Senior Living (January 2006)

Merrill Gardens makes $126M purchase

SEATTLE OWNER/OPERATOR BUYS SIX COMMUNITIES FROM WESTLAKE AFFILIATE

By John Mugford

Merrill Gardens, a Seattle-based owner and operator of senior housing communities, has entered an agreement to acquire a six-community portfolio of senior housing properties from a division of San Mateo, Calif.-based Westlake Development Co. The $126-million, 1,000-unit transaction was expected to close by the end of 2005.

The properties range from 126 units to 203 units and are located in the California cities of Rohnert Park, Fremont, Vacaville, Manteca, Sonoma and Vallejo. The facilities are all two- and three-story, wood-frame buildings containing studio, one- and two-bedroom units. Merrill Gardens did not provide an overall occupancy.

Merrill Gardens, which is owned by the R.D. Merrill Co., has been on a growth track ever since entering the senior housing market 12 years ago with one community in Seattle. With its latest acquisition, the 2,700-employee company now controls 8,741 units in 70 communities in 12 states. It has 15 communities in California. Revenues were $159 million in 2004.

In other news from Merrill Gardens, the company in mid-December announced that it had reached an agreement to purchase an existing retirement community located in Santa Maria, Calif., from Santa Maria Senior Living, a Washington-based LLC. The total value of the transaction is $25 million.

The community has 133 apartment units with a capacity for 150 residents. Santa Maria is located about 30 minutes south of San Luis Obispo and one hour north of Santa Barbara. An addition to the community is scheduled to begin in the summer of 2006 that will add 103 independent and assisted living units.  Completion is slated for summer of 2007.

According to Merrill Gardens officials, the company continues to seek additional acquisitions, concentrating on the West Coast, particularly Washington and California.

Westlake Development Co. is a real estate management, development, and investment company with a 30-property portfolio and 600 employees.

Omega Healthcare

makes investments

totaling $116 million
TIMONIUM, Md. – Omega Healthcare Investors Inc. (NYSE: OHI), a real estate investment trust (REIT), recently closed on the acquisition of 10 skilled nursing facilities and one assisted living facility for a total investment of about $115.5 million.

The facilities, which are all in Ohio, have a total of 1,610 beds and are subject to a new 10-year master lease between Omega and affiliates of an existing operator, CommuniCare Health Services. The annualized rent is about $11.6 million, with annual escalators and two 10-year renewal options. In addition, Omega will make available, for one year, a working capital line of credit totaling $12.5 million.

Omega is a REIT that invests in and provides financing to the long-term care industry. As of Sept. 30, Omega owned or held mortgages on 216 skilled nursing and assisted living facilities with about 22,407 beds in 28 states. The facilities are operated by 38 third-party healthcare operating companies.

American Retirement

to develop, manage

$32 million project
NASHVILLE, Tenn. – American Retirement Corp. (NYSE:ARC), a provider of senior living housing and care, recently announced that it has sold land to and entered an agreement with ASF of Green Hills LLC, an affiliate of American Seniors Foundation (ASF), to develop a rental assisted living residence in Nashville. The community, The Cumberland at Green Hills, would have 93 assisted living units and 17 Alzheimer’s units.

As part of the transaction, ARC conveyed its interest in the land and other incurred costs, such as architectural and engineering, to ASF. According to a long-term management agreement, ARC will act as the developer of the project and will manage the community. The total development cost is an estimated $32.3 million.

ARC has obtained $26.3 million of debt financing for the project from Bank of America. In turn, ARC has provided ASF with an aggregate of $32.3 million of development financing, including the land purchase and construction costs, which is secured by a first mortgage lien.

According to ARC officials, the company currently operates 76 senior living communities in 19 states, with an aggregate unit capacity of about 14,300 units and resident capacity of about 16,000.

Construction was expected to begin in December.

For the Record

Mid-America Development Partners (Mid-Am), of Oakbrook, Ill., and St. Louis-based HPD Cambridge Inc. have announced a partnership to develop LaGrange Pointe, an active adult community in LaGrange, Ill. The development is slated to feature 30 apartments, a public restaurant, 3,000 square feet of retail space and a 23-space parking garage. Mid-Am and HPD Cambridge anticipate a spring 2006 start for the development… Arbor Commercial Mortgage of Uniondale, N.Y., has closed a $10.37 million FHA loan to refinance the Woodmark at Uptown, an assisted living facility in Albuquerque, N.M. Jeremy Frankel of Arbor originated the 35-year loan, which was underwritten in Arbor’s Dallas lending office… K. Hovnanian Homes’ Minnesota division has received approval from the city of Maple Grove, Minn., for the development of a  
300-home active-adult community. The company’s future project is to be called Four Seasons at Rush Creek. K. Hovnanian has built its Four Seasons communities in eight other states and has plans for more communities in Minnesota… Herbert J. Sims & Co. Inc. recently announced that it has closed a $96.7 million financing for Horizon House, a not-for-profit retirement community in downtown Seattle. Proceeds are being used to fund the development and construction of a $74 million expansion and renovation project for the existing campus and the current refunding of the organization’s Series 1995 Bonds… Red Mortgage Capital, the mortgage banking arm of Red Capital Group, has structured a $22.8 million first mortgage interim loan for Dogwood Forest assisted living communities located in the Georgia cities of Stockbridge, Fayetteville, Alpharetta and Gainesville. Red Mortgage Capital provided the loan to affiliates of Solomon Senior Living Holdings to acquire and refurbish the four properties. The assisted living and Alzheimer’s facilities collectively house 215 units and 243 licensed beds. Trinity Lifestyles Management, an affiliate of Solomon, will operate the properties… Wilkinson Corp. of Yakima, Wash., is reportedly in the process of putting together an initial public offering (IPO) for a Canadian REIT focused on senior nursing homes worth up to $125 million. A year ago, another U.S.-based REIT, Sunrise Real Estate Investment Trust, entered Canada with a $200-million IPO. The difference is that Sunrise already had property in Canada whereas Wilkinson Corp. does not.  Wilkinson does have 20 senior care facilities in California, Oregon, Illinois and Tennessee. q