Linden Ponds complex regains fiscal footing

Linden Ponds expects court to OK debt plan

By Jessica Bartlett
Globe Correspondent / August 7, 2011

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The expansion plans are on hold, but after a turbulent spring and summer, Linden Ponds appears headed for a period of financial stability.

Back in April, the upscale retirement community off Route 53 in Hingham missed a bond repayment, and in mid-June filed for protection from creditors under Chapter 11 of the US Bankruptcy Code. It is currently late on about $1.7 million of property taxes due to the town.

But the company has been paying all bills incurred since the bankruptcy filing, while discussing the payment of overdue property taxes with Hingham officials, and sending out 48 formal communications to its 1,198 residents to keep them informed.

The company has a hearing scheduled for Aug. 18 in Dallas, where a federal bankruptcy judge is expected to approve its debt-restructuring plan. The proposal includes forgiving about $34 million of Linden Ponds’ $150 million debt.

The restructuring “takes the community into a strong financial position,’’ said Adam Kane, senior vice president of corporate affairs for Linden Ponds’ management company, Erickson Living, which has elder housing properties in nine states.

Kane stressed that the community’s financial future does not depend on anticipated growth. Its current occupancy rate of a little over 90 percent can ensure it health, he said.

“Since Linden Ponds stopped construction 2 1/2 years ago, this is the highest rate of occupancy, and it has increased over the last two years,’’ Kane said. “We expect the occupancy to continue to rise to the mid-90 percent range.’’

It was the limited occupancy rate that got the organization into trouble when the real estate market tumbled in 2008, during the second phase of construction at the Hingham campus.

Linden Ponds subsequently halted construction, and although the occupancy in the newly built apartments increased, it wasn’t enough to service the amount of debt taken out by the community.

This restructuring will alleviate that difficulty, Kane said, by making the debt manageable for the smaller-than-expected campus.

“It’s simply taking the debt where it was projected to be, at 1,700 units, to be comfortably handled by 988 units, which is its existing size,’’ Kane said. “We feel confident the community will be able to perform and perform well with a new resized debt.’’

According to Kane, residential satisfaction has not suffered. There will be no staff laid off because of the financial difficulties, no changes to the operating model, no alteration to amenities, and no changes to the financial obligations or the rights of residents, he said.

Residents agreed that things seemed to be looking up.

“I don’t look at it as a major problem,’’ said Bob Miller, a Linden Ponds resident. “I spent 46 years with one steel company, out of Pittsburgh, and had a wonderful career, and they went through Chapter 11 bankruptcy filing twice, and I came through that . . . it wasn’t all bad.’’

According to Miller, who has lived at Linden Ponds for four years, most of the residents feel confident that the board of directors has things under control.

“I haven’t found anyone here who is concerned,’’ Miller said. “And I think the reorganization is needed. It has to do with the bonds that are coming out, and when all is said and done, it will be a much stronger organization.’’

Barbara Durland, president of the Resident Advisory Committee at Linden Ponds, said that although residents remain happy, it is not a case of bliss bred out of ignorance.

“We’re all very aware’’ of the company’s financial difficulties, Durland said. “It’s not a secret.’’

She added that residents leaving the facility have been receiving their reimbursed entrance fees, the quality of life has not decreased, and the financial crisis was not discouraging people from coming to live there.

While residents, vendors, and staff have felt only a blip in the radar due to the operation’s financial burdens, the entity that has felt Linden Ponds’ troubles the most is its host community.

According to Hingham officials, Linden Ponds owes $1.7 million in property taxes for the third and fourth quarters of the fiscal year that ended June 30. An additional $799,519 was due to the town last Monday, and was paid by the company later in the week, officials said. The next quarterly payment of $799,519 will come due Nov. 1, and the company expects to pay that on time, officials said.

According to Town Administrator Ted Alexiades, Linden Ponds will be paying 14 percent interest on top of the taxes in arrears from the 2011 fiscal year. If the bill isn’t paid by late September, he said, the town will put a lien in the property, and bump the interest rate to 16 percent.

Selectman Bruce Rabuffo noted that Linden Ponds tried to reduce the interest rate during the bankruptcy process, but “we protected our rights under Massachusetts law.’’

Rabuffo added that although it’s unclear when the town will be paid in full, Hingham will be near the front of the line of creditors.

“If they do have difficulties, we’ll be on the list of people that get paid early,’’ he said.

That still leaves the question of expansion.

Hingham’s population of residents age 65 and older is expected to increase by 29.5 percent between 2000 and 2020, which could outstrip the capacity of Linden Ponds.

“There may be an impact that it might create a housing question,’’ Rabuffo said. “So we’re looking at alternatives.’’

Linden Ponds officials stress that the debt restructuring still leaves room for possible expansion. Alexiades also predicted that although the community may flounder in the short term, the organization will eventually grow.

“They offer an outstanding product,’’ Alexiades said, adding “there is a market demand for that, but it’s taking more time to materialize.’’

Jessica Bartlett can be reached at