Henry Ford Village, a 1,038-bed nonprofit continuing care retirement community (CCRC), has filed for Chapter 11 bankruptcy protection.
The spectre of financial distress has loomed over the senior living industry since Covid-19 began sweeping across the United States last spring, placing providers under enormous operational and financial pressure. Providers that were strained prior to the pandemic have been particularly vulnerable. Henry Ford Village is another case in point, as Covid-19 compounded existing financial challenges and created a “perfect storm” for the CCRC, according to court documents.
The CCRC campus is located on the site of Henry Ford’s birthplace in Dearborn, Michigan. The community was originally developed by Erickson Retirement Communities in the early 1990s, and was acquired by Henry Ford Village (HFV) in 1998. Des Moines, Iowa-based Life Care Services started operating the CCRC in 2010 and is still the management company.
Over the years, a number of challenges beset Henry Ford Village, which led to mounting entrance fee liabilities, according to the Chapter 11 documents. These challenges included increased competition; the 2008 housing crisis and Great Recession; and the bankruptcies of General Motors and Chrysler, which decreased the number of older adults who were able to sell their homes and move to HFV.
Henry Ford Village began facing legal actions from parties seeking repayment of their refundable entrance fees. A class action that was filed in 2014 resulted in a settlement agreement that was reached in principle in 2019, under which HFV and other defendants were to pay $800,000.
Such was the situation when Covid-19 struck. As the pandemic disrupted the capital markets, HFV was not able to complete a planned refinancing, while Covid-19 also drove up operational costs and hurt occupancy. In early October, HFV received a notice of default on its bond obligations. HFV filed a motion seeking relief from paying the class action settlement, and the court denied that motion on Oct. 22. This decision precipitated the Chapter 11 filing, according to court documents.
As of Oct. 28, Henry Ford Village had a total outstanding principal obligation on its bond debt of about $52.3 million.
Under bankruptcy protection, the CCRC intends to remain fully operational — on a pandemic footing — while undertaking a financial restructuring, which could include finding a strategic or financial acquirer or sponsor.
“This financial restructuring will allow us to achieve our goals while continuing to serve our residents with the highest level of service and care, and continuing to provide the resources, support and amenities they have come to enjoy and rely on while keeping COVID-19 safety protocols,” Executive Director Bruce Blalock said in a press release. “We are immensely grateful for our employees – who have worked tirelessly to transform our operations in light of the pandemic – and we are confident they will continue to engage residents in new, exciting and safe ways throughout this process.”