A new court filing in California suggests the recent fragile truce established between Toledo’s HCR ManorCare and its landlord could be close to fracturing, putting the nursing home operator a step closer to receivership.
Quality Care Properties, the Bethesda, Md.-based real estate investment trust that owns the 239 elder-care facilities operated by the Toledo firm, said ManorCare filed a legal brief Friday seeking to dismiss claims the Maryland trust made in a complaint filed last August that sought a court-approved receivership.
The real estate investment trust said the matter has been further complicated by ManorCare’s failure to pay a newly agreed-upon monthly rent of $14 million by the required Jan. 25 due date.
As a result, Quality Care said it will “pursue available judicial paths, will object to HCR ManorCare’s request for dismissal of the receivership action, and will continue to pursue the receivership complain.”
The two sides are scheduled to be in court on Feb. 22.
Quality Care did not respond to a request seeking comment. An HCR ManorCare spokesman said the company did not have a comment at this time.
The outcome is critical to Toledo and elsewhere, as the company has 1,700 employees in the Toledo area and 50,000 employees nationwide. The company is based in a Summit Street building in downtown Toledo. It is the nation’s second largest operator of skilled nursing homes and assisted-living centers. It operates its facilities under the names of Manorcare, Heartland, and Arden.
Quality Care’s threat to proceed with a receivership would disrupt a recent agreement the two sides reached to settle their landlord-tenant dispute.
In late December, ManorCare and Quality Care struck a deal for one year of reduced rent payments.
ManorCare was to pay $23.5 million in monthly rent for the 239 nursing home and assisted living facilities, and Quality Care agreed that it would not enforce any legal remedies available to it over the next 11 months.
The two firms have been in a rent dispute since last June, when Quality Care Properties alleged ManorCare defaulted on its lease by not paying its $39.5 million monthly rent. On Aug. 17, Quality Care appeared before Judge Frederick Shaller in California Superior Court in Los Angeles County asking that ManorCare be placed in receivership as provided by terms of the lease.
Quality Care has given ManorCare multiple time extensions to come up with a response to the receivership request. In succeeding months, it has made partial rent payments while the two sides have been in private negotiations to restructure the payments.
The dispute centers on a 2011 master lease agreement signed between ManorCare and the predecessor company of Quality Care. ManorCare has said the lease was signed at the top of the market, and changes in patient reimbursement rates and other regulatory matters have made the terms untenable.
ManorCare said last month that it expects to be unable to pay even the reduced rent, and that its operations are expected to trend significantly downward over 2018, according to an SEC filing.
Quality Care collected $19 million in rent for November. ManorCare paid $23 million in rent in August, $17.6 million in September, and $21 million in October.
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