At Oak Crest Village, a van pulls up to the Town Center entrance. (Baltimore Sun photo by Barbara…)
Just months after Erickson Retirement Communities filed for bankruptcy, the company's new owners say they are poised for expansion with the same business model that seized up along with the housing and credit markets last year.
Local entrepreneur Jim Davis, whose Redwood Capital Investments LLC bought Erickson for $365 million this month, said the Catonsville-based company is more financially sound than ever after wiping out most of its debt through the bankruptcy. That will enable Erickson to move forward in the next year with new housing at about a dozen of its existing communities that are not fully developed, he said.
Davis acknowledged that the company must reverse negative perceptions stemming from the financial collapse, especially among seniors who pay $400,000 or more to live in the retirement campuses. He must also continue to contend with an economy and real estate market that haven't fully recovered.
Erickson's emergence from bankruptcy represents a quick turnaround. It's also a new venture for Davis, whose success story started with the founding of Aerotek in 1983 with his cousin, Baltimore Ravens owner Steve Bisciotti. That company grew into Hanover-based Allegis Group, a $5.6 billion company that bills itself as one of the biggest staffing firms in the world.
In one of his first interviews since the Erickson sale was completed, Davis said last week that he intends to adhere to the vision that propelled the company for nearly three decades before the housing crisis halted rapid expansion of its neighborhood-style communities and forced it into bankruptcy.
"It has been through some difficult times but has come through remarkably well," said Davis, who will serve as chief executive at Erickson. "I'm very optimistic about the long-term growth potential of the industry and this company. … This company is more strongly positioned than any other in the industry."
Experts say that even though real estate development sparked Erickson's financial troubles, the company is healthy enough to take on new projects. Erickson has a competitive advantage to fill pent-up demand, and there's a growing need for senior housing that offers a range of medical care and living options as baby boomers reach retirement, experts said.
"There are incredible development opportunities at all those [Erickson] sites," said Robert Kramer, president of the National Investment Center for the Seniors Housing & Care Industry. He said a number of additional units could be built that had been planned in phases or been halted when the economy tanked.
"With the expectation of very little new supply coming out in the industry overall — because there's just no construction financing — they have an opportunity," Kramer added.
Davis said his investment firm Redwood Capital didn't use debt financing to purchase Erickson, and post-bankruptcy the company is in an "an extraordinarily strong position financially."
Long-term demographic trends also bode well for the company. Company officials point out that the population of seniors age 65 and older is projected to grow 60 percent, to 63.9 million people, in the next 15 years, when that segment of older Americans will make up nearly 18 percent of the population.
Davis has traveled to all 19 Erickson communities across the country in recent months, speaking with employees and residents and taking a look at facilities. Ruth Pundt had one burning question for the new owner when he stopped by Oak Crest Village in Parkville.
As a resident for 14 years of the independent-living portion of Oak Crest, a 90-acre campus that Erickson developed and manages, Pundt said she felt secure about her investment even during the bankruptcy but she wondered about Davis' commitment to providing the services and amenities she has come to expect.
Oak Crest is made up of brick apartment complexes clustered around clubhouses set on manicured lawns. Residents can move to assisted or nursing care if needed. Pundt's lifestyle means filling her days with clubs and activities, managing the community's thrift store, hosting TV shows for an Oak Crest channel and dining out on site every night. Many of her friends work out in the gym, tend garden plots or enroll in classes.
She said Davis reassured her when he met with members of the community's resident advisory council. "We feel Mr. Davis is going to maintain the same quality of care we're receiving," said Pundt, 74.
Erickson was founded 26 years ago by John Erickson, who is credited with pioneering the large, campus-style continuing care communities where residents pay a refundable entrance fee. Its Maryland communities — Charlestown in Catonsville, Oak Crest and Riderwood in Silver Spring — have been completely built out and purchased by independent not-for-profits set up by Erickson.