Erickson Retirement Communities, one of the biggest retirement community developers in the country, has filed for Chapter 11 bankruptcy protection. Reuters has more:
LLC, a U.S. retirement community developer, filed for Chapter 11 bankruptcy, and reached an agreement to sell its assets to Redwood Capital LLC, court documents showed.
In a filing with the U.S. Bankruptcy Court for the Northern District of Texas on Mon(d)ay, Erickson Retirement Communities listed both estimated assets and liabilities of more than $1 billion.
Maryland-based Erickson Communities, which was founded in 1983, currently includes 19 campuses and houses more than 22,000 people and has about 12,000 employees.
Erickson has 20 retirement communities around the country, according to their website. The Baltimore Sun reports on the reasons behind Erickson’s bankruptcy filing:
Erickson’s real estate arm, which acquires land for campuses and builds projects, has been hurt by the recession, as seniors who couldn’t sell existing homes put off moving to continuing-care communities.
The structure of the Erickson payments system, in which residents paid an upfront fee, also made the company vulnerable when the economy tanked…Seniors in Erickson communities generally paid their refundable entrance fees – ranging from $150,000 to upward of $400,000 – by selling their homes.
When the housing market collapsed, values declined and seniors either couldn’t sell their homes or didn’t feel they should, (investment expert Robert) Kramer said. “For most seniors, they still had an enormous appreciation compared to what they paid for their homes, but it wasn’t worth what it was two or three years ago and that is what they saw.”
Erickson was in the midst of large developments outside Maryland but couldn’t get seniors to put down the money to move in. When the credit markets collapsed, Erickson couldn’t restructure its loans.