Sunday, July 27, 2014

New York CCRC Files for Reorganization in Bankruptcy Court

The Amsterdam, also known as Amsterdam House at Harborside, has been marketed as the "first and only" life care community in Nassau County.  It now also appears to be the first CCRC in that county -- and perhaps in the state of New York -- to seek the protection of the bankruptcy court.  The company filed under Chapter 11 for "Reorganization" on July 23, 2014.

As reported in Newsday on July 23:

"An upscale retirement community in Port Washington has filed for bankruptcy protection after failing to get all of its bondholders to support a debt restructuring. The Amsterdam at Harborside sought protection in federal court from its creditors under Chapter 11 of the U.S. Bankruptcy Code. Executives at the not-for-profit said Wednesday that it would not close and there are no plans to fire any of the 173 employees. In a court filing in Central Islip on Tuesday, the continuing-care complex said its liabilities and assets were both in the range of more than $100 million to $500 million."

According to news reports, The Amsterdam was opened in 2010, near the peak of the recession, a tough time for many CCRCs.  It is a "refundable entrance" fee model, with entrance fees ranging from $500,000 to $1.6 million, with a reported 85% occupancy status. Newsday also reports that "under the proposed restructuring plan, [company spokespersons said] the retirement community would honor the contracts of existing residents, continue to refund residents' money when they no longer live there, and maintain the current fee structure."

Update:  Senior Housing News describes the filing as a "pre-negotiated chapter 11 bankruptcy petition to restructure an estimated $220 million in debt."

Current Affairs, Federal Cases, Health Care/Long Term Care, Housing | Permalink

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Could someone familiar with New York law and the Amsterdam residency agreements clarify here what “might” happen? For example, it’s my understanding that refundable entrance fees are required by the State of NY to be escrowed. But do the resident contracts (agreements) state that a new resident must occupy a vacated independent unit in order for the escrowed refund to be released to the departed resident? If the Chapter 11 scares off new, post-petition residents, does this mean the refunds for residents who bail out during the Chapter 11 process are held up until the new resident flow starts again? If the Chapter 11 leads to Chapter 7 (admittedly unlikely), do the escrowed funds have priority over the claims of the secured creditors? (Probably so, but I’m just wondering).

Posted by: Jennifer Young | Jul 28, 2014 6:30:24 AM

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