XML 30 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Events
3 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent Events
SUBSEQUENT EVENTS
The Company evaluates subsequent events in accordance with ASC Topic 855, Subsequent Events. The Company evaluates subsequent events up until the date the condensed consolidated financial statements are issued.

Lease Amendments and Related Agreements
Pristine Lease Termination. On February 27, 2018 (the “LTA Effective Date”) the Company entered into a Lease Termination Agreement (the “LTA”) with Pristine under which Pristine agreed to surrender the facilities retained (the “Retained Facilities”) by Pristine under the Pristine master lease, as amended (as amended, the “Lease”) to an operator or operators designated by the Company in its sole and absolute discretion, in a transaction or transactions similar to the one effected in December 2017. Pursuant to the LTA, the operational transfers of the Retained Facilities were to occur within 180 days of the LTA Effective Date, and Pristine agreed to make commercially reasonable efforts to facilitate such transfers. Pristine further agreed that, until the date or dates upon which such operational transfers occurred (each an “LTA Transition Date”), Pristine would continue to operate the Retained Facilities, collect revenues, pay payroll and other current operating expenses, pay the scheduled base rent and, to the extent of funds available, pay additional rent due under the Lease. To the extent the operations were unable to fund the additional rent, the Company agreed to fund the impound account as needed to meet current real property tax and franchise permit fee liabilities accruing, if any, through the LTA Transition Date(s). The Company determined that it will continue to (i) recognize Pristine rental revenues on a cash basis, and (ii) reserve the outstanding obligations of Pristine to the Company as of December 31, 2017, consisting of $6.3 million in property tax reimbursements and advances of 2016 and 2017 franchise permit fees made during the year ended December 31, 2017, $3.3 million of 2017 property tax reimbursements and franchise permit fees expected to be advanced after December 31, 2017 and $0.8 million of unpaid base rent from September 2017.
Under the LTA, and upon Pristine’s full performance of the terms thereof, the Company agreed to terminate the Lease and all future obligations of the tenant thereunder; however, under the terms of the Lease, the Company’s security interest in Pristine’s accounts receivable will survive any such termination. Such security interest is subject to the prior lien and security interest of Pristine’s working capital lender, Capital One, National Association (“CONA”), with whom the Company has an existing intercreditor agreement that defines the relative rights and responsibilities of CONA and the Company with respect to the loan and lease collateral represented by Pristine’s accounts receivable and its respective security interests therein.
Pursuant to the LTA, on May 1, 2018 the operations of the Retained Facilities were transferred to Trio Healthcare, Inc. (“Trio”) and Hillstone Healthcare, Inc. (“Hillstone”). Trio assumed operations in seven facilities based primarily in the Dayton, Ohio area under a new 15-year master lease, while Hillstone assumed the operation of the two facilities in Willard and Toledo, Ohio under a new 12-year master lease. The aggregate annual base rent due under the new master leases with Trio and Hillstone is approximately $10.0 million, with standard CPI-based escalators.
OnPointe Lease Terminations. On March 12, 2018, the Company terminated two separate facility leases between the Company and affiliates of OnPointe Health (“OnPointe”), which covered two properties located in Albuquerque, New Mexico and Brownsville, Texas. The Brownsville lease termination also terminated an option agreement which would have granted the tenant the right, under certain circumstances, to purchase the Brownsville property. OnPointe continued to operate the facilities following the lease terminations, and worked cooperatively with the Company to effectuate an orderly transfer of the operations in the two properties to two existing CareTrust tenants.
On May 1, 2018, OnPointe completed the operational transfers of both facilities. An affiliate of Eduro Healthcare, LLC (“Eduro”) assumed operational responsibility for the Albuquerque property, and the Company entered into a lease amendment with Eduro amending their existing master lease with the Company to add the Albuquerque property thereto. An affiliate of Providence Group, Inc. (“Providence”) assumed operational responsibility for the Brownsville property, and the Company entered into a lease amendment with Providence amending their existing master lease with the Company to add the Brownsville property thereto. The aggregate annual base rent increase under the Eduro and Providence master leases, as amended, is approximately equivalent to the aggregate annual base rent the Company was receiving under the two OnPointe leases.