Christian Care Communities & Services (CCC&S), a not-for-profit, faith-based organization that operates three CCRCs in the Dallas, Texas area, filed for Chapter 11 bankruptcy following several years of operational and financial difficulties. In addition, there is already a stalking horse bidder lined up for a bankruptcy sale of the three Dallas communities and the company’s assets. North Texas Benevolent Holdings, LLC, an affiliate of McFarlin Group, agreed to a price of $44.25 million, or $58,200 per unit, with a sale expected later in the third quarter.
In addition, North Texas Benevolent Holdings announced that it plans to lease the communities to affiliates of the not-for-profit Boncrest Resource Group, honoring all resident contracts, deposits and entrance fees in the process. Founded in 2017, Boncrest made its first foray into seniors housing in 2021 when it took over the last two entrance fee CCRCs in the Brookdale Senior Living/Healthpeak Properties joint venture. They were located in Missouri and Indiana and comprised 434 units and 457 units, respectively.
Meanwhile, the three Dallas-area communities are located in Mesquite, Fort Worth and Allen, and total 760 units. There were several capex projects planned in 2020, but CCC&S delayed those due to lack of funding. Occupancy then dropped precipitously during the pandemic, and the organization failed to pay the principal payments on its bonds due in March 2021. Then, in April 2021, Fitch Ratings downgraded the organization to a D rating. Currently, the organization holds about $50 million of outstanding municipal bonds.
CCC&S engaged Houlihan Lokey in July 2021 to evaluate strategic alternatives and provide advisory services in connection with a financial restructuring, merger or ultimate sale. After Houlihan Lokey reached out to a number of interested parties, the eventual stalking horse bidder submitted an LOI in March. Included in the sale would be the three communities, two plots of excess land, and the assets of a hospice business, a home health business and an outpatient therapy business.
To complete the sale, CCC&S officially filed for Chapter 11 bankruptcy protection on May 23, 2022 in the Northern District of Texas. Plus, as part of the process, CCC&S secured debtor-in-possession financing to fund the communities through the bankruptcy cases and will stay on to operate until Boncrest takes over.
McFarlin Group announced its intentions to acquire distressed seniors housing assets in late 2020, when it was in the process of raising about $100 million for its Opportunistic Senior Living Fund I, LP, with the goal to acquire these distressed assets at deep discounts (as much as 50% of par value of the loan), hold them for a period of roughly five years and then selling. The firm also said it would focus on states where overdevelopment was most pernicious, which would have to include the Dallas deal and its acquisition of four stand-alone memory care communities in the Houston area last month.
CCC&S still has to consider other bids in the next few months, so the deal isn’t done yet, but we imagine distressed deals like this could become more common as lenders lose patience post-COVID and expenses soar.
