CHICAGO • Quality Care Properties Inc. has agreed to cut rents for HCR ManorCare but said the nursing home chain, which already owes more than $300 million in back rent, will struggle to pay even the reduced amount, according to a regulatory filing on Tuesday.
Under the deal, which includes a one-year forbearance agreement, Quality Care reduced monthly rents under HCR ManorCare’s master lease to $23.5 million through Nov. 30, 2018, while the two companies discuss a broader restructuring.
HCR ManorCare declined to comment.
Quality Care, a real estate investment trust (REIT), relies on the nursing home chain for more than 90 percent of its revenue.
Quality Care did not disclose the extent of the discount it gave, but it has been entitled to about $39.5 million in monthly rents under the master lease agreement, according to previous filings.
Toledo, Ohio-based HCR ManorCare, with more than 250 skilled nursing and assisted living facilities across the U.S., is among several nursing home chains struggling as government Medicaid and Medicare reimbursement rates fail to keep pace with rising costs.
In the St. Louis area, HCR operates ManorCare Health Services in Florissant and also owns Heartland Hospice.
As a result, health care landlords such as Quality Care are scrambling to protect their businesses from the downturn.
HCR ManorCare has warned its landlord it “expects operating results to continue to trend significantly downward in 2018,” Quality Care said on Tuesday.
Quality Care also said it may not remain in compliance with certain covenants under its own loan agreements if it fails to receive a material portion of rents from ManorCare.
Quality Care was spun off in 2016 by larger REIT HCP Inc., which had acquired the HCR ManorCare assets from private equity firm Carlyle Group LP in 2010 for $6.1 billion. Quality Care shares fell 3 percent to close at $13.60 on Tuesday.