Quality Care Properties Inc. agreed to amend its master lease with its primary tenant HCR III Healthcare LLC to reduce HCR III's monthly rent payment to $23.5 million for a one-year period beginning Nov. 30.
Rent in excess of the reduced rent will be deferred until the end of the period. However, Quality Care acknowledged that HCR III's parent, HCR ManorCare, Inc., informed it that it expects to be unable to pay a material portion of the reduced rent during some or all of the period due to its financial position. HCR ManorCare expects its operating results to "continue to trend significantly downward in 2018," Quality Care said in a release.
Quality Care and HCR ManorCare are negotiating a "comprehensive restructuring" of their economic relationship after ManorCare defaulted on its lease in July. In August, Quality Care launched a process to appoint an independent receiver to operate the skilled nursing and assisted living/memory care facilities leased to HCR ManorCare.
Under the lease amendment, Quality Care agreed to forbear enforcing remedies for certain defaults until Jan. 16, 2018, unless either party commits a material breach of the agreement.
Quality Care said the agreement constitutes a "material amendment" to its first-lien credit and guaranty agreement with its lenders and Barclays Bank PLC, the administrative agent. The agreement is also a material amendment to the indenture governing Quality Care's 8.125% senior secured notes due 2023 with Wilmington Trust NA as trustee and collateral agent.