Landlords Force Proficient Nursing Center Operator Fortis Management Group into Receivership

Landlords have actually reached a consensual contract to have actually a receiver appointed for Fortis Management Group, which defaulted on master leases this past spring covering 65 healthcare centers in the upper Midwest, becominig the current post-acute/skilled nursing operator injured by a difficult operating environment.

Milwaukee lawyer Michael S. Polsky of Beck, Chaet, Bamberger & & Polsky was called as receiver. Polsky has actually kept Focus Management Group USA Inc. as a monetary consultant and operations consultant during the receivership procedure.

“We have figured out that the most effective method to stabilize the company is to seek appointment of a receiver who will presume all duty for running the business and put it in a stronger position for transition to brand-new operators,” said a Fortis spokesman.

Milwaukee-based Fortis’ 65 facilities are located in Wisconsin, Michigan, Minnesota, Oregon, Idaho and Washington.

Fortis defaulted on its master leases in March when it failed to make minimum rent payments amounting to $2.3 million. It cannot pay again in April and July, according to receivership papers submitted in the case. In addition, the filings explained Fortis’s service as now being insolvent.

Fortis Management Group was formed to manage retirement home offered by Extendicare Inc., a nursing home chain based in Markham, Ontario, in 2015 to an investor group led by Development Capital LLC, an Atlanta-based personal investment company, and an affiliate of Dubai-based Safanad Inc., also a financial investment company. Development Capital formed separate LLCs as property owner for each of the centers.

Fortis is the latest post-acute/skilled nursing operator to suffer severe setbacks. In June, Quality Care Characteristic (NYSE: QCP) reported that its primary occupant, competent nursing center operator HCR ManorCare Inc., defaulted on its master lease. Quality Care has actually demanded complete payment of back due lease of $79.6 million.

If HCR cannot create the payment it would activate an occasion of default requiring payment of an extra roughly $265 million of delayed rent and allow Qaulity Care lessors to end the master lease and designate a receiver.

Quality Care pointed out numerous continuous difficulties dealing with the post-acute/skilled nursing sector, including:

A shift away from a traditional cost for service model to brand-new managed care models with decreased payments and lengths of stays, especially handled Medicare plans;
Increased competition from alternative health care services such as home-based health agencies and lifecare in your home, community-based service programs, along with increased offered senior housing, retirement home and convalescent centers;
Increased regulatory examination on government reimbursements.

While Quality Care stated it expects the post-acute/skilled nursing operating environment to stay tough in the near term, it thinks long-lasting market trends could benefit service providers that survive the existing health care services shakeout, pointing out the growing elderly population, expected increases in aggregate experienced nursing expenditures and supply restrictions in the experienced nursing sector due to certificate of requirement requirements and other barriers to entry.

While development of brand-new skilled-nursing centers has actually slowed as a result of the new payment processes and market uncertainty, some are still being constructed. For example, Houston-based Medistar Corp. began building on a brand-new 60,000-square-foot care facility in Humble, TX. The facility will consist of 104 total beds, consisting of 70 beds of proficient nursing focusing on short-term rehab care, 18 beds of assisted living and 16 beds of memory care. Building is expected to be finished in 2018.


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