Sam Dean | The Roanoke Times

Beryl Fidler greets fellow Glebe residents at a weekly Bible study at The Glebe. For Fidler, the home's faith-based nature is important, so much so that Fidler said her "next move is to heaven."

Sam Dean | The Roanoke Times

Glebe resident Dan Janosko uses the retirement home's gym. Virginia Baptist Homes points to residents such as Janosko to make a case that not all of their residents are wealthy. A power-line route surveyor for 46 years, Janosko lives in one of the Glebe's one-bedroom units. "I saved money when I was working. I didn't splurge. And that's the only reason I can be here," he said.

Sam Dean | The Roanoke Times

The Glebe's dining room is a showpiece of the retirement home. The facility's financial viability assumes a 93 percent occupancy rate.

Sam Dean | The Roanoke Times

Don Johnson waters plants in The Glebe's greenhouse. "This was and still is the best financial deal of the better retirement homes," he said.

DALEVILLE -- When The Glebe opened here three years ago off U.S. 220 near the upscale Ashley Plantation subdivision, it offered financially comfortable retirees resort-style living and amenities reminiscent of a four-star hotel.

Now, the Virginia Baptist Homes subsidiary finds itself in a sort of financial purgatory and looking for a savior:

• Unlike many luxury continuing care retirement communities, which have boomed in recent years, The Glebe is only 68 percent full, and it's two months overdue on $15 million in loans from investors whose money paid for construction costs. Its continuing financial viability assumes a 93 percent occupancy rate.
• The company heads for a scheduled, much-publicized hearing before the Virginia Supreme Court this week in a battle with Botetourt County that could require The Glebe to pay millions of dollars in taxes that it never expected and never budgeted for.
• Because the nonprofit's finances are shaky and to protect residents from losing their life savings, the state has forced The Glebe to forgo the collection of entrance fees for the time being, which can range up to $324,000 for one person and are a large revenue source for retirement communities.

The lower-than-expected sales, pending legal battle and pressure from investors have put grave question marks over The Glebe's ability to survive at the same time a slacking economy has caused relatively wealthy retirees to reconsider their plans.

"Who knew?" the Rev. Randall Robinson, Virginia Baptist Homes' president, said in a recent interview. "We thought it would fill up because of the quality of the facility."

Robinson predicts The Glebe will rebound when the economy does. But The Glebe's future also depends in part on the outcome of a legal battle against Botetourt County that hinges on whether it's a religious institution at all.

The answer to that question seems anything but clear.

Religion and taxes

Robinson describes The Glebe as a ministry, where the care provided to residents is spiritual in nature.

"We're here because of our call from God to be in this place," he said.

Real estate tax exemptions for churches and religion-based, nonprofit retirement communities are common in Virginia, and the General Assembly granted Virginia Baptist Homes tax-exempt status in 1976. At that time, Virginia Baptist Homes' continuing care facilities in Newport News and Culpeper were subsidizing the costs of some residents' care.

The Glebe relied on that status in its business plans and assumed it wouldn't have to pay levies in Botetourt County.

But the assisted-living center doesn't employ a minister, nor does it offer religious services other than what residents arrange on their own. Residents and employees can be of any religion, as well as atheist.

Meanwhile, the bells and whistles it offers were aimed at seniors with solid retirement incomes. Residents' payments fund all the services they receive, though The Glebe intends to subsidize services to some residents in the future once it builds up a benevolent fund and is on firmer financial footing.

Botetourt County officials said the facility was like no other nonprofit organization they had ever seen. They questioned whether The Glebe is religious or charitable.

So they sued The Glebe soon after it opened, challenging its real estate tax exemption .

"It's kind of hard to associate the word 'benevolent' with lap of luxury," said Don Assaid, chairman of the Botetourt County Board of Supervisors. "There's nothing about that place you'd walk into and say, 'This is a charitable, religious and benevolent operation.' It's just not."

Circuit Court Judge Michael Irvine sided with the county in its lawsuit last year. The judge ruled that The Glebe showed no signs of religious or benevolent practices and that Virginia Baptist Homes' exemption did not automatically transfer to subsidiary retirement communities, such as The Glebe.

In response, Virginia Baptist Homes appealed the ruling to the Virginia Supreme Court. .

At stake is a lot of money.

According to the Botetourt County Treasurer's Office, at the end of August, The Glebe owed the county nearly $516,000 in back taxes, penalties and interest and going forward could owe annual taxes of about $227,000.

It's likely that local governments across the state will pay attention to the high court's ruling. The Virginia Association of Counties and the Local Government Attorneys of Virginia Inc. filed a joint legal brief with the Supreme Court in support of Botetourt County's argument.

"I think we're all watching very carefully what the final determination will be," said Sandee Levin, president of the Virginia Association of Nonprofit Homes for the Aging.

She noted that among the 50 nonprofit continuing care facilities throughout the state, some pay real estate taxes and some don't.

In Roanoke, Brandon Oaks makes what is known as a payment in lieu of taxes. The payment is 20 percent of its estimated real estate tax to the city.

"A lot of retirement communities that are not for profit like we are, and like The Glebe, make payments in lieu of taxes," said Andy Dickinson, executive director of Brandon Oaks, a Lutheran-based facility. "We recognized early on the need to work with the local taxing authority and come up with some agreement."

Sherman Holland, Roanoke's commissioner of revenue, said it's up to the Roanoke City Council to decide whether a nonprofit can make such payments or must pay the full tax.

"You have to be a charitable organization," Holland said.

He doesn't think The Glebe would qualify and that if it were located in Roanoke, the city would likely be taking the same legal measures as Botetourt County.

"They're probably saying, you know, 'We are charitable,' " Holland said of The Glebe. "But how many poor families are over there? None."

At one point The Glebe met with the county and offered to make a payment in lieu of taxes. But those negotiations broke down very quickly. Assaid said the amount offered was "ridiculous." Robinson declined to comment on the meeting.

"I mean, we were literally miles apart," Assaid said. "When we tried to negotiate that further, they just decided they wanted to go to court, which suited me, because it's a moral issue. How do you justify negotiating one person's taxes in the county when you don't do that for everybody else?"

Whatever the outcome of the Supreme Court hearing, Robinson said The Glebe will persevere.

"We're not going to pull up stakes and run away," he said. "And hopefully, the Supreme Court of Virginia will say, 'We value what you've done.' "

Risky investment

Apart from the court case, The Glebe's financial underpinnings appear to be in jeopardy. An audit has raised "substantial doubt" as to whether it can survive.

In 2003, Virginia Baptist Homes financed the Botetourt County facility by borrowing $55.5 million that it raised by selling tax-exempt bonds through Roanoke County's Industrial Development Authority, now the Economic Development Authority.

Virginia Baptist Homes' plan was aggressive. Enough retirees were expected to flock to The Glebe to nearly fill it by the end of 2007, just more than two years after it opened. With that in mind, bond payments were structured so that the first repayment to investors of $15 million was to have been made July 1.

But with its occupancy low, the cash-strapped Glebe defaulted on the payment. And though the bonds were issued through Roanoke County's EDA, the county doesn't back them. Repayment is the sole responsibility of The Glebe.

Doug Chittum, Roanoke County's director of economic development, said the agency agreed to help Virginia Baptist Homes issue the bonds because The Glebe's business plan seemed sound.

"I've never heard anyone say, 'Hey, they're doing a poor job managing this thing.' Or, 'They've done a poor job in marketing.' All I keep hearing is that maybe it got built too aggressive to start with," Chittum said.

Because of the default, the Virginia State Corporation Commission has stepped in. It's the state agency that granted Virginia Baptist Homes a license to operate a health care facility at The Glebe. To protect new residents who move to The Glebe from the potential of losing their life savings, the SCC has ordered The Glebe not to accept any more entrance fees until its finances improve.

"If they didn't do this they were going to lose their license," said Ken Schrad, director of the SCC's division of information resources. "If you're aware of a financial condition, you don't want new residents entering into this long-term financial arrangement when you're not confident about the current financial status of the company."

The SCC took the action after reviewing an independent audit done in April of The Glebe's finances for 2006 and 2007.

The report by the Richmond-based auditing firm Ernst & Young states that "there is substantial doubt regarding The Glebe Inc.'s ability to continue as a going concern."

The report also estimates that the resale value of the bonds has dropped considerably, from $55.5 million to $43.7 million.

A Virginia Supreme Court ruling against The Glebe would only deepen its financial problems and could further weaken the value of the bonds.

"At the end of the day, if they lose this ruling, it's a lot of money [in tax payments] that they have to give up," said Anthony Marrelli, a financial advisor with Citi Smith Barney in Washington, D.C. He represents a bond holder and is determining how to advise his client.

Meanwhile, Virginia Baptist Homes is asking the bond holders for more time to get its finances in order before making the bond payments.

Marrelli said waiting longer in hopes of a payout may be the best financial approach for bond holders.

But with the real estate market in a slide nationally, those investors may have to wait a long time for a financial turnaround.

The Glebe is one of several high-end retirement communities in Western Virginia, including Roanoke's Brandon Oaks, Kendal at Lexington and Westminster Canterbury in Lynchburg.

While about two dozen new residents moved to The Glebe last year, just five moved in this year.

The Glebe needs to fill 42 more units to raise enough money to start paying back investors.

A new marketing consultant has been retained to help get The Glebe back on track. The retirement community's rate structure is also being examined.

"You always look at pricing. You always look at the market," Robinson said.

He points to the slumping economy and sour housing market as reasons more seniors aren't moving in to The Glebe.

"We've had a lot of folks that would love to move here that just can't sell their homes," he said. "It's not just our retirement community but the whole industry."

On Wednesday, however, the same Roanoke County EDA that helped The Glebe sell its bonds took out an ad in The Roanoke Times about a financing plan with Richfield Retirement Community in Salem that would add 2 more buildings and 44,000 square feet of living space for retirees there, at a cost of $5.8 million.

Wealthy retirees

Residents interviewed at The Glebe say the cost is worth the sense of security.

"What we buy is a contract," Marlene Short said. "And the contract says that they will take care of us for the rest of our lives."

Don Johnson, 74, said he checked out prices at other retirement communities before moving to The Glebe from Smith Mountain Lake.

"This was and still is the best financial deal of the better retirement homes," he said.

Scott Findley, minister of seniors at Bonsack Baptist Church, conducts regular Bible study meetings at The Glebe at the request of residents.

"Just because this was built with quality, and they've got a hairdresser and a store and a bank all here so people don't have to go out when it's freezing rain outside, it's not the Taj Mahal," he said of The Glebe's amenities. "I don't think there's anything to apologize for here at all."

And what will happen to The Glebe's residents if the facility's finances don't improve?

Levin, of the Virginia Association of Nonprofit Homes for the Aging, said the life-care contracts at retirement communities are usually honored when the management changes hands.

"There may be something in the future that changes, but these residents would not really be affected," she said.

"More than likely that would be the scenario under any sort of transaction," said Schrad, of the SCC. The SCC's bureau of insurance would have to approve any sale of such a facility.

Robinson said Virginia Baptist Homes remains confident that The Glebe's finances will improve and that the facility will have more residents soon.

"In the not too distant future it will be full and cooking right along," he said.