Redwood wins Erickson auction

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Redwood Capital Investments LLC, a company controlled by Baltimore businessman Jim Davis, won control of the assets of bankrupt senior housing builder Erickson Retirement Communities at an auction that lasted until the early hours of Wednesday morning.

Davis’ company beat out a team led by New York-based private equity giant Kohlberg Kravis Roberts & Co., which announced Tuesday that it was partnering with California investment company Coastwood Senior Housing Partners and Chicago-based private equity firm Beecken Petty O’Keefe & Co. to make a play for Erickson’s assets.

The auction began Tuesday at 10 a.m. in the New York offices of law firm DLA Piper and ended at 3:58 a.m. Wednesday, according to Erickson spokesman Mel Tansill.

Terms of Redwood’s bid were not disclosed, but in a news release, Erickson said Redwood would acquire “substantially all the assets of the company, subject to court approval.” In October, Erickson announced that it planned to sell the company to Redwood for $100 million in cash and debt, with Redwood taking on about $500 million of Erickson’s debt.

The Baltimore Business Journal reported on its Web site Wednesday that Davis’ purchase price for all of Erickson’s assets was $365 million in cash.

Erickson operates 19 retirement communities serving about 23,000 senior citizens in 11 states, including three in Maryland — Catonsville’s Charlestown, Parkville’s Oak Crest and Riderwood in Silver Spring. The developer, which opened its first facility 26 years ago, is headquartered in Catonsville.

“We are pleased that the interests of Redwood Capital are well aligned with Erickson’s long-term growth strategy and the interests of all community residents,” John C. Erickson, the company’s founder and executive chairman, said in a statement. “Redwood Capital has the capital resources to address Erickson’s long-term needs and has assured us they support the actions Erickson feels are necessary to strengthen the company immediately and for the future.”

Calls to Davis’ Hanover office were not returned, but in a statement released by Erickson, he said the company had “tremendous opportunities for growth.”

Erickson filed for Chapter 11 bankruptcy protection Oct. 20, 10 months after laying off more than 250 of its 13,000 workers. This past summer, according to news reports, the developer abandoned a 2,000-unit project in Howard County and has delayed projects in Missouri, New Jersey, North Carolina and Ohio.

Rick Grindrod, Erickson’s CEO, said in an interview Wednesday that the company will continue to operate as a management company for its 19 communities. The assets sold at auction consist mostly of land, buildings and landowner entities associated with projects in Philadelphia, Northern Virginia, Texas, Colorado, Kansas and elsewhere, he said.

Grindrod declined to disclose any terms of the deal, including what Redwood paid for Erickson.

“The auction came down to what the two were willing to pay and how they were willing to restructure the debt. … It was all about who created the most value,” Grindrod said. “Two years ago, when the economy was strong, we were developing apartments at a pretty good pace. With the collapse of the economy, we stopped development, laid off our entire development division, and now we’ll start our marketing process and see what the demand is.”