Seniors having trouble selling their homes are seniors who can't move, so Erickson Retirement Communities rolled out a plan of attack last year: personal moving consultants to help prospective clients find buyers in the toughest housing market in decades.
It's starting to pay off now, the company says. Seniors are moving into 200 to 300 of its apartment homes a month, up more than 10 percent from a year ago, said Tom Neubauer, executive vice president of sales.
But that improvement - after several years of worsening economic conditions - wasn't quick enough to prevent the Catonsville-based senior-living provider from filing for bankruptcy protection this week in order to reorganize. Erickson, which has 19 large "continuing-care" communities across the country, said it needs to restructure debt and separate its management and real estate businesses into separate companies. That will allow a sale to Redwood Capital Investments LLC in Hanover, the company said.
"We had to make very difficult decisions this year to maintain those high levels of services so residents aren't affected," said Mel Tansill, a spokesman for Erickson.
The 23,000 residents shouldn't be affected by the bankruptcy filing and planned sale, the company reiterated Tuesday. Their deposits are safe, said Bruce R. "Rick" Grindrod Jr., Erickson's president and chief executive. Residents make sizable deposits when they move in - in the Baltimore area, the entrance fees range from $100,000 to $400,000 - and the money is due back to them or their heirs when they leave or die.
Their contracts are with nonprofits that operate Erickson's communities, not with Erickson, and are not part of the bankruptcy proceedings, Grindrod said.
The company expects to emerge from Chapter 11 and complete the sale by the end of March, Grindrod added.
For Erickson, a tough housing market and tight lending came at a bad time - just as it was expanding rapidly. It opened eight retirement communities in the past four years, according to the Ziegler Companies, a financial services firm.
The senior-living industry has performed well despite the downturn, but new communities are struggling to fill empty spots, said David Schless, president of American Seniors Housing Association, a trade group whose members finance, develop or operate all types of senior housing. He described Erickson as "one of the most aggressive developers in the recent history of the industry."
"That was a strength, but it became a weakness when not only were those projects not built and filled at the rate they were before, but the credit markets shut down and they couldn't refinance," said Bob Kramer, president of the National Investment Center for the Seniors Housing & Care Industry.
Erickson's lenders wrote move-in targets into the construction-loan terms. As the number of move-ins declined, the financiers declared the company in violation. Grindrod said the company tried negotiating, but it was having a difficult time hammering out restructuring agreements. It has nearly 50 lenders.
One development in Ohio went into foreclosure shortly before it was to have opened in August. All deposits were refunded to people who had planned to move in, Grindrod said.
"The key bank ... decided that they did not want to go forward with a working-capital loan that was necessary to launch the operations at that campus, nor did they want to continue with the construction loan to complete the construction of that campus," Grindrod said. "With no other choice, we did not object to their foreclosing on that project."
Because Erickson's Baltimore-area communities opened long before the housing slump, they have high occupancy rates and strong financial positions, he said. Charlestown in Catonsville - Erickson's first community - opened in 1983. Oak Crest in Parkville opened in 1995.
Both are built out. Many of Erickson's newer communities are not. The company intends to add more buildings, but it stopped construction at some locations last year and everywhere else this year as economic troubles mounted. All the halted construction projects were outside Maryland.
"I expect things are going to get dramatically better when Redwood takes over, because they have the capital capacity to ... resume construction of buildings at developing campuses when the economy turns around," Grindrod said.
Jim Davis, who controls Redwood Capital, is the majority owner of Hanover-based staffing firm Allegis Group. He did not return calls seeking comment Monday or Tuesday.
Erickson pioneered the idea of large, 1,000-unit retirement "campuses," providing the economies of scale to offer amenities such as pools, fitness centers and restaurants affordable to middle-class residents. The company was also the first to offer refundable entrance fees, Kramer said.
