Bad news for the owner of retirement communities bearing the name of Maryland philanthropist John Erickson. (He started Retirement Living TV here in town).
WaPo reports that Erickson Retirement Communities has filed for Chapter 11 bankruptcy protection and has agreed to be purchased by Redwood Capital Investments, an investment company controlled by Baltimore businessman Jim Davis.
Erickson is apparently another casualty of the real estate meltdown.
Erickson spokesman Mel Tansill said the bankruptcy filing in Dallas and the agreement with Redwood took place on Monday. He said Erickson, which is based in Baltimore County, must restructure its debt to complete the sale. Tansill said Erickson will also reorganize by separating its management and real estate arms. The actions require court approval. Erickson expects approval in the first quarter of 2010.
Erickson operates 19 communities with 23,000 residents in 11 states.
As the Sun's Jay Hancock reports, it's important to understand what's not being sold. Erickson-developed communities such as Oak Crest and [Catonsville's] Charlestown are non-profits that are separate from the for-profit company that is being dealt to Davis. Thus they should be relatively insulated from whatever trauma is affecting Erickson Retirement.
The WSJ said John C. Erickson, who founded the company in 1983, has held town-hall-style meetings at Erickson campuses and sent a letter last month to reassure residents that the company's financial distress won't affect their lifestyle or the safety of their deposits, which are supposed to be refundable when a resident dies or moves out of a community. In a written statement Monday, Mr. Erickson called Mr. Davis "a strong advocate for community residents" who will safeguard their financial security. The company filed for court protection in U.S. Bankruptcy Court, Dallas, Texas.
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2 years ago
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2 comments:
The real problems were with the leadership of this company. The founder set this company up for failure when he let it run on nepotism, always promoting his children to the highest offices despite their lack experience or ability to lead. This led to the corporation being managed more like a "mom and pop" shop as opposed to a real fortune 500 company. This coupled with very poor vision and strategy strangled the once cash cow. A lot more will come out on this. Lots of people watched this ship go down but they were too scared to say anything before it sank, for any voice of opposition was met with termination.
I'm just wondering where smalz123 gets his information. I've been with Erickson for 12 years and the issue at hand has nothing to do with lack of vision or "nepotism". The economy is the sole reason for the state of the company. I fully expect the sale and restructuring will enable Erickson to emerge financially stronger.
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