Quality Care Properties, Inc. (NYSE: QCP) on Monday issued an ultimatum to HCR ManorCare, Inc., its primary skilled nursing tenant: Pay the nearly $80 million in back rent that you owe, or you’ll be on the hook for a whole lot more.
The Bethesda, Md.-based real estate investment trust (REIT) issued a notice of default to ManorCare, one of the nation’s largest skilled nursing operators, and gave it until this Friday to pay $79.6 million in missed rent obligations, according to an 8-K filed late Monday afternoon. Should the Toledo, Ohio-based ManorCare fail to pay by the end of the day on July 14, QCP will immediately call due an additional $265 million in deferred rent obligations.
Lack of payment would also cause QCP to terminate its master lease with ManorCare, and allow the REIT to “appoint receivers or exercise other remedies with respect to any and all leased properties,” the filing read.
Last week, QCP announced that the beleaguered ManorCare had missed its July rent payment entirely after falling short by half in June. The provider managed to come up with $8.2 million of its July rent last Friday, QCP reported, but that still was far below the $39.5 million required under its master lease agreement. In response to the short rent payment, QCP slapped ManorCare with a notice of default that same day.
ManorCare’s default represents the latest bad news for the provider, which accounts for about 94% of QCP’s annual revenues: In April, the two parties entered into a forbearance agreement that was meant to help ManorCare meet its rent obligations, but it ended up paying only $15 million of the $32 million it owed for June.
QCP — which was spun off from former “big three” REIT HCP, Inc. (NYSE: HCP) last year — had also been exploring an equity takeover of its troubled tenant, a move that would strip it of its REIT status. Those talks have since stalled out, according to another 8-K filing submitted last week.
The Carlyle Group, the Washington, D.C.-based private equity giant that has owned ManorCare since 2007, has also reportedly signaled its desire to sell the business, according to June reports.
Written by Alex Spanko