U.S. District Court Judge Michael Hogan has approved bidding procedures for the sale of 149 seniors housing facilities operated by Sunwest Management, paving the way for a bankruptcy auction to be held on or about May 17.
A joint venture formed by Emeritus Corp., Blackstone Real Estate Advisors and Columbia Pacific Advisors will serve as the stalking horse bidder at the bankruptcy auction.
The stalking horse bidder makes the initial offer on a bankrupt company’s assets, thereby setting a floor on pricing. The stalking horse bidder also is typically entitled to monetary compensation in the event that another party ultimately acquires the assets.
The impending sale comes as Salem, Ore.-based Sunwest Management, now known as Stayton SW Assisted Living, is currently in the midst of a Chapter 11 bankruptcy reorganization.
Sunwest was charged with securities fraud by the U.S. regulators in March of last year. The Securities and Exchange Commission called the business a Ponzi scheme.
The $1.3 billion bid by the Blackstone/ Emeritus Joint Venture for most of the assets of the consolidated Sunwest enterprise includes a combination of cash, securities, and assumption of debt. This latest bid is higher than the joint venture’s original bid of $1.15 billion in January, according to Reuters.
Meanwhile, existing investors and other claimants in the bankruptcy estate will be permitted to exchange their claims for either cash or up to 49% of the units in the venture.
The court chose the Blackstone/Emeritus group as stalking horse bidder rather than a separate proposal from AEW Capital Management.
At its peak, Sunwest was one of the largest assisted living owners and operators with over 275 properties in 37 states and an estimated annual revenue of $500 million. The company employed 12,000 people.
The SEC contends that Sunwest raised $300 million from more than 1,300 investors by promising a steady income stream and touting its success in running properties. But the company ran into financial problems, and many of the properties lost money.
The properties were sold as tenant-in-common investments, or fractional ownership stakes in properties, and were a popular investment vehicle for smaller investors at the height of the real estate boom.