Sims Raises $27,075,000 from Individual Investors to Co-Invest in Merrill Gardens Affiliate

Herbert J. Sims & Co., Inc. (“Sims”) (through its affiliate HJ Sims Investments, LLC) provided equity to MGJV Investments II, LLC (“MGJV”), an affiliate of Merrill Gardens, LLC (“Merrill Gardens”). Merrill Gardens is the owner and operator of 71 senior living facilities throughout the United States. Merrill Gardens ranks as the third largest private senior housing operator, and the thirteenth largest senior housing operator in the United States. MGJV was established to develop and acquire nine (9) senior housing communities that will be operated by Merrill Gardens.

goal

Merrill Gardens’ goal was to seek a co-investor for MGJV with its senior management and its own private investors. Merrill Gardens looked for Sims to be the single largest investor in MGJV. Sims agreed and subscribed to 38% of the $53.75 million offering. Sims raised $15.2 million to meet the initial capital call for three identified properties, one (1) acquisition and two (2) development properties, as well as to meet its obligation for the second capital call. Sims then raised an additional $11.875 million to meet its obligation for the third, and final, capital call. Combined, the second and third capital calls funded the equity needed for the addition of five (5) more properties to the MGJVII portfolio, one (1) acquisition and four (4) development properties. The last property is expected to be added to MGJV in early 2007.

The challenges were (1) raising only the amount of funds required by MGJV for its initial capital call, while committing to fund the full subscribed amount; (2) providing the flexibility to change the size of Sims’ investment; (3) having the capital ready when capital calls are made; (4) not all of the properties in MGJV are identified; and (5) closing on the investment simultaneously with MGJV’s other investors.

solution

Sims, through its high net worth client base, capitalized Sims Merrill Gardens I, LLC to provide the capital to MGJV. The funds raised by Sims, together with funds invested by Merrill Gardens’ key principals and private investors, was used to meet MGJV’s equity commitments for the eight (8) properties in the portfolio and one (1) proposed property.

Sims’ structure was attractive to Merrill Gardens for several reasons: (1) since the investment was made directly by a Sims’ controlled entity, it allowed Merrill Gardens to access Sims’ extensive high net worth client base without having to deal with a number of third-party investors; (2) the arrangement was openended so that additional capital can be raised and invested through the Sims controlled entity to fund MGJV’s share of future acquisitions and developments; (3) Sims was willing to be the largest owner of MGJV, but allow Merrill Gardens to remain as the managing member with day-to-day control; and (4) the execution of the transaction was efficient since Sims was able to complete its offering and make its initial investment in MGJV in less than six weeks.

implementation

Sims raised the equity through two (2) private placements to its high net worth client base. Sims Merrill Gardens I raised $15,200,000 in January, 2006, through the issuance of Series I Bonds, and $11,875,000 in December, 2006, through the issuance of Series II Bonds. The Sims financing was attractive for several reasons: (1) Sims’ commitment to funding a majority of the equity in MGJV; (2) Sims ability to increase its equity interest if needed; (3) Sims’ investment is equity and therefore does not require a fixed return; (4) Sims’ investment allowed Merrill Gardens to focus on what it does best – develop, own and operate senior living facilities.

result

The equity provided by Sims, along with the other investors, satisfied the equity requirements by the senior lenders on the initial properties, and allowed Merrill Gardens to locate additional opportunities. Sims involvement was instrumental in increasing MGJV’s initial offering from a total of $35 million to$53.75 million to ultimately create a portfolio value of over $300 million.