Senior Housing: Fitch Ratings uses Erickson to extend negative outlook on senior living
by Daniel J. Sernovitz for the Baltimore Business Journal
Fitch Ratings extended its negative outlook for the nation’s senior living sector, highlighted by the challenges that forced Erickson Retirement Communities of Catonsville into bankruptcy late last year.
New York-based Fitch, in a press release issued Tuesday, said Erickson’s October bankruptcy and subsequent auction illustrates the divide between more established retirement communities and newer start-up developments.
“The case of Erickson Retirement Communities provides a good example of the sector’s bifurcation between start-up and mature companies,” Fitch wrote in its 2010 Senior Living Outlook. Fitch said it expects 2010 will be an active year for the formation of new retirement community companies to compete with more established firms.
Fitch said the industry has been “under unprecedented pressure over the past 18 months” because of a variety of factors including falling occupancy rates, reduced cash flow, the nationwide credit crunch and the ongoing real estate slump that’s kept seniors from selling their homes to move into retirement communities.
At the same time, Fitch noted select Erickson communities continue to hold on to strong bond ratings and earned at least one Positive Rating Outloook from the ratings agency.
In a statement, Erickson spokesman Mel Tansill said more than 2,000 new residents moved into Erickson-managed retirement communities and that resident satisfaction levels have not fallen off since the bankruptcy.
“We look forward to continue to bring the vibrant Erickson Living experience to as many people as possible in the coming year,” Tansill said in a statement.
Fitch’s outlook is reinforced by a report issued March 15 by Annapolis-based National Investment Center for the Seniors Housing & Care Industry, which noted a similar drop in occupancy among retirement communities. Occupancy rates fell nationally to 88.9 percent in the fourth quarter of 2009, down 1.6 percent from a year earlier.
The Baltimore region’s housing market saw less of a drop, falling about .1 percent to 92.7 percent in the fourth quarter of 2010.
That’s a mixed bag for Erickson, which has 19 retirement communities in Greater Baltimore and across the country. Locally, its Charlestown Retirement Community in Catonsville is the region’s largest continuing care retirement community.
Swelling debt forced Erickson to seek Chapt. 11 bankruptcy protection in October 2009last year. Redwood Capital LLC of Hanover bought the company’s assets at a bankruptcy auction in December for $365 million. In February, Redwood Capital includes Jim Davis, co-founder of Hanover staffing firm Allegis Group. In February, Davis announced plans to become Erickson’s CEO this spring as part of the company’s new executive team.
Tansill said Erickson hopes to reemerge from bankruptcy protection by the end of April.
