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Blackstone targets bankrupt senior living portfolio

The firm has agreed to buy up to 148 properties from Sunwest, which filed a pre-packaged Chapter 11 reorganisation plan in August. The SEC sued Sunwest for fraud in March after it almost devolved into a Ponzi scheme.

The Blackstone Group has agreed to buy up to 148 senior living properties from US retirement home operator Sunwest, as it works its way through a pre-packaged Chapter 11 reorganisation plan.

The deal has to be approved by US courts after the US Securities and Exchange Commission sued Sunwest for fraud in March. New York-based Blackstone said in a statement the transaction would close when the Chapter 11 plan “becomes effective”.

On March 1 (when the SEC filed its lawsuit), most of us were facing the complete loss of our investments. Today, we all have a good shot at getting a significant part of our money back, soon and in cash.

Bill Bryan, chairman of the court-appointed management committee dealing with Sunwest's bankruptcy

Blackstone hopes to team up with retirement home specialist Emeritus Senior Living and Columbia Pacific Management. Under the agreement, Emeritus would invest 10 percent of the equity as well as manage the facilities. Columbia is controlled by Emeritus chairman and co-chief executive officer Dan Baty.

The SEC claimed Sunwest company and founder Jon Harder sold stakes in specific retirement homes without telling buyers the money would help pay expenses for other properties, many of which were losing money, according to a Bloomberg report. Sunwest devolved almost into a Ponzi scheme, the agency said.

Under the reorganisation plan, Sunwest planned to consolidate about 150 profit-generating facilities into a new company and sell as many as 100 other properties.

Federal receiver Michael Grassmueck, who was appointed to take control of the company in March after the SEC filed its lawsuit, said the deal would make a “meaningful distribution to investors and creditors” if approved.

Sunwest investor Bill Bryan, chairman of the court-appointed management committee, added: “On March 1 (when the SEC filed its lawsuit), most of us were facing the complete loss of our investments. Today, we all have a good shot at getting a significant part of our money back, soon and in cash.”