Premium Edge - Chapter 11 Case Summary

Business Description

Premium Edge, LLC, doing business as Alura Senior Living (the "Debtor"), is a Florida limited liability company that owns and operates a senior living community known as Alura Senior Living (the "Community"), located at 777 Roy Wall Blvd, Rockledge, Florida 32955.

• The Community provides critical healthcare services and support to older adults and individuals with disabilities who need assistance with the daily tasks of life.
• Within its Memory Care units, the Debtor cares for individuals who suffer from Alzheimer's disease, dementia, and other cognitive disabilities that make independent living impractical and potentially dangerous.

The Debtor generates revenue through the rents and fees paid by its residents, all of which are on a "private pay" basis. The Debtor does not receive any payments from public or private institutional payment programs such as Medicare, Medicaid, or private insurance.

• The Debtor's monthly revenue is approximately $700,000, while operating expenses total approximately $500,000 per month.

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Corporate History

The Debtor was formed on September 16, 2016 and has three members (the "Members"), each of which is a Florida limited liability company. The Members' respective interests in the Debtor are as follows:

• Alesde, LLC — 51.275%
• Osope LLC — 40.725%
• Verari, L.L.C. — 8%

Corporate Governance

Rather than a board of directors, the Debtor is governed by a Membership Committee, whose members are unanimously elected by the unanimous written consent of the Members.

• The current members of the Management Committee are Adriana Dall'Armellina and Alberto Espinosa. Mr. Espinosa also serves as President of the Debtor. There are no other titled officers of the Debtor.

The Management Agreement

Premium Edge Senior Care LLC (the "Manager") acts as the Debtor's Manager pursuant to a Management Agreement dated June 1, 2023.

• The individuals with ownership and control of the Manager, Adriana Dall'Armellina and Francisco Javier Gonzalez, are also the individuals who own and control Verari, L.L.C., which holds an 8% ownership interest in the Debtor.

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Operations Overview

The Community opened in 2021 and has a licensed capacity of 147 beds across 127 units, separated into thirty-three (33) independent living ("IL") units, sixty-nine (69) assisted living ("AL") units, and twenty-five (25) memory care ("MC") units.

• The Debtor is required to make at least 20% of the total number of units available to residents whose income does not exceed 50% of the area median income (adjusted for family size), as determined by the United States Department of Housing and Urban Development. The Debtor is currently exceeding this requirement by making 26% of all of its units available to qualifying residents.
• As of the Petition Date, 122 residents reside at the Community, resulting in an occupancy rate of 94%. By apartment type, the IL units are 86% occupied, the AL units are 95% occupied, and the MC units are 100% occupied.

Resident Agreements and Fees

• Independent Living: Residents of the IL units enter into an Independent Living Resident Agreement (the "IL Resident Agreement"), which typically continues until terminated by either party on sixty-day notice, or on thirty-day notice in the event of the resident's death.
  • Residents pay monthly base rent (the "IL Base Rent") in advance on the first day of the month, ranging from $4,190 to $5,620 per month depending on the style of apartment and number of occupants.
  • Basic services included in the IL Base Rent comprise meals; utility services such as gas, electricity, water and sewer, internet, WiFi, and television services; housekeeping; laundry; grounds keeping; transportation; parking; and social and wellness programming. Additional meals, guest meals, and additional transportation are charged separately.
  • Health care services are not included in IL Resident Agreements; IL residents agree to convert to AL residents and execute an AL Resident Agreement in the event they require care and services provided under the Community's AL license.
• Assisted Living: Residents of the AL units enter into an Assisted Living Facility Resident Agreement (the "AL Resident Agreement"), which typically carries a one-year, automatically renewing term and may be terminated by the resident on thirty (30) day written notice or by the Community on forty-five (45) day written notice (or as otherwise provided, such as when care needs change or upon the death of the resident).
  • Residents pay monthly base rent (the "AL Base Rent"), ranging from $4,778 to $7,387 per month depending on the style of apartment and number of occupants, plus a care fee (the "Care Fee") based on the level of assistance required, ranging from $500 to $2,100 on a scale of assistance from one to five.
  • AL residents may also pay additional one-time or monthly personal service fees for services such as transportation, pet fees, meal delivery, and landline phones, as well as fees for supplemental care services such as blood sugar monitoring, injectable medications, or catheter emptying.
• Memory Care: Residents of the MC units also enter into an Assisted Living Facility Resident Agreement. Memory care is treated as a higher level of care that is included in the MC resident's monthly base rent rather than charged as a separate Care Fee.
  • MC Base Rent ranges from $7,950 to $8,350 per month. MC residents may also pay the same categories of additional personal service and supplemental care fees available to AL residents.

Across all unit types, residents also pay a one-time, non-refundable community service fee (the "Community Service Fee") of $3,000, which covers the admission process, room preparation, and certain maintenance costs. Residents generally pay their rent through a third-party service provider, Yardi Systems, LLC, and its online payment portal RentCafe, except for approximately 10% of residents who pay by check.

Workforce

• The Debtor employs approximately 87 employees (the "Employees"), of which approximately 65 are full-time and 22 are part-time.
• In addition to the Employees, the Debtor occasionally utilizes the services of independent contractors sourced from Arbor Temporary Services, Inc. d/b/a Arbor Medical Staffing and ShiftKey, LLC to provide nursing and medical support services as needed, for the purpose of covering shifts that the Debtor's Employees are otherwise unable to fill.

Management Services

Pursuant to the Management Agreement, the Manager provides all of the management services necessary to the operation of the Community (collectively, the "Services"), including, but not limited to:

• hiring, training, promoting, and supervising the Employees, in consultation with the Debtor;
• ensuring compliance with applicable rules and regulations of public authorities applicable to the Community and/or its residents;
• supervising, providing, and maintaining the financial and medical records of the Community;
• maintaining budgeting, billing, accounting, and other financial procedures;
• overseeing and supervising the purchase of supplies, equipment, and furnishings; and
• providing marketing, design, and branding support services.

In exchange for the Services, the Manager receives a management fee equal to 5% of gross revenues, payable in arrears on the seventh day of each month. At the Debtor's current gross revenue levels, the current monthly fee due to the Manager is approximately $35,000.

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Prepetition Obligations

As of the Petition Date, the Debtor owes a total of approximately $32.41 million in outstanding principal obligations under the Series A Bonds and $80,000 in outstanding principal obligations under the Series B Bonds, for a total of approximately $32.49 million in outstanding principal bond obligations, together with accrued and unpaid interest thereon (the "Bond Obligations").

The Bond Obligations

• UMB Bank, N.A. ("UMB Bank" or the "Bond Trustee") serves as successor indenture trustee for (i) the $32,515,000 original principal amount Capital Trust Agency Senior Living Revenue Bonds (Alura Senior Living Project) Series 2019A (the "Series A Bonds") and (ii) the $1,095,000 original principal amount Capital Trust Agency Senior Living Revenue Bonds Taxable Series 2019B (the "Series B Bonds," and together with the Series A Bonds, the "Bonds"), issued by the Capital Trust Agency (the "Issuer") pursuant to an Indenture of Trust dated as of November 1, 2019.
• Proceeds of the Bonds were loaned to the Debtor pursuant to a Loan Agreement dated as of November 1, 2019, as modified by a First Amendment to Loan Agreement dated as of December 3, 2021, and were used to finance and refinance the acquisition of the Community, refinance certain existing indebtedness, fund certain reserves, and pay costs of issuance of the Bonds.
• Concurrently with the issuance of the Bonds, the Debtor issued a promissory note in the principal amount of the Series A Bonds and a promissory note in the principal amount of the Series B Bonds (collectively, the "Notes"), which were delivered to the Bond Trustee.

Security for the Bond Obligations

• To secure payment of the Notes and all other obligations under the Indenture and the Loan Agreement, the Debtor pledged its gross revenues pursuant to the Loan Agreement and executed and delivered to the Bond Trustee a Mortgage With Assignment of Rents and Leases Security Agreement and Fixture Filing, dated as of November 1, 2019.
• Pursuant to the Bond Documents, the Debtor granted the Bond Trustee a security interest in substantially all of its assets. There are no other secured creditors.

Unsecured Debt

• As of the Petition Date, the Debtor estimates that general unsecured creditors are owed approximately $90,000. This group includes non-insider trade creditors and vendors.

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Events Leading to Bankruptcy

Pandemic-Era Losses and Capital Infusions

The Community's certificate of occupancy was issued in April 2021, and the Community began accepting residents in July 2021, in the midst of the COVID pandemic. In the years since the Community opened, the Debtor incurred significant operating losses and reductions in liquidity attributable to the consequences of the pandemic, including significant increases in staffing costs necessary to ensure its continued ability to care for its residents and comply with COVID protocols, as well as drastic increases in real estate property tax and insurance costs.

• In addition to the $6.2 million of capital contributed at the closing of the Loan Agreement, the Debtor contributed an additional $4 million in capital to make the required interest payments due between July 2021 and June 2023, when the impacts of the COVID-19 pandemic were the most severe and the Community, along with senior living facilities across the country, struggled with decreased occupancy rates.
• By way of example, the Debtor's occupancy rate in 2022 began at 51% in January and increased to 61% in December.

Inability to Service the Bond Obligations

Despite consistent increases in occupancy and revenue since 2022, the Debtor has struggled to service the Bond Obligations, recording net operating losses of $1.339 million in FY 2025, $2.24 million in FY 2024, and $3.755 million in FY 2023.

• These operating losses are due in significant part to a 79% increase in real estate taxes and a 236% increase in insurance premium costs from the amounts estimated in connection with the Community's pre-COVID development and financing projections, which had been used to determine the Debtor's ability to service the Bond Obligations.

The Forbearance Agreement

Following a covenant default related to the long-term debt service coverage ratio (the "LTDSCR") required under the Bond Documents, the Debtor and the Bond Trustee entered into a Forbearance Agreement dated as of June 1, 2023, pursuant to which the Bond Trustee agreed to forbear from exercising its rights and remedies under the Bond Documents and lowered the interest rates under the Series A and Series B Bonds from 7% to 5% and from 8% to 6%, respectively.

• The Debtor made these interest payments timely every month during the three-year life of the Forbearance Agreement.
• The LTDSCR under the Bond Documents stood at .5 against a required ratio of 1:1.0; the Debtor has since worked diligently to increase the LTDSCR from .5 to .92.
• When the Forbearance Agreement was executed, Greenwich Investment Management, Inc. ("GIM") was acting as the bondholder representative, representing the holders of more than 66.66% in principal amount of the outstanding Bonds. The ownership of the Bonds changes from time to time as a result of secondary market trading, and as of April 1, 2026, GIM was no longer the bondholder representative.

Stalled Extension Negotiations and Chapter 11 Filing

The Forbearance Agreement expires on May 31, 2026. The Debtor, the Bond Trustee, and a controlling percentage of Bondholders were engaged in discussions through early April 2026 to extend the Forbearance Agreement on substantially similar terms, including the continued reduction of current debt service obligations, in light of the Debtor's positive improvements to the Community's operations and financial condition.

• However, following further secondary market trading of the Bonds and a change in the identity of the holders of a majority in principal amount of outstanding Bonds, those discussions stalled, resulting in the filing of the Chapter 11 Case to preserve and maximize the value of the Debtor.

Objectives of the Chapter 11 Case

The Debtor is unable to substantially improve its operating cash flow or liquidity position to the levels necessary to service its Bond Obligations on their current terms. Accordingly, the Debtor filed the Chapter 11 Case to preserve its assets and operations and protect its residents while undertaking either (i) a going concern sale process or (ii) a refinancing transaction that will allow the Debtor to continue to provide care for its residents while maximizing the financial recovery for key stakeholders.

• Of critical importance is the continued care of the 122 residents currently residing in the Community who depend on it for their care and daily needs, many of whom are among society's most vulnerable individuals, including those who qualify for the low-income housing units the Community makes available.