Dispute with landlord puts HCR ManorCare’s future in question
Whichever swerves first could well determine whether ManorCare, which has 1,700 workers in the
Quality Care's lease allows it to place ManorCare in a court-approved receivership should the tenant default on its rent. And last May, ManorCare defaulted on its
On
However, during an extended four-month wait for ManorCare to respond to the request, the two sides agreed in December to a lower monthly rent of
Even as a settlement appeared likely, ManorCare failed to pay the new rent by a
Quality Care, a public company whose stock is traded under the ticker symbol QCP, resumed its posture of seeking a receiver to take charge of ManorCare, which operates 292 post-acute/skilled nursing and memory care/assisted living properties owned by the real estate investment trust.
Experts say the ongoing dispute is raising many questions: Is Quality Care serious about receivership? Can ManorCare survive that? What would receivership look like? Does Quality Care want cash or perhaps something else?
"I don't think QCP has any capability to operate nursing homes. The problem with nursing homes is you can't take a week off to think about them," said
"It seems to me they are trying to force HCR to go out and find a buyer for itself or force them to go through a bankruptcy -- which is something you can't do with over 250 nursing facilities," he said.
"The buyer would be the best solution for QCP,"
"Their investors don't want QCP to be a [real estate investment trust] with just one main tenant,"
"Under those circumstances, QCP makes less money and does not pay a dividend," he said. "The shareholders would like to see ManorCare's assets be dispersed to about 10 to 12 operators.
"That to me is the optimal outcome,"
ManorCare officials declined to comment on the situation. Quality Care officials did not respond to a request seeking comment.
The judge would decide if the receiver takes complete control of an entity or just certain aspect, like finances. "In this case I don't know a receiver who would want to have complete responsibility for operating all these facilities,"
A receiver in charge of finances is the most likely scenario, he said. "In a lot of receiverships, they are run similar to a bankruptcy because you have certain priorities that must be met. Wages are the first wall and is typically a priority,"
"But in a case like this, what happens if nursing home 'X' can't stand on its own feet? Would the receiver then shut it down and sell [the license]? How is that going to be looked at -- as an individual property or part of a total package?"
A receiver could question whether ManorCare has managed the 292 facilities correctly and decide a different eldercare operator should run the facilities,
But
Still, a receivership is not the way to go, he said.
"It would be like the dog that finally caught the car, then didn't know what to do with it,"
Any reconciliation would require both sides to sit down, take their medicine, and get back to business," he said. "If I was QCP, I would hope ManorCare would come up with a deal to sell their (licenses). But I don't know if there's a deal out there for them," he said.
"ManorCare has a contract to pay a certain amount of rent. The fact that life has changed for them, a landlord would say, 'That's not my problem,' "
He said it is logical to think that Quality Care has sent feelers to at least 15 regional-based eldercare operators about running the facilities if things with ManorCare don't work out. "If they haven't, I would be shocked," he added.
"There's some math involved. QCP is saying the road's already been paved. Why lower the rent again?" he said.
"These are elderly people in their facilities," he said. "If you don't run things correctly, people die."
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