A continuing care retirement community in suburban Chicago filed for Chapter 11 bankruptcy protection last week after defaulting on part of its $141 million debt.
Elmhurst’s Park Place in Elmhurst, Illinois, defaulted on nearly $15.5 million in bond debt issued by the Illinois Finance Authority in 2016, a document filed with the Northern District Bankruptcy Court shows. from Illinois. This is the second time in the last five years that the CCRC has filed for bankruptcy protection.
Park Place of Elmhurst is owned and operated by Providence Life Services, a nonprofit provider of 11 CCRC based in Tinley Park, Illinois.
“This process strengthens Park Place as a financially stronger community,” Park Place President Rich Van Hattem said in a statement. published by Crain’s Chicago Business. “Right now, Park Place’s occupancy rate is very stable and above national averages. All refundable registration fees have been paid, as promised, to former residents or their estates. Park Place continues to honor employee compensation and benefit programs. All of our suppliers are paid in a timely manner.
The 2016 bonds were supposed to be paid from the initial move-in and turn-around entry fees. However, a slower-than-expected turnover in occupancy occurred, and entrance fee income declined accordingly.
Additionally, Park Place in April requested nearly $1.4 million in Paycheck Protection Program (PPP) funds under the CARES Act. The application was approved and the funds received in May, triggering a default as part of the 2016 restructuring requiring CCRC to transfer all gross proceeds to the bond trustee.
Park Place reported total operating revenue of $15.7 million as of October 30, net income of $4.7 million before debt service and a net loss of nearly $1.9 million. . It listed total assets of $135.4 million against $241.1 million in liabilities.
As of December 15, Park Place of Elmhurst owed $141.1 million in outstanding principal resulting from the issuance of the 2016 debt.
The community previously filed for bankruptcy in January 2016, seeking to restructure more than $146 million in bond debt issued for building the campus in 2010. Court documents revealed Park Place made timely payments on the debt bond “A” and “B”. With Tranche “C”, however, it paid a single interest payment of $23,126 in May 2017 and was never able to generate excess revenue to continue servicing principal or interest on the obligations.
The community soon found itself struggling to service the “B” tranche of bond debt, which was due to be fully repaid by May 15.
The filing reveals that a restructuring term sheet is being negotiated which should allow Park Place to emerge from bankruptcy in about four months, after approval. Under the terms of the deal, current bondholders will swap outstanding debt for $107.3 million in new bond issues. Park Place will also have to deposit an additional $3 million in a liquidity fund for payment of monthly interest or principal, and for payment of operating expenses as needed.
The restructuring plan will honor all resident contracts, protect compensation and benefits for Park Place vendors and employees. Providence Life Services will continue to own the campus after the restructuring is complete.
“We are confident in this process because it protects the future of our residents and our community while providing better bond terms for Park Place,” Van Hattem said in a statement provided to Senior Housing News.
Another Chicago-area CCRC, Clare Oaks in Bartlett, Illinois, filed for Chapter 11 protection in June 2019. Last August, the community and its bondholders entered into a restructuring agreement on how to get out of bankruptcy.
Under the terms of the agreement, Clare Oaks will be managed by Evergreen Senior Living Properties LLC, an operator of a portfolio of several CCRCs in Texas. The plan also includes $5 million in deferred capital improvements, converting 60 skilled nursing units to 32 assisted living units, and independent residents would be asked to modify their residency agreements tied to the timing of health care reimbursements. entry are paid. This is to avoid future cash shortages.