Spokane Baptist Association Homes CEO Glen Pierce realized four years ago that if the organizations 96-unit Holman Gardens Retirement Community, in Spokane Valley, wanted to survive, it would need to undergo a financial restructuring.


To make such a restructuring successful, though, the organization needed at least 94 of its 96 residents to agree to the plan, something lenders and lawyers didnt think would ever happen.


The lenders told us, Well go along for the ride, but we dont think well ever get there, Pierce says.


After four years of planning and a number of meetings over the course of two years, Spokane Baptist Association Homes proved skeptics wrong, getting all of Holman Gardens residents to go along with the restructuring and completing it this past summer.


The retirement community needed the residents to agree to the plan, because it involved converting all of the living units to rentals from buy-in units. In the buy-in arrangements, residents already had paid a large upfront feeranging from $45,000 to $90,000and a monthly maintenance fee thereafter. Under the old arrangement, they would receive a large chunk of their initial buy-in fee back when they moved out and Holman Gardens found a new buyer for their living unit.


As part of the rental-conversion plan, residents received back either all or a percentage of what they would normally get back upon moving out, and those who opted to stay began paying monthly rent. As rentals, about half of the living units now are leased out at market rates, and the other half are designated as affordable to low-income senior households and are leased to such residents.


Of the low-income units, about half are designated for households whose annual income is 80 percent or less of the median in Spokane County, and the other half are designated for those with 50 percent or less of median income.


Linda Hubble, administrator at Holman Gardens, says residents with market-rate units received all their buy-in refund and now pay $1,500 to $1,650 a month rent, which is about $600 more than they paid in monthly maintenance fees under the buy-in system.


Residents whose incomes are at or below 80 percent of the median received 85 percent of their buy-in refund and pay $1,000 to $1,100 a month in rent, which is slightly more than they paid in maintenance fees.


Residents at 50 percent or less of median income received only 65 percent of their buy-in fee back, but pay about $700 in monthly rent, which is less than they paid in monthly fees previously.


Pierce says residents rent payments cover all of the services that had been paid for previously through the monthly fees, including utilities, one meal a day, transportation, activities, and classes.


The total cost of the restructuring came in at about $5.2 million, Pierce says. He says the bulk of the financing for the restructuring came from the Seattle office of Boston-based CWCapital LLC, but Sterling Savings Bank and Impact Capital, both of Spokane, provided vital predevelopment funding to cover related, upfront costs, such as appraisals and market studies.


Spokane Baptist Association Homes could have converted Holman Gardens into a market-rate senior-apartment complex easily, but the organization would have displaced about half of its current residents, which would have gone against its mission to provide affordable housing, Pierce says.


When Holman Gardens made the conversion to rentals, it had 10 living units that it was trying to sell on behalf of former residents, many of whom had moved to an assisted-living facility. Having bought those units along with the others, the organization made them available for rent. As of earlier this month, the complex had only one unit available.


Pierce says the driving force for the conversion to a rental facility was that demand for buy-in living units at strictly independent-living communities has declined sharply in recent years, and Holman Gardens struggled to find buyers for the living units on behalf of its residents.


When residents would leave Holman Gardens, it was taking 15 to 18 months to resell units, he says. Five years ago, they would sell in 90 days.


Under the buy-in system, all residents would receive 85 percent of their initial buy-in fee when their living unit sold. When units took a number of months to sell, residents wouldnt have access to that money, which put a financial strain on some of them who already had moved to an assisted-living facility, Pierce says. At the same time, he says, those residents couldnt qualify for Medicaid because they had a large sum of money they were due to receive.


Pierce says one reason that demand for buy-in units dropped is that seniors appear to be staying in their own homes longer and consequently are seeking independent-living apartments like those at Holman Gardens at older ages than they once did.


For example, he says that in the 1980s, many of the Holman Gardens residents were in their 70s, and some of those original residents still live at the complex. In recent years, the average age of a new resident is closer to 85.


A resident who moves to an apartment at an older age, meanwhile, might be there for only a couple of years before he or she needs to move into an assisted-living center. In such a situation, the buy-in model is less attractive, Pierce says.


Several faith-based organizations nationwide have similar situations and are trying to turn those around, he says.


He adds, however, that the buy-in model still appears to be successful in retirement communities that offer varying levels of care on the same campus, since the initial buy-in investment carries over when a resident moves to a more comprehensive level of care.