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How skilled nursing facilities and their landlords can reconnect

May 8, 2018
by I Advance Senior Care
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As multiple skilled nursing tenants struggle to pay their real estate investment trust (REIT) landlords, a Chicago-based real estate management company is looking to change the model of skilled nursing leases by getting its operators to see it as a partner.

For Mozart Healthcare, the goal is to be “on the ground with our operators,” CEO and co-founder Archie Shkop told Skilled Nursing News.

His brother and co-founder Ben Shkop, who serves as chief operating officer, agreed.

“We want to be viewed as a business partner who happens to get their distributions in the form of a rent check,” he said.

Over the last few years, multiple skilled nursing tenants have struggled to pay the REITs that own their buildings.

HCR ManorCare notably declared bankruptcy and had to be taken over by its landlord, Quality Care Properties (NYSE: QCP), before finding a buyer in hospital chain ProMedica. Signature Healthcare has struggled to pay its landlords Omega Healthcare Investors, Inc. (NYSE: OHI) and Sabra Health Care REIT (Nasdaq: SBRA), while Omega’s tenant Orianna is in the middle of bankruptcy proceedings.

In Ben Shkop’s view, the REIT model of leasing has forced SNF operators into rents and structures that are never allowed to be profitable, which keeps them from running the operating business the way it should be run.

“There’s a disconnect between the people that are buying the real estate and the people that are operating the actual nursing home,” he said. “If you have a disconnect with those two, you are setting yourself up for failure.”

Mozart currently leases to seven different nursing home operators, and the company is hoping to double that number by the end of this year. It has locations in Ohio, Texas, and Michigan, and aims to expand to the West Coast shortly.

Read the full story at Skilled Nursing News.

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