With Fewer Seniors Able to Afford Retirement Housing, Fairview Village Files for Bankruptcy

The Fairview Village retirement community and several other not-for-profit corporations associated with Downers Grove-based VibrantLiving Communities & Services filed for Chapter 11 bankruptcy protection Feb. 4 in the U.S. Bankruptcy Court for the Northern District of Illinois. 

A motion has been made to consolidate the five bankruptcy cases under the proposed lead debtor, Fairview Ministries Inc., which oversees and manages Fairview Village, Fairview Baptist Home and Fairview Residence of Rockford.

Court documents paint a picture of an organization hurt by the prolonged economic downturn. Declining real estate values and investment losses have “made it difficult, if not impossible, for seniors to move into retirement housing facilities such as Fairview Village, as many older adults rely on the proceeds from the sale of their home to fund the upfront entrance fee required by most (continuing care retirement communities),” according to the petition.

As a result, Fairview Village’s independent living occupancy declined from 95 percent in 2007 to a 12-month rolling average of 83.3 percent by Nov. 30, 2010. The facility’s skilled nursing and assisted living population is stable at 74.6 percent and 82.8 percent respectively, according to the filing. 

The lower-than-anticipated occupancy and entrance fees have contributed to declining cash balances, the petition states. Among the company’s top 20 unsecured creditors are 17 former residents who are owed “refund claims” totaling $2.94 million, according to court documents. 

One former resident has filed a breach-of-contract complaint in DuPage County Circuit Court seeking a judgment of $32,667 plus interest for the remaining balance owed under the entrance fee obligation, according to court documents.

Fairview Village enters into such agreements with each resident, offering a choice of either a 90 percent or a 100 percent refund upon termination of the residency agreement, either voluntarily or by death. In February 2010, the company began making those payments on a deferred installment plan basis.

Entrance fees at the facility range from about $141,000 to $385,000, depending on the size of the residential unit. Monthly fees, which cover operational costs and various services, range from about $1,050 to $2,600 per Downers Grove resident. Residents also are required to select a “lifecare plan” as part of the residency agreement.

To address declining occupancy, Fairview Ministries retained a marketing consultant and began offering “new and more competitive entrance fee programs.” It also began escrowing deposits and entrance fees from new residents in December 2010.

The company implemented a cost-cutting plan in 2009, and in 2010 hired a consultant who provided more than 30 recommendations for improving revenues and reducing costs. VibrantLiving’s board also instructed management to seek out a buyer for the company’s Crimson Pointe assisted living facility, which is operated by Fairview Residence of Rockford. 

The company's expansion plans in Downers Grove and the Pacific Northwest, which were primed with $12 million in cash from a 2008 bond refinancing, were placed on permanent hold later that year “due to the inability to access capital markets and ongoing liquidity issues,” according to the filing.

In 2007, Fairview Village had proposed the addition of 197 apartments, a new nursing home and a fitness center on its existing 40-acre campus, as well as the construction of 32 senior apartments with entry fees in the $600,000 range on the west side of Fairview at Lynn Gremer Court. The Village Council voted to deny its petition to rezone that property from single- to multi-family housing in November 2008.

During the council's deliberations, Fairview Village was praised as a good corporate neighbor and established centerpiece of the community. The company, whose roots extend back more than 100 years, moved to Downers Grove in 1973 and 20 years later added residential living facilities including garden homes, townhomes and apartments to its landscaped campus.

According to the bankruptcy petition, Fairview Ministries owes at least $59.8 million to between 1,000 and 5,000 creditors, including the Illinois Finance Authority, an agency of state government. The petition lists assets of $10 million to $50 million and asks that the recently established escrow account of nearly $1 million be excluded from payments to lenders or other creditors. 

Fairview Ministries believes its creditors would be better served if the company continues to operate than if it liquidated, according to the petition. Mesirow Financial is managing the restructuring effort.

Calls to Fairview Village were not returned and the company's website does not address the Chapter 11 filing.

A hearing is scheduled for March. 8.