I noticed this week that there were two recent senior living-related chapter 11 bankruptcy filings. One in New York and the other in Delaware. This could be one looming example of types of nation-wide fall outs from industry-wide COVID changes.
An upscale retirement community in Port Washington NY, The Amsterdam at Harborside, filed recently for the second time in seven years (commonly known in bankruptcy lingo as a “Chapter 22”). According to the filing papers, the 329 unit community is out of compliance with state laws by its inability to make all debt payments, and inability to make refunds of resident entrance fees during the pandemic. There are currently 375 residents, and there is anticipated to be no reduction or disruption of services. The reasons for the filing included the lack of enough new residents to pay all day to day costs and make entrance-fee refunds owed to relatives of deceased residents. The community also has defaulted on local Industrial Development tax-exempt bonds including various property tax breaks extending out over a number of years.
The second filing affects a larger number of assisted living facilities operating under the “Country Place” umbrella. This filing in Delaware affects about 50 smaller retirement communities primarily in Texas and Alabama, each operating as its own separate subsidiary. These assisted living communities are primarily in small rural markets, often without as many alternative options. The Debtor is CP Holdings LLC, the holding company for the various operating entities. The initial filing papers anticipate an immediate sale process with the senior secured lender, a Hong Kong-based fund, as the stalking horse bidder. A “stalking horse” bid is a common practice, where the initial bid sets the floor for the purchase price, subject to higher and better bids.
These two filings follow a late 2020 filing by Henry Ford Village, a 1,038-bed nonprofit continuing care retirement community (CCRC) in Dearborn, Michigan. Those filing papers explained the “perfect storm” that created all the financial challenges. Again, there were to be no impact on services to residents, with a quick sale process.
We have been involved in numerous health-care related filings over our many years in business. They present some special challenges in the chapter 11 process. It is obvious that “senior living” of all types has been greatly challenged and most likely permanently changed by the circumstances and fallout from the COVID pandemic. Time will tell how many more filings will follow. Hopefully there will be an occupancy rebound as things return to normal, but some will be unable to survive the loss of residents and revenue over the last year.
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