Henry Ford Village, a 1,038-bed nonprofit, nonprofit (CCRC) retirement community, has filed for Chapter 11 bankruptcy.
The specter of financial distress has hung over the senior housing industry since Covid-19 began sweeping across the United States last spring, placing providers under enormous operational and financial pressure. Providers who were strained before the pandemic have been particularly vulnerable. Henry Ford Village is another example, as Covid-19 has compounded existing financial challenges and created a “perfect storm” for CPAB, 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, began operating CCRC in 2010 and is still the management company.
Over the years, a number of challenges beset Henry Ford Village, resulting in increased entrance fees, according to the Chapter 11 documents. These challenges included increased competition; the 2008 housing crisis and the Great Recession; and the bankruptcies of General Motors and Chrysler, which reduced the number of seniors who were able to sell their homes and move to HFV.
Henry Ford Village has started to face legal actions from parties seeking reimbursement of their refundable entrance fees. A class action lawsuit that was filed in 2014 resulted in a settlement agreement that was concluded in principle in 2019, under which HFV and other defendants were to pay $ 800,000.
This was the situation when Covid-19 struck. As the pandemic disrupted capital markets, HFV was unable to complete a planned refinancing, while Covid-19 also pushed up operating costs and hurt occupancy rates. At the beginning of October, HFV received a notice of default on its bond obligations. HFV filed a motion for compensation for payment of the class action settlement, and the court dismissed that motion on October 22. The move precipitated the filing of Chapter 11, according to court documents.
As of October 28, Henry Ford Village had a total obligation outstanding on its bond debt of approximately $ 52.3 million.
Under the protection of bankruptcy law, CCRC intends to remain fully operational – on a pandemic basis – while undertaking financial restructuring, which could include the search for 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 enjoy and rely on.” while maintaining COVID-19 security. protocols, ”Executive Director Bruce Blalock said in a press release. “We are extremely grateful to our employees – who have worked tirelessly to transform our operations in light of the pandemic – and we are confident that they will continue to engage residents in new, exciting and safe ways throughout this process. . “