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March 5, 2014
PARTNERSHIPS
AND JOINT VENTURES
PRESENTERS
John MehrkensVP of Senior Housing Partners,Presbyterian Homes &Services, MN
Adam Kane, Esq.Senior Vice Presidentfor Corporate AffairsErickson Living
William PettitPresident and Chief Operating OfficerR. D. Merrill Co.
Michael ComparatoChairman and Chief Executive Officer, Vieste, LLC
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Moderator:
R. Jeffrey Sands, Esq.Principal / General CounselHJ Sims
HJ Sims ConferenceMarch 4 – 6,
2014Senior Housing Partners
Affiliated w/Presbyterian Homes & Services
St. Andrew’s Village, Mahtomedi, MN
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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. Andrew’s Village, Mahtomedi, MN
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McKenna Crossings, Prior Lake, MN
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McKenna Crossings, Prior Lake, MN
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McKenna Crossings, Prior Lake, MN
Courtyard
Club Room
Dining Room
Cafe
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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
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Valley Ridge, Burnsville, MN
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Valley Ridge, Burnsville, MN
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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
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Development Partnerships
William PettitPresident and Chief Operating Officer
R. D. Merrill Co.
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.
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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
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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
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Choosing Development Partner• Criteria• Expectations• Expectations
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Structure
• Responsibilities• Capital Obligations• Merrill oversight• Exit
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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.
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Erickson LivingCreating Communities That Celebrate
Life
March 2014
Erickson Overview
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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
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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
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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.
86.0%
88.0%
90.0%
92.0%
94.0%
96.0%
Erickson Senior Housing
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
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Landowner
• Erickson Living Properties
Provider
• Not for Profit
Manager
• Erickson Living Management
LeaseManagement
Contract
Structure
Share of Cash Flow
Percent of Revenue
The Lease and Management Contract need to be “market rate” agreements
Key Points
• IRS regulations
• Respect for autonomy
• Alignment of interests
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Erickson’s Growth Strategy
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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
29Ashby Ponds New Residential Building Highland Springs Continuing Care
Building
VIESTEPUBLIC PRIVATE REAL ESTATE & INFRASTRUCTURE INVESTMENT SOLUTIONS
Presented By: Michael ComparatoChief Executive Officer
11TH ANNUAL HJ SIMS CONFERENCE
Ft. Lauderdale, FloridaMarch 4-6, 2014
VIESTE
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
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V
EXAMPLES:
Waste to Energy Facility Glendale, Arizona
Youth/Amateur Sports ComplexDelavan, Wisconsin
Adult Congregate LivingKissimmee, Florida
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.
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V
Joint Ownership Performance Agreements Incentives and Concessions
SENIOR LIVING VALUE PROPOSITION
Wabash County, Indiana
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VGlendale, Arizona
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
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