2018 Annual Meeting EXPO June 5 June 7

2018 Annual Meeting & EXPO June 5 – June 7, 2018 The For-Profit Push

Today’s presenters Beverly Asper Brian Gabriel Jeni Jarrell Director Partner Strategic Account Lead 717 574 5130 215 972 2381 860 678 4300 beverly. asper@bakertilly. com brian. gabriel@bakertilly. com jeni. jarrell@bluespireseniormarketing. com

Agenda 1. Demographic profiles driving development 2. Market presence and growth of for-profit senior living providers 3. Research and development strategies of for-profit senior living companies 4. Financial comparisons between for-profits and not-for-profits 5. Marketing and sales approach between for-profits and not-for-profits

Demographic profiles driving development

Demographic projections

Demographic implications By 2035, for the first time in U. S. history, older adults will outnumber children The number of people age 85+ is expected to nearly triple by 2060 (to 19 million) Demographic shift Number of older adults increasing at same time as longevity As life expectancy increases, individuals are likely to spend a longer portion of their lives accessing senior services @65 +19 years

Baby boomer population 54 - 72 years 10, 000 80 million Source: Med. Pac The current ages of baby boomers Every day for the next 13 years, 10, 000 baby boomers will reach age 65 By 2030, Medicare is projected to have nearly 80 million beneficiaries – up from 54 million in 2015 – almost all baby boomers 7

Highest senior population U. S. 15. 6% 2017 Source: World. Atlas. com, March 2018, ESRI, March 2018 8

Alzheimer’s disease projections 9

Top for-profit and not-for-profit senior living organizations

Top for-profit providers Source: 2017 ASHA 50 11

Top for-profit providers Provider 2017 Properties 2017 Units Brookdale Senior Living (TN) 835 70, 440 Welltower Inc. (OH) 665 65, 428 Ventas Inc. (IL) 682 59, 154 HCP Inc. (CA) 362 46, 031 Senior Housing Properties Trust (MA) 434 35, 018 Boston Capital (MA) 419 28, 398 Colony North. Star Healthcare (CA) 215 18, 145 New Senior Investment Group (NY) 146 17, 836 Senior Lifestyle (IL) 152 14, 966 Enlivant (IL) 239 11, 253 Source: 2017 ASHA 50 12

Top not-for-profit providers Source: Leading. Age Ziegler 150 13

Top not-for-profit providers Provider 2017 Properties 2017 Units 1. National Senior Campuses (MD) 16 19, 051 2. The Evangelical Lutheran Good Samaritan Society (SD) 168 17, 839 3. ACTS Retirement Services, Inc. (PA) 21 7, 862 4. Presbyterian Homes and Services (MN) 43 7, 135 5. Benedictine Health (MN) 39 5, 270 6. Covenant Retirement Communities (IL) 18 5, 022 7. Human. Good fka Cornerstone (ABHOW & be. group) (CA) 19 4, 761 8. Ascension Senior Living (MO) 27 4, 624 9. Trinity Senior Living Communities fka Trinity Health Senior Communities (MI) 22 4, 198 10. Retirement Housing Foundation (CA) 18 4, 105 Source: 2017 Leading. Age Ziegler 150 14

Ownership by property type Percentage of Units O wned by Not-for-profit vs. For-profit O rganizations Nonprofit 100% 95% 88% 90% For-profit 74% 80% 74% 70% 60% 51% 49% 40% 26% 30% 20% 12% 10% 26% 5% 0% Independent Living Assisted Living Memory Care Nursing CCRCs 15

Research and development strategies of for-profit providers

Target market and site selection > Moving away from larger markets to areas with lower concentration of competition > Cluster projects to streamline overhead and concentrate marketing dollars > Target new neighborhoods under development/growth areas with home values ~$400, 000+ > Areas commanding higher rents > Densely populated areas of age-and-income qualified seniors 17

Development focus Movement away from CCRCs > > Stand alone building Focus on IL, AL, memory care Prototype product More flexible with research and approvals - Faster to develop, faster to fill, faster profit > Locate IL next to memory care as a separate facility > Focus on level of care with tailored approaches to ensure quality, then marketability > Modern design to attract younger resident 18

Development focus > Independent living: - 800 -1, 400 sf Rental contract Efficient design, shorter halls Concierge services, centrally located amenities - High-end finishes, mirror non-age restricted housing offering > Skilled - Boutique hospitality style rehab > Focus on: - Unique dining experiences, venues, culinary experience - Branded memory care programs with research outcomes - Hotel feel > Assisted living/memory care - Private apartments - Promote as IL; add services as needed - Level of care fees lowers entry rate 19

Brookdale has merged with or acquired five for -profit senior living companies since 2005 Brookdale Senior Living 20

Brookdale case study: For-profit strategy “To achieve consistent operational excellence in our core business” > Continue to evaluate and selectively purchase existing operations > To address competition: increased use of discounts and incentives, local marketing efforts, additional associate retention efforts and capital projects Source: Brookdale 10 -K Annual Report, December 2016 21

Brookdale case study – Key priorities 1 Enhance customer and associate experience By simplifying the role of the Executive Director > Allows for more focus on customers and associates > Improve model for recruiting and retaining associates > New talent development and training programs > Expand system to gauge and improve quality of relationship with customers and associates 2 Improve marketing and sales processes > Leverage brand recognition > Customized marketing campaigns in markets and communities with the highest potential > Community segmentation – identify optimal levels of price, service offerings, amenities and programs based on local demand Source: Brookdale 10 -K Annual Report, December 2016 22

Brookdale case study – Key priorities 3 Simplify the organization > Reduce spans and layers in organization – brings decisionmaking closer to customers > Establish corporate shared service centers of excellence to reduce cost, improve effectiveness 5 Innovate for growth 4 Optimize portfolio and leverage scale > Focus on maximizing value and performance of ancillary services > Portfolio optimization – acquisition, disposal, restructure > “Program Max” initiative: expand, renovate, redevelop and reposition certain existing communities where economically advantageous > Evaluate, test and implement innovations that enhance customer experience > Explore models to drive new economics Source: Brookdale 10 -K Annual Report, December 2016 23

Financial and operational comparisons 24

Cost efficiencies > Replicate “prototype” models without local or regional boundaries > Access to capital > Economies of scale with contracted vendors > Efficiency of labor: - Lean staffing models vs. “mission” - Higher pay 25

Operations > 35 - 40 percent profit margin > The right building designed with an independent and attractive look and feel > Best practices and standards for all properties 26

Operating margins Financial ratios > For-profit CCRCs range from 7. 9% to 39. 9%, with a median of 24. 9%. (EBITDAR/Total Revenues) > Not-for-profit (used NOM) - Single-site ranges from -1. 57% to 10. 39%, with a median of 6. 73%; - Multi-site ranges from. 92% to 13. 9%, with a median of 13. 24% > Fitch Investment Grade (IG) 7. 9% Debt service coverage ratio > There is no “CCRC” ratio for the for-profits; closest is combination IL/AL/ALZ, range from 1. 6 to 5. 3, no median provided > Not-for-profit - Single site median 2. 41, multi-site 2. 70; - DSCR revenue basis (no entrance fees) single site median. 96, multi-site 1. 31. > Fitch IG 2. 50, revenue basis. 9

For-profit providers in the news 28

Bankruptcies and acquisitions

Bankruptcies and acquisitions

Bankruptcies and acquisitions

The marketing and sales approach 32

The key to successful marketing and sales is understanding what makes you different and OWN it! 33

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QUESTIONS TO ASK YOURSELF: How do you compare on cost? Do you have a strong value message? Do you have a strong luxury message? How do your levels of care differ? How do you compare on amenities and services? What happens to residents if they run out of money? What is your staffing ratio compared to your competitors? How is the personality of your community different? Does your sales team follow a different process? More responsive with a more catered approach? 37

MARKETING STRATEGIES 38

ADVANTAGES OF HAVING COMPETITION: Challenges every community to be better Educates the market The retirement community voice gets LOUDER New competition – strengthens voice – strengthens education 39

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SEARCH ENGINE MARKETING Pay-per-click Maps/ reviews/ local SEO GOAL: Page prominence and dominance SEO 41

PAY-PER-CLICK Instant traffic Easy to target a specific audience Pay only for performance/clicks Complete control over campaign and easy to measure results Paid ads typically take up 85% above-the fold pixels 50% of adults searching can’t identify paid ads on search results Users are 51% more likely to click on a link if a PPC and SEO link appear Use competitor names as keywords 42

LOCAL SEO/MAPS/REVIEWS Historic hierarchy of importance SEO PPC Maps/Google My Business Detailed and reviewed businesses are twice as likely to be considered reputable New features to enhance listings such as posts (events, incentives), Q&A, chat and analytics Consistency of information affects SEO Gain control and override undesired images in directories/listings 43

REMARKETING Brings non-converting visitors back to the website Hierarchy of content, ranging from general site visitors to targeting visitors based on their interest Broadens advertising for lower cost 44

GEO-FENCING Reach those potential prospects based on a place they are visiting Market to potential prospects based on their location/interest Target an audience by serving mobile ads to prospects when they enter/exit designated conversion zones 45

ENCOURAGE THE COMPARISON Encourage prospects to opt-in Use a brand filter for everything you do and share Create touring guides and resources Host educational events - Guide to Retirement/Senior Marketing 101 Don’t specifically attack 46

The key to successful marketing and sales is understanding what makes you different and OWN it! 47

Thank you! Connect with us: bakertilly. com/healthcare bluespireseniormarketing. com

Sources > Alder, J. (2017, March 21). Memory Care Developers Shift Course. Seniors Housing Business. > Coma, J. For-Profit Senior Living: Its Impact on the Not-For-Profit Sector. BB&T Capital Markets. > Regan, T. (2017, October 17). Top Trends for Nonprofit Senior Living This Year. Senior Housing News. > Nelson, M. (2017, March 1). These Strategies Produce the Most Assisted Living Move-Ins. Senior Housing News. > Mullaney, T. (2017, February 14. ) Senior Housing Construction to Increase in 2017. Senior Housing News. > Parvin, O. Walter, A. (2016 June 13). Care for All: Financing and Development Considerations for Affordable Assisted Living Facilities. Lancaster Pollard News and Articles. > Wilson, B. (2013, April 14). The For-Profit Versus Nonprofit Conundrum. Lancaster Pollard News and Articles. > Grape, T. (Fall 2014). The Senior Housing Boom. NAIOP Magazine. > Gottlieb, M. (2015). Healthcare REITs and their operator partnerships. Cornell Real Estate Review 12 (1), 112 -125. Retrieved from http: //scholarship. sha. cornell. edu/crer/vol 12/issl/12 > Formigle, I. (2016, September 9). How to Invest in Senior Housing Real Estate. Crowd. Street. 49

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