A Chicago area continuing care retirement community has exited a 15-month Chapter 11 bankruptcy process with a reduced debt load, a new operator and a $5 million capital improvement plan in place for 2021.
Clare Oaks, located in the suburb of Bartlett, emerged from bankruptcy on November 6, 2020, the community announced in a statement. The CCRC entered Chapter 11 bankruptcy protection on June 11, 2019, seeking to restructure $86 million in debt. The community opened in 2008.
During the bankruptcy process, Clare Oaks’ creditors committee fought with its primary bondholders — private equity firm Lapis Advisors and Amundi Pioneer Asset Management — over its future. Last July, a federal judge ordered the two sides to restart negotiations, and a restructuring agreement was reached last August.
Under the terms of that agreement, Dallas-based ER Senior Management will operate the community. The group, also known as Evergreen Senior Living, operates four CCRCs in Texas. The two parties agreed to reduce the debt load to $46 million, and the bondholders have agreed to put up $5 million for capital improvements.
“The goal of this rigorous process was to reduce the burden of unrealistic long-term debt, an all-too-common phenomenon among CCRCs opened earlier this century, and to infuse fresh capital for a series of improvements,” Julie Boggess, chair of Clare Oaks’ new board of directors, said in a statement.
The board and ER Senior Management named Tim Lynch as Clare Oaks’ new executive director. He comes from The Craig, an Evergreen Senior Living CCRC in Amarillo, Texas and has 20 years experience in the long-term care industry.
The main project involves converting 60 skilled nursing units into 32 assisted living units, Evergreen Senior Living President and CEO Chris Coates told Senior Housing News.
Other improvements include adding a second dining venue in the form of a bistro, renovating Clare Oaks’ main lobby to double as an activity center and encourage better social interaction, and deferred maintenance.
Once the town of Bartlett approves of the plan and permitting is in place, the improvements are expected to be completed by the first quarter of 2022 at the latest, Coates said.
Clare Oaks is exiting bankruptcy as another suburban Chicago area CCRC enters Chapter 11 protection for the second time in five years. Last month, Park Place of Elmhurst in Elmhurst, Illinois filed for Chapter 11 protection after defaulting on $15.5 million in bond debt issued by the Illinois Finance Authority in 2016. The community, operated by Providence Life Services in Tinley Park, Illinois, has $141 million in debt on its ledger.
The 2016 bonds were supposed to be paid from initial move-in and turnover entrance fees. But a slower than expected turnover in occupancy has occurred, and entrance fee revenues have decreased as a result.