What happened

Quality Care Properties (NYSE:QCP), better known as QCP, reached a deal with its primary tenant HCR ManorCare to resolve an ongoing battle with the struggling skilled nursing operator.

Under the terms of the agreement, QCP will release its claims against HCR ManorCare for unpaid rent and other obligations in exchange for 100% equity ownership of HCR ManorCare. In other words, HCR ManorCare will become a wholly owned subsidiary of QCP. QCP is no longer just a landlord, but will effectively become an operator of skilled nursing and rehabilitation centers.

Investors seem to be thrilled with this news, as the stock is up by 27% as of 11:00am EST on the morning of the announcement.

Nurse checking patient in a skilled nursing facility.

Image source: Getty Images.

So what

Without getting too deep into the backstory, the back-and-forth battle between HCR ManorCare and its landlord QCP has been going on for some time now. QCP was spun off from healthcare REIT HCP (NYSE:HCP) in October 2016 to remove the distressed HCR ManorCare properties from HCP's portfolio and to focus on maximizing shareholder value from them.

Now, it appears that QCP has taken a big step in the right direction, and has also eliminated a great deal of uncertainty.

Now what

As a result of the transaction, QCP expects to no longer qualify as a REIT, which was the original intention after the spinoff from HCP. To be a REIT, your primary business must be owning properties, and if HCR ManorCare becomes a wholly owned subsidiary of QCP, this will no longer be the case.

Shareholders don't seem to mind, however. The resolution of the ongoing drama with HCR ManorCare is a huge weight off the shoulders of QCP and its investors, and now the company can move forward and focus on operating a profitable skilled nursing business.

Matthew Frankel owns shares of HCP and Quality Care Properties, Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.