KeyTrendsinanEvolving

AgingServicesField:StayingCompetitiveand

PreparingfortheFuture

October31,2016

Presenters

RobLove

Love&CompanyPresident/CEO

JimHudgins

THWDesignPresident

TadMelton

ZieglerManagingDirector

Agenda

v Theseniorlivingfield:Todayandtomorrow

v Today’strendsandchallengesv Disruptors:Tomorrow’strends,and

howtoprepareforthemv Financingnon-traditionalgrowth

strategiesv Q&A

TheSeniorLivingWorldToday

TheLongAwaitedAgingofAmericaHasArrived!

MarketsDiscountTheFuture-

DemographicsAreDestiny!

Source:U.S.DepartmentofHealth&HumanServicesNationalCenterforHealthStatistics;PewResearchCenter

Today’s80-yrold

Today’s70-yrold Willpeakat81.1million

Impactofimmigration

EvenWithATailwind,ItWon’tBeEasy

SeniorLivingToday:Ziegler’sObservations

v Occupancylevelsareveryhighthroughouttheindustryandwaitinglistsaregrowing,despitewhatappearstobeadecliningtrendintraditionalskillednursingoccupancy

v NFPdevelopmenttrendsaccelerating:§ Re-emergenceofnewcampuses;Positioningofexisting

campuseswithmajorinvestmentsinagingfacilitieslikeskillednursing,expansionofindependentliving,andadoptionofcontemporaryprogramminginareaslikewellness,rehabandhospitality

v Pressureinformofstaffingcostsandavailabilityandtechnologicalinnovation

SeniorLivingToday:Ziegler’sObservations

v Significantconfusionaboutultimateimpactofhealthcarereformbuteffortstoanticipatethefutureleadingtoinnovativestrategiesandcollaborativerelationshipsoff-campus,albeitusuallynotmovingtheneedleonnetincome

v AbundanceofcapitalandacceleratingdemographicsfuelinganhistoricamountofdevelopmentintheformofFPcompetitors

v Anybusinessorproducttiedtoseniorlivingissubjecttointenseinvestorinterest,beitfacilities,homecare,serviceproviderstechnology,etc.

OccupancyIsGenerallyVeryHigh

Sources:ZieglerNationalCCRCListing&Profile,LeadingAge,NICMAP®DataandAnalysisService,TheNationalCenterforHealthStatistics,CentersforMedicareandMedicaidServices

84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

94%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Seniors Housing Occupancy by Profit Status; MAP314Q05 – 2Q16

Not-For-Profit

For-Profit

2.68%

NFPCCRCOccupancyAboveFP

Sources:ZieglerNationalCCRCListing&Profile,LeadingAge,NICMAP®DataandAnalysisService,TheNationalCenterforHealthStatistics,CentersforMedicareandMedicaidServices

81%

83%

85%

87%

89%

91%

93%

95%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CCRC Occupancy by Profit Status; MAP314Q05 – 2Q16

Not-For-Profit

For-Profit

5.91%

SkilledNursingOccupancyAtFiveYearLow

Source: National Investment Center for the Seniors Housing & Care Industry | Skilled Nursing Data Report; data through June 2016

NewCampusesRe-emerging

Source:ZieglerNationalLPC(CCRC)Listing,8/29/16

6

21

46

51

43

51

70

92

69

65

74

81

29

80

28

52

85

70

74

93

81

89

54

46

33

20

8

12

0 20 40 60 80 100 120 140 160 180 200

1950-1954

1955-1959

1960-1964

1965-1969

1970-1974

1975-1979

1980-1984

1985-1989

1990-1994

1995-1999

2000-2004

2005-2009

2010-2014

2015-2019

Loca

tions

LPC Incremental Growth, By CCRC Type1950 to Present (Year of Opening)

Purpose built Non-purpose built

PROJECTED(+17fromlastyear)

ExistingCampusesGrowing,Evolving

HealthcareReformDrivingPost-AcuteStrategies

v Providersarespendingincreasedtimefocusingonpost-acuteactivities

v For-profitcompetitionhasbeensignificant,particularlyinmetromarkets

v Scaleandsophisticationareprovingtobekeydifferentiators

v Post-acutenetworksareevolving(frombricks&mortartoHCBS)

v Thecustomerischanging(acuity,lengthofstay)

Non-ResidentialActivitiesEvolving

Source:2016LeadingAgeZiegler150(preliminarydata)

70%oftheLZ150withHCBSarebelow$10millionannuallyinHCBSrevenue

StaffingChallengesRapidlyEmerging

15.6%

53.0%

0% 10% 20% 30% 40% 50% 60%

Limitadmissionsb/cofstaffingshortages

Workw/tempagenciestofilldirectcarestaffvacancies

Hasyourorganizationhadto…

Limitadmissionsb/cofstaffingshortages

Workw/tempagenciestofilldirectcarestaffvacancies

Source:ZieglerCFOHotline,June2016

ChallengesLeadingtoIncreasedAffiliationActivity

Complexities of Healthcare

Ability to Attract Talent/Workforce

Management

Ø Neededlarge-scalevisibilityinlocalmarketØ Greatermarketpowerw/consolidationØ Healthcareconsolidationelevatingsophisticationoflocalhospitals/healthsystems

Ø NeedtoinvestinEHR/EMRplatforms

ØNeedlarge-scalebrandingtofacilitaterecruitment

ØScaleleadstogreaterprofessionaldevelopmentopportunities

ØGrowthinfor-profitsleadingtogreatercompetitionforstaff

For-ProfitDevelopmentRobust

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Con

stru

ctio

n vs

. Exi

stin

g In

vent

ory

Senior Housing Construction by Profit Status; MAP314Q05 – 2Q16

Not-For-Profit

For-Profit

Source: NIC MAP® Data & Analysis Service, as of 6/30/16 © National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org

ILDevelopmentExploding

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Construction vs. Inventory; MAP31Seniors Housing | 4Q05 – 2Q16

Independent Living*

Assisted Living*

Not-for-Profits

Source: NIC MAP® Data & Analysis Service, as of 6/30/16 © National Investment Center for the Seniors Housing & Care Industry | www.NICMAP.org

• HighpercentageofALmemorycare;someIL

• Ofteninmarketswithhighbarrierstoentry

• Educatedmarketslackingupdatedproducts/services

• Hospitalitylifestyle:“Theygetit!”

• Multiplediningvenues

• Expandedwellness

ForProfitCommunitiesFor-ProfitCommunities

ForProfitCommunitiesFor-ProfitCommunities

Pub

Bistro

Dining

Entry

Lobby

RehabGym

Kitchen

Activity

“Catered”LivingProducts• 54Units- 90,000sfapprox.

• Commons• Fullkitchen• Diningroom• Pub(Opentocommunity)• Residentactivityspaces• PT/OTsuite• Wellnesssuite

• Carebaseateachfloor

• Unitssizes: 525sf– 1,200sf

ForProfitCommunitiesFor-ProfitCommunities

“Catered”LivingProducts• 54Units- 90,000sfapprox.

• Commons• Fullkitchen• Diningroom• Pub(Opentocommunity)• Residentactivityspaces• PT/OTsuite• Wellnesssuite

• Carebaseateachfloor

• Unitssizes: 525sf– 1,200sf

Don’tCountSNFMarketOutYet!

v SNFmarketisbifurcatingintonewerphysicalplantsw/STMedicarerehabfocusvs.olderSNFsfocusingonlong-termMedicaidpatients

AlmostAnythingRelatedtoSeniorLivingIsTakingOff!

Today’sTrendsandChallenges

forNot-for-Profits

v Oldercampuses/“product”

v Highproportionofsmallresidences

v Uninspireddiningprograms

v Outdatedfitnessandwellnessspacesandprogramming

v Institutionalhealthcare

v Limitedcontractoptions

PrimaryChallengesforNot-for-Profits

27

PrimaryChallenges

Smallresidences=Olderresidents=

Fewercouples=Loweraffluence=

Lowermargins

SmallerResidencesProduceLowerMargins

v Lifecareactuarialsurplusprojections,singleresidents*

Comm A Comm B Comm C§ Studio: -12% n/a -18%§ 1BR: 4% 7% 0%§ 1BR/Den: 19% 22% 9%§ 2BR: 28% 31% 19%§ 2BR/Den: 37% 41% 28%WeightedAvg,Single: 10% 15% 3%

*Goalis>10%

WellnessInitiatives

• Newwellnesscenter• Aquaticcenter• Fitness/aerobics• Multipurposeroom• Spaservices• Cafedining

• Outsidememberships• Over500+members• Age55+qualify• Highschool

swimming events• CreatebrandID

Wellness Renovation

WellnessLobby/GroupExerciseStudio

WellnessInitiatives

Wellness Renovation

WellnessLobby Fitness/ExerciseEquip

WellnessInitiatives