A Houston-based continuing care retirement community (CCRC) is the latest campus to file for Chapter 11 bankruptcy protection, as it aims to restructure $140.3 million in bond debt.
The CCRC, The Buckingham, cited pressures stemming from multiple challenges including Hurricane Harvey in 2017 and the coronavirus pandemic, which impacted the community’s ability to attract new residents and generate revenue in order to cover expenses and pay debts.
Furthermore, The Buckingham defaulted on some of its debt obligations. The filing was recorded in U.S. Bankruptcy Court for the Southern District of Texas on June 25.
CCRCs generally have proven resilient during the pandemic. On Monday, Fitch Ratings issued a report noting that strong residential real estate markets and healthy consumer demand have created tailwinds for the sector.
Still, some CCRCs — also known as life plan communities — have struggled and filed for bankruptcy in order to restructure after the pandemic placed strains on operations, or exacerbated existing struggles.
Built in 2005 in Houston’s affluent River Oaks neighborhood, The Buckingham is an entrance fee-based campus that was once part of a portfolio of CCRCs owned by Senior Quality Lifestyle Corporation (SQLC). When that company affiliated with Lifespace Communities in 2019, the Buckingham disaffiliated and struck out on its own with an independent board constituted with members experienced in bankruptcy and restructuring who recognized the headwinds the community faced.
The Buckingham is managed by Greystone Management Services, which also handles the marketing for the community. It consists of 303 independent living residences, 67 assisted living units, 33 memory care units, and 92 skilled nursing residences. As of June 23, the occupancy rates were 71% for assisted living, 62% for independent living, 57% for skilled nursing and 45% for memory care.
Construction was financed with tax-exempt bonds issued through the Tarrant County Cultural Education Facility Finance Corporation. The current bond trustee is UMB Bank. As of the petition date, $140.34 million in principal remained outstanding related to the bond debt, plus $16.3 million in interest.
The Buckingham claims $198.2 million in assets versus $345.1 million in liabilities, including $130.4 million in contingent entrance fee refunds, according to the filing.
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The restructuring plan, if approved, will continue operations without impacting residents; restructure the debt to better align with projected cash flows; and pay in full outstanding resident fee obligations. Additionally, the community would receive a $28.5 million cash infusion to fund reserves and fund necessary capital improvements.
“We’re incredibly optimistic that this difficult but prudent step to refinance our debt will put our community on a future path that’s stronger than ever,” Michael Wyse, board chairman for The Buckingham, said in a statement.
Earlier this month, The Amsterdam at Harborside in Port Washington, New York filed for Chapter 11 bankruptcy protection for the second time in seven years, with a pre-negotiated plan to restructure $199.5 million in bond debt.
Park Place of Elmhurst, in the Chicago suburb of Elmhurst, Illinois, filed for Chapter 11 protection in December 2020 after defaulting on $15.5 million in bond debt issued by the Illinois Finance Authority.
Henry Ford Village, a CCRC in Dearborn, Michigan, is poised to exit bankruptcy after a court approved a $76.3 million acquisition bid by an affiliate of Sage Healthcare Partners.