Residents and directors of the financially-troubled Temple Foundation Inc. are close to a compromise agreement that could bring the foundation and the two life-care facilities it manages out of bankruptcy court in the next few weeks.
Almost all of the residents of Washington House, the foundation's 183-unit facility in Alexandria, and The Virginian, a 200-unit facility in Fairfax, have agreed to increases in their fees as a way of putting the teetering foundation back on its fiscal feet.
"The Temple Foundation's Board of Directors and counsel have held various meetings with residents and they have agreed to changes in their contracts to generate additional revenue to keep Temple stable and self-sufficient," said the foundation's lawyers in a motion asking to have the case dismissed that was filed in U.S. Bankruptcy Court in Alexandria several weeks ago. The court, which heard arguments on the motion two weeks ago, is scheduled to make a determination in early November.
The Temple Foundation, started by the Temple Methodist Church of Rosslyn but with no financial connections to the church, is a non-profit corporation that opened Washington House in Alexandria over 12 years ago and The Virginian in 1980. The two facilities are "life-care" residences for the elderly, apartment houses that combine independent living with support facilities and nursing home rooms in case the residents become to old to care for themselves.
Life-care retirement developments became popular in the early seventies as a model that could offer varying care for an aging population within the same residence. In the past few years, however, a number of life-care facilities have run into financial troubles when their elderly populations turned out to be in better health than originally anticipated.
Life-care facilities, including The Virginian and Washington House, generally require large "founder's fees," usually of $10,000 or more, with additional monthly fees for apartment use and services.
According to one source close to the problems at Temple, the combination of unexpected longevity of the residents in Washington House with the high inflation of the late '70s and the fact that a number of original members had been given contracts locking the foundation into low monthly room rates, started to strain the financial resources of the foundation several years ago.
"There just wasn't the kind of turn-over the foundation had counted on," said the source. "Without the constant infusion of new capital, things got tight."
The foundation filed under Chapter 11 of the U.S. Bankruptcy Code last February to protect itself from creditors, a move triggered in part by mounting financial problems and a dispute over ownership of The Virginian. Thompson Associates, a Fairfax company that built and owned The Virginian, sued the foundation for $600,000 in unpaid rent. The foundation filed for bankruptcy the day Thompson's suit came up on the court docket.
Lawyers for the foundation said in court documents at that time that the Temple Foundation's revenues were insufficient to cover the cost of maintaining the two retirement homes, and in particular to support the health care centers in both buildings. The foundation listed $18,716 in unsecured claims and nearly $5 million in secured debt, primarily mortgages on the Washington House property. The foundation said it had just over $13 million in assets.
In May most of the members of the board of directors for the foundation resigned under pressure from residents concerned about alleged mismanagement of the facilities. Two of the directors stayed on, and Preston Carruthers, a 10 percent shareholder in Thompson Associates, became president.
Carruthers said that residents at Washington House had agreed to increases in the infirmary room rate to approximately $1,400 a month. Residents at The Virginian had agreed to infirmary rates of $500 a month in addition to the monthly fee, which averages around $950 for a one-bedroom. Monthly fees for residents at the Washington House have been standardized, reducing the amount of resident-to-resident subsidization.
"The foundation got in trouble when the rate of inflation for medical supplies rose three times faster during the '70s than the cost of living," said Carruthers. "The residents' contracts allowed for cost of living increases in fees but that did not cover the cost of funding the infirmary beds."
Carruthers said the normal cost of a nursing home bed today runs between $2,100 and $2,800 a month, higher than the foundation's new fees of around $1,400 a month at both facilities. He said that there is still some subsidization of the infirmary by the healthy residents, but that it is now more balanced.
Some residents, however, said they still might have trouble with the new rates, and a handful still have not endorsed the changes.
"We can manage it, but if my mother permanently moves into the infirmary at some point, it's going to be nip and tuck," said one woman whose mother is a resident of Washington House. "She has had good care but it worries me that the Temple Foundation will still hold on to this after the bankruptcy proceeding. It's been a big confusion for a lot of us."
Residents interviewed at both facilities said that the bankruptcy case had triggered "great trauma" and fear of displacement among the residents, particularly those who had invested their life savings to pay the founder's fees.
Many, however, said they believed the worst was over.
"We've decided to take a chance on this," said one resident of the Virginian. "We have high hopes that it will work. I think we've got some good management now."
Carruthers said he has made no secret of his connection with Thompson, or of the fact that he sits on the board of directors for the parent company of the food service for the two facilities. Some of the residents say that his connections actually make them feel more secure about the foundation's future.
"In the beginning I thought it was great this place was non-profit," said one resident of The Virginian, who asked not to be named. "Even though the foundation is still non-profit, I'm encouraged by the fact that Carruthers stands to make a profit through his connection with Thompson if the place stays fiscally sound. I'm for that now."
Carruthers said that he expected the court to dismiss the case soon, as most of the major problems have been solved. He said that Thompson Associates agreed to forgive the outstanding debt on the building when the new board took over and that the other small creditors were going to be paid their full claims. He did caution, however, that there was always the possibility that one of the residents who had not agreed to the changes might sue the foundation, and thereby delay the bankruptcy. He said there were about 10 residents still negotiating.
Carruthers said that the bankruptcy killed the foundation's plans to build a third facility near the Courthouse Metro stop in Arlington, but that the foundation is looking into expanding The Virginian to include more infirmary beds