Capital’s previously announced plan to terminate its master leases with Healthpeak Properties, announced last month. Combined with rent reductions that also were announced Monday, the moves are expected to improve the company’s cash flow by approximately $22 million and reduce lease liabilities by approximately $253 million, Capital said.
“We are pleased to immediately strengthen our cash position and reduce our lease exposure by reaching early termination agreements with all of our landlords,” Capital Senior Living President and CEO Kimberly S. Lody said. “We appreciate the collaborative relationships we have had with Healthpeak, Ventas and Welltower over the years.”
Lody said Capital remains “laser-focused” on its turnaround plan.
“The management team will continue to take proactive actions to best position the company to drive sustainable growth and value creation,” she said. “These agreements further progress our strategy to reduce our lease liabilities and increase the percentage of our portfolio that is company-owned.”
As part of the agreement, Capital will pay Ventas rent of approximately $1 million per month from Feb. 1 through Dec. 31, a reduction of approximately $300,000 per month from the amount that otherwise would have been due. With Welltower, Capital agreed to pay approximately $2.2 million per month between Feb. 1 through Dec. 31, a reduction of approximately $600,000 per month from the amount that otherwise would have been due.
To fulfill the original contractual rent under its leases through Dec. 31, Capital will release security deposits currently held by Ventas and Welltower. The operator and REITs agreed to try to transition or convert the portfolios to management agreements by the end of the year. Any facilities that have not been transitioned or converted by Dec. 31 will convert to management agreements. Then the master leases will be terminated.
Also Monday, Capital announced the rescheduling of its fourth-quarter and full-year 2019 earnings call, which was set for Monday. The new date is March 31 at 10 a.m. ET.