Suburban Chicago retirement community goes bankrupt again

0

As the baby boom generation ages, demographic trends promote retirement communities like Park Square. But his two bankruptcies highlight the dangers of borrowing heavily, even in an industry with a growing customer base.

Completed in 2012, the complex located at 1050 Euclid Ave. is a so-called Continuing Care Retirement Community, with Independent Living, Assisted Living and a Retirement Home on the same property. Residents can move in when they are active and healthy, knowing they will have the support they need as their health declines and move into an assisted living facility and eventually the care facility property nurses.

A problem at Park Place is that its residents are moving through the community more slowly than expected, depriving the property of the revenue needed to pay off some of its debt. Like other retirement communities, Park Place relies heavily on entrance fees, one-time refundable payments residents make when they move in. People pay to live there: Entrance fees to Park Place range from $375,000 to $950,000, according to a court document filed by Park Place.

But its residents are living longer than expected, meaning the property has fewer apartments available for people willing to pay their entrance fees and move in. Without healthy turnover – new residents replacing those who die or move – Park Place has not generated enough inflow -fee revenue to repay the $15.5 million in bonds that matured in May, according to the court document.

“Debtors maintain a waiting list for new residents, but there is insufficient turnover to allow reoccupancy of campus apartments,” the filing said.

Park Place, which owes a total of $141 million in bond debt, says it has worked with its bondholders to develop a debt restructuring plan and expects to be out of Chapter 11 in about four months. Bondholders would suffer significant losses under the bankruptcy plan, receiving approximately $108 million in new debt on the property in exchange for the $141 million in existing bonds that would be retired.

“This process strengthens Park Place as a financially stronger community,” Park Place President Rich Van Hattem said in a statement. “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 property’s 180 self-contained units are 91% occupied, according to public records. But even after emerging from bankruptcy, Park Place still failed to generate enough cash to cover its debt payments.

In the first 10 months of the year, the community generated total net income before debt payments of $4.7 million, according to the court filing. But after making debt payments of $6.6 million, Park Place suffered a cash loss of $1.9 million during the period.

Although the coronavirus pandemic has hit retirement communities and retirement homes hard, Park Place has so far weathered the crisis. COVID-19 infected four residents and 30 staff members, but only one resident died from the virus, the filing said.

Park Place, which is owned by Providence Life Services, a non-profit chain of 11 retirement communities, based in Tinley Park, did not make an executive available for interview. Representatives of Kansas City, Mo.-based UMB Bank, Park Place’s bondholder trustee, did not respond to requests for comment.

Park Place issued the bonds when it pulled out of bankruptcy in 2016 through the Illinois Finance Authority. Ziegler, a Chicago-based investment bank, sold the bonds for Park Square.

Park Place’s loss of cash in the first 10 months of the year has been corrected in this updated story. The location of UMB Bank’s head office has also been corrected.

Share.

Comments are closed.