By Eliot Somen
Loyola University Chicago says it faces little financial risk in the bankruptcy proceedings of The Clare at Water Tower, an upscale residence for the elderly, built on land owned by the university.
The Clare recently filed for Chapter 11 bankruptcy protection after defaulting on bond debt of $229 million. The 53-story building at Loyola’s Water Tower Campus houses the university’s School of Communication.
Wayne Magdziarz, Loyola’s vice president of capital planning, said the university faces minimal financial exposure to its 99 year land lease with The Clare.
“Loyola has a strong ground lease with the Clare,” Magdziarz said. “We are in touch with the Clare as they go through this difficult period. None of their financial issues impacts our ground lease nor our university space (School of Communication) in the building.”
Loyola is the largest unsecured creditor with $1.54 million in unpaid rent, but the university has agreed to defer payments while The Clare reorganizes, Magdziarz said.
“Knowing that The Clare was facing difficulty several months ago, Loyola agreed to defer some of their ground rent to later in the lease term (which is 99 years). We are continuing to monitor their situation to ensure that our ground rent will re-commence according to our agreed schedule,” Magdziarz said.
The Clare, a retirement and health-care facility for people over 62, opened in December 2008. Before opening, it had deposits for 220 of its 248 independent living units, Bloomberg/BusinessWeek reports. As of Nov. 1, 82 units were occupied, an occupancy rate of 33 percent, according to court papers.
Construction of the 53-story building at 55 E. Pearson St., on Chicago’s Gold Coast, was funded by a $229 million municipal bond offering. Bank of New York Mellon Corp. is the trustee for the bonds. Bank of America Corp. provided the Clare with a $137.5 million letter of credit, Bloomberg/BusinessWeek reports.
The residence seeks court approval to borrow as much as $12 million from Redwood Capital Management LLC while in bankruptcy, according to a court filing.
“Redwood has stepped in as the Debtor in Possession (DIP) financing source to provide capital (and therefore time) for the Clare to operate and organize a restructuring plan. Redwood’s DIP financing will be used to cover operating costs for The Clare while they remain in Chapter 11,” Magdziarz said.
Revenue has fallen at The Clare amid the U.S. economic slowdown, Judy Amiano, chief executive officer of Clare’s developer, Franciscan Sisters of Chicago Service Corp., told Bloomberg/BusinessWeek.
“Prospective senior residents are having difficulty selling their homes and have lost significant amounts of their retirement funds in the financial market, making it difficult, if not impossible, for them to move into or remain in senior housing facilities,” Amiano said in court papers.