The N.C. Department of Health and Human Services has denied an application to develop a new adult care home in Wilmington. 

The project, submitted in March by Winston-Salem-based New Hanover Opco II LLC and New Hanover Propco II LLC, proposed relocating 64 beds from Castle Creek Memory Care to a new adult care home, known as The Landings of New Hanover. 

According to the state’s decision, the certificate of need application (CON) failed to meet all required statutory review criteria, including demonstrating feasible financing, adequate staffing and partnerships with local health professional training programs. 

Efforts to reach a representative of New Hanover Opco for comment were not successful this week.

Castle Creek Memory Care, located in Castle Hayne, closed in 2022 after navigating pandemic-related challenges, according to the application. The property was purchased for $5.9 million last year, with plans to convert it into a 54-bed inpatient treatment center. 

The CON application was filed by Charles Trefzger, listed as manager of New Hanover Opco. Trefzger is the founder and CEO of Affinity Living Group and was also named as the manager of Castle Hayne AL Holdings LLC, the entity that managed Castle Creek Memory Care. While Castle Hayne AL Holdings surrendered the facility’s license for its 84 adult care home beds after selling the property, the facility is still considered a health services facility under state regulations. 

New Hanover Opco LLC operates two adult care homes in Wilmington: New Hanover House and the Luminance at Riverlights. In 2023, the state conditionally approved the relocation of 20 adult care home beds from Castle Creek Memory Care to the Luminance at Riverlights, as well as 40 adult beds from New Hanover House. 

The proposed single-story facility would have been located at 8604 Market St. and consisted of 30 private rooms and 34 semi-private rooms, with 10 private rooms and 14 semi-private rooms designated as special care unit beds for memory care residents.

While the state reviewers acknowledged a need for additional adult care home services in New Hanover County – and determined that the project would not duplicate existing or approved services in the area – they found the application did not demonstrate financial feasibility.

According to the application, a manager from Cary-based Integrated Asset Advisors expressed interest in providing a $12.9 million loan to cover capital expenditures for the project, as well as a $976,000 loan to cover working capital needs. 

However, the state found that the provided forward-looking financing reports excluded the facility's operating costs, and that after adding them, the project’s expenses would exceed total net revenue for each of the first three full fiscal years following the facility's construction. 

Additionally, according to state reviewers, the project did not budget adequate operating expenses for the staffing and management positions it projected would be needed to operate the facility – and failed to demonstrate the availability of a health workforce. 

“The applicant does not adequately describe the expected effects of the proposed services on competition in the service area or adequately demonstrate the proposal would have a positive impact on cost-effectiveness, quality, and access,” the state findings document stated, “because the applicant does not adequately demonstrate that the proposal is cost effective because the applicant did not adequately demonstrate that projected operating costs are reasonable and would enhance competition.”

While the application included efforts to collaborate with local health professional training programs and planned to reach out to local community college nursing programs, the state found that it did not demonstrate that the training programs would have access to the facility for training purposes. 

Had the application been approved, applicants included a proposed timeline with construction beginning in July 2028 and the facility opening in October 2030. 

According to certificate of need rules, any person aggrieved by the state’s denial of the application may file a petition within 30 days of the decision.