With the Erickson bankruptcy filing, there has been some vocal concern over the status of the deposits at various CCRCs operated by Erickson and has been subject to a significant amount of filings in the Bankruptcy court. The Bankruptcy court has an upcoming hearing to determine whether new residents will receive greater protections for the refund of their initial entrance deposits (IEDs) than those currently living in the communities. According to one of the filings as quoted below, Erickson’s new resident flow has dropped dramatically since the filing:
As anticipated by the Debtors, since the Petition Date, the Debtors have seen a substantial decrease in the amount of IEDs received from new residents. Prepetition, the Debtors received approximately $13.4 million in IEDs on a monthly basis. During the first two weeks after the Petition Date, there was a significant reduction in IEDs. This last week, Debtors received approximately $1 million in IEDs. The Debtors are hopeful the relief sought in this Motion will provide new residents with comfort that during the time periods covered in this motion, the new residents can elect to leave their respective CCRC and receive a refund of their IED. The Debtors believe that these modifications are critical to obtaining new IEDs pending confirmation of a plan in these cases.
Erickson is seeking:
A prompt resolution of the Emergency Motion is necessary for the Debtors’ successful reorganization. The Motion is a practical manner in which to protect the interests of residents and their deposits during the pendency of this case and provide for the proper transfer of the deposits when required. The relief requested is reasonable under the circumstances and will maximize the value of the estate by not discouraging prospective residents from choosing to live at the Debtors’ various continuing care retirement communities and paying the required deposits.
A resident’s ability to elect to leave their respective CCRC is necessary to provide prospective residents with the peace of mind that, during the pendency of the Debtors’ chapter 11 cases, the residents are not held captive by their obligations under the Residence and Care Agreements. The current requirement that a new resident pay an IED prior to the refund of an exiting resident’s IED will necessarily deter prospective residents from entering into Residence and Care Agreements while the Debtors cases are pending. Allowing the residents to have a free look at whether or not the CCRCs are operating effectively while these cases are pending should drastically increase the willingness of potential residents to pay an IED. Because IEDs are critical to the Debtor Landowners’ operations, the provision regarding return of the IEDs should be amended in order not to discourage prospective residents from choosing to reside at one of the Debtors’ CCRCs.
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Even if the judge grants the motion, will these actions be enough to satisfy new resident’s concerns?
All documents on the Erickson Bankruptcy can be viewed on PACER for the North Texas Bankruptcy Court. If you register for an account (paid subscription), view case # Case 09-37010-sgj11, Doc 286 & 287.
