Cash-strapped Doylestown Health will sell off retirement community as part of financial recovery bid
The Doylestown nonprofit is also getting relief from banks as it fails to meet loan conditions because of cash losses.
The owner of Doylestown Hospital is trying to sell a Bucks County retirement community it has owned since 1992 as part of a bid to restore the nonprofit’s financial health, which severely deteriorated during the COVID-19 pandemic.
The announcement of the planned sale of Pine Run Retirement Community comes as Doylestown Health is negotiating with banks for relief from loan conditions that require the organization to maintain certain levels of unrestricted cash reserves, among other requirements.
A Doylestown Health official told investors Friday during a conference call that management has an agreement in principal with TD Bank and PNC Bank to suspend those requirements retroactively for Dec. 31 and is working on a similar arrangement for March 31.
The health system’s financial reserves have fallen by 37%, or $45 million, since 2019.
Proceeds from the sale will be used to reduce debt and restore financial reserves.
“We’re very optimistic that this will be an incredible part of the plan of us restructuring ourselves in a way that we can gain stronger financial underpinning that the pandemic took out from under us,” Doylestown CEO Jim Brexler told analysts.
Analysts asked him for an estimate of how much financial relief Doylestown might get from the sale. He did not provide a specific answer but called the sale a major change for the organization that is not taken lightly.
“If it did not have significant impact to our financial position and strengthening, it would not be worth pursuing because at this point Pine Run is still a strategic element of our overall continuum of care,” Brexler said.
Pine Run is a so-called continuing-care retirement community, which means it offers residences for people still living independently, assisted living units for people who need help with daily tasks, and a nursing home. In all, it has 517 beds.
Industry benchmarks typically compare retirement community sales on the basis of price per bed. Last year, Tryko Partners LLC bought Attleboro Community in Langhorne, a retirement community with 415 beds. The purchase was made with the help of a $46.3 million term loan, which means that Tryko paid at least $111,000 per bed. It’s not known how much cash Tryko, of Brick, N.J., put into the deal.
If Doylestown receives a similar price per bed, it could get in the range of $50 million for Pine Run — though it’s not clear how much the net proceeds would be if Doylestown has debt specific to that property that needs to be paid off when it is sold.
Doylestown had $222 million in long-term debt at the end of September.
“We’re very optimistic that this will be an incredible part of the plan of us restructuring ourselves in a way that we can gain stronger financial underpinning that the pandemic took out from under us,” Brexler said.
Pine Run residents learned of the planned sale Thursday. “People here are dumbfounded and very upset,” said a resident who declined to give her name.