UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2017~~2018


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37805

Quality Care Properties, Inc.

(Exact name of registrant as specified in its charter)


Maryland		81‑2898967
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7315 Wisconsin Avenue, Suite 550 East

Bethesda, Maryland 20814

(Address of principal executive offices)

(240) 223-4680

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐☒ Accelerated Filer ☐ Non-accelerated Filer ☒☐ (Do not check if a smaller reporting company) Smaller Reporting Company ☐ Emerging growth company ☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ☐ NO ☒

As of ~~November 3~~May 2, ~~2017~~2018, there were 9394,~~809~~196,~~524~~282 shares of the registrant’s $0.01 par value common stock outstanding.

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QUALITY CARE PROPERTIES, INC.

INDEX

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	3
	Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017	3
	Combined Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2017 and 2016	4
	Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three Months Ended March 31, 2018 and 2017	4
	Combined Consolidated Statements of Equity for the Nine Months Ended September 30, 2017 and 2016	5
	Consolidated Statements of Equity for the Three Months Ended March 31, 2018 and 2017	5
	Combined Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	6
	Notes to the Combined Consolidated Financial Statements	7
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4441
Item 4.	Controls and Procedures	4542
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4543
Item 1A.	Risk Factors	4543
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4644
Item 3.	Defaults Upon Senior Securities	4645
Item 4.	Mine Safety Disclosures	4645
Item 5.	Other Information	4645
Item 6.	Exhibits	4645
Signature		47

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Quality Care Properties, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
ASSETS
Real estate:
Building and improvements	$	43,~~352~~976,~~802~~172	$	4,~~891~~289,~~996~~798
Land		~~592~~529,~~464~~847		~~637~~585,~~601~~559
Accumulated depreciation		(~~984~~991,~~135~~293)		(1991,~~111,768~~731)
Net real estate		3,~~961~~514,~~131~~726		43,~~417~~883,~~829~~626
Real estate and related assets held for sale, net		—357,355		~~16,019~~—
Cash and cash equivalents		~~311~~352,~~969~~251		~~126~~325,~~185~~587
Restricted cash		24		1724
Intangible assets, net		~~165~~137,~~627~~414		~~199~~158,~~745~~072
Straight-line rent receivables, net		2,~~713~~199		32,~~296~~462
Other assets, net		2220,~~719~~661		2622,~~284~~293
Total assets	$	4,~~464~~384,~~183~~630	$	4,~~789~~392,~~375~~064
LIABILITIES AND EQUITY
Bank line of credit	$	75,000	$	2575,000
Term loan		~~954~~952,~~659~~901		~~957~~953,~~465~~768
Senior secured notes		~~732~~734,~~702~~122		~~730~~733,~~604~~412
Tenant security deposits and deferred revenue		65,~~688~~426		58,~~587~~029
Accrued interest		25,~~391~~831		1210,~~526~~548
Accounts payable and accrued liabilities		98,~~693~~872		410,~~426~~117
Income taxes payable		—		16,544
Total liabilities		1,802,152		1,790,874
Total liabilities		1,804,133		1,752,152
Redeemable preferred stock		1,930		1,930
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 93,809,524 and 93,597,519 issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		938		936
Common stock, $0.01 par value, 200,000,000 shares authorized, 94,196,282 and 93,809,524 issued and outstanding as of March 31, 2018 and December 31, 2017, respectively		942		938
Additional paid-in capital		3,~~169~~173,~~555~~171		3,~~163~~171,~~954~~460
Accumulated deficit		(~~512~~594,~~870~~062)		(~~130~~573,~~094~~635)
Total stockholders' equity		2,~~657~~580,~~623~~051		32,~~034~~598,~~796~~763
Noncontrolling interests		497		497
Total equity		2,~~658~~580,~~120~~548		32,~~035~~599,~~293~~260
Total liabilities and equity	$	4,~~464~~384,~~183~~630	$	4,~~789~~392,~~375~~064

See accompanying Notes to the ~~Combined~~ Consolidated Financial Statements.

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Quality Care Properties, Inc.

~~COMBINED~~ CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

~~Nine Months Ended~~

September 30,

March 31,

2017

2016

2017

2016

2018

2017

Revenues:

Rental and related revenues

5563,~~690~~415

~~123~~112,~~280~~237

~~246,876~~

~~366,455~~

Tenant recoveries

~~310~~10,879

~~387~~10,548

~~1,064~~

~~1,149~~

Total revenues

5674,~~000~~294

~~123~~122,~~667~~785

~~247,940~~

~~367,604~~

Costs and expenses:

Depreciation and amortization

3130,~~440~~011

3534,~~879~~450

~~100,300~~

~~129,870~~

Operating

~~606~~11,141

110,~~032~~734

~~2,139~~

~~3,056~~

General and administrative

67,~~991~~110

76,~~131~~341

~~20,486~~

~~16,359~~

Restructuring costs

510,~~475~~356

—3,239

~~13,358~~

—

Interest

35,~~134~~987

—34,225

~~104,799~~

—

Impairments

92,~~910~~898

~~21,145~~—

~~391,959~~

~~21,145~~

Total costs and expenses

8997,~~556~~503

6588,~~187~~989

~~633,041~~

~~170,430~~

Other income:

Gain on sales of real estate

—

—3,283

~~3,283~~

~~6,460~~

Other income, net

~~277~~2,955

~~213~~21

~~402~~

~~255~~

Total other income, net

~~277~~2,955

~~213~~3,304

~~3,685~~

~~6,715~~

(Loss) income before income taxes

(3320,~~279~~254)

5837,~~693~~100

~~(381,416)~~

~~203,889~~

Income tax expense

(~~799~~153)

(~~5,173~~281)

~~(1,299)~~

~~(18,014)~~

Net (loss) income and comprehensive (loss) income

(3420,~~078~~407)

5336,~~520~~819

~~(382,715)~~

~~185,875~~

Noncontrolling interests' share in earnings

(20)

—(24)

~~(61)~~

—

Net (loss) income and comprehensive (loss) income attributable to the Company

(3420,~~098~~427)

5336,~~520~~795

~~(382,776)~~

~~185,875~~

Less: preferred share dividends

(60)

—(111)

~~(232)~~

—

Net (loss) income and comprehensive (loss) income attributable to common shareholders

(3420,~~158~~487)

5336,~~520~~684

~~(383,008)~~

~~185,875~~

(Loss) earnings per common share, basic and diluted

(0.3622)

0.5739

~~(4.09)~~

~~1.99~~

See accompanying Notes to the ~~Combined~~ Consolidated Financial Statements.

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Quality Care Properties, Inc.

~~COMBINED~~ CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

(Unaudited)

	Common Stock		Additional Paid-In Capital		~~Net~~Accumulated ~~Parent Investment~~Deficit		~~Accumulated~~Total ~~Deficit~~Stockholders' Equity		~~Total Stockholders' Equity~~NoncontrollingInterests		~~NoncontrollingInterests~~Total Equity		~~Total Equity~~
January 1, 2017	$	936	$	3,163,954	$	—	$	(130,094)	$	3,034,796	$	497	$	3,035,293
January 1, 2018	$	938	$	3,171,460	$	(573,635)	$	2,598,763	$	497	$	2,599,260
Net (loss) income		—		—		—(20,427)		(~~382~~20,~~776~~427)		~~(382,776)~~20		61(20,407)		~~(382,715)~~
Stock-based compensation		24		52,~~836~~370		—		—2,374		~~5,838~~—		—2,374		~~5,838~~
Distributions on preferred shares		—		(235)		—		—		(235)		(61)		(296)
Cancellation of common shares		—		(599)		—		(599)		—		(599)
September 30, 2017	$	938	$	3,169,555	$	—	$	(512,870)	$	2,657,623	$	497	$	2,658,120
Distributions on preferred shares		—		(60)		—		(60)		(20)		(80)
January 1, 2016	$	—	$	—	$	5,087,494	$	—	$	5,087,494	$	—	$	5,087,494
March 31, 2018	$	942	$	3,173,171	$	(594,062)	$	2,580,051	$	497	$	2,580,548
Net income		—		—		185,875		—		185,875		—		185,875
January 1, 2017	$	936	$	3,163,954	$	(130,094)	$	3,034,796	$	497	$	3,035,293
Net distributions to parent		—		—		(413,404)		—		(413,404)		—		(413,404)
Net income		—		—		36,684		36,684		24		36,708
September 30, 2016	$	—	$	—	$	4,859,965	$	—	$	4,859,965	$	—	$	4,859,965
Stock-based compensation		—		1,733		—		1,733		—		1,733
Distributions on preferred shares		—		(3)		—		(3)		(24)		(27)
March 31, 2017	$	936	$	3,165,684	$	(93,410)	$	3,073,210	$	497	$	3,073,707

See accompanying Notes to the ~~Combined~~ Consolidated Financial Statements.

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Quality Care Properties, Inc.

~~COMBINED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2017		2016
	2018		2017
Cash flows from operating activities:
Net (loss) income	$	(~~382~~20,~~715~~407)	$	~~185~~36,~~875~~819
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		~~100~~30,~~300~~011		~~129~~34,~~870~~450
Amortization of market lease intangibles		163		238
Amortization of right of use assets		~~217~~83		~~127~~67
Amortization of deferred financing costs		82,~~379~~471		—2,591
Stock-based compensation expense		52,~~838~~374		—1,733
Straight-line rents		~~583~~263		~~225~~146
Settlement of Tranche A deferred rent obligation		—		91,605
Gain on sales of real estate		—		(3,283)
Gain on sales of real estate		(3,283)		(6,460)
Impairments		2,898		—
Impairments		391,959		21,145
Deferred income tax expense		—		17,398
Changes in:
Other assets		~~557~~727		~~382~~435
Tenant security deposits and deferred revenue		(~~399~~2,603)		~~955~~(97)
Accrued interest		1215,~~865~~283		—15,234
Accounts payable and accrued liabilities		5(1,~~207~~265)		~~(468)~~4,696
Income taxes payable		~~(16,544)~~—		—(16,544)
Net cash provided by operating activities		~~122~~29,~~980~~838		~~440~~76,~~677~~255
Cash flows from investing activities:
Acquisitions of real estate		—		(106,588)
Leasing costs and tenant and capital improvements		(15)		(66)
Leasing costs and tenant and capital improvements		(206)		(1,162)
Net proceeds from the sales of real estate		—		19,287
Net proceeds from the sales of real estate		20,787		62,258
Net cash (used in) provided by investing activities		(15)		19,221
(Increase) decrease in restricted cash		(7)		14,526
Net cash provided by (used in) investing activities		20,574		(30,966)
Cash flows from financing activities:
Proceeds from issuance of debt		50,000		—
Repayments of debt		(2,500)		(2,500)
Repayments of debt		(7,500)		—
Repurchase of cancelled shares		(599)		—
Payment of deferred financing costs		(34)		—
Distributions paid		(60)		(75)
Borrowing from parent		—		1,162
Net cash used in financing activities		(3,159)		(2,575)
Distributions paid		(236)		—
Net increase in cash, cash equivalents and restricted cash		26,664		92,901
Net distributions to parent		—		(413,404)
Cash, cash equivalents and restricted cash, beginning of period		325,611		126,202
Net cash provided by (used in) financing activities		42,230		(412,242)
Cash, cash equivalents and restricted cash, end of period	$	352,275	$	219,103
Net increase (decrease) in cash and cash equivalents		185,784		(2,531)
Cash and cash equivalents, beginning of period		126,185		6,058
Cash and cash equivalents, end of period	$	311,969	$	3,527
Supplemental cash flow information:
Income taxes paid	$	~~17,269~~78	$	~~551~~16,714
Interest paid	$	8318,~~555~~233	$	—16,277
Supplemental disclosure of non-cash financing activities:
Accrued distributions	$	60	$	—63
Accrued deferred financing costs	$	—	$	34

See accompanying Notes to the ~~Combined~~ Consolidated Financial Statements.

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Quality Care Properties, Inc.

NOTES TO THE ~~COMBINED~~ CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. Business

Quality Care Properties, Inc. (“QCP” or the “Company”) is a publicly-traded Maryland corporation ~~that~~(NYSE: ~~was~~QCP) primarily engaged in the ownership and leasing of post-acute/skilled nursing properties and memory care/assisted living properties. We were formed in 2016 to hold the HCR ManorCare, Inc. (“HCRMC”) portfolio (“HCRMC Properties”), 28 other healthcare related properties (“non‑HCRMC Properties,” and, collectively with the HCRMC Properties, the “Properties”), a deferred rent obligation (“DRO”) due from HCRMC under a master lease agreement (the “Tranche B DRO”) and an equity method investment in HCRMC (together, the “QCP Business”) previously held by HCP, Inc. (“HCP”). Prior to the separation from HCP, which was completed on October 31, 2016, QCP was a wholly owned subsidiary of HCP. In connection with the separation, HCP transferred to certain subsidiaries of QCP the equity of entities that hold the QCP Business. Pursuant to the separation agreement, dated as of October 31, 2016, by and between HCP and QCP, HCP effected the separation by means of a pro rata distribution of substantially all of the outstanding shares of QCP common stock to HCP stockholders of record as of the close of business on October 24, 2016, the record date ~~for the distribution~~ (the “Spin‑Off”). At the time of the Spin-Off, the Properties contributed to QCP consisted of 274 post‑acute/skilled nursing properties, 62 memory care/assisted living properties, one surgical hospital and one medical office building, including 18 properties then held for sale.

Unless the context otherwise requires, references to “we,” “us,” “our,” and “the Company” refer to QCP on a consolidated basis. ~~after~~QCP ~~giving~~elected ~~effect~~ to ~~the~~be ~~transfer~~treated ofas ~~assets~~a ~~and~~real ~~liabilities~~estate ~~from~~investment ~~HCP~~trust as(“REIT”) ~~well~~under asthe toapplicable provisions of the ~~QCP~~Internal ~~Business~~Revenue ~~prior~~Code toof ~~the~~1986, ~~date~~as ofamended (the ~~completion~~“Code”), ofcommencing ~~the~~with ~~separation.~~its ~~Before~~initial ~~the~~taxable ~~completion~~year ofended ~~the~~December ~~separation~~31, ~~the~~2016. ~~QCP~~REITs ~~Business~~are ~~was~~generally ~~operated~~not ~~through~~liable ~~subsidiaries~~for offederal ~~HCP,~~corporate ~~which~~income ~~operates~~taxes as along ~~real~~as ~~estate~~they ~~investment~~continue ~~trust~~to ~~(“REIT”)~~distribute ~~under~~not ~~the~~less ~~Internal~~than ~~Revenue~~100% ~~Code~~ of ~~1986,~~their asREIT ~~amended~~taxable (income. Pursuant to the ~~“Code”~~Merger Agreement (as defined below)., QCP has ~~operated~~agreed ~~and~~to ~~expects~~conduct toits ~~continue~~business toin ~~operate~~the asordinary acourse and to maintain REIT ~~under~~status. If the ~~applicable~~transactions ~~provisions~~contemplated ofby the ~~Code~~Merger Agreement are terminated, we would expect to ~~the~~terminate ~~extent~~our ~~consistent~~REIT status in connection with ~~maximizing~~the ~~stockholder~~HCRMC ~~value~~Transactions. ~~REITs~~If ~~are~~our ~~generally~~REIT status is not ~~liable~~terminated, ~~for~~we ~~federal~~must ~~corporate~~meet ~~income~~a ~~taxes~~number asof ~~long~~organizational asand ~~they~~operational ~~continue~~requirements, toincluding a requirement that we annually distribute ~~not~~to ~~less~~our ~~than~~stockholders ~~100~~at least 90% of ~~their~~our REIT taxable income., determined without regard to the dividends paid deduction and excluding any net capital gains, and maintaining compliance with certain income and asset tests.

~~Before~~As ~~the~~of ~~separation~~March 31, ~~QCP~~2018, ~~had~~the ~~not~~Properties ~~conducted~~consisted ~~any~~of ~~business~~257 aspost‑acute/skilled anursing ~~separate~~properties, ~~company~~61 memory care/assisted living properties, one surgical hospital and ~~had~~one nomedical ~~material~~office ~~assets~~building oracross ~~liabilities.~~29 ~~The~~states, ~~operations~~including of74 ~~the~~properties ~~business~~classified ~~transferred~~as toheld usfor bysale ~~HCP~~(see onNote 4), with 292 of the ~~Spin-Off~~320 ~~date~~properties ~~are~~leased ~~presented~~to HCRMC under a master lease agreement (as ifamended ~~the~~and ~~transferred~~supplemented ~~business~~from ~~was~~time ~~our~~to ~~business~~time, ~~for~~the ~~all~~“Master ~~historical~~Lease”). ~~periods~~The ~~presented~~properties ~~and~~subject atto the ~~carrying~~Master ~~value~~Lease ofare ~~such~~leased ~~assets~~on ~~and~~a ~~liabilities~~triple‑net ~~reflected~~basis into ~~HCP~~HCRMC’s ~~books~~indirect wholly owned subsidiary, HCR III Healthcare, LLC (“HCR III” or the “Lessee” and, ~~records.~~together ~~Additionally~~with HCRMC, “HCR ManorCare”). All of the ~~financial~~Lessee’s ~~statements~~obligations ~~reflect~~under the ~~common~~Master ~~shares~~Lease ~~outstanding~~are atguaranteed ~~the~~by ~~separation~~HCRMC. ~~date~~The asnon‑HCRMC ~~outstanding~~Properties ~~for~~are ~~all~~leased ~~periods~~on ~~prior~~a triple-net basis to other national and regional operators and other tenants unaffiliated with HCRMC. See Note 3 for additional information on the ~~separation~~Master Lease and leases with other tenants.

AsThe aHCRMC result of the Spin-Off, QCP is an independent, publicly-traded, self-managed and self-administered company. However, we initially lacked certain non‑management administrative capabilities, and accordingly, we entered into an agreement with HCP pursuant to which HCP will provide certain administrative and support services to us on a transitional basis (the “Transition Services Agreement”), expiring on the earlier of October 31, 2017 or completion of all services to be provided by HCP under the agreement, unless extended or earlier terminated. As of October 31, 2017, we completed the transition of these services to QCP’s operating platform.Transactions

AsPlan ofSponsor September 30, 2017, the Properties consisted of 257 post‑acute/skilled nursing properties, 61 memory care/assisted living properties, one surgical hospital and one medical office building across 29 states, with 292 of the 320 properties leased to HCRMC under a master lease agreement (as amended and supplemented from time to time, the “Master Lease”). The properties subject to the Master Lease are leased on a triple‑net basis to HCRMC’s indirect wholly owned subsidiary, HCR III Healthcare, LLC (“HCR III” or the “Lessee”). All of the Lessee’s obligations under the Master Lease are guaranteed by HCRMC. The non‑HCRMC Properties are leased on a triple-net basis to other national and regional operators and other tenants unaffiliated with HCRMC. See Note 3 for additional information on the Master Lease and leases with other tenants.Agreement

On March 2, 2018, QCP entered into a plan sponsor agreement (the “Plan Sponsor Agreement”) with HCRMC, HCP Mezzanine Lender, LP, a wholly owned subsidiary of QCP (“QCP Purchaser”), and certain lessor subsidiaries of QCP. The Plan Sponsor Agreement contemplates that, among other things, pursuant to a prepackaged plan of reorganization of HCRMC (the “Prepackaged Plan”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), QCP Purchaser will acquire all of the issued and outstanding capital stock of HCRMC, in exchange for the discharge under the Prepackaged Plan of all claims of QCP against HCRMC and its subsidiaries arising under HCRMC’s guaranty of the Master Lease. On March 4, 2018, as required by the Plan Sponsor Agreement,

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~~NOTE~~HCRMC 2.filed ~~Summary~~a voluntary petition for reorganization under chapter 11 of ~~Significant~~the ~~Accounting~~Bankruptcy ~~Policies~~Code in the United States Bankruptcy Court for the District of Delaware.

~~Basis~~On April 25, 2018, the parties to the Plan Sponsor Agreement entered into an amendment to the Plan Sponsor Agreement (the “PSA Amendment”), pursuant to which QCP consented to HCRMC’s entry into the Alternative PSA and the Alternative RSA (as described under “―The Welltower/ProMedica Transactions” below). The PSA Amendment makes termination of ~~Presentation~~the Alternative PSA a condition to the consummation of the transactions contemplated by the Plan Sponsor Agreement (the “HCRMC Transactions”), extends the outside date for the consummation of the HCRMC Transactions to January 15, 2019 and makes certain other changes to the terms of the Plan Sponsor Agreement. If the Alternative PSA (as defined below) is terminated, the Plan Sponsor Agreement will remain in effect and the parties thereto will be obligated, subject to the terms and conditions of the Plan Sponsor Agreement, as amended, to consummate the HCRMC Transactions.

~~The~~Completion ~~accompanying~~of ~~unaudited~~the ~~combined~~HCRMC ~~consolidated~~Transactions ~~financial~~is ~~statements~~subject ~~have~~to ~~been~~certain ~~prepared~~other inconditions, ~~accordance~~including ~~with~~state ~~United~~licensing ~~States~~approvals, ~~(“U.S.”)~~and ~~generally~~the ~~accepted~~Plan ~~accounting~~Sponsor ~~principles~~Agreement ~~(“GAAP”).~~may ~~All~~be ~~intercompany~~terminated ~~balances~~under ~~and~~certain ~~transactions have been eliminated in combination and consolidation~~circumstances.

~~These~~Restructuring ~~combined~~Support consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by GAAP for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The Company believes that the disclosures made are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring adjustments) have been included. Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying unaudited interim financial information should be read in conjunction with the audited combined consolidated financial statements of QCP and notes thereto included in our 2016 Annual Report on Form 10-K, as amended (the “Annual Report”). Agreement

~~The~~Concurrent ~~accompanying~~with ~~combined~~the ~~consolidated~~execution ~~financial~~of ~~statements~~the ~~include~~Plan ~~the~~Sponsor ~~consolidated~~Agreement, ~~accounts~~HCRMC, Carlyle MC Partners, L.P., a Delaware limited partnership, Carlyle Partners V-A MC, L.P., a Delaware limited Partnership, Carlyle Partners V MC, L.P., a Delaware limited partnership, CP V Coinvestment A, L.P., a Delaware limited partnership, CP V Coinvestment B, L.P., a Delaware limited partnership and MC Operations Investments, LLC, a wholly owned indirect subsidiary of QCP (collectively, the ~~Company~~“Initial Restructuring Support Parties”), entered into a restructuring support agreement (the “Restructuring Support Agreement”), pursuant to which, subject to the terms and conditions therein, the ~~combined~~Initial ~~consolidated~~Restructuring ~~accounts~~Support Parties, as owners of ~~the~~common ~~QCP~~stock ~~Business.~~of ~~Accordingly~~HCRMC, covenanted to, among other things, support the ~~results~~HCRMC ~~presented~~Transactions ~~reflect~~and the ~~aggregate~~Prepackaged ~~operations~~Plan, and ~~changes~~not intake ~~cash~~any ~~flows~~action, ~~and~~directly ~~equity~~or indirectly, that could interfere with the confirmation of the ~~Company~~Prepackaged onPlan aor ~~consolidated~~the ~~basis~~consummation ~~for~~of ~~periods~~the ~~subsequent~~HCRMC toTransactions. ~~and~~In ~~including~~addition, the ~~October~~Initial 31Restructuring Support Parties agreed not to transfer, ~~2016~~sell ~~separation~~or ~~date~~pledge ~~and~~their ofHCRMC common stock or the ~~QCP~~right ~~Business~~to onvote aunless ~~carve-out~~the ~~basis~~transferee ~~for~~of ~~periods~~those ~~prior~~shares joins the Restructuring Support Agreement. All obligations pursuant to the ~~October~~Restructuring ~~31,~~Support ~~2016~~Agreement ~~separation~~will terminate upon the earlier of the effective date of the Prepackaged Plan or termination of the Plan Sponsor Agreement.

For periods prior to the separation, our combined consolidated financial statements were derived from HCP’s consolidated financial statements and underlying accounting records and reflect HCP’s historical carrying value of the assets and liabilities, consistent with accounting for spin‑off transactions in accordance with GAAP. The ~~accompanying~~Welltower/ProMedica combined consolidated financial statements for periods prior to the separation do not represent the financial position and results of operations of one legal entity, but rather a combination of entities under common control that have been “carved out” from HCP’s consolidated financial statements and reflect significant assumptions and allocations. The combined consolidated financial statements reflect that the Properties have been combined since the period of common ownership. All intercompany transactions have been eliminated in combination and consolidation. Since the Company prior to the separation did not represent one entity, a separate capital structure did not exist. As a result, the combined net assets of this group have been reflected in the combined consolidated financial statements as net parent investment for periods prior to the separation.Transactions

~~For~~On ~~accounting~~April ~~and~~25, ~~reporting purposes~~2018, ~~the~~QCP ~~combined~~entered ~~consolidated~~into ~~financial~~an ~~statements~~agreement ofand ~~QCP~~plan ~~include~~of merger (the ~~historical~~“Merger ~~results~~Agreement”) ofwith ~~operations~~Welltower Inc. (“Welltower”) and Potomac Acquisition LLC, ~~financial~~a ~~position~~Delaware limited liability company and ~~cash~~a ~~flows~~subsidiary of Welltower, pursuant to which the ~~QCP~~parties ~~Business~~agreed ~~transferred~~that, subject to ~~QCP~~the byterms ~~HCP~~and asconditions ifset forth in the ~~transferred~~Merger ~~business~~Agreement, ~~was~~Welltower ~~the~~would ~~Company’s~~acquire ~~business~~all ~~for~~of our outstanding capital stock in an all-cash ~~historical~~merger ~~periods~~(the ~~presented~~“Merger”). The Merger is expected to close in the third quarter of 2018.

~~For~~In ~~periods~~connection ~~prior~~with to the ~~separation,~~transactions ~~the~~contemplated ~~combined~~by ~~consolidated~~the ~~financial~~Merger ~~statements~~Agreement, ~~include~~on ~~the~~April ~~attribution~~25, of2018, ~~certain~~QCP ~~assets~~also ~~and~~entered ~~liabilities~~into ~~that~~an ~~have~~alternative ~~historically~~plan ~~been~~sponsor ~~held~~agreement at (the ~~HCP~~“Alternative ~~corporate~~PSA”) ~~level~~with HCRMC, ~~but~~ProMedica ~~are~~Health ~~specifically~~System, ~~identifiable~~Inc. or(“ProMedica ~~attributable~~Parent”), toSuburban ~~the~~Healthco, ~~Company~~Inc. ~~All~~(“ProMedica ~~transactions~~Purchaser” ~~between HCP~~and, ~~its~~together ~~subsidiaries~~with ~~and~~ProMedica ~~the~~Parent, ~~Company~~“ProMedica”) ~~are~~and ~~considered~~Meerkat toI beLLC, ~~effectively~~pursuant ~~settled~~to inwhich the ~~combined~~parties ~~consolidated~~agreed ~~financial~~that, ~~statements~~subject atto the ~~time~~terms ~~the transaction is recorded. All payables~~ and ~~receivables~~conditions ~~with~~set ~~HCP~~forth ~~and~~in ~~its~~the ~~consolidated~~Alternative ~~subsidiaries~~PSA, ~~including~~ProMedica ~~notes~~would ~~payable~~acquire ~~and~~all ~~receivable,~~of ~~are~~the ~~reflected~~newly asissued acommon ~~component~~stock of ~~net~~HCRMC ~~parent~~as ~~investment.~~part ~~The~~of ~~total~~an ~~net~~alternative ~~effect~~plan of ~~the~~reorganization ~~settlement of these transactions for periods prior to the separation is reflected as net distributions to parent~~ in ~~the~~connection ~~combined~~with ~~consolidated~~HCRMC’s ~~statements~~ongoing ofbankruptcy ~~equity and cash flows~~proceeding.

~~For~~If ~~periods prior to~~ the ~~separation,~~Welltower/ProMedica ~~the~~transactions ~~combined~~are ~~consolidated financial statements include expense allocations related to certain HCP corporate functions~~consummated, including executive oversight, treasury, finance, human resources, tax planning, internal audit, financial reporting, information technology and investor relations. These expenses have been allocated to the ~~Company~~closing ~~based on direct usage or benefit where specifically identifiable, with the remainder allocated pro rata based on cash net operating income, property count, square footage or other measures. All~~ of the ~~corporate~~transactions ~~cost~~contemplated ~~allocations~~by ~~were deemed to have been incurred and settled through net parent investment in~~ the ~~period~~Alternative inPSA ~~which~~will ~~the~~immediately ~~costs~~precede ~~were recorded. Following~~ the ~~Spin‑Off,~~closing ~~the Company entered into the Transition Services Agreement and a tax matters agreement with HCP to provide these functions at costs specified in the agreements for an interim period. As~~ of ~~October 31, 2017, we completed~~ the ~~transition of these services to QCP’s operating platform~~Merger. ~~Corporate expenses of $0.0 million~~

Merger Agreement with Welltower

Upon consummation of the Merger, QCP’s stockholders will receive $20.75 in cash for each share of QCP’s common stock, plus an additional right to receive a per share cash payment of $0.006 per day during the period beginning on August 25, 2018 through the closing of the Merger (such payments, the “Merger Consideration”).

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~~and~~ Each ~~$7.5~~of ~~million~~QCP’s ~~were~~and ~~allocated~~Welltower’s obligation to consummate the ~~Company~~Merger oris ~~incurred~~subject ~~through~~to a number of customary closing conditions, including: (1) approval of the ~~agreements~~Merger ~~during~~by the ~~three~~holders ~~months~~of ~~ended~~a ~~September~~majority ~~30,~~of ~~2017~~QCP’s ~~and~~outstanding ~~2016,~~shares ~~respectively,~~of ~~and~~common ~~$1.1 million~~stock; ~~and~~(2) ~~$16.~~delivery of a legal opinion to QCP addressing its qualification as a REIT; (3) material compliance with covenants; (4) ~~million~~accuracy ~~were~~of ~~allocated~~each party’s representations, subject to ~~the~~materiality ~~Company~~thresholds; (5) absence of injunctions or ~~incurred~~orders ~~through~~that prohibit or restrain the ~~agreements~~consummation ~~during~~of the ~~nine~~Merger; ~~months~~and ~~ended~~(6) ~~September~~the ~~30,~~closing ~~2017~~of ~~and~~the ~~2016,~~acquisition ~~respectively~~by ProMedica of all of the newly issued common stock of HCRMC pursuant to the Alternative PSA. In addition, ~~and~~the ~~have~~Merger ~~been~~Agreement ~~included~~may ~~within~~be ~~general~~terminated ~~and~~under ~~administrative~~certain ~~expenses~~specified circumstances, including, but not limited to, (i) a change in the ~~combined~~recommendation ~~consolidated~~of ~~statements~~our Board of ~~operations~~Directors, ~~and~~(ii) ~~comprehensive~~our entrance into an agreement for a superior offer or (~~loss~~iii) ~~income~~the termination of the Alternative PSA. Upon termination of the Merger Agreement under specified circumstances, QCP will be required to pay Welltower a termination fee of $59.5 million (which amount is reduced to $19.8 million in certain instances). Upon termination of the Merger Agreement under certain other specified circumstances, QCP will be entitled to receive a reverse termination fee of $250 million from Welltower.

~~The~~QCP ~~combined~~has ~~consolidated~~made ~~financial~~customary ~~statements~~representations ~~reflect all related party transactions with HCP including intercompany transactions~~ and ~~expense~~warranties ~~allocations. Management considers the expense methodology~~ and ~~results~~has agreed to becertain ~~reasonable~~customary ~~for~~covenants ~~all~~in ~~periods~~the ~~presented.~~Merger ~~However~~Agreement, ~~the allocations may not be indicative of the actual expense that would have been incurred had the Company operated as an independent~~including, ~~publicly-traded~~among ~~company for all periods presented. Accordingly~~others, ~~the~~covenants ~~combined~~to ~~consolidated~~conduct ~~financial~~its ~~statements~~business ~~herein~~in ~~do not necessarily reflect what~~ the ~~Company’s~~ordinary ~~financial~~course ~~position,~~and ~~results~~maintain ~~of operations or cash flows would have been if it had been a standalone company during all periods presented, nor are they necessarily indicative of~~ its ~~future~~REIT ~~results of operations, financial position or cash flows~~status.

~~Principles~~QCP stockholders will be asked to vote to approve the Merger at a special meeting of ~~Consolidation~~stockholders that will be held on a date yet to be announced.

~~The~~Alternative ~~combined~~PSA ~~consolidated~~with financial statements include the accounts of the Company, its wholly owned subsidiaries, the equity method investment and the consolidated Exchange Accommodation Titleholder (“EAT”) variable interest entity (“VIE”). There were no properties held by the EAT as of September 30, 2017 or December 31, 2016.ProMedica

The ~~Company~~Alternative isPSA ~~required~~contemplates that, among other things, pursuant to ~~continually~~an ~~evaluate~~amended ~~its~~plan ~~VIE~~of ~~relationships~~reorganization ~~and~~of ~~consolidate~~HCRMC ~~these~~(the ~~entities~~“Amended ~~when~~Plan”) itunder ischapter ~~determined~~11 toof bethe Bankruptcy Code, ProMedica Purchaser will acquire all of the ~~primary~~newly ~~beneficiary~~issued common stock of ~~their~~HCRMC, ~~operations.~~in Aexchange ~~VIE~~for isa ~~broadly~~cash ~~defined~~contribution as(consisting of either a capital contribution or a combination of a capital contribution and an ~~entity~~unsecured, ~~where~~subordinated ~~either~~loan (iin a principal amount not to exceed $550 million) ~~the~~ ~~equity~~by ~~investment~~ProMedica atto ~~risk~~HCRMC isin ~~insufficient~~an amount sufficient to ~~finance~~pay, ~~that~~in ~~entity~~full, all claims in respect of HCRMC’s ~~activities~~credit ~~without~~facility, ~~additional~~dated ~~subordinated~~as ~~financial~~of ~~support~~July 17, ~~(ii) substantially~~2017 ~~all~~with ofRD anCredit, ~~entity’s~~LLC, ~~activities~~as ~~either~~administrative ~~involve~~agent orand ~~are~~collateral ~~conducted~~agent, onas ~~behalf~~amended of(the “Centerbridge Facility”), an ~~investor~~agreed ~~that~~deferred ~~has~~rent ~~disproportionately~~obligation ~~few~~owed ~~voting~~to ~~rights~~QCP orin the amount of approximately $440 million (~~iii)~~ the ~~equity~~“Agreed ~~investors~~Deferred asRent Obligation”) and a ~~group~~distribution ~~lack~~to ~~any~~the holders of HCRMC’s existing preferred and common equity in the ~~following:~~amount of $50 million (a) the ~~power~~“Total ~~through~~Equity ~~voting~~Distribution”), oreach ~~similar~~of ~~rights~~which towill ~~direct~~be paid at the ~~activities~~closing of anthe ~~entity~~transactions ~~that~~contemplated ~~most~~by ~~significantly~~the ~~impact~~Alternative PSA. Payment of these amounts will not increase the ~~entity~~Merger Consideration, nor will the amounts be distributed to QCP’s ~~economic~~shareholders ~~performance,~~of ~~(b)~~ record as of the ~~obligation~~date toof ~~absorb~~the Merger. If the ~~expected~~Alternative ~~losses~~PSA ofis anterminated ~~entity~~and orinstead ~~(c)~~ the ~~right~~HCRMC toTransactions ~~receive~~are consummated, the ~~expected~~Tranche ~~residual~~B ~~returns~~DRO, any accrued but unpaid rent under the Master Lease and any other claims of anQCP ~~entity~~and its subsidiaries against HCRMC will be discharged in accordance with the Plan Sponsor Agreement.

AThe ~~variable~~Amended ~~interest~~Plan ~~holder~~includes ~~is considered to be~~ the ~~primary~~following ~~beneficiary~~terms, ofwhich ashall ~~VIE~~apply if ~~it has~~ the ~~power~~transactions tocontemplated ~~direct~~by the ~~activities~~Alternative ofPSA ~~a variable interest entity that most significantly impact~~ (the ~~entity’s~~“Plan economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is notTransactions”) ~~the~~are primary beneficiary of a VIE. Consideration of various factors includes, but is not limited to, its form of ownership interest, its representation on the VIE’s governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and its ability to replace the VIE manager and/or liquidate the entity.consummated:

~~Equity~~· ~~Method~~The ~~Investment~~ Agreed Deferred Rent Obligation owed to QCP will be paid in full and the balance of our claims against HCRMC will be waived and released;

~~The~~· ~~Company~~All ~~owns~~creditors an(including ~~approximately~~creditors 9%holding ~~equity~~claims ~~interest~~subordinated inpursuant ~~HCRMC that, although the Company does not have the ability~~ to ~~exercise~~section ~~significant~~510(b) ~~influence~~of ~~over HCRMC, is accounted for under~~ the ~~equity~~Bankruptcy ~~method~~Code) of ~~accounting. Beginning on January 1, 2016, equity income is recognized only if cash distributions are received from~~ HCRMC. Noother ~~cash~~than ~~distributions~~QCP ~~have~~will ~~been~~be ~~received~~unimpaired ~~from~~under ~~HCRMC during 2016 or 2017. As of September 30, 2017 and December 31, 2016,~~ the ~~carrying~~Amended ~~value of the equity method investment was zero. See Note 3 regarding the Company’s Master Lease with HCRMC.~~ Plan;

~~Use~~· Holders of ~~Estimates~~ HCRMC’s existing preferred and common equity will receive a portion of the Total Equity Distribution, allocated as set forth in the Amended Plan; and

~~Management~~· isThe ~~required~~Amended toPlan ~~make~~will ~~estimates~~include ~~and~~customary ~~assumptions~~releases ~~in the preparation of financial statements in conformity with GAAP. These estimates~~ and ~~assumptions~~exculpation ~~affect~~by ~~the~~HCRMC ~~reported amounts~~ of ~~assets and liabilities and~~ the ~~disclosure~~reorganized ofHCRMC, ~~contingent~~its ~~assets~~current and ~~liabilities~~former atrepresentatives, ~~the~~ProMedica, ~~date~~QCP ~~of the combined consolidated financial statements~~ and ~~the~~certain ~~reported~~other ~~amounts of revenue and expenses during the reporting period~~parties. Actual results could differ from management’s estimates. Management believes that the assumptions and estimates used in preparation of the underlying combined consolidated financial statements are reasonable.

The Alternative PSA contains additional commitments by HCRMC, ProMedica and QCP relating to the conduct of HCRMC’s bankruptcy case, including for HCRMC to use reasonable best efforts to pursue entry of a confirmation order by the bankruptcy court confirming the Amended Plan within 65 days following the date of the Alternative PSA.

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~~Recent~~The ~~Accounting~~consummation ~~Pronouncements~~of the Plan Transactions is subject to certain conditions, including: (i) the receipt of certain state licensing approvals with respect to the Plan Transactions; (ii) the entry by the bankruptcy court of a confirmation order confirming the Amended Plan; and (iii) no entry of an order by the bankruptcy court dismissing HCRMC’s Chapter 11 case or converting HCRMC’s Chapter 11 case into a case under Chapter 7 of the Bankruptcy Code or an order materially inconsistent with the Alternative PSA, the Amended Plan or the confirmation order in a manner adverse to ProMedica or QCP. The obligation of HCRMC to consummate the Plan Transactions is also conditioned upon compliance by ProMedica in all material respects with its pre-closing obligations under the Alternative PSA, while the obligation of ProMedica to consummate the Plan Transactions is also conditioned upon a court of competent jurisdiction not having determined that HCRMC has breached in any material respect its pre-closing obligations under the Alternative PSA.

InThe ~~May~~Alternative ~~2017,~~PSA will automatically terminate if the ~~Financial~~Merger ~~Accounting~~Agreement ~~Standards~~is ~~Board~~terminated. ~~(“FASB”)~~The ~~issued~~Alternative ~~Accounting~~PSA ~~Standards~~may ~~Update~~also ~~(“ASU”)~~be ~~No.~~terminated ~~2017-09~~by QCP if an order confirming the Amended Plan is not entered within 65 days following the date of the Alternative PSA, ~~Stock~~the ~~Compensation~~Plan Transactions have not been consummated by 11:59 ~~Scope~~p.m. New York City time on October 12, 2018, or if HCRMC fails to pay such cash and cash equivalents available to pay all or part of ~~Modification~~the ~~Accounting~~Reduced ~~(“ASU~~Cash ~~2017-09”).~~Rent ~~The~~(as ~~amendments~~defined in ~~ASU~~the ~~2017-09~~Alternative ~~provide~~PSA) ~~guidance~~after ~~about~~making ~~which~~all ~~changes~~transfers toof funds permitted under the ~~terms~~Centerbridge Facility, and retaining such reserves and making such other expenditures that either HCRMC’s chief restructuring officer or ~~conditions~~board of adirectors ~~share-based~~has ~~payment~~determined ~~award~~would ~~require~~be annecessary ~~entity~~to allow HCRMC to ~~apply~~operate ~~modification~~in ~~accounting~~the ordinary course of business. ~~ASU~~Either ~~2017-09~~HCRMC isor ~~effective~~ProMedica ~~for~~may ~~fiscal~~also ~~years,~~terminate ~~and~~the ~~interim~~Alternative ~~periods~~PSA ~~within~~if ~~such~~the ~~years,~~Plan ~~beginning~~Transactions ~~after~~have ~~December~~not been consummated by 11:59 p.m. New York City time on October 15, ~~2017~~2018. ~~Early~~The ~~adoption~~Alternative isPSA ~~permitted~~also contains various other termination rights. AIf ~~reporting~~the ~~entity~~Alternative ~~must~~PSA ~~apply~~is terminated, the ~~amendments~~Plan inSponsor ~~ASU~~Agreement ~~2017-09~~will ~~using~~remain ain ~~prospective~~effect ~~approach.~~and ~~The~~the ~~Company~~parties ~~does~~thereto ~~not~~will ~~expect~~be obligated, subject to the ~~adoption~~terms ofand ~~ASU~~conditions ~~2017-09~~of onthe ~~January~~Plan 1Sponsor Agreement, ~~2018~~as amended, to ~~have~~consummate athe ~~material~~HCRMC ~~impact~~Transactions. onSee ~~its~~“―The ~~combined~~HCRMC ~~consolidated~~Transactions” ~~financial statements~~above.

~~In January 2017~~HCRMC, ~~the~~ProMedica ~~FASB~~and ~~issued~~QCP ~~ASU~~have ~~No.~~made ~~2017-01~~customary representations, ~~Clarifying~~warranties ~~the~~and ~~Definition~~covenants ofin athe ~~Business~~Alternative ~~(“ASU 2017-01”)~~PSA. ~~The~~ProMedica ~~amendments~~has infurther ~~ASU~~agreed ~~2017-01~~to ~~provide~~reimburse anHCRMC ~~initial~~for ~~screen~~certain torestructuring ~~determine~~costs ifpaid ~~substantially~~from ~~all~~and ofincluding ~~the~~May ~~fair~~1, ~~value~~2018 ofuntil the ~~gross~~earlier ~~assets~~of ~~acquired~~ (~~or disposed of~~i) isthe ~~concentrated~~effective indate ~~a single identifiable asset or a group~~ of ~~similar identifiable assets, in which case~~ the ~~transaction~~Amended ~~would~~Plan beor ~~accounted~~(ii) ~~for as an asset acquisition. In addition, ASU 2017-01 clarifies~~ the ~~requirements~~date ~~for~~of atermination ~~set~~ of ~~activities to be considered a business and narrows~~ the ~~definition~~Alternative ~~of an output. ASU 2017-01 is effective for fiscal years~~PSA, ~~and interim periods within such years, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments~~ in ~~ASU~~an ~~2017-01~~aggregate ~~using~~amount anot ~~prospective approach. The Company adopted ASU 2017-01 on January 1, 2017 and expects~~ to ~~recognize~~exceed a$2 ~~majority~~million ofper ~~its~~calendar real estate acquisitions and dispositions as asset transactions rather than business combinations, which in the case of acquisitions will result in the capitalization of related third party transaction costsmonth. ~~The adoption had no impact on the Company’s combined consolidated financial statements as of and for the three and nine months ended September 30, 2017.~~

InAlternative ~~November~~Restructuring ~~2016,~~Support the FASB issued ASU No. 2016-18, Restricted Cash (“ASU 2016-18”). The amendments in ASU 2016-18 require an entity to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of cash flows. ASU 2016-18 is effective for fiscal years, and interim periods within such years, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a full retrospective approach. The Company does not expect the adoption of ASU 2016-18 on January 1, 2018 to have a material impact on its combined consolidated statements of cash flows as the Company does not have material restricted cash activity.Agreement

InConcurrent ~~August~~with ~~2016,~~ the ~~FASB~~execution ~~issued~~of ~~ASU~~the ~~No.~~Alternative ~~2016‑15~~PSA, ~~Classification~~HCRMC, ofthe ~~Certain~~Initial ~~Cash~~Restructuring ~~Receipts~~Support ~~and~~Parties, ~~Cash~~ProMedica ~~Payments~~Parent ~~(“ASU~~and ~~2016-15”).~~MC ~~The~~Operations ~~amendments~~Investments, inLLC, ~~ASU~~a ~~2016-15~~wholly ~~are~~owned ~~intended~~indirect tosubsidiary ~~clarify~~of ~~current~~QCP ~~guidance~~(together onwith the ~~classification~~Initial ofRestructuring ~~certain~~Support ~~cash~~Parties ~~receipts~~ and ~~cash~~ProMedica ~~payments~~Parent, in the ~~statement~~“Restructuring ofSupport ~~cash~~Parties”), ~~flows.~~entered ~~ASU~~into ~~2016-15~~an isalternative ~~effective~~restructuring ~~for~~support ~~fiscal~~agreement ~~years,~~(the ~~and~~“Alternative ~~interim~~RSA”), ~~periods~~pursuant ~~within~~to ~~such years~~which, ~~beginning~~subject ~~after~~to ~~December~~the ~~15,~~terms ~~2017.~~and ~~Early~~conditions ~~adoption~~therein, isthe ~~permitted.~~Restructuring ASupport ~~reporting~~Parties, ~~entity~~as ~~must apply~~ the ~~amendments~~owners inof ~~ASU~~common ~~2016-18~~stock ~~using~~of aHCRMC ~~full~~and/or ~~retrospective~~the ~~approach.~~sponsor ~~The~~under ~~Company~~the isAlternative ~~currently~~PSA, incovenanted ~~compliance~~to, ~~with~~among ~~substantially~~other ~~all~~things, ofsupport the ~~clarifications~~Plan inTransactions ~~ASU~~and ~~2016-15~~the ~~and~~Amended asPlan. ~~such~~In addition, the ~~Company~~Restructuring ~~does~~Support Parties agreed not ~~expect~~to ~~the~~transfer, ~~adoption~~sell ofor ~~ASU~~pledge ~~2016‑15~~their onHCRMC ~~January~~common 1,stock ~~2018~~or tothe ~~have~~right ato ~~material~~vote ~~impact~~unless onthe ~~its~~transferee ~~combined~~of ~~consolidated~~those ~~statements~~shares ofjoins ~~cash~~the ~~flows~~Alternative RSA.

InAll ~~March~~obligations ~~2016,~~pursuant ~~the FASB issued ASU No. 2016‑08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016‑08”). ASU 2016‑08 is intended~~ to ~~improve~~ the ~~operability~~Alternative ~~and~~RSA ~~understandability~~will ofterminate ~~the~~upon implementation guidance on principal versus agent considerations. ASU 2016‑08 is effective for fiscal years, and interim periods within such years, beginning after December 15, 2017. Early adoption is permitted at the ~~original~~earlier ~~effective date~~ of the ~~new~~effectiveness ~~revenue standard (January 1, 2017). The Company is evaluating the impact~~ of the ~~adoption~~Amended ofPlan ~~ASU 2016‑08 on January 1, 2018 on its combined consolidated financial position~~ or ~~results of operations. Under ASU 2016-08, ultimate financial responsibility is~~ the ~~main~~date driving force behind principal versus agent considerations. Since the Company holds the ultimate financial responsibility for real estate taxes and property insurance at its properties (i.e., as principal), the Company anticipates that the new guidance will result in a gross-up of ~~real~~termination ~~estate tax and property insurance recovery revenue and expense in an annual amount~~ of ~~approximately $45 to $55 million, based on~~ the ~~portfolio~~Alternative ofPSA ~~properties~~and ~~owned~~Plan asSponsor ~~of September 30, 2017~~Agreement.

~~In August 2014, the FASB issued ASU No. 2014‑15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a~~ Going Concern (“ASU 2014‑15”). The amendments in ASU 2014‑15 provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern (i.e., it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued) and to provide related footnote disclosures. In doing so, the Assessment

The consolidated financial statements have been presented on the basis that the Company would continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. In its going concern assessment for the first quarter of 2018, management identified certain conditions which raised substantial doubt about the Company’s ability to continue as a going concern prior to consideration of management’s plans to mitigate the conditions identified and alleviate the substantial doubt. A “going concern” or like qualification or exception in the independent auditors’ opinion within their report accompanying the annual consolidated financial statements would constitute an event of default under our senior secured credit facilities.

HCRMC, the ultimate parent company of our principal tenant, continues to be adversely impacted by underperformance, and a challenging operating environment in the post-acute/skilled nursing sector. The impact of the downward, and expected continued downward, pressure on revenues and operating income has resulted in HCRMC’s default under the Master Lease and materially lower rent payments to the Company. This continued performance decline

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~~amendments~~has ~~should~~reduced, ~~reduce~~and ~~diversity~~will inlikely ~~the~~continue ~~timing~~to ~~and~~reduce, ~~content~~the ofCompany’s ~~footnote~~cushion/coverage ~~disclosures.~~under ~~The~~its ~~Company~~debt ~~adopted~~service ~~ASU~~coverage ~~2014-15~~ratio ~~on January 1~~(“DSCR”), ~~2017,~~a ~~resulting~~covenant in ~~the~~its ~~requirement~~senior ~~for~~secured ~~management~~credit tofacilities. ~~evaluate~~We ~~for~~believe ~~each~~it ~~annual~~is ~~and~~likely ~~interim~~our ~~reporting~~DSCR ~~period~~will ~~whether~~fall ~~there~~below ~~are~~the ~~conditions~~minimum or1.75 ~~events,~~coverage ~~considered~~ in ~~the aggregate~~2018, ~~that~~which ~~raise~~would ~~substantial~~constitute ~~doubt about the Company’s ability to continue as~~ a ~~going~~covenant ~~concern~~violation ~~within one year after the date that the financial statements are issued,~~ and ~~provide~~event ~~certain~~of ~~disclosures~~default ~~for~~under such ~~conditions~~credit orfacilities, ~~events~~absent ~~identified,~~proactive ifaction ~~any~~by management.

InManagement ~~May~~plans 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers (“ASU 2014‑09”). This update changes the requirements for recognizing revenue. ASU 2014‑09 provides guidance for revenue recognition to ~~depict~~implement the ~~transfer~~following ofactions, ~~promised goods or services to customers in an amount that reflects the consideration to~~ which ~~the~~should ~~entity~~have ~~expects to be entitled in exchange for those goods or services. In August 2015,~~ the FASB issued ASU No. 2015‑14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015‑14”). ASU 2015‑14 defers the effective date of ASU 2014‑09 by one year to fiscal years, and interim periods within such years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within such years, beginning after December 15, 2016. A reporting entity may apply the amendments in ASU 2014-09 using either a modified retrospective approach, by recording a cumulative-effect ~~adjustment to equity as~~ of ~~the~~mitigating ~~beginning of~~ the ~~fiscal~~risk ~~year~~ of ~~adoption~~covenant or a full retrospective approach. The Company is evaluating the complete impact the adoption of ASU 2014‑09 on January 1, 2018 will have on its combined consolidated financial position or results of operations. Since revenue for the Company is primarily generated through leasing arrangements, which are excluded from ASU 2014-09, the Company expects that it will be impacted in its recognition of non-lease revenue (see gross-up discussion under ASU 2016-08 above) and its recognition of real estate sale transactions. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under current guidance. As a result, the Company generally expects that the new guidance will result in more transactions qualifying as sales of real estate and revenue being recognized at an earlier date than under current accounting guidance.violation:

~~Adoption~~· ofWe ~~Accounting~~have ~~Standards~~entered ~~Codification~~into ~~Topic~~the ~~842~~Merger Agreement, ~~Leases~~ whereby we expect that Welltower, upon the closing of the Merger, will pay off our outstanding indebtedness.

In· ~~February~~We ~~2016,~~are in the ~~FASB~~process ~~issued~~of ~~ASU~~selling ~~No. 2016‑02,~~74 ~~Leases~~non-core ~~(Topic 842)~~skilled ~~(“ASU~~nursing/senior ~~2016‑02”~~housing ~~or “ASC 842”)~~facilities. ~~ASU 2016‑02 supersedes the current accounting for leases.~~ The ~~new~~proceeds ~~standard, while retaining two distinct types~~ of ~~leases,~~any ~~finance~~such ~~and~~sales ~~operating,~~will ~~(i) requires~~be ~~lessees~~used to ~~record~~reduce adebt ~~right of use asset~~ and aimprove ~~related~~our ~~liability~~DSCR ~~for~~covenant ~~the~~compliance. ~~rights~~We ~~and~~expect ~~obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar~~ to ~~current~~close ~~accounting,~~on ~~(ii) eliminates current real estate specific lease provisions, (iii) modifies~~ the ~~lease~~sales ~~classification criteria and (iv) aligns many~~ of ~~the~~some ~~underlying~~or ~~lessor~~all model principles with those in the new revenue standard (see above). ASU 2016‑02 is effective for fiscal years beginning after December 15, 2018, and interim periods within such years. Early adoption is permitted. Entities are required to use a modified retrospective approach when transitioning to ASU 2016‑02 for leases that exist as of orthese ~~are~~assets ~~entered~~before ~~into after~~ the ~~beginning~~end of ~~the earliest comparative period presented in the financial statements~~2018.

~~The~~· ~~Company~~We ~~elected~~expect to ~~early adopt ASU 2016‑02, effective as of April 1, 2016 (the “Adoption”), which was a change in accounting principle. Upon the Adoption, the Company elected a permitted practical expedient to~~ use ~~hindsight in determining the lease term under the new standard. The Adoption results in~~ a ~~material~~portion ~~change to the accounting for the Company’s Master Lease entered into by the Company and HCRMC in April 2011 upon the acquisition~~ of ~~the~~our ~~HCRMC~~cash ~~Properties.~~on ~~Given~~hand ~~the decline in HCRMC’s performance subsequent to the 2011 acquisition~~ (~~see Note~~ $352.3), itmillion ~~was concluded that the lease term (~~as ~~defined~~of ~~by ASC 842) was shorter than originally determined at (i) the lease commencement date in April 2011 and (ii) the lease classification reassessment date in~~ March ~~2015 when the Company and HCRMC amended the Master Lease (the “HCRMC Lease Amendment”) (see Note 3). When applying hindsight~~31, ~~the lease classification reassessment in April 2011 resulted in the Master Lease being reclassified from a direct financing lease (“DFL”~~2018) to anrepay ~~operating~~a ~~lease.~~portion ~~When~~of ~~applying~~our ~~hindsight,~~outstanding ~~the~~indebtedness ~~lease classification reassessment~~ in ~~March~~order ~~2015 resulted in the Master Lease continuing~~ to bemaintain ~~classified~~compliance aswith anour ~~operating~~DSCR ~~lease~~covenant. Under the transition guidance required by ASU 2016‑02, the Master Lease, which was previously accounted for as a DFL, has been accounted for as an operating lease as of the earliest comparable period presented.

~~While~~· ~~the~~We ~~Company~~expect isto ~~primarily~~maintain asufficient ~~lessor,~~liquidity itlevels ~~also~~to ~~considered~~enable ~~the~~us ~~lessee~~to ~~transition~~honor ~~and~~our ~~application~~current ~~requirements~~obligations ~~under~~over ~~ASU~~the ~~2016‑02~~next 12 months.

Further, if the Merger is not consummated and we complete the HCRMC Transactions, we expect to consolidate some or all of the operations and assets and liabilities of HCRMC, including HCRMC’s debt under the Centerbridge Facility, which is scheduled to mature on January 17, 2019. We believe, based on the performance and relatively low leverage of the collateral (the hospice business), it is probable that we will be able to extend the maturity or refinance this obligation prior to maturity.

We believe it is probable that management’s plans will be effectively implemented during 2018 and the first half of 2019. Moreover, we believe it is probable that management’s plans, when implemented, will mitigate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern.

NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.

These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by GAAP for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. The Company believes that the disclosures made are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring adjustments) have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The accompanying unaudited interim financial information should be read in conjunction with the audited combined consolidated financial statements of QCP and notes thereto included in our 2017 Annual Report on Form 10-K (the “Annual Report”).

Following the Spin‑Off, the Company entered into a transition services agreement and a tax matters agreement with HCP to provide certain corporate functions at costs specified in the agreements for an interim period. As of October 31, 2017, we completed the transition of these services to QCP’s operating platform. Corporate expenses of $0.5 million were incurred through the agreements during the three months ended March 31, 2017 and have been included within general and administrative expenses in the consolidated statements of operations and comprehensive (loss) income.

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~~NOTE~~The 3consolidated financial statements reflect all related party transactions with HCP including intercompany transactions. ~~Operating~~No ~~Leases~~other related party transactions or relationships are reflected in the Company’s consolidated financial statements. As of December 31, 2017, HCP was no longer a related party.

~~Master~~Principles ~~Lease with HCRMC including an Event~~ of ~~Default, Lease Modifications and Related Impairments~~Consolidation

The ~~Company~~consolidated ~~acquired~~financial ~~334~~statements ~~post‑acute/skilled~~include ~~nursing and memory care/assisted living properties in its 2011 transaction with HCRMC and entered into~~ the ~~Master~~accounts ~~Lease~~of ~~supported by a guaranty from HCRMC. The HCRMC Properties are divided into four pools, as described within~~ the ~~Master Lease~~Company, ~~with~~its ~~initial~~wholly ~~lease~~owned ~~terms~~subsidiaries ofand ~~13 to 17 years. HCRMC has~~ the ~~option~~equity tomethod ~~renew leases by pool whereby all properties within a pool must be renewed~~investment. ~~The renewal terms vary by subpools within each pool and range from five to 17 years.~~

~~During~~The ~~the~~Company ~~three~~is ~~months~~required ~~ended~~to ~~March 31,~~continually ~~2015,~~evaluate ~~the~~its ~~Company~~variable interest entity (“VIE”) relationships and ~~HCRMC~~consolidate ~~agreed~~these toentities ~~market~~when ~~for~~it ~~sale~~is determined to be the ~~real~~primary ~~estate~~beneficiary ~~and~~of their operations. ~~associated~~A ~~with~~VIE 50is ~~non‑strategic~~broadly ~~properties~~defined ~~under~~as an entity where either (i) the ~~Master~~equity ~~Lease.~~investment ~~HCRMC~~at ~~receives~~risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) substantially all of an ~~annual~~entity’s ~~rent~~activities ~~reduction~~either ~~under~~involve or are conducted on behalf of an investor that has disproportionately few voting rights or (iii) the ~~Master~~equity ~~Lease~~investors ~~based~~as ona ~~7.75%~~group lack any of the ~~net~~following: ~~sales~~(a) the ~~proceeds~~power ~~received~~through byvoting or similar rights to direct the ~~Company.~~activities of an entity that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of an entity or (c) the right to receive the expected residual returns of an entity.

OnA ~~March 29,~~variable ~~2015,~~interest ~~certain~~holder ~~subsidiaries~~is ofconsidered to be the ~~Company~~primary ~~entered~~beneficiary ~~into~~of ana ~~amendment~~VIE toif ~~the~~it ~~Master~~has ~~Lease~~the ~~effective~~power ~~April 1,~~to ~~2015~~direct (the ~~“HCRMC~~activities ~~Lease~~of ~~Amendment”).~~a ~~The~~variable ~~HCRMC~~interest ~~Lease~~entity ~~Amendment~~that ~~reduced~~most ~~initial~~significantly ~~annual~~impact ~~rent~~the byentity’s aeconomic ~~net~~performance ~~$68 million~~and ~~from~~has ~~$541 million~~the obligation to ~~$473 million.~~absorb ~~Commencing~~losses ~~on April 1~~of, ~~2016~~or the right to receive benefits from, the ~~minimum~~entity ~~rent~~that ~~escalation~~could ~~was~~potentially ~~reset~~be significant to 3the VIE.0% ~~for~~The ~~each~~Company ~~lease~~qualitatively ~~year~~assesses ~~through~~whether ~~the~~it ~~expiration~~is of(or is not) the ~~initial~~primary ~~term~~beneficiary of ~~each~~a ~~applicable~~VIE. ~~pool~~Consideration of ~~properties.~~various ~~Prior~~factors toincludes, ~~the~~but ~~HCRMC~~is ~~Lease~~not ~~Amendment~~limited to, ~~rent~~its ~~payments~~form ~~would~~of ~~have~~ownership ~~increased~~interest, ~~3.5%~~its representation on ~~April 1~~the VIE’s governing body, ~~2015~~the size and ~~2016~~seniority ~~and~~of ~~3.0%~~its ~~annually~~investment, ~~thereafter.~~its ~~The~~ability ~~initial~~and ~~term~~the ~~was~~rights ~~extended~~of ~~five~~other ~~years~~investors to anparticipate ~~average~~in ofpolicy ~~16 years,~~making decisions and ~~the~~its ~~extended~~ability ~~expirations~~to ~~under~~replace the ~~available~~VIE ~~extension~~manager ~~options~~and/or ~~remained~~liquidate the ~~same~~entity. ~~See Note 7 for commitments for capital additions.~~

AsEquity ~~consideration~~Method for the rent reduction, the Company received a DRO from the Lessee equal to an aggregate amount of $525 million, which was allocated into two tranches: (i) a Tranche A DRO of $275 million and (ii) a Tranche B DRO of $250 million (together the “DROs”). The DROs are considered minimum rental payments and were initially included in the calculation of straight‑line rent. The Lessee made rental payments on the Tranche A DRO equal to 6.9% of the outstanding amount (representing $19 million for the initial lease year) until the entire Tranche A DRO was paid in full in March 2016 in connection with the nine property purchases discussed below. Commencing on April 1, 2016, until the Tranche B DRO is paid in full, the outstanding principal balance of the Tranche B DRO will be increased annually by (i) 3.0% initially, (ii) 4.0% commencing on April 1, 2019, (iii) 5.0% commencing on April 1, 2020 and (iv) 6.0% commencing on April 1, 2021 and annually thereafter for the remainder of its term. The Tranche B DRO is due and payable on the earlier of (i) certain capital or liquidity events of HCRMC, including an initial public offering or sale, or (ii) March 31, 2029, which is not subject to any extensions. The HCRMC Lease Amendment also imposes certain restrictions on the Lessee and HCRMC until the Tranche B DRO is paid in full, including with respect to the payment of dividends and the transfer of interest in HCRMC.Investment

~~Additionally,~~The ~~HCRMC agreed to sell, and the~~ Company ~~agreed~~owns ~~to purchase, nine post‑acute/skilled nursing properties for~~ an ~~aggregate~~approximately ~~purchase~~9% ~~price~~equity ofinterest ~~$275 million~~in ~~(see~~HCRMC ~~Note 4).~~that, ~~The~~although ~~Company acquired seven properties during~~ the ~~year~~Company ~~ended~~does ~~December 31,~~not ~~2015~~have ~~for $183.4 million,~~ the ~~proceeds~~ability ~~of which were used~~ to ~~settle~~exercise asignificant ~~portion~~influence ofover ~~the~~HCRMC, ~~Tranche A~~is ~~DRO,~~accounted ~~and~~for ~~reduce~~under the ~~straight‑line~~equity ~~rent~~method ~~receivable~~of accounting. ~~During~~Beginning ~~the~~on ~~first~~January 1, ~~quarter of~~ 2016, ~~the~~equity ~~Company~~income ~~completed~~is ~~the~~recognized ~~remaining~~only ~~two~~if ofcash ~~the~~distributions ~~nine~~are ~~post‑acute/skilled~~received ~~nursing property purchases~~ from HCRMC ~~for $91~~.~~6 million,~~ ~~which~~No ~~settled~~cash ~~the~~distributions ~~remaining~~have ~~portion~~been ofreceived ~~the~~from ~~Tranche A~~HCRMC ~~DRO~~during ~~and~~2016, ~~reduced~~2017 ~~the~~or ~~straight‑line rent receivable~~2018. ~~Following~~As ~~the purchase~~ of aMarch ~~property~~31, ~~the~~2018 ~~Lessee~~and ~~leases~~December ~~such~~31, ~~property~~2017, ~~from~~ the ~~Company~~carrying ~~pursuant~~value toof the ~~Master~~equity ~~Lease.~~method ~~The~~investment ~~nine~~was ~~properties~~zero. ~~initially~~See ~~contribute an aggregate of $19~~Note ~~million~~3 ofregarding ~~annual rent (subject to escalation) under~~ the Company’s Master Lease with HCRMC.

AsUse ~~part~~ of the Company’s fourth quarter 2015 review process, it assessed the collectability of all contractual rent payments under the Master Lease. The Company’s evaluation included, but was not limited to, consideration of: (i) the continued decline in HCRMC’s operating performance and fixed charge coverage ratio during the second half of 2015, with the most significant deterioration occurring during the fourth quarter, (ii) the reduced growth outlook for the post‑acute/skilled nursing business and (iii) HCRMC’s 2015 audited financial statements. The Company determined that the timing and amounts owed under the Master Lease were no longer reasonably assured as of December 31, 2015. As a result, the Company placed the Master Lease on nonaccrual status and utilizes the cash basis method of accounting beginning January 1, 2016, in accordance with its policies.Estimates

AsManagement ais ~~result~~required ofto ~~placing~~make estimates and assumptions in the ~~Master~~preparation ~~Lease~~of onfinancial ~~nonaccrual~~statements ~~status,~~in conformity with GAAP. These estimates and assumptions affect the ~~Company~~reported ~~further~~amounts ~~evaluated~~of assets and liabilities and the ~~carrying~~disclosure ~~amount~~of contingent assets and liabilities at the date of ~~its~~the ~~straight‑line~~consolidated ~~rent~~financial ~~receivables~~statements asand the reported amounts of ~~December 31,~~revenue ~~2015.~~and ~~Due~~expenses toduring the ~~significant~~reporting ~~decline~~period. inActual ~~HCRMC~~results could differ from management’s ~~fixed~~estimates. Management believes that the assumptions and estimates used in preparation of the underlying consolidated financial statements are reasonable.

Reclassifications

Certain prior period amounts have been reclassified to conform with current period presentation, including (i) grossing up tenant recoveries and operating expenses for real estate taxes and property insurance related to triple-net leases on the consolidated statements of operations and comprehensive (loss) income; (ii) reclassifying restructuring costs from general and administrative expense to a separate line item on the consolidated statements of operations and comprehensive (loss) income; and (iii) including the effects of restricted cash on the consolidated statements of cash flows.

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~~charge~~ Recent ~~coverage~~Accounting ratio in the fourth quarter of 2015, combined with a lower growth outlook for the post‑acute/skilled nursing business, the Company determined that it was probable that its straight‑line rent receivables were impaired and an allowance for straight‑line rent receivables was recognized as of December 31, 2015. An impairment charge of $180.3 million related to the straight‑line rent receivables was recorded, net of $17.2 million that was reclassified to equity income as a result of the Company’s ownership interest in HCRMC. The impairment charge was recorded in impairments, net in the combined consolidated statement of income and comprehensive income for the year ended December 31, 2015.Pronouncements

In ~~November~~May ~~2016~~2017, the ~~Company~~Financial ~~provided~~Accounting toStandards ~~HCR~~Board ~~III~~(“FASB”) ~~reductions~~issued Accounting Standards Update (“ASU”) No. 2017-09, Stock Compensation: Scope of ~~contractual~~Modification ~~rent~~Accounting ~~due~~(“ASU ~~under~~2017-09”). The amendments in ASU 2017-09 provide guidance about which changes to the ~~Master~~terms ~~Lease~~or asconditions ~~follows:~~of a $5share-based ~~million~~payment ~~reduction~~award require an entity to apply modification accounting. ASU 2017-09 is effective for ~~the~~fiscal ~~month~~years, ofand ~~November~~interim ~~2016~~periods within such years, abeginning $after December 15, ~~million~~2017. ~~reduction~~Early ~~for~~adoption ~~the~~is ~~month~~permitted. The amendments of ~~December~~ASU ~~2016~~2017-09 ~~and~~are ato ~~$10~~be ~~million~~applied ~~reduction~~prospectively ~~for~~to ~~the~~an ~~month~~award ofmodified ~~January~~on ~~2017.~~or ~~HCR~~after ~~III~~the ~~paid~~adoption indate. ~~full~~Consequently, the ~~contractual~~impact ~~rent~~of ~~due~~the ~~for~~adoption on January 1, 2018 will be dependent on whether the ~~months~~Company modifies any of ~~February~~its ~~2017~~share-based payment awards and ~~March~~the ~~2017~~nature of such modifications.

~~During~~In November 2016, the ~~first~~FASB ~~quarter~~issued ofASU ~~2017~~No. 2016-18, ~~the~~Restricted ~~Company~~Cash ~~collected~~(“ASU 2016-18”). The amendments in ASU 2016-18 require an ~~impound~~entity ~~deposit~~to reconcile and explain the period-over-period change in total cash, cash equivalents and restricted cash within its statements of $4cash flows.0 ~~million~~ASU ~~from~~2016-18 ~~HCRMC~~is effective for ~~real~~fiscal ~~estate~~years, ~~taxes~~ and ~~insurance~~interim asperiods within such years, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in ASU 2016-18 using a ~~result~~full ofretrospective ~~HCRMC~~approach. ~~not~~The ~~meeting~~adoption ~~certain~~of ~~covenant~~ASU ~~requirements~~2016-18 on January 1, ~~which~~2018 ~~amount~~resulted ~~was~~in ~~returned~~no change and an increase of $4.0 million in ~~connection~~net ~~with~~cash ~~entering~~provided ~~into~~by operating activities for the ~~Agreement~~three ~~(defined~~months ~~below)~~ended March 31, 2018 and 2017, respectively, on the consolidated statements of cash flows.

OnIn ~~April~~August 52016, ~~2017,~~ the ~~Company~~FASB ~~entered~~issued ~~into~~ASU aNo. ~~forbearance~~2016‑15, ~~agreement~~Classification ~~(the~~of ~~"Agreement")~~Certain ~~with~~Cash ~~HCR~~Receipts ~~III~~ and ~~HCRMC~~Cash Payments (~~together,~~“ASU ~~"HCR ManorCare"~~2016-15”). ~~Among~~ ~~other~~The ~~things,~~amendments ~~the~~in ~~Agreement~~ASU ~~required~~2016-15 ~~HCR~~are ~~ManorCare~~intended to ~~make~~clarify ~~cash~~current ~~rent~~guidance ~~payments~~on ofthe ~~$32~~classification ~~million for each~~ of ~~April,~~certain ~~May~~cash receipts and ~~June~~cash ofpayments ~~2017,~~in ~~with~~the astatement ~~deferral~~ of ~~payment~~cash ~~of the additional $7~~flows.5 ~~million~~ASU ~~per~~2016-15 ~~month~~is ~~otherwise~~effective ~~due~~for ~~until~~fiscal ~~the earlier of (i) July 5~~years, ~~2017~~ and ~~(ii)~~interim anperiods ~~early~~within ~~termination~~such ~~of the Agreement~~years, ~~with~~beginning ~~all~~after ~~deferred~~December ~~amounts~~15, ~~becoming~~2017. ~~immediately~~Early ~~due~~adoption ~~and~~is ~~payable upon an early termination~~permitted. ~~The~~A ~~Agreement~~reporting ~~also~~entity ~~required~~must ~~HCR~~apply ~~ManorCare~~the toamendments ~~deliver~~in ~~its~~ASU 2016-15 ~~audited~~using ~~financial~~a ~~statements~~full ~~and~~retrospective ~~auditor~~approach. ~~consent~~The toadoption ~~QCP~~of ~~not~~ASU ~~later~~2016‑15 ~~than April 10, 2017, which were received~~ on ~~April~~January 101, ~~2017~~2018 ~~and~~did ~~included~~not have a ~~"going~~material ~~concern"~~impact ~~exception~~on ~~for HCR ManorCare in~~ the ~~auditor~~consolidated ~~opinion.~~statements ~~During~~of ~~the~~cash ~~term~~flows ofas the ~~Agreement,~~Company ~~QCP~~was ~~also~~already ~~agreed~~in tocompliance ~~provide HCR ManorCare~~ with asubstantially ~~temporary~~all ~~secured extension~~ of ~~credit of up to $7 million per month during each of April, May and June of 2017 (up to $21 million in~~ the ~~aggregate),~~clarifications ~~which would be due and payable~~ in ~~full~~ASU ~~not later than December 31, 2017, subject to acceleration upon certain events~~2016-15.

~~HCR~~In ~~ManorCare~~March ~~made~~2016, the ~~reduced~~FASB ~~cash~~issued ~~rent~~ASU ~~payments~~No. 2016‑08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016‑08”). ASU 2016‑08 is intended to improve the operability and understandability of ~~$32~~the ~~million~~implementation guidance on principal versus agent considerations. ASU 2016‑08 is effective for ~~each~~fiscal years, and interim periods within such years, beginning after December 15, 2017. Early adoption is permitted at the original effective date of ~~April~~the new revenue standard (January 1, 2017). Under ASU 2016-08, ultimate financial responsibility is the main driving force behind principal versus agent considerations. Since the Company holds the ultimate financial responsibility for real estate taxes and ~~May~~property insurance at its properties (i.e., as principal), the adoption of ~~2017~~ASU 2016‑08 on January 1, 2018 results in a gross-up of real estate tax and property insurance recovery revenue and expense for triple-net leases. ~~HCR~~The ~~ManorCare~~Company ~~borrowed~~reflected a real estate tax and property insurance gross-up of $710.6 million ~~for~~and ~~April~~$10.2 ~~2017~~million ~~under~~in the ~~temporary~~accompanying ~~secured~~consolidated ~~credit~~statements ~~agreement~~of operations and comprehensive (loss) income for the three months ended March 31, 2018 and 2017, respectively.

OnIn ~~June~~May 22014, ~~2017,~~the ~~QCP~~FASB ~~received~~issued ~~$15~~ASU ~~million~~No. 2014‑09, Revenue from ~~HCR~~Contracts ~~ManorCare~~with Customers (“ASU 2014‑09”). This update changed the requirements for recognizing revenue. ASU 2014‑09 provides guidance for revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, ~~constituting~~the $8FASB ~~million~~issued ASU No. 2015‑14, Revenue from Contracts with Customers (Topic 606): Deferral of ~~rent~~the ~~and~~Effective ~~repayment~~Date (“ASU 2015‑14”). ASU 2015‑14 defers the effective date of ASU 2014‑09 by one year to fiscal years, and interim periods within such years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within such years, beginning after December 15, 2016. A reporting entity may apply the $7amendments ~~million~~in ~~secured~~ASU ~~loan~~2014-09 ~~extended~~using ~~pursuant~~either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the ~~Agreement~~beginning of the fiscal year of adoption or a full retrospective approach. The Company adopted ASU 2014‑09 on January 1, ~~rather~~2018 ~~than~~using the full ~~$32~~retrospective ~~million~~approach for its adoption. Since revenue for the Company is primarily generated through leasing arrangements, which are excluded from ASU 2014-09, the Company is impacted in ~~rent~~its recognition of non-lease revenue (see gross-up discussion under ASU 2016-08 above) and its recognition of prospective real estate sale transactions; the Company has concluded that there is no change required to bethe ~~paid~~recognition treatment of sales of real estate in previous periods upon adoption of ASU 2014-09. Under ASU 2014-09, revenue recognition for ~~June~~real ~~2017~~estate ~~under~~sales is largely based on the ~~terms~~transfer of ~~the~~control ~~Agreement~~versus continuing involvement under current guidance. As a result, the Company generally

HCR ManorCare is currently required to pay approximately $39.5 million in monthly rent under the Master Lease. On July 7, 2017, QCP received approximately $8.2 million from HCR ManorCare. On July 7, 2017, QCP delivered a notice of default under the Master Lease relating to nonpayment of rent due and other matters. The notice of default demanded payment of all current and past due rent, totaling approximately $79.6 million, by the end of the day on July 14, 2017. Such amount was not paid, and therefore, an Event of Default exists under the Master Lease, requiring the immediate payment of an additional approximately $265 million of Tranche B DRO and permitting the QCP lessors to terminate the Master Lease, appoint receivers or exercise other remedies with respect to any and all leased properties. On August 3, 2017, QCP received approximately $23.0 million in rent from HCR ManorCare.

On August 17, 2017, QCP commenced an action in the Superior Court of the State of California for the County of Los Angeles (the “Court”) to appoint an independent receiver for its skilled nursing and assisted living/memory care facilities as contemplated by the Master Lease after an Event of Default by HCR ManorCare. The independent receiver would not be affiliated with either QCP or HCR ManorCare and would provide oversight and seek to preserve the value of the HCRMC Properties. QCP intends to work with the independent receiver, if appointed by the Court, to transition the HCRMC Properties to new owners and/or operators.

On September 25, October 19 and November 2, 2017, QCP announced that it had agreed with HCR ManorCare to extend the deadline for HCR ManorCare's response to QCP's receivership complaint to October 18, November 1 and December 1, 2017, respectively, in each case subject to Court approval (which was granted), to allow for the continuation of workout discussions, including with respect to the sale or re-leasing of any of the HCRMC Properties. HCR ManorCare continues to be in default under the Master Lease. HCR ManorCare paid approximately $17.6 million

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~~and $21.0~~expects ~~million~~that inthe ~~rent~~new ~~for~~guidance ~~September~~will ~~and~~result ~~October~~in ~~2017,~~more ~~respectively.~~transactions ~~Over~~qualifying ~~$446~~as ~~million~~sales inof ~~rent~~real estate and ~~other~~revenue ~~obligations~~being ~~continue~~recognized toat bean ~~immediately~~earlier ~~due~~date ~~and~~than ~~payable~~ under ~~the~~prior ~~Master~~accounting ~~Lease~~guidance.

AsNOTE of June 30, 2017, in connection with management’s belief that an Event of Default was imminent and the closing of our fiscal quarter, the Company expected to have the ability to sell or re-lease any HCRMC Property unencumbered by the Master Lease3. ~~This~~Operating resulted in a reduction in the expected holding period of certain facilities, which resulted in an impairment charge of $382.0 million during the second quarter of 2017. As of September 30, 2017, the Company determined there was a reduction in the expected holding period of certain additional facilities, which resulted in an impairment charge of $9.9 million during the third quarter of 2017. See Note 4 for additional information on the impairment analysis performed.Leases

~~The~~Master ~~Company~~Lease ~~incurred legal, advisory and diligence costs related to its restructuring and workout discussions~~ with HCRMC ~~totaling $5.5 million and $13.4 million during the three and nine months ended September 30, 2017, respectively.~~

The Company ~~recognized~~leases the HCRMC ~~rental~~Properties (292 post‑acute/skilled nursing and ~~related~~memory ~~revenues~~care/assisted ~~totaling $48.9 million~~living ~~and $116.4 million~~properties ~~for~~as of March 31, 2018) under the ~~three~~Master ~~months~~Lease ~~ended~~supported ~~September~~by ~~30,~~a ~~2017~~guaranty ~~and~~from ~~2016~~HCRMC. The HCRMC Properties are divided into four pools, ~~respectively~~as described within the Master Lease, ~~and~~with ~~$226~~initial lease terms of 13 to 17 years.2 ~~million~~HCRMC has the option to renew leases by pool whereby all properties within a pool must be renewed. The renewal terms vary by subpools within each pool and ~~$345~~range from five to 17 years.8 ~~million~~The ~~for~~Company determined that the ~~nine~~timing ~~months~~and ~~ended~~amounts ~~September~~owed 30under the Master Lease were no longer reasonably assured as of December 31, ~~2017~~2015. As a result, the Company placed the Master Lease on nonaccrual status and utilizes the cash basis method of accounting beginning January 1, 2016, ~~respectively~~in accordance with its policies.

On December 22, 2017, QCP and certain of its subsidiaries entered into a Forbearance Agreement and Amendment to Master Lease and Security Agreement (the “Agreement”) with HCR ManorCare. The Agreement amended the Master Lease to reduce monthly cash rent to $23.5 million (“Reduced Cash Rent”) during a one-year rent reduction period beginning on November 30, 2017 and ending on November 30, 2018 (the “Rent Reduction Period”). Rent in excess of Reduced Cash Rent is deferred during the Rent Reduction Period and becomes immediately due and payable at the end of the Rent Reduction Period. HCR ManorCare paid $23.5 million of Reduced Cash Rent for December 2017, but only $9.5 million of Reduced Cash Rent for January 2018.

On March 2, 2018, concurrent with the signing of the Plan Sponsor Agreement, HCR ManorCare made a rent payment to QCP of $23.5 million, which represents the $14 million and $9.5 million payments previously due on January 25 and February 10, 2018, respectively. HCR ManorCare did not make the $14 million rent payment due on February 25, 2018. HCR ManorCare paid $23.5 million of Reduced Cash Rent for each of March and April 2018. QCP also agreed in the Plan Sponsor Agreement to enter into an amendment to the Master Lease on the date of the consummation of the HCRMC Transactions (the “Master Lease Amendment”). Unless the Alternative PSA is terminated, the parties to the Plan Sponsor Agreement will not be required to consummate the HCRMC Transactions and QCP will not enter into the Master Lease Amendment.

QCP expects to continue to receive rent payments from HCR ManorCare during the Chapter 11 period in accordance with the provisions of the Alternative PSA or, if the Alternative PSA is terminated, in accordance with the provisions of the Plan Sponsor Agreement. While HCR ManorCare continues to be in default under the Master Lease, QCP agreed in the Plan Sponsor Agreement and the Alternative PSA to forbear from bringing suit or exercising certain remedies under the Master Lease, including with respect to the failure to pay rent and a related event of default, until the earlier of the completion of the transactions contemplated thereby or termination of the Plan Sponsor Agreement and the Alternative PSA, as applicable.

The Company incurred legal, advisory and diligence costs related to its restructuring and workout discussions with HCRMC totaling $10.4 million and $3.2 million during the three months ended March 31, 2018 and 2017, respectively.

The Company recognized HCRMC rental and related revenues (including recovery revenues) totaling $66.1 million and $114.5 million for the three months ended March 31, 2018 and 2017, respectively.

Other Leases

The non‑HCRMC Properties are leased on a triple-net basis to other national and regional operators and other tenants unaffiliated with HCRMC. These operating leases expire between years 2019 and 2025 with renewal options of ~~five years or greater. One of the non‑HCRMC Properties contains variable lease payments structured as a percentage of gross revenues once a gross revenue threshold is exceeded.~~

As of September 30, 2017 and December 31, 2016, the straight‑line rent receivables, net balance was $2.7 million and $3.3 million, respectively.

NOTE 4. Real Estate Acquisitions, Dispositions and Impairments

Acquisitions

During 2016, the Company completed the remaining two of the nine post‑acute/skilled nursing property purchases from HCRMC for $91.6 million, which proceeds were used to settle the remaining portion of the Tranche A DRO (see Note 3). The purchase price was allocated $86.4 million to real estate and $5.2 million to intangible assets, with no goodwill recognized.

Additionally, during 2016, the Company acquired a memory care/assisted living property for $15.0 million. The property was developed by HCRMC and was added to the Master Lease. The purchase price was allocated $14.1 million to real estate and $0.9 million to intangible assets, with no goodwill recognized. The actual revenues and earnings of the property since the acquisition date, as well as the supplementary pro forma information assuming the acquisition had occurred as of the beginning of the prior period, are deemed insignificant to the Company.

One of the three acquisitions during 2016 (the “acquired property”) was structured as a reverse like‑kind exchange pursuant to Section 1031 of the Internal Revenue Code (a “reverse 1031 exchange”). On September 9, 2016, the Company completed the reverse 1031 exchange and as such, the acquired property is no longer in the possession of the EAT, which had been classified as a VIE as it is a thinly capitalized entity. The Company had consolidated the EAT because it was the primary beneficiary as it had the ability to control the activities that most significantly impacted the EAT’s economic performance. As of December 31, 2015, the EAT held property reflected as real estate with a carrying value of $27.1 million, for which the Company closed on the property in the first quarter of 2016.

Dispositions

During 2015, the Company and HCRMC agreed to market for sale the real estate and operations associated with 50 non‑strategic properties that were leased to HCR III under the Master Lease (see Note 3). During 2015, the

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~~Company~~five ~~completed~~years 22or ~~of the sales for $218~~greater.8 ~~million,~~One ~~resulting in gain on sales~~ of ~~$39.1 million. From~~ the ~~proceeds,~~non‑HCRMC ~~$14.5~~Properties ~~million~~contains ~~was~~variable ~~held~~lease bypayments astructured ~~Qualified~~as ~~Intermediary for~~ a ~~1031~~percentage ~~exchange that was not completed at December 31, 2015 and was classified as restricted cash as~~ of ~~December~~gross ~~31,~~revenues ~~2015.~~once ~~The~~a ~~1031~~gross ~~exchange~~revenue ~~closed~~threshold inis ~~the first quarter of 2016~~exceeded.

~~During~~As ~~2016, the Company completed 21~~ of ~~the~~March ~~non-strategic property sales~~31, ~~bringing~~2018 ~~the~~and ~~total sold to 43 through~~ December 31, ~~2016~~2017, ~~and sold one additional HCRMC Property for an aggregate amount of $114.6 million, resulting in gain on sales of $10.6 million. During~~ the ~~nine~~straight‑line ~~months~~rent ~~ended September 30~~receivables, ~~2016,~~net ~~the~~balance ~~Company~~was ~~completed 11 of the 21 sales for an aggregate amount of~~ $622.32 million, ~~resulting~~and ~~in gain on sales of~~ $62.5 million, respectively.

~~During~~NOTE ~~the nine months ended September 30, 2017, the Company sold the seven remaining non-strategic properties for aggregate net proceeds of $19~~4.3 ~~million,~~Real ~~resulting in gain on sales of $3.3 million.~~Estate

~~Impairments~~Dispositions

During ~~the three months ended September 30~~2015, ~~2016,~~ the Company ~~recognized~~and anHCRMC ~~impairment~~agreed ~~charge of $21.1 million related~~ to ~~the~~market ~~17 then remaining non-strategic properties as of September 30, 2016 as well as one additional property sold during the fourth quarter of 2016, each classified as held~~ for sale~~. The~~ ~~properties~~the ~~were~~real ~~determined~~estate toand beoperations ~~impaired~~associated ~~in connection~~ with ~~the~~50 ~~closing~~non‑strategic ~~of the quarter because the carrying value of the respective~~ properties ~~exceeded~~that ~~the~~were ~~expected~~leased ~~cash flows due~~ to aHCR ~~reduction~~III inunder the ~~projected~~Master ~~net~~Lease ~~sales~~(see ~~prices~~Note 3). ~~for~~During the ~~properties.~~three ~~The~~months ~~impairment~~ended ~~charge~~March is31, ~~equal~~2017, to the ~~aggregate~~Company ~~amount~~sold ~~by which~~ the ~~carrying~~seven ~~value~~remaining ofnon-strategic ~~the respective~~ properties ~~exceeds~~for ~~the~~aggregate ~~estimated~~net ~~fair~~proceeds ~~value~~ of ~~the~~$19.3 ~~respective properties~~million, ~~which~~resulting ~~was~~in ~~based~~gain on ~~projected~~ sales ~~prices~~of in$3.3 ~~active markets less costs to sell, which are considered a Level 2 input in the fair value measurement hierarchy~~million.

During the three and nine months ended September 30, 2017, the Company recognized impairment charges of $9.9 million and $392.0 million, respectively, related to certain skilled nursing properties classified as held for use. The properties were determined to be impaired in connection with the closing of the respective quarter under the recoverability test because the carrying value of the respective properties exceeded the expected undiscounted cash flows over the estimated holding period for the respective properties, due to a reduction in the expected holding period for the properties (see Note 3) and the continued financial deterioration of the post-acute/skilled nursing sector. The impairment charges are equal to the aggregate amount by which the carrying value of the respective properties exceeds the estimated fair value of the respective properties. Fair value of the properties was estimated using market-based data, including recent comparable sales, market knowledge, brokers’ opinions of value and the income approach, which are considered Level 3 inputs in the fair value measurement hierarchy. A significant assumption used in determining the estimated fair value of these properties was a per bed market rate specific to each individual market, the range of which was $15,000 to $88,000 per bed.

Real Estate and Related Assets Held for Sale

~~The~~We ~~seven~~are ~~remaining~~in the process of selling 74 non~~‑strategic~~-core ~~properties~~skilled ~~sold~~nursing/senior ~~during~~housing ~~2017~~facilities, ~~were~~with ~~classified~~eight aspurchase ~~held~~and sale agreements to sell 46 properties executed to date for ~~sale,~~aggregate ~~net~~gross asproceeds of ~~December~~approximately $253.0 million. The proceeds of any such sales will be used to reduce debt and improve our DSCR covenant compliance. We expect to close on the sales of some or all of these non-core properties before the end of 2018. During the three months ended March 31, ~~2016~~2018, asthe ~~follows~~Company ~~(in~~recorded ~~thousands):~~an impairment charge of $2.9 million to reduce the carrying value of the non-core properties to fair value less costs to sell.

Real estate:
Building and improvements	$	19,170
Land		2,380
Accumulated depreciation		(7,405)
Net real estate		14,145
Intangible assets, net		1,252
Straight-line rent receivables, net		622
Real estate and related assets held for sale, net	$	16,019

The 74 non‑core properties were classified as held for sale, net as of March 31, 2018, as follows (in thousands):


	March 31,
	2018
Real estate:
Building and improvements	$	304,784
Land		55,337
Accumulated depreciation		(19,185)
Net real estate		340,936
Intangible assets, net		15,725
Other assets		694
Real estate and related assets held for sale, net	$	357,355

NOTE 5. Debt

Overview

In anticipation of the Spin‑Off, the Company entered into certain debt arrangements which, upon completion and closing of the Spin‑Off and related transactions on October 31, 2016, were binding upon QCP. The proceeds from the Company’s borrowings, less applicable financing costs, fees and expenses, were transferred to HCP as partial consideration for the QCP Business.

Debt as of March 31, 2018 and December 31, 2017 consisted of the following (in thousands):


			Net Balance Outstanding as of
	Interest	Maturity	March 31,		December 31,
Debt	Rate	Date	2018		2017
Senior secured revolving credit facility(1)	Floating	October 31, 2021	$	75,000	$	75,000
Senior secured term loan(2)	Floating	October 31, 2022		952,901		953,768
Senior secured notes	8.125%	November 1, 2023		734,122		733,412
Total			$	1,762,023	$	1,762,180

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~~the~~(1) ~~Company’s~~The ~~borrowings,~~interest ~~less~~rate ~~applicable~~was ~~financing~~6.90% ~~costs,~~and ~~fees~~6.60% ~~and~~as ~~expenses~~of March 31, ~~were~~2018 ~~transferred~~and toDecember ~~HCP~~31, as2017, ~~partial~~respectively. ~~consideration~~Remaining ~~for~~availability under the ~~QCP~~facility ~~Business~~was $25.0 million as of March 31, 2018.

~~Debt~~(2) The interest rate was 6.90% and 6.60% as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, ~~consisted of the following (in thousands):~~ respectively.

			Balance Outstanding as of
	Interest	Maturity	September 30,		December 31,
Debt	Rate	Date	2017		2016
Senior secured revolving credit facility(1)	Floating	October 31, 2021	$	75,000	$	25,000
Senior secured term loan(2)	Floating	October 31, 2022		954,659		957,465
Senior secured notes	8.125%	November 1, 2023		732,702		730,604
Total			$	1,762,361	$	1,713,069

(1) The interest rate was 6.49% and 5.86% as of September 30, 2017 and December 31, 2016, respectively. On April 26, 2017, the Company borrowed an additional $50.0 million under the senior secured revolving credit facility, the proceeds of which were available for working capital and other corporate purposes, resulting in remaining availability under the facility of $25.0 million.

(2) The interest rate was 6.49% and 6.25% as of September 30, 2017 and December 31, 2016, respectively.

Covenants

Our secured debt agreements contain certain customary affirmative covenants, including furnishing audited annual financial statements without a “going concern” or like qualification or exception in the audit report of our independent registered public accounting firm and maintaining a minimum debt service coverage ratio, and events of default. The negative covenants in the debt agreements include, ~~including~~among other things, limitations (none of which are absolute) on ~~the~~our ~~incurrence~~ability ofto: incur additional debt, ~~issuance~~or ofissue certain preferred shares; create liens on certain assets; make certain loans or investments (including acquisitions); pay dividends on or make distributions in respect of our capital stock or make other restricted payments; consolidate, ~~payment~~merge, sell or otherwise dispose of all or substantially all of our assets; sell assets; enter into certain transactions with our affiliates; change our lines of business; restrict dividends, ~~sale~~from our subsidiaries or restrict certain liens that secure our obligations under our secured debt agreements; prepay certain junior lien debt or material unsecured debt; modify the terms of ~~properties~~certain debt or organizational agreements; and ~~modification~~make any amendment or waiver to, or replacement or termination of, the Master Lease or certain other material leases (including amendments, waivers, replacements or terminations that would be materially adverse to the lenders; provided that neither dispositions and ~~events~~investments ofotherwise ~~default.~~permitted Asunder ofthe ~~September~~credit 30agreement, ~~2017~~nor any rent reductions in connection with the Master Lease, ~~management~~shall ~~believes~~be considered "materially adverse" for purposes of the ~~Company~~covenant). isAdditionally, inour ~~compliance~~debt agreements include restrictions with ~~all~~regard ~~debt~~to ~~covenants,~~the ~~current~~net oncash ~~all~~proceeds ~~loan~~from ~~payments~~the ~~and~~sale ~~not~~of ~~otherwise~~a inproperty, ~~default~~excluding the original 50 non-strategic properties under ~~its~~the Master Lease, whereby the proceeds must be used to repay debt, ~~agreements~~fund a capital expenditure or invest in a replacement property within 365 days of receipt, along with many other restrictive provisions.

The events of default in the secured debt agreements include (with customary thresholds and grace periods) non-payment of principal, interest or other amounts due thereunder; in the case of our senior secured credit facilities, a “going concern” qualification or exception in the independent auditors’ opinion within their report accompanying our annual financial statements; violation of covenants; material inaccuracy of a representation or warranty when made or deemed made; cross-default (after the expiration of any grace period) and cross-acceleration to material recourse indebtedness; bankruptcy events with respect to us or any of our material subsidiaries; general inability to pay debts; certain Employee Retirement Income Security Act of 1974 (“ERISA”) events; unpaid, uninsured final monetary judgments or non-monetary judgements that have not been discharged; invalidity of a material portion of the guarantees or of liens on a material portion of the collateral; and a change of control.

As of March 31, 2018, management believes the Company is in compliance with all debt covenants, current on all loan payments and not otherwise in default under the debt agreements. See “Going Concern Assessment” in Note 1 for further discussion of our anticipated compliance with debt covenants.

Fair Value of Debt

The carrying values of our variable-rate debt approximate their fair value. We estimate the fair values of fixed-rate debt using trading quotes in an inactive market, which falls within Level 2 of the fair value hierarchy. The fair value of the Notes with $750 million face value was estimated to be $~~761~~780.39 million and $~~753~~765.80 million as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016~~2017, respectively.

NOTE 6. Equity

Prior to the Spin-Off, the financial statements were carved out from HCP’s books and records; thus, there was no separate capital structure and the net assets were reflected as net parent investment in the accompanying combined consolidated financial statements. Upon becoming a separate company on October 31, 2016, our ownership is now classified under the typical stockholders’ equity classifications of common stock, additional paid-in capital and accumulated deficit in the accompanying combined consolidated financial statements.

Common Stock

Our charter authorizes the issuance of 200,000,000 shares of common stock, $0.01 par value per share (“common stock”). On October 31, 2016, 93,594,234 shares of QCP common stock were issued to stockholders of HCP pursuant to the Spin-Off. HCP distributed QCP common stock to HCP’s stockholders on a pro rata basis, with each HCP stockholder receiving one share of QCP common stock for every five shares of HCP common stock held on the record date. Holders of HCP common stock received cash in lieu of any fractional shares of QCP common stock which they would have otherwise received.

Preferred Stock

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Preferred Stock ranks prior to our common stock with respect to the payment of dividends and distributions upon liquidation, dissolution or winding up. The Class A Preferred Stock entitles the holders thereof to cumulative cash dividends in an amount equal to 12% per annum of the aggregate liquidation preference, payable quarterly. Pursuant to the terms of the Preferred Stock, we may, at our option at any time on or after October 14, 2017, redeem the Class A Preferred Stock at any time in whole, or from time to time in part, for cash at a price per share equal to the liquidation preference, plus any accumulated, accrued and unpaid dividends, to, but excluding, the date of redemption. Due to their contingent redeemability upon a Change of Control (as defined in the Articles Supplementary relating thereto) and redeemability at the stockholder’s option after the seventh anniversary, the Class A Preferred Stock is classified as redeemable preferred stock within mezzanine equity (outside of permanent equity) in the accompanying consolidated balance sheets.

Our charter authorizes the issuance of up to 50,000,000 shares of our preferred stock, par value $0.01 per share. Prior to the Spin-Off, we issued 2,000 shares of Class A Preferred Stock with an aggregate liquidation preference of $2 million to HCP, which it later sold to institutional investors following the completion of the Spin-Off. The Class A Preferred Stock ranks prior to our common stock with respect to the payment of dividends and distributions upon liquidation, dissolution or winding up. The Class A Preferred Stock entitles the holders thereof to cumulative cash dividends in an amount equal to 12% per annum of the aggregate liquidation preference, payable quarterly.

Pursuant to the terms of the Preferred Stock, we may, at our option at any time on or after October 14, 2017, redeem the Class A Preferred Stock at any time in whole, or from time to time in part, for cash at a price per share (the “Preferred Stock Redemption Price”) equal to the liquidation preference, plus any accumulated, accrued and unpaid dividends, to, but excluding, the date of redemption. Upon the occurrence of a Change of Control (as defined in the Articles Supplementary relating thereto), we must redeem all of the outstanding shares of Class A Preferred Stock for cash at a price per share equal to the Preferred Stock Redemption Price. At any time after October 14, 2023, a holder of shares of Class A Preferred Stock has the right to require us to repurchase all or a portion of the holder’s shares at a price per share equal to the Preferred Stock Redemption Price. Except as described above, the shares of Class A Preferred Stock have no stated maturity, are not subject to any sinking fund and will remain outstanding indefinitely. Due to their contingent redeemability upon a Change of Control and redeemability at the stockholder’s option after October 14, 2023 (both described above), the Class A Preferred Stock is classified as redeemable preferred stock within mezzanine equity (outside of permanent equity) in the accompanying consolidated balance sheets.

Stock-Based Compensation

On October 31, 2016, the Company’s Board of Directors adopted the Quality Care Properties, Inc. 2016 Performance Incentive Plan (the “Plan”), which permits the Company to grant awards to officers, employees, directors and consultants of the Company or a subsidiary. An aggregate of 9,500,000 shares of common stock has been reserved for issuance under the Plan. In addition, the maximum number of awards to be granted to a participant in any calendar year is 3,000,000 shares and the maximum value of awards to be granted to a non-employee director in any consecutive 12-month period is $500,000. Awards may be in the form of stock options, stock appreciation rights, stock bonuses, restricted stock, performance stock, stock units, phantom stock, dividend equivalents, any similar rights to purchase or acquire shares, any other award with a value derived from the value of or related to the common stock, or performance-based cash rewards. As of March 31, 2018, there were 3,007,322 common shares available for future grant under the Plan.

On March 819, ~~2017~~2018, the Company, upon receiving the approval of the Compensation Committee of the Board of Directors, issued ~~the~~to ~~2017~~employees ~~performance-based~~44,592 restricted stock ~~awards~~units to(“RSU”) ~~Messrs.~~for ~~Ordan,~~2017 ~~Neeb~~service ~~and~~(with ~~Richards~~one-third investing upon grant and the ~~maximum~~remaining ~~amounts~~two-thirds ofvesting ~~107,642~~over ~~shares,~~a ~~61,894~~two-year ~~shares,~~service period) and 3244,~~292~~592 ~~shares,~~RSUs ~~respectively,~~for ~~that~~2018 ~~may~~service be(vesting ~~earned~~over ~~upon~~a ~~satisfaction~~three-year ofservice ~~certain performance criteria~~period).

On ~~May~~March 2519, ~~2017~~2018, the Company, upon receiving the approval of the Compensation Committee of the Board of Directors, issued 10to a non-executive officer (i) a one‑time equity award grant of 38,~~177 fully~~719 ~~vested~~RSUs that will vest in full on the third anniversary of the grant date; (ii) a one‑time equity award grant of options to purchase 400,000 shares of the Company’s common stock, of which 200,000 vested in full on the grant date and 200,000 will vest subject to the ~~independent~~achievement ~~members~~of certain performance criteria, with vested options not exercisable until the second anniversary of the ~~Board~~grant date; and (iii) a one-time equity award grant of ~~Directors~~additional options to purchase 200,000 ~~representing~~shares ~~partial~~of ~~compensation~~the ~~for~~Company’s ~~their~~common ~~service~~stock that will vest in full on, and are not exercisable until, the ~~Board~~second anniversary of ~~Directors~~the grant date.

~~The~~On ~~Company~~March ~~recorded~~22, ~~total~~2018, ~~stock-based~~the ~~compensation~~Company, ~~expense~~upon ~~related~~receiving tothe approval of the ~~outstanding~~Compensation ~~restricted~~Committee ~~stock~~of ~~units~~the Board of Directors, ~~stock~~issued ~~options~~the ~~and~~2018 performance-based stock awards ofto $2Messrs.0 ~~million~~Ordan, Neeb and ~~$5.8~~Richards ~~million~~in ~~during~~ the ~~three~~maximum ~~and~~amounts ~~nine~~of ~~months~~125,261 ~~ended~~shares, ~~September~~75,156 30shares, ~~2017~~and 43,841 shares, respectively, ~~which~~that ismay ~~included~~be ~~within~~earned ~~general~~upon satisfaction of certain performance criteria, and ~~administrative~~the ~~expense~~2018 time-vested stock awards to Messrs. Ordan, Neeb and Richards in the ~~accompanying~~amounts ~~combined~~of ~~consolidated~~83,507 ~~statements~~shares, of50,104 ~~operations~~shares, and ~~comprehensive~~29,227 ~~(loss)~~shares, ~~income~~respectively.

The Company recorded total stock-based compensation expense related to the outstanding RSUs, stock options and performance-based and time-vested stock awards of $2.4 million and $1.7 million during the three months ended March 31, 2018 and 2017, respectively, which is included within general and administrative expense in the accompanying consolidated statements of operations and comprehensive (loss) income. The amount of compensation

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related to unvested awards that the Company expects to recognize in future periods was approximately $25 million as of March 31, 2018.

NOTE 7. Commitments and Contingencies

Legal Proceedings in General

From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. Except as described below, the Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s business, prospects, financial condition, results of operations or cash flows. The Company’s policy is to record a liability when a loss is considered probable and the amount can be reasonably estimated and to expense legal costs as they are incurred.

Legal Proceedings related to HCRMC

On April 20, 2015, the U.S. Department of Justice (“DOJ”) unsealed a previously filed complaint in the U.S. District Court for the Eastern District of Virginia against HCRMC and certain of its affiliates in three consolidated cases following a civil investigation arising out of three lawsuits filed by former employees of HCRMC under the qui tam provisions of the federal False Claims Act. The DOJ’s complaint in intervention is captioned United States of America, ex rel. Ribik, Carson, and Slough v. HCR ManorCare, Inc., ManorCare Inc., HCR ManorCare Services, LLC and Heartland Employment Services, LLC (Civil Action Numbers: 1:09cv13; 1:11cv1054; 1:14cv1228 (CMH/TCB)). The complaint alleges that HCRMC submitted claims to Medicare for therapy services that were not covered by the skilled nursing facility benefit, were not medically reasonable and necessary, and were not skilled in nature, and therefore not

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entitled to Medicare reimbursement. Summary judgment motions have been filed in October and early November, 2017. A trial date has been set for January 22, 2018. While HCRMC has indicated that it believes it is in material compliance with all applicable laws and regulations and is vigorously defending itself against the claims, the ultimate outcome is uncertain and a significant adverse judgment against HCRMC or significant settlement obligation could impact HCRMC’s liquidity, financial stability, business operations and operating results. See Note 11. “Subsequent Events—Legal Proceedings related to HCRMC.”

Legal Proceedings related to HCP

Pursuant to a separation and distribution agreement that QCP and HCP entered into in connection with the completion of the Spin‑Off: (i) any liability arising from or relating to QCP’s business has been assumed by QCP and QCP has indemnified HCP and its subsidiaries (and its respective directors, officers, employees and agents and certain other related parties) against any losses arising from or relating to such liability, and (ii) HCP has indemnified QCP (including its subsidiaries, directors, officers, employees and agents and certain other related parties) for any liability arising from or relating to legal proceedings involving HCP’s real estate investment business prior to the Spin‑Off and its retained properties. HCP is currently a party to various ~~legal~~class ~~actions~~action and ~~administrative~~derivative ~~proceedings~~lawsuits, ~~including~~legal ~~various~~actions ~~claims~~and ~~arising~~administrative ~~in the ordinary course of its business~~proceedings, which are subject to the indemnities provided by HCP to QCP, including the actions described below.

HCP has reported that, on May 9, 2016, a purported stockholder of HCP filed a putative class action complaint, Boynton Beach Firefighters’ Pension Fund v. HCP, Inc., et al., Case No. 3:16‑-cv‑-01106‑-JJH, in the U.S. District Court for the Northern District of Ohio against HCP, certain of its officers, HCRMC, and certain of its officers, asserting violations of the federal securities laws. The suit asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and alleges that HCP made certain false or misleading statements relating to the value of and risks concerning its investment in HCRMC by allegedly failing to disclose that HCRMC had engaged in billing fraud, as alleged by the ~~DOJ~~U.S. Department of Justice in a pending suit against HCRMC arising from the False Claims Act. The plaintiff in the suit demands compensatory damages (in an unspecified amount), costs and expenses (including attorneys’ fees and expert fees), and equitable, injunctive, or other relief as the Court deems just and proper. ~~The~~On ~~DOJ~~November ~~lawsuit~~28, ~~against~~2017, ~~HCRMC~~the isCourt ~~described~~appointed inSociete ~~greater~~Generale ~~detail~~Securities ~~above.~~GmbH As(SGSS Germany) and the ~~Boynton~~City ~~Beach~~of ~~action~~Birmingham isRetirement and Relief Systems (Birmingham) as Co-Lead Plaintiffs in ~~its~~the ~~early~~class ~~stages~~action. ~~and~~Co-Lead aPlaintiffs ~~lead~~must ~~plaintiff~~file ~~has~~a ~~not~~consolidated ~~yet~~Amended ~~been~~Complaint ~~named,~~by ~~the~~February ~~defendants~~28, ~~have~~2018. ~~not~~Defendants ~~yet~~filed ~~responded~~their motion to dismiss the ~~complaint.~~Amended ~~HCP~~Complaint ~~has~~on ~~reported~~March ~~that~~30, it2018. HCP believes the suit to be without merit and intends to vigorously defend against it.

HCP has also reported that, on June 16, 2016 and July 5, 2016, purported stockholders of HCP filed two derivative actions, respectively Subodh v. HCR ManorCare Inc., et al., Case No. 30‑-2016‑-00858497‑-CU‑-PT‑-CXC and Stearns v. HCR ManorCare, Inc., et al., Case No. 30‑-2016‑-00861646‑-CU‑-MC‑-CJC, in the Superior Court of California, County of Orange, against certain of HCP’s current and former directors and officers and HCRMC. HCP is named as a nominal defendant. As both derivative actions contained substantially the same allegations, they have been consolidated into a single action. The consolidated action alleges that the defendants engaged in various acts of wrongdoing, including, among other things, breaching fiduciary duties by publicly making false or misleading statements of fact regarding HCRMC’s finances and prospects, and failing to maintain adequate internal controls. As the Subodh/Stearns action is in the early stages, ~~the~~ defendants have not yet responded to the complaint. On April 18, 2017, the Court approved the parties’ stipulation staying the action pending further developments, including in the related securities class action litigation. The Court ~~also~~recently adjourned the status conference scheduled for ~~April~~January 2710, ~~2017~~2018 to ~~January~~June 1011, 2018.

HCP has also reported that, on April 10, 2017, a purported stockholder of HCP filed a derivative action, Weldon v. Martin et al., Case No. 3:~~17cv~~17-cv-755, in federal court in the Northern District of Ohio, Western Division, against certain of HCP’s current and former directors and officers and HCRMC. HCP is named as a nominal defendant. The Weldon complaint asserts similar claims to those asserted in the California derivative actions. In addition, the complaint asserts a claim under Section 14(a) of the Exchange Act, alleging that HCP made false statements in its 2016 proxy statement by not disclosing that HCP’s performance issues in 2015 were the direct result of billing fraud at HCRMC. On April 18, 2017, the Court re-assigned and transferred this action to the judge presiding over the related federal securities class action. The defendants have not yet been served or responded to the complaint. On July 11, 2017, the Court approved a stipulation by the parties to stay the case pending disposition of the motion to dismiss the class action.

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~~The Kelley complaint~~ asserts ~~similar~~a ~~claims~~claim tounder ~~those~~Section ~~asserted~~14(a) inof the ~~Weldon~~Exchange ~~and in the California derivative actions. Like Weldon~~Act, ~~the~~ ~~Kelley~~alleging ~~complaint also additionally alleges~~ that HCP made false statements in its 2016 proxy statement, ~~and~~by ~~asserts~~not adisclosing ~~claim~~that ~~for~~HCP’s aperformance ~~violation~~issues ofin ~~Section~~2015 ~~14(a)~~were of the ~~Exchange~~direct ~~Act.~~result ~~The~~of ~~case~~billing isfraud ~~currently~~at ~~before Judge James V~~HCRMC. ~~Selna.~~ On ~~September~~April 2518, 2017, the ~~defendants~~Court ~~moved~~re-assigned toand ~~transfer~~transferred ~~the~~this action to the ~~Northern~~ ~~District~~judge ofpresiding ~~Ohio~~over ~~(i.e.,~~ the ~~court~~related ~~where~~federal ~~the~~securities class action. ~~and~~Defendants ~~other~~have ~~federal~~not ~~derivative~~yet ~~action~~been ~~are~~served ~~pending)~~ or, inresponded ~~the alternative,~~ to ~~stay~~ the ~~action~~complaint. ~~Oral argument~~On isJuly ~~currently scheduled for December 4~~11, 2017., ~~Judge~~the ~~Selna~~Court ~~granted~~approved ~~HCP’s~~a ~~joint~~ stipulation toby ~~stay~~ the ~~time~~parties to ~~respond~~stay to the ~~complaint~~case ~~until 60~~pending ~~days~~disposition ~~after~~of the ~~transfer~~ ormotion ~~stay~~to ~~motion~~dismiss isthe ~~decided~~class action.

HCP has also reported that, on July 21, 2017, a purported stockholder of HCP filed another derivative action, Kelley v. HCR ManorCare, Inc., et al., Case No. 8:17-cv-01259, in federal court in the Central District of California, against certain of HCP’s current and former directors and officers and HCRMC. HCP is named as a nominal defendant. The Kelley complaint asserts similar claims to those asserted in Weldon and in the California derivative actions. Like Weldon, the Kelley complaint also additionally alleges that HCP made false statements in its 2016 proxy statement, and asserts a claim for a violation of Section 14(a) of the Exchange Act. On September 25, 2017, Defendants moved to transfer the action to the Northern District of Ohio (i.e., the court where the class action and other federal derivative action are pending) or, in the alternative, to stay the action. The Court granted Defendants’ motion to transfer on November 28, 2017, and Kelley is now pending in the Northern District of Ohio.

HCP has also reported that the Court in the Northern District of Ohio is considering a request to consolidate the Weldon and Kelley actions.

HCP has also reported that HCP’s Board of Directors received letters dated August 17, 2016, April 19, 2017, and April 20, 2017 from private law firms acting on behalf of clients who are purported stockholders of HCP, each asserting allegations similar to those made in the Subodh and Stearns matters discussed above. Each letter demands that the Board of Directors take action to assert HCP’s rights. The Board of Directors completed its evaluation and determined to reject the demand letters. Rejection notices were sent in December of 2017.

Commitments for Capital Additions

As part of the HCRMC ~~Lease~~lease ~~Amendment~~amendment effective April 1, 2015, the Company agreed to provide the Lessee, upon the Lessee’s request, through April 1, 2019 amounts to fund Capital Additions Costs (as defined in the Master Lease) approved by the Company, in the Company’s reasonable discretion. Such amounts may not exceed $100 million in the aggregate (“Capital Addition Financing”), nor may the Lessee request more than $50 million in Capital Addition Financing in any single lease year. In connection with any Capital Addition Financing, the minimum rent allocated to the applicable property will be increased by an amount equal to the product of: (i) the amount disbursed on account of the Capital Addition Financing for the applicable property times (ii) at the time of any such disbursement, the greater of (a) 7.75% and (b) 500 basis points in excess of the then -current 10‑year Treasury Rate. Any such Capital Addition Financing shall be structured in a REIT tax‑compliant fashion. Through ~~September~~March 3031, ~~2017~~2018, approximately $2.8 million in Capital Addition Financing has been funded by the Company, with no such funding during 2017 or the first quarter of 2018.

Tenant Purchase Options

On May 30, 2017, the Company and Tandem Health Care, LLC (“Tandem”), a tenant with an option to purchase the nine properties it leases from us at a favorable purchase price, entered into a lease amendment extending the option expiration date from May 31, 2017 to July 31, 2017 and increasing the purchase price. If exercised, the Company would forego approximately $7.5 million in annual rent in exchange for the approximate $81.7 million purchase price, which proceeds the Company would expect to use to repay outstanding debt. In connection with entering into the amendment, the Company collected a $1.0 million nonrefundable deposit from Tandem, which amount would be applied towards the purchase price upon option exercise. On July 31, 2017, Tandem exercised their purchase option, paying an additional $0.5 million nonrefundable deposit to be applied towards the purchase price, with closing no later than October 4, 2017. On October 4, 2017, the Company and Tandem entered into a lease amendment extending the closing date to potentially as late as January 4, 2018, subject to the receipt of certain nonrefundable extension fees and deposits. On October 5 and 23, 2017, Tandem paid a $1.0 million nonrefundable extension fee and a $1.0 million nonrefundable extension deposit, respectively, to extend the closing date to December 5, 2017, with the right to further extend the closing date to January 4, 2018 upon payment of an additional $1.0 million nonrefundable extension fee by November 30, 2017.

NOTE 8. Income Taxes

IfThe ~~the~~ Company ~~elects~~elected to ~~qualify~~be treated as a REIT, ~~and~~commencing with its initial taxable year ended December 31, 2016. REITs are generally not liable for federal corporate income taxes as long as they continue to distribute not less than 100% of ~~its~~their REIT taxable income,. If the Company’s ~~will~~REIT ~~generally~~status is not beterminated, ~~subject~~the Company determines to ~~federal~~continue orto ~~state~~qualify as a REIT and ~~local~~the ~~income~~Company ~~taxes.~~distributes ~~However~~100% of its taxable income, then the ~~following~~Company iswill acontinue ~~discussion~~to ofgenerally anot ~~deferred~~be ~~tax~~subject ~~liability~~to ~~that~~federal ~~QCP~~or ~~assumed~~state ~~from~~and ~~HCP~~local inincome ~~the Spin-Off~~taxes.

~~HCP~~The ~~acquired~~Tax ~~the~~Cuts ~~HCRMC~~and ~~Properties~~Jobs inAct ~~2011~~of ~~through~~2017 an(the ~~acquisition~~“2017 ofAct”) arepresents Csweeping ~~Corporation,~~tax ~~which~~reform ~~was~~legislation ~~subject~~that makes significant changes to ~~federal~~corporate and ~~state~~individual ~~built‑in~~tax ~~gain~~rates ~~tax,~~and ifthe ~~any~~calculation of ~~the~~taxes, ~~assets~~as ~~were~~well ~~sold~~as ~~within~~international ~~10 years,~~tax ofrules. upSo tolong ~~$2 billion.~~as Atwe ~~the~~remain ~~time~~a REIT, ~~HCP~~we ~~intended~~are generally not required to ~~hold~~pay ~~the~~federal ~~assets~~taxes ~~for~~otherwise atapplicable ~~least~~to ~~10 years,~~regular atcorporations ~~which~~if ~~time~~we comply with the ~~assets~~various ~~would~~tax noregulations ~~longer~~governing beREITs. ~~subject~~Shareholders, however, are generally required to ~~the~~pay ~~built‑in~~taxes ~~gain~~on ~~tax~~REIT dividends.

In December 2015, the U.S. Federal Government passed legislation which reduced the holding period, for federal tax purposes, to five years. HCP satisfied the five-year holding period requirement in April 2016. In September 2016, the U.S. Treasury issued a proposed regulation that would change the holding period back to 10 years, but effective only for conversion transactions after August 9, 2016. As currently proposed, these regulations will not impact the HCRMC Properties, as the HCRMC conversion transaction occurred on April 7, 2011.

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However, certain states still require a 10‑year holding period and, as such, the assets are still subject to state built‑in gain tax. As of March 31, 2016, HCP determined that it may sell assets during the next five years and, therefore, recorded a deferred tax liability. HCP calculated the deferred tax liability related to the state built‑in‑gain tax using the separate return method and recorded a deferred tax liability of $12.4 million representing its estimated exposure to state built‑in gain tax, which estimate was revised to $17.4 million during the three months ended September 30, 2016. As a result of the tax liquidation of a QCP subsidiary during the fourth quarter of 2016, the deferred tax liability became due and payable by April 15, 2017. After adjusting the estimated amount to actual, the income taxes payable as of December 31, 2016 was $16.5 million, which amount was paid to the taxing authority during the first quarter of 2017.

NOTE 9. Earnings Per Common Share

We determine basic earnings per common share based on the weighted average number of shares of common stock outstanding during the period and we consider any participating securities for purposes of applying the two-class method. We determine diluted earnings per common share based on the weighted average number of shares of common stock outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into ~~common~~ shares atof ~~the earliest date possible. As described in Note 1, the~~ common ~~shares~~stock ~~outstanding~~ at the ~~separation~~earliest date ~~are reflected as outstanding for all periods prior to the separation~~possible.

The following table sets forth the computation of our basic and diluted earnings per common share (in thousands, except per share data):

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
Numerator:
Net (loss) income attributable to common shareholders	$	(3420,~~158~~487)	$	5336,~~520~~684	$	~~(383,008)~~	$	~~185,875~~
Denominator:
Weighted average common shares outstanding - basic		93,608		93,598		93,602		93,598
Weighted average shares of common stock outstanding - basic		93,619		93,598
Compensation-related shares		—		—		—		—
Weighted average common shares outstanding - diluted		93,608		93,598		93,602		93,598
Weighted average shares of common stock outstanding - diluted		93,619		93,598
(Loss) earnings per common share - basic and diluted	$	(0.3622)	$	0.5739	$	~~(4.09)~~	$	~~1.99~~

For the three ~~and nine~~ months ended ~~September~~March 3031, 2018 and 2017, additional potentially dilutive securities include outstanding stock options, restricted stock units, deferred stock units and performance-based stock awards. For the three ~~and nine~~ months ended ~~September~~March 3031, 2018 and 2017, diluted shares exclude the impact of any such securities because their effect would be anti-dilutive. ~~There~~or ~~were no such securities outstanding during the three and nine months ended September 30, 2016~~insignificant. We accrue distributions when they are declared.

NOTE 10. Concentration of Credit Risk

Concentrations of credit risk arise when one or more tenants or operators related to the Company’s investments are engaged in similar business activities or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions. The Company regularly monitors its portfolio to assess potential concentrations of risks.

Assets related to HCRMC represented 9089% ~~and 94%~~ of the Company’s total assets as of ~~September~~March 3031, ~~2017~~2018 and December 31, ~~2016, respectively~~2017. The Company derived 8789% and 9193% of its total revenues from the Master Lease with HCRMC for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017,~~2018 ~~respectively,~~ and ~~94% of its total revenues from the Master Lease with HCRMC for the three and nine months ended September 30~~2017, ~~2016~~respectively.

NOTE 11. Subsequent Events

See Note 1 for activity related to definitive agreements entered into with Welltower and ProMedica and Note 3 for activity related to HCR ManorCare subsequent to March 31, 2018.

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NOTE 11. Subsequent Events

See Note 3 for activity related to HCR ManorCare and Note 7 for activity related to an exercised tenant purchase option subsequent to September 30, 2017.

Legal Proceedings related to HCRMC

In respect of United States of America, ex rel. Ribik, Carson, and Slough v. HCR ManorCare, Inc., ManorCare Inc., HCR ManorCare Services, LLC and Heartland Employment Services, LLC (Civil Action Numbers: 1:09cv13; 1:11cv1054; 1:14cv1228 (CMH/TCB)), on November 8, 2017, the United States and HCRMC filed a joint motion to continue a summary judgment hearing and stay all deadlines that states, “the United States has advised Defendants of its intent to move to dismiss this case with prejudice”; the joint motion further states that the parties are working to draft the relevant dismissal documents, and intend to file a notice of dismissal or further status report on November 17, 2017. On November 9, 2017, the court approved the joint motion. A relator in this matter has filed papers with the court to the effect that she will oppose any dismissal agreement reached between the United States and HCRMC.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the ~~combined~~ consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q (“Quarterly Report”). See “—Overview – Basis of Presentation” below for defined terms. Our financial statements may not necessarily reflect our future financial condition and results of operations~~, or what they would have been had we been a separate, stand‑alone company during all periods presented~~.

Cautionary Language Regarding Forward-Looking Statements

Statements in this Quarterly Report that are not historical statements of fact may be deemed “forward-looking statements.” We intend to have our forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with those provisions. Forward-looking statements include, among other things, statements regarding our intent, belief or expectations, including, but not limited to, statements regarding: the ~~anticipated~~Merger ~~structure~~(as defined below), ~~benefits~~the Plan Transactions (as defined below), the HCRMC Bankruptcy (as defined below) and ~~tax~~the ~~treatment~~HCRMC Transactions (as defined below); benefits of the Spin‑Off (as defined below); future financing plans, business strategies, growth prospects and operating and financial performance of Quality Care Properties, Inc. (“QCP”) and its tenants and operators, including HCR ManorCare, Inc. (“HCRMC”); expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations.

Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward‑looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward‑looking statements are reasonable, we can give no assurance that our expectations will be attained. Further, we cannot guarantee the accuracy of any such forward-looking statement contained in this Quarterly Report, and such forward-looking statements are subject to known and unknown risks and uncertainties that are difficult to predict. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

· ~~the~~our ~~HCRMC~~ability ~~Properties~~to ~~(defined~~continue ~~below)~~as ~~representing~~a ~~substantially~~going ~~all~~concern, ofwhich ~~our~~contemplates the realization of assets and ~~our~~satisfaction ~~reliance~~of onliabilities ~~HCRMC~~in ~~for~~the ~~substantially~~normal ~~all~~course of business, including the effective implementation and success of management’s plan to mitigate the conditions that raise substantial doubt about our ~~revenues~~ability to continue as a going concern (see “Going Concern Assessment” below for more information);

· the ~~impact~~occurrence of any event, change or other circumstance that could give rise to the ~~Event~~termination of ~~Default~~the ~~under~~agreement ~~the~~and ~~Master~~plan ~~Lease~~of merger, dated April 25, 2018, by and among QCP, Welltower Inc., Potomac Acquisition LLC and certain of QCP’s subsidiaries (~~defined~~the ~~below~~“Merger Agreement”), ~~and~~the ~~ongoing~~alternative ~~negotiations~~plan ~~with~~sponsor agreement, dated April 25, 2018, by and among QCP, HCRMC, ~~(as~~ProMedica ~~further~~Health ~~discussed~~System, ~~under~~Inc., Suburban Healthco, Inc. and Meerkat I LLC (the “~~—Portfolio~~Alternative ~~Overview~~PSA”), ~~including~~or ~~risks~~the ~~related~~other toagreements entered into in connection with the ~~following:~~Merger Agreement and Alternative PSA;

· ~~The~~failure ~~uncertainty~~to ~~that~~obtain ~~negotiations~~the ~~with~~required ~~HCRMC~~vote ~~will~~of ~~result~~QCP instockholders anto ~~agreement~~approve the merger contemplated by the Merger Agreement (the “Merger”), or ~~that~~the failure to satisfy any ~~such~~of ~~agreement~~the ~~would~~other beclosing ~~beneficial~~conditions to the ~~Company~~Merger or to the transactions contemplated by the Alternative PSA (the “Plan Transactions”), including the receipt of certain state licensing approvals;

· ~~The~~the ~~Company's~~ ability to ~~enforce~~meet ~~remedies~~expectations ~~under~~regarding the ~~Master~~timing ~~Lease~~ and ~~the~~completion ~~costs~~of ~~associated~~the ~~with~~Merger ~~enforcing~~and ~~such~~the ~~remedies~~Plan Transactions;

· Inrisks ~~the~~associated ~~event~~with the ~~Company~~disruption ~~terminates~~of ~~the~~management’s ~~Master~~attention ~~Lease~~from ~~with~~QCP’s ~~respect~~ongoing tobusiness ~~any~~operations ordue ~~all HCRMC Properties, the impact~~ to the ~~Company~~pendency ~~under~~of the ~~Company's~~Merger, ~~credit~~Plan ~~agreements~~Transactions ofand ~~such~~HCRMC ~~termination~~Transactions;

· In the ~~event~~effect of anthe ~~appointment~~announcement of anthe ~~independent~~Merger, ~~receiver~~the ~~for~~Plan Transactions and the HCRMC ~~Properties,~~Transactions on the ability of ~~such~~QCP ~~receiver,~~to ifmaintain ~~appointed,~~relationships towith ~~preserve~~its ~~value~~partners, ~~and~~tenants, ~~successfully~~providers ~~transition~~and ~~HCRMC~~others ~~Properties~~with towhom ~~new~~it ~~owners~~does ~~and/~~business, or ~~operators;~~on its operating results and businesses generally;

· In the event of a possible HCRMC bankruptcy, the impact to the Company under the Company's credit agreements of a rejection of the Master Lease by HCRMC and of limitations and delays in bankruptcy on the Company’s ability to exercise remedies and seek recoveries under the Master Lease. 21

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the bankruptcy court in the HCRMC Bankruptcy may not approve the terms of the amended plan of reorganization of HCRMC (the “Amended Plan”) under Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), pursuant to the Alternative PSA;

if the Alternative PSA is terminated, our ability to consummate the transactions (the “HCRMC Transactions”) contemplated by the plan of reorganization of HCRMC pursuant to the plan sponsor agreement (the “Plan Sponsor Agreement”), dated March 2, 2018, by and among HCRMC, QCP, HCP Mezzanine Lender, LP, a wholly owned subsidiary of QCP, and certain lessor subsidiaries of QCP, as amended on April 25, 2018, and satisfy closing conditions to the HCRMC Transactions, including state licensing approval;

the consequences to QCP if the Plan Transactions and the HCRMC Transactions are not consummated, including risks related to the following:

the commencement of non-consensual Chapter 11 proceedings for HCR III Healthcare, LLC (“HCR III”) or other subsidiaries of HCRMC and rejection of the Master Lease in such Chapter 11 proceedings;

our ability to enforce remedies under the Master Lease (or the guaranty thereof) and the costs associated with enforcing such remedies;

we may elect to terminate the Master Lease with respect to any or all of the HCRMC Properties, which may result in an event of default under our secured debt agreements;

if we terminate the Master Lease with respect to any or all of the HCRMC Properties, our ability to sell or re-lease HCRMC Properties, including as a result of the automatic stay provisions of the U.S. Bankruptcy Code in the event that HCR III and/or other subsidiaries of HCRMC were to commence their own Chapter 11 bankruptcy proceedings;

restrictions imposed by HCRMC’s credit facility, dated as of July 17, 2017 with RD Credit, LLC, as administrative agent and collateral agent, as amended (the “Centerbridge Facility”), that infringe upon HCRMC’s ability to use cash flow generated by HCRMC entities other than HCR III (our tenant under the Master Lease) and its direct and indirect subsidiaries to meet its obligations to us under the guaranty of the Master Lease;

in the event of an appointment of an independent receiver for the HCRMC Properties, the ability of such receiver to preserve value and pay rent to us under the Master Lease; and

our ability to qualify or maintain our status as a real estate investment trust (“REIT”).

the consequences to QCP if the Plan Transactions are not consummated and the HCRMC Transactions are consummated, including risks related to the following:

successfully developing and executing a strategy to improve and/or restructure, in whole or in part, HCRMC’s business of providing skilled nursing, assisted living/memory care, hospice and other ancillary services;

challenges in selling, remarketing or re-leasing our skilled nursing and assisted living/memory care facilities (including those identified as non-core to our business) on terms favorable to us, or at all;

successfully restructuring our substantial debt and enhancing our and HCRMC’s capital structure, including our ability to extend or refinance HCRMC’s debt under the Centerbridge Facility, which is scheduled to mature on January 17, 2019;

our ability to retain the new HCRMC management or hire other executives and other employees following the consummation of the HCRMC Transactions; and

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· our ~~dependency~~ability onto ~~HCRMC’s~~realize ~~ability~~benefits from operating and ~~willingness~~being totaxed ~~meet~~as ~~its~~a ~~contractual~~C ~~obligations~~corporation ~~under~~in the ~~Master~~probable ~~Lease~~event ~~and~~of ~~guaranty~~a ~~thereof,~~termination ~~including~~of ~~risks~~our ~~related~~REIT tostatus in connection with the ~~following:~~HCRMC Transactions.

· ~~the~~our ~~impact~~ability ofto ~~HCRMC’s~~stay ~~decline~~compliant inwith ~~operating~~our ~~performance~~debt ~~and fixed charge coverage~~covenants;

· the impact of the “going concern” exception in the auditors’ opinion to HCRMC’s ~~continuing~~audited ~~failure~~consolidated tofinancial ~~pay~~statements ~~rent~~as of December 31, 2017 and 2016 and for the three years in the ~~amount~~period ~~required~~ended byDecember 31, 2017, resulting from recurring losses from operations, non-compliance with the terms of the Master Lease, and uncertainty regarding the ability to repay or refinance its credit agreement;

· the ~~impact~~continuing offinancial ~~the~~deterioration ~~“going~~of ~~concern”~~HCRMC ~~exception~~and in the ~~auditors’~~impact ~~opinion~~on toour ~~HCRMC’s audited consolidated~~ financial ~~statements~~condition asand results of ~~December 31~~operations, ~~2016~~further ~~and~~impacted ~~2015~~by ~~and for~~ the ~~three~~added ~~years~~delay inif the ~~period~~Alternative ~~ended~~PSA ~~December~~is ~~31, 2016, resulting from recurring losses and negative working capital~~terminated;

· ~~the~~HCR ~~U.S.~~III ~~Department~~and ~~of Justice (“DOJ”) lawsuit against~~ HCRMC ~~(see~~may ~~Note~~continue 7.to ~~“Commitments~~fail ~~and~~to ~~Contingencies—Legal~~meet ~~Proceedings~~their ~~related~~obligations to ~~HCRMC”~~us ~~and~~under ~~Note~~the ~~11.~~Master ~~“Subsequent~~Lease ~~Events—Legal~~and ~~Proceedings related to HCRMC” to~~ the ~~combined~~guaranty ~~consolidated~~thereof ~~financial~~(unless ~~statements~~such ~~included~~guaranty inis ~~Part~~terminated I,pursuant ~~Item~~to 1the ofPlan ~~this~~Sponsor ~~Quarterly Report~~Agreement), ~~and~~whether ~~other~~or ~~legal~~not ~~proceedings involving~~ HCRMC,’s ~~including~~results ~~litigation costs and the possibility~~ of ~~adverse~~operations ~~results and related developments~~improve; ~~and~~

· ~~restrictions~~the ~~imposed~~financial bycondition ~~HCRMC’s~~and ~~new~~operations ~~credit~~of ~~facility~~our ~~(as~~other ofexisting ~~July~~and ~~2017)~~future ~~that~~tenants ~~constrain~~and ~~HCRMC’s~~operators, ~~ability~~including topotential ~~use~~bankruptcies ~~cash~~and ~~flow~~downturns ~~generated~~in bytheir ~~HCRMC entities~~businesses, ~~other~~and ~~than~~their ~~HCR~~legal ~~III~~and ~~Healthcare~~regulatory proceedings, ~~LLC~~which (has resulted in uncertainties regarding our ~~tenant~~ability ~~under~~to realize the ~~Master~~full ~~Lease)~~benefit ~~and~~of ~~its~~such ~~direct~~tenants’ and ~~indirect~~operators’ ~~subsidiaries~~leases, toincluding ~~meet~~the ~~its~~recovery ~~obligations~~of toany investments made by us ~~under~~in ~~the~~their ~~guaranty~~operations, ofand ~~the~~which ~~Master~~may ~~Lease.~~result in further impairment charges with respect to underperforming facilities;

· our ability to sell or re-lease HCRMC Properties if we terminate the Master Lease with respect to any or all of the HCRMC Properties or if we reach agreement with HCRMC with respect to such sales and re-leasing activities, including risks relating to the following:

· the Company’s ability to identify potential new owners and/or operators and negotiate and consummate sales or re-leasing transactions on terms acceptable to the Company;

· HCRMC’s ability and willingness to cooperate with the transfer of facility operations to new owners and/or operators; and

· constraints on the transfer of healthcare properties, including licensing and regulatory requirements and Medicare and Medicaid provider arrangements.

· the financial condition and operations of HCRMC and our other existing and future tenants and operators, including potential bankruptcies and downturns in their businesses, and their legal and regulatory proceedings, which has resulted in uncertainties regarding our ability to realize the full benefit of such tenants’ and operators’ leases, including the recovery of any investments made by us in their operations, and which may result in further impairment charges with respect to underperforming facilities;

ongoing trends in the healthcare industry, including a shift away from a traditional fee‑for‑service model and increased penetration of government reimbursement programs with lower reimbursement rates, average length of stay and average daily census, and increased competition in the industry, including for skilled management and other key personnel;

· the effect on us, our tenants and operators of legislation and other legal requirements, including licensure, certification and inspection requirements, and laws addressing entitlement programs and related services, including Medicare and Medicaid, which may result in future reductions in reimbursements or fines for noncompliance;

· the potential impact on us, our tenants and operators from current ~~and~~or future litigation matters, claims or investigations, including the possibility of larger than expected ~~litigation~~ costs arising therefrom, adverse results and related developments;

23 · competition for, and our ability to negotiate the same or better terms with and obtain regulatory approvals for, new tenants or operators if our existing tenants’ and operators’ leases are terminated or not renewed;

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· competition for, and our ability to negotiate the same or better terms with and obtain regulatory approvals for, new tenants or operators if our existing leases are not renewed or we exercise our right to replace HCRMC or other tenants upon default;

negative economic conditions in our geographies of operation;

uninsured or underinsured losses that our properties may experience and other unanticipated expenses, including environmental compliance costs and liabilities;

our non‑investment grade rating from credit rating agencies;

our ability, as a highly levered company, to manage our indebtedness level, changes in the terms of such indebtedness and changes in market interest rates;

covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations;

our ability to pay dividends and the tax treatment of such dividends for our stockholders;

the loss of key personnel;

~~· our ability to qualify or maintain our status as a real estate investment trust (“REIT”);~~ 23

· Table ~~the ability to achieve some or all~~ of ~~the benefits that we expect to achieve from the Spin‑Off (defined below) or to successfully operate as an independent, publicly‑traded company;~~Contents

· ~~the~~unexpected ~~ability~~liabilities, ~~and~~disputes ~~willingness of HCP to meet and/~~or ~~perform~~other ~~its~~potential ~~obligations~~unfavorable ~~under~~effects ~~any~~related ~~contractual~~to ~~arrangements that are entered into with us in connection with~~ the Spin‑Off ~~and any of its obligations to indemnify~~, ~~defend~~the ~~and~~Merger ~~hold us harmless from~~ and ~~against~~the ~~various~~HCRMC ~~claims,~~Transactions; ~~litigation~~ and ~~liabilities;~~

· ~~unexpected~~additional ~~liabilities~~factors discussed in Part I, ~~disputes~~Item or1A. ~~other~~“Risk ~~potential~~Factors” ~~unfavorable~~in ~~effects~~our ~~related~~Annual toReport on Form 10-K filed on March 8, 2018 (the ~~Spin‑Off;~~“Annual ~~and~~Report”), as updated by Item 1A. “Risk Factors” in Part II of this Quarterly Report.

· additional factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K filed on March 31, 2017, as amended (the “Annual Report”).

Forward‑looking statements speak only as of the date of this Quarterly Report. Except as may be required under the federal securities laws and the rules and regulations of the Securities and Exchange Commission (the “SEC”), we expressly disclaim any obligation to release publicly any updates or revisions to any forward‑looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.

Overview – Basis of Presentation

Quality Care Properties, Inc. (“QCP” or the “Company”) is a publicly-traded Maryland corporation ~~that~~(NYSE: ~~was~~QCP) primarily engaged in the ownership and leasing of post‑acute/skilled nursing properties and memory care/assisted living properties. We were formed in 2016 to hold the HCR ManorCare, Inc. (“HCRMC”) portfolio (“HCRMC Properties”), 28 other healthcare related properties (“non‑HCRMC Properties,” and, collectively with the HCRMC Properties, the “Properties”), a deferred rent obligation (“DRO”) due from HCRMC under a master lease (the “Tranche B DRO”) and an equity method investment in HCRMC (together, the “QCP Business”) previously held by HCP, Inc. (“HCP”). Prior to the separation from HCP, which was completed on October 31, 2016, QCP was a wholly owned subsidiary of HCP. In connection with the separation, HCP transferred to certain subsidiaries of QCP the equity of entities that hold the QCP Business. Pursuant to the separation agreement, dated as of October 31, 2016, by and between HCP and QCP, HCP effected the separation by means of a pro rata distribution of substantially all of the outstanding shares of QCP common stock to HCP stockholders of record as of the close of business on October 24, 2016, the record date (the “Spin‑Off”). At the time of the Spin-Off, the Properties contributed to QCP consisted of 274 post‑acute/skilled nursing properties, 62 memory care/assisted living properties, one surgical hospital and one medical office building, including 18 properties then held for sale.

Unless the context otherwise requires, references to “we,” “us,” “our,” and “the Company” refer to QCP on a consolidated basis. QCP elected to be treated as a real estate investment trust (“REIT”) under the applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its initial taxable year ended December 31, 2016. REITs are generally not liable for federal corporate income taxes as long as they continue to distribute not less than 100% of their REIT taxable income. Pursuant to the Merger Agreement, QCP has agreed to conduct its business in the ordinary course and to maintain REIT status. If the transactions contemplated by the Merger Agreement are terminated, we would expect to terminate our REIT status in connection with the HCRMC Transactions. If our REIT status is not terminated, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, and maintaining compliance with certain income and asset tests.

As of March 31, 2018, the Properties consisted of 257 post‑acute/skilled nursing properties, 61 memory care/assisted living properties, one surgical hospital and one medical office building, including 74 non-core properties actively being marketed for sale. The Properties are primarily located in Pennsylvania, Illinois, Ohio, Florida and Michigan. As of March 31, 2018, 292 of the 320 properties were leased to HCRMC under a master lease agreement (as amended and supplemented from time to time, the “Master Lease”). The Master Lease properties are leased to HCRMC’s wholly owned subsidiary, HCR III Healthcare, LLC (“HCR III” or the “Lessee” and, together with HCRMC, “HCR ManorCare”). All of HCR III’s obligations under the Master Lease are guaranteed by HCRMC. The non‑HCRMC Properties are leased on a triple-net basis to other national and regional operators and other tenants unaffiliated with HCRMC. Our primary source of revenues is rent payable under the Master Lease.

The Master Lease is structured as a triple‑net lease, in which HCRMC, either directly or through its affiliates and sublessees, operates the properties and is responsible for all operating costs associated with the properties, including the payment of property taxes, insurance and repairs, and providing indemnities to us against liabilities associated with the operation of the properties.

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~~Unless~~Going ~~the~~Concern context otherwise requires, references to “we,” “us,” “our,” and “the Company” refer to QCP on a consolidated basis after giving effect to the transfer of assets and liabilities from HCP as well as to the QCP Business prior to the date of the completion of the separation. Before the completion of the separation, the QCP Business was operated through subsidiaries of HCP, which operates as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). QCP has operated and expects to continue to operate as a REIT under the applicable provisions of the Code, commencing with its initial taxable year ended December 31, 2016. REITs are generally not liable for federal corporate income taxes as long as they continue to distribute not less than 100% of their REIT taxable income. If we determine to maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains.Assessment

AsThe ofconsolidated ~~September~~financial ~~30,~~statements ~~2017,~~included ~~the~~in ~~Properties~~Part ~~consisted~~I, ofItem ~~257 post‑acute/skilled~~1 ~~nursing~~of ~~properties,~~this 61Quarterly ~~memory~~Report ~~care/assisted~~have ~~living~~been ~~properties,~~presented ~~one~~on ~~surgical~~the ~~hospital~~basis ~~and~~that ~~one~~the ~~medical~~Company ~~office~~would ~~building.~~continue ~~The~~as ~~Properties~~a ~~are~~going ~~primarily~~concern, ~~located~~which incontemplates ~~Pennsylvania,~~the ~~Illinois,~~realization ~~Ohio,~~of ~~Florida~~assets and ~~Michigan.~~satisfaction As of ~~September~~liabilities ~~30,~~in ~~2017,~~the ~~292~~normal course of ~~the~~business. ~~320~~In ~~properties~~its ~~were~~going ~~leased~~concern toassessment ~~HCRMC~~for ~~under~~the afirst ~~master~~quarter ~~lease~~of ~~agreement~~2018, ~~(as~~management ~~amended~~identified ~~and~~certain ~~supplemented~~conditions ~~from~~which ~~time~~raised tosubstantial ~~time,~~doubt about the ~~“Master~~Company’s ~~Lease”).~~ability ~~The~~to ~~Master~~continue ~~Lease~~as ~~properties~~a ~~are~~going ~~leased~~concern prior to ~~HCRMC~~consideration of management’s ~~wholly~~plans ~~owned~~to ~~subsidiary,~~mitigate ~~HCR~~the ~~III~~conditions ~~Healthcare, LLC~~identified ~~(“HCR~~and ~~III”~~alleviate or the ~~“Lessee”)~~substantial doubt. ~~All~~A of“going ~~HCR~~concern” ~~III’s~~or ~~obligations~~like ~~under~~qualification ~~the~~or ~~Master~~exception ~~Lease~~in ~~are~~the ~~guaranteed~~independent byauditors’ ~~HCRMC.~~opinion ~~The~~within ~~non‑HCRMC~~their ~~Properties~~report ~~are~~accompanying ~~leased~~the onconsolidated afinancial ~~triple-net~~statements ~~basis~~would toconstitute ~~other~~an ~~national~~event ~~and~~of ~~regional~~default ~~operators~~under ~~and~~our ~~other~~senior ~~tenants~~secured ~~unaffiliated~~credit ~~with HCRMC~~facilities.

~~The~~HCRMC, ~~Master~~the ~~Lease~~ultimate isparent ~~structured~~company asof aour ~~triple‑net~~principal ~~lease~~tenant, incontinues ~~which~~to ~~HCRMC,~~be ~~either~~adversely ~~directly~~impacted orby ~~through~~underperformance, ~~its affiliates~~ and ~~sublessees,~~a ~~operates~~challenging ~~the~~operating ~~properties~~environment ~~and~~in isthe ~~responsible~~post-acute/skilled ~~for~~nursing ~~all~~sector. ~~operating~~The ~~costs~~impact ~~associated~~of ~~with~~ the ~~properties~~downward, ~~including~~and ~~the~~expected ~~payment~~continued ~~of property taxes~~downward, ~~insurance~~pressure ~~and~~on ~~repairs,~~revenues and ~~providing~~operating ~~indemnities~~income tohas usresulted ~~against~~in ~~liabilities~~HCRMC’s ~~associated~~default ~~with~~under the ~~operation~~Master ofLease ~~the~~and ~~properties.~~materially ~~HCR~~lower ~~III~~rent ispayments ~~required~~ to ~~expend~~the aCompany. ~~minimum~~This ~~amount~~continued ~~during~~performance ~~each~~decline ~~lease~~has ~~year for capital projects (as defined in the Master Lease)~~reduced, ~~which,~~and aswill oflikely ~~September~~continue ~~30,~~to ~~2017~~reduce, ~~is equal to approximately $31 million for all of~~ the ~~HCRMC~~Company’s ~~Properties~~cushion/coverage inunder ~~the~~its ~~aggregate.~~debt Asservice ~~part~~coverage ofratio ~~the HCRMC Lease Amendment~~ (~~defined in~~ “~~—Portfolio Overview~~DSCR” ~~below~~) ~~effective April 1~~, ~~2015, we~~a ~~agreed to~~covenant ~~provide~~in ~~HCR~~its ~~III,~~senior ~~upon~~secured ~~HCR~~credit ~~III’s~~facilities. ~~request,~~We ~~through~~believe ~~April~~it 1,is ~~2019~~likely ~~amounts~~that toour ~~fund~~DSCR ~~Capital~~will ~~Addition~~fall ~~Costs~~below ~~(as defined in~~ the ~~Master~~minimum ~~Lease) approved by us, in our reasonable discretion~~1.75 ~~Such~~coverage ~~amounts may not exceed $100 million~~ in ~~the aggregate~~2018, ~~nor~~which ~~may~~would ~~HCR~~constitute ~~III~~a ~~request~~covenant ~~more~~violation ~~than~~and ~~$50 million~~event inof ~~any~~default ~~single~~under ~~lease~~such ~~year.~~credit ~~See~~facilities, ~~“—Liquidity~~absent ~~and~~proactive ~~Capital~~action ~~Resources—Capital~~by ~~Expenditures” for additional information~~management.

~~Before~~Management ~~the~~plans ~~separation, QCP had not conducted any business as a separate company and had no material assets or liabilities. The operations of the business transferred~~ to usimplement ~~by HCP on~~ the ~~Spin-Off~~following ~~date~~actions, ~~are~~which ~~presented~~should ashave if the ~~transferred~~effect ~~business~~of ~~was~~mitigating ~~our business for all historical periods described and at~~ the ~~carrying~~risk ~~value~~ of ~~such~~covenant assets and liabilities reflected in HCP’s books and records. Additionally, the financial statements reflect the common shares outstanding at the separation date as outstanding for all periods prior to the separation.violation:

As· aWe ~~result~~have ofentered ~~the~~into ~~Spin‑Off, QCP is a publicly‑traded company (NYSE: QCP) primarily engaged in~~ the ~~ownership~~Merger ~~and~~Agreement, ~~leasing~~whereby ofwe ~~post‑acute/skilled nursing properties and memory care/assisted living properties. Our primary source of revenues is rent payable under the Master Lease. We~~ expect ~~HCR III~~that ~~will~~Welltower, ~~generate~~upon ~~revenues primarily from patient fees and services. As a result of~~ the ~~Event~~closing of ~~Default under~~ the ~~Master Lease~~Merger, ~~payment~~will ofpay ~~the~~off ~~Tranche B~~our ~~DRO currently~~ outstanding ~~under the Master Lease is now due~~indebtedness. ~~See “—Liquidity and Capital Resources—Deferred Rent Obligation” for additional information regarding the Tranche B DRO.~~

· We ~~initially~~are ~~lacked~~in ~~certain~~the ~~non‑management~~process ~~administrative~~of ~~capabilities,~~selling ~~and~~74 ~~accordingly,~~non-core weskilled ~~entered~~nursing/senior ~~into~~housing anfacilities. ~~agreement~~The ~~pursuant~~proceeds toof ~~which~~any ~~HCP~~such sales will ~~provide~~be ~~certain~~used ~~administrative and support services~~ to usreduce ondebt aand ~~transitional~~improve ~~basis~~our ~~(the~~DSCR ~~“Transition~~covenant ~~Services~~compliance. ~~Agreement”),~~We ~~which~~expect isto ~~customary~~close ~~for a transaction such as the Spin‑Off, expiring~~ on the ~~earlier~~sales of ~~October~~some ~~31, 2017~~ or ~~completion of~~ all ~~services to be provided by HCP under the agreement, unless extended or earlier terminated. As~~ of ~~October~~these ~~31,~~assets ~~2017, we~~before ~~completed~~ the ~~transition~~end of ~~these services to QCP’s operating platform~~2018.

~~For~~· ~~periods~~We ~~prior~~expect to ~~the~~use ~~separation,~~a ~~the~~portion ~~historical combined consolidated financial statements included in Part I, Item 1~~ of this Quarterly Report include the combined consolidated accounts of the QCP Business as derived from HCP’s consolidated financial statements and accounting records at their historical carrying values. The historical combined consolidated financial statements reflect our ~~financial position, results of operations and~~ cash ~~flows~~on ashand ~~“carved out” from HCP prior to the Spin‑Off, in conformity with U.S. generally accepted accounting principles~~ (~~“GAAP”)~~$352.3 ~~The~~million ~~combined~~as ~~consolidated financial information reflects the adoption~~ of ~~ASU~~March ~~2016‑02~~31, ~~Leases~~2018) ~~(see Note 2~~ to ~~the~~repay ~~combined~~a ~~consolidated~~portion ~~financial~~of ~~statements~~our ~~included~~outstanding indebtedness in ~~Part~~order I,to ~~Item~~maintain 1compliance ofwith ~~this~~our ~~Quarterly~~DSCR ~~Report)~~covenant.

We expect to maintain sufficient liquidity levels to enable us to honor our current obligations over the next 12 months.

Further, if the Merger is not consummated and we complete the HCRMC Transactions, we expect to consolidate some or all of the operations and assets and liabilities of HCRMC, including the Centerbridge Facility, which is scheduled to mature on January 17, 2019. We believe, based on the performance and relatively low leverage of the collateral (the hospice business), it is probable that we will be able to extend the maturity or refinance this obligation prior to maturity.

The HCRMC Transactions

On March 2, 2018, QCP entered into a plan sponsor agreement (the “Plan Sponsor Agreement”) with HCRMC, HCP Mezzanine Lender, LP, a wholly owned subsidiary of QCP (“QCP Purchaser”), and certain lessor subsidiaries of QCP. The Plan Sponsor Agreement contemplates that, among other things, pursuant to a prepackaged plan of reorganization of HCRMC (the “Prepackaged Plan”) under Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), QCP Purchaser will acquire all of the issued and outstanding capital stock of HCRMC, in exchange for the discharge under the Prepackaged Plan of all claims of QCP against HCRMC and its subsidiaries arising under HCRMC’s guaranty of the Master Lease. On March 4, 2018, as required by the Plan Sponsor Agreement, HCRMC filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.

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On April 25, 2018, the parties to the Plan Sponsor Agreement entered into an amendment to the Plan Sponsor Agreement (the “PSA Amendment”) pursuant to which QCP consented to HCRMC’s entry into the Alternative PSA and an alternative restructuring support agreement (as described under “―The Welltower/ProMedica Transactions” below). The PSA Amendment makes termination of the Alternative PSA a condition to the consummation of the transactions contemplated by the Plan Sponsor Agreement (collectively, the “HCRMC Transactions”), extends the outside date for the consummation of the HCRMC Transactions to January 15, 2019 and makes certain other changes to the terms of the Plan Sponsor Agreement. If the Alternative PSA is terminated, the Plan Sponsor Agreement will remain in effect and the parties thereto will be obligated, subject to the terms and conditions of the Plan Sponsor Agreement, as amended, to consummate the HCRMC Transactions.

Completion of the HCRMC Transactions is subject to certain other conditions, including state licensing approvals, and the Plan Sponsor Agreement may be terminated under certain circumstances. See Part I, Item 1A. “Risk Factors—Risks Related to the HCRMC Transactions and the HCRMC Bankruptcy” and Note 14. “Subsequent Events” to the combined consolidated financial statements included in Part IV, Item 15 of our Annual Report for a more detailed discussion of the HCRMC Transactions.

The Welltower/ProMedica Transactions

On April 25, 2018, QCP entered into an agreement and plan of merger (the “Merger Agreement”) with Welltower Inc. (“Welltower”) and Potomac Acquisition LLC, a Delaware limited liability company and a subsidiary of Welltower, pursuant to which the parties agreed that, subject to the terms and conditions set forth in the Merger Agreement, Welltower would acquire all of QCP’s outstanding capital stock in an all-cash merger (the “Merger”). The Merger is expected to close in the third quarter of 2018.

In connection with the transactions contemplated by the Merger Agreement, on April 25, 2018, QCP also entered into an alternative plan sponsor agreement (the “Alternative PSA”) with HCRMC, ProMedica Health System, Inc. (“ProMedica Parent”), Suburban Healthco, Inc. (“ProMedica Purchaser” and, together with ProMedica Parent, “ProMedica”) and Meerkat I LLC, pursuant to which the parties agreed that, subject to the terms and conditions set forth in the Alternative PSA, ProMedica would acquire all of the newly issued common stock of HCRMC as part of an alternative plan of reorganization in connection with HCRMC’s ongoing bankruptcy proceeding.

If the Welltower/ProMedica transactions are consummated, the closing of the transactions contemplated by the Alternative PSA will immediately precede the closing of the Merger.

See Part I, Item 1A. “Risk Factors—Risks Related to the Merger and the Plan Transactions” and Note 1. “Business” to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report for a more detailed description of the Merger, the Alternative PSA and related agreements.

Ordering of Analysis

We discuss and provide our analysis in the following order:

Portfolio overview;

Results of operations;

HCRMC financial information;

Liquidity and capital resources;

Dividends;

Contractual obligations;

Off‑balance sheet arrangements;

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Inflation;

Non-GAAP financial measures;

Critical accounting policies; and

Recent accounting pronouncements.

PORTFOLIO OVERVIEW

As of ~~September~~March 3031, ~~2017~~2018, our portfolio consisted of 320 properties as follows (dollars in millions):

Operator	Property Type	Property Count	Operating Beds/Units(1)	~~Occupancy~~Net ~~%(1)~~Book Value		Q1 2018 EBITDAR(1)(2)		Occupancy %(1)
HCRMC	Post-acute/skilled	~~232~~160	3022,~~786~~100	~~81.6~~$	2,913	$	43	86.1
	Senior housing	6058	43,~~208~~774	~~80.4~~	607		15	77.7
Tandem Consulate Health Care	Post-acute/skilled	9	932	89.8
	Non-core properties	74	9,092		357		(3)	78.0
Covenant Care	Post-acute/skilled/Senior housing	12	1,261	73.1
Tandem/Consulate Health Care	Post-acute/skilled	9	932		40		3	90.8
Genesis HealthCare	Post-acute/skilled/Senior housing	5	477	68.9
Covenant Care	Post-acute/skilled/Senior housing	12	1,261		40		3	71.6
Remaining	Hospital/Medical office	2	37 Beds/88,000 Sq. Ft.	N/A
Genesis HealthCare	Post-acute/skilled/Senior housing	5	477		11		1	67.4
Total		320
Remaining	Surgical hospital/Medical office	2	37 Beds/88,000 Sq. Ft.		43		2	N/A
Total		320		$	4,011	$	64

(1)

Data was derived by us solely from information provided to us by the operators.

~~Master~~(2) ~~Lease~~Normalized ~~with~~earnings ~~HCRMC~~before ~~including~~interest, antaxes, ~~Event~~depreciation amortization and rent. Includes imputed management fee of ~~Default,~~4% ~~Lease~~on ~~Modifications~~post-acute/skilled and ~~Related~~senior ~~Impairments~~ housing and 2% on surgical hospital (included in “Remaining” category).

~~The Company derived 87% and 91% of its total revenues for the three and nine months ended September 30, 2017, respectively, from the 292 properties leased to HCRMC under the~~ Master Lease ~~and~~with ~~operated by~~ HCRMC ~~through HCR III. See “—HCRMC Financial Information” below for more information on HCRMC’s financial results.~~

~~During~~The ~~2015,~~Company wederived ~~and~~89% ~~HCRMC~~of ~~agreed~~its tototal ~~market~~revenues for ~~sale~~ the ~~real~~three ~~estate~~months ~~and~~ended ~~operations~~March ~~associated~~31, ~~with~~2018 50from ~~non‑strategic~~the 292 properties ~~that were~~ leased to ~~HCR~~HCRMC ~~III~~ under the Master Lease. ~~Pursuant~~and tooperated ~~the~~by ~~agreement,~~ HCRMC ~~received~~through anHCR ~~annual~~III. See ~~rent~~“—HCRMC ~~reduction~~Financial ~~under~~Information” ~~the~~below ~~Master~~for ~~Lease~~more ~~based~~information on ~~7.75%~~HCRMC’s offinancial ~~the net sales proceeds received by us~~results.

On ~~March~~December 2922, ~~2015~~2017, weQCP and ~~HCRMC~~certain ~~agreed~~of its subsidiaries entered into a Forbearance Agreement and Amendment to ~~amend~~Master Lease and Security Agreement (the “Agreement”) with HCR ManorCare. The Agreement amended the Master Lease to reduce monthly cash rent to $23.5 million (“~~HCRMC~~Reduced ~~Lease~~Cash ~~Amendment~~Rent”). ~~Commencing~~during ~~April~~a one-year rent reduction period beginning on November 130, ~~2015~~2017 and ending on November 30, we2018 ~~provided~~(the an“Rent ~~annual~~Reduction ~~net~~Period”). ~~rent~~Rent ~~reduction~~in excess of Reduced Cash Rent is deferred during the Rent Reduction Period and becomes immediately due and payable at the end of the Rent Reduction Period. HCR ManorCare paid $68 23.5 million of Reduced Cash Rent for December 2017, ~~which~~but ~~equated~~only to$9.5 ~~first~~million ~~year~~of ~~rent~~Reduced Cash Rent for January 2018.

26 On March 2, 2018, concurrent with the signing of the Plan Sponsor Agreement, HCR ManorCare made a rent payment to QCP of $23.5 million, which represents the $14 million and $9.5 million payments previously due on January 25 and February 10, 2018, respectively. HCR ManorCare did not make the $14 million rent payment due on February 25, 2018. HCR ManorCare paid $23.5 million of Reduced Cash Rent for each of March and April 2018. QCP also agreed in the Plan Sponsor Agreement to enter into an amendment to the Master Lease on the date of the consummation of the HCRMC Transactions (the “Master Lease Amendment”). Unless the Alternative PSA is

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under the amendment of $473 million, compared to the $541 million annual rent that would have commenced April 1, 2015, prior to the HCRMC Lease Amendment. The contractual rent increases by 3.0% annually during the initial term, commencing April 1, 2016. In exchange, we received the following consideration:

· A right to acquire fee ownership in nine post‑acute/skilled nursing properties valued at $275 million with a median age of four years, owned and operated by HCRMC. We retained a lease receivable of equal value, (the “Tranche A DRO”) earning income of $19 million annually (included in the amended initial lease year rent of $473 million above), which was reduced as the property purchases were completed. Following the purchase of a property, HCRMC leases such property from us pursuant to the Master Lease. The nine properties contribute an aggregate of $19 million of annual rent (subject to escalation) under the Master Lease;

· The Tranche B DRO with an initial principal amount of $250 million, is payable by HCRMC upon the earlier of: (i) March 31, 2029, which is the end of the initial term of the first renewal pool under the Master Lease; or (ii) certain capital or liquidity events of HCRMC, including an initial public offering or sale. The Tranche B DRO increases each year as follows: 3.0% in April 2016 through 2018, 4.0% in 2019, 5.0% in 2020 and 6.0% in 2021 and annually thereafter until the end of the initial lease term. As a result of the Event of Default under the Master Lease, payment of the Tranche B DRO currently outstanding is now due; and

· Extension of the initial lease term by five years, to an average of 16 years.

During 2015, 22 of the 50 non‑strategic property sales were completed for $218.8 million. As of December 31, 2015, the remaining 28 properties that had not yet been sold were classified as real estate and related assets held for sale. During 2015, we recognized an impairment charge of $47.1 million related to the anticipated sale of the 50 non‑strategic properties based on the projected sales price. During 2016, we completed an additional 21 of the 50 non‑strategic property sales and sold one additional HCRMC property, generating proceeds of $114.6 million, with the remaining seven properties classified as real estate and related assets held for sale as of December 31, 2016. The seven remaining non‑strategic properties were sold in the first quarter of 2017 for an aggregate amount of $19.3 million. During 2016, we recognized an additional impairment charge of $21.4 million related to the 18 properties held for sale as of September 30, 2016. We received all of the proceeds from the property sales.

Additionally, during the fourth quarter of 2016, the Company recognized an impairment charge of $145.7 million related to seven skilled nursing properties classified as held for use as a result of their expected future undiscounted cash flows being less than their carrying values due in large part to the continued financial deterioration of the post-acute/skilled nursing sector.

We acquired seven HCRMC properties during 2015 for $183.4 million, the proceeds of which were used to settle a portion of the Tranche A DRO. During 2016, we acquired two additional properties for $91.6 million. The aggregate $275 million purchase price proceeds for the nine properties were used to settle the Tranche A DRO in full. For additional information regarding the DRO, see “—Liquidity and Capital Resources—Deferred Rent Obligation.”

In February 2016, we acquired a new 64‑bed memory care property in Easton, Pennsylvania for $15.0 million, which opened in January 2016 and is located adjacent to one of our existing post‑acute properties. The property was developed by HCRMC and added to the Master Lease with a term of 16 years.

In November 2016, we provided to HCR III reductions of contractual rent due under the Master Lease as follows: a $5 million reduction for the month of November 2016, a $15 million reduction for the month of December 2016 and a $10 million reduction for the month of January 2017. HCR III paid in full the contractual rent due for the months of February 2017 and March 2017.

On April 5, 2017, the Company entered into a forbearance agreement (the "Agreement") with HCR III and HCRMC (together, "HCR ManorCare"). Among other things, the Agreement required HCR ManorCare to make cash rent payments of $32 million for each of April, May and June of 2017, with a deferral of payment of the additional $7.5 million per month otherwise due until the earlier of (i) July 5, 2017 and (ii) an early termination of the Agreement, with all deferred amounts becoming immediately due and payable upon an early termination. The Agreement also required HCR ManorCare to deliver its 2016 audited financial statements and auditor consent to QCP not later than April 10,

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~~2017~~terminated, ~~which were received on April 10, 2017 and included a "going concern" exception for HCR ManorCare in~~ the ~~auditor~~parties ~~opinion. During~~to the ~~term~~Plan ofSponsor ~~the~~ Agreement, ~~QCP~~will ~~also~~not ~~agreed~~be toobligated ~~provide HCR ManorCare with a temporary secured extension of credit of up~~ to $7consummate ~~million per month during each of April, May and June of 2017 (up to $21 million in~~ the ~~aggregate),~~HCRMC ~~which~~Transactions ~~would be due~~ and ~~payable~~QCP inwill ~~full~~ not ~~later~~enter ~~than~~into ~~December~~the Master ~~31,~~Lease ~~2017, subject to acceleration upon certain events~~Amendment.

QCP expects to continue to receive rent payments from HCR ManorCare ~~made~~during the ~~reduced~~Chapter ~~cash~~11 ~~rent~~period ~~payments~~in accordance with the provisions of ~~$32~~the ~~million~~Alternative ~~for~~PSA ~~each~~or, ofif ~~April~~the ~~and~~Alternative ~~May~~PSA is terminated, in accordance with the provisions of ~~2017~~the Plan Sponsor Agreement. While HCR ManorCare ~~borrowed~~continues $7to ~~million~~be ~~for~~in ~~April~~default ~~2017~~under the Master Lease, QCP agreed in the Plan Sponsor Agreement and the Alternative PSA to forbear from bringing suit or exercising certain remedies under the ~~temporary~~Master ~~secured~~Lease, ~~credit~~including ~~agreement~~with respect to the failure to pay rent and a related event of default, until the earlier of the completion of the transactions contemplated thereby or termination of the Plan Sponsor Agreement and the Alternative PSA, as applicable.

OnIf ~~June~~the 2,Alternative ~~2017,~~PSA ~~QCP~~is ~~received~~terminated ~~$15~~and ~~million~~we ~~from~~complete ~~HCR~~the ~~ManorCare~~HCRMC Transactions, ~~constituting~~the $8Master ~~million~~Lease ofAmendment ~~rent~~will ~~and~~provide, ~~repayment~~among ofother ~~the~~things, $7for ~~million~~deferral ~~secured~~of ~~loan~~rent ~~extended~~in ~~pursuant~~each month to the ~~Agreement,~~extent ~~rather~~that ~~than~~HCR ~~the~~III ~~full~~does ~~$32~~not ~~million~~generate insufficient ~~rent~~cash ~~required~~flow to bepay ~~paid~~the ~~for~~full ~~June~~amount ~~2017~~of ~~under~~rent ~~the~~due ~~terms~~for ofsuch ~~the Agreement~~month.

~~HCR~~The ~~ManorCare~~Company isincurred ~~currently required to pay approximately $39.5 million in monthly rent under the Master Lease. On July 7~~legal, ~~2017,~~advisory ~~QCP~~and ~~received~~diligence ~~approximately~~costs ~~$8.2~~related ~~million from HCR ManorCare. On July 7, 2017, QCP delivered a notice of default under the Master Lease relating~~ to ~~nonpayment~~its ofrestructuring ~~rent due~~ and ~~other~~workout ~~matters.~~discussions ~~The~~with ~~notice~~HCRMC ~~of default demanded payment of all current and past due rent,~~ totaling ~~approximately~~ $7910.64 million~~, by~~ ~~the end of the day on July 14, 2017. Such amount was not paid,~~ and ~~therefore, an Event of Default exists under the Master Lease, requiring the immediate payment of an additional approximately~~ $~~265~~3.2 million ofduring ~~Tranche B DRO and permitting~~ the ~~QCP~~three ~~lessors~~months toended ~~terminate~~March ~~the Master Lease~~31, ~~appoint~~2018 ~~receivers or exercise other remedies with respect to any~~ and ~~all leased properties. On August 3,~~ 2017, ~~QCP received approximately $23~~respectively.~~0 million in rent from HCR ManorCare.~~

OnRESULTS ~~August~~OF 17, 2017, QCP commenced an action in the Superior Court of the State of California for the County of Los Angeles (the “Court”) to appoint an independent receiver for its skilled nursing and assisted living/memory care facilities as contemplated by the Master Lease after an Event of Default by HCR ManorCare. The independent receiver would not be affiliated with either QCP or HCR ManorCare and would provide oversight and seek to preserve the value of the HCRMC Properties. QCP intends to work with the independent receiver, if appointed by the Court, to transition the HCRMC Properties to new owners and/or operators.OPERATIONS

OnThree ~~September~~Months ~~25,~~Ended ~~October~~March ~~19 and November 2~~31, ~~2017,~~2018 ~~QCP~~Compared ~~announced that it had agreed with HCR ManorCare~~ to ~~extend~~Three ~~the~~Months ~~deadline~~Ended ~~for~~March ~~HCR ManorCare's response to QCP's receivership complaint to October 18~~31, ~~November 1 and December 1,~~ 2017, respectively, in each case subject to Court approval (which was granted), to allow for the continuation of workout discussions, including with respect to the sale or re-leasing of any of the HCRMC Properties. HCR ManorCare continues to be in default under the Master Lease. HCR ManorCare has paid approximately $17.6 million and $21.0 million in rent for September and October 2017, respectively. Over $446 million in rent and other obligations continue to be immediately due and payable under the Master Lease.

AsResults offor ~~June 30, 2017, in connection with management’s belief that an Event of Default was imminent and~~ the ~~closing~~three ofmonths ~~our~~ended ~~fiscal~~March ~~quarter~~31, ~~the~~ ~~Company~~2018 ~~expected~~and to2017 ~~have the ability to sell or re-lease any HCRMC Property unencumbered by the Master Lease. This resulted~~ (in ~~a reduction in the expected holding period of certain properties, which resulted in impairment charges as discussed below.~~thousands):

During the three and nine months ended September 30, 2017, the Company recognized impairment charges of $9.9 million and $392.0 million, respectively, related to certain skilled nursing properties classified as held for use. The properties were determined to be impaired in connection with the closing of the respective quarter under the recoverability test because the carrying value of the respective properties exceeded the expected undiscounted cash flows over the estimated holding period for the respective properties, due to a reduction in the expected holding period for the properties and the continued financial deterioration of the post-acute/skilled nursing sector. The impairment charges are equal to the aggregate amount by which the carrying value of the respective properties exceeds the estimated fair value of the respective properties. If the post-acute/skilled nursing sector and, in particular, the operating results of HCRMC, continue to decline, our remaining properties may lose value and we may recognize additional impairments in the near term.


	Three Months Ended
	March 31,				Change
	2018		2017		$
Revenues:
Rental and related revenues	$	63,415	$	112,237	$	(48,822)
Tenant recoveries		10,879		10,548		331
Total revenues		74,294		122,785		(48,491)
Costs and expenses:
Depreciation and amortization		30,011		34,450		(4,439)
Operating		11,141		10,734		407
General and administrative		7,110		6,341		769
Restructuring costs		10,356		3,239		7,117
Interest		35,987		34,225		1,762
Impairments		2,898		—		2,898
Total costs and expenses		97,503		88,989		8,514
Other income:
Gain on sales of real estate		—		3,283		(3,283)
Other income, net		2,955		21		2,934
Total other income, net		2,955		3,304		(349)
(Loss) income before income taxes		(20,254)		37,100		(57,354)
Income tax expense		(153)		(281)		128
Net (loss) income and comprehensive (loss) income		(20,407)		36,819		(57,226)
Noncontrolling interests' share in earnings		(20)		(24)		4
Net (loss) income and comprehensive (loss) income attributable to the Company		(20,427)		36,795		(57,222)
Less: preferred share dividends		(60)		(111)		51
Net (loss) income and comprehensive (loss) income attributable to common shareholders	$	(20,487)	$	36,684	$	(57,171)

~~The~~Total ~~Company~~revenues. Total ~~incurred~~revenues ~~legal,~~decreased ~~advisory~~by ~~and diligence costs related to its restructuring and workout discussions with HCRMC totaling~~ $548.5 million ~~and~~to $1374.4 3 million ~~during~~for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2017,~~2018 ~~respectively.~~primarily ~~During~~due ~~the~~to ~~first~~a ~~quarter~~$52.0 million ofaggregate ~~2017,~~net ~~the~~reduction/deferral/underpayment ~~Company collected an impound deposit~~ of ~~$4.0~~rent ~~million~~due ~~from~~under ~~HCR~~the Master

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~~ManorCare~~Lease for ~~real~~the ~~estate~~2018 ~~taxes~~period. ~~and~~This ~~insurance~~decrease aswas partially offset by a ~~result~~net of$3.5 million ~~HCR~~increase ~~ManorCare~~primarily ~~not~~from ~~meeting~~rent ~~certain~~escalations ~~covenant~~under ~~requirements~~the Master Lease, ~~which~~net ~~amount~~of ~~was~~reductions ~~returned~~related into ~~connection~~the ~~with~~sale ~~entering~~of ~~into~~seven ~~the~~non‑strategic ~~Agreement~~properties during 2017.

~~Tenant~~Depreciation ~~Purchase~~and ~~Options~~amortization expense. Depreciation and amortization expense decreased by $4.4 million to $30.0 million for the three months ended March 31, 2018 primarily due to reductions related to lower depreciable bases of properties that were impaired during 2017 and depreciation and amortization being ceased on properties classified as held for sale during 2018.

OnRestructuring May 30, 2017, the Company and Tandem Health Care, LLC (“Tandem”), a tenant with an option to purchase the nine properties it leases from us at a favorable purchase price, entered into a lease amendment extending the option expiration date from May 31, 2017 to July 31, 2017 and increasing the purchase pricecosts. Restructuring Ifcosts ~~exercised,~~increased ~~the~~by ~~Company would forego approximately~~ $7.51 million ~~in annual rent in exchange for the approximate $81.7 million purchase price, which proceeds the Company would expect~~ to ~~use to repay outstanding debt. In connection with entering into the amendment, the Company collected a~~ $110.0 4 million ~~nonrefundable~~for ~~deposit from Tandem, which amount would be applied towards~~ the ~~purchase~~three ~~price~~months ~~upon~~ended ~~option~~March ~~exercise. On July~~ 31, ~~2017,~~2018 ~~Tandem~~primarily ~~exercised~~due ~~their~~to ~~purchase option, paying an~~ additional ~~$0.5 million nonrefundable deposit to be applied towards the purchase price~~legal, ~~with~~advisory ~~closing no later than October 4, 2017. On October 4, 2017, the Company~~ and ~~Tandem~~diligence ~~entered~~costs ~~into~~related ~~a lease amendment extending the closing date~~ to ~~potentially as late as January 4, 2018, subject to~~ the ~~receipt~~Company’s ofrestructuring ~~certain nonrefundable extension fees~~ and ~~deposits.~~workout Ondiscussions ~~October 5 and 23, 2017, Tandem paid a $1.0 million nonrefundable extension fee and a $1.0 million extension deposit, respectively, to extend the closing date to December 5, 2017,~~ with ~~the right to further extend the closing date to January 4, 2018 upon payment of an additional $1~~HCRMC.~~0 million nonrefundable extension fee by November 30, 2017.~~

~~RESULTS~~Interest OFExpense. Interest ~~OPERATIONS~~expense increased by $1.8 million to $36.0 million for the three months ended March 31, 2018 primarily related to higher interest rates on variable rate debt and additional indebtedness incurred during 2017.

~~Three~~Impairments. During ~~Months~~the ~~Ended~~three ~~September~~months 30ended March 31, ~~2017~~2018, ~~Compared~~we recorded an impairment charge of $2.9 million to ~~Three~~reduce ~~Months~~the ~~Ended~~carrying ~~September~~value ~~30,~~of ~~2016~~the non-core properties to fair value less costs to sell upon their classification as held for sale. There were no such impairments recorded during the corresponding 2017 period.

~~Results~~Gain ~~for~~on sales of real estate. During the three months ended ~~September~~March 3031, 2017, ~~and~~we ~~2016~~recognized ~~(in~~a ~~thousands):~~gain of $3.3 million from the sale of seven non‑strategic properties. There were no such sales during the 2018 period.

	Three Months Ended
	September 30,				Change
	2017		2016		$
Revenues:
Rental and related revenues	$	55,690	$	123,280	$	(67,590)
Tenant recoveries		310		387		(77)
Total revenues		56,000		123,667		(67,667)
Costs and expenses:
Depreciation and amortization		31,440		35,879		(4,439)
Operating		606		1,032		(426)
General and administrative		6,991		7,131		(140)
Restructuring costs		5,475		—		5,475
Interest		35,134		—		35,134
Impairments		9,910		21,145		(11,235)
Total costs and expenses		89,556		65,187		24,369
Other income:
Other income, net		277		213		64
Total other income, net		277		213		64
(Loss) income before income taxes		(33,279)		58,693		(91,972)
Income tax expense		(799)		(5,173)		4,374
Net (loss) income and comprehensive (loss) income		(34,078)		53,520		(87,598)
Noncontrolling interests' share in earnings		(20)		—		(20)
Net (loss) income and comprehensive (loss) income attributable to the Company		(34,098)		53,520		(87,618)
Less: preferred share dividends		(60)		—		(60)
Net (loss) income and comprehensive (loss) income attributable to common shareholders	$	(34,158)	$	53,520	$	(87,678)

Other income, net. Other income, net increased by $2.9 million to $3.0 million for the three months ended March 31, 2018 primarily due to the recognition of $2.5 million of nonrefundable deposits received from a tenant related to an expired purchase option during the 2018 period.

Total revenues. Total revenues decreased by $67.7 million to $56.0 million for the three months ended September 30, 2017 primarily due to a $69.6 million aggregate underpayment of rent due under the Master Lease for the

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2017 period. This decrease was partially offset by a net $1.9 million increase primarily from rent escalations under the Master Lease, net of reductions related to the sale of 28 non‑strategic properties and one additional property during 2017 and 2016.

Depreciation and amortization expense. Depreciation and amortization expense decreased by $4.4 million to $31.4 million for the three months ended September 30, 2017 primarily due to reductions related to lower depreciable bases of properties that were impaired during the fourth quarter of 2016 and the second quarter of 2017.

Restructuring costs. Restructuring costs of $5.5 million incurred during the three months ended September 30, 2017 consist primarily of legal, advisory and diligence costs related to the Company’s restructuring and workout discussions with HCRMC.

Interest. During the three months ended September 30, 2017, we incurred interest expense of $35.1 million primarily related to the indebtedness incurred in connection with the Spin-Off, which was completed on October 31, 2016. There was no debt outstanding during the three months ended September 30, 2016.

Impairments. During the three months ended September 30, 2017, we recognized an impairment charge of $9.9 million related to certain properties classified as held for use. During the three months ended September 30, 2016, we recognized an impairment charge of $21.1 million related to 18 properties classified as held for sale. The properties were determined to be impaired and the impairment charge is equal to the aggregate amount by which the carrying value of the respective properties exceeds the estimated fair value of the respective properties classified as held for use or the projected sales price less costs to sell of the respective properties classified as held for sale (see Note 4 to the combined consolidated financial statements included in Part I, Item 1 of this Quarterly Report).

Income tax expense. Income tax expense decreased by $4.4 million to $0.8 million for the three months ended September 30, 2017. The decrease is primarily the result of increasing deferred tax liabilities by $5.0 million, representing an adjustment to our estimated potential exposure to state built‑in gain tax from determining that we may sell assets during the next five years, during the three months ended September 30, 2016 (see Note 8 to the combined consolidated financial statements included in Part I, Item 1 of this Quarterly Report), with no such expense incurred during the 2017 period.

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Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Results for the nine months ended September 30, 2017 and 2016 (in thousands):

	Nine Months Ended
	September 30,				Change
	2017		2016		$
Revenues:
Rental and related revenues	$	246,876	$	366,455	$	(119,579)
Tenant recoveries		1,064		1,149		(85)
Total revenues		247,940		367,604		(119,664)
Costs and expenses:
Depreciation and amortization		100,300		129,870		(29,570)
Operating		2,139		3,056		(917)
General and administrative		20,486		16,359		4,127
Restructuring costs		13,358		—		13,358
Interest		104,799		—		104,799
Impairments		391,959		21,145		370,814
Total costs and expenses		633,041		170,430		462,611
Other income:
Gain on sales of real estate		3,283		6,460		(3,177)
Other income, net		402		255		147
Total other income, net		3,685		6,715		(3,030)
(Loss) income before income taxes		(381,416)		203,889		(585,305)
Income tax expense		(1,299)		(18,014)		16,715
Net (loss) income and comprehensive (loss) income		(382,715)		185,875		(568,590)
Noncontrolling interests' share in earnings		(61)		—		(61)
Net (loss) income and comprehensive (loss) income attributable to the Company		(382,776)		185,875		(568,651)
Less: preferred share dividends		(232)		—		(232)
Net (loss) income and comprehensive (loss) income attributable to common shareholders	$	(383,008)	$	185,875	$	(568,883)

Total revenues. Total revenues decreased by $119.7 million to $247.9 million for the nine months ended September 30, 2017 primarily due to a $126.2 million aggregate reduction/deferral/underpayment of rent due under the Master Lease for the 2017 period. This decrease was partially offset by a net $6.5 million increase primarily from rent escalations under the Master Lease, net of reductions related to the sale of 28 non‑strategic properties and one additional property during 2017 and 2016.

Depreciation and amortization expense. Depreciation and amortization expense decreased by $29.6 million to $100.3 million for the nine months ended September 30, 2017 primarily due to reductions related to depreciable assets with estimated useful lives of five years becoming fully depreciated in the first quarter of 2016 and reductions related to lower depreciable bases of properties that were impaired during the fourth quarter of 2016 and the second quarter of 2017.

General and administrative expenses. General and administrative expenses increased by $4.1 million to $20.5 million for the nine months ended September 30, 2017 primarily due to additional compensation-related and other costs being incurred by the Company on a stand-alone basis after the Spin-Off.

Restructuring costs. Restructuring costs of $13.4 million incurred during the nine months ended September 30, 2017 consist primarily of legal, advisory and diligence costs related to the Company’s restructuring and workout discussions with HCRMC.

Interest. During the nine months ended September 30, 2017, we incurred interest expense of $104.8 million primarily related to the indebtedness incurred in connection with the Spin-Off, which was completed on October 31, 2016. There was no debt outstanding during the nine months ended September 30, 2016.

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Impairments. During the nine months ended September 30, 2017, we recognized impairment charges totaling $392.0 million related to certain properties classified as held for use. During the nine months ended September 30, 2016, we recognized an impairment charge of $21.1 million related to 18 properties classified as held for sale. The properties were determined to be impaired and the impairment charge for each period is equal to the aggregate amount by which the carrying value of the respective properties exceeds the estimated fair value of the respective properties classified as held for use or the projected sales price less costs to sell of the respective properties classified as held for sale (see Note 4 to the combined consolidated financial statements included in Part I, Item 1 of this Quarterly Report).

Gain on sales of real estate. During the nine months ended September 30, 2017, we recognized a gain of $3.3 million from the sale of seven non‑strategic properties. During the nine months ended September 30, 2016, we recognized a gain of $6.5 million from the sale of 11 non-strategic properties.

Income tax expense. Income tax expense decreased by $16.7 million to $1.3 million for the nine months ended September 30, 2017. The decrease is primarily the result of recognizing deferred tax liabilities of $17.4 million, representing our estimated potential exposure to state built‑in gain tax from determining that we may sell assets during the next five years, during the nine months ended September 30, 2016 (see Note 8 to the combined consolidated financial statements included in Part I, Item 1 of this Quarterly Report), with no such expense incurred during the 2017 period.

HCRMC FINANCIAL INFORMATION

HCRMC is our principal operator and lessee, representing approximately 8789% ~~and 91%~~ of our total revenues for the three ~~and nine~~ months ended ~~September~~ ~~30,~~March ~~2017~~31, ~~respectively~~2018. HCRMC, along with other post-acute/skilled nursing operators, has been and continues to be adversely impacted by a challenging operating environment in the post-acute/skilled nursing sector, which has put downward pressure on revenues and operating income. Ongoing trends in the post-acute/skilled nursing sector include, but are not limited to the following:

A shift away from a traditional fee for service model towards new managed care models, which base reimbursement on patient outcome measures;

Increased penetration of Medicare Advantage plans (i.e., managed Medicare), which has reduced reimbursement rates, average length of stay and average daily census, particularly for higher acuity patients;

· Increased competition from alternative healthcare services such as home health agencies, life care at home, community -based service programs, senior housing, retirement communities and convalescent centers;

Increased regulatory scrutiny on government reimbursements; and

· ~~Increased~~Wage ~~wage~~ pressure ~~from~~above ~~tightening~~reimbursement ~~labor~~rate ~~markets~~growth.

In addition to the industry trends, HCRMC’s recent performance has been impacted by, ~~among other things,~~ the following:

· HCRMC’s exit from 50 non-strategic properties;

Certain costs and expenses related to HCRMC’s restructuring initiatives; and

· In April 2015, the U.S. Department of Justice (“DOJ”) filed a civil complaint against HCRMC for alleged false claims related to Medicare reimbursement. ~~HCRMC~~On ~~continues~~November to27, ~~defend~~2017, ~~against~~the Court granted the ~~complaint~~United ~~and~~States’ ismotion ~~incurring~~to dismiss the case with prejudice. HCRMC incurred associated legal and regulatory defense costs, which were approximately $1115 million, ~~and~~ $911 million ~~for 2016~~ and ~~2015, respectively, and approximately~~ $139 million for ~~the nine months ended September 30~~2017, ~~2017.~~2016 ~~See Note 7. “Commitments~~ and ~~Contingencies—Legal Proceedings related to HCRMC” and Note 11. “Subsequent Events—Legal Proceedings related to HCRMC” to the combined consolidated financial statements included in Part I~~2015, ~~Item 1 of this Quarterly Report.~~

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~~Due~~respectively. toSee ~~the~~Note ~~above-described~~10. ~~factors,~~“Commitments ~~among~~and ~~others,~~Contingencies—Legal ~~HCRMC’s~~Proceedings ~~performance~~related ~~continued~~ to ~~deteriorate~~HCRMC” into ~~2015, 2016 and 2017, despite~~ the ~~amendment~~combined ~~reducing~~consolidated ~~annual rent due under the Master Lease effective April 2015 and subsequent rent relief and forbearance. As a result of the continued~~ financial ~~deterioration~~statements ~~and~~included ~~nonpayment~~in ofPart ~~total rent obligations due~~IV, on ~~July~~Item 7,15 ~~2017, we delivered to HCRMC a notice~~ of ~~default~~ ~~under~~ the ~~Master~~Annual ~~Lease (see “—Portfolio Overview” above for more information)~~Report.

Due to the above-described factors, among others, HCRMC’s performance continued to deteriorate in 2015, 2016, 2017 and 2018, despite the amendment reducing annual rent due under the Master Lease effective April 2015 and subsequent rent relief and forbearance.

HCRMC’s continued financial deterioration has resulted in eroded operating margins and lease and fixed charge coverages, as indicated below (all HCRMC data was provided to us by HCRMC or derived by us solely from information provided to us by HCRMC):

· On a trailing 12-month basis, normalized earnings before interest, taxes, depreciation, amortization and rent (“EBITDAR”) has declined from $~~427~~373.08 million for the period ended ~~June~~December 3031, 2017 to $~~390~~346.27 million for the period ended ~~September~~March 3031, ~~2017~~2018.

· On a trailing 12-month basis, normalized fixed charge coverage (“FCC”) has declined from 0.~~87x~~73x for the period ended ~~June~~December 3031, 2017 to 0.~~80x~~66x for the period ended ~~September~~March 3031, ~~2017~~2018.

· On a trailing 12-month basis, facility (excluding corporate items and non-QCP properties) cash flow coverage (“CFC”) has declined from 0.~~76x~~61x for the period ended ~~June~~December 3031, 2017 to 0.~~69x~~54x for the period ended ~~September~~March 3031, ~~2017~~2018, net of the impact of the sale of negatively performing non-strategic properties.

· ~~Operating~~HCR ~~results~~ManorCare ~~for~~has ~~2017~~provided ~~are~~forecast ~~trending~~information ~~significantly~~to ~~downward~~QCP ~~when~~that ~~compared~~indicates toHCR ~~the~~ManorCare ~~historical~~expects operating results ~~for~~to ~~2016~~continue to trend significantly downward in 2018.

· The report of HCRMC’s independent auditors in its year-end ~~2016~~2017 financial statements included in the Annual Report includes a “going concern” exception, which indicates substantial doubt about HCRMC’s ability to continue as a going concern, resulting from recurring losses ~~and~~from ~~negative working capital. In July 2017~~operations, ~~HCRMC~~non-compliance ~~indicated~~with ~~that~~the ~~they~~terms ~~financed~~of ~~debt~~the ~~that~~Master ~~was~~Lease, inand ~~default~~uncertainty ~~with~~regarding athe ~~new~~ability ~~facility.~~to Asrepay ofor ~~September~~refinance ~~30,~~its ~~2017,~~credit agreement. HCRMC had $550 million of outstanding indebtedness under ~~their~~the ~~new~~Centerbridge ~~facility~~Facility ~~that~~as ~~matures~~of inMarch ~~July~~31, 2018.

For a more detailed description of risks we are subject to due to our dependence on HCRMC, including adverse business and financial conditions and developments, see Part I, Item 1A. “Risk Factors—Risks Related to Our Business” in the Annual Report.

The following tables summarize HCRMC’s reported consolidated financial information (in millions)(1):

	September 30,		December 31,
	March 31,		December 31,
	2017		2016
	2018		2017
Real estate and other property, net	$	21,~~465~~885.94	$	2,~~534~~441.65
Cash and cash equivalents		177.5		130.6
Assets held for sale, less allowance for losses		410.1		3.7
Goodwill, intangible and other assets, net		1,640.4		1,602.3
Cash and cash equivalents		164.7		163.4
Total assets	$	4,283.8	$	4,267.5
Goodwill, intangible and other assets, net		1,638.0		1,655.6
Debt and financing obligations	$	5,958.0	$	5,726.3
Total assets	$	4,098.2	$	4,264.2
Accounts payable, accrued liabilities and other		1,137.7		1,170.1
Debt and financing obligations	$	5,611.4	$	6,001.3
Accounts payable, accrued liabilities and other		1,559.6		1,116.5
Redeemable preferred stock		2.1		2.1
Total deficit		(23,~~814~~074.09)		(2,~~631~~855.07)
Total liabilities and equity	$	4,~~283~~098.82	$	4,~~267~~264.52

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	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2017		2016		2017		2016
	2018		2017
Revenues	$	~~925~~934.20	$	~~951~~949.43	$	~~2,809.9~~	$	~~2,893.6~~
Operating, general and administrative expense		(~~846~~857.79)		(~~838~~850.81)		~~(2,537.7)~~		~~(2,527.4)~~
Depreciation and amortization expense		(32.49)		(32.50)		~~(96.6)~~		~~(97.6)~~
Interest expense		(~~123~~132.23)		(~~114~~112.85)		~~(349.9)~~		~~(345.0)~~
Other income, net		30.14		5.4.1		~~10.0~~		~~13.7~~
Loss on debt extinguishment		(4.4)		—		(4.4)		—
Loss on disposal of assets(2)		(126.6)		(1.3)
Loss on disposal of assets		(0.2)		(10.0)		(2.3)		(12.6)
Loss before income tax benefit		(215.3)		(42.5)
Impairment		(14.8)		—		(14.8)		(6.0)
Income tax benefit		1.2		1.1
Loss from continuing operations before income tax benefit		(93.4)		(39.3)		(185.8)		(81.3)
Net loss	$	(214.1)	$	(41.4)
Income tax (expense) benefit		(0.8)		0.6		3.2		8.8
Loss from continuing operations		(94.2)		(38.7)		(182.6)		(72.5)
Loss from discontinued operations, net of taxes		—		—		(0.1)		—
Net loss	$	(94.2)	$	(38.7)	$	(182.7)	$	(72.5)

(1)

All data was provided to us by HCRMC or derived by us solely from information provided to us by HCRMC.

(2)

Primarily relates to the write-down of the non-core properties by HCRMC during the three months ended March 31, 2018.

The following table summarizes HCRMC’s reported operating results on a trailing 12-month basis (in millions)(1):

	Trailing 12 Months Ended
	September 30,		June 30,
	March 31,		December 31,
	2017		2017
	2018		2017
HCRMC Results of Operations
Revenues	$	3,~~759~~725.08	$	3,~~785~~741.2
Operating and general and administrative expenses		(3,~~384~~391.96)		(3,~~376~~383.98)
Depreciation and amortization expense		(~~128~~129.56)		(128.8)
Asset impairment(2)		(1,956.2)		(1,941.4)
Impairment		(14.8)		(14.8)
(Loss) income before other (expenses) income and income taxes		(1,710.6)		(1,661.9)
Income (loss) before other (expenses) income and income taxes		189.8		213.8
Interest expense		(~~463~~505.57)		(~~455~~486.10)
Gain (loss) on disposal of assets		1.5		(8.4)
Loss on debt extinguishment		(4.4)		(4.4)
Equity in earnings, interest income and other		12.8		15.4
Loss on disposal of assets		(129.6)		(4.3)
Loss from continuing operations before income taxes		(2,159.8)		(2,110.0)
Equity in earnings, interest income and other		9.1		13.0
Income tax expense		(1,109.1)		(1,105.1)
Loss from continuing operations before income taxes		(440.8)		(267.9)
Loss from continuing operations		(3,268.9)		(3,215.1)
Income tax benefit (expense)		45.8		45.7
Loss from continuing operations		(395.0)		(222.2)
Loss from discontinued operations:
Facility EBITDARM		—		(0.1)
Other loss, net of taxes		—		(0.1)
Other income, net of taxes		—		—
Loss from discontinued operations		—		(0.1)
Net loss	$	(~~3,268~~395.90)	$	(~~3,215~~222.23)
EBITDAR and FCC Calculation
Revenues	$	3,~~759~~725.08	$	3,~~785~~741.2
Operating and general and administrative expenses		(3,~~384~~391.96)		(3,~~376~~383.98)
Impairment		(14.8)		—(14.8)
Equity in earnings, interest income and other		129.81		1513.40
Facility EBITDARM from discontinued operations		—		(0.1)
Other adjustments		3.4		3.4
Other adjustments		3.3		3.4
EBITDAR		331.9		359.0
EBITDAR		375.4		427.0
Normalizing adjustments(2)		14.8		14.8
Normalizing adjustments(3)		14.8		—
Normalized EBITDAR(3)	$	346.7	$	373.8
Normalized EBITDAR	$	390.2	$	427.0
Fixed charges:
Cash rent(4)	$	~~468~~474.80	$	~~467~~470.09
Interest expense - term loan and other		1952.63		2338.07
Total fixed charges	$	~~488~~526.43	$	~~490~~509.06
As Reported FCC(5)		0.~~77x~~63x		0.~~87x~~70x
Normalized FCC(5)		0.~~80x~~66x		0.~~87x~~73x
Facility Level Coverage
Facility EBITDAR(6)	$	256.4	$	279.8
Facility CFC(7)		0.54x		0.61x

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Facility Level Coverage
Facility EBITDAR(6)	$	299.7	$	327.9
Facility CFC(7)		0.69x		0.76x

(1)

Results include revenues and expenses related to all businesses managed by HCRMC including (i) Facility EBITDARM (EBITDAR before management fees) for communities owned by the Company, (ii) home health care, hospice and rehabilitation services and (iii) general and administrative, depreciation, interest and income tax expenses. All data was provided to us by HCRMC or derived by us solely from information provided to us by HCRMC.

(2) ~~Primarily~~Relates ~~relates~~ to ~~the~~a non-cash impairment charges that are excluded for the purposes of ~~goodwill~~calculating normalized FCC.

(3) ~~Relates~~Includes tonormalized aEBITDAR for the non-~~cash~~core ~~impairment~~properties ~~charge~~of ~~that~~($6.8) ismillion ~~excluded~~and ($2.7) million for the ~~purposes~~trailing of12 ~~calculating~~months ~~normalized~~ended ~~FCC~~March 31, 2018 and December 31, 2017, respectively.

(4) Cash rent for purposes of calculating the coverage ratios is not reduced by the $6962.60 million aggregate rent deferral/underpayment for ~~July~~January, ~~August~~February and ~~September~~March ~~2017~~2018, the $4655.50 million aggregate rent deferral/underpayment for ~~April~~October, ~~May~~November and ~~June~~December 2017, the $1069.6 million aggregate rent ~~reduction~~underpayment for ~~January 2017~~July, August and September 2017, the $2046.5 million aggregate rent ~~reduction~~deferral for ~~November~~April, May and ~~December~~June ~~2016~~2017, and the $10 million rent reduction for January 2017.

(5) Represents EBITDAR (as reported FCC) or normalized EBITDAR (normalized FCC) divided by total fixed charges. EBITDAR for the trailing 12 months ended ~~September~~March 3031, ~~2017~~2018 and ~~June~~December 3031, 2017 includes ~~losses~~income of $91.37 million and loss of $150.59 million, respectively, related to the 50 non-strategic assets sold.

(6)

Includes an imputed management fee of 4%.

(7) For purposes of calculating Facility CFC, cash rent is not reduced by the $62.0 million aggregate rent deferral/underpayment for January, February and March 2018, the $55.0 million aggregate rent deferral/underpayment for October, November and December 2017, the $69.6 million aggregate rent underpayment for July, August and September 2017, and the $46.5 million aggregate rent deferral for April, May and June 2017, but is reduced by the $10 million rent reduction for January 2017 ~~and the $20 million aggregate rent reduction for November and December 2016~~.

LIQUIDITY AND CAPITAL RESOURCES

WeOur consolidated financial statements included in Part I, Item 1 of this Quarterly Report have been presented on the basis that we would continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. See “—Going Concern Assessment” above for additional details on management’s liquidity plans and Part I, Item 1A. “Risk Factors—Risks Related to Our Business—Our ability to continue as a “going concern” contemplates the realization of assets and satisfaction of liabilities in the normal course of business, including the effective implementation and success of management’s plan to mitigate the conditions that raise substantial doubt about our ability to continue as a going concern” in our Annual Report for risks related to management’s going concern assessment. Subject to our ability to implement our liquidity plan described under “—Going Concern Assessment,” we anticipate: (i) funding recurring operating expenses, (ii) meeting debt service requirements, including principal payments and maturities and (iii) satisfying our distributions to our stockholders, as required for us to qualify as a REIT, for the next 12 months primarily by using cash flow from operations, available cash balances and borrowings under the senior secured revolving credit facility (see “—Debt” below for details on the facilities). In addition, we may elect to meet certain liquidity requirements through proceeds from the sale of assets or from borrowings and/or equity and debt offerings.

These expectations are forward‑looking and subject to a number of uncertainties and assumptions, which are described under Part I, Item 1A. “Risk Factors” in the Annual Report. If our expectations about our liquidity ~~prove~~are tonot ~~be incorrect~~achieved, we could be subject to a shortfall in liquidity in the future, and this shortfall may occur rapidly and with little or no notice, which would limit our ability to address the shortfall on a timely basis.

Cash Flow Summary

The following summary discussion of our cash flows is based on the ~~combined~~ consolidated statements of cash flows and is not meant to be an all‑inclusive discussion of the changes in our cash flows for the periods presented below.

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Cash, ~~and~~ cash equivalents and restricted cash were $~~312~~352.03 million and $~~126~~325.26 million at ~~September 30~~March 31, ~~2017~~2018 and December 31, ~~2016~~2017, respectively, representing an increase of $~~185~~26.87 million. The following table sets forth changes in our cash flows (in thousands):

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2017		2016		Change
	2018		2017		Change
Net cash provided by operating activities	$	~~122~~29,~~980~~838	$	~~440~~76,~~677~~255	$	(~~317~~46,~~697~~417)
Net cash provided by (used in) investing activities	$	20,574	$	(30,966)	$	51,540
Net cash (used in) provided by investing activities	$	(15)	$	19,221	$	(19,236)
Net cash provided by (used in) financing activities	$	42,230	$	(412,242)	$	454,472
Net cash used in financing activities	$	(3,159)	$	(2,575)	$	(584)

Net cash ~~provided~~from by operating activities decreased by $~~317~~46.74 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 compared to the same period in ~~2016~~2017. The decrease was primarily the result of the following: (i) ~~$91.6 million of cash received from the settlement of~~ a ~~portion of the Tranche A DRO in the 2016 period, (ii) a~~ $~~126~~52.20 million aggregate net reduction/deferral/underpayment of rent paid under the Master Lease in the ~~2017~~2018 period, (~~iii~~ii) a $165.7 million increase in ~~income~~restructuring ~~taxes~~costs paid, and (iviii) a $832.60 million ofincrease in interest paid. This increase was partially offset by a $16.6 million decrease in ~~the~~income ~~2017~~taxes ~~period~~paid.

Net cash ~~provided~~from ~~by (used in)~~ investing activities ~~increased~~decreased by $5119.52 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 compared to the same period in ~~2016~~2017. The ~~increase~~decrease was primarily the result of $~~106~~19.~~6 million~~3 from (i) the purchase of two HCRMC Properties during 2016 (the proceeds of which were used by HCRMC to settle a portion of the Tranche A DRO described above) and (ii) the investment in a memory care property in 2016. This increase was partially offset by the following: (i) a $41.5 million ~~decrease~~ in proceeds received from the sale of properties in the 2017 period, ~~compared~~with tono ~~the~~corresponding ~~2016~~sales ~~period~~proceeds ~~and~~received ~~(ii) a decrease~~ in ~~restricted cash of $14.5 million recognized during~~ the ~~2016~~2018 period.

Net cash ~~provided~~from ~~by (used in)~~ financing activities ~~increased~~ decreased by $~~454~~0.5 6 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2017~~2018 compared to the same period in ~~2016~~2017. The ~~increase~~decrease was primarily due to ~~the following: (i)~~ a $~~413~~0.46 million ~~decrease~~repurchase inof ~~net~~cancelled ~~distributions~~shares ~~to parent (none~~ in the ~~2017~~2018 period ~~since after the October 31, 2016 Spin-Off date) and~~ (~~ii)~~no ~~$50.0~~such ~~million~~repurchase in ~~proceeds from issuance of debt received during~~ the 2017 period). ~~This increase was partially offset by $7.5 million in repayments of debt in the 2017 period.~~

Deferred Rent Obligation

In addition to the fixed annual rent under the Master Lease, in 2015 we received a DRO from HCR III equal to an aggregate amount of $525 million, which was allocated into two tranches: (i) a Tranche A DRO of $275 million and (ii) a Tranche B DRO of $250 million. HCR III made rental payments on Tranche A equal to 6.9% of the outstanding amount (representing $19 million) for the initial lease year until the entire Tranche A DRO was paid in full in March 2016 in connection with the nine aggregate property purchases. We recognized the 6.9% Tranche A rental payments in rental and related revenues when earned and included the Tranche A DRO in our calculation of straight‑line rent. As properties were acquired from HCRMC, the straight‑line rent calculation was adjusted to reflect the corresponding partial settlement of the Tranche A DRO. Commencing on April 1, 2016, until the Tranche B DRO is paid in full, the outstanding principal balance of the Tranche B DRO will be increased annually by (i) 3.0% initially, (ii) 4.0% commencing on April 1, 2019, (iii) 5.0% commencing on April 1, 2020, and (iv) 6.0% commencing on April 1, 2021 and annually for the remainder of its term. The Tranche B DRO is due and payable on the earlier of (i) certain capital or liquidity events of HCRMC, including an initial public offering or sale, or (ii) March 31, 2029, which is not subject to any extensions. ~~See~~On July 14, 2017, an event of default under the Master Lease caused the Tranche B DRO to become immediately due and payable (see “—Portfolio Overview” ~~for~~included ain ~~discussion~~Part ofII, ~~the~~Item ~~impact~~7. “Management’s Discussion and Analysis of ~~the~~Financial ~~Event~~Condition and Results of ~~Default~~Operations” onin our Annual Report for a more detailed discussion of the ~~Tranche~~event Bof ~~DRO~~default). The HCRMC ~~Lease~~lease ~~Amendment~~amendment effective April 1, 2015 also imposes certain restrictions on HCR III and HCRMC until the Tranche B DRO is paid in full, including with respect to the payment of dividends and the transfer of interest in HCRMC. The outstanding principal balance of the Tranche B DRO was $265.2 million as of ~~September~~ 30March 31, ~~2017~~2018. The Tranche B DRO is being accounted for as a minimum lease rental payment and was initially included in our straight‑line rent calculation. The annual escalations of the principal balance are considered variable lease rental payments, as the Tranche B DRO is prepayable at the option of HCRMC, and as such, are not included in our straight‑line rent calculation. As a result of placing the Master Lease on nonaccrual status, we further evaluated the carrying amount of our straight-line rent receivables and determined that it was impaired at December 31, 2015 (see Note 3. “Operating Leases” to the combined consolidated financial statements included in Part IIV, Item 115 of ~~this~~our ~~Quarterly~~Annual Report for a more detailed discussion).

36Upon completion of the transactions contemplated by the Alternative PSA, an agreed deferred rent obligation owed to QCP in the amount of approximately $440 million will be paid in full and the balance of QCP’s claims against HCRMC will be waived and released. If the Alternative PSA is terminated and instead the HCRMC Transactions are consummated, the Tranche B DRO, any accrued but unpaid rent under the Master Lease and any other claims of QCP and its subsidiaries against HCRMC will be discharged in accordance with the Plan Sponsor Agreement.

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If the Alternative PSA is terminated and we complete the HCRMC Transactions, the Master Lease Amendment will provide, among other things, for deferral of rent in each month to the extent that HCR III does not generate sufficient cash flow to pay the full amount of rent due for such month. See Part I, Item 1A. “Risk Factors—Risks Related to the HCRMC Transactions and the HCRMC Bankruptcy” and Note 14. “Subsequent Events” to the combined consolidated financial statements included in Part IV, Item 15 of our Annual Report for a more detailed discussion of the HCRMC Transactions.

Debt

Overview

InAfter ~~connection~~the ~~with~~consummation of the Spin-‑Off and related transactions, we ~~transferred~~are ~~approximately~~highly $1levered.~~7 billion~~ inAs ~~cash to HCP (together with our common stock) in exchange for the transfer to us~~ of ~~the~~March ~~equity~~31, of2018, ~~the~~we ~~entities~~had ~~that~~outstanding ~~hold the QCP Business,~~ approximately $601.8 ~~million~~billion offace ~~which~~value ~~was~~of ~~used~~aggregate toindebtedness. ~~pay~~Our ~~fees,~~total ~~costs~~debt ~~and~~is ~~expenses~~comprised ~~incurred in~~of ~~connection with~~ the ~~Spin-Off~~senior ~~transaction.~~secured ~~The~~notes, ~~cash~~the ~~requirements~~senior ofsecured ~~the~~term ~~Spin‑Off~~loan ~~were~~and ~~financed~~any ~~through~~outstanding ~~our~~ borrowings ~~pursuant~~under to the senior secured ~~term~~revolving ~~loan~~credit ~~and~~facility. ~~the~~Our ~~sale~~liquidity ofrequirements ~~the~~are ~~senior~~significant, ~~secured~~primarily ~~notes~~due to debt service requirements.

~~After~~Debt ~~the~~as ~~consummation~~ of ~~the~~March ~~Spin‑Off and related transactions~~31, we2018 ~~are~~consisted ~~highly levered. As~~ of ~~September 30, 2017, we had outstanding approximately $1.8 billion face value of aggregate indebtedness. Our total debt is comprised of~~ the ~~senior~~following ~~secured~~(in notes, the senior secured term loan and any outstanding borrowings under the senior secured revolving credit facility. Our liquidity requirements are significant, primarily due to debt service requirements.thousands):

Debt as of September 30, 2017 consisted of the following (in thousands):


			Principal		Net
	Interest	Maturity	Balance		Balance
Debt	Rate	Date	Outstanding		Outstanding(3)
Senior secured revolving credit facility(1)	Floating	October 31, 2021	$	75,000	$	75,000
Senior secured term loan(2)	Floating	October 31, 2022		987,500		952,901
Senior secured notes	8.125%	November 1, 2023		750,000		734,122
Total			$	1,812,500	$	1,762,023

			Principal		Net
	Interest	Maturity	Balance		Balance
Debt	Rate	Date	Outstanding		Outstanding(3)
Senior secured revolving credit facility(1)	Floating	October 31, 2021	$	75,000	$	75,000
Senior secured term loan(2)	Floating	October 31, 2022		992,500		954,659
Senior secured notes	8.125%	November 1, 2023		750,000		732,702
Total			$	1,817,500	$	1,762,361

(1)

The interest rate was 6.90% as of March 31, 2018. Remaining availability under the facility was $25.0 million as of March 31, 2018.

(12) The interest rate was 6.4990% as of ~~September~~March 3031, ~~2017~~2018. ~~Remaining availability under the facility was $25.0 million as of September 30, 2017.~~

(2) The interest rate was 6.49% as of September 30, 2017.

(3)

Net of discounts and deferred financing costs, except those related to the revolving credit facility.

Covenants

Our secured debt agreements contain certain customary affirmative covenants, including furnishing audited annual financial statements without a “going concern” or like qualification or exception in the audit report of our independent registered public accounting firm and maintaining a minimum debt service coverage ratio, ~~(discussed~~and ~~below),~~events of default. The negative covenants in the debt agreements include, ~~including~~among other things, limitations (none of which are absolute) on ~~the~~our ~~incurrence~~ability ofto: incur additional debt, ~~issuance~~or ofissue certain preferred shares; create liens on certain assets; make certain loans or investments (including acquisitions); pay dividends on or make distributions in respect of our capital stock or make other restricted payments; consolidate, ~~payment~~merge, sell or otherwise dispose of all or substantially all of our assets; sell assets; enter into certain transactions with our affiliates; change our lines of business; restrict dividends ~~and~~from ~~sale~~our subsidiaries or restrict certain liens that secure our obligations under our secured debt agreements; prepay certain junior lien debt or material unsecured debt; modify the terms of ~~properties,~~certain debt or organizational agreements; and ~~events~~make ofany ~~default.~~amendment Asor waiver to, or replacement or termination of, ~~September~~the 30Master Lease or certain other material leases (including amendments, ~~2017~~waivers, ~~management~~replacements ~~believes~~or terminations that would be materially adverse to the ~~Company~~lenders; isprovided that neither dispositions and investments otherwise permitted under the credit agreement, nor any rent reductions in ~~compliance~~connection with ~~all~~the ~~debt~~Master ~~covenants~~Lease, ~~current~~shall onbe ~~all~~considered ~~loan~~"materially ~~payments~~adverse" ~~and~~for ~~not~~purposes ~~otherwise~~of inthe ~~default~~covenant). ~~under~~Additionally, ~~its~~our debt agreements include restrictions with regard to the net cash proceeds from the sale of a property, excluding the original 50 non-strategic properties under the Master Lease, whereby the proceeds must be used to repay debt, fund a capital expenditure or invest in a replacement property within 365 days of receipt, along with many other restrictive provisions.

~~Our~~The ~~senior~~events ~~secured term loan requires our debt service coverage ratio (“DSCR”), as defined in the term loan as the ratio~~ of ~~Specified~~default ~~EBITDA (as defined~~ in the ~~term~~secured ~~loan as principally HCRMC’s Tenant EBITDAR) to consolidated~~ debt ~~service~~agreements ~~charges~~include (aswith ~~defined~~customary inthresholds ~~the~~and ~~term~~grace ~~loan~~periods), tonon-payment beof ~~not~~principal, ~~less~~interest ~~than~~or ~~1.75~~other toamounts 1due asthereunder; ofin the ~~last~~case ~~day~~ of ~~any~~our ~~four-quarter~~senior ~~period.~~secured ~~The~~credit ~~DSCR at March 31~~facilities, ~~June~~a 30“going ~~and~~concern” ~~September~~or ~~30,~~like ~~2017~~qualification ~~was~~or ~~2.27x, 2.17x~~exception ~~and 1.93x, respectively. Upon a Material Amendment (as defined~~ in the ~~term~~independent ~~loan)~~auditors’ ofopinion ~~the~~within ~~Master~~their ~~Lease,~~report accompanying our ~~DSCR~~annual ~~covenant~~financial ~~will~~statements; beviolation ~~measured~~of oncovenants; ~~QCP’s~~material ~~Consolidated~~inaccuracy ~~EBITDA~~of ~~(as~~a ~~defined~~representation inor ~~the~~warranty ~~term~~when ~~loan) and~~made ~~will no longer be directly tied to HCRMC’s Tenant EBITDAR.~~

~~The Company may elect to use a portion of its cash on hand ($312.0 million as of September 30, 2017) to repay a portion of its outstanding indebtedness as a means to improve the DSCR coverage.~~34

Equity

Prior to the Spin-Off, the financial statements were carved out from HCP’s books and records; thus, there was no separate capital structure and the net assets were reflected as net parent investment in the combined consolidated financial statements. Upon becoming a separate company on October 31, 2016, our ownership is now classified under the typical stockholders’ equity classifications of common stock, capital in excess of par value and accumulated deficit in the combined consolidated financial statements.

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or deemed made; cross-default (after the expiration of any grace period) and cross-acceleration to material recourse indebtedness; bankruptcy events with respect to us or any of our material subsidiaries; general inability to pay debts; certain Employee Retirement Income Security Act of 1974 (“ERISA”) events; unpaid, uninsured final monetary judgments or non-monetary judgements that have not been discharged; invalidity of a material portion of the guarantees or of liens on a material portion of the collateral; and a change of control.

As of March 31, 2018, management believes the Company is in compliance with all debt covenants, current on all loan payments and not otherwise in default under its debt agreements.

Our senior secured term loan requires our debt service coverage ratio (“DSCR”), as defined in the senior secured term loan as the ratio of Specified EBITDA (as defined in the senior secured term loan as principally HCRMC’s Tenant EBITDAR) to consolidated debt service charges (as defined in the senior secured term loan), to be not less than 1.75 to 1 as of the last day of any four-quarter period. The DSCR at March 31, June 30 and September 30, 2017 was 2.27x, 2.17x and 1.93x, respectively. As a result of Material Amendment (as defined in the senior secured term loan) of the Master Lease in connection with the Second Agreement, our DSCR covenant is measured on QCP’s Consolidated EBITDA (as defined in the senior secured term loan), is no longer directly tied to HCRMC’s Tenant EBITDAR, and as of December 31, 2017 and March 31, 2018 was 2.14x and 1.79x, respectively.

We expect our DSCR coverage to continue to decline in 2018, absent proactive action by management. Accordingly, the Company expects to use a portion of its cash on hand ($352.3 million as of March 31, 2018) to repay a portion of its outstanding indebtedness in order to maintain compliance with our DSCR covenant.

Equity

Common Stock

Preferred Stock

Our charter authorizes the issuance of up to 50,000,000 shares of our preferred stock, par value $0.01 per share. Prior to the Spin‑Off, we issued 2,000 shares of Class A Preferred Stock with an aggregate liquidation preference of $2 million to HCP, which it later sold to institutional investors following the completion of the Spin-Off. The Class A Preferred Stock ranks prior to our common stock with respect to the payment of dividends and distributions upon liquidation, dissolution or winding up. The Class A Preferred Stock entitles the holders thereof to cumulative cash dividends in an amount equal to 12% per annum of the aggregate liquidation preference, payable quarterly. ~~Pursuant~~ to the terms of the Preferred Stock, we may, at our option at any time on or after October 14, 2017, redeem the Class A Preferred Stock at any time in whole, or from time to time in part, for cash at a price per share equal to the liquidation preference, plus any accumulated, accrued and unpaid dividends, to, but excluding, the date of redemption. Due to their contingent redeemability upon a Change of Control (as defined in the Articles Supplementary relating thereto) and redeemability at the stockholder’s option after the seventh anniversary, the Class A Preferred Stock is classified as redeemable preferred stock within mezzanine equity (outside of permanent equity) in the consolidated balance sheets.

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Stock-Based Compensation

On March 819, ~~2017~~2018, the Company, upon receiving the approval of the ~~compensation~~Compensation ~~committee~~Committee of the ~~board~~Board of ~~directors~~Directors, issued ~~the~~to ~~2017~~employees ~~performance-based~~44,592 restricted stock ~~awards~~units to(“RSU”) ~~Messrs.~~for ~~Ordan,~~2017 ~~Neeb~~service ~~and~~(with ~~Richards~~one-third investing upon grant and the ~~maximum~~remaining ~~amounts~~two-thirds ofvesting ~~107,642~~over ~~shares,~~a ~~61,894~~two-year ~~shares,~~service period) and 3244,~~292~~592 ~~shares,~~RSUs ~~respectively, that~~for ~~may~~2018 beservice ~~earned~~(vesting ~~upon~~over ~~satisfaction~~a ofthree-year ~~certain~~service ~~performance criteria~~period).

On ~~May~~March 2519, ~~2017~~2018, the Company, upon receiving the approval of the Compensation Committee of the Board of Directors, issued 10to a non-executive officer (i) a one‑time equity award grant of 38,~~177~~719 ~~fully~~RSUs ~~vested~~that will vest in full on the third anniversary of the grant date; (ii) a one‑time equity award grant of options to purchase 400,000 shares of the Company’s common stock, of which 200,000 vested in full on the grant date and 200,000 will vest subject to the ~~independent~~achievement ~~members~~of certain performance criteria, with vested options not exercisable until the second anniversary of the ~~Board~~grant date; and (iii) a one-time equity award grant of ~~Directors~~additional options to purchase 200,000 ~~representing~~shares ~~partial~~of ~~compensation~~the ~~for~~Company’s ~~their~~common ~~service~~stock that will vest in full on, and are not exercisable until, the ~~Board~~second anniversary of ~~Directors~~the grant date.

~~The~~On March 22, 2018, the Company, ~~recorded~~upon ~~total~~receiving ~~stock-based~~the ~~compensation~~approval ~~expense~~of ~~related~~the toCompensation Committee of the ~~restricted~~Board ~~stock~~of ~~units~~Directors, ~~options~~ ~~and~~issued the 2018 performance-based stock awards ofto $2Messrs.0 ~~million~~Ordan, Neeb and ~~$5.8~~Richards ~~million~~in ~~during~~ the ~~three~~maximum ~~and~~amounts ~~nine~~of ~~months~~125,261 ~~ended~~shares, ~~September~~75,156 30shares, ~~2017~~and 43,841 shares, respectively, ~~which~~that ismay ~~included~~be ~~within~~earned ~~general~~upon satisfaction of certain performance criteria, and ~~administrative~~the ~~expense~~2018 time-vested stock awards to Messrs. Ordan, Neeb and Richards in the ~~combined~~amounts ~~consolidated~~of ~~statements~~83,507 ofshares, ~~operations~~50,104 shares, and ~~comprehensive~~29,227 ~~(loss)~~shares, ~~income~~respectively.

The Company recorded total stock-based compensation expense related to the restricted stock units, options and performance-based stock awards of $2.4 million and $1.7 million during the three months ended March 31, 2018 and 2017, respectively, which is included within general and administrative expense in the consolidated statements of operations and comprehensive (loss) income. The amount of compensation related to unvested awards that the Company expects to recognize in future periods was approximately $25 million as of March 31, 2018.

Capital Expenditures

Capital expenditures for the Properties leased under the various lease agreements are generally the responsibility of the respective lessee, which may submit requests seeking financing from us to cover all or a portion of such expenditures as described below. Capital expenditures of the lessee are expected to be primarily for complying with its obligations to make certain expenditures at each of the Properties each lease year. We anticipate that these capital expenditures will be funded by the lessee through the cash flow from its operation of our properties, along with additional borrowings, if necessary.

38As part of the HCRMC lease amendment effective April 1, 2015, we agreed to provide HCR III, upon HCR III’s request, through April 1, 2019 amounts to fund Capital Additions Costs (as defined in the Master Lease) approved by us, in our reasonable discretion. Such amounts may not exceed $100 million in the aggregate (“Capital Addition Financing”), nor may HCR III request more than $50 million in Capital Addition Financing in any single lease year. In connection with any Capital Addition Financing, the minimum rent allocated to the applicable property will be increased by an amount equal to the product of: (i) the amount disbursed on account of the Capital Addition Financing for the applicable property times (ii) at the time of any such disbursement, the greater of (a) 7.75% and (b) 500 basis points in excess of the then-current 10‑year Treasury Rate. Any such Capital Addition Financing shall be structured in a REIT tax‑compliant fashion. Through March 31, 2018, we have provided approximately $2.8 million in Capital Addition Financing, with no such funding during 2017 or the first quarter of 2018.

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As part of the HCRMC Lease Amendment effective April 1, 2015, we agreed to provide HCR III, upon HCR III’s request, through April 1, 2019 amounts to fund Capital Additions Costs (as defined in the Master Lease) approved by us, in our reasonable discretion. Such amounts may not to exceed $100 million in the aggregate (“Capital Addition Financing”), nor may HCR III request more than $50 million in Capital Addition Financing in any single lease year. In connection with any Capital Addition Financing, the minimum rent allocated to the applicable property will be increased by an amount equal to the product of: (i) the amount disbursed on account of the Capital Addition Financing for the applicable property times (ii) at the time of any such disbursement, the greater of (a) 7.75% and (b) 500 basis points in excess of the then current 10‑year Treasury Rate. Any such Capital Addition Financing shall be structured in a REIT tax‑compliant fashion. Through September 30, 2017, we have provided approximately $2.8 million in Capital Addition Financing, with no such funding during 2017.

DIVIDENDS

We ~~will~~elected ~~elect~~ to qualify as a REIT under the applicable provisions of the Code, commencing with our taxable year ended December 31, 2016. WeSo long as we remain a REIT, we intend to distribute at least 90% of our REIT taxable income to our stockholders out of assets legally available for distribution. To help create additional liquidity and flexibility to execute our strategy, and in light of our high tenant concentration in one operator, HCRMC, and the ongoing headwinds facing HCRMC and the broader post‑acute/skilled nursing industry, we instituted a conservative distribution policy. Our board of directors will regularly evaluate, determine and, if it deems appropriate, adjust our distribution levels.

If our REIT status is not terminated and we determine to continue to qualify as a REIT, we must distribute to our stockholders an amount at least equal to: (i) 90% of our REIT taxable income, determined before the deduction for dividends paid and excluding any net capital gain (which does not necessarily equal net income as calculated in accordance with GAAP); plus (ii) 90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code; less (iii) any excess non‑cash income (as determined under the Code).

Distributions made by us will be authorized and determined by our board of directors, in its sole discretion, out of legally available funds, and will be dependent upon a number of factors, including restrictions under applicable law, actual and projected financial condition, liquidity, funds from operations and results of operations, the revenues we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, the annual REIT distribution requirements and such other factors as our board of directors deems relevant.

Our distributions may be funded from a variety of sources. To the extent that our cash available for distribution is less than 90% of our taxable income, we may consider various means to cover any such shortfall, including borrowing under a revolving credit facility or other loans, selling certain of our assets or using a portion of the net proceeds we receive from future offerings of equity or debt securities or declaring taxable share dividends. In addition, our charter allows us to issue shares of preferred stock, including our Class A Preferred Stock, that could have a preference on distributions, and if we do, the distribution preference on the preferred stock could limit our ability to make distributions to the holders of our common stock. Accordingly, no dividends may be declared or paid on our common stock unless dividends have been paid or set aside for payment on all outstanding shares of preferred stock that have a preference on distributions, including the Class A Preferred Stock.

Due to our lack of REIT taxable income following the Spin-Off and considering the stepped-up tax basis of the HCRMC properties as a result of the Spin-Off and the ongoing financial difficulties experienced by our primary tenant, HCRMC, we have not had, nor do we expect to have in the near future, taxable income and, accordingly, have not declared a dividend on our common shares since the Spin-Off.

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CONTRACTUAL OBLIGATIONS

The following table summarizes our material contractual obligations and commitments at ~~September~~March 3031, ~~2017~~2018, by year through initial maturities, ~~excluding any debt premiums, discounts or issuance costs~~ (in thousands):

	2017		2018-2019		2020-2021		After 2021		Total
	2018		2019-2020		2021-2022		After 2022		Total
Senior secured term loan	$	27,500	$	20,000	$	20960,000	$	~~950,000~~—	$	~~992~~987,500
Senior secured revolving credit facility		—		—		75,000		—		75,000
Senior secured notes		—		—		—		750,000		750,000
Interest(1)		48116,~~233~~979		~~261~~268,~~354~~717		~~257~~248,~~876~~635		~~173~~60,~~890~~938		~~741~~695,~~353~~269
Total contractual obligations and commitments(2)	$	50124,~~733~~479	$	~~281~~288,~~354~~717	$	~~352~~1,~~876~~283,635	$	1810,~~873,890~~938	$	2,~~558~~507,~~853~~769

(1) Interest on variable-rate debt is calculated using rates in effect at ~~September~~March 3031, ~~2017~~2018.

(2)

This table excludes the Capital Addition Financing pursuant to the Master Lease as the timing and amount of payments are uncertain.

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OFF‑BALANCE SHEET ARRANGEMENTS

We own an equity interest in HCRMC, which is deemed an unconsolidated variable interest entity (“VIE”) as described in Note 2 to the ~~combined~~ consolidated financial statements included in Part I, Item 1 of this Quarterly Report. Our risk of loss with respect to this VIE is ~~generally~~ limited to our investment in the VIE and any outstanding loans receivable from the VIE. As of ~~September~~March 3031, ~~2017~~2018, the carrying value of our investment in HCRMC was zero.

INFLATION

Our leases often provide for either fixed increases in base rents or indexed escalators, based on the Consumer Price Index or other measures, and/or additional rent based on increases in the tenants’ operating revenues. Our medical office building leases require the tenants to pay the property operating costs such as real estate taxes, insurance and utilities. All of our post‑acute/skilled nursing, memory care/assisted living and surgical hospital leases require the tenant to pay all of the property operating costs or reimburse us for all such costs. We believe that inflationary increases in expenses will be offset, in part, by the tenant expense reimbursements and contractual rent increases.

NON‑GAAP FINANCIAL MEASURES

We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure. Below is a summary of important non‑GAAP supplemental measures that our management believes are useful in evaluating our business.

Funds From Operations (“FFO”) and FFO as Adjusted

We believe FFO is an important non‑GAAP supplemental measure of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets utilizes straight‑line depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. The term FFO was designed by the REIT industry to address this issue.

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is net income (loss) (computed in accordance with GAAP):

excluding gains or losses from sales of depreciable property, which exclusion includes any current and deferred taxes directly associated with sales of depreciable property;

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excluding impairments of, or related to, depreciable real estate;

excluding real estate and other depreciation and amortization;

plus the allocable portion of FFO of unconsolidated entities accounted for under the equity method of accounting based upon economic ownership interest. Adjustments for our equity method investment in HCRMC are calculated to reflect FFO on the same basis.

FFO does not represent cash generated from operating activities in accordance with GAAP, is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to net income (loss) determined in accordance with GAAP. We compute FFO in accordance with the current NAREIT definition; however, other REITs may report FFO differently or have a different interpretation of the current NAREIT definition from ours.

In addition, we present FFO before the impact of transaction costs, impairments of non‑depreciable assets and severance‑related charges (“FFO as adjusted”). Management believes that FFO as adjusted provides a meaningful supplemental measure of our FFO run‑rate and is frequently used by analysts, investors and other interested parties in the evaluation of our performance as a REIT. At the same time that NAREIT created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe investors and financial analysts who review our operating performance are best served by an FFO run rate earnings measure that includes, in addition to adjustments made to arrive at the NAREIT defined measure of FFO, other adjustments to net income (loss) determined in accordance with GAAP. FFO as adjusted is used by management in analyzing our business and the performance of our properties, and we believe it is important that investors and financial analysts understand this measure used by management. We use FFO as adjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) assess our performance as compared with similar real estate companies and the industry in general; and (v) evaluate how a specific potential investment will impact our future results. This non-GAAP supplemental measure is a modification of the NAREIT definition of FFO and should not be used as an alternative to net income (loss) (determined in accordance with GAAP) or FFO. Other REITs or real estate companies may use different methodologies for calculating adjusted FFO, and accordingly, our FFO as adjusted may not be comparable to those reported by other REITs.

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includes, in addition to adjustments made to arrive at the NAREIT defined measure of FFO, other adjustments to net income (loss) determined in accordance with GAAP. FFO as adjusted is used by management in analyzing our business and the performance of our properties, and we believe it is important that investors and financial analysts understand this measure used by management. We use FFO as adjusted to: (i) evaluate our performance in comparison with expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) assess our performance as compared with similar real estate companies and the industry in general; and (v) evaluate how a specific potential investment will impact our future results. This non-GAAP supplemental measure is a modification of the NAREIT definition of FFO and should not be used as an alternative to net income (loss) (determined in accordance with GAAP) or FFO. Other REITs or real estate companies may use different methodologies for calculating adjusted FFO, and accordingly, our FFO as adjusted may not be comparable to those reported by other REITs.

Funds Available for Distribution (“FAD”)

FAD is defined as FFO as adjusted after excluding the impact of the following: (i) amortization of right of use assets and market lease intangibles, net; (ii) straight‑line rents; (iii) amortization of deferred financing costs; and (iv) stock-based compensation expense. Also, FAD includes adjustments to compute our share of FAD from our equity method investment in HCRMC. Other REITs or real estate companies may use different methodologies for calculating FAD, and accordingly, our FAD may not be comparable to those reported by other REITs. Although our FAD computation may not be comparable to that of other REITs, management believes FAD provides a meaningful supplemental measure of our performance and is frequently used by analysts, investors and other interested parties in the evaluation of our performance as a REIT. We believe FAD is an alternative run rate earnings measure that improves the understanding of our operating results among investors and makes comparisons with (i) expected results, (ii) results of previous periods and (iii) results among REITS more meaningful. FAD does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs as it excludes the following items which generally flow through our cash flows from operating activities: (i) adjustments for changes in working capital or the actual timing of the payment of income or expense items that are accrued in the period; (ii) transaction-related costs; and (iii) severance-related expenses. FAD is a non-GAAP supplemental financial measure and should not be considered as an alternative to net income (loss) determined in accordance with GAAP.

41The following table reconciles net (loss) income attributable to common shareholders, the most directly comparable GAAP financial measure, to FFO, FFO as adjusted and FAD (in thousands):

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	For the Three Months
	Ended March 31,
	2018		2017
Net (loss) income attributable to common shareholders	$	(20,487)	$	36,684
Depreciation and amortization		30,011		34,450
Gain on sales of real estate		—		(3,283)
Impairments of real estate		2,898		—
FFO	$	12,422	$	67,851
Restructuring costs		10,356		3,239
FFO as adjusted	$	22,778	$	71,090
Straight‑line rents		263		146
Amortization of right of use assets and market lease intangibles		42		50
Amortization of deferred financing costs		2,471		2,591
Stock-based compensation expense		2,374		1,733
FAD	$	27,928	$	75,610

The following table reconciles net income attributable to common shareholders, the most directly comparable GAAP financial measure, to FFO, FFO as adjusted and FAD (in thousands):

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
Net (loss) income attributable to common shareholders	$	(34,158)	$	53,520	$	(383,008)	$	185,875
Depreciation and amortization		31,440		35,879		100,300		129,870
Gain on sales of real estate		—		—		(3,283)		(6,460)
Taxes associated with real estate disposition(1)		—		4,970		—		17,398
Impairments of real estate		9,910		21,145		391,959		21,145
FFO	$	7,192	$	115,514	$	105,968	$	347,828
Restructuring costs		5,475		—		13,358		—
Severance‑related charges		—		3,494		—		3,494
FFO as adjusted	$	12,667	$	119,008	$	119,326	$	351,322
Straight‑line rents		240		122		583		225
Amortization of right of use assets and market lease intangibles		43		51		141		150
Amortization of deferred financing costs		2,323		—		8,379		—
Stock-based compensation expense		1,965		—		5,838		—
FAD	$	17,238	$	119,181	$	134,267	$	351,697

(1) For the three and nine months ended September 30, 2016, we recognized a deferred tax liability and related income tax expense of $5.0 million and $17.4 million, respectively, representing our estimated potential exposure to state built‑in gain tax resulting from the determination that we may sell our HCRMC assets prior to satisfying the 10‑year holding requirement.

Net Operating Income (“NOI”) and Adjusted NOI

NOI and Adjusted NOI are non‑GAAP supplemental financial measures used to evaluate the operating performance of real estate. NOI is defined as rental and related revenues and tenant recoveries, less property level operating expenses and bad debt expense. NOI excludes all other financial statement amounts included in net income as presented in the ~~combined~~ consolidated financial statements. Management believes NOI provides relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. Adjusted NOI is calculated as NOI after eliminating the effects of straight‑line rents, amortization of right of use assets and market lease intangibles. Adjusted NOI is oftentimes referred to as “cash NOI.” We use NOI and Adjusted NOI to make decisions about resource allocations, and to assess and compare property level performance. We believe that net income (loss) is the most directly comparable GAAP measure to NOI. NOI should not be viewed as an alternative measure of operating performance to net income (loss) as defined by GAAP since it does not reflect various excluded items. Further, our definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as they may use different methodologies for calculating NOI.

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~~The~~of ~~following~~right ~~table~~of ~~reconciles~~use ~~net~~assets ~~income~~and ~~attributable~~market lease intangibles. Adjusted NOI is oftentimes referred to ~~common~~as ~~shareholders~~“cash NOI.” We use NOI and Adjusted NOI to make decisions about resource allocations, and to assess and compare property level performance. We believe that net income (loss) is the most directly comparable GAAP ~~financial~~ measure, to NOI. ~~and~~NOI ~~Adjusted~~should ~~NOI~~not ~~(in~~be ~~thousands~~viewed as an alternative measure of operating performance to net income (loss): as defined by GAAP since it does not reflect various excluded items. Further, our definition of NOI may not be comparable to the definition used by other REITs or real estate companies, as they may use different methodologies for calculating NOI.

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
Net (loss) income attributable to common shareholders	$	(34,158)	$	53,520	$	(383,008)	$	185,875
Depreciation and amortization		31,440		35,879		100,300		129,870
General and administrative		6,991		7,131		20,486		16,359
Restructuring costs		5,475		—		13,358		—
Interest expense		35,134		—		104,799		—
Impairments		9,910		21,145		391,959		21,145
Gain on sales of real estate		—		—		(3,283)		(6,460)
Other income, net		(277)		(213)		(402)		(255)
Income tax expense		799		5,173		1,299		18,014
NOI	$	55,314	$	122,635	$	245,508	$	364,548
Non‑cash adjustments to NOI
Straight‑line rents		240		122		583		225
Amortization of right of use assets and market lease intangibles		43		51		141		150
Adjusted NOI	$	55,597	$	122,808	$	246,232	$	364,923

The following table reconciles net (loss) income attributable to common shareholders, the most directly comparable GAAP financial measure, to NOI and Adjusted NOI (in thousands):

Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) and Adjusted EBITDA


	For the Three Months
	Ended March 31,
	2018		2017
Net (loss) income attributable to common shareholders	$	(20,487)	$	36,684
Depreciation and amortization		30,011		34,450
General and administrative		7,110		6,341
Restructuring costs		10,356		3,239
Interest expense		35,987		34,225
Impairments		2,898		—
Gain on sales of real estate		—		(3,283)
Other income, net		(2,955)		(21)
Income tax expense		153		281
NOI	$	63,073	$	111,916
Non‑cash adjustments to NOI
Straight‑line rents		263		146
Amortization of right of use assets and market lease intangibles		42		50
Adjusted NOI	$	63,378	$	112,112

~~EBITDA~~Earnings ~~is defined as earnings~~ before ~~interest~~Interest, ~~taxes~~Taxes, ~~depreciation~~Depreciation, and ~~amortization.~~Amortization ~~Adjusted~~for ~~EBITDA~~Real isEstate ~~defined as EBITDA after eliminating the effects of gain~~ (~~loss~~“EBITDAre”) ~~on sales of real estate, impairments, severance‑related charges~~ and ~~transaction costs. We consider EBITDA and~~ Adjusted EBITDA important supplemental measures to net income (loss) because they provide an additional manner in which to evaluate our operating performance. We believe that net income (loss) is the most directly comparable GAAP measure to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items. Further, our definition of EBITDA and Adjusted EBITDA may not be comparable to the definition used by other REITs or real estate companies, as they may use different methodologies for calculating EBITDA and Adjusted EBITDA.EBITDAre

~~The~~NAREIT ~~following~~has ~~table~~defined ~~reconciles~~EBITDAre ~~net~~as ~~income attributable to common shareholders, the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA (in thousands)~~follows:

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2017		2016		2017		2016
Net (loss) income attributable to common shareholders	$	(34,158)	$	53,520	$	(383,008)	$	185,875
Interest expense		35,134		—		104,799		—
Income tax expense		799		5,173		1,299		18,014
Depreciation and amortization		31,440		35,879		100,300		129,870
EBITDA	$	33,215	$	94,572	$	(176,610)	$	333,759
Gain on sales of real estate		—		—		(3,283)		(6,460)
Impairments		9,910		21,145		391,959		21,145
Severance‑related charges		—		3,494		—		3,494
Restructuring costs		5,475		—		13,358		—
Adjusted EBITDA	$	48,600	$	119,211	$	225,424	$	351,938

GAAP net income;

~~CRITICAL~~· ~~ACCOUNTING~~Plus, ~~POLICIES~~ interest expense;

~~The~~· ~~preparation of financial statements in conformity with GAAP requires our management to use judgment in the application of accounting policies~~Plus, ~~including~~income ~~making~~tax ~~estimates and assumptions. We base estimates on the best~~ expense;

43 · Plus, depreciation and amortization;

Plus, losses, or minus, gains, on the disposition of depreciated property, including losses/gains on change of control;

Plus, impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate;

Plus, or minus, adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates.

Adjusted EBITDAre is defined as EBITDAre after eliminating the effects of severance‑related charges and transaction costs. We consider EBITDAre and Adjusted EBITDAre important supplemental measures to net income (loss) because they provide an additional manner in which to evaluate our operating performance. EBITDAre and Adjusted EBITDAre should not be viewed as alternative measures of operating performance to net income (loss) as defined by GAAP since they do not reflect various excluded items. Further, EBITDAre and Adjusted EBITDAre are not intended to be used as measures of cash generated by operations or dividend-paying capacity; instead, the statement of cash flows prepared in accordance with GAAP, along with any supplemental disclosures, should be relied on for those purposes. We compute EBITDAre in accordance with the current NAREIT definition; however, other REITs may report

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~~information~~EBITDAre ~~available to us at the time, our experience~~ and onAdjusted ~~various~~EBITDAre ~~other~~differently assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. If our judgment or ~~interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would~~ have ~~been applied, resulting in~~ a different ~~presentation~~interpretation of ~~our combined consolidated financial statements. From time to time, we re‑evaluate our estimates and assumptions. In~~ the ~~event~~current ~~estimates~~NAREIT ordefinition ~~assumptions prove to be different~~ from ~~actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain~~ours. Critical accounting policies are those that may require complex judgment in their application or require estimates about matters that are inherently uncertain. Through the period covered by this Quarterly Report, there were no material changes to the “Critical Accounting Policies” included within Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.

The following table reconciles net (loss) income attributable to common shareholders, the most directly comparable GAAP financial measure, to EBITDAre and Adjusted EBITDAre (in thousands):


	For the Three Months
	Ended March 31,
	2018		2017
Net (loss) income attributable to common shareholders	$	(20,487)	$	36,684
Interest expense		35,987		34,225
Income tax expense		153		281
Depreciation and amortization		30,011		34,450
Gain on sales of real estate		—		(3,283)
Impairments		2,898		—
EBITDAre	$	48,562	$	102,357
Restructuring costs		10,356		3,239
Adjusted EBITDAre	$	58,918	$	105,596

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with GAAP requires our management to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our consolidated financial statements. From time to time, we re‑evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Critical accounting policies are those that may require complex judgment in their application or require estimates about matters that are inherently uncertain. Through the period covered by this Quarterly Report, there were no material changes to the “Critical Accounting Policies” included within Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to the ~~combined~~ consolidated financial statements included in Part I, Item 1 of this Quarterly Report for the impact of new accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Concentration of Risk

Substantially all of our properties are leased to HCR III, consisting of 232 post‑acute/skilled nursing properties and 60 memory care/assisted living properties as of ~~September~~March 3031, ~~2017~~2018, pursuant to the Master Lease. The Master Lease is structured as a triple‑net lease, in which HCR III, either directly or through its affiliates and sublessees, operates and manages the properties thereunder and is responsible for all operating costs associated with the HCRMC Properties, including the payment of taxes, insurance and all repairs, and providing indemnities to us against liabilities associated with the operation of the HCRMC Properties. In addition, all obligations under the Master Lease are guaranteed by HCRMC, the parent of HCR III. As our revenues predominantly consist of rental payments under the Master Lease, we are dependent on HCRMC for substantially all of our revenues. Consequently, any material decline in HCRMC’s business is likely to have a material adverse effect on our business as well. ~~On July 7, 2017, we delivered to HCRMC a notice of default under the Master Lease (see “—Portfolio Overview” above for more information).~~

The geographic concentration of the Properties makes us susceptible to adverse economic developments in certain states, including Pennsylvania, Ohio, Illinois, Michigan and Florida, each of which has ~~historically~~ generated over 10% of our revenues. Thus, any adverse conditions affecting these regions, including downturns in the local economies or changes in local real estate conditions, increased competition or decreased demand, changes in state‑specific legislation and local climate events and natural disasters (such as earthquakes, wildfires and hurricanes), could adversely affect our operating results and our ability to make distributions to stockholders.

For additional information regarding concentration and how we monitor our credit risk with HCRMC, see Note 10 to the combined consolidated financial statements included in Part I, Item 1 of this Quarterly Report.41

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our revenues during one or more of the past three years. Thus, any adverse conditions affecting these regions, including downturns in the local economies or changes in local real estate conditions, increased competition or decreased demand, changes in state‑specific legislation and local climate events and natural disasters (such as earthquakes, wildfires and hurricanes), could adversely affect our operating results and our ability to make distributions to stockholders.

For additional information regarding concentration and how we monitor our credit risk with HCRMC, see Note 10 to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Interest Rate Risk

We are exposed to interest rate risk with respect to our variable-rate debt, including indebtedness that we incurred in connection with the Spin‑Off. In connection with the Spin‑Off, we entered into the senior secured credit facilities which are comprised of the $100 million senior secured revolving credit facility and the $1.0 billion senior secured term loan. See “—Liquidity and Capital Resources—Debt” within Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a further description of our indebtedness.

An increase in interest rates would increase our annual interest expense. A 0.125% change to the interest rate of the variable-rate indebtedness, including the senior secured term loan and the senior secured revolving credit facility, would change annual interest expense by approximately $1.3 million, based on the outstanding debt at ~~September~~March 3031, ~~2017~~2018. An increase in interest rates could make future financing by us more costly. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.

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our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.

We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and variable rates for our indebtedness. However, the REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. See Part I, Item 1A. “Risk Factors—Risks Related to Our Status as a REIT—Complying with the REIT requirements may limit our ability to hedge effectively.” in the Annual Report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September~~March 3031, ~~2017~~2018. Based upon that evaluation, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~September~~March 3031, ~~2017~~2018.

Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during the ~~fiscal~~first quarter toof ~~which~~2018 ~~this report relates~~ that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company is a party to legal proceedings, lawsuits and other claims that arise in the ordinary course of the Company’s business. Except as contained in Note 7. “Commitments and Contingencies—Legal Proceedings related to HCRMC” and “—Legal Proceedings related to HCP” ~~and Note 11. “Subsequent Events—Legal Proceedings related~~ to ~~HCRMC” to~~ the ~~combined~~ consolidated financial statements included in Part I, Item 1 of this Quarterly Report, the Company is not aware of any legal proceedings or claims that it believes may have, individually or taken together, a material adverse effect on the Company’s business, prospects, financial condition, results of operations or cash flows. The Company’s policy is to record a liability when a loss is considered probable and the amount can be reasonably estimated and to expense legal costs as they are incurred. The information contained in Note 7. “Commitments and Contingencies—Legal Proceedings related to HCRMC” and “—Legal Proceedings related to HCP” ~~and Note 11. “Subsequent Events—Legal Proceedings related~~ to ~~HCRMC” to~~ the ~~combined~~ consolidated financial statements included in Part I, Item 1 of this Quarterly Report is incorporated by reference in this Part II, Item 1.

Item 1A. Risk Factors

~~Through~~Except as set forth below, through the period covered by this Quarterly Report, there were no material changes to the “Risk Factors” included in Part I, Item 1A of the Annual Report.

45RISKS RELATED TO THE MERGER AND THE PLAN TRANSACTIONS

The announcement and pendency of our proposed Merger and the Plan Transactions could adversely affect our business, financial results and operations.

The announcement and pendency of the proposed Merger and the Plan Transactions could cause disruptions in and create uncertainty surrounding our business, including by affecting our ability to maintain relationships with our partners, tenants, providers and others with whom we do business or as a result of potential legal proceedings which may be brought in connection with the Merger or the Plan Transactions. Any such disruptions or uncertainty could have an adverse effect on our business, financial results and operations, regardless of whether the Merger and the Plan Transactions are completed. In addition, we have diverted, and will continue to divert, significant management resources towards the negotiation, entry into and anticipated completion of the Merger and Plan Transactions, which could adversely affect our business and results of operations.

In addition, without the consent of Welltower and subject to certain other exceptions, we are subject to restrictions on the conduct of our business prior to the consummation of the Merger as provided in the Merger Agreement, including, among other things, certain restrictions on our ability to make certain capital expenditures, investments and acquisitions, sell, transfer or dispose of our assets, amend certain contracts or our organizational documents and incur indebtedness. These restrictions could prevent us from pursuing otherwise attractive business opportunities, result in our inability to respond effectively to expiring leases, developments with our tenants (including changes in the financial positions of our tenants) or other industry developments, and may otherwise harm our business, financial results and operations.

The Merger Agreement contains provisions that could discourage or make it difficult for a third party to acquire us prior to the completion of the proposed Merger.

The Merger Agreement contains provisions that restrict our ability to entertain a third party proposal to acquire us. These provisions include the general prohibition beginning 45 days after the date of the Merger Agreement on our soliciting, initiating, knowingly encouraging, providing nonpublic information in connection with, or engaging in discussions or negotiations regarding any alternative acquisition proposal, subject to certain exceptions, and the requirement that we pay a termination fee of $59.5 million (which amount is reduced to $19.8 million in certain instances) if the Merger Agreement is terminated in specified circumstances. These provisions might discourage an otherwise-interested third party from considering or proposing to acquire us, even in connection with a proposal that may be deemed of greater value to our stockholders than the proposed Merger. Furthermore, even if a third party elects to propose an acquisition, the concept of a termination fee may result in that third party offering a lower value to our stockholders than such third party might otherwise have offered.

Failure to complete the proposed Merger and the Plan Transactions could adversely affect our business, results of operations and the market price of our common stock.

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There is no assurance that the closing of the Merger or the Plan Transactions will occur. Each of QCP’s and Welltower’s obligation to consummate the Merger is subject to a number of customary closing conditions, including: (1) approval of the Merger by the holders of a majority of QCP’s outstanding shares of common stock; (2) delivery of a legal opinion to QCP addressing its qualification as a REIT; (3) material compliance with covenants; (4) accuracy of each party’s representations, subject to materiality thresholds; (5) absence of injunctions or orders that prohibit or restrain the consummation of the Merger; and (6) the closing of the acquisition by ProMedica of all of the newly issued common stock of HCRMC pursuant to the Alternative PSA. The consummation of the Plan Transactions is subject to certain conditions, including: (i) the receipt of certain state licensing approvals with respect to the Plan Transactions; (ii) the entry by the bankruptcy court of a confirmation order confirming the Amended Plan; and (iii) no entry of an order by the bankruptcy court dismissing HCRMC’s Chapter 11 case or converting HCRMC’s Chapter 11 case into a case under Chapter 7 of the Bankruptcy Code or an order materially inconsistent with the Alternative PSA, the Amended Plan or the confirmation order in a manner adverse to ProMedica or QCP. The obligation of HCRMC to consummate the Plan Transactions is also conditioned upon compliance by ProMedica in all material respects with its pre-closing obligations under the Alternative PSA, while the obligation of ProMedica to consummate the Plan Transactions is also conditioned upon a court of competent jurisdiction not having determined that HCRMC has breached in any material respect its pre-closing obligations under the Alternative PSA. We cannot predict with certainty whether and when any of the conditions to the Merger Agreement or the Alternative PSA will be satisfied.

In addition, the Merger Agreement may be terminated under certain specified circumstances, including, but not limited to, (i) a change in the recommendation of our Board of Directors, (ii) our entrance into an agreement for a superior offer or (iii) the termination of the Alternative PSA. Further, the Alternative PSA will automatically terminate if the Merger Agreement is terminated. The Alternative PSA may also be terminated by QCP if an order confirming the Amended Plan is not entered within 65 days following the date of the Alternative PSA, the Plan Transactions have not been consummated by 11:59 p.m. New York City time on October 12, 2018, or if HCRMC fails to pay such cash and cash equivalents available to pay all or part of the Reduced Cash Rent (as defined in the Alternative PSA) after making all transfers of funds permitted under the Centerbridge Facility, and retaining such reserves and making such other expenditures that either HCRMC’s chief restructuring officer or board of directors has determined would be necessary to allow HCRMC to operate in the ordinary course of business. Either HCRMC or ProMedica may also terminate the Alternative PSA if the Plan Transactions have not been consummated by 11:59 p.m. New York City time on October 15, 2018. The Alternative PSA also contains various other termination rights.

If the Merger and the Plan Transactions are not consummated, and there are no other parties willing and able to acquire us for consideration greater than or equal to that provided for in the Merger Agreement and on other terms acceptable to us, our stock price will likely decline. We will be obligated, subject to the terms and conditions of the Plan Sponsor Agreement, to consummate the HCRMC Transactions. We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger and the Plan Transactions, as well as the diversion of management resources, for which we will have received little or no benefit if the closing of the Merger does not occur. Many of the fees and costs will be payable by us even if the Merger and the Plan Transactions are not completed and may relate to activities that we would not have undertaken other than to consummate the Merger and the Plan Transactions. Further, in connection with the proposed Merger and the pursuit of the Plan Transactions as an alternative to the HCRMC Transactions, we have diverted resources from, and delayed the potential closing of, the HCRMC Transactions. As a result, if the Merger and the Plan Transactions are not completed, the risks to the consummation of the HCRMC Transactions will have been exacerbated, as will the risks to our business. For a more detailed description of these risks see Part I, Item 1A. “Risk Factors—Risks Related to the HCRMC Transactions and the HCRMC Bankruptcy” in the Annual Report.

A failed Merger may result in negative publicity and a negative impression of us in the investment community. If the Merger is not approved by our stockholders, or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to us will be offered or that our business, prospects or results of operations will not be adversely affected. Upon termination of the Merger Agreement by us or Welltower under specified conditions, our remedy may be limited to receipt of a termination fee of $250 million from Welltower, and under some circumstances, we would not be entitled to receive any termination fee. The occurrence of any of these events individually or in combination could have a material adverse impact on our results of operations and our stock price.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

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Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

2.1†		Plan rm 8-K (File No. 001-37805), filed March 5, 2018)
2.1.1		Amendment, dated as of April 25, 2018, to the Plan Sponsor Agreement, dated March 2, 2018, by and among HCR ManorCare, Inc., Quality Care Properties, Inc., HCP Mezzanine Lender, LP and the lessors identified therein (incorporated herein by reference to Exhibit 2.3 to Registrant’s Current Report on Form 8-K (File No. 001-37805), filed April 30, 2018)
2.2		Alternative Plan Sponsor Agreement, dated as of April 25, 2018, by and among HCR ManorCare, Inc., Quality Care Properties, Inc., ProMedica Health System, Inc., Suburban Healthco, Inc., Meerkat I LLC and the other lessors identified therein (incorporated herein by reference to Exhibit 2.2 to Registrant’s Current Report on Form 8-K (File No. 001-37805), filed April 30, 2018)
2.3		Agreement and Plan of Merger, dated as of April 25, 2018, by and among Welltower Inc., Potomac Acquisition LLC, Quality Care Properties, Inc. and certain subsidiaries of Quality Care Properties, Inc. (incorporated herein by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K (File No. 001-37805), filed April 30, 2018)
10.1		and MC Operations Investments LLC (incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 001-37805), filed March 5, 2018)
10.2		Restructuring Support Agreement, dated as of April 25, 2018, by and among HCR ManorCare, Inc., Carlyle MC Partners, L.P., Carlyle Partners V-A MC, L.P., Carlyle Partners V MC, L.P., CP V Coinvestment A, L.P., CP V Coinvestment B, L.P., ProMedica Health System, Inc. and MC Operations Investments, LLC (incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No. 001-37805), filed April 30, 2018)
31.1*		Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.45

** FurnishedTable ~~herewith.~~of Contents


101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.

**Furnished herewith.

†Certain schedules or similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplemental copies of any of the omitted schedules or attachments upon request by the SEC. A list of the schedules to the Plan Sponsor Agreement follows:

Schedule 1.1(a)	Permitted Liens
Schedule 1.5	Severance and Other Payments
Schedule 2.1(b)(ii)	Capital Structure
Schedule 2.1(d)(i)	Governmental Filings
Schedule 2.1(e)	Financial Statements
Schedule 2.1(f)	Absence of Certain Changes
Schedule 2.1(g)	Litigation and Liabilities
Schedule 2.1(h)	Employee Benefits
Schedule 2.1(i)	Labor Matters
Schedule 2.1(j)	Compliance with Laws; Licenses
Schedule 2.1(k)	Undisclosed Liabilities
Schedule 2.1(l)	Material Contracts and Government Contracts
Schedule 2.1(o)	Environmental Matters
Schedule 2.1(p)	Taxes
Schedule 4.1	Interim Operations
Schedule 4.1(a)(xi)	Capital Expenditure Budget
Schedule 4.1(a)(xix)(I)	Nondiscretionary Payments Under Company Plans
Schedule 5.1(b)(ii)(C)	13-Week Cash Budget
Schedule 5.1(c)	Chief Restructuring Officer Responsibilities
Schedule 5.2(a)(i)	Adjustment to Rent; Forbearance
Schedule 5.3(b)	SNF/AL Remarketing Process
Schedule 6.1(b)	Governmental Approvals
Schedule 45.1.8-1 to Exhibit 4	Identified Facilities
Schedule 1 to Exhibit 5	Excess Severance Payments

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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 9, 2017		QUALITY CARE PROPERTIES, INC.
Date: May 9, 2018		QUALITY CARE PROPERTIES, INC.
		/s/ C. MARC RICHARDS
	By:	/s/ C. MARC RICHARDS
		C. Marc Richards
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Filing Compare · QUALITY CARE PROPERTIES, INC.