CCRC Closures, Sales and Repositionings

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CCRC Closures, Sales and Repositionings

• Paul Gordon
• Hanson Bridgett LLP
• 415-995-5014
• pgordon_at_hansonbridgett.com
• www.seniorcarelaw.com
• Martha Tamburrano
• CEO, The Episcopal Home Communities
• [phone]

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Economic Factors Underlying the Problem

1. Economic stress is affecting consumers of all
   senior care properties.
2. Slump in home resales, drop in valuations, deter
   seniors from moving
3. Retirement savings decimated

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Bankruptcies / Asset Divestitures

• Erickson, other individual CCRC properties
• a. GAO study of CCRCs, security of entrance
  fee refund promises
• Sunwest bankruptcy, Sunrise asset sales

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Key Strategies

• Price Reductions / Waivers
• waiver of community fees, security deposits,
  first months fee
• lower fee increases

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Entrance Fee / CCRC Strategies

• Deferred or Partial Entrance Fee payment with
  promissory note and deed of trust on home
• a. short term, pending sale of home
• b. can charge interest for holdover
• Pure rental contract no entrance fee
• a. option to convert to continuing care
• Use of Third-Party Financers (Elderlife)

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• Adjusting Refundability
• a. Amortized entrance fee providers offer 90
  refund option higher fee
• b. Refundable entrance fee providers offer
  amortized refund lower fee
• Lower health screening / admission criteria
• Offer high interest rates on pre-sale deposits

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Adjust Services and Amenities

• Unbundle prices less inclusive, more a la carte
  services
• Offer special amenities for free finish
  upgrades

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Incentives

1. Referral fees to residents, staff
2. Assist with staging and selling home
3. Cover moving costs

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Examples of Repositioning / Turnarounds / Closures

1. CCRC provider adding new contract types with
   refundable entrance fee options, fewer included
   health benefits
2. Closure of one retirement community with
   residents transferring to nearby community with
   high vacancy rate
3. Acquisition / merger of stand-alone facility into
   larger network of similar facilities

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1. Stand-alone facility bringing in national /
   regional management company to increase
   efficiency and expertise
2. Remodeling, remarketing, reinventing service
   packages, fee structures

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• Legislation
• Assisted living closure law 2008
• CCRC closure law 2010
• CCRC temporary closure law 2011
• Investigations
• GAO
• Senate Committee on Aging

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Additional merger/closure issues

1. Attorney General review / public meeting
2. License transfers / leasebacks
3. Medicare certification / overpayment liabilities
4. Post-closing escrows to cover liabilities
5. Tax exemptions issues / charitable trusts