Where to begin....
Once upon a time, in a world where residential prices were rising at a faster and faster pace, and no one ever imagined it possible that it could be any other way, continuing care retirement communities (CCRC's) were built to take advantage of all that equity older adults had in their single-family homes and condominiums. The compelling business case was obvious and the market grew accordingly. The pricing of CCRC units was based upon the median home value of the surrounding area. It all made sense...until it didn't.
The Franciscan Sisters of Chicago (FSCSC) having served the community for 115 years (they founded the first Catholic nursing home in Chicago in 1898) and successfully developed numerous (and highly acclaimed) communities for older adults in several Midwestern states found themselves in 2004 with a remarkable opportunity to develop a CCRC only one block from Chicago's Magnificent Mile. The $229 million project ($9 million over budget) would be the only CCRC in downtown Chicago.
Ground was broken on the 248 unit high-rise (tallest CCRC in the world) in 2006 and construction delays forced the project to open in December 2008 (13 months later the expected and three months after the Lehman bankruptcy). Timing is everything. In the first few months after opening, 160 original depositors walked away from the project either because their home values or their investments diminished. The intense marketing efforts could not overcome the worsening economic conditions and the project never came close to reaching the break-even point of 200 occupied units (approximately).
Today's news was not surprising. In September, FSCSC announced it would stop payment on its bond obligation. Today's Chapter 11 filing will give the Franciscan Sisters time to find a buyer for the property while maintaing their obligation to the current residents of the Clare. I suspect that for the right price, there will be many interested parties in this luxury property. Assuming the new purchaser will have significantly lower capital costs, I suspect the "new" rates for units will be significantly lower then the original prices ranging from $540,000 for 775SF one-bedroom to $1.2 million for a 1,700 three-bedroom suite. Of course, the new owner may elect for the property to become a rental, or abandon the concept of an older adult community.
This is a sad day for the sponsoring organization. The economic downturn swept away many grand visions and I sincerely hope that FSCSC is able to move forward and continue to meet the needs of older adults it serves so well.