Erickson Retirement trying to reorganize, cut debt
Developer seeking equity investor
By Lorraine Mirabella
October 6, 2009
Erickson Retirement Communities, a struggling developer that has built retirement communities in 11 states, is working to separate its building and management entities, restructure debt and bring in an equity investor.
The Catonsville-based company’s real estate arm, which acquires land for campuses and builds projects, has been burdened by heavy debt amid the recession, Mel Tansill, a spokesman, said Monday.
"The real estate side … has been greatly impacted by the national recession, causing debt that we will work to eliminate through the business separation of the two entities," Tansill said in an e-mail. He declined to offer further details, but said the management operation, which provides Erickson residents with services and amenities, remains strong.
Tansill said the company is continuing to work with lenders to restructure debt, extend loans and adjust lenders’ financial standards so they reflect the economic slowdown.
"Erickson is confident that by restructuring our finances and engaging an equity investor, we will become stronger and better able to achieve our mission," Tansill said.
He said financial problems stemmed from misreading the economy.
In obtaining bank financing, the company made what it thought were conservative projections about completing projects and selling homes to new residents, Tansill said. Retirement communities have struggled as seniors couldn’t sell existing homes and put off moving.
"We frankly didn’t foresee the magnitude or duration of the economic crisis that hit us and all of America," Tansill said.
He said the company has no plans for more broad-based layoffs this year. Erickson employs 12,012 workers at the corporate headquarters and its 19 communities.
In January, Erickson laid off 260 employees, a 2 percent staff reduction that the company blamed on the deepening recession. Most of those cuts came at corporate headquarters in construction, development and corporate support functions.
Since then, financial problems have forced the company to suspend or cancel development of some of its new communities. The company suspended construction of a $585 million retirement community in Hingham, Mass., after completing half of its Linden Ponds project, Tansill said.
The company also has canceled plans to build new communities in Ohio, New Jersey, Minnesota and Colorado. The project in Ohio was the only one tied to the economy; the company stopped the other projects because they failed to meet development standards, Tansill said without elaboration.