AdCare Health Systems Closes Lease of Five Nursing Homes in Georgia, More Than Doubles Annualized Revenue

SPRINGFIELD, OH–(Marketwire – August 2, 2010) –  AdCare Health Systems, Inc. (NYSE Amex: ADK), an Ohio-based long-term care, home care and management company, has closed on a previously announced agreement to lease five privately held nursing homes in South Georgia that is expected to more than double its revenue.

The five facilities have been leased under a five-year term from the owner, with an extension option for an additional five years. The facilities have on aggregate 615 beds that generate approximately $35 million in annualized revenue.

AdCare’s upfront cost for the transaction was $700,000 in cash, plus legal and accounting closing costs. At closing, the company assumed approximately $1.3 million in negative working capital and purchased for $2 million approximately $5.5 million in existing receivables due to these facilities. In addition, AdCare provided the lessor $1.16 million, comprised of the first month’s lease payment and a security deposit that includes an amount equal to two months lease payment.

With the close of this transaction, AdCare estimates its revenue run-rate will exceed $61 million annually, representing an increase of more than 120% over the company’s 2009 revenues.

“This lease is the first major transaction we closed since we began our acquisition campaign at the end of last year,” said Chris Brogdon, AdCare’s vice chairman and chief acquisitions officer. “We expect these facilities to be very profitable for AdCare, especially as they come under our more capable management and benefit from the economies of scale we bring to the table.”

AdCare also reported it signed an agreement to lease an additional five nursing homes in Georgia that produce annualized revenues of approximately $37 million, which it plans to close on September 30, 2010.

“We are also now moving quickly toward closing the other two acquisitions we announced in the first half of 2010,” noted Brogdon. “As we have outlined in our M&A strategy, we are also continuing to evaluate foreclosures and other poorly run facilities that we can secure at below-market prices, as well as target acquisitions of both profitable and turnaround properties to grow our business.”

Brogdon joined AdCare last September when the company announced a new M&A growth strategy to build upon its strong reputation for operational efficiency and high-quality living environments.

About AdCare Health Systems
AdCare Health Systems, Inc. (NYSE Amex: ADK) develops, owns and manages assisted living facilities, nursing homes and retirement communities and provides home healthcare services. Prior to becoming a publicly traded company in November of 2006, AdCare operated as a private company for 18 years. AdCare’s 900 employees provide high-quality care, management services and other services for patients and residents residing in 19 facilities, seven of which are assisted living facilities, 11 skilled nursing centers and one independent senior living community. The company owns eight of those facilities. In the ever-expanding marketplace of long-term care, AdCare’s mission is to provide quality healthcare services to the elderly. For more information about AdCare, visit www.adcarehealth.com.

Safe Harbor Statement
Statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of federal law, which can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “plans,” “anticipates” or similar expressions. Statements in this announcement that are forward-looking include, but are not limited to, statements that with the closing of this transaction, AdCare estimates its revenue run-rate will exceed $61 million annually, representing an increase of more than 120% over the company’s 2009 revenues; that the leased facilities mentioned in this release will be very profitable for AdCare; that it plans to close the newly announced additional five leases on September 30, 2010; and that the company is moving quickly toward closing the other two acquisitions it announced in the first half of 2010. Such forward-looking statements reflect management’s beliefs and assumptions, and are based on information currently available to management. The forward-looking statements involve known and unknown risks that may make the results, performance or achievements of the company differ materially from those expressed or implied in such statements. Such factors are also identified in the public filings made by the company with the U.S. Securities and Exchange Commission, and they include, but are not limited to, the company’s ability to secure lines of credit and/or an acquisition credit facility, find suitable acquisition properties at favorable terms, changes in the health care industry because of political and economic influences, changes in regulations governing the industry, changes in reimbursement levels including those under the Medicare and Medicaid programs, and changes in the competitive marketplace. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements.