Landlord says Cedar Haven owes millions, wants receiver appointed

Cedar Haven Healthcare Center’s landlord wants a Lebanon County judge to appoint a receiver to run the skilled nursing facility, formerly the county home, which it alleges is severely behind in rent and payments owed to the state, jeopardizing its ability to stay open.

590 South 5th Avenue LLC, owner of the building and real estate at that address in South Lebanon Township, has filed a lawsuit claiming that Cedar Haven Acquisition LLC, its tenant and the operator of the 430-bed facility, owes it $1,400,000 in overdue rent and another $1,000,000 in overdue assessments to the commonwealth.

The lawsuit, filed on Oct. 30, is based on the Cedar Haven lease, which allows the court to appoint a receiver to operate the facility and deal with its creditors.

A receivership is similar in some ways to a bankruptcy, but has some important differences. Receivership allows an outside party – a receiver – to manage and reorganize a company’s operations and debts to prevent bankruptcy, but does not stop creditors from trying to collect what they are owed. It theoretically benefits both a company and its creditors.

Bankruptcy offers a company protection from its creditors by at least temporarily freezing collection efforts and possibly eliminating some or all of a company’s debts.

Cedar Haven Acquisition had previously spent three years in Chapter 11 bankruptcy, between 2019 and 2022.

Documents filed in court include an Oct. 14 email from Cedar Haven Acquisition’s managing partner, Charles Blalack, to a creditor stating that Cedar Haven Acquisition might have trouble meeting payroll and paying the state assessments, but that it had ruled out a Chapter 11 bankruptcy reorganization.

“The chapter 11 approach is likely to be another expensive and drawn out affair, consuming much of my time over a several month period,” Blalack wrote, “and I am just not willing to re-live that experience.”

In an Oct. 22 email to the creditor, Blalack, alluding to a possible unsuccessful appeal of the state assessments, wrote “[i]n light of the absence of any response to my email to you of October 14, and the likelihood that the appeal will take weeks to be addressed (with no certainty of outcome), I will be left with no choice but to begin the orderly wind down of Cedar Haven this week.”

A “wind down” is a legal term for the orderly closing and dissolution of a business.

590 South 5th Avenue filed suit on Oct. 30, asking for an emergency receiver and an injunction preventing Cedar Haven Acquisition from closing the facility. The court appointed Kansas attorney Michael Flanagan as temporary receiver that day.

A hearing to make Flanagan a permanent receiver has been scheduled for Wednesday, Nov. 26, at 2:30 p.m. before Lebanon County Common Pleas Judge Charles Jones at the Lebanon County Municipal Building.

Other court documents state that Blalack is the sole or controlling owner of Cedar Haven Acquisition along with its parent company, Stone Barn Holdings LLC., the facility’s manager, Stone Barn Management LLC., and its primary lender and secured creditor, Fremont Lake LLC.

None of the above entities is objecting to the appointment of a receiver, although Fremont Lake has asked that any receivership order include protections for collateral interests it holds in certain Cedar Haven assets.

Cedar Haven, once owned and operated by Lebanon County, was chronically losing money by 2013 due to ever-rising pension liabilities and operating costs coupled with decreasing government reimbursements. Following a search for potential buyers, which focused on continuing high-quality patient care as much as finances, county commissioners voted 2-1 to sell the home to Complete HealthCare Resources in 2014.

Post-sale events did not go smoothly. Questions arose about the identity of the real purchaser and whether commissioners knew at the time of the sale. Labor disputes and an unsuccessful strike followed in 2016 and 2017.

590 South 5th Avenue LLC eventually became owner of the real estate and nursing home building, and Cedar Haven Acquisition became the facility’s licensed operator. They currently remain in those roles.

Blalack told LebTown in a Nov. 22 email that he and his companies have poured considerable time, effort, and money into improving resident care at Cedar Haven and had sought to work with the state, lenders, and creditors. He did not directly respond to questions about Cedar Haven’s future or whether a sale was being considered.

Attempts to reach attorneys for 590 South 5th Avenue via email had been unsuccessful as of publication time.