The SeniorCare Investor: The Auction At The Clare At Water Tower A Success

Senior Care Development Wins Bid For Premier CCRC
 

All eyes were on Chicago during the second week of April, as two bids were received for The Clare at Water Tower to compete with the $29.5 million stalking horse bid from an affiliate of Senior Care Development (SCD) already approved by the bankruptcy court.  It was expected that at least one or possibly two other bidders would take a run at this premier CCRC in downtown Chicago, since it seemed as if topping the stalking horse bid was the proverbial no-brainer at 13 cents on the dollar (at least, based on the par value of the bonds outstanding). After all, the original sponsor borrowed $229 million to build the 53-story tower, and even though occupancy was just 33%, the future entrance fees from the unoccupied units would be a financial windfall if they could be filled in a reasonable amount of time, and without that debt to repay.    

We are not sure whether the biggest surprise was who showed up at the auction, or who didn’t. We always figured that Erickson Living was a definite, especially since the controlling shareholder, Redwood Capital Investments, was the DIP lender for The Clare in bankruptcy. We also thought that Brookdale Senior Living (NYSE: BKD) would step into the fray because the stalking horse bid was quite low relative to even the most conservative approach to value, and because BKD was local.  We were wrong (imagine that), as neither showed up, and while we don’t know whether Brookdale ever had much interest, Erickson certainly did, since Redwood was the DIP lender.  But in late March, Redwood had filed a “limited objection” with the court claiming that the bid procedure provided “the stalking horse bidder an informational advantage, if not monopoly,” and they wanted the bid procedures changed so that all bidders would receive the same information and face the same requirements.”  One of the reasons for being the DIP lender, however, is to ensure you know everything that is going on in case you want to make a bid.  Apparently, in the end Redwood and Erickson thought there was “too much hair” on the deal (and the process) and decided not to make a bid.  Erickson is back on a growth track and may start some new developments and not buy into someone else’s problems (see story on development).............Want to read more? Click here for a free trial to The SeniorCare Investor and download the current issue today