2014 alfa conference senior housing fundamentals and trends

www.NICMAP.org

Seniors Housing Fundamentals and Trends ALFA 2014 Conference & Exposition Wednesday, May 21, 2014 Phoenix, AZ

www.NIC.org

Despite Our Best Efforts, We Are All Still Aging

© National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org 2

• U.S. Seniors Housing Market Fundamentals

• U.S. Economic Outlook & Drivers of Seniors Housing Demand

• Seniors Housing Market in Select Metropolitan Areas

• U.S. Seniors Housing Capital Market Trends

Presentation Outline


U.S. Seniors Housing Market Fundamentals

Vacancy Rates Have Fallen For All Property Types

5

Source: CBRE, NIC MAP: Analytics

© National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org

0

2

4

6

8

10

12

14

16

18

2005Q4 2006Q4 2007Q4 2008Q4 2009Q4 2010Q4 2011Q4 2012Q4 2013Q4

Multifamily Retail Office Warehouse Assisted Living Independent Living

0

500

1,000

1,500

2,000

2,500

3,000

0 - 80% 80 - 85% 85 - 90% 90 - 95% 95 - 100%

Prop

erty

Cou

nt

MAP100 Seniors Housing Occupancy Distribution 1Q14

Seniors Housing Occupancy Distribution


Source: NIC MAP® Data & Analysis Service

Primary

Secondary All Markets

86%

87%

88%

89%

90%

91%

92%

93%

2006 2007 2008 2009 2010 2011 2012 2013 2014

Seniors Housing Occupancy 4Q05 – 1Q14

Seniors Housing Occupancy Continues to Strengthen

7



83%

85%

87%

89%

91%

93%

95%

2006 2007 2008 2009 2010 2011 2012 2013 2014

Occupancy by Campus Type; Primary Markets 4Q05 – 1Q14

Freestanding Memory Care

CCRCs*

Rental Independent Living

Occupancy Rises in All Campus Types

8



*Includes all CCRCs and other entrance fee properties.

Rental Assisted Living

Market Fundamentals: We All Hope This Won’t Happen


0

2,000

4,000

6,000

8,000

10,000

12,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Units Under Construction by Campus Type; Primary Markets 4Q05 – 1Q14


CCRCs*

Independent Living

Assisted Living

Construction Moderates, 1Q14 Starts Down 65% vs. Last Year

10



*Includes all CCRCs and other entrance fee properties.

0

1,000

2,000

3,000

4,000

0

1,000

2,000

3,000

4,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Construction Starts (Nbr. Units); Primary Markets 1Q06 – 1Q14

Majority Independent Living

Assisted Living Construction Starts Moderate – Weather to Blame?

11



Majority Assisted Living

Presenter

Presentation Notes

Multifamily started recently peaked in end of 2008; troughed end of 2009

-1%

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014

Rolling Four-Quarter Starts vs. Inventory and Annual Absorption Majority Independent Living; Primary Markets

Absorption

Construction Starts

Independent Living: Construction Starts Remain Modest

12



-1%

0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014

Rolling Four-Quarter Starts vs. Inventory and Annual Absorption Majority Assisted Living; Primary Markets

Absorption

Construction Starts

Assisted Living: Supply Headwinds Remain

13



0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2006 2007 2008 2009 2010 2011 2012 2013 2014

Units Under Construction in Majority Assisted Living By Campus Type | Primary Markets | 4Q05 – 1Q14


Combined Properties

Freestanding Assisted Living

Most Assisted Living Construction in Combined Service Properties

14



Units % Total

IL 940 12%

AL 4,402 57%

MC 2,282 29%

NC 139 2%

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014

Annual Rent Growth/Inflation; Primary Markets 1Q07 – 1Q14

Majority AL

Majority NC

Majority IL

Cost Index*

Asking Rent Growth Remains Steady, Outpacing Expenses for Now…

15

Source: NIC MAP® Data & Analysis Service; Bureau of Labor Statistics; NIC Research & Analytics


* Avg Hourly Earnings (Nursing/Residential Care) x 0.60 + Food/Beverage CPI x 0.40, annual % chg

U.S. Economic Outlook & Drivers of Seniors Housing Demand

Seniors Housing Market is Impacted By:


• The Economy: Growth in Jobs and Income

• The Consumer: Their Economic Wherewithal and Their Attitudes

• The Housing Market: Velocity of Sales and Prices

• Current Seniors Housing Market Conditions

• Federal Reserve Policy and Capital Markets: Interest Rates, Inflation and the Cost of Capital

• Potential Shocks to the Economy: Inflation, Global Disruption in Capital Markets

Private Sector Jobs Reach Peak; Government Jobs Drop

21.20

21.40

21.60

21.80

22.00

22.20

22.40

22.60

22.80

23.00

23.20

102.00

104.00

106.00

108.00

110.00

112.00

114.00

116.00

118.00

Jan-

06

Apr-

06

Jul-0

6

Oct

-06

Jan-

07

Apr-

07

Jul-0

7

Oct

-07

Jan-

08

Apr-

08

Jul-0

8

Oct

-08

Jan-

09

Apr-

09

Jul-0

9

Oct

-09

Jan-

10

Apr-

10

Jul-1

0

Oct

-10

Jan-

11

Apr-

11

Jul-1

1

Oct

-11

Jan-

12

Apr-

12

Jul-1

2

Oct

-12

Jan-

13

Apr-

13

Jul-1

3

Oct

-13

Jan-

14

Private Sector Employment Total GovtSource: US Bureau of Labor Statistics

Employment, 000s

Layoffs and Claims Are Around Pre-recession Levels

19

Source: Moody’s Analytics, U.S. Bureau of Labor Statistics


0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

7000.00

8000.00

9000.0020

04Q

120

04Q

220

04Q

320

04Q

420

05Q

120

05Q

220

05Q

320

05Q

420

06Q

120

06Q

220

06Q

320

06Q

420

07Q

120

07Q

220

07Q

320

07Q

420

08Q

120

08Q

220

08Q

320

08Q

420

09Q

120

09Q

220

09Q

320

09Q

420

10Q

120

10Q

220

10Q

320

10Q

420

11Q

120

11Q

220

11Q

320

11Q

420

12Q

120

12Q

220

12Q

320

12Q

420

13Q

120

13Q

220

13Q

320

13Q

420

14Q

1

Initial Claims (000s) JOLTS Layoffs (000s, right)

The Housing Market Is Recovering

Source: National Association of Realtors, Moody’s Analytics

0

50

100

150

200

250

300

0

1000

2000

3000

4000

5000

6000

7000

8000Fe

b-99

Oct

-99

Jun-

00

Feb-

01

Oct

-01

Jun-

02

Feb-

03

Oct

-03

Jun-

04

Feb-

05

Oct

-05

Jun-

06

Feb-

07

Oct

-07

Jun-

08

Feb-

09

Oct

-09

Jun-

10

Feb-

11

Oct

-11

Jun-

12

Feb-

13

Oct

-13

NAR Existing Home Sales Median Price ($, right scale) Average Price ($, right scale)

Summary of Key Economic Indicators


2013 2014 2015 GDP Capital Economics 1.9 2.8 3.0 Moody's Analytics 1.9 3.1 4.0 Federal Reserve 1.9 2.8-3.0 3.0-3.2 Inflation Capital Economics 1.5 1.5 2.0 Moody's Analytics 1.5 2.1 2.1 Federal Reserve 1.5 1.5-2.0 1.7-2.0 Unemployment Rate Capital Economics 7.4 6.4 5.7 Moody's Analytics 7.4 6.4 6.0 Federal Reserve 7.4 6.1-6.3 5.6-5.9 10-Year Treasury (%) Capital Economics 3.0 3.3 3.5 Moody's Analytics 3.0 3.2 4.1

Federal Reserve 3.0 na na

Source: Moody’s Analytics, Capital Economics, Federal Reserve

85%

86%

87%

88%

89%

90%

91%

92%

93%

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Seniors Housing Supply-Demand Forecast; Primary Markets 1Q06 – 1Q15’F

Inventory Growth (L)Absorption (L)Occupancy (R)

Forecast

Aggregate Private-pay Seniors Housing Recovery Likely to Continue



Units

85%

86%

87%

88%

89%

90%

91%

92%

93%

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Majority Independent Living Supply-Demand Forecast Primary Markets | 1Q06 – 1Q15’F


Forecast

Tempered Construction to Contribute to Independent Living Recovery



Units

85%

86%

87%

88%

89%

90%

91%

92%

93%

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Majority Assisted Living Supply-Demand Forecast Primary Markets | 1Q06 – 1Q15’F


Forecast

Assisted Living Supply to Accelerate, Overall Balanced Supply-Demand



Units

Location, Location, Location: Metropolitan Area Performance


75%

80%

85%

90%

95%

100%

PIT SJ

BA

LB

OS

NY

MIN SF

PO

RS

AC

DC

DE

NC

LED

ET

SE

A LAO

RL

SA

CIN PH

IA

TLM

AP

31S

TL SD

TAM KC

MIA

HO

UR

IVC

HI

LVD

AL

PH

O

Seniors Housing Occupancy by Metro Market As of 1Q14 Pre-recession Peak to Trough Range

Current Quarter Occupancy

The Breadth of the Recovery Varied Across the Primary Markets

26



Construction Concentrated Locally and in Assisted Living/Memory Care

27 © National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org

0 500 1,000

DEN

STL

PIT

KC

CHI

LA

HOU

MIN

SJ

DET

CCRCs*

0 500 1,000

DET

DC

PHI

DEN

BAL

NY

HOU

SA

MIA

DAL

Independent Living

0 500 1,000

PHO

SEA

DAL

PHI

TAM

ATL

BOS

MIN

HOU

NY

Assisted Living

0 500 1,000

DC

BOS

TAM

ATL

PHO

DAL

CHI

CLE

HOU

DEN


Current Construction Rankings (New/Expansions)

*Includes all CCRCs and other entrance fee properties. Source: NIC MAP® Data & Analysis Service

High Construction ≠ Falling Occupancy

28



* Annual % change ** Annual % change; as of Jan 2014

Majority Assisted Living Supply-Demand; 1Q14 Top 10 Markets Ranked by Construction vs. Inventory

Construction Absorption* Inventory* Employment**Houston, TX 17.4% 9.6% 8.7% 2.8%Denver, CO 12.7% 4.5% 6.1% 1.6%Detroit, MI 10.5% 3.5% 0.5% 2.1%Minneapolis, MN 9.4% 9.6% 7.7% 1.3%Cleveland, OH 9.3% 2.0% 0.0% 0.0%Orlando, FL 8.7% 1.2% -0.1% 3.0%Tampa, FL 8.1% 1.3% 0.2% 2.5%Boston, MA 8.0% 3.4% 6.0% 0.2%Kansas City, MO 8.0% 0.6% 0.9% 0.6%San Antonio, TX 7.5% 5.8% 4.1% 1.8%All Primary Markets 5.4% 2.8% 2.3% 1.7%

Seniors Housing Market in Select Metropolitan Areas

Job Performance in Select Metro Areas

Metro Area Jobs (000s) Quarter Above/Below Prior Peak

2013 Q4 % Decline Job Decline Achievement to Peak

Number of Jobs

Boston 2,537 -4.0 (101,200) At Peak 45,100 Houston 2,816 -4.1 (107,300) At Peak 206,600 San Jose 978 -8.1 (75,400) At Peak 47,700 Phoenix 1,831 -12.4 (238,800) 2016Q1 (96,200) U.S. 137,248 -6.2 (8,500,000) 2014 Q2 (1,036,000) Source: U.S. Dept. of Commerce; Moody's Economy.com

Peak to TroughRelative Job Performance

Housing Prices Are Recovering

Metro Area Peak Home Price

Total Peak to Trough Decline

Price ($) % Currently Below Peak

% Currently Above Trough

Dollars Percent

Boston 378,784 (8.0) 22.7 411,878 (25.0) Houston 183,385 18.0 27.7 155,415 (7.6) San Jose 793,951 (7.2) 65.8 855,810 (44.1) Phoenix 194,631 (28.8) 72.5 273,249 (58.7) U.S. 199,546 (8.0) 22.1 221,337 (27.7) Source: National Association of Realtors; Moody's Economy.com

Relative Home Price Performance 2013 Q4 Median Existing Home Price

Markets: Boston, Houston, San Jose and Phoenix


Source: NIC MAP® Data & Analysis Service 0 5,000 10,000 15,000 20,000 25,000

Phoenix, AZ

Boston, MA

Houston, TX

San Jose, CA

Units by Property Type As of 1Q14

Majority ILMajority AL

47 Properties

125 Properties

140 Properties

153 Properties

88%

90%

92%

94%

96%

98%

-200

0

200

400

600

800

2006 2007 2008 2009 2010 2011 2012 2013 2014

Uni

ts

Boston Seniors Housing Supply-Demand 1Q06 – 1Q14


Boston’s Seniors Housing Fundamentals



0

10

20

30

40

50

60

70

80

0 - 80% 80 - 85% 85 - 90% 90 - 95% 95 - 100%

Prop

erty

Cou

nt

Boston Seniors Housing Occupancy Distribution 1Q14

Boston’s Seniors Housing Fundamentals



0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014

Seniors Housing Annual Rent Growth (%) 4Q06 – 1Q14

Boston MAP31

Boston’s Rent Growth Outpaces Primary Markets

35



78%

80%

82%

84%

86%

88%

90%

92%

94%

96%

-200

-100

0

100

200

300

400

2006 2007 2008 2009 2010 2011 2012 2013 2014

Uni

ts

Houston Seniors Housing Supply-Demand 1Q06 – 1Q14


Houston’s Seniors Housing Fundamentals



0

5

10

15

20

25

30

35

40

45

50

0 - 80% 80 - 85% 85 - 90% 90 - 95% 95 - 100%

Prop

erty

Cou

nt

Houston Seniors Housing Occupancy Distribution 1Q14

Houston’s Seniors Housing Fundamentals



0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2007 2008 2009 2010 2011 2012 2013 2014


Houston MAP31

Houston’s Rent Growth Outpaces Primary Markets

38



84%

86%

88%

90%

92%

94%

96%

-100

-50

0

50

100

150

200

2006 2007 2008 2009 2010 2011 2012 2013 2014

Uni

ts

San Jose Seniors Housing Supply-Demand 1Q06 – 1Q14


San Jose’s Seniors Housing Fundamentals



0

5

10

15

20

25

30

0 - 80% 80 - 85% 85 - 90% 90 - 95% 95 - 100%

Prop

erty

Cou

nt

San Jose Seniors Housing Occupancy Distribution 1Q14

San Jose’s Seniors Housing Fundamentals



-2%

-1%

0%

1%

2%

3%

4%

5%

2007 2008 2009 2010 2011 2012 2013 2014


San Jose MAP31

San Jose’s Rent Growth Outpacing Primary Markets

41



78%

80%

82%

84%

86%

88%

90%

92%

94%

-100

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012 2013 2014

Uni

ts

Phoenix Seniors Housing Supply-Demand 1Q06 – 1Q14


Phoenix’s Seniors Housing Fundamentals



0

5

10

15

20

25

30

35

40

45

50

0 - 80% 80 - 85% 85 - 90% 90 - 95% 95 - 100%

Prop

erty

Cou

nt

Phoenix Seniors Housing Occupancy Distribution 1Q14

Phoenix’s Seniors Housing Fundamentals



-1%

0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014


Phoenix MAP31

Phoenix’s Rent Growth Underperforming

44



U.S. Seniors Housing Capital Market Trends

$0

$2

$4

$6

$8

$10

$12

2008 2009 2010 2011 2012 2013 2014

U.S. Seniors Housing & Care Transactions Volume ($b) 1Q08 – 1Q14* User/Other

PrivateInstitutionalPublic/REIT

Private Buyers Represent 60% of 1Q14 Volume, Public/REITs Close $368m


Source: NIC MAP® Data & Analysis Service * Volume for 1Q14 is preliminary. Closed transactions only.

$0

$2

$4

$6

$8

$10

$12

2008 2009 2010 2011 2012 2013 2014

U.S. Seniors Housing & Care Transactions Volume ($b) 1Q08 – 1Q14*

Majority Nursing CareMajority Assisted LivingMajority Independent Living

Initial Transactions Volume Estimate at $2.0B for 1Q14


Source: NIC MAP® Data & Analysis Service * Volume for 1Q14 is preliminary. Closed transactions only.

$0

$50

$100

$150

$200

$250

2008 2009 2010 2011 2012 2013 2014

Rolling 4-Quarter Price Per Unit ($k) By Property Type & Portfolio/Single Property | 1Q08 – 1Q14*

Seniors Housing: Portfolio

Seniors Housing: Single

Nursing Care: Portfolio

Nursing Care: Single

Non-Portfolio Pricing Remains Near Peak

48



* Pricing for 1Q14 is preliminary. Closed transactions only.

Presenter

Presentation Notes

During 1Q14 (lower, median, upper): Seniors Pricing Distribution: 84k, 129k, 206k Nursing Pricing Distribution: 44k, 64k, 97k

Bottom Decile Bottom Quartile

Median

Top Quartile

Top Decile

$0

$50

$100

$150

$200

$250

$300

$350

$400

2008 2009 2010 2011 2012 2013 2014

Seniors Housing Rolling 4-Quarter Price Per Unit ($k) Distribution 1Q08 – 1Q14

Pricing Variation Remains Wide

49



Seniors Housing Investment Returns Outpace Other Property Types


Source: NCREIF

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

One Year Three Years Five Years Ten Years

NPI

Apartment

Hotel

Industrial

Office

Retail

Seniors Housing

Seniors Housing

Multifamily

0

100

200

300

400

500

600

700

2008 2009 2010 2011 2012 2013 2014

Spre

ad O

ver 1

0-Ye

ar Y

ield

(bas

is p

oint

s)

Rolling 4-Quarter Cap Rate Spreads 1Q08 – 1Q14*

Seniors Housing Following Multifamily Spreads Over 10-year Treasury

51

Source: NIC MAP® Data & Analysis Service; RCA; FRED


* Pricing for 1Q14 is preliminary. Closed transactions only.

Chuck Harry Managing Director and Director of Research & Analytics [email protected]

Beth Mace Chief Economist and Director of Capital Markets Outreach [email protected]

National Investment Center for the Seniors Housing & Care Industry 410.267.0504 www.nic.org www.nicmap.org


Majority Property Types & Campus Types


Seniors Housing and

Care

Seniors Housing

Majority IL

Independent Living* CCRC

Majority AL

Assisted Living*

Freestanding Memory Care CCRC

Nursing Care

Majority NC

Nursing Care* CCRC

Majority Property Type

Campus Type

* Includes freestanding and combined properties.

Documents

2014 alfa conference senior housing fundamentals and trends