The Chapter 11 bankruptcy saga of a Dallas, Texas CCRC is heating up, with the landlord in the case recently claiming the operator’s plan forward was something out of a “Disney fairy tale.”
Attorneys on behalf of Intercity Investment Properties filed a motion to dismiss the Chapter 11 case brought by Dallas, Texas-based continuing care retirement community (CCRC) Edgemere, highlighting perceived flaws with the operator’s plan forward after the initial bankruptcy filing this spring.
“While like any good story, there are figments of truth, but the plan reads more like a Disney fairy tale—describing a fictional world in which the debtors wish to live, rather than the real world in which the debtors operate,” the motion to dismiss the Ch. 11 bankruptcy plan reads.
Legal news publication Law360 first reported on the case’s latest development.
Intercity Investment Properties takes issue with the fact that it views the Edgemere bankruptcy plan as hinging on a “successful outcome that is untethered to legal or economic realities.”
Among other projections, the bankruptcy plan assumes Edgemere returning to a net operating income of roughly $780,000 in 2024. But based on Intercity Investment Properties’ projections, the community’s net operating income won’t turn positive until 2025.
“The grim reality is that the debtors are hemorrhaging cash, squandering resources and lack sufficient funds to operate in Chapter 11 under their current DIP loan,” the court filing reads.
Edgemere filed for Chapter 11 bankruptcy in April after reporting over $112 million in debt citing issues caused by the Covid-19 pandemic and Winter Storm Uri. Edgemere also sued Intercity and its agent Kong Capital, alleging breach of contract, fraud, and interference with business, and civil conspiracy, among other claims.
With the current bankruptcy proposal, Intercity claims it would give current residents of Edgemere a “false sense of security” that deposits previously paid were secure. The community’s refinancing is based on an outcome where Intercity is entitled to $20 million until the lease expires in 2049 or is extended by 25 years with a rent reduction to $2.2 million annually, the motion states.
In the filing, Intercity also claims that Edgemere faces nearly $6 million in accrued liabilities, over half of which, $3.14 million, were from accruing additional post-petition expenses.
West Des Moines, Iowa-based Lifespace Communities is a nonprofit organization that owns and operates 14 CCRCs across seven states. The operator affiliated with Texas-based Senior Quality Lifestyles Corporation (SQLC) in 2019, a move that brought Edgemere into its portfolio.
Edgemere is not the only Dallas-based senior living community facing financial trouble, with multiple properties at varying stages in the Chapter 11 bankruptcy process.
Another Texas-area CCRC, The Buckingham, also filed for Chapter 11 bankruptcy protections in 2021 following challenges faced since a deadly hurricane in 2017 and the pandemic.
And in April, a court OKed a Chapter 11 bankruptcy plan for American Eagle Delaware Holding Company and its subsidiary Eagle Senior Living.
In July, a stalking horse bid of $45 million was made by the McFarlin Group of Dallas for three Christian Care Communities and Services in ongoing Chapter 11 proceedings.
Senior living communities represented the largest portion of delinquencies reported by municipal bond issuers in the first quarter of 2022, showing it is “was the most poorly positioned sector to withstand the pandemic,” according to an April 15 report by Moody’s Investors Service.