Audited Financial Statements
Albany Place distressed debt update from Reorg's Americas Municipals team.
Auditors Novogradac & Co. issued a going-concern qualification in the 2021 audited financial statements for Albany Place Development, a senior living community in Guilderland, N.Y., that operates under the name Promenade at University Place. Novogradac cites Albany Place’s losses
from operations and bond covenant defaults
as events that raise substantial doubt about its ability to continue as a going concern. The auditors call out the company’s difficulties stemming from a Legionella infection
in 2019 as causing continuing financial distress.
Albany Place had a net loss of $4.5 million for 2021 and its liquidity position and projected cash flows are “insufficient to continue to operate while meeting operational, regulatory, and debt service obligations,” according to the financial statements.
After failing to make its Jan. 1 debt service payment, Albany Place is now in discussions with bondholder representatives regarding the fiscal status of the company, the financial statements say. The company “will look to re-establish covenant requirements with bondholder representatives once operations can be normalized.”
In addition to failing to make the Jan. 1 debt service payment, Albany Place ended the year with an occupancy rate of 38%, below the 85% occupancy rate as required by its bond covenant. Further, although the debt service coverage ratio and liquidity covenants are not applicable until after “stabilization” of the facility or no later than Dec. 31, Albany Place does not anticipate meeting either of these covenants by Dec. 31, according to the financial statements.
Albany Place reports $31.8 million in Series 2017 bonds as of Dec. 31, 2021, plus $3.8 million of accrued interest. The company does not anticipate being able to cover debt service “for the foreseeable future as a result of insufficient cash flows.” It is “unknown” when Albany Place will be able to pay the missed Jan. 1 principal payment obligation.
The financial statements describe the Legionella
infection at Albany Place’s facility as having “created operational and financial burdens in the form of water restrictions, costly control measures, legal and consultation fees and public relations crisis management efforts.”
One of the residents who contracted legionellosis in 2019 has died, and while a settlement has been reached with this resident’s known heirs, Albany Place may be subject to further action from family members from this resident or other residents and families.
In addition, the general contractor that was engaged to perform the construction management and oversight services for the renovation of the facility has filed a lawsuit against Albany Place to be paid for the remaining balance of the amounts owed under the construction contract. The financial statements say that this legal matter is still pending and that the company is unable to predict the ultimate outcome.