Personal Financial Trouble Triggers Elder Home Bankruptcy
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Personal Financial Trouble Triggers Elder Home Bankruptcy

December 8, 2011

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Bloomberg Businessweek reports that a high-end Chicago retirement community, The Clare at Water Tower, has filed for Chapter 11 bankruptcy protection. In court documents, the not-for-profit company indicated that chief among its reasons for financial distress was its potential clients’ personal financial struggles.

Its seems that elderly Chicagoans who would usually be selling their homes, collecting retirement benefits, and moving into the Clare are unable to do so because of the depressed housing and stock markets. As a direct result, the Clare no longer has sufficient income to keep up with its debts.

In its filing with the bankruptcy court, official documents reportedly listed both debts and assets of as much as $500 million. Earlier this fall, the Clare apparently failed to make payments on a bond of $29 million. Prior to its opening in 2008, the Clare’s future looked rosy, with reported deposits on 220 of its 248 available units.

But timing proved fatal; the stock market crashed, and now the community has managed to fill only a third of its available residences. Potential residents, who must be at least 62 to move in, are seeing their retirement accounts lose value on the stock market and are delaying moving in or pulling themselves from contention altogether.

Among its creditors, the Clare reportedly listed the city of Chicago, to which it owes nearly half a million dollars in a development obligation; Bank of New York Mellon Corp., to which it owes $229 million; Bank of America Corp., to which it owes $137.5 million; Loyola University, to which it owes $1.54 million in rent; and Greystone Development, to which it owes $356,200.

Reorganization Plans

As of now, reports indicate that the Clare plans to reorganize under bankruptcy’s Chapter 11, and to continue operations with the help of loans. The retirement community apparently hopes to borrow as much as $12 million from Redwood Capital Management LLC.

If the company manages to keep its head afloat and get back on track financially, it could be poised to make a successful comeback: in the next several years, the Baby Boomer generation will be entering retirement and demand for living units in retirement facilities is likely to outpace current supply.

Whether or not the Boomers start demanding living units at the Clare in time, though, is anyone’s guess.


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