BRADENTON, Fla. - A Tampa-based real estate broker specializing in the sale of senior housing communities has a new niche: the sale of distressed senior housing financed with tax-exempt bonds.

CLW Health Care Services Group closed recently on two properties owned by nonprofits in default - Carlton Cove in Huntsville, Ala., the sale of which closed May 30, and Marsh's Edge in St. Simons Island, Ga., which closed June 27.

Both facilities are continuing care retirement communities, or CCRCs, where residents pay an entrance fee. Some residents rely on the sale of their homes to fund some or all of the entrance fees, which range from $100,000 to $700,000, according to CLW senior sales associate Megan Fetter.

CLW specializes in other types of senior housing sales, in addition to entrance-fee CCRC's, which are typically financed with tax-exempt bonds and owned by nonprofit organizations or companies.

Carlton Cove and Marsh's Edge are the only two entrance-fee CCRC's involving bond defaults that the company has sold, and it's a niche that the firm wants to develop.

"We're getting ready to do a big marketing piece," said CLW director Allen McMurtry. "We're going to reach out primarily to institutional bondholders, trustees, and bond attorneys that do this type of work."

Not all CCRC sales are distressed sales, and McMurtry said the vast majority of entrance-fee CCRCs are owned by nonprofits that typically don't sell unless there's a distressed situation.

"I would say overall this industry is doing well and the underlying fundamentals are doing well, although CCRCs have been hit more than any other sector of senior housing by the downturn in housing," McMurtry said.

Since some residents rely on the sale of their homes to come up with the entrance fee or a portion of it, he said the downturn in the housing market has made it difficult for some people to sell their homes.

While the real estate downturn was not a major factor that caused difficulties for Carlton Cove and Marsh's Edge, it is a growing concern for other entrance-fee CCRCs today, according to James LeBuhn, a senior director at Fitch Ratings.

"Our biggest concern for the sector is obviously the weakness and the continuing weakness in the housing sector," LeBuhn said. "We think that is going to cause a softness in terms of the financial performance throughout the industry. However, we don't think that will be material enough to cause widespread downgrades."

Fitch's 2008 outlook for the CCRC industry is stable, despite the weakening of the housing market and overall softening of the U.S. economy.

"We think there are certain parts of the country that are more apt to suffer more than the national average," LeBuhn said. "Obviously, the Florida market would, with its retrenchment ... and the softness in the housing market. We think California and certain parts of the Northeast - areas that saw big run-ups in housing prices - are probably going to see a bit more pressure."

In the entrance-fee CCRCs rated by Fitch, LeBuhn said the agency has seen "some slight pressures" but no known distressed properties so far.

"We've seen a stretching out of the turnover period of a unit, but we haven't seen any material deterioration on occupancy or financial performance to date," he said.

But the soft housing market could make it difficult for CCRC operators that depend on entrance fees for part of the cash flow and debt-service payments. LeBuhn predicted that start-up facilities would feel the brunt of the current real estate market.

Another concern, however, involves wealthy retirees whose sizeable investment portfolios are not doing well in today's equity market.

"The thing about moving into a CCRC, it's a lifestyle choice. It's a decision that you can put off," LeBuhn said.

Carlton Cove and Marsh's Edge were distressed by factors other than those affecting today's housing market, and Fetter said there was a lot of interest from buyers in both sales.

Carlton Cove was financed with $77 million of debt sold in 2001 by the Huntsville Special Care Facilities Financing Authority. The 43-acre facility has 253 independent-living apartments and single-family homes, as well as a health center providing personal daily assistance, skilled nursing, and Alzheimer's care. It opened in February 2003, and was owned by Carlton Cove Inc., a nonprofit corporation.

After experiencing a number of operational and occupancy challenges, Carlton Cove filed for Chapter 11 bankruptcy protection in August 2006. After a number of attempts to sell the property, CLW was retained in late November 2007.

Carlton Cove was auctioned April 15 and sold to ACTS Retirement-Life Communities, a faith-based nonprofit company in Pennsylvania, for $27.25 million. The bankruptcy court approved the sale on April 17 and closing was May 30. The facility has since been renamed Magnolia Trace.

Marsh's Edge was financed with $99.9 million of debt sold in 2004 by the nonprofit Coastal Community Retirement Corp.

Located in a retirement destination, the 75-acre facility is comprised of 30 cottage homes, 110 independent living apartments, and a 52-unit health center providing assisted living, Alzheimer's, and skilled nursing services. It opened in phases between 2004 and 2007.

Sales and resulting occupancy did not meet projections, which was partially attributed to construction delays.

CLW was hired to sell the property. It was purchased by Senior Living Communities, an owner of retirement communities in the Southeast, and Health Care REIT, for $55.6 million through a forbearance agreement.

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