Merrill Gardens to Keep Expanding After $145 Million JV Acquisition

Merrill Gardens retirement communities has acquired the real estate of four West Coast properties as part of a joint venture for $145 million. The recently completed properties were already operated by Seattle-based Merrill Gardens and were financed by Cushman & Wakefield.

The properties—Merrill Gardens of Huntington Beach, Merrill Gardens at Lafayette, Merrill Gardens at Campbell and Merrill Gardens at First Hill—had occupancy rates in the “mid 90s,” Bill Pettit, president of R.D. Merrill Company, the parent company of Merrill Gardens, told Senior Housing News. Three of the properties are in California, while one is in Washington.

The properties were developed as part of the company’s fourth development fund, with each fund producing roughly 1,200 senior housing units. Merrill Gardens develops and operates communities with independent living, assisted living and memory care, and has plans to continue building. It currently is the 19th-largest operator in the country by resident capacity, according to the recently released annual Argentum rankings. 

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“The markets we’re in with these assets are pretty high-barrier-to-entry markets, so we haven’t seen much new supply in these markets,” he said. “And there’s not a lot on the horizon. There are not a lot of competing products.”

The acquisition includes a total of 456 units across the four communities, which are located in high-barrier markets, including Orange County, San Francisco, Silicon Valley and downtown Seattle.

Down the line, Merrill Gardens will likely make similar transactions on five more properties that are part of its current development fund. The properties, which are located in Washington, California, Alabama and Georgia, are independent living, assisted living and memory care on a rental basis, Pettit told SHN.

“There are five more properties in the process of lease up or actually just wrapping up construction in the current development fund,” Pettit said. “As those properties mature, we will look to partner to own those properties long term with us.” 

The company is likely to continue developing and may soon double the number of communities it operates and owns, in part. A future development fund will develop another eight to 10 properties, according to Pettit. 

While Merrill Gardens is aggressively adding communities, the company is unlikely to shift toward acquiring properties rather than developing new ones in the near future.

“We think that if we are going to pay premium to buy products, [we’d] rather develop a product we want rather than buy someone else’s product. That way, we get what we want, keep a consistent quality product and will produce a kind of environment for our residents that they are used to seeing with a comfortable return for our investors.”

Written by Amy Baxter

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