Bankrupt Mariner Post-Acute Network is shedding a few dozen of its 400 nursing homes across the country, and more almost certainly will follow.
The Atlanta-based company, which declared bankruptcy earlier this year (January 24, p.10), owns some but leases most of the buildings where it operates its long-term-care nursing businesses.
To both raise capital for creditors and focus operations, Mariner has petitioned the U.S. Bankruptcy Court in Wilmington, Del., for permission to reject leases on about 25 facilities it doesn't own and to sell about five facilities it does own.
"We're going through the restructuring process, and as part of that process we're working with the banks on focusing on core operations and key markets," spokeswoman Kym Spell said.
As of Sept. 30, 1999, Mariner operated 400 skilled nursing facilities, with more than half in five states: California, Colorado, Florida, North Carolina and Texas. That number will decrease.
Bankruptcy law allows companies to reject unfavorable leases.
The majority of Mariner's requests in bankruptcy court involve 26 buildings owned by Senior Housing Properties Trust, a company based in Newton, Mass.
Under a deal the two companies have worked, Mariner will buy five buildings from Senior Housing for $24 million (two in California and three in North Carolina); in exchange, Senior Housing will allow Mariner to pull out of 21 leases, divesting itself of its nursing home businesses at those locations.
Of those 21, Senior Housing will assume operations of 17 and lease the other four to private operators.
"We've been setting up an infrastructure such that we can take back properties and manage them ourselves," said David Hegarty, president of Senior Housing. "For the next couple of years we envision controlling these assets."
A new law allows real estate investment trusts to hire contractors to operate facilities they own for up to six years, said Alexis Hughes, a New York-based real estate analyst for JP Morgan.
The real estate owner of a Bethany, Okla., facility has proposed to take over operations of the facility now that Mariner has rejected the lease. But that transaction is not without its snags.
The Oklahoma State Department of Health requires new operators to apply for a certificate of need, a process that takes a minimum of 45 days.The lease is scheduled for rejection by May 31.
In a letter to the state, attorneys for Mariner have stated that if the company can't get approval for a transfer of operations by that date, it may wind down operations. But the state requires 90 days notice before an operator may close a long-term-care facility.
Other private companies are taking over nursing homes where Mariner has rejected the lease without much fuss.
One nursing home in Naperville, Ill., renamed Community Nursing and Rehabilitation Center, was bought from owner Central DuPage Hospital for $5.4 million earlier this month by a pair of first-time nursing home operators.
Rejections of leases on nursing homes in California, Ohio, Texas, Florida and Illinois are also on the table.
Mariner is selling off other money-losing homes to raise cash.
In one deal, The Ensign Group, a private company based in San Juan Capistrano, Calif., is slated to buy a Mariner home in Phoenix, Ariz., for $1.3 million.
Mariner also plans to sell an 82-bed facility in Des Moines, Iowa, and three facilities in Rochelle, Ill., for a total of $4 million, according to court filings.