4St. Andrew’s Village, Mahtomedi, MN 60%/40% partnership with St. Andrews Lutheran Church44 Assisted Living Apartments25 Memory Care Apartments70 Independent Living ApartmentsChild Daycare located on siteTown Center - 16,000 sq. ft.
7McKenna Crossings, Prior Lake, MN Club RoomCourtyardCafeDining Room
8McKenna 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 Apartments18 Memory Care Apartments79 Independent Living ApartmentsTown Center - 26,000 sq. ft.
11Valley Ridge, Burnsville, MN Partnership w/CDA – PHS owns Assisted Living and manages the CDA owned Independent Living.80 Independent Living Apartments40 Assisted Living Apartments20 Memory Care ApartmentsTown Center - 20,000 sq. ft.
12Development Partnerships William PettitPresident and Chief Operating OfficerR. D. Merrill Co.
13Merrill GardensOwns 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.
14Structural QuestionsFirst question: Should I self develop or use outside developer?Pros and ConsSecond question: Should I contract with an outside developer or include developer in a joint venture?
15Merrill Conclusion Joint Venture Reasons Alignment of Interests Identity of PurposeAttracts 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
16Choosing Development Partner CriteriaExpectations
18ResultsApproach has lead to a group of joint venture partners that really buy into the Merrill approachInterests are alignedLocal knowledge enhances choice of sitesResults in multiple projects and solid pipelineHas resulted in projects that are part of larger community developments.
19Creating Communities That Celebrate Life Erickson LivingCreating Communities That Celebrate LifeMarch 2014
21Erickson’s Diverse & Expansive Portfolio Erickson manages a diverse portfolio of senior living facilities of various sizes ranging from 200 to 2,250 unitsErickson’s healthcare facilities provide a full continuum of services to residents and seniors seeking stand-alone health services
22Company OverviewErickson Living is one of the largest senior living operators in the United StatesApproximately 20,000 units in 11 markets across the U.S.Owned by Redwood Capital, a family office with significant capital dedicated to senior housingTrack record of strong partnerships with not-for-profits which operate 16 Erickson communitiesErickson is a trailblazing senior living companyDifferentiated product with high resident satisfactionIndustry leading occupancy and longer length of stayDominant market positionsMost comprehensive healthcare system in senior livingOnly senior housing operator taking risk in a Medicare Advantage planDiversified service offering across the spectrum of senior living and healthcareCommitted and experienced service culture
23Industry Leading Results Erickson management has driven industry leading occupancies and high resident satisfactionIndependent living occupancy: 96%; Industry average: 90%Healthcare occupancy: 94% 1; Industry average: 89%Customer satisfaction: 95% will recommend to family and friendsErickson Managed Communities Quarterly Occupancy 1Source: Erickson Management and NICMAP.(1) Excludes ETH, HSD, and WCD healthcare buildings currently in lease-up.
24Working with Non Profits Erickson Living has a history of working with non profitsWork together to further the mission of the non profitAlign incentives to create a win – winErickson takes development risk and non profit focuses on governanceNon profit purchase option or maintain as a joint venturePropriety source of capital for expansion and repositioningProvide the non profit access to our national resources and programsRegulatorySales and MarketingPublic Relations and Crisis ManagementCentralized Back OfficeOperationsErickson HealthErickson AdvantageErickson Realty and Moving Services
25Structure Landowner Erickson Living Properties Provider Not for Profit ManagerErickson Living ManagementShare of Cash FlowPercent of RevenueLeaseManagement ContractThe Lease and Management Contract need to be “market rate” agreements
26Alignment of interests Key PointsIRS regulationsRespect for autonomyAlignment of interests
28Growth StrategyErickson is committed to investing in strategic growth opportunitiesWork with additional Not For Profit CommunitiesSenior living and healthcare facility acquisitions and developmentExpansion of ancillary services, primary care medical group, at-risk products, and innovative new Medicare and Medicaid servicesLeverage senior living and healthcare facility expertise to explore additional development opportunities in Erickson’s footprintExplore partnership opportunities with regional and national operatorsAshby Ponds New Residential BuildingHighland Springs Continuing Care Building
29Public Private Real Estate & Infrastructure Investment Solutions VIESTEPublic Private Real Estate & Infrastructure Investment Solutions11TH ANNUAL HJ SIMS CONFERENCEFt. Lauderdale, FloridaMarch 4-6, 2014Presented By: Michael ComparatoChief Executive Officer
30vIESTEVA consortium of companies that collectively plan, finance, design, build, own and operate capital assets.Asset classes include renewable energy, biofuels, social infrastructure and healthcare facilitiesEXAMPLES:Waste to Energy Facility Glendale, ArizonaYouth/Amateur Sports Complex Delavan, WisconsinAdult Congregate Living Kissimmee, Florida
31Public 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 OwnershipPerformance AgreementsIncentives and Concessions
32SENIOR LIVING VALUE PROPOSITION Wabash County, IndianaGlendale, ArizonaRural County IndianaProperty Tax Net of TIFPayroll Tax with 60% capture rate$1.5 million investment (10% of capex)Facilitated sale of residual acreage to hospitalSuburban Metro PhoenixProperty Tax – No TIFPayroll Tax with 30% capture rateExpedited entitlement processInfrastructure improvementsOverviewQuantify and promote economic impact early in planningIncorporate economic impact and host jurisdiction into project modelDon’t expect to receive something you don’t ask for