MedEquities Realty Trust Inc. will defer some of the monthly base rent due for Mountain's Edge Hospital, which is one of four properties the company leases to Fundamental Healthcare, through the first quarter of 2019.
According to the company's quarterly filing with the SEC, Mountain's Edge is in the process of adding five operating rooms, and the expansion has resulted in procedure rooms being offline. Fundamental Healthcare expects the facility will be able to offer more surgical services after the expansion is complete, resulting in higher patient volumes and reimbursements. At June 30, Fundamental owed MedEquities $1.0 million in base rent, and $400,000 of that had been subsequently collected.
The expansion project is forecast to be complete in the first quarter of 2019, at which time surgical procedures will resume. MedEquities expects the deferred rent balance will be about $2.4 million. Fundamental will be expected to pay that amount in equal monthly installments through the balance of 2019, and interest on the deferred rent will accrue at 9.0% during the deferral and repayment periods.
MedEquities also said in the filing that skilled nursing facility Mira Vista Court's operating results have been negatively affected by turnover in the facility's administrator role and increased competition in its market.
Facility rent coverages for both Mountain's Edge and Mira Vista are below the minimum ratio of 1.10x stated in the master lease with Fundamental for the 12-month period ending March 31. The two other properties leased to Fundamental — Horizon Specialty Hospital of Henderson and Physical Rehabilitation and Wellness Center of Spartanburg — are in compliance with the minimum facility rent coverages. However, Fundamental's portfolio rent coverage ratio was 0.86x for the 12 months ended March 31, below the minimum ratio of 1.20x under the master lease.
Fundamental's guarantor is in compliance under its guaranty agreement.