Residents owed $130 million after their senior living community went bankrupt are poised to suffer big losses but won't be left empty-handed under a sale agreement approved by a New York federal court.
Current and former residents of The Harborside, a 329-unit continuing-care retirement community in Port Washington on Long Island's North Shore, are anticipated to receive an initial $6 million distribution after a sale of the facility for $86 million to Chicago-based private equity firm Focus Healthcare Partners, according to a plan approved by a bankruptcy court on Thursday.
They would also get additional distributions including as much as $36 million in the next one to two years after the senior home's affiliate, Amsterdam Nursing Home Corp., sells its skilled-nursing facility on New York City's Upper West Side.
The accord is a bittersweet victory for the home's residents.
The senior citizens put down hundreds of thousands of dollars or more in exchange for an apartment and unlimited health care and were promised as much as 90% of the entrance fee refunded if they moved or died. The facility's bankruptcy, however, voided those contracts, and the residents were at risk of losing everything. Many now expect to receive only a fraction of their initial outlay, which ran as high as $1 million for some units.
"This is not a good result in the abstract," said U.S. Bankruptcy Judge Alan S. Trust, who presided over the case at the US Bankruptcy Court for the Eastern District of New York. "In the reality of the circumstances, this is the best available result."
Twenty-one residents of the Harborside's nursing home and assisted living units who require extensive medical care will be forced to relocate. The Harborside has submitted a closing plan to the state Department of Health that provides for the safe transfer or discharge of residents, and must identify at least three facilities where they can be housed. About 70 people in its independent-living units have the option to stay.
Joshua Shapiro, whose 93-year-old mother recently moved out of the Harborside, praised Judge Trust for refusing to approve a deal unless residents received some compensation.
"If it hadn't been for him pushing, there's no way in hell the sponsor would've coughed up a penny and it would've been bupkis for the families," Shapiro said, using the Yiddish word for "nothing."
Focus Healthcare Partners agreed to buy the Harborside for $86 million. Bondholders, owed around $168 million, will receive $73 million after the sale closes and $8.8 million, plus 7.5% interest per year, from Amsterdam Nursing Home Corp, the Harborside's affiliate, for a recovery of about 50 cents on the dollar.
Unlike residents, bondholders own secured debt, which bankruptcy law puts ahead of entrance fees from seniors and their families. Those fees are treated as lower ranking unsecured debt.
Elizabeth Aboulafia, a lawyer representing current and former Harborside residents, said that while the sale doesn't offer enough money to fully compensate the senior citizens, it is the best option available in light of the retirement home's dire financial circumstances.
Before the current deal materialized, the resident's group alleged in a December court filing that Harborside's financial stakeholders were "leveraging the fear of the residents to their own economic advantage while the safety and security of the elderly and frail hang in the balance."
All residents would have incurred additional, immediate moving costs with no prospect of any financial recovery if the sale fell apart and Harborside closed, Aboulafia said.
The sprawling complex of apartments opened in 2010. In recent years, pandemic restrictions, labor shortages, soaring wages and supply costs helped push the facility to the brink. As occupancy slumped, Harborside was unable to pay its bills.
The thread is a common one for some continuing-care retirement communities, many of which rely on a steady stream of entrance fees to pay operating costs, debt service and resident refunds. Harborside is among at least 16 CCRCs that filed for bankruptcy since 2020.
The sale and broader proposal for repaying residents is subject to additional closing conditions, which lawyers said aren't anticipated to hinder the deal with Focus or the bankruptcy plan.
The sale to Focus came after New York health regulators in October blocked the sale of Harborside to an Iowa company that would have maintained current operations and honored partial refunds of entrance fees, shocking residents.
Focus, which owns some 15 senior living and health-care properties across the US, said keeping the doors open is a better outcome than a total liquidation and noted that it would accommodate some of the current residents. The firm will seek licenses from New York state to offer assisted-living and memory care in the future.
