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PRESENTERS William Pettit John Mehrkens Michael Comparato

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Presentation on theme: "PRESENTERS William Pettit John Mehrkens Michael Comparato"— Presentation transcript:

0 PARTNERSHIPS AND JOINT VENTURES
March 5, 2014

1 PRESENTERS William Pettit John Mehrkens Michael Comparato
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 Moderator: R. Jeffrey Sands, Esq. Principal / General Counsel HJ Sims

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

3 St. Andrew’s Village, Mahtomedi, MN

4 St. Andrew’s Village, Mahtomedi, MN
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.

5 McKenna Crossings, Prior Lake, MN

6 McKenna Crossings, Prior Lake, MN

7 McKenna Crossings, Prior Lake, MN
Club Room Courtyard Cafe Dining Room

8 McKenna Crossings, Prior Lake, MN
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.

9 Valley Ridge, Burnsville, MN

10 Valley Ridge, Burnsville, MN

11 Valley Ridge, Burnsville, MN
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.

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

13 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 1890’s by timber pioneer R.D. Merrill. Has a long history of developing senior housing communities.

14 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?

15 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

16 Choosing Development Partner
Criteria Expectations

17 Structure Responsibilities Capital Obligations Merrill oversight Exit

18 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.

19 Creating Communities That Celebrate Life
Erickson Living Creating Communities That Celebrate Life March 2014

20 Erickson Overview

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

22 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

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.

24 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

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

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

27 Erickson’s Growth Strategy

28 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 Erickson’s footprint Explore partnership opportunities with regional and national operators Ashby Ponds New Residential Building Highland Springs Continuing Care Building

29 Public Private Real Estate & Infrastructure Investment Solutions
VIESTE Public Private Real Estate & Infrastructure Investment Solutions 11TH ANNUAL HJ SIMS CONFERENCE Ft. Lauderdale, Florida March 4-6, 2014 Presented By: Michael Comparato Chief Executive Officer

30 vIESTE V 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 EXAMPLES: Waste to Energy Facility Glendale, Arizona Youth/Amateur Sports Complex Delavan, Wisconsin Adult Congregate Living Kissimmee, Florida

31 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. Joint Ownership Performance Agreements Incentives and Concessions

32 SENIOR LIVING VALUE PROPOSITION
Wabash County, Indiana Glendale, Arizona 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 Overview Quantify and promote economic impact early in planning Incorporate economic impact and host jurisdiction into project model Don’t expect to receive something you don’t ask for


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