Refunds of $100M in entrance fees are key to Harborside retirement community sale, judge says
The Harborside retirement community in Port Washington has filed for bankruptcy protection from its creditors three times in 10 years. Credit: Newsday/J. Conrad Williams Jr.
The federal bankruptcy judge overseeing the sale of a retirement community in Port Washington said on Monday he would not approve the proposed $80 million buyout until some provision is made for the entrance-fee refunds owed to residents and the families of deceased residents.
The Harborside’s entrance-fee refunds are estimated to top $100 million and wouldn’t be paid by Focus Healthcare Partners LLC under the buyout offer it made on Dec. 12.
Chicago-based Focus is the only bidder for The Harborside, which has filed for bankruptcy three times in the past 10 years. The facility is home to about 180 residents whose average age is 90.
Curt Schaller, co-founder of Focus, told Newsday that the investment firm "can’t direct who receives the sale proceeds. That allocation is a decision for the seller, bondholders, and residents who are owed entrance fees, overseen by the court."
However, he said if the Focus bid is successful the residents who chose to remain in their independent-living apartments will pay below-market rent, and benefit from $20 million in building improvements and higher levels of service.
"While we can build a better future at The Harborside, unfortunately we can't undo money lost by others that led to this bankruptcy," Schaller said.
In Monday's hybrid hearing, Judge Alan S. Trust asked the attorneys for The Harborside, its creditors and residents, as well as its founder, Amsterdam Continuing Care Health System Inc., why no provision has been made to honor the entrance-fee refunds. He urged the parties to find a remedy.
“I’m not going to approve the sale to Focus until all the pieces of the puzzle are brought together,” the judge said during the 45-minute hearing. “I will not approve [the sale] in isolation.”
Still, he authorized Focus to begin a 30-day due diligence process where it will examine The Harborside’s finances and operations.
The judge also ordered that Elizabeth M. Aboulafia, the attorney for a group of residents and their families, be included in talks going forward to resolve outstanding issues, such as the entrance-fee refunds and new homes for residents who would be displaced by Focus’ proposal to close The Harborside’s assisted-living units, nursing home and dementia care unit.
Aboulafia called the absence of any money for entrance-fee refunds in the Focus buyout offer “a gaping hole,” estimating each refund totals in "the high six figures or the low seven figures."
She said, "It’s completely unacceptable to leave residents holding the bag,” for The Harborside’s repeated bankruptcies.
Aboulafia also said the proposed closure of the assisted-living units, nursing home and dementia care unit would “rip families apart” because couples would be forced to find separate accommodations to meet their individual medical needs.
Having paid hundreds of thousands of dollars and even millions to move to The Harborside, Aboulafia said, “these couples don’t have the dollars to obtain a spot at a facility that can care for their spouse and then find a place for themselves to live.”
For those who are frail, she said, “their health could be impacted to a terrifying degree.”
Aboulafia and others asked why Manhattan-based Amsterdam Continuing Care hasn’t agreed to supplement the Focus offer as it did with the offer from Life Care Services Communities LLC in 2023.
Amsterdam pledged $62 million to the LCS offer, with $41 million expected to go toward paying the entrance-fee refunds. The contribution was to come from the sale of the Amsterdam Nursing Home on the city's Upper West Side.
This year, Iowa-based LCS dropped its bid for The Harborside due to a regulatory dispute with the state Department of Health. LCS is the third-largest operator of senior care facilities in the country.
Melanie L. Cyganowski, an attorney for Amsterdam Continuing Care, said on Monday, “We continue to hold an open door" to negotiations with The Harborside's management, creditors, residents and with Focus.
"But [Amsterdam Continuing Care] doesn’t have a legal obligation to do anything," she said. "The parent has no more money to give."
The federal bankruptcy judge overseeing the sale of a retirement community in Port Washington said on Monday he would not approve the proposed $80 million buyout until some provision is made for the entrance-fee refunds owed to residents and the families of deceased residents.
The Harborside’s entrance-fee refunds are estimated to top $100 million and wouldn’t be paid by Focus Healthcare Partners LLC under the buyout offer it made on Dec. 12.
Chicago-based Focus is the only bidder for The Harborside, which has filed for bankruptcy three times in the past 10 years. The facility is home to about 180 residents whose average age is 90.
Curt Schaller, co-founder of Focus, told Newsday that the investment firm "can’t direct who receives the sale proceeds. That allocation is a decision for the seller, bondholders, and residents who are owed entrance fees, overseen by the court."
However, he said if the Focus bid is successful the residents who chose to remain in their independent-living apartments will pay below-market rent, and benefit from $20 million in building improvements and higher levels of service.
"While we can build a better future at The Harborside, unfortunately we can't undo money lost by others that led to this bankruptcy," Schaller said.
In Monday's hybrid hearing, Judge Alan S. Trust asked the attorneys for The Harborside, its creditors and residents, as well as its founder, Amsterdam Continuing Care Health System Inc., why no provision has been made to honor the entrance-fee refunds. He urged the parties to find a remedy.
“I’m not going to approve the sale to Focus until all the pieces of the puzzle are brought together,” the judge said during the 45-minute hearing. “I will not approve [the sale] in isolation.”
Still, he authorized Focus to begin a 30-day due diligence process where it will examine The Harborside’s finances and operations.
The judge also ordered that Elizabeth M. Aboulafia, the attorney for a group of residents and their families, be included in talks going forward to resolve outstanding issues, such as the entrance-fee refunds and new homes for residents who would be displaced by Focus’ proposal to close The Harborside’s assisted-living units, nursing home and dementia care unit.
Aboulafia called the absence of any money for entrance-fee refunds in the Focus buyout offer “a gaping hole,” estimating each refund totals in "the high six figures or the low seven figures."
She said, "It’s completely unacceptable to leave residents holding the bag,” for The Harborside’s repeated bankruptcies.
Aboulafia also said the proposed closure of the assisted-living units, nursing home and dementia care unit would “rip families apart” because couples would be forced to find separate accommodations to meet their individual medical needs.
Having paid hundreds of thousands of dollars and even millions to move to The Harborside, Aboulafia said, “these couples don’t have the dollars to obtain a spot at a facility that can care for their spouse and then find a place for themselves to live.”
For those who are frail, she said, “their health could be impacted to a terrifying degree.”
Aboulafia and others asked why Manhattan-based Amsterdam Continuing Care hasn’t agreed to supplement the Focus offer as it did with the offer from Life Care Services Communities LLC in 2023.
Amsterdam pledged $62 million to the LCS offer, with $41 million expected to go toward paying the entrance-fee refunds. The contribution was to come from the sale of the Amsterdam Nursing Home on the city's Upper West Side.
This year, Iowa-based LCS dropped its bid for The Harborside due to a regulatory dispute with the state Department of Health. LCS is the third-largest operator of senior care facilities in the country.
Melanie L. Cyganowski, an attorney for Amsterdam Continuing Care, said on Monday, “We continue to hold an open door" to negotiations with The Harborside's management, creditors, residents and with Focus.
"But [Amsterdam Continuing Care] doesn’t have a legal obligation to do anything," she said. "The parent has no more money to give."
WHAT NEWSDAY FOUND
- A federal bankruptcy judge is withholding his approval of a $80 million buyout of The Harborside retirement community until provisions are made for paying entrance-fee refunds owed to residents and the families of deceased residents.
- The entrance-free refunds exceed $100 million, and the facility’s current owner said it doesn’t have the money to pay.
- The would-be buyer, Focus Healthcare Partners LLC, said it didn’t cause The Harborside’s financial problems and has no plans to pay the refunds.
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
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