Lean Appraisal Training January 26, 1010 Sheraton Chicago Hotel and Towers Room: Chicago VI Sponsored by Eastern Lender’s Association In Coordination

Lean Appraisal Training

January 26, 1010Sheraton Chicago Hotel and Towers

Room: Chicago VISponsored by

Eastern Lender’s Association In Coordination with

HUD’s Office of Insured Health Care Facilities

Challenges of the Current Market

SOW 2010

Appraisal Statement of Work

SOW ChangesSignaturesEngagement & Intended UsersExhibitsHypothetical Conditions & Extraordinary Assumptions

4

SOW Changes, ContinuedMarket Analysis

TraditionalTruncated

Regional DescriptionSite DescriptionImprovement Description

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SOW Changes, ContinuedRemaining Economic LifeLand ValuationCost ApproachSales Comparison ApproachIncome ApproachSpecial Appraisal Requirements

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Appraisal Issues by Section

Sales Comparison Approach

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Appraisal Issues by SectionSales Comparison Approach

Comp adjustments unsupported by market or narrative explanation

Per unit prices unrealistic and unsupported by comps

NOI adjustments not discounted for higher risk of projected NOI

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NOI adjustment will reflect all differences between comps and subject

OIHCF will require two analyses – a single NOI adjustment

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And an adjustment analysis for all factors EXCEPT NOI

Reconcile into a single conclusion

10


Income Capitalization Approach

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Hypothetical versus current operations

Assumptions of repairsMarket Norms?Trigger for Full Market StudiesTrigger for Initial Operating Deficits

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Income ProjectionsMedicareMedicaid

Where are rates going?Historical average? Current rate? Published

rate?Private Pay

Advertised rate versus achievedOther incomePricing strategies

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ExpensesCommon Questions

Categories Chart of Accounts?

Taxes & Non-ProfitsReserve for Replacements & the PCNAAccounts Receivable FinancingExpense Comparables

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CapitalizationCap Rate Selection

Sales ComparablesMarket SurveysBand of Investment

Discounted Cash Flow

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Cost Approach

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Cost Approach a.k.a. Summation Approach

Based on the reasoning that a buyer will not pay more than the cost to reproduce or replace the subject.

Reproduction refers to an exact replica.

Replacement refers to improvements with similar or equivalent utility.

(Eliminates super-adequate features of the subject)

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Replacement Cost New Less Depreciation (RCNLD)

The Current Cost to Construct the Improvements(Hard Costs, including Labor and Materials)

Plus Soft Costs, Entrepreneurial Incentive

Minus Depreciation

Plus the Market Value of the Land

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Sample Cost Approach SummaryDirect Cost – Buildings $6,209,552

Direct Cost - Site Improvements 150,000Total Direct Costs $6,359,552Indirect Costs 859,570Entrepreneurial Incentive 720,000RCN of the Improvements: $7,939,122Depreciation ($1,077,907)Subtotal $6,861,215Land Value 400,000Furniture, Fixtures & Equipment (FF&E) 290,000Indicated Value – Cost Approach $7,551,215Rounded $7,550,000

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Market Value of the LandWhether or not a Cost Approach is

developed, the appraiser is required to estimate the value of the land as if vacant.

A minimum of three comparables sales will be used.

If there is a recent or pending sale of the subject land, the sales price must be analyzed.

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Market Value of the LandWhen Environmental Remediation is RequiredThe estimate of the value

“should be made as if the project is unaffected by contamination and conditioned on successful removal.

The self-contained appraisal report must address any effect on marketability that may be present due to the prior environmental history.”

See MAP Guide, Chapter 9, Rev. 9/18/2009, p. 20

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Direct CostsThe cost to construct equivalent

improvements including structures,site improvements,materials & labor

DATA SOURCES

National Cost Publications (Marshall & Swift, Means,

etc. )

Actual Construction CostsComparable Costs (may include soft costs) 22

Indirect Costs Soft Costs, Entrepreneur’s Incentive

Soft Costs = Expenditures Other Than Labor & Materialse.g. Financing Costs, Insurance and Taxes

during Construction, Permits, Administrative Costs, Professional Fees, Lease-up/Marketing Costs

Entrepreneurial Incentive = "the amount an entrepreneur expects to receive for his or her contribution to a project and risk." The Dictionary of Real Estate Appraisal, 4th ed., p. 96

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Indirect CostsSoft Costs, Entrepreneurial IncentiveFrom the LEAN Appraisal Guidelines:“….absorption, staffing costs, other intangible start-up

operating costs, occupancy costs, and entrepreneurial incentive must be considered and identified.”

“The entrepreneurial incentive should be an amount sufficient to attract a typical owner/investor to develop a project...”; i.e, compensation for the developer’s risk and expertise associated with development.

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DepreciationAccrued Depreciation is a loss in value due to all causes including:

Physical DeteriorationFunctional ObsolescenceExternal or Economic Obsolescence

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DepreciationPhysical Deterioration:

A loss in value due to age, deferred maintenance and/or wear and tear on an improvement.

Functional Obsolescence:A loss of building utility. May be curable or incurable.

External or Economic Obsolescence:A loss in value due to factors outside the subject

property. Often incurable because it is beyond the control of the property owner.

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Remaining Economic LifeThe appraisal will include an estimate

of the Remaining Economic Life and the Effective Age of the improvements.

At a minimum, the economic life estimate from the Marshall & Swift Cost Estimating Manual will be quoted.

Other published life estimates may also be quoted when available.

27

Remaining Economic Life (REL)Remaining Economic Life is defined as:

The period over which improvements will continue to contribute to property value;

an estimate of the number of years remaining in the economic life of the structure or structural components as of the date of the appraisal;

used in the age life method of estimating depreciation1 .

1The Dictionary of Real Estate Appraisal, 4th Edition

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Use of the Cost ApproachHUD requires the Cost Approach when

the actual or effective age of the facility is five years or less or

the appraiser believes this approach is applicable and relevant to producing a credible appraisal report.

OIHCF expects a fully developed Cost Approach whenthere is little depreciation, orthe un-depreciated replacement cost new would be

lower than the conclusions of the Sales Comparison or Income Capitalization Approaches.

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In those cases where the Cost Approach is not developed:The appraisal must include narrative

justification for the elimination of the Cost Approach.

The Base Costs must be carefully discussed in the narrative justification for excluding the approach.

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Highest & Best UseCertificationAddenda & ExhibitsFinal Value Reconciliation

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CHICAGO 2010

PHOTOGRAPHSThe new SOW for appraisal requires more pictures. The appraisal should provide photographic evidence to the quality, condition and adequacy of the physical plant.

New ConstructionFloor PlansSite PlansElevations

Existing ConstructionSOW RequirementsLiving SupportCommon

The Exhibits should be clear and readable. The pictures should be focused and of adequate size.

Real estate is appraised in its highest and best use.

Current vs.Vacant Site Highest and Best Use

Often, no matter what the site’s economic circumstances are, the provided appraisal report indicate the vacant site’s highest and best to be the current use.

The appraisal’s vacant site highest and best analysis should examine the prevalent market conditions using the 4 noted tests independent of the current use.

Test Each UseParkingZoningFinancial Feasibility

The reason a vacant site’s highest and best use analysis is completed is to:

1. Estimate land value.

2. Identify comparablevacant land sales.

The reconciliation should review the characteristics of the approaches relied upon an reconcile those approaches into a final value estimate.

The reconciliation should review the

3 approachesAppropriatenessAccuracyQuantity of Evidence

APPRAISAL

Only one certification is required . The LEAN Program accepts the USPAP Certification. The independent MAP Certification is not required.

MARKET STUDYThe required market study certification is the certification found in the market study statement of work.


Initial Operating DeficitsSinking Funds“As-is” Valuation Techniques

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Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7ALF move-ins 15 4 4 4 3 4 4ALF Move-outs 0 0 0 0 0 0 0ALF beds filled 15 19 23 27 30 34 38Potential Gross Income $61,845 $78,338 $94,830 $111,322 $123,691 $140,183 $156,675Real Estate Taxes ($14,833) ($14,833) ($14,833) ($14,833) ($14,833) ($14,833) ($14,833)Insurance ($9,642) ($9,642) ($9,642) ($9,642) ($9,642) ($9,642) ($9,642)Utilities and Garbage Removal ($10,435) ($10,435) ($10,435) ($10,435) ($10,435) ($10,435) ($15,652)Management Fees ($5,000) ($5,000) ($5,000) ($5,566) ($6,185) ($7,009) ($7,834)Salaries & Benefits ($54,929) ($54,929) ($54,929) ($54,929) ($54,929) ($54,929) ($76,900)Administrative ($19,159) ($19,159) ($19,159) ($19,159) ($19,159) ($19,159) ($19,159)Food Cost and Dietary ($12,460) ($4,100) ($4,920) ($6,560) ($7,380) ($8,200) ($9,020)Oper./Repairs & Maintenance ($4,641) ($4,641) ($4,641) ($4,641) ($4,641) ($4,641) ($4,641)Housekeeping ($1,167) ($1,167) ($1,167) ($1,167) ($1,167) ($1,167) ($1,167)Programs and Activities ($962) ($962) ($962) ($962) ($962) ($1,924) ($1,924)Other ($8,336) ($8,336) ($8,336) ($8,336) ($8,336) ($8,336) ($11,795)TOTAL ($141,564) ($133,204) ($134,024) ($136,230) ($137,669) ($140,275) ($172,567)R4R ($5,478) ($5,478) ($5,478) ($5,478) ($5,478) ($5,478) ($5,478)Adjusted Net Operating Income ($85,197) ($60,344) ($44,672) ($30,386) ($19,456) ($5,570) ($21,370)Debt Service ($69,151) ($69,151) ($69,151) ($69,151) ($69,151) ($69,151) ($69,151)MIP ($5,444) ($5,444) ($5,444) ($5,444) ($5,444) ($5,444) ($5,444)Debt Service

Profit (Loss) ($159,792) ($134,939) ($119,267) ($104,981) ($94,051) ($80,165) ($95,965)

Miscellaneous

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15-Minute Break

51

Appraisal

Case Studies

52

Anatomy of a Skilled Nursing Facility Sale

HUD Lean Appraisal TrainingChicago, Illinois

Salient Facts of the Sale’s Market Area

Rural Southwest Iowa market Town straddles two counties Two SNFs in subject town and two more in each

of the two counties – six total SNFs in market area

Total population in combined counties has been and is projected to continue gradually declining

75-plus population is projected to be stable Private-pay assisted living market saturation is

achieved (no further private-pay SNF demand shift expected to assisted living).

Salient Facts of the Sale Property 3.17-acre site is stable, desirable area Building erected in 1971 and 1975, with

last renovations in 1995 Wood-frame construction, brick exterior,

gabled roof, base-board heat and window A/C units

Average condition 1971 section is not sprinklered

Salient Facts of the Sale Property 90 total SNF beds 26 private patient rooms 32 semi-private patient rooms 10 private toilets, balance of patient rooms

share adjoining toilets 30,668 square feet Therapy areas converted from other

function space, not purpose built Buyer plans to spend $300,000 to install

sprinklers in the un-protected areas, upgrade some mechanical systems and freshen up the appearance

Profile of the Competitive Market

Market Totals or Averages

Sale Current

Sale 3-Year Average

Sale Forecast

SNF Beds 369 90 90 90

Occupancy 81% 79% 79% 81%

Private-pay Mix

36% 32% 26% 27%

Medicare Mix

7% 7% 9% 9%

Sale’s Utilization Forecast Comments Occupancy is expected to increase slightly

because new ownership will reduce survey deficiencies and improve reputation – seller was absent in past few years

Renovations should improve total census Mix should remain the same Forecast applies current private-pay rates –

they are at market Forecast applies current Medicare rates, with

last 12 months RUGs mix Renovations will allow the private-pay rates

to increase to market levels. Seller’s rates were below market.

Medicaid Reimbursement Issues New ownership will receive reimbursements based on their

allowable expenses – facility-specific, cost-based reimbursement.

Future reimbursements are limited to the lower of the owner’s actual allowable cost or statewide ceilings.

Ownership is expected to continue to operate at expense levels below statewide ceilings. Pro forma assumes the per-diem nursing expense will increase, but remain below reimbursement ceilings, resulting in higher cost and reimbursements.

Direct and Indirect current and forecasted amounts (expenses) are:

Medicaid Rates Current Forecast

Direct $57.41 $65.51

Indirect $61.61 $63.33

Medicaid Capital Reimbursement Issues Current ownership reports total mortgage debt of

$57,000 and receives only $.44 per patient day in interest.

Allowable capital basis is $326,566. An additional $300,000 in capital basis will be

allowed once the buyer spends this amount on renovations.

Total potential allowable basis will be $626,566 ($326,566 + $300,000).

The new ownership’s interest and depreciation will be paid off a basis of $626,566.

Iowa reimburses actual interest on the allowable debt up to the allowable capital basis.

No reimbursement for equity allowed.

New Owner’s Capital Reimbursement (Interest) Step-up(Prior ownership was receiving $.44/PD for interest)

Interest Cost Forecasts

Loan Amount $626,566Interest Rate 6.35%Amortization Period 20 Mortgage Constant 8.84%

Beginning MortgageYear Balance Payment Interest Principal

1 $626,566 $55,396 $39,325 $16,072 27,923 $1.412 610,494 55,396 38,274 17,122 27,923 1.373 593,372 55,396 37,154 18,242 27,923 1.334 575,130 55,396 35,962 19,434 27,923 1.295 555,696 55,396 34,691 20,705 27,923 1.246 534,991 55,396 33,337 22,059 27,923 1.19

Paitent Days Interest / PD

Other Operating Differences Buyer Vs. Seller

Buyer will reduce therapy and pharmacy expenses. Seller, being a mom-and-pop operator, wasn’t able to achieve economies in these areas. Ancillary expenses are forecast to approximate typical charges from third-party companies.

The seller’s Part B revenue was minimal in 2009, but consistent with the buyer’s pro forma levels in 2007 and 2008.

Seller’s Actual Versus Buyer’s Pro Forma Revenues, Expenses and EBITDAR

Revenue Source Seller's 2009 Buyer's Pro Forma Private, VA & Other $932,239 $1,045,679 Medicare 957,145 914,606 Medicaid 2,020,191 2,225,572 Other Revenues (Net) Part B, Miscellaneous 5,324 48,123

Total Effective Gross Revenue $3,914,900 $4,233,980

Departmental Expenses Expenses General & Administrative $217,881 $244,624 Central Office / Management 156,596 171,371 Nursing, Social Services & Activities 1,852,194 2,045,221 Ancillary 502,112 320,173 Dietary 393,749 437,116 Laundry & Housekeeping 218,974 248,635 Maintenance 223,419 249,971 Property & Liability Insurance 113,166 66,837 Property Taxes 60,640 61,424 Reserves for Replacements 27,000 45,000 Total Expenses $3,765,732 $3,890,373

Net Operating Income $143,844 $343,607

Sale Price Indicators

Gross Sale Price $1,650,000Operating Stabilization Expenses (transition to higher rates) 150,000Buyer Expenditures Made After Sale 300,000Total Net Price $2,100,000

Price per Bed 90 $23,333Price per Square Foot 30,668 $68.48Net Revenue Multiplier (Pro Forma Revenue) $4,233,980 0.496Capitalization Rate, Buyer's Rate $343,607 16.4%Capitalization Rate - Trailing Seller's Actual $143,844 6.8%

Calculation of Equity Capitalization Rate

Equity Capitalization RateTotal Net Sale Price $2,100,000Total Debt $1,680,000Total Equity $420,000

Net Operating Income or EBITDAR $343,607Annual Debt Service (20-year Amortization & 6.0% Interest) -$144,433EBTD (Earnings Before Taxes and Depreciation (Equity NOI) $199,175Equity Capitalization Rate 47.4%

Deriving Equity Capitalization Rates from Sale and/or Surveyed Data

Overall Capitalization Rate 13.5%Less Debt Service Component (75% LTV, 8.0% Loan Constant) -8.0%Remainder -- Attributable to Equity 5.5%25% Equity Position InvestmentEquity Capitalization Rate (5.5% / 25.0%) 22.0%

{.135 - (.10 75)} / 0.25 = 0.22

Cost and Depreciation Analysis

Cost Approach AnalysisEstimated Replacement Cost of All Improvements $5,366,900Estimated Replacement Cost of the MME 585,000Total Replacement Cost 5,951,900Land Value 100,000Total Cost New Before Operating Deficits $6,051,900

Depreciation AnalysisSale Price $2,100,000Less Land Value -100,000Less Stabilization Costs -150,000Net Value Attributable To Improvements & MME $1,850,000Less MME Value -180,000Indicated Value of the Improvements $1,670,000Estimated Replacement Cost of All Improvements 5,366,900Improvement Price Divided By Cost New 31.1%Implied Total Depreciation 68.9%Building Effective Age 37Implied Annual Rate of Depreciation 1.9%Implied Total Economic Life - Years (1.0 / Annual Depreciation Rate) 53.7

Single-Year Cash Flow Valuation Trap — Medicaid Rate-Setting Example

Patient Days $s/PPD Total Patient Days $s/PPD Total Patient Days $s/PPD Total

Private pay 10,000 134.62$ 1,346,154$ 10,000 140.00$ 1,400,000$ 10,000 145.60$ 1,456,000$

Medicaid 30,000 117.49 3,524,571 30,000 123.36 3,700,800 30,000 114.00 3,420,000

Total revenue 40,000 121.77$ 4,870,725$ 40,000 127.52$ 5,100,800$ 40,000 102.40$ 4,876,000$

Operating expenses

Nursing 58.00$ 2,320,000$ 53.00$ 2,120,000$ 55.12$ 2,204,800$

Indirect expenses 51.00 2,040,000 47.00 1,880,000 48.88 1,955,200

Reserves 0.48 19,200 0.50 20,000 0.52 20,800

Total operating expense 109.48$ 4,379,200$ 100.50$ 4,020,000$ 104.52$ 4,180,800$

Net operating income 491,525 1,080,800 695,200

1.45

Medicaid rate calculations

Nursing 58.00$ 53.00$

Indirect care 51.00 47.00

Total operating expenses 109.00$ 100.00$

Plus inflation @ 4% 4.36 4.00

Plus capital payment capital 10.00$ 10.00$

Total Medicaid Rate 123.36$ 114.00$

Previous Year P&Ls Current Year P&Ls Following Year P&Ls

Following-Year Rate

Current-Year Rate

Appraisal

Q & A

70

Market StudiesGeographical Highlights

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Geographical Highlights

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Five hardest hit states – CA, NV, AZ, FL, and MI; Midwest was also particularly hard hit due to manufacturing base

While overall some states haven’t suffered as much but some of their MSA’s have been hit much harder due to unemployment, housing busts, etc.

OIHCF did extensive economic analysis of several of the hardest hit areas of the country – FL and AZ


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FL area physically examined was Tampa MSA and portions to the south and east

AZ area physically examined was Phoenix MSA and areas surrounding Phoenix to the NW and SE and south toward Tucson

Economic deterioration for some parts of the country isn’t over yet and may linger for portions of the country


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OIHCF is NOT excluding any parts of the country

Applications in areas that are known to have extensive economic hardships will be given extraordinary attention and analysis by OIHCF appraisers

There does appear to be pockets that have not been effected as dramatically as one would expect


75

Additional areas may be physically examined as the situation dictates; as the course of the economy evolves; and as OIHCF upper management reassesses risk factors and claims to the fund

Market StudyStatement of Work

SOW 2010

Healthcare Market Study Guidelines for HUD/FHA

Section 232

January 22, 2010 (supersedes previous versions)

78

This presentation will highlight the substantive changes to the Statement of Work.

Reason for the changes.New document can be found on the FHA portal:

http://portal.hud.gov/portal/page/portal/HUD/federal_housing_administration/healthcare_facilities/section_232/lean_processingpage

Combined the ALF and SNF Statement of Works.Preface has gone.

II. General Guidelines for the Market Study Report.

A. Deliverables:

photographs of the subject site; data sheets with photographs of the

“comparables” (defined as those properties used to determine payor rates);

datasheets of the “competitors” (defined as those properties used to determine competitive supply with the PMA), photographs are encouraged;

exhibits such as floor plans, site plans, and elevations sufficient to give the reader a clear idea of what is proposed;

II. General Guidelines for the Market Study Report.

A. Deliverables (continued):

definition of terms e.g. capture rate, penetration rate, utilization rate, saturation rate;

identification of who the client and intended users are;

identification of the intended use of the report; anddisclosure of prior assignments completed on the

subject property.

III. Specific Reporting Requirements

C. Definition of the primary market area.

“The area that the majority of the project’s demand will be drawn from considering physical barriers, psychological barriers, density of population, linkages, and the location of competing facilities. Market area analysis for long term care and seniors housing should focus not only upon seniors but also upon adult children who may be caregivers for an elderly person residing outside the market area.”

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E. Description of the Current Inventory and Supply count: Distinctions between ‘competitors’ and ‘comparables.’

The level of competitiveness of each of the “competitors”.

A current occupancy survey of “competitors” in the primary market area for the type(s) of product, including an explanation of any vacancy or absorption problems in the market. The survey should include information on the existence of and sizes of any waiting lists in existing facilities.

Extent of concessions or similar incentives of those in initial rent-up among the “competitors” in the PMA. 82


F. Rate Determination:

The market study will determine the appropriate rates for the subject. Differences in pricing strategies should be accounted for. For example, some facilities may charge lower base shelter fees with higher care fees, while others will quote higher shelter fees with lower care fees. The rate conclusions for the subject must show a consistent pricing strategy between shelter and care charges.

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84


85

J. Demand Estimate and Analysis.

Quantify the estimate of unmet demand of the subject’s unit types. Rather than only comparing the subject’s saturation rate to the rates of other markets, the market study must quantify the unmet demand in numbers. The unmet demand must be determined for the current market and include a forecasted demand for five years in the future. The demand estimate should show the number of beds by payor source (private pay, Medicare, Medicaid, etc.).


86

When the supply is compared to demand it is acceptable to account for enough vacancy for the market to operate fluidly. Since the point of a supply analysis is to quantify the capacity of the existing supply; it is not appropriate to discount the supply count for vacancies beyond 5%.

Because the focus of the supply count should be on capacity, the market study will discuss the existence and impact of any off-line product in the PMA. An off-line unit is one that is not being operated because of the lack of market demand for the unit. Facilities that are licensed for more beds than they operate may or may not count as off-line units.


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K. Data, Estimates and Forecasting:

The use of case studies to derive utilization rates is encouraged. If instead published rates (utilization/saturation/penetration) are used to infer demand, explain in detail how the rate was derived and follow the same methodology, when applying the factor to the subject market.

L. Basic Assumptions for SNF and Intermediate Care

4. Many elders demanding shelter and care receive financial assistance from adult children or other relatives.

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Market Study

Case Studies

89

Extracting Saturation Rates From Comparable Markets

A Michigan Assisted Living Case Study

HUD Lean Training

January 2010

Chicago, Illinois

HUD Lean Training, January 2010, Chicago

Midland, Saginaw and Lansing (East) Market Area Map


Midland

Saginaw

Lansing

N

Income Qualifying The Demand Step One – Annual Income Before Home Value Adjustment

Minimum annual income necessary for private-pay is set at 25th percentile of the smallest private-pay unit in competitive market

Adjust needed income for income taxes Assumes 100% of income will be used for assisted living Note: Other income assumptions can be made. Keep in mind that

consistency between subject and comparable markets is paramount in making assumption for comparisons


Saginaw MI Midland MI Lansing MI

Annual Rent With Minimum 3.0 ADL Rent $36,348 $38,844 $41,856Percentage of Income for Rent 100.0% 100.0% 100.0%Minimum Annual Income Necessary $36,348 $38,844 $41,856Tax Rate 15.0% 15.0% 15.0%Minimum Pre-Tax Income Needed For Smallest Private-pay ALF Unit in Market $42,762 $45,699 $49,242

Step Two – Income Qualifying The Demand Annual Income Necessary Adjusting for Home Value Equity

Minimum income is reduced to reflect income achieved from equity in the sale of personal residence – median home value applied

Assume average deduction for commissions, renovations and debt equals 20% of property value

Income from home sale equals 4% investment rate on net value Income from home equity deduces minimum needed income


Saginaw MI Midland MI Lansing MIMedian Home Value $87,001 $101,462 $116,036Reduction Factor for Mortgage 80.0% 80.0% 80.0%Net Home Value $69,601 $81,170 $92,829After-Tax Safe Investment Rate 4.0% 4.0% 4.0%Annuity Period 12 12 12Interest Income and Principal on Cash from Sale of Home $7,416 $8,649 $9,891Minimum Pre-Tax Income, Reduced by Interest Income & Principal from Sale of Home $35,346 $37,050 $39,351

Step Three - Qualified Population in Defined Primary Market

Based on necessary annual income to pay for the minimum-sized ALF unit, the income- and age-qualified population is determined.

This population is further sorted to reflect population living alone (no one at home to assist) and needing assistance with activities of daily living (ADL’s).


Saginaw MI Midland MI Lansing MITotal Age/Income Qualified Private-pay Demand 4,642 2,115 4,083

Living Alone 48.0% 48.0% 48.0%Requiring Assistance with ADLs & Mobility 30.0% 30.0% 30.0%

Net Qualified Demand A 668 305 588

Step Four – Saturation Rate Calculation – Divided Occupied Units by Net Qualified Demand

Total and occupied supply is determined by surveying the competition

Occupied units reduced to reflect demand originated from primary market

Saturation rate equals local actual demand divided by net qualified demand from market


Saginaw MI Midland MI Lansing MITotal Competitive Supply 388 205 273

Actual Current Market Private-pay

Occupancy B 310 194 261

Primary Market Demand Originating in

Primary Market (A x 80.0%) C 248 155 209

Net Qualified Demand -- Private-pay 668 305 588

Implied Private-pay Saturation Rate at Stabilized Occupancy Rate (C ÷ D) 37.1% 50.8% 35.5%

Market Study

Q & A

96

Lunch

Documents

Lean Appraisal Training January 26, 1010 Sheraton Chicago Hotel and Towers Room: Chicago VI Sponsored by Eastern Lender’s Association In Coordination