Devonshire PGA Holdings LLC and its associated entities, a continuing care retirement community based in Palm Beach Gardens, Fla., filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Wilmington, Delaware on Thursday. A consensual deal has been reached by the CCRC’s owners and Erickson, the secured lender, and will be implemented through a pre-packaged filing.
The business operations of the Devonshire, including the associated Chatsworth healthcare properties and holdings, have been managed by two management companies that are both owned by Craig Anderson.
In April 2012, Devonshire PGA Holdings defaulted on more than $158.4 million in principal and interest. In addition, the holdings company owed about $20.2 million on its defaulted mezzanine loan as of Sept. 11. On September 12, mezzanine lender HJ Sims foreclosed on the loan, making it the technical owner of the holdings company that owns the Devonshire and Chatsworth properties.
In the past several months, Erickson Living has acquired all of the Devonshire’s senior debt—amounting to approximately $177 million—and has been pursuing its options as lender.
Erickson, HJ Sims, and Anderson have worked out a consensual deal with a reorganization plan that releases all of the debt and leaves the community owned by Erickson.
“We are pleased that all parties acted in the best interests of the residents and employees to reach a consensual resolution,” says Adam Kane, senior vice president of corporate affairs at Erickson. “We believe that the recapitalization of Devonshire will restore it to one of the premiere CCRCs in the country. Erickson looks forward to having Devonshire in its CCRC network.”
The Devonshire opened in 2007 and is comprised of an independent living facility with 327 units and another 110 units that are a combination of assisted living and skilled nursing.
SHP Senior Living says the community was impacted negatively by the financial downturn in 2008, it says in court documents.
“The severe and protracted real estate market downturn resulted in a drastic and proportional decline in the ability of many communities, including the Facility, to sell units to prospective residents,” said court documents. “[A]lthough the Facility is fully operational, the housing market has limited its ability to achieve a stabilized occupancy rate in the independent living sections of the Facility.”
The plan of reorganization preserves all of the residents’ rights to refunds and life care commitments, and the community will emerge debt free and under Erickson’s management, says Kane.