Tuesday, July 29, 2014
From Senior Housing News, comes the word of River Terrace Estates, a nonprofit Continuing Care Retirement Community (CCRC) in Bluffton, Indiana, that filed for protection in bankruptcy court on July 22. Unlike some Chapter 11 reorganizations for CCRCs, River Terrace is not a "new" construction, having opened in 2004. However, as with newer operations that came on line just as the 2008 financial crisis hit, River Terrace reports being impacted by the recession, reportedly a hard hit for housing in Northern Indiana. As described in Senior Housing News, one potentially unique aspect of the River Terrace financing issues is the source of the loans it carried:
"Contrary to some CCRCs that rely heavily on institutional investments, River Terrace Estates’ financing encompasses roughly 1,400 individuals who own RTE bonds. As a result, the CCRC determined that Ch. 11 was the only feasible method to restructure the bonds. In connection with the filing, the CCRC has already filed a plan of reorganization in order to expedite the process, River Terrace Estates stated in a news release.
'Because we have some 1,400 bondholders, we decided the best way to give them a voice in this process is to ask them to vote on a two-part plan so we know their intentions,' Stewart said. RTE bondholders will be asked to vote on whether they want to keep their bonds for the long-term based on the community’s recent progress, or market the CCRC to validate its value."
According to news reports, either way, "bondholders will take a serious haircut, perhaps recovering only 53% in a bond exchange or $0.46 on the dollar in the sale of the facility, a hard hit on predominantly non-institutional investors," according to George Mesires, a lawyer with the finance and restructuring team for a Chicago law firm, quoted in Senior Housing News and on the firm's website.
Another potentially unique feature will be River Terrace Estate's plan for going forward with a different payment model for new residents. Rather than paying an entry fee described as $55k to $100k, new residents can pay a "nonrefundable communtiy fee of about $30,000, accordiong to figures provided" by a spokesperson quoted in Senior Housing News.
This summer has brought news of other financial struggles for CCRCs, including the June Chapter 11 filing by Texas-based senior living company Sears Methodist Retirement Systems, and the Chapter 11 filing by a New York life care community, The Amsterdam on July 23. The ability of CCRCs to emerge successfully from similar reorganizations in the past has often depended on new operating partners and restructuring of loans, but also on the ability of the companies to reassure future residents of appropriate protection and use of "large" upfront fees.