A continuing care retirement community (CCRC) in Philadelphia is currently seeking a debt reorganization or a sale following its recent filing for Chapter 11 bankruptcy protection.
Doing business as Deer Meadows Retirement Community, non-profit organization The Baptist Home of Philadelphia (BHP) filed for Ch. 11 bankruptcy on April 25 after a number of factors prevented the entry-fee CCRC from being able to service its debt obligations.
The greatest contributors leading to the Chapter 11 filing had to do with a $23.38 million bond debt the organization took on in 1998 compounded with additional debt acquired between the years of 2003 and 2008 when the CCRC had taken out some loans for further capital improvements, BHP President and CEO Lisa Sofia told SHN.
“We’re dual tracking our Chapter 11,” Sofia said. “We’re still looking for a reorganization of debt and we’re looking for a sale at the same time.”
Deer Meadows, which is home to 491 residents in Northeast Philadelphia, is owned and operated by BHP, a 501(c)(3) tax-exempt nonprofit corporation formed in 1869. The CCRC offers 126 living accommodations for independent and personal care, as well as 206 skilled nursing beds.
The $23.38 million in bond debt Deer Meadows took in 1998 went towards the development of a new nursing home on campus featuring 135 beds and was also used toward renovating an existing nursing home space into 78 personal care units, according to bond offering documents.
While $23 million was appropriate bond debt at that time in 1998, Sofia says, it was additional debt, including two Beneficial Bank lines of credit totalling approximately $8.13 million, as well as an extra $7 million to expand several apartments that brought PHB to the Chapter 11 filing.
“Between the bond debt and the added on bank debt, the organization was heavily leveraged in debt,” Sofia said.
The economic downturn, a 14% reduction in Medicare reimbursement and stagnant Medicaid reimbursement in Pennsylvania were other contributing factors leading to the Ch. 11 filing, too, Sofia said, as many prospective residents were unable to sell their homes during the recession.
But now that the organization has filed for bankruptcy protection, it remains optimistic as it continues to entertain the potential sale of Deer Meadows while simultaneously seeking reorganization of debt.
“Deer Meadows will be able to continue its mission long into the future,” Sofia said. “The organization was given the ability to turn itself around so it could be in a position to have potential buyers.”
Right now, BHP is going through several hearings and motions it has filed in wake of the Chapter 11 and is working closely with KPMG LLP, which the organization hired to find prospective buyers for Deer Meadows.
“At the same time, we’re fully operational,” Sofia said. “Residents are our number one priority. We’re very grateful that the organization will continue operating and that residents and staff will continue operating, too.”
Written by Jason Oliva