I am sure many people are relieved to hear you are validating what most of those of us who work or have worked for Erickson were already aware: nothing related to the Bankruptcy will affect the residents of Erickson Communities.

The residents were and are the focal point of everything Erickson. Charlestown is over 25 years old and many of its residents have been there since it opened; a testament to the active lifestyle Erickson provides.

While the leadership of Erickson may have made some mistakes along the way, the truth is nothing could have prepared them, or us as citizens, for the economic downturn that has occured in this country.

Erickson is not a bank or an investment firm on Wall Street that abused the system for their own greed. As one who used to work for Erickson, I think it needs to be said that Erickson not only took care of its residents first and foremost, but took care of its employees too. I think some people who were laid off and are angry, forget that.

I too was laid off...I went through the same disapointment we all do when let go and its a tough job market. But I am extremely dismayed at the stressing of the bankruptcy and what negative impact could be instead of telling the real story: One man had a vision to grow a company that could improve the lives of those of us who are fortunate enough to grow older. He succeeded. For over 25 years, he and his incredible employees, provided an environment of health, happiness and growth, for the residents and employees.

And they shared information with competitors. Nothing was a secret. John believed we should"share our gifts" and helped other retirement centers and did research and shared that to promote healthy aging. But I guess that's not news. I guess getting a book published nationally to share the "secrets" of how our (yes I still say our) residents live better lives, add life to their years, is too mundane a story in today's economic environment. Sad...but this company will survive and that is good for the thousands of people who reside or will reside in one of their outstanding communities.

Do I believe they could have done better fianancially and operationally? Sure. But hindsight is always 20-20. I think you would do a better service to tell the whole story...and include the positive impact this company and its employees had on the world of aging...

Thank you, Mr. Hancock, for continuing to cover this story, and for providing factual information for the residents and families of Erickson communities. Much appreciated!

Thank you Mr. Hancock for keeping us up to date on issues related to the Erickson communities. It will feel so much better when the re-structuring of the debt is complete and things can perhaps get back to normal, w/ out such an outpouring of emotion.

My concern is w/ the company Erickson is selling to? What is their track record w/ seniors? What assurance (besides the statement in a letter from John Erickson) is there that this entity will carry on the same philosophy of care and selection of geriatric/gerontology educated and sensitive personnel that the Erickson communities have become so well known for.

Thanks for telling our story. The only thing that will have a negative effect on us, the residents, is bad publicity and fear-mongering. Those things will discourage new people from moving in and do more damage than the Erickson financial problems.

As a long time resident, I am saddened by the turn of events for John Erickson and his employees. The reasons are numerous for the demise of the Corporation; both outside forces and poor timing for expansion coupled with a global view of the Erickson brand. As for the residents of these commnities, we are the lucky receipients of a lifestyle immagined and implemented by Erickson management who we,the not for profit board, have contracted with. I have every confidence that the Residence and Care agreement which we signed will be honored and deposit refunded. Current and prospective residents should take comfort in the current moral worth of our staff here at Riderwood.
I would urge the new owner to keep this staff in place and LEARN from them how to successfully operate a CCRC. I would also suggest that the new owner form a task force/focus group of residents who have worked on various committes to discuss history and the future of these viable and beautiful campuses just overflowing with "great idea people"!

Appreciate your interest in the goings on at the Erickson communitieas. Although there have been meetings in each campus, you have been very helpful in getting us info on the overall picture

You keep indicating that a resident has never failed to get back his full entrance fee--not true. A portion of the original entrance fee is used to return the unit back to its original condition--ie: repaint, new carpeting among other things.

This is a good article with helpful information, but I do think you underplay the effect the bankruptcy could have on residents. The bankruptcy filings make clear that the non-profits, while technically separate entities are set up by Erickson. The business plan depends upon the non profits "loaning" (apparently for no interest) the IEDs to the for-profit land-owner corporations, also set up by Erickson, to pay down the construction debt, and then eventually forgiving those loans in order to lower the purchase cost when the non-profit purchases the land and buildings when all phases of the construction have been completed. If the communities you are describing are among the eight communities in which the non profits have purchased the land and buildings from the landowner corp, then I think you are correct that the bankruptcy should have little to no effect on the residents. For the 11 communities still in the development stage, however, the non-profits are loaning money to an entity that owns the land and buildings that is in bankruptcy, so it seems to me there has to be risk that the nonprofit will not receive full value for the IEDs they have loaned to the landowner corp. My in-laws have been deciding whether to move into an Erickson community, and have had to take this risk into account. That being said, there is risk in every investment and I believe that my in-laws are going to move in and pay the IED because of Erickson's overall track record. They will do so, however, realizing that there is a risk to what they are doing and that their community may ultimately be affected by the bankruptcy despite Erickson's efforts to insulate them from any such effect.

While many are thanking you for keeping them informed, unfortunately no one seems to
realize that your information is wrong. The Erickson commumities at Charlestown, Oak Crest, Riderwood and others are independent, non-
profit corporations that are
NOT owned by Erickson Retirment Communities. They do not come under the bankruptcy
proceedings. Their only tie to ERC is that they have a contract with ERC to manage
the campuses. Their only problem is with alarmist, incorrect headlines that falsely imply that they are
involved with the bankruptcy, which they are not! I wish Mr. Hancock would do some research and stop spouting his incorrect ideas.

Hi Bill: You are correct, and I have made all those points in previous posts and comments. Go read them. The fact that the nonprofits are legally independent from Erickson corporate does not mean they are at zero risk from the bankruptcy.

The only 'risk" is reputational risk from inaccurate newspaper articles
and headlines.

Article today is closer to the truth. You still don't have it completely correct. As a result, you do the Senior Citizens of Oakcrest and all of Baltimore a disservice. Please continue your investigation with accuracy and completeness. Have you sat down with an Oakcrest representative? You have left many positive aspects of the financial situation at Oakcrest out of your report. Without this, your report is incomplete and dishonest.

Hi Advocate: Let me know what you believe is dishonest or incomplete and I'll try to respond to your concerns.

If entrance fees do not go to a bank, where do they go ? And in whose name are they registered ?

The most insightful and probably accurate observation in this analysis is that the interests of residents will be protected not so much because of a clear legal structure (Anyone who has had a lawyer examine the situation knows that the relation between Erickson, the local communities, and the other legal entities involved in the Erickson structure are complex and somewhat unclear.) as because it is in no one’s interest to “abuse residents” as long as the communities remain viable businesses that can provide profit for their management companies. This is generally a good thing for residents.

On the other hand, the potential for losing deposits is not the only possible threat to the well-being, financial and otherwise, of residents. The bankruptcy has other implications for residents and their relation to the company that will manage their communities:

1. Are the problems that led to bankruptcy central to the present Erickson organization and therefore likely to reoccur within the community management wing of Erickson? Erickson claims that the sole causes of the bankruptcy were the larger financial context and the non-cooperation of banks. But there are reasons to question this claim and worry about some of the ways in which ERC has been changing within the last four or five years: very rapid expansion with more attention to building new communities than managing older ones, increasing numbers of inexperienced staff with little direct contact with residents who make numerous foolish mistakes and scapegoat others when things go wrong, and a tendency to reward loyalty over competence within the organization.

2. To what extent will the bankruptcy lead to serious cutbacks in resources available to the communities and their residents? Will residents end up footing the bill for the mistakes made by management? Certainly this appears to be true in the continual visible cutbacks in many areas of life within the Erickson communities including dining services, general services, and security among others and the rapid turnover of lower and medium level employees in the local communities.

3. The bankruptcy will inevitably lead to serious cutbacks in the Erickson staff both in Catonsville and at the local communities. Who is going to be cut and why? Will the basis of these cuts be competence or connections? Are these choices going to be made for the benefit of residents or the benefit of management?

Hopefully the bankruptcy court, the boards of directors, and the new management will look after the interests of residents and employees of the local communities as well as the interests of upper level Erickson employees.

In response to Bill's question of October 31, according to the Affidavit filed by Erickson in the bankruptcy court, a 54 page document that describes the operations of Erickson and its various subsidiaries to explain why bankruptcy protection is necessary, during the development phase of each new community, a non-profit is established to enter into Residence and Care Agreements with seniors (generally defined as age 62 and over although it appears that may vary from state to state). Those Residence and Care agreements call for an Entrance Deposit(ED) and a monthly maintenance fee. The first ED received for any living unit is referred to as an Initial Entrance Deposit (IED). The IEDs are loaned by the non-profit to a for-profit subsidiary of Erickson established to own the land and buildings during the development stage of the community. This entity is referred to generically as a landowner corp. Those IEDs are not deposited in any bank and not held for the benefit of the person moving into the living unit. When the community is completely developed, and all construction is complete, the non-profit purchases the land and buildings from the landowner corp. and forgives the loans to the corp in return for the corp lowering the price of the land and buildings by the amount of the loans being forgiven. The cost of the land and buildings beyond the forgiven loans is financed through issuance of municipal bonds. In essence then the non-profit uses the IEDs to pay for the land and buildings over time, rather than having to float a larger bond issue when they purchase the land and buldings. After the IEDs, anytime the living unit changes hands, because of the resident dying or otherwise deciding to move out, the next resident pays an ED for the unit, and the ED of the next resident is used to refund the ED to the previous resident or the previous resident's estate. There are provisions in the Residence and Care Agreement to deal with the situation of the subsequent resident paying less in an ED than the previous resident. According to the Affidavit, neither the IEDs nor the subsequent EDs are put in the bank and held for the resident.

According to the Affidavit, eight communities have completed the development phase and the non-profit now owns the land and buildings, while 11 communities are still in development. My concern, expressed in an earlier post, is that the non-profits at the 11 communities still under development have loaned IEDs to a landowner corp that is now in bankruptcy, and it seems to me the residents of those communities are at some risk, how much I cannot say, from the bankruptcy. The eight communities in which the non-profit now owns the property appear to have little to no risk from the bankruptcy, since they theoretically at least could just hire a new management company if Erickson Retirement Communities was not performing satisfactorilly. Residents should be aware however that the non-profits do not deposit their EDs in escrow, and the resident will receive a refund of the ED only if a subsequent resident pays an ED for the living unit, unless state law in the state in which the community is located, provides otherwise. That being said, as Mr. Hancock points out, in 26 years it appears that no one has lost their ED, except for amounts deducted to bring the unit back to a salable condition after a resident leaves.

Paul: Thanks for posting this. You beat me to the punch. JH

As I stated in my initial post, my in-laws are considering moving into an Erickson Community that is still in the development stage. They are aware that Erickson has filed a motion to allow it to put IED's into escrow, and the motion was supposed to be argued on October 29, but I haven't been able to find anything about whether that motion has been granted. Obviously, they would feel much better about moving in if they knew the IED was going into escrow during the bankruptcy. Mr. Hancock, do you have any sources who could tell you whether the motion will be decided soon or anything about the motion's status?

The vast majority here at Riderwood are now and have been very pleased with the Erickson concept and the current management. We feel complete confidence in what we have been told and explained. Other retirement plans that we have compared Riderwood to do not even touch the advantages that we enjoy here at Riderwood. I know that those residents that I have spoken to continue to advise friends and families that this is the very best that life has offered us'
It almost compares to being on a continual vacation, perhaps like a cruise, with the advantage that noone gets sea-sick.
Thank you Mr. Erickson for developing this program. We do hope that everything pending results in the best for everyone.

This is an update to my post asking about the status of the motion to allow Erickson to put the IEDs in escrow during the bankruptcy. I spoke to bankruptcy counsel for Erickson Retirement Communities. The motion has been granted, the formal order has not yet been uploaded to the court's website. During the bankruptcy, Erickson will put the IEDs of new residents in escrow, so that they will not be affected by the bankruptcy. That is certainly a relief to my in-laws, and should be to others considering moving into an Erickson Community during the bankruptcy.

Your OCV Resident returns--For the most part your blog and the comments give a positive spin on the issue at hand. But I want to offer a perspective on and motive for moving into OCV that has not been touched onby you or in any comments as far as I can determine.

THIS IS MY PERSONAL PERSPECTIVE ON AND MOTIVE FOR MOVING IN TO OCV. And I "build" on the statements in your blog and quotes by Peter Chapman-- "Having reviewed lots of documents and talked to bankruptcy specialists, I believe that Erickson residents will be insulated from the financial trauma at the parent company. Peter Chapman, publisher of Erickson Retirement Bankruptcy News and a longtime bankruptcy watcher, goes further.

“From a customer's perspective, bankruptcy should be a non-event," Chapman told me. "The company's goal is that the bankruptcy doesn't impact the individuals that they are providing service to. They're telling the bankruptcy court: 'If we disrupt our customer base, we're out of business.' I don't think anybody's going to object to that."

What he's saying is that it's in nobody's interest -- not Erickson, not Erickson's creditors, not the guy who's buying Erickson, not the nonprofit corporations that own Erickson's communities -- to abuse residents. It's in everybody's interest to ensure that Erickson as a business continues as normally as possible."

Respectfully, but candidly, I did not move in over 5 years ago with any intention of moving out later and get my refund.Nor did I move and pay the entrance fee so upon my death, my beneficiaries[ in my case my grown children ]would receive an inheritance of whatever refund is paid to my estate.

Basically, I moved to enjoy my remaining years[ and I am doing that as I send this comment] but with the knowledge that I would receive "continuing care" should I need it and thus not be a burden on my family with whom I have a very close tie--They are under no expectation that they will receive an inheritance when I die.

Thie assurance-which I am sure others here have -give me a peace of mind and why I believe it is perhaps the most important reason why it ia in the interest of ERC to see that this comes out OK for us residents.
Maryland law[Health Services Article] defines a Continuing Care faciiity as meaning "providing shelter and providing either medical and nursing or other health related services or making the services readily accessible through the provider..."

OCV is one of 34 CCRC's in Maryland.And there are differeny types--OCV is a "fee for service" CCRC. One pays for higher level of care like Assisted Living or Nursing Home care which in OCV and other ERC communities is called Renaissance Gardens.
I will pay more for a higher level of care-it is in the Resident Care Agreement.

Should I have to "draw down" my assets and they decline to a point that I would have difficulty paying, then my entrance deposit becomes the source for additional funds--I knew this "up front" when I moved in and so did my children,

So I am epousing another perpective on why I moved in and comforted in feeling secure here; and so does my family.

There is more to the story and many may have questions;like what happens should all assets are drawn down;when does Medicaid kick in or use of the OCV Benevolent Care Fund funded by care-giving residents and others?

This is not for this comment.

In response to Paul's post of November 2nd, the land owner companies to which the communities loan the entrance deposits are also separate legal entities from Erickson corporate and each other and therefore not likely included in any of the bankruptcy proceedings. Erickson corporate is simply a management company under contract from the communities to run the CCRCs and the construction company is under contract from the landowner to build the CCRC structures.

In response to JT. I should have made this clear in my earlier post. The bankruptcy is a consolidated bankruptcy involving Erickson Retirement Communities, Erickson Construction, and each of the landowner corporations, which are subsidiaries of Erickson Retirement Communities. That is what led to my concern over possible loss of the IED. With the order allowing Erickson to put the IEDs in escrow, my in-laws are moving in to their living unit at an Erickson Community today.

ERICKSON IS NOT A PONZI SCHEME, BUT THE MECHANICS ARE TOO CLOSE TO BE COMFORTING. ELIMINATE OR DRASTICALLY REDUCE NEW ENTRANTS, WHICH IS NOW INEVITABLE FROM THE BAD PUBLICITY, AND THE WHOLE THING WILL SOON UNRAVEL. WE STOPPED JUST SHORT OF COMIHG IN BECAUSE OF THE PUBLICITY AND MY PREDICTION OF THIS BECAUSE OF THE ECONOMY. A SHAME.

It is clear that John Erickson created a very successful form of retirement community that has worked well for many years, has a number of talented employees, and has satisfied many residents most of the time. It is also clear that in the past few years, the bureaucracy has expanded enormously, the founder has become less involved in the organization, decisions have become increasingly routinized, even rigid, with less and less creative problem solving. This structure (especially the community construction wing) ran into serious problems adjusting to a changing economic context. Thus the bankruptcy.

The critical question is how much this massive expansion, routinization, and suppression of creativity have created a structure (including its community management wing) with decreasing ability to function well in any economic context, without significant wasting of financial resources. At Riderwood, for example, you must look beyond the quite popular and competent staff of the director’s office (Donna Mason & Bo Lundh) to other Erickson employees. The truth is that those two do not make all of the decisions themselves and that most of the decisions they do make are dependent on input and “information” from other Erickson employees.

Again and again you can see signs of poor decisions made by staff at “Corporate” such as the remodeling of the Potomac Café to make it LESS handicap accessible. These costly mistakes could be avoided with more bottom-up input, but such input, especially from lower level Riderwood employees, is discouraged. More autonomy of the local community from the Erickson bureaucracy and more room for input from local staff and residents would be a good thing.

Younger, healthier residents deal primarily with the more public face of Erickson. The older and more disabled residents become, the more they are forced to deal with the far less competent and cooperative side of the administration, particularly the Director of Resident Services. To become aware of some of these problems, one needs to do more than an informal survey of younger more active residents. One must pay attention to former residents whose families have moved them out of the community, former employees who have been fired or quit in frustration, long-time members of the Family Council at Renaissance, lawsuits and threatened lawsuits involving Erickson, outside employees who have been banned from the property, the families of now deceased former residents, residents who have experienced extensive pressured to move to Renaissance, and the handling of conflicts in general. A department of Resident “Services” that actually tried to serve rather than control residents (and staff) would certainly work better and cost less.

I'm on waiting list to eventually move to Maris Grove. Very concerned about the Erickson Bankruptcy and appreciate Mr. Hancock's blog and following comments. I am also grateful to Paul for his Nov 2 comments; where can I read the "54 page court filing"?

In Response to Sid Hess, I found the affidavit through a link in a Wall Street Journal blog. Go to http://blogs.wsj.com/developments/2009/10/21/questions-linger-as-erickson-enters-bankruptcy/

There is a link from that article to the affidavit, which has been filed in bankruptcy court in Dallas Texas, and is a matter of public record. Mr. Hancock's article is a better article, but the wsj blog has a direct link to the affidavit.

Thanks to Paul, Bill, Jay and all others who have provided so much enlightening information. Please, one question: Does anyone know if Riderwood is "free and clear" financially from the "construction wing" of Erickson? Thank you, Jay, for making all this discussion and information available to those of us on a priority list.

In response to Evie, I checked the affidavit mentioned in my earlier posts. Riderwood is one of the eight campuses for which development has been completed, the landowner corp dissolved, and the campus is now owned by a non-profit called Riderwood Village, Inc. Riderwood Village, Inc. is not an entity involved in the bankruptcy. Since Riderwood only contracts with ERC to manage the property, assuming there are other companies around that could manage the property if Erickson no longer could, theoretically the bankruptcy should have little or no effect on Riderwood.

For Sid Hess, Maris Grove is one of the 11 communities still under development and is owned by Concord Campus LP, which is part of the bankruptcy. That campus, as I have said in previous posts, appears to be at some risk from the bankruptcy, I just can't say how much. That risk is lessened, however, by the bankruptcy court ruling allowing the IEDs to be placed in escrow during the pendency of the bankruptcy.

I will be visiting the ERC Tallgrass Creek in Overland Park,KS soon for information on a future buy in. What can you tell about the current status of the Tallgrass ERC and plans for future build out of the CRC portion of that facility? Thanks

In response to Gene. I have no particular insight into what is happening at Tallgrass Creek. All I can tell you is it appears from the bankruptcy affidavit to be the most recently opened of the Erickson CCRC's and so it appears to have the most construction left to complete. As of September it had only 227 completed units and was 61.2% occupied. I believe a location like Tallgrass has the most to fear from the bankruptcy. If the landowner corp (Kansas Campus LLC) does not have the resources to complete construction there will simply be a senior citizen apartment building at the site, because it does not appear the assisted living and skilled nursing facility has yet been built. I would ask the director of the facility how they expect to assure that construction of the assisted living and skilled nursing facility will take place before agreeing to pay an IED, since the ability to "age in place" is the main reason for choosing a CCRC over a senior citizen apartment complex. By the way, according to the affidavit the average monthly fee at Tallgrass is $1,754 and the average IED is $154,038, which should give you some basis to compare what they are asking you to pay.

In response to Paul: I agree with your assessment of risk for potential residents of the newer communities but must disagree with your implication that an Independent Living retirement community is no more than a "senior citizen apartment complex." Using the example of Riderwood, with which I have been familiar for almost a decade, the independent living part of such a facility provides many more resources to elderly, handicapped, and even seriously ill residents than an apartment complex, including dining services, repairs available from General services, social workers, the medical center, Home Health aides, on campus activities, rapidly available security, EMTs, and even an ambulance, on campus performances, a chapel, on campus physical and occupational therapists, and much more.