A high-end continuing care retirement community in Florida has defaulted on its $158.2 million mortgage loan, and the state Department of Financial Services’s Division of Rehabilitation and Liquidation is in the process of being appointed as receiver for purposes of rehabilitation, according to court documents.
Devonshire at PGA National, LLC, the community’s owner, is a Delaware limited liability company formed in November 2006 as a wholly-owned subsidiary of Devonshire PGA Holdings, LLC, which in turn was a wholly-owned subsidiary of SHP Senior Living Investments, LLC. Craig Andersen is listed as the managing member at Devonshire at PGA National, LLC and founder of SHP Senior Living Investments.
The company was formed to buy The Devonshire at PGA National, a CCRC located in Palm Beach Gardens, Fla., in a $165 million acquisition that closed on May 1, 2007. The community consists of 327 independent living units, 70 skilled nursing beds, 21 assisted living units, and 19 dementia care units.
At the time of the acquisition, the community was close to 97% occupied, according to The SeniorCare Investor, and much of its annual cash flow was derived from entrance fees that ranged between $222,000 and $687,000.
GE Business Financial Services ended up with the community’s term loan after acquiring most of the assets of the former Merrill Lynch Healthcare Finance, which had provided $181.2 million in financing for the acquisition.
The loan balance for the Devonshire at PGA National, LLC became due and payable on April 30, 2012, according to court documents, which say financial statements submitted by the community’s owner “reflect that Respondent did not have the funds to pay off the loan at that time.”
Since its 2007 acquisition, the community’s occupancy has dropped to about 77%, state filings show.
On May 7, GE Business Financial Services served a notice of default to Devonshire demanding immediate payment of the entire principal balance, along with interest and all leases and rents due to the community.
The Florida Office of Insurance Regulation said it had “determined that [the Devonshire] is insolvent or about to become insolvent,” the document reads.
Under certain Florida statutes, insolvency renders further transaction of business as a CCRC to be “hazardous to its residents, policyholders, creditors, stockholders, or the public” and is grounds for being placed in a receivership.
On May 14, the Florida Department of Financial Services requested the Second Judicial Circuit to order the Devonshire to show cause as to why it shouldn’t be in state-receivership. It also petitioned to launch an investigation into the CCRC’s financial affairs, requiring full compliance and cooperation.
Subsequently, Devonshire was ordered on May 31 to appear before a circuit judge on July 9, 2012, “to show good cause if any there may be, as to why the Department should not be appointed Receiver of Respondent for purposes of rehabilitation” in accordance with certain state statutes.
More information can be read at the Division of Rehabilitation and Liquidation.
Written by Alyssa Gerace