Servant to take reins at Sherburne Common

The selectmen approved the amended ground lease for Sherburne Commons last Wednesday, helping pave the way for Servant Healthcare Investments of Florida to assume ownership of the island's bankrupt senior living community.

With all the terms for the transaction in place with the U.S. Bankruptcy Court, the final sale hearing is now scheduled for Nov. 23 in Barnstable Town Hall, followed by a 10-day appeal period. Once the appeal time ends, Servant and Sovereign Bank, holding a $29 million mortgage on Sherburne Commons, will have a closing on the purchase. Servant, known as the "Stalking Horse," was the sole bidder on the South Shore Road development that declared bankruptcy a year ago. That drastic action resulted from a low residency rate that prevented the non-profit, twoyear old Sherburne Commons, Inc. from repaying its debt to Sovereign Bank.

"Our expectation is that we will become owner sometime in December," Servant CEO John Mark Ramsey said in a phone interview last week. "It is our intention to close as quickly as we can after the final bankruptcy court approval."

Ramsey also said that when the transaction is completed, representatives from Servant will meet with residents to outline their plans for the future.

Servant's purchase price is approximately $6.5 million with $4.5 million slated to be paid to the bank. The remainder, through a gift by Sovereign Bank, will be deposited in an account called a "Settlement Pool" for the Sherburne Commons residents who paid substantial entry fees to live there and were guaranteed a 90 percent return on their investments in the event that they moved or died.

In order for residents to qualify for a pro rata share of the settlement pool, under a formula which will provide their shares within 30 days of the closing date, residents must enter into a settlement agreement with Sovereign Bank in a form acceptable to the bank and residents, and enter into new resident agreements with Servant. As an example of a pro rata share, the court documents use an entrance fee of $250,000 from a resident, who would, based on the formula calculations, subsequently receive $75,000 minus purchase price adjustments, if any, and some administrative expenses.

Martha Butler, president of the Sherburne Commons residents association, said this week that its members know of the settlement pool. It has also been explained to them that under Servant, if a resident sells their cottage or apartment under the condo arrangement, they will receive 90 percent of what they paid originally, or 90 percent of the sale amount if it is less than originally paid.

"It's to keep us happy, but we have to stay here until 2011 to keep that 'place' money," she said, adding that residents are realistic about the transfer of ownership, yet hopeful that Servant will operate the development for the residents' benefit. "They need us and they need to keep us happy."

There are 34 people, mostly over 80 years old, living at Sherburne. According to the documents, some residents paid entrance fees as high as $934,000, $843,391 and $789,098, and others paid less, such as $239,000, $265,020 or $361,774.

Monthly cottage fees range between $3,000 to more than $4,000 and monthly independent living apartment fees begin around $2,000 and go up to almost $4,000 in a two-person arrangement.

With approval from Sovereign Bank, Sherburne Commons, Inc. will continue to draw cash from an account to fund operations for the residents until Dec. 8, according to Harry Murphy of Hanify and King, a Boston attorney representing the Sherburne Commons residents.

In order for Servant, a profit-making business, to own Sherburne Commons and operate it on town-owned property through Riverwood Management, another Florida-based company, Special Town Meeting voters in September had to approve several zoning changes. They included altering the entrance age from 62 to 55, allowing skilled nursing care and allowing the units to be sold as condos I