A continuing care retirement community in suburban Chicago filed for Chapter 11 bankruptcy protection last week, after defaulting on a portion of its $141 million in debt.
Park Place of Elmhurst in Elmhurst, Illinois defaulted on nearly $15.5 million in bond debt issued by the Illinois Finance Authority in 2016, a document filed in the Northern District of Illinois bankruptcy court indicates. This is the second time in the past five years that the CCRC has filed for bankruptcy protection.
Park Place of Elmhurst is owned and operated by Providence Life Services, a Tinley Park, Illinois-based nonprofit provider of 11 CCRCs.
“This process fortifies Park Place as a financially stronger community,” Park Place Chairman Rich Van Hattem said in a statement published by Crain’s Chicago Business. “At this time, Park Place’s occupancy is very stable and above national averages. All refundable entry fees have been paid, as promised, to former residents or their estates. Park Place continues to honor employees’ compensation and benefit programs. All our vendors are paid in a timely manner.”
The 2016 bonds were supposed to be paid from initial move-in and turnover entrance fees. However, a slower than expected turnover in occupancy has occurred, and entrance fee revenues have decreased as a result.
Additionally, Park Place applied in April for nearly $1.4 million in Paycheck Protection Program (PPP) funds under the CARES Act. The application was approved and the funds were received in May, triggering a default under the 2016 restructuring requiring the CCRC to transfer any gross revenues to the bond trustee.
Park Place reported $15.7 million in total operating revenue as of October 30, $4.7 million in net income before debt service and a net loss of nearly $1.9 million. It listed total assets of $135.4 million against $241.1 million in liabilities.
As of December 15, Park Place of Elmhurst owed $141.1 million in outstanding principal stemming from the 2016 debt issuance.
The community previously filed for bankruptcy in January 2016, seeking to restructure over $146 million in bond debt issued for the campus’ construction in 2010. Court documents revealed that Park Place made timely payments on the “A” and “B” bond debt. With the “C” tranche, however, it paid a single $23,126 interest payment in May 2017, and has never been able to generate excess revenue to further service the principal or interest on the bonds.
The community soon found itself struggling to service the “B” tranche of bond debt, which was supposed to be fully redeemed by May 15.
The filing reveals that a restructuring term sheet is being negotiated which should allow Park Place to exit bankruptcy in roughly four months, after approval. Under the terms of that agreement, the current bond holders will exchange the outstanding debt with $107.3 million in new bond issuance. Park Place will also be required to deposit an additional $3 million in a liquidity fund for payment of monthly interest or principal, and for payment of operating expenses as needed.
The restructuring plan will honor all residents’ contracts, protect Park Place’s vendors and employees’ compensation and benefits. Providence Life Services will continue to own the campus after the restructuring is complete.
“We are confident in this process because it protects the future of our residents and community while it provides more beneficial bond terms for Park Place, ” Van Hattem said in a statement provided to Senior Housing News.
Another Chicago-area CCRC, Clare Oaks in Bartlett, Illinois, filed for Chapter 11 protection in June 2019. Last August, the community and its bondholders reached a restructuring agreement on how to exit bankruptcy.
Under the terms of the agreement, Clare Oaks will be managed by Evergreen Senior Living Properties LLC, an operator of a portfolio of several CCRCs in Texas. The plan also calls for $5 million in deferred capital improvements, converting 60 skilled nursing units to 32 assisted living units, and independent living residents would be asked to modify their residency agreements related to when entrance fee refunds are paid. This is intended to prevent future liquidity crunches.