A luxury retirement community once called the “Ritz-Carlton of senior living” is on the brink of financial ruin as its landlord and lenders demand debt payment.
Edgemere has struggled through falling occupancy levels and an expired deal with its landlord and bondholders that allowed it to delay making monthly payments since October, according to the Dallas Business Journal.
Compounding the risk is an expired forbearance agreement with Dallas-based Intercity Investment Properties allowing Edgemere to delay payments of monthly rent, as well as interest and principal on its $109 million of outstanding debt, according to Edgemere’s 2021 financial report.
As of Dec. 31, Edgemere said it had only 62 days’ worth of cash – far below a requirement to keep 150 days of cash on hand, according to a filing with Electronic Municipal Market Access or EMMA, which protects investors, state and local governments and the public interest.
“It’s unfair and unjust for Edgemere to continue to take deposits from future residents under current circumstances,” said Coe Schlicher, CEO of Kong Capital, an Austin-based real estate private equity firm that specializes in strategic investments in senior housing.
Intercity Investment hired Schlicher’s firm to help it find a solution, considering that a financial failure of Edgemere could affect the living situation and health of hundreds of seniors, he said.
“I fear the residents are on a sinking ship and some of them may not even know it,” Schlicher said.
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Edgemere’s occupancy decline during Covid-19 was felt across the senior housing industry, which was “hammered,” according to an annual report by research firm Integra Realty Resources. However, Edgemere’s financial woes began long before Covid-19.
When Edgemere first opened in 2001, it “immediately set a new standard for luxury senior living,” according to the organization’s website. Schlicher described the Mediterranean-styled community as the “Ritz-Carlton of senior living.”
Since its opening, the community saw increasing competition from newer luxury senior living communities in Dallas. As the years went on, Edgemere’s average occupancy in its independent living units went from 93.3 percent in 2018 to 74 percent last year, according to its 2021 financial report.
In recent years, Edgemere’s annual losses went from $12 million in red ink in 2018 to about $30 million last year, according to its financial reports. Its unrestricted cash position dropped dramatically from about $37 million at the end of 2019 to less than $7 million at the end of 2021, according to its 2020 and 2021 financial reports.
Communities like Edgemere start with a hefty cash reserve from residents’ deposits but if they lose money each year, the reserve eventually runs dry, Schlicher said.
“Based on the publicly filed quarterly financial reports, Edgemere does not appear to have the current assets necessary to pay in full its landlord, its bondholders, its resident refunds and other creditors,” he said.
If Edgemore is not able to pay its rent, Intercity has no obligation to keep the senior living facility running and may choose to replace the tenant.
[Dallas Morning News] – Maddy Sperling