(Editor’s note: This story contains information not in the print edition.)
The sale of Covenant at South Hills has been postponed two weeks as residents and other creditors hammer out the final details of a deal with a potential buyer.
Concordia Lutheran Ministries was the only qualified bidder at a hearing in U.S. Bankruptcy Court last week before Judge Judith Fitzgerald. Fitzgerald previously scheduled an auction for the B’nai B’rith-sponsored senior living facility on Sept. 3, but rescheduled the sale for Sept. 17 to give the parties time to finalize a deal.
Because there was only one qualified bidder, no auction occurred.
Concordia, a nonprofit, submitted a $15 million all-cash bid. Under the terms of Concordia’s proposal, Covenant residents would lose the entirety of their entrance deposits — in some cases up to $330,000 — and would no longer be served by a kosher kitchen.
Another potential for-profit buyer, LifeCare of the South Hills, did not have sufficient financing in place to support its prior bid of $17 million. LifeCare of the South Hills is an affiliate of West Virginia-based The Orchards at Foxcrest.
At last Thursday’s hearing, Fitzgerald also ruled that the Court would consider any additional qualified buyers that submitted bids by Sept. 14, if those bids exceeded Concordia’s $15 million offer. That move came at the request of Steven Diaz, an attorney representing his mother, a resident of Covenant. Diaz’s appearance Thursday was his first in the case.
“The Court today demonstrated a high sensibility to a need to do the best possible thing for all of the parties, including the residents, and demonstrated flexibility to allow a qualified bidder with a better offer to come forward at this late hour,” Diaz said.
“The residents would have lost essentially everything if this matter had concluded today,” Diaz continued. “So, in the next two weeks, nothing adverse to their interests will happen, but something positive might happen.”
Robert Bernstein, attorney for creditor Madison Investment Trust, told the Court that Concordia’s $15 million offer was “less money than Madison thinks the property should bring.” He also indicated that a better offer could surface within the next two weeks.
Scott Fox, CEO of LifeCare, said his company is not entirely out of the running, and had re-opened negotiations with the bondholders following the Court’s order of a two-week extension of the sale.
“We’re still interested,” Fox said. “But it’s late in the game. Who knows what’s going to happen.”
But some don’t think the extension will yield new offers.
“I think it’s unlikely that a new buyer could be found in the next two weeks,” said Charles Prine, who chairs the Official Committee of Unsecured Creditors, representing the Covenant’s residents. “It would seem that anyone who would be a new bidder would not have time to do the appropriate due diligence or to see if they could handle this situation.”
Prine said that his group still supported Concordia’s offer, despite the fact that each resident would lose his entrance deposit under the terms of Concordia’s proposed contract.
“We’re really satisfied with Concordia as the most appropriate current bidder,” Prine said. “They are the most experienced, and the most qualified. We’re looking forward to them jumping in here and getting the place back on track.”
Prine said that residents would most likely lose their entrance deposits regardless of who ultimately purchased the Covenant.
“It seems under the circumstances very unlikely that any new bidder could come in and pay our deposits back,” Prine said.
Prine said that many residents blamed B’nai B’rith for the loss of their funds — in some cases their life savings.
“I’m sure there’s a considerable deep resentment against B’nai B’rith, whom they [the residents] hold responsible for the loss of their deposits,” he said.
In fact, several residents have already filed an adversary complaint against B’nai B’rith International, B’nai B’rith Housing, and officers of B’nai B’rith, as well as Greystone Development Company, which helped develop and market the facility.
“The lawsuit against B’nai B’rith represents the residents’ best hope of recovering their deposits,” said Ted Goldberg, one of the attorneys for the residents who are suing B’nai B’rith.
Many residents say they relied on B’nai B’rith’s reputation and assurances when purchasing their interests in the Covenant.
“The B’nai B’rith connection gave us piece of mind that this was a good decision, and we were told that this was going to be a model facility and others would be built across the country,” said Howard Snyder, who moved his parents into the facility in 2005, several years after Covenant’s financial problems began.
“We never even thought to do due diligence because it was B’nai B’rith,” Snyder added. “If we had known there was a financial problem, we wouldn’t have bought in. B’nai B’rith knew the Covenant was in trouble then, but they never revealed it. We all knew this was backed by B’nai B’rith.”
Dozens of attorneys and observers packed Judge Fitzgerald’s courtroom last Thursday, including two full rows of residents. No local Jewish organization sent a representative to observe.
(Toby Tabachnick can be reached at firstname.lastname@example.org.)