Harborside sale approved, residents to get 25% of $130M in entrance fee refunds

A sale of The Harborside retirement community was approved Thursday by a federal bankruptcy court judge in Central Islip.

The decision by Judge Alan S. Trust ensures that some of the residents who had worried about being displaced won’t have to move and residents and families of deceased residents will be paid about 25% of the entrance fee refunds owed to them. 

The buyer for the Port Washington facility, Focus Healthcare Partners LLC, hopes the $86 million transaction will close in the next two months, an executive told Newsday after the court hearing.

The sale agreement also sets aside about $42.5 million for entrance fee refunds, which would be paid in two installments.

The lion’s share of that funding, $36.5 million, would come from the sale of the Amsterdam Nursing Home on Manhattan’s Upper West Side. The nursing home’s owner opened The Harborside in 2010. Chicago-based Focus is contributing $2 million toward the entrance fee refunds.

“It’s a bad result but it’s the best result available,” the judge said. “It does appear to be fair and reasonable.”

He had delayed Thursday’s hearing by eight days to give the parties more time to find money to pay a portion of the $130 million owed in entrance fee refunds. He said the sale's approval was contingent on that provision.

Besides the sale agreement, Trust approved The Harborside's plan to close its nursing home, assisted living area and dementia care by March 14. The closure is a requirement for Focus Healthcare to take over the property because the investment group only wants to offer independent living apartments initially.

Trust asked Harborside attorney Rachel Nanes if the state Department of Health had approved the closure plan. She said the DOH has offered no recent comments on the plan, which she said would affect 21 residents, most of whom live in the nursing home.

A DOH spokesperson told Newsday "the department is reviewing the closure plan."

March 14 relocation deadline

Fran Schmidt, who has lived at The Harborside since it opened more than 14 years ago, expressed relief that the sale would go through because she said she wants to remain in her independent living apartment.

“We can enjoy our homes, and we don’t have to move,” said Schmidt, 91, a retired antiques dealer. “I think this is good news," she said outside the courtroom. 

Schmidt was one of four Harborside residents who attended Thursday’s 90-minute hearing. She has witnessed all three of the facility's bankruptcy filings in the past 10 years. 

Daniel Schreiber, whose mother-in-law is in independent living and father-in-law is in the nursing home, said the closure plan’s March 14 deadline “is unrealistic and should be extended by another 30 days.”

He said his family hasn’t received information about potential housing and care for his in-laws.

“It’s elder abuse," he told the judge. "Families are being ripped apart."

Schreiber and others asked about the timing of the Amsterdam Nursing Home sale and the total price tag, since it’s the source for most of The Harborside entrance fee refunds. 

James Drew, an Amsterdam attorney, responded that a sale agreement for the nursing home was reached “a couple of years ago but it’s subject to regulatory approval.” He did not provide additional details. 

Attorneys for The Harborside’s unsecured creditors and residents noted that Amsterdam wasn’t required to contribute to the sale agreement for The Harborside.

“We extracted all that these partners were willing to provide,” said Elizabeth M. Aboulafia, the residents’ lawyer. “I wish it was more.”

Eric Walker, the unsecured creditors’ lawyer, agreed. He said residents and families of deceased residents would be given the choice to accept the estimated 25 cents on the dollar in entrance fee refunds or pursue future legal action.

Refund holders aren’t the only ones receiving less than what they are owed — bondholders are out about $100 million under the sale agreement, which provides them with $82.5 million, according to their attorney. 

Separately, Curt Schaller, co-founder of Focus Healthcare, said the company plans to spend "significantly more than $20 million" on improvements to the common areas and independent living apartments at the retirement community. He also said Chelsea Senior Living, which manages four other retirement communities on Long Island, has been hired to run The Harborside.

Asked why Focus insisted on the closure of The Harborside's skilled care units, Schaller said Focus didn't want the sale to collapse in a regulatory dispute with the state health department, which is what happened last fall with a prior bidder. He said Focus plans to seek the state licenses required to reopen the assisted living area and dementia care unit, though he didn't provide a timeline. 

"What happened to these residents was a real tragedy that angers me," Schaller said in an interview with Newsday. "This is a black eye for the industry." 

By James T. Madore

james.madore@newsday.comJamesTMadore

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.