State of Senior Living and the Senior Living Capital Markets 2013*
Dan HermannSenior Managing Director Head of Investment BankingZiegler
Steve JeffreyManaging DirectorSenior Living Investment BankingZiegler
Lisa McCrackenSenior Vice President Senior Living Research & DevelopmentZiegler
Mike McDanielSenior Managing Director Capital MarketsZiegler
*An educational component of the ongoing Ziegler CFO Workshop SeriesSM
AGENDA
Section 1 - PROVIDER & INDUSTRY TRENDS
Section 2 - STATE OF SENIOR LIVING CAPITAL MARKETS
Section 3 - CAPITAL MARKETS UPDATE
Questions & Answers
1
THIS YEAR’S “STATE OF SENIOR LIVING” FEATURES:
2
Provider & Industry Trends• Supply & Demand• External Environment• Operations• The Consumer• The Impact
State of Senior Living Capital Markets• Investment banking• Financing options• Senior living credit • General market
conditions• Municipal bond market
Preview of what’s to come
PROVIDER & INDUSTRY TRENDSSection 1
3
Dan HermannSenior Managing Director Head of Investment BankingZiegler
Lisa McCrackenSenior Vice President Senior Living Research & DevelopmentZiegler
4
SUPPLY & DEMAND
EXTERNAL ENVIRONMENT
OPERATIONS
THE CONSUMER
THE IMPACT
CREATING A STRONGER SENIOR LIVING INDUSTRY
5
Creating a Stronger
Senior Living Industry
The Consumer
Supply & DemandOperations
The Impact Creating a Stronger
Senior Living Industry
External Environment
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1990 1995 2000 2005 2010 2015 2020 2025 2030
(In
Tho
usan
ds)
65 Years & Over 75 Years & Over 85 Years & Over 100 Years & Over
DEMOGRAPHICS DEFINE THE MARKET PROJECTED U.S. SENIORS POPULATION (1990 TO 2030)
6Source: U.S. Census Bureau National Population Projections (released 2008, based on Census 2006)
5 Year Increments
Where we are today
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1990 1995 2000 2005 2010 2015 2020 2025 2030
(In
Tho
usan
ds)
75 Years & Over 85 Years & Over 100 Years & Over
7Source: U.S. Census Bureau National Population Projections (released 2008, based on Census 2000)
DEMOGRAPHICS DEFINE THE MARKET PROJECTED U.S. SENIORS POPULATION (1990 TO 2030)
5 Year Increments
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1990 1995 2000 2005 2010 2015 2020 2025 2030
(In
Tho
usan
ds)
85 Years & Over 100 Years & Over8Source: U.S. Census Bureau National Population Projections (released 2008, based on Census 2000)
DEMOGRAPHICS DEFINE THE MARKET PROJECTED U.S. SENIORS POPULATION (1990 TO 2030)
5 Year Increments
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90+
Popu
lati
on
Age
2012 US Population
DEMOGRAPHICS DEFINE THE MARKETINFLUENCERS
9Sources: US Census Bureau Data
Continuing Care Retirement Communities, 2011 profile
Oldest Baby Boomer turns 67 this year
Adult Children Decision Makers
Average IL age upon move-in
Gen XGen Y
Current age of AL & MC resident
Current average age of
IL resident
10Source: US Census Bureau
DEMOGRAPHICS DEFINE THE MARKETMEDIAN AGE BY STATE 1990
11Source: US Census Bureau
2000DEMOGRAPHICS DEFINE THE MARKETMEDIAN AGE BY STATE
12
Today, eight of the top 11 states with the oldest populations are in the Northeast.
Source: US Census Bureau
2010DEMOGRAPHICS DEFINE THE MARKETMEDIAN AGE BY STATE
SENIOR LIVING TRENDSCONTINUUM OF CARE
13
Age-RestrictedHousing
IndependentLiving
Assisted LivingMemory Care
Skilled Nursing
Increasing Acuity
RealEstate
HealthcareServices
Senior Housing Continuum of Care
HCBS
THE INDEPENDENT LIVING CONSUMERNET WORTH
• Early Boomers (1946-1955) have a significantly higher net worth than previous generations did in their 50s and 60s
14Source: The Nielson Company, 2013
$162,222
$170,604
$241,333
$0 $100,000 $200,000 $300,000
Depression Babies
War Babies
Early Boomers
Net worth (in 2010 dollars) by generation at same age (50-69 year olds)
• Increases seen in health care, drugs, health insurance and… entertainment, hobbies & personal care
• Shift in consumption among 65-74 year olds
15
Spending among 65-74 year olds (‘00’10)
THE INDEPENDENT LIVING CONSUMERSPENDING
16
THE INDEPENDENT LIVING CONSUMERWHO ARE THEY?
17
WELLNESS IN CCRCS: THE ONGOING TRANSFORMATION
Institutionalized Care / Poorhouses
Wellness = Physical Fitness
Whole-Person Wellness
Centers for Healthy Aging
Headline: “Wellness Program Triples Sales for Florida Provider”
– Senior Housing News, July 2013
NATIONAL SURVEY OF WHOLE PERSON WELLNESS IN CCRCS
• 8 Key Characteristics of Culture of Wellness– Written wellness objectives – A wellness team inclusive of residents – More than two departments included on wellness
teams – Staff wellness is part of the mission statement
and/or objectives – Staff use resident wellness programs – Staff-only wellness programs (programs designed
to be used exclusively by staff) – More than two groups excluding residents (e.g.,
residents’ family members) use wellness programs – Staff hired in the past five years specifically to
implement wellness programming
18
• Consumers are better “informed” than ever
THE INDEPENDENT LIVING CONSUMERINFORMATION AT THEIR FINGERTIPS
19
THE ASSISTED LIVING CONSUMER
20
According to the Alzheimer’s Association, in 2012, 15.4 million caregivers provided an estimated 17.5 billion hours of unpaid care, valued at more than $216 billion.
21
• As population ages, increasing demand for support services
• Blurring of continuum– IL with in-home support services versus Assisted Living
• Median age between IL and AL is narrowing
• Consumer often the adult children– Are you designing for adult children?– Marketing to adult children?
THE ASSISTED LIVING CONSUMER
ASSISTED LIVING DEMANDMEMORY CARE SERVICES
2013 Costs of Alzheimer's = $203 Billion
Source: Alzheimers Association, 2013 22
• Notable increases in past five years in demand for short-stay healthcare
• Considerations for CCRC business model– Internal resident admissions vs. from the non-CCRC resident
pool
• Relationship with healthcare reform– Decrease LOS and improve outcomes
23
THE SUB-ACUTE/REHAB CONSUMER
EXISTING BUSINESS LINES AND OPPORTUNITIES FOR GROWTH
24
Services• Home and
Community Based Services
• PACE• Hospice• Other
Traditional Bricks and Mortar Real Estate• Expansions• New Community• Affiliations, Merger
& Acquisitions• Dispositions
25
Creating a Stronger
Senior Living Industry
Supply & Demand
The ImpactThe Consumer
External Environment
Creating a Stronger
Senior Living Industry
Operations
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Uni
ts
Year
ILU ALU NCB All Units
26
2013 LZ 100Growth: Growth of Largest 100 Systems, Combined Unit MixFrom 1950 (Excludes Evangelical Lutheran Good Samaritan Society)
Partial histories used if complete data was unavailable
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
27Source: 2013 LeadingAge Ziegler 100
• Full 2013 report just released• www.ziegler.com
• Continued growth in number of units– 2012 #100- 782 units– 2013 #100- 793 units– 1.6% increase in total units
FY 2011-FY 2012
• Increases in IL & AL, continued decline in SN units (largely SNFdispositions)
• Growth largely through expansion and M&A activity
2013 LEADINGAGE ZIEGLER “LZ” 100 TRENDS
0
30,000
60,000
90,000
120,000
ILU ALU NCB
Uni
ts
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2.4% Average Annual Growth (AAG) in total units from 2000 to 2012
GROWTH: INCREASE IN NFP UNITS (+ NEARLY 200 UNITS)
Increase in ILUs Increase in ALUs Decrease in NCBs
28Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
3.9% AAG
0.2% AAG
3.9% AAG
0
100
200
300
400
500
600
700
800
900
1,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Com
mun
ity M
ix
CCRC IL AL NH
Δ = 3.2%Δ = 2.3%Δ = 2.1%
Δ = 2.3%Δ = 1.4%
Δ = 1.7%
48.5%
13.6%
15.2%
22.7%
47.6%
13.4%
16.6%
22.4%
47.9%
13.6%
16.4%
22.1%
48.5%
14.0%
16.6%
20.9%
48.7%
14.7%
16.6%
20.0%
50.5%
14.7%
16.8%
18.1%
51.4%
14.6%
16.8%
17.2%
50.6%
14.6%
17.0%
17.8%Δ = 1.7%
50.1%
14.4%
16.9%
18.7%
Δ = 0.6%
16.6%
17.2%
14.7%
51.5%
Δ = 0.3%15.9%
17.0%
14.6%
52.5%
Δ = 1.1%
Δ = 3.4%
49.9%
14.7%
16.9%
18.5%
15.4%
16.9%
14.5%
53.3%
Δ = 0.3%
29
2013 LZ 100ANALYSIS OF THE DATA: COMMUNITIESTOTAL COMMUNITIES BY YEAR, BY TOTAL COMMUNITIES, 2000 THROUGH 2012
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
30
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Uni
ts
Year
ILU ALU NCB All Units
Crosslandsopens
Cartmelopens
Kendal at Oberlin opens
Kendal at Ithaca opens
Kendal at Lexington opens
Barclay Friends af f iliated
Kendal at Longwood opens
Lathrop Communities af f iliated
Conistonopens
Kendal at Hanover opens
Kendal at Granville and Kendal on Hudson open
CCRC Second Community (emergence of the system) Other Acquisition
Kendal at Longwood expands
Barclay Friends expands
Oberlin and Lexington expand
Oberlin and Lathrop expand
The Collington acquired
2013 LZ 100 Pace of Growth #8THE KENDAL CORPORATION (PA) The Admiral at the Lake
acquired
Oberlin and Longwood expand
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1926 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Uni
ts
Year
ILU ALU NCB All Units
AMV expands
Asbury Solomons opens
Inverness Village opens
Reeders Memorial Home acquired
Bethany Village and Epworth Manor acquired in a merger with
Wesley Af f iliated Services
AMV expands
Asbury Solomons and Epworth expand
AMV disposes of assisted living facility
Forestview acquired
AMV and Springhill expand
Springhill acquired
CCRC Second Community (emergence of the system) Other Acquisition
Reeders Memorial
Home disposed
Asbury Methodist Village
(AMV) opens
Epworth Manor sold
Bethany Village and Forestview
expand
AMV expands
Bethany Village expands
2013 LZ 100 Pace of Growth #15ASBURY COMMUNITIES (MD)
32Source: Preliminary 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1881 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Uni
ts
Year
ILU ALU NCB All Units
Concordia -Main campus
opens
Ridgewood Place expands
Concordia at Ridgewood Place and
Concordia at the Orchard acquired
2013 LZ 100 Pace of Growth #30CONCORDIA LUTHERAN MINISTRIES (PA)
CCRC Second Facility (emergence of the system) Other Acquisition
Concordia at Rebecca Residence
acquired
Main campus expands
Concordia Medical Equipment acquired
Concordia of the South Hills acquired
Concordia of Wexford and Concordia of Franklin Park
acquired
Concordia at Sumner acquired
Concordia of Cranberry and Concordia of Fox Chapel
acquired
Good Samaritan Hospice acquired
Concordia and Cabot expand
2013 LZ 100ANALYSIS OF THE DATA: SYSTEM HEADQUARTERS
33Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
HEADQUARTERS’ LOCATIONS BY SIZE (TOTAL UNITS)
= <1,000 Units
= >5,000 Units
= 5,000-3,000 Units
= 3,000-1,000 Units
THE DEMAND
• Construction is at a historical high for memory care
• The number of Americans 85+ will increase from 5.5 million in 2010 to 19 million by 2050 as adults are living longer
• Researchers predict death rates will decline even faster as science improves
34
Source: NIC MAP Construction Monitor 2013
Source: US Census Bureau
35Source: NIC MAP Data & Analysis Service
0
20
40
60
80
100
120
140
For Profit Not-For-Profit
Num
ber o
f Pro
pert
ies
Und
er C
onst
ruct
ion
Seniors Housing Construction by Profit Status; MAP31As of 2Q13
New PropertiesExpansions
Largely IL w/ AL and memory
support or free-standing AL
NEW CAMPUS VS EXPANSIONS
CONSTRUCTION: COMMUNITIES VS UNITS
36Source: NIC MAP Data & Analysis Service
Properties under construction
Units under construction
37Source: NIC MAP Data & Analysis Service
CCRC UNIT GROWTH/CONSTRUCCTION STILL HIGHER AMONG NOT-FOR-PROFITS’S
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Uni
ts
CCRC Units Under Construction
Not-For-Profit
For-Profit
38
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Uni
ts
ILUs Under Construction
For-Profit
Not-For-Profit
Source: NIC MAP Data & Analysis Service
INDEPENDENT LIVING RENTALS CONTINUE AMONG FOR-PROFITS
39
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Uni
ts
ALUs Under Construction
For-Profit
Not-For-Profit
Source: NIC MAP Data & Analysis Service
ASSISTED LIVING PROPERTIES CONTINUE AMONG FOR-PROFITS
40
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Uni
ts
Freestanding MC Units Under Construction
For-Profit
Not-For-Profit
Source: NIC MAP Data & Analysis Service
FREE-STANDING MEMORY CARE (MOSTLY AL)
41
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
For-Profit Not-For-Profit For-Profit Not-For-Profit For-Profit Not-For-Profit For-Profit Not-For-Profit
CCRCs Independent Living Assisted Living Freestanding Memory Care
Uni
ts
Total Unit Inventory
2005
2006
2007
2008
2009
2010
2011
2012
2013Q2
TOTAL UNITS: FOR-PROFITS VS NOT-FOR-PROFITS
Source: NIC MAP Data & Analysis Service
# San Antonio 1995
1 Air Force Village I
2 Air Force Village II
3 Army Residence Community
4 Emeritus at Amber Oaks (FP)
5 Forum at Lincoln Heights, The (FP)
6 Golden Estates
7 Madison Estates (FP)
8 Morningside Ministries at the Chandler Estate
9 Morningside Ministries at the Meadows
10 Patriot Heights (FP)
11 Timberhill Villa (FP)
12 Village at Incarnate Word, The
# San Antonio 2013
1 Adante Senior Living (FP)
2 Air Force Village I
3 Air Force Village II
4 Army Residence Community
5 Emeritus at Amber Oaks (FP)
6 Emeritus at Hamilton House (FP)
7 Emeritus at Hollywood Park (FP)
8 Emeritus at Kingsley Place Medical Center (FP)
9 Emeritus at Oakwell Farms (FP)
10 Emeritus at Woodbridge Estates (FP)
11 Forum at Lincoln Heights, The (FP)
12 Franklin Park Sonterra (FP)
13 Golden Estates
14 Madison Estates (FP)
15 Morningside Ministries at the Chandler Estate
16 Morningside Ministries at the Meadows
17 Patriot Heights (FP)
18 The Waterford at Thousand Oaks (FP)
19 The Waterford on Huebner (FP)
20 Timberhill Villa (FP)
21 Villa De San Antonio (FP)
22 Village at Incarnate Word, The 42
NEW COMMUNITY GROWTH: LOCAL MARKET ANALYSISSAN ANTONIO 1995 TO 2013
SOURCE: Ziegler Investment Banking; LeadingAge; Caring.com; and Google Maps
1995 2013
GROWTH DEFINED
Growth
New Community locations
HCBS offerings
Expansions
For-profit ventures
Sponsorships
Joint Ventures
43
WHY GROW?• Allows for greater promotion of mission• Greater ability to generate economies
of scale• Attract better talent & leadership
– Greater ability to pursue passions– Growth provides invigorating challenges; diversion from
status quo– Compensation and benefits options increase with growth
• Increased ability to borrow capital• Diversification in services ensures long-term financial
stability• Greater ability to expand into underserved markets• Additional programs and services enhance current customer
experience44
0
100
200
300
400
500
600
700
1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012 2012
Expansions New Communities Merg/Acq/Affil Dispositions
SYSTEM TRENDS 2013: EVIDENCE OF GROWTH
45
2013 LZ 100: Types of Growth
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
5 Years 3 Years Last Year
GROWTHEXPANDING & REPOSITIONING AGING CAMPUSES
• Aging Campuses will continue to be a major management focus and issue
• Numerous campus repositionings in progress
• Size and scope varies– Market size and dynamics – large metro to small market– Competition within market– Modernizing healthcare with emphasis on resident-centered
care– Focus on variety of amenities throughout the continuum– Need for more Memory Care offerings
46
45 46 5993
220
453
9351
0
100
200
300
400
500
1980-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012 2012
Com
mun
ities
Expansion: The addition of new units to an existing community. Note: If a new community is added to an existing campus this is also considered an expansion.
SYSTEM GROWTH & CHANGE: EVIDENCE
47
2013 LZ 100: Expansions
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
5 Year Increments Last Year
3 Years
48
7.50
8.00
8.50
9.00
9.50
10.00
10.50
11.00
11.50
12.00
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(Age
)
50th PERCENTILE
Single-Site Multi-Site
AVERAGE AGE OF FACILITY • This ratio (AGE) measures an organization’s commitment to maintaining its physical plant
• Many organizations are embarking upon repositionings and renovations, but AGE suggests the investment isn’t sufficient to counter the aging of their physical plants
Source: Preliminary Financial Ratios & Trend Analysis of CARF-CCAC Accredited Organizations, 2013.
CARF-CCAC AVERAGE AGE OF PHYSICAL PLANTNATIONAL TREND IS AT ALL-TIME HIGH
REPOSITIONING & EXPANDINGSELECT ZIEGLER-FINANCINGS
49
Miralea
North HillRiverMead
Spring Lake
MRC CrestviewC.C. Young
The Terraces at San Joaquin Epworth Villa
22
4743
50
68
75
22
6
0
25
50
75
1980-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012 2012
Com
mun
ities
New Community: Growth by the addition of units through construction of a new location.
50
2013 LZ 100: GROWTH: SPECIFIC GROWTH TYPE BREAKDOWN
New Community Growth
• Pace of new community development has slowedSource: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
5 Year IncrementsLast Year3 Years
The Kendal Corporation,The Admiral at the Lake,
Chicago, ILFriendship Senior Options,
Greenfields at Geneva,Geneva, IL
Volunteers of America,Mary Marshall Assisted Living,
Arlington, VA
Presbyterian Homes and Services,Founders Ridge,Bloomington, MN
Volunteers of America,The Homestead at Anoka,
Anoka, MN
Presbyterian Homes and Services,Valley Ridge,
Burnsville, MN
2013 LEADINGAGE ZIEGLER 100GROWTH: NEW COMMUNITIES2012 LOCATIONS
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
NEW COMMUNITY DEVELOPMENT - CCRCSRECENT OPENINGS & PROJECTED OPENINGS
52
2011:15 Craigside, HIThe Stayton at Museum Way, TXAberdeen Heights, MOMirador, TX
2012:GreenFields of Geneva, IL Park Place, ILThe Admiral, ILCarondelet Village, MN
2013 & Beyond:Covenant Place of Lenexa, KSThe Village at Orchard Ridge, VAThe Terraces at Bonita Springs, FLThe Barrington of Carmel, INSearStone CCRC, NCHertiage at Fort Wayne, IN
The Terraces of Boise, IDThe Arlington of Naples, FLThe Crossings, TXMonteCedro, CASinai Residences, FLLutheran Village at Miller’s Grant, MD
The Crossings, TX
The Arlington of Naples, FLThe Terraces at Bonita Springs, FL
SELECT ZIEGLER FINANCEDNEW CAMPUSES
53
Aberdeen Heights
Mirador
Stayton at Museum WayPark Place of Elmhurst
The Terraces at Bonita Springs
The AdmiralAt The Lake
The Barrington of Carmel
15 Craigside
GreenFields of Geneva
54
621
46 51 43 5170
9269 65 74 81
3528
52
85 7074
9381
89
5446 33 20
8
0
20
40
60
80
100
120
140
160
180
200
Loca
tions
Purpose built Non-purpose built
34
73
131121 117
144151
181
123 111107 101
Source: Ziegler National CCRC Listing and Profile
43
Proj
ecte
d
ZIEGLER NATIONAL CCRC LISTING & PROFILECCRC INCREMENTAL GROWTH, BY CCRC TYPE (1950 TO PRESENT)
5 Year Increments
Fina
ncia
l Cri
sis
0
180
360
540
720
900
1,080
1,260
1,440
1,620
1,800
1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Com
mun
ities
Year
Purpose Built Non-PB All CCRCs
Growth of CCRCs, By CCRC TypeFROM 1950
55Source: Ziegler National CCRC Listing and Profile
ZIEGLER NATIONAL CCRC LISTING & PROFILE
Approximately 1,960 CCRCs
56
• Costs– Capital costs are coming
down– Construction costs are flat– Site acquisition costs are
down
• Capital Access– Fixed rate market has been
the source– Banks – still sitting on the
sidelines, appraisals problem
– Alternate bond structures have been created to fill bank void
• Third Party Seed Capital is available for qualified projects– Bond Anticipation Notes -
with lead time– Other project specific
options
• Sponsor Support – “skin in the game” is likely essential– Equity (can be minimal)– Liquidity Support
Agreements
NEW COMMUNITY GROWTH
NEW COMMUNITY GROWTHNATURAL INDUSTRY BUSINESS CYCLE PROGRESSION
57
How does your
organization foster
innovation?
Fina
ncia
l spo
nsor
ship
/com
mit
men
t by
pur
suin
g or
gani
zati
on
Strategic control by candidate organization
High Control Low Control
Joint Venture
Sponsorship Transition Options
Asset
Purchase
Affiliation & Merger
Management Company
Acquisition
SPONSORSHIP TRANSITION – CONTINUUM OF OPTIONS
58
21
1217
42
56
75
26
8
0
10
20
30
40
50
60
70
80
1980-1984 1985-1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012 2012
Com
mun
itie
s
59
2013 LZ 100: Affiliations, Mergers & AcquisitionsSYSTEM GROWTH & CHANGE: EVIDENCE
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/21)
5 Year IncrementsLast Year3 Years
2013 LEADINGAGE ZIEGLER 100GROWTH: MERGERS/ACQUISITIONS/AFFILIATIONS2012 LOCATIONS
Concordia Lutheran Ministries,Concordia at Wexford,
Wexford, PA
* Acquisitions of communities that were previously joint ventures.
Concordia Lutheran Ministries,Concordia of Franklin Park,
Sewickley, PA
Givens Estates Retirement Community,Givens Highland Farms,
Black Mountain, NC
Presbyterian Homes and Services,Walnut Ridge,
Clive, IA
The Eddy,Our Lady of Mercy Center,
Guilderland, NY
The Eddy,St. Peter’s Nursing and Rehab Center,
Albany, NY
The Eddy,Schuyler Ridge,Clifton Park, NY
Concordia Lutheran Ministries,Concordia at Sumner,
Copley, OH
2013 LZ 100AFFILIATIONS & ACQUISITIONS & MERGERS2000 - 2012
61
• Affiliation most often through NFP to NFP, often along similar faith based traditions
Source: 2013 LeadingAge Ziegler 100 Publication (data as of 12/31/12)
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
NH AL IL CCRC
Healthcare Reform
82
56
37
59
5055
61 6052
73
8693
48
0
10
20
30
40
50
60
70
80
90
100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013YTD(August)
Hospital M&A Transactions
62SOURCE: Irving Levin Associates, Inc
HEALTHCARE (HOSPITAL) CONSOLIDATION TRENDS
GROWTH THROUGH CONSOLIDATION:AFFILIATION, MERGER & ACQUISITION
• Anticipate that in the next few years, most expansion into new physical locations will be through consolidation– Single-sites growing into systems– Systems looking to expand into new markets– Struggling single-sites or multi-sites exploring
affiliation strategies
• External influencers:– Healthcare reform– Statewide managed care organizations (size matters)– Technological investments– Consistent trends: healthcare, home health
63
THE GOOD NEWS & THE BAD NEWS
• The Good News – Not-for-profits as a whole are in a strong financial position– Innovation is blossoming with alternative revenue streams,
services and models– Success evident in HCBS offerings– Growth in units and communities through M&A continues– Expansion into more memory care within continuum– Supply continues to grow– For-profits have largely pulled out of new entry fee CCRCs
• The Bad News:– Barriers to new entry-free CCRCs are high– The for-profit growth in AL and MC has lessened the pull for
expansion among NFPs to new locations64
65
Creating a Stronger
Senior Living Industry
Supply & Demand
The ImpactThe Consumer
External Environment
Creating a Stronger
Senior Living Industry
Operations
66
• Home Health• Hospice• PACE• Villages• Medical Homes• Senior Centers• Child care programs• Physician Services
• On-campus to existing residents vs off-campus
• “Housing with services”
CONTINUED DEMAND FOR SERVICES AT HOME
67
• HCBS for non-residents accounts for nearly 3% of revenue among 2013 LZ 100
• 61% of the LZ 100 provide HCBS
• Expansion of mission
• Joint ventures and affiliations
• Increased dependence on sophistication & core competencies for success
INCREASE IN HOME CARE USE, 2000 - 2010
Educational materials from ECRI Institute
Average Age of HCBS Providers
Average Age of Non-HCBS Provider
2013 LZ 100 81 yrs. 63 yrs.
HOME & COMMUNITY-BASED SERVICES (HCBS)
INCREASING SOPHISTICATION IN MEMORY CARE SERVICES
• Specialized Adult Day services– Memory Cafes– Memory Club– Friends Club
• Caregiver support– “Alzheimer’s Supper Club”
• Non-traditional services (nighttime respite; dinner)• Use of cognitive stimulation technologies• Collaboration opportunities with other organizations
(churches, senior centers)
68
69Credited to CliftonLarsonAllen 9/2013
1 25 6 7
9
13
25
0
10
20
30
1990 1998 2003 2004 2009 2010 2011 Projectedend of2015
Cumulative Number of CCaH Operations
CONTINUING CARE AT HOME (“CCRC WITHOUT WALLS”)
• Continued growth in CCaH model• Expected to nearly double within the next two years
PACE GROWTH
• 94 programs across 31 states• 30,000+ enrollees nationally• Few managed care states mandate PACE as option (NJ, KS)• Currently all NFP programs except one (may change in 2014
to more FPs)• Growing numbers
of state PACEassociations
70
PACE Enrollment Growth: 2006-2012
Source: National PACE Association
71
• Long Term Care Commission– Recommendations issued; funding source
still unclear• Affordable Care Act
– Medicaid expansion varies by state– Large employer mandate pushed back
• Reimbursement– Threatened profitability– ACA encouraging at home services to thwart decreased revenues– Long-term care insurance rates continue to increase
• IRS– Non-Profit Status issues continue to increase
• FASB – CCRC Entrance Fee Accounting
EXTERNAL ENVIRONMENT-HOT SPOTS
HEALTHCARE REFORM: THE LATEST
• Value Based Payments, ACOs and Bundled Payments Underway
• CMS Pilot Programs Continue– July release of results from
Pioneer ACO Model-23 ACOs participate (cost comparisons; shared savings; quality measures)
• Increased need for care coordination between long-term care, hospitals and safety-net providers (AAAs, social service agencies)
• Use of technology (EHRs, etc.)
72
Patients Populations
Reactive Preventive
Individual Providers
Integrated health teams & network
Individuals Communities
Sick-care system Well-care system
ACCOUNTABLE CARE ORGANIZATIONS: NATIONAL LANDSCAPE
73
478
278
200
160
100
200
300
400
500
Total IndividualACOs
Medicare ACOs(three models)
Private SectorACOs (existoutside ofMedicare)*
Medicaid ACOs(states)
Source: Centers for Medicaid & Medicare Services*Industry estimates of private sector
• 40% of Americans live in an area w/ an ACO
• 28% live in an area w/ two or more ACOs
74
• Some hospitals in acquisition mode; most looking for stronger integration and coordination
• Data, Data, Data! – Quality outcomes are king (LOS, readmissions)– Patient/resident satisfaction– Lower costs
• Technology• Strong record of governance• Size matters• Five-Star rating(s)
HEALTHCARE REFORM: WHAT WILL GET YOU A SEAT AT THE TABLE?
Creating a Stronger
Senior Living Industry
75
Operations
The Consumer
External Environment
Supply & Demand
Creating a Stronger
Senior Living Industry
The Impact
• Relentless Commitment to Mission Through Bottom Line– NOM– Rate increases – outpacing CPI– Ongoing monitoring entry fee pricing and move-in incentives
• Marketing and Sales • Incremental improvements in housing market• Impact of Social Media
• Aging Plant• Governance
– Leadership development programs– Succession Planning – Benchmarking and Scorecards
• Technology
OPERATIONAL HOT SPOTS
76
TRENDS IN THE WORKFORCE
• Wave of retirees among top management• Despite wave of retirements in certain positions, overall, the
workforce is aging• Workforce shortages, particularly
with expansion of HCBS
• Increasing diversity of olderadult living alone presentsadditional staffing demands(highest proportion of seniorliving alone among minority populations)
• Population aging and so is your workforce!
77
Percent of 60+ Employed Population
Source: Centers for Retirement Research at Boston College, May 2013
• Personal care aides and home health aides are projected to be the fastest-growing occupations in the country between 2010 and 2020, increasing by 71% and 69%
• Positions for nursing aides, orderlies and attendants are expected to increase by 20%
• the number of women aged 25-54—the main labor pool that supplies direct-care workers—will only increase by about 1% compared to demand for these workers increasing by 48%.
78Source: Paraprofessional Healthcare Institute, July 2013
LABOR POOL CHALLENGES
79
55
105
155
205
255
305
355
405
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(Day
s)
50th PERCENTILE
Single-Site Multi-Site
DAYS CASH ON HAND • Days Cash on Hand (DCOH) up for both provider types
• Remains in the +/- 300 day range of the past five to ten years for both provider types
Source: Preliminary Financial Ratios & Trend Analysis of CARF-CCAC Accredited Organizations, 2013.
FOCUS ON OPERATIONSDAYS CASH ON HAND
FOCUS ON OPERATIONSNET OPERATING MARGIN RATIO
80Source: Financial Ratios & Trend Analysis of CARF-CCAC Accredited Organizations, 2013.
• Slight decrease for multi-site providers to 6.77%. 2012 was the highest multi-site NOM in study history
• Single-site providers weakened to 6.55%, following years of sustained improvement
• Multi-site providers have nearly ‘caught up’ to single-site providers
• NOMs remain well-above recent averages
• Increased spending for marketing and HCBS for both provider types
NET OPERATING MARGIN
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(Per
cent
ages
)
50th PERCENTILE
Single-Site Multi-Site
FOCUS ON OPERATIONSNOM-ADJUSTED (NOM-A) RATIO
81Source: Financial Ratios & Trend Analysis of CARF-CCAC Accredited Organizations, 2013.
NET OPERATING MARGIN-ADJ
5.50
7.50
9.50
11.50
13.50
15.50
17.50
19.50
21.50
23.50
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
(Per
cent
ages
)
50th PERCENTILE
Single-Site Multi-Site
• NOM-A highlights importance of cash flow from entrance fees, compared to NOM (where net entrance fee receipts are excluded)
• Creditors, regulators, rating agencies, etc. acknowledge importance of entrance fees in offsetting healthcare risk, operating costs
• NOM-A relatively flat for both provider types due to an increase in entrance fees refunded, for both provider types, that offset entrance fees received
82Source: NIC MAP Monitor Report 2nd Q 2013
83%
85%
87%
89%
91%
93%
95%
2006 2007 2008 2009 2010 2011 2012 2013
CCRC Occupancy by Profit Status; MAP314Q05 – 2Q13
Not-For-Profit
For-Profit
NFP CCRC occupancy consistently higher than
for-profit CCRCs
NOT-FOR-PROFIT DIFFERENTIATOR
FOCUS ON OPERATIONSOCCUPANCY
83
In addition: • Non-profit
occupancy continues approximately 60 bps above for-profit occupancy
• Occupancy rates are somewhat stronger for 100 largest MSAs
• NIC research shows that entrance fee occupancy has certainly been affected by recent economic challenges
85.0%
86.0%
87.0%
88.0%
89.0%
90.0%
91.0%
92.0%
93.0%
94.0%
95.0%
4Q20
051Q
2006
2Q20
063Q
2006
4Q20
061Q
2007
2Q20
073Q
2007
4Q20
071Q
2008
2Q20
083Q
2008
4Q20
081Q
2009
2Q20
093Q
2009
4Q20
091Q
2010
2Q20
103Q
2010
4Q20
101Q
2011
2Q20
113Q
2011
4Q20
111Q
2012
2Q20
123Q
2012
4Q20
121Q
2013
2Q20
13Entrance Fee Rent
Source: NIC MAPTM 6/30/13, Most recent available data as of 9/18/13
DEBT SERVICE COVERAGE RATIO
84
• Debt Service Coverage (DSC) ratio is generally considered to be the most important ratio for evaluating an organization’s financial viability
• Reflects ability to fund debt service with cash flow from net cash revenues and net entrance fees
• DSC weakened slightly for multi-sites and to a greater degree for single-sites
• Both provider types impacted by an increase in entrance fees refunded and an increase in principal payments
Source: Financial Ratios & Trend Analysis of CARF-CCAC Accredited Organizations, 2012.
1.00
1.50
2.00
2.50
3.00
3.50
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
(Rat
io)
50th PERCENTILE
Single-Site Multi-Site
DEBT SERVICE COVERAGE
• Building your Brand– Continued name changes
• Resource Challenged Providers: Obtaining the most “Bang for your Buck”– Those with lower occupancy most likely with oldest physical
plant and need a greater commitment with marketing expenditures
• Creating that initial “WOW” experience for….– Prospective residents AND Adult Children
• Continued pressure on marketing counselor to be savvy and experienced
85
MARKETING STRATEGIES AND TRENDS
• Home prices historically peak during the summer months.
• Every city tracked by the S&P Index is showing very positive signs (Composite-20 up ~12%).
• Chicago, after 66 consecutive months of negative YOY growth, has finally showed improvement.
• Seven housing markets had greater than 15% year-over-year growth.
86
0.0%
4.0%
8.0%
12.0%
16.0%
20.0%
24.0%
28.0%
Com
posi
te-1
0Co
mpo
site
-20
Phoe
nix
- A
ZLo
s A
ngel
es -
CA
San
Die
go -
CA
San
Fran
cisc
o -
CAD
enve
r -
COW
ashi
ngto
n -
DC
Mia
mi -
FLTa
mpa
- F
LA
tlan
ta -
GA
Chic
ago
- IL
Bost
on -
MA
Det
roit
- M
IM
inne
apol
is -
MN
Char
lott
e -
NC
Las
Vega
s -
NV
New
Yor
k -
NY
Clev
elan
d -
OH
Port
land
- O
RD
alla
s -
TXSe
attl
e -
WA
S&P/Case-Shiller® Home Price Index% Change (YOY)
June 2013
Source: S&P/Case-Shiller® Home Price Index, August 2013
2013 REAL ESTATE MARKETS: S&P CASE-SHILLER® INDEX
87
0
10
20
30
40
50
60
70
80
All Adults(2013)
All Adults(2005)
Ages 50-64 Ages 65+(2013)
Ages 65+(2009)
Percentage of Internet Users Who Use Social Networking Sites
IMPACT OF SOCIAL MEDIA
• Technology increasingly a differentiator• Must have vs. “Nice to have”
– Healthcare reform– Relationship to outcomes
• Telehealth (Behavioral and Biometric)• Electronic Health Records• Personal Emergency Response Systems• Health Information Exchange
• Increase in companies offering aging-related technologies
88
TECHNOLOGY: A GAME CHANGER
75.5%83.0%
9.6%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
EMR/EHR Systems POC/POS Systems None
89Responses add up to more than 100% as question was “check all that apply” N=94
DOES YOUR ORGANIZATION USE ANY OF THE FOLLOWING ELECTRONIC DOCUMENTATION TECHNOLOGIES?2013 LZ 100
• The use of the Internet for those over 65 has gone from 19% in 2008 to 40% in 2010 to 53% in 2012 (Pew Research Center, 2012)
• Nationally, more than 59% of those over 65 have made an online purchase (Forrester Research, 2012)
90
Re-thinking, re-committing and re-tasking those charged with governance to better contend with the ‘new reality’
• Leadership Development– National LeadingAge program extending to state
organizations
• Recruitment, orientation, education and engagement of board members– Diversity of talents, backgrounds, commitment a must
• Succession Planning an increasing focus of many senior living providers
• Drivers of growth– Need strategic, business-minded, mission-driven thinkers to
challenge the organization91
GOVERNANCE: LIVING THE “NEW REALITY”
Creating a Stronger
Senior Living Industry
92
The Impact
External Environment
Supply & Demand
Operations Creating a Stronger
Senior Living Industry
The Consumer
WHAT IS THE IMPACT OF ALL OF THIS?
• Identify the intersections between:– Understanding your consumer– Knowing your local demand and supply characteristics– Appreciating how the environment can shape your
organization and foster innovation– Refining operations to satisfy short-term goals and positioning
the organization for future growth and evolution
Embrace the opportunitiesAdvance the not-for-profit imperative
93
STATE OF SENIOR LIVING CAPITAL MARKETSSection 2
94
Steve JeffreyManaging DirectorSenior Living Investment BankingZiegler
95
• Total industry volume estimated to exceed $4.0 billion for the second consecutive year
• Fixed-rate and bank credit volume driven primarily by refundings in the first half of the year, with more activity expected around new money financings and bank refinancing options in the second half of the year
• Long-term rates driven upward in June by rise in Treasury yields and massive cash flows out of general and high yield municipal bond funds
• Bank market has remained active with a focus on direct purchase options with bank LOC options increasingly rare
STATE OF SENIOR LIVING CAPITAL MARKET TRENDS
FINANCING A SENIOR LIVING PROJECT SENIOR LIVING FINANCING DECISION TREE
96
UseCashFund
new project
Conventional Bank Loan
Taxable Bonds
Tax-Exempt
Variable Rate*
Unrated Rated GovernmentPrograms
(HUD/Freddie/Fannie)
Fixed Rate*
Bank Direct Purchase/ Enhanced
LOC
ARROSSM
TEMPSSMBank Direct Purchase
Fixed/VariableCombination
Taxable
*Synthetic fixed rate debt and synthetic floating rate debt are also possible through the use of interest rate management products (swaps).
IssueDebt
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
3 Month 6 Month 1 Year 3 Year 5 Year 7 Year 10 Year 30 Year
Yield %
Maturities
4 Years Ago 3 Years Ago 2 Years Ago Friday 9/13/13
HISTORICAL INTEREST RATES
97
Treasury Yield Curve
SOURCE: Ziegler Investment Banking, as of 9/13/13
VRDBs Direct Bank Purchase
Traditional Fixed-Rate Bonds
98Source: Ziegler Investment Banking, as of 9/13/13
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
SIFMA LIBOR (1 Month)
SIFMA 1 Mo. LIBOR
Minimum: 0.05% 0.18%
Maximum: 7.96% 8.69%
Average: 2.49% 3.58%
Current: 0.06% 0.18%
HISTORICAL INTEREST RATES (SENIOR LIVING)
$1,5
77
$1,4
90
$2,2
46
$2,5
06
$2,3
20
$2,2
93
$3,1
42
$3,5
24
$5,0
77
$4,9
82
$2,8
49
$2,8
60
$3,7
80
$3,1
60
$3,0
32
$4,1
38
$5,9
11
$7,3
94
$2,4
80
$1,8
01
$2,6
37
$1,1
48
$3,6
65
$3,1
00
$475
$1,0
66
$1,3
00
$1,5
00
$1,2
50
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Est 2
013
(In M
illio
ns)
Other Bank Credit Par Volume
99
• Fixed-rate market shut down from Fall 2008 to Fall 2009• 2009-2010 volume due to pent-up demand following shut-down• Bank credit continues in the form of direct purchase
# ofIssues 277153 186 286 186 223 216 284 447 335 191 171 216 194 201 218 240 291 86 59 5885 65
NOT-FOR-PROFIT SENIOR LIVING FINANCINGS
SOURCE: Thomson Financial Securities Data, as of 9/13/13; and Ziegler Investment Banking , 2013 estimates thru 12/31/13
Estimated Other/Bank
Credit
100
$1,2
87
$1,1
86
$1,4
48
$1,6
30
$1,5
00
$1,6
63
$2,2
43
$2,4
45
$2,5
22
$4,0
58
$2,4
34
$2,6
05
$2,9
66
$2,1
46
$2,0
92
$2,4
42
$3,1
45
$3,9
34
$1,3
20
$1,1
74
$1,9
00
$968
$1,3
81
$1,4
00
$290
$304 $7
98 $876
$820
$630
$899 $1
,079
$2,5
55
$924
$415
$255
$814
$1,0
14$9
40
$1,6
96
$2,7
66
$3,4
60
$1,1
60
$627
$737
$180
$2,2
84
$1,7
00
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Est.
201
3
New Money Refunding
In M
illio
ns
VOLUME BY PURPOSE
NOT-FOR-PROFIT SENIOR LIVING FINANCINGS
• Trends for refinancings follow borrowing cost movement– greater proportion in 2012-2013• Average new money per year for last five years was approximately $1.3 billion• New money average for 5 most recent years far below 5 year average “pre-crash” of $2.8 billion
SOURCE: Thomson Financial Securities Data, as of 9/13/13; and Ziegler Investment Banking 2013 estimates thru 12/31/13
101
VOLUME BY CREDIT STRUCTURE
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,00019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Est.
201
3
Non-Rated (Unenhanced) Rated (Unenhanced) Letter Of Credit Backed Bond Insurance FHA/GNMA
In M
illion
s
NOT-FOR-PROFIT SENIOR LIVING FINANCINGS
• 2009 was a “transition” year as bank LOCs “evaporated”• Nearly all publicly issued debt is done through the fixed rate markets
SOURCE: Thomson Financial Securities Data, as of 9/13/13; and Ziegler Investment Banking 2013 estimates thru 12/31/13
• Compared with one year ago, the sector experienced a net loss of one rating; there is also one less organization rated by multiple rating agencies.
102
NON-PROFIT SENIOR LIVING CREDIT RATING TRENDSCUMULATIVE SENIOR LIVING RATINGS
NOTE: Of the 145 organizations, 1 has some type of unique third party support essential to the rating; and 2 ratings backed by guarantees; and 2 ratings based on bond insured program; both are excluded from the above totals.
• All of these agencies publish guidelines for their ratings
• CCAC, Fitch & S&P publish rating category medians for key ratios
0
20
40
60
80
100
120
140
160
180
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
YTD
2013
S&P Fitch Moody's
Rated Bond Issues Through 9/13/13
S&P 65
Fitch 96
Moody’s 3
*164
*19 organizations have debt rated by more than one rating agency. Therefore, there are a total of 145 organizations with rated debt.
SOURCE: Ziegler Investment Banking, as of 9/13/13
NON-PROFIT SENIOR LIVINGCREDIT RATING TRENDS
NON-PROFIT SENIOR LIVING CREDIT RATING TRENDS
103
19
38
8
0
28
54
13
12 1 0 00
10
20
30
40
50
60
A CategoryRatings
BBB CategoryRatings
BB CategoryRatings
OtherCategoryRatings
S&P Fitch Moody's
Rating Categories
“A” & “BBB” 142
“BB” 21
Other 1
164
Ratings Distribution by Category
• Roughly 25% of individual CCRCs are rated
• Some of these are within the rating of a larger obligated group
SOURCE: Ziegler Investment Banking, as of 9/13/13
NON-PROFIT SENIOR LIVING CREDIT RATING TRENDSUPGRADES AND DOWNGRADES
104Indicates change in rating for an organizationSOURCE: Ziegler Investment Banking, as of 9/13/13
• 2013 YTD has the best Upgrade/Downgrade Ratio since 1997• FitchRatings assigned Stable outlook to the sector in fall 2012• S&P maintains negative outlook but is cautiously optimistic
• Recent Downgrades– Deterioration in cash combined with
physical plant needs– Additional debt and project risk
105
INSTITUTIONAL PURCHASERS OFNOT-FOR-PROFIT SENIOR LIVING DEBT
• Top 20 institutional buyers purchase just over 80% of senior living debt
• Top 5 buyers purchase roughly 40%
• Top 5 buyers have purchased between 40 and 75 individual issues since 2005
• Some differentiation among rated and non-rated buyers: 3 firms appear in Top 5 for both rated and non-rated issues
Top 5
Top 10
Top 20
All Institutions
0%
20%
40%
60%
80%
100%
Percen
t of P
ar Value
Purchased
Institutional Purchasers of NFP Senior Living Debt All Fixed Rate2005 ‐ 2012
Ziegler UnderwrittenSource: ZIB
MMD 30-Year "AAA"
Minimum: 2.69%
Maximum: 4.51%
Average: 3.40%
Current: 4.41%
2.00%2.25%2.50%2.75%3.00%3.25%3.50%3.75%4.00%4.25%4.50%4.75%5.00%5.25%5.50%5.75%6.00%6.25%6.50%6.75%7.00%
1/2/
2013
1/6/
2013
1/10
/201
31/
14/2
013
1/18
/201
31/
22/2
013
1/26
/201
31/
30/2
013
2/3/
2013
2/7/
2013
2/11
/201
32/
15/2
013
2/19
/201
32/
23/2
013
2/27
/201
33/
3/20
133/
7/20
133/
11/2
013
3/15
/201
33/
19/2
013
3/23
/201
33/
27/2
013
3/31
/201
34/
4/20
134/
8/20
134/
12/2
013
4/16
/201
34/
20/2
013
4/24
/201
34/
28/2
013
5/2/
2013
5/6/
2013
5/10
/201
35/
14/2
013
5/18
/201
35/
22/2
013
5/26
/201
35/
30/2
013
6/3/
2013
6/7/
2013
6/11
/201
36/
15/2
013
6/19
/201
36/
23/2
013
6/27
/201
37/
1/20
137/
5/20
137/
9/20
137/
13/2
013
7/17
/201
37/
21/2
013
7/25
/201
37/
29/2
013
8/2/
2013
8/6/
2013
8/10
/201
38/
14/2
013
8/18
/201
38/
22/2
013
8/26
/201
38/
30/2
013
9/3/
2013
9/7/
2013
9/11
/201
39/
15/2
013
106
HISTORICAL INTEREST RATES & PRICING SPREADSSELECT 2013 SPREADS ABOVE 30-YEAR MMD “AAA”
106
Yields and Spreads above 30 year MMD forspecific “rated” transactions indicated
(1) Final maturity of greater than 30 years(2) Final maturity of less than 30 yearsSource: Thomson Financial Municipal Market Monitor, as of 9/18/13
1/24/13ABHOWPleasanton, CA4.125%+139 bps (1)
S&P BBB /Fitch BBB+
1/31/13Appalachian Christian VillageJohnson City, TN4.80% +193 bps (1)
Fitch BBB-
2/7/13Emerald HeightsSeattle, WA3.85% +99 bps (1)
Fitch A-
3/5/13Fleet LandingAtlantic Beach, FL3.99% +105 bps (1)
Fitch BBB
4/23/13Kendal at OberlinOberlin, OH3.65% +75 bps (2)
S&P A-
7/16/13Covenant
Westminster, CO5.769% +177 bps (2)
Fitch BBB+ / S&P BBB
8/1/13BHI Senior LivingIndianapolis, IN
6.10% +188 bps (2)
Fitch BBB+
8/13/13United Methodist Retirement CommunityChelsea, MI6.25% +188 bps (1)
Fitch BBB+
2.00%2.25%2.50%2.75%3.00%3.25%3.50%3.75%4.00%4.25%4.50%4.75%5.00%5.25%5.50%5.75%6.00%6.25%6.50%6.75%7.00%
1/2/
2013
1/6/
2013
1/10
/201
31/
14/2
013
1/18
/201
31/
22/2
013
1/26
/201
31/
30/2
013
2/3/
2013
2/7/
2013
2/11
/201
32/
15/2
013
2/19
/201
32/
23/2
013
2/27
/201
33/
3/20
133/
7/20
133/
11/2
013
3/15
/201
33/
19/2
013
3/23
/201
33/
27/2
013
3/31
/201
34/
4/20
134/
8/20
134/
12/2
013
4/16
/201
34/
20/2
013
4/24
/201
34/
28/2
013
5/2/
2013
5/6/
2013
5/10
/201
35/
14/2
013
5/18
/201
35/
22/2
013
5/26
/201
35/
30/2
013
6/3/
2013
6/7/
2013
6/11
/201
36/
15/2
013
6/19
/201
36/
23/2
013
6/27
/201
37/
1/20
137/
5/20
137/
9/20
137/
13/2
013
7/17
/201
37/
21/2
013
7/25
/201
37/
29/2
013
8/2/
2013
8/6/
2013
8/10
/201
38/
14/2
013
8/18
/201
38/
22/2
013
8/26
/201
38/
30/2
013
9/3/
2013
9/7/
2013
9/11
/201
39/
15/2
013
107
HISTORICAL INTEREST RATES & PRICING SPREADSSELECT 2013 SPREADS ABOVE 30-YEAR MMD “AAA”
107
Yields and Spreads above 30 year MMD forspecific “unrated” transactions indicated
(1) Final maturity of greater than 30 years(2) Final maturity of less than 30 yearsSource: Thomson Financial Municipal Market Monitor, as of 9/18/13
4/30/13Plymouth Place
Ottawa, IL6.00% +316 bps (1)
5/22/13Lutheran Homes, Irmo, SC
5.14% +210 bps (1)
6/4/13PRCN, Seattle, WA5.043% +175 bps (1)
6/5/13Country Manor
Sartell, MN5.50%
+221 bps (1)
6/18/13Inverness VillageTulsa, OK5.875%+235 bps (2)
MMD 30-Year "AAA"
Minimum: 2.69%
Maximum: 4.51%
Average: 3.40%
Current: 4.41%
6/27/13North Hill,Needham, MA6.68%+247 bps (1)
7/16/13Presbyterian ManorsWichita, KS6.57% +257 bps (2)
8/1/13Magnolia ManorColumbus, GA6.50%+228 bps (1)
2013 SENIOR LIVING BANK CREDIT MARKETS OVERVIEW
• Banks of all sizes continue to have a strong appetite for senior living and are aggressively competing for new opportunities.
• Clear movement toward direct purchase financings or direct loans with LOC options rare due to BASEL III reserve requirements requiring equal reserves.
• Cost of bank credit is falling and term lengths are extending. Direct purchase commitments of 5-7 years likely with up to 10 years also a possibility. Direct purchase fixed or floating options available. Yield protection language is typically standard.
• In 2012-2013YTD, the top 5 banks captured just over 50% of the Ziegler-facilitated transactions
108
109
• LOC enhanced debt has been replaced by direct bank purchase, taxable construction loans
SOURCE: Thomson Financial Securities Data, as of 9/13/13, Ziegler Investment Banking, Other Bank Credit Estimates thru 12/31/13
BANK CREDIT ACTIVITY (SENIOR LIVING)
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Est
.
Volu
me
Mill
ions
Letter of Credit Backed VRDB's & Other Bank Credit Volume1990 - 2013
Other Bank Credit (Est.)
Letter of Credit Backed
110
BANK CREDIT ACTIVITY (SENIOR LIVING)ZIEGLER FACILITATED NEW MONEY VS EXISTING DEBT
$14.9
$67.2 $92.5 $148.5
$108.6
$178.1 $220.3
$645.2 $569.5
$270.7
$0
$100
$200
$300
$400
$500
$600
$700
$800
2009 2010 2011 2012 2013 YTD
Bank
Cre
dit
Vol
ume
(MM
)
Bank Credit ActivityZiegler Facilitated
New Money v. Existing Debt
New Money
Exiting Debt
Source: ZIB 09/01/13
111
Variable Rate Demand Bonds vs Revenue Bond Index vs Fed Fund Target Rate vs 30-Year NR Institutional
SOURCE: Ziegler Investment Banking, as of 9/13/13
0.00
2.00
4.00
6.00
8.00
10.00
12.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Variable Rate Demand Bonds Revenue Bond Index
Fed Fund Target Rate 30-Yr NR-Institutional
VRDBsRevenue
Bond IndexFed Fund
Target Rate30-YR NR
InstitutionalMinimum: 0.05% 4.06% 0.25% 5.00%Maximum: 8.00% 7.83% 8.25% 10.75%Average: 2.50% 5.60% 3.46% 7.16%Current: 0.06% 5.31% 0.25% 7.00%
HISTORICAL INTEREST RATES (SENIOR LIVING)
STATE OF SENIOR LIVING CAPITAL MARKETS UPDATE
Section 3
112
Mike McDanielSenior Managing Director Capital MarketsZiegler
113
STATE OF SENIOR LIVING CAPITAL MARKETS FIXED RATE MARKETS
• Historic Lows
• Supply is Favorable
• Buyers Have Money
“Now History”
“Supply is Still Favorable”
“Buyers Have Little, if any, Money”
• Credit Risk
114
STATE OF SENIOR LIVING CAPITAL MARKETS FIXED RATE MARKETS
• Housing Market
115
STATE OF SENIOR LIVING CAPITAL MARKETS FIXED RATE MARKETS
• Uncertainty
116
STATE OF SENIOR LIVING CAPITAL MARKETS FIXED RATE MARKETS
STATE OF SENIOR LIVING CAPITAL MARKETS MUNICIPAL VOLUME
117
TOTAL NFP SENIOR LIVING $3.665 Billion
(1.0% of Municipal)
Healthcare$29.8 Billion
8.0%
$376.2 BillionTOTAL MUNICIPAL
SOURCE: Totals from Thomson Securities Data and The Bond Buyer as of 1/2/13
118
STATE OF SENIOR LIVING CAPITAL MARKETS FREQUENCY IN THE MARKETS: ZIEGLER 2012
Issue Date State Total Par Rating Project TypeFriendship Village of Tempe March AZ $77,030,000 Unrated RefundingInverness Village May OK $47,130,000 Unrated RefundingWake Robin May VT $23,835,000 Unrated RefundingCapital Manor May CA $50,135,000 Unrated RefundingHolland Home Obligated Group June MI $50,390,000 BB+ RefundingKahala Senior Living Community June HI $73,400,000 BBB- RefundingACTS Retirement-Life Communities July FL/GA/PA $105,875,000 A-/BBB+ RefundingNazareth Living Center July MO $8,035,000 Unrated New Money/ExpansionThe Blakeford at Green Hills July TN $29,210,000 BBB- RefundingThe Barrington of Carmel August IN $119,020,000 Unrated New CampusCovenant Retirement Communities August CO $150,170,000 BBB+/BBB- RefundingWestminster Village of Terre Haute August IN $12,175,000 Unrated RefundingCountry Manor Campus August MN $20,410,000 Unrated RefundingThe Terraces at San Joaquin Gardens (ABHOW) September CA $71,035,000 Unrated New Money/RepositioningTerwilliger Plaza October OR $18,245,000 BBB RefundingMasonic Homes of Kentucky October KY $49,655,000 Unrated New Money/RefundingChristian Living Communities October CO $49,195,000 Unrated RefundingAsbury Pennsylvania Obligated Group October PA $51,640,000 Unrated RefundingLutheran Homes & Services Obligated Group October IL $98,500,000 Unrated New Money/RefundingLindenGrove, Inc. October WI $17,390,000 Unrated RefundingThe United Methodist Village-Godfrey November IL $10,365,000 Unrated RefundingKendal at Ithaca November NY $8,985,000 BBB+ RefundingEpiscopal Communities & Services November CA $64,160,000 A- RefundingEpiscopal Senior Communities and Services December CA $127,480,000 BBB+/BBB- New CampusEpworth Village December OK $78,635,000 Unrated New Money/RefundingMRC The Crossing Point December TX $7,645,000 Unrated BANSEl Castillo Retirement Community December NM $24,030,000 BBB- New Money/RefundingClare Oaks December IL $14,000,000 Unrated New Money2012 Total $1,457,775,000
Non-Profit Senior Living Fixed Rate Issues 2012
Source: Ziegler Investment Banking
STATE OF SENIOR LIVING CAPITAL MARKETS FREQUENCY IN THE MARKETS: ZIEGLER 2013
119Source: Ziegler Investment Banking *In Process
Issue Date State Total Par Rating Project TypeAmerican Baptist Homes of the West OG Jan CA $71,250,000 BBB+/BBB New Money/ExpansionAppalachian Christian Village Jan TN $19,520,000 BBB- New Money/RefundingEmerald Heights Feb WA $29,845,000 A- RefundingFleet Landing Mar FL $40,050,000 BBB RefundingKendal at Oberlin Apr OH $21,620,000 A- RefundingPlymouth Place Arp IL $24,765,000 NR RefundingLutheran Homes of South Carolina May SC $35,450,000 NR New Money/RefundingCountry Manor Campus Jun MN $13,445,000 NR New Money/ExpansionPresbyterian Retirement Communities Northwest Jun WA $14,840,000 NR RefundingInverness Village Jun OK $24,110,000 NR RefundingNorth Hill Jul MA $93,625,000 NR New Money/ExpansionPresbyterian Manors Jul KS $85,055,000 NR New Money/RefundingCovenant Retirement Communities Jul CA/CO $59,995,000 BBB+/BBB- New Money/RefundingMagnolia Manor Aug GA $35,840,000 NR RefundingBHI Senior Living Aug IN $22,015,000 BBB+ New MoneyUnited Methodist Retirement Communities Aug MI $11,000,000 BBB+ New Money2013 Total $602,425,000*Rockwood Retirement Communities Day-to-Day WA $108,000,000 NR*Peace Village Sep IL $25,000,000 NR*Poway RHF Housing Oct CA $15,000,000 NR*Fleet Landing Oct FL $39,500,000 BBB*East Ridge Retirement Village Nov FL $70,000,000 NR*Ohio Presbyterian Retirement Services Nov OH $50,000,000 BBB2013 Total $909,925,000
Non-Profit Senior Living Fixed Rate Issues 2013
STATE OF SENIOR LIVING CAPITAL MARKETS FIXED-RATE DISTRIBUTION (CONT’D)
120
97%
3%
Institutional Retail
92%
8%
Institutional Retail
• In past 12 months, Ziegler’s retail and institutional distribution of total underwritten product was 5% and 95%, respectively
Non-RatedAugust 2012 – September 2013
RatedAugust 2012 – September 2013
Source: Investment Banking, as of September, 2013
2
2.5
3
3.5
4
4.5
5
5.5
6
Jan-
08
Apr
-08
Jul-
08O
ct-0
8Ja
n-0
9A
pr-0
9Ju
l-09
Oct
-09
Jan-
10
Apr
-10
Jul-
10O
ct-1
0Ja
n-1
1A
pr-1
1Ju
l-11
Oct
-11
Jan-
12
Apr
-12
Jul-
12O
ct-1
2Ja
n-1
3A
pr-1
3Ju
l-13
Perc
ent
(%)
'AAA' MMD Index30-Year Maturity Yield
121Source: Thomson Financial Municipal Market Monitor, as of 9/13/12
4.39%
STATE OF CAPITAL MARKETSHISTORICAL INTEREST RATES
Minimum: 2.47%Maximum: 5.92%Average: 4.05%Current: 4.39%
122
Senior Living Credit Spreads - “Bubbles and Pops”
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
30-YR NR NewCampus
30-YR NR-Institutional
30-YR NR-Retail
30-YR "BBB"
30-YR "A"
MMD 30-YR "AAA"
Tech Bubble Real Estate Bubble
NR = Non-Rated
SOURCE: Ziegler Investment Banking, as of 9/13/13
STATE OF SENIOR LIVING CAPITAL MARKETS HISTORICAL INTEREST RATES
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.00
2008
2009
2010
2011
2012
2013
30-YR NR NewCampus
30-YR NR-Institutional
30-YR NR-Retail
30-YR "BBB"
30-YR "A"
MMD 30-YR "AAA"
123
NR = Non-Rated
SOURCE: Ziegler Investment Banking, as of 9/13/13
MMD 30-YR "AAA"Maximum: 5.92Minimum: 2.47Average: 4.03Current: 4.39
STATE OF SENIOR LIVING CAPITAL MARKETS HISTORICAL INTEREST RATES (CONT’D)
Senior Living Rates: Visual Spread
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Perc
en
t (%
)
Senior Living Yields 30-Year Maturity, 'A' Category
10-Year Average
1990 - YTD Average
A Category Yield
STATE OF SENIOR LIVING CAPITAL MARKETSHISTORICAL INTEREST RATES (CONT’D)
124
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Perc
en
t (%
)
Senior Living Yields 30-Year Maturity, 'BBB' Category
BBB Category Yield
10-Year Average
1990 - YTD Average
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Perc
en
t (%
)
Senior Living Yields 30-Year Maturity, Non-Rated
Non-Rated Category Yield
10-Year Average
1990 - YTD Average
Source: Ziegler Capital Markets
STATE OF SENIOR LIVING CAPITAL MARKETSHISTORICAL INTEREST RATES (CONT’D)
125Source: Ziegler Capital Markets
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Perc
en
t (%
)
Senior Living Yields 30-Year Maturity, 'A' Category
10-Year Average
1990 - YTD Average
A Category Yield
STATE OF SENIOR LIVING CAPITAL MARKETSHISTORICAL INTEREST RATES (CONT’D)
126Source: Ziegler Capital Markets
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Perc
en
t (%
)
Senior Living Yields 30-Year Maturity, 'BBB' Category
BBB Category Yield
10-Year Average
1990 - YTD Average
STATE OF SENIOR LIVING CAPITAL MARKETSHISTORICAL INTEREST RATES (CONT’D)
127Source: Ziegler Capital Markets
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
Sep-
03
Mar
-04
Sep-
04
Mar
-05
Sep-
05
Mar
-06
Sep-
06
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Perc
en
t (%
)
Senior Living Yields 30-Year Maturity, Non-Rated
Non-Rated Category Yield
10-Year Average
1990 - YTD Average
STATE OF SENIOR LIVING CAPITAL MARKETSRATES, CASH FLOWS & MARKET FAILS
128
0.00
2.00
4.00
6.00
8.00
10.00
12.00
-$20,000
-$15,000
-$10,000
-$5,000
$0
$5,000
$10,000
$15,000
Jan-
90
Jan-
91
Jan-
92
Jan-
93
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Cash Flow 30-YR NR-Institutional MMD 30-YR "AAA"
Source: Investment Company Institute, Cash Flows as of July, 2013, and Ziegler Investment Banking, as of 9/13/13
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
11.00
12.0020
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
30-YR NRInstitutional
30-Yr MMD
129
30-Year NR Institutionalvs
MMD 30-Year “AAA”
NR = Non-Rated
• Fed May 22 statement
• Detroit bankruptcy, Puerto Rico credit concerns
• T/E Mutual Fund outflows
SOURCE: Ziegler Investment Banking, as of 9/13/13
30-YR NRInstitutional
MMD 30-YR"AAA"
Maximum: 10.75 6.04Minimum: 5.10 2.47Average: 6.97 4.48Current: 7.00 4.39
STATE OF SENIOR LIVING CAPITAL MARKETS HISTORICAL INTEREST RATES (CONT’D)
STATE OF SENIOR LIVING CAPITAL MARKETS ALL MUNICIPAL BOND FUNDS: INFLOWS/OUTFLOWS
130Source: LipperFMI Data Service, as of 9/11/13
All Municipal Bond Fund Weekly In/Outflows
($7,000,000)
($6,000,000)
($5,000,000)
($4,000,000)
($3,000,000)
($2,000,000)
($1,000,000)
$0
$1,000,000
$2,000,000
$3,000,000
01/0
7/09
02/0
7/09
03/0
7/09
04/0
7/09
05/0
7/09
06/0
7/09
07/0
7/09
08/0
7/09
09/0
7/09
10/0
7/09
11/0
7/09
12/0
7/09
01/0
7/10
02/0
7/10
03/0
7/10
04/0
7/10
05/0
7/10
06/0
7/10
07/0
7/10
08/0
7/10
09/0
7/10
10/0
7/10
11/0
7/10
12/0
7/10
01/0
7/11
02/0
7/11
03/0
7/11
04/0
7/11
05/0
7/11
06/0
7/11
07/0
7/11
08/0
7/11
09/0
7/11
10/0
7/11
11/0
7/11
12/0
7/11
01/0
7/12
02/0
7/12
03/0
7/12
04/0
7/12
05/0
7/12
06/0
7/12
07/0
7/12
08/0
7/12
09/0
7/12
10/0
7/12
11/0
7/12
12/0
7/12
01/0
7/13
02/0
7/13
03/0
7/13
04/0
7/13
05/0
7/13
06/0
7/13
07/0
7/13
08/0
7/13
09/0
7/13
In/Outflows ($000s)
-$12,000,000
-$10,000,000
-$8,000,000
-$6,000,000
-$4,000,000
-$2,000,000
$0
$2,000,000
$4,000,000
$6,000,000
Jan-
2012
Feb-
2012
Mar
-201
2
Apr-
2012
May
-201
2
Jun-
2012
Jul-2
012
Aug-
2012
Sep-
2012
Oct-
2012
Nov-
2012
Dec-
2012
Jan-
2013
Feb-
2013
Mar
-201
3
Apr-
2013
May
-201
3
Jun-
2013
Jul-2
013
Aug-
2013
Sep-
2013
In/Outflows (000s)
131
All Municipal Bond Funds Inflows/Outflows (Monthly)2012 – 2013
Source: LipperFMI Data Service, as of 8/22/12
STATE OF SENIOR LIVING CAPITAL MARKETS MUNICIPAL BOND FUNDS FLOWS
$200.0
$250.0
$300.0
$350.0
$400.0
$450.0
$500.0
$550.0
$600.0
$650.0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
In Billions
132Source: Investment Company Institute, as of July, 2013
$535.6B
Changes in Municipal Bond Fund Asset Values (1996 – 2013)
STATE OF SENIOR LIVING CAPITAL MARKETS CHANGES IN MUNICIPAL BOND FUND ASSET VALUES
133
Senior Living Interest Rate Ranges Tax-Exempt Revenue Bonds (1)
1) Non-state specific2) Long-term (25-30 Yr), fixed rate
SOURCE: Ziegler Investment Banking, as of 9/13/13
STATE OF SENIOR LIVING CAPITAL MARKETS CURRENT INTEREST RATES (SENIOR LIVING)
SENIOR LIVINGFINANCING STRUCTURES
(Insurers Ratings: Fitch/S&P/Moody's)
CREDITENHANCEMENT
Unrated - Start-Up Communities 8.25% - 8.50% -- 8.25% - 8.50% + 386 to + 411 + 294 to + 319Unrated - Existing Stable Communities 7.00% - 7.25% -- 7.00% - 7.25% + 261 to + 286 + 169 to + 194Unrated - Ziegler Retail 6.75% - 7.00% -- 6.75% - 7.00% + 236 to + 261 + 144 to + 169"BBB" Rated (Fitch, S&P or Moody's) 6.25% - 6.50% -- 6.25% - 6.50% + 186 to + 211 + 94 to + 119"A" Rated (Fitch, S&P or Moody's) 5.70% - 5.85% -- 5.70% - 5.85% + 131 to + 146 + 39 to + 54"AA" Rated (FHA) 5.00% - 5.15% 0.50% 5.50% - 5.65% + 111 to + 126 + 19 to + 34
AVERAGE LONG-TERM INTEREST RATE
RANGES (2)
ALL-ININTEREST
COST
AVERAGE RATESPREAD TO
"AAA" MARKET*
SPREAD TOREVENUE BOND
INDEX
SUMMARY
• Interest rates
• Credit spreads
• Supply/Demand
• Fed
134
WRAP-UP & PREVIEW OF WHAT’S TO COME
135
Dan HermannSenior Managing Director Head of Investment BankingZiegler
136
137
2103 LEADINGE AGE ANNUAL MEETING: DALLAS
138
The 2013 Ziegler Reception at The House of Blues
Tuesday, October 29, 20138:00 p.m. - 11:00 p.m.The House of Blues2200 N Lamar Street | Dallas, TX 75202
QUESTIONS & ANSWERSB.C. Ziegler and Company is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417. Website: www.nasba.org. Attendees are eligible to receive up to 14.0 credits for attendance at the 16th Annual Ziegler Senior Living Finance + Strategy Conference. No prerequisites or advance preparation are required for this group-live educational conference. Program level is basic.
For more information regarding administrative policies such as complaint and refund, please contact our offices at 312-705-7262. No fees are required for senior living providers or capital markets participants (Letter of Credit Banks or Investors).
©2013 B.C. Ziegler and Company | Member SIPC and FINRA | www.ZieglerSeniorLivingFinance.com