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March 5, 2014 PARTNERSHIPS AND JOINT VENTURES. PRESENTERS John Mehrkens VP of Senior Housing Partners, Presbyterian Homes & Services, MN Adam Kane, Esq.

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Presentation on theme: "March 5, 2014 PARTNERSHIPS AND JOINT VENTURES. PRESENTERS John Mehrkens VP of Senior Housing Partners, Presbyterian Homes & Services, MN Adam Kane, Esq."— Presentation transcript:


2 PRESENTERS John Mehrkens VP of Senior Housing Partners, Presbyterian Homes & Services, MN Adam Kane, Esq. Senior Vice President for Corporate Affairs Erickson Living William Pettit President and Chief Operating Officer R. D. Merrill Co. Michael Comparato Chairman and Chief Executive Officer, Vieste, LLC 1 Moderator: R. Jeffrey Sands, Esq. Principal / General Counsel HJ Sims

3 HJ Sims Conference March 4 – 6, 2014 Senior Housing Partners Affiliated w/Presbyterian Homes & Services

4 St. Andrews Village, Mahtomedi, MN 3

5 60%/40% partnership with St. Andrews Lutheran Church 44 Assisted Living Apartments 25 Memory Care Apartments 70 Independent Living Apartments Child Daycare located on site Town Center - 16,000 sq. ft. St. Andrews Village, Mahtomedi, MN 4

6 McKenna Crossings, Prior Lake, MN 5

7 6

8 Courtyard Club Room Dining Room Cafe 7

9 Originally formed as a 50%/50% partnership with Shepherd of the Lake Lutheran Church (currently 100% owned by PHS). 66 Assisted Living Apartments 18 Memory Care Apartments 79 Independent Living Apartments Town Center - 26,000 sq. ft. McKenna Crossings, Prior Lake, MN 8

10 Valley Ridge, Burnsville, MN 9

11 10

12 Partnership w/CDA – PHS owns Assisted Living and manages the CDA owned Independent Living. 80 Independent Living Apartments 40 Assisted Living Apartments 20 Memory Care Apartments Town Center - 20,000 sq. ft. Valley Ridge, Burnsville, MN 11

13 Development Partnerships William Pettit President and Chief Operating Officer R. D. Merrill Co.

14 Merrill Gardens Owns and operates 21 senior living communities in four states with a focus on lifestyle. Each Merrill Gardens community is different in physical structure, reflecting the characteristics of the area where it is located and the needs of residents. Affiliate of the R.D. Merrill Company, a private holding company formed in the 1890s by timber pioneer R.D. Merrill. Has a long history of developing senior housing communities. 13

15 Structural Questions First question: Should I self develop or use outside developer? – Pros and Cons Second question: Should I contract with an outside developer or include developer in a joint venture? – Pros and Cons 14

16 Merrill Conclusion Joint Venture – Reasons Alignment of Interests Identity of Purpose Attracts Developers who have a longer term interest in the project and/or the location (i.e. part of a larger development) and so they care about long term viability (not just build and go). Shares financial burden and risk 15

17 Choosing Development Partner Criteria Expectations 16

18 Structure Responsibilities Capital Obligations Merrill oversight Exit 17

19 Results Approach has lead to a group of joint venture partners that really buy into the Merrill approach Interests are aligned Local knowledge enhances choice of sites Results in multiple projects and solid pipeline Has resulted in projects that are part of larger community developments. 18

20 Erickson Living Creating Communities That Celebrate Life March 2014

21 Erickson Overview 20

22 Ericksons Diverse & Expansive Portfolio Erickson manages a diverse portfolio of senior living facilities of various sizes ranging from 200 to 2,250 units Ericksons healthcare facilities provide a full continuum of services to residents and seniors seeking stand-alone health services 21

23 Company Overview Erickson Living is one of the largest senior living operators in the United States Approximately 20,000 units in 11 markets across the U.S. Owned by Redwood Capital, a family office with significant capital dedicated to senior housing Track record of strong partnerships with not-for-profits which operate 16 Erickson communities Erickson is a trailblazing senior living company Differentiated product with high resident satisfaction Industry leading occupancy and longer length of stay Dominant market positions Most comprehensive healthcare system in senior living Only senior housing operator taking risk in a Medicare Advantage plan Diversified service offering across the spectrum of senior living and healthcare Committed and experienced service culture 22

24 23 Industry Leading Results Erickson management has driven industry leading occupancies and high resident satisfaction Independent living occupancy: 96%; Industry average: 90% Healthcare occupancy: 94% 1 ; Industry average: 89% Customer satisfaction: 95% will recommend to family and friends Erickson Managed Communities Quarterly Occupancy 1 Source: Erickson Management and NICMAP. (1) Excludes ETH, HSD, and WCD healthcare buildings currently in lease-up.

25 Working with Non Profits Erickson Living has a history of working with non profits Work together to further the mission of the non profit Align incentives to create a win – win Erickson takes development risk and non profit focuses on governance Non profit purchase option or maintain as a joint venture Propriety source of capital for expansion and repositioning Provide the non profit access to our national resources and programs Regulatory Sales and Marketing Public Relations and Crisis Management Centralized Back Office Operations Erickson Health Erickson Advantage Erickson Realty and Moving Services 24

26 25 Landowner Erickson Living Properties Provider Not for Profit Manager Erickson Living Management Lease Management Contract Structure Share of Cash Flow Percent of Revenue The Lease and Management Contract need to be market rate agreements

27 Key Points IRS regulations Respect for autonomy Alignment of interests 26

28 Ericksons Growth Strategy 27

29 Growth Strategy Erickson is committed to investing in strategic growth opportunities Work with additional Not For Profit Communities Senior living and healthcare facility acquisitions and development Expansion of ancillary services, primary care medical group, at-risk products, and innovative new Medicare and Medicaid services Leverage senior living and healthcare facility expertise to explore additional development opportunities in Ericksons footprint Explore partnership opportunities with regional and national operators 28 Ashby Ponds New Residential BuildingHighland Springs Continuing Care Building

30 V IESTE PUBLIC PRIVATE REAL ESTATE & INFRASTRUCTURE INVESTMENT SOLUTIONS Presented By: Michael Comparato Chief Executive Officer 11 TH A NNUAL HJ S IMS C ONFERENCE Ft. Lauderdale, Florida March 4-6, 2014

31 V IESTE A consortium of companies that collectively plan, finance, design, build, own and operate capital assets. Asset classes include renewable energy, biofuels, social infrastructure and healthcare facilities 30 V EXAMPLES: Waste to Energy Facility Glendale, Arizona Youth/Amateur Sports Complex Delavan, Wisconsin Adult Congregate Living Kissimmee, Florida

32 PUBLIC PRIVATE PARTNERSHIPS A Public Private Partnership (PPP) is formed when a public sector entity elects to divert from traditional, government-funded and executed delivery models to accomplish a capital project or program. The lack of capital, stress on public debt and a tremendous amount of deferred investment in public sector infrastructure dictate the introduction of alternative delivery methods that include private sector resources. 31 V Joint Ownership Performance Agreements Incentives and Concessions

33 SENIOR LIVING VALUE PROPOSITION Wabash County, Indiana 32 V Glendale, Arizona Overview Quantify and promote economic impact early in planning Incorporate economic impact and host jurisdiction into project model Dont expect to receive something you dont ask for Rural County Indiana Property Tax Net of TIF Payroll Tax with 60% capture rate $1.5 million investment (10% of capex) Facilitated sale of residual acreage to hospital Suburban Metro Phoenix Property Tax – No TIF Payroll Tax with 30% capture rate Expedited entitlement process Infrastructure improvements

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