QCP Frames ManorCare, Welltower Deals as Best Options Amid Turmoil

When Welltower Inc. (NYSE: WELL) and ProMedica announced their deal to acquire Quality Care Properties (NYSE: QCP) — and, by extension, skilled nursing giant HCR ManorCare — the move was a strategic splash designed to shake up the long-term landscape.

For QCP, however, it was simply the best way to play a less-than-ideal hand.

On a brief conference call with investors Thursday, CEO Mark Ordan provided further insight into both the Welltower deal and the erstwhile REIT’s takeover of ManorCare through bankruptcy court, which he framed as the clear choice among an array of daunting options.

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Originally spun off from HCP Inc. (NYSE: HCP) in 2016, QCP ended up existing for only around a year and a half. During that time, Ordan said, executives toured more than 100 facilities with a variety of industry experts to figure out exactly how to turn around the struggling skilled nursing portfolio.

After all that, the ManorCare takeover was “the best possible decision at the time given our very difficult position,” Ordan said on a brief conference call with shareholders Thursday morning, even while knowing the risks associated with the move.

“These risks included a sustained, long-term business trajectory since 2012. This decline steepened in 2017, and continues as we speak,” he said.

That rapidly spiraling decline involved a long summer of missed rent deadlines, a lease default, and then a prolonged stalemate in which QCP granted ManorCare multiple extensions in its attempt to place control of the chain in the hands of a third-party receiver.

Even after determining that the move to take over ManorCare was the right choice, QCP’s management then faced down a future in which the REIT assumed the provider’s outstanding debts amid a challenging industry landscape — while also overseeing a 40,000-employee company with a staff of about 10.

“Even if we were to sell assets to reduce our debt, that, of course, would not change the trajectory and the health of our core business,” Ordan said.

Thus, in the company’s view, the Welltower-ProMedica deal represented the best way out of the pickle while preserving value, Ordan said.

“We believe that ProMedica and Welltower are very well-positioned acquirers, and they will not face the same risks and constraints that we would face in managing our assets,” he said.

Written by Alex Spanko

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