9 senior living communities involved in $3.9 million SEC fraud case get new owners
One of the nine former Oxton / Manor House properties recently sold at auction.
Nine Georgia and Alabama senior living communities that went into receivership last year after their owner was charged with fraud and had his assets frozen now have new owners.
Agemark Acquisition, new owner of eight of the Oxton / Manor House communities, and Opelika Retirement Investors, the owner of one, paid a total of almost $27 million for them via auction.
“For more than a year, I've overseen the operations at these facilities, and I believe they are well-positioned to thrive under new permanent ownership,” said Derek Pierce, managing director at turnaround and consulting firm Healthcare Management Partners. Pierce personally was named receiver of the communities.
Agemark Acquisition closed on the following communities, shown with total gross cash consideration, on April 6:
Opelika Retirement Investors closed on one community April 2:
The properties had been in receivership since January 2017, when owner Dwayne Edwards was charged with fraud and had his assets frozen after the Securities and Exchange Commission alleged that he had diverted funds raised from investors to buy or renovate assisted living and memory care communities and used them for other purposes.
Between July 2014 and September 2015, according to the complaint, Edwards and his business partner, Todd Barker, and the limited liability companies they set up to serve as borrowers, raised almost $62 million through nine separate municipal bond offerings. Edwards, the commission said, improperly commingled at least $3.9 million from the offerings and the revenues of the communities underlying them.
The SEC announced in July that it had settled with Edwards. Barker previously had agreed to a settlement.
‘Stalking horse' auction
HMP said it was able to work with law firm Waller Lansden Dortch & Davis to maximize the amount recouped for bondholders by holding “stalking horse” auctions.
In such auctions, a potential purchaser, known as a stalking horse purchaser, agrees to submit a bid publicly before the formal auction. That bid effectively sets the lowest dollar amount for all bids and is designed to ensure that at least one party will bid at the auction. It also enables the seller to market-test the stalking horse purchaser's initial bid to determine whether higher and better offers are possible.
The auctions of all nine communities were conducted simultaneously on Feb. 15. HMP said that, through the process, it was able to increase the initial bids from $23.9 million to $26.6 million.
“The stalking horse auction was a significant step forward to returning funds to the investors in these nine senior care communities,” Pierce said. “We were able to secure strong, capable bidders while seeking the best possible offer for the facilities and moving expeditiously towards closing.”
Approximately 55 potential purchasers conducted due diligence on the communities, HMP said.
Meanwhile, a quarterly report filed Tuesday by Waller asks that the receivership be continued to enable Pierce to pursue existing claims against third parties and continue investigating whether other claims should be pursued.