William (Bill) Pettit, president and COO of Merrill Gardens since he helped launch the company 20 years ago, has kept the family owned business at the leading edge of growth and change in the senior-living industry. Now he has put together a deal that he figures will position the company for growth under new leadership for the next 20 years.
Pettit, once a rising young star in banking before forsaking that industry to help the R.D. Merrill Co. strategize diversifying from its timber-industry roots, last week announced the deal by which Merrill Gardens will sell more than half of its properties for $183 million to provide for major investments in the future.
Seattle-based Merrill Gardens is selling its equity stake in 38 senior-living projects for $173 million to Health Care REIT, with which Merrill Gardens had put together an $817 million partnership three years ago that Pettit described, at the time, as "the leading edge of a trend" for senior-living companies. Proof of the accuracy of his prediction came as other senior-living companies soon followed the model of te REIT-relationship.
In essence, the Akron-based Health Care REIT is now buying out the 20 percent of the partnership that Merrill Gardens retained in the 2010 deal and is inking an agreement with Ermitus Senior Living, also Seattle based, to manage the portfolio.
Merrill Gardens will receive an additional $10 million from Emeritus as a management termination fee and will retain 26 communities and proceed with what's described by Tana Gall, whom Pettit lured to Merrill Gardens recently from LeisureCare, still another Seattle-based regional retirement-living company, as "big reinvestment plans."
Of those 26, the REIT will continue a relationship with 10, and another 10 are slated to come on line as new communities that will benefit from the "reinvestment" plans.
Part of the lure for Gall was assuming Pettit's title as Merrill Gardens' president, although the 64-year-old Pettit retains the title of president of R.D. Merrill Co.
Pettit went to work for the Merrill Family in 1992 after a series of banking successes that included becoming head of strategic planning for Seafirst Bank at age 31 in 1980 and becoming chief financial officer in 1985 at the age of 36 before joining problem-plagued E. F. Hutton in New York, only to see the 1987 crash "seal its fate."
So he returned to the Puget Sound area as president of Pacific First Financial and two years later helped guide its takeover.
He was invited to join the R.D. Merrill Co. to help what he deferentially refers to as "the family" as the third generation of the business founded in the 1890s by Richard Dwight Merrill as an environmentally friendly timber operation determine its future.
In the end, the Merrill family decided to have fourth-generation Charles Wright III, chairman since then, take over and chart the future.
Pettit recalls that Wright felt the timber heritage was important, but not the direction he wished to take with the company so, with Pettit's assistance, moved to diversify. In 1993, the company acquired its first independent and assisted living facility in Seattle and Pettit became president and COO of both the company and its senior-living business.
Over the following 17 years, leading up to the 2010 deal with Health Care REIT, Merrill Gardens grew to become one of the largest and most respected senior living companies in the country, operating 56 senior housing communities in 10 western and southern states. It won Family Business of the Year honors in Washington State four times.
"The performance of senior housing has provided one of the best real estate investments of the past decade," Pettit says, but adds that "in reality we never made much money on operations, pretty much a breakeven business model there."
But with last week's deal, he expects Merrill Gardens to have the opportunity, over the next 24 months, "to re-engineer and add new-technology tools to the process'' in a manner that will enhance efficiency and thus bring more bottomline profits, including for the new communities coming on line, and thus growth opportunities.
Pettit says he has no plans to retire soon, adding "I expect to be working for the family for another five or six years."