The recession has been tough on just about everyone. Businesses, hospitals, even entire cities have been filing for bankruptcy protection to try to save their assets. The newest headline in bankruptcy, however, is “More Nuns in Bankruptcy Court.” This headline is referring to a story reported by Business Week, concerning a retirement community in Chicago. The community, called Clare Oaks, has made headlines due to its unlikely owners; the Sisters of St. Joseph of the Third Order of St. Francis.
This bankruptcy is now the third bankruptcy filed by nuns in the past two months. The Clare at Water Tower has filed for Chapter 11 bankruptcy after defaulting on municipal bonds back in September. It seems the decision to default was made in advance, as the living facility’s assets and liabilities were both right around $500 million when they no longer could pay. The bond debt is now $229 million.
The economy is mostly to blame for the company’s bankruptcy, as prospective senior residents are having problems selling their homes and have lost significant amounts of retirement funds. The sluggish economy is making it difficult for many seniors to get started on their retired lives.
The Clare is currently on a 99-year lease on land owned by Loyola University, which is The Clare’s largest unsecured creditor. The University is currently owed over $1.5 million in rent. Other unsecured creditors who may not see their full debt paid are the city of Chicago for a $450,000 development obligation as well as a private Development company in Texas for $350,000.
The Clare ran into financial trouble before opening in December 2008, when it had deposits for 220 of its 248 living units. The 62+ retirement and health-care facility took out a $29 million municipal bond offering from the Bank of New York Mellon Corp. to complete the project. Unfortunately, the recession hit even harder and over half of the promised residents had backed out of their agreements. As of November 1st, 2011 only 82 units were occupied. This gave the 53-story high-rise and occupancy rate of only 33%.
The Clare is hoping to continue operating, and is seeking court approval to borrow up to $12 million from Redwood Capital Management. While this bankruptcy may be a last attempt at saving the senior living facility, the units are still not selling, leaving The Clare’s monthly working capital very low. For more information about bankruptcy news, click here.