Tag Archives: landlords

Office Landlords Anticipate More Offers as Shared-Workspace Business Grab Area

Looking Ahead: Apple, Amazon Site Selections May Advantage the Office Market as Tech Development Gets

Apple is apparently eyeing Research Triangle Park in North Carolina for a research study and advancement campus. It is among the prospective offers that could create momentum for the workplace market in the next six months. image courtesy of City of Durham, NC.

U.S. workplace proprietors and brokers are more positive than they were six months ago as innovation giants Amazon and Apple prepare to pick development sites and shared-workspace companies take up to 1 million square feet of workplace on a monthly basis.

The booming economy has returned the technology sector to its accustomed function as a workplace need leader at the start of the second half of 2018, according to Scott Homa, director of office research for Jones Lang LaSalle. Overall workplace need dipped in the first quarter to one of its floors of the 10-year healing as innovation business momentarily drew back on leasing.

“A great deal of really beneficial characteristics in play will supply extra uplift and possibly push the workplace market towards increased deal speed in the 2nd half of the year,” Homa stated.

Those factors consist of large-scale leasing by WeWork and other shared workplace occupants in nearly every big U.S. market. In Washington, D.C., for instance, four co-working tenants have actually signed leases in recent months that will represent nearly 200,000 square feet of new need, according to Robert Hartley, research study director for Colliers International. He adds that it’s “just a matter of time” before shared office suppliers take control of an entire building in the District.

Financial and professional firms which typically account for the bulk of office leasing are still consolidating or cutting down, however, stated Andrew Nelson, primary economist for Colliers International.

“There’s no indication yet of any slowdown in the tech and coworking development, witness the substantial leasing this year by Facebook, WeWork and others,” Nelson said. “But that will not be enough to counter the weaknesses somewhere else in the workplace sector.”

Choices on broadening head office or structure other facilities might produce momentum for the office market in the next six months. Amazon’s last option for its second headquarters school, referred to as HQ2, will bring an estimated 50,000 jobs and 8 million square feet of workplace to among 20 finalist communities. Apple is reportedly focusing on the Research study Triangle Park near Raleigh, North Carolina, as a website for a financial investment of approximately $2 billion in a research study and advancement center that could utilize thousands of employees.

“Whenever a respected blue-chip organization makes a decision like that, it truly confirms the marketplace and produces extra credibility,” Homa stated. “Definitely a headquarters decision might have really, actually considerable downstream impacts throughout the more comprehensive office market.”

An increasing cost of living, increasing rents and a shortage of labor remain an obstacle for all office-using industries, even beyond technology enclaves such as the San Francisco Bay Area, according to analysts. Greater building deliveries are likely to outstrip need in the next year in significant markets such as Chicago, New York City and Washington, prompting property managers to start providing free lease and concessions to fill space.

“We’re seeing a great deal of occupiers looking for those better worths and more favorable offer economics,” Homa stated. “Concessions are one of the more under-the-radar indicators and something that we’ll be seeing in the second half.”

Another brilliant spot is that the energy market, a significant need chauffeur earlier in the years, might be poised for at least a mini-rebound. With oil costs remaining regularly above $70 a barrel, energy towns like Houston and Oklahoma City that have actually struggled recently willl be worth viewing carefully in coming months, said Cushman & & Wakefield primary economist Ken McCarthy.

Houston, the only major U.S. market in the previous year to publish negative need for workplace, is hovering near its peak job rate at 17 percent however may already have weathered the worst of the oil crisis, inning accordance with CoStar data.

The amount of subleased space disposed on the market by shrinking energy firms has actually slowly declined considering that late 2016, and Houston is one of only two or 3 cities predicted to see rent growth, albeit very slight, in the next couple of years, inning accordance with CoStar information.

As need sags throughout the nation, CoStar experts are urging financiers to remain focused on the greatest quality assets which command 70 percent of overall demand although they make up just one-third of office stock. While workplace demand peaked in 2015, high-quality properties are still garnering more than twice their fair share of need.

“There’s little reason this will cool down in the next year or 2, offered the hot economy,” said CoStar handling specialist Paul Leonard.

Office footprints are on typical 15 percent denser by square video footage today than in the 1980s, dropping to roughly 215 square feet per employee, because of telecommuting and other changes in the work environment. Fortunately for landlords is that business want and able to pay more per square foot to attract the very best skill, Leonard stated.

“Business profits are near record highs, nearly 20 percent above the last cycle, making it tasty for companies to justify reinvesting in their operations and real estate,” he stated. “The flight to quality has lasted far longer than previous cycles. Exactly what’s various is there hasn’t been any wavering up until now in need for premium area, in spite of record rent levels in most markets.

“Choices aren’t being made on basis of rent, but rather on the accessing and retention of talent.”

Editor’s note: This is the 3rd in a series on the industrial realty outlook for the second half of 2018.

MULTIFAMILY OUTLOOK: Multifamily Investors Are Getting Utilized to ‘Normal’

RETAIL OUTLOOK: Mall Transformations, Big Box Accessibility Advantage Retail Growth

Issue for a Cleaner City Clashes with Expenses to NYC'' s Business Landlords

From the top flooring of New York University’s Kimmel Center, against a backdrop of attention-stealing northwest views such as the glass sheathing currently climbing its way up a tower called 30 Hudson Backyards, New York City Housing Authority Vice President of Sustainability Bomee Jung asks the audience gathered at the Seventh Yearly Conference on Sustainable Real Estate one easy question: The number of had heard mention of the real estate authority in the news over the past week? A good one-third of the space’s hands raise. Then she asks just how much of the news heard readied. All the hands drop. Lots of no doubt have actually followed current reports detailing claims of structure mismanagement.

“The reason we have a sustainability program is since the outcomes we are having as a property manager are not amazing,” Jung contends. “Among the methods we can improve is to look particularly at our energy results. A big portion of experience you have as a tenant ties to energy sustainability. The experience of not having thermal comfort in your house ties to how we are handling the buildings’ heat and warm water as a proprietor.”

The agency is investing into improving exhaust ventilation and heating and cooling systems, and setting up LED lighting across its portfolio.

Energy efficiency is a specter haunting numerous owners and operators of the city’s business realty buildings. That’s primarily due to the fact that given that 2009, New York has actually been aggressively tightening its energy codes and sustainability efforts for buildings over 50,000 square feet through its Greener, Greater Buildings Plan.

The local laws passed consist of such requirements as the step and reporting of energy and water intake to the city through the Environmental Protection Agency’s Energy Star platform, and the auditing and retro-commissioning of existing systems every Ten Years. Passed at the very same time however expanded to structures more 25,000 square feet, another law needs all common-area lighting be upgraded to satisfy New york city City Energy Conservation Code requirements by 2025 and for electrical sub-metering to be set up by the exact same due date.

Then in 2016, the De Blasio administration produced a roadmap for its 80×50 plan, which targets an 80 percent decrease in New York City’s greenhouse emissions by 2050 and is mandating energy-efficiency improvements throughout structures of all sizes.

To satisfy the emissions reduction, the strategy needs New york city City commercial buildings to satisfy tighter, “ultra-low energy requirements,”– suggesting existing structures will require considerable investment into “deep energy retrofits” consisting of overhaul of heating and cooling systems and much better insulation to lower energy loss. The plan also goes for increased financial investments into on-site renewable energy throughout the City, consisting of the placement of solar panels on roofs on City structures.

Though sustainable initiatives probably conserve proprietors loan in time, the funding of such projects and the training needed to bring upkeep employees up-to-date on new tracking innovations proves tough. The city says it will have to deal with the public and private sectors on “suitable funding systems.”

Invesco, for instance, is purchasing so-called clever technology to track structure energy usage through apps, states Lesley Lisser, director of property management at the institutional investment firm. However she cautions the innovation needs to be easy to use so that training building managers and upkeep personnel is not so strenuous a process.

“You need to discuss it to everyone who runs those buildings,” she says, adding that partnering with innovation companies that can train workers is crucial. Invesco is also looking in sustainability efforts for its York City apartment holdings, says Lisser, but she included the company is economically driven. Hence any sustainability initiatives she advances need to develop expense savings or make monetary sense, such as by means of tax rebates or smaller energy costs. “In office and multifamily you can obtain higher leas when you are purchasing the rewards,” she says.

Discussing rent premiums from energy efficiency, Nick Stolatis, vice president at asset management firm EPN Realty Services, has a different take. “It’s a green premium or a brown discount rate,” he says. An Energy Star or LEED certification might tip the scales in occupants’ decision-making procedure. “They might not pay you more lease, however they may be willing to pay your lease instead of going across the street and pay less,” he discusses.

In working to fulfill energy requireds, older buildings will need the most attention. Since of New york city’s tighter building regulations, federal government rewards connected to fulfilling Energy Star standards and the appeal of LEED to international investors, brand-new jobs built by the city’s largest designers are quite efficient. Simply ask Jonathan Flaherty, senior director of Sustainability and Energies at Tishman Speyer.

Pointing out Tishman’s latest advancement, a 2.8 million-square-foot office tower called The Spiral, Flaherty states developing to city codes implies it will be ensured LEED Silver. He adds that Tishman is working toward attaining LEED Gold and stays optimistic on that front.

Citing exactly what he calls “aggressive goals” on behalf of 80×50, Flaherty says it won’t be the city’s leading developers that will have problem fulfilling them.

“The issue will be the 14,000 approximately brick-façade punch-window multifamily buildings that are not even near to attaining their goals,” he stated. “These buildings are perfectly nice, but not efficient.” A majority of these properties are owned by individual New York tax payers, he notes, and they will have to spend for these improvements. “We are talking hundreds of thousands per building, for brand-new heat pumps, windows, façades,” he adds.

The most affordable effectiveness building you can build today would still be six or seven times more effective than one integrated in the 1970s, notes Timon Malloy, president of the Fred. F. French Investing Co.

. Flaherty estimates that fulfilling the Mayor’s preliminary goal of reducing emissions 50 percent by 2030 across the city will require “most likely $10-15 billion in developing effectiveness enhancements, at minimum.”

Tishman Speyer is working with BE-Ex, the Building Energy Efficiency Exchange, an independent nonprofit that works to spread out understanding and best practices to smaller property managers throughout the network.

“We are offering individuals the self-confidence to do energy-retrofit tasks. It’s an exciting time because we are starting to get financial data, difficult number values of how it aids with leasing,” says BE-Ex Executive Director Richard Yancy, mentioning the benchmarking rules in play considering that 2009. Given that energy effectiveness is lower on the list of concerns for a lot of New york city City developers, Yancy states the group has developed “a list of touchpoints: Daily measures that can decrease operating costs, midrange improvements that pay in 1-2 years and more substantial work.”

Sustainability is “a considerable element” in property space and “important” to running a building effectiveness, adds Stolatis. “Benchmarking is the fundamental building block. You cannot handle that which you don’t measure.” Nor can you surpass it.

Obtaining the funding needed to make deep retrofits on existing structures is among the obstacles, panelists agreed. A scheme called Home Assessed Clean Energy financing is amongst the funding choices potentially offered to personal loan providers across the country, however the system must initially be adopted by state and city governments. It is available in New york city.

Through SPEED Financing, money supplied to designer is paid back as a line product on a property tax bill. “The benefit is property taxes and assessments have a senior lien, so tax evaluations earn money first. It’s extremely appealing to investors. We can supply long-term financing, as much as 20 or Thirty Years,” says David Gabrielson, executive director at PACENation, its advocacy group.

Also in organisation is the New York Green Bank, a state-sponsored funding entity that deals with private capital to fund clean energy innovations for structures. However, panelists stated that regardless of the firm’s excellent intents, there’s a misstep that makes it a less-popular option to some owners. It must follow the requirements of the Liberty of Info Act, opening information to the general public. Considering that a big part of realty is incorporated not as its own entity but as a pass-through, accepting this funding opens the owner’s personal finances to both the bank and public scrutiny.

Green Bank has not had much deal activity with owners of New york city City structures, because they are not really interested in the encumbrances connected with it, inning accordance with panelists. And foreign-based owners are exempt from the funding.

Speed bumps aside, panelists said New york city’s stricter building regulations put it among a handful of cities nationally and that sustainable-development practices and principles are getting pace.

“The exciting thing is it is not such a small circle,” says Yancy, calling President Trump’s choice to take out of the Paris climate agreement “somewhat of an advantage” for the sustainability market. “About 1,200 business leaders and 400 mayors signed the ‘we are still in’ statement. So how do we speak about energy performance as a bottom line? There’s a huge advantage to how energy-efficient structures run for their renters. We have to scale up the discussion.”

Bon-Ton Landlords Washington Prime, Namdar Real Estate Deal to Buy Struggling Merchant Out of Bankruptcy

$128 Million Quote Would Keep Dept. Shop Chain as Going Issue

A financier group composed of DW Partners, Namdar Realty Group (including its partner Mason Possession Management) and Washington Prime Group has actually offered to buy The Bon-Ton Stores Inc. (OTCQX: BONT) out of bankruptcy for $128 million cash in a quote to keep the seller as a going issue.

The struggling, Milwaukee-based outlet store chain declared Chapter 11 insolvency reorganization this past February. The financier group, which includes two of Bon-Ton’s existing property owners, proposes to acquire Bon-Ton through an insolvency court-supervised sale procedure.

Considering that the retailer declared insolvency, other groups have actually shown interest in buying up and liquidating the firm.

Bon-Ton and the financier group still need to complete a property purchase arrangement in advance of an auction, now arranged to be held on April 16.

The financier group had actually conditioned its desire to continue with settlements on a deposit of $500,000 to cover the expense of due diligence. The court approved the work fee.

The financier group would get all of Bon Load’s assets with one exception– a 743,600-square-foot distribution center at 115 Business Pkwy in West Jefferson, OH (Columbus). That home would be sold independently to AM Retail Group Inc., which operates retailer areas owned by G-III, including Wilsons Leather, G.H. Bass & & Co., Calvin Klein Efficiency, Karl Lagerfeld Paris and DKNY shops.

Bon-Ton is a tenant in 15 of Washington Prime Group’s properties, totaling 1.48 million square feet. DW Partners is an alternative property manager and Namdar Real estate Group is a privately held business realty investment and management company that owns and operates more than 30 million square feet of industrial real estate in the U.S. Bon-Ton is a tenant in 13 of its properties.

Neither Washington Prime nor Namdar have commented yet on the deal.

Bon-Ton operates 250 shops, which includes 9 furnishings galleries, in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers brands.

This would not be the very first time property owners have actually teamed to purchase up a distressed but major tenant in their property portfolios.

In September 2016, Simon Residential Or Commercial Property Group (NYSE: GGP), GGP (NYSE: GGP) and Authentic Brands Group LLC acquired Aeropostale Inc. through a bankruptcy court supervised sale for $80 million. Therefore far, that move seems to be working out for the REITS.

GGP chipped in $20.4 million of cash for its part. At the end of in 2015, GGP sold a 54% share of its interest in the joint venture to Genuine Brands Group LLC for $16.6 million, which resulted in a $12 million gain to GGP.

Namdar’s and Washington Prime’s bid makes good sense for a couple of reasons, inning accordance with Morgan Stanley Research analysts Richard Hill and Ronald Kamdem.

If they were to lose Bon-Ton as a renter, cap rates fortheir shopping malls would likely broaden if provided the risk of co-tenancy and capex requirements to redevelop.

However it could also be rather of an offensive relocation. It’s possible that the property managers could place Bon-Ton shops in shopping centers where they have a big box job.

“We can’t assist however think this would be a competitive advantage for these 2 shopping center landlords relative to their peers,” the 2 experts said. “First, they could decide to keep open stores at their residential or commercial properties while closing others at competing locations. Second, it could offer them a chance to purchase shopping malls from their rivals at more attractive valuations if there is a threat of losing a significant occupant.”

Bon-Ton Landlords Namdar Realty, Washington Prime Deal to Purchase Struggling Seller Out of Insolvency

$128 Million Quote Would Keep Dept. Store Chain as Going Issue

A financier group composed of DW Partners, Namdar Realty Group (including its partner Mason Asset Management) and Washington Prime Group has actually provided to buy The Bon-Ton Stores Inc. (OTCQX: BONT) from personal bankruptcy for $128 million money in a quote to keep the seller as a going concern.

The having a hard time, Milwaukee-based outlet store chain filed for Chapter 11 bankruptcy reorganization this previous February. The financier group, which includes 2 of Bon-Ton’s current property owners, proposes to acquire Bon-Ton through a personal bankruptcy court-supervised sale procedure.

Because the retailer declared insolvency, other groups have actually shown interest in purchasing up and liquidating the firm.

Bon-Ton and the investor group still have to settle a possession purchase agreement in advance of an auction, now arranged to be hung on April 16.

The financier group had actually conditioned its desire to proceed with settlements on a deposit of $500,000 to cover the expense of due diligence. The court authorized the work cost.

The financier group would get all of Bon Heap’s assets with one exception– a 743,600-square-foot warehouse at 115 Business Pkwy in West Jefferson, OH (Columbus). That home would be offered separately to AM Retail Group Inc., which operates retail store areas owned by G-III, including Wilsons Leather, G.H. Bass & & Co., Calvin Klein Efficiency, Karl Lagerfeld Paris and DKNY stores.

Bon-Ton is a renter in 15 of Washington Prime Group’s properties, totaling 1.48 million square feet. DW Partners is an alternative asset manager and Namdar Real estate Group is an independently held commercial realty investment and management firm that owns and runs more than 30 million square feet of industrial property in the U.S. Bon-Ton is a tenant in 13 of its homes.

Neither Washington Prime nor Namdar have actually commented yet on the deal.

Bon-Ton runs 250 stores, which includes 9 furniture galleries, in 23 states in the Northeast, Midwest and upper Fantastic Plains under the Bon-Ton, Bergner’s, Boston Shop, Carson’s, Elder-Beerman, Herberger’s and Younkers brands.

This would not be the first time landlords have teamed to purchase up a struggling however significant occupant in their home portfolios.

In September 2016, Simon Property Group (NYSE: GGP), GGP (NYSE: GGP) and Genuine Brands Group LLC got Aeropostale Inc. through a personal bankruptcy court monitored sale for $80 million. And so far, that relocation seems to be working out for the REITS.

GGP broke in $20.4 countless cash for its part. At the end of in 2015, GGP offered a 54% share of its interest in the joint endeavor to Authentic Brands Group LLC for $16.6 million, which led to a $12 million gain to GGP.

Namdar’s and Washington Prime’s quote makes good sense for a few reasons, inning accordance with Morgan Stanley Research experts Richard Hill and Ronald Kamdem.

If they were to lose Bon-Ton as a renter, cap rates fortheir malls would likely widen if given the risk of co-tenancy and capex requirements to redevelop.

But it could likewise be somewhat of an offensive relocation. It’s possible that the property managers might position Bon-Ton stores in shopping malls where they have a huge box vacancy.

“We can’t help but think this would be a competitive benefit for these 2 shopping mall landlords relative to their peers,” the two analysts said. “Initially, they could opt to keep open shops at their properties while closing others at completing areas. Second, it could offer them an opportunity to purchase shopping malls from their rivals at more attractive evaluations if there is a threat of losing a major renter.”

Toys R Us Closings May Prove Fortunate to A Lot Of Landlords

Nobody Likes Losing an Anchor Renter but Toys R United States Closures Likely To Produce More Upside than Down

The

Plant San Jose The announcement from Toys R Us last week that it will initially be closing up to 182 stores by April could end up being a favorable for much of the property managers affected.

A considerable, if not majority, of the properties are located in strong retail trade locations with attractive shopping demographics. In addition, retail properties near or in the shopping mall with shops slated for closure that are funded by openly held loans in business home mortgage backed securities (CMBS) have actually been reporting strong financial results.

As part of its September 2017 Chapter 11 personal bankruptcy reorganization filings, Toys ‘R United States announced recently it planned to close 182 shops, around one-fifth of all of its U.S. shops. While mass store closure statements normally develop angst among CMBS investors, upon additional analysis the closures may really produce more upside than down, inning accordance with John Vecchione, director of CoStar Risk Analytics.

Vecchione found that, while the overall CMBS loan exposure to Toys R United States is $20 billion, the recent closure statements will affect only about $2 billion in CMBS loans. When CoStar’s Area Quality Rating is applied to this collateral, it revealed that places backed by just $400 countless the CMBS loans was located in bad trade locations with a greater threat of replacing Toys R Us with a lower renter, or not having the ability to fill the space at all.

CoStar’s exclusive Location Quality Score (LQS) uses multiple variables, including trade location incomes, retail density and market competitors to assess the performance of more than 1.5 million retail properties in the CoStar database.

The CoStar LQS can provide insight regarding whether the shop closure is called for by a location in a poor trade location, or whether it remains in a trade area most likely to support a different retail user.

Toys R Us and Infants R United States have an average LQS of 70 (from 100), which remains in line with the score for the average U.S. shopping center. By way of comparison, among Toys R United States’ main competitors, Walmart, has a shop portfolio where the average LQS is more detailed to 58.

“In figuring out the full CMBS loan exposure to Toys R Us, we broadened our research study beyond the leading 5 renters provided in standard CMBS reporting. Using CoStar’s renter research, we were able to put together a much more detailed list of CMBS loans either directly or indirectly exposed to Toys R United States,” Vecchione stated. “In the end we were shocked that the majority of CMBS loans exposed to Toys R United States might potentially benefit from the closings.”

One such home is The Plant, a 485,895-square-foot shopping center in San Jose. Toys R Us/Babies R Us is the 2nd biggest renter inhabiting 64,850 square feet under a lease with a January 2023 lease expiration.

The center has been posting strong monetary outcomes at 93% occupancy and net operating income through the very first 9 months of 2017 of $9.98 million – sufficient NOI to cover its overall financial obligation payment amounts more than two times, according to the latest bondholders’ report from last month.

At Pipeline Village East and West in Hurst, TX, Toys R United States runs both a Toys R United States and Children R Us shop occupying 60% of the 132,529 rentable square feet. Toys R Us is closing the 30,790-square-foot Infants R United States however keeping open its 49,210-square-foot Toys R Us, which it reported is profitable and in reality in the leading 25% of its shops in the region, according to the current shareholders’ report from last month.

Babies R Us, in fact, comprise more than half of the shops Toys R United States revealed it is closing, a disproportionate share since the brand name accounts for almost one-fourth of its U.S. shop portfolio.

CoStar Risk Analytics shows the Pipeline Village property will most likely discover an occupant however at a lower rent.

Toys R United States is working with A&G Real estate Partners to evaluate its leases and has till mid-April to continue its review of its portfolio of more than 790 U.S. stores. It has asked some property owners for a three-week extension to make a decision.

Emilio Amendola, co-president of A&G Real estate Partners did not get into specifics but informed CoStar that interest in Toys R United States homes “has actually been really strong.”

Other retail experts concur that most of locations being closed might offer upside to their property owners.

“The good news here is that almost all of the properties are Class A or B areas– both the shopping mall and metropolitan places– and solid realty,” said Garrick Brown, vice president – retail intelligence for Cushman & & Wakefield. “Toys R United States has, both in the shops they are keeping open and the ones allocated for closure, a great property portfolio.”

“The sizes of these shops differ however usually they are 40,000 square feet or less, which means that re-tenanting these areas will be a lot easier than if the footprints were bigger or if they were not within prime areas already.”

Brown stated he sees the prospective occupant swimming pool for this size box is relatively strong with these sites likely going to grocery, off-price garments or other mid to junior box users.

That said, Brown added, he would not be amazed if Toys R United States continues to close some locations as leases end and increasingly see them combining standalone Toys R Us and Children R Us stores under one roofing system. As part of its closure announcement, Toys R Us stated that will be the case in six of its planned shop closures.

Editor’s Note: To find which properties have the most upside or to learn more about CoStar Danger Analytics, contact John Vecchione, Director.

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.