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“Stark Reminder Things Can & Do Fail” – Sen. Rubio Demands No Commercial Real Estate Bailouts

"Stark Reminder Things Can & Do Fail" – Sen. Rubio Demands No Commercial Real Estate Bailouts

Authored by Senator Marco Rubio, via RealClearPolitics.com,

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"Stark Reminder Things Can & Do Fail" - Sen. Rubio Demands No Commercial Real Estate Bailouts

Authored by Senator Marco Rubio, via RealClearPolitics.com,

In the mid-2000s, small-town Minnesota resident Charles Marohn saw an upscale strip mall being built in a neighboring city. By 2020, the mall was still half-vacant. It was a clear signal that supply had exceeded demand. Yet just as the pandemic began to recede, Marohn saw another, even larger mall go up on an adjacent property.

It violates all the laws of common sense, but it’s the norm across much of the United States.

Many of us have seen evidence of the commercial real estate industry’s “if you build it, they will come” mindset firsthand — the large empty office buildings, unused business parks, and blank storefronts. Now, it has Wall Street spooked.

“I see a tsunami of loans coming due,” one CEO recently told CBS.

“It’s really the perfect storm,” said another.

“You could see a run on all small regional banks. … And that could put us back to where we were with the financial crisis of ’08.”

Other real estate insiders are already calling for “some sort of intervention or assistance from federal regulators or a bailout from elected officials.”

On the one hand, the fact that our financial class is willing to admit the error of its ways is an improvement over the days leading up to the Great Recession, when real estate investors indulged in delusions of never-ending profits until the bill finally came due, and responsible homeowners were left to pick up the tab.

On the other hand, the “experts” should have seen this coming years ago. Other people did. For instance, locals sounded the alarm on commercial real estate glut in Washington, D.C., as far back as 2017. Of course, that didn’t stop developers from erecting new buildings in the nation’s capital, which still has vacancy rates above 20%.

Vacant properties, the work-from-home revolution, rising crime in urban centers, the unaffordability of city housing — all of these factors and more should have made it obvious that commercial real estate was approaching a cliff. Instead, there was unfounded optimism that things would return to “normal.” Owners used an “extend and pretend” strategy to get to the next monthly payment or quarterly earnings report. The façade only came down with the failure of Silicon Valley Bank.

That failure was a stark reminder that things can and do fail, and that investors in failed businesses can be wiped out. That’s the way the real world works. Unfortunately, the financialization and consolidation of our economy have disconnected our markets from reality. WeWork and private real estate investment trusts — some of which are now blocking investor withdrawals — are among the clearest examples of this, but they are far from the only examples.

Take the case of the Minnesota strip mall. If the developer had sought financing for the project from a local bank, it probably never would have gotten off the ground. But as Marohn writes, “[i]f the local bank has any involvement today, it is [typically] as a broker — getting paid to make the transaction happen and then selling that commercial loan onto a secondary market.” In other words, financial constructs are disrupting local market feedback.

We have created an economy in which large-scale investors only realize they’ve gone wrong when it’s too late to turn back. This proved devastating to middle-, working- and lower-income Americans in 2008, who suffered a historic economic downturn while those “too big to fail” were bailed out by Washington. Unfortunately, history may be repeating itself.

If the Biden administration protects investors from the consequences of their actions, as the Federal Reserve let slip it would do in March, it will essentially be transferring wealth — at a massive scale — from America’s working class to the very investors and laptop liberals responsible for this crisis. That would tear our social fabric to shreds and further expand our class divide.

As policymakers, our duty is to the common good, not the stock market. Whether we like it or not, our economy is in the midst of a massive transformation. There will be winners and losers, but bailing out commercial real estate investors isn’t in our national interest. In fact, it would be the definition of unjust.

Tyler Durden Thu, 05/25/2023 - 15:45

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Major healthcare company defaults and files Chapter 11 bankruptcy

50-year-old nursing home operator files Chapter 11 bankruptcy after defaulting on over $50 million in loans.

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Operators of nursing homes and senior living facilities were severely impacted during the Covid-19 pandemic in 2020 as about 40% of residents had or likely had Covid-19 that year. More than 1,300 nursing homes had infection rates of 75% or higher during surge periods, the U.S. Department of Health and Human Services Office of the Inspector General reported.

The high infection rates led to severe staffing challenges, including significant loss of staff and substantial difficulties in hiring, training and retraining new staff, according to a February 2024 report. 

Those staffing challenges, however, continue today, as rising inflation makes it more expensive to compensate these essential workers.

Related: Another discount retailer makes checkout change to fight theft

In addition to staffing challenges, operators have also faced a number of economic issues that have driven some of these companies to file for bankruptcy or, in some cases, shut down facilities. Rising inflation, which affects products, supplies and employee wages, and higher interest rates over the past couple years have severely impacted operators' budgets. On top of those economic issues, operators are battling inadequate Medicare, Medicaid and insurance reimbursements that can lead to capital shortfalls.

Senior care facility bankruptcies rise

Financial hardship has led dozens of operators of senior facilities to file for bankruptcy over the past three years, with 13 companies filing petitions in 2021, 12 debtors filing in 2022 and 15 more in 2023, according to advisory firm Gibbins Advisors.

Notable Chapter 11 filings over the past year have included Evangelical Retirement Homes of Greater Chicago, which filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Illinois in June 2023 to sell its assets at auction. Also, Windsor Terrace Health, an operator of 32 nursing homes in California and three in Arizona, filed its petition in the U.S. Bankruptcy Court for the Central District of California in August 2023 listing $1 million to $10 million in assets and liabilities and unable to pay its debts.

More recently, Magnolia Senior Living, an operator of four facilities in Georgia, filed for Chapter 11 protection on March. 19 in the U.S. Bankruptcy Court for the Northern District of Georgia.

Doctor cares for a skilled-nursing facility patient.

Shutterstock

Loan defaults, ransomware attack force Petersen into bankruptcy 

Finally, Petersen Health Care, operator of about 100 nursing homes, assisted-living and long-term care facilities in Illinois, Iowa and Missouri, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Delaware on March 20. 

The company, which had revenue of $340 million in 2023, was suffering financial distress from increased overhead, low reimbursements and a ransomware attack in October 2023 that interrupted the company's efforts to bill patients and insurance companies.

The company's financial problems worsened as it defaulted on payments on more than $50 million in loans that led to 19 of the company's facilities being placed into receivership. 

Petersen asserted in a March 21 statement that it will continue to operate its business as normal, as it is seeking court approval of a $45 million debtor-in-possession financing commitment from lenders to fund post-petition operating expenses and working capital.

“Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents,” CEO David Campbell said in a statement. “We will emerge from restructuring as a stronger company with a more flexible capital structure. This will enable us to continue as a first-choice care provider and a reliable employer for our staff.”

The Peoria, Ill.,-based company, founded in 1974, operates skilled-nursing facilities, assisted/independent living communities, memory care services and homes for the developmentally disabled.

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Key healthcare firm files Chapter 11 bankruptcy after defaulting

50-year-old nursing home operator files Chapter 11 bankruptcy after defaulting on over $50 million in loans.

Published

on

Operators of nursing homes and senior living facilities were severely impacted during the Covid-19 pandemic in 2020 as about 40% of residents had or likely had Covid-19 that year and over 1,300 nursing homes had infection rates of 75% or higher during surge periods, the U.S. Department of Health and Human Services Office of the Inspector General reported.

The high infection rates led to severe staffing challenges, including significant loss of staff and substantial difficulties in hiring, training and retraining new staff, according to a February 2024 report. Those staffing challenges, however, continue today, as rising inflation makes it more expensive to compensate these essential workers.

Related: Another discount retailer makes checkout change to fight theft

In addition to staffing challenges, operators have also faced a number of economic issues that have driven some of these companies to file for bankruptcy or, in some cases, shut down facilities. Rising inflation, which affects products, supplies and employee wages, and higher interest rates over the past couple years have severely impacted operators' budgets. On top of those economic issues, operators are battling inadequate Medicare, Medicaid and insurance reimbursements that can lead to capital shortfalls.

Senior care facility bankruptcies rise

Financial hardship has led dozens of operators of senior facilities to file for bankruptcy over the past three years, with 13 companies filing petitions in 2021, 12 debtors filing in 2022 and 15 more in 2023, according to advisory firm Gibbins Advisors.

Notable Chapter 11 filings over the past year have included Evangelical Retirement Homes of Greater Chicago, which filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Illinois in June 2023 to sell its assets at auction. Also, Windsor Terrace Health, an operator of 32 nursing homes in California and three in Arizona, filed its petition in the U.S. Bankruptcy Court for the Central District of California in August 2023 listing $1 million to $10 million in assets and liabilities and unable to pay its debts.

More recently, Magnolia Senior Living, an operator of four facilities in Georgia, filed for Chapter 11 protection on March. 19 in the U.S. Bankruptcy Court for the Northern District of Georgia.

Shutterstock

Loan defaults, ransomware attack force Petersen into bankruptcy 

Finally, Petersen Health Care, operator of about 100 nursing homes, assisted-living and long-term care facilities in Illinois, Iowa and Missouri, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on March 20, suffering financial distress from increased overhead, low reimbursements and a ransomware attack in October 2023 that interrupted the company's efforts to bill patients and insurance companies.

The company's financial problems worsened as it defaulted on payments on over $50 million in loans that led to 19 of the company's facilities to be placed into receivership. 

Petersen asserted in a March 21 statement that it will continue to operate its business as normal, as it is seeking court approval of a $45 million debtor-in-possession financing commitment from lenders to fund post-petition operating expenses and working capital.

“Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents,” CEO David Campbell said in a statement. “We will emerge from restructuring as a stronger company with a more flexible capital structure. This will enable us to continue as a first-choice care provider and a reliable employer for our staff.”

The Peoria, Ill.,-based company, which was founded in 1974, operates skilled-nursing facilities, assisted/independent living communities, memory care services and homes for the developmentally disabled.

Read More

Continue Reading

Uncategorized

Major healthcare facilities operator files Chapter 11 bankruptcy

50-year-old nursing home operator files Chapter 11 bankruptcy after defaulting on over $50 million in loans.

Published

on

Operators of nursing homes and senior living facilities were severely impacted during the Covid-19 pandemic in 2020 as about 40% of residents had or likely had Covid-19 that year and over 1,300 nursing homes had infection rates of 75% or higher during surge periods, the U.S. Department of Health and Human Services Office of the Inspector General reported.

The high infection rates led to severe staffing challenges, including significant loss of staff and substantial difficulties in hiring, training and retraining new staff, according to a February 2024 report. Those staffing challenges, however, continue today, as rising inflation makes it more expensive to compensate these essential workers.

Related: Another discount retailer makes checkout change to fight theft

In addition to staffing challenges, operators have also faced a number of economic issues that have driven some of these companies to file for bankruptcy or, in some cases, shut down facilities. Rising inflation, which affects products, supplies and employee wages, and higher interest rates over the past couple years have severely impacted operators' budgets. On top of those economic issues, operators are battling inadequate Medicare, Medicaid and insurance reimbursements that can lead to capital shortfalls.

Senior care facility bankruptcies rise

Financial hardship has led dozens of operators of senior facilities to file for bankruptcy over the past three years, with 13 companies filing petitions in 2021, 12 debtors filing in 2022 and 15 more in 2023, according to Gibbins Advisors.

Notable Chapter 11 filings over the past year have included Evangelical Retirement Homes of Greater Chicago, which filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Illinois in June 2023 to sell its assets at auction. Also, Windsor Terrace Health, an operator of 32 nursing homes in California and three in Arizona, filed its petition in the U.S. Bankruptcy Court for the Central District of California in August 2023 listing $1 million to $10 million in assets and liabilities and unable to pay its debts.

More recently, Magnolia Senior Living, an operator of four facilities in Georgia, filed for Chapter 11 protection on March. 19 in the U.S. Bankruptcy Court for the Northern District of Georgia.

Shutterstock

Loan defaults, ransomware attack force Petersen into bankruptcy 

Finally, Petersen Health Care, operator of about 100 nursing homes, assisted-living and long-term care facilities in Illinois, Iowa and Missouri, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on March 20, suffering financial distress from increased overhead, low reimbursements and a ransomware attack in October 2023 that interrupted the company's efforts to bill patients and insurance companies.

The company's financial problems worsened as it defaulted in on payments on over $50 million in loans that led to 19 of the company's facilities to be placed into receivership. 

Petersen asserted in a March 21 statement that it will continue to operate its business as normal, as it is seeking court approval of a $45 million debtor-in-possession financing commitment from lenders to fund post-petition operating expenses and working capital.

“Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents,” CEO David Campbell said in a statement. “We will emerge from restructuring as a stronger company with a more flexible capital structure. This will enable us to continue as a first-choice care provider and a reliable employer for our staff.”

The Peoria, Ill.,-based company, which was founded in 1974, operates skilled-nursing facilities, assisted/independent living communities, memory care services and homes for the developmentally disabled.

Read More

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