Indiana CCRC Leans on New Fee Model After Chapter 11 Bankruptcy Filing

An Indiana continuing care retirement community (CCRC) with $14 million of outstanding debt is leaning on Chapter 11 bankruptcy protection as well as a new fee model for independent living residents to help meet the community’s financial obligations.

River Terrace Estates, a CCRC located in Bluffton, Ind., on Tuesday filed for Ch. 11 in the U.S. Bankruptcy Court for the Northern District of Indiana, citing inability to satisfy its long-term debt in the aftermath of the Great Recession.

Opened in 2003, the owners of the 501(c)(3) not-for-profit CCRC in 2008 sought the leadership of Continuums Foundation, a nonprofit corporation that specializes in operating, acquiring, repositioning and developing large-scale senior housing campuses.


Despite the nonprofit group’s efforts to stabilize River Terrace Estates in the last six years, it has not been able to satisfy the CCRC’s long-term debt obligations, says Continuums Foundation CEO David Stewart.

“It was a combination of things,” Stewart told SHN. “Primarily, it was trying to recover from the Recession and the way the housing market was hit in this portion of Northern Indiana.”

River Terrace Estates (RTE) has approximately $14 million in municipal bonds outstanding.


Contrary to some CCRCs that rely heavily on institutional investments, River Terrace Estates’ financing encompasses roughly 1,400 individuals who own RTE bonds. As a result, the CCRC determined that Ch. 11 was the only feasible method to restructure the bonds. In connection with the filing, the CCRC has already filed a plan of reorganization in order to expedite the process, River Terrace Estates stated in a news release.

“Because we have some 1,400 bondholders, we decided the best way to give them a voice in this process is to ask them to vote on a two-part plan so we know their intentions,” Stewart said.

RTE bondholders will be asked to vote on whether they want to keep their bonds for the long-term based on the community’s recent progress, or market the CCRC to validate its value.

In either path, bondholders will take a serious haircut, perhaps recovering only 53% in a bond exchange, or $0.46 on the dollar in a sale of the facility, a hard hit on predominantly non-institutional investors, says George Mesires, a partner in the Chicago office of Faegre Baker Daniels law firm.

“This case is unlike many of the recent CCRC bankruptcy cases because of the high number of retail bondholders,” Mesires said. “Without a clear mouthpiece for the bondholders, it may be difficult to gain consensus.”

Continuums Foundation is optimistic that a new pricing option for independent living at River Terrace Estates will help the community in meeting its outstanding debt.

Rather than paying the typical entry-fee that can range anywhere between $55,000 to a little over $100,000, River Terrace Estates residents who are “healthy, vital” adults over age 62 can pay a non-refundable community fee of about $30,000, according to figures provided by Stewart.

“A positive response to our new rental option for independent living makes our retirement community available to more seniors in our area,” stated Nicole Melching, River Terrace Estate’s executive director since October 2013. “This new option will accelerate our growth in occupancy, which also will help repay our bond obligations.”

During the reorganization, the community will continue to operate with residents’ contracts and employees’ compensation safeguarded, River Terrace Estates said in a release.

One of these safeguards includes protecting entry fees for most recent residents in an escrow account while the community goes through debt restructuring.

“It demonstrates that people’s entrance fees are protected,” Stewart said. “It gives added security and comfort in demonstrating that their investment in River Terrace Estates was safe. We also felt that was an important action step in our commitment to new residents.”

Written by Jason Oliva

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