A senior housing care firm was the successful bidder in an auction to buy the bankrupt The Clare at Water Tower luxury condominium project located on Loyola University Chicago’s Water Tower Campus.
The acquisition was led by Senior Care Development, out of Harrison, N.Y., which ended up paying $53.5 million in cash along with agreeing to assume liabilities that include approximately $57 million in existing resident contracts, according to Senior Care News.
While Loyola owns the land beneath the high-rise at 55 E. Pearson St., it always maintained it faced minimum liability during the bankruptcy.
“By being the winning bidder, we ended up with a beautiful CCRC which is really highly unique and probably the best-located, most magnificent community in any urban setting that I know of in the country,” says David Reis, CEO of Senior Care Development, told Senior Care news. “The Clare is going to be the jewel in our crown.”
Here is a portion of the Senior Care News story:
As the stalking horse bidder, Senior Care Development worked with the Clare’s not-for-profit sponsor the Franciscan Sisters of Chicago and Houlihan Lokey, whose Healthcare Group was hired to restructure the luxury community, and was able to solve many of its problems, which Reis says “allowed the debtor to maximize value at an auction setting.”
By taking on the resident contract liability, all of the Clare’s current residents are guaranteed a 100% refund on any money due to them upon leaving, Reis says, adding that through the bankruptcy and restructuring process, none of the residents have lost a dollar.
Reis says his company helped write an addendum to the resident agreement which all existing residents will sign, reaffirming their refunds and allowing the new ownership to offer a different contract to prospective residents that is “more in line with normal industry standard” after a previous agreement (which delayed refunds until other unoccupied units were sold) that Reis calls “off-mark.”
The new policy will refund a resident’s entrance fee when that particular unit has been resold, and Reis says he’s confident in the Chicago Senior Care partnership’s ability to put the community on the right track.
The new owner also plans to offer a variety of refund structures. The current plan is predominantly a 90% refund structure, says Reis, but new options will include a 50% refund-of-capital plan and a 0% refund plan. “By doing so, we’ll be able to push down the average entrance fee to a level that we think will be highly attractive,” he says.
“The problems the Clare had are all solvable,” Reis told SHN. The plan is to lower apartment prices to a “market-correct” level with price points a minimum of 20% less expensive than what they’re at right now, while maintaining current standards. “It will still be luxury, 100%,” he says. “That’s the market we’re serving, and that we expect to continue to serve.”
The high-rise’s issues have been financial in nature, not operational, and Reis says the goal is to attract prospects at a lower price point who are looking for a high-end style of living; he hopes a lower price point will give the Clare a competitive edge over nearby The Admiral at the Lake.
Buying the Clare at such a discounted price—its development cost sponsor Franciscan Sisters $272 million—allows Chicago Senior Care to “pass the discount on” to residents, says Reis.
At time of sale, the community’s skilled nursing, assisted living, and memory care units were “doing well,” according to Reis, likely because there’s “not a whole lot” offering similar services in downtown Chicago. But the independent living is only about 35% occupied, and that’s where the new venture is hoping to attract new business.
For now, Chicago Senior Care is focusing on transitioning ownership and management of the building, and will take possession in about 60 to 90 days, pending normal regulatory requirements.
“We look forward to working with the Franciscans as we transition from their ownership to ours; they’ve been nothing but professional through this whole process, and we expect smooth sailing,” Reis says.