KKR makes bid for Erickson Retirement Communities 

Posted: 7:42 pm Tue, December 22, 2009
By Robbie Whelan
Daily Record Business Writer

A team led by private equity giant Kohlberg Kravis Roberts & Co. is bidding on the assets of bankrupt real estate developer Erickson Retirement Communities, according to a person familiar with the matter, adding a major contender to the push to claim the remains of a company that folded this year, a victim of the credit crisis.

Representatives from Catonsville-based Erickson began private auction proceedings with KKR and its partners, which include San Francisco-based Coastwood Senior Housing Partners and Chicago’s Beecken Petty O’Keefe & Co at 10 a.m. Tuesday, the person said, declining to be identified by name until the result of the auction is announced.

The result of the auction was not available Tuesday evening.

“The auction process is underway and we expect to make an announcement when it is concluded. Until then, Erickson will have no comment,” said Mel Tansill, Erickson’s spokesman, in an e-mailed statement Tuesday.

Erickson filed for Chapter 11 bankruptcy Oct. 20, listing over $1 billion in debts to 254 different creditors. A rapid expansion during the real estate boom, paired with a weak housing market, was blamed for the company’s troubles.

Many seniors who move into Erickson communities rely on being able to sell their homes to pay Erickson’s required security deposits, which sometimes top $350,000.

Erickson operates 19 retirement communities in 11 states, serving about 23,000 seniors. The company opened the doors to its first project 26 years ago, with Catonsville’s Charlestown. Other Maryland properties include Parkville’s Oak Crest and Riderwood in Silver Spring.

Since then, the company’s model has been to acquire land and build senior campuses, then sell the projects off to nonprofit entities supported by National Senior Campuses Inc. These nonprofits, in turn, contract with Erickson to manage the communities.

The day before Erickson’s bankruptcy filing, the company issued a statement saying it had entered into a “definitive agreement” to sell its assets to Redwood Capital Investments LLC, a private investment group led by Baltimore businessman Jim Davis.

Redwood had planned to pay about $75 million in cash and $25 million in debt for Erickson, then take on about $500 million in debt from the purchase.

Davis, who is a partner in Hanover-based staffing company Allegis Group, did not return phone calls seeking comment Tuesday.

The companies involved in the KKR-backed bid have various connections to Erickson and to the field of senior housing investment.

Officials from Coastwood and Erickson have served on panels organized by the National Investment Center for the Seniors Housing & Care Industry, a trade group. Both KKR and Beecken Petty O’Keefe, a private equity firm that specializes in investments in the health care industry, have put money into drug maker Jazz Pharmaceuticals Inc.

Peter Martin, an analyst with equities research firm JMP Securities, said most of the Erickson’s financials are being kept private, so it would be difficult to estimate the value of the company. But its bankruptcy filing listed more than $1 billion in assets.