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U.S. nursing home chain faces landlord showdown over default

U.S. nursing home chain faces landlord showdown over default
From Reuters - October 16, 2017

CHICAGO (Reuters) - The fate of one of the largest U.S. nursing home operators, HCR ManorCare, will reach a critical court deadline on Thursday in a battle over months of unpaid rent, a growing problem in an industry where eviction would put thousands of elderly out on the street.

Many nursing home chains spun off their properties to real estate companies over the last decade to unlock value. Now those landlords need to deal with operators behind on their rentwithout harming thousands of elderly residents.

In a lawsuit filed in August, HCR ManorCares landlord, Quality Care Properties Inc, said the chain owes more than $300 million in rent at its 292 skilled nursing and assisted living locations.

ManorCare has until Oct. 18 to respond to the lawsuit Quality Care filed seeking to replace management with a court-appointed receiver who would oversee everything from laundry and meals to patient care at ManorCares facilities.

Generally, a landlord can evict a tenant who fails to pay rent.

However, because the leased properties care for approximately 30,000 patients - many of whom are elderly, vulnerable and require specialized care - abrupt eviction could cause substantial harm, Quality Care said in its lawsuit, filed in California state court on August 17.

ManorCare declined to comment but said in June it had been negotiating its master lease agreement for several months and remains committed to high-quality patient care.

Toledo, Ohio-based ManorCare is the largest senior housing chain in financial distress. But other leveraged chains arestruggling under declining reimbursements, higher costs, lower occupancy and increased federal scrutiny over billing.

Receivers have been appointed to replace management at small regional chains. But many in the healthcare industry are watching to see how the first stand-off between such a large national chain and Quality Care, a specialized real estate investment trust, plays out, analysts and advisers said.

NURSING HOME RECEIVERSHIPS

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