Concordia finishing first year under new ownership in the black
In less than a year’s time, Concordia Lutheran Ministries, the new owner of the former B’nai B’rith-sponsored Covenant at South Hills, has significantly increased occupancy at the senior living facility in Mt. Lebanon, and is “very close” to being safely in the black, the company CEO said.
Not bad for a facility that was forced to file for bankruptcy protection early last year after struggling with its debts from the day it opened in 2002.
The facility consists of 126 independent living apartments, 48 assisted living units, 12 memory-support beds and 46 skilled nursing beds.
“Skilled nursing and assisted living are both running about 95 percent plus [occupied] right now,” said, Concordia President and CEO Keith E. Frndak. “And there are only 19 independent living apartments left.”
When Concordia purchased the facility last year, there were about 50 vacant independent living apartments.
“Most months, we are now in the black,” Frndak said.
Although the facility was never in the black when affiliated with B’nai B’rith, Frndak says it is “not a fair comparison.”
Covenant at South Hills financed its development of the facility with $59 million in tax-exempt bonds, creating huge interest payment obligations. Concordia, on the other hand, purchased the facility in bankruptcy for $12.8 million, paying 80 percent cash.
“We purchased for cash, so our interest was reduced,” Frndak said. “There is a significant advantage by acquiring the facility for cash.”
While Covenant at South Hills found it challenging to locate buyers for its independent living units, which required entrance fee deposits up to $330,000, Concordia has re-structured its fees, making the apartments more affordable to a greater segment of the population.
“We believe all the apartments will be sold by next summer,” Frndak said. “We reduced the price significantly. We worked hard to make the facility affordable.
“Before, only about 10 percent of the senior population could afford to live here,” he continued. “Now, three or four times that number can afford it. We have the ability to market to a wider group of people.”
Residents also can now choose to rent an apartment, rather than purchase one.
Contributing to the financial turnaround for the facility may be a recent deal struck between Concordia and the municipality of Mt. Lebanon for a significant property tax break.
While operated by Covenant, the facility fell behind in paying its tax bill, and wound up in litigation with Mt. Lebanon in 2003 concerning both the taxability and the assessed value of the facility.
In 2008, the municipality, the school district and Allegheny County entered into a settlement agreement with Covenant agreeing to a $28 million assessed value of the property.
Under Concordia’s recent agreement with Mt. Lebanon, the tax assessment for the property is reduced from $28 million to $12.8 million, reflecting the amount paid by Concordia to purchase the property. In addition, Concordia’s annual tax rate will not increase through 2015, regardless of any changes in millage, reassessment or adjustments due to anti-windfall provisions.
The Mt. Lebanon Board of Commissioners and the Mt. Lebanon School Board unanimously approved the agreement last month.
Frndak would not comment on the property tax agreement, saying it had not yet been signed. Neither would Mt. Lebanon Commissioner Raja (who goes by one name), a spokesman for the municipality.
Concordia will celebrate its financial turnaround, as well as various physical improvements to the facility, on Oct. 26 at Concordia.
“We’re very pleased,” Frndak said. “It’s a good facility, with good people.”
(Toby Tabachnick can be reached at email@example.com.)