Dallas retirement home Edgemere drops restructuring plan, backs sale plan

Edgemere will support a plan by its debt holders that includes a sale of the luxury Dallas retirement community’s assets, its lawyer said in federal bankruptcy court Tuesday.

Jeremy Johnson, lawyer for the senior living home, said Edgemere has withdrawn its restructuring plan, which hinged on winning a lawsuit against its landlord to reduce rent payments, as well as a cash infusion from its parent company, Lifespace Communities Inc. Edgemere filed for bankruptcy in April, listing its liabilities at between $100 million and $500 million.

Originally, there were two competing plans, one from Edgemere and one from the debt holders. But now Edgemere says it will drop its plan and support the debt holders’ sale plan, with some modifications. The parties will work together to file a revised plan by Tuesday.

The debt holders’ original plan called for selling “substantially all” of Edgemere’s assets for $48.5 million to a new owner that would continue operating the 1.55 million-square-foot facility built on land wedged between Preston Hollow and University Park. Current and new residents would be offered new monthly rental agreements, doing away with the business model that required large upfront entrance fees.

Johnson said the new plan will be “very similar” to the original, but will have some changes.

One of the changes is that Lifespace is expected to make a substantial financial contribution, part of which will go to debt holders as additional returns on their secured claim and part of which will be used to set up a fund to help pay refunds due to current and former residents, Johnson said. Former residents are owed $37 million, while current residents’ deposits total $107 million.

Edgemere’s previous recovery plan had Lifespace contributing $20 million. Lifespace, based in Dallas and West Des Moines, Iowa, is a not-for-profit that operates 17 communities in seven states and reported revenue of $282 million in 2020, the last year its tax filings are available.

Lifespace has also agreed to work with a bidder found by the debt holders in order to ease the transition, Johnson said. The proposed initial bidder for Edgemere’s assets is Bay 9 Holdings LLC, according to a court filing.

Additionally, Edgemere and its landlord, InterCity Investments, reached an agreement about the rent money owed, including late fees. Judge Michelle Larson said this was “very good news,” allowing the court to forgo a time-consuming and expensive evidentiary hearing on the matter.

“I impress upon the parties to continue to work consensually to the extent that you can on those matters that can be settled,” she said. “But obviously I understand that there’s still going to be some push and pull with respect to the plan process and the adversary process.”

The new development comes only weeks before a $10 million emergency loan floated to Edgemere by its debt holders was to come due.

In a follow-up hearing on Nov. 30, Steve McCartin, the lawyer representing the committee of unsecured creditors, said Edgemere residents are “pretty confused” and there is “substantial uncertainty at the facility” as they struggle to understand the complex bankruptcy process. While the Edgemere team has been “anxious to communicate” with residents, they’ve held off during the legal proceedings, he said.

“We were concerned with the competing plans that someone would think we stepped over from informational only to solicitation,” he said.

McCartin said the committee he represents wants to hold a town hall meeting as soon as possible in order to explain to Edgemere residents where the bankruptcy process stands. A disclosure statement of the plan is expected to be approved on Dec. 15.

“My committee members called me this morning and said they really just don’t think we can wait,” he said.

The bankruptcy proceedings, now into their eighth month, have been fiery from the start, with Edgemere suing its landlord, Intercity Investment Properties. Edgemere contends the landlord, working with a private equity firm, set out to hurt the community’s reputation so it could terminate a 55-year ground lease that runs through 2054.

Occupancy at Edgemere is hovering at 65%, although independent living occupancy is slightly higher at 72%. The continuing care community has 304 independent-living apartments, 113 assisted-living suites and 87 nursing beds.