Investing in Seniors Housing

Maravilla, Santa Barbara, CA

Housing Opportunity, 2013

March 22, 2013

Investing in Seniors Housing

Vi at Palo Alto Palo Alto, CA

CCRC

2

Investing in Seniors Housing

Vi at La Jolla Village La Jolla, CA

CCRC

3

Investing in Seniors Housing

Sagewood Phoenix, AZ

CCRC

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Today’s seniors housing is a mix of real estate, hospitality and care.

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Institutional Interest in Seniors Housing High

Source: 2013 Plan Sponsor Survey; Kingsley Associates; Institutional Real Estate, Inc.

Relative Attractiveness of Property Types for New Investments by Year

2010 – 2013 (Ratings: 1 = least attractive, 5 = most attractive)

1 2 3 4 5

Hotel

Infrastructure

Office

Retail

Multifamily

Industrial / R&D

Medical Office

+ Seniors Housing

2013 2012 2011 2010

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Key Takeaways

• Seniors housing and care’s market value is $300 billion and growing.

• Seniors housing private and public investment returns outperformed other

commercial real estate property investments during the past five years.

• Three of the 10 largest REITs are now health care REITs.

• Seniors housing was a resilient real estate sector during the economic

recession.

• Strong outlook for seniors housing market fundamentals.

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Seniors Housing Continuum

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Size of the Property Market

Source: NIC Research

Estimated National Counts as of 2012Q4

Number of Properties Number of Units

Majority Independent Living 4,048 878,315

Majority Assisted Living 7,118 534,081

Majority Nursing Care 11,206 1,505,944

Total 22,372 2,918,340

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Rents Vary by Care Segment

Source: NIC MAP® Data & Analysis Service

Average Monthly Rent by Care Segment as of 2012Q4

$0 $1,500 $3,000 $4,500 $6,000 $7,500 $9,000

Nursing Care

Memory Care

Assisted Living

Independent Living

Housing, Laundry, Meals, Socialization, Personal Care

Housing, Laundry, Meals, Socialization, Personal Care, Memory Support

Housing, Laundry, Meals, Socialization, Personal Care, Skilled Nursing Care

Housing, Laundry, Meals, Socialization

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$9.6B in SH&C Properties Trade in 2012

Source: NIC MAP® Data & Analysis Service; RCA

Seniors Housing & Care Transaction Volume ($B)

2008Q1 – 2012Q4

0

5

10

15

20

25

30

2008 2009 2010 2011 2012

Rolling 4-Quarter Volume Quarterly Volume

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REITs Still Driving Transaction Activity

Source: NIC MAP® Data & Analysis Service; RCA

SH&C Transaction Activity by Buyer Composition ($B)

2008Q1 - 2012Q4

0

2

4

6

8

10

12

2008 2009 2010 2011 2012

Institutional Private Public User/Other

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Health Care REITs Outperform Other REITs

Source: SNL; Green Street Advisors

Annualized Total Returns (%)

1-, 3-, 5- and 7-year Periods

September 30, 2012

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

1 Year 3 Years 5 Years 7 Years

Apartment Industrial Office

Retail Hotels Health Care

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Seniors Housing Total Returns Outpaced NPI*

Source: NCREIF; AEW Research

Annualized Total Returns (%)

1-, 3-, 5- and 7-year Periods

December 31, 2012

*NCREIF Property Index (NPI)

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1 Year 3 Years 5 Years 7 Years

Apartment Industrial Office

Retail Hotels Seniors Housing

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Seniors Housing Rents Less Volatile

Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR

Year-over-Year Asking Rent Growth Trends (%)

2007Q1 – 2012Q4

-15%

-10%

-5%

0%

5%

10%

15%

2007 2008 2009 2010 2011 2012

Apartment Office Retail Hotels Seniors Housing

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Seniors Housing Occupancy Held Up Well

Source: NIC MAP® Data & Analysis Service; MBAA; REIS; STR

Year-over-Year Occupancy Trends (Basis Points)

2007Q1 – 2012Q4

-800

-600

-400

-200

0

200

400

600

2007 2008 2009 2010 2011 2012

Apartment Office Retail Hotels Seniors Housing

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• Strengthening demographics

• Rising penetration rates and product acceptance

• Affluence

• Improving health care and longer life expectancy

• Higher education levels

• Fewer informal family care givers available

Demand Drivers for Seniors Housing

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Strong Demographic Growth

Source: U.S. Census Bureau

Population Growth (%), 2013-2020

0

1

2

3

4

2013 2014 2015 2016 2017 2018 2019 2020

Seniors Housing

Renter

2013-2020 CAGR (%):

75+ Cohort: 2.2

25-34 Cohort: 0.6

U.S. Population 0.8

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Demographics Will Remain Strong for Decades

Source: U.S. Census Bureau

Population Growth (%), 2013-2040

-1

0

1

2

3

4

5

2015 2020 2025 2030 2035 2040

U.S. Overall Renter Seniors Housing

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Pace of New Supply is Now Tempered

Source: NIC MAP® Data & Analysis Service

Distribution of Existing Units by Year Property Opened (%), 1985 - 2012

0%

2%

4%

6%

8%

10%

12%

1985 1990 1995 2000 2005 2010

Independent Living Assisted Living Nursing Care

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Construction Activity Has Been Tempered

Source: NIC MAP® Data & Analysis Service

Construction vs. Inventory (%); MAP31

2005Q4 – 2012Q4

0%

1%

2%

3%

4%

5%

6%

7%

2006 2007 2008 2009 2010 2011 2012

Independent Living Assisted Living

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Moderating Supply Growth to Aid Recovery

Source: NIC MAP® Data & Analysis Service

Seniors Housing Historical and Forecast Supply-Demand; MAP31

2006Q1 – 2013Q4’F

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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

Un

its

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

Seniors Housing Average Cap Rates Higher

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

Rolling Four-Quarter Cap Rate/Yield (%)

2008Q1 – 2012Q4

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2008 2009 2010 2011 2012

Seniors Housing Multifamily Office 10-Year Treasury

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Implementation Strategies

• Intermediated Investments

• Direct Investments:

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Conclusions

• Strong outlook for market fundamentals

• Solid and relatively stable investment returns

• Increasing presence of institutional investors

• A range of investment strategies that potentially also diversify

a multi-asset portfolio

• Variety of avenues for investment available

• Experienced, quality operator is key to mitigating risks and

achieving success through various cycles

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National Investment Center for

the Seniors Housing & Care Industry (NIC)

www.nic.org | (410) 267-0504

Investing in Seniors Housing

Sagewood, Phoenix, AZ