NEWS BRIEF: With a mere $15 Million Investment, PACS Group is Boosting its Footprint by Nearly 25% by Acquiring the Operations of 53 Healthcare Facilities in the Western U.S.

Less than 2 months after "going public" on the New York Stock Exchange, Farmington, Utah-based PACS Group will take over the operations of 53 skilled nursing and assisted/independent living facilities across eight western states from Prestige.

The cost for this "operational acquisition" is $0, as in "zero dollars."

However, PACS will invest $15 million into a newly formed Real Estate Joint Venture that will own the underlying real estate of 37 of these 53 healthcare facilities, with the $15 million investment giving it a 25% stake in the newly formed JV.

In its first major transaction since becoming a publicly traded company on the New York Stock Exchange and releasing results from its first quarter (ended 31 March 2024), Farmington, Utah-based PACS Group (NYSE:PACS) announced it will "take over" the operations of 53 skilled nursing and assisted/independent living facilities across eight western states from Prestige.

With the acquisition, PACS will see its footprint grow by nearly 25% to over 260 facilities, up from 218 facilities as of the end of the company's first quarter (ended 31 March 2024).

These 53 new healthcare facilities mean that PACS will have

• 2,511 additional skilled nursing beds, and
• 1,334 additional assisted living and independent living units

added to its portfolio.

According to the news release announcing this purchase, PACS will acquire the operations of 53 healthcare properties from Vancouver, Washington-based Prestige, specifically assisted/independent living facilities and skilled nursing facilities (SNFs).

This acquisition will see PACS take over operations in

• Oregon (21 facilities),
• Washington (19 facilities),
• Idaho (6 facilities),
• Nevada (3 facilities), and
• 1 facility each in Alaska, Arizona, California and Montana,

with the Alaska, Idaho, Montana, Oregon, and Washington facilities representing new states for PACS operations.

With the operational purchase, PACS will add ~5,000 Prestige employees to its workforce, giving it an employee base of over 37,000 people.

The Real Estate Side of this Acquisition

As is often the case in the healthcare world, the business side of providing healthcare services is separate from the real estate side of the business, as is the case with Prestige and the majority of PACS' currently owned, operated, and managed facilities.

As such, PACS will invest approximately $15 million in a to-be-formed real estate joint venture that will own 37 of the current properties housing the Prestige operations, giving PACS a 25% ownership stake in this real estate JV.

{AUTHOR'S NOTE: Although PACS would not disclose who owns the remaining 75% of this real estate JV, I would not be surprised to learn it was owned by the family that started and leads Prestige today.}

When the operational acquisition closes, PACS will then make triple net lease payments to both the newly formed JV, as well as the unaffiliated landlords of the remaining 16 properties.

According to Derick Apt, Chief Financial Officer of PACS,

“The Prestige acquisition illustrates an important element of our growth model in action. We consider acquisitions, both large and small, when we believe the PACS operating model can thrive in the local markets.

Prestige Background

Family owned Prestige traces its roots back to 1946 when Sarah Delamarter began using her nursing skills to care for seniors in her home in Oregon as a means to support her family.

Today, Prestige provides healthcare services through over 80 facilities that serve as

• Independent living communities,
• Assisted living facilities,
• Memory care facilities, as well as
• Skilled nursing and rehabilitation centers.

Pending customary closing conditions, applicable regulatory approvals and third-party consents, PACS expects the transaction will close sometime in the third quarter of 2024.

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