kendal at hanover – resident discussion · 11/20/2019 · ziegler financing corporation and b.c....
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B.C. Ziegler and Company | Member SIPC & FINRA
KENDAL AT HANOVER – RESIDENT DISCUSSION
Keith RobertsonManaging [email protected]
PRESENTED BY
ZIEGLER INVESTMENT BANKING | SENIOR LIVING FINANCE PRACTICE
November 20, 2019
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Investment banking, capital markets and proprietary investment services offered through B.C. Ziegler and Company. FHA mortgage banking services are provided through Ziegler Financing Corporation which is not a registered broker/dealer. Ziegler Financing Corporation and B.C. Ziegler and Company are affiliated and referral fees may be paid by either entity for services provided.
This presentation was prepared based upon information provided by Management and contains certain financial information, including audited and unaudited information, certain statistical information and explanations of such information in narrative form (the “Information”). Management believes this information to be correct as of the date or dates contained herein. However, the financial affairs change constantly, and such changes may be material. Today’s discussion may contain forward-looking statements, which may or may not come to fruition depending on certain circumstances, including those outside the control of management. Please be advised that management has not undertaken, assumed no duty and are not obligated to update the Information. In addition, please be advised that past financial results do not predict futurefinancial performance.
DISCLAIMERS
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CHANGING BUSINESS AS USUAL
Changing Customer
Workforce Pressures
Skilled Nursing/
Post-Acute
Technology &
Innovation
COMPETITION
Source: Ziegler Investment Banking
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OVERALL SECTOR OBSERVATIONS
• Not-for-Profit Senior Living sector is generally healthy– Highest occupancy levels since ‘07; Highest number of rated
organizations• Active reinvestment in existing campuses• Continued growth of community-based platforms• New location growth not fast enough to counter rate of NFP
closures and dispositions• Active merger, acquisition, affiliation environment• Working hard on workforce and developing leaders• Devoting significant resources to adapting to dynamic
healthcare environment• Investing in technology and innovation
Source: Ziegler Investment Banking
5Sources: Urban Land Institute; and Source: U.S. Census Bureau National Population Projections based on 2010 Data. 2016 Base Population; Projections updated in 2017 (released March 13, 2018)
Increasing Demand
0.00
20.00
40.00
60.00
80.00
100.00
120.00
1980 1990 2000 2010 2020 2030 2040 2050 2060
(In M
illio
ns)
65 - 74 75 - 79 80 - 84 85+
We Are Here
DEMOGRAPHICS DEFINE THE MARKET FORECASTED U.S. SENIORS POPULATION (1980 TO 2060) (MILLIONS)
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FACT SHEET: AGING IN THE UNITED STATES
Demographics Positive Developments Challenges
Population of 65+ will nearly double by 2060
Education levels are increasing
Obesity rates among 60+ have been increasing
Older adult population becoming more racially diverse
U.S. life expectancyincreased
Wide economic disparities
Diversity gap between generations
Gender gap in life expectancy is narrowing
More older adults are divorced
Older adults are working longer
Steep rise in American’s living with Alzheimer’s disease
Aging in place Uncertainty over future of Social Security andMedicare
Source: Population Reference Bureau, July 2019, “Aging in the United States”
75% of NFPs have dedicated memory care
units; increase from 60% last year
7Source: The Transamerica Center for Retirement Studies, December 2017
BABY BOOMER RETIREMENT EXPECTATIONS
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OVERALL GROWTH OBSERVATIONS
• Not-for-profit (NFP) senior living growth is picking up in select markets, but new location growth remains relatively flat– Dispositions and closures outpacing new location growth
• For-profit growth of new locations continues to be high
• NFP growth through affiliation and acquisition has surpassed growth through new development
• NFPs are actively reinvesting in existing campuses
• Overall growth of NFP residential housing was 2.8% in 2018
• Expansion of the continuum with home and community-based services (HCBS) platforms (joint ventures common)
Source: Ziegler Investment Banking
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FUTURE NOT-FOR-PROFIT NEW LOCATIONSANTICIPATED OPENINGS IN THE NEXT 5 YEARS
Source: Ziegler Investment Banking, September 2019
• Tracking an additional 10 For-Profit Life Plan Communities in development
1
2 1
4
3
53 MD, 2
7
3
Upper New England, 2
1
3
1
1
1
2
41
3
50 NFP New Locations
LPC, 48%
IL only, 8%
IL/AL/MC, 38% AL/MC,
2%
AL/SN, 4%
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SATELLITE CAMPUSES – NEW CAMPUS ALTERNATIVETYPICAL ELEMENTS OF NEW LOCATION SATELLITE CAMPUSES
• Geographic proximity to other campus, often a larger, full-continuum community
• Generally smaller development with fewer amenities• Limited, if any, healthcare settings• Contractual relationship with main campus (primarily for
healthcare; access to amenities)• Generally would not exist without the resources and support of
main campus• Branding tied to parent• Reliant on main campus for governance, leadership, etc.
Source: Ziegler Investment Banking
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COMMUNITY EXPANSION & REPOSITIONINGS: TRENDS 2014-MAY 2019
Source: Ziegler Investment Banking (deals as of 5/31/19)
86%
52%
43%39%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Independent Living Common area upgrades Skilled Nursing Memory Care
Ziegler-Financed Deals 2014-2019: Use of Funds
Expansion of ILUsUnit changes/upgrades
Combining ILUs
Dining venuesWellness centers
Common area upgrades
Modernizing SNFConversion to private
Household models
Specialized memory support units-generally in AL
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0%
2%
4%
6%
8%
10%
12%
14%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Construction vs. Inventory; MAP31Seniors Housing | 4Q05 – 3Q19
For-Profit Independent Living*
For-Profit Assisted Living*
Not-for-Profits
FOR-PROFIT INVESTMENT IN INDEPENDENT LIVING IS INCREASING
Source: NIC MAP® Data Service | www.nic.org/nic-map; *Excludes CCRCs
2019 LZ 200 Growth: 3.0%
2019 LZ 200 (data as of 12/31/18)
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SIGNIFICANT NEW DEVELOPMENT COMING FROM FOR-PROFIT/PRIVATE SECTOR
Publicly announced projects January 2019 through August 2019
Source: Ziegler Investment Banking; Tracking of “In The Pipeline” publicly announced projects, Senior Housing News
Type # of New Campuses # of Expansions or Repositionings
Not-For-Profit Sponsor 14 14
For-Profit Owner 243 27
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SECTOR CONSOLIDATION• Similar to other health and service-related sectors, the not-
for-profit senior living sector is consolidating
• Sponsorship Transitions– Affiliations– Mergers– Acquisitions– Dispositions
29 41 63 97 149 204 264 320385 446
36 5175
111174
254
345405
568651
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018 Sep-19
Cumulative Totals (2010-SEPT 2019) by # of Transactions & # of Communities
Transactions Market-Rate Communities
Note: Includes market-rate communities; excludes government subsidized; The ELGSS community count is also excluded from the community count (represents 160+ communities); Source: Ziegler Investment Banking 9/1/2019
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PRIMARY CONSOLIDATION DRIVERS VARY DEPENDING ON STRENGTH OF ENTITIES INVOLVED
Pressured Situations
Strategic Mergers & Affiliations
Complexities of Healthcare
Leadership Turnover
Inability to be competitive with reimbursement pressures; not viewed as strong partner to health networks
CEO termination or retirement; no clear successor; inability to recruit high-level talent
Board “asleep at the wheel”; unaware of threats and pressures and need to change and be proactive
Complexities of Healthcare
Leadership Turnover
Board Strength
Strengthen existing platforms; benefits of scale
CEO departure or retirement opens dialogue
Board initiates; understands benefits peer merger or affiliation might bring
Source: Ziegler Investment Banking
Board Strength
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UNIVERSITY-RELATED SENIOR LIVINGRELATION TO UNIVERSITY
SOURCE: Ziegler Investment Banking, as of 9/1/17
12
32
19
1
12
6
0
5
10
15
20
25
30
35
Direct Ties EstablishedTies
Indirect Owned NoAffiliation
Unknown
Relationship to College/University
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UNIVERSITY-RELATED SENIOR LIVING“ESTABLISHED OR DIRECT TIES” EXAMINED
7.3%
51.2%
36.6%
4.9%
Retirement Community Distance from College/University
Greater Than 2 Miles
Less Than 2 Miles
Adjacent To or OnCampus
Unknown
SOURCE: Ziegler Investment Banking, as of 9/1/17
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SENIOR LIVING & SERVICES WORKFORCE
• Technologies and innovative solutions
• Benefits• Staff training
• Minimum wage hikes• Cost of insurance• Bonus/incentive comp.• Cost of turnover
• Branding• Improving internal
efforts• Starting younger
• AI/Technology
• Front-line staff• Middle-Management• C-Suite• External partners
Stakeholder Groups Recruitment
Retention$
Source: Ziegler Investment Banking
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DEFINING HOME & COMMUNITY-BASED SERVICES
PACE Home Care Hospice
Adult Day CCaH Villages
NORCs Home Health
Sources: Ziegler Investment Banking
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HCBS SERVICE LINES AMONG NOT-FOR-PROFIT PROVIDERS• Percentage of providers offering HCBS (off-campus to non-residents) -
likelihood increases with the size of the organization
Source: Preliminary 2019 LeadingAge Ziegler 200 (data as of 12/31/18)
70%
50%45%
70%
59%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Largest 10 Largest 100 Largest 200
Multi-Site Providers (LZ 200)
2018 2019
34%
46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Largest 150 Single-Sites
Single-Site Providers
2018 2019
• 70% have annual HCBS revenue <$10M• 30% of providers are in joint venture for HCBS
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THE GROWING COMPLEXITY OF THE SKILLED NURSING SERVICE LINE
• Changes occurring within the skilled nursing side of the business (long-term & post-acute)
Reimbursement Challenges
Shifting Consumer Preference
Aging-in-Place
Regulatory Pressures
Workforce Shortages“Skip the SNF”
Source: Ziegler Investment Banking
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TECHNOLOGY: NOT-FOR-PROFITS AS INNOVATORS
“Nonprofit organizations are the pioneers of seniors housing. The first communities, dating back to the early 1900s, were affiliated with religious organizations. Fast-
forward to today and nonprofit organizations are again on the forefront of innovation.”
Source: Seniors Housing Business, August-September 2019
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ZIEGLER LINK•AGE FUNDS
HEALTH SYSTEMS INDUSTRY PROFESSIONALSSENIOR LIVING PROVIDERS
HEALTHCARE IT
• Population Analytics• Clinical Decision Support• Care Management Software• Regulatory Reporting• Medication Management and
Adherence• Remote Monitoring• Telehealth Platforms
HEALTHCARESERVICES
• Homecare 2.0• Palliative and Hospice Care• Capitated Physician Models• Concierge Medicine• Behavioral Change
Management• Emerging Managed Care
Models
OTHER POST-ACUTE OR AGING RELATED
• Post-Acute Care Diagnostics and Therapeutics
• Medicare Advantage / Dual Eligible Plans
• Chronic Disease Management
• Institutional Pharmacy
GENERATING RETURNS, both financial and strategic, for organizations across the healthcare and aging services landscape that have a significant interest in finding innovative solutions to improve the independence, quality and cost of care, and overall lives of the aging population.
Source: Ziegler and Link•Age
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Ziegler is a privately-held investment bank, capital markets and proprietary investments firm A registered broker dealer with SIPC & FINRA Ziegler provides its clients with capital raising, strategic advisory services, equity & fixed-income trading and researchFounded in 1902, Ziegler specializes in the healthcare, senior living and educational sectors as well as general municipal finance
ABOUT ZIEGLER