The long road to successful bankruptcy sale may be coming to an end soon for Henry Ford Village, a large CCRC in Dearborn, Michigan. New York-based Sage Healthcare Partners is the winning bidder with a $76.3 million offer. That is more than $6 million above the stalking horse price of $69 million, which submitted by MED Healthcare Partners last month in accordance with bid procedures approved by the U.S. Bankruptcy Court for the Eastern District of Michigan, Southern Division. The deadline for competing offers was set for April 30, and a court hearing to approve the transaction is scheduled for May 24.
We are exaggerating when we say this CCRC is large. Originally developed by Erickson Retirement between 1993 and 1998 on 35 acres, the property features 852 independent living units, 96 assisted living/memory care units and 89 skilled nursing beds. Henry Ford Village eventually filed for Chapter 11 bankruptcy protection in October 2020. The reason, we assume, was the low occupancy. The IL units as of November were at 69.0% and the healthcare units combined were at 66.2%. We do not know how much of this was COVID-related or other problems, because most CCRCs have outperformed the rest of the senior care market with regard to census during the pandemic. But we believe it was a combination of COVID and previous census difficulties.
RBC Capital Markets marketed the not-for-profit community. In addition to other outstanding liabilities, such as entrance-fee refunds ($34 million) and some wages and management fees, the debt outstanding is about $51.5 million, which is not too bad given the size of the community.
The key will obviously be to fill the IL units and collect those entrance fees. The entrance fees have ranged from $27,000 to $356,000, but the market has been competitive, and it is unclear whether they would have to come down (probably). About 89% of the units are entrance fee, while 10% are rental. Our estimate is that there are about 260 empty IL units, and given the economy and the pandemic, it will take a while to fill them. But, they represent up to $50 million of potential cash revenues. No wonder Sage Healthcare Partners wants the chance.
