As described in the introduction of this book, most of the $6.1 billion that Carlyle paid for ManorCare—$4.8 billion—was borrowed, while the firm and its investors put up the remainder. Carlyle’s first major move, in 2010, was to sell ManorCare’s real estate to another investment firm for over $6 billion.45 ManorCare then rented back the facilities that it once owned. This was the sale-leaseback tactic, described in Chapter 1, that is a hallmark of so many private equity deals. As Peter Whoriskey and Dan Keating of the Washington Post later recounted, by selling ManorCare’s real estate, Carlyle was able to recover the money that it had put into the deal.46 In other words, with this sale alone, Carlyle had basically broken even and still owned an enormous nursing home chain.

But selling ManorCare’s property put a terrible strain on the business. ManorCare needed real estate to operate, and with the sale, ManorCare was obligated to pay nearly half a billion dollars a year in rent to occupy the buildings it was already using.47 On top of this, under the terms of the deal, ManorCare was still responsible for paying the buildings’ insurance, upkeep, and property taxes. This meant that ManorCare now had all the obligations of owning its properties, with all the costs of renting them.