QCP Grants Forbearance to ManorCare, Hints at Major Restructuring

Less than a year after spinning off from HCP Inc. (NYSE: HCP), skilled nursing real estate investment trust (REIT) Quality Care Properties (NYSE: QCP) could be setting the table for big changes related to its struggling primary tenant, HCR ManorCare. One option could be the REIT taking a larger equity stake in the beleaguered skilled nursing operator.

Maryland-based QCP has entered into a forbearance agreement with HCR III Healthcare, LLC and its parent company HCR ManorCare, Inc., the REIT announced April 5. One of the largest skilled nursing operators nationally, ManorCare has faced challenges on multiple fronts, facing industry headwinds, operational challenges, and Department of Justice investigations. Freeing itself of this troubled tenant, major senior housing owner HCP spun off its ManorCare portfolio last year and tapped Mark Ordan—a noted turnaround artist in the senior care sector—to lead the new REIT as its CEO.

About 94% of Quality Care Properties’ total revenues during the year ended Dec. 31, 2016, can be attributed to HCR ManorCare.


The new forbearance agreement, among other things, necessitates that HCR ManorCare makes $32 million cash payments for rent in April, May and June, deferring payment of the additional $7.5 million due per month until the early termination of the agreement or July 5—whichever comes first.

The agreement also necessitates that HCR ManorCare delivers its 2016 audited financial statements and auditor consent to Quality Care Properties no later than April 10, which is anticipated to include a “going concern” exception for HCR ManorCare in the auditor opinion, according to a press release.

“We are pleased to have reached this agreement and are working with HCR ManorCare to reach a comprehensive, long-term solution to the master lease that seeks to both preserve and enhance the value of our properties, while supporting the ability of HCR ManorCare and its thousands of employees and caregivers to provide high-quality care for their patients and residents,” Ordan said in the press release. “We remain open to all appropriate solutions, including possibly transitioning to increased equity ownership in HCR ManorCare.”


Quality Care Properties’ assets are located in 29 states and include 257 post-acute/skilled nursing facilities, 61 memory care/assisted living communities, a medical office building and a surgical hospital.

Written by Mary Kate Nelson

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