Merrill Gardens Pares Down Portfolio, Plans $173 Million Reinvestment

On Thursday, Health Care REIT announced it was buying out Merrill Gardens’ equity stake in 38 senior housing properties for $173 million and entering a triple-net lease with Emeritus Senior Living to manage the portfolio, leaving Merrill Gardens with 26 communities and big reinvestment plans.

The move to sell its interest in more than half of its portfolio was, from Merrill Gardens president Tana Gall’s perspective, an opportunity to pare down the number of communities in order to make “significant changes” in the ones that are left.

“It’s way easier to roll out new platforms and new technology for a smaller group versus a larger group,” she says. “We want to be more nimble and efficient, and better in the way we do business.”


That objective, she says, parallels the fact that Merrill Gardens now has capital to make those investments—namely, $173 million from the sale of its 20% stake in the 38-property joint venture portfolio, and another $10 million from Emeritus as a management termination fee.

Gall just recently left her post as president of Leisure Care—where she spent nearly 20 years—to join Merrill Gardens. The deal with Health Care REIT was well underway by the time Gall made the jump, but she will play a large role in the company’s reinvestment plans.

“The timing works from the standpoint of Merrill Gardens’ strategic plan to move forward on a more nimble and efficient platform,” says Gall.


The decision to relinquish ownership and management of those 38 communities in particular had more to do with deal structures rather than cherry picking, according to her.

“How the joint venture was set up was the magic of those communities [that were sold],” she says. The remaining communities, according to her, are 94% occupied with the exception of two that are currently under development.

“In the next 18-24 months, instead of rapid growth, we’ll be reinvesting in things that make this company cutting edge,” Gall says. “We’ll focus on technology, and not just that, but also the people [who work at Merrill Gardens] and how technology is used to make employees’ lives better, and how we can use those efficiencies [gained from technology] to make our residents’ lives better.”

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That includes investing in different accounting and human resources systems in an effort to create better environments for employees.

Merrill Gardens also plans on investing some of the proceeds from the sale of its 20% interest in the portfolio into the development of four to five new communities each year, according to Gall, although no more specifics were immediately available.

“We want to really look at the industry, and we want to do [senior living] really well by breaking down stereotypes of what senior housing is to people,” she says. “I want people to have a product they want and desire. That’s what we’re going to be looking at.”

Already, Gall and her team have been speaking to residents, family members, and the senior population at large to find out what people are looking for. It’s “absolutely” an attempt to get ahead of the curve and build the next generation of senior living communities, Gall says.

“I’ve been visiting properties this past week to see what’s working and what’s not and to start collaborating with all of my associates at Merrill Gardens to find out what the cutting edge is, what’s the ‘next great thing,'” she says.

In order to find that out, she says they’re benchmarking ideas and concepts not just in the senior living industry, but also in hospitality and other relevant sectors.

“What’s being provided in hotels from the standpoint of, can a resident from their apartment go to their touchscreen TV to book transportation for their next trip? Can they sign up for a concert outing through their iPad?” she says. “For me, it’s finding out relevance. What makes sense to invest in and do with residents?”

Despite the big move, Gall says Merrill Gardens’ strategy has not changed.

“In its 20 years in the industry, Merrill Gardens has been as true to its core as any company—not just in our industry but in the country—on knowing what they do and doing it well,” she says. “At the end of the day, it is a business. Bill [Pettit, the company’s CEO] has talked to many people throughout his 20 years [who are interesting in] purchasing the company, or parts of it. Ultimately, Merrill Gardens is alive and well and moving forward as a company.”

Written by Alyssa Gerace

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