Merrill Gardens

Defying Conventional Wisdom: A Mixed-Use Intergenerational

Housing Success Story

Billy Pettit, Vice President

Merrill Gardens

Merrill Gardens

Snapshot

I. Who We Are

II. The Projecta. Vision

b. Capitalization

III. Success Stories:a. Development challenges

b. Financial & operational

c. Community

d. Emergence of a new concept

Merrill Gardens

Who We Are

• 19-Year History in Senior Housing Industry• 6th Largest Private Owner/Operator• 57 Acquisitions (5,825 Units) • 23 Developments (2,644 Units)• Vertically Integrated & Scalable Platform• Emerging Mixed-Use Portfolio (1,600+ units)

Merrill Gardens

Awards• 2008 Best Proposed Active

Adult/Retirement Community– Winner of the Gold Award by

the National Active Retirement Association

• 2010 ULI Awards for Excellence Finalist– One of seventeen finalists

from over 170 projects throughout North and South America.  The only senior housing community to be recognized as a finalist.

Merrill Gardens

Vision: Create a Unique Product Directed at Specific Seniors

Source: ProMatura Group, LLC

Merrill Gardens

SITE

UNIVERSITY VILLAGE SHOPPING CENTERUNIVERSITY OF WASHINGTONDOWNTOWN SEATTLE

Merrill Gardens

Mixed Use Development

• Primary Focus was Senior Housing• Apartments:

– Natural progression from senior housing

– Multiple options available: market rate, age-restricted, students

– Strong market fundamentals

• Retail: “If you build it, they will come”– Lost all but one tenant due to recession

– Shifted focus to local businesses with established relationships in the community

– Bonus: Located one block from University Village, the largest destination center in the region

Merrill Gardens

The University – an Intergenerational Campus

Merrill Gardens

Merrill Gardens

Project Statistics

• 2.5 Acre Site• 226 Total Units

– 123 IL/AL Units

– 103 Market-Rate Apartments

• 22,500 Square Feet of Retail Space• $71 Million Total Cost• $55 Million Tax-Exempt Financing

Merrill Gardens

Capitalization

• Equity:– Joint Venture with Existing Development Partner

– Private Placement in 2006• $53.5 Million Raise

• 8 Property Portfolio

• Debt:– Tax Exempt Financing through WSHFC

– 20% Set Aside Units @ 50% AMI

– 78% LTC

– Nonrecourse

– All-In Rate 1.24%!!!

Merrill Gardens

Intergenerational Living:• Shared Courtyard• Social Events• Greenhouse and Gardening• Bocce Court• Walking Path for Exercise• Outdoor Dining

Merrill Gardens

Intergenerational Living

• Wii Bowling Leagues• Movie Night in the Courtyard• Combined Happy Hours• Pep Rallies• Dining Room Open to all Residents• Concierge Services for Apartments

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Success: Development

• 6-Parcel Assemblage • Condo Building Holdout• 3 Different Sets of Zoning Guidelines• Existing Creek Running through Site• SDOT Right of Way• Grade Change • NIMBY-ism

Merrill Gardens

Success: Financial & Operational

• Who would have thought?− Opened in Height of Recession: April 2009

− Recessionary Impacts were Very Real• Concessions

• Lease-Up

• Two + Years Later…− Occupancy:

• Senior Housing: 99%+

• Apartments: 99%+

• Retail: 100%

− Distributions on par with underwriting

Merrill Gardens

Revenue by Component (TTM) Current Revenue % of TotalMerrill Gardens - 69.8% $ 5,471,693 69.8%The Corydon - Apartment - 20.3% $ 1,590,591 20.3%The Corydon - Retail - 9.9% $ 773,780 9.9%

Total $ 7,836,064 100.0%

Merrill Gardens

Occupancy Metrics

Sources: NMHC; Dupre and Scott; NIC MAP; US Census

57.3%

95.9% 98.8%82.8% 85.9% 86.3%87.2% 87.4% 87.7%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

YE 2009 YE 2010 Q2 2011

Merrill Gardens at The UniversitySenior Housing Comparative Occupancy Trends

MG @ University* Seattle -Majority IL Industry

89.8%

96.2%98.6%

94.0%96.4% 96.5%

87.7% 88.4%91.1%

80.0%

85.0%

90.0%

95.0%

100.0%

YE 2009 YE 2010 Q2 2011

The CorydonMultifamily Comparative Occupancy Trends

The Corydon* Seattle Metro Industry* Properties opened April 2009

Merrill Gardens

• Case Study for Intergenerational Living– Student, Resident & Team Member

• Fundraising• Community Events• UWAA Relationship• Retail Focused on Local Operators

Success: Community

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Success: Business Model

• Complementary Uses are Important• Diversified Returns within a Single Asset• Scalability Across Markets• Concept Primed for Specific Markets• Experienced Operators are Imperative

Merrill Gardens

Lessons Learned

• The Concept Works; Performance Speaks for Itself• Sister Project in Kirkland, WA• Seniors Like Keg Parties, Too!

• Unfortunately, We're Not Perfect...– Less-than-Ideal Parking Access for Retail

– Operational Challenges of Shared Services

– Lots of Patience and Apologies

Merrill Gardens

Questions