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Ensign Group Signs Lease Agreement with Mainstreet Health

The Ensign Group, Inc.ENSG recently signed definitive agreements to simultaneously sell and lease two skilled nursing facilities and one assisted living community to Mainstreet Health Investments Inc. ("MHI"). The transaction is subject to certain customary closing conditions.

The company has always taken up inorganic growth strategies in order to strengthen verticals. Along with acquisitions and mergers, divestures also have been a major strategy for the company primarily to focus on core operations. In the last reported quarter, its urgent care unit, Immediate Clinic Seattle, Inc., has completed asset sale deal with not-for-profit health care organization, MultiCare Health System.

Over the last one year, the stock has lost 15%, narrower than the decline of 18% incurred by the Zacks categorized Nursing Homes industry. Although the whole medical sector has been suffering from President Donald Trump's decision of abolishing the ObamaCare act, Ensign Group managed to witness narrower loss than the industry on the back of solid fundamentals.

Coming back, Ensign Group has planned to lease the properties from Mainstreet Health under a 20-year triple-net master lease term and CPI-based annual escalators once the transaction is completed. The properties to be given for lease are mainly based in the high-density neighborhoods of the Los Angeles and Phoenix metro markets, and have been under the company's area of operations for long. Per Mainstreet Health's agreement, Ensign Group is likely to be released from lease obligations on three under-development transitional care facilities in Kansas and Texas.

Ensign Group expects the transaction to have significant contribution toward making its balance sheet healthier. The deal is likely to bolster the company's operational efficiency as well by enhancing the values of the assets involved. With the completion of this transaction, the number of Healthcare Resorts that are currently operated by Ensign Group and its subsidiaries but are developed by Mainstreet Property Group will include five in Kansas, one in Texas and one in Colorado. Moreover, as a result of the sale-leaseback transaction, Ensign Group along with its subsidiaries is likely to own the real estate of 48 of the 211 healthcare facilities within the portfolio.

Ensign Group has vast opportunities in both its existing and new markets. Moreover, the company is actively seeking and negotiating several other transactions to acquire real estate and to lease both well performing and struggling skilled nursing, assisted living and other healthcare-related businesses. Consequently, the stock price is likely to increase in future on the back of shareholders' appreciation of the company's initiatives.

Zacks Rank and Stocks to Consider

Ensign Group presently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks from the medical sector include HCA Holdings, Inc. HCA , Inogen Inc. INGN and Avinger, Inc. AVGR . While Inogen sports a Zacks Rank #1 (Strong Buy), the other two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

HCA Holdings delivered positive surprises in the trailing four quarters with an average beat of 10.16%.

Inogen posted positive surprises in three of the last four quarters with an average positive surprise of 49.08%.

Avinger delivered positive surprises in two of the last four quarters, the average beat being 4.35%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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